Bons, P. & Anor trading as Scale Aviation Australia v The Commissioner of Taxation of the Commonwealth of Australia

[1994] FCA 311

PETER BONS AND CAROL BONS TRADING AS SCALE AVIATION AUSTRALIA v. THE
COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
No. NG987 of 1992
FED No. 311/94
Number of pages - 14
Sales Tax - Statutory Construction
(1994) 28 ATR 239
(1994) Aust Sales Tax Cases 85-188

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
BEAZLEY J

CATCHWORDS

Sales Tax - whether scale aircraft are exempt from sales tax - whether the goods sold by the applicant are "aircraft" as defined in s3(1) of the Sales Tax Assessment Act (No.1) 1930

Statutory Construction - construction of exemption provisions in taxing legislation - whether term "aircraft" to be construed literally - whether provision to be construed liberally - whether provision to be construed by reference to associated exemptions within the legislation - use of extraneous material - meaning of same provision in another statute - whether context affects literal application of provision - whether history of terminology and statute affects construction of provision - Sales Tax Assessment Act (No.1) 1930; Sales Tax (Exemptions and Classifications) Act 1935; Sales Tax (Off-shore Installations) Amendment Act 1987

Sales Tax Assessment Act (No.1) 1930

Sales Tax (Exemptions and Classifications) Act 1935

Sales Tax (Off-shore Installations) Amendment Act 1987

Sales Tax (Exemptions and Classifications) Amendment Act 1988

Air Navigation Act 1920

Acts Interpretation Act 1901

Magna Stic Magnetic Signs Pty Ltd v Commissioner of Taxation (1991) 28 FCR 39

Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981) 147 CLR 297

Warrington v Furber 8 East 242

Burt v Commissioner of Taxation (1912) 15 CLR 469

Diethelm v FCT (1993) 116 ALR 420

Ashfield Municipal Council v Joyce (1978) AC 122

Commissioner of Taxation v Thomson Australian Holdings Pty Ltd (1989) 25 FCR 481

Ocean Road Motel Pty Ltd v Pacific Acceptance Corporation Ltd (1963) 109 CLR 276

Peacock v Zyfert (1983) 48 ALR 549

Betterways Panels, Ltd v Commissioners of Customs and Excise (1964) 1 All ER 948

HEARING

SYDNEY, 23 July 1993
#DATE 24:5:1994

Counsel for the Applicant: J W Durack

Solicitors for the Applicant: A G Robinson Creais

Counsel for the Respondent: A Robertson and M A Robinson

Solicitors for the Respondent: Australian Government Solicitor

ORDER

THE COURT DECLARES THAT:
1. The scale aircraft sold by the applicants in the period October to

December 1992 are goods which come within Item 119A of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935.

THE COURT ORDERS THAT:
2. The respondent pay the applicants' costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

BEAZLEY J This is an application for a declaration that certain scale aircraft manufactured and sold by the applicants during the period October and December 1992, are exempt from sales tax pursuant to s.3(1) of the Sales Tax Assessment Act (No.1) 1930 and Item 119A of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 (the Exemptions and Classifications Act). The principle issue which the application raises is whether the goods sold by the applicants, which are subject of the application, are "aircraft" as defined in s.3(1) of the Sales Tax Assessment Act (No.1).

Background Facts
2. The applicants, trading as "Scale Aviation Australia," manufacture scale aircraft which, save for the weight of the aircraft, is a 31% scale version of an aircraft originally designed and built in Australia known as the "Victa Airtourer." The applicants sell the scale aircraft (the scale Airtourer) by wholesale and retail, either in assembled form or in kit form. The kits are assembled by parts coupling with other parts and by a various assortment of fasteners, "much like a meccano set". The applicants also sell component parts for the scale Airtourer.

