District Council of Coober Pedy v Collector of Customs Cowell Electric Supply Co. Ltd v Collector of Customs
[1993] FCA 235
•23 APRIL 1993
Re: DISTRICT COUNCIL OF COOBER PEDY and COWELL ELECTRIC SUPPLY COMPANY LTD
And: COLLECTOR OF CUSTOMS
Nos. NG251 and 252 of 1992
FED No. 235
Number of pages - 39
Customs - Practice and Procedure
(1993) 17 AAR 369
(1993) 42 FCR 127
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Hill J(1)
CATCHWORDS
Customs - diesel fuel rebate - rebate allowable where fuel used "in mining operations" or "other operations connected with mining" - whether generation of electricity and reticulation of water in towns adjacent to mining sufficiently connected with mining operations.
Customs - diesel fuel rebate - rebate allowable where fuel for use by purchaser "at residential premises" - whether use confined to use of the purchaser.
Customs - diesel fuel rebate - rebate allowable where fuel for use "at a hospital" - whether, where electricity is generated, the generation has to be on or close to the hospital grounds.
Customs - diesel fuel rebate - rebate allowable where fuel for use "in primary production" or in operations connected with "the cultivation or gathering in of crops" - whether generation of electricity and reticulation of water in agricultural areas is sufficiently connected with primary production operations.
Practice and Procedure - jurisdiction of Court on appeal from Administrative Appeals Tribunal - question of law - whether all facts being agreed the question whether a case falls within or without statutory provision is a question of law - question whether sufficient connexion exists involves a question of fact and degree not conferring jurisdiction on Court.
Act Interpretation Act 1901: s.15AA
Administrative Appeals Tribunal Act 1975: s.44
Customs Act 1901: ss.164(1)(a), (aa), (b), (c), 164(7)
Re Queensland Electricity Commission and Collector of Customs (1990) 13 AAR 119; disapproved.
Collector of Customs v. Cliffs Robe River Iron Associates (1985) 7 FCR 271; discussed.
Collector of Customs v. Cliffs Robe River Iron Associates (1985) 7 FCR
Australian National Railways Commission v Collector of Customs (SA) (1985) 8 FCR 264; discussed.
Collector of Customs (Tas) v. Flinders Island Community Association (1985) 7 FCR 205; discussed.
HEARING
SYDNEY, 22 March 1993
#DATE 23:4:1993
Counsel and Solicitors M H Tobias QC and M R Speakman
for Applicants: instructed by Blake Dawson Waldron
Counsel and Solicitors D F Jackson QC and S Gageler
for Respondent: instructed by the Australian Government
Solicitor
ORDER
The Court orders that:
1. Appeals allowed in part.
2. Remit to the Administrative Appeals Tribunal for determination in accordance with law so much of the claims of the applicants as related to s.164(1)(aa), (b) and (c) of the Customs Act 1901.
3. Order 2 is stayed for a period of 28 days from the making of this order.
4. No order as to costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
HILL J Before the Court are two applications brought under s.44 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act"). In the first, the applicant is the District Council of Coober Pedy ("the Council"). In the second, the applicant is Cowell Electric Supply Company Limited ("Cowell"). In each case the respondent is the Collector of Customs ("the Collector"). At issue in both applications is the entitlement to rebates of duty paid in respect of diesel fuel pursuant to s.164 of the Customs Act 1901 ("the Act"). Sub-section (1) of s.164 of the Act provides as follows:
"(1) A rebate is, subject to subsections (2) and (3) and to such conditions and restrictions as are prescribed (being conditions and restrictions that relate to goods generally, to goods included in a class of goods that includes diesel fuel or to diesel fuel only), payable to a person who purchases diesel fuel for use by him -
(a) in mining operations (otherwise than for the purpose of propelling a road vehicle on a public road);
(aa) in primary production (otherwise than for the purpose of propelling a road vehicle on a public road);
(b) at residential premises in:
(i) providing food and drink for;
(ii) providing lighting, heating, air-conditioning, hot water or similar amenities for; or
(iii) meeting other domestic requirements of; residents of the premises;
(c) at a hospital or nursing home or at any other institution providing medical or nursing care; or
(d) at a home for aged persons."
Relevant to the interpretation of s.164(1) are the following definitions of "agriculture", "mining operations", "residential premises", "primary production" and "use" all contained in s.164(7) of the Act:
"'agriculture' means:
(a) the cultivation of the soil;
(b) the cultivation or gathering in of crops; or
(c) the rearing of live-stock; and includes:
(d) viticulture, horticulture, pasturage or apiculture;
(e) hunting or trapping carried on for the purpose of a business; or
(f) other operations (including operations by way of pest or disease control or by way of soil or water conservation) connected with any operations referred to in paragraph (a), (b), (c), (d) or (e); but does not include fishing operations or forestry;
...
'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; and includes -
(c) 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;
(ca) other operations connected with the dressing or beneficiation of minerals, or ores bearing minerals, where that dressing or beneficiation is an integral part of the operation for the recovery of the minerals or of the ores, being operations that are carried out in, or at a place adjacent to, the area in which the dressing or beneficiation occurs;
(d) where minerals, or ores bearing minerals, are dressed or beneficiated, at a place other than the mining site, as an integral part of operations for their recovery - the transporting of the minerals or ores from the mining site to the place where they are dressed or beneficiated;
(e) the liquefying of natural gas;
(f) where natural gas is liquefied at a place other than the mining site - the transporting of the natural gas from the mining site to that place; or
(g) the production of common salt by means of evaporation;
but does not include quarrying operations carried on for the sole purpose of obtaining stone for building, road making or similar purposes; ...
'primary production' means:
(a) agriculture;
(b) fishing operations; or
(c) forestry;
...
'residential premises' means:
(a) premises used as a house; or
(b) other premises at which at least one person resides;
but does not include:
(c) premises used in the business of a hotel, motel or boarding house or a similar business;
(d) premises used as a hospital or nursing home or as any other institution providing medical or nursing care;
(e) premises used as a home for aged persons; or
(f) premises used as a boarding school; ...
'use', in relation to diesel fuel in relation to a person, does not include the sale or other disposal of the diesel fuel by the person to another person."
In both applications the applicants were unsuccessful in the Administrative Appeals Tribunal. It is from the decisions of the Tribunal constituted by Mr McMahon, a Deputy President, and Messrs Stanford and Coffey, that the applicants appeal to this Court. Pursuant to the provisions of s.44(1) of the AAT Act, the appeal to this Court is an appeal "on a question of law", that is to say the appeal is limited to a question of law.
Counsel for the Collector submitted that the Court had no jurisdiction to hear the appeal as no question of law arose. The submission was, however, put as a formal submission and no argument was directed specifically to it. It will be clear, as the submissions for the applicants are developed in this judgment, that the present appeals did involve issues of law and that accordingly the Court is competent. I shall, however, defer discussion of this issue until the conclusion of this judgment.
The Facts
5. Before the Tribunal the two matters proceeded by way of agreed statements of fact. The relevant facts are set out in considerable detail in the Tribunal's reasons for decision. That part of the reasons covers some thirty-five typed pages. It is unnecessary, in my view, to canvas all of the factual material set out in the reasons. A short summary will suffice.
At relevant times, the Council purchased diesel fuel for use by it in the generation and reticulation of electricity sold to residents of Coober Pedy. It also used diesel fuel in the reticulation of water to the same residents. Up until 6 December 1988 electricity for the Coober Pedy area was generated by Cowell. In addition, and in the period covered by its appeal, Cowell purchased diesel fuel for use in the generation of electricity in power stations located at or near various outback towns in South Australia, being Penong, Nundroo, Coorabie, Kingoonya, Marla, Glendambo, Marree and Oodnadatta. The period in respect of which the claim for rebate is made is, in the case of the Council, the period 1 August 1986 to 30 June 1990 in respect of fuel purchased by it to operate water bore pumps for the reticulation of water and the period 7 December 1988 to 30 June 1990 in respect of fuel purchased for use to generate electricity. In respect of Cowell, the period is 1 August 1986 to 6 December 1988 in respect of electricity generation at Coober Pedy and 1 August 1986 to 30 June 1990 in respect of diesel fuel used to generate electricity for the various townships to which reference has been earlier made.
The Council is the District Council for the township of Coober Pedy, having responsibility, since 1 January 1987, for local government at that township, pursuant to the provisions of the Coober Pedy (Local Government Extension) Act 1981 (SA) as amended. In the period when Cowell generated electricity at Coober Pedy, it did so pursuant to a contractual arrangement with the Coober Pedy Progress and Miners' Association Incorporated, which was the predecessor of the Council. Upon the Council initially assuming responsibility for local government, it contracted with Cowell for that company to undertake the generation and distribution of electricity at Coober Pedy township for the period 1 January 1987 to 6 December 1988.
The electricity generated by the Council was supplied by it to consumers by a distribution grid which terminated at meter boxes installed at the premises of individual consumers. The electricity remained the property of the Council until it passed through the meters installed at consumers' premises.
The Council likewise had the responsibility of supplying bore water at Coober Pedy since 1 January 1987. Diesel fuel bore pumps were located at approximately twenty-three kilometres from the township boundaries. The water was pumped to a water treatment plant located within the town boundary and after treatment was supplied to consumers by a reticulation system terminating at a metered connection installed at the premises of individual consumers. The water so treated remained the property of the Council until it passed through the meters installed at consumers' premises. The use of meters enabled precise calculations to be made, in the relevant periods, of the electricity, or water as the case may be, consumed by particular consumers or groups of them.
Coober Pedy lies 850 kilometres north-west of Adelaide on the Stuart Highway. Its estimated present population is 2,229. Until 1915 there was no settlement there. In that year opal was discovered and by 1920 a fledgling township existed consisting of approximately twelve opal prospectors and miners. In 1920 there was a short mining rush when the population increased to approximately 300, a figure not surpassed until the late 1960s. Between 1920 and 1960 the population fluctuated, essentially with the fortunes of opal mining. Mechanical prospecting and mining techniques were introduced during the 1960s and use of such equipment became widespread in the 1970s, when the population began to increase.
The township was, at all relevant times, surrounded by an area of an irregular shape, approximately 40 kilometres north, 50 kilometres south, 30 kilometres east and 20 kilometres west from the town boundaries, proclaimed under South Australian mining legislation to be a "precious stones field". No more than approximately twenty people resided within this precious stones field at any relevant time. The number of miners working the precious stones field surrounding Coober Pedy grew from 445 in 1985 to 680 in 1990.
Apart from mining, the only economic activity undertaken outside Coober Pedy, but within a 200 kilometre radius of it, was very extensive dry land grazing. There were no manufacturing establishments, excluding single establishment enterprises employing fewer than four persons in Coober Pedy in the relevant period, but there were six manufacturing enterprises employing fewer than four persons each. There is some tourism in Coober Pedy, the main attraction being opal mining, visiting underground houses and buildings and the sale of polished opals.
The Council and its predecessor generated electricity in a powerhouse located within the boundaries of the town, within approximately four kilometres of all residential premises to which it was connected, with the exception of two spur lines of approximately three kilometres and five kilometres in length from the township boundaries, each of which was connected to ten residential premises. The electricity was supplied largely to residential premises, but at the relevant times approximately 130 consumers were in the category "general purpose commercial and government consumers". One of those consumers was the Coober Pedy Hospital which consumed electricity in the hospital. Likewise, the water reticulated was supplied largely for domestic purposes but also to the Coober Pedy Hospital.
