CSR Ltd v Chief Executive Officer of Customs

[1997] FCA 1093

FEDERAL COURT OF AUSTRALIA

ADMINISTRATIVE LAW - Appeal from Administrative Appeal Tribunal - Diesel fuel duty - Applications for rebate of duty on basis that fuel was used in “mining operations” - Relevant operations were for extraction of sand, basalt, granite and quartzite - Whether “mining for minerals” - Extraction method similar to that in mining operations generally - Relevance of evidence of accepted application of “mining”, “quarrying” and “minerals” - Whether evidence from people in “quarrying” activities was admissible in that respect - Legitimacy of considering “informed general usage” of the words - Application of High Court decisions regarding mining operations, in relation to the Income Tax Assessment Act 1936 - Effect of exclusion of some quarrying activities from definition of “mining operations” - Whether Tribunal failed to apply beneficial construction of the legislation.
Customs Act 1901, s 164

Excise Act 1901, s 78A

CSR LIMITED and METROMIX PTY LTD v CHIEF EXECUTIVE OFFICER OF CUSTOMS
NG506 of 1997

JUDGES:      WILCOX, KIEFEL and LEHANE JJ
PLACE:         SYDNEY
DATE:           23 OCTOBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 506 of 1997

BETWEEN:

CSR LIMITED
FIRST APPLICANT

METROMIX PTY LTD
SECOND APPLICANT

AND:

CHIEF EXECUTIVE OFFICER OF CUSTOMS
RESPONDENT

JUDGES:

WILCOX, KIEFEL and LEHANE JJ

WHERE MADE:

SYDNEY

DATE OF ORDER:

23 OCTOBER 1997

THE COURT ORDERS THAT:

1. The application be dismissed.

1. The applicants pay the respondent’s costs of the appeal.

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	NG 506 of 1997

BETWEEN:

CSR LIMITED
FIRST APPLICANT

METROMIX PTY LTD
SECOND APPLICANT

AND:

CHIEF EXECUTIVE OFFICER OF CUSTOMS
RESPONDENT

JUDGES:	WILCOX, KIEFEL and LEHANE JJ
PLACE:	SYDNEY
DATE:	23 OCTOBER 1997

REASONS FOR JUDGMENT

THE COURT:  The applicants, CSR Limited and its partly-owned subsidiary, Metromix Pty Ltd (both referred to as “CSR”), applied for diesel fuel rebates under s 164 of the Customs Act 1901 and s 78A of the Excise Act 1901, on the basis that fuel purchased by them was used in “mining operations” conducted at five sites. In relation to each site, the Chief Executive Officer of Customs determined that the activities did not fall within that description. CSR appealed against each of the determinations to the Administrative Appeals Tribunal. The appeals were heard together and dismissed. Although the Tribunal considered the operations at each site could be categorised as “quarrying”, it did not accept CSR was “mining for minerals”, as the legislation required. CSR now appeals to this Court against the Tribunal’s decisions. By virtue of s 44(1) of the Administrative Appeals Tribunal Act 1975, CSR’s right of appeal is confined to matters of law.

The statutory provisions
Sections 164(1) of the Customs Act and s 78A of the Excise Act provide for a rebate in respect of diesel fuel used for purposes that include “mining operations”, except where they involve road vehicles on public roads.  In respect of both statutes, the definition of “mining operations” is provided by the Customs Act: see s 78A(7) Excise Act.  The definition that applied at the date of the Tribunal hearing was:

“‘mining operations’ means:

(a)exploration, prospecting, or mining for minerals, or the removal of overburden and other activities undertaken in the preparation of a site to enable mining for minerals to commence;  or

(b)the dressing or beneficiation of minerals, or ores bearing minerals, as an integral part of operations for their recovery;

and includes: …”

There followed a list of twenty two items. They are not presently relevant; it is common ground between the parties that the case in respect of each site turns on the question whether the activities at that site constituted “mining for minerals” within par (a) of the definition. In that connection it is relevant to note that the word “minerals” was itself defined, by s 164(7) of the Customs Act, in this way:

“‘minerals’ means minerals in any form, whether solid, liquid or gaseous and  whether organic or inorganic;”

The concluding words of the definition of “mining operations” exclude:

“…quarrying operations carried on for the sole purpose of obtaining stone for building, road making or similar purposes.”