1. The scale Airtourer is operated from the ground by means of a five or six channel digital proportional radio transmitter. It has to be started manually, but otherwise replicates the aerodynamics, engineering and all other functions and features of the full size Airtourer. It varies in mode of control, and of course weight and size. It is made of fibreglass and weighs about 15 kilos, compared to about 700-800 kilos for the full size aircraft. It has a wing span of approximately 2.46 metres. The fuselage is 2.08 metres in length and the wing area, of 11.46 square feet, has an operational weight of 13 to 14.5 kilograms. It has a 50cc or greater engine, can reach speeds of between 40 and 160 kilometres per hour, and can fly to altitudes of several thousand feet. However, it is restricted to flying at an altitude of no more than 300 feet by the Civil Aviation Orders made under the regulations to the Air Navigation Act. It is possible to obtain permission to exceed that height. The flying time of the scale Airtourer is limited by the amount of fuel which is carried. Its normal flying time is approximately 15 minutes. It can perform the same manoeuvres as are performed by the full sized aircraft. The instrument panel is not an operative instrument panel, but is a facsimile of a real instrument panel. It is possible for the scale Airtourer to have auxiliary fitments which will feed back telemetry information to the operator, relating to, for example, speed or altitude. It is constructed with a model pilot sitting in the cockpit. All components of the Airtourer, with the exception of common fasteners used in other applications, are specifically designed, moulded or constructed for the scale Airtourer.

The goods sold
4. During the period October to December 1992, the applicants sold one scale Airtourer in assembled form and five in kit form. The detail of the goods sold is important, as, for the purposes of determining liability for sales tax, the goods sold at the point of sale must be identified. In the case of the assembled scale Airtourer, the purchaser supplied, at his own cost, the engine, the radio controls and some battery components associated with the engine and radio controls, and these were then assembled along with other parts supplied by the applicants (or the applicants' business predecessors). The five kits did not include an engine, a motor, an exhaust system, a propeller or any of the radio control equipment for the completed scale Airtourer. These components were sometimes already in the possession of the purchaser, or were purchased from the applicants or elsewhere. In addition, the following components were not included in the kits: the canopy, the wing leading edges, two main access panels of fibreglass mouldings, and the wing fairing. The kits contained plans for the construction of the Airtourer. The sale prices of kits which the applicants sell range from $1,000 to $2,000. The sale prices of the kits subject of this application were at the lower end of this price range, as they were only partial kits, that is, they lacked components additional to those specified above, as, at the time of sale not all the components had been manufactured to finalise the kits. The applicants stated that: "those that are sold were part sold, and because (the purchasers) want the rest of them, they have not been totally paid for", and that the intention was that when the balance of the components had been manufactured to complete the kit they would be forwarded to the purchasers.

Statutory Scheme
5. The applicants are manufacturers, and thus subject to the Sales Tax Assessment Act (No.1). That Act relevantly provides:

"S17(1) Subject to, and in accordance with, the provisions of this Act, the sales tax imposed by the Sales Tax Act (No.1) 1930 shall be levied and paid upon the sale value of goods manufactured in Australia by a taxpayer and sold by him or treated by him as stock for sale by retail or applied to his own use. S19 Sales tax shall be paid by the manufacturer of goods manufactured in Australia and -

(a) sold by the manufacturer to an unregistered person or to a registered person who has not quoted his certificate in respect of the sale;

(b) treated by the manufacturer as stock for sale by retail; or

(c) applied by the manufacturer to his own use.

S20 Notwithstanding anything contained in section 19, sales tax shall not be payable under this Act by the person specified in that section upon the sale value of goods the sale value of which is, by virtue of the Sales Tax (Exemptions and Classifications) Act 1935-1973, exempt from sales tax under this Act."

Section 3(1) of the Sales Tax Assessment Act (No.1) provides:

"In this Act, unless the contrary intention appears - 'Aircraft' means a machine or apparatus that can derive support in the atmosphere from the reaction of the air or from buoyancy;"

Subject to any contrary intention appearing in the Exemptions and Classifications Act this definition applies to Item 119A by virtue of s3(1) of that Act which provides:

"Any expression used in this Act shall, unless the contrary intention appears, have the same meaning as in the relevant Sales Tax Assessment Act."

The applicants submitted, and it is not in dispute, that there is nothing in the context or scheme of the Exemptions and Classifications Act to indicate a contrary intention.

