Deputy Federal Commissioner of Taxation v Stronach

The Deputy Federal Commissioner of Taxation (Queensland) sought to recover sales tax from George Alexander Stronach, a master builder and contractor. The dispute concerned whether freestone and granite, excavated by Stronach from quarries and processed for building purposes, constituted "goods manufactured in Australia" subject to sales tax under the Sales Tax Assessment Act (No. 1) 1930-1935, or if they were exempt as primary products derived from mining operations. A special case was stated for the opinion of the High Court of Australia.

The High Court was required to determine two primary legal issues. Firstly, whether the freestone and granite, as prepared by the defendant, qualified as "goods manufactured in Australia" within the meaning of the Act. Secondly, if they were considered manufactured goods, whether they were exempt from sales tax under section 20(1)(g) of the Act, which provided an exemption for primary products derived directly from mining operations that had not undergone any process or treatment resulting in an alteration of their form, nature, or condition.

The Court reasoned that the processes undertaken by Stronach, including sawing, shaping, planing, and polishing the freestone and granite, constituted a "manufacture" as defined by the Act, transforming the raw quarried material into commodities suitable for building construction. Furthermore, the Court held that the operations of excavating freestone and granite from quarries were not "mining operations" in the ordinary sense, distinguishing them from the circumstances in *Australian Slate Quarries Ltd. v. Federal Commissioner of Taxation*. Crucially, even if the extraction were considered mining, the subsequent processing of the stone resulted in an alteration of its form, nature, and condition, thereby disqualifying it from the exemption under section 20(1)(g).

Accordingly, the High Court answered the questions submitted in the affirmative, finding that the freestone and granite were goods manufactured in Australia and were liable for sales tax. The case was remitted to a judge to enter judgment in accordance with these findings and to determine costs.