The Tribunal decision
In relation to each of the five sites, the Tribunal made findings about the nature of the material extracted, the method of extraction and treatments employed and the uses for which the extracted material was suitable.  At two sites, Londonderry and Oxley Creek, quartz sand was extracted from other materials.  At Oxley Creek this involved dredging.  The sand extracted at both sites could be used in the concrete industry, where density and grain size had  to comply with certain Australian Standards; the sand from Londonderry could also be used as bricklayer’s sand or, with further refining, in glass manufacture.  Hard rock extraction was undertaken at Pakenham (fine grained basalt - “blue metal”) and Cooma Road (granite, with some dacite present).   At both these sites the material was extracted by drilling and blasting then crushed, screened and stored.  The Tribunal listed the mineral types present in the Pakenham basalt.  This material was suitable for use as road base, although its primary use was for aggregate in concrete.  The granite from Cooma Road could also be used for general purpose concrete, and as asphalt aggregate.  The rock extracted at the fifth site, Marrangaroo, was quartzite.  It had a number of uses, ranging from those in the concrete and building industries to road base and rail ballast, and also as a metallurgical material in steel making, where it might be used in iron smelting to control the silica content of slag; in this respect the material differed from the others.  The Marrangaroo material was obtained, at site, by drilling and blasting, crushing and screening. 

There was evidence before the Tribunal concerning the accepted application of the words “mining”, “quarrying” and “minerals”, the respective attributes of mining and quarrying and the aspects of those operations which might be regarded as similar.  Some witnesses spoke of “quarry products” and referred to the specifications of concrete aggregate, and the properties in rock aggregate that made it suitable for road making.  The applicant argued before the Tribunal that only witnesses from the mining industry, as distinct from the “quarrying industry”, ought to give this evidence, but the Tribunal noted that the applicant claimed the activity popularly called “quarrying” was a branch of the mining industry.   If that was so, it reasoned, people working in the “quarrying industry” were themselves in the mining industry; so, logically, it ought to hear from them.  Ultimately, the Tribunal found that quarrying operations were distinct from mining operations.

The Tribunal received this terminological evidence because it thought it appropriate to consider the “informed general usage” of the words in the legislation, especially “mining” and “minerals”.   In this connection the Tribunal referred to two decisions of the High Court of Australia, NSW Associated Blue-Metal Quarries Ltd v Commissioner of Taxation (1956) 94 CLR 509 and North Australian Cement Ltd v Commissioner of Taxation (1969) 119 CLR 353.

After summarising the considerable evidence on usage, the Tribunal observed there was no one consistent view expressed by the witnesses that would permit ready categorisation of the subject operations as either “mining” or “quarrying”.  It went on:

“The Tribunal is satisfied that the weight of the evidence is that informed general usage regards quarrying as carried out for the purposes of extracting material for the use in the construction and building industries, and for like purposes, which material is identified by reference to its physical features, such as its durability, size, shape, etc, rather than it is identified by reference to its mineralogy.  The Tribunal also accepts that material having different mineralogy may be able to be used to form aggregate, which is then applied for the same or similar end uses, and that this distinguishes the material extracted in the quarrying process from that extracted in the mining process whereas in the latter case extraction is for material having specific mineralogical qualities.  The use of the terms ‘quarrying’ and ‘mining’ in that context provides a useful and substantive point of distinction between the two industries.  The Tribunal is satisfied that the evidence shows that the point of distinction is recognised in the nomenclature used by those engaged in carrying out the activity of quarrying, e.g. the use of the term ‘quarry’ to describe the area where extraction occurs, the terms ‘aggregate’ and ‘sand’ to describe the material extracted, rather than by reference to its mineralogy.  The Tribunal finds that those terms are more commonly applied in the industry than is the term ‘minerals’ to describe what is extracted at the five sites.  The separate reporting in the annual reports of the extraction of construction materials from mining activities carried out by companies such as the applicant, which have or had conducted both operations, as well as more peripheral distinctions, e.g. the distinction made in advertising between quarries and mining in CSR’s advertising of quarries and mining; the fact that the industries have different reporting codes, different trade associations; and the fact that generally the quarrying industry may be described as being more vertically integrated than is the case with the mining industry, all support the view that the two industries are distinguished in ‘informed general usage’.”

