CEO of Customs v Tony Longo Pty Ltd

[1999] NSWSC 1240

CITATION:	CEO OF CUSTOMS v TONY LONGO PTY LTD [1999] NSWSC 1240
CURRENT JURISDICTION:	Civil
FILE NUMBER(S):	11069/98
HEARING DATE(S):	15/06/99, 17/06/99, 16/07/99, 16/09/99, 06/12/99
JUDGMENT DATE:	6 December 1999
PARTIES :	Chief Executive Officer of Customs (Plaintiff-Respondent) Tony Longo Pty Limited t/as Aquila Shoes (Defendant-Applicant))
JUDGMENT OF:	Adams J at 1

COUNSEL :	Mr A Gelbart (Plaintiff) Mr S Gageler with Mr J R Clarke (Defendant)
SOLICITORS:	Australian Government Solicitor (Lyn Brady) (Plaintiff) KPMG Legal (Defendant)
CATCHWORDS:	Customs Act 1901, ss30, 68, 132, 132A, 153 - Customs Tariff Act 1987, s21 - imported goods released for home consumption without entry - when obligation to pay duty arose - whether calculation of duty possible - whether debt created.
ACTS CITED:	Customs Act 1901 Customs Tariff Act 1987 Customs and Excise Legislation Amendment Act 1992
CASES CITED:	In Re Gregg Prechelt [1999] QSC 36 (3 March 1999) Carter Holt Harvey Manufacturing Group Pty Ltd v Comptroller-General of Customs (1996) 128 FLR 96
DECISION:	Application upheld; Statement of Claim struck out.

Transcript checked

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

ADAMS J

MONDAY 6 DECEMBER 1999

11069/98

CHIEF EXECUTIVE OFFICER OF CUSTOMS

v TONY LONGO PTY LIMITED

JUDGMENT

1    HIS HONOUR: Following an order that the proceedings between the parties continue on pleadings and, inter alia, that the plaintiff should file and serve a Statement of Claim, a Statement of Claim was duly filed on 12 February 1999. It is sufficient for present purposes to set out the allegations in paragraphs 1 to 7-

1. The plaintiff is the Chief Executive Officer of Customs.
1a The Defendant is a company duly incorporated under the laws of Australia and is liable to be sued in and by its corporate name and style.
2. In the period 1987 to 1990 inclusive the Defendant traded under the name Aquila Shoes.
Goods # 1
3. In or about July, 1987 Goods # 1 were:
3.1 imported into Australia
3.2 imported into Australia for home consumption.
Particulars of Goods # 1
672 pairs of shoes, supplied by Calcado Raly, Portugal:
Particulars of Importation
Airway Bill No: MAWB 057 376 36756, dated:
28 July, 1987.
4. At the time of importation the Defendant was:
4.1 the owner of Goods # 1,
4.2 importer of Goods # 1,
4.3 beneficially interested in Goods # 1,
5. Goods # 1 were not entered as required under Part IV of the Customs Act 1901 (C’wth).
6. Amount of Customs duty payable in relation to Goods # 1 is $9116.86.
7. No Customs duty has been paid in respect of Goods # 1.

2    By Notice of Motion the defendant seeks to have the Statement of Claim struck out pursuant to Part 15 rule 26 of the Rules of the Court as disclosing no reasonable cause of action. 3    The crucial provisions relevant to the cause of action sought to be established by the plaintiff are contained in the Customs Act 1901 (the Act) and the Customs Tariff Act 1987 (the Tariff Act). These Acts must be read together. Indeed, the Act is, by s4 of the Tariff Act, to be incorporated in the latter Act "and shall be read as one" with it. 4 Section 21 of the Tariff Act provides -

“(1) Duties of Customs are imposed, in accordance with this Act, on:


(a) goods imported into Australia on or after the commencement day; and

(b) goods:

(i) imported into Australia before the commencement day; and
(ii) entered, or again entered, for home consumption on or after the commencement day."