1. Section 5(1) of the Exemptions and Classifications Act provides:
   

"Notwithstanding anything contained in any Sales Tax Assessment Act, sales tax shall not, subject to this section, be payable upon the sale value of any goods covered by any item or sub-item in the first column of the First Schedule, under any Act specified in the second column of that Schedule opposite that item or sub-item."

Item 119A in the First Schedule thus exempts:

"(1) Aircraft other than

(a) gliders (including motorised gliders); or

(b) Hang gliders (including motorised hang gliders) ...

(4) Parts for goods covered by sub-item (1)...

(5) Materials (other than lubricants) for use in the construction or repair of, so as to form part of, goods covered by this item."

1. The definition of "aircraft" in s3(1) of the Sales Tax Assessment Act (No.1) was inserted into that Act by the Sales Tax (Off-shore Installations) Amendment Act 1987, which was an Act to amend the sales tax laws in relation to off-shore installations. Previously, there had been no definition of the word "aircraft" in the Sales Tax Assessment Act (No.1), notwithstanding that Item 119A was already in the Exemptions and Classifications Act.

2. The applicants' case is that the scale Airtourer falls within the definition of "aircraft" in the sales tax legislation, in that it is a heavier than air man-made contrivance, kept in the air by forces produced by the air. In other words, it is a "machine or apparatus that can derive support from the atmosphere from the reaction of air" and its sale is thus exempt from sales tax. The applicants submitted that there is nothing in the Exemptions and Classifications Act which suggests that Parliament intended the definition to have a restricted ambit or that any machine which literally fell within its terms was not thereby covered by the exemption. They further submitted that they are assisted in their categorisation of the scale Airtourer as "aircraft" within the statutory definition by having regard to associated exemptions.

3. The respondent does not dispute that the scale Airtourers, once assembled, are machines which derive support from the atmosphere from the reaction of air. However, he submitted that the meaning of "aircraft" in Item 119A has to be determined in the context of the sales tax legislation and that the scale Airtourers, once assembled, are model aircraft to which Item 119A does not apply. It was further submitted that the sales tax legislation required, in the first instance, the identification of the goods, subject of the classification, at the point of sale. In this case, the goods sold were 5 kits and 1 assembled machine. Counsel for the respondent submitted that the goods sold in kit form are not aircraft, even if Item 119A applies to model aircraft. Nor was the assembled scale Airtourer an "aircraft" as the applicants did not supply all parts, but rather sold some parts, which they then assembled with other components supplied by the purchaser. In both cases, therefore, it could not be said that there was a sale of an "aircraft". Rather, there was the sale of parts only of an aircraft. In response to this submission, counsel for the applicants submitted that even if the kits are not assembled aircraft, they are "parts" of aircraft and thus fall within par4 of item 119A. Likewise, the sale of the assembled aircraft was a sale of "parts" of an aircraft in assembled form and thus also within par4 of Item 119A. The first question which must be determined therefore is the meaning of "aircraft" within the relevant sales tax legislation.

Meaning of "Aircraft"
10. Counsel for the applicants submitted that the scale Airtourer falls within the statutory definition of "aircraft" which, he submitted, was the same as its ordinary meaning. The statutory definition of "aircraft" is set out above. The Shorter Oxford English Dictionary on Historical Principles defines "aircraft" broadly as "flying machines collectively". The Macquarie Dictionary defines "aircraft" as:

"any machine supported for flight in the air by buoyancy (such as balloons and other lighter-than-air craft) or by dynamic action of air on its surfaces (such as aeroplanes, helicopters, gliders, and other heavier-than-air craft)".

This definition is effectively the same as the statutory definition in s3(1) of the Sales Tax Assessment Act (No.1). The Macquarie Dictionary relevantly defines an "apparatus" as:

"an assemblage of instruments, machinery, appliances, materials etc. for a particular use",

and "machine" as:

"an apparatus consisting of interrelated parts with separate functions, which is used in the performance of some kind of work; a mechanical apparatus or contrivance; something operated by a mechanical apparatus, such as a motor vehicle, a bicycle or an aeroplane".

