Deputy Commissioner of Taxation v Stewart

[1984] HCA 11

HIGH COURT OF AUSTRALIA

Gibbs C.J., Murphy, Brennan, Deane and Dawson JJ.

DEPUTY COMMISSIONER OF TAXATION v. STEWART AND ANOTHER

(1984) 154 CLR 385

15 March 1984

Sales Tax (Cth)

Sales Tax (Cth)—Liability—Exemption—Goods applied to manufacturer's own use—Lottery ticket dispensing machines—Free supply to public benevolent institutions—Type of use—Whether to be exclusive—Inherent character of goods—Relevance—Sales Tax Assessment Act (No. 1) 1930 (Cth), ss. 3(1), 17(1), 19(c), 20—Sales Tax (Exemptions and Classifications) Act 1935 (Cth), s. 5(1), 1st Sched., par. 81(1)(c).

Decisions

1984, March 15. The following written judgments were delivered: -

GIBBS C.J. The present appellant, the Deputy Commissioner of Taxation, brought an action in the Local Court of Adelaide, claiming that an amount of $17,018.61 was payable by the respondents as sales tax and additional tax in respect of goods, known as ticket dispensing machines, manufactured by the respondents and allegedly applied to their own use during the period from 1 September 1977 to 30 November 1979. The claim succeeded in its entirety before Senior Judge Ligertwood, but on appeal to the Full Court of the Supreme Court of South Australia it was held, by a majority, that certain of the machines, namely those supplied to public benevolent institutions, were exempt from sales tax, and the amount of the judgment was reduced to $5,830.23. From that decision the Deputy Commissioner of Taxation has appealed to this Court by special leave. (at p387)

2. Before 1 September 1977 the respondents, who traded under the name of Globe Agencies, conducted a business of selling lottery tickets, mainly to sporting bodies which use the lottery as a means of raising funds. The form of the lottery was simple; participants would buy tickets and the holders of certain tickets would be entitled to receive prizes. In about September 1977 the respondents were approached by the Surf Life Saving Association of South Australia with a request to design a small machine which could be used to sell the tickets mechanically - i.e., a machine which would yield a ticket to anyone who inserted a twenty-cent coin. The Association, because of its financial commitments, did not wish to buy the machine, but requested the respondents to supply it free of charge. The respondents acceded to this request and did design a machine and supplied it to the Association at no cost. Thereafter, during the period 1 September 1977 to 30 November 1979, the respondents made a number of the machines and supplied them free of charge to various organizations, including the public benevolent institutions, which wished to use them for the purpose of raising funds by the conduct of the lottery. The machines remained the property of the respondents, who serviced them free of charge, and, when necessary, replaced them free of charge. They were supplied on condition, inter alia, that only tickets supplied by the respondents were to be dispensed from the machines. The benefit to the respondents from these transactions was that they tended to increase the demand for lottery tickets, which the respondents sold, at a profit, to the organizations using the machines. It may be added for the sake of completeness that after 1 July 1978 the tickets were sold, not by Globe Agencies, but by a company, Globe Vending Pty. Ltd., which was the trustee of a settlement under which the respondents were beneficiaries. Although it was contended in the courts below that since after 1 July 1978 the tickets were not sold by the respondents, but by the company, the machines were therefore not supplied for the benefit or purposes of the respondents, this argument was not advanced before us, and it is convenient to refer (as I have done) to the sale of the tickets by the respondents and accurate to say that the supply of the machines was for their own business purposes. (at p388)

3. Twenty-four of the machines were supplied to the Adelaide Children's Hospital. The tickets used in those machines were always supplied free of charge, in effect as a charitable gift. (at p388)

4. Section 17(1) of the Sales Tax Assessment Act (No. 1) 1930 (Cth), as amended, provides as follows:
"Subject to, and in accordance with, the provisions of this Act, the sales tax imposed by the Sales Tax Act (No. 1) 1930 shall be levied and paid upon 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." The person liable for the tax is indicated by s. 19 which provides as follows:

"Sales tax shall be paid by the manufacturer of goods manufactured in Australia and -

(a) sold by the manufacturer to an unregistered person or to a registered person who has not quoted his certificate in respect of the sale;

(b) treated by the manufacturer as stock for sale by retail; or

(c) applied by the manufacturer to his own use."

