Bell Bros Pty Ltd v Federal Commissioner of Taxation

[1967] HCA 37

HIGH COURT OF AUSTRALIA

Owen J.

BELL BROS. PTY. LTD. v. FEDERAL COMMISSIONER OF TAXATION

(1967) 116 CLR 665

18 October 1967

Pay-roll tax

Pay-roll tax—Rebate of tax by reference to exports—Producer for export—Whether taxpayer owner of the goods when processed—Passing of property—Pay-roll Tax Assessment Act 1941-1962 (Cth), s. 16A (1).*

Decision

October 18.
The following written judgment was delivered:-
OWEN J. This is an appeal by the taxpayer, under s. 40 (5) of the Pay-roll Tax Assessment Act 1941-1963 (Cth), against a decision of the Board of Review confirming the disallowance by the Commissioner of an objection to his determination that the taxpayer was not entitled to a rebate in respect of tax imposed by the Pay-roll Tax Act for the year ending 30th June 1962. The taxpayer's claim to be entitled to the rebate is based upon s. 16c of the Pay-roll Tax Assessment Act and the only question raised for decision before the Board and before this Court was whether the taxpayer was the "producer for export" of large quantities of pyritic cinders which it exported to Japan during the relevant year. If it was, it is conceded that the rebate should be allowed. (at p667)

2. The pyritic cinders in question were, before shipment from Australia, put by the taxpayer through a process of screening, in circumstances to which I shall later refer, in order to bring them into the form or condition in which they were exported and, for relevant purposes, a "producer for export" is defined by s. 16A (1) of the Act to mean "the person who was the owner of those goods when they were brought into that form or condition". (at p667)

3. Pyritic cinders are residues left after the roasting of pyrites to produce sulphur dioxide gas. This was a process carried out in Western Australia by Cuming Smith &Mount Lyell Farmers Fertilisers Ltd. (which I shall call "the company") at its works at Bassendean in Western Australia. Such cinders, which are about the size of particles of sand, contain a substantial percentage of iron but it would seem that prior to 1960 the company had not regarded these residues as having any or much commercial value and a large dump of them was accumulated on portion of the land upon which it carried on its operations as a manufacturer of fertilizer. The dump, or a considerable part of it, also contained quantities of rubbish such as discarded building materials and the like. On 17th February 1960, the taxpayer wrote to the company confirming discussions which had taken place between them "concerning the purchase on a royalty basis of approximately 6,500 tons of pyritic cinders" from this dump and stating that : "Shipment is expected to be effected from Fremantle during early April next. It will therefore be necessary for us to stockpile quantities of cinders at Fremantle wharf and for that purpose we propose commencing loading from your Bassendean works within the next few days. To cover our arrangements we confirm the following : - (1) As loads are taken from your works, our drivers will sign your delivery notes. (2) We will weigh each load at our Bayswater weighbridge. You are at liberty to have your representative in attendance to check all weights. (3) Copies of weighbridge notes will be sent you weekly for the purpose of preparation of your invoice to us - payment at 10s. 6d. per ton royalty to be on monthly settlement. (4) You to define the route we are to follow both inwards and outwards from the cinders dump. . . ." On the following day the company replied confirming acceptance of the arrangements set out in the taxpayer's letter and adding that : "Ownership of the material passes to you upon loading of your vehicle at the works, with monthly settlement for tonnage taken as you propose." These arrangements were carried out and the first shipment to Japan of approximately 6,000 tons was made by the taxpayer in April 1960. The procedure adopted was that the material in the dump was loaded onto the taxpayer's trucks, its drivers signed the company's delivery notes, the loads were weighed at the weighbridge and taken thence to Fremantle to be shipped. The material was taken from a part of the dump which contained little or no foreign matter and did not require to be screened. (at p668)

