CCA Beverages (Sydney) Pty Ltd v Commissioner of Taxation
[1997] FCA 117
•3 MARCH 1997
CATCHWORDS
Sales Tax - tax payable on canned and bottled beverages - whether tax payable on containers bought to fill with soft drink for re‑sale - circumstances in which container component will not be included in the taxable value of contents due to container already having been the subject of a taxable dealing under Sales Tax Assessment Act 1992 (Assessment Act) - construction of s 95 of Assessment Act - circumstances in which is there a "need to know" the price for which particular goods were sold, the parties not having allocated a particular amount for these goods - circumstances in which is there a "need to know" how much of a global price relates to some other element of a transaction where the parties have not allocated a particular amount to that element - whether in light of the following: aim of s 35(1) of Assessment Act is to ensure in situations in which a container is associated with goods that are the subject of a taxable dealing, the taxable value will include a component for the container, effect of exemption Item 27 is to exempt dealings with a container from tax on the footing that it will contain goods the subject of an assessable dealing and at that time be subject to sales tax, credit ground CR 8A proceeds an assumption that tax will be payable on the last wholesale sale and grants a credit for the amount of tax paid earlier, policy of sales tax legislation is that sales tax should, in the ordinary case, be a tax upon the last wholesale sale, there is under s 95 a "need to know" in circumstances where there is a taxable dealing in canned and bottled beverages, tax already having been paid as the containers - whether a credit arose under CR 4 at time of sale of canned and bottled beverages - whether fact that tax was paid on containers rather than containers and contents meant that there had been no "dealing" within the terms of CR 4 on which tax had been paid - whether a credit arose under CR 8A of Assessment Act - whether containers exempt under Item 27, Schedule 1, s 24 Assessment Act - whether containers were bought for use in marketing "take‑away" beverages - credit amount - amount of tax payable on dealing with the containers - whether containers of a kind ordinarily used for "household purposes" under para (b) or (d) of Item 1(1), Schedule 2, Sales Tax (Exemptions and Classifications) Act 1992 - whether fact that when purchased required a technical process and special equipment to seal them meant could not be regarded as goods of a kind ordinarily used for "household purposes"
Sales Tax Assessment Act 1992, subs 16(1), subs 16(2), s 24, Subs 11(2), subs 21(2), subs 21(3), s 35, s 95
Sales Tax (Exemptions and Classifications) Act 1992, Item 27 of Schedule 1, Item 1 of Schedule 2
Taxation Laws Amendment Act No. (2) 1993
Slades Soft Drink Pty Ltd v Federal Commissioner of Taxation FCA (Jenkinson J) August 1991 unreported
Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204
Curtis v The Perth and Fremantle Bottle Exchange Co Ltd (1914) 18 CLR 17
Pepsi Seven‑up Bottlers Perth Pty Ltd v Federal Commissioner of Taxation (1995) 132 ALR 632
Brayson Motors Pty Ltd v Federal Commissioner of Taxation (1985) 156 CLR 651
Hygienic Lily Ltd v Deputy Commissioner of Taxation (1987) 13 FCR 396
Diethelm Manufacturing Pty Ltd v Commissioner of Taxation (1993) 44 FCR 450
Commissioner of Taxation v Chubb Australia Ltd (1995) 56 FCR 557
CCA BEVERAGES (SYDNEY) PTY LIMITED v COMMISSIONER OF TAXATION
No. NG 053 of 1996
CORAM:Lockhart, Sackville and Lehane JJ
PLACE:Sydney
DATE:3 March 1997
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )
GENERAL DIVISION ) No. NG 053 of 1996
ON APPEAL FROM A SINGLE JUDGE
OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:CCA BEVERAGES (SYDNEY) PTY LIMITED
(A.C.N. 001 614 455)
Appellant
AND:COMMISSIONER OF TAXATION
Respondent
CORAM:Lockhart, Sackville and Lehane JJ
PLACE:Sydney
DATE:3 March 1997
MINUTE OF ORDERS
THE COURT ORDERS THAT:
Orders varied by omitting orders 2 and 6.
Appeal otherwise dismissed.
Appellant to pay respondent's costs.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 53 of 1997
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF
THE FEDERAL COURT OF AUSTRALIA
BETWEEN:CCA BEVERAGES (SYDNEY)
PTY LIMITED
Appellant
AND:COMMISSIONER OF TAXATION
Respondent
3 March 1997
REASONS FOR JUDGMENT
LOCKHART J.
I have had the advantage of reading the reasons for judgment of Lehane J. with which I agree. I agree also with the orders proposed by his Honour.
I certify that this page is a
true copy of the reasons for
judgment herein of the Honourable
Justice Lockhart
Associate
Dated: 3 March 1997
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )
GENERAL DIVISION ) No. NG 053 of 1996
ON APPEAL FROM A SINGLE JUDGE
OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
CCA BEVERAGES (SYDNEY) PTY LIMITED
(A.C.N. 001 614 455)
Appellant
AND:
COMMISSIONER OF TAXATION
Respondent
CORAM:Lockhart, Sackville and Lehane JJ
PLACE:Sydney
DATE:3 March, 1997
REASONS FOR JUDGMENT
SACKVILLE J:
I have had the advantage of reading the reasons for judgment prepared by Lehane J. I
agree with the orders proposed and reasons given by his Honour.