However, s. 20 of that Act provides as follows:

"Notwithstanding anything contained in section 19, sale tax shall not be payable under this Act by the person specified in that section upon the sale value of goods the sale value of which is, by virtue of the Sales Tax (Exemptions and Classifications) Act 1935-1973, exempt from sales tax under this Act."

Section 5(1) of the Sales Tax (Exemptions and Classifications) Act 1935 (Cth), as amended, provides as follows:

"Notwithstanding anything contained in any Sales Tax Assessment Act, sales tax shall not, subject to this section, be payable upon the sale value of any goods covered by any item or sub-item in the first column of the First Schedule, under any Act specified in the second column of that Schedule opposite that item or sub-item."

Item 81, in the first column of the First Schedule, so far as material, provides as follows:

"(1) Goods for use (whether as goods or in some other form), and not for sale, by -

(a) a public hospital;

(b) a hospital which is carried on by a society or association otherwise than for the purpose of profit or gain to the individual members of the society or association;

(c) a public benevolent institution; or

(d) a public organization which the Commissioner is satisfied is established and maintained for the relief of unemployed persons

. . .

(3) Goods for use (whether as goods or in some other form), and not for sale, by a society, institution or organization established and maintained for the purpose of obtaining money exclusively or principally for donation towards the establishment or maintenance of hospitals or public benevolent institutions referred to in sub-item (1)."

The Acts specified opposite item 81 in the second column of the First Schedule as those to which the exemption contained in that item applies are the Sales Tax Assessment Acts (Nos. 1 to 9). Section 3(1) of the Sales Tax Assessment Act (No. 1) contains a definition of "goods" which is rendered applicable to the Sales Tax (Exemptions and Classifications) Act by s. 3(1) of the latter Act. The material part of that definition (which applies unless the contrary intention appears) is as follows:

"'Goods' includes commodities, but does not include -

(a) goods which have, either through a process of retailing or otherwise, gone into use or comsumption in Australia; . . . ." (at p390)

5. It is clear that once a machine had been supplied to a public benevolent institution it would come within the description contained in item 81 unless it had first ceased to be "goods" within the meaning of that definition. The First Schedule to the Sales Tax (Exemptions and Classifications) Act describes exempted goods in two main ways - by reference to the nature of the goods themselves and by reference to the use to which it is intended to put them. In many cases of the second kind the words "for use" indicate the purpose to which it is intended the goods shall be put, rather than the use for which the goods were designed. That this is so is evidence in the case of many items - e.g. anthorpological speciments "for use by research workers" (item 61), articles for use of the Governor-General (item 73(i)) and goods for use by a municipal council (item 78(i)). It is certainly true of item 81(1), since many goods used in a hospital or by a public benevolent institution might equally well be used by any person or any other organization. The word "use" does not connote exclusive use. Where it is intended that the use should be exclusive express provision is made in the Schedule to that effect: see for example items 74D and 77 and see also items 13(1), 14A, 41(ii) and 42B. If item 81 were construed as requiring that the goods should be exclusively used by a public hospital or public benevolent institution, inconvenient or absurd results would follows. For example, many goods necessarily obtained by a public hospital are used not only by the hospital but by patients and visitors. Hospital beds, and chairs in a hospital ward, provide obvious examples. No doubt an article would not fall within item 81 if the use to which it was to be put by the hospital or institution was transient or insubstantial; the suggestion in Federal Commissioner of Taxation v. Hamersley Iron Pty. Ltd. (1981) 37 ALR 595, at p 605; 12 ATR 429, at p 439; 81 ATC 4,582, at p. 4,590. that the goods must be for use to "a significant degree" would appear to be correct. However if the goods are intended to be put substantial use by a public benevolent institution, they will fall within item 81 notwithstanding that they may be applied to the use of others as well. The provisions of cl. 3 of item 81 do not provide any indication that goods which are for use for fund raising by public benevolent institutions can fall only within that clause and not within cl. 1. If the institution itself uses the goods for the purpose of fund raising the case will fall within cl. 1, whereas if the goods are used by an organization which is established to raise money for the institution it will fall within cl. 3. (at p391)