5 When goods are imported, s68(1) of the Act requires them to be entered for home consumption, warehousing or trans-shipment. The Statement of Claim alleges that the relevant goods were imported into Australia for home consumption but were not entered as required by the Act. The defendant was, at the relevant time, both the owner and importer of the goods. The Statement of Claim relies upon importation alone as creating the obligation to pay Customs duty, quantified variously in relation to the sets of imported goods specified. 6 The point that the defendant takes is deceptively simple. It is, that there being no entry for home consumption, there can be no obligation to pay the sums specified or, if there be an obligation, it cannot be quantified to create the debt alleged. 7 Specification of the sum payable as Customs duty is provided for by s132 of the Act which states -

(1) Subject to this section and to section 123B, the rate of any import duty payable on goods is the rate of the duty in force when the goods are entered for home consumption.
(2) Where goods are entered for home consumption more than once before import duty is paid on them, the rate at which the import duty is payable is the rate of the duty in force when the goods were first entered for home consumption.
(3) Subject to subsection 38(5), for the purposes of this section, where an entry for home consumption in respect of goods is withdrawn under subsections 38(1) and (2) and the goods are subsequently entered for warehousing, the entry for home consumption shall be disregarded.
Prepayment of duty
132A. Where, before goods are entered for home consumption, an amount is paid to a Collector in respect of duty that may become payable in respect of the goods, the amount shall, upon the goods being entered for home consumption, be deemed, for the purposes of this Act, to be an amount of duty paid in respect of the goods."

8 Section 132B is irrelevant for present purposes. The defendant points out that s 132 contains no reference to the circumstance that might obtain should goods be imported but no entry made. Section 21 of the Tariff Act thus has the role of identifying the goods subject to duties of Customs. Moreover, if entry for home consumption were not material to the imposition of duty, s21(1)(b) would not need to refer to it. The omission to enter the goods in certain circumstances is made the subject of criminal proceedings, which may or may not obtain here, but which the pleadings do not seek to deal with. It may be that proceedings could be taken to require compliance with the obligations created by s68(1) of the Act, but as this matter was not raised before me I say no more about it. 9 Under s30 of the Act goods are subject to the control of Customs (relevantly) from the time of importation until dealt with in accordance with an entry of the goods for home consumption, or until export. Offences may be committed if the goods are dealt with otherwise than in accordance with an entry, in certain circumstance. Again, the Statement of Claim does not purport to deal with those circumstances. 10 It is, I think, necessary to appreciate that rates of duty may well vary between the time that goods are imported into Australia and the time that they are the subject of an entry for home consumption. Over the years those rates have varied very substantially almost from year to year. 11 Amongst other submissions, the defendant argues that even if an obligation to pay Customs duty arose following importation of these goods so that, for example, an offence may have been committed, if there was an intention to evade duty, that obligation cannot be quantified for the purpose of civil proceedings for debt under s153 of the Act until an entry of any kind but, relevantly here, for home consumption is made. At all material times s153 of the Act read as follows -

"All duties shall constitute Crown debts charged upon the goods in respect of which the same are payable and payable by the owner of the goods and recoverable at any time in any court of competent jurisdiction in the name of the Collector."

12 The plaintiff submits that in the absence of an entry the duty is imposed on importation and the relevant rate is that applying as at that date. This submission seems to be inconsistent with the specific provisions of s132 of the Act set out above. 13 The question raised by the Notice of Motion was considered, though in a somewhat different context, in the Supreme Court of Queensland In Re Gregg Prechelt [1999] QSC 36 (3 March 1999) per Muir J. The issue for determination on that application was whether customs duty was payable on a consignment of cigarettes imported into Australia from Norfolk Island. The goods fell, it was agreed, within s68(1)(f) of the Act, but the release of the goods, on which customs was payable, was declined pending valuation and payment of duty. The Court needed to consider the effect of s68 of the Act in the form it took following the Customs and Excise Legislation Amendment Act 1992. Section 15 of the Tariff Act was at that time substantially in the same form as s21(1) of the legislation I am considering, although some details differ. 14 It was submitted on behalf of the applicant, before Muir J, that although s15 of the Tariff Act imposed duties and s16 prescribed the mode of calculation of the rate of duty, s 132 of the Act fixed a rate for all goods by reference to the date on which such goods were "entered for home consumption" and that as these goods were not so entered, no rate of customs duty is set in respect of the goods in question and, accordingly, no duty was payable. 15 As his Honour pointed out, although s132 of the Act has varied from time to time, it has always provided, in substance, that duties are to be paid at the rate applicable when the goods were entered for home consumption. His Honour referred to the Customs Law of Australia (1904) by Wallaston in explaining the purpose for s132. It is convenient to set out the passage relied on -

"This section disposes for many purposes of the question so often raised under other Acts, as to what constitutes the exact date of importation. Seeing that duties are leviable under the tariff on importation and become a debt due to the Crown immediately on importation, a change in the tariff after importation, but before payment of duty, frequent raised the question under the State laws, as to what duties were payable.
The above settles the point as regards the rate of duty. Liability to or freedom from duty is determined by the law in force at the date of entry for home-consumption, not the date of importation."

16    His Honour pointed out that the concept "entry for home consumption played a central role in the operation of the legislation”. With respect to his Honour, this is self-evidently so. 17    In this case, as in Prechelt, the strength of the defendant's submission lies in the plain words of the legislation itself, not only, of course, those of s21(1) of the Tariff Act, but s68 and s132 of the Act. I consider that his Honour is correct in categorising the function of s132 as performing the critical requirement of "identifying the amount of tax to be calculated and assessed ... so that absent such a provision, there is no mechanism by which tax imposed in a general way by ss 15 and 16 [here 21 and 22 of the Tariff Act] can attach to particular goods." 18 I find, with respect, the reasoning of Muir J in Prechelt to be convincing, resting as it does upon both the clear language of the sections to which I have referred, but also on the express scheme of the Act. But, even if I did not share his Honour's view, my doubts would not be of a kind as to justify departing from the decision; see ReBrashs Pty Ltd (1994) 15 ACSR 477 per Hayne J at 483. 19 Mr Gelbart, who represented the plaintiff in this hearing, and whose arguments I found most helpful in clarifying the issues, pointed out that there were a number of earlier decisions both in England and in the High Court of Australia to which Muir J did not refer and which did not appear to have been brought to his attention. The persuasive way in which Mr Gelbart developed the argument in this respect had, I must confess, led me to waiver during the hearing on the appropriate conclusion. However, at the end of the day I do not consider that the observations that were the subject of his careful submissions were such as to lead me to differ from the conclusion reached, albeit in absence of any such reference, in Prechelt. 20    In deference to the arguments addressed to me in this respect by Mr Gelbart, I should make some reference to those decisions. 21    In point of chronological order, the first case is that of The Attorney General v Ansted & Ors (1844) 152 ER 1304. In that case the defendants had imported fruit for which they passed a warehousing entry and then stored them in a bonded warehouse. A portion of the fruit came into their possession by the dishonesty of their agent whom they employed to pay the duty and procure delivery. In the result, the fruit was taken into home consumption without any duty having been paid to Customs. No entry for home consumption was made, but their agent had misappropriated the money received for payment of the duty. The Crown sued them for debt. The defendants argued that the duty did not attach on importation but only on entry of the goods. His Lordship, the Chief Baron, referred to the object of "recent Acts of Parliament" as to enable merchants in certain cases to postpone the payment of duties, but not to discharge the importer from liability for payment by that process. His Lordship pointed out that the right of the Crown to the duties of Custom pre-existed the recent legislation and their liability to pay as importers on entering the goods for home consumption, was unaffected by their failure to make an entry and, thus, contend that their own failure released them. Baron Parke was essentially of the same opinion, pointing out that it did not lie in the mouth of the defendants to contend that the time for payment had not arrived, because no entry for home consumption had been made, since that arose from their own fault. The other Barons of Exchequer on the Court, agreed. 22 Having regard to the specific terms of s132 of the Act, general statements such as those made in this case are, on the face of it, somewhat less convincing than they otherwise would be. However, Ansted commended itself to Starke J, at first instance in Wing On & Co Limited v The Collector of Customs for New South Wales (1938) 6 CLR 97 at 100, where his Honour said -

"The defendant became possessed of uncustomed goods and exercised control and a power of disposition over them, and thus, in my opinion, became liable for the duties. The other argument based upon sec. 132, that the duties shall be paid at the rate in force when goods are entered for home consumption, is met, I think, by the reasons given for the decision in Attorney-General v Ansted . It was the duty of the defendant when it became possessed of uncustomed goods to enter them at the Customs, and it cannot excuse itself by neglecting to perform this duty."

It is important, I think, to note as making at least one point of distinction, the observation of Dixon J (as he then was) at page 109 that -

"But it is sufficiently plain that under some understanding the goods were brought to the defendant company uncustomed and that they were at once resold, all with the intention of defeating the revenue."


The argument on appeal proceeded on the basis that it was not disputed on behalf of the defendant that the importer continued to be liable to pay the duties and that by virtue of s153 of the Act this liability continued until it was discharged by payment or otherwise. Although the proposition stated by Starke J is broad enough to apply to what might be the present circumstances, yet I consider that it was significantly affected by the consideration that the defendant was party to a scheme to evade duty and, with respect, the reasoning of Muir J in Prechelt is more directly in point. I note that there is no allegation in the Statement of Claim, at all events, that the defendant neglected to make an entry for home consumption, let alone was party to an attempted evasion.

In Wilson v Chambers & Co Pty Ltd , (1926) 38 CLR 131 the question arose, among others, as to whether duty was evaded by transferring, without an appropriate entry, paint on board a ship in Port Kembla to the ship's stores, some of which was then used for painting the vessel. It seems to follow that if there was no obligation to pay a duty, then there could be no evasion of it. Knox CJ, dealing with the evasion offence charged against the defendants, drew the distinction between "evade" and "avoid" and having determined the evidence proved no more than an omission to pay duty which was legally payable, that the information was rightly dismissed (38 CLR at 136). I do not consider that his Honour's judgment deals in substance with the point before me. The same, I think, may be said of the judgments of Higgins and Rich JJ. Starke J said (38 CLR at 150-151) -
"A duty was imposed on the goods mentioned in the information ... upon importation into Australia and that duty was payable, in this case, upon the arrival of the ship in Port Kembla",


citing Attorney-General v Ansted .

This, however, does not deal with the question of calculation, which was unnecessary having regard to the nature of the proceedings, his Honour disposing of the point by concluding that a mere omission or negligence to pay duty could not satisfy the statutory prerequisites for the commission of the offence. In a more elaborate judgment in this respect, Isaacs J considered, I think, that there was an instant obligation to pay the duty that arose when the entry for warehousing should have been made. (It matters not that the entry required was not for home consumption but for warehousing.) His Honour, however, in dealing with a number of authorities, in particular with the judgment of Baron Parke in Ansted , made the point that, "Where by the importer's own fault, those provisions [relating to making an entry] were not complied with, the original liability stood and the time for payment had arrived." Again, this does not take the issue of calculation; it also rests upon a finding of fault on the part of the importer, an allegation which, as I have pointed out, is not make in the Statement of Claim.

23 Putting the applicant's argument in this Court in another way, it was submitted by Mr Gageler that, even if there was an imposition of liability to pay duty on importation by virtue of s21, the time for payment could not arrive, having regard to the imperative and exclusive language of s132 of the Act until quantification of the rate was possible; in other words, the requirement of making of the entry for home consumption had been satisfied. 24 In Carter Holt Harvey Manufacturing Group Pty Ltd v Comptroller-General of Customs (1996) 128 FLR 96 at 98, Fitzgerald P and Mackenzie J, with whom Pincus JA agreed, said of s153 of the Act -

"That provision is plainly applicable where an import entry has not been made, duty has not been paid, and an authority to deal with imported goods has not been obtained."

If I may say so, with respect, this statement is plainly right, so far as it goes. However, the result might be forfeiture of the goods under s229(1)(g) at all events. The imported goods would also be subject to a charge referable to an inchoate sum, capable of execution once the amount due is calculated. It does not appear that this decision was referred to by Muir J in Prechelt , but having regard to the issues in it, I do not consider, with the greatest respect, it demonstrates a flaw in his Honour's judgment.

25 The submission made by Mr Gelbart cuts across the difficulties of calculation by proposing that in the absence of an entry, the date of importation applies where the goods have been improperly removed from the control of Customs and this enables the calculation of duty to be precisely made. This is the approach, indeed, taken in the Statement of Claim except there is no allegation of improper removal. It maybe that these reasons do not do justice to this submission, which has the advantage of simplicity and which appears to express (and I say this with unfeigned respect for the judges to whom this of course refers) assumptions which have underlain the administration of the Customs legislation for some time. Nevertheless, I do not see how such assumptions can survive reference to the specific language of the Act. 26 Accordingly, I uphold the application and strike out the Statement of Claim. 27 It follows that there should be an order for costs for the applicant. 28 I will grant liberty to apply on three days notice in case some specific orders need to be taken out.

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Last Modified: 06/30/2000