I certify that this is a true copy of the Reasons for Judgment of the Honourable Justice Sackville.
Associate:
Dated: 3 March, 1997
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )
GENERAL DIVISION ) No. NG 053 of 1996
ON APPEAL FROM A SINGLE JUDGE
OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:CCA BEVERAGES (SYDNEY) PTY LIMITED
(A.C.N. 001 614 455)
Appellant
AND:COMMISSIONER OF TAXATION
Respondent
CORAM:Lockhart, Sackville and Lehane JJ
PLACE:Sydney
DATE:3 March 1997
REASONS FOR JUDGMENT
LEHANE J: This appeal from orders made by a single judge of the Court (Lindgren J) raises intricate questions of construction of the so‑called streamlined sales tax legislation: the Sales Tax Assessment Act 1992 (the Assessment Act) and the Sales Tax (Exemptions and Classifications) Act 1992 (the Exemptions Act). The way in which those questions are resolved will determine, principally, the amount of sales tax payable by the appellant (CCA) on certain wholesale sales which it made of canned and bottled soft drink, some made shortly before, and the others shortly after, 26 May 1993. The earlier group of sales is, both in the pleadings and in the judgment under appeal, described as the "First Sales" and the bottles and cans containing the soft drinks sold as the "First Relevant Containers"; the later group of sales is described as the "Second Sales" and the bottles and cans containing the soft drink as the "Second Relevant Containers". I shall retain
that terminology. The relevance of the date 26 May 1993 is that amendments of the Assessment Act, which I shall discuss later, took effect in relation to dealings after that date.
CCA manufactured the soft drink. It bought the containers, in parts. In the case of the bottles, as might be expected, it purchased the bottle itself and a cap. In the case of the cans, it purchased a can body open at one end and the can end. In each case CCA subjected the container to a process which eliminated air, filled the container with soft drink, sealed it and labelled it. The products of that process were the bottles and cans of soft drink which CCA sold to retailers. The retailers to whom the First Sales and the Second Sales were made were, in broad terms, retail sellers of "fast food", including chicken, pizzas and meat pies. Each retailer put the soft drink in glass fronted refrigerators. Buyers of food commonly bought chilled bottled or canned soft drink as well. Each of the retail shops was a "take‑away" shop, in the sense that none made provision for buyers of food to eat it there; but it could be expected that food bought would be taken away and promptly eaten and soft drink bought taken away and, usually at least, promptly drunk.
CCA was registered under Pt 6 of the Assessment Act but did not quote its registration number, under Pt 7, in relation to its purchase of the First Relevant Containers or the Second Relevant Containers. If a purchaser is entitled to and does quote for a sale, the transaction is not taxable: Assessment Act, s 27(1). If the purchaser, although entitled to quote, does not do so, the exemption available under s 27(1) does not apply. For reasons which will appear, CCA prefers that the transactions by which it purchased the containers should be regarded as taxable dealings.
In its statement of claim CCA alleged circumstances which, it said, produced the result that it was not entitled to quote. The respondent (the Commissioner), in his defence, admitted the circumstances but before us his counsel did not concede that as a result CCA was not entitled to quote. We heard no argument on that question and it is unnecessary for us to consider it. The parties are in agreement, in my view correctly so, that it does not matter whether CCA was or was not entitled to quote; what matters is that in fact it did not do so.
The transactions by which the First Relevant Containers and the Second Relevant Containers were sold to CCA were assessable dealings for the purposes of the Assessment Act because they were wholesale sales by persons who manufactured the containers in the course of a business: Assessment Act subs 16(1) and Schedule 1 Table 1, No. AD1a. Because CCA did not quote, each transaction was also a taxable dealing unless the goods were covered by an exemption Item, all the requirements of which had been met (Assessment Act subs 16(2), s 24, other provisions for exemption being clearly inapplicable). The only possibly relevant exemption (so as to prevent the purchase of the containers being a taxable dealing) under s 24 was Item 27 in Schedule 1 to the Exemptions Act, which reads (omitting irrelevant matter):
(1)Goods ("the main container") for use by a person ("the exemption user") as a container exclusively for contents consisting wholly of
assessable goods (or of assessable goods and containers for those assessable goods).
(2)In addition, the exemption user must intend or expect that:
(a)the main container will be used as a container in relation to the contents at the time of an assessable dealing that consists of:
(i)a sale of the contents; or
(ii)a delivery of the contents that is covered by AD4a; or
(iii)a lease AOU of the contents; and
(b)possession or control of the main container will pass to the person who is the purchaser, customer or lessee, as the case requires, for that assessable dealing.
(3)This item does not cover goods that are for use by the exemption user in marketing:
...
(b)take‑away beverages or foodstuffs (whether for consumption on the premises from which they are sold or elsewhere).
