Ha & Lim v NSW

[1997] HCATrans 70

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S45 of 1996

B e t w e e n -

NGO NGO HA

First Plaintiff

SOKHIENG LIM

Second Plaintiff

and

STATE OF NEW SOUTH WALES

First Defendant

BRUCE BUCHANAN

Second Defendant

R. G. SMITH

Third Defendant

Office of the Registry
  Sydney  No S165 of 1996

B e t w e e n -

WALTER HAMMOND & ASSOCIATES PTY LIMITED

Plaintiff

and

STATE OF NEW SOUTH WALES

First Defendant

BRUCE BUCHANAN

Second Defendant

I.P. SMITH

Third Defendant

Case Stated

BRENNAN CJ
DAWSON J
TOOHEY J
GAUDRON J
McHUGH J
GUMMOW J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 12 MARCH 1997, AT 10.17 AM

(Continued from 11/3/97)

Copyright in the High Court of Australia

BRENNAN CJ:   Yes, Mr Spigelman.

MR SPIGELMAN:   Your Honours, could I go back to the Commonwealth’s submissions.  I was dealing with the four examples at pages 10 to 11 of the Commonwealth’s submissions.  I think I may have said that all four of them deal with inputs.  That is wrong.  Two of them do; two of them do not.  The first example is an input example, namely, circumstances in which tyres, which are obviously also a consumer good, are an input into the manufacture of cars.

Now, there are two ways of dealing with this.  Our first and primary submission is that in so far as the State levy, whatever it is, falls indifferently on the two areas then it is not an excise, but, alternatively, we accept that there may be, as your Honour the Chief Justice put to me, a necessity to exempt the commodity in so far as it is an input and the reason for that would be because it is taxing a step in production, perhaps a step in production of the commodity into which the tyres go.

As a matter of substance of course, it may be the case that, even on the first way we put the case, a tax of a particular raw material - one thinks perhaps of iron ore in the Hamersley Iron Case - would in its particular circumstances be on a step in production of steel because no one buys iron ore on its own.  So, in that sort of case, even though it may be on a commodity, by reason of the circumstances, in substance it is on production.

So our first answer to this example is that in one way or another attacks on an input would be exempt.  But our next answer, and our second answer to this example, turns on the phrase “thereby disadvantages local production”.  The important thing, as I think your Honour Justice Dawson has said, particularly in Capital Duplicators, any State tax has that effect, namely, a payroll tax, a land tax, disadvantages local products in so far - and it is just like any other cost.  Wage increases disadvantage local products but, dealing with taxation only, the question is whether this aspect is a material test for distinguishing excise taxes from any other form of taxes.  We say it is not.  If all forms of tax have this effect, then the effect itself is not the critical or determinative test - it may be a relevant test - for distinguishing excise taxes from others.

DAWSON J:   Once you depart from calculating the tax by reference to the quantity or value of the goods involved you are left in this state, are you not?

MR SPIGELMAN:   Yes, because one then has no sure guide as to how to distinguish excises from other taxes.

DAWSON J:   Except that it has an effect on the price of the goods - the cost of production.

MR SPIGELMAN:   As your Honours put and I as I have just adopted, any State tax has that effect.  One can have a wistful look back over one’s shoulder of criterion of liability, for example, but we are not putting that as an alternative way of distinguishing the particular field of taxation with which ‑ ‑ ‑

DAWSON J:   But once you abandon that and reference to the quantity or value of goods you are completely at sea. 

MR SPIGELMAN:   Yes.  The quantity or value I think went first in terms of the history of the matter.  Our third answer to this example is that, of course, the Commonwealth can pass legislation to overcome this disadvantaging effect, if it wishes.  The most obvious form of such legislation would be an increase in customs duty, but it may be that it can pass legislation of a more direct character.  As for the second, we are dealing here with substitutes not inputs.  This is the case where there is a customs duty on olive oil and the States taxes the substitutes for the olive oil, namely, all other vegetables oils is the example used.

What this does is to change the price relativity of the imports and local production but it does so - and the critical thing about the example is the targeting for specific incidents, namely, it says the nature of the State tax is targeted to the substitutes for the imports which are subject to the customs duty, and a protective duty, not just a revenue duty.

