Goliath Portland Cement Company Ltd and Ors and Chief Executive Officer of Customs

[2004] AATA 678

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 678

ADMINISTRATIVE APPEALS TRIBUNAL      )

)       Nos T1998/131, T1998/132 T1999/39, T1999/63,         T1999/210, T2001/23, T2001/45, T2001/46  

GENERAL ADMINISTRATIVE  DIVISION		)
Re		GOLIATH PORTLAND CEMENT COMPANY LTD and OTHERS

Applicants

And CHIEF EXECUTIVE OFFICER OF CUSTOMS

Respondent

DECISION

Tribunal Mr S P Estcourt QC, (Deputy President)
Associate Professor B W Davis AM (Part-time Member) 

Date29 June 2004

PlaceHobart

Decision The decisions under review are affirmed.

[Sgd S P Estcourt QC]

Deputy President

CATCHWORDS

Customs and Excise – rebates – diesel fuel – whether mining for minerals – whether minerals must be separated – (Cth) Customs Act 1901 s164(7) – “Mining operations”.

Goliath Portland Cement Co Ltd; Shaw Contracting Pty Ltd and CEO of Customs [1998] AATA 796

Goliath Portland Cement Co Ltd & Anor v Chief Executive Officer of Customs (2000) 101 FCR 11

Chief Executive Officer of Customs v Adelaide Brighton Cement Ltd [2003] FCA 780

David Mitchell v Chief Executive Officer of Customs (2001) 107 FCR 252

Adelaide Brighton Cement Ltd v CEO of Customs [2002] AATA 688

REASONS FOR DECISION

29 June 2004 Mr S P Estcourt QC., (Deputy President)
Associate Professor B W Davis AM (Part-time Member)    

1. In each of these applications the applicants seek the review of decisions of the respondent, refusing rebate under s164 of the Customs Act 1901, (“the Act”), for diesel fuel used, in what the applicants contend are, “mining operations” within the meaning of s164(7) of the Act and which are undertaken at Railton in Tasmania.

2.      The periods of claim encompassed by these applications fall between 5 January 1996 and 5 January 2001, and the claims relate to diesel fuel used at what are termed, the New Mine Site and the Old Mine Site, for the purposes of removal of overburden, extraction and transport of limestone and clay and stockpiling of recovered materials.

3.      Goliath Portland Cement Co Ltd, (“Goliath”), holds a consolidated mining lease at its Railton site, where two separate areas are used to extract limestone and clay for processing into the saleable products of crushed limestone and cement.  Some materials are purchased externally for use in this process.

4.      The Old Mine Site at the southern end of the lease was used from the 1920’s until September 1999.  Overburden clay deposits were removed to permit extraction of limestone deposits rich in calcite.  The clay deposits contained silica, alumina and iron oxide, with few other contaminants.  As a consequence extraction operations were easier and less complex than at the New Mine Site.

5.      Materials were extracted by drilling and blasting, sorted by colour and physical characteristics, then stockpiled in layers with chemical testing prior to being fed to a crusher and blender which was smaller and less technologically advanced than machinery used at the New Mine Site.  The extracted and blended materials were subsequently used in cement production on site, with limited sales of commercial limestone as well.

6.      The New Mine Site is at the northern end of the mining lease, where there is a substantial deposit of Ordovician limestone, about 1000 feet deep which is overlain by overburden of varying thicknesses.  Stripping commenced in 1992-93, with limited limestone and clay extraction in 1994 and full production from 1999.  Current operations extend some 80 metres deep.  A new crusher plant and trunk conveyor system came into operation in September 1997.

7.      The New Mine Site has proven more difficult to operate than the Old Mine Site, since it contains some undesirable material (“dirty stone”) and some limestone with more clay seams.  The company has adopted more regular and sophisticated sampling, to ensure that undesirable contaminants are restricted.

8.      The limestone and clay, which contain the targeted minerals calcite, silica, alumina and iron oxide, are extracted by drilling and blasting, following initial mapping and management planning of the site.  Materials obtained are sorted and conveyed to a series of stockpiles near the crusher plant.  The crusher incorporates a continuous online analyser, so that sorting and mixing can be used to achieve desirable characteristics, prior to use of materials in cement production.  The calcite, silica, alumina and iron oxide are not separated from each other or from the limestone and clay recovered.

9.      Stockpiles near the crusher site include both high and lower grade limestone and clay sorted into four different types dependent upon silica, alumina, iron oxide and alkali content.  Each summer the company undertakes overburden stripping, tests clay to verify its chemical and mineral content and then creates a twelve month stockpile of targeted minerals which can be mixed with the calcite and other materials from crushed limestone for subsequent commercial use in cement production.

10.     Diesel powered vehicles and machinery are used in operations at both the Old Mine Site and the New Mine Site to dewater the excavation area, drill, blast, extract and load limestone and clay from each mining area.  Methods and equipment are varied according to needs and the planned extraction sequence is carried out by contractors engaged by Goliath to conduct its operations.  The applicants have claimed diesel fuel rebate for all operations up to the crusher plant.

11.     As part of the operations, dumping of unwanted materials and rehabilitation of the site are conducted to restore the natural environment.

12.     Diesel fuel rebate claims similar to those in these applications were before this Tribunal in September 1998 in Goliath Portland Cement Co Ltd; Shaw Contracting Pty Ltd and CEO of Customs [1998] AATA 796. In that case the Tribunal held that the company’s extraction operations constituted mining for minerals because their purpose was to obtain lime which was present in the limestone mined in the form of the mineral calcite and thus the diesel fuel purchased and used in those operations qualified for rebate under s164 of the Act.

13. The Tribunal’s decision in that case was taken on appeal to the Federal Court, and on 22 August 2000 a Full Court reinstated the respondent’s decisions to refuse the rebate on the basis that it could not be said that lime was a “mineral” which was “recovered” within the meaning of s164 of the Act, since although limestone was recovered and the process which followed might be described as one of the beneficiation of limestone, this was only as part of a continuous process in the manufacture of cement [Goliath Portland Cement Co Ltd & Anor v Chief Executive Officer of Customs (2000) 101 FCR 11 at pp.17-18].

14.     The applications for rebate with which the Full Court’s decision was concerned included not only diesel fuel purchased and used in the removal of overburden at the New Mine Site and extraction operations at the Old Mine Site, but also diesel fuel purchased and used by Goliath to fire the kilns at the cement plant. The decision did not concern extraction operations at the New Mine Site, which are said to be different to those at the Old Mine Site.

15.     In contrast with those applications with which the Full Court’s decision was concerned, it is contended by the applicants that the claims for rebate presently before the Tribunal concern diesel fuel purchased and used for the purpose of the extraction operations carried out at the New Mine Site (although in some cases the Old Mine Site), and that none of them makes any claim for diesel fuel purchased and used to fire the kilns.

16.     These matters, it is contended by the applicants, involve important points of distinction. Firstly, because in David Mitchell v Chief Executive Officer of Customs (2001) 107 FCR 252 mining operations similar to those in the present case were found to have come to an end when the limestone containing the mineral calcite was extracted from the earth and in Chief Executive Officer of Customs v Adelaide Brighton Cement Ltd [2003] FCA 780, again a case similar to the present, Mansfield J noted that the applications before him were clearly made to reflect “the line” recognised in David Mitchell as to when mining operations by the extraction of limestone material, ultimately for use in the manufacture of cement, came to an end. Secondly, it is claimed that the operations at the New Mine Site involve different mining methods and different equipment.

17.     The operations at the New Mine Site described above and detailed in evidence before the Tribunal are not, in the Tribunal’s judgment relevantly different, to the point of the crusher plant, from the operations to that point at the Old Mine Site which were in evidence before the Tribunal in 1998.

18.      Attached to the applicants’ statement of facts and contentions and adopted in evidence before the Tribunal was a document entitled “Schedule 2” which detailed the differences between operation methods employed at the Old Mine Site and the New Mine Site over the relevant periods.  With the possible exception that twice each week at the New Mine Site Goliath now crushes high grade limestone, including some pure calcite, to ensure it has a stockpile of material high in calcite and free of any clay at all, it is the Tribunal’s view that the operations said to be mining operations are, to the point of the crusher plant, materially indistinguishable from the operations to that point in evidence before the Tribunal in 1998.

19.     In circumstances where nothing has changed in any material respect between the facts in evidence in the 1998 applications and those in evidence in the present case, and leaving aside for the moment considerations of stare decisis, the Tribunal, sees no reason  why it would make findings of fact in any way different to those made in the earlier decision and finds accordingly to the point of the crusher plant.  That is to say, the Tribunal finds that the applicants’ activities (including rehabilitation of the mine sites), concerned with extracting the limestone and clay from the earth, crushing them and stockpiling them, involve mining for minerals.

20.     If the Tribunal is not obliged, by virtue of the Full Court’s decision in Goliath, to conclude, as a matter of law, for the sole reason that the respondent did not separate the minerals from the limestone before use, that it was mining for limestone, which is a material excluded from the definition of “minerals” in s164(7) of the Act, it would not so find.

21.     The Tribunal’s view is that as a matter of fact, the minerals, calcite, silica, alumina and iron oxide are nonetheless recovered despite not being separated from each other and from the limestone and clay before being used.

22.     There is no commercial necessity to further refine the four minerals before their use in the manufacture of cement.  As Deputy President Forgie said in Adelaide Brighton Cement Ltd v CEO of Customs [2002] AATA 688 at [48]:

“Adelaide Brighton Cement wins the four materials from the earth and does so purposively because it has a specific use for them.  It no less wins or recovers them by virtue of winning or recovering all four at once.”

23.     The difficulty for the applicants however, is that notwithstanding that this Tribunal is disposed to find as a matter of fact that, to the point of the crusher plant, Goliath is mining for the minerals needed to make cement, namely calcite, silica, alumina and iron oxide, the Full Federal Court in Goliath has held as a matter of law, that because the end product sought is cement, the minerals are recovered only as a part of a continuous process in the manufacture of cement and not as part of “mining operations” as defined by s164(7) of the Act.

24.     The Tribunal adopts the following passages from the closing submissions of Mr Robertson SC, counsel for the respondent, as a correct analysis of the reasoning and findings of the Full Court in Goliath:

“44.     In Adelaide Brighton Cement Mansfield J erroneously held that the only issue before the Goliath Full Court was whether Goliath was mining for lime and thereby failed to appreciate the significance of the conclusion of the Goliath Full Court (101 FCR 11) at 18 [29] that ‘Calcite is not the mineral mined and recovered’.  Mansfield J erroneously distinguished Goliath on that basis.

45.      The Goliath Tribunal found that Goliath was mining for calcite.  The Full Court at 18 [29] said that “Calcite is not the mineral mined or recovered” and thus expressly rejected that finding by the Goliath Tribunal which was contended for by Goliath at all stages of that litigation.

46.      The Goliath Tribunal at (1998) 53 ALD 659 at 664 [18] and 668 [39] noted Goliath’s contention that it did not mine for limestone, but for the calcite in the limestone, so that the exclusion of limestone by paragraph (b) of the amended definition of ‘minerals’ did not apply and the further submission that the purpose of their operations was to mine for, primarily, the mineral calcite, because that mineral is known to be a source of calcium oxide, namely the mineral lime.  The applicants also submitted that they mined for ‘alumina, quartz and iron-bearing minerals within the clay.’  The Goliath Tribunal accepted the above submissions at 669 [46]-[47].

47.      On appeal to the Full Court (101 FCR 11) Goliath consistently maintained the argument that it was mining for calcite.  The Full Court noted at 16 [22] that Goliath: ‘submitted that the initial object of the operations was the recovery of calcite from limestone; and the overall purpose was to recover lime.’  And at 18 [26] noted Goliath’s reliance on calcite: ‘They [Goliath] … point to calcite and lime occurring in the process.’ (their underlining)

48.      The Full Court considered and dealt with lime and calcite in turn.

49.      The Full Court rejected Goliath’s submission that lime was a recovered mineral, stating at [28]: ‘In our view it could not be said that lime was a ‘mineral’ which was ‘recovered’.’ (their emphasis)

50.      The Full Court rejected Goliath’s submission that calcite was recovered stating at 18 [29] that: ‘Calcite is not the mineral mined or recovered’.  That conclusion was a finding of law, because the appeal was limited to a question of law, and the conclusion rejected a submission put by Goliath.  It is not a passing factual comment.  It is directly inconsistent with the findings of the Goliath Tribunal at [47] upon which Goliath relied. (their emphasis)

51.      The reasoning for that conclusion is apparent from what precedes it.  At 17 [24] the Full Court referred to the previous cases on ‘mining operations’, noting that central to it ‘is the notion of the recovery of minerals’ and that ‘The completion of recovery may be said to occur, and mining operations conclude, when no further process is undertaken … to separate the mineral from any material adhering to it’.

52.      At 18 [26] the Full Court said that Spender J in North Australian Cement had: ‘held that the extraction of limestone for the purpose of the manufacture of cement was properly characterised as mining operations, limestone being the mineral.’  The Full Court then noted:  ‘That might also be accepted for the purposes of the present case, although it does not assist the appellants [Goliath] because of the exclusion of limestone from the definition of minerals.  They go further and point to calcite and lime occurring in the processes.’

53.      Similarly in [27] the Full Court observed that the end product in Goliath’s operations is cement and held that: ‘Limestone is clearly recovered and the process which follows may be described as one of beneficiation of the limestone, but only as part of a continuous process in the manufacture of cement.’

54.      The Full Court’s reasoning may fairly be summarised as follows.  Limestone was certainly recovered, but that was insufficient because limestone was excluded from the definition of ‘minerals’.  What followed was the production of cement.  Calcite was present in the limestone, but was never separated or recovered from it.  Therefore the central requirement of the definition of ‘mining operations’ that there must be operations for the recovery of ‘minerals’, was not satisfied.

55.      The Full Court made orders ‘finally disposing of the matter rather than to remit it for further consideration by the Tribunal, since it turned upon a question of construction’ at 19 [30].  The end result was that Goliath was denied diesel fuel rebate, due to the Full Court’s application of the exclusion of limestone from ‘minerals’.

56.      The Goliath Full Court’s reason for concluding in the opening sentence of [29] that it was unnecessary to deal with the question is explained in the very next sentence: ‘Calcite is not the mineral mined or recovered’.  The suggestion that the Goliath Full Court somehow ‘did not advert to’ the finding of the Tribunal in that case that ‘Goliath mines for calcite’ is untenable, as the finding is quoted in full by the primary judge in Goliath [Chief Executive Officer of Customs v Goliath Portland Cement Ltd [1999] FCA 666; 22 AAR 182 at [15]], and Goliath’s express reliance upon calcite in the appeal, which was necessarily based upon the finding of the Tribunal, is referred to twice by the Full Court, at [22] and [26], prior to the Court’s ruling in [29] quoted above.  The Full Court dealt expressly with the two limbs of Goliath’s case, lime in [28] and calcite in [29].”

25.     Faced with the Full Court’s decision in Goliath, so understood, the Tribunal is bound to apply it, given that the Tribunal finds that the facts which are in evidence in the present cases are no different in any material respect to those in the earlier applications.  Notwithstanding that no claim for rebate is made in respect of fuel used past the point of the crusher plant, Goliath nonetheless remains a manufacturer of cement and the application of the Full Court’s reasoning is not, in the Tribunal’s judgment, avoided by restricting the claim for rebate to fuel used in operations prior to the firing of the kilns.

26.     The Tribunal does not take the view that the decision of the Federal Court in David Mitchell (2001) 107 FCR 252 that it was open to the Tribunal in that case to hold that the extraction was for calcite and thus constituted mining operations, should be preferred to the Full Court decision in Goliath.  The decision in David Mitchell does, with respect to the Court and in particular to Spender J, appear to the Tribunal to proceed on the basis of a misunderstanding as to the findings of both the Tribunal and the Full Court in Goliath.

27.     The Tribunal adopts the following passages from the closing submissions of Mr Robertson SC as a correct analysis of the erroneous basis relied upon in David Mitchell to distinguish Goliath:

“61.     At 257, Spender J having reproduced at [27] paragraph [29] of the judgment of the Goliath Full Court observed at [28] that:

‘The statement in that passage of the Full Court’s reasons that “calcite is not the mineral mined or recovered” is a statement inconsistent with the findings of the Tribunal in the present matter.’

62.      The respondent submits that Spender J erroneously distinguished the Goliath Full Court decision on that basis.  The statement was also ‘inconsistent’ with a finding of the Goliath Tribunal.  Spender J did not recognise that in paragraphs [22] of [26] of the Goliath Full Court decision the Full Court was rejecting a submission made by Goliath, and overturning for legal error a finding made by the Goliath Tribunal, and therefore, in holding that calcite was not the mineral mined or recovered, the Goliath Full Court was expressing a conclusion of law (the appeal being limited to questions of law).”

28.     The Tribunal is also mindful of the decision of Mansfield J in Chief Executive Officer of Customs vAdelaide Brighton Cement Ltd [2003] FCA 780, where his Honour held that it was open to the Tribunal in that case to hold that Adelaide Brighton Cement Ltd was mining for minerals or, put another way, that it is not an error for the Tribunal to find that an applicant is not mining for limestone when it is targeting the minerals in it. As already noted however, Mansfield J appears, with respect to His Honour, to be in error as to what he thought was the only issue before the Goliath Full Court. Moreover the Tribunal is bound by the conclusion of law of the Full Court in Goliath on the same material facts as in that case.

29. This Tribunal is bound to hold that the applicants in this case are not mining for minerals for the purpose of the definition of “mining operations” in s164(7) of the Act because the recovery of, either limestone, which is excluded from the definition of “minerals” in the Act in any event, or the recovery of calcite and the other targeted minerals, is only as part of a continuous process in the manufacture of cement.

30.     At the time of writing these reasons the reserved decision of the Full Court is awaited in the appeal against the decision of Mansfield J in Adelaide Brighton Cement.  It is regrettable that for reasons pertaining to the composition of the Tribunal in this case, this decision must be handed down by 30 June 2004 and thus without the benefit of the Full Court’s decision in that case.

31.     The decision of the Tribunal is, that for the reasons given, the decisions under review are affirmed.

I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of
Mr S P Estcourt QC., (Deputy President)
Associate Professor B W Davis AM (Part-time Member)

Signed:  K L Miller (Administrative Assistant)

Date/s of Hearing  17, 18, 19, 20, 21 May 2004
Date of Decision  29 June 2004
Counsel for the Applicant         Dr G Flick QC with Mr N Beaumont   

Solicitor for the Applicant           Freehills
Counsel for the Respondent     Mr A Robertson SC with Dr A Gelbart
Solicitor for the Respondent       Australian Government Solicitors