David Mitchell Limited v Chief Executive Officer of Customs
[2001] FCA 294
•23 MARCH 2001
FEDERAL COURT OF AUSTRALIA
David Mitchell Limited & Anor v Chief Executive Officer of Customs
[2001] FCA 294TAXES AND DUTIES – statutory interpretation - diesel fuel rebate available for fuel used in “mining operations” – fuel used in extraction of limestone for production of lime - whether exclusion of one material means its constituents also excluded – identification of mineral recovered
WORDS AND PHRASES – “minerals”, “mining operations”, “the end product”
Excise Act 1901 (Cth) s 78A(1)
Customs Act 1901 (Cth) s 164(1) and s 164(7)
Administrative Appeals Tribunal Act 1975 (Cth) s 44
Customs and Excise Legislation Amendment Act 1995 (Cth)
Customs and Excise Legislation Amendment Act (No 1) 1996(Cth)Chief Executive Officer of Customs v Goliath Portland Cement Co Ltd [1999] FCA 666, (1999) 42 ATR 189 referred to
Goliath Portland Cement Co Limited v Chief Executive Officer of Customs [2000] FCA 1164, (2000) 101 FCR 11 applied
Transurban City Link Ltd v Allan [1999] FCA 1723, (1999) 95 FCR 553 followed
Federal Commissioner of Taxation v ICI Australia Ltd (1972) 127 CLR 529 applied
Chief Executive Officer of Customs v Tasmanian Electro Metallurgical Co Pty Ltd (1997) 76 FCR 476 followed
DAVID MITCHELL LIMITED AND LOONGANA LIME PTY LIMITED v CHIEF EXECUTIVE OFFICER OF CUSTOMS
V 698 of 1999
SPENDER, MARSHALL and GYLES JJ
MELBOURNE
23 MARCH 2001
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 698 of 1999
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
DAVID MITCHELL LIMITED
FIRST APPELLANTLOONGANA LIME PTY LIMITED
SECOND APPELLANTAND:
CHIEF EXECUTIVE OFFICER OF CUSTOMS
RESPONDENTJUDGES:
SPENDER, MARSHALL and GYLES JJ
DATE OF ORDER:
23 MARCH 2001
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The appeal be allowed.
2.That each order of Ryan J of 19 November 1999 be set aside.
3.That the decision of the Administrative Appeals Tribunal of 9 February 1998 be set aside and in lieu it be ordered that the reviewable decision in V96/607 and V96/1328 be set aside, and the matter be remitted to the Administrative Appeals Tribunal for reconsideration in accordance with the direction that diesel fuel rebate be assessed for payment in accordance with the reasons of this Court.
4.That there be no order as to costs of the appeal, and no order as to costs of the proceedings before Ryan J.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 698 of 1999
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
DAVID MITCHELL LIMITED
FIRST APPELLANTLOONGANA LIME PTY LIMITED
SECOND APPELLANTAND:
CHIEF EXECUTIVE OFFICER OF CUSTOMS
RESPONDENTJUDGES:
SPENDER, MARSHALL and GYLES JJ
DATE:
23 MARCH 2001
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
SPENDER J:
In my opinion, this Court is obliged to hold that the operations at the relevant time conducted by David Mitchell Limited (David Mitchell) and Loongana Lime Pty Limited (Loongana) were “mining operations”, within the meaning of the then s 164(1)(a) of the Customs Act 1901 (Cth) (the Act), and s 78A(1)(a) of the Excise Act 1901 (Cth) (the Excise Act), only insofar as the extraction process was concerned, so that the appellants are entitled to a rebate on the diesel fuel used in that extraction process. However, the subsequent dressing and calcination processes of what was extracted, done for the purpose of obtaining lime, were not “mining operations” as defined, with the consequence that the diesel fuel rebate is not payable for fuel used in the dressing and calcination process.
Whether a diesel fuel rebate is available under s 164(1)(a) of the Act and s 78A(1)(a) of the Excise Act, where what is won from the earth is limestone which is then subjected to various processes to produce lime, or cement, has provoked serious judicial disagreement: see the judgment of Heerey J at first instance in Chief Executive Officer of Customs v Goliath Portland Cement Co Ltd (1999) 42 ATR 189 and the judgment of the Full Court on appeal Goliath Portland Cement Co Limited and Shaw Contracting Pty Limited v Chief Executive Officer of Customs [2000] FCA 1164; and the judgment of Ryan J at first instance in the present matter [1999] FCA 1611.