1. I do not agree that the ordinary popular meaning of "aircraft" is necessarily the same as its defined meaning. Whilst there is a dictionary meaning of aircraft which is coextensive with the statutory definition, I consider that it is arguable whether the ordinary meaning of the word "aircraft" includes model aircraft. In my opinion the meaning of "aircraft" in ordinary usage could mean a full sized aircraft, as submitted by counsel for the respondent. However, as the term is a defined term, it is to that definition to which regard must be had for the purpose of determining whether any particular machine or apparatus falls within the exempting Item: see Magna Stic Magnetic Signs Pty Ltd v Commissioner of Taxation (1991) 28 FCR 39. Counsel for the respondent conceded that the scale Airtourer literally falls within the statutory definition. Therefore, unless there is some reason why it should be excluded from the definition of "aircraft" in the sales tax legislation, it is exempted from sale tax.

2. The task of the Court in interpreting statutory provisions, including taxing provisions, is to ascertain what the legislature means by the words it has used. In Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981) 147 CLR 297 Mason and Wilson JJ said at 320:
   

"The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aides to construction."

1. It has long been held that the situations in which tax will be imposed should be clear. As Lord Ellenborough said in Warrington v Furber 8 East 242 at 245:
   

"I think that when the subject is to be charged with a duty, the cases in which it is to attach ought to be fairly marked out; and we should give a liberal construction to the words of exception, confining the operation of the duty".

See also Armytage v Wilkinson 3 AC 355 at 369. In Burt v Commissioner of Taxation (1912) 15 CLR 469 Barton J said at 482, 483/4:

"Where the construction of such exceptions (to tax) is seriously in doubt, the interpretation should favour those whose claims are based upon the exceptions."

Higgins J at 487 also referred to the rule that a liberal construction is to be given to words of exception to a tax or duty. In Diethelm v FCT (1993) 116 ALR 420 French J again referred to the principle, stating at 433:

"Classifications of goods attracting exemptions or beneficial rates should be liberally construed unless the text or context requires a narrow construction.

..."

1. Whilst counsel for the applicants claimed the benefit of this principle, his primary submission was that no ambiguity concerning the meaning of the word "aircraft" arose either in terms of the statutory definition or its ordinary meaning. However, to the extent that there is any ambiguity, the applicants are entitled to a liberal construction of the exempting provision. A liberal construction favours the scale Airtourer falling within Item 119A.

Associated exemptions
15. Counsel for the applicants next submitted that support for the inclusion of the scale Airtourer within Item 119A was to be found in the terms of associated exemptions in the Exemptions and Classifications Act which indicated that if the legislature intended to exclude goods used for recreational purposes from the exempting provisions, it did so expressly. Counsel argued that the absence of any such specific exclusion from Item 119A, other than that of gliders, was significant and that there was nothing in the Act which indicated that the legislature intended Item 119A to be confined to aircraft used for non-recreational purposes.

1. The consideration of associated exemptions and exclusions from exemptions can provide guidance as to the proper construction of an exemption provision by giving an indication of the legislature's intention: Ashfield Municipal Council v Joyce (1978) AC 122; Young Men's Christian Association v Sydney City Council (1954) 20 LGR(NSW) 35 per Sugerman J, McGarvie Smith Institute v Campbelltown Municipal Council (1965) 83 W.N (Pt 1) (NSW) 191 per Else Mitchell J. However, as Lord Wilberforce stated in Ashfield Municipal Council v Joyce, consideration of associated exemptions will not always be determinative of the construction of a particular exemption. His Lordship stated at 137:
   

"But, as has often been said, in legislation of this kind, conferring exemptions on particular interests, probably with representation in Parliament, overlapping and tautology and insertion of particular words ex majore cautela, are only to be expected and are indeed unavoidable."

