Commissioner of Taxation v Totalisator Administration Board of Queensland

[1990] HCA 48

HIGH COURT OF AUSTRALIA

Brennan, Deane, Dawson, Gaudron and McHugh JJ.

COMMISSIONER OF TAXATION v. TOTALISATOR ADMINISTRATION BOARD OF QUEENSLAND

22 November 1990

Decision

BRENNAN, DEANE, DAWSON, GAUDRON and McHUGH JJ. The question raised by this appeal is whether the Totalisator Administration Board of Queensland ("the TAB") is liable for sales tax upon various items printed by it for use in connection with the gambling business it conducts in or in association with betting shops throughout Queensland. The TAB has a printery in which the items so used, but only those items, are printed.

2. Section 17(1) of the Sales Tax Assessment Act (No.1) 1930 (Cth) ("the Act") levies sales tax on "the sale value of goods manufactured in Australia by a taxpayer and sold by him or treated by him as stock for sale by retail or applied to his own use". By s.17(2) of the Act the reference in s.17(1) to "goods manufactured in Australia by a taxpayer and applied to his own use" is to be read as a reference to "goods manufactured in Australia by a manufacturer in the course of carrying on a business and applied to his own use, whether for the purposes of that business or for any other purpose and whether or not the goods are of a class manufactured by the manufacturer for sale" (par.(a)) and as a reference as set out in s.17(2)(b). Section 17(2)(b) has no bearing on the present matter. It is not in issue that the items were printed by the TAB in the course of carrying on a business and were applied by it to its own use. The question is thus whether, in terms of s.17(2)(a), the items are "goods manufactured in Australia by a manufacturer".

3. Section 3(1) of the Act defines "manufacturer" to mean, unless a contrary intention appears,

"a person who engages, whether exclusively or not, in the manufacture of goods, and includes a printer, publisher, lithographer or engraver...".

Again subject to any contrary intention, the sub-section defines "goods" to include "commodities", and "manufacture" to include "production".

4. It was held by the Full Court of the Supreme Court of Queensland (Thomas, Derrington and Ambrose JJ.), dismissing an appeal from a declaratory order made by McPherson J., that the TAB was not liable for sales tax on the items printed by it and used in its business. In the view of the Full Court the TAB was not a manufacturer, its business being neither that of a manufacturer of goods nor that of a printer. Additionally, in the view of Thomas J., with which view Ambrose J. agreed, there was no liability for sales tax because the printed items had no discernible sale value and were, for all practical purposes, unsaleable. On this view, presumably, the items of printed matter were, by reason of these considerations, not "goods" as that word is used in the expression "goods manufactured in Australia" in s.17(1) and (2) of the Act.

5. It is convenient to consider first whether the items of printed matter, whether because they had no discernible sale value or because they were unsaleable, were such as to be outside the notion of "goods manufactured in Australia". Given that s.17(1) applies to "goods manufactured ... by a taxpayer and ... applied to his own use" and that by s.17(2) that reference extends to "goods manufactured ... and applied to his own use, ... whether or not the goods are of a class manufactured by the manufacturer for sale", there is no warrant (whether by reason of the reference in that sub-section to "sale value" or otherwise) for excluding from the ambit of the word "goods" as used in s.17(1) of the Act goods which are unsaleable or goods which have no discernible sale value. However, it has long been accepted that the expression "goods manufactured in Australia", even with the aid of the definitions contained in s.3(1) of the Act, does not extend to every object transformed or brought into existence by a physical process or operation. See, for example, Adams v. Rau (1931) 46 CLR 572 and Federal Commissioner of Taxation v. Rochester (1934) 50 CLR 225. So far as the question turns on the word "manufactured", the test is whether the process or operation is one that would "ordinarily be described by the words 'manufacture' or 'production'": Rochester, per Dixon J. at p 226. By parity of reasoning, the test whether objects are "goods" is whether they would ordinarily be described by the words "goods" or "commodities". Although unsaleable items are not necessarily outside the conception of "goods" in s.17(1) of the Act, it may be useful, in determining whether they are properly described as "goods" or "commodities", to consider whether they are saleable. Many objects which are unsaleable are not properly described as "goods" or "commodities". However, some objects are properly so described notwithstanding that, for one reason or another, they are unsaleable. References in cases such as Federal Commissioner of Taxation v. Riley (1935) 53 CLR 69, at pp 78-79, and Commissioner of Taxation v. Nimrod Theatre Company Ltd. (1985) 5 FCR 269, at pp 272-273, to the question whether particular objects are or are not saleable are properly to be understood as referring to a feature which in many cases (but not invariably) will indicate whether the objects are properly described as "goods" or "commodities".

6. The items printed by the TAB and used in its business fall into three broad categories. In the first category are items of stationery, office supplies and printed forms used for administrative purposes at its head office. The second category consists of similar items used for administrative purposes in the betting shops. The third category consists of display material, including posters, betting cards, form guides, race lists and dividend cards, provided to or for the information of the customers of the TAB. There is no difficulty in describing all these items as "goods" or, for that matter, as "goods produced". Accordingly, if the TAB is a manufacturer, it is liable for sales tax on the sale value of these items.

7. There is nothing in the Act to suggest that the word "manufacturer" does not, when used in s.17(2)(a), bear the meaning assigned to it in s.3(1) of the Act. The purely formal submission to the contrary made on behalf of the TAB must be rejected. Thus, for present purposes, "manufacturer" means "a person who engages, whether exclusively or not, in the manufacture of goods, and includes a printer".

