Dawson Rockwater Joint Venture Between Dawson Engineering Pty ltd & Brown & Root Pty Ltd v Chief Executive Officer of Customs

[1998] FCA 1010

FEDERAL COURT OF AUSTRALIA

CUSTOMS AND EXCISE – excise duty – diesel fuel rebate – whether a rebate of duty is payable with respect to diesel fuel used in vessels travelling to and from the location where their activities in preparing an offshore mining site were to commence

Excise Act 1901 (Cth) s 78A
Customs Act 1901 (Cth) s 164(1)(a)
Customs and Excise Amendment Act 1995 (Cth)

Chief Executive Officer of Customs v Tasmanian Electro Metallurgical Co Pty Ltd (1997) 76 FCR 476, considered
WMC Resources Limited v Chief Executive Officer of Customs (Federal Court of Australia, unreported, 15 December 1997, No 1451 of 1997) dist
Chief Executive Officer of Customs v Dyno Wesfarmers Ltd (1997) 73 FCR 1 dist

DAWSON ROCKWATER JOINT VENTURE BETWEEN DAWSON ENGINEERING PTY LTD AND BROWN & ROOT PTY LTD v CHIEF EXECUTIVE OFFICER OF CUSTOMS
VG 186 OF 1998

JUDGE:        MERKEL J
PLACE:        MELBOURNE
DATE:          21 AUGUST 1998

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 186 of 1998

BETWEEN:	DAWSON ROCKWATER JOINT VENTURE BETWEEN DAWSON ENGINEERING PTY LTD ACN 008 881 025 AND BROWN & ROOT PTY LTD ACN 008 705 502 APPLICANT
AND:	CHIEF EXECUTIVE OFFICER OF CUSTOMS RESPONDENT
JUDGE:	MERKEL J
DATE OF ORDER:	21 AUGUST 1998
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The application be dismissed.

1. The applicant pay the taxed costs of the respondent of and incidental to the application.

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	VG 186 of 1998

BETWEEN:	DAWSON ROCKWATER JOINT VENTURE BETWEEN DAWSON ENGINEERING PTY LTD ACN 008 881 025 AND BROWN & ROOT PTY LTD ACN 008 705 502 APPLICANT
AND:	CHIEF EXECUTIVE OFFICER OF CUSTOMS RESPONDENT

JUDGE:	MERKEL J
DATE:	21 AUGUST 1998
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

Background

The applicant (“Dawson Rockwater”) has appealed on questions of law to the Court, pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (“the AAT Act”), from a decision of the Administrative Appeals Tribunal (“the AAT”). The AAT’s decision was given upon a review of two decisions of a delegate of the respondent that diesel fuel rebates were not payable in respect of certain sea journeys undertaken by four tug vessels. The AAT affirmed the decisions of the delegate.

In September 1996, the tug vessels were required to journey to Port Kembla or to Barry’s Beach Marine Terminal where they were to commence their task of towing and later assisting in the installation of production platforms in Bass Strait pursuant to a contract between the applicant and Esso Australia Limited.  Under that contract the applicant was required to provide, in addition to its engineering services, tow vessels for the purposes of the towing and installation of the production platforms in Bass Strait.  Three of the vessels then made return journeys from Barry’s Beach Marine Terminal to Fremantle following the completion of the activities performed by the vessels in towing and installing the production platforms in Bass Strait.

The particular journeys in respect of which the diesel fuel relate was claimed were as follows:

• outward journeys by the tug vessels Valisa and Frontier from Fremantle to Port Kembla in New South Wales;

• outward journey by the tug vessel Audrey from Fremantle to Barry’s Beach Marine Terminal in Victoria;

• return journey for all three tug vessels from Barry’s Beach Marine Terminal to Fremantle; and

• outward journey by the tug vessel the Rockwater II from Fremantle to Barry’s Beach Marine Terminal.

The applicant claimed payment of the diesel fuel rebate in respect of the diesel fuel purchased for use in the outward and return journeys on the ground that the diesel fuel was used in mining operations pursuant to s 164 of the Customs Act 1901 (Cth) (“the Customs Act”) and s 78A of the Excise Act 1901 (Cth).

Mining operations, as defined for the purposes of both Acts, include activities undertaken in the preparation of a site to enable mining to commence.  It is common ground that the site at which the production platforms in Bass Strait were installed is a site at which mining was to commence.

The diesel fuel purchased for use in respect of the journeys between Port Kembla and Barry’s Beach Marine Terminal and the mining site in Bass Strait was purchased by Esso and is the subject of a separate claim which is not relevant for present purposes.