Now, that key of the targeting means that it is not on olive oil, and it would not have this effect if the tax was on all vegetable oils including olive oil, if the State tax was, but it is in the targeting to the substitutes, the locally produced substitutes.  The first answer to that is when the State does target in that very specific way then it may be that the particular form of taxation is appropriately characterised as in substance a tax on the local production, and one gets that from the circumstances.  The targeting that is specifically directed, or, at least whether intentionally or not has the incidence of the very specific character here.  If that targeting applies then one may in substance say it is a tax on the local production even though it may be expressed to come into effect at some later point of the distribution chain.

BRENNAN CJ:   What do you mean by “targeting”?

MR SPIGELMAN:   Well, the example says you have olive oil and that is somehow exempt from the State taxation, namely, the State has taken, in this example, the precise area of local production which is sought to be protected by Commonwealth policy.  It has taken the vegetable oils and specifically excluded the imported kind of substitute.

BRENNAN CJ:   Why do you say “specifically excluded”?  Why not simply a sales tax on vegetable oils?

MR SPIGELMAN:   Not including olive oil.

BRENNAN CJ:   Well, either that or sales tax on safflower oil, canola oil, and nominate them?

MR SPIGELMAN:   Yes.  Now, in either case, your Honour, when one looks at the State tax in this example however expressed, all non‑olive oils or a list of them ‑ there is a targeting process - targeting - that does not necessarily mean it intentionally be done with this objective in mind, but the example isolates the local production in circumstances where there is a close substitute imported, and that is the example.  Now, by limiting the State tax to the local production in the context where the substitute is imported, that is what I mean by targeting: the limitation of a State tax in that context, and if that is such a limitation we say as a matter of substance it may be a tax on local production.

It depends on the circumstances.  One can get much more complicated circumstances than this where there is some olive oil imported and some locally produced and matters of that character, but questions of substance are inherently, we submit, matters which will depend on those sorts of circumstances, and the specific example that the Commonwealth gives here, we submit, is, on its face, something that will not pass the test that we propound.

BRENNAN CJ:   What is it that converts, on your argument, a sales tax into a tax on production in that situation?

MR SPIGELMAN:   Where there is a sales tax limited to an area of local production where there is a close substitute that is imported.

DAWSON J:   Really, the effect is to nullify the customs duty which is imposed by the Commonwealth.  That is the ultimate question because it is the observe of customs duty.

MR SPIGELMAN:   That may be expressing my proposition perhaps in a higher level of generality.

DAWSON J:   Yes.

KIRBY J:   But the problem is that customs duty can be fixed by reference to an objective fact as it crossed the boundary and the problem I see with your theory of the section is that it can so easily be undermined. All you do is put the tax a little later and you have then completely undermined the obvious purpose of the Constitution which was to reserve this exclusively to the Commonwealth.

MR SPIGELMAN:   Your Honour, I am not quite sure what your Honour is putting as the obvious purpose.  We accept that there is an obvious purpose at the level of tariff policy ‑ ‑ ‑

KIRBY J:   By that I mean this is one of those relatively rare provisions where the framers have gone to the trouble of charting a territory and saying, “This is exclusive to the Commonwealth”, and that is rare.  They have gone to that trouble for a purpose.  The purpose is to mark it out.  With customs, it is marked out by an objective fact.  It seems rather unlikely to me that with excise, it would be marked by a variable definition that you can avoid by the very simple procedure of, put the tax a little later down the line, and that just does not gel with going to all this trouble to mark it out as exclusive.

MR SPIGELMAN:   May I say, the question of what is variable is a question which we say strikes at the Commonwealth and plaintiff’s case, not at ours.  We say our alternative is the only true, precise test in the sense that when we say “home production”, that is the equivalent in terms of certainty to the customs act of importation that one knows.

What one then faces is a substance rather than form question as to when in substance - if you impose a tax on a step in production, either production itself, or a step in production, there is no uncertainty.  The uncertainty here applies only in so far as one applies to a step later than production, or a step in production, and the test there is simply - the uncertainty arises from the circumstances in which one, as a matter of substance, is answering what is a certain test; namely, home production.