The appellants are related companies, David Mitchell owning 90 per cent of the issued capital in Loongana. The operations of David Mitchell at Lilydale in Victoria and Loongana in Western Australia were described (at [2]) in the Administrative Appeals Tribunal (the Tribunal) as follows:
“The aim in relation to each site is to extract limestone through open-cut operations and subject it to calcination to produce, in the first instance, calcium oxide (CaO), commonly called quicklime or just ‘lime’. In the case of the lime produced at Lilydale, one third is sold in that form for agricultural and industrial application, with the balance being further processed to produce calcium hydroxide (commonly referred to as hydrated lime). In the case of Loongana the calcium oxide (lime) is sold to the goldmining companies in the Kalgoorlie region for use in goldmining operations.”
It is necessary to set out the history of the respondents’ claims in some detail.
On 2 May 1996, an officer of the Australian Customs Service decided that:
“In respect to [sic] the claim for diesel fuel purchased on or after 1 July 1995 for the Lilydale site …it is not considered that these activities are eligible for the payment of rebate as it is my opinion that the operations involve the mining of limestone. The changes to the Diesel Fuel legislation exclude limestone, among a number of other things, from the definition of ‘minerals’ in section 164(7) of the Customs Act with effect from 1 July 1995. As a result, it is my view that the excavation of limestone after 1 July 1995 does not satisfy the purposive test of ‘mining operations’ referred to in Subsection 164(7) of the Customs Act 1901.”
An application was made on 28 May 1996 to have that decision reviewed by the Tribunal. The claim the subject of that decision was in respect of “diesel fuel used in excavation and processing of limestone at the … Lilydale site”.
On 24 October 1996 an officer of the Australian Customs Service decided that the activities of Loongana Lime Pty Ltd at Loongana Western Australia were not eligible for the payment of rebate: “as it is my opinion that the operations involve the mining of limestone.” An application to review that decision was made to the Tribunal on 31 October 1996.
Both matters were heard together, and the Tribunal on 9 February 1998 in each case decided:
“The Tribunal sets aside the reviewable decision and remits the matter to the respondent for reconsideration in accordance with the direction that diesel fuel rebate be assessed for payments in accordance with the findings of the Tribunal.”
The conclusion of the Tribunal was:
“By virtue of the weight of evidence and a proper reading of the legislation, the Tribunal finds that:
§the sites are mines. It is noted that the respondent concedes that fact. The process of getting the limestone is mining,
§limestone is an ore. It is included as a mineral by definition of the Act,
§the operations to physically upgrade the mined limestone at both sites and to prepare it for calcination constitute dressing,
§the calcining process constitutes beneficiation (an overall term which includes dressing),
§lime is a mineral,
and thus the activities of the applicants in relation to their claims on this matter are ‘mining operations’ being mining for minerals, and the dressing or beneficiation of minerals, or ores bearing minerals, as an integral part of operations for their recovery pursuant to s. 164 of the Act.”
The Chief Executive Officer of Customs (Customs) lodged an appeal to the Federal Court of Australia. This appeal was pursuant to s 44 of the Administrative Appeals Tribunal Act which permits an appeal from the AAT “on a question of law”. One of the questions of law said by Customs to be raised on the appeal was:
“Whether the process of calcining limestone to produce [lime] as carried out by the Respondents is a mining operation within the definition of ‘mining operations’ in s.164(7) of the Customs Act 1901 (C’wth).”
Amongst the grounds of that appeal was the following:
“The Tribunal erred in failing to construe the phrase ‘for their recovery’ in s.164(7) of the Customs Act 1901 (C’wth) to mean recovery of those minerals or ores bearing minerals which are present in the material as extracted from the earth.”
On 19 November 1999, Ryan J granted the application for review, set aside the decision of the Tribunal, and reinstated the decision of the Customs refusing David Mitchell and Loongana a diesel fuel rebate.
David Mitchell and Loongana appealed to this Court from the decision of Ryan J.