The Tribunal gave specific consideration to the silica extracted at Marrangaroo, but concluded there was no basis for distinguishing those operations from the operations at the other sites.   No separate point is taken before us on this matter. 

There was clearly evidence to support the findings and conclusions of the Tribunal.  However, the applicants argue that, in reaching its conclusions, the Tribunal erred in law; it misdirected itself as to the appropriate approach to the construction of the definition  “mining operations” in the Customs Act.

The contentions on appeal
The principal submission made to us by counsel for the applicants concerned the use made by the Tribunal of the two abovementioned High Court cases, in ascertaining the area of application of the terms “mining operations” and “mining for minerals”.  Counsel pointed out these are statutorily-defined terms, for the purposes of the Customs Act and Excise Act, whereas there was no relevant statutory definition in the Income Tax Assessment Act 1936, under which those cases arose. Counsel submitted that, in those circumstances, the views expressed in those cases could not be imported into the present cases. Further, they said, the taxation legislation was concerned with different factors, such as the valuable nature of the material won and its end use. Counsel argued that “mining operations”, in the Customs Act, ought to be understood by reference to the register of meaning indicated by the definition provided by s 164(7), which ranged broadly, and also by reference to its ordinary meaning; it was an unduly restrictive and erroneous approach to import meanings from the tax cases. Counsel also repeated the submission put to the Tribunal that evidence from persons in the quarrying industry ought not to have been taken into account.

In their written submissions, counsel said:

“It is not an accepted method of construction to confine the width of the statutory definition by any particular informed general usage of the phrase.  The phrase has an expansive meaning in the Acts and activities which fall within the statutory meaning of the phrase will not otherwise fall outside the phrase merely because one specific school of thought is of the view that the activities in question cannot be described as ‘mining operations’ or are able to be described as ‘quarrying operations’.  Further if the material extracted by the applicants falls within the definition of ‘minerals’, then the fact that the products are called ‘rock’ or ‘sand’ or ‘aggregate’ in informed general usage does not take that material outside the statutory definition.” 

Counsel referred to comments about the intended width of the definitions in Collector of Customs v Bell Basic Industries Ltd (1988) 20 FCR 146. They also drew attention to the concluding words of the definition of “mining operations” and argued they indicated a legislative recognition that an activity that might bear the description “quarry operations” may fall within the definition. They accepted it does not follow that every type of quarrying operation falls within the definition of “mining operations”. “What does follow”, said counsel, “is that the mere fact that an operation may be described as a ‘quarrying operation’ does not ipso facto disqualify it from falling within the statutory definition of ‘mining operations’ or attracting the characterisation of ‘mining for minerals’”.  They pointed out that the reference to particular quarrying purposes, at the end of the statutory definition, would have been unnecessary if Parliament intended the definition to exclude all quarrying operations.  Counsel argued it is incorrect to construe the relevant statutory provisions by reference to labels; the Act requires an examination of the facts pertaining to the essential character of the operations for which the diesel fuel was purchased, in order to determine whether the applicant’s activities constitute “mining for minerals” and, therefore, “mining operations”.