1. Commissioner of Taxation v Thomson Australian Holdings Pty Ltd (1989) 25 FCR 481 provides an example where the court did have regard to associated exemptions for the purposes of construction of one of the Items in the Schedule. In that case, Burchett J was concerned with the exemption of a "catalogue or price list" in one of the exempting Items of the Sales Tax (Exemptions and Classifications) Act 1935. His Honour examined other exemptions within the Item, and found that the exemption in question was one in a series of exemptions of a degree of specificity. His Honour held that whilst the word "catalogue" is capable of a wide range of applications, its more confined ordinary meaning should apply. His Honour stated that to interpret the Item otherwise:
   

"...would be to strike one off-key note in a scale to intrude, into Item 51's succession of discrete subject matters, the universe of things that would be imported by understanding "catalogue" in a wide sense. In its context, par (c) should be regarded as dealing with another single category of documents."

1. However, in Diethelm v FCT (1993) 116 ALR 420 French J expressed caution as to the use of this principle. His Honour stated at 433:
   

"Generalisation about the construction of such statutory classifications is to be undertaken with caution. Decisions on one such classification may have only limited application to another, albeit they share similar features. While purposive construction is desirable, the purpose to be served by a particular exemption or rebate may be beyond discovery. The efforts of special interest groups or perceptions of political imperatives at the time the classification was enacted may all be reflected in the definition of the particular category of goods in question."

1. In the present case, there is no reference to model aircraft in the sales tax legislation. Nor is there any reference in any of the Sales Tax Assessment Acts or in any of the other Items in the Schedules to the Exemptions and Classifications Act which make reference to models. Therefore, unless a model form of any particular goods which are within an exemption or classification, itself falls into the exemption, it is subject to the general rate of sales tax. However, counsel for the applicants submitted that an examination of Item 119A and Items 119B and 125 revealed a structure of the legislation whereby, if Parliament intended to exclude any particular type or species of good from an Item which had recreational uses, it did so expressly. Thus, gliders, which are generally used for recreational purposes, but which fall literally within the definition of "aircraft", are expressly excluded from 119A. Item 119B exempts:
   

"goods for use...by a person exclusively in...the...operation...of a railway providing...a service for the transport of persons or goods,"

but specifically excludes:

"a service provided for, or in connection with, purposes of recreation, pleasure or amusement."

Item 125 which exempts "explosives", but excludes from the exemption "fireworks, rockets, coloured fires, sporting power, safety cartridges, percussion caps and ammunition". Most of the items so excluded from Item 125 are used for recreational purposes.

1. These three items do illustrate that in certain Items in Schedule 1, recreational goods which might otherwise fall within an exempting Item, are expressly excluded. To that extent, the structure of these Items support the applicants' case. However, it is not determinative of the proper construction of Item 119A, which appears amongst a series of miscellaneous Items which have no obvious relationship nor any common thread or correspondence of subject matter in other of the Items in the schedule.

Meaning of "aircraft" in other legislation
21. Counsel for the applicants referred to the Operational Civil Aviation Orders made under the Air Navigation Regulations which make provision for model aircraft (Section 95.21, "Exemption from Provisions of the Civil Aviation Regulations - Model Aircraft") and submitted that model aircraft should also be treated as aircraft within the meaning of the definition of "aircraft" in the sales tax legislation. The word "aircraft" is defined in the Air Navigation Act 1920, under which the Air Navigation Regulations are made, to mean "any machine or craft that can derive support in the atmosphere from the reactions of the air." This definition is, relevantly, identical to the definition in the sales tax legislation. However, whilst reference to the air navigation legislation does not detract from the applicants' case, it does not assist, as, unless there is connecting feature between statutes, legislation must be construed according to its own terms, and not in accordance with its meaning in another statute, although upon a proper construction of each, a word or phrase may have the same construction in each. There is no interconnection or relationship at all between the sales tax legislation and the air navigation legislation, and accordingly the fact that model aircraft, which literally fall within the definition of "aircraft" in both pieces of legislation, are expressly recognised within the regime of the one, does not mean that model aircraft thereby necessarily falls within the other.

