El Dahir and Commissioner of Taxation

[2004] AATA 102

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 102

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No VT2003/48

TAXATION APPEALS  DIVISION		)
Re		SAMER EL DAHIR

Applicant

And COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Deputy President S P Estcourt QC.,

Date30 January 2004

PlaceMelbourne

Decision The decision under review is affirmed.

[Sgd S P Estcourt QC]

Deputy President

CATCHWORDS

Customs and Excise – tobacco producer licence – whether applicant fit and proper person to hold such licence – whether refusal “necessary to protect the revenue” – decision affirmed.

Excise Act 1901 – s39A

Re Martino and Australian Taxation Office [2002] AATA 1242

REASONS FOR DECISION

30 January 2003 Deputy President S P Estcourt QC.,        

1. The applicant has applied to the Tribunal to review a decision of the Commissioner of Taxation of 26 February 2003 refusing the grant of a tobacco producer licence pursuant to the provisions of s39A(2)(a) and s39A(2)(j) of the Excise Act 1901 (“the Act”).

2. In summary the respondent’s reasons for refusal under those provisions of the Act were:

(a)that the applicant was not considered to be a fit and proper person;

(b)that the applicant would not be able to keep proper books or accounts to enable the respondent to adequately audit those books or records; and

(c)to protect the revenue.

3.      At the hearing of this appeal before the Tribunal, the respondent’s counsel in defending the decision to refuse the licence application made by the applicant relied principally on the applicant’s police record, which included convictions for assault occasioning actual bodily harm and malicious damage in March 1995 and convictions for using a false instrument and making and using false statements to obtain money in July 2000. 

4. The respondent’s contention was that these convictions justified the respondent’s refusal to grant the licence on the basis that the applicant was not a fit and proper person within the meaning of s39A(2)(a) of the Act, as expanded by s39B and also meant, insofar as the convictions involved making and using false instruments, that he would be at high risk of failing to comply with the requirements of the legislative regime controlling the tobacco industry insofar as they related to the keeping and providing of records.

5.      The Tribunal is able to deal with this last contention immediately.

6. Section 39A(2)(j) of the Act provides as follows:

“(2)     Without limiting sub-section (1) but subject to sub-section (3), the Collector may refuse to grant a licence if, in the Collector’s opinion:

(i)the applicant would not be able to keep proper books of account or records to enable the CEO adequately to audit those books or records.”

7. The applicant’s convictions for dishonesty are based on his involvement in the making of a number of false documents and the use of at least one of them in order to dishonestly obtain a bank loan. There is no suggestion in the evidence that the applicant lacks the capacity to keep proper books of account or records for the purposes of the Act, rather the respondent’s contention is that because of the applicant’s propensity for dishonesty he could not be relied upon to provide honest records. In the Tribunal’s view, that contention is outside the ambit of the ground of refusal contained in s39A(2)(j) which, in the Tribunal’s view, is directed at an inability to keep proper records, and not to a propensity for dishonesty, which is dealt with in s39A(2)(a) as explained by s39B of the Act.

8.      The Tribunal is equally able to dispose summarily of the respondent’s contention that the applicant is not a fit and proper person because of the offences for which he was convicted on 30 March 1995.  Those convictions are:

§Burwood Local Court on 30 March 1995 – assault occasioning actual bodily harm – fined $300;

§Burwood Local Court on 30 March 1995 – malicious damage – ordered to serve 80 hours of community service and pay compensation of $2,500.

9.      The applicant gave uncontradicted and unchallenged evidence to the Tribunal, both orally and in the form of a written statement, which suggests that the family dispute out of which the charges against him arose, is at least capable of being viewed on the basis that the defendant was provoked and that his response was out of character and has not been repeated.  It is the Tribunal’s view that the facts surrounding that incident would not of themselves render the applicant unfit to hold a tobacco producers licence. 

10.     Of much greater concern to the Tribunal are the offences involving dishonesty in July 2000. 

11.     The undisputed facts are that on 20 July 2000, the applicant appeared before Magistrate Lucas at the court house at Burwood, where he was convicted as follows:

(d)use a false instrument with intent – placed on a 2 year bond (recognisance) and fined $500;

(e)make false statement to obtain money – placed on 2 year bond and fined $300;

(f)make false instrument with intent – placed on a 2 year bond and fined $300.

12. Section 39A(2)(a) of the Act provides as follows:

“(2)Without limiting sub-section (1) but subject to sub-section (3), the Collector may refuse to grant a licence if, in the Collector’s opinion:

(a)where the applicant is a natural person – the applicant is not a fit and proper person.”

2.Section 39B provides:

“The Collector may, in considering whether an actual person is a fit and proper person, have regard to:

(b)whether, within 10 years before making the application, the person was convicted of:

…

(ii)an offence against the law of the Commonwealth, or of a State or of a Territory that is punishable by imprisonment for a period of 1 year or longer or by a fine of 50 penalty units or more.”

13.     The applicant gave evidence that shortly prior to his detection in respect of the matters for which he was convicted in July 2000, he had obtained some work with the Granville Mower Service for a couple of months, fixing lawnmowers.  He said that while he was working with Granville Mower Services he noticed an empty shop next door and he thought he could open a tobacco shop and so he did. 

14.     The applicant gave evidence that he wanted to borrow $15,000 to carry out some renovations and extensions to the old house in which he lived with his wife and 6 children.   He reasoned that he would be able to open his tobacconist business and make enough money to pay the loan back.

15.     In his evidence the applicant said that when he approached the ANZ Bank at Auburn he was not sure whether it was the last week of his work at the Granville Mower Service or whether he had left shortly before, but whichever it was, he was either unemployed or shortly thereafter to his knowledge to become unemployed.

16.     The applicant gave evidence that at the Bank he saw one, Rachid Kabbara, who he believed to be an Arab speaking employee of the Bank, but who on the evidence before the Tribunal would appear to have been a facilitator remunerated by the Bank on a commission basis for introducing successful loan applicants.

17.     The applicant was told by Mr Kabbara that his income would not be enough to succeed in obtaining a loan.  Mr Kabbara gave the applicant the name of an accountant outside the bank to whom the applicant went and who confirmed that his income was not enough to successfully obtain a loan. The accountant then proceeded, on the applicant’s evidence, to use the information he gave him about his employment at Granville Mower Services to fabricate a number of documents, falsifying the applicant’s financial position.

18.     The documents provided by the accountant to the applicant included a bogus group certificate dated 13 August 1999, 3 false pay advice slips for the period 6.1.2000 to 24.2.2000 and 2 letters of reference from the Granville Mower Centre dated 20 January and 24 February 2000, falsely stating that the applicant was at those dates earning a weekly gross wage of $800 and an annual gross salary of $41,600.

19.     The applicant in support of his loan application says that when made to the Bank used one only of the false letters of reference and kept the bogus pay slips and group certificate in his briefcase as he realised, he said, that whilst all of the documents were false, the documents apart from the letter of reference were “more serious than the letter”.

20.     When the applicant completed his application for loan with the ANZ Bank at Auburn, he also falsely stated that he had been employed at the false income of $41,600 by the Granville Mower Centre for some 3 years and 2 months.  That is to say, three years longer than was the fact of the matter.

21.     In considering whether the applicant is a fit and proper person, the Tribunal instructs itself generally in accordance with the comments of Deputy President Forgie in Martino v Australian Taxation Office [2002] AATA 1242 . Deputy President Forgie there said as follows:

“43.What is apparent from these passages from the High Court’s judgment in the Bond case is that the matters we must take into account in determining what is a fit and proper person depends upon the context in which those words appear. In the context of the Act, the person whose fitness and propriety is under consideration is not the licence holder but an associate of the licence holder, a third party as it were. The fitness and propriety of the associate is not determinative of whether the licence holder’s licence may be suspended or cancelled for the Collector must not take either step unless satisfied that it is necessary to do so to protect the revenue (s.39G(2)). Even taking into account that limitation, it seems to me that the privileges, obligations and responsibilities of a licence holder under the Act must have some hand in shaping the matters to which regard must be had in deciding whether an associate is a fit and proper person.

44.What are those privileges, obligations and responsibilities? If, as in this case, the licence is a producer licence, the licence holder has the privilege of growing tobacco. A person who does not hold such a licence may not knowingly or recklessly grow tobacco (Act, s.28). Unlike a wheat farmer or a market gardener, who produces his or her crop for his or her own profit, a tobacco farmer grows each crop for his or her own profit and also for the benefit of Australia’s revenue for it is subject to the payment of excise under the Excise Tariff Act 1921. Tobacco is excisable and, as such, is subject to the CEO’s control until delivered for home consumption or for exportation to a place outside Australia, whichever first occurs (Act, s.61(1)). While it is subject to that control, the tobacco must not be moved, altered or interfered with except as authorised by the Act (s.61(2)). A Collector may give a person written permission to remove goods that are subject to control from one place to another or to deliver certain goods for home consumption without entry (ss.61A and 61C). The effect of s.60 is that a person who has possession, custody or control of the tobacco must keep it safely and, when requested by a Collector to do so, must account for it to the Collector’s satisfaction. If he or she fails to do either of those things, the Collector may make a written demand for him or her to pay the Commonwealth an amount equal to the amount of the excise duty which would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand.

45.As part of the regime of control under the Act, the licensed producer must produce tobacco in accordance with it (Act, s.29), store tobacco at licensed premises (Act, s.30) and maintain accounts and records in accordance with the Excise Regulations 1925 (“the Regulations”) (Act, s.32). Accounts are required of the number of hectares on which the producer grows tobacco leaf, the quantity of tobacco leaf harvested, the quantity of tobacco leaf cured, and all sales of tobacco leaf (Regulations, r.3). Detailed records are required in various returns and books required under rr.4, 5 and 6. Regulation 39A requires a producer to apply for permission to destroy Australian tobacco leaf stored on his or her premises. Even if permission is given, it may only be destroyed by an approved method and evidence must be given to the Collector to show that it has been so destroyed.

46.Given the nature of the privileges, obligations and responsibilities of the holder of a production licence, qualities of diligence, honesty and the likelihood of his or her observing the law would seem to be pivotal characteristics to be taken into account in considering whether an associate of a licence holder is a fit and proper person.  It may be that there are other characteristics that may be relevant but, as I have only limited evidence about Mr Giuseppe Martino, I do not need to do so in this case.”  (Emphasis added)

22.     The applicant gave uncontradicted evidence that he is remorseful in respect of his involvement in these offences of dishonesty, that he has never done anything of a similar nature since, and that he has since borrowed money from lending institutions and has had no difficulty in making full and timely repayments.

23.     The applicant also gave uncontradicted evidence that he has been involved in the tobacco industry working on his brother’s tobacco farm for some 3½ years in the same area in which he has purchased property, and in respect of which he has made this application for a producers licence.  He is well respected in this local community and is a good and generous neighbour.

24.     The difficulty for the Tribunal in assessing the weight to be attached to this evidence of recent good conduct is that the period since the applicant’s convictions is relatively short, particularly in the context of the applicant’s permanent residence in Australia, which only most recently commenced in 1989.

25.     After carefully weighing the nature of the privileges, obligations and responsibilities of the holder of a production licence, the Tribunal is of the view in the context of the particular legislative regime governing the control of the tobacco industry, that the respondent was justified in refusing to grant a licence to the applicant on the ground that he was not a fit and proper person.  In the respondent’s reasons for decision in respect of the review of the primary decision-maker’s refusal, it was said:

“You contend the scale of these offences should not warrant disqualification from obtaining a tobacco producers licence.  The gravity of a person’s actions depends upon the vantage point from which they are viewed.  In the context of this case we must view it in the context of a licensing regime.”

26.     In the Tribunal’s view, that comment is valid and unfortunately in that context, the applicant’s willing participation in the production of false documents designed to dishonestly obtain a loan from a lending institution, his use of at least one of those false documents and his willingness to provide false information to the Bank about the length of his employment, all demonstrate the lack of the pivotal characteristic to be taken into account in considering whether a person is a fit and proper person to hold a licence, namely honesty.

27.     In addition to considering whether the applicant is a fit and proper person to hold a licence, it is also necessary for the Tribunal to consider whether it can be said that the refusal is “necessary to protect the revenue”.

28.     This is so, given that s39A(3) provides as follows:

“If the application is for a producer licence or dealer licence, the collector must not refuse to grant the licence under paragraph (2)(a), (b), (c), (d) or (f) unless the collector is satisfied that it is necessary to refuse to grant the licence to protect the revenue.”

29.     Deputy President Forgie considered the meaning of the words “necessary to protect the revenue” in her decision in the case of Martino v Australian Taxation Office (supra).  In that case, Deputy President Forgie said:

“50.     … The expression “protect the revenue” is not defined in the Act and I am not aware of any authorities that have considered it. The word “revenue” has been considered in Stephens v Abrahams (1902) 27 VLR 753 by Hodges J in the context of an appeal against a conviction for, in essence, presenting a false document with intent to defraud the revenue contrary to the Customs Act 1901 (“Customs Act”).  Hodges J took:

“the ‘revenue’ to be moneys which belong to the Crown, or moneys to which the Crown has a right, or moneys which are due to the Crown, as indicated by sec.153 of the Customs Act 1901, which says:- All duties shall constitute Crown debts charged upon the goods in respect of which the same are payable and payable by the owner of the goods and recoverable at any time in any Court of competent jurisdiction by proceedings in the name of the Collector.’ I would include those duties as part of the revenue, and the question is, Was there evidence of an intent to defraud the revenue-that is, to get out of the revenue something that was already in it, or to prevent something from getting into the revenue which the revenue was entitled to get?  That, I think, would be defrauding the revenue.” (page 767 and see also Parker v Churchill (1986) 9 FCR 334 at 348, per Jackson J)

51.      The ordinary meanings of the word “protect” include “keep safe, take care of” (The New Shorter Oxford English Dictionary, 3^rd edition, 1993) and they would seem to be the senses in which the word is used in the expression “protect the revenue”.  Mr Martino’s licence may only be cancelled if it is necessary to take care of the money belonging to the Crown in right of the Commonwealth.  That has the aspect of ensuring that the Commonwealth receives all that it should in the form of any excise that is ultimately payable in respect of tobacco originally grown on Mr Martino’s farm and keeps all that it receives. It also has the aspect of not spending more of the Commonwealth’s money than need be spent in carrying out its supervisory duties and responsibilities under the Act and in ensuring that the tobacco is not marketed illegally in Australia, and so avoid the payment of excise duty, if it cannot be marketed legally.

52.      What is meant by the word “necessary”?  I have taken the view that (sic) the meaning adopted by Allen J in State Drug Crime Commission of NSW v Chapman (1987) 12 NSWLR 447:

“As to the word ‘necessary’ it does not have, in my judgment, the meaning of ‘essential’.  The word is to be subjected to the touchstone of reasonableness.  The concept is one as to what reasonably is necessary in a commonsense way.  As Pollock CJ said in Attorney General v Walker (1849) 3 Ex 242; 154 ER 833:

‘It may be stated as a general rule that those things are necessary for the doing of a thing which are reasonably required or which are legally ancillary to its accomplishment.’” (page 452) (Emphasis added)

30. In the Tribunal’s view, these comments of Deputy President Forgie are apposite to the present case and it can and ought be said that the refusal of a producers licence to the applicant is reasonably necessary in a commonsense way as a means of ensuring that the Commonwealth receives all that it should in the form of excise from tobacco grown in this country, and also that it does not have to spend more of the Commonwealth’s money than is necessary in supervising production of tobacco under the Act and ensuring that tobacco grown by the applicant is not marketed illegally in Australia so as to avoid the payment of excise duty.

31.     In short, in the Tribunal’s view, it is reasonably necessary in a commonsense way to assist in accomplishing the objective of maximising the recovery of excise on legally grown tobacco that producers licences not be granted to persons with, at least a recent, conviction involving the use of fraud to obtain financial gain.  The case may be different where the person’s actions have in the past been dishonest, but their recent conduct demonstrates diligence and honesty.   As the Tribunal has said however, notwithstanding the applicant’s uncontradicted evidence as to his recent record of industry and also his standing in the local community, too little time has passed since his dishonest conduct to allow a judgment to be made in the applicant’s favour, at least as at the present date.   A further application in a year or two more may need to be viewed differently if the applicant’s good conduct continues.

32.     It follows that the decision of the Tribunal is that the decision under review is affirmed.

I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President S P Estcourt QC., (Deputy President)

Signed: K L Miller (Administrative Assistant)

Date/s of Hearing  3 December 2003
Date of Decision  30 January 2004
Counsel for the Applicant         Mr Robert Deane
Solicitor for the Applicant          Stewart Thompson and Francis
Counsel for the Respondent     Mr Brendan Kissane
Solicitor for the Respondent     ATO Legal Practice