6. For these reasons the machines fell within the exemption described in item 81, notwithstanding that their inherent character was not that of goods designed for use by a public benevolent institution, and notwithstanding that they were not exclusively used by the institution, but were applied to the use of the respondents as well, unless the Deputy Commissioner of Taxation is correct in contending that each machine was applied to the use of the respondents at the time when it was manufactured, and had at that time gone into use, and so ceased to be "goods" within the meaning given by the definition to that word in the Sales Tax (Exemptions and Classifications) Act, including of course item 81. (at p391)

7. The starting point of the argument presented on behalf of the Deputy Commissioner is that the machines were applied by the respondents to their own use, and therefore liable to tax under ss. 17 and 19 unless exempted by the Sales Tax (Exemptions and Classifications) Act. The next step in the argument is that the application of the machines to the use of the respondents occurred when they were manufactured, and before they were supplied to the public benevolent institutions. It followed, so it was submitted, that as soon as the machine had been manufactured it had "gone into use" in Australia within the meaning of those words in the definition of "goods", and had therefore ceased to be "goods" as defined in the Sales Tax (Exemptions and Classifications) Act and did not fall within the exemption contained in item 81, which applies to "goods for use . . . by . . . a public benevolent institution". Alternatively, it was submitted that ss. 17 and 19 provide three "taxing points", one of which is the application of the goods to the use of the manufacturer, and that it is at the time when the goods pass the taxing point that it is necessary to inquire whether they are covered by an item in the First Schedule. In the present case, according to this submission, the machines were applied to the use of the respondents, and attracted sales tax, before they became goods for use by a public benevolent institution. (at p391)

8. There can be no doubt, and it was conceded by the respondents, that all of the machines manufactured by them, except the twenty-four supplied to the Adelaide Children's Hospital, were applied by the respondents to their own use. They were supplied to promote the sale of the respondents' tickets, and were in that way employed for the purposes of the respondents and so applied to their own use within the meaning of that expression as used in ss. 17 and 19: see Max Factor &Co. Inc. v. Federal Commissioner of Taxation. (1971) 124 CLR 353, at p 362 However, the argument for the Deputy Commissioner on this aspect of the case can only succeed if it is right to say that the machines were applied to the use of the respondents immediately upon their manufacture, and that the machines did not become "goods for use" by the public benevolent institutions until some time after they had been applied to the use of the respondents. (at p392)

9. The contention of the Deputy Commissioner that the machines were applied to the use of the respondents immediately on manufacture, and were not "for use" by any public benevolent institution until later, was based in part on the state of the evidence in the case and in part on his submission as to the effect of the provisions of the statutes. In the proceedings for the recovery of the tax in the Local Court there was produced a certificate by the Deputy Commissioner under s. 10 of the Sales Tax Procedure Act 1934 (Cth), as amended, certifying that the amount claimed was due in respect of goods manufactured by the respondents and applied to their own use, and this cast on the respondents the onus of proving that the tax was not payable. It was contended that the respondents had failed to discharge this onus. In particular it was said that they had not given evidence that satisfactorily established whether a machine was manufactured only on receipt of an order from the particular institution to which it was later supplied, or whether, on the other hand, the respondents manufactured a number of machines and drew upon the stock thus produced when an institution requested that it be supplied with a machine. In the course of examination in chief, the male respondent was asked: "After a machine was manufactured how did you go about conveying possession of that machine to the particular organization for whom it was manufactured?" To this question he replied: "They used to come to our factory and pick them up." This suggests that each machine was made on request, but the question was a leading one. That suggestion is supported by the fact that in most, but not all, cases the logo of the organization for which the machine was intended would be applied by the respondents to the face of the machine. If each machine was manufactured on request by the institution to which it was supplied the argument that the machines attracted sales tax before they qualified for the exemption cannot succeed, because the purpose that the goods should be used by an institution mentioned in item 81 would have existed from the very moment when the respondents formed an intention to apply the goods to their own use. However, it is not necessary to resolve this question of fact in order to uphold the decision in favour of the respondents. (at p393)