4. On 26th May 1960 the taxpayer wrote a further letter to the company confirming "our order to purchase 10,000 tons of pyritic cinders on royalty basis and conditions similar to those set out in our letter dated 17th February last" and asking for confirmation. On 30th May 1960, the company replied confirming acceptance of the order for 10,000 tons and stating : "Conditions to be as for the previous delivery, are as set out in our letter of 18th February and yours of 17th February 1960." No screening of the material taken under this second agreement was done and it was shipped in August 1960. The same procedures of loading from the dump at the company's premises, signing delivery notes, weighing and carrying to Fremantle were adopted but on this occasion the cinders shipped contained a quantity of rubbish and of this the buyers complained. Cinders thereafter shipped by the taxpayer were accordingly put by it through a screening process carried out at a screening plant erected by the taxpayer on the company's land close to the dump. (at p668)

5. On 19th July 1961, the taxpayer wrote to the company confirming "the recently telephoned offer made by our Mr. David Bell for the purchase of the remaining quantities of pyrites cinders at your Bassendean works, together with current production during the terms of this arrangement". The letter set out the estimated quantities remaining in the dump and the estimated production of cinders from the company's operations up to the end of 1961, and went on : "We desire to purchase those estimated quantities for the sum of 11s. 6d. per ton, delivery to be taken by 31st December next, terms and working conditions to be similar to those set out in our letter of 17th February 1960 (except as to price per ton)." On 21st July 1961, the company replied confirming the purchase and the price and stating that : "Conditions are similar to those set out in your letter of 17th February 1960, and our acceptance dated 18th February 1960." The cinders the subject of this last-mentioned agreement were dealt with by the taxpayer in the following way. Material taken from portions of the dump close to the screening plant was pushed by bulldozers to where that plant stood and put through the screen. The screened material was then loaded into the taxpayer's trucks and delivery notes were signed by the drivers. It was taken to the weighbridge, weighed and thence carried to the wharf for shipment. Material taken from portions of the dump which were a few hundred feet away from the screening plant was loaded into the taxpayer's trucks at the dump, taken to the screening plant and there screened. The screened material was then loaded on the taxpayer's trucks, delivery notes were signed, the loads were taken to the weighbridge and weighed and taken on to Fremantle. It is in respect of the export of the cinders purchased under the agreement to be found in the letters of 19th July and 21st July 1961 that the taxpayer claims to have been the "producer for export". (at p669)

6. I should interpolate that the Commissioner has at no time disputed that the screening of these materials is a form of processing, grading or sorting within the meaning of s. 16A (1.) of the Act. The sole question is whether the taxpayer was the owner of the goods exported when that process took place and the answer to this question depends upon ascertaining when it was that the property in the material passed from the company to the taxpayer. This is turn depends upon the construction of the agreement to be found in the letters of 19th and 21st July 1961 which, except as to price, incorporated by reference the provisions of the first agreement contained in the letters of 17th and 18th February 1960. It is no doubt true that when these two earlier letters were exchanged it was not contemplated by either party that screening of the material in the dump might become necessary and it was anticipated that the material would be loaded direct from the dump into the taxpayer's trucks and taken thence via the weighbridge to Fremantle. I have no doubt that it was the intention of the parties, as expressed in their letters, that the property in each truckload of the material was to pass as and when the truck was loaded at the dump for the purpose of removing the load from the company's premises. In the later agreement with which this case is concerned and which was made after both parties knew that it had been found necessary to screen the material taken from the dump, the same provision as to the passing of the property was adopted. As applied to that later agreement the provision meant, in my opinion, that the property was to pass as and when each truck was loaded with the screened material for the purpose of taking it from the company's premises. What was being sold by the company and bought by the taxpayer was pyritic cinders, not pyritic cinders and discarded building material. (at p670)

7. The submission made on behalf of the taxpayer was that the property passed as and when a truck was loaded at the dump for the purpose of carrying it to the place where the screening plant stood. But I cannot accept that argument. It would lead to the curious result that as to the material bulldozed from the dump to the screening plant, the property would not pass until after the screening process had been completed and the screened material loaded into trucks to be taken to the weighbridge while in cases in which the material was loaded into trucks at the dump for carriage for a short distance to the screening plant, the property would pass on loading at the dump. (at p670)

8. In my opinion the Board of Review rightly upheld the Commissioner's determination and this appeal should be dismissed with costs. (at p670)

Orders

Appeal dismissed with costs.