Capital Duplicators Pty Ltd & Anor v Australian Capital Territory and Anor

.

• -,~~

IN THE HIGH COURT OF AUSTRALIA

Registry No CS of 1990
B e t w e e n -
CAPITAL DUPLICATORS PTY LTD
and LUHAZE ACT PTY LTD

Plaintiffs

and
AUSTRALIAN CAPITAL TERRITORY
and COMMISSIONER FOR
AUSTRALIAN CAPITAL TERRITORY
REVENUE

Defendants

Questions Reserved pursuant
to section 18 of the
Judiciary Act 1903

MASON CJ
BRENNAN J

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DAWSON J

TOOHEY J

GAUDRON J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 20 APRIL 1993, AT 10.22 AM

MR D.M.J. BENNETT, QC:

May it please the Court, I appear

with my learned friend, MR R.C. REFSHAUGE, for the
plaintiffs. (instructed by Macphillamy Cummins &
Gibson)

MR D.F. JACKSON, QC: If the Court pleases, I appear with my

learned friend, MR L.S. KATZ, for the defendants.
(instructed by the ACT Government Solicitor)

MR G. GRIFFITH, QC, Solicitor-General for the Commonwealth:

If the Court pleases, I appear with my learned
friends, MR G.K. BURTON and MR S.J. GAGELER, for
the Attorney-General for the Commonwealth
intervening. (instructed by the Australian

Government Solicitor) The Attorney-General has
filed written submissions which basically support
the status quo, and for that reason our submission
would be that our submissions should be last to the
Court.

MASON CJ: Yes, Mr Solicitor.

MR K.H. PARKER, QC, Solicitor-General for Western Australia:

If it please the Court, with my learned friend,
MSC.A. WHEELER, I appear for the Attorney-General
for the State of Western Australia intervening.
(instructed by the Crown Solicitor for Western

Australia) Our instructions would be to firstly
oppose any reconsideration of existing authority.
If, on the other hand, the Court were to consider
authority, to argue for a view of the duty of
excise which would substantially support the
validity of the legislation in question.
With respect to the matter raised by my

learned friend, the Solicitor for the Commonwealth,
we would read his submissions as arguing for a
position which would very clearly spell invalidity

for the legislation in question. We would
therefore submit that his position might be with

those challenging the legislation.

MR W.C.R. BALE, QC, Solicitor-General for Tasmania:

May it

please the Court, I appear with my learned friend,
MR M.M.G. MILLER, intervening on behalf of the
Attorney-General for Tasmania. (instructed by the

Crown Solicitor for Tasmania) We take on
intervention the same position as that outlined by
my learned friend, the Solicitor-General for
Western Australia, on both points.

MR J.J. DOYLE, QC, Solicitor-General for South Australia:

If the Court pleases, I appear with MR B.M. SELWAY
and MS G.L. EBBECK for the Attorney-General for the
State of South Australia to intervene generally in
support of the defendants but, as the Court will
have seen from the outline which I think members of

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the Court should have, we do wish to put
submissions to the effect that Parton was wrongly decided and a number of other cases. (instructed
by the Crown Solicitor for South Australia)
Could I just also add the point that in my

respectful submission, there appears to be no
particular reason why the Solicitor for the
Commonwealth should put his submissions in any
order other than that suggested by the Solicitor
for Western Australia.

MR K. MASON, OC, Solicitor-General for New South Wales: If

the Court pleases, I appear in this matter with my
learned friends, MR J.L.B. ALLSOP,
MS K.M. GUILFOYLE and MS M.A. MARTY. (instructed

by the Crown Solicitor for New South Wales) We
support the respondents and basically take the same
position as Western Australia.

MR P.A. KEANE, QC, Solicitor-General for Queensland: May it

please the Court, I appear with my learned friends,
MR R.W. CAMPBELL and MR B.T. DUNPHY, on behalf of
the Attorney-General for Queensland. (instructed

by the Crown Solicitor for Queensland) Our
position is the same as that taken by the Solicitor
for Western Australia on all points.

MR D. GRAHAM, OC, Solicitor-General for Victoria: May it

please the Court, I appear with my learned friend,
DR s.c. KENNY, for the Attorney-General for the
State of Victoria and the Attorney-General for the
Northern Territory, intervening firstly to oppose
any application that the Court should reconsider
the correctness of the decisions of Dennis Hotels,
Dickenson's Arcade and H.C. Sleigh and further, if
there is to be reconsideration, generally to
support submissions that we believe to be advanced

by the State of South Australia. (instructed by

the Victorian Government Solicitor and the
Solicitor for the Northern Territory) We also take the same position in regard to the order of hearing
in relation to the Solicitor for the Commonwealth.

MASON CJ: Yes. Mr Jackson, I should say, first of all,

that, unfortunately, Justice Deane is unable to

take his place on the bench today. It is expected
that he will be able to sit tomorrow, and he is
willing to participate by reading the transcript of
today's proceedings before tomorrow. In the
unlikely event that Justice Deane is not available
tomorrow, then we will have to consider what course should then be taken and counsel will be at liberty
to put any submission that they wish to put on the
matter to the Court then.

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MR JACKSON:	Your Honour, so far as the defendant is

concerned, we are perfectly content with that
course.
Might I just say something in relation to the

attitude that we adopt in relation to re-opening of
the matter, and it is simply this: as one of the
arguments which we shall seek to advance to defend
the legislation, we would seek the Court to re-open
some of its earlier decisions and to reconsider, in
effect, the whole question of excise, and we would
seek, in that regard, to arrive at a meaning of the
term "duty of excise" which is similar, to put it
shortly, to that arrived at by the Court in its
early decision in Peterswald v Bartley.

MASON CJ: Yes. Now, Mr Jackson, we should also say at this

stage that we think that the Solicitor for the

Commonwealth should follow you. I am sorry, follow

the plaintiff. Mr Bennett.

MR BENNETT:	If it please the Court. an outline of submissions, and of some fuller	I hand up 10 copies of
submissions.

MASON CJ: Yes, Mr Bennett.

MR BENNETT:

Your Honours, there is one preliminary matter.

On 9 March this year there was gazetted the Business Franchise ( 11 X" Videos) Amendment Act. We

only learnt of that Act yesterday. The second
reading speech in relation to that Act by the
Chief Minister, which I will hand to Your Honours
in a moment, said, in effect, "We are putting some
amendments through because this will assist in
preventing it being an excise".
We would wish to submit that it does not

achieve that result. It would seem somewhat
inappropriate that the case should be decided

solely on the basis of the Act as it stood before
and, accordingly, I seek leave to amend the
question referred by simply adding the numbers
"-93" after the numbers "1990" wherever appearing
so as to make good our submission in relation to

the Amendment Act. I should hand to Your Honours
ten copies of the Amendment Act and the second

reading speech. The relevant part of the second
reading speech appears at the top of the second
page.

MASON CJ:

Mr Bennett, is there not a problem in relation to

the way in which the statement of claim is
presently cast because it goes to the 1990 Act and
there is a claim for repayment in relation to the
1990 Act?

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MR BENNETT: Well, Your Honour, it would necessitate an

amendment. The alternative course, which I quailed
from in view of the time factor was to have a
further statement of claim and shorten all
necessary times to accelerate those proceedings to
be heard with these proceedings. If Your Honours
regarded that as the preferable course that could
certainly be done by tomorrow morning and one could
then seek all necessary orders nunc pro tune to
have those proceedings - - -

MASON CJ: Well, that might be the best course to pursue and

you might discuss it with your opponents in the
meantime because we do not know what their attitude
is to the amendment, although I take it they
probably have no objection.

MR BENNETT:

The same problem arose in Street's case,

Your Honour may recall, although there the
amendment was just before the special leave
application and therefore it was an appeal, which
was easier. But there is a general power to amend
under Order 29 rule 12.

MASON CJ: Yes.

MR BENNETT:

And I appreciate Your Honour's concern about

the statement of claim and I will take the
course - - -

BRENNAN J: That means your argument will have to deal with

two states of legislation - the 1990 legislation
and the 1990 amended legislation.

MR BENNETT: Well, the addition to the argument will be very

short indeed because, really, we will be submitting it makes no difference, except, possibly, to a very
minor aspect of it - but I will come to that.
Your Honours, the starting submission assumes

the continuing acceptance by this Court of the
result in Dennis Hotels, and the result in Philip
Morris, and the course we have taken is to make
submissions to the effect that on each of the bases
put forward in Philip Morris this legislation has

the effect of producing an excise. We also will be
submitting, as Your Honours have seen, that in
relation to the judgments of Your Honour
Justice Dawson and Your Honours Justice Toohey and
Justice Gaudron, the approaches taken, we would
respectfully submit, should not be followed.

Starting with the approach taken by

Your Honour the Chief Justice and Justice Deane,
the submission is a simple one, indeed. But for
the exception in Dennis Hotels, Your Honours would
have regarded the fee in Philip Morris as an

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excise, and the fee involved in the present case,
we would submit, is substantially indistinguishable
from the fee in Philip Morris, except in respects
which strengthen the submission that it is an
excise. May I just show Your Honours how the

structure of the legislation works? Do
Your Honours have the Business Franchise ("X"
Videos) Act 1990?

MASON CJ: Yes.

MR BENNETT:

Your Honours will see that under section 5 an

application for a licence has to be accompanied by
the basic fee, which is a small nominal amount
which Your Honours need not be concerned with, of
$50, and an amount equal to an estimate of the

advance fee. The advance fee is defined by
section 19(1) in relation to the grant of the
licence, as:
40% of the total wholesale value of "X" videos
supplied ..... in the month for which the
licence is granted or renewed.

A licence is granted, I should say, for one month.
So if we assume a hypothetical merchant who
commences business on 1 January, he has to apply in December for a licence and he has to pay an advance fee being his estimate of what the tax would be for the month of January based on anticipated sales in

January. Your Honours see, under section 19(1),
that is 40 per cent.
When February comes, under section 9, he

applies for a renewal of the licence:
no later than 7 days before the expliration of
the term.

So before 24 January, he applies for renewal for

February, he pays the basic fee of $50 again, and
under paragraph 9(2)(c), it must be:
accompanied by -
(i) in the case of the first application for
the renewal -

which this is by an estimation of the advance
fee.This advance fee is defined by section 19(2) in relation to the first renewal as 40 per cent of the
"X" videos in the month for which it is renewed.

So this time he repeats what he did previously. He
estimates for February and he pays an advance fee
based on what the February trading is likely to be.
When March comes it is slightly different. He now,
again under section 9, applies for renewal, but

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this time it is not the first application for
renewal, so section 9(2)(c)(i) does not apply, and
under section 9(2)(c)(ii) he must pay the franchise

fee. The franchise fee, as defined by section 20,
as the fee for two months previously, as the:
40 per cent of the total wholesale value of
the "X" videos supplied by wholesale -

in the two months before. So he now again pays a
fee based on the January sales. In April, it is
again based on February sales; in May it is based
on March sales and so on. It is at this point that
there is an ambiguity in the legislation, which has
been cured in the amending Act.
The ambiguity arises as to whether or not he

gets credit, in effect, against the March and April
franchise fees for the January and February fees he

has already paid as an advance fee. The two views
are - and I will show Your Honours the two sections
in a moment - first that he, in effect, gets a tax
holiday for two months, assuming that his estimates
of the advance fee were right and no adjustment is

required. He simply has no tax to pay in March and

April. The alternative view is that he pays for
those two months twice.
I will just show Your Honours how that

ambiguity arises. Under section 21:
No advance fee or franchise fee is payable in
relation to the supply or offer for retail
sale of an "X" video where either such fee is
payable in relation to any previous supply, or
any previous offer for retail sale, of that
video.

So the argument would be, there has been a fee paid
in relation to the previous supply or offer to

supply of the video, in relation to January and
February, and therefore the franchise fee is
reduced, in effect, to zero, or perhaps to the
excess if the estimate was a little bit under.
The alternative view relies on section 9(6),

and that view says:
Section 19 -

not section 21, section 19, which is the section
which defines the advance fee -
does not affect liability for a franchise fee
calculated in relation to "X" videos .....
(a) supplied by wholesale; or

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(b) offered for retail sale;
in the first 2 months after the licence is
granted.
Now, if that said section 21 rather than section 19

there would be no problem. The question is, how
does one reconcile section 9(6) with section 21 in
relation to the two months.
Probably the better view is that section 9(6) being the specific section overrides the general
section and that it is - giving it a fairly
beneficial construction, on a Cooper Brookes basis,
one can read it as meaning that the fact that you
have to pay an advance fee, defined in section 19,
does not affect the liability for a franchise fee
and therefore one does not get one's tax holiday
for those two months.
But there is that slight ambiguity in relation to the first two months, and that may be important
(a) in relation to the amendments, and (b) in
relation to the closeness of the imposition to a
fee on the goods.
While I am referring to those sections, may I

just remind Your Honours of two other features of
them which we place great emphasis on, and that is
that both section 21 and section 9(6) refer to fees in relation to previous supply. If Your Honours go to section 21, Your Honours see:
No advance fee or franchise fee is payable in
relation to the supply or offer for retail
sale of an "X" video -

it is not even "in relation to a licence", it is -

in relation to the supply or offer ..... of an
"X" video where either such fee is payable in
relation to any previous supply, or any
previous offer for retail sale.

We submit that is of great importance in that it
represents, in a sense, an internal admission in
the legislation that this is not just a licence
fee, it is a licence fee in relation to the actual
supply of videos.
Section 9(6) is not quite so clear in that

area. It refers to a franchise fee -
calculated in relation to "X" videos -

supplied or offered for sale; but 21 is, of
course, much clearer.

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The other feature that Your Honours would have
noted from these sections is the relationship between the wholesale tax and the retail tax.
There are two types of licences. There are wholesale licences and retail licences, and both
are required. But the effect of section 21 appears

to be that the same video is not taxed twice. So
if the wholesaler has paid his tax by way of
licence fee in relation to a particular video, then
the retailer does not pay it again. Again, that
indicates an attempt to relate the tax to
particular goods rather than make it a fee for a
licence.
May I return to my submissions in relation to

Your Honour the Chief Justice and Justice Deane's

reasons. The Dennis Hotels exception Your Honours
regarded as being based on the traditional
regulation of liquor licences in Australia, and the
similar policy arguments relating to tobacco in
Dickenson's Arcade, and Your Honours expressed some
doubt about H.C. Sleigh about whether it extended
to petrol.
We would submit that one cannot compare

pornographic videos with liquor and tobacco, or

place them in the same special category. We submit
that for a number of reasons. It is true that one
can make a fairly easy facile comparison and say,
"Well, they are all vices which the government
wishes to control or limit in some way; or there
are areas where there are policy reasons why

regulation of sale is desirable." We would submit,
with respect, that is a facile approach. First of
all, regulation of sales may be desirable in
relation to toys, therapeutic goods, motor
vehicles, petrol and many household appliances, if
only for safety reasons apart from anything else.
There are all sorts of reasons why it may be
desirable to control particular products, and

indeed, why particular products may be dangerous if

not sold in some sort of supervised way. The
obvious example there is therapeutic goods, drugs
sold by pharmacists, matters of that sort.
Even if one limits the class to goods

considered by some to be harmful in moderation and
one says, "Well, there are a significant group of
people who regard alcohol and tobacco as being
vices, or as being harmful in moderation, and
pornography is really the same sort of
thing" - even if one takes that sort of approach,
one would then have to include, and I have given a
list of some articles, roulette wheels, dice and
playing cards, radioactive substances, lead,
contraceptives, blood for transfusions, and
possibly publications critical of the government or

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the political system - all those products would
have groups in society which would regard their
sale in any quantities as being undesirable, or
their use in any quantities as being undesirable,
and would regard in many case the users of them as

committing some sort of vice. But one would not
wish to extend the classes to matters of that
nature.
We submit that once one extends the Dennis

Hotels exception to all goods in relation to which regulation may be one of the purposes of the licence fee, the exception ceases to be the exception and becomes the general rule. That is not to say, of course, that if one has something which is in every sense genuinely a regulatory proposal and solely a regulatory proposal, that it

would necessarily be an excise.
To take an obvious example, if the fees in the

present case were all applied to defray the costs
of censorship or to defray the costs of inspectors
who inspected licensed premises, or in some way to
regulate the sale of these products, one might say

there was a different sort of situation. One might
say there was a closer relationship; to adopt the
phrase, "no closer relationship" which appears in a
number of the cases.
But that is a different type of exception.

What one does not do, we would submit, is extend
the class of products to other products. We simply
indicate that if one does, all that list might well

be incorporated. Of course, there is specific
reference in the judgments to which I am referring,
those of the Chief Justice and Justice Deane, to
the undesirability of extending to classes of other
products.
We then submit that the present legislation is

not regulatory for a number of reasons. These
reasons, of course, I will be adopting by reference
when I come to some of the other judgments in
Dennis Hotels. The first is the size of the fee. It is a very substantial fee; it is 40 per cent.
It is larger than the fee in the other franchise
cases and clearly far more than is required by the
cost of regulation. If anything, it is closer to
Hematite; it is a very substantial percentage. It is a percentage which suggests a tax rather than
mere regulation.
Secondly, there is no restriction at all on what videos are to be excluded. There is no

banning of any categories of videos. None, however
obscene or violent, are excluded. Thirdly, there
is no regulation in the Act of type of premises,

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age of purchasers, manner of display, manner of
packaging or anything like that which one would
expect in a regulatory code. There are certain

requirements in relation to licensees. They are
set out in section 5. Let me take Your Honours to

those. Your Honours will see that the Commissioner
must grant the licence on compliance with the
conditions:
if the Commissioner is satisfied on reasonable
grounds in the circumstances that the
applicant is a fit and proper person to hold a
licence of that type.

Those circumstances include the following: whether the person is a bankrupt. That has got enormous
relevance to the regulation of "X" videos. It is
obviously there, we would respectfully submit, to
make sure that the person can pay the fee.
(b) if the applicant is a body corporate -
whether it is being wound up -

same thing.
(c) whether an amount under a tax law is due
by the applicant -

the same. So the first three, the ones one starts

with, are concerned with money. The fourth one is:
(d) whether the applicant has contravened a
provision of this Act -

which, of course, is only concerned with money and
licensing -
the Tax Act -

and then almost as an afterthought -

the Publications Control Act 1989 -

There is the first place one gets a possibility of another sort of regulation. Finally, a very broad general one:
(e) whether the applicant has been convicted
of an offence punishable on conviction by a
fine of not less than $10,000 or by
imprisonment for a period of not less than 1
year.

No limitation of type of offence. The offence may
have been a fraud, it may have absolutely no
relationship to fitness to sell pornographic

videos. So those are hardly circumstances likely

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to suggest that this is in reality regulatory

legislation. The true nature of the impost, we
submit, appears in what one could call, I hope
without disrespect, a Freudian slip in section 21
where the draftsman has used the words I have
referred to:
franchise fee is payable in relation to the
supply or offer for retail sale of an "X"
video -

That is what it is and there, if one is talking in
common law terms, is the admission by the defendant
as to what it is. To a lesser degree, one can get
that from 9(6), although certainly not as clearly.
Another significant provision in this regard

is section 27. Section 27 provides that if:
(1) A person ..... wholesales or retails "X"
videos without the appropriate licence is
liable to pay the Territory an amount equal to
the sum of the fees which would have been
payable under this Act if such a licence had -
(a) been granted -
So much for being an Act which is charging a

fee for a licence. It is charging exactly the same

fee if you do not get the licence. One could
hardly have a clearer illustration of a provision
which demonstrates this is not an Act concerned
with regulation or licensing. In relation to such
a person, of course, there has been no means of
determining if the person is a fit and proper
person.
The scheme, as I have submitted, is to impose an ad valorem tax on all "X" videos supplied by
wholesale or offered for retail sale.

section 21 ensures that no video is taxed more than And then
once. And, as I have said, there is a possible
exception in relation to the first two months. But
of course, assuming that I am correct in my
submission as to the meaning of section 9(6),
namely that it does result in the first two months
being taxed twice, that does not really affect the
overall argument for two reasons. First, as a
matter of ultimate economics, there is a rough sort
of balancing, because if one shuts up shop and
surrenders one's licence, one never has to pay the
franchise fee in relation to the videos sold in the
last two months. That is a matter which is
referred to in Dennis Hotels, and I will come back
to it later on.