Again, the statement of claim alleges facts which, CCA says, resulted in subpara (2)(a) not being satisfied so that the exemption was unavailable; once again, the Commissioner admitted the facts but did not concede the consequence. CCA also contended that the exemption was unavailable in any event because the soft drinks were "take‑away beverages"; that was disputed by the Commissioner. CCA treated the purchases of the First Relevant Containers and the Second Relevant Containers as taxable dealings; it paid the manufacturer of each of them a price which included sales tax, and is thus to be taken
as a person who has borne tax on them: Assessment Act subs 11(3). The filling and sealing of the containers was, in Assessment Act terminology, a "non‑lease AOU" and a "packing AOU" and would itself have been an assessable dealing had the containers not already been the subject of a taxable dealing (subss 21(2) and (3) and Schedule 1 Table 1 No. AD3a or AD13a) and, if assessable, would have been a taxable dealing unless an exemption Item applied: here also, the only potentially applicable exemption Item is 27 which, again, CCA says was not available on the facts.
In any event, when CCA made the First Sales and the Second Sales it proceeded on the basis that those transactions were, for sales tax purposes, to be treated as separate sales of soft drink and containers. The sales of the soft drink were taxable dealings on which CCA was required to pay sales tax. The sales of the containers, however, were not assessable dealings, because the containers were not "assessable goods" as defined in the Assessment Act (see the definitions in s 5 and note 1, Table 1); they were not "assessable goods" because they were "Australian‑used goods", a class which is excluded from the definition of "assessable goods". They fell within the category of Australian used goods because they had been applied to CCA's own use by way of the non‑lease AOU to which I have referred.
CCA charged a global price to the purchaser in each of the First Sales and Second Sales (i.e. a single price for soft drink and container without apportionment between the two elements) and included in the price an amount for sales tax. The amount included for sales tax, however, and the amount of sales tax paid to the Commissioner, was calculated
not on the entire price but on that part of it only which CCA claimed to be attributable to the soft drink. The Commissioner, on the other hand, asserts that the taxable value of the soft drink the subject of the First Sales and the Second Sales (i.e. the amount on which sales tax is payable) is the total price (excluding sales tax) charged by CCA for the cans and bottles of drink. In essence, therefore, the substance of the dispute is this. The Commissioner says that CCA is liable to pay sales tax on the invoice price charged to retailers for the container and contents (less sales tax and delivery charges). The Commissioner's position is that CCA is entitled to a credit in respect of sales tax paid by it for its containers (that sales tax being payable because CCA did not quote its registration number at the time of purchase). CCA's position is that sales tax is payable only in respect of the taxable value of the goods sold attributable to the soft drink. It contends that the taxable value of the soft drink is to be assessed by reference to s 95 of the Assessment Act. CCA's position is advantageous to it, presumably, because the sales tax paid in respect of the containers at the point of purchase and the sales tax paid on the soft drink component of the First and Second Sales is less than the sales tax payable if the Commissioner's contentions are correct.
The proceedings leading to the orders from which this appeal is brought were instituted by CCA in order to resolve the dispute thus arising. CCA sought declarations substantially to the effect that the taxable value of each of the First Sales and Second Sales did not include a component for the containers and was the amount of the total price which CCA attributed to the soft drink. Declarations were also sought that the First Relevant Containers and the Second Relevant Containers were not covered by Item 27
Schedule 1 to the Exemptions Act and a declaration that the containers were covered by Item 1 Schedule 2 to the Exemptions Act. The last declaration goes to the rate of tax payable on the containers and was sought on the basis that the containers were "goods of a kind ordinarily used for household purposes ... in connection with preparing, serving or consuming ... beverages [or] ... preserving or storing ... beverages". On CCA's approach sales tax was payable at the rate of 10%. The Commissioner contended that the containers did not fall within any permutation of the description in Item 1, Schedule 2 and that therefore the appropriate rate was 20%.
The primary judge refused all the declarations sought by CCA and made, instead, declarations giving effect to the Commissioner's contentions; they included declarations to the effect that CCA is entitled to a credit for sales tax paid on the First Relevant Containers and the Second Relevant Containers.
On the appeal CCA seeks the following declarations:
(a)a declaration that the taxable value of the First Sales does not include a component for any of the First Relevant Containers associated therewith;
(b)a declaration that the component of the First Relevant containers so excluded is $60.11.
(c)a declaration that the taxable value of the Second Sales does not include a component for any of the Second Relevant Containers associated therewith;
(d)a declaration that the component of the Second Relevant Containers so excluded is $230.56;
(e)a declaration that the First and Second Relevant Containers are covered by Item 1 Schedule 2, Sales Tax (Exemptions and Classifications) Act 1992.
No declaration is now sought to the effect that exemption Item 27 is inapplicable. There are, accordingly, in substance two questions to be determined. They are:
Does the taxable value of the First Sales and the Second Sales include a component for the containers? In other words, is the taxable value the composite price (excluding sales tax) or is it only the portion of it attributable to the soft drink?
Are the First Relevant Containers and the Second Relevant Containers goods of a kind ordinarily used for household purposes in connection with preparing, serving or consuming, or with preserving or storing, beverages? As will appear, this issue has practical significance only if the first question is answered in the negative (that is, by finding that the taxable value of the First and Second Sales is limited to the portion of the value attributable to the soft drink).