8. On behalf of the Commissioner of Taxation ("the Commissioner") it was argued that the words "a person who engages, whether exclusively or not, in the manufacture of goods", as used in the definition of "manufacturer" in s.3(1) of the Act, refer to any person who manufactures or produces goods. On behalf of the TAB it was argued that the words serve only to indicate that a manufacturer who engages in other activities does not, on that account, cease to be a manufacturer. On that argument, as accepted by the Full Court, a person is a manufacturer only if his or her business is such as would ordinarily be described as that of a manufacturer.

9. The argument made on behalf of the TAB is, in essence, an argument that denies any real definitional function to the definition of "manufacturer" in s.3(1) of the Act. "Manufacturer", according to the argument, bears its ordinary meaning and the definition serves only to ensure that it is not confined, as it might be on an artifically restrictive approach, to the meaning of "one who engages exclusively in the manufacture of goods". This aspect tells against acceptance of the construction advanced on behalf of the TAB unless that construction is necessitated by the language of the Act.

10. The foundation of the argument made on behalf of the TAB was the presence of the words "by a manufacturer" in the expression "goods manufactured in Australia by a manufacturer in the course of carrying on a business" in s.17(2)(a) of the Act. The words "by a manufacturer", it was said, are superfluous if "manufacturer" is construed, as submitted on behalf of the Commissioner, to mean any person who produces or manufactures goods. Of course, the words "in the course of carrying on a business" would also be superfluous if "manufacturer" were construed, as submitted on behalf of the TAB, to mean only a person whose business is such that it would ordinarily be described as that of a manufacturer. These considerations suggest that the proper way to approach s.17(2)(a) is to treat the words "by a manufacturer in the course of carrying on a business" as a composite expression the purpose of which is to emphasize the business or commercial aspect of manufacturing necessary before goods attract sales tax as "goods manufactured in Australia". On that approach s.17(2)(a) does not control the definition of "manufacturer". Nor should it, for it is not the only provision of the Act that operates by reference to "goods manufactured ... by a manufacturer". Section 17(2)(b) operates in the same way.

11. Counsel for the TAB also relied upon the terms of ss.11 and 13 of the Act to support the argument that s.17(2)(a) applies only to a person whose business is such that it would ordinarily be described as that of a manufacturer. Section 11(1) requires that "a person who is a manufacturer or a wholesale merchant ... be registered". Section 13 provides that "(a) person carrying on business as a manufacturer or as a wholesale merchant who is required by or under section 11 to become registered" commits an offence if he or she refuses or fails to do so. The terms of s.13, it was said, make it plain that "manufacturer" in s.11 means "one who carries on business as a manufacturer" and, hence, confirm the view of the definition of "manufacturer" advanced on behalf of the TAB. One difficulty with this argument is that the expression "person carrying on business as a manufacturer" in s.13 of the Act itself imports the definition of "manufacturer" in s.3(1) of the Act. Another difficulty is that, on the argument made on behalf of the TAB, the expression "carrying on business as a manufacturer" would neither add to nor detract from that which would be conveyed if s.13 made it an offence for a manufacturer to refuse or fail to become registered.

12. The language of s.11 and s.13 cannot be easily reconciled. It may be that s.13, like the expression "by a manufacturer in the course of carrying on a business" in s.17(2)(a) of the Act, was intended to emphasize the business or commercial aspect necessary before goods attract sales tax as "goods manufactured in Australia". Whatever the explanation and even if s.13 controls the meaning of "manufacturer" in s.11, s.13 provides no reason for treating the definition of "manufacturer" in s.3(1) of the Act as something other than a true statutory definition. The text of Pt III (which includes s.13) of the Act confines it to those manufacturers or wholesale merchants who carry on business as such: see Brayson Motors Pty. Ltd. (In Liq.) v. Federal Commissioner of Taxation (1985) 156 CLR 651, at pp 660-661. But, as there is nothing in the text of Pt IV (which includes s.17) that would limit the meaning of "manufacturer" to a person who carries on business as a manufacturer, there is no warrant for construing "manufacturer" in s.17(2)(a) so as to restrict the goods on which tax is levied to goods manufactured in Australia by a manufacturer whose business is manufacturing.

13. Given the ordinary function of a statutory definition, the first limb of the definition of "manufacturer" in s.3(1) of the Act extends to a person who manufactures or produces goods even though his or her business is not such that it would ordinarily be described as that of a manufacturer. Accordingly, the TAB was and is a manufacturer and is thus liable for sales tax on the items printed by it and applied to its own use in its gambling business.

14. As the TAB falls within the first limb of the definition of "manufacturer" in s.3(1) of the Act, it is unnecessary to consider whether it is also a printer within the second limb of that definition. It may, however, be observed that the two parts of the definition take different forms, the first defining "manufacturer" by reference to activities and the second by reference to the fact that a person is or may be characterized as "a printer, publisher, lithographer or engraver". Thus, the words "whether exclusively or not" describe the activities which bring a person within the first limb of the definition and do not bear on the question whether a person is "a printer, publisher, lithographer or engraver". The TAB would not ordinarily be characterized as a printer merely because it prints items for use in its gambling business. However, it might be otherwise if its printing activities were such as to constitute an identifiably distinct business. See, as to distinct businesses in the context of the Act and related legislation, Brayson Motors, at pp 661- 662.

15. The appeal should be allowed. The order of the Full Court should be set aside. The appeal to that Court should be allowed with costs, the order of McPherson J. set aside and, in lieu thereof, it should be ordered that the summons be dismissed with costs.

Orders

Appeal allowed with costs.

Set aside the order of the Full Court of the Supreme Court of Queensland and in lieu thereof order that the appeal to that Court be allowed with costs and that the order of McPherson J. be set aside and in lieu thereof order that the summons be dismissed with costs.