10. The view of the statutory provisions on which the Deputy Commissioner's argument proceeds is one that a manufacturer has made goods which he intends will be used for his own purposes, and has evidenced his intention, as for example by putting and keeping the goods on a shelf, he has applied the goods to his own use within ss. 17 and 19, and the goods have "gone into use" within the meaning of the definition. Counsel placed much reliance on Federal Commissioner of Taxation v. York Motors Pty. Ltd. (1946) 73 CLR 459 in which it was held that a taxpayer treated goods as stock for sale by retail when the goods were so appropriated in the books of the company. Starke J. (1946) 73 CLR, at pp 480-481 said that "It is enough if he decides to sell his stock by retail and evidences in some manner his decision". Dixon J. said: (1946) 73 CLR, at p 484
"'Treat' in the statutes covers, I think, any measure taken in the conduct of business with reference to the goods unequivocally referable to a present intention or decision that the goods shall then and there be retail stock."
The Court was there discussing the meaning of "treated" in s. 17, and not the meaning of "applied", and it was not concerned with the effect of the Sales Tax (Exemptions and Classifications) Act, or with the meaning of the words "gone into use" in the definition of "goods". The word "applied" means "devoted to" or "employed for the special purpose of" (Max Factor &Co. Inc. v. Federal Commissioner of Taxation (1971) 124 CLR, at p 362 and although in some cases goods may no doubt be applied to the use of a person simply by keeping them in reserve - e.g. by keeping spare parts for use in the person's vehicles or machinery - in the circumstances of the present case the application of the machines to the use of the respondents occurred when they were devoted to the respondents' purposes by supplying them to the institutions. In other words, the respondents did not apply the machines to their own use, and the machines did not go into use, when they were made and kept ready for subsequent delivery to one of the institutions. While the machines were so held, they were only of potential use to the respondents, and they were not in fact used at all. This can be illustrated by the fact that a machine taken from stock and supplied to the Children's Hospital would have been of no benefit to the respondents, since the lottery tickets were supplied free by them to that hospital. (I do not consider that the fact that the machines carried, in addition to the logo, a small plate showing the name of the maker, meant that to supply them was for the benefit of the respondents.) In other words, until a machine was supplied, it could not be said whether or not the supply would amount to an application to the use of the respondents. When a machine was supplied to an institution which was or would become the purchaser of the respondents' tickets it was so applied. This conclusion is consistent with the decisions in Deputy Commissioner of Taxation v. Taubmans (N.S.W.) Pty. Ltd. (1966) 115 CLR 570 where it was held that the defendant applied the colour cards to its own use either when it used them directly or when it made them available to the storekeepers who stocked its goods (1966) 115 CLR, at p 574 , and with Max Factor &Co. Inc. v. Federal Commissioner of Taxation where it was held that the company applied the cosmetics to its own use when it gave them to its own employees or to buyers employed by departmental stores. (1971) 124 CLR, at p 365 (at p394)

11. The distinction which the Deputy Commissioner seeks to draw between the time at which the respondents formed an intention to apply the goods to their own use, and the time at which they formed an intention to supply the goods for use by a public benevolent institution, seems artificial in fact, but the basic answer to his contentions is that something more than mere manufacture is necessary before the manufacturer can be said to have applied the manufactured goods to his own use. (at p394)

12. It was submitted that the respondents' contentions were contrary to the scheme of the Acts, since the intention of item 81 is to benefit public benevolent institutions by the amount which they save in sales tax when goods are sold or leased to them. No doubt the intention of items such as item 81 is to benefit the user, and not the manufacturer, but it cannot be assumed that this object was not achieved in the present case, since if sales tax had been payable the respondents would have been expected to pass it on to the institutions in one way or another. There is nothing in item 81 to limit its provisions to the case of sale or lease. It was said also that to accept the respondents' contentions might open the way to tax avoidance schemes; e.g., it might be possible for a taxpayer to supply goods for use to a public benevolent institution for a very short period, and then recover the goods and apply them to his own purposes. Nothing like that occurred in the present case, and the fact that item 81 contemplates a real and significant use may be enough to prevent any such scheme from succeeding. However, that question may be left until it arises. (at p395)