The sole issue between the parties before the AAT, and on the appeal, is whether the diesel fuel in question was purchased for use in activities undertaken in the preparation of the site in Bass Strait to enable mining to commence at that site.

The Customs Act

The claims for the diesel fuel rebate arise under s 78A of the Excise Act 1901 (Cth) and s 164 of the Customs Act. Section 78A states that the phrase “mining operations” has the same meaning as it has in s 164 of the Customs Act. Section 164(1)(a) of the Customs Act provides that a rebate is payable to a person who purchases diesel fuel for use “in mining operations”.

Section 164(7) relevantly provides that “mining operations” include, inter alia:

“(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;…”.

A number of activities are specifically set out in s 164(7) as being activities which are to be included within the definition of “mining operations”. However, those particular activities are not relevant for present purposes.

The relevant provisions of the Customs Act were inserted by the Customs and Excise Amendment Act 1995 (Cth) which redefined the meaning of “mining operations” as defined in s 164(7) prior to its amendment. The Explanatory Memorandum for the amending bill stated that the amendment of the definition of “mining operations” was in order “to specify a clear list of activities in which the use of diesel fuel is to be able to afford the repayment of rebate…”. Whilst there has been some debate over whether the amendments narrowed or merely clarified the range of activities that were to fall within the scope of “mining operations” that debate is of no relevance to the aspect of the definition with which I am concerned in the present case.

Prior to the amendment, the relevant part of the definition of “mining operations” for the purposes of transportation of the kind being considered in the present case was set out in s 164(7)(a) which included in the definition:

“other operations connected with exploration, prospecting or mining for minerals that are carried out in, or at a place adjacent to, the area in which the exploration, prospecting or mining occurs;”.

As is apparent, operations “connected with exploration, prospecting or mining”, which would include transportation activities, were limited to those that were carried out “in, or at a place adjacent to, the area in which the exploration, prospecting or mining occurs”.  Under the amending Act there was no such limitation.  Transportation activities were to be rebatable activities if they were activities undertaken in the preparation of a site to enable mining for minerals to commence.

The AAT Decision

The AAT, in a brief ex tempore decision, referred to the relevant statutory provisions in the context of recent amendments to the Act. The AAT then concluded that Dawson Rockwater’s claim did not fall within the current definition of “mining operations” in s 164(7). The reasons for that conclusion were stated as follows:

“There are clearly degrees of remoteness from the activity which in this case constitutes mining for minerals. The activities of getting the tugs to and from a point where those tugs can be used to transport a concrete gravity structure from its point of manufacture to the oil field are, in the opinion of the Tribunal, too remote to be considered as part of “mining for minerals”. This activity is more one relating to transporting equipment to the site to enable mining for minerals to commence rather than it is mining for minerals and is, in the view of the Tribunal, too remote and is not contemplated by the definition contained in the Customs Act and accordingly, the applications cannot succeed.”

Criticism, with some justification, was made on behalf of Dawson Rockwater as to the manner in which the conclusion was stated.  However, on a fair reading of the decision as a whole I am satisfied that in substance the AAT determined that the activities in question were either antecedent or subsequent to mining operations as defined.  In that context the AAT’s use of the notion of remoteness was not apt but I am satisfied that the AAT was using remoteness to emphasise that the activities in question fell outside the statutory definition of mining operations.

Contentions of the Parties

It was submitted on behalf of Dawson Rockwater that it was compelled it to use the four tug vessels in question as they were the only available tug vessels that were suitable for towing and installing the production platforms in Bass Strait in the manner required under contract with Esso.  It was then contended that as those tug vessels were located in Fremantle the activities undertaken in the preparation of the Bass Strait site to enable mining to commence, began with the outward journeys of those vessels and concluded upon the return journeys of three of those vessels to Fremantle.  No claim was made in respect of a “return” journey of Rockwater II.  Dawson Rockwater submitted that the AAT had erred in law in concluding that the activities in respect of which the diesel fuel was purchased were too remote from mining operations, as defined, to be rebatable under the Act.  In particular, it contended that the AAT had erred in law by failing to recognise that the activities in question formed an integral part of the process by which the platforms were transported to and installed at the site to enable mining to commence and were therefore rebatable activities.