KIRBY J:   But the problem for that, from a textual point of view, for my own part, I always feel it is safer if we can go back to the text, and I think you have been trying to do that.  But if you go back to the text, and if you take those commas as indicative, bounties are expressed to be on production, but excise is not and, therefore, we are left with a word - “excise” - which the Court has constantly said over 90 years is elusive.  We have got a series of decisions which give guidance, but when we go back to the text, the framers withheld the word “production” from excise and, therefore, we must think, “Well, now, did that mean that it is a wider concept?” and given that you can so very, very readily define yourself out of the excise by simply putting the tax a little later down the line of the contact with the goods.

MR SPIGELMAN:   Can I say this, your Honour?  We do not define ourselves out of excise by putting the tax a little later on the goods.  How we define ourselves ‑ ‑ ‑

KIRBY J:   Well, I realise you say there is an objective fact of production, manufacture, and that is objective.  But, from the point of view of raising revenue, if the concept is wider, you can very easily circumvent it by placing your tax at a point later than production or manufacture.

MR SPIGELMAN: No, your Honour, and it does not circumvent at any level of purpose, we submit, if at the later point than manufacture it applies equally to imported goods and domestic goods and the reason for that is if it does so apply it has no effect on a protective purpose, namely, it does not affect the relativities of the two kinds of goods. That may come up again in example (c) in the Commonwealth’s submissions and I will come to that in a moment, but can I say this? I do not want to repeat myself, but your Honour has directed attention to the specification of production or export and your Honour says there is no such specification with respect to excise. There is in section 93 which identifies excise in the same terms as the bounties are in section 90, namely, an “excise paid on goods produced or manufactured in a State”.

So that concept is elsewhere in the Act and may I just repeat my point that bounties are - any test of what is the purpose of these provisions of the Constitution must answer the question why you can give - must be consistent with the fact that the States can give bounties on distribution or sale, that is to say, this is the two sides of the coin argument that I put at the outset of my submissions and the fact that production or export is specifically mentioned in relation to bounties is not a point of distinction with the words “customs” and of “excise”. It is, in fact, corroborative of the fact that the intention in the use of the word “excise” was regarded by the founders as by definition limited to home production.

McHUGH J: Section 93 deals with a very special situation and the fact that the words “paid on goods produced or manufactured” follow from the word “excise” in that section seem to me to tell against your argument about section 90 because the words are at large. They are words of limitation in section 93.

MR SPIGELMAN: We say the same applies as words of limitation with respect to where those same words appear after “bounties” in section 90. They are words of limitation in one; they are in the other.

KIRBY J:   They are not the same word.  I know we have to be very careful about expressio unius, but the fact is that in 93 they are there “produced or manufactured”, in 90 it is “production”, and it is within the context of bounties and not in the context of excise, as the commas indicate.

MR SPIGELMAN:   There is no doubt that those words ‑ ‑ ‑

KIRBY J:   I am not saying that any of this is easy, and the history of the Court’s grappling with it indicates that it is not, but I think, as you have been attempting to do, our surest guide is to try to get back to the text and see what it was that was the purpose of the combination of sections here.

MR SPIGELMAN:   We say it is a tariff policy purpose and not a monopoly of taxation on commodities purpose.  I addressed your Honours on that yesterday.  I reiterate my basic submission on text which, in our submission, has not been dealt with, and that is that, if States can give bounties on sale, what is the purpose?  What we submit is that the purpose has to be defined in such a manner as is consistent with the States having that power.  I think I have dealt with the substitutes point, namely, example (b).  I may or may not have said that, even if my targeting proposition not be correct, then once again we are in the position where the Commonwealth can pass legislation which has the effect of overriding the State tax.

The next example, (c), is a restricted example.  It is a non‑ad valorem tax, namely, it is not a percentage:  it is an increase by a similar amount.  It distorts relativities because the imported product has a qualitative advantage.  I think your Honour Justice McHugh mentioned shoes as an example, although in the context we were discussing yesterday, I think a percentage increase rather than a non‑ad valorem increase, as this example specifies.  Obviously this effect depends on the customs duty.  It has no such effect if the customs duty changes.  It is presumed in this example that the customs duty does not change.  That is to say, the Commonwealth can restore whatever it wanted its tariff policy to be by the simplest of legislative changes, namely, an increase in customs duty.