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So, in a sense, one can say the trade-off is,
one pays double for the first two months, but
nothing for the last two months.
Secondly, and perhaps more importantly, in relation to the first two months, the fee has a

different name. It is an advance fee dealt with on
a separate basis from the franchise fee, and

indeed, calculated on a separate basis. The Act
does not seem specifically to provide for any
adjustment in relation to the advance fee, so one
pays it in a slightly different basis for the first
few months. If that be not be an excise, so be it.
Of course, it is a very small part of my case, that
the advance fee is also an excise. The main
concern, of course, is the franchise fee.

So, it is easy to separate them, if

Your Honours take the view that charging the first two months twice, and the last two months not at

all, is a significant feature. The franchise fee
would still fail, even though the advance fee might
have a stronger case for it.
We do submit that the advance fee is also

invalid. It is clearly, in effect, an ad valorem
tax, and the mere fact that one may pay
80 per cent, not 40 per cent, on the first two
months makes it, if anything, more rather than less
of an excise.
Now, I should say a little now about the 1993

amendments. These do two things. They do a
number of things, but two things as far as we are
concerned. They eliminate the ambiguity.
Section 9(6) is repealed, and there is a new provision in section 7 which has the effect of
making it clear that one pays twice in relation to

the first two months. I will not take Your Honours

through the verbiage that achieves that, I would not have thought it was controversial, and if it is, I will deal with it in reply.
The second matter it does is to alter the

basis on which the fee is calculated by saying
under section 19, there is what is now called "an
initial fee" which seems to substitute in part for
the advance fee, and provides that the Commissioner
assesses the initial fee as what is fair and
reasonable, having regard to the wholesale stock
held, and the amount that is likely to be sold in
the first month. So, there is a slightly more
subjective basis for assessing the initial fee for
the first month.
Then under section 20A:

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The franchise fee for the second month
following the month in which a licence is
issued is the a.mount of a franchise fee
calculated under section 20 on the basis of
the Commissioner's estimate of likely
trading ..... having regard to -

if it took place from the first day of the month,
it was continuous:
the wholesale value of "X" videos traded in
that month -

And, if it was not continuous, the estimate of the
likely videos that would have been traded if it was
continuous, and then, in relation to the following

month, the same estimate. So that the franchise
fee now, instead of being based on the month, two
months forward, seems to be calculated under
section 20 on the basis of the Commissioner's
estimation of current trading.
The difficulty with that is that section 20

and section 20A do not read well together. The way
it reads now is, section 20 says, "Subject to
section 20A the franchise fee is 40 per cent of

what was sold two months previously". Your Honours
see that under the (Amendment) Act section 12
simply adds the words, "Subject to section 20A". So we start with a proposition that the
franchise fee is the 40 per cent of what was sold

two months ago. So we are looking at March. We
take 40 per cent of what the licensee sold in
January, but then that "Subject to section 20A"
which says it is the a.mount "calculated under
section 20", so it is the a.mount of the videos sold
two months ago:
on the basis of the Commissioner's estimate of
likely trading in 'X' videos under the licence

for a typical month, having regard to -

(a) in relation to trading in 'X' videos
under the licence during the month in
which the licence was granted -

So one has regard to trading during March, one

then has to find the Commissioner's estimate of
likely trading for a typical month, but one is only
doing that for the purpose of working out under
section 20 what 40 per cent of the fee was for two

months ago. So it is very difficult, I have to
confess, to construe what the intention was except
hopefully to stop it being an excise.

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In our respectful submission, really what this
does is one of two things: it either says you are
still basically looking at what you sold two months
ago - in which case the reasons we have given we
submit it is an excise - or it makes it worse
because if what it is saying is you have got to
have regard to what you are selling in the current
month, in the month of March, then it is much
closer to a current fee on stock actually going

through. And that, of course, is on a number of
the views taken in Dennis Hotels, far closer to the
concept of an excise.
So we would submit that the amendments not

only do not assist the defendant but if anything

they hinder in the overall result. Our submission,
therefore, to summarize what I have said thus far,
is that on the judgments of Your Honour the Chief
Justice and Justice Deane there is no real doubt that this is an excise. It is something that would
be an excise but for Dennis Hotels and the
industries referred to in Dennis Hotels should not
be extended.
May I come to the judgment of Your Honour

Justice Brennan. It commences at page 442. We
start with the proposition that this is clearly a
tax on a step in the distribution of goods,
primarily the wholesale step, because in the normal
course there will be no further tax at the retail
level, although if the retailer is the wholesaler
or if he buys from a wholesaler outside the
jurisdiction, then it is a tax on the retail stage.
The test is: is there a closer connection with distribution than being exacted for the
privilege of engaging in distribution at all? That
is the phrase which is adopted by Your Honour at
page 445 point 8, from the judgment of
Justice Kitto in Dennis Hotels and it is a test
which has a lot of similarities, we would

respectfully submit, to the approach taken by
Your Honours the Chief Justice and Justice Deane
and to the approach taken by
Your Honour Justice McHugh.
Your Honour then held in that case, at the

passages I have referred to, that although in form
it was a licence fee in that case, it was in

substance a step in the distribution of goods. The
fee was calculated on the Dennis Hotels formula,
and it therefore may have a closer connection with
distribution than being exactly for the privilege
of engaging in it at all.
So, Your Honours, the ratio of Your Honour's

dissenting judgment was that if one has a Dennis

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Hotels formula, that is strong evidence that the
test is satisfied, that it may well have a closer
connection with distribution than being exactly for
that privilege.
Now, Your Honour referred to a number of

substantial features then, at page 461 and
following, which distinguished the Philip Morris

tax from the Dennis Hotels tax. The first was that
the scheme did not purport to be regulatory and we
repeat that submission - I have already given the
reasons why, if this is intended to be a regulatory
Act, it falls a long way short of achieving that
result.
The second was that the tax was established so

as to fall on all goods only once in the chain of
distribution. That is true in the present case,

with two qualifications. One is the first two
months, where they are taxed twice, and that may
simply be the imposition of an additional excise;
the other is the last two months, which are not
taxed at all, and that, we submit, is a small

factor against the present situation. The third
is, the rate is substantial, and here it is
40 per cent.
We also make the point that the proximity of the relevant period and the shortness of the
licence period are the same as in Philip Morris.
Under the original Act it was two months; under the
new Act, depending on how one puts together those
irreconcilable sections, it is either two months or
the current month but, in either event, it is a
very small gap and, if it were in one case, no gap.
We would submit that, clearly, on the approach
Your Honour took in Philip Morris, this would be an
excise.
In relation to Your Honour Justice Dawson, the

ratio of Your Honour's judgment, in our respectful
submission, was that the criterion of liability was
something other than the taking of a step in a
process of passing goods down to the consumer.
Before I come to that, Your Honour referred, at
page 466, to another possibility, and that was the
possibility, based on Peterswald v Bartley and the
very early cases, that section 90 was confined to
goods manufactured in the relevant State, that
being a narrower approach than that taken by
Justices Toohey and Gaudron where the goods had to
be manufactured in Australia.

As we read Your Honour's judgment,

particularly the sentence going from page 473 to
page 474, Your Honour ultimately took the view that
it was not possible to apply that test today in the

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20/4/93

light of existing authorities, and we would
respectfully agree with that, but may I simply add
to that two other reasons why that test would be
inappropriate: the first is that it would seem to
raise an inconsistency or a problem in
reconciliation with Cole v Whitfield, and that
arises in this way. There are only three types of
goods in the world: there are goods manufactured in
the State in question, goods manufactured
interstate, including Territories for this purpose,
and goods manufactured oversees and imported, and
that exhausts the universe of goods. Section 90
talks about duties of customs and of excise, and I will be submitting in a few minutes that duties of
customs extends to taxes on imported goods at any
stage in the process.
If one confines duties of excise to a duty on goods manufactured in the State, what section 90
does is prohibit a tax on imported goods, prohibit
a tax on goods manufactured in the State, but leave
goods manufactured interstate. If one had a
general tax on particular goods simply defined by
the nature of the goods and without reference to
where they are manufactured, we would submit one
would have the result that it would be pro tanto a
customs duty in so far as they are imported,
pro tanto an excise in so far as they were
manufactured in the State and invalid under
section 90 under both of those, and by virtue of
the application of section 90, it would become
discriminatory against interstate goods because
that is all that would be left. And then under
Cole v Whitfield, the remainder of it would fall

under section 92. So one would have the result
that that view of section 90, by its actual
application, would expose the balance of the tax on
goods generally to invalidity under section 92.
It is also, we submit, an approach which has

another problem, and that is that one thing which
seems to be agreed in the historical analyses of
this part of the Constitution is that one of the
primary purposes was to eliminate State barriers,
the border posts, and to replace them with a
concept under which the whole of Australia would be
a single customs zone. If the concept of excise
requires local manufacture as part of that concept,
then we would submit it is appropriate to look at
Australia rather than the particular State or to deal with that further because it is an argument
which Your Honour did not ultimately regard as
being open, unless of course the whole issue is

reopened. And we would submit if it is, for those
reasons it is inappropriate.

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We respectfully submit that the criterion of
liability test ought not to be applied, and we make
the submission, with respect, that it is an

approach which prefers form to substance. We
appreciate Your Honour's statement in the judgment
that the form substance distinction does not really
have much operation where there is no identifiable
substance, but we submit that the mere difference
of opinion as to what the substance is does not
mean it is not there, and that - - -

DAWSON J: Well, it might.

MR BENNETT:

Your Honour, there can be substance.

It is

just that only one, two or a number smaller than
seven of the Justices have regarded it as being
there.

DAWSON J:	What is your view of the substance?
MR BENNETT:	Your Honour, we submit that there must be a

substance, and the mere fact that there is a
difference of opinion as to what it is simply does
not prevent there being a substance.

DAWSON J:	What is it?
MR BENNETT:	We submit it is the test substantially laid

down by the Chief Justice and Justices Deane,
Brennan and McHugh, that any tax upon any step in
the movement of goods between manufacture,
production and sale without limitation as to where
the goods are manufactured or produced is an
excise.

DAWSON J:	Why do you stop short of consumption?
MR BENNETT:	Your Honour, there are two views in relation to

consumption, but the general view has been that a
consumption tax is not an excise; but if it is,
the argument remains.

included in an excise - Even if a consumption tax is

DAWSON J:

We really need not go into this.

I mean, it has

been gone into a number of times, has it not?

MR BENNETT: Yes. Well, Your Honour, we make the submission

in any event that the definitions to which I have

referred do sufficiently identify the substance and
that the form should not be preferred.

DAWSON J:	What do you say about Bolton v Madsen?
MR BENNETT:	Your Honour, it is - - -

DAWSON J: It has never been overruled.

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MR BENNETT:

No, it has not formally been overruled,

Your Honour. But it is inconsistent, we would
submit, with the majority views expressed in the
later cases.

McHUGH J: Its grip on life is very precarious.

MR BENNETT: Precisely, Your Honour. That is a submission

we respectfully - - -

McHUGH J:

Some may have pronounced it dead.

MR BENNETT: Well, it is at least 4/7ths dead, Your Honour,

perhaps I should say. We do make the submission in
subparagraph iv on pages 6 to 7 that one can find
in this Act on Your Honours' test that this is an

excise. We would submit that the true criterion of
liability is not merely a fee for engaging in an

activity. One gets that first in section 27 which
says that one pays it even if one does not get a
licence. One gets it from the references I have
referred to in section 21 and section 9(6). It is
significant that section 3 of the Act incorporates
the provisions of the Taxation (Administration) Act
by reference, and the Tax Act, which is the
Taxation (Administration) Act, is incorporated and

to be read as one with this Act. So it is very
much, we would submit, even in form a taxation Act.

BRENNAN J: What is the import of that provision? What does

it do by requiring it to be read with this Act?

MR BENNETT:

Your Honour, it is hard to see what it does.

The Act is there and it is not repealed by anything in it, and reading it as one probably takes it no
further, except that it is a useful indicium that
the legislature regards it as a taxation Act and is using the machinery of tax collection, the existing machinery of tax collection, in relation to the
collection of the licence fee.

BRENNAN J: That may be so, but I mean you are dealing here

with a small Territory Government. I suppose
people might double up on the duties that they
perform, and if there is a tax commissioner he
might be the one to collect licence fees.

MR BENNETT:

Your Honour, one could confer powers upon them

without incorporating the Act by reference.

BRENNAN J: That is why I was wondering what the

incorporation did.

MR BENNETT:	Your Honour, we see it more in the light of an acknowledgement of the true nature of the Act more
than anything else. One cannot really give it any substantive significance that would affect the

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20/4/93

argument that I can see. Turning to the views
taken by Your Honours Justices Toohey and Gaudron,
that was the view that a tax is only an excise if
it is imposed exclusively on locally manufactured
goods, we submit that this view is historically, as
well as in its context in Philip Morris, a minority view. We have listed a number of statements in the

authorities which it is inconsistent with. I will
not take Your Honours to those; Your Honours are
no doubt familiar with them, and I have given the
references. There are others.
I make the submission in paragraph 3 with a

little diffidence, as one always does in this
Court, but so far as we can see, the view put
forward in this judgment is not one which was the
ratio of any reported decision nor, except in the
different form in which it was espoused by
Justice Murphy who took the State view, the
"manufactured in the State" view, it does not seem
to have been the basis of any reported judgment in

this Court - the ratio basis for it. I say that
subject to correction, but that seems to be the
situation.
It is a view which, in practice, results in no

real restriction being imposed on the States at
all. One can always define a class of goods in
such a way that it includes some goods not
manufactured in the State. Indeed, really, to
achieve validity under that view, all one has to do
is omit the words "manufactured in the State" from
the taxation legislation to achieve assured
validity.
We make a brief submission in paragraph 5 that

on this view, there is one provision which would
seem to be invalid. If Your Honours go to
paragraph 20(2)(a), there is a specific franchise
fee imposed on "X" videos manufactured by a

licensee. So if a wholesale licensee actually
manufactures his own videos and then wholesales
them, he is charged 40 per cent of that. That
presumably relates to people who manufacture in the
Territory.

BRENNAN J: It does not say so, does it?

MR BENNETT:

No, Your Honour, and section 17 does say that:

This Division applies in relation to -
(a) the supply ..... by a wholesale licensee;
or
(b) the offer ..... for retail sale by a retail
licensee;

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20/4/93

whether the video is manufactured, supplied or
offered for sale by wholesale or retail within
or outside the Territory.
But the imposition of this particular tax is on "X"
videos manufactured. There may well be a question
as to whether section 17 is intended to apply where
the retailer is himself the manufacturer. If that
is the case, on the views expressed by Your Honours
Justices Toohey and Gaudron, that part of the Act
would be an excise.
In the next few paragraphs, I deal with our submission that the views of Justices Toohey and

Gaudron ought not to be followed. We make this

submission in relation to them. The first is that
the juxtaposition of the words "customs" and

"excise" is significant. A duty of customs may be
imposed on imported goods at any time before,

during or after importation. As far as we are
concerned, of course, it is the "during" or "after"
which is important. There is the familiar
statement in Carmody v Lovelock to which I have

referred. I will read it to Your Honours; it is
only a short sentence - Your Honours need not take
the book. It is 123 CLR 1 at page 27. His Honour
says:
The fact that the tax might not become
exigible until after the importation had been
completed did not make it any the less a tax
imposed in respect of the importation, or in
other words the fact that the tax was
retrospective in operation did not prevent it

from being a duty of customs. There are references in the judgments of
Justices Higgins, Powers and Starke in the COR case
to the same effect. When one looks at the two
words together, one gets this result: assuming in

favour of the judgment I am dealing with that an
excise is a tax on locally manufactured goods,
locally in the sense of within Australia, and a
customs duty is a tax on imported goods, one has

really covered the field. The universe again only
consists of imported goods and Australian
manufactured goods.
Now, if all goods are covered by the phrase,

it would be surprising if the phrase has to be
broken up. In other words, if one says, "Duties of
customs or duties of excise shall not be imposed",
and the two of them between them cover the whole
field, why, one asks rhetorically, should one
nevertheless read that as permitting a duty which
one does not know whether it is a customs or an
excise?

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20/4/93

In other words, if one says, "All men and all
women shall do something", then it would not be a
defence to failing to do it that one had not proved whether the person was one or the other. It simply

covers the universe. And if it covers the
universe, the universe includes matters as to which
one does not know whether it is the one or the
other.
If one had a statute saying, "No person shall assault a male or female person", it would not be
an essential part of the indictment to prove that

the person assaulted was one or the other sex. The

words simply cover the universe. And on that basis
one wonders, why would one wish to say, "You may
not impose a tax on imported goods; you may not
impose a tax on non-imported goods; but you may, of
course, impose a tax on all goods, whether imported
or unimported" and that, in our respectful
submission, would be a surprising construction.
We then get to the same result in two slightly

different ways in paragraphs vii and viii on
page 10. First, we submit, one can regard such a
tax, that is a tax on all widgets or all "X"
videos, as one which is pro tanto a customs duty
and pro tanto an excise, depending on whether the
particular goods happen to be imported or locally
manufactured.
May I just remind Your Honours of what was

said by Sir Garfield Barwick in Western Australia v
Chamberlain Industries, 121 CLR 1 at 14 to 15,
where, after citing a lengthy passage from the
judgment of Justice Isaacs in the COR case, His
Honour, at the top of page 15, says this:
The plaintiffs, as I follow them, really say that unless a tax by an Act is in all the
circumstances to which the Act is intended to

apply a duty of excise, it cannot be a duty of
excise in any of those circumstances. Quite
apart from authority, that proposition, in my
opinion, is evidently fallacious. And as far
as authority is concerned, it is denied by the
case to which I have referred.

And there is another reference to the same sort of
proposition by Justice Windeyer in Dennis Hotels.
So one has to look, one does not just look at

the Act and say, "Here is an Act, it imposes an

excise, that is it". One has to look at the
particular goods and in relation to particular
goods, we would submit either they are imported or
they are local, therefore either it is a customs

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duty or it is an excise. In either event it is
invalid.
Now, I should confess in making that

submission that it may require a minor amendment to
the statement of claim because we have only
referred to excise and not to customs duty. That
is a matter which perhaps I can seek leave to do
tomorrow morning at the same time as I make the
other alteration. It is simply to enable that
argument to be made, that the two between them
cover the field and pro tanto, it is wholly invalid
because part of it is an excise and part of it is a
customs duty.
The other approach is to say the phrase "duties of customs and of excise" is a hendiadys,
it is a composite phrase and it simply means duties
on goods, whether they are imported or locally
manufactured. It is a similar means of reaching
the same result.
Finally, may I turn to the judgment of

Your Honour Justice McHugh. Your Honour's
franchise cases are set out at page 500. They are the length of the licence period, the smallness of the fee and the length of time between the commencement of the license period and the end of the period for which the licence fee was
reasoning is similar to that of Justice Brennan.
calculated. Now each of those are cases where this
case either shares the features of Philip Morris or

is stronger. We have got a one month licence
period, as in Philip Morris, we have got a
40 per cent rate, we have got a length of time of
two months - although on one view of it no months
under the amending legislation - and they are all
features which Your Honour held gave rise to an
excise.

At page 501 Your Honour refers to the

indication that it is to be collected only once in
the chain of distribution and that, likewise,
assists the plaintiff. We would submit, with
respect, that there is no real doubt that on the
approach taken by Your Honour this would be an
excise.
I turn to the second part of my submissions,

which is a submission as to whether the Court
should hear argument that Dennis Hotels should be
overruled, and I have telescoped in this section
whether it should be overruled with whether the
Court should hear the argument. Although that is
not done, perhaps, so formally in the submissions.

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As Your Honours have not separated it, I will not
separate it.
We first make the obvious submission. This Court has on two occasions declined to hear
argument to this effect in relation to Dennis
Hotels: once in Evda Nominees and once in Philip

Morris. And in addition in Dickenson's Arcade and
for that matter in H.C. Sleigh, it declined to
overrule it.
We submit that the reluctance to overrule a

long-standing decision must be greater, not less,
when there have been previous refusals. The mere
fact that a litigant, or a State, comes back to
this Court again and again and says, "I renew the
application'', gives it no additional strength and, in our respectful submission, adds considerably to

its weakness. And what one has to ask is this:
what has changed? Why is it that in Evda Nominees
and in Philip Morris there was no reason for doing
it but today there is?
We would submit that nothing has changed.

Certain things have altered in our favour - in

favour of the status quo. The first is that the
Commonwealth now supports the status quo. That is
a significant matter for the Court to take into

account. The second is that only one State seeks
the overruling, and one Territory which is the
party to the case.
The third is that the economic system, which

the Court regarded as a factor for not overruling
the case, has continued for a number of further
years; for, I think, four more years. That must be
a very significant factor. It is not merely a case
where the Court has said, other people have acted
on our decision in case X, therefore we will not

overrule it because of that acting, but it goes

much further. The Court has, having said that
once, people have continued to rely not merely in
reliance on Dennis Hotels, but in reliance on this
Court saying it will not overrule Dennis Hotels.
So that case is far stronger, we would submit, for
retaining the status quo than in any other case
where a party comes to the Court and says, we would
like you to reconsider that case.

But there is a further argument. perhaps understand if Your Honours were minded to

One could
do what was done in Cole v Whitfield, if
Your Honours could discern a common view as to what
section 90 meant, that there might be some
advantage, although we would submit against this
course, in the Court saying, we will deliver a
joint judgment, we now have all reached agreement

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and this is the new view of section 90 which
repeals all 29-odd cases on the subject. But
although I am not obviously able to make this
submission as a matter of certainty from this side
of the bar table, it must be obvious from a reading
of Philip Morris that that is not the situation.
Now if that is not the situation, one has to

say, what is going to be gained? There will now
be, instead of the approach taken in Dennis Hotels
there will be a clean slate; four of Your Honours
have indicated the view that Your Honours would
take in relation to excises; there may no longer be
an exception in relation to the licence cases,
except perhaps in much stronger cases of licences;
there may be the distinctions which the four of
Your Honours who have taken that view have laid
down, which are slightly different, but certainly
similar, and there will be the two minority views

which appeared in Philip Morris. And how, one
asks, is anyone better off, except that those who
relied on Dennis Hotels have lost their exception.
In my respectful submission, stare decisis has

always accepted in multi-judge courts, that there
may be situations where the result in a case is not
the same as the sum of the individual judgments. for different reasons, with the result that
although there is a majority for each dissenting
point, there is a minority for the result that the
dissentients would seek. There is nothing
surprising about that; it inevitably occurs in
multi-judge courts, and it has occurred in this
Court from time to time and, in my respectful submission, largely for the reasons given by the
Chief Justice and Justice Deane in Philip Morris,
that is something which can continue.
It is not as if there is any embarrassment or

difficulty for anyone, except perhaps law students
studying section 90; there is no difficulty for the
States. They are well able to devise liquor and
tobacco taxes, and perhaps petrol taxes, although
they may be in a limbo at the moment, but they are
well able to devise taxes in those three areas
which comfortably fit with the views which four of
Your Honours expressed in Philip Morris.

McHUGH J: But this submission assumes that Parton did not

wrongfully withdraw the States' entitlement to
taxation of goods. Supposing the view that
South Australia seeks to put is the correct view in
this particular case, the fact that Dennis Hotels
was overruled would not matter.

Capital	20/4/93
MR BENNETT:	Your Honour, we would firstly submit it is not

the correct view. We would secondly submit that
there is not a majority for that view, and the very
phrase "correct view", itself, makes an assumption about the existence of previous authorities. What we submit is that the appropriate course is simply
to leave the matter where it was left four years

ago. The States know what they can do, they know
what they cannot do, and the economic system which
has been built on Philip Morris can continue, and
at the same time, new taxes which would be regarded
as excises, cannot continue.
If Your Honours were to take a different

course, of course we have a submission as to what
should occur. But, in our respectful submission,
the various factors I have indicated suggest that
there should be no reconsideration.
May I finally make some short submissions as

to the rule which we submit should be laid down if
Dennis Hotels and the franchise cases are
overruled, and there is no surprise in our

submissions in this area. We adopt the tests laid
down by the Chief Justice and Justice Deane; we
would be content to accept the formulations of

Justice Brennan or Justice McHugh. I have given
the reasons why the Court should not accept the
formulations of Justice Dawson, nor of
Justice Toohey and Justice Gaudron.
Putting this a little differently, if the case

were to be overruled, the Court would have three
realistic choices: it could adopt the views of
Your Honour Justice Dawson; it could adopt the
views of Justices Toohey and Gaudron, or it could
adopt a view similar to the views expressed by the
four Justices whose views we adopt, and we submit
the third of those is the most appropriate.

I should, for the sake of completeness, say

there are three other views that could be adopted.
It could adopt the past/present distinction which
was the basis of three of the judgments in
Dennis Hotels, that if you calculate the reference to a past period, you are right, but if you
calculate the reference to a present period, you
are not. That is a distinction which, we would submit, would be inappropriate, although there,
ironically, it may well be that if that were
adopted, the amendment has had the effect of making
what was not an excise into an excise.
One might take the very narrow approach taken

by Justice Fullagar in Dennis Hotels, and say it is
only a tax on production or manufacture, but that
seems to be a view which has no modern supporters.

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One could say, thirdly, that the view hinted at by
Justice Dawson in Philip Morris, that it is only manufacture in a State, but that again, we submit,

for the reasons I have given, is inappropriate.
So, if there is to be a fresh analysis, we

submit that it is the view of the Chief Justice and
Justices Deane, Brennan and McHugh, which form
between them the basis for a fresh rationale.

I should say one other thing. At

pages 12 to 13, we have listed the way the four
criteria for overruling cases,referred to in John's
case, might be applied here. Just going through
those: the first is that Dennis Hotels rests on a
principle carefully worked out in a significant
succession of cases, at least 11 of them and, in
particular, it seems to have applied Matthews and
Parton.
The second submission requires a little bit of

development but we make this submission, that all
the judges in Dennis Hotels, except
Justice Fullagar, were not in great disagreement as

to the principle to be applied. The difference
between the three Justices in the majority, other
than Justice Fullagar, and the three Justices in
the minority, was simply based on this question of
past or future, and that distinction was, if one
goes to the case - seems to have been based on very

similar tests to those which we espouse. May I
just make that good.
If Your Honours go to Dennis Hotels, 104 CLR

529, Justice Taylor, first of all, at page 577 to
578, makes an interesting point about the
significance of an annual licence fee. Three lines
from the bottom of page 577 he says this:
A review of the history of the legislation
shows that, in Victoria, until 1916 licensed

victuallers were required to pay fees
determined by reference to the assessed annual
value of their premises though from 1906 to
1916 they were required, in addition, to pay a
"compensation fee" calculated by reference to

a percentage of past purchases. Then in 1916
provisions not dissimilar to those now in
force came into operation. In these
circumstances it is said that there was a
change from an impost which was not a duty of
excise to one which is, the ground for the
assertion being that the fee has changed from
a fixed fee to one that is calculated by the
view I am unable to see that this
application of a percentage to past purchases. contrary

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change had the effect of transforming the
character of the fee and of making it a duty

of excise. Even if one is prepared to accept
fully - which, as at present advised, I am
not - that a tax payable by a trader and
measured by the amount of the commodities
which he buys or sells in the course of his
business is, prima facie, a duty of excise
there is, I think, ample in the considerations
to which I have already adverted to displace
any prima facie impression which the formula
for the calculation of the fees payable by
licensed victuallers may tend to produce.
There can be little doubt that the annual purchases made by a licensed victualler are,
in practice, a reliable and well-established
guide to the annual value of his licensed
premises and to me there is no significant
difference between a fee which is calculated
by reference to that value and one which is
calculated directly by reference to past
purchases. In these circumstances to say that
one is a duty of excise and the other is not
is, I think, to attach far too much
significance to the manner -
et cetera. Now, what that indicates is this: that
because a licence fee based on value of business is
closely related to the value of the licence, the
value of the licensed commodity as opposed to the
value of the goods, it is less likely to be an
excise. But here, of course, one is dealing with a
one month turnover. While a year's turnover may be
a reasonable guide to value, a month's turnover

simply is not. No doubt this commodity, like all
others, is to some extent seasonal, but in industry
generally it is well known that a monthly figure
has no relationship at all to value, it can vary
far too much; an annual figure does.

So there is a significant distinction on that

test between the present case and the other, but
what is important for present purposes is that it
is that sort of factor which leads His Honour to
say there is a distinction between a fee based on a
past period, a past period which gives an
indication of the value of the licence, and a fee
based on a current period.
Justice Kitto at page 566 makes in effect the

same point. At almost exactly the middle of the
page, Your Honours see the word "case" in the
left-hand margin:
But if you are going to lay down a formula for
general application the figures of the most
recently closed financial year are probably as

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convenient a guide as you can get. And the
important point is that in so far as they are a guide to the probable volume of business in
the near future they are a guide to the
relative values, as between different
businesses in the same class, of the
advantages which licences will confer.
Again therefore, the same point is made. That does
not apply to a monthly licence as much as to an
annual licence, but in any event it shows that what
one is looking for is: is there a closer
connection other than a mere licence - very much

the approach taken by Justice Brennan. The third
Justice in this group, Justice Menzies, at
pages 580 to 581, relies on a slightly different
factor. His Honour places weight there on the fact
that if one does not renew a licence, one gets a
year's worth of goods that are never taxed. That
is far more significant than the two months in the
present case, but again what is important is that
this is part of an overall weighing process.
None of these three Justices are saying that

for all purposes anything that is a licence fee is

not an excise. They are saying one must apply a
test, one must look at the substance, one must work
out is this really the one or the other, and one
does that by asking all these questions and looking
at these indicia, which is a process the Court

applies in many areas of law. We submit that that
approach is not significantly different from the
approach taken by Sir Owen Dixon and by
Justices McTiernan and Windeyer, the three Justices
who took the other point of view.
So really, Dennis Hotels is a case where on one view of it, six of the Justices took an
approach which is similar, although the results

they reached were different. It is true they did
not comprise the whole of the majority, but nevertheless we would submit that that fails to satisfy the second criterion in John's case for
overruling.
The third criterion is the obvious one I have

referred to and the one the Court has referred to:
the importance of the States having ordered their
affairs and the economic balance. We call in aid
the absence of enthusiasm among State
Solicitors-General for my learned friend Mr Doyle's

position. We submit that is eloquent support for
the status quo.

The fourth factor is an obvious one. We add

to it a factor to which I referred earlier, that
this is not merely a case of a decision people

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acted on; it is a case where people have acted on
a statement that the decision is not going to be
overruled. Indeed, that has occurred on at least
two occasions.
Finally, I come to the question of censorship.

This is a very short point. I will not detain
those at the bar table who are not interested in it
longer than I need to. It really is a defensive
point and it arises in this way: if Your Honours
are of the view that the exception in Dennis Hotels
stands and should be extended to pornographic
videos because they have some similar features with
alcohol and cigarettes, if Your Honours take that
view, then, we would submit - and it would follow
that Your Honours would also have taken the view
that this is substantially a regulatory Act - one
then has to have regard to the Australian Capital
Territory (Self-Government) Act. Section 23
excludes from that Act - it is only 11 words so
Your Honours will not really need it:
Subject to this section, the Assembly has no
power to make laws with respect to:
(g) the classification of materials for the
purposes of censorship.

That was something which was left to the federal
Government.
If this is substantially a regulatory Act

then, we submit, it falls within that exclusion.
Might I just show Your Honours what it does. If
Your Honours go back to the Business Franchise
( "X" Videos) Act, Your Honours will see the
prohibition is against wholesaling or retailing

"X" videos. An "X" video is a -
video classified as an "X" film under the

But under section 16 it is given an extended Classification of Publications Ordinance.
definition, and Your Honours will not need that
ordinance. Under section 16 the licence fee
section extends it to -
a video which at the time of that supply or
offer was not classified, or which had been
refused classification under the
Classification of Publications Ordinance, but
which is later classified as an "X" film.

So one is dealing with, amongst other things,

unclassified videos. Now, the process of
classification, we submit, is a process which
involves the identification, by reference to

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consequence, of the classes into which items are
divided. It would be a meaningless exercise for
the Commonwealth, which has the power of
classification, to divide all films into A, B, C, D
and E down to Z films and say nothing at all about
what one can do with the different categories, and
then for the Territory Government, which has no
power in relation to classification, to say, "Well,
we will say that you have to be 15 to see an A
film, 17 to see a B film, accompanied by a parent
to see a C film, and in a special type of premises
to see an E film", and so on. If one does that, if one imposes consequences different to those imposed by the person who merely identifies what category
they fall into, then, in my submission, one has
classified because what is relevant about the class
is not naming it, not the letter X, or the letter

A, B, C or G or anything else. What is relevant is
what one can do with it.

BRENNAN J: But is the Classification of Publications

Ordinance 1983 - did it survive the enactment of the (Self-Government) Act?

MR BENNETT: It is a Commonwealth ordinance, Your Honour.

BRENNAN J:	Commonwealth ordinance.
MR BENNETT:	It did not become an enactment; it is a

Commonwealth ordinance which is in force - - -

BRENNAN J: In force in the ACT - - -

MR BENNETT:	Yes, Your Honour.
BRENNAN J:	by operation of what?

MR BENNETT:

By operation of law.

It was not repealed by

anything in the ACT (Self-Government) Act.

BRENNAN J:

Do not let me delay you.

MR BENNETT:

No.

I will just show Your Honour the -

Mr Refshauge is just turning it up in the
ACT (Self-Government) Act, Your Honour. But, if I
can just say this, section 34 of the
ACT (Self-Government) Act provides that in subsection (6):
The regulations may amend Schedule 3 by
omitting a law from that Schedule -

that did not occur -
If, before 1 July, 1992, the regulations do not amend Schedule 3 by omitting all the laws

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in Schedule 3 ..... then ..... those laws shall be
taken to be enactments -
and Schedule 3, which is laws and provisions not to
become enactments, includes the Classification of

Publications Ordinance 1983. So it simply remains
a Commonwealth ordinance and never became an
ACT enactment. It is under the Seat of Government
Act.

BRENNAN J: Except after 1 July, 1992.

MR BENNETT:

It was added to schedule 3 by a regulation

before the commencement date of the Act. So it is
in schedule 3, but it does not, in one sense,
really matter whether it became an enactment or did

not, for my purposes. The submission we make is
that whether it became an enactment or not, the
present law is a law with respect to the
classification for the purposes of censorship if
what it does is impose regulatory consequences
which depend upon the way a film has been
classified, and that is really the point we make.
We are not attacking the Classification of
Publications Ordinance; what we are attacking is
this Act in so far as we say it relates to
classification.
And then the second part of the submission is that this is a fortiori because of the words "with
respect to". Clearly this is a case where it is an
enactment of laws with respect to a classification
of materials. If an ordinance adopts one of the
Commonwealth's classifications and imposes
consequences, it must be a law with respect to

classification. We would go further and say it is
a law which classifies, but even if one does not go
that far, it is certainly with respect to

classification. And then we point out in relation
to section 16, that is even stronger, because the

consequence is imposed on a class which does not
exist independently under Commonwealth law; that is
a class of unclassified films. So, in so far as there has been no classification of unclassified
films, this ordinance creates that class and
imposes consequences by reference to it.
As I say, the submission only arises if

Your Honours take the view that this is a
regulatory Act and, for that reason, not an excise.
For the reasons we have given, that, I would
submit, would be inappropriate. For those reasons,
it is our submission that the legislation is
invalid as an excise or possibly pro tanto as a
customs duty and pro tanto as an excise duty, in so

far as it imposes the irrelevant impositions. I

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will bring in, in the morning, an amended statement
of claim which I will then seek leave to file.
The only matter I need to mention before I sit

down is to remind Your Honours that we have not
dealt at all, because we regard it as not being
included in this question referred to the Court,
with the question of recovery of fees paid in the
past. That is a matter which would obviously
require evidence and would have to be determined
independently, if we succeed in this hearing. We
remind Your Honours that it is not a matter which
Your Honours need to give any attention to so far
as Your Honours' judgments in these proceedings are

concerned. May it please the Court.

MASON CJ:

Thank you, Mr Bennett.

Mr Solicitor for the

Commonwealth.

MR GRIFFITH: If the Court pleases, may I briefly revisit

the Court's ruling this morning in respect of order

of addresses. We have exposed our submissions by
filing full written submissions, as directed by
Your Honour the Chief Justice, with the Court last
Friday, which indicates the basic Commonwealth
position to, as we put it when we announced our
appearance, support the status quo but adopt the
view that excise is not limited to imposts on
Australian production and also to revisit the issue
of taxes on consumption and to put a submission
that the proper definition of "excise", if the
Court is minded to revisit the issue of the meaning
of "excise", does, in our submission, include
"consumption".
The difficulty for us in speaking next after

the plaintiff in our address to the Court is that
the learned Solicitor-General for South Australia
has indicated that he intends to engage in a
wholesale attack on the definition of "excise" as

it has been received in this Court, quite apart from the Dennis Hotels exception and, to put it
simply, our position is that there is an element of
Aunt Sally in us, at this stage, having to address
that argument when it is an argument which has not
been put to the Court and, in ordinary order of
proceedings, would be one for those attacking
doctrine to first put before it is answered.
So whilst we are quite content to put our

principal submissions to the Court, it would be our
submission that, accepting the Court's ruling this
morning, that the Commonwealth should have a right
of reply on that issue, confined to that issue.
Otherwise we are in a position of addressing
argument to a chimera.

Capital(4)

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MASON CJ: Yes, the Court is of opinion you should have a

right of reply on that issue, Mr Solicitor.

MR GRIFFITH:	I am indebted to the Court for that ruling.
The Commonwealth's position simply is that, in

this matter, it supports the status quo to resolve
the issue before the Court in this case, in the
context that we would submit that Dennis Hotels should be treated as a limited exception to the
general rule that an excise is any tax which is, in
substance, a tax on goods. So, to answer
Your Honour Justice Dawson's inquiry to my learned
friend in respect of what is the substance of
excise, we broadly adopt the statement of
His Honour Justice Dixon in Matthews, which we have
replicated in paragraph 1.1 of our submissions -
that is at volume 60 CLR at page 303 to page 304.
We submit that the Court should not reopen

Dennis Hotels in its consideration of the matters before it in this case, for the same reasons as
were determined by the Court in Evda Nominees and
in Philip Morris, and that is, we submit, for the
simple reason that the States have organized their
financial affairs in reliance upon this narrow
exception and it perhaps could be put, and we leave
it to the States to put it, that the effect of the
decision in Philip Morris would have served to
increase this reliance. It did clarify the

extremely limited nature of the exception. And it
is our submission to the Court that the
legislation, in this case, cannot fall within the

exception and, for that reason, is invalid. We do
not wish to detain the Court with any detailed
examination of the legislation and, if the Court
pleases, could we hand to the Court a written
submission dealing with the terms of the
legislation as to why we say that it would
constitute an excise.

Those submissions were prepared in ignorance

of the amendment constituted by the 1993 Act No 15
of 1993 and, if we may make two short observations
as to the terms of that legislation. Firstly, the
amended section 19 substituted by the 1993 Act does
seem to be a very curious provision because it
substitutes for an initial fee fixed by reference
to a quantum 40 per cent of the defined subject-
matter, a fee which is defined as being one merely as being fair and reasonable in the circumstances,
and we would make a passing observation to the
Court that it may well be, although we do not see
it is our role to carry that issue before the Court
here, that - - -

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DAWSON J: Taking up 1.2 in that document you have just

handed up, Mr Solicitor, how do you differentiate
between a land tax on the producer of goods and an
excise, or qo you say a land tax is an excise?

MR GRIFFITH:

I am sorry, Your Honour, could you repeat

that.

DAWSON J:

How do you differentiate a land tax on the

producer of goods from an excise duty?

MR GRIFFITH:

Your Honour, really by reference to the test

of Matthews would be our cornerstone.

DAWSON J: I am looking at 1.2. That is the test, is it,

that you suggest?

MR GRIFFITH:	Yes, Your Honour, but - - -
DAWSON J:	Does not a land tax find its way into the cost or

price structure of goods produced?

MR GRIFFITH:

Your Honour, we submit that it is an impost in

respect of the ownership of land.

DAWSON J:

Maybe it is, but it finds its way into the cost

or price structure of the goods.

MR GRIFFITH: That is the issue of inquiry, Your Honour, and

so far there has been no decision of this Court
that a land tax does so constitute. It may be if
it was raised for consideration, Your Honour, that
one could apply the test and - - -

DAWSON J: It is common sense, is it not, that any cost

finds its way into the cost of the goods?

MR GRIFFITH:

Your Honour, we submit that although of course

one accepts that goods do not pay imposts, that
common sense is able to distinguish when in fact

there is an impost on commodities as commodities,
as distinct from other imposts in effect on
obligations on the person who is liable to pay.

DAWSON J:

Common sense has not suggested much in 70 years

in that direction. I am just taking the test that

you posit there. Why is not a land tax an excise
if it is imposed upon the manufacture of goods?

MR GRIFFITH:	Your Honour, it may in some circumstances be, but we submit that is not the inquiry to determine
whether or not a particular impost is an excise, to
exhaust the possibilities of whether it may be possible to say whether a particular impost - in
Your Honour's example, land tax - could constitute
something which might be regarded as a tax on goods.

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DAWSON J:

I do not understand that. Are you not saying

there that the inquiry is whether the tax finds its
way into the cost or price structure of the goods?

MR GRIFFITH:

Your Honour, the inquiry is whether or

not - - -

DAWSON J: Is that the test you are suggesting?

MR GRIFFITH:

Your Honour, what we say is whether or not it

is levied upon goods.

DAWSON J:

But that does not tell you much.

The next step

you say is: does it finds its way into the cost of
the goods?

MR GRIFFITH:

Your Honour, does it have a close relation to the production or manufacture or consumption of

goods? That is a matter of particular factual

inquiry. One has to decide whether there is a
close connection or not. Hitherto in consideration

in this Court of this issue, a tax such as a land

tax or, if one likes, Your Honour, the bare licence
fee not in relation to volume that was in the

Peterswald case, has not been regarded as such an

impost as constituting a tax upon goods.

appreciate the logic of Your Honour's remark that
it may be possible to look at other fees, for
example the sort of fee that was imposed in the

Hematite case, and form a view as to, although it

was a lump sum fee, whether it was one which

constituted an impost upon goods bearing a
relationship to goods.

That becomes a matter of particular factual
inquiry in the circumstances but, Your Honour, we
do submit it is not possible to say just because
there is an outgoing, that necessarily follows that
it finds its way into the price of the goods and
therefore is an excise, or it is not.

DAWSON J: All right. If you find there is a land tax and

you inquire and you find that the land tax finds
its way into the cost of the goods, do you then say
the land tax is an excise?

MR GRIFFITH:

Not necessarily, Your Honour.

DAWSON J: If it finds its way into the cost of the goods.

MR GRIFFITH: Your Honour, it still remains whether or not

one can say that there is a close relationship.

DAWSON J:

What is your test for finding whether the

relationship is close enough?

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MR GRIFFITH:

Your Honour, the test which has been adopted

by the Court in its consideration of excise. When
one looks at the circumstances - Hematite is a good
example of looking at the circumstances where there
is basis where minds might differ, Your Honour, but
the view is taken in the Hematite case by a
majority of this Court that, in the circumstances,
a lump sum fee did constitute an impulse which did
enter into the price of the goods, did have a close
connection with goods in their manufacture,
production, distribution or consumptions, and for
that reason was to be characterized in excise.
But, Your Honour, it does become a matter of
inquiry as to which side of the line one is on, and
for the moment land tax is not being an impost
which has been regarded by any decision of the
Court, as being on the other side of the line.
With respect, Your Honour, one cannot answer the
question of what is a definition of excise by
postulating every form of charge and input in the
production, manufacture or distribution of imported
or locally manufactured goods, or even consumption,
as we submit, as being a necessary ingredient to
the basic definition of what is an excise.
But, if Your Honours question is, "Is it

possible that a land tax may be an excise?",
Your Honour, our first answer to that is to say
that is an inquiry for another day. For the
moment, Your Honour, the authority of this Court
does not seem to indicate that it is. If that did
become an issue, Your Honour, it would involve the
same sort of inquiry, in our submission, as one
would have seen in the Hematite cases, for example.

MASON CJ:

Mr Solicitor, I thought you were using the word

"directly" in that proposition to exclude taxes
like land tax, but of course you have blurred it by
putting in parenthesis the words "in substance and
practical operation".

MR GRIFFITH:

Your Honour, it was not intended to blur it,

so perhaps if we could take the blurring out by
taking out the parentheses there but, Your Honour,
it is a question of directly affecting, and
Your Honour, the decisions of this Court, if they
do one thing, Your Honour, we say enable one to
form - whilst these decisions remain as decisions
of the Court, to approach the issue absent the
Dennis Hotel's exception, in a rational way to form a view as to whether or not there is the close
relationship, so one, in effect, has an impost
which one can say is impost upon goods with respect
to commodities. We would admit, Your Honour, that
on the face of things, a land tax is not an impost
on commodities.

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MASON CJ:

What do you mean by, "on the face of things".

Are you suggesting, as I gather you did in one or
two of your responses to Justice Dawson, that a
land tax could, in some circumstances, be an
excise?

MR GRIFFITH:

No, we are not suggesting that, Your Honour.

We say that it has never been suggested in this
Court that it is a land tax. If it -

MASON CJ:

I thought you came perilously close to

acknowledging that there might be circumstances

MR GRIFFITH:

Your Honour, that was not intended. If that

was claimed in this Court, Your Honour, well then
we would respond to that as an issue, but we would
say, Your Honour, it is clear enough at the moment
that such an impost is not regarded as being
something which does directly affect commodities.

McHUGH J:	What about a payroll tax on employees engaged in the production of goods?
MR GRIFFITH:	Your Honour, that would seem to be within the

same category. I do not want to appear to be
wishy-washy in resiling from a dogmatic answer that
would seem on authority that a payroll tax has not
been regarded as an excise, but at the same time
there is no authority of this Court holding that.
Now, it is conceivable that a case might be mounted
by reference to evidence of economists or something of the like, with respect to such an impost, and if
that happened, the Court's duty would be to
consider that evidence and to form a conclusion as
to whether or not one can say there is a tax which

directly affects commodities. Now for the
moment - - -

McHUGH J: Is not the problem that the criterion of liability

test kept the Parton test in check? Once this
Court abandon the criterion of liability test, then
the Parton test runs wild.

MR GRIFFITH: With respect, Your Honour, it does not run

wild.

McHUGH J: Well, once you start talking about substance and

practical operation, all you can do is make a value
judgment from case to case. That might satisfy
members of the Court who decide the case, but it is
very difficult from a government's point of view,
is it not; from a State's point of view, knowing
what they can do and what they cannot do.

MR GRIFFITH: With respect, Your Honour, there is settled

guidance from this Court, absent the Dennis Hotels

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exception, as to the meaning of excise and perhaps,
Your Honour, this legislation is a good example
because in essence when one looks at the history of
this legislation it arose because of the issue
which was determined adversely to the Territory in
the Capital Duplicators (No.l) case, 109 AR 1, as
to whether or not section 90 bound the Territory.
That issue having been determined, one is left with a legislation, in our submission, which fairly clearly cannot be supported because it is an excise
and one which, we would submit, also fairly clearly
does not come within the Dennis Hotels exception.
So that there is not all that much difficulty about
it, with respect and, Your Honour, one can confirm
that by looking at the filed submissions of South
Australia which meet that obvious problem head on
by saying let us redefine excise to, in effect,
exclude it as a limitation on the, capacity of the
States to impose indirect taxes.
It is basically what the submission for South

Australia would seem to be on their filed
submissions, and we have not heard from the other
States as to their attitude with respect to that matter other than there seems to be an indication that the other States would wish to argue that
issue with Dennis Hotels safely in their pockets,
rather than to have Dennis Hotels itself up for
reargument, as was submitted in the Philip Morris
case.
But, Your Honour, with respect, there is a

reasonable element of certainty in application of
the present test and it is one which is capable of
marking off the basic position, in our submission,
whereby impost on goods, whether imported or
locally manufactured, are beyond power of the
States. Our submission is that that is not a
result which is surprising, it is one which was

intended by those who drew the Constitution and is
a necessary meaning to be drawn from the several
provisions of the Constitution dealing with the
consequences in respect of the imposition of
customs duties, excises and bounties upon the
imposition of uniform duties of customs.
So, in answer to your question, we would say

there is in practice not all that much difficulty
in applying the test that had been accepted by the majority of the Court. The difficulty has been to
admit philosophically, in our submission, the
Dennis Hotels exception, it having no other
justification other than it is there and the States

have acted in reliance upon it. As to that, our
submission is a rather pragmatic one: the
Commonwealth law accepts it because it is there.

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To indicate that our view is pragmatic, if the
Court did choose to reopen Dennis Hotels, our submission is that the Court on reconsidering the
issue of the Dennis Hotels principle, if it be
called principle, should overrule it and return to
what we say is the correct expounded doctrine of
this Court on the meaning of excise.

DAWSON J: That is what I am trying to - I will not pursue

this, Mr Solicitor, but how can a tax directly
affect the cost of goods as opposed to indirectly?

MR GRIFFITH: Well, Your Honour, in our submission there is

no real difficulty in fact in determining whether
or not there is an impost upon goods as goods.

DAWSON J: That is not the question I am asking,

Mr Solicitor. Can you give an example of a tax
which directly affects the cost of goods, as
opposed to indirectly?

MR GRIFFITH:

Your Honour, a tax that directly affects the

cost of goods is a sales tax, at the point of final
sale.

DAWSON J: It is passed on in the price.

MR GRIFFITH: Well, it directly affects the price of goods,

Your Honour.

DAWSON J:

Only by being passed on in the price.

MR GRIFFITH: Well, that is the manner in which it affects

it, Your Honour.

DAWSON J: Yes, but every tax is passed on in the price, in

so far as it can be.

MR GRIFFITH:

Your Honour, unfortunately I do not have a

qualification in economics, but my understanding is

by the person who - - - some taxes are of the nature which have to be borne

DAWSON J:

A direct tax is a tax which is paid by the person

on whom it is imposed.

MR GRIFFITH: Yes, Your Honour, but it is not imposed in

respect of goods.

DAWSON J: That is not to the point. All taxes on the

manufacture of goods, if they are passed on, are
passed on indirectly in the price.

MR GRIFFITH: Well, Your Honour, income tax is perhaps an

example.

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DAWSON J: That is a direct tax, yes, but we are not talking

about that.

MR GRIFFITH: But, Your Honour, we say it is not passed on.

DAWSON J: But you say the test is whether it is passed on

directly.

MR GRIFFITH:

Our submission basically, Your Honour, is

whether or not it is a tax on goods.

DAWSON J: But that does not tell you anything.

MR GRIFFITH: Well, Your Honour, the High Court, for 90

years, various of the Justices have been telling us
this is the basic inquiry.

DAWSON J:

But they have pointed out time and time again

that goods do not pay taxes, that what determines
whether the tax is a tax on goods is some
relationship between the tax and the goods, and
then one has to find out what the relationship is.
You say the relationship is a direct effect on the
price structure.

MR GRIFFITH:

Your Honour, we say: is it a tax directly

affecting commodities? And that, Your Honour, is a
basic approach which has enabled the Court to
distinguish cases such as payroll tax or land tax,
if you like, from taxes which impose an impost on

commodities. Now, the Hematite case, Your Honour,
indicates how the Court has regard to matters of
substance and has regard to circumstances other
than mere criterion of application but, none the
less, Your Honour, the inquiry is one which the
Court has, over the years, been able to answer in
specific cases as to whether or not it can be said
the impost is an impost directly affecting
commodities.

The point we wish to make is that it seems to

us that there is a logical consequence that one
should have regard to imposts on consumption as
much as one has regard to imposts on production,
manufacture, distribution and final sale leading to

the point of consumption. And we would say that
Dickenson's case is a good example where there was,
in effect, an attempt to apply a consumption tax
which, none the less, was dealt with by the Court
in the context of excluding because, historically,
some judgments of this Court had done so by
reference, it seems, to the Canadian experience of
direct and indirect tax which, we submit, in our
submissions, is an inappropriate analogy to exclude
consumption. But subject to that addition, Your
Honour, it is our submission that the authority of this Court is reasonably clear as to what is a

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definition of excise; it is one that is readily
understood.

DAWSON J: Well, that is a view that I cannot share.

MR GRIFFITH:

We accept Your Honour's view as to that but,

Your Honour, what we seek to do in our submissions,
if we may enlarge upon them, probably after the
luncheon adjournment, is that the consequence, in
our submission, of taking a narrower view and
confining the meaning of excise to imposts on
production or manufacture or, very narrowly, just
to production, is to entirely undermine the
constitutional scheme to ensure that there should
be a customs union within Australia upon the
imposition of uniform duties of customs.

McHUGH J: But in Hematite, Mr Justice Gibbs pointed out

that the States could do that in numerous ways.
They can build railways, they can reduce petrol tax
or -

MR GRIFFITH: Yes, Your Honour, but what they cannot do, in

our submission, is to destroy the constitutional
structure of prohibiting States by duties of
customs and excise from interfering with the tariff
union which is constituted under the Constitution.
There may be a capacity to deal with the question
of what businesses are carried on, whether they can
be carried on at all, which His Honour
Justice Gibbs pointed out. But what the
Constitution prohibits is the breaking down of the
fiscal union of the sort which Australia has had
since, I think, April 1901, which has been the aim
and object of the European Community for the

23 years past. And it is only as from
1 January 1993 that the European Community, by at
least seeking to limit differentials to 6 per cent
between the members of the Community, is
approaching what we submit is the basic fiscal
union, the tariff union, which is provided by the

terms of the Constitution; and advisedly and
openly provided in the context, we submit, that
those who drew the Constitution were aware that a
consequence of this would be that the States did
lose all control as it then was over indirect
taxation, and they did lose control over some
80 per cent or so of their revenues, principally
customs revenues, but also imposts by way of
excise.

We submit, Your Honour, that the

constitutional intention is one which was affected
and in a form which we say has been recently
conferred in the judgment of three members of this
Court at least in the Capital Duplicators case. If
I could refer the Court to the judgment of

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Justices Brennan, Deane and Toohey in Capital
Duplicators, 109 ALR 15 - it is our basic
submission that this judgment from page 15 to
page 20 conveniently summarizes the reason, in our
submission, that one cannot accept a view of excise
of the sort put to me by Your Honour Justice Dawson
as being an impost to be defined by criterion of
operation alone and limited to imposts, in so far
as the definition of "excise" is concerned - - -

DAWSON J: That may not be the best test, but it is faute de

mieux.

MR GRIFFITH:

Yes, well, I accept what Your Honour says, but

in the context we submit that the answer is the
analysis of the three Justices that I here refer to
confirming - I will not read all of what was said,
but I adopt all of what was said between page 15 to
page 20 where one sees at page 16 line 10:
As Cole v Whitfield showed, one of the

objectives of the federation was the creation
of a free trade area embracing the
geographical territory of the uniting
Colonies.

Then there is a reference at the foot of the page
to Cole v Whitfield holding:
the purpose of section 92 was:
" ... to create a free trade area throughout the
Commonwealth and to deny to Commonwealth and
States alike a power to prevent or obstruct
the free movement of people, goods and
communications across State boundaries."

In the next paragraph the point is made by
Their Honours that:
the Constitution made provision to ensure that

the Parliament, and the Parliament alone,
should have legislative power to impose duties
of customs and excise and to grant bounties on
the production or export of goods.

And at line 18:
To create and maintain a free trade area
embracing all parts of the Commonwealth, the

Constitution provided, inter alia, that
uniform duties of customs should be imposed
(s 88) and that, on the imposition of uniform
duties of customs, all State laws imposing
duties of customs or excise or offering
bounties on the production or export of goods
should cease to have effect and the power of

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20/4/93

the Parliament - that is, the Parliament of
the Commonwealth - to impose duties of customs
and excise and to grant bounties on the
production or export of goods should become
exclusive and, further, that trade, commerce
and intercourse among the States should be

absolutely free. When ss 88, 90, 92 and 99
are read, as they were read on 1 January 1901,
in the context of a Constitution dealing with
the distribution of the entirety of Australian
legislative power - Imperial power
apart - which might be exercised over the
territory of the Commonwealth, those
provisions can be seen to effect the objective
of creating a free trade area em.bracing the

whole of that territory. The collection and
control of duties of customs and excise and
the control of the payment of bounties were so
central to the fulfilment of the objective of
creating a free trade area that, on the
establishment of the Commonwealth, those
powers passed to the Executive Government of
the Commonwealth, and the departments of
customs and excise in each State were
transferred to the Commonwealth ..... It would
frustrate the manifest purpose of s 86 if,
after uniform duties of customs were imposed,
part of the functions of collecting and
controlling duties of excise or controlling
the payment of bounties were to pass from the
Executive Government of the Commonwealth to
the Executive of a territory government whose
legislature might be empowered to impose its
own duties of excise or to grant its own
bounties on the production or export of goods.
At the top of page 18:
When the Commonwealth was established, the
economic interests of all parts of the

Commonwealth were protected, inter alia, by

the exclusive power conferred on the discriminatory exercise of that power imposed
by ss Sl(iii) and 99 ..... In terms, s 90 makes
the legislative power of the Parliament in
respect of duties of customs and excise and in
respect of bounties exclusive of any other
legislative power.

Then there is a reference to the well-known
statement of Justice Dixon in Parton dealing with: "the power of the Parliament of the
Commonwealth to impose duties of customs and
of excise exclusive it may be assumed that it
was intended to give the Parliament a real

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control of the taxation of commodities and to
ensure that the execution of whatever policy
it adopted should not be hampered or defeated
by State action."
Their Honours refer to Mr Justice McTiernan
attributing to section 90:
the object of effecting "a uniform fiscal
policy for the Commonwealth" -

and accepting the remarks of Chief Justice Gibbs in
Hematite:
the object of s 90 was at least to prevent
frustration of the tariff policy of the
Parliament. It is a mistake to regards 90 as
doing no more than allocating the legislative
powers to which it refers as between the
Commonwealth and the States. It confined to the Parliament the power to impose duties of
customs and excise and to grant bounties as a
necessary part of the constitutional mechanism
for achieving an essential objective of the
federal compact: the creation and maintenance
of a free trade area throughout the
Commonwealth and uniformity in duties of

customs and excise and in bounties. As
Deane J said in Hematite Petroleum Pty Ltd v
Victoria:
"(T)the provision of s 90 of the Constitution that the power of the Commonwealth Parliament
to impose duties of excise shall be exclusive
cannot properly be seen as part of a merely
arbitrary division of legislative powers
between the Commonwealth and the States. To
the contrary, that provision - or some other
means of ensuring uniformity of excise duties
throughout Australia - was a necessary

ingredient of any acceptable scheme for
achieving the abolition of internal customs
barriers which was an essential objective of
the Federation and for ensuring that the
people of the Commonwealth were guaranteed
equality as regards the customs and excise
duties which they were required to bear and
the bounties which they were entitled to
receive."
Duties of excise are taxes which are

likely to be borne by the consumer. Wherever
they be imposed, they are likely to be borne
where the goods are acquired for
consumption ..... If s 90 is to play its part in
achieving the "essential objective" of
abolishing internal customs barriers and in

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guaranteeing equality as regards the customs
and excise duties which the people of the
Commonwealth are to bear, it must be construed
as restricting to the Parliament the sole
legislative power to impose duties of customs
and excise and to grant bounties on the
production or export of goods ..... Ifs 122
authorised the creation of a legislature for
an internal territory with the powers referred
to ins 90, it would be a Trojan horse
available to destroy a central objective of
the federal compact and to defeat the express
requirements of s Sl(iii) ..... It is not to the
point that, if the Parliament could validly
confer legislative power to impose duties of
customs and excise and to grant bounties upon
withdraw the power or to override its
the Legislature of a self-governing internal

exercise. The exclusivity provision of s 90
was incorporated in the Constitution not for the protection of the Parliament but for the protection of the people of the Commonwealth,
including those who resided in an area of a
State which was subsequently to become an internal Territory. They, no less than the other people of the Commonwealth, were and
remain entitled to the maintenance of the free
trade area throughout the Commonwealth which,
in the context of other provisions of the
Constitution to which reference has been made,
the exclusivity provision of s 90 of the
Constitution was intended to ensure.
Now, it is our submission that the propositions put by the learned Solicitor-General
for South Australia in his written submissions go
to deny what we submit are these fundamental
propositions and, in effect, to provide, if
accepted, that the basic equality as regards

customs and excise duties, the basic tariff
economic union which is the essential scheme of the
Constitution and indeed, we say, the main precipitating factor of the formation of the
Commonwealth of Australia, is any further to be
provided because, in effect, the submissions
embraced by that written submission to the court
would enable the States to establish inequalities
in respect of each of those fundamental matters by the provision of an impost on goods, in connection with goods which, but, whilst not being confined in
its application to goods manufactured either within
the State or within Australia, could be regarded as
being merely an impost upon commodities and, on
that narrow view which is submitted, therefore
permissible to create fiscal inequality within the
Commonwealth.

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The written submissions which we have filed in the Court seek to deal with the manner in which
such impost would have an effect contrary to those
fundamental principles which we say are
incorporated within the consitutional framework.
We deal with that in section 5 of our submissions,

page 15 and following. May I perhaps take the
Court briefly to those submissions.
What we here seek to do, is to demonstrate

that if there is a State or Territory tax on
production or on consumption, or on goods used to
make a. commodity or substitutes, that will have a
necessary impairment on Commonwealth tariffs; that
submission.we make in paragraph 5.3. Also, such
State or Territory taxes, we submit, would have an
impairment on Commonwealth bounties; that
submission we make in paragraph 5.4. And in 5.5 we
make what we say are obvious submissions in respect
of the necessary consequence of a State or
Territory tax on commodities as to impairing the
free trade area implicit or, we say, explicit in
the Constitution, if imposed at a stage of
production, distribution or consumption, and our
submission is that it is necessary for such imposts
to be uniform to ensure a free trade area, and the
necessary uniformity, in our submission, is secured
by the constitutional requirement that the power to
impose such imposts, whether they be duties of
customs or of excise or bounties, shall be
exclusive to the Commonwealth and, of course,
applied without discrimination.
We furnished to the Court a brief volume of

supplementary materials with respect to our
submissions, and if I could take the Court briefly
to the discussion which I have referred to of the
application of fiscal barriers in the European
community, in particular at page 141, an extract
from a European community document, Europe Without

Frontiers, completing the internal market.
What this extract does, in our submission, is
conveniently summarize the circumstance that, if
there are differential impost on goods between
States, that has the effect of dictating
particularly frontier controls to control the
movement of goods in response to such
discriminatory fiscal operations and also has an
effect of economic distortion between the States by
reference to the various rates of impost that

applied. Now, the mechanism adopted by the common
market to deal with these issues to avoid the
necessity for frontier controls, which of course
was the necessity also as an imperative for the
Constitution to eliminate colonial customs
barriers, was firstly to provide as from 1970 that

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value added tax should be adopted as the basic
mechanism for taxation of goods and services, and
secondly to move as speedily as possible to a
uniform taxation environment, so that if all goods
from all States pay impost at more or less the same
rate, then the problems of the frontier controls
would be removed. If I could take the Court to
page 144, where they discuss this mechanism of the
frontier controls and different levels in indirect
taxes, the discussion is quite interesting,
although short:
In the absence of any frontier controls,
significant price differences resulting from
differences between indirect tax levels on
each side of any border would provide an
irresistible incentive for those in highly
taxed countries to provision themselves in the
low-tax country next door.
The only way to avoid such artificial fiscal
incentives to the diversion of trade and
distortion of competition is to reduce the
disparities between Member States' tax levels
to the point where they no longer provide that
incentive. However, the objective of the
elimination of factors distorting trade must
be balanced with the need for national revenue
authorities to retain the greatest possible
discretion over the rates of tax appropriate
to their circumstances.
The example of the United States of America
demonstrates that you can have different tax
rates from state to state without frontier
controls between them. All that is necessary
is for the differences between neighbouring
taxes and the price differences they may cause
to be narrow enough to make smuggling
pointless. in the United States there are no
fiscal frontiers as such, nor is there

complete harmonization of retail taxation
between individual states. American evidence
suggests that some variations can be
accommodated provided they are limited in
scale. Differences of up to 6%, even between
neighbouring states, do not appear to distort
trade significantly. The Commission believes
that a similar system could be applied without
difficulty in the Community.
So the mechanism of the community to deal with

this problem is to seek to get within what is the
magic range of 6 per cent, and so in that way avoid
the distortions and the necessity to have frontier
controls. At page 141, the point is made the tax
man has perhaps the biggest stake in frontier

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control and the discussion on this page emphasized
very starkly the extent to which having
differential impost on goods has a consequence that
frontier controls and custom controls can become
necessary.
This position is also confirmed in respect of the European Community at page 154 where the author
Swan in a book published in 1978, I think, at 154
refers to article 99 of the Rome Treaty which
required the Commission to:
consider how to further the interests of the
common market by harmonizing the legislation
of the various Member States concerning
turnover taxes, excise duties and other forms
of indirect taxation -

and he refers to the requirement that all:

states were to adopt VAT by not later than
1 January 1970 -
but it has taken some 23 years since that date for
the harmonization in the European Community to
advance to the extent of the basic abolition of
border controls.
Annexed, also, in our materials is a document

source from a New South Wales task force
investigating the State tax system in August 1988.
And at page 165 that task force admits the problem
Dennis
with respect to imposing what we say is the given that Queensland, the adjacent State, does not levy franchise fees on petroleum or tobacco

products. The task force, on the following page,
recommends increases in the New South Wales tax if
Queensland moves to introduce a tobacco tax,
because the problem is that if Queensland does not,
the task force report makes it clear that one then

has the problem of cross-border traffic and
evasion.
But we refer to this material to make what we

say is the basic point, that the Constitution
explicitly provided for this tariff union which, we
submit, is the envy of other States. In the United
States of America, of course, there is no
equivalent of prohibition on excise, so one has the
basic operating position that as we mentioned,
6 per cent differential seems to work in a rough
and ready way, although the Court would see from
the extracts of the materials from Posner, which we
include at page 125 of our materials, that there
also are other difficulties with respect to the
movement of goods between States and the

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discrimination between goods produced in one State
and another, arising not only from sales taxes, but
arising from the differential operation of other
taxes.
If, for example, goods in one State had borne

a particular tax which is not a sales tax, and then
also bear a sales tax in the State where they are
sold, well then, there is an element of
discrimination of perhaps the Bath v Alston sort,
if I could refer to it in those terms, which can
distort the economic free trade area and, as we
have referred to in our other materials, the
European Community has taken almost a quarter of a
century to move towards what we submit is the basic
and informed provision provided in the structure of
the Australian Constitution to ensure that there is
fiscal union. That might be an appropriate time,
if the Court pleases.

MASON CJ:

The Court will adjourn now, Mr Solicitor, and resume at 2.15 pm.

AT 12.45 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.18 PM:

MASON CJ: Yes, Mr Solicitor?

MR GRIFFITH:

At the risk of exciting the Court with what

might seem submissions of counsel despair, may I
return briefly to the question of land tax. We
would submit that the issue of whether or not a
land tax can be an excise may depend very much upon

the circumstance of the land tax. Perhaps I should have thought of it before lunch, but I did not.
One can make the obvious distinction between a
general land tax which, on the face of things, one
would doubt would constitute an excise as being a
tax with respect to commodities, and a land tax
used on land for production; the sort of Matthews
type of impost. So that we would say in answer to
Your Honour's general question, it might depend on
the particular facts.

As to what is the appropriate approach, our submission is it is not a case to say there can be
no principles. Firstly, there is a role for
precedent but, secondly, we would say the sort of
inquiry is that which is embraced by way of example
in the statement of His Honour

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Chief Justice Barwick in Anderson's which is cited
with approval by Your Honour the present Chief

Justice in Hematite at 151 CLR 629. Your Honour
there said:
In Anderson's Barwick CJ expressed the broad
view of an excise, that a tax is a duty of
excise if it is upon or in respect of goods at
any point including the point of manufacture
or production as they pass to consumption,
saying:
" ... in arriving at the conclusion that the
tax is a tax upon the relevant step,
consideration of many factors is necessary,
factors which may not be present in every case
and which may have different weight or

emphasis in different cases. The
'indirectness' of the tax, its immediate entry
into the cost of the goods, the proximity of
the transaction it taxes to the manufacture or
production or movement of the goods into
consumption, the form and content of the
legislation imposing the tax - all these are
included in the relevant considerations."
To similar effect were the remarks of

Your Honour Justice Brennan in Philip Morris,
167 CLR 462, where Your Honour said, in the middle
of the page:
It is one thing to treat a tax calculated at a
modest rate on the value of commodities in
which transactions took place in a previous
period as a fee for a licence to continue to
carry on the business in which those
transactions took place; it is another thing
to treat in that way a tax calculated as a
large percentage of the value of the
commodities in which such transactions took

place. In the former case, a modest licence
fee calculated by reference to past
transactions may be merely a business overhead
in carrying on a current business, as Taylor J
noted in Dennis Hotels. In the latter case, a
fee which must be paid as the price of
continuing to carry on a business and which is
calculated at a substantial rate on the value
of a commodity in which transactions have
taken place in the business is likely to enter
immediately and precisely into the price

charged for the commodity to the next buyer in the chain of distribution and wears the aspect of a tax on transactions in the commodity
rather than a licence fee to carry on a
business. It appears more clearly as a tax
"upon goods".

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And to similar effect were the remarks of
Your Honour the Chief Justice and Justice Deane at
page 436, where Your Honours said:
In the end the reason why a tax upon any step
in the production, manufacture, sale or
distribution of goods is held to be a duty of
excise is that such a tax has a general
tendency to be passed on to persons down the
line to the consumer and will prejudice the
demand for the goods burdened by the
imposition of the tax.

One example of the sort of inquiry which none the
less can lead, we submit, to clear results, is the
decision of this Court in Browns Transport Pty Ltd
v Kropp, 100 CLR 117. In that case there was a
question as to whether or not there was an excise
by reference to a fee fixed by reference to the
goods carried, and at page 129 in the joint
judgment of the Court, it stated in the first full
paragraph:
In the present case it is clear enough

that the impost is a tax. "It is a compulsory
exaction of money by a public authority for public purposes, enforceable at law, and is

not a payment for services rendered". As to
whether it is a direct tax or an indirect tax, it is to be observed that no reason appears on
the face of the Act or in the case stated for
supposing that there was any expectation or
intention that the licensee should indemnify
himself at the expense of his customers.
While the licensing fee would no doubt
normally enter, like any other outgoing, into
the calculation of fares and freights to be
charged, this does not mean that it is
expected to be "passed on" as such. But it is
unnecessary to consider this matter, because

whether it is expected to be "passed on" or
not, it is very clear, in our opinion, that
the tax is not a tax "upon" goods, or "in
respect of" goods, or "in relation to" goods.
So, it was a matter of inquiry by the Court to

apply what, we submit, is a test readily settled by
authority of this Court, which may, in certain
circumstances, give rise to uncertainty of result
until the Court has authoritatively determined in a
disputed issue. So, turning to the other example
raised before the adjournment to the question of
payroll tax, we would submit that that issue was a
matter of inquiry, using the sort of approach
adumbrated by the settled approach of this Court as
exemplified, for example, by the authorities we
have just referred to.

Capital(4) 52 20/3/93
We make a brief reference to the volume of

historical materials which has been filed by my
learned friend, the Solicitor-General for

South Australia, with the Court. We submit that
when one looks at those materials they do not show
that the term "excise" had any fixed connotation in
Australia in 1900, but they go, it seems to us, to
show four things. Firstly, that the original 18th
century meaning of "excise" was simply an inland
tax on goods of the same nature as "customs", and
this seems very much in accordance with the
discussion of Justice Windeyer in Dennis Hotels,
104 CLR, particularly page 599 to page 601.
Justice Windeyer there continued his examination of
the history of excise in England in the
19th century, and they, as do the historical
materials filed, show that by then it had developed
a much wider meaning and come to be used to
describe any tax at all, collected by the excise
commissioners. And this, of course, was a wider
usage that did not prevail in Australia, and did not practice in Australian colonies in 1900, all duties of excise were levied on production. So, as
we see it, the colonial practice showed the
denotation of excise in 1900, but did not fix its
connotation. Other forms of taxes on goods were
not in use and therefore their classification, and
the question of their classification, in our
submission, did not arise.
May I take the Court briefly to the table on page 20 of our filed submissions, the thin document
which we filed. That annexure is a summary of

State taxation for the years 1896 to 1897. The
Court will there see the preponderance of the State revenue was duties of customs ranging as high in
the case of South Australia and South Australia
(Northern Territory) and Queensland in the range of

80 to 90 per cent. The average for all States for
duties of customs for their revenue in that year
was 74.2 per cent. Duties of excise were not so

significant, but none the less comprised an average
of 5 per cent of average revenue of each of the colonies in 1896. So that together customs and excise were firstly the only forms of taxation on
goods at the time of Federation, and accounted for
something like 80 per cent of colonial revenue.
When one looks at the Convention Debates what one does see is accepted by all those who
participated in the debate that it was essential
that all power to impose these imposts of customs
and excise which were admitted as constituting
80 per cent of colonial revenue must be vested
exclusively in the Commonwealth Parliament,
although the debates also make it clear that there

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was an intention not to impose the wider meaning of
the English usage to "excise".
May I take the Court to the summary in our

materials, the second volume of supplementary
materials, in respect of the Convention Debates.
We appreciate that again my learned friend the
Solicitor-General for South Australia has filed
more material in respect of the Convention Debates,
but commencing at page 1 of the supplementary
materials there is what we see as particular
relevant extracts from the debates with connecting
annotations in typescript which, in our submission,
sufficiently summarizes the approach of the
delegates to the issue of the disposition of
customs and excise power under the Constitution.
We draw together this material on page 16
paragraph 20 and following, drawing what we submit
are conclusions from the rather paucity of material
which one does pick up from the Convention Debates. This is also supported by an extract from the
New South Wales Parliament which is attached at
page 22, the legislative council, in respect of
debate where the Honourable Edmund Barton
participated. But one can detect, as we conclude
in paragraph 20, that there was clearly uncertainty

as to the meaning of excise. The definition was
not clarified in the Constitution, but it was
understood that Parliament might "impose an excise
on anything it pleased".
But we submit what was understood by the

delegates was that the provisions were intended to
ensure that the Federal Government had control over
the external tariff policy and that there would be

internal free trade. There was a recognition that
this involved taking away from each of the colonies
its almost sole source of revenue to ensure that
the States did not have a power which will enable

them to take away the benefits of inter-colonial
free trade, which all parties desire to see
embedded in the Constitution.
It was the case that customs duties were

imposed on the goods of the same sort as excise was
imposed - as of course was often the practice in

England - but deletion of the Deakin amendment
confirmed that the Commonwealth's exclusive power
of excise was in general intended to be broader

than existing categories of excise. The
comprehensive expression "duties and customs and
excise" was intended to achieve the abolition of
internal customs barriers and, we submit, the
attainment of this essential object of the
Federation: namely, that the people of the

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Commonwealth were guaranteed equality as regards
customs and excise duties.
We refer to the sections already sufficiently

referred to to the Court whereby it was clear that
within two years of Federation there would be a
uniform tariff policy and on the imposition of
uniform duties of customs the people or the States
would thereafter be deprived of the protection of
any tariff barriers or preferential bounties

against inter-State competition. So the people of
no State were to be disadvantaged in relation to
the people of any other State by the burden of
higher customs or excise duties or by less
favourable treatment as regards bounties on
production or export of goods, or restriction upon
access to goods and to the markets and territories
of the other States.
We submit that the references in the

Convention Debates to extant duties and excises was
merely illustrative and in the context that it was
accepted that most of the colonial revenues passing
to the Commonwealth would be duties of customs
rather than duties of excise. But the transfer was
unqualified because it was seen as the essential
object as we have already referred to as the
Federal compact. It was intended that Parliament's exclusive power to impose duties of customs and excise must include, we submit, imposts on goods
whether imported, exported, or produced in
Australia.
Although revenues for duties of excise are

relatively small in proportion to customs duties it
was none the less accepted that control of all of these must pass to the Commonwealth to ensure the basic unity of the Australian economy. Australia,
in that case, was accepted as being entitled to
have those powers on the basis that it was
expected, as the extracts show, that there would be

a surplus of revenue that some forfeits of the
revenue would flow back to the States by way of
surplus distribution provisions. But the fact that
those expectations were not realized, in our
submission, was no reason to limit the meaning of
excise as part of the comprehensive phrase.
So although one can say that there was

uncertainty as to precise meaning, there certainly
was no attempt at precise definition, so when one
goes to Quick and Garran, extracts of which are the
next part of our supplementary materials, we see
that the discussion of the learned authors is
concerned more with establishing that the English
usage was not intended in section 90, than

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establishing any clear meaning of duties of excise
for the purpose of the constitutional provisions.
And, we submit, Peterswald v Bartley, decided

in l CLR, is really only concerned with the same

distinction. The levy in that case was a brewer's
licence, it was not levied on production, it was
clearly a tax on the manufacture and, of course, as
has been pointed out - for example, most recently
by Your Honours the Chief Justice and Justice Deane
in Philip Morris - the discussion in Peterswald was
permeated by reserve powers doctrine. But, in any
event, the decision would seem to be one that was
right on its facts; the decision of the Court was
directed at establishing the distinction between an
excise and a true licence fee.
So when, for the first time, the question of a

sales tax arose in Commonwealth Oil Refineries,
there, of course, the majority of the Court held
that section 90 was to apply.
So, by reference to these matters of

constitutional context - and I will not take the
Court in detail to the constitutional provisions,
to section 86 and following, because the Court is
sufficiently aware of them - our basic submission
to the Court is that all taxes on commodities are
either duties of customs, if imposed on importation
or exportation, or duties of excise. And we submit
that a duty of excise is a tax on commodities
imposed at the stage of production, sale,
distribution and, as we have made clear in our
further submission filed with the Court,
consumption.
The Constitution, of course, makes elaborate provisions for the sharing of Commonwealth customs
and excise revenues, particularly sections 87, 89,

93 and 94 - section 94 dealing with distribution of
surplus revenue after five years - but it was
always contemplated, and this was admitted, for
example, by Chief Justice Gibbs in Hematite
Petroleum v Victoria, 151 CLR at page 617, that the
constitutional structure imposed by section 80

would result in a fiscal vertical imbalance. From
the start it was contemplated that the Commonwealth
revenue would greatly exceed its needs and, for
example, Quick and Garran, at page 127, assume the
Commonwealth Parliament's need would be satisfied
with a quarter share of direct taxation, customs
and excise, and that no direct federal taxation
would be needed. The States would be able to
supplement, with local direct taxation, their
section 87 or section 94 share of customs and
excise revenues. So when one reads Quick and
Garran one sees an assumption that there would be

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no State indirect taxes, and we submit the fact
that the Commonwealth needs have risen does not
affect the interpretation of this constitutional
scheme.
We have referred sufficiently in our rather

long extract of the Court's judgment in the first
Capital Duplicators case to what we submit is the
basic philosophical thrust of section 90 and, of course, before then it had been accepted in this Court that the exclusive Commonwealth control of taxation of commodities was necessary to ensure
that Commonwealth policy would not be hampered or

defeated by State actions. So we have that aspect
as well as, of course, the acceptance of a free
trade area.
May I give the Court a brief reference also to the remarks of Justice Deane in Hematite Petroleum,
151 CLR 660, where His Honour makes the point that
together with section 92 of the Constitution,
uniform taxation of goods is needed in order to
prevent the distortions and inequities that would
otherwise result in relation to trading commodities
within Australia. At page 660 His Honour says:
In combination, these provisions effectively
deprived the people of any State of the
protection of tariff barriers or preferential
bounties against interstate
competition ..... The people of a State were not
to be disadvantaged, in relation to the people
of any other State, by the burden of higher
customs or excise duties, by less favourable
treatment as regards bounties on production or
export of goods, or by restriction upon
access, for themselves, their goods and their
legitimate commercial endeavours, to the

territory and markets of other States. To the
contrary, that provision -

section 90 -
or some other means of ensuring uniformity of
excise duties throughout Australia - was a
necessary ingredient of any acceptable scheme
for achieving the abolition of internal
customs barriers which was an essential
objective of the Federation and for ensuring
that the people of the Commonwealth were
guaranteed equality as regards the customs and
excise duties which they were required to bear
and the bounties which they were entitled to
receive.
We submit - and we summarize the submissions in paragraph 2.4 on page 4 of our submissions - that

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the purposes of section 90 would be frustrated not
only by a State tax limited to goods produced in
the State or limited to imported goods, but also by
a State tax imposed equally upon both classes of
goods.
I have already taken the Court to section 5 of

our submissions where we analyse the various
mechanisms whereby we say such a State tax would
frustrate what we say are these basic purposes of
section 90 as we list them in paragraph 2.4 of our

submissions. We submit it is no answer to say that
because a State tax is imposed equally on both
local and imported goods and therefore raises the
prices equally of both classes of goods, it cannot
affect the operation of Commonwealth tariffs or
bounties or impair the operation of the free trade
area. Our submissions firstly in section 5 deal
with the aspects dealt with in paragraphs 2.4(b)
and (c), and our submissions in section 3 of our
submissions deal with the aspect dealing with
2.4(a).
Our basic submission is that taxes on goods

entering or leaving - we say the State or

Australia, if you like - are duties of customs. We
say all other taxes on goods within the State or
within Australia, wherever produced, are excise
duties whether they are imposed equally on locally
produced or imported goods. This simple definition
is one which we say is found from the earliest
discussions.
May I refer the Court briefly to the extract

from Blackstone which is extracted at page 46 of
our supplementary materials. At page 48, dealing
with what are referred to as perpetual taxes,
first:

The customs; or the duties, toll, tribute, or
tariff, payable upon merchandize exported and
imported.

And then over to the extracted materials at
page 53, under the section heading II:
Directly opposite in its nature to this is the excise duty; which is an inland imposition, paid sometimes upon the consumption of the
commodity, or frequently upon the retail sale,
which is the last stage before the
consumption.

So no definition by reference to local production or manufacture.

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The same discussion occurs, of course, in
Stephen's commentaries, which are next extracted
commencing at page 57, with the reference to
customs at page 58 and the reference to excise at
page 62, where the author goes on to say at
page 62:
The relationship of excise to customs duties
is always of great importance;

The discussion as to Mill, which is the next part of our extracted material at page 64, is more dealing with the concept of direct and indirect taxes and, apart from the citation in our
submissions, I will not take the Court, in detail,
to that reference.
It is our submission, and we pick up citations

as to that in our written submissions, that there
emerge two alternative constructions of section 90,
which we submit lead to the same substantive test
for excise, although perhaps these aspects have not always been adequately isolated in judgments of the
court. The first approach, and we say it reflects
the simple 18th century approach that we have just
referred to, but not the expanded 19th century
sense which included licence fees which could not
be described as a tax on goods, is to regard customs duties as taxes on goods entering or leaving Australia and an excise duty as any other
tax on goods wherever they have been produced. And
we submit, on that basis, a sales tax imposed
equally on locally produced and imported goods is
an excise simply because it is a tax on goods.
We refer in paragraph 2.14 on page 9 of our

submissions to various occasions where this Court
or members of the Court have adopted this approach,
and I will not give the Court those separate

citations, but merely refer to them. A second
construction is to read excise as meaning a tax on

on the sale or other distribution or on consumption goods produced domestically, which includes any tax
of other goods. This was a view that one, for
example, can see reflected in Quick and Garran at
page 837 and also one sees it reflected in the
extracts from Mill, Principles of Political
Economy, which is extracted in our materials at

page 64 to 124. So the derivation of this view is
to read excise as meaning a tax merely on
production or on manufacture, with sales taxes on
locally produced goods being regarded in substance

as taxes on production or manufacture. And this
seems to be a view adopted by Justice Rich and
Williams in Parton, 80 CLR 252, and we refer also
to discussion by Justice Gibbs in Dickenson's
Arcade, 130 CLR 218.

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But our submission is, however defined, the
comprehensive expression "duties of customs and
excise" includes imposts on goods including tax on
goods applying in respect of both imported and
local goods at a stage subsequent production or
manufacture. So our primary submission, as our
submissions make clear as filed with the Court, is

that excise is not limited to the impost on goods
locally produced and manufactured, but includes all
inland imposts on goods. But the alternative
analysis which we say produces the same result is
to regard the impost on the distribution or
consumption of imported goods as themselves customs
duties and the impost on the distribution or
consumption of locally produced or manufactured

goods as excise. And this approach is one which
one sees particularly in the judgment of
Justice Windeyer in Dennis Hotels, if I could take
the Court briefly to 104 CLR, starting at page 592:
A tax payable by a trader and measured by

the amount of a commodity that in the course
of his business he buys or sells is, in my
view, prima facie a duty of excise. If it be
measured by the quantity of the goods so
bought or sold it is a specific duty. If it
be measured by the price or value of the
trader's purchase or sales of the particular

goods it is an ad valorem duty. In either
event it is prima facie an excise because it

is a tax laid on the commodity. Of course the
taxpayer, not the commodity, pays the tax.
But we need not be hypercritical about the
phrase duties "on commodities", for it goes
back a long way.

Then at page 593, about the middle of the page,
His Honour says:
But there is no difficulty in the simple

notion of a tax which it is intended should be
borne by the consumers of a particular
commodity - by smokers of tobacco or drinkers
of beer for example - but which by means of a
customs or excise duty is collected by the
revenue authorities from an importer,
manufacturer or trader through whose hands the
commodity reaches the consumer, the smoker or
the drinker.

His Honour then goes on at page 599 to discuss the
broad pre-19th century view and the 19th century
view, referring at page 599 point 3 to:
There is no doubt that until the

nineteenth century an excise duty in England
meant an inland tax levied upon goods which

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were either produced in or had come into the
Kingdom, whereas a customs duty was levied at
the quay, that is upon importation.
And then His Honour goes on to discuss the
alternative meaning which we refer to in
paragraph 2.15 of our submissions and also of
course in 2.14. His Honour concludes at about
point 7 on page 600:
And it may well be that the word "excise" in the expression "duties of customs or of excise" in s.90 refers only to duties upon
goods locally produced. But, however this may
be, it is the scope of the comprehensive
expression "duties of customs or of excise"
which is the critical matter.

His Honour goes on at page 601:
Accepting that, it would be a strange result
if s.90 had the effect of prohibiting the
State of Victoria from imposing a purchase or
sales tax on whisky or beer made in Victoria,
yet leaving it free to do so on whisky made in
Scotland or beer made in South Australia. But

in my view it is not so. The place where a
particular commodity is produced may determine
whether a tax on it is best called a customs
or an excise duty; but that is really
unimportant since either is equally beyond the
power of the State.
So, in our submission, one would obtain the

same result, although it is the view of the
Attorney-General for the Commonwealth put to the
Court that the first alternative, that one based on
the 18th Century English view of excise is the one
to be preferred and which gives a simple and
straightforward meaning to the dichotomy between

duties of customs dealing with duties levied on
entry or exit from the State, and duties of excise
being all other imposts on goods. This is similar to the approach of
Chief Justice Dixon in Dennis Hotels, 104 CLR 540, where at point 4 on page 540 he said:
For so far as I am concerned I think an inland
tax upon goods of a class manufactured in
Australia and abroad, imposed without regard
to their place of origin, is an excise. It
may be that it is an excise because it
includes goods of home manufacture and as to
imported goods is not. That seems to be the
way it was regarded in The Commonwealth and
Commonwealth Oil Refineries v South Australia.

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But it would be ridiculous to say that a State
inland tax upon goods of a description
manufactured here as well as imported here was
not met bys 90, excluding as that section
does both duties of customs and duties of
excise, because the duty was not confined to
goods imported and so was not a duty of
customs and was not confined to goods
manufactured at home and so was not a duty of
excise.
So one has often enough members of this Court using
expressions such as ttabsurdtt or ttridiculous'' in
dealing with the submission that there is a limited
meaning of duties of excise so as to include only
imposts directly levied on goods manufactured or
produced either in the particular State or within
the Commonwealth as such, rather than being levied
generally on goods.
Of course, if one has regard to the general

purpose of duties of excise, which is to raise
revenue, of course, in the ordinary nature of
things such imposts would not be expressed whether
there was a constitutional inhibition or not by
reference to local production or manufacture.

McHUGH J:

Have you got any economic materials which support

your proposition that a uniform sales tax, for
example, could lead to reduced demand for the local
product as well as the imported product?

MR GRIFFITH:

Your Honour, the material of Posner in the

supplementary materials is directed to that. Also
the material with respect to the Common Market
where, of course, there is no section 92, so that
the difficulty for the Economic Community was to get to the point where they could destroy custom
barriers. These graphs that one looked at when one
studied economics A always seemed to be the same

shape but proved different things and Posner does
incorporate those in his discussion.
Your Honour, we would submit that the material

we included in our section 5 is, whilst in a
simplified perhaps non - - -

McHUGH J: That is a series of assertions though, is it not?

MR GRIFFITH:

We say it is a series of facts that

self-evidently follows.

McHUGH J: Take the illustration you gave about demand for

locally produced cars may be different by reason of
the uniform sales tax than the reduction of demand

for foreign luxury cars. As a non-economist I have
some difficulty following that, having regard to

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the fact that they would cater for different
markets.

MR GRIFFITH:

Your Honour, one has a lot of separate

inquiries one can make. One can say, "Well, what
if there is an impost only on the local
manufactured good but not on the imported good?".

McHUGH J: Well, I have no problem with that but I am more

concerned about how a uniform sales tax - once the
goods have gone into circulation, how is the
Commonwealth's tariff policy injured by a uniform
sales tax?

MR GRIFFITH:

Your Honour, there are two aspects of tariff

policy: one is external tariff and one is the
absence of discriminatory tariff within Australia,
and we say each of those aspects is essential to be

preserved, Your Honour. So that if one has an
impost in respect of one particular State and not
in respect of others, we say that necessarily has a
distorting effect and one can pick up from our
materials, as the New South Wales task force
dealing with just a simple aspect of the effect of
adjacent States that do or do not have petroleum or
cigarette - Dennis Hotels type - levies, of the
consequence of that, Your Honour. It has the
effect of increasing the price within the State so
those within the State pay more than those outside
the State - - -

McHUGH J: But I am really directing my mind to section 90

as opposed to section 92.

MR GRIFFITH:

Your Honour, it must, we say, by definition,

destroy the free trade area because there are

different prices in different States. We say,
Your Honour, it is axiomatic that there is this
destruction - if you like, the Trojan horse -

through the principle. The mere fact of having an

impost not uniform across Australia but in one
State, which is inherent on admitting a State power
to levy an impost on goods at all - we say that it
is totally prohibited by section 90 - is to destroy
this basic principle. If a product is to be more
expensive in one State than another, Yo~r Honour,
in that case the persons in that State who wish to
buy it pay more and there is also the issue of
cross-border traffic, avoidance, and the
discriminatory effect - - -

McHUGH J:

I was postulating a case where section 92 will

not strike down a State legislation.

MR GRIFFITH:

Your Honour, of course the relationship

between section 92 and section 90 is something that
has been touched on by various judgments of this

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Court. Perhaps this whole issue of section 90
should have been touched on and sorted out in Cole
v Whitfield but it was - my learned and honourable
friend, Mr Jackson, ran the section 92 point but
not the section 90 point. But, Your Honour, there
is a relationship there. We submit, Your Honour,
that they are both directed to ensuring this free
trade area within Australia and if excise is to be
given a narrower meaning than has been admitted by
decisions of this Court to date, or a meaning
narrow to the point of, we say, elimination, which would involve the acceptance of the submissions to
be made for South Australia, in that case one would

of the Federal compact, which was to ensure a
uniform free trade area. And it is destruction of
the very thing which was created which we say puts
it outside the ambit of what may be permissible
within a construction of the terms of the

destroy what we say, Your Honour, is the basic part other sections dealing with the question of the
consequences upon imposition of uniform duties or
customs.
Your Honour, we would submit one does not have

to go to the extent of proving particular economic
effect. It is the fact that there is a difference
which, in itself, is totally inconsistent with the
constitutional framework.

GAUDRON J: But, Mr Solicitor, you are using free trade to

be uniform and if it were intended that things
should be uniform, surely we would have uniform
wages throughout the Commonwealth, uniform rates.
It is an assumption that gives a certain meaning to
language that that -does not have to bear.

MR GRIFFITH:

Your Honour, we must confine it in respect of

goods, because it is uniform duties of customs; it
is not dealing with the uniformity in services, for

example.

GAUDRON J: But if we deal with it even in terms of wages in

manufacturing industry.

MR GRIFFITH:

Your Honour, with respect, that is not goods.

GAUDRON J:

It enters into the cost of manufactured goods.

submission, with respect to taxes, imposts on
commodities.

MR GRIFFITH:

Yes, Your Honour, but the inquiry is, in our

GAUDRON J: Yes, but my suggestion to you is that to say

that you have a free trade zone does not
necessarily mean that you have to have uniform
costs and prices throughout the country, and you

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are giving it a meaning which the words do not
ordinarily bear.

MR GRIFFITH:

Your Honour, we would say to admit that there

can be disparity of State imposts is to admit, in
effect, that you get to a position of mounting
customs barriers. Because of the nature of the
impost, the State will attempt to levy that impost

on goods corning within the State. It might be that
it cannot be ensured perfectly because
constitutionally one cannot have a physical customs
barrier at the border, but the legislation of its
nature - and we would say once it gets beyond this
6 per cent, which it would seem in American
references and European references to be a rough
measure above which one will have these border
difficulties arise - it will follow that any State
legislation which attempts to impose an impost on
goods will create a situation totally inconsistent.

GAUDRON J:

So would it follow on your argument that if all

the States imposed a uniform rate of sales tax on
specified goods, you would still have a free trade
zone; you would have no difficulty?

MR GRIFFITH:

Your Honour, that would have exactly the

result as if the Commonwealth imposed the impost

which the Commonwealth has power to do. The answer
to Your Honour's question is that yes, the
Constitution vests in the Commonwealth the power to
impose, uniformly and without discrimination,
imposts of that sort and, to ensure that that
result is obtained, at the same time withdraws
completely from the States, in our submission, the
power to impose this impost.
Perhaps Your Honour's remarks give me an

opportune time to inform the Court of a matter
which I intended to inform the Court at the
conclusion of my submissions. Although we have not
heard them yet, we adopt prospectively the

submissions to be made by the Solicitor-General of

New South Wales as to prospective overruling. So
that in the event that Dennis Hotels were to be
overruled by this Court, we would associate with
his submissions to be made to the Court that such
overruling should only have effect prospectively. Further, Your Honour, we respond here to a
request made to the Commonwealth by South
Australia. The Commonwealth has indicated to South Australia and has indicated generally to the States
that it is prepared in the event that Dennis Hotels
were overruled to impose at a uniform rate Dennis
Hotels-type imposts in respect of the existing
Dennis Hotels-type impost and to distribute the

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amounts so collected to the States at an equal
rate.
Your Honour, that of course, we submit, is

within the power of the Commonwealth so to do because the Commonwealth may impose duties of
excise which we would submit to Your Honour that
these imposts are. To us, Your Honour's example confirms the uniformity rather than destroys it,
which we say is an integral part of the
constitutional plan, admitting of course,
Your Honour, that it is limited to goods because
section 90 is limited to goods; duties of customs,
duties of excise are limited to goods.
Although it is not constitutionally necessary to decide whether duties of customs are limited to
impost at times of importation, we submit that it
would be convenient for the Court to adopt the
first view which we put in paragraph 2.14 as the
correct meaning of "excise".
We will not take the Court again to our

discussion at paragraph 5 which we say shows that
the constitutional purpose of section 90 cannot be
achieved if a narrow criterion is applied.
In paragraph 4 of our submissions at page 12

and following, we deal with the parts of our
submission that I have already referred to, that we
submit that excise is not limited to taxes on
consumption. To this extent, the submission made as part 4 of our submissions can stand alone, but
we do point out that the reason why duties of
excise in Australia have come not to be regarded as
not including impost on consumption, seem to be
more by reference to, first, taking up the
discussion of Mill on indirect tax, and then
picking up particularly Privy Council discussion of
the direct indirect provisions of the Canadian
Constitution, particularly arising from the

discussion of the judicial committee in Atlantic
Smoke Shops Limited v Conlon, and importing these,
although somewhat diffidently, into Australian
constitutional laws, as done by Justice Dixon in
Parton, 80 CLR 261.
But we would submit that, in essence,

Justice Dixon got it right in Matthews v Chicory,
60 CLR 304, and we refer also, to
Chief Justice Latham, 277, Justice Starke, 284 to
285 and, as we have already referred to,
Justice Higgins and Justice Rich in Commonwealth
Oil Refineries v South Australia, 38 CLR, 435,

Justice Higgins, and 437, Justice Rich. We must
admit that the qualification of Justice Dixon was
adopted without discussion in Dennis Hotels, and in

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the joint judgment of this Court in Bolton v
Madsen.
In Dickenson, Chief Justice Barwick, 130 CLR,

at page 185 to page 186, said that:
There was no logical reason, in my opinion, for ending at the point of entry into
consumption -

and noted that that seemingly:
was considered to be the constraint of the
opinion of the Privy Council in Atlantic Smoke
Shops Ltd v Conlon -

and he said:
Whilst the question whether the decision of
the Privy Council really required this
limitation may well have been open to
argument, in deference to the views expressed
by other Justices, I have accepted the
limitation.

As did the other Justices in Bolton v Madsen, as I
mentioned.
Your Honour, the present Chief Justice, in

Dickenson's Arcade at page 239 noted that:
The justification for the restriction is
evidently based on the notion that consumption
is not sufficiently proximate to the
production and manufacture of goods.

Was something that appeared to be derived from
section 93. Although, Your Honour, of course then,
and also since, has accepted the limitation to
exclude production.

In our submission, if one looks at this as a

matter of principle, that once the essential nature
of an excise as a tax on goods is accepted, there
is no need then to discriminate between consumption

and impost before consumption. So far as
section 93 is concerned, that of course was a
transitional section which is spent, and it was
dealing with the fair distribution of surplus revenue, not with the definition of "excise".
If one looks at section 93, of course, what it

does as distinct from the state of production or
manufacture, it allocates the surplus by reference
to the state of consumption, rather than the state of production. This is exactly the same principle
one sees, for example, in our materials on the

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Common Market, where the idea of allocation of taxes to ensure that the state of consumption is the state which receives the benefit of the tax, not the state of manufacture or production.
It has been sufficiently observed by authority in this Court that the classification of taxes into
direct and indirect is one of convenience which has
really little to offer in respect of the proper
construction of the Australian constitutional
provisions and it is our submission that that being
accepted, there is no reason for limiting an excise
duty by reference to the Canadian classifications.
It is a long way from protecting the purposes of
what we say-are the Australian constitutional
structure and scheme to impose a limitation to
exclude a tax on consumption.
Having said that, we admit Your Honour's the

Chief Justice remarks, I think, in Philip Morris
that taxes on consumption are not all that common
and of course Dickenson's Arcade shows the
difficulty of effectively imposing a tax on

consumption. In essence one could only see an
effective scheme in respect of large value items,

such as a motor car. One could imagine a State
provision requiring you to have a licence to buy a
motor car that would cost you a thousand dollars.
Our submission would be that if there were such a

scheme such an impost would be as much a duty of
excise as would be an impost on the final sale.
Our submissions that excise is not limited to taxes on Australian production are summarized in
part 3 of our submissions. That is a matter upon
which, with the Court's permission, we have
reserved our position on reply. So, if the Court
pleases, we will wait until we hear the case which

we have to answer as to that. So that subject to
dealing with the matters raised by my learned

friend, Mr Doyle, in his submissions as to the
narrow meaning of "excise" confined to duties of
production and excise, our submissions remain those
as summarized in our written submissions given to
the Court, accepting as we do that there is a
little bit of tension in our approach to Dennis
Hotels because, although we make a formal submission that Dennis Hotels should not be reopened, we are unable in the event that Dennis
Hotels is reopened to say anything in its support,
other than to endorse the view that it should only
be overall with prospective effect and to advise
the Court of the Commonwealth's acceptance that it
is prepared to take immediate action to protect
existing revenue bases of the States which may be
affected by any overruling of Dennis Hotels.

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The Commonwealth has no submissions to make on
the alternative argument as to classification and,
although I understood, at some time, my learned
friend, Mr Bennett, was going to make some
submission about severance, the Commonwealth has no
particular submissions to make as to that issue.
If the Court pleases.

MASON CJ:

Thank you Mr Solicitor.

Mr Jackson?

MR JACKSON:

Your Honours, may I hand to the Court copies of

our outline of submissions. Your Honours will
understand in reading them that we feel a trifle
slighted, small though the Australian Capital
Territory might be, by the constant reference to my
learned friend the Solicitor-General for South
Australia and the constant forgetting of us.

MASON CJ: Yes, Mr Jackson.

MR JACKSON:

Thank you, Your Honour.

Your Honours, before

moving to Part A of our submissions, may I mention

one thing. Your Honours will see on the
penultimate page of the document I handed to the
Court, that in paragraph 2 it refers· to a document
as being copy attached. Your Honour, that document
we have put with another group of documents; I will
give it to Your Honours in due course.
Your Honours, may I move immediately to Part A

of our submissions and that relates to the question
of the validity of the 1990 Act and I will say
something a little later concerning the amendments
to the Act. If one assumes that there is no
alteration in the existing tests - and Your Honours
we would say and with respect say parenthetically,
whatever precisely the existing test might be - and
Your Honours, we would seek to say that there are
two bases on which the provisions of the "X" Videos
Act 1990 are valid, assuming that those tests are

within a category similar to that of liquor and to be applied: the first is that the videos fall
tobacco, the validity of the impost on which was
upheld in Philip Morris Limited v Commissioner of
Business Franchises.
The second is that when the impost is looked

at in the context in which it appears, it should be
seen as a fee for the ability to carry on lawfully

the trade which it permits. The two matters

overlap to some extent. Now, Your Honours, those
are the submissions which we will seek to make out.
In dealing with them I need to go to the
legislation to some extent and to go to the
legislation and the context in which it appears -
and Your Honours, I use that additional
qualification for a reason to which I will come.

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Your Honours, before I do so, may I say just
one thing, and it is this: it is the fact that a
fee for a licence is calculated by reference to the
value of transactions engaged in by the holder has
been regarded as an indicium that the fee is,
rather than is not, an excise. But, Your Honours,
that is not, with respect, always the case, and may
I refer Your Honours to two things; the first is
this, that Your Honours will have seen in the
passages to which my learned friend, Mr Bennett,
referred this morning from Dennis Hotels v
Victoria, 104 CLR 529, at pages 578 and 566
particularly, that fact was adverted to, that there
may be a fee, which is a licence fee of some kind,
calculated by reference to the volume of trade
without it necessarily being an excise. That is
the first aspect of it.
The second is this, that it is not, with

respect, a self-evident factor, that when there is
a fee calculated by reference to the volume of
trade, to put it shortly, that the fee will of its
nature be likely to be an excise. Certainly, and
perhaps in the more usual course of events, a duty
of excise will be one which is calculated by
reference to the value of transactions, but it may well be that the most fair or the most just way of
computing a fee for a type of licence may be by
adopting a fee which is related to the value of the
transactions carried on pursuant to the licence.
And, Your Honours, if one engages in a

transaction 100 times a year, it may not be unfair
that the licence fee should be 10 times as much as
the licence fee for a licensee who does the same

thing 10 times a year rather than 100. And,
Your Honours, that would certainly be the case, one would think, in circumstances where, under a form
of licence, services only were provided and there
is not, in our submission, any very compelling

one comes to goods or goods and services combined. reason why a different view should be adopted when Your Honours, in short, the preliminary matter
which we would seek to mention is that we would
cavil, if we may say so, with respect, at the view
that to have a licence fee fixed by reference to
the value of transactions carried on under it is to
place one almost inevitably within the ambit of
duty of excise.
Your Honours, could I go then to the terms of the 1990 Act and may I, at this point, give
Your Honours a bundle of legislation which is
legislation which indicates the context in which

the Act finds itself. Your Honours will have some
of these because some have been given to

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Your Honours already, but it contains, amongst
other things, a copy of a consolidated version of
the Act after the 1993 amendment and, also,
Your Honours, it contains a number of other pieces
of legislation to which I will refer, and it
includes as well the Classification of Publications

Ordinance 1983. Your Honours, the bundle has two
parts, I fear.
Now, if I could take Your Honours to the terms

of the 1990 Act. What Your Honours will see is
that the Act is concerned with "X" videos, the term
"X videos" being one which is defined by
section 4(2).
Your Honours will see that the terms of

section 4(1) define an "X" video to mean:

a video classified as an "X" film under the
Classification of Publications Ordinance 1983.
That takes one to that enactment, the
Classification of Publications Ordinance, which is
in the bundle I gave Your Honours, and I wonder if
I could take the Court to section 25(2) of that.
Section 25(2) at page 8 of that document describes
what is an "R" or an "X" film. There are different
conditions imposed in relation to them, but the
definition of an "X" film appears in section 25(2)
as being one which the Censorship Board has
decided:
(a) depicts, expresses or otherwise deals with
matters of sex, drug misuse or addiction,
crime, cruelty, violence or revolting or
abhorrent phenomena in a manner that is likely
to cause offence to a reasonable adult person;
or
(b) is unsuitable for viewing by a minor.

Your Honours will then see that the two possible

classifications are there referred to. One then
goes from there to section 26(l)(b)(iv), and
Your Honours will see that in section 26(l)(b)(iv)
the classification is to be approved, of a film,
"as an "R" or an "X" film" where the censor is of
the opinion that the film fits within

section 25(2). And as I submitted a moment ago,
there are greater restrictions on dealing in an "X"
than in an "R" film. That appears from section 35.
Your Honours will see at page 16 that in
section 35(2) there are the conditions that apply
in relation to an "R" film, and in subsection (3)
the conditions that apply in respect of an "X"

film. Your Honours will see amongst other things
paragraph (a):

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(a) the publication shall not be sold ..... to a
minor;
(b) the publication shall not be exhibited or
displayed, except in a restricted publications
area within the meaning of the Publications
Control Act of the Territory;
(c) the publication shall not be sold -
et cetera -
(d) the publication shall not be delivered to
a person who has not made a direct request for
the publication;
(e) the publication shall not be delivered to
a person unless it is contained in a package
made of plain opaque material.

TOOHEY J: Those conditions govern distribution, but they do

not of themselves determine whether a film should
be classified as "X" or as "R". Does anything in
the Act determine that?

MR JACKSON:

The answer directly, Your Honour, is no.

The

position seems to be this: a film that satisfies
the test in section 25(2) qualifies as either being
an "R" or an "X" film. If I could just pause at
that point to say that if one goes to section 25(3)
the Court can see there the power not to classify a
film because, in effect, it is worse in the scale
of films, and Your Honours will see, for example,
subsection (4) also.
Now, one has to see from the way in which

films are dealt with in the Act which is the worse,
and it seems likely from section 35(2) and 35(3)
that an "X" film is a film which is worse, if I can
put it that way, than an "R" film, and that is from

the terms of section 35(3).

TOOHEY J: Although the same criteria applied to the

classification of the film as an "R" or an "X"
film.

MR JACKSON:	To determine which it is, Your Honour, but within the range of films that fit within that,
there must no doubt be degrees and what is
determined is essentially that if a film should
have imposed upon it the conditions that are
referred to in section 35(3), then it is an "X"
film rather than an "R" film which has fewer
restrictions apposite to it. Your Honour, I do not
know that I can take it really beyond that, but so
far as the films that are classified are concerned,

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the "X" film appears to be at, in effect, the top
or the bottom of the tree.
Perhaps I can just say this: if one goes to

the terms of section 35(3), when a film is an "X"
film, it may be seen that there are various
requirements that are imposed by the legislation in
relation to the manner of distribution of it and in
relation to the conduct of those engaged in
distribution of it. In the nature of things,
requirements of that kind are ones which may well
be difficult to police, are ones which depend to a
degree on the integrity on the part of the
"vendor", if I can use that word in inverted
commas, and they are provisions or conditions which
seem very akin to things like sales of liquor or
tobacco to under-age persons.
Your Honours will see that section 35(3)

Publications Control Act we would submit, that the
refers to the 1989 of the also apparent,
similarities which exist with the sale and so on of

tobacco and liquor are quite strong. Can I take
up the definition of "X" films, the last definition
Your Honours for a moment to the terms of the

in section 3. Your Honours will see that it uses
the term "classified" and "classify" is defined in the same provision as meaning classified under the
legislation to which I was referring a moment ago. Your Honours will see that the Act also contains a definition of a "restricted publications area" at
page 3 of the Act in section 3, referring to the

regulations. Your Honours will also see that
section 5 of that Act is a provision which says
that:
A person shall not advertise ..... an
objectionable publication.

The term "objectional publication" is given meaning
by again section 3 at the bottom of page 2 and

includes unclassified publications. Your Honours,
if I could just pause to say that if one goes to
the succeeding provisions of the Act - and I will
take Your Honours to them very quickly - what one
sees is that the Act imposes various restrictions
and prohibitions upon dealings in material which is
unclassified and also on material which has an "X"
classification.
The point that I am seeking to make about them

is that one does not see the Business Franchise Act
operating, to use the expression in our outline of
submissions, in a vacuum, but it is not an Act
which itself needs to impose various requirements

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on the holders of a licence because Your Honours
will recall that the conditions that are to be
taken into account include whether there has been
compliance with the Act to which I first referred,
and that is the Classification of Publications
Ordinance, the requirements of which themselves
pick up the Act to which I am now referring, the
Publications Control Act.
If I could take Your Honours very briefly to sections S, 6, 7, 8 and 10 of the Publications
Control Act, what Your Honours will see is that it
controls by way of prohibiting various dealings in
unclassified material, and one might think that if
a person is dealing in "X" videos, the temptation
to deal in unclassified videos would also from time
to time be strong and even if there were not a
temptation, the temptation not to take care in
one's dealings to comply with the Act would be a
matter of some importance.
From there, Your Honours, one goes to section 12(l)(e) which prohibits sales, et cetera
of unclassified video tapes, et cetera, that are

subsequently classified as "X" films. You will see
that it attracts the highest penalty. Section 13
proscribes advertising of unclassified tapes or
discs. Sections 14 and 17 are also concerned with
broadly similar matters. Your Honours, if I could
just pause at this point, the whole area is
obviously one that is closely regulated in respect
of the matters to which I have so far referred. If
one then goes to section 18(b), Your Honours will
see that:
A person shall not publish .....
(b) an "R" film or an "X" film;
otherwise than in accordance with the

conditions set out in section 19 -

If one goes to section 19(3), the Act then sets out various conditions which are to apply in relation

to an "X" film. Your Honours, the provisions that
are there referred to reflect those that were
referred to in section 35(3) of the Classification
of Publications Ordinance. Could I ask
Your Honours to note particularly section 19(3)(f)
first of all and section 19(3)(g). You will see
that section 19(3)(f) refers to "premises in a

prescribed area". The position which obtains is
that the prescription of such areas is dealt with
by the Publications Control Regulations made under

that Act. They are amongst the documents that I
handed to Your Honours.

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What Your Honours will see is that by
regulation 6 of those regulations three parts only
of the Australian Capital Territory have been
prescribed as areas within which "X" videos, or "X"

video premises may be set up. Your Honours will
also see - - -

TOOHEY J:	I am sorry, Mr Jackson, you mean set up for public viewing?
MR JACKSON:	No, Your Honour, set up as, to put it shortly,

shops.

TOOHEY J: Right.

MR JACKSON:	I said, "to put it shortly", it is described as being "shall not be published otherwise than on
premises in a prescribed area". But there are then restrictions to which I am about to come on what it is to look like and what viewing there may be of if
from the street, for example. Now, I have referred to section 19(3)(f). Could I refer Your Honours
also to section 19(3)(b), I should have said, that it "shall not be exhibited or displayed, except in
a restricted publications area", and Your Honours
will see going again to the regulations that in
regulation (3)(1) and (3)(2) and (3)(3) there are
quite stringent requirements about the extent to
which one can get into or see into those premises.

Now, Your Honours, the position of minors is
dealt with again - if I can return to the
Publications Control Act - in section 28 where minors may not be permitted to enter and there are
related provisions following in the same section.
Your Honours the Act contains, in section 31 and
the following sections, significant enforcement
powers in relation to it.
I am sorry to have taken some time in going to

those provisions, but what they do is to provide
the context in which one finds the terms of the Act

which is in question in the present case. In that
regard, what one sees is that it is hardly
surprising that the "X" Videos Act itself does not
provide any detail for the regulation of premises
of this kind because the matter is dealt with in
the two other already existing enactments which
were in force.
If one goes to the terms of the 1990 Act, what

Your Honours will see in section 24(1) is that

A person who is not -
(a) a wholesale licensee;
et cetera -

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shall not wholesale an "X" video. Section 24(2) goes on to provide that there is not
to be wholesaling, in effect, by or on behalf of a
licensee -
except in accordance with the licence.
Now, Your Honours will see that the way in

which the term "wholesale" is there used, but the
term is one which is defined by the Act, and
"wholesale" is defined in section 4(1) at the
second page of it, to include:
hire to another person for the purpose of
retail or wholesale trade; and
carry on the business of wholesaling;

And, Your Honours, presumably when it speaks of
hire to another person in that context, it means
hire to another person in the course of carrying on
of the retail trade by the wholesaler.
Your Honours, the Act deals also with

retailing of "X" videos. That is dealt with in
section 25 and the expression "retail" is also
defined, again in section 4(1), and you will see
that it includes:
hire to another person in the course of retail
trade;

Now, Your Honours, the goods that are being used
for the purpose of hiring are, in at least one
sense of the term, goods which already have reached
the consumer; they are not still in the path from
producer or manufacturer to consumer; they are in a
sense in the course of being consumed and used and

Your Honours, they are in, for practical purposes, reused until no longer capable of effective use. the same position as building equipment or fork
lifts or items used for party hire and,
Your Honours, what one does see in relation to
those items is that it seems difficult, we would
submit with respect, to regard them as being items
which are somewhere on the way towards reaching the

consumer, because they have reached the consumer. Other people view them, of course; there would be
no point in the business if they did not, but they
have reached the consumer in the sense of having
reached the last person who would wish to buy them.

Your Honours, if one looks also at the provisions of the Act, what they do, in our
submission, is to demonstrate that the Act is
seeking to say, you want to carry on a business of

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distributing, in one way or another, videos of this
kind; you cannot carry on a business of this kind
without a licence; it is the type of business that
should be licensed and the fee for the licence is
40 per cent of the value of each transaction that
you enter into or engage in, whatever be the type
of transaction.
And, Your Honours, in those circumstances, and

I will come to the provisions of the taxing
provisions in just a moment, but that essentially,
we would say, is what the Act is saying; it is
taking something that is a very restricted activity
and saying, if you want to engage in it you have to
get a licence; the fee for the licence is a high
fee undoubtedly, but you pay the fee depending on
the trade you do, whatever be the trade in it.

TOOHEY J:

Mr Jackson, why does the Act use the term

"franchise"? Where is the notion of franchise in
that legislation?

MR JACKSON: Well, Your Honour, there is not really any

notion of franchise in the sense of A allowing B to

use A's right. Where it comes from, Your Honour,
one suspects, is this: in the documents that my learned friend, Mr Bennett, handed Your Honours
this morning, dealing with the explanatory
memorandum or, I think, it was the speech in the
House, dealing with the amending Act, one of the
things that was observed by the Minister
introducing it was that in the past, as a matter of
convenience, some of the enactments of the
Australian Capital Territory had used terminology
which was similar to terminology used by the
States, even though it was not thought that they

were then subject, of course, to section 90. And
that was done - I do not have the piece of paper in
front of me - for reasons to enable, in effect, a
kind of national accounting of various things and
some similarities and comparisons to be made, and

sometimes just for convenience. Why the term is

used, Your Honour, I cannot take beyond that. I am
not entirely certain who originated the expression
"business franchise".
Your Honour, could I just say, however, in relation to it, that the need to adopt measures of
that kind, unusual types of taxes, taxes striking
at odd points, is one of the features that, in our
submission, is a product of the interpretation
which has been adopted of section 90, of the
broader interpretation that has been adopted. case when dealing with the application we make to
re-open the decisions, but it was a matter observed
upon in, for example, the discussions by the trade

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advisory committee of the Constitutional Commission in some passages I will take Your Honours to in due course.
So, Your Honour, I am sorry, that was a long

and unsatisfying answer, I know.

TOOHEY J: Thank you.

GAUDRON J:

Do I take it from what you have just said that

these products are never sold as products?

MR JACKSON: No, Your Honour. Perhaps, as my learned

friend, Mr Bennett says, the trade is seasonal and
sometimes some are sold, some may be sold by post,
some sold to the person, some leased, hired out,
like ordinary videos as it were, and it depends,
Your Honour.

GAUDRON J:

I see.

MR JACKSON: The point I was seeking to make about it was not

to say these are all hired out. What I was seeking
to say was that the statute seeks to cover all the
transactions that might be engaged in in relation
to videos of this kind, and it was not one that, as a matter of characterization, should be regarded as
fixing on, or done by reference to, the sales, in
effect, of them.
Your Honours, could I go then to an aspect of

the Act itself, and that is that the Act really
hardly surprisingly, requires that the applicant be
a fit and proper person to hold the licence.

Now, my learned friend took Your Honours to
section 5 and may I refer particularly to section 5(2) and what is said is that the
Commissioner has to be:

satisfied on reasonable grounds in the
circumstances that the applicant is a fit and
proper person to hold a licence of that type.

Now, subsection (3), of course, commences with the term "includes", but Your Honours will see - which of course is not a limiting provision - and then
Your Honours will see in section 5(3)(d) that there is the reference to the Publications Control Act
1989. Your Honour, it is all right to say that -

and I am perhaps paraphrasing my learned friend in
saying, there it is by a side wind at the heel of
the hunt, as it were, but if you look at the Act
that is referred to, is an Act which contains very
strict requirements, and an Act which contains
detailed requirements and limitations, both itself
and by adoption of the other Act to which I

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referred, matters which govern the whole of the
trade. So, Your Honours, it cannot just be treated
as something which is unimportant. It is not
necessary to put it in a fuller way in the Act.
Your Honours, a licence, of course, may be

granted subject to conditions, and that appears
from section 5(6)(c) and, Your Honours, there is
power to have decisions reviewed, and Your Honours
will see in section 22(1) of the Act the various
types of decisions that may be reviewed, and then
there can be a review by the Australian Capital
Territory Administrative Appeals Tribunal and there
may also be, Your Honours, of course, proceedings
in the Supreme Court of Australian Capital
Territory under the Australian Capital Territory
Administrative Decisions (Judicial Review) Act, and in fact there has been one such case.
Your Honours will recall the Act has only been

in force for a relatively few years but can I just
give Your Honours a reference to an unreported
decision in which the question of the fitness and
propriety of an applicant was dealt with by
Mr Justice Higgins in a decision given on

28 January 1993. The name of the case is Alphaone
Pty Ltd v Commissioner for ACT Revenue, and,
Your Honours, in that case he set aside the
decision of the Commissioner not to grant such a licence. Your Honours, we can provide copies of
that to the Court, and perhaps I can do so the next
adjournment.
Your Honours, could I just say then that if

one looks at the provisions to which I have
referred in this Act and in the cognate enactments,
what one sees is that there is a very significant
similarity between liquor/tobacco on the one hand and "X" films on the other and, indeed, one might
think a more stringent governing of the way in

which "X" films are to be dealt with than one would
ordinarily expect to see in the case of liquor and
tobacco.
Could I say two further things about it,

Your Honours? The first is this - - -

BRENNAN J:

What is the analogy or the genus to which they

all belong?

MR JACKSON: Well, Your Honour, it is difficult precisely to

identify a genus in respect of it. Could I just
say that the species, as it were, tend to indicate
a number of things: the first, Your Honour, is that
they are, on the one hand, substances or items, the
use of which is likely or potentially likely, to be deleterious to human mental or physical health; the

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second is that they are items in respect of which
there tends to have been - and I will come to the
detail of this in a moment - legislative regulation

for some time. May I just say in relation to
videos, videos have not been around for a terribly
long time but for the time they have been around,
for practical purposes, there has been a regulation
of them.
Your Honours, I do not know that I can put it

more exactly than that, and could I say two things:
the first of them is that they seem to have
characteristics, so far as one can identify them,
similar to those which liquor and tobacco possessed
in the reasons for judgment of Your Honour the
Chief Justice and Justice Deane to which I will
come in a moment.

McHUGH J: What, that the demand for them is inelastic, so

they are a better vehicle for taxation?

MR JACKSON: Well, Your Honour, that is probably true. If a

person is sufficiently interested in obtaining
them, no doubt, it may be that if they - - -

McHUGH J: But the explanatory memorandum suggest that the

"X" classification is for hard core pornography.

MR JACKSON:

Hard core pornography it is described as, yes.

And, Your Honour, in that one might expect that no
doubt there is an absolute limit to the amount that
people are prepared to pay but there will be people
who, by inclination or by personal condition, are
prepared to.pay large sums if the price gets high
enough. As I said, no doubt there is a limit but
there is certainly an element of inelasticity
because there is a kind of addiction to them,
Your Honour.

Your Honours will have seen - and no doubt

these things tend to come from the United States
which, in some respect, has so much to show us but
Your Honours will have seen, on so many occasions
there have been, in recent years, since videos of
this kind became more generally available, attempts
to rely by way of mitigation or in defence of
crimes, on the fact that persons have become inured
to violence, for example, by watching videos of
this kind. The point I am seeking to make about
them, Your Honour, is that they do fall at least
within a category which is similar to liquor and
tobacco in the sense of being appropriate for
regulation and licensing.
Your Honour, could I go then to - perhaps I

should say one other thing. If I could go to the

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first of the bases on which we would seek to rely.
I am sorry, I am interrupting myself again.
The second point I was going to make in answer

to Your Honour Justice Brennan before was this:
that where one has items of a kind such as this,
whether it be tobacco, liquor or "X" videos, there
is no doubt a legislative choice on whether there
should be absolute prohibition, no restriction
whatsoever, or whether there should be some form of
licensing with perhaps a fee which might discourage
persons from participating in the trade, that in
the end no doubt it is a question of legislative
choice. But the fact that a fee charged for it is
one which may contain an element of perhaps
legislative disapproval or conditional approval
does not mean that it necessarily is an excise.
Your Honours, could I come then to Philip

Morris -

BRENNAN J:

Is it any more than neutral as to whether it is

an excise?

MR JACKSON: It depends, Your Honour, on the particular

case. One could see, for example, a licence fee

which was imposed at a very high rate. If that was
done, whether it be imposed as a lump sum or as
something that relates to the volume of the trade, in that case it is easier to say, we would submit,

that that is plainly to be a licence fee. I use
the term in contradistinction to a duty of
excise.One sees on the other hand a fee which is a

relatively low one. It may just be seen to be then

simply a way of obtaining revenue. It may be
neutral, but it may not be too.

BRENNAN J:

I must confess at the moment I do not see the

significance of that at all. If the tax is imposed
by reference to the transactions or the value of

transactions and the transactions have as their
subject-matter goods, then is that not the area of
discourse in which one determines whether it is a
duty of excise or not?

MR JACKSON:

Your Honour, I accept that that is the area one

is talking about. The issue would not arise
otherwise. But having said that is the area, it
then becomes a question of determining whether the
particular exaction is or is not such a duty.
Your Honour, it is clear, of course, that the fact
that the duty, licence fee or tax, whatever it may
be, is imposed by reference to sales is a factor
which is germane to the question whether it is an
excise, and it is a factor which suggests that the
fee may be an excise. But the point I am seeking
to make about it is that it is not a conclusive

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matter. It is one of the factors, and I referred
Your Honours to the observations of Justice Taylor in Dennis Hotels.

BRENNAN J:	What I am endeavouring to discover is whether your argument depends upon either the social
disapproval of the substance with which the tax is
concerned or the licence fee is concerned, or
whether it does not. Is that a criterion?
MR JACKSON:	Yes, Your Honour, I am sorry, I had been running together the two arguments and was about to
try to ascribe the case to one or other.
Your Honour, the one I was about to refer to was
this: what we would say is that one does look to
the matter to which Your Honour put to me and that
is the social acceptability, to put it loosely, of the particular item and, Your Honour, it is
difficult to identify criteria other than those
adopted by the Chief Justice and Justice Deane in relation to tobacco and liquor in Philip Morris and
what we would say is that, if tobacco and liquor
fall within that category, so too do these videos.

BRENNAN J: Is it because of the fact that there is a

licensing regime or because of the fact that it is
a substance which may be deleterious if ill used?

MR JACKSON: Well, it is both of those things, Your Honour.

BRENNAN J: In other words, one looks to see whether there

is a sufficient number of indicia of similarity
between "X" rated videos, on the one hand, and
those substances which have been the subject of the
Dennis Hotels and Dickenson's Arcade, on the other.
Is that right?

MR JACKSON:

Yes. Your Honour, not the most satisfactory

approach, no doubt, but that is one of the reasons,
perhaps, why the case should be reopened.

BRENNAN J: It just makes it very difficult to articulate.
MR JACKSON:	Your Honour, I understand the problem, if I may

say so, with respect.

McHUGH J:

Mr Jackson, I am just not following what you just said to Justice Brennan.

I thought you were

arguing, as a matter of principle, that this was
not a tax upon goods, but a licence for a business,
and at the same time you were seeking to rely by
analogy on the precise decision in Dennis Hotels.

MR JACKSON:

Your Honour, I am sorry; perhaps I did not make

myself clear when I started. What I am seeking to
do is this: there are two possible bases, we would
submit, within the existing test that are

Capital(4)

20/4/93

applicable in such a way that the fees in question

here are not duties of excise. Your Honour, one of
them is to say that the "X" videos are, to put it
shortly, in the same category as liquor and

tobacco; that is argument A, as it were. Argument
Bis somewhat a broader one, and that is to say
that if one looks at the whole thing, these are
really a licence fee for carrying on this business

and not a duty of excise. Now, Your Honour, they
are two separate arguments, but there is
undoubtedly overlapping in them and I indicated at
the start -

McHUGH J:

One is an argument of principle; the other one is

an argument for analogy to precedent.

MR JACKSON:

Your Honour, the first is an argument by

analogy; I accept that. The second is to seek to
say, in a sense, that Your Honour Justice Brennan
in Philip Morris said that one must look at all the
features and at the end of the day arrive at a
conclusion, and that is really the second one. It
is an argument on principle, but in a sense it
becomes, I suppose, a question of characterization.
And, Your Honours, what I was going to say about
the first of those was that the approach taken by
Your Honour the Chief Justice and Justice Deane in
Philip Morris appears in 167 CLR at page 440 at

about point 2. Now, Your Honours in the first new
paragraph on the page deal, in a sense, with the
features leading to the conclusion which follows in
the next paragraph and in the next paragraph
Your Honours say:
Liquor licensing has a unique history and

it is not easy to imagine a range of
commodities whose characteristics and history
would lead to a similar outcome. However, in
our opinion, a similar view may be taken of
tobacco, though it lacks the long history of

legislative regulation that has been a feature
of the merchandising of liquor. Tobacco and
tobacco products have like characteristics
which invite regulatory control -

and, Your Honours, no doubt that is the product of
there being deleterious effects on smokers if they
take them up too young -
and that control is appropriate to sale and
distribution of the commodities.

Then Your Honours refer to the fact in the next
sentence that:
In the case of neither is a tax ..... likely to
be passed on as a significant component of the

Capital(4)

20/4/93

cost of different and dissimilar manufactured
goods.
Your Honours, amongst the documents that I handed
to Your Honours a moment ago was included a
document which sets out an extract from the
Australian Law Reform Commission's Report No 55 on
censorship procedure. That is a report in 1991.
Now, Your Honours will see, in the pages that

have been extracted, pages 2 to 6, in effect, the
history of what has occurred since videos became

commonly available. Your Honours will see
paragraph 1.5 and then paragraph 1.6, the 1984
scheme, you will see the principles there referred
to, and then an overview of the scheme appears in
paragraphs 1.7, 1.8 and 1.9.
I shall not take Your Honours through the

detail of that, I simply wish to indicate that it
is obviously a matter which has been regarded, in
all the jurisdictions, as one deserving of some
control and you will see, for example, in
paragraph 1.8, a summary of the position in
relation to "X" films.
Your Honours, if I could move to the second

aspect of what I was saying, the second test,

looking at the matters together. What I am
referring to there is set out in the reasons for
judgment of Your Honour Justice Brennan, again in
Philip Morris, and the page to which I am about to

refer is page 445. I do that, Your Honours, really
by way of introduction to the particular passage
which comes a little later. At page 445, at about
point 6, Your Honour, under the heading,
"Proposition 2: No closer connexion", set out a
passage from Justice Kitto in Dennis Hotels and the
"no closer connexion" appears in the second
paragraph of that quotation where His Honour said:

To say so much is to exclude a tax -

exclude, that is, from the concept of duty of
excise -
which has no closer connexion with production
or distribution than that it is enacted for the privilege of engaging in the process at
all."

Your Honour then elaborated upon that. Then at
page 458 commencing at point 1, in a passage which
goes through to page 459, about point 2,
Your Honour said on page 458, about point 3:

Capital(4)

20/4/93

the calculation of that fee on a Dennis Hotels
formula is a relevant but not conclusive
factor -
Then Your Honour repeated that at the start of the
next paragraph. I will not read out the remainder
of that paragraph, but at the end of it on page 459
Your Honour said that:
The significance of a Dennis Hotels
formula ..... must vary according to the
statutory context in which the formula appears
and the actual operation of the statute.

Your Honours, in the present case the licence fee,
as I have said before, is high of course, but we would submit it is apparent that it is a fee for

the privilege to engage in a business which
requires strict control; they are not selling

suit ..... or something like that. Your Honours,
those are the submissions we wish to make in
relation to that.
It may be convenient, Your Honours, if at this

point I - - -

McHUGH J:

What about the people who do not have the licence but have still got to pay the fee?

MR JACKSON:

Your Honour, if one looks at the provision in relation to them, what you see is a provision that

is really in a sense a perfectly normal thing. It

says you have to have a licence; for the licence
you have to pay a fee. But then as most statutes
that impose licence fees would say, if you do not
have a licence, then you are still liable to pay

the fee.

Your Honour, sometimes they say you pay

twice the fee. It is a perfectly normal provision,

we would submit, but is ancillary to the main

object of it.

It may be convenient, Your Honours, while

turning to the Act, if I could take Your Honours
for a moment to part D of our written submissions
which deal with the classification of materials for

censorship purposes.

Your Honours, we really do

not wish to add very much to these written
submissions on that topic but in relation to it the
position was that the Classification of

Publications Ordinance was in force before

self-government.

Your Honours have seen the system

of classification.

The explanatory statement

referred to in paragraph 2 is amongst the documents
we have given to Your Honours.

Your Honours have seen the provisions referred to in section 22(1) and 23(l)(g) of the

Capital(4)

20/4/93

(Self-Government) Act which are paraphrased in
paragraph 3. Your Honours, one of the matters
referred to in the (Self-Government) Act in
schedule 4 is that one of the matters the executive
of the Territory has responsibility for is
Territory censorship, except classification of
materials.
Your Honours, the history of the events which

occurred is set out in paragraphs 5, 6, 7 and 8 and
what we would submit is that it is quite plain that
the provision of the (Self-Government) Act which
limits the legislative power of the Territory, and
that is section 23(l)(g), when it speaks of the
classification of materials for the purposes of of the Act do not touch upon that at all; they do not give any classification to materials for the purposes of censorship. They adopt those that are
censorship, that it is speaking of classifications
of the nature referred to in the Classification of
referred to in the Classification of Publications
Ordinance and, Your Honours, that is the short
position, we would submit.
Your Honours, may I come then to the question of reopening the Court's previous decisions in
relation to section 90 and, Your Honours, as is
apparent from our outline of submissions, we wish
to invite the Court to enter into a reconsideration
of its previous decisions on the meaning of the
term "duty of excise" in section 90 and the meaning
of the term which we would invite the Court to
adopt is that such duties are those which are
imposed on a producer or manufacturer of goods by
reason of that producer or manufacturer's
production or manufacture of the goods and
Your Honours, allied to that is the notion that the
duty proscribed is one which would be imposed in
respect of production or manufacture within the
jurisdiction.

Now, Your Honours, this morning our le.arned

friend said that a notion of that kind, that what
is contemplated by the prohibition in section 90,
is a prohibition on duties of excise imposed by,
for example, a State in respect of production or manufacture within the State, is one which could not be right, because it would have the result that
the State might seek to impose a duty on production
anywhere in Australia and that one would then have
a situation that because of section 90, as so
interpreted, one would then have the duty being
invalid in respect of the home State and one would
have to rely on section 92 to make invalid the duty
in respect of the other States. But that is one of

Capital(4)

20/4/93

the functions of section 92. Your Honour, that is
what section 92 is for.

BRENNAN J: It does not follow, does it? I mean, what would

there be to prevent Victoria imposing a tax on BHP
in respect of its production of iron ore at
Port Kembla.

MR JACKSON: Well, Your Honour, section 92.

BRENNAN J: Why? It is not protective, is it?

MR JACKSON: Well, Your Honour, if one assumes that the tax

that is imposed is a tax which is upon BHP in
respect of that production, well then, Your Honour,
there are two possibilities I suppose. One would
be an underlying question, not quite resolved, as
to the ambit of State legislative power to do that
in respect in an area of another State in
Australia.

BRENNAN J: That is in relation to a corporation

incorporated in Victoria, and its principal place
of business there. It is a tax upon that
corporation. The reference point by which the tax
is quantified is its production of goods elsewhere.

MR JACKSON: Well, Your Honour, it may be that the result is

that it is not a duty of excise.

BRENNAN J: But that means that section 90, when it speaks

of uniform duties of customs and excise is not
exhausting the tax on goods, is that right?

MR JACKSON: Well, Your Honour, that is the question. It is

not exhausting the taxes on goods.

BRENNAN J:

So what section 90 was speaking about was duties

of customs at the external tariff barrier and

excise at the internal customs barriers?

MR JACKSON:

Your Honour, what section 90 is talking about

is that it does a number of things. One is, that
it prohibits a State from imposing a duty of
customs. It speaks of uniform duties of customs.
It contemplates there be one duty; the boundary has
moved from the State boundaries to the external
boundary of the nation. That is one thing in

relation to customs. What it is also saying in
relation to duties of excise is that only the
Commonwealth can impose a duty which can be

regarded as a duty of excise. The question then is
what is a duty of excise? And, in relation to
that, that is where we make the submission that I
indicated a moment ago. But, Your Honour, may I
come to that a little later.

Capital(4)

20/4/93

MASON CJ:

Mr Jackson, it would be convenient to adjourn

now. We will resume at 10.15 tomorrow.

AT 4.15 PM THE MATTER WAS ADJOURNED

UNTIL WEDNESDAY, 21 APRIL 1993

Capital(4)

20/4/93

[1993] HCATrans 87

Key Legal Topics

Areas of Law

Constitutional Law

Statutory Interpretation

Legal Concepts

Appeal

Jurisdiction

Statutory Construction

by the State of South Australia.	(instructed by
the Victorian Government Solicitor and the

Commonwealth should follow you.	I am sorry, follow
the plaintiff.	Mr Bennett.

required.	He simply has no tax to pay in March and
April.	The alternative view is that he pays for

indeed, why particular products may be dangerous if
not sold in some sort of supervised way.	The

the same.	So the first three, the ones one starts
with, are concerned with money.	The fourth one is:

substance a step in the distribution of goods.	The
fee was calculated on the Dennis Hotels formula,

Gaudron ought not to be followed.	We make this
submission in relation to them.	The first is that

the person assaulted was one or the other sex.	The
words simply cover the universe.	And on that basis

overrule it because of that acting, but it goes
much further.	The Court has, having said that

similar tests to those which we espouse.	May I
just make that good.

they reached were different. It is true they did not comprise the whole of the majority, but	nevertheless we would submit that that fails to	satisfy the second criterion in John's case for
overruling.

A, B, C or G or anything else.	What is relevant is
what one can do with it.

it has been received in this Court, quite apart	from the Dennis Hotels exception and, to put it
simply, our position is that there is an element of
Aunt Sally in us, at this stage, having to address
that argument when it is an argument which has not
been put to the Court and, in ordinary order of proceedings, would be one for those attacking doctrine to first put before it is answered.

extremely limited nature of the exception.	And it
is our submission to the Court that the

in that direction.	I am just taking the test that
you posit there.	Why is not a land tax an excise

the circumstance of the land tax. Perhaps I should	have thought of it before lunch, but I did not.
One can make the obvious distinction between a
general land tax which, on the face of things, one
would doubt would constitute an excise as being a
tax with respect to commodities, and a land tax
used on land for production; the sort of Matthews
type of impost. So that we would say in answer to
Your Honour's general question, it might depend on
the particular facts.
As to what is the appropriate approach, our submission is it is not a case to say there can be
no principles. Firstly, there is a role for
precedent but, secondly, we would say the sort of
inquiry is that which is embraced by way of example
in the statement of His Honour

territory and markets of other States.	To the
contrary, that provision -

Australia, if you like - are duties of customs.	We
say all other taxes on goods within the State or within Australia, wherever produced, are excise

supplementary materials is directed to that.	Also
the material with respect to the Common Market

through the principle.	The mere fact of having an
impost not uniform across Australia but in one

of the Federal compact, which was to ensure a uniform free trade area. And it is destruction of the very thing which was created which we say puts it outside the ambit of what may be permissible within a construction of the terms of the	destroy what we say, Your Honour, is the basic part other sections dealing with the question of the
consequences upon imposition of uniform duties or customs.

submissions to be made by the Solicitor-General of
New South Wales as to prospective overruling.	So
that in the event that Dennis Hotels were to be

within a category similar to that of liquor and	to be applied: the first is that the videos fall
tobacco, the validity of the impost on which was upheld in Philip Morris Limited v Commissioner of Business Franchises.

the trade which it permits.	The two matters
overlap to some extent.	Now, Your Honours, those

Ordinance 1983.	Your Honours, the bundle has two
parts, I fear.

Your Honours will then see that the two possible
classifications are there referred to.	One then

video premises may be set up.	Your Honours will
also see - - -

Your Honours, they are in, for practical purposes, reused until no longer capable of effective use.	the same position as building equipment or fork
lifts or items used for party hire and,
Your Honours, what one does see in relation to
those items is that it seems difficult, we would
submit with respect, to regard them as being items
which are somewhere on the way towards reaching the
consumer, because they have reached the consumer. Other people view them, of course; there would be
no point in the business if they did not, but they
have reached the consumer in the sense of having
reached the last person who would wish to buy them.
Your Honours, if one looks also at the provisions of the Act, what they do, in our
submission, is to demonstrate that the Act is
seeking to say, you want to carry on a business of

sometimes just for convenience.	Why the term is
used, Your Honour, I cannot take beyond that.	I am

case.	One could see, for example, a licence fee
which was imposed at a very high rate.	If that was