Reference to the explanatory memorandum.
22. Counsel for the applicants further relied upon the explanatory memorandum to the 1988 amendment to Item 119A as supporting their case. Regard may be had to extraneous material such as the explanatory memorandum to legislation as an aid to construction if there is an ambiguity in the legislation: s15AB of the Acts Interpretation Act 1901. Re Bolton ex parte Beane (1987) 162 CLR 514; Harris v Australian Broadcasting Corporation (1983) 50 ALR 551 at 559-560; TCN Channel Nine Pty Ltd v Australian Mutual Provident Society (1982) 42 ALR 496. In my opinion, there is no ambiguity in the definition of aircraft in the sales tax legislation. However, if I am incorrect in this, the explanatory memorandum supports the applicants' case. It states:

"Taxable goods to become exempt

(Schedule, Part I - Amendment of First Schedule) At present aircraft are exempt from sales tax only when used principally for business purposes. There are, in fact very few taxable sales of aircraft but the costs of administering the current law is high.

This Bill will exempt all aircraft other than gliders (including motorised gliders, hang gliders and motorised hang gliders)."

1. Counsel for the respondent submitted that the effect of the amendment was only to remove the distinction between uses as the factor which qualified or disqualified an aircraft for or from Item 119A. He submitted that it did not have the effect of bringing machines within the exemption which otherwise were excluded. However, this submission begs the question of what is meant by "aircraft" within the definition. It is only when that question is determined does one look at the qualifying factors to the exempting Item. Prior to the amendment, the qualifying factor was business use and the exclusion was gliders and hang gliders. The scale Airtourer would not have fallen within Item 119A because even if it was an aircraft within the statutory definition, it is not used principally for business purposes. Now, there is no such qualifying provision. The exclusion as to gliders and hang gliders remains. As I have said, the scale Airtourer falls literally within the definition of "aircraft" and thus must be exempt from sales tax unless there is some reason why the term should not be interpreted literally.

Respondent's case
24. Counsel for the respondent submitted that the history of the definition of "aircraft", the history of the section and the context in which it appeared, namely, the sales tax legislation, all indicated that the definition did not include model aircraft such as are under consideration here.

History of definition
25. Counsel for the respondent identified the Paris Convention for the Regulation of Aerial Navigation as the source of the sales tax legislation definition. The Convention definition of aircraft was: "any machine that can derive support in the atmosphere from the reactions of the air." This definition, according to Professor Diederiks-Verschoor in An Introduction to Air Law, has continued to serve as the cornerstone of air law. Counsel for the respondent submitted that the origin of the definition limits its scope to the kind of aircraft envisaged by the Paris Convention, namely, full sized aircraft used for the transportation of passengers and goods. There are a number of difficulties with this argument, not the least of which is that the Paris Convention definition is not as wide as the statutory definition, which extends to machines or apparatus that derives support in the atmosphere from buoyancy. That brings within the definition a quite different kind of aircraft, such as hot air balloons, which were not within the purview of the Paris Convention. It must also be remembered, as Professor Diederiks-Verschoor observed, air law does not consist exclusively of air transport law, and that "one should also not minimise the fact that the term "aircraft" has a different meaning in various air law Conventions". In so stating, Professor Diederiks-Verschoor was saying no more than that the interpretation of a statutory definition or provision must be undertaken by examination of the terms of the legislation under consideration, and the meaning it may bear in other different legislation is of limited utility.

History of legislation
26. Counsel for the respondent next submitted that parliament's intention was to be gleaned from the nature of the amending legislation which introduced the definition into the Sales Tax Assessment Act (No.1). The definition of "aircraft" was inserted into the sales tax legislation by the Sales Tax (Off-shore Installations) Amendment Act, which dealt with the taxation of off-shore installations, including sea installations, at which aircraft could moor and land. As model aircraft could not moor or land at such sea installations, it was submitted that they were and are not intended to be included within the definition of "aircraft." However, whilst the history of legislation may assist in its proper construction, it must be remembered, as Taylor J said in Ocean Road Motel Pty Ltd v Pacific Acceptance Corporation Ltd (1963) 109 CLR 276 that:

"...it is not open to question that where by amendment a new provision is inserted into a principal Act and that provision speaks of "this Act" it speaks of the whole Act of which from the time of amendment it forms part and, of course, of the Act in the form which it may from time to time thereafter assume."