That highlights one simple fact about this which we have said a number of times:  any cost increase on the imported product has the same effect - that includes taxes as well as other forms of costs - but any other State impost - payroll tax, land tax, increases - has the same effect of changing the ability of the local manufacturer to compete with the import.  Once again, we say this effect is no way of distinguishing an excise from any other form of tax.  Finally, we also say in this case ‑ ‑ ‑

BRENNAN CJ:   The difference between those taxes that you have referred to such as payroll and tax that we are concerned with here is, I suppose to sum it up, the difference between indirect and direct taxes in some ways.

MR SPIGELMAN:   Yes, it can be.  It is an appropriate distinction.

BRENNAN CJ:   The indirect taxes, the payroll tax, that depends on volume of production, does it not, of the commodity, the unit cost?

MR SPIGELMAN:   It may, but so directly may payroll tax be related to volume and production, in the sense that if you put on more staff then ‑ ‑ ‑

BRENNAN CJ:   That is what I am suggesting.  Its relationship to the volume of production is not as direct as a tax which is calculated by reference to the quantity of the goods themselves.

MR SPIGELMAN:   Yes, it may not be, but we have got away from that being a standard, namely, one no longer tests excise by reference to quantity matters.  Yes, there would be no doubt it is ‑ ‑ ‑

BRENNAN CJ:   When you say you do not test it by reference to quantity matters, that does not mean that the nature of the imposition is not itself a relevant factor in determining the character of the tax.

MR SPIGELMAN:   When one has a list of factors of the character your Honour identifies we can readily accept that something related to quantity can be more closely related to the indirectness, or the goods, if one likes, than something which may be so related but perhaps indirectly, like a payroll tax which depends on the quantity of labour.  Nevertheless, your Honours, if our test is correct the question becomes one of not asking whether it is on the goods in the way of the old formula but whether or not it is on the domestic production.  In that respect, the process of production, payroll taxes are not further removed from the discrimen of the tax that we propose than taxes directly associated with quantity, because the process of production are still part of ‑ ‑ ‑

BRENNAN CJ:   That seems to me to be a big point that you need to address, because if - and it goes back to that second instance again - we are speaking about a tax on domestic production and we are speaking about a tax which is imposed by reference to the quantity of goods or the value of goods and it is imposed at some point subsequent to the emergence from the factory door, then the opportunity of describing that tax as a tax upon production, short of consumption, seems to me to be very substantial indeed.  It is very difficult to draw that bright line between the time that it leaves the factory door and the time at which the tax is imposed.

MR SPIGELMAN:   Yes, because one is there dealing with an in substance test at a point at which the actual criterion of liability - if I could use that phrase for this purpose - is other than obviously a step in production itself.  We say that there is longstanding authority, going back to as far as Commonwealth Oil Refineries, that it is a question of substance, even on the test we now propound.

BRENNAN CJ:   Well, first sale, one can identify that fairly readily as a tax upon production.

MR SPIGELMAN:   It being the sale by the manufacturer referable to how much he gets.

BRENNAN CJ:   Yes.  Second sale, more difficult.

MR SPIGELMAN:   May I say, as I said yesterday, if we had not gone to Parton and drawn the line out here we would have a line of authority by now which defined that indifferent factual circumstances.  The factual circumstance in example (b) is a specific example where, for the targeting reason I mentioned, it may be that if this tax is imposed on distribution, or even say one may say in substance, by reason of the targeting, it is on production.  That is not our primary submission but we can see how it could be said.

BRENNAN CJ:   I do not want to delay you because I understand generally the thrust of your submissions, but if you take that as an example you are going to impose, say, a sales tax on the sale penultimate to consumption and the way in which you characterise that as a tax upon domestic production is simply that there happens to be an alternative imported product.  So that you have got ‑ ‑ ‑

MR SPIGELMAN:   Subject to a customs duty.

BRENNAN CJ:   Well, subject to a customs duty.  Perhaps exempt from a customs duty, but imported.

MR SPIGELMAN:   And it is a close substitute.

BRENNAN CJ:   That might be a matter of variability.

MR SPIGELMAN:   Substance tests, I think, always will be, your Honour.