Counsel submitted the relevant purpose was to be taken as that of the operator.  Although this may be seen as of lesser importance than the inquiry as to the subject matter of the activity in question, namely the substance sought and extracted, the reference to purpose provided by ‘for’ can clearly only be that of the operator.  Counsel went on to analyse in detail the Tribunal’s course of reasoning.  They then said the Tribunal committed “five principal errors of law”, viz:

“(a)it did not construe the statutory phrase ‘mining for minerals’ according to the ordinary meaning that those words possessed in the statutory context in which they were used;

(b)it construed the statutory phrase ‘mining operations’ by reference to the same phrase as used in the Income Tax Assessment Act, that analogy being manifestly inappropriate in the statutory context of s 164 of the Act;

(c)if reference was to be made to ‘informed general usage’, the Tribunal informed itself by reference to usage which was neither relevant nor general;

(d)it failed to either construe or apply the statutory phrase beneficially;

(e)     it failed to make relevant findings of  fact.”

Counsel for the respondent defended the Tribunal’s approach.  They pointed out that, in Neumann Dredging Co Ltd v Collector of Customs (Qld) (1987) 79 ALR 588 at 589, Burchett J (with whom Northrop and Spender JJ agreed) said that “mining” and “minerals” are both “words of imprecise and potentially wide meaning, which must be understood according to the context in which they are used”. Burchett J observed that, “in construing s 164 (of the Customs Act) one cannot overlook the High Court’s decisions on the similar usage of the expression ‘mining operations’ in  NSW Associated Blue-Metal Quarries and North Australian Cement Ltd”.  We note that, after referring to some dictionary definitions, Burchett J went on (also on 589):

“A settled view would exclude activities such as quarrying for blue metal, which are unrelated to an ordinary understanding of ‘mining’ as the word is used in Australia today.  Likewise, in my opinion, the settled meaning of the expression ‘mining operations’, and in particular of the expression ‘mining for minerals’, would exclude the activities of the appellant.”

The activities of the then applicant involved dredging for sand.

After reference to several authorities, counsel for the respondent submitted the relevant question is one of fact and, in answering that question, the Tribunal did not fall into error.  In particular, counsel said, it was proper for the Tribunal to follow the guidance given by the High Court in NSW Associated Blue-Metal Quarries and North Australian Cement Limited and pay attention to informed general usage in the industry.  Counsel responded to the applicants’ identified alleged errors of law by saying:

“(a)The meaning of the expression ‘mining for minerals’ is one of fact.  Having failed on the facts, the applicants cannot successfully convert those facts into questions of law ... ‘informed general usage’ is not an exclusionary approach but one which takes into account all relevant matters. ...

(b)The reference to High Court authority on the meaning of ‘mining’ and ‘minerals’ is not ... an error of law or inappropriate or productive of legal error.  The Full Court of the Federal Court has held to the contrary is Neumann Dredging and in Bell Basic.

(c)...  there is no error of law in examining informed general usage ... There is no error of law in the Tribunal’s conclusions of fact:  the Tribunal decided the issues by reference to the weight of the evidence.  The Tribunal did not exclude any of the evidence as irrelevant but assessed it all for weight. ...

(d)The respondent submits it is not an independent error of law to fail to apply a beneficial construction.  In any event, the Tribunals said ... that the legislation should not be given a restrictive interpretation and, in examining whether usage had altered the position as found by the courts up to that time, the Tribunal did not adopt a restrictive interpretation.  Its task was to decide on the facts whether the applicants’ activities were or were not mining for minerals within section 164. ...

(e)The only fresh point in this paragraph of the applicants’ submissions is that the Tribunal did not deal with beneficiation.  However since the decision was that the applicants were not mining for minerals it follows that they were not engaged in ‘the dressing or beneficiation of minerals, or ores bearing minerals, as an integral part of operations for their recovery:  these emphasised words are omitted by the applicants.  In State Rail Authority of New South Wales v Collector of Customs (1991) 33 FCR 211 at 215 the Full Court said that the concept of the recovery of the minerals is retained as the central point of reference of the section and the recovery process was intended to be the key element as emphasised by the phrase ‘as an integral part of operations for their recovery.”