Cowell supplied electricity to the various townships at which it generated electricity. Subscribers at each township included the occupiers of residential premises and agricultural properties and some general purpose commercial and government consumers. The electricity connected to residential premises was consumed, inter alia, in providing lighting, heating, air-conditioning, hot water and similar amenities for, or meeting other domestic requirements of, the residents of those premises. In some towns, for example Kingoonya, which is located on the transcontinental railway line approximately 650 kilometres north-west of Adelaide, a service town for the railway, the generator was located approximately 120 metres from the township area and was within approximately 600 metres of all residential premises to which it was connected. In other towns, for example Oodnadatta, the generator was located about 1,290 metres from the main township area where the large majority of premises connected to the grid were, in the relevant period, located. The nearest connection was approximately 100 metres from the powerhouse.
In summary, both the Council and Cowell operated as governmental instrumentalities supplying electricity (and in the case of the Council, water) to all and sundry within the area of reticulation. The customers of each of the Council and Cowell included miners, farmers, commercial and government enterprises as well as the large body of ordinary residential customers.
The claims by the Council and Cowell
16. The Council claimed to be entitled to diesel fuel rebates as follows:
(a) a rebate for diesel fuel purchased for use by it to generate electricity for Coober Pedy for the period 7 December 1988 to 30 June 1990 on the basis that its electricity generation was an operation "connected with" mining and so was "in mining operations" within the meaning of s.164(1)(a) of the Act;
(b) a rebate for diesel fuel purchased for use by it to operate water bore pumps between 1 August 1986 and 30 June 1990 for supply of water to Coober Pedy on the basis that the operation of those bore pumps was an operation "connected with" mining and so was "in mining operations" within the meaning of s.164(1)(a) of the Act;
(c) alternatively to (a), a rebate for diesel fuel purchased for use by it to generate electricity between 7 December 1988 and 30 June 1990 for residential premises and the hospital in Coober Pedy, on the basis that this electricity generation was used by it "at residential premises" for the purposes permitted in s.164(1)(b) or "at a hospital" within s.164(1)(c);
(d) alternatively to (b), a rebate for diesel fuel purchased for use by it to operate water bore pumps between 1 August 1986 and 30 June 1990 for supply of water to residential premises and the hospital in Coober Pedy, on the basis that the operation of those bore pumps was a use by it "at residential premises" for the purposes permitted in s.164(1)(b) or "at a hospital" within s.164(1)(c).
Cowell claimed to be entitled to the following diesel fuel rebates:
(a) a rebate for diesel fuel purchased for use by it to generate electricity for Coober Pedy for the period 1 August 1986 to 6 December 1988 on the basis that its electricity generation was an operation "connected with" mining and so was "in mining operations" within the meaning of s.164(1)(a) of the Act;
(b) alternatively to (a), a rebate for diesel fuel purchased for use by it to generate electricity between for the period 1 August 1986 to 6 December 1988 for residential premises and the hospital in Coober Pedy, on the basis that this electricity generation was used by it "at residential premises" for the purposes permitted in s.164(1)(b) or "at a hospital" within s.164(1)(c);
(c) a rebate for diesel fuel purchased for use by it in generating electricity for agricultural properties in the vicinity of Penong, Nundroo-Coorabie, Kingoonya and Marla, for the period between 1 August 1986 and 30 June 1990, on the basis that this electricity generation was an operation "connected with" the "cultivation or gathering in of crops" or the "rearing of livestock" and so "in primary production" within the meaning of s.164(1)(aa) of the Act;
(d) a rebate for diesel fuel purchased for use by it in generating electricity between 1 August 1986 and 30 June 1990 for supply to residential premises and hospitals in Penong, Nundroo-Coorabie, Kingoonya, Marla, Glendambo, Marree and Oodnadatta, on the basis that this electricity generation was "at residential premises" for the purposes permitted in s.164(1)(b) or "at a hospital" as contemplated by s.164(1)(c).
The Tribunal's Reasons
18. The Tribunal rejected the claims of each of the Council and Cowell. In part it did so on the basis that it was bound to follow the decision in Re Queensland Electricity Commission and Collector of Customs (1990) 13 AAR 119, a decision of the Tribunal comprising the President, O'Connor J, Breen and Forgie (Deputy Presidents). That decision had, however, not considered the extended definitions of "mining operations" and "primary production" which definitions include the references to "connected operations". The extended definition had, however, been considered by the Full Court of this Court in Collector of Customs v Cliffs Robe River Iron Associates (1985) 7 FCR 271 and three later decision of the Tribunal; Re Western Mining Corp Ltd and Collector of Customs (1985) 9 ALN N148, Re Western Mining Corp and Collector of Customs (No 2) (1985) 9 ALN N26 and Re Mount Newman Mining Co Pty Ltd and Ors and Collector of Customs (1985) 9 ALN N146. These cases were referred to by the Tribunal as the "Western Australian mining town cases", a label which I will likewise adopt. These cases, in all of which the rebate had been granted, were distinguished by the Tribunal in the following passage, referring to Coober Pedy (at 48):
"137. That town was not created by any one developer. It did not come into existence as part of the infrastructure of a mining operation. It was not developed from an embryo settlement to form an integral part of a mining industry. It is true that most of the residents are connected with the mining of opals in one way or the another (sic) or provide services for those who mine opals. There are significant differences however between the facts in this case and the facts in the Western Australian mining town cases.
138. Opal mining is carried on not by a company but by a collection of individuals. One of the documents attached to the agreed statement of facts summarises the regulations applying in the proclaimed precious stones field. They include a provision that a person may hold only one precious stones claim at a time. Although the little manufacturing activity that is carried on in Coober Pedy may well be associated with the processing of opals, and the tourism may well exist only because of the presence of opal mining (although there is no evidence to support either supposition) it is going too far, in our view, to equate the conditions in Coober Pedy with those considered in Cliffs. In Western Mining No.2 the town and mining operations existed side by side in an isolated and remote area and each was said to be dependent on the other for the continuation of the function which each performed. In our view it is not possible to say that the township of Coober Pedy performs an analogous function in relation to the multiplicity of individual mining claims and workings in the surrounding district. The fact that there is no unified development of mine and township, stretches the connection between the use of diesel fuel and mining operations to the point where, in our view, no acceptable nexus exists. The same result will be arrived at by a consideration of policy."
The Tribunal considered also the legislative policy underlying s.164 of the Act, as discussed in the Cliffs Robe River case, but was of the view that the grant of the rebate would not in any way assist or encourage mining operations. It took into account that if the applicants were to be successful, all that would probably happen would be that part of a subsidy received from an agency of the South Australian government would be replaced by a rebate of diesel fuel tax from the Commonwealth government. As the Tribunal said (at 50):
"The end result would simply be a shift in the source of public financing. It would be unlikely to result in cheaper electricity for those engaged in mining and those associated with mining of opals."
In considering the claims by Cowell based on the generation of electricity in connection with agricultural operations, the Tribunal said (at 51-2):
"143. In any event, it can not be said that Kingoonya, Marla, Nundroo-Coorabie and Penong are in any way analogous to the position of the Western Australian mining towns. They are not part of the infrastructure of an agricultural industry in the sense that wharves, roads, workers' housing and schools are in a purpose built mining town. The agricultural towns were not constructed or operated by the applicant for the purpose of enabling it to carry on the business of primary production on the adjacent land. The observations of the Federal Court in Cliffs, it seems to us, can not possibly have any application to the situation obtaining in relation to the agricultural towns.
144. Furthermore, the evidence before us hardly justifies the characterisation of these 4 towns for present purposes as agricultural towns. Marla is a new town which resulted from the realignment of the Stuart Highway. It services the Mintabie opal fields which, according to the evidence, produce more in value than the Coober Pedy fields and have approximately the same number of miners. These miners, however, appear to live on the fields as there are 150 residents at Marla but 600 miners at Mintabie. Although it was submitted that Marla was an agricultural town, the evidence indicates that there is only one electricity connection which might be called agricultural and that is only for a property water bore. The remaining connections are general or residential. The evidence shows that Kingoonya has now been replaced by Glendambo with the relocation of the Stuart Highway. The list of connections there shows that there is a hotel and caravan park. The remainder of the connections are either residences or water bores, street lights or for Telecom needs. From the evidence before us it seems that this little town is essentially residential. Penong appears from the evidence to be similar to Marla in the characterisation of the consumers of electricity. Nundroo and Coorabie appears to be a rural district rather than a town with the bulk of the residents living on farms. It has the largest proportion of agricultural connections (16 out of 30) with some residential
(5) and some general (9). The bulk of the supply to the rural properties would be to the residences on the farms. The evidence indicates that only a small proportion of the power supply would be used for electric equipment used in actual rural production. Accordingly, even if the nexus with agriculture could be established in accordance with the tests laid down in QEC, it could not be established on the facts in relation to any of these towns or districts."
The claim based upon s.164(1)(b) received little attention. The Tribunal left open the question whether the applicants complied with the locational test, comprehended by the requirement that the use must be "at residential premises". It was of the view, however, having regard to the Queensland Electricity case, that it was not possible for the applicants to comply with what it referred to as the "purposive test", that is to say, that the use of the fuel must be for one of the purposes referred to in s.164(1)(b)(i), (ii) or (iii) of the Act.
No attention at all was given to the claims depending upon s.164(1)(c), namely that the use of the diesel fuel was a use "at a hospital".
In the Cliffs Robe River case the Full Court of this Court comprising Bowen CJ, Morling and Neaves JJ, in a unanimous judgment, pointed out (at 275) that the comparable provisions of the Excise Act 1901 (Cth):
"...reflect a legislative policy of encouragement of mining operations and should not be given a narrow application."
The same may, of course, be said of primary production and hospitals, nursing homes or other institutions providing medical and nursing care. The reference in the Act to the use of diesel fuel at residential premises reflects a policy of subsidising domestic consumers who purchase diesel fuel for use at residential premises for ordinary domestic purposes. Clearly the legislation was intended to confer a benefit upon the user of diesel fuel in the circumstances referred to in the section. In the event of ambiguity appearing in the section giving rise to a choice between possible interpretations, the Court will construe the legislation in a way which will promote the purpose or object underlying the Act: s.15AA of the Acts Interpretation Act 1901 (Cth). The Act should receive a benevolent construction to effectuate the legislative purpose and should not be construed restrictively: Canwan Coals Pty Ltd v Federal Commissioner of Taxation (1974) 1 NSWLR 728 at 733. So said, however, it is nevertheless necessary to construe the legislation having regard to the language employed by Parliament.
The claims under s.164(1)(a)
25. A convenient starting point for the resolution of the present cases, so far as they concern s.164(1)(a) of the Act, is the decision of the Tribunal in Re Queensland Electricity Commission and Collector of Customs to which reference has already been made. No doubt the Tribunal was correct in accepting, as a matter of comity, the reasoning in that case, although it must be said that irrespective of the composition of the Tribunal in the Queensland Electricity Commission case, the Tribunal in the present case was not bound to follow it. Nevertheless, no doubt the reasons of a Tribunal presided over by a Presidential Member deserve respect and consistency in administrative decision-making is clearly desirable.
The applicant in the Queensland Electricity Commission case sought a rebate for fuel used by it in the generation of electricity supplied to residences, hospitals, nursing homes and to persons engaged in agriculture. One of the issues for determination by the Tribunal was whether the person who purchased and used the fuel had to be the person engaged in the activity specified in s.164. The Tribunal said (at 124-5):
"It has not been suggested by the Queensland Electricity Commission that the Boards are themselves engaged in primary production. Counsel submitted that it was sufficient that the diesel fuel was purchased by the Boards with the intention of it being used, at least in part, in primary production. He argued that it was immaterial (that) those actually engaged in primary production were third parties. We do not accept that submission. While we have agreed that the provisions of this legislation should have a beneficial operation, we are not persuaded that the cases cited by the applicant support its position. Both the Federal Court and this Tribunal have taken a liberal approach to the interpretation of the purposes set out in s.164(1)(a) to (d). A beneficial interpretation, however, does not mean that the words 'for use by him' should have anything other than their plain and commonsense meaning. Close examination of the cases cited by counsel reveals that in each case there is a close association between the user of the fuel and the prescribed activity. In none is there an arm's length transaction of the type entered into by the Boards. We agree with the Collector that there must be some nexus between the use made of the fuel by the purchaser and the purpose for which rebate is payable. This approach is necessitated by the words 'for use by him' in s.164(1). If it were not necessary to find a nexus between the use of the fuel made by the purchaser and the purpose for which rebate is payable then the words 'by him' would be superfluous.
In this case there is no such nexus between the use made of the diesel fuel by the Boards and any of the three purposes with which we are concerned - primary production, residential premises, hospitals, nursing homes and similar institutions or homes for aged persons. The Boards use the diesel fuel to generate electricity. That electricity is supplied to others who may use the electricity for one of the purposes set out in ss.164(1).... The Boards do not themselves use the electricity which they generate for any of those purposes. To say, then, that the Boards, which have purchased the diesel fuel themselves use that fuel for any of the purposes for which rebate is payable is to draw too long a bow. Even adopting a liberal interpretation of ss.164(1)..., it would be stretching common sense and not be in accordance with the plain meaning of the words of the subsections to say that there is a nexus between the use of the diesel fuel by the Boards and one of the purposes."
Counsel for the Council and Cowell submitted that the Queensland Electricity Commission case was wrongly decided and that I should not follow it. Counsel accepted that it was a requirement of eligibility for the rebate that the diesel fuel be for use by "the claimant for the rebate" in the manner and/or at the places prescribed by ss.164(1)(a)-(d). The significance of the words "for use by him" was said to be that the purchaser of the diesel fuel could not sell the fuel to a third party who then used it for the specified purposes. No doubt that is (at least) one of the consequences of the use of the words "for use by him". It was submitted, however, that these words did not require that the claimant be also involved directly in the field for which the fuel was used. In other words, taking the example of mining operations, it was not necessary that the purchaser of the fuel itself be involved directly in mining operations. Likewise, where relying upon s.164(1)(aa), it was not necessary that the purchaser of the fuel be a farmer.
So it was submitted, to the extent that the Queensland Electricity Commission case held otherwise, it was clearly incorrect.
Alternatively, the Queensland Electricity Commission case should, it was submitted, be distinguished, because the case did not consider the extended definition of "mining operations" and "primary production" as including "other operations connected with" exploration etc or agriculture, as the case may be.
The fact that there need be no identity between the person undertaking mining or agriculture in the conventional sense of those words, on the one hand, and a person undertaking the connected operations, on the other, was established by the Full Court of this Court in Australian National Railways Commission v Collector of Customs (SA) (1985) 8 FCR 264. In that case, the appellant used diesel fuel to power railways operating in South Australia. It claimed a rebate in respect of fuel used during a relevant period for the purpose of carriage by rail of livestock for reward, inter alia, on occasions where that livestock was carried away from an area the subject of a programme for the eradication of tuberculosis or brucellosis or for restocking after the carrying out of such a programme, or carried from an area where they were bought in store condition to another area to gain body weight preparatory to sale, or carried from an area subject to drought for agistment in another area. It was held that the rebate was available as the diesel fuel was for use by the railway in operations connected with "the rearing of livestock".
Davies J said (at 268):
"The benefit of the diesel fuel rebate is not restricted to a person who carries on mining operations or primary production using those terms in their ordinary parlance. The rebate is given not to persons who carry on occupations as defined but to persons who purchase diesel fuel for use in operations as defined."
Sheppard and Burchett JJ were of the same view. At 275 their Honours said:
"The other matter to be noticed is that although, at first sight, it might appear that the rebate is payable only to persons who are themselves directly engaged in, for example, mining operations or primary production, it will also be payable to persons if their use of it is for those purposes even though they themselves are not miners or primary producers. Thus, it is payable where a primary producer, for example, a grazier, engages a contractor to carry out work connected with primary production and the contractor uses diesel fuel in operating the plant necessary for the task. The contractor providing the equipment is in that case entitled to the rebate. The rebate will not be payable in relation to the carriage of livestock unless it can be said that the carriage of them which led to the use of diesel fuel was in connection with the rearing of them or in connection with other operations (including operations by way of pest or disease control) connected with the rearing of the livestock."
The Court rejected, however, a claim for rebate by the Railways Commission for the carriage of fertilisers as being in connection with primary production because the carriage of the fertiliser was: "...remote from any operation connected with the cultivation of the soil" (at 277). A question of degree was involved.
The Australian National Railways case was recently followed by Drummond J in Pozzolanic Enterprises Pty Limited v Collector of Customs (unreported, Federal Court, 30 November 1992) to allow a claim for rebate to a cartage contractor engaged in the transport of mill produced stock feed to farming properties. As his Honour said (at 8):
"That the applicant is itself a carrier and not a primary producer does not disentitle it to fuel rebate, so long as the applicant purchased the fuel used in the unloading operations for use by it in operations connected with the rearing of livestock...".
Some of the language in the Queensland Electricity Commission case may suggest to the contrary. Indeed the comment (at 124):
"Close examination of the cases cited by counsel reveals that in each case there is a close association between the user of the fuel and the prescribed activity. In none is there an arm's length transaction of the type entered into by the Boards."
is clearly inconsistent with the Australian National Railways case which is referred to in the preceding page of the report. Obviously enough there was an arm's length transaction interposed between the Railways Commission and the primary producer in the Australian National Railways case, but that of itself did not operate to disentitle the Railways Commission from the rebate. To this extent I do not agree with what is said in the Queensland Electricity Commission case, although, with respect, I would agree in the ultimate result in that case.
The nature of the connection required for operations to be "connected with" mining or primary production, as the case may be, was a matter discussed by the Full Court of this Court in Collector of Customs v Cliffs Robe River Iron Associates (supra) particularly at 274-5. The claimant in that case was a joint venturer engaged in mining iron ore in the Pilbara region of Western Australia and in transporting that ore by rail from Pannawonica to Cape Lambert where it was crushed, prepared as fines and shipped. The claimant was obliged, pursuant to an agreement with the State of Western Australia, to develop, inter alia, a town site at Pannawonica adjacent to the physical mining. The diesel fuel purchased was used in the generation of electricity for the town. It was argued that the diesel fuel was used in "mining operations", as that term was defined in the Act, because it was used in other operations connected with mining.
For the Collector it was argued that for "other operations" to be connected with mining they had to be operations connected directly or associated with the physical extraction or treatment of the mineral and carried out in or at a place adjacent to the area in which the mining occurred. It was said that the generation of electricity was not so connected. This argument was rejected. The Court said (at 275):
"The meaning of the word 'connection' is both wide and imprecise. One of its common meanings is 'relation between things one of which is bound up with, or involved, in another' (Shorter Oxford English Dictionary). We were referred to a number of cases where, in other contexts, the meaning of the word 'connection' had been discussed, but we do not think that any assistance is to be derived from them. Given that the generation of electricity in the present case was carried out at a place adjacent to the area in which the mining occurred, the question of law which arises is whether, on the facts of this case, it was open to the Tribunal to hold that the generation of electricity for the township was an operation connected with the mining for minerals. In our opinion it was. The construction of the town of Pannawonica, and the supply of electricity to it, was an essential part of the scheme to establish the mine... The township forms part of the infrastructure of the mine, its sole function being to provide a place of residence for the mine workers, there being none other available. The township was constructed and is operated by the respondent solely for the purpose of enabling it to mine the minerals on the adjacent land. The township has no alternative source of electricity, and without electricity it could not provide a place of residence for the mine workers and the mine could not operate. Having regard to these facts, it was well open to the Tribunal to conclude that the generation of electricity for the township was so bound up with and involved in the mining for minerals that it was an operation connected with the mining for minerals."
It was upon this case, and the Western Australian Mining Town cases, that the applicants in the present case founded their principal submissions.
The Western Australian Mining Town cases can be shortly noted. In each of Re Western Mining Corp Ltd and Collector of Customs, Re Western Mining Corp and Collector of Customs (No 2) and Re Mount Newman Mining Co. Pty Limited and Ors and Collector of Customs to which reference has already been made, the claimant for the rebate was itself involved in a mining venture. In each case an agreement existed with the Western Australian government for either the creation or the development of a township.
In the first Western Mining case, a town, Laverton, had previously existed on the site in question but it was considerably expanded with the advent of mining. The generation of electricity was vital to the existence of the town and the town was vital to the extraction of ore. Most of the town residents were either directly engaged in the operations of Western Mining or provided services for those who were. In the second Western Mining case concerned with the town site at Kambalda, there had been no development or occupation of the town until Western Mining commenced its operation.
Likewise in the Mount Newman case, Mount Newman Mining Co. Pty Ltd was the manager on behalf of various joint venturers in iron ore mining operations carried on in the Pilbara region of Western Australia. Its claim for the rebate was allowed in circumstances where again the township to be developed existed largely to provide housing or other services for the mining operations adjacent to it.
It was submitted for the Council and Cowell that the Tribunal took the view that the Western Australian Mining Town cases were the high water mark of a liberal approach to the exemption and that any factual difference between those cases and the present cases would operate to disqualify the respective applicant from the rebate.
It is certainly true that the Tribunal compared the facts of the present case with those of the Western Australian Mining Town cases, but I do not think that it can be said that they regarded any factual differences as necessarily operating to disqualify the applicants from exemption.
The applicants also challenged certain findings or perhaps inferences of fact made by the Tribunal. It is clear enough that the Tribunal's comment that Coober Pedy was not developed from an embryo settlement to form an integral part of a mining industry would not seem to have been supported by the agreed statements of facts. But that was not critical to the Tribunal's decision. So too the discussion by the Tribunal of the legislative policy may be criticised as erroneous. With respect to the Tribunal, I do not see any significance at all, assuming the necessary connection exists between the operations and mining, in the tension which could be created between the State government subsidy on the one hand and the grant of the rebate on the other.
So far as the claim for rebate related to s.164(1)(a), it seems to me that the Tribunal accepted that the proper test was that expressed in Cliffs Robe River Iron Associates, namely whether (at 275):
"Whether the generation of electricity for the township was so bound up with and involved in the mining for minerals that it was an operation connected with the mining for minerals."
The Tribunal was of the view, on the facts of the case, that this could not be said. That clearly was a view open to the Tribunal. The Tribunal, in reaching this conclusion, compared the facts in the present case with those in the Western Australian Mining Town cases. It was entitled so to do. It does not follow from this that it regarded each of the matters referred to in the Western Australian Mining Town cases as a necessary precondition to the obtaining of the rebate.
Generally speaking, an entity which generates electricity and supplies it to all and sundry would not, in any ordinary usage of language, be said to be engaged in an operation connected with mining merely because the persons to whom the electricity to be supplied happened themselves to be engaged in mining operations. Something more would ordinarily be required. In the Western Australian Mining Town cases the extra factors consisted in the facts that the suppliers of electricity were also miners and that they were required, as part of their obligations in the development of the mine, to provide electricity. Those two factors assisted the Tribunal in reaching the conclusion that the generation of electricity was so bound up with and involved in the mining as to make the generation of electricity itself an operation connected in the relevant sense with the mining for minerals.
One of the difficulties of the application of s.164 to the facts of a particular case is that for a non-miner to qualify for a rebate the operation carried on by it has to be one connected with mining. However, the degree of connection is not express. Clearly there is a spectrum of circumstances extending from those cases where operations are connected in a direct way with mining to those where the connection is remote or perhaps trivial. The Full Court in Cliffs Robe River Iron Associates rejected the need for the connection to be direct. The same may clearly be said of the decision of the Full Court in Australian National Railways. But in neither case was it made clear whether any connection at all, no matter how remote, would be sufficient, or whether some greater degree of connection would be necessary, for example, a requirement that the connection must be "sufficient": cf Federal Commissioner of Taxation v Broken Hill Pty Co. Ltd (1969) 120 CLR 240 at 277.
It seem highly unlikely that the legislative intent was to provide a rebate for diesel fuel used in an operation where that operation had but a remote or tenuous connection with mining. That this is so must follow from the rejection of the rebate claim for the transportation of fertiliser in the Australian National Railways case. Thus, while the connection need not be direct, there must still exist a connection which is real and substantial. It will also then be a question of degree whether, in a particular case, there is a use of the diesel fuel in a connected operation.
That question of degree, in the present case, the Tribunal decided adversely to the applicants. As I have said, it was open for the Tribunal so to do and no error of law was involved in that. The appeals, so far as they relate to the claims under s.164(1)(a), must accordingly be dismissed.
The claims under s.164(1)(b)
51. As already indicated, the Tribunal did not find as a fact whether the generation of electricity, either by the Council or by Cowell, was "at" a residential property. It found that it was possible that that question could be resolved in favour of the applicants, having regard to the decisions in Collector of Customs, Tasmania v Flinders Island Community Association (1985) 7 FCR 205 and Collector of Customs v Perkins Shipping Pty Ltd (1989) 24 FCR 520. Cowell, particularly, relied upon these two cases.
In the Flinders Island case, the respondent was a company limited by guarantee acting, in essence, as a cooperative for a group of aboriginal residents forming a community on Flinders Island. It generated electricity for the community. It was conceded that the fuel was used by the respondent for the purpose of meeting domestic requirements, falling within the category specified in s.164(1)(b). The only question was whether the electricity was generated "at" residential premises. There were eight houses on the estate which shared the electricity generated. The generator did not stand on land occupied by any of the residential premises. The Court said (at 211):
"As is shown both by dictionary definitions and by the authorities, 'at' is a word of flexible meaning. The first meaning attributed to the preposition by The Shorter Oxford English Dictionary is: 'Expressing primarily the relation of a thing to a point of space which it touches; hence, indefinitely, the 'place' where it is, in the sense of 'close to, near, by, in etc'."
The word "at" clearly depends upon the context and subject matter as the Full Court observed in the Flinders Island case. It may be used in a sense meaning "near to" or "adjacent to". However, in the present context, as the Full Court said (at 213):
"...the word should be taken to require a close connection between the use and the residential premises but not use within the residential premises. What is a sufficiently close connection must depend upon the circumstances of the particular case... In this regard it appears that the Parliament intended to give a rebate in respect of use of diesel fuel for what might be called home generation of electricity for domestic purposes; as contrasted, for example, with the generation of electricity by commercial or local government supplier. It is consistent with that policy and the use of the word 'at', that the generation takes place in physical proximity to the supplied houses and that the resultant electricity be used only at premises falling within the definition of 'residential premises'.
In the result there were a number of factors which made it proper, in the Flinders Island case, to conclude that the generation took place "at" each of the residential premises. Those factors were said to be (at 213-4):
"...common ownership of each of those 'premises' by the respondent, the proximity of each house to the generator, the existence of relationships - other than merely contractual relationships - between the respondent on the one hand and each of the residents on the other and between the residents themselves, the supply to each resident of electricity at cost rather than as a commercial transaction, the communality of operation of the generator involving each resident taking his or her share of responsibility for the supply of electricity to them all and the fact that the generator was appropriate in size and design genuinely to fulfil the purpose of supplying the domestic needs of these eight houses. There is no question here of a colourable operation designed to disguise other purposes lying behind the installation, and operation, of the generator."
Perkins Shipping, to which the Tribunal also referred, concerned the availability of a rebate to a ship owner in providing amenities for the crew quarters on a multi-purpose roll-on roll-off ship.
As the Tribunal correctly pointed out, in addition to the locational test there is also a purposive test in s.164(1)(b). The diesel fiel in question must be used by the purchaser of it in:
"(i) providing food and drink for;
(ii) providing lighting, heating, air-conditioning, hot water or similar amenities for; or
(iii) meeting other domestic requirements of; residents of the premises."
Despite a strong submission to the contrary, in my view it is clear that the purposive use must be a use by the purchaser of the diesel fuel. It is not sufficient that someone else actually provide the matters referred to in ss.164(1)(b)(i) and (ii) or meet the domestic requirements as referred to in s.164(1)(b)(iii) of the Act. In other words, the rebate is not available merely because electricity is supplied to some person at residential premises where the person so supplied provides food and drink to others.
However, it does not seem to me that the Tribunal considered the possibility that the supply of electricity itself, if otherwise generated "at" residential premises, would fall within the words "meeting other domestic requirements" of residents of the premises. The word "domestic" in the context has its ordinary meaning of "of or belonging to the home, house or household" (Shorter Oxford English Dictionary and cf Federal Commissioner of Taxation v Forsyth (1981) 148 CLR 203 at 216 per Wilson J). I see no reason why electricity could not be said to be provided to meet the domestic requirements of residents of premises. Indeed, that seems to me an apt description.
In my view, it is simply not correct to say that a favourable application of the purposive test to the applicants was precluded by the Queensland Electricity Commission case. This was a matter just not considered by the Queensland Electricity Commission case at all. To the extent to which it was, then I think that case was, with respect, not correct.
It follows, in my view, that the claims made by both the Council and Cowell under s.164(1)(b) need to be returned to the Tribunal for a finding of fact to be made as to whether the generation took place at residential sites. Counsel for the respondent submitted that I should decide this matter myself on the basis of the evidence that was before the Tribunal, that evidence being undisputed. However, in debate on the matter there seemed to be dispute as to precisely the relationship of the generating plant, on the one hand, to the residential sites, on the other. Further, neither party seemed prepared to argue fully the factual question involved. This being the case I do not think that it is appropriate that I enter into the task of deciding what is peculiarly a question of fact. That is a matter for the Tribunal.
I should say, however, that nothing in the material to which I was taken by the parties suggests that it would be open to the Tribunal to find in a way favourable to the applicants. It may well be that I was not taken to all the evidence. Be that as it may, I think that it would be appropriate that I stay the operation of the order remitting the matter for determination to the Tribunal for a period of 28 days to see whether the parties can agree on the resolution of the factual matter and thus obviate, if possible, the necessity for the matter to be returned to the Tribunal on this issue.
The claim under s.164(1)(aa) by Cowell
62. The claim by Cowell that its supply of electricity was an operation connected with agriculture, involves the same considerations as did the claim of both applicants under s.164(1)(a). The issue may be summarised as whether the supply of electricity to agricultural properties and to residential properties in which farmers reside can be characterised as the carrying on of an operation associated with agriculture. That is an issue which, in my view, the Tribunal just did not address, although it presumably would have answered that question, conformably with its view on s.164(1)(a), adversely to the applicants. Its comment that a successful claim for the diesel fuel rebate by Cowell would be unlikely to result in the encouragement of agriculture by the provision of cheaper electricity, hardly seems to be to the point, and indeed may not even be accurate. In the absence of evidence, that matter would have to be speculative.
I agree with the Tribunal that the five towns of Kingoonya, Marla, Nundroo, Coorabie and Penong are not in any way analogous to the position of the towns in the Western Australian Mining Towns cases. They are certainly not part of the infrastructure of some agricultural industry in the same way as the infrastructure of a purpose-built mining town would be. I do not, however, think that that necessarily concludes the issue, particularly in respect of electricity supplied to farms. The mere fact that the bulk of the supplies to rural properties would be to residences on the farm, rather than for use to actually run equipment used in rural production, would again not seem to me to be the point. Ultimately, the Tribunal was required to, but did not, answer the statutory question whether, on the facts of the case, the generation of electricity, so far as that electricity was sold to agricultural farmers, was an operation connected with agriculture. It was open to the Tribunal so to find, but it did not deal with the issue. The matter must, for this reason also, be remitted to the Tribunal for determination.
The claim under s.164(1)(c)
64. The Tribunal also did not address the claim that electricity, or water as the case may be, involved a use of the diesel fuel "at a hospital". There was no finding on the question of whether the generation of electricity or the pumping of water took place "at" a relevant hospital. I must say that it seems to me highly unlikely that it did, but the matter was not considered. Contrary to the submissions of counsel for the Collector, there is no purposive test involved in a claim under s.164(1)(c). I reject also the submission that the nursing home or hospital referred to in that paragraph must be one run by the purchaser of diesel fuel. Again, but subject to any agreement which the parties may come to as to the resolution of this matter during the period in which my order shall be stayed, the matter must be returned to the Tribunal for determination.
Whether there was a question of law
65. It is obvious from the above discussion that a number of questions of law arose. Among these were the correctness of the Queensland Electricity Commission case followed by the Tribunal, the meaning of the words "connected with" and the question whether any connection with mining operations, however slight, might suffice. Further, it seems abundantly clear that in a case where all the facts are agreed and the only question is whether on those facts the matter necessarily falls within the claim for exemption, a question of law is involved. That this is so is clear from the Australian National Railway case (at 277), the Cliffs Robe River Iron Associates case (at 275), as well as from a large number of other cases including: Hope v Bathurst City Council (1980) 144 CLR 1 at 7; Haines v Leves (1987) 8 NSWLR 442 at 476; Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 355-6; State Rail Authority (New South Wales) v Collector of Customs (1991) 33 FCR 211 at 217; Commissioner of Taxation v Mount Isa Mines Ltd (1991) 28 FCR 269 at 277-8; Collector of Customs v Eveready Australia Pty Ltd (1992) 105 ALR 513 at 517; Federal Commissioner of Taxation v Bivona Pty Ltd (1990) 92 ALR 593 at 595; Federal Commissioner of Taxation v Roberts (1992) 108 ALR 385 at 390-91.
Once, however, the meaning of the concept of "operations connected with" has been determined, the question whether a particular operation is or is not connected with mining or agriculture, as the case may be, will involve merely a question of fact, for it involves a matter of degree.
It follows, in my view, despite the formal submission to the contrary by the Collector, that the Court had jurisdiction to entertain the appeal.
Conclusion
68. I would allow the appeal in part and remit to the Tribunal for determination in accordance with law so much of the claims of both the Council and Cowell as were made under s.164(1)(aa), (b) and (c) of the Act. As the applicants have been but partially successful, it seems to me that an appropriate order is that there be no order as to costs.
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