The respondent disputed the contentions of Dawson Rockwater. He contended that the AAT had decided, as a question of fact, that the activities in question did not fall within the statutory provisions and that the decision was not appellable under s 44(1) of the AAT Act as, in truth, the error alleged is one of fact rather than of law. It was also contended on behalf of the respondent that in any event the decision was, as a matter of law, clearly correct. It was said that the activities in respect of which the rebate was claimed were activities anterior or subsequent to the activities that might arguably fall within the statutory definition. In substance it was said that on a view of the facts most favourable to Dawson Rockwater the fuel was purchased for use in the journeys to and from the locations (ie Port Kembla and Barry’s Beach) where activities to enable the preparation of the site for mining arguably commenced with the towing of the platforms to Bass Strait. The respondent claimed that the outward and return journeys were activities antecedent to, or after the conclusion of, activities undertaken in the preparation of the Bass Strait site to enable mining to commence.

The authorities

I considered the Customs Act as amended in Chief Executive Officer of Customs v Tasmanian Electro Metallurgical Co Pty Ltd (1997) 76 FCR 476 at 485 where I indicated that notwithstanding the amendment of the definition of “mining operations” the following principles can be distilled from the cases:

“1.      The relevant statutory provisions reflect a legislative policy of encouragement of mining operations and should not be given a narrow application:  see Collector of Customs v Cliffs Robe River Iron Associates (1985) 7 FCR 271 at 275.

2. Whether an activity falls within the definition of "mining operations", as defined in s 164(7) of the CA, is a question of fact: see Abbott Point Bulk Coal Pty Ltd v Collector of Customs (supra) at 378 and Collector of Customs v BHP Australia Coal Ltd (supra) at 507.

3.        The diesel rebate is payable to a person who purchases fuel for use by that person in mining operations as defined notwithstanding that the person is not a miner and that the relevant mining operation takes place at a location away from the mining site:  Australian National Railways Commission v Collector of Customs, South Australia (1985) 8 FCR 264 at 268-9 and 275 and Chief Executive Officer of Customs v Dyno Wesfarmers Ltd (1997) 73 FCR 1.”

The effect of the amendments on transportation activities was considered recently by Lee J in  WMC Resources Limited v Chief Executive Officer of Customs (Federal Court of Australia, unreported, 15 December 1997, No 1451 of 1997). In that case his Honour was concerned with a claim in respect of fuel purchased for use in transporting construction materials, plant and equipment from the port of Onslow on the Australian mainland to Varanus Island for use in the construction of facilities (including a pipeline) required to extract and produce natural gas from the East Spar gas field. The AAT rejected the claim on the basis that the act of transportation “was a discrete activity which preceded the relevant mining operations and was not a part of them” and, therefore, “was not an activity in ‘mining operations’ as defined in s 164(7) of the Customs Act 1901”.

Lee J considered the provisions of s 164(7) and (at 24-25) concluded that:

• there is no requirement that activities which are entitled to the rebate have a temporal relationship with the production of a mineral;

• activities undertaken in preparation of a site to enable mining for minerals to commence are not restricted to acts on the site;

• the activities involved in preparation of a site for mining are not restricted to acts of disturbance or excavation of land;

• contrary to the view taken by the AAT it was open to it on the material to conclude that if construction materials, plant and equipment and fuel transported from Onslow to Varanus Island were used in establishing the wells, the pipeline and the processing facilities on Varanus Island, the act of transportation was an activity undertaken in preparation of a site to enable mining for minerals to commence.

His Honour found that the AAT had erred in law in limiting the activities which were capable of constituting activities in preparing a site for mining to commence and remitted the matter to the AAT for re-determination.

The amended section was also considered by a Full Court in Chief Executive Officer of Customs v Dyno Wesfarmers Ltd (1997) 73 FCR 1. That case concerned a claim for diesel fuel rebate used by special trucks (called MMU’s) which travelled 150 km from the depot in Kalgoorlie to mine sites where they mixed ingredients for the explosive charges required and pumped explosive into prepared drill holes. The evidence before the AAT was that the vehicles were purpose built vehicles and, to be used successfully at the mine site, had to be loaded with explosive ingredients at the depot for transportation to the mine site. The vehicles were also required to return to the depot for more explosive ingredients to be used on the next occasion at the mine site. The AAT concluded that the transportation was an integral part of the mining operations and upheld the claim for the diesel fuel rebate. On the appeal to the Court against the AAT decision it was contended on behalf of the Chief Executive Officer of Customs that the activities encompassed within the definition of mining operations related to operations which occur on a mine property and do not extend to activities carried on outside that property. The Full Court rejected that contention. However, in discussing the amended definition the Court said at 5:

“In s.164(1)(a), the preposition ‘in’ is used to connect the words ‘for use by him’ with the term ‘mining operations’ so as to require the prospective use of the diesel to be use within the ambit of ‘mining operations’. The Shorter Oxford English Dictionary uses the expression ‘In the process or act of’ to express the meaning of the word ‘in’ in such a context.  It follows that the issue for consideration is not that which was considered in Collector of Customs v The Western Australian Government Railways Commission (Westrail) (1995) 39 ALD 21, in which Lee J considered an earlier definition of the term ‘mining operations’ which included ‘operations connected with ... mining for minerals that are carried out in, or at a place adjacent to, the area in which the exploration, prospecting or mining occurs’. That was a wider extension, because of the use of the words ‘connected with’ though limited by the words ‘in, or at a place adjacent to, the area in which ... mining occurs.’”

And at 6:

“The issue whether an activity is an activity ‘in mining’ is essentially a question of fact unless, as Kitto J. pointed out in Blue-Metal Quarries, only one conclusion is reasonably open.  The term ‘mining’ is not a narrow technical term, it is a wide term of ordinary parlance.  Whether an activity is ‘in mining’ must depend very much upon what that activity is and how mining is carried out.”

And at 7:

“When the issue is whether a particular operation is ‘in’ a specified activity, matters respecting locality and place can be, and often are, relevant.  And they were relevant in the proceedings before the Tribunal.  Even under the broad concept provided by s.51(1) of the Income Tax Assessment Act 1936 (Cth) which permits the deduction of outgoings incurred "in gaining or producing the assessable income, or ... necessarily incurred in carrying on a business for the purpose of gaining or producing such income’, it has been held that fares paid by taxpayers, whether employed or carrying on business on their own account, in travelling day by day from their homes to their places of employment or business, are not deductible. See Lunney v Federal Commissioner of Taxation (1958) 100 CLR 478. We mention this case simply to illustrate the relevance of place to the question whether an operation is ‘in’ an activity which principally at least is conducted at a particular location. The distance travelled by the MMUs and the relationship between the DWL's Kalgoorlie depot and the activity of mining were factors which the Tribunal therefore took into account.”

Conclusions

In my view the transportation activities considered in WMC Resources Limited and Dyno Wesfarmers Limited can be readily distinguished from the activities the subject of the present case.  The activities in those cases were part of an integrated process by which “mining operations” as defined were carried out and as such were analogous to the activities involved in the towing and installation of the platforms from Port Kembla and Barry’s Beach to and from Bass Strait.  Those towing and installation activities may be said to be part of the integrated process by which the site was prepared for mincing to commence.  Neither case was concerned with activities of the kind claimed in the present case which were anterior or subsequent to the activities involved in towing and installing the platforms.  In the present case the outward and return journey’s of the particular tug boats depended upon the purely fortuitous circumstance of where they happened to be located when required to commence the outward journey, or where they were required to travel on the return journeys.

In my view the use of the preposition “in” in s 164(1) is significant. It was intended by the legislature to define more clearly the activities which were to be entitled to the diesel fuel rebate. Whilst it may be arguable that the anterior and subsequent transportation activities to which I have referred were activities undertaken “in connection with” the preparation of a site to enable mining to commence, in my view, those activities are not activities undertaken “in” the preparation of a site to enable mining to commence. Using the Lunney analogy referred to in Dyno Wesfarmers, the activities involved in the tug vessels getting to and from work are qualitatively different to the activities involved in working.

Accordingly, I am of the view that it was open on the evidence before the AAT for it to conclude that, as a matter of fact, the activities the subject of the claim did not fall within the statutory requirement that the rebate is only payable in relation to activities undertaken in the preparation of the site to enable mining to commence. Whilst the manner in which the AAT expressed its conclusions may have been less than satisfactory, for the reasons I have already set out I am satisfied that the substance of the AAT’s decision was that the claim for fuel used related to activities that were anterior or subsequent to those falling within the definition of mining operations. The AAT did not err in law in arriving at that finding of fact nor did it err in law in arriving at its consequential conclusion that the activities the subject of the claim by Dawson Rockwater did not fall within the definition of “mining operations” in s 164(1).

For the above reasons the application of Dawson Rockwater is to be dismissed with costs.

I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel

Associate:

Dated:            

Counsel for the Applicants:	Mr J Slonim
Solicitor for the Applicants:	Slonims
Counsel for the Respondent:	Mr C Maxwell
Solicitor for the Respondent:	Australian Government Solicitors
Date of Hearing:	6 August 1998
Date of Judgment:	21 August 1998