Conclusions on submissions
We accept the respondent’s submissions.  We do not think the Tribunal fell into any of the errors suggested by counsel for the applicants.  Contrary to their submission, the Tribunal did construe the words “mining for minerals” according to their ordinary meaning, but with reference to the statutory context in which they were used.

The Tribunal did not take the meaning of “mining operations” directly from the judgments in NSW Blue-Metal Quarries or North Australian Cement.  The Tribunal noted that, in NSW Blue-Metal Quarries, Kitto J determined that “mining operations” did not extend to the extraction of stone, such as blue metal, by open excavation and that Menzies J held likewise in North Australian Cement in relation to the recovery of limestone by open cut extraction.  But the Tribunal did not simply apply these conclusions to the cases it had to consider.  Rather it took from the cases guidance as to the appropriate way of determining the meaning of critical terms not defined in the Customs Act, notably “mining”.  In accordance with that guidance, it considered evidence of the use of these terms in the mining and quarrying industries, together with evidence as to the materials recovered and the uses to which they were, or could be, put.  The Tribunal reasoned that the evidence as to actual and potential use provided a basis for drawing an inference as to the qualities or properties sought in the extracted materials. 

In North Australian Cement, Menzies J was concerned with activities that included aspects usually associated with mining.  The activities were carried out under a “mining lease” for the extraction of “non-metallic minerals”.  They involved exploration, planning, drilling and blasting.  In this context his Honour rejected, as too simplistic, two approaches suggested to him:  either to hold that all open cut extractions of the earth’s crust amounted to mining, or to treat as conclusive the use to which the material was intended to be put.  Menzies J preferred to determine whether the activities constituted mining “by an informed general usage which takes into account both the way in which the deposits of the material occur, the character of the material to be recovered and the uses to which it may reasonably be put.”:  see 362-363.   He thought that approach to be consistent with that taken by Kitto J in Blue-Metal Quarries.   Menzies J commented (at 363) that the judgment of the Full Court in that case, affirming Kitto J, supported “the application of a pragmatic test, i.e. that in Australia to speak of limestone workings as a mining property, even if technically justifiable, would be outside common usage and would ‘sound odd and incongruous’”.

Although we appreciate that, in North Australian Cement, Menzies J was not concerned to construe a statutory definition of “mining operations”, we see no legal error in the Tribunal here following his general approach. The definition refers to “minerals”. Although that word is defined in s 164(7), the definition does not provide much assistance in this case; for present purposes, it refers the reader back to the ordinary English meaning of “minerals”. So the situation is not dissimilar to that in NSW Blue-Metal Quarries and North Australian Cement.  In those cases the Court looked at informed general usage, the method of working and the substance or materials sought and taken.  The latter factor is of some importance in the present sub-section.  It seems to us that, rather than providing a meaning different from that attributed to ‘mining’ and ‘mining operations’ in the earlier cases, the definition with which the Tribunal was concerned emphasised the features held by those cases to be relevant - the nature of the material sought and the use to which it would likely be put.

It is important to note that, in both Neumann Dredging and Bell Basic, Full Courts of this Court approved the course taken by the Tribunal in this case, of adopting the approach taken by Menzies J in North Australian Cement.  Both the Full Court cases were concerned with the same statutory provisions as the present case; so they constitute Full Court authority directly in point.  Bell Basic was recently followed by Cooper J in  Collector of Customs v Neumann Sands (Victoria) Pty Ltd (1996) 136 ALR 584 at 590.

The definition of  “mining operations” refers to “mining for minerals”.  It follows that “mining” has to be undertaken “for minerals”, if it is to qualify under s 164.  This requires account to be taken of the properties of the material extracted or recovered.  Guided by the substantial expert evidence on the matter, the Tribunal found that an important question is whether the material is extracted because of its mineral qualities or some other quality, such as its physical characteristics.  This finding was supported by the evidence; we discern no error in it. Considering this question, the Tribunal found that CSR sought to recover materials having particular physical attributes, such as particle shape and size and durability, which rendered them useful for particular construction purposes.  The materials were not sought because of their mineral qualities.