The history of the relevant legislation is set out:
Prior to 1 July 1995, s 164(7) provided:
“ ‘mining operations’ means:
(a)exploration, prospecting or mining for minerals; or
(b)the dressing or beneficiation (at the mining site or elsewhere) of minerals, or ores bearing minerals, as an integral part of operations for their recovery;
…
but does not include quarrying operations carried on for the sole purpose of obtaining stone for building, road making or similar purposes;”
and:
“ ‘minerals’ means minerals in any form, whether solid, liquid or gaseous and whether organic or inorganic.”
The definitions of “mining operations” and “minerals” were amended in 1995 and 1996; see Customs and Excise Legislation Amendment Act 1995 (Cth), No 87 of 1995; and Customs and Excise Legislation Amendment Act (No 1) 1996 (Cth), No 21 of 1996. In both cases the amendments took effect from 1 July 1995.
The 1995 amendment inserted the following definition of “mining operations”:
“ ‘mining operations’ means:
(a)exploration, prospecting, the removal of overburden and other activities undertaken in the preparation of a site to enable mining to commence or mining for minerals; or
(b)the dressing or beneficiation of minerals, or ores bearing minerals, as an integral part of operations for their recovery;
…
but does not include quarrying operations carried on solely for the purpose of obtaining stone for building, road making or similar purposes.”
To the definition of “minerals” the following exception was added:
“except sand, sandstone, soil, slate, clay (other than bentonite or kaolin), basalt, granite, gravel, limestone or water.” [Emphasis added].
The 1996 amendments provided for a new paragraph (a) of the definition of “mining operations”:
“(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.”
The 1996 amendment to the definition of “minerals” in s 164(7) relevantly separated out the reference to limestone in the exception from minerals, but saved from that exception “agricultural use limestone”:
“ ‘minerals’ means minerals in any form, whether solid, liquid or gaseous and whether organic or inorganic, except:
(a)sand, sandstone, soil, slate, clay (other than bentonite or kaolin), basalt, granite, gravel or water; or
(b)limestone (other than agricultural use limestone).”
“Agricultural use limestone” was in turn defined to mean “limestone for use in the de-acidification of soil in any agricultural activity other than the activity referred to in par (t) of the definition of agriculture”. Paragraph (t) is not relevant for present purposes.
It is the statutory regime after the 1996 amendments that are applicable in the present matter.
There is no argument that, insofar as David Mitchell produced limestone at its Lilydale site for agricultural purposes, it was entitled to a rebate for diesel fuel used in that part of its operations.
In respect of the claims for rebate which were in dispute, the Tribunal said (at [17]):
“There is no dispute that in order to produce lime by calcination it is necessary to feed calcium carbonate (CaCO¦) to the kiln. The calcium carbonate is in the form of calcite which is present in the limestone together with other materials. Both parties agree that calcite is a mineral. Thus the purpose of the extraction process is to obtain the mineral calcite. Is it properly described then as quarrying for a mineral (the mineral calcite) or as mining for a mineral (the mineral calcite)?”
The Tribunal made reference to the definition of “mining operations” as inter alia “mining for minerals” and noted that the definition goes on to exclude ‘quarrying operations carried on solely for the purpose of obtaining stone for building, road making or similar purposes”. After referring to some of the evidence before it, the Tribunal found:
“On the basis of this evidence and that of the applicant’s witnesses the Tribunal finds that the extraction process at Lilydale and Loongana constitutes ‘mining operations’.”
The Tribunal found that the purpose of the extraction process was to obtain the mineral calcite and “the extraction process…constitutes ‘mining operations’.” In my opinion, this is a finding of fact that there was mining for the mineral calcite. This finding was open to the Tribunal.
Ryan J at first instance agreed with the observations of Heerey J in Goliath at first instance, at [25]. Heerey J said:
“If ‘limestone’ has been expressly excluded from the statutory definition of ‘minerals’ it seems to me to follow inexorably that the essential and defining component of limestone, namely calcite, must also be excluded. One cannot mine for calcite without mining for limestone, and vice versa.”
The Full Court, on appeal from the judgment of Heerey J (Lee, Cooper and Kiefel JJ) said at [29]:
“On the view we have taken of the matter it is unnecessary to deal with the question whether the exclusion of ‘limestone’ from the definition of ‘minerals’ carries with it the exclusion of its constituents. Calcite is not the mineral mined or recovered. If that were the case we are however respectfully unable to agree with his Honour the primary Judge (with whom Ryan J agreed in David Mitchell) that any more was intended by the exclusion than a reference to limestone as such. An exclusion from beneficial legislation should not, in our view, be read widely unless it is clear that it was intended to incorporate more than is conveyed, namely the stated material. Calcite cannot, as a matter of language, be regarded as a derivative of the word limestone (as to which see Pearce, D. C., Statutory Interpretation in Australia, 4th ed. Sydney: Butterworths, 1996. [6.41]).”