In the present case, although the definition was inserted by the Sales Tax (Off-shore Installations) Amendment Act, there was nothing in that legislation to indicate that the definition should be confined to aircraft of the type which could moor or land and to do so.

1. However, there is an aspect of the history of Item 119A which, it could be argued, does indicate that the legislature may have intended to confine the meaning of "aircraft" in the manner for which the respondent contends. Item 119A, in its present form, was amended on 23 August 1988 by the Sales Tax (Exemptions and Classifications) Amendment Act 1988. It had been previously amended in 1981. The 1981 exempting Item was in the following terms:
   

"Aeroplanes, including flying boats, seaplanes and helicopters, but not including goods to be used by a person or persons exclusively or principally for purposes other than business or industrial purposes unless that use is in the course of a business carried on by another person or other persons, being a business consisting of the carriage of passengers or goods;"

Gliders, which previously had been included in the exemption, were omitted under the amending legislation. The Explanatory Memorandum to the 1981 Amendment, in referring to this change, stated that gliders and hang gliders were to be "taxable at 171/2%, like other personal transport and recreational equipment" and that the resultant taxation of gliders would bring them into the same tax position as other forms of personal transport such as motor vehicles, motor cycles, boats, bicycles and surf skis. It is arguable, that the reason proffered for the exclusion of gliders from the exemption, namely to bring them into line with other recreational equipment, indicates a legislative intention to exclude recreational goods from Item 119A, and that that intention was carried forward in the 1988 amendments, which continued to exclude gliders. However, the 1981 form of Item 119A was significantly different from its current form. The 1981 version did not refer to "aircraft" but to "Aeroplanes, including flying boats, seaplanes and helicopters, but not including goods to be used by a person or persons exclusively or principally for purposes other than business or industrial purposes unless that use is in the course of a business carried on by another person or other persons, being a business consisting of the carriage of passengers or goods;"

1. In my opinion, not only did the explanatory memorandum provide some indication that the legislature intended to exclude recreational goods, the express terms of the Item make it unlikely that model aircraft would fall within its purview. Given the substantial change to the terms of Item 119A in the 1988 amendment, it cannot be said, in my opinion, that any such intention to exclude recreational goods was carried forward, unless, of course, such goods were expressly excluded from the exemption.

Context of Sales Tax Legislation
29. Counsel for the respondent, although conceding that the Airtourer was plainly a machine or apparatus which derived support from the atmosphere, submitted that if the definition was construed literally, as the applicants contended, any machine that can derive support in the atmosphere from the reactions of the air would be an aircraft, a result which was clearly not intended by the legislature. He submitted that the intention of the legislature was to be gleaned from the context of the sales tax legislation, which required a distinction to be made between what is an aircraft and what is a toy. He enumerated several factors which should be considered to determine whether a machine or apparatus falls within the definition, as he submitted it should be properly construed. Those factors were size, weight, area or locomotion, whether it was designed to transport goods or passengers; whether there is a pilot; whether it can get from A to B or whether its landing place is confined to its taking off point as is the case with the radio controlled scale Airtourer; the length of flight; what it is made of; and whether it can be flown indoors or outdoors.

1. Counsel for the respondent submitted that none of these factors was determinative. He conceded that just because something was small did not mean it could not be an "aircraft". However, he submitted that the primary or dominant factor in determining whether a machine was an aircraft as defined was whether it was designed for the "transport of goods, passengers or the person who is flying the machine". The respondent also relied on the fact that there was no evidence that the applicants' goods are not "capable of anything except taking off, flying around, doing some aerobatics and landing". Counsel for the applicants, on the other hand, relied upon the evidence of the first applicants that:
   

"many radio controlled aircraft have wing spans exceeding those of full sized aircraft and are suitable for use in aerial photography, movie making, weather forecasting, agriculture, oil exploration, communications, defence purposes etc. Furthermore, there has been a wide range of unmanned full sized aircraft flown by radio control ...".