Sales tax treatment of containers
Chapter 20 of the Explanatory Memorandum which accompanied the bill for the Assessment Act describes how those who drafted the legislation thought it would operate in relation to containers. Paragraph 20.2 provides the following overview:
The general approach of the new law will be to apply the same treatment to containers as applies to their contents. This is also the approach of the existing law, but its implementation is complicated and numerous exceptions have obscured its effect. The new law will be designed to "tax" containers at the same time and at the same rate (if any) as their contents. This will be achieved by the device of making containers liable to tax at the time that their contents are put in them, but exempting the dealing from tax if the contents are assessable goods. When the contents subsequently become liable to tax, the value of the container will be included in the taxable value of the contents.
The Explanatory Memorandum proceeds to describe in more detail the way in which this result was thought to come about. The general quoting regime is said to apply to the purchase of containers (subject to certain qualifications, not relevant to the present problem, in relation to containers for export and goods imported in containers). The assumption clearly is that someone in the position of CCA will (usually, at least) be able to quote, so that the first assessable dealing with a container is likely to be its application to own use by filling and sealing it (paras 20.5 and 20.6). It is then said that exemption Item 27 will apply to that dealing if the conditions of that Item are met; if not, the application will be a taxable dealing (para 20.17). If the application to own use is exempt, then the "container component recouped in a taxable dealing with the contents" will be added to the taxable value of the contents: that result, the Explanatory Memorandum tells us (para 20.19), was to be achieved by subcll 35(2) and (3) of the Bill). A "container component" would, however, not be included in the taxable value of the contents if the container itself had been the subject of a taxable dealing before the time when it became the container of the contents (para 20.21), that result being claimed to follow from sub cl 35(4) of the Bill.
The propositions thus stated are illustrated by the following diagram which appears at the end of Chapter 20 of the Explanatory Memorandum. It should be noted that the diagram, although it does not say so, assumes that the manufacturer will quote when purchasing the containers.
CONTAINERS
This diagram sets out
the basic scheme for the EMPTY BOX
taxing of containers
under the new law
¡ ¡ ¡
¡ ¡ ¡ ¡
¡ ¡ ¡
¡¡ ¡
GOODS PACKED IN BOX
(Packing AOU)
Box is now a container
÷ ø
Item 27
satisfied
Item 27
not
satisfied
Packing AOU is exempt Packing AOU is taxable
¯ ¯
CONTENTS
SOLD
CONTENTS
SOLD
¯ ¯
Value of the
container is
included in the
taxable value of
the contents
No value for
the container is
included in the
taxable value of
the contents
It should be noted that the author of the Explanatory Memorandum apparently considered that those results would be arrived at through the combined operation of the definitions and exemption Item 27 and cl 35 of the Bill. Particularly - and the relevance of this will appear - there is no suggestion that cl 95 of the Bill might have a role to play. Nor is there any reference to the possible availability of credits in respect of sales tax paid when containers have been acquired.
As the Explanatory Memorandum suggests, s 35 of the Assessment Act is crucial to the way in which the Assessment Act treats containers. In the form which it took until 26 May 1993, it provided:
35. (1) This section deals with situations in which a container is associated with goods ("the contents") that are the subject of a taxable dealing. The aim of this section is to ensure that the taxable value will include a component for the container, even though the parties may have allocated a separate amount to the container.
(2)If:
(a)the taxable value of the dealing is calculated by reference to the price (excluding tax) for which the contents were sold; and
(b)the parties have allocated a separate amount to the container;
then the taxable value is increased by so much of the value of the container as is recouped by the seller in connection with the sale of the contents.
(3)If the taxable value of the dealing is not calculated as mentioned in subsection (2), then the taxable value is increased by so much of the value of the container as could reasonably be expected to have been recouped by the taxpayer in connection with a hypothetical sale of
the contents at the time of the actual taxable dealing with the contents.
(4)This section does not apply if:
(a)the taxpayer has borne tax on the container; or
(b)the container is a shipping container covered by exemption Item 60.
The section appears to assume that in the ordinary course, where a container and its contents are sold by wholesale without any apportionment of the price between the two, the wholesale price (excluding sales tax) is the taxable value: Schedule 1, Table 1, No AD1a. In this way, sales tax would be payable in respect of the container. However, subs 35(1) deals with the case where the parties have attempted to avoid the usual result by specifying separate prices for container and contents. This device, so we were told, was held by Jenkinson J in Slades Soft Drink Pty Ltd v Federal Commissioner of Taxation, 6 August 1991, unreported FCA, to be effective in avoiding the usual result. In any event, s 35(1) is clearly intended, as the opening words state, to ensure that the taxable value of a container and contents will include a component for the container even where the parties have attributed separate prices to container and contents. In that circumstance, the section increases the taxable value of the contents to include a component for the container.
By its express terms, s 35(2) only operates where the parties have allocated a separate amount to the container. Lindgren J held, clearly correctly in my view, that subs (3) equally operates only in that circumstance. There are various kinds of assessable (and
taxable) dealings, some of which are wholesale sales where the taxable value is the sale price and others of which are different kinds of dealings where the taxable value is a "notional" wholesale selling price or an amount calculated in some other way. Subsection (2) deals with the former category, subs (3) with the latter. As a matter of construction, I think there can be no doubt that subs (3), as much as subs (2), applies only where the parties to the dealing have allocated a separate amount to the container. However that may be, the dealings with which this case is concerned were wholesale sales, where the taxable value is calculated by reference to the selling price, so that, if either subsection were applicable, it would be subs (2), not subs (3). But because the soft drinks and containers were, by the First Sales and the Second Sales, sold for global prices (i.e. no separate amount was allocated to the containers) s 35, by its terms, cannot apply.