13. As will have appeared, I consider that in any case the machines supplied to the Children's Hospital were not applied to the use of the respondents. (at p395)

14. For these reasons, in my opinion, the machines supplied to the public benevolent institutions fell within item 81 of the Schedule to the Sales Tax (Exemptions and Classifications) Act and accordingly sales tax was not payable in respect of them. (at p395)

15. I would dismiss the appeal. (at p395)

MURPHY J. I agree with the primary judge, Senior Judge Ligertwood, that sales tax is payable on the respondents' ticket dispensing machines. (at p395)

2. The Sales Tax (Exemptions and Classifications) Act 1935 discloses no intention to exempt from sales tax goods used by a manufacturer or wholesaler for its own purposes and in circumstances where it retains ownership of the goods. This can be seen from the use of the words "and not for sale" in item 81(1), words which in the context contemplate that property will pass to the public benevolent institution, before the exemption is applicable. (at p395)

3. The contrary view enables easy avoidance, which could not have been intended by the Parliament. For example, a wholesaler could avoid the payment of thousands of dollars of sales tax by making a new prestige car available to a hospital (for display at a fund-raising function or other use) but retaining ownership and then recovering the car after a short period and selling it. Other more sophisticated devices can easily be imagined. The exemption could never have been intended to apply in such circumstances. It should be read in the light of s. 15AA(1) of the Acts Interpretation Act 1901 which states that ". . . a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object". (at p395)

4. The appeal should be allowed. (at p395)

BRENNAN J. The Chief Justice has set out the salient facts and the texts of the relevant statutory provisions. I need not repeat them. The ticket vending machines that were used by the public benevolent institutions were manufactured by the respondents. The respondents retained ownership of the machines, the respective institutions being gratuitous bailees of them. If we leave aside for the moment the machines bailed to the Adelaide Children's Hospital, it is common ground that each machine was "applied by the manufacturer to his own use", so that the respondents became liable to pay sales tax upon the sale value of the machine (Sales Tax Assessment Act (No. 1) 1930 (Cth), ss. 17(1), 18(3), 19(c)) unless, at the time when the machine was so applied to the respondents' own use, the sale value of the machine was exempt from sales tax by virtue of the Sales Tax (Exemptions and Classifications) Act 1935 (Cth): the No. 1 Assessment Act, s. 20. The sale value of a machine was exempt from sales tax if, at that time, the machine was covered by an item in the first column of the First Schedule to the Exemptions and Classifications Act: s. 5(1). The relevant item in the First Schedule is item 81, and the relevant part of that item reads:
"(1) Goods for use . . ., and not for sale, by -

. . .

(c) a public benevolent institution."

For the purposes of the No. 1 Assessment Act and the Exemptions and Classifications Act, "goods" are defined to exclude "goods which have, either through a process of retailing or otherwise, gone into use or consumption in Australia". (at p396)

2. Two questions therefore fall for determination in ascertaining whether the respondents are liable for sales tax in respect of each machine: first, when was the machine first "applied by the manufacturer to his own use"? That is the time when sales tax is levied upon the sale value of the machines unless the sale value is exempt. That too is the time after which a machine, having "gone into use", is excluded from the definition of "goods" and is thus incapable of being covered by item 81. Once sales tax is levied upon the sale value of goods applied by a manufacturer to his own use, the manufacturer becomes liable to pay the tax and it is payable within twenty-one days after the close of the month in which the liability accrued: s. 24(c) of the No. 1 Assessment Act. Although provision is made for refunds of overpaid tax (s. 26), once liability for sales tax accrues, a subsequent use of goods by a public benevolent institution does not extinguish the liability. Thus the second question is whether each of the machines was "goods for use . . . by a public benevolent institution" when it was first "applied by the manufacturer to his own use"? (at p396)

3. After manufacture each machine was held in stock, perhaps for a brief period and perhaps bearing the logo of the institution for which the respondents intended it. Was the holding in stock of a machine with a view to bailing it to an institution an application of the machine to the respondents' own use? Section 17(1) of the No. 1 Assessment Act specifies an application to use as an element in liability to sales tax additional to the element of manufacture. What is required is the employment of goods for some purpose of the manufacturer. Until that occurs, the goods are not applied to the manufacturer's own use: Max Factor &Co. Inc. v. Federal Commissioner of Taxation. (1971) 124 CLR 353, at pp 361-362 In ascertaining whether a manufacturer in dealing with goods in a particular way has thereby applied the goods to his own use, regard must be had to the nature of the goods and the manufacturer's purpose in dealing with them in that way. The respondents' business was the supply and sale to institutions of lottery tickets, and the respondents' sole use for the machines was as a means of selling to the public the tickets supplied and sold by the respondents to the institutions. A machine was not applied to the manufacturer's own use as it emerged from the manufacturing process and was placed in storage; in my opinion, it was not so applied until it was bailed to an institution which took the machine in order to sell the tickets supplied by the respondents. When each machine was bailed to an institution which was or was expected by the respondents to become a customer to whom the respondents supplied or expected to supply tickets, the machine was applied by the manufacturer "to his own use": see Deputy Federal Commissioner of Taxation v. Taubmans (N.S.W.) Pty. Ltd. (1966) 115 CLR 570, at p 574 (at p397)

4. The second question thus falls to be answered in respect of each machine as at the time when it was bailed to a benevolent institution. Was it then a machine "for use . . . by a public benevolent institution"? (at p397)

5. The use by a public benevolent institution referred to in item 81 is not necessarily exclusive of the use of the goods by others. Indeed, the use of particular goods by others is often the use intended for them by public benevolent institutions - hospital beds, for example. But the proposed use by a public benevolent institution must be sufficiently substantial in extent and time that it is right to regard that proposed use of the goods as giving a character to the goods. That is a question of fact and degree. Among the material circumstances which reveal a characteristic use, regard may be had to the nature of the goods, the activity of the institution which is to be advanced by using the goods, the terms upon which the goods are to be acquired by the institution or upon which the institution is to be entitled to use them, the power of others to determine or qualify that use, and the likelihood of the use being changed by the decision of the institution, by the decision of another person having power to determine or qualify the use or by the decision of both the institution and that person. As the question whether goods were goods for use by a public benevolent institution is likely to arise for determination after the institution has begun to use them, evidence of the actual use to which the goods have been put will be relevant and admissible. (at p398)

6. In the present case, each machine (including those bailed to the Adelaide Children's Hospital) was, at the time when it was bailed to a particular institution suitable only for use for selling tickets. The respondents, as owners of each machine, and the institution to which it was bailed both intended that the machine should be so used for an indefinite period to their mutual advantage or, in the case of those bailed to the Adelaide Children's Hospital, to the advantage of the Hospital. The use of each machine by the institution to which it was bailed was the characteristic use to which it was devoted when it was bailed. In my opinion, each machine was, at that time, covered by item 81. It follows that there was no sales tax payable. The appeal should be dismissed. (at p398)

DEANE J. The issue on this appeal has resolved itself into the question whether certain ticket dispensing machines which were manufactured by the respondents in the period from 1 September 1977 to 30 November 1979 were exempt from sales tax for the reason that, at the time when liability to tax would otherwise have attached, they were "(g)oods for use . . . and not for sale, by . . . a public benevolent institution" within the meaning of those words as used in item 81(1) in the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 (Cth) ("the Act"). (at p398)

2. The machines, on being activated by the insertion of a twenty cent coin, dispense a ticket which bears a number. Tickets which exhibit designated numbers may be exchanged for a prize. The particular machines involved in the appeal ("the subject machines") were new machines which the respondents supplied on loan to certain institutions which are, for the purposes of the proceedings, conceded to have been "public benevolent institutions". They were so supplied free of charge but, as the respondents' standard form of conditions specified, on the basis that the tickets to be dispensed from them would be purchased from the respondents' "organization". In fact, the tickets for these machines were, for part of the relevant period, not supplied by the respondents themselves but by a family company as trustee of a discretionary trust under the terms of which the respondents were beneficiaries. The property in the machines remained in the respondents and the bailment of them to the various institutions would appear to have been terminable at will. (at p398)

3. The legislative scheme to be discerned in the Commonwealth Acts (the Assessment Acts (Nos. 1-9), the Taxing Acts (Nos. 1-9) and the Exemption Act) which constitute the sales tax legislation was explained by Dixon J. in Deputy Federal Commissioner of Taxation (S.A.) v. Ellis &Clark Ltd. (1934) 52 CLR 85, at pp 89-92 It is unnecessary, for present purposes, to examine that scheme in detail or to various types of action or transaction which attract tax or all of the various categories of person who are made liable to pay it. It suffices to say that a manufacturer of goods in Australia who applies them to his own use is prima facie made liable to pay sales tax upon the "sale value" of the goods: Sales Tax Assessment Act (No. 1) 1930 (Cth), ss. 17(1) and 19(c). In the present case, the parties are agreed that, except for twenty-four machines supplied to the Adelaide Children's Hospital, the subject machines were, at some stage, "applied to (their) own use" by the respondents in that they were applied to the overall business (sale of tickets and manufacture and supply of machines) which was carried on by the respondents' "organization" and that, were it not for the claimed exemption, sales tax would have become payable by the respondents in respect of the machines at the time the machines were so applied. The twenty-four machines supplied to the Adelaide Children's Hospital were provided with free tickets as a charitable activity on the part of the respondents. They can, for the moment, conveniently be put to one side. (at p399)

4. There was some discussion, in the course of argument, of the question when the subject machines were in fact "applied" by the respondents "to (their) own use". The appellant Deputy Commissioner submitted that a machine was so "applied" immediately its manufacture was completed and it was held awaiting delivery to a bailee. The respondents submitted that a machine was not "applied to (their) use" until it was actually committed to the business of the respondents' "organization" by being handed over to a particular bailee. The evidence would appear to support the respondents' approach in that it contains no suggestion that any of the subject machines was held as part of a general stock or reserve before being allocated to a particular bailee. The matters mentioned in the following paragraph make it unnecessary, however, to decide whether the respondents' approach is, in truth, the correct one. (at p399)

5. The first respondent gave evidence to the effect that most of the machines which were entrusted to public benevolent institutions, such as the machines involved in the present case, were separately identified by a "logo" of the particular institution. When such a logo was to be attached, it was attached "in manufacturing" the machine. The first respondent also gave general evidence that, after a machine was manufactured, possession of it was "conveyed" to the particular organization "for whom it was manufactured" by representatives of the organization coming to the factory and picking it up. That evidence was given largely in answer to leading questions. No objection was, however, taken to it being obtained in that form and neither the accuracy nor the general applicability of the evidence was questioned in cross-examination or challenged by other evidence. The plain inference from that evidence is that each of the subject machines in the present case had, by the time when manufacture was completed, been designated as a machine to be delivered to a particular public benevolent institution as bailee. That being so, the subject machines had been so designated at the time when they were applied by the respondents to their own use regardless of whether that time was, as the appellant submits, at the moment when manufacture was completed or, as the respondents submit, when a particular machine was delivered to the particular organization as bailee. (at p400)

6. Section 5 of the Sales Tax (Exemptions and Classifications) Act 1935 (Cth) provides that, notwithstanding anything contained in any Sales Tax Assessment Act, sales tax shall not, subject to qualifications which are not presently relevant, be payable upon the sale value of any goods covered by any item or sub-item in the first column of the First Schedule under any Act specified in the second column of that Schedule opposite that item or sub-item. The various "items" in the First Schedule consist of descriptions of particular classes of goods. Specific goods come within a particular class if, and only if, they satisfy the relevant description at the time when liability to sales tax would otherwise attach. Item 81(1), which applies in respect of all of the various Sales Tax (Assessment) Acts, exempts "Goods for use (whether as goods or in some other form), and not for sale, by" a number of designated types of institution or organization including "a public benevolent institution". Whether the subject machines were, at the time they were applied to the respondents' own use, within the protection of item 81(1) depends upon the connotation of the words "goods for use" in the sub-item. There is no applicable statutory definition of those words. Their connotation must be determined as a matter of ordinary construction. (at p400)

7. The classification of goods by reference to the nature of their projected use is found in many of the items in the First Schedule. In some items, the requirement is that the goods be "for use exclusively". In some, it is that they be "for use primarily and principally". In some, as in item 81, there is no qualifying adverb at all. In some items, it is required that the goods be "for use" for a designated purpose. In others, it is required that they be for use in a designated industry, place or activity. In others, as in item 81, it is required that they be for use by a designated category of person. In some cases, the requirement that goods be "for use" in a particular industry is coupled with a further requirement that they be "goods of a kind used exclusively, or primarily and principally, in that industry" (item 13) or that they not be "articles ordinarily used for any other purpose": item 12(2). (at p401)

8. From this variety of references to "goods for use", three presently relevant points emerge with tolerable clarity. The first is that, where it is intended that goods be for use exclusively or "primarily and principally" before they come within a particular exemption, the First Schedule expressly says so. The second is that, where the relevant requirement is that goods be "for use by" a particular person or organization (e.g. the Governor-General, the Governor of a State, certain Navy, Army and Air Force institutions, a public benevolent institution: items 73, 73A, 74E, 81(1)), the requirement is referring to projected actual use rather than the inherent quality or nature of the goods themselves. The third is that, in those items (such as item 81) where it is required that goods be "for use" by a particular category of person or organization, there is no designation of any person, such as the manufacturer or the purchaser of the goods, by reference to whose purposes or intentions the question whether the relevant requirement is satisfied must be determined. While the subjective intentions of manufacturer or purchaser are relevant and may well be conclusive, what is required is an objective characterization of the goods themselves in the light of all the relevant circumstances. That characterization must be made as at the time when liability to sales tax would otherwise attach. It will, in an appropriate case, be made with the benefit and in the context of knowledge of the actual use which was subsequently made of the goods. (at p401)

9. Item 81 does not require that the goods be used "exclusively" or "primarily and principally" by a public benevolent institution. It suffices that the goods come within the classification of goods for use by such an institution. That does not mean that any intended or planned or possible subsequent use of the goods by a public benevolent institution, however transient or insignificant or uncertain, would justify the goods being characterized as "goods for use" by that institution. The projected use by the institution must be such as would warrant characterization of the goods by reference to it. Ordinarily, that would involve definite commitment to a use by the institution as the main projected use of them. In other words, the question whether particular goods satisfy the description of being goods for use by a public benevolent institution will ordinarily fall to be answered by identifying the relevant projected use of the goods and by ascertaining whether that use answers the description of a use of the goods by a public benevolent institution. (at p402)

10. The intended and actual use of each of the relevant machines in the present case was for the sale of tickets to the public. The direct use of the machine for that purpose was by the particular public benevolent institution to whose possession the machine was entrusted and which was responsible for the machine's day to day operation and entitled to the proceeds of the sale of tickets. On the evidence, that use was the intended indefinite use of the machine at and from the time its manufacture was completed. It was the actual use to which the machine was devoted. It is, in my view, the appropriate use by reference to which the machine should be characterized for the purposes of the First Schedule. It is true that, in the wider context of the overall business of the respondents' "organization", the machine could properly be seen as also being used by the respondents in their business. In the absence of any requirement of exclusive or primary or principal use however, that consideration does not preclude the machine from being properly characterized as "Goods for use . . . and not for sale, by . . . a public benevolent institution". In the context of the evidence in the present case to the effect that, from the time of their manufacture, the contemplated and actual direct use of each of the subject machines for an indefinite period was by a public benevolent institution, I consider that each of the machines involved in the present case was properly to be so characterized at the time when it was applied by the respondents to their own use. It follows that sales tax was not payable in respect of any of the machines supplied to public benevolent institutions. It is unnecessary to consider the respondents' submission that the twenty-four machines supplied to the Adelaide Children's Hospital had not, in any event, been applied by them to their own use. (at p402)

11. The appeal must be dismissed with costs. (at p402)

DAWSON J. I have had the advantage of reading the reasons for judgment of the Chief Justice. I agree with those reasons and there is nothing which I could usefully add. I would dismiss the appeal. (at p403)

Orders

Appeal dismissed with costs.