Counsel for the respondent submitted that this evidence was irrelevant to the issue as there was no evidence that the scale Airtourer had any such uses or capabilities. Whilst this is correct, this evidence does indicate that there are a wide variety of machines which literally fall within the definition of "aircraft" and is another factor which suggests that a liberal construction should be given to the word.

1. In my opinion, there is nothing in the definition of "aircraft" which renders its operation "absurd," "extraordinary," "capricious", "irrational" or "obscure," if applied literally. The question remains, therefore, whether there is any "good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions": Cooper Brookes per Mason and Wilson JJ at 321. In my opinion, there is no good reason to conclude that the literal reading of the definition of "aircraft" does not conform to the legislative intent.

Identification of the Goods
32. Counsel for the respondent next submitted that even if a model aircraft such as the "scale Airtourer" fell within the exemption, the goods sold were not aircraft as defined. They lacked the essential character of "aircraft" as the goods sold were in kit form or involved the sale of an assembled item in respect of which the applicants had supplied only part of the goods.

1. For the purposes of the sales tax legislation, goods are to be classified according to the state they are in at the taxing point: Diethelm v FCT (supra). The goods the subject of these proceedings are five kits and one fully assembled scale Airtourer. None of the kits sold contained all the component parts. They were missing such vital components as the engine, motor, exhaust system, propeller and the radio control equipment. All kits had other components missing, although some may have contained components which others did not. However, the evidence was that the kits sold in the relevant period did not contain the canopy, the wing leading edges, two main access panels of fibreglass mouldings, and the wing fairing. However, even if only the absence of engine, motor, exhaust system, propeller and the radio control equipment is considered, it is clear that it would be impossible to assemble, from the kits sold, a machine or apparatus that can derive support in the atmosphere from the reaction of the air. That is, it would be impossible to assemble an aircraft from the component parts sold.

2. Counsel for the applicants, submitted however, that the goods sold were parts for an aircraft within 119A(4), or materials for use in the construction of, so as to form part of, an aircraft within Item 119A(5). The word "parts" is not defined in the legislation. Its dictionary meaning is:
   

"Part...That which with another or others makes up a whole; a certain amount, but not all, of any thing or number of things; a portion, division, section, element, constituent, piece..."

It is a concept which is used throughout Schedule 1 of the Exemptions and Classifications Act. For example, Item 113E(1) exempts:

"Machinery, implements, apparatus and materials (other than road vehicles of the kinds ordinarily used for the transport of persons or the transport or delivery of goods, or parts for those vehicles) for use by a person exclusively or primarily and principally in the repair or maintenance of machinery, implements or apparatus used by him and covered by item 113A, 113B, 113C or 113D, but not including lubricants."

Item 113E(2) exempts:

"(2) Parts for machinery, implements or apparatus covered by sub-item (1)."

It is important to note that Item 119A(4) does not refer to "spare parts" or "replacement parts". It refers to "parts". The kits, containing parts of a scale Airtourer, fall within the ordinary dictionary meaning of that word, and there is nothing in the legislation which indicates that a narrow or confined meaning should be given to the word. Accordingly, I am of the opinion that the kits fall within the meaning of "parts" in Item 119(4).

1. I am of the same opinion in relation to the assembled scale Airtourer which was sold. The starting point remains of course, the identification of the thing sold. The evidence on that is not precise. All that is known is that the applicants supplied a combination of assembled parts. Parts supplied by the purchaser were also assembled so as to construct the scale Airtourer. There is no evidence as to whether the applicants assembled the parts which it had first, and then later installed those parts supplied by the purchaser, or whether it did not commence assembly until such time as it had been provided with the parts by the purchaser. Nor is there any evidence as to what was included in the sale price. Presumably, the price which was charged for the item included a charge for the assembly. However, whatever be the position, I am of the opinion that there was a sale of parts of an aircraft within s119A(4).

1. However, I am of the opinion that neither the kits nor the assembled aircraft which was sold, fall within Item 119A(5). When that paragraph refers to materials for use in the construction of, so as to form part of, an aircraft, it is referring to construction material and not to component parts of the aircraft itself.

2. It follows from what I have said that the applicants are entitled to the declaration sought.