BRENNAN CJ:   Yes, so substitutability plus tax upon the quantity or value, and you have a tax upon domestic production.  It does not seem to be a very bright line, does it?

MR SPIGELMAN:   Your Honour, once one gets into questions of substance it will not always be a bright line.

DAWSON J:   But you do have an ultimate guiding principle.

MR SPIGELMAN:   Yes.

DAWSON J:   On the majority’s view at the moment you do not.  You do have an ultimate guiding principle and you have asked the question whether it distorts the tariff policy.  Then that would be the guide.

McHUGH J:   That seems to me to be a much vaguer guide than asking whether or not it is a tax on the step in the production or distribution of goods.

MR SPIGELMAN:   Yes.

DAWSON J:   That is not the test any longer.

MR SPIGELMAN:   Yes.

McHUGH J:   If your argument is correct it really takes away from the government the right to control or encourage industries.  I mean, if the federal government wants to encourage a computer industry in this country so they put on a tax of 100 per cent on imported computers, and then State governments or one State government decides to tax the sale of computers 30 per cent, it reduces demand, and perhaps that is the end of the industry.

MR SPIGELMAN:   Each of these four examples we say, and I will come to this point in relation to example (c) - and I was about to - if the Commonwealth believes that is happening it can stop it by exercise of its other legislative powers. The issue for this Court is whether the Constitution should be so construed as to stop that for all time irrespective of whether or not with respect to any particular industry, the Commonwealth is interested in doing anything.

This is a case in point. The Commonwealth comes here and says, “Our legislation is valid” for different reasons. One can infer that our legislation and the tax that we impose is not offensive to any Commonwealth policy, but it is to be presumed that the Constitution makes it so for all time, subject to the exception of Dennis Hotels et cetera. We submit that that is not the original intention, but making effective Commonwealth policy on matters of that character is carried to a certain extent by the Constitution but it is also, to a certain extent, left for the Parliament to assert its superior legislative powers under 109.

The question really is ‑ your Honour, and I think we are at idem, the Commonwealth policy with respect to tariff policy must be protected. The issue is to what extent the Constitution mandates that protection rather than leaving at least some part of the detail of the protection to be left to the Commonwealth Parliament to assert its policy. I do not think that would ‑ ‑ ‑

McHUGH J:   I know, but one of the problems is it does not always have the power to deal with it.  As you pointed out yesterday, a lot of markets are local, although I am not sure these days, particularly with the Internet, to what extent there can be said to be any really local markets now.

MR SPIGELMAN:   If your Honour pleases, to the extent to which there has been a drift away from localisation of markets then, of course, the relevant Commonwealth powers to which I have been referring are expanding in terms of more interstate intercourse in the case of the Internet, perhaps, rather than trade and commerce.

McHUGH J:   One can order clothes from stores interstate, one always could, I suppose.  Catalogues have been sent out for a long period of time, but no doubt there are plenty of local markets around, although they are probably declining rather than expanding.

MR SPIGELMAN: Our basic submission in all of these cases is that each of these examples can be fixed by Commonwealth legislation if it wants to, and the question is whether or not, in a context where the Court has in other respects found the implication of federalism in the Constitution and has defined that in certain ways, where one is dealing with something which is at the heart of the existence of the States as a separate polity, namely, their power to tax, the Court should be slow, we submit, in such a context to read the scope of the purpose of particular constitutional provisions more broadly than is necessary.

DAWSON J:   And here we are talking about exclusivity, not power as such, and your reply is the degree of exclusivity is to be found in one place, anyway, which is the limitation on the bounties provision, because bounties are the most obvious means of encouraging commerce.

MR SPIGELMAN:   Yes, as taxes are the most obvious means of discouraging whatever aspect of commerce one wishes to discourage. 

McHUGH J:   Yes.

MR SPIGELMAN:   Could I come to the fourth example?  It is raw material imported free of duty.  This is also an import case.  It is not a sales tax.  I mean, perhaps I should indicate these four examples, with the possible exception of the third, namely (c), do not address the case that is before the Court; namely, a retail sales tax, or a wholesale tax on a commodity in the form it will go to the final consumer.  One is not dealing here with an input of any character, let alone a raw material, such as in (d).