The Tribunal’s finding on the purpose of extractions also disposes of the applicant’s argument relating to that part of  the definition of “mining operations” which extended it to the “dressing or beneficiation of minerals …” where that was “an integral part of operations for their recovery”.   Counsel said this had not been dealt with by the Tribunal.  Consistent with the earlier part of the definition, however, for “dressing or beneficiation” to qualify, it must be associated with the recovery of minerals. 

Counsel for CSR also submitted it was sufficient to show that each of the materials extracted at the sites could qualify as a mineral.  Putting to one side the divergence of evidence as to whether relevant materials might be described as “minerals”, the Tribunal found that was not why they were sought.  Consequently, it was not legally erroneous for it to conclude that the activity did not constitute “mining for minerals”.

The applicant took issue with the Tribunal’s use of evidence of terms used by persons working in or associated with the five sites.  The Tribunal justified that course on the basis that CSR had contended its sites were part of the mining industry.  It seems to us it was proper to have regard to evidence of the use of terms in the quarrying industry. The evidence demonstrated that people at CSR’s sites described the site, the processes undertaken and the materials taken using terms different from those used at places that were called mines.  The Tribunal did not use this evidence to determine the meaning of “mining operations”, except by a process of exclusion; rather it treated it as confirming the point of distinction between “mining” and “quarrying” which the Tribunal otherwise found to exist.

We agree with counsel for the applicants that the exclusion, at the end of the definition “of mining operations”, of “quarrying operations carried on solely for the purpose of obtaining stone for building, road making or similar purposes” indicates the drafter contemplated that quarrying operations might be caught by the statutory definition; otherwise no exclusion would have been necessary.  However, as counsel conceded, the argument cannot be pushed too far.   Burchett J pointed out in Neumann Dredging, after referring to Corporate Affairs Commission (SA) v Australian Central Credit Union (1985) 157 CLR 201, that courts must be cautious in drawing implications out of exceptions. He said:

“In s 164, the words of non-inclusion are added to avoid any suggestion that the quarrying referred to is included:  but there was a real risk that it might otherwise have been included by virtue of para (c) of the so-called definition.  That is a sufficient explanation of the present of those additional words.  There is, of course, no suggestion that para 9c) has any application in the present case.”

In the present case it can be said the exclusions were inserted to avoid any suggestion that the particular quarrying activities there mentioned, concerning stone, were to be treated as included in the definition.  That does not imply that the quarrying of another material, such as sand or rock, must be categorised as mining operations. 

Counsel for the applicant referred to the intended beneficial effect of the legislation. They argued that, because operations might be said to be quarrying operations, this did not automatically disqualify them as mining operations; some characteristic features of mining applied equally to quarrying, and there were common methods of extraction.  They said that, since the legislation was intended to have a beneficial effect, it followed that, where an activity could be seen to fall into either category, it ought be held to be mining.  However, the method of extraction, and some other characteristics of each industry, are only aspects of the undertakings.  The Tribunal had regard to similarities of processes but found they were not determinative.  Its decision was reached by reference to other features, which it considered justified a distinction between mining and quarrying.  In our view no error of law affected this process of evaluation.

The applicant has failed to show any error of law in the Tribunal’s decision.  The appeal should be dismissed with costs.

I certify that this and the preceding thirteen (13) pages

are a true copy of the Reasons for Judgment of the Court.

Associate:

Dated:             23 October 1997

APPEARANCES

Counsel for the Applicants:                  G Flick SC and A P Coleman
Solicitors for the Applicants:                 Freehill Hollingdale & Page
Counsel for the Respondent:                A Robertson SC and Dr A Gelbart
Solicitors for the Respondent:               Australian Government Solicitor
Date of Hearing:  8 September 1997