Eurovox Pty Ltd v Chief Executive Officer of Customs

[1998] FCA 1637

FEDERAL COURT OF AUSTRALIA

CUSTOMS AND EXCISE – Tariff Concession orders – whether radio cassette players and compact disc units of a kind used as original and replacement components in passenger motor vehicles are goods of a kind used as replacement components in a passenger motor vehicle

WORDS AND PHRASES – “replacement components”

Customs Tariff Act 1995 (Cth)
Customs Act 1901 (Cth) ss 269F, 269HA, 269SJ(1)
Customs Regulations 1926 (Cth) Reg 185(1)(a)

Hygienic Lily Ltd v Deputy Commissioner of Taxation (1987) 13 FCR 396 – cited
Commissioner of Taxation v Chubb Australia Ltd (1995) 56 FCR 557 - cited
Airovent Pty Ltd v Federal Commissioner of Taxation (1998) ATC 4800 - cited

EUROVOX PTY LTD v CHIEF EXECUTIVE OFFICER OF CUSTOMS

VG 151 OF 1998

JUDGE:         MERKEL J
PLACE:         MELBOURNE
DATE:           18 DECEMBER 1998

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 151  of  1998

BETWEEN:	EUROVOX PTY LTD APPLICANT
AND:	CHIEF EXECUTIVE OFFICER OF CUSTOMS RESPONDENT
JUDGE:	MERKEL J
DATE OF ORDER:	18 DECEMBER 1998
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The application be dismissed.

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

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 151  of  1998

BETWEEN:	EUROVOX PTY LTD APPLICANT
AND:	CHIEF EXECUTIVE OFFICER OF CUSTOMS RESPONDENT

JUDGE:	MERKEL J
DATE:	18 DECEMBER 1998
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

The Court

Introduction

Goods are not entitled to concessional rates of duty upon their importation into Australia pursuant to Item 53(a) Pt III of Sch 4 of the Customs Tariff Act 1995 (Cth) (“the Customs Tariff Act”) if the goods are “of a kind used as replacement components in passenger motor vehicles…”. The issue arising on the present appeal is whether certain radio cassette players and compact disc units are used as “replacement components” in vehicles when those players and units are goods of a kind used as replacement and original components in the vehicles.

Background

The applicant has appealed, under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth), from a decision of the Administrative Appeals Tribunal (“the AAT”) which confirmed two decisions of the respondent rejecting the applicant’s applications for a Tariff Concession Order (“TCO”) in respect of radio cassette players and compact disc units.

The first decision related to an application made on 25 September 1996 for a TCO for goods described as motor vehicle, radio – broadcast receivers combined with sound recording or reproducing apparatus (“radio cassette players”).  The second decision related to an application made on 11 October 1996 for a TCO for goods described as motor vehicle reproducers, digital audio, compact disc, laser beam (“compact disc units”).  A successful application for a TCO would entitle the applicant to import, free of duty, its radio cassette players and compact disc units, which are used as original components in passenger motor vehicles.  However, an unsuccessful application would result in the applicable rate of duty being 15 per cent.

The legislation

The applications for TCO’s were made pursuant to s 269F of the Customs Act 1901 (Cth) (“the Customs Act”) which provides for a person to apply to the respondent for a TCO by an application which is required to contain a full description of the goods to which the application relates.

Under s 269HA of the Customs Act, a TCO cannot be made if the relevant goods are goods in respect of which, under subs 269SJ(1) of the Act, the CEO is prevented from making a TCO. Subsection 269SJ(1) of the Customs Act provides that the respondent must not make a TCO in respect of goods:

“(aa)   described in terms other than generic terms; or

(a)      described in terms of their intended end use; or

(b)declared by the regulations to be goods to which a TCO should not extend.”

Subsection 269SJ(1A) of the Customs Act provides that goods are taken not to be described in generic terms if their description indicates they are goods of a particular brand or model, or that a particular part number applies to the goods.

Regulation 185(1)(a) of the Customs Regulations 1926 (Cth) provides that, for the purposes of subs 269SJ(1) of the Act, a TCO should not extend to goods:

“(a)in respect of which the general rate of customs duty specified in the Customs Tariff Act 1995 is 15%”

Item 53 Pt III of Sch 4 of the Customs Tariff Act provides certain exemptions which enable a general rate of 15% to be reduced to 5%, but under Item 53(a) the exemptions do not apply to goods:

“of a kind used as replacement components in passenger motor vehicles.”

The AAT decision

The issue for determination by the AAT was whether the goods the subject of the TCO applications were goods of a kind used as replacement components in passenger motor vehicles.

The AAT decided that the words “replacement components” were used in their ordinary and natural meaning which coincided with the meaning used in the trade.  In substance it concluded that the words meant replacement of a constituent part of a motor vehicle.  It was common ground that radio cassette players and compact disc units were constituent parts of a motor vehicle for the purposes of the definition.

The applicant’s cassette players and compact disc units were used in the assembly of locally manufactured motor vehicles and in the final assembly of imported passenger motor vehicles.  However, other brands of players and units were imported for sale in, what was described in the evidence as, the after sales market.  Those brands, which perform similar functions to the applicant’s units, are sold in retail outlets as replacement components.

The AAT concluded that notwithstanding that the applicant imported its radio cassette players and compact disc units as original component parts to be installed in new vehicles, other well known brands of radio cassette players and compact disc units were imported into Australia for use as replacement components in passenger motor vehicles.

The reasoning of the AAT for affirming the respondent’s decisions was set out in the following passages in its reasons for decision:

“The answer to the question of whether the term ‘replacement components’ has a commercial meaning well understood in the motor industry and is used in that sense rather than in its ordinary natural meaning does not necessarily determine whether the goods in question answer the description in Item 53.  This is because it is necessary to ask whether the goods meet the qualification, ‘of a kind used…’.

The use of the words ‘goods of a kind’ entails the determination of a relevant genus of goods Diethelm per Hill J, at 471.  In that case His Honour referred to the judgment of Gummow J, in Hygienic Lily Ltd v Deputy Commissioner of Taxation (1987) 13 FCR 396 at 399 where the Court considered whether the goods fell within the same item as under consideration in Diethelm and Chubb.  Gummow J held that the goods (three sizes of paper cups bearing designs including the trademark ‘McDonalds’) were of the genus ‘cups’, that class of goods being of a kind ordinarily used for household purposes.  Gummow J said:

‘…the setting in which the phrase ‘good of a kind’ appears suggests it is directed not to the use for which the particular goods in question were designed or manufactured, nor to the purpose to which it is intended those particular goods shall be put, but rather to the nature, quality and adaptation of goods in the class of genus in question.’

In our opinion the inclusion of the words ‘of a kind’ in the expression has the effect of broadening the class of goods covered by Item 53.  It is not specific to goods used as replacement components or ‘ordinarily used’, the latter being the expression under consideration in the cases referred to, but of a kind used as replacement components.

While it is accepted that the applicant’s goods are provided for use in the vehicle manufacturing process it is also clear on the evidence that other goods of the same basic features and functions to the Eurovox goods are sold through various commercial outlets as replacement components for passenger motor vehicles.  It was not suggested these other goods are other than replacement components.  Nor was it challenged that the other goods fall within the description of the Eurovox goods for which a TCO was sought.

For these reasons we would affirm the decision under review on both applications.”

The appeal

The applicant’s main criticism of the AAT’s decision related to the AAT’s alleged failure to distinguish between replacement components and original components for motor passenger vehicles.  It was said that as most motor passenger vehicle components were capable of use as original or replacement parts the effect of the decision of the AAT was to render nugatory the distinction intended to be drawn by the legislature between original components (which were able to be the subject of a TCO) and replacement components (which were not able to be the subject of a TCO).

The applicant submitted that as a result of the failure of the AAT to make the distinction required by the Act between the two kinds of components, the AAT erred in law in two respects. The first was said to be that if the genus the subject of the TCO applications was drawn by the applicant too widely, it was incumbent upon the AAT to accede to the request made on behalf of the applicant at the hearing to narrow the genus to radio cassette players and compact disc units “designed for installation as original components in passenger motor vehicles”. It was submitted that under s 33(3A) of the Acts Interpretation Act 1901 (Cth) the AAT had power to substitute the narrower category for that which was the subject of the applicant’s TCO applications.

In my view the AAT did not err in law in failing to accede to the request to alter the description of the goods so that they were limited to goods designed for installation as original components in passenger motor vehicles. The power conferred by s 33(3A) is subject to a contrary intention: see Statutory Interpretation in Australia, Pearce and R S Geddes Third Edition (1988) para 6.1 at 109. The statutory scheme in Div 2 Pt 15A of the Customs Act contains a contrary intention. A TCO is to be in respect of goods which are to be fully described in the TCO application: see s 269F. Section 269G provides for withdrawal of an application. After accepting a valid application the respondent must publish notice of it in the Gazette (s 269K).  A scheme for amendment of an application (including a notice in the Gazette of the amended description) is provided for in s 269L.  Section 269P only provides for the TCO to be made in respect of the goods the subject of an application which has been accepted by the respondent as a valid application.  I am satisfied that the intention of the statutory scheme is that TCO’s are only to be made in respect of goods the subject of an application for a TCO which has been accepted or amended, and gazetted as such, in accordance with the statutory provisions to which I have referred.  If it is intended to change the “kind” of goods the subject of an application, then an amendment is required to be made in accordance with s 269L.  That did not occur in the present case.

There is a further reason for rejecting the applicant’s submission.  The suggested amended classification is not one which would overcome the problem of the genus being stated too widely in the application.  As was stated by Gummow J in the passage cited above from Hygienic Lily Ltd, “goods of a kind” is directed not to the use for which the particular goods in question were designed or manufactured, nor to the purpose to which it is intended those particular goods shall be put but, rather, to “the nature, quality and adaptation of goods in the class or genus in question”.  In my view the proposed genus suggested by the applicants purports to relate to the use for which the particular goods in question were designed rather than to the nature, quality and adaptation of the goods.  Thus, on the evidence, the amended description can apply to goods that are used as replacement, as well as original, components.

The second error of law said by the applicant to have been made by the AAT was that in its decision it raised the question of whether the goods which were original components could also be replacement components but had failed to answer that question. In substance, the applicant contended that in order to maintain the intended distinction (which was recognised in Sch 4) between original and replacement components, Item 53(a) was to be interpreted as referring only to replacement components which are used “exclusively”, “principally” or “primarily” as replacement components.

I am not satisfied that the AAT erred in law in its conclusion that the goods the subject of the TCO applications are goods of a kind used as replacement components in passenger motor vehicles.  The question of whether goods are of the kind described in the application is essentially a question of fact for the AAT: see Commissioner of Taxation v Chubb Australia Ltd (1995) 56 FCR 557 at 559 per Burchett J, 569-570 per Hill J and 575 per Tamberlin J. In the present case there was ample evidence before the AAT upon which it was entitled to conclude that the radio cassette players and compact disc units described in the applications are goods of a kind used as replacement components in passenger motor vehicles.

I am also not satisfied that in arriving at its conclusion the AAT erred in its interpretation of Item 53.  The AAT’s task was to determine the characterisation to be given to the genus of goods described in the application and to inquire whether these goods were of the kind described in Item 53(a).  That is precisely what the AAT did.  The applicant’s contentions require that adverbs such as “ordinarily”, exclusively” “principally” or “primarily” are to be read into Item 53(a) thereby limiting its application.  However, if the legislature intended that goods which were “ordinarily”, “exclusively”, “principally” or “primarily” used as replacement parts were to constitute a restriction on the genus in Item 53 then, as is common place in respect of exemptions and classification in sales tax legislation, the legislature could have been expected to have said so: see for example Airovent Pty Ltd v Federal Commissioner of Taxation (1998) ATC 4800 at 4803-4805 per Sackville J. However, the adverbs which would restrict the class or genus of goods described in Item 53 are absent.

In these circumstances, the issue for the AAT was one of characterisation of the goods the subject of the application.  That issue was essentially one of fact which the AAT was required to address by reference to the use of the kind of goods described in the applications.  If the goods were goods that merely had the capacity or potential to be used as replacement parts but were not of a kind used as replacement parts then they would not fall within goods of a kind described in Item 53(a).  If the goods described were characterised as goods of a kind used as original, rather than replacement, components they would also not fall within Item 53(a).

However, the evidence accepted by the AAT in the present case established that the replacement usage of the goods described was real and actual rather than merely a possible or trivial usage.  In those circumstances there was ample evidence before the AAT upon which it was entitled to conclude that the goods the subject of the application were goods of a kind used as replacement components in passenger motor vehicle.  It did not err in law in doing so.

Conclusion

For the above reasons I am satisfied that the AAT did not err in law in affirming the decisions

under review.  In these circumstances the application of the applicant is to be dismissed with costs.

I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel

Associate:

Dated:             18 December 1998

Counsel for the Applicant:	Mr P J Hanks
Solicitor for the Applicant:	Comlaw
Counsel for the Respondent:	Mr S Gageler
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	10 December 1998
Date of Judgment:	18 December 1998