Before 27 May 1993 (i.e., during the period when the First Sales were made) s 35 would have been inapplicable in any event because of para (4)(a): as has been seen, CCA had "borne tax" on the containers. By the Taxation Laws Amendment Act No. (2) 1993 s 35 was amended by omitting para (4)(a); but for the reasons I have given s 35, as amended, was equally inapplicable to the Second Sales as to the First Sales.
Section 35 therefore does not apply in the circumstances of this case. However, before proceeding further, it may be observed that s 35 does not operate, and never has operated, to reduce the taxable value of a dealing with goods in a container in circumstances where a dealing with the container has already been taxed. It provides
only for increases; as first enacted it provided (but, as amended, does not provide) that there was to be no increase where the taxpayer had already borne tax on the container.
How then, if at all, does the legislation produce the result suggested in para 20.21 of the Explanatory Memorandum, and in the diagram, that a "container component will not be included in the taxable value of the contents if ... the container has itself been the subject of a taxable dealing at, or before, the time when it became a container in relation to the contents"? The Commissioner contended that no provision produced that precise result (though he pointed to the existence of certain credit items, to which I shall return). CCA contended that the result was brought about by s 95 of the Assessment Act. That section is as follows:
95.(1) If there is a need to know the price for which particular goods were sold, but the parties have not allocated a particular amount to those goods, the price for which those goods were sold is (for the purposes of the sales tax law) the price for which the goods could reasonably be expected to have been sold if they had been sold separately.
(2)Similarly, if there is a need to know how much of a global amount relates to some other element of a transaction, but the parties have not allocated a particular amount to that element, the amount to be allocated to that element (for the purposes of the sales tax law) is the amount that could reasonably be expected to have been allocated to that element if that element had been the only subject matter of the transaction.
The substance of CCA's argument was that the scheme of the sales tax legislation is to impose tax, in relation to particular goods, once only; the container and contents were treated by the sales tax legislation as separate goods attracting separate treatment under
the legislation; even as a matter of general law a sale of drink in a container did not necessarily involve a sale of the container as well (Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 - see especially at 222 per Dixon J; Curtis v The Perth and Fremantle Bottle Exchange Co Ltd (1914) 18 CLR 17); when, therefore, tax has already been paid on a container it is not again payable when there is a wholesale sale of the contents; accordingly, when a can or bottle of soft drink is sold by wholesale for an undifferentiated price there is a need to know the price for which "particular goods" (i.e. the drink as opposed to the can or bottle) are sold; accordingly, subs 95(1) applies and the global price is apportioned, attributing to the contents so much of the price as would be expected to be paid for them if sold separately. Thus is the object of the legislation achieved: tax is paid at the appropriate point on the contents, calculated on the amount for which they are to be regarded as sold and, tax having already been paid on the container, no further tax is payable on the balance of the price attributable to it.
CCA pointed out, the Commissioner agreed and it seems clearly to be true, that there is no provision in the Assessment Act, other than s 95, which would produce that result. The Explanatory Memorandum, CCA said, indicates that the result reflects the legislative intention and, it contended, the words of the section (if not in all respects felicitous) are apt to give effect to it.
Much of the argument on the appeal concentrated on the construction of s 95. There is no doubt that the section has its difficulties. The heading speaks of apportionment. Subsection (1) clearly enough deals with a case where several goods are sold in one transaction, no particular amount of the price being allocated to certain of those goods. The subsection, however, does not explicitly proceed to apportion the purchase price: it asks the question, for what might the particular goods be expected to be sold if sold separately? The result of applying that test literally to each of the goods comprised in the transaction might result, not in an apportionment of the actual global price, but in individual prices the sum of which might exceed or be less than the actual price. Subsection (2) speaks of allocating to a particular "element" of a transaction a portion of a "global amount", but the inquiry is still as to "the amount that could reasonably be expected to have been allocated to that element if that element had been the only subject matter of the transaction" - a somewhat strange use of the word "allocated" in the hypothetical case where there is a transaction in the particular "element" alone. Those difficulties arise here, however, only if CCA is right in its contention that s 95(1) applies to the First Sales and the Second Sales: if that is right, it is necessary to consider whether what subs 95(1) requires is apportionment and, if so, on what basis the apportionment is to be made.
Another apparent difficulty of construction relates to the distinction between circumstances where subs (1) applies and those where the applicable subsection is (2): that requires a construction of the words "some other element of a transaction"; one possible construction might be that (2) is the obverse of (1) in the sense that an "other element of a transaction" is anything other than the "particular goods" referred to in (1), so that the other element might, perhaps, be either services or goods. Another, and I think more likely, construction is that an "other element" is subject matter of a transaction
other than goods sold in the transaction: where the transaction is a sale, the other element is likely to be services; where the transaction is of some other kind, then no doubt the "element" might be either goods or services. On that view, as Mr Bloom QC for CCA contended, subs (1) might be applicable in the present circumstances, but subs (2) would not. Again, however, that question arises only if s 95 is to be read as enabling or requiring, where goods are sold in a container, apportionment of the price between goods and container.
There can, I think, be no doubt that it did not occur to the author of the Explanatory Memorandum that s 95 might be relevant in these circumstances. As I have mentioned, the section is not referred to in the chapter of the Explanatory Memorandum dealing specifically with containers. Nor do the paragraphs of the Explanatory Memorandum which describe the intended operation of s 95 refer to circumstances such as the present. Paragraph 9.33 describes the intended operation of subs 95(1) as follows:
If taxable and exempt goods, or goods that are taxed at different rates are packaged and sold together for one inclusive price, then the goods will be treated separately for the purpose of calculating the taxable value ...
Examples are then given of "gift packs" containing a watch and a fountain pen or clothing and perfume. Paragraph 9.34 describes the intended operation of subs 95(2) in this way:
If goods are sold as part of package which involves payment for something that is not goods, e.g. goodwill, installation charges or a maintenance
agreement, then the elements that are not goods will be treated separately for the purpose of calculating the taxable value of the goods ...
The examples given are the sale of a wholesale business for a single price which includes stock and goodwill, and the packaging together of a bag of golf clubs and "free" golf lessons for an inclusive price.
If the language of the section clearly and necessarily were applicable to circumstances such as the present, or if a consideration of the section in the context of the Assessment Act as a whole, particularly those provisions of a dealing with containers, indicated that of possible constructions one was to be preferred which covered goods sold in containers, then the Explanatory Memorandum would be of little significance (Acts Interpretation Act 1901 s 15AB). The introductory words, however, of subs 95(1), which indicate the circumstances in which the subsection applies, are question‑begging: the subsection applies "if there is a need to know the price for which particular goods were sold". The question here is thus, is there a need to know the price for which the soft drink (as opposed to the containers) comprised in the First Sales and the Second Sales was sold? Mr Bloom argued that there was such a need in circumstances such as the present, to avoid double taxation: the containers had already passed a "taxing point" and been taxed and, consistently with the scheme of the Assessment Act, should not be taxed again; to avoid that result it is necessary to know how much of the price paid by the retailers is attributable to the contents of the containers because it is only on that amount that tax remains to be paid. As Mr Gzell QC for the Commissioner pointed out, however, there are a number of difficulties with that argument.
First, as I have already mentioned, the Explanatory Memorandum states as the intention of the provisions relating to containers that a container should attract tax at the same time, and at the same rate, as its contents (as to the similar scheme of the previous legislation, see Pepsi Seven‑up Bottlers Perth Pty Ltd v Federal Commissioner of Taxation (1995) 132 ALR 632 at 634, 635 (Hill J)). It is clear that that is precisely what s 35 is intended to bring about in situations where it applies. Subsection (1) explicitly provides that the aim of the section is to ensure, in situations in which a container is associated with goods that are the subject of a taxable dealing, the taxable value (i.e. of the contents) will include a component for the container - "even though the parties may have allocated a separate amount to the container". The section thus assumes that where no separate amount is allocated no particular provision is needed because in those circumstances the taxable value (of the contents) will necessarily include a component for the container. Where the parties separate the prices, however, special provision is required, and the special provision is to be found in subss (2) and (3). Exemption Item 27 is consistent with the same statutory intention: where it applies, its effect is to exempt dealings with a container from tax on the footing that it will contain goods the subject of an assessable dealing and will, at the time of that dealing, be caught in the "sales tax net".
Secondly, in considering whether there is a "need to know", the possible availability of credits must be taken into account. It is convenient to consider first the position under the Assessment Act as amended from 27 May 1993, that is, as it applied during the period when the Second Sales were made. In addition to amending subs 35(4) in the way
I have described, the Taxation Laws Amendment Act (No. 2) 1993 introduced into Table 3 in Schedule 1 to the Assessment Act a new credit ground, CR 8A. The summary of the ground is "ensuring no double tax in respect of containers". The details are:
Claimant is the taxpayer for an assessable dealing ... with goods that are the contents of a container. Container is not covered by exemption Item 27(3). Claimant has borne tax on the container.
The amount of the credit is the tax borne on the container; the time when the credit arises is the time of the assessable dealing (with the goods in the container). Lindgren J held that the Second Relevant Containers and the First Relevant Containers were not "covered by" exemption Item 27(3) because they were not (as CCA contended they were) goods for use in marketing take‑away beverages. For reasons to which I shall come, in my view his Honour was right and CCA thus has the benefit of the credit for the Second Sales. It may be noted that CR 8A is applicable whether or not s 35 applies: i.e. it is available equally where the retailer pays a global price as where separate prices are charged for container and contents. I appreciate that, as Mr Bloom put to us, it is not always a legitimate process to construe one provision of an act (here, s 95) by reference to a later amendment of another provision. That consideration, however, loses a good deal of its force in circumstances such as the present, where an amendment is made shortly after new and complex legislation takes effect, avowedly for the purpose of correcting an error and of reinforcing the principle that container and contents should be taxed at the same rate and time: see the Further Supplementary Explanatory Memorandum to the Taxation
Laws Amendment Bill (No. 2) 1993, introductory paragraph and para 5; see also the diagrams accompanying that explanatory memorandum.
In relation to the First Relevant Containers, Lindgren J held that a credit arose at the time of the First Sales under credit ground CR 4, "avoiding double tax on the same goods". There is a difficulty with that credit ground because its basis is that the claimant has become liable to tax on an assessable dealing but has borne tax on "the goods" before the time of the current dealing. In this case, the relevant assessable dealing was with the contents and the goods on which tax had been paid were the containers. CCA, in support of its argument that s 95 should be held and apply, to avoid double taxation, suggested that CR 4 was inapplicable because the dealing was not with the goods on which tax had been paid. I see no reason, however, to dissent from his Honour's conclusion that:
Literally, contents and container are the subject of an assessable dealing or assessable dealings ... and CCA bore tax on the First Containers before the time of that sale.
The Commissioner did not seek to disturb that conclusion.
There is a third, related point. In Brayson Motors Pty Ltd v Federal Commissioner of Taxation (1985) 156 CLR 651 at 657 the Court affirmed, in relation to the predecessors of the current sales tax legislation, the well understood principle that:
The policy of the legislation was and is that sales tax should, in the ordinary case, be a tax upon the last wholesale sale.
That policy was, as the High Court observed, coupled with a legislative intention that goods should be taxed at their full wholesale value. As Lindgren J points out, that policy equally characterises the 1992 legislation. It would be very odd indeed if, despite the application of that policy evident in s 35, in exemption Item 27, in the Explanatory Memorandum for the 1992 Bills and equally in the 1993 amendments and the Explanatory Memorandum relating to them, it was possible for, for example, a manufacturer of soft drink in a position to quote on a purchase of containers to pay tax at that point in the chain rather than the (presumably greater amount of) tax payable on the last wholesale sale of soft drink in its container. The point needs no elaboration: credit ground CR 8A proceeds on the assumption that tax will be payable on the last wholesale sale and grants a credit for the (presumably lesser) amount of tax paid earlier. In perhaps a different and somewhat more general context, credit ground CR 4 does precisely the same thing.
Thus, in my view the Assessment Act and Exemptions Act contain a coherent legislative scheme for the taxation of dealings in containers and their contents, one which negatives the "need to know" which is a condition of the application of s 95; and for those reasons I would reject CCA's contentions in relation to s 95 and uphold the decision of Lindgren J.
The declarations made by his Honour included declarations as to CCA's entitlement to credits in respect to both the First Sales and the Second Sales. I have already dealt with his Honour's conclusion as to the applicability of credit ground CR 4 to the First Sales. I can see no reason why, if ground CR 4 was applicable to the First Sales, it was not
equally applicable to the Second Sales. However, his Honour held that the Second Sales gave rise to a credit under ground CR 8A: that depended, as I have said, on his Honour's conclusion, challenged by CCA, that the First Relevant Containers and the Second Relevant Containers were not goods for use by CCA in marketing take‑away beverages.
In Pepsi Seven-up Bottlers Hill J held, at 637:
In my view, when in ordinary parlance one speaks of "take‑away" one refers to food which has been prepared for consumption away from the premises where it is sold, irrespective of the place where the food itself is prepared. Such take‑away food is to be distinguished from items such as crisps or confectionary, to which reference has already been made, because it is (at least in comparative terms) freshly prepared for virtually immediate consumption. Packaged crisps or confectionary, on the other hand, while no doubt intended for consumption away from the place they are sold, do not fall within the ordinary usage of the word "take‑away" because they are not freshly prepared for virtually immediate consumption, but rather intended to be kept, subject to any shelf‑life restriction, until the purchaser desires to consume them ...
If, as I think correct, the expression "take‑away beverage" must be construed by analogy, it must thus refer to a beverage which is freshly prepared for almost immediate consumption. It would not refer to a pre‑packaged can or bottle used for containing the beverage for consumption at such time as the purchaser should desire to consume the contents. So construed the exemption item would cover coffee or tea sold to customers to take‑away, as well as milk shakes or soft drinks dispensed through post‑mix dispensing machines to be taken away in cups, but not to bottles or cans of soft drink, or for that matter cartoned milk.
I respectfully agree with the observations of Hill J, which seem to me to encapsulate, as clearly as one reasonably could, the popular concept of "take‑away". The construction contended for by CCA, which is to the effect that a can of soft drink bought chilled in a "fast food" shop, with food intended for immediate consumption, is to be regarded as a "take‑away beverage", whereas the same can of soft drink purchased from the shelf of a supermarket, unchilled, is not, would make the relevant characteristic of the beverage in its can or bottle dependent on the circumstances of the ultimate retail sale. I see no need to adopt a construction which would introduce complexities of that sort.
"Household goods"
The question whether the First Relevant Containers and the Second Relevant Containers fall within Item 1 of Schedule 2 to the Exemptions Act goes to the rate of duty payable on a dealing with the containers. The argument on behalf of the Commissioner appeared to assume that the First Sales and the Second Sales - that is, the sales to the retailers - were the point at which the question arose. If that were so, the question, on the view which I have taken, would not arise: the containers are not taxed at that point, but the contents are taxed on the basis of a taxable value including a component for the containers. His Honour proceeded, however, on the footing that the question arose at the point at which CCA actually bore tax on the containers, that is when it bought them (or their parts). Given his Honour's conclusion, with which I agree, that CCA is entitled to a credit for the tax paid at that point, the question is presumably of very little practical significance. It was argued, however, and I should deal with it.
It was put that the goods were of a kind ordinarily used for household purposes and were within either para (b) or para (d) of Item 1(1) of Schedule (2) to the Exemptions Act, that is, either as goods of a kind ordinarily used in connection with preparing, serving or consuming food or beverages or as goods of a kind ordinarily used in connection with cooking, preserving or storing food or beverages. Alternatively, CCA argued that the bottles and caps or can bodies and can ends, as acquired by CCA, were, within Item 1(2), goods marketed principally as parts of goods ordinarily used in connection with one or some of those activities. Obviously, the question about "parts" arises only if the complete container falls within one of the categories in Item 1(1).
Lindgren J held that, because CCA's canned and bottled beverages are commonly consumed domestically, the containers in which they are sold by retailers are commonly found in use in homes as the means of, at least, storage of the beverages. In his Honour's view, that showed that the containers in the form in which CCA sold them to the retailers were goods of a kind ordinarily used for household purposes in connection with storing beverages. His Honour concluded, however, that the question had to be decided having regard to the form of the containers as purchased by CCA from their manufacturers: as so purchased, they required flushing, labelling and sealing. That meant that the cans as purchased, requiring a technical process and special equipment to seal them, could not be regarded as goods of a kind ordinarily used for household purposes; and because CCA had not suggested that the bottles should be regarded differently, it had not discharged the onus which it bore of establishing that when purchased the containers fell within one of the paragraphs of Item 1(1).
The Commissioner sought to support his Honour's conclusion; he also filed a notice of contention which he supported by arguments, submitted to his Honour but not dealt with
in the judgment, to the effect that in any event containers of the kinds in question were not ordinarily used in a household for any of the specified purposes.
CCA relied particularly on Hygienic Lily Ltd v Deputy Commissioner of Taxation (1987) 13 FCR 396 in support of its argument that the bottles, particularly, were of a kind ordinarily used in a household in connection with serving and storing beverages. But the bottles in question here, and more so the cans, seem to me several steps removed from the cups with which Hygienic Lily was concerned, and in any event that case must now be read in the light of the decisions of the Full Court in Diethelm Manufacturing Pty Ltd v Commissioner of Taxation (1993) 44 FCR 450 and Commissioner of Taxation v Chubb Australia Ltd (1995) 56 FCR 557.
I must say that it seems to me a somewhat surprising proposition that the sorts of cans and bottles here in question are goods of a kind ordinarily used for household purposes in connection with serving, consuming, preserving or storing beverages. Certainly in the absence of evidence I think it is impossible to say that his Honour was in error in holding that CCA had failed to discharge the onus which it bore. Though perhaps it does not matter, I am inclined respectfully to doubt that, because cans or bottles of soft drink are commonly to be found in household refrigerators or on household shelves, the bottles or cans are to be regarded as goods ordinarily used for household purposes in connection with storing beverages. I am by no means convinced that, because a household buys a can of soft drink and the soft drink remains in the can until the can is opened and the drink consumed, the household is properly to be described as "using" the can for storing
the drink. In other words, I think there is a good deal to be said for the Commissioner's arguments in favour of his notice of contention. It is, however, unnecessary to pursue that aspect of the matter further.
Conclusion
Among the declarations made by his Honour were declarations that the First Relevant Containers and the Second Relevant Containers were within Item 27 of Schedule 1 to the Exemptions Act. CCA argued that it was not open to his Honour, on the pleadings, to come to that conclusion and, while the Commissioner did not concede the correctness of that argument, he did not argue in support of those declarations. The substance of the point made by CCA was that it was admitted on the pleadings that CCA did not have, in relation to all the containers, the intention or expectation required by para (2)(a) of the exemption Item so that it must be concluded that the exemption was not available. In the absence of argument to the contrary, and because on the view I have taken the declarations as to the availability of the exemption have no practical consequence, those declarations in my opinion should be omitted from the orders made by the trial judge. Otherwise, the reasons which I have given lead to the conclusion that the orders made by his Honour were correct.
Accordingly, in my view, the orders made by the trial judge should be modified by omitting the declarations numbered 2 and 6; otherwise, the appeal should be dismissed. CCA should pay the Commissioner's costs, here and below.
I certify that this and the preceding 28 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane.
Associate:
Dated: 3 March 1997
Heard: 26 September 1996
Place: Sydney
Decision: 3 March 1997
Appearances: Mr D H Bloom QC and Mr A Robertson SC of counsel instructed by Firmstone & Feil appeared for the appellant.
Mr I V Gzell QC and Mr S W Gibb of counsel instructed by the Australian Government Solicitor appeared for the respondent.
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