I am not quite sure whether (d) is meant to say what it says.  The second sentence says:

A State tax applying to the locally manufactured product would then increase the cost of that product when exported -

Now, this does not seem to make any particular link to the raw material. What one is talking about here is a State tax on exports. Now, that may be a Customs duty, just in the same way as bounties are on exports of goods in section 90. It may be that it is not meant to say this. It may be a State tax applying to the raw material that may have been what was intended.

McHUGH J:   That is the way I read it.  They are saying if you tax the raw material, then you increase the cost of production, therefore, you reduce the capacity to export in competitive markets.

MR SPIGELMAN:   Then it is exactly the same as example (a).

McHUGH J:   Except operating at a different - - -

MR SPIGELMAN:   Raw material rather than tyres.  But for all legal purposes it is the same, and my answers to (a) apply; namely, it may or may not be, in substance, a tax on the production.  If one is dealing with something like iron ore, there probably would be, because there is no market for iron ore other than as a commodity.

GAUDRON J:   It would look to be very much like a Hematite Case, would it not, which you concede is probably valid, on your analysis.

MR SPIGELMAN:   That was a tax on a step in production.

GAUDRON J:   I am sorry, was probably invalid on your analysis, yes.

MR SPIGELMAN:   Yes.  Anyway, that seems to be the thrust of what was intended.  Once again we make the two points, any State tax is capable of having this effect and the Commonwealth can override it if it wants to.  Could I come to the issue of which and how many cases are to be overruled, if our proposition is right?  We think there may only be two.  Parton, itself, is on, I think, South Australia, or it may have been Western Australia’s list of cases that needs to be overruled. 

It would appear that in so far as the Parton formula extends beyond distribution to a sale to consumers, if it does so extend - your Honours will recollect that it did not use the words “before” and “after” at that stage; they came later - that if the Parton formula does extend that far, it is obiter because this case was about distribution, it was not about consumer sales, and similarly in Bolton v Madsen, which adopted and applied the formula, it was also obiter because that was a tax on transport which was, in fact, found to be valid.  So whilst the formula has been accepted, there are, in fact, very few cases that apply that part of the formula, namely, the final tax on retail sale or even penultimate wholesale sale, with which we are concerned in this case.

McHUGH J:   What about Philip Morris?  Would it not have to be overruled?

MR SPIGELMAN:   No.

McHUGH J:   It was a manufacturer, was it not?

MR SPIGELMAN:   Yes.

McHUGH J:   And a wholesale tax?

MR SPIGELMAN:   Can I come to those in order?  I think the only one of the franchise cases that may need to be overruled would be that part of Dickenson’s which referred to the regulation.  There were three bits in Dickenson’s.  The two provisions imposing the legislation were found to be valid because they imposed it on consumption, but the third part was the regulation was struck down which made the retailer responsible for its collection.

BRENNAN CJ:   In the light of your approach to the matter, how should Dennis Hotels have been decided?

MR SPIGELMAN:   Dennis Hotels would be a valid form of licence fee by reason of the fact that it applied indifferently to liquor produced in Australia and imported liquor and that third part of Dickenson’s that was, in fact, decided adversely to the State revenue should also have been upheld. 

Just going back to Parton, could I ask your Honours to - I do not want to read it again, but there was in there a tax on dairymen and owners of milk depots.  Milk depots were a step in production, namely, they mixed or treated the milk.  That appears from pages 255 point 4 and 254 point 1.  A dairyman, if one looks at 254 point 2, which was the other person who bore the tax, may have also been a step in production because there is something about him preparing the commodity for sale, but at least it was clear, I think, that it probably extended, when one looks at it, as far as distribution of some character, but Parton did not extend as far as retail sale, namely, the sale to a consumer. 

There was expressly excluded from the incidence of the tax in that case what was defined as a “milk shop” and a milk shop was somewhere where you bought goods on the premises, you did not supply goods to another premises, and that category of dairymen who were milk shops were not subject to the tax and that reads to us as if this tax did not extend to a retail sale at all.