The statement in that passage of the Full Court’s reasons that “calcite is not the mineral mined or recovered” is a statement inconsistent with the finding of the Tribunal in the present matter. However, the conclusion of the Full Court is that if calcite was the mineral mined or recovered, it is not excluded from being mining operations by the exclusion of limestone from the definition of minerals.
It follows that there was no legal error by the Tribunal in its holding that the extraction process at Lilydale and Loongana for the mineral calcite constitutes mining operations, with the consequence that those operations attract an entitlement to the diesel fuel rebate.
The decision of Ryan J (at [46]) was
“that it was not open to the Tribunal to characterise the activities of David Mitchell or Loongana (except to the extent that they were directed to the recovery of agricultural limestone) as “mining operations” within the meaning of s 164 of the Act.”
His Honour determined (at [37]) that:
“…the Tribunal erred in holding the total integrated process to the completion of calcination included dressing and beneficiation for the recovery of a mineral other than limestone.”
His Honour considered that:
“…the activities at Lilydale and Loongana are properly characterised as the recovery of limestone. It is true that calcite is the commercially valuable constituent of limestone but that does not entail that limestone is an ore of calcite.”
I have already indicated that, in my opinion, the Tribunal found as a fact properly open to it that the extraction process was the obtaining of the mineral calcite, and was thus mining operations. Insofar as Ryan J characterised that process as the recovery of limestone, he appears to have accepted that the view of Heerey J that ‘limestone’ and ‘calcite’ are, for the purpose of the definition of “mining operations”, synonymous, in the sense that if one recovers limestone one recovers calcite, and vice versa, a view rejected by the Full Court in Goliath.
However, in my opinion, Ryan J was correct when he concluded that:
“the Tribunal erred in holding that the total integrated process to the completion of calcination included dressing and beneficiation for the recovery of a mineral other than limestone”.
The error identified was an error of law. That error was the failure to apply the proper test of what constitutes “mining operations” in par (b) of that definition, in particular failing to give effect to the crucial requirement that any dressing or beneficiation of a mineral, or an ore bearing a mineral, had to be as an integral part of the process of recovery of that mineral.
Before calcining, the limestone was subjected to screening, crushing and picking to ensure that it had an acceptably high calcite content. Ryan J noted (at [37]):
“That feature would tend to support the characterisation of the process as the dressing or beneficiation of limestone, but not as part of operations for the recovery of calcite.”
Even if one were to accept that the screening, crushing and picking was a dressing or beneficiation of calcite, that would still not be part of operations for the recovery of calcite. Rather, it would be the dressing or beneficiation of calcite for the recovery of lime, and therefore not within the definition (b) of “mining operations”.
The end product of the extraction and calcination is lime, but lime is not mined at Lilydale or Loongana. On the finding of the Tribunal, what is mined at Lilydale and Loongana is the mineral calcite.
Further, in my opinion, the calcining process cannot be seen as mining operations in reliance on par (b) of the concept of mining operations, namely the dressing or beneficiation of minerals or ores bearing minerals as an integral part of operations for their recovery.
The Full Court in Goliath noted at [24]:
Central to the phrase ‘mining operations’ is the notion of the recovery of minerals: see Collector of Customs v BHP Australia Coal Limited (1994) 53 FCR 499; Federal Commissioner of Taxation v Broken Hill Proprietary Co Ltd (1969) 120 CLR 240; 120 CLR 267; The Commissioner of Taxation v ICI Australia Ltd (1972) 127 CLR 529. The phrase ‘as an integral part of the operations for their recovery’, which qualifies the extended meaning given to ‘mining operations’ in par (b) in that definition, underlines this. What one has regard to is the object of the operations undertaken: the end product: Broken Hill Co Ltd, 273, 274. Put another way, that is when the mining operation ends. So, in cases concerning the recovery of the mineral salt from brine pumped to the surface and subjected to evaporation, it has been held that mining operations were engaged in: ICI Australia, 557; Regional Director of Customs (WA) v Dampier Salt (Operations) Pty Ltd (1996) 67 FCR 108. The completion of recovery may be said to occur, and the mining operations conclude, when no further process is undertaken by the miner to separate the mineral from any material adhering to it or intermixed with it prior to sale: Abbot Point Bulk Coal Pty Ltd v Collector of Customs (1992) 35 FCR 371, 380; Collector of Customs v BHP, 508; FCT v Broken Hill Co, 245.”
So viewed, mining operations in this case are at an end when the limestone containing the mineral calcite is extracted from the earth.
Recovery in par (b) of the definition of “mining operations” involves the freeing or separation of the designated mineral from the ore body in which it inheres, as Ryan J held. The observations of Barwick CJ in Federal Commissioner of Taxation v ICI Australia Ltd (1972) 127 CLR 529 at 567 are apposite:
“In the mining to recover many metals what is brought out of or up from the earth is a substance in which the metal is embedded or intermixed. The recovery of the metal is a process of freeing it from that total substance, in general referred to as the ore or ore body. A mineral is defined in the Shorter Oxford Dictionary as ‘any substance which is obtained by mining. In early and modern technical use the ore (of a metal)’. It does not seem to matter whether the process of freeing the mineral is mainly physical or chemical. In general, the process of freeing the metal leaves on the one hand the metal and on the other a residue. I much doubt whether that residue, for example, the sand resulting from the flotation process used in the barrier mines, or the quartz after the removal of the gold in the case of gold recovered from reef gold or the dross after a cyanide process is properly called the ore or the metal's ore. That term, it seems to me, is properly used to describe the substance in which the metal has been found whilst still embedded in or intermixed with it. But the section treats that from which the metal is separated as the ore of the metal. But be that as it may, in general, the ‘separation’ of the metal leaves two physically identifiable substances, usually solids.”
In my opinion, consistent with the observations of Barwick CJ, limestone is not an “ore” bearing the mineral “lime”.
I respectfully agree with the conclusion of Ryan J that limestone is not capable of being characterised as an ore of lime.
The Act specifies that a mineral is something which is mined. The noun “minerals” has in its ordinary meaning the denotation of substances which can be won by mining. It appears from the definition of “mineral” as a noun in the Oxford English Dictionary that a “mineral” means “any substance which is obtained by mining; a product of the bowels of the earth”. I agree with Ryan J that that denotation is reinforced by the definition of “mining operations” in s 164(7) with its concentration on “mining for minerals” and the “recovery” of minerals, of which is mining is regarded as an integral part.
Lime, as produced by the appellants, emerges after the calcining process of limestone. It does not occur naturally at the site of either phase of operations of the appellants, either in its own right or as a constituent of limestone. The lime is not “embedded” in or “intermixed” with the limestone, or with anything else. Lime is not “recovered” from the earth, and lime is not obtained by mining. It is obtained by calcining limestone.
I respectfully agree with Ryan J, when he observed:
“The fact that a synthetically produced substance may occur naturally elsewhere and, in those circumstances, be ‘mined for’, does not warrant equating the synthetic producer’s activities with mining for a mineral.”
In this case, lime is not “recovered” from its “ore” limestone: the limestone is not properly to be described as “the substance in which the lime has been found while still embedded in or intermixed with it”. I acknowledge that in Chief Executive Officer of Customs v Tasmanian Electro Metallurgical Co Pty Ltd (1997) 76 FCR 476, Merkel J (at 489) held that it was open to the Tribunal to find that pyrolusite and cryptomelane were ores bearing manganese, and that it was open on the evidence for the Tribunal to conclude that:
§“the sintering and smelting operations at Bell Bay involved the beneficiation of a mineral or an ore-bearing mineral as an integral part of operations for their recovery
§manganese was a mineral
§the sintering and smelting operation at Bell Bay was a process of beneficiation of pyrolusite and cryptomelane, being ores bearing manganese, for the recovery of manganese in a form suitable for it use in steel making”, being ferromanganese and silicomanganese.
His Honour further held (at 490) that the Tribunal was entitled to reject the submission that:
“…the processes at Bell Bay, involving chemical change and additives, were part of the process for manufacturing alloys rather than for the recovery of a mineral.”
While I respectfully agree that the removal of impurities and the consequential improvement of a mineral concentration can form part of the “recovery” process, what has to be recovered is the mineral in the ore; I would, for myself, doubt whether the production of an alloy of the mineral in the ore could properly be described as the recovery of the mineral.
In Goliath, it was held that limestone was recovered and subjected to a process to produce cement. The Full Court said at [28]:
“In our view it could not be said that in this case that lime was a ‘mineral’ which was ‘recovered’. Limestone is certainly recovered and the process which follows may be described as one of beneficiation of the limestone, but only as a part of a continuous process in the manufacture of cement …The whole process undertaken is one which goes well beyond the removal of impurities to recover any mineral. Whilst the nature of the process applied in recovery will not always be conclusive of the question whether a mineral has been recovered, what is required is that the mineral be present when the material in which it is contained was taken from the earth, as Ryan J points out in David Mitchell. It is in that sense that one views a process or processes of recovery and what is said to be a ‘mineral’: that which may be won by mining, albeit that other steps are necessary to render it useful or saleable. The fact that his Honour held limestone not to be an ore, which differs from the finding made here by the Tribunal, does not affect the approach otherwise taken. It is, in our view, highly artificial to speak of lime being ‘recovered’ in a process such as this because it was possible to physically remove it.”
[My emphasis].This reasoning supports the correctness of the decision of Ryan J that the par (b) definition of “mining operations” does not apply to the respondents’ dressing and calcining operations.
To come within par (b) of “mining operations”, what has to be dressed or beneficiated is the mineral which is recovered; or the ore bearing that mineral, which mineral is recovered. Here, what is recovered is lime, which is not that which is dressed or beneficiated. Nor is that which is dressed or beneficiated an ore of lime. Ryan J was correct to hold (at [37]) that “the Tribunal erred in holding the total integrated process to the completion of calcination included dressing and beneficiation for the recovery of a mineral other than limestone”. It follows that neither appellant is entitled to a diesel fuel rebate in respect of the operations which involve screening, crushing and picking, and the calcining process itself.
Having regard to the terms of the decision of the AAT and of Ryan J, the appropriate orders to make on the appeal are as follows.
(1) The appeal be allowed.
(2) That each order of Ryan J of 19 November 1999 be set aside.
(3)That the decision of the Administrative Appeals Tribunal of 9 February 1998 be set aside and in lieu it be ordered that the reviewable decision in V96/607 and V96/1328 be set aside, and the matter be remitted to the Administrative Appeals Tribunal for reconsideration in accordance with the direction that diesel fuel rebate be assessed for payment in accordance with the reasons of this Court.
Since the appellants have been partially successful and therefore partially unsuccessful, a fair order as to costs is:
(4)that there be no order as to costs of the appeal, and no order as to costs of the proceedings before Ryan J.
I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender. Associate:
Dated: 23 March 2001
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 698 of 1999
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
DAVID MITCHELL LIMITED
FIRST APPELLANTLOONGANA LIME PTY LIMITED
SECOND APPELLANTAND:
CHIEF EXECUTIVE OFFICER OF CUSTOMS
RESPONDENTJUDGES:
SPENDER, MARSHALL & GYLES JJ
DATE:
23 March 2001
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
MARSHALL J
This is an appeal from the judgment delivered on 19 November 1999 by a single Judge of the Court (“the primary Judge”). The judgment concerned an application made by the present respondent to review a decision of the Administrative Appeals Tribunal (“the AAT”).
Pursuant to s78A(1) of the Excise Act 1901 (Cth) and s164(1) of the Customs Act 1901 (Cth) (“the Act”), a person who purchases diesel fuel for use in mining operations, on which duty has been paid, is entitled to payment of a rebate.
In May 1996, a delegate of the respondent (“the delegate”) refused to pay diesel fuel rebate on diesel fuel purchased by the first appellant, David Mitchell Limited (“DML”), for the excavation and processing of limestone. In October 1996, a similar decision was made in respect of the operations of the second appellant, Loongana Lime Pty Limited (“Loongana”).
Subsequent to the decision of the delegate of May 1996 and prior to the decision of the delegate of October 1996, the Act was amended. At the time of the delegate’s decision in October 1996, “mining operations” was defined in s164(7) of the Act (which now appears in an immaterially amended form) to mean, so far as is presently relevant:
“(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 … .”
Also in s164(7) of the Act (as amended), “minerals” is defined to mean:
“minerals in any form, whether solid, liquid or gaseous and whether organic or inorganic, except:
(a)sand, sandstone, soil, slate, clay (other than bentonite or kaolin), basalt, granite, gravel or water; or
(b)limestone (other than agricultural use limestone).”
In the case of DML, the delegate found that DML was extracting and processing limestone. Consequently, no diesel fuel rebate was payable as “mining for minerals” under the Act did not include mining for limestone. In the case of Loongana, the delegate found that Loongana was in the business of chemically manufacturing quicklime from limestone for use in the gold mining industry. The delegate also said that:
“[Loongana’s] operation is not to win anything having a characteristic of a kind which ordinary understanding would describe as a mineral. There is nothing to indicate that [Loongana] is recovering any specific mineral or minerals embedded in or intermixed with the limestone.”
The appellants sought a review of each adverse decision in the AAT. On 9 February 1998, the AAT set aside the decisions of the delegate and remitted the matter to the respondent “for reconsideration in accordance with the direction that diesel fuel rebate be assessed for payments in accordance with the findings of the Tribunal”.
In its reasons for decision at [6] thereof, the AAT observed that the provisions of the Act which provide for the diesel fuel rebate “are beneficial in nature” and “designed to promote and encourage … mining activity”. Consequently, it was held that the relevant provisions of the Act should not be narrowly construed.
The AAT also observed that the extraction methods of DML and Loongana were “substantially the same”. They were described in the following way by the AAT (at [7]):
“In each case the operations involve the removal of overburden, the extraction of limestone by use of open-cut mine benching system, involving drilling and blasting, removing the limestone and crushing it to a size suitable for calcining (heating). The crushed ore is screened and good quality, suitably sized material is fed into a kiln and subjected to a temperature of approximately 1000 degrees centigrade for five or more hours.”
At its Lilydale site in Victoria, DML processes limestone which is sold for various uses including aglime, stock feed manufacture, soil improvement, market gardening and industrial filler in the case of good quality limestone; and as “toppings” for pathways, driveways and car parks, or as crusted rock in the case of poor quality limestone. At its Western Australian goldfields site, Loongana processes high quality material only.
The AAT held at [17] of its reasons for decision that “the purpose of the extraction process is to obtain the mineral calcite”. At [29], the AAT said that:
“On the balance of the evidence submitted, the Tribunal finds that … the limestone at the applicant’s sites at Lilydale and Loongana is properly described as an ore which is mined at those two locations.”
At [48], the AAT found that:
“… lime is a mineral for the purposes of the Act.”
At [54], the AAT reiterated that:
“… limestone is an ore which is mined at Lilydale and Loongana and, therefore, properly subject to activities falling within the definition of mining operations.”
The AAT went on to add that:
“The term limestone may be used when referring to the material fed to the kiln but in fact it is the mineral calcite; its true and accurate description is, for example, “97.2% pure calcite”. What is recovered in this integrated operation is not limestone but lime.”
At [56], the AAT said that:
“The purpose of the mining operations is to recover lime, the elements of which are present in the calcite as mined.”
The primary Judge granted the application for review, set aside the decision of the AAT, and ordered that the decisions refusing the rebate be reinstated in respect of DML and Loongana.
The primary Judge applied the reasoning of Heerey J at first instance in Chief Executive Officer of Customs v Goliath Portland Cement Co Ltd [1999] FCA 666 at [25], (1999) 42 ATR 189 at [25] thereof where Heerey J said:
“If ‘limestone’ has been expressly excluded from the statutory definition of ‘minerals’ it seems to me to follow inexorably that the essential and defining component of limestone, namely calcite, must also be excluded. One cannot mine for calcite without mining for limestone, and vice versa.”
At [37] of his reasons, the primary Judge said that:
“… I consider that the activities at Lilydale and Loongana are properly characterised as the recovery of limestone. It is true that calcite is the commercially valuable constituent of limestone but that does not entail that limestone is an ore of calcite. As I understand the process, nothing is done to separate calcite from the limestone before the limestone is fed into the kilns to produce lime. … Accordingly, I have concluded that the Tribunal erred in holding the total integrated process to the completion of calcination included dressing and beneficiation for the recovery of a mineral other than limestone.”
The present appeal was heard on 9 May 2000. On that day, the Full Court reserved its judgment. On 22 August 2000, another Full Court delivered its reasons for judgment in an appeal from Heerey J: see Goliath Portland Cement Co Limited v Chief Executive Officer of Customs [2000] FCA 1164, (2000) 101 FCR 11.
The following points were fundamental to the reasoning of the Full Court in Goliath:
· central to the phrase “mining operations” in s164(7) of the Act is the notion of the recovery of minerals (see paragraph [24]);
· in construing that phrase one focuses on “the end product” which is “the object of the operations undertaken” (which was, relevantly, cement) (see paragraph [24]);
· a mineral must be “present when the material in which it is contained [is] taken from the earth” (see paragraph [28]);
· the Full Court critically held that (at [28]):
“It is … highly artificial to speak of lime being “recovered” … because it was possible to physically remove it. This is not and could not be undertaken in this process, the manufacture of cement”;
· all that was intended by the exclusion of “limestone” was the exclusion of “limestone as such”. “(I)t was not intended to refuse rebate where a mineral within the stated minerals was sought to be recovered” (see paragraph [30]).
After the delivery of judgment in Goliath, this Full Court received written submissions from the parties in the present appeal. Neither party sought to submit that Goliath was incorrectly decided. In my view, at the very least, the reasoning of the Full Court in Goliath is not “clearly erroneous”; see Transurban City Link Ltd v Allan [1999] FCA 1723, (1999) 95 FCR 553 per Black CJ, Hill, Sundberg, Marshall and KennyJJ, at [29].
In the written submissions filed on behalf of DML and Loongana, it was said that:
“… if one applies the reasoning of the Full Court in Goliath to the present case and accepts as the Full Court in Goliath did that the statutory exclusion of limestone does not include calcite or lime, one is led to the conclusion that the appeals should be allowed. The end product sought by the relevant operations in the present appeals is lime, this is the recovered mineral which is useful and saleable. It is therefore not artificial, as in the Goliath case, but entirely natural in the present case to speak of lime as being “recovered”.”
The respondent’s written submissions conceded that Goliath “may be distinguished … so far as it turns on the factual finding in that case that the ‘desired end product’ of a ‘continuous process of manufacture’ was cement”. The respondent also accepted that in the present case the “desired end product of a continuous process of manufacture was lime”. However, the respondent challenged the AAT’s finding that “lime is a mineral” for the purpose of rebate on two grounds. First it was said that the AAT’s reasoning is premised on the erroneous view that “limestone is a s164 mineral” and second, that the lime obtained was not, as the AAT assumed, “the product of a process of ‘mining for minerals’ but the product of a process of ‘manufacture’”.
The AAT’s views on limestone being a mineral for the purposes of s164 of the Act cannot distract the Court from its task of asking what was the desired end product of each process at Lilydale and Loongana. The desired end product was lime. Lime is a mineral. That was a question of fact for the AAT to determine. I see no basis for interfering with that finding of fact. The entire process (other than the dressing and beneficiation) was one which resulted in the production of lime as a consequence of mining material from the ground, i.e. a mining operation.
I see no merit in the submission of the respondent that the process, in reality, was one of manufacturing rather than one of mining. In my view, for the foregoing reasons, the primary Judge erred in holding that the AAT had wrongly determined that rebate was payable.
I would make the following orders:
1.The appeal be allowed.
2.The orders of the primary Judge of 19 November 1999 be set aside.
3.The decision of the Administrative Appeals Tribunal of 9 February 1998 be affirmed.
4.The respondent pay the appellants’ costs of the appeal and their costs of the hearing
before the primary Judge of the appeal from the Administrative Appeals Tribunal.
I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. Associate:
Dated: 23 March 2001
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 698 OF 1999
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
DAVID MITCHELL LIMITED
FIRST APPELLANTLOONGANA LIME PTY LIMITED
SECOND APPELLANTAND:
CHIEF EXECUTIVE OFFICER OF CUSTOMS
RESPONDENTJUDGES:
SPENDER, MARSHALL and GYLES JJ
DATE:
23 MARCH 2001
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
GYLES J:
I agree with Spender J.
I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. Associate:
Dated: 23 March 2001
Counsel for the Appellants: J W de Wijn QC with M Bearman Solicitor for the Appellants: Mallesons Stephen Jaques Counsel for the Respondent: A H Slater QC with A Gelbart Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 9 May 2000 Date of Judgment: 23 March 2001
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