Capital Duplicators Pty Ltd & Anor v Australian Capital Territory & Anor; Rainsong Holdings Pty Ltd v Australian Capital Territory

[1993] HCATrans 92

. Replacement Page

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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

Registry No C4 of 1993

B e t w e e n -

RAINSONG HOLDINGS PTY LIMITED

Plaintiff

Capital(4)	272	23/4/93
MASON CJ BRENNAN J DEANE J DAWSON J TOOHEY J GAUDRON J McHUGH J

and

AUSTRALIAN CAPITAL TERRITORY

and COMMISSIONER FOR

AUSTRALIAN CAPITAL TERRITORY

REVENUE COLLECTIONS

Defendants

Questions Reserved pursuant

to section 18 of the
Judiciary Act 1903

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 23 APRIL 1993, AT 9.47 AM

(Continued from 22/4/93)

Copyright in the High Court of Australia

Capital(4) 272A 23/4/93

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MASON CJ: Yes, Mr Solicitor?

MR GRIFFITH:  Your Honours, having intervened at the

adjournment last night, may I resile from my

statement that was only one hand-up being the one I

handed up yesterday. We have a short extract from

Shoup, Fiscal Harmonization in Common Markets,

Volume II: Practice, 1967 to hand to the Court.

These extracts are directed to the issue of, as we

put it, harmonization in a free trade area or

economic or customs union as discussed by the

author. It is not possible in his view without
either non-discriminatory or uniform rates of

general indirect tax either on the origin or the

destination principle.

I should add to Your Honours that the extract

from Mellor which we attached to the paper we

handed to Your Honours last night discusses the

origin or destination principle. It picks up some

of the concept that Your Honour Justice Deane

engaged my learned friend, the Solicitor-General

from South Australia, in discussion yesterday.

Shoup refers to that as being the alternative to

having discriminatory rates by way of support with

customs levies - compensating customs levies to

offset inequality.

Also in this extract there is support for the

proposition that we have made of continuation of
the characterization of the tax to ultimate

consumption. I will not take the Court to these

materials, and I emphasize that they are extracts

of a chapter of about 160 pages, but it is just to

assist these concepts.

DAWSON J: But the concepts are not much use, Mr Solicitor,

unless one takes into account, for instance,

section 92 and the total picture. Does the author,

Mr Mellor, deal with that anywhere in his work?

MR GRIFFITH:  Your Honour, there is a following chapter in

Mellor that discusses the decisions of this Court

and we have not extracted that for the Court on the

basis we accept the comment of Justice Brennan and

it is not very helpful for the Court in considering
these issues to see discussions; we are not even
sure Mr Mellor is a lawyer or not, but it is not a

very satisfactory discussion and we did not want to

disturb the Court with that, but in answer to Your

Honour's question about section 92, Your Honour, we

make the proposition, and that is why we refer to

something such as Shoup, that you do have this

choice to ensure a customs union and we say that

the constitutional framework is such that it is

insured and the possibility or the necessity for

Capital(4) 273 23/4/93

customs barriers and compensating taxes, is

avoided.

DAWSON J: It seems the reasoning seems, if I may say so, to

go something like this: (a) now when we look at it,

this is desirable; (b) the founding fathers

understood these concepts; (c) therefore it is

desirable that the Constitution says so; next step

the Constitution does.

MR GRIFFITH: With respect, Your Honour, our submissions are

the obvious, that it is my learned friend,

Mr Doyle, is saying now it is desirable that the

States should reverse the fiscal imbalance, which

our submissions, and we refer to the table on

page 20 of our original filed submissions, say was

accepted as fundamental by the founding fathers,
hence the provisions in the Constitution for return
of 75 per cent of the revenue to the States. So,

with respect, Your Honour, we would reverse the

appellation that Your Honour gives to our

submissions and apply it to those who say that

there should be a capacity now recognized of the

States to impose taxes in a differential way within

the geographical area of the Commonwealth on

commodities but, Your Honour, that is obviously the

identified point of difference and perhaps it is

not possible for me to satisfy Your Honour by

applying the same appellation to Mr Doyle.

DAWSON J:  What you have to do is identify that what was

understood by "excise" was something in the broader

sense rather than in the narrower sense.

MR GRIFFITH:  Your Honour, it may well be the case at the

end of the day that we will find that this
historical material does not take us very far. For

example, the historical material referred to by my

learned friend, Mr Doyle, particularly the

Victorian Report, at volume 111 of those

materials - I could take the Court briefly to that.

Mr Graham made the point that each of the authors of this were very worthy colonial, and in due

course some of them Commonwealth officers.	The
statement there is:

The imposition of uniform Duties of Customs without uniform Duties of Excise

would, we think, be disastrous to trade and
also to the revenue; commodities would be

made in those states in which the excise was lowest ..... whilst the manufacturers in those

states in which the Excise Duties were highest

would be ruined. To avoid the possibility of

this we suggest the amendment of section 88 in

such a manner as to bind the Commonwealth to

impose a common Excise Tariff, along with the

Capital(4) 274 23/4/93

uniform Customs Tariff, within two years of

the establishment of the Commonwealth. This

alteration would have a modifying effect upon

sections 87, 89, 90, 92 and 93; but to make

the meaning clear the words "and Excise" might

be inserted after the words "Duties of

Customs" in each of those sections.

My learned friend, Mr Doyle, referred to the fact

that this report was taken up and discussed in the

Convention Debates, Your Honour, and we say here is

a clear enough statement to show that there should

be uniformity throughout the Commonwealth.

The point we make by referring, for example,

to -

DAWSON J: In relation to excise, but that does not answer

the question of what you mean by "excise".

MR GRIFFITH:  I am sorry, Your Honour, I did not hear the

last point.

DAWSON J: Uniformity in relation to excise.

MR GRIFFITH:  We say in relation to imposts on goods,

Your Honour.

DAWSON J: But that depends on whether "excise" means that,

and all the contemporary expositions seem to point

to the contrary, including this Court in Peterswald

v Bartley.

MR GRIFFITH: Well, what Chief Justice Griffith said there

would seem to indicate that they were regarded as

reciprocal, in our submission.	Your Honour, at
page 506 he said:

It will be noticed that whenever in the

Constitution the expression "duties of excise"

is used, it is used in close juxtaposition

with the expression "duties of customs", as

being a term relating to things of the same

nature, and governed by the same rules.

DAWSON J: That is the whole basis of the case that is put

against you.

MR GRIFFITH:  Your Honour, perhaps this exchange is really

indicating the issue of dispute for the Court to

determine.

DAWSON J: But all I am saying is to point to some economic

theory and say that that produces a desirable

result, and that therefore the Constitution meant

that just does not persuade me anyway.

Capital(4) 275 23/4/93

MR GRIFFITH: Well, Your Honour, our basic submission is the

constitutional framework provides specifically for

that and it is not controlled, we say, by the

history. But if one looks at the history,

Your Honour, one finds that that intention is

confirmed, to have a true tariff union within

Australia, and we would submit, Your Honour, not a

capacity of differential, or we say by definition

by reference to the constitutional prohibition on

the Commonwealth imposing discriminatory taxation,

section Sl(ii) and (iii) and section 99,

Your Honour.

We say that, by definition, any State impost

on goods constitutes discrimination within that

constitutional sense. That would be our short

answer example of the submission of my learned

friend, Mr Bale - the Solicitor-General of South

Australia to postulate a new test based on

discrimination.	We say necessarily a State impost
discrimination.	We say necessarily a State impost

on commodities, Your Honour, is discriminatory

within that context. But, Your Honour, that is our

submission which either will be acceptable to a

majority of the Court or will not.

BRENNAN J:  Mr Solicitor, it may be, and it depends on the

analysis of the historical material, but if it

appeared that the only duties of excise that were

in existence at the time of Federation were duties

that were imposed on production or manufacture by

means of a bond store, that one could then say

duties of excise mean duties on production or

manufacture. The other way one might approach it

is to say the only duties that were imposed on

goods at that time were duties of excise of that

kind and therefore the phrase "duties of excise"

means a tax on goods.

So the legal question of the meaning of duties

of excise might take one of two forms: it is the

tax which was imposed on production or manufacture in the way in which it was in those days, or it is

the tax on goods which was imposed and because
there are new forms of taxes on goods they are

still within the meaning of excise.

MR GRIFFITH:	Your Honour, it had been the intention of our submissions, perhaps imperfectly conveyed as filed,
to cover the latter meaning to indicate the
connotation embraced advances in the mechanisms for
imposts on goods.

BRENNAN J:  I understand that is the submission. I must say

at the moment I am still looking to see whether or

not there is any touchstone by which one can give

Capital(4) 276 23/4/93

the interpretation one way or the other to that

meaning.

MR GRIFFITH: 

Your Honour, our basic reference points for

touchstone, we say, is the constitutional
provisions providing for the mechanism, which we
say admitted the fiscal imbalance which would
necessarily follow from what is provided. But,

none the less, Your Honour, in short, we say a

uniform tariff area throughout the geographical

area of Australia. And we say, Your Honour, that

is clear, and the fact that it was intended to be

non-discriminatory is confirmed by section Sl(ii),

Sl(iii) and section 99.

If nothing else, Your Honour, we say it is

confirmed by the basic fact of the union of the colonies to form the Commonwealth of Australia.

But there, on that issue, Your Honour, it is clear

the Commonwealth is given virtually exclusive power

and denied the capacities to discriminate

whatsoever within the territory of Australia. We

submit, Your Honour, it is necessarily and directly

inconsistent with this, to permit the States to

discriminate, and territories, geographical area by geographical area, and cause the distortions, which

we say, self-evidently - this is why I refer to the

economic material - must result if you do not have

non-discriminatory or uniform rates.

I was intending in the reply, Your Honour, to

deal with the issue raised by my learned friend, Mr

Doyle, of a tendency towards uniformity, and our

basic proposition is, Your Honour, there may be

such tendencies, but that is not the constitutional

mandate. The constitutional mandate is a

constitutionally entrenched uniformity, and not one

to be produced in an ad hoc way by co-operation for

necessary economic reasons between the States.

So that, in essence, Your Honour, perhaps when

one looks at the historical material, the

legislation on excise, the English writings, the

Convention Debates, one is left with a clear field

at the end. We are happy to argue it on that

basis, although we have referred to the material

and our summary in our materials handed to the

Court which we say is fairly clear our way. We say

clear, because our basic proposition is it is in

the Constitution. We say this is the essence of

the constitutional compact, and that in the end is

a matter, in our submission, of construction of

several sections of the Constitution, but we would

say, of the entire Constitution, and that is why we

refer, because it is a convenient summary of

approach of the judgment of three of Your Honours

Capital(4) 277 23/4/93

in the Capital Duplicators (No 1) case, 109 ALR 1

which I referred to in my opening.

The essence of our submissions is that that is

where the answer lies on the principle and one is,

perhaps, going down byways in exploring many of the

matters, including, we would submit, much of the

historical material which has been put in great

volume, including by us, before the Court.

Could I make some short remarks on this

question of elasticity in pricing as to whether or

not necessarily an impost on goods carries through

to the price. We would refer to the extracts in

Mill which are included in our materials, page 84

to 86, paragraph 2 dealing with taxes on

commodities.

My learned friend, the Solicitor-General for

Queensland, has a clearer, he says, photocopy at

page 505 of his materials, but whether his or ours

is clearer, the basic point made by Mill is that,

in paragraph 2:

A tax on any one commodity, whether laid on

its production, its importation, its carriage

from place to place, or its sale, and whether

the tax be a fixed sum of money for a given

quantity of the commodity, or an ad valorem

duty, will, as a general rule, raise the value

and price of the commodity by at least the

amount of the tax.

It also says here:

There are few cases in which it does not raise

them by more than that amount.

Then he goes on to say the higher price necessitated -

by the tax, almost always checks the demand

for the commodity.

Now, we do not assert that a tax imposed on the

distribution, sale or consumption of goods will

necessarily affect the rate of production and
importation of those goods because, of course, the
ultimate economic incidence, as the Court has seen
in the economic material in the submissions put
before it, may depend upon the means of exaction

and the elasticities of supply and demand within

the particular market.

But it is our submission that section 90

prohibits the States levying duties of excise as a

means of exaction. The prohibition, we say, is the

Capital(4) 278 23/4/93

States may not levy a tax where the method of its calculation or the circumstances of its imposition

show that it has a natural discernible relationship

with the quantity or value of the goods produced,

distributed, sold or consumed.

Now, one reason for this is the general

tendency of such a tax to increase the price or

costs of the goods to the consumer which may lead

to a reduction in demand and consequent reduction

in the production or importation of the goods. But

the pricing incidence of this tendency will depend

on elasticities of the market.

It may be that in some exceptional cases,

because of the supply or demand elasticities for

certain goods at certain times, the tax will be

wholly absorbed by persons upon whom it is imposed,

or possibly by suppliers to that person without any

effect on production or importation.	We do not
deny that possibility.

What we say is, discussion of this possibility

confuses the rule with its reason. Section 90

prohibits States levying all duties of excise, and

if a State tax answers that description of a duty

of excise because of its means of exaction, in our
submission that is the end of the matter and is not
to the point and not open because of the words of

the Constitution to argue that the elasticities of

the market are such that a particular duty of

excise may have no real effect on importations.

DAWSON J:  Mr Solicitor, I am not sure what your definition

of an excise is.

MR GRIFFITH:  Your Honour, we basically come back to the

definition which we set out in paragraph 1 of our

submissions by reference to the statement -

DAWSON J:  If any tax finds its way into the cost of the

goods, the cost structure, it is an excise.

MR GRIFFITH: 

Your Honour, really I can only refer again to

the submissions which we made on this point
in -

DAWSON J: Is that what you say?

MR GRIFFITH: 

No, Your Honour, we say that it is a question

of the particular circumstances as to whether or
not one can characterize the tax as being a tax on

commodities. If one can, having regard - and I
made submissions to the Court after the luncheon
adjournment on Tuesday as to that, Your Honour.

Capital(4) 279 23/4/93

DAWSON J: That is no definition to say it depends on the

circumstances. Can you not do better than that?

MR GRIFFITH:	Your Honour, we say basically it is clear, that one can recognize imposts in respect of
commodities. There is ample authority of this
Court which enables one to do that, Your Honour.
In essence, the submission before the Court by
those advancing a new definition is to say, "We
submit we can start with a clear sheet of paper and
create a definition which none the less involves
case by case examination but one which is
essentially based on the absence of selectivity
based on State or Australian production or
manufacture."

In essence, Your Honour, the test put against

us has those same issues which suggested

difficulties in our definition.	We submit that
they are not difficulties.	By and large it is
clear.	In the odd case where there is a

difficulty, it is a function of this Court to say

which side of the line it is, for example Hematite.

Their views might differ, Your Honour, but a majority decision of the Court had no difficulty in saying that in the circumstances that impost was an

impost on commodities and constituted an excise. That does not mean that there might not be cases

which are close to the line or possibly on the

other side of it.

But the point we seek to make here is that the

logical consequence of the South Australian

argument with respect to the fact that one cannot

assume that excises or imposts on goods necessarily

are carried through to the price would be to

immerse the Court in the complex inquiry of

economic fact in every case where the State

asserted that its tax did not have the relevant

economic effect of passing into the price. We say

the reasoning of the Canadian cases illustrate the

difficulties of such an approach. So, for example,

the Judicial Committee in Bank of Toronto v Lambe,

(1887) 12 AC 575 at page 581, said:

Probably it is true of every indirect tax that

some persons are both the first and the final

payers of it; and of every direct tax that it

affects persons other than the first payers;

and the excellence of an economist's

definition will be measured by the accuracy

with which it contemplates and embraces every incident of the thing defined. But that very excellence impairs its value for the purposes of the lawyer. The legislature cannot

possibly have meant to give a power of

taxation valid or invalid according to its

Capital(4) 280 23/4/93

actual results in particular cases. It must
have contemplated some tangible dividing line

referable to and ascertainable by the general

tendencies of the tax and the common

understanding of men as to those tendencies.

May I make some short submissions in response

to the volume of materials prepared on behalf of
the Attorney-General of New South Wales on the

concept of duties and excise in late 19th century

economic literature. Our submission is that this

analysis is a frozen snapshot of customs duty and

internal indirect taxation in the 19th century.

Apart from licence fees, as the Court has seen

often enough in this case, there was little

taxation on goods imported or manufactured after

the stage of importation in respect of the
imposition of customs duties, and after the stage

of production or manufacture in the case of

produced or manufactured goods. So excise duties

by and large were limited to limited classes of

inelastic demand such as wine, spirits, beer and

tobacco. In the colonies they were also limited to

goods bearing similar duties of customs if

imported. This is a point made by Quick and Garran

at page 837.

But we submit it remains that the economic

effects of taxation of goods within a country

imposed at a stage later than production or

manufacture importation, has an economic effect in

a capacity to distort internal free trade, and this

is referred to, for example, by Justice Dixon in

Matthews v Chicory Marketing Board, 60 CLR 263. We

submit there is no reason in principle to limit the

meaning of excise by limitation of impost on the

actual production or manufacture of goods to

exclude the attainment of what we have submitted

are the proper objects of section 90 in its

constitutional context.	And we say the purpose of
the provision confirms that the court has correctly

hitherto, taken the view that the characterization

of excise is a matter of substance rather than form

and that an impost at a point subsequent to

production, properly may be characterized as an

impost on goods. Indeed, Garran touches upon this

aspect in the extract of his 1896 paper in The

Australian Economist, which appears in full at

pages 131 and following, but particularly pages 131

to 133 of my learned friend's, the

Solicitor-General for New South Wales materials,

and also extracted at page 13 of his summary at the

commencement at that volume. There Garran said in

1896:

The fiscal policy of federated Australia must

be one and indivisible, and must therefore be

Capital(4) 281 23/4/93

controlled by the federal Parliament ..... This

of course implies that the provincial

revenues ..... must be raised chiefly by direct

taxatio~; whilst the federal revenues will be

chiefly raised by indirect taxation.

Of course, as is noted by Garran and the other

materials before the Court, it was contemplated, not be needed for federal purposes. Garran in this
although this control would be given to the Federal
Parliament and moneys paid into the Federal

distribution of surplus federal revenue amongst article in 1896 discusses the mechanisms for in settled form in the Constitution.

The factor (d) referred to by my learned

friend, Mr Mason, on pages 11 to 14 and 16 of these

materials in the summary is, we submit, directed to

the crucial issue of constitutional principles and

that is the proposition that:

Internal free trade and prosperity within an

economic unit were seen to be fostered by

removing local indirect taxes.

And we say that this principle is embodied in the

fiscal provisions of section 90 and this part of

the material, we submit, supports the Commonwealth

position and the principle, of course, was that

summarized by Your Honour Justice Deane in

Hematite, a reference which I read to the Court on

Tuesday, the citation, 151 CLR 661.

DAWSON J: But it cannot cover all indirect taxes,

section 90, can it?

MR GRIFFITH:  Your Honour, we would wish to get away from

the concept of indirect taxes as a measurement of

excise.

DAWSON J: All right, I will desist, but you would say a

payroll tax is not an excise?

MR GRIFFITH:  Your Honour, what we say is that that has never been determined by the Court.

DAWSON J:  I am asking what you say. Payroll tax on a

producer, and it will be a tax on others as well?

MR GRIFFITH: Well, Your Honour, we say that is perhaps

another matter for consideration for this Court

after - - -

DAWSON J:  I am asking what you would say about it?

Capital(4) 282 23/4/93

MR GRIFFITH:	I would say, Your Honour?
DAWSON J: Yes.

MR GRIFFITH: Well, Your Honour, I would not say it could

not be; I would say there are arguments that it

could be and it may be a majority of the

Court - - -

DAWSON J: What would determine whether it is or it is not?

MR GRIFFITH: Your Honour, the question would be whether in

all the circumstances it could be said to be an

impost on commodities.

DAWSON J: That is just rephrasing the question.

MR GRIFFITH:	Your Honour, that is the inquiry that one must make. But, Your Honour, we have had cases for
excise since volume 1 of the Commonwealth Law Reports; it is not a matter that one can say that
there is a touchstone that gives an answer by
reference yes or no in every case.
DAWSON J:	You must face up to the problem, because you are saying that section 90 has a policy behind it which
is to prevent differential taxes which may have an
effect on goods, the concept of a free market.
Well now, here is a tax which does and maybe
differential; now what do you say about it?
MR GRIFFITH:	The payroll tax?
DAWSON J: Yes.

MR GRIFFITH:  Your Honour, I say a payroll tax could be argued to be an excise. One would have to consider

whatever evidence was available for and against

that and determine whether or not in the

circumstances a majority of this Court felt that

there was a necessary - - -

DAWSON J: Would the fact that it is imposed generally, not

only on the producers of goods, be of significance?

MR GRIFFITH: Yes, Your Honour, it could be regarded as

significant.

DAWSON J:  Why?

MR GRIFFITH: Well, Your Honour, the inquiry is whether or

not it is just a tax, or whether it is a tax on

commodities. Hematite illustrates the necessary

inquiry and characterization that one must engage

in. Relevant - - -

Capital(4) 283 23/4/93

DAWSON J:  The fact that it was of general application was

indicated, that it was not directed at the producer

as a producer.

MR GRIFFITH: Well, Your Honour, that may well give the

answer.

DAWSON J:  So that it is not a tax on production or

manufacture, that would be the answer.

MR GRIFFITH:  Your Honour, until this Court determines that

payroll tax is not an excise, or is an excise, the

matter remains undecided and, with respect, my

personal view about it does not matter.

DAWSON J:  I am not asking for your personal view, I am

asking you as a matter of submission.

MR GRIFFITH: Well, Your Honour, as a matter of submission

we submit the issue of whether or not payroll tax
could, on the evidence before this Court, be

regarded as an excise or not cannot now be

determined.

DAWSON J:  You see, that is the trouble, with respect, with

your submission.	You will not say what the limits
are.	And unless you say what the limits are or

suggest some limits, the sky is the answer. That

was what Mr Justice Murphy was saying in criticism

of this concept of an excise: the ever widening

concept.

MR GRIFFITH: With respect, Your Honour, we say that it does

have a reference point, it is whether one says in

all the particular circumstances it is an impost on

commodities.

DAWSON J: But I put an example to you and you refused to

make a submission about it.

MR GRIFFITH:  It is not a matter of a refusal to make a

submission, it is a matter, Your Honour, in which

the answer is not clear because it depends on the

circumstances involved in respect of that

particular - - -

DAWSON J:  We will not carry it on, but I do not consider it

an answer to say that it depends on the

circumstances.	I just do not consider that is
helpful.

MR GRIFFITH:  Your Honour, with respect, that is no

different from what my learned friend, Mr Doyle,

does when he refers to his test of selectivity.	He
says, well, of course you are not going to have a
State tax on Coonawarra red but - - -

Capital(4) 284 23/4/93

DAWSON J: But that is not so. In the example he would say

that a payroll tax in the circumstances I gave you

is not an excise because it is generally imposed

and therefore one can say that it is not directed

at production or manufacture, even though it falls

on a producer or manufacturer as to other people.

That is a perfectly clear answer.

MR GRIFFITH:	Your Honour, I was referring to the ambulatory concept of my learned friend's submission, that it
would depend on whether or not goods of the same
type were imported or not, or manufactured only in
Australia, presumably, or in another view within
the States - - -

DAWSON J: But you know the test, even if the application of

the test may raise questions of fact.	I do not
even know what your test is.

MR GRIFFITH: With respect, Your Honour, we had intended to

make it abundantly clear in our filed submission.

DAWSON J: It is not to me, I am afraid, Mr Solicitor.

MR GRIFFITH: Well, Your Honour, our test basically is to

adopt what the Court has said hitherto, putting

Dennis Hotels issues on one side, and say that

works perfectly satisfactorily, as indeed is shown

by the relative paucity of cases on excise.	We
only have one every three or four years.	We submit
that is not bad going, Your Honour.	By and large,

one does recognize an excise when one sees it.

GAUDRON J: Could I ask you this, Mr Solicitor: does your

submission contemplate that there may still be

licence fees on the basis of the "no closer

connection" criteria that Mr Justice Kitto had in

Bolton v Madsen?

MR GRIFFITH:

Your Honour, licence fees are a bit difficult

for us because we have submitted to the Court not

to reopen it because it is there that - - -

GAUDRON J: Yes, but on your wide submission.

MR GRIFFITH:  We cannot think of any other reason not to

overrule Dennis Hotels other than it is there and

the States have relied upon it. So, Your Honour,

our submission would be on an imposts such as that

sort that they would seem fairly clearly to fall

within our definition of "excise".

GAUDRON J: Yes, but is it because they have a close

connection, or is it because they ultimately affect

commodities?

Capital(4) 285 23/4/93

MR GRIFFITH:  Your Honour, we say the basic inquiry is

whether they are an impost on commodities, and we

say in the circumstances one has regard to the

various factors that the Court have referred to,

that is what they constitute.

GAUDRON J:  I still do not know. Do you allow for the "no

closer connection" test?

MR GRIFFITH:  Your Honour, it is just a question of whether

one sees in all the circumstances a particular

impost one sees as an impost on commodities. If

there is, we say then the question is answered.	On
the face of things, those sort of licence fees of the Dennis Hotels type at least, Your Honour, we say clearly fall within the line for a matter of
principle.	But if it is something of the licence

fee of the Peterswald type, clearly we would say it

would fall on the other side of the line.	It was
just a licence fee for a single amount not

dependent on volume or quantity of manufacture or

trading, and would seem just to have been an impost

in respect of the carrying on of the business, not,

we would say, an impost on commodities. I do not

know whether that provides a reference point for

considering a particular case to decide how the

characterization may occur. But that is our

submission.

What we do submit is that the expression "duties of customs and excise" is compendious and

embraces external tariff policy and internal free

trade, and I have referred to

Chief Justice Griffith in Peterswald v Bartley,

1 CLR 506, which we say embraces that concept,

admittedly having regard to the ambit of excise as

it was seen in 1900.

So we say it is right to say, as my learned

friend, Mr Mason, does in paragraph (d) of his

submissions in this volume of materials that the:

Duties of excise and of customs were linked

because of their economic effect on fostering

a common tariff policy within -

the jurisdiction, and although at Federation

imposts were not charged generally on goods in the

course of their distribution and sale or

consumption after importation or manufacture, we

say it would be to destroy the object sought to be

attained by the constitutional scheme to limit
duties of excise as meaning to taxes on manufacture
or production, and to exclude imposts on goods in

the course of distribution or consumption; and to

exclude general imposts on both imported and

Capital(4) 286 23/4/93

locally produced or manufactured goods in the

course of production or distribution.

My learned friend, Mr Mason, referred to the

indication that I gave to the Court that the

Commonwealth had indicated in response to a formal

request from South Australia that in the event of

the overruling of Dennis Hotels the Commonwealth

would adopt measures to make up the loss of Dennis

Hotels type revenues to the States and Territories.

I should make it clear to the Court that this

indication is not one which is necessarily

dependent upon legislation, but it is none the less

an offer made by the Commonwealth to the States,

but one which as the Court has heard, has not been

taken up collectively by the States and

Territories. That matter really cannot be taken

much further other than we did regard it as

appropriate that the Court should know of those

communications between governments.

Now, in essence, we submit the issue before the Court is to decide whether or not the Court or

a majority, I do not know if that is very fair to

my learned friend, but it seems to me most apt,

whether the Court is going to tie itself to the mast of received doctrine, Ulysses-like, if you

like, and resist the siren call of my learned and

persuasive friend, the Solicitor-General for

South Australia. He stood as an unlikely siren

before the Court, offering from the bar table as

Your Honours passed before him, a glass of his

delightful Coonawarra Red, all the while saying it

can be taxed in the State of manufacture, even on
first sale or production, so long as it is not
taxed selectively. ·we say that is the basic

essence of what is put to the Court as the choice.

prohibition directed to ensure the effectiveness of to do is to emasculate the clear constitutional Our response is to say, what he asks the Court the tariff union within Australia. Now, perhaps

that imagery is inappropriate, but to us that seems

to be the stark choice, given by his beguiling

submissions to the Court.

Of course, in practice, the States will never

impose selective imposts by reference to local

production or manufacture either within Australia

or the States. Why should they? Would

South Australia ever tax Coonawarra Red? Certainly

not. There is no reason for them to do so. What

the States seek is not a power to control the

economy or control production or manufacture within

the State, or interfere with production or

manufacture throughout Australia, or to use the

Capital(4) 287 23/4/93

sort of mechanisms that Chief Justice Gibbs

referred to in Hematite, to control in other ways

than fiscal impost, production or manufacture.

What is sought, is fundamental fiscal power

generally to raise revenue by generally taxing

commodities, but it is our submission that it is this power which is generally and completely, we

say, withdrawn from the States by section 90 on the imposition of uniform duties of customs and excise.

Our submission is that the impermissible slide of

my learned friend, Mr Doyle's submissions is in

paragraph 5 of his submissions to the Court.

We say the immediate purpose of section 90 was

to ensure upon imposition of uniform duties of

customs and excise States would be prevented from

imposing imposts on commodities, whether those

commodities be imported into Australia, or produced

anywhere in Australia. If the description is

compendious and includes all impost in connection

with all commodities, imported or locally

manufactured, as Your Honour Justice Brennan

pointed out in the transcript page 117 to 118, the

effect of the customs union effected by the Constitution was the colonial impost, which

formerly were duties of customs when imposed upon

goods imported into other colonies, became duties

of excise. We submit, however described, upon the

imposition of uniform duties of customs became
imposts falling within the exclusive power of the

Parliament.

BRENNAN J:  I am not sure that that observation is entirely

accurate. When one looks at section 95 and sees

that Western Australia was entitled to impose

duties of customs.

MR GRIFFITH: Your Honour is quite correct. It is a danger

of picking up a remark which seems useful and

hurling it back at the Court. So, if we could

leave section 95 on one side as something which is

spent.

They tell the story, Your Honour, that my

learned and first predecessor, Sir Robert Garran, on the first day of the Commonwealth, drafted the

relevant declaration to provide for Western

Australia to become part of the Commonwealth. But,

having drafted it, Your Honour, as the only

employee of the Commonwealth, he did not know what

to do with it. The story is that he got on his

bicycle and rode to the Victorian Government
printer and had it printed, and in that way Western

Australia did join the Union. I cannot say the

staff in the Solicitor-General's office has much

improved since those dates, but now days I walk to

Capital(4) 288 23/4/93

court rather than coming by bicycle.	But thank you
for Your Honour's observation.

Our submission is that, my learned friend Mr

Doyle's submissions, and I do not intend any

disrespect to my learned and honourable friend on

my right in referring constantly to Mr Doyle, but

we identify that from the point of view of our

intervention as where the articulation of the

principle to be answered lies, is that it must be

rejected to uphold the principle of the free trade

area mandated, we say, by the constitutional scheme embracing the whole geographical area of Australia.

The tariff on goods throughout Australia had

to be uniform, and I will not take the Court again
to the long extracts which I read from the judgment

of Your Honours Justices Brennan, Deane and Toohey

in Capital Duplicators, 109 ALR 15 to 20, but our

submission remains that the basic answer to my

learned friend's contentions lie in those very

concepts discussed in Your Honours' judgments.	We
say it would frustrate the manifest purpose of

section 86 and section 90 if after uniform duties

of customs were imposed, part of the functions of

imposing duties of excise was to pass to the State

and Territories.

The economic interests of all Australians in

all parts of the Commonwealth are protected by the

exclusive powers conferred on the Parliament by

section 90 and by the restrictions on

discriminatory exercise imposed by sections 51 and

52 and section 99 and, we say, implicitly by the

entire Constitution.

As is referred to by Your Honours at page 18

of this report, the reasons for denying legislative

power in identifying the exclusive power of

Parliament have been referred to by Justice Dixon

in Parton, by Justice McTiernan also in Parton, as

is quoted by Your Honours, and then Your Honours go

on to say:

the object of s 90 was at least to prevent

frustration of the tariff policy of the

Parliament.

So we agree with the statement that:

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 does confirm the power of the Parliament to:

Capital(4) 289 23/4/93

impose duties of customs and excise and grant

bounties as a necessary part of ..... achieving

an essential objective of the federal compact:

the creation and maintenance of a free trade

area -

or an economic or customs union -

throughout the Commonwealth and uniformity in duties of customs and excise and in bounties.

So that if section 90 is to play its part in

achieving this essential object of abolishing

internal custom barriers and guaranteeing equality

as regard to customs and excise duties which the

people of the Commonwealth are to bear, it must be

construed, in our submission, as restricting to the

Commonwealth Parliament the sole legislative power

to impose duties of customs and excise and grant

bounties on production for export of goods.

To admit the capacity of the States individually to impose imposts in respect of

commodities, so long as those imposts are not

directed specifically or exclusively to commodities

of local production of manufacture, would we say,

to adopt the language of Your Honours, be a Trojan

horse to destroy the essential objective of the
federal compact and also of course defeat the

express requirement of section Sl(ii) and (iii).

So the exclusivity provisions are, we submit,

and agree with Your Honours' remarks, for the

protection of the people of the Commonwealth.

Your Honours' remarks at page 20 were:

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 ..... the exclusivity provision of

s 90 of the Constitution was intended to

ensure.

So the heart of the South Australian submissions is

that each State and Territory may impose

non-selective imposts in respect of commodities.

This, we say, is necessarily destructive of the

free trade area throughout the Commonwealth which

we submit is mandated by the Constitution. The

Convention Debates were, my learned friend, market and equality of treatment, but the market

which was created by the Constitution was a single

national market. Duties of customs and excise is a

convenient expression to refer to the tariff which

Capital(4) 290 23/4/93

was mandated by the Constitution of a uniform

throughout Australia.

I have already referred to this, but to refer

to my learned friend's point that there will be a natural tendency towards uniformity or an absence

of a great disparity of impost, we submit that it

must necessarily follow that State imposts will

cause irregularities and distortions in the

constitutional sense in discrimination. It is only

if you get complete correspondence between State

taxes that you will not have destruction of fiscal
unity. This, for example, is discussed in the

extract of chapter 2 of Mellor which he gave the

Court last evening.

But if uniformity is obtainable by

co-operation between the States, it none the less

remains, in our submission, that the constitutional

fact is that these are matters not left by the

Constitution to be resolved by theories or practice

of market response to fiscal differences between

States; they are matters mandated by the

Constitution upon the imposition of uniform duties of excise and custom for complete equality of

imposts by the combination of the power being

vested exclusively in the Commonwealth and further

by the constitutional requirement that these powers
be exercised without discrimination.

The reference to the pre-1900 meanings of "excise" in either literature or convention debates

and elsewhere is answered by the, we say, the

proposition which one derives from that, namely

that the manifest purpose of the constitutional

provisions is the control of all taxes on

commodities. Whether imported or local, he passed

the exclusive power of the Commonwealth upon the

imposition of uniform duties of customs, and we

refer to the Court to Garran's discussion at pages

131 to 133 of my learned friend, Mr Mason's

materials.

We say the colonial practice goes no further

than showing the connotations of excise in 1900.

The obvious point to impose a tariff at that time

was on the manufacturer or the producer. The

colonial understanding does not delimit the constitutional meaning, it does not fix its

connotation which embraces new forms of taxes on

commodities which have since developed.

As Chief Justice Barwick said in Dickenson,

130 CLR 185:

Capital(4) 291 23/4/93

But in determining both connotation and

denotation, the constitutional purposes of the grant of exclusive power must be kept in mind.

We say this constitutional purpose is sufficient

established, if one wishes to, from the Convention

Debates by showing that the frame has mandated

exclusive Commonwealth control over excise,

complementary to exclusive Commonwealth control

over customs.

There was some uncertainty as to meaning and

there was no real attempt at definition. We have

referred to that in our supplementary materials,
paragraphs 24 to 25. But there is nothing in the
constitutional debates to show that it was

contemplated that the States may impose

differential tariffs. In our submission, to the

contrary, and we have to the Court to page 111 of

my learned friend, Mr Doyle's materials where the

Victorian 1896 report specifically refers to this

important contrary principle.

So reference to "excise duty" might be

regarded as a convenient way to referring to the

tariff and what the Convention Debates support is

the intention, we submit, to provide that all State

power to tax commodities would pass to the

Commonwealth, and the necessary and foreseen

passing of State finances was provided for by the

constitutional provisions for surplus revenue.

In John Fairfax & Sons in New South Wales,

Justice Higgins, at 39 CLR 144 said:

It is not necessary for us to decide the outside boundary of the denotation of the

term.

I think here, Your Honour, he meant "connotation".

said in Street's case and start again but I think	I always have to go back and read what Your Honour
Higgins' "denotation" is Your Honour's
"connotation". I hope I have got that right.
Justice Rich at page 146 seemed do the same thing.

If I could take Your Honours briefly to what

Justice Rich said in the Commonwealth Oil

Refineries case, 38 CLR 437. His Honour, there

referring to the Taxation (Motor Spirit Vendors)

Act of 1925 says:

it is simply an inland tax directly imposed

upon the sale of a commodity and this always

was and still is denominated a duty of excise.

This is page 437.

Capital(4) 292 23/4/93

The notion that the commodity taxed must be produced within the territory of the taxing

Government is based upon the contrast of economists between duties upon home and

foreign manufactures, and has no warrant in

the meaning of the term excise or its

application in England.

He refers to Blackstone.

Economists called the duties upon home

manufactures duties of excise because such

they were. But there is no authority, so far

as I am aware, which explicitly denies the

correctness of the application of that term to
duties upon goods collected in respect of use,

consumption or sale because the duty is not

confined to goods of home manufacture.

In my opinion, the Constitution gives exclusive power to the Commonwealth overall

all indirect taxation imposed immediately upon

or in respect of goods, and does so by

compressing every variety thereof under the

term "customs and excise". If the expression

"duties of excise" be restricted to duties

upon or in respect of goods locally produced

the fiscal policy of the Commonwealth may be

hampered.

And, His Honour Justice Rich in Fairfax,

39 CLR 146, went on after referring to his earlier

remarks, said:

I was of the opinion that the expression
"duties of excise" found its way into the

Constitution ..... without any precise

connotation. And I considered that the

expression was not restricted in its

denotation to duties upon or in respect of

goods of local production but comprised inland

duties upon or in respect of goods wherever

produced. Excise duties are "an inland
imposition, and are imposed sometimes on the

manufacturer or dealer, sometimes on the

commodity itself, or the retail sale".

Dr Johnson's well-known definition, "a hateful

tax levied upon commodities, and adjudged, not

by the common judges of property, but wretches

hired by those to whom excise is paid", does

not suggest that the origin of the goods is an

essential part of the tax.

And this comprehensive meaning, which we referred

to in our written submission, paragraph 2.14, was

developed, of course, by Justice Dixon in Matthews

and in Parton and Dennis Hotels and

Capital(4) 293 23/4/93

Justice Windeyer in Dennis Hotels. I have already

referred the Court to those citations which were

given in paragraph 2.14 and I will not take the

Court again to them, other than say, these state

quite specifically what we embrace as the

compendious meaning.

The alternative construction, admitting the

same result of Justice Windeyer, is in

Dennis Hotels, 104 CLR 600 to 601, where His Honour

said:

it is the scope of the comprehensive

expression "duties of customs or of excise"

which is the critical matter ..... 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 -

or Territory. And it has been sufficiently

referred to by the Court, the extent to which

judgments such as those of His Honour

Chief Justice Dixon in Dennis Hotels at page 540

and also Justice Windeyer page 600 to 601 make the

point that it would be absurd to have a position

that - perhaps I should say what Chief Justice

Dixon said at page 540, 104 CLR:

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 by section 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.

And His Honour had already 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.

The narrower approach suggested, we say merely by

individual judgments such as Justice Isaacs in

Commonwealth Oil Refineries, 38 CLR 430 or

Justice Fullagar in Dennis Hotels, 104 CLR 557 to

558, referred to by my learned friends Mr Jackson

and Mr Doyle, merely elevate form over substance,

Capital(4) 294 23/4/93

and we would answer those statements by referring

to what Justice Dixon said in Parton, 80 CLR 260,

to say that it will reduce the section only to

formal signiflcance. So the essence of the

South Australian submissions, we submit to the

Court, is to reduce section 90 to only formal

significance and that, of course, is why my learned

friend submitted that Dennis Hotels in this case

was by the by. On his submissions all imposts by

States on respective goods in connection with

goods, other than what might be regarded as an

extraordinary and provocative impost limited by reference to production or manufacture within a

State or within Australia on the Coonawarra Red,

for example, there would be, apart from that, no

effective limitation upon the capacity of the

States generally to impose imposts upon the

distribution and the sale of all commodities.

So, my learned friend Mr Doyle was able to

accept the proposition that almost any State

impost, other than one which had

a ..... discriminatory selective operation in the way

that he defined, would be within State power.

So general value added taxes on commodities,

or a general sales tax, is of the essence of what

my learned friend defines as within power, so long

as they are not selectively defined by reference to

Australian production or manufacture. As we have

said, given that the fiscal aim of the State impost

is to raise State revenue, of their nature such

imposts would not be imposed selectively defined by

reference to production within a State or

production within Australia.

The nature of such imposts is to raise as much

revenue as possible for the States to reduce what

is regarded as the unsatisfactory fiscal imbalance

by reference to imposing, as much as one may

generally impose, imposts on goods as commodities.

We say this fiscal imbalance is one which is in the

essence of what was foreseen and what was provided

for in the Constitution.

It is our submission that a uniform impost on

imported and local goods is none the less

discriminatory in the constitutional sense because

it is an impost of that sort which is prohibited to

the Commonwealth by sections Sl(ii) and (iii) and

section 99 and, we submit, that it is equally

prohibited to the States not by direct prohibition,

which would have been articulated, we submit, if it
was intended that the States were to have power to

impose impost on commodities, but prohibited to the

States by the mechanism of complete withdrawal of

State power to tax imported or local goods.

Capital(4) 295 23/4/93

So to engage in inquiry of whether or not

there is factual discrimination, for example, in

respect of margarine in Tasmania, we would submit

is a false inquiry. The mere fact of impost

limited to the State of Tasmania on that commodity,

we say, is fatal to its validity, that it is

discrimination within the sense of the

constitutional prohibition.

We have already made the point in answer to

the reference of Chief Justice Gibbs in Hematite,

151 CLR 617, that there are many mechanisms for

State control of manufacture of goods. We say this issue before the Court is not one directed to: are

there mechanisms for the States to control the

manufacture or production of goods within the

State, or attempt to control such production or

manufacture outside the State, what is here

asserted is a power to impose impost in respect of

commodities generally, not power to control

industry.

We say whether or not the State intends to

effect tariff policy and really intends to raise

revenue, what it seeks to do is, I think,

proscribed by section 90. The case is not about the capacity of States to undermine Commonwealth tariff
policy by non-fiscal means, it is about tax on

trade and, as we have submitted, the basic answer,

we say, lies in the terms of the Constitution

itself, not in the historical material. And the

underlying policy and constitutional mandate we

have submitted is clear.

So that if the Court does accept that duties

of customs and excise is a compendious expression,

section 90, we say, then is to be regarded as

directed as all imposts on goods, whether coming

into Australia or from overseas, or into States

from other States. In our submission section 90

grants the Commonwealth exclusive power over all

duties of customs, excise and bounties. It is an

exclusive power, we submit, over taxing of

commodities on entry or within Australia so as to

ensure equality of treatment of the people of

Australia and so maintain - - -

MASON CJ:  Mr Solicitor, I do think you are covering ground

that has already been covered.

MR GRIFFITH:  Your Honour, your comment is totally apposite

because I have nine words to go and then I was

going to conclude my submissions, so it was merely

a peroration of one sentence, but if I may finish

that and then totally agree with Your Honour's

remark. I was going to say and so maintain the

free trade area of the Commonwealth which was

Capital(4) 296 23/4/93

established by the Constitution, but the force of

such peroration now perhaps will be denied by the

transcript showing Your Honour's interjection.

DAWSON J:  Mr Solicitor, there is one thing I wanted to ask

you. Mr Mellor, whose essay you rely on in the

material you handed up last night, does examine the

questions which you have been examining today and
comes to the conclusion that the narrow view, which
is the view which is espoused by the plaintiff and

South Australia, is the preferable view in relation to the harmonization of taxation within Australia;

and he says it is a view which is consistent with

Cole v Whitfield. So in economic terms, he comes

to the conclusion which is opposite to that which

you are putting.	I take it you do not embrace
that.	You only embrace Chapter One of his work, do
you?

MR GRIFFITH:  Your Honour, we did have a debate as to

whether to give the Court Mr Mellor or not. But

Mr Mellor has two parts. As I mentioned, this

first part was discussion of basic economic theory

which is useful to demonstrate this origin and

destination.

DAWSON J:	And based upon that theory and an examination of the competing views he comes to a view which is
quite the contrary of the one that you are espousing.

MR GRIFFITH: Well, Your Honour, the next chapter of

Mr Mellor is what we would say is an unsatisfactory

discussion of the authorities of this Court, and

then follows two pages of conclusions which seem to

be unrelated to the discussion which he engages in

in the part which we gave to the Court.

DAWSON J: Well, the conclusion is not irrelevant that the

narrow view of section 90 is consistent with Cole v

Whitfield and would reflect much more plausible

concerns about the consequences of unharmonized

taxation and, in addition, about the particular

difficulties which arise under the origin principle

of harmonization.

MR GRIFFITH: This is to engage in the issue that

Justice Brennan raised as to the extent to which

concerned with are filmed overseas but manufactured

in the Australian Capital Territory from masters.

Territory there are added to them the trailers of By being copied from masters, and then in the	other movies, they are placed in the boxes and so
on - the significance of all that may have to be
looked at. If virtually all videos are in that
category that may be relevant on one view of the
test laid down by the Court to whether it is an
excise or not in its application to them, if a pro tanto test is applied.

What we would submit is appropriate,

particularly if I may say so, with respect, bearing

in mind the possibility of divergence of views, is
to permit argument about short minutes after the

parties have had a chance to see Your Honours'

judgments. Of course, if my learned friend,

Mr Doyle's submission is accepted, one would need

to have a factual inquiry in any event to see

Capital(4) 321 23/4/93

whether the tax is an impost on locally

manufactured or produced goods. So it is not only

if I succeed. Even on some of the tests laid down

by other counsel here we might be entitled to some

measure of success. And on Mr Doyle's test, we

would submit that we are entitled to some measure

of success. So we submit that is the appropriate

course and, of course, on that occasion the Court

will also be able to make orders in relation to the

proceedings commenced by Rainsong, hopefully

without further argument.	May it please the
Court.

MASON CJ: Thank you, Mr Bennett. The Court will consider

its decision in this matter and we will adjourn

until 10.15 am on Tuesday next.

AT 11.48 AM THE MATTER WAS ADJOURNED SINE DIE

Capital(4) 322 23/4/93