So that the formula in Parton, in so far as it extends to a retail sale, was obiter.  Similarly in Bolton v Madsen, it was not concerned with retail - which accepted the formula.  There were three cases involving primary production like Logan Downs, livestock, Gosford Meats, slaughter of animals, and Kailis, fish processing, which were all excises but none of them involved the kinds of steps that are in issue in this case, namely, retail sale or wholesale sale in this case with respect to a commodity which is in its final form, namely, in the form that it is going to be sold by retail.  Anderson’s was found not to be an excise, and I will come to that in a moment.

We then have the group of receipts duty cases from Western Australia.  There is the Iron Ore Case which may be explained from the way I have said as falling within my ‑ ‑ ‑

DAWSON J:   That is Chamberlain’s Case.

MR SPIGELMAN:   Yes, Chamberlain was the manufacture of tractors.

DAWSON J:   That is right.

MR SPIGELMAN:   IAC was locally manufactured cars.  They were both held to be excise, even though - they are the two cases which we think probably do need to be overruled.

DAWSON J:   They were wrong anyway.

MR SPIGELMAN:   There was a recepts duty that applied indifferently to domestic manufacture and imports in the way for which we contend.

DAWSON J:   Their correctness has been questioned on any view in any event.

MR SPIGELMAN:   They are the two cases, and that part of Dickenson’s to which I referred, which we think are decisions of the Court contrary to the test for which we contend.  Obviously in this case we are concerned with propounding an alternative test within which we fall, but the facts of this case are in fact limited to that last point, namely, consumption, the final act of retail sale and the act of wholesale of a product in that final form.  We accept that the test which we propound, conformably with what your Honours Justices Toohey, Dawson and Gaudron have put, goes beyond the facts necessary for this case.  It would be enough for us to not go quite as far, but obviously we are seeking leave to reopen Parton to allow the Court to put what is a troubled area of its jurisprudence on what we believe is at least a firm footing and a coherent footing and one to which one does not need anomalous exceptions.

McHUGH J:   But this is a high risk strategy on the part of the States, is it not?  If you want us to go back and examine the cases for 50 years and we hold that Parton was wrongly decided, why should we stop at the franchise cases?  If we think they were wrongly decided, why should we not overrule those?

MR SPIGELMAN:   Your Honour, it is a high risk strategy.  It is why the States have taken a different position to that which most of them took at the time of Capital Duplicators, and if your Honours are overruling Parton, then we all appreciate, as we have said in our submissions, that the process of such reconsideration may involve us losing some things on which we presently rely, but it is high risk strategy.

McHUGH J:   Yes, I know, but I am saying if we have got to look at this area afresh, and if we come to the view that Parton was rightly decided but that the franchise cases were wrongly decided, then why should not we overturn the franchise cases?

MR SPIGELMAN:   For all of the reasons that your Honours have refused to in the past - and I will be coming to that in a moment, if I may.

KIRBY J:   There seems to be a conceptual ambivalence in your view:  you are urging reopening if it favours you but urging restraint if it does not favour you.  That is a natural thing.

MR SPIGELMAN:   This will no doubt come as a great surprise to your Honour, but ‑ ‑ ‑

KIRBY J:   That is a natural thing for you to do, but you see, unfortunately, unlike you, we have to try to be conceptual.

GUMMOW J:   In fairness to you, Mr Spigelman, I do not think the Commonwealth in their written submissions really face up to all these possibilities either.

MR SPIGELMAN:   We appreciate there is a certain Pandora’s box quality about this process, however, our basic submission is that if Parton is to stay then the exceptions to Parton, which have been developed for good reason by reason of the breadth of Parton, are matters that should also stay, by reason of the breadth of Parton and the progressive tearing away of other matters which confine Parton, whether it be the value test or the criterion of liability test.

McHUGH J: What disturbs me, Mr Solicitor, is this. If the franchise cases are good only as a matter of precedent but are not authorised by the Constitution, then it is one thing to say, as a matter of precedent, people can be liable civilly for taxes. It seems to me you enter another dimension altogether when the State wants to gaol people for doing that which the Constitution says they cannot do but which is, as a result of some precedents of this Court, the Court has allowed the States to do.

MR SPIGELMAN:   Nothing has changed in that respect - and obviously I was going to address this - since the Court established those precedents and refused leave to reargue them on several occasions.  That is to say, the legislation at all times contained provisions of enforcement leading to fines.  The question of imprisonment arises by reason of a conspiracy to defraud charge, which is the one that Mr Roberts’ client faces.  That was also an available mechanism of enforcement at all times but the Court on previous occasions refused leave to reopen and therefore maintained the validity of the relevant legislation.

So that has not changed.  May I say not only has it not changed, it will save me the time obviously when I come to prospective overruling, the same principle applies.  We say it is still the case.  I was coming to that.  Perhaps I may refer to that briefly again.  We say that all of the franchise cases are basically correct for different reasons that we propound, namely, each of them applied to liquor, tobacco, petrol, indifferently as to whether or not it was imported or on local production.  So the discrimin of taxation was not local production either as a matter of form or of substance.

There was, your Honour, the question in the patent formula of how it applied to goods of local provenance and the joint judgment in Capital Duplicators at 589 to 590, came to the conclusion that excise extended to all internal taxes as distinct from customs which was simply the point of importation.  This is, as it were, another bright line.  One can accept that as a bright line distinction, namely, point of entry, that is a customs, anything inside which is on goods is internal.  We say there is an equal bright line point of entry , customs,  or anything which is on domestic production, namely, local provenance is the alternative.

The passage at 589 to 590 of Capital Duplicators does not identify a substantial body, we submit, of other authority, including post Bolton v Madsen authority, which identified the concept of excise as used in the Constitution with locally produced goods. Could I take your Honours to Anderson’s 111 CLR 353. That is a case in which it was found not to be an excise, but the passages I wish to take your Honours to are the passages which restricts the concept of excise to goods of local provenance even in the context of the Bolton v Madsen acceptance of the Parton formula.  If one looks at page 373, which is in the judgment of Justice Kitto, the last full paragraph on the page:

It is now established, as the Court said in Bolton v Madsen, that for constitutional purposes duties of excise are taxes directly related to goods (i.e. goods originating in Australia), imposed at some step in their production or distribution before they reach the hands of consumers.

This is the Court accepting the broad formula perhaps which had come from Parton and been accepted in Bolton v Madsen in the joint judgment but, nevertheless, confining it, we say, to goods originating in Australia.  That is repeated at about point 3 on the next page.  Your Honours will see there is a passage:

The reason is that a duty of excise is, at bottom, a burden upon home production or manufacture.

The reference is “home production or manufacture”:

Obviously it is such a burden if it is payable upon a step in production or manufacture in its character of such a step.  Not so obviously but just as certainly, it is such a burden if it is payable upon a step in distribution -

et cetera.  So this is the substance not form, we submit but, notwithstanding the application of the broader formula extending to distribution, we say it is the home production on manufacture that is the focal point.  Justice Taylor at page 376 agreed with Justice Kitto.  Then on the next page at 377, Justice Menzies:

In deciding whether stamp duty so imposed is a duty of excise, nothing is, I think, to be gained by going back beyond Bolton v Madsen, where there appears a statement of what this Court has decided is a duty of excise.

That being the broad formula:

It is a tax directly relating to goods - and, as I think, goods of home production only - imposed at a step in their production on distribution before reaching the consumer.

So even if one accepts the broader Bolton v Madsen and Parton formula, we say there is a majority in this Court restricting it to goods of home - at this stage.  I know the reasoning of other Judges went on to perhaps beyond this.

The final judgment is that of Justice Windeyer, which is relevant to the point I am making, constituting the majority, we say, on this part of the reasoning at page 379, at about point 3:

In either case the levy, it its typical form, is exacted in respect of a specified commodity, determined by its inherent physical character, and sometimes additionally by the place of its origin.  In the case of an excise, being a duty on the commodity locally produced, the point - upon production or at some stage after production and before consumption -

that is important to us -

before consumption - at which the duty is collected is a matter of administrative convenience rather than determinant of the fiscal character of the impost.

So we say at this stage the majority of the Court still accepted that, notwithstanding the breadth of the formula in Parton, which was accepted in Bolton v Madsen, it was still restricted to duties of home production, products of home production.  We submit that the first time the further step was taken of saying, “It’s all inland taxes,” is Capital Duplicators in that passage at page 589 to 590.

Now, if Parton is not reopened, or if it is reopened and the Court affirms it, then we say, alternative, this is a tax within the franchise cases, we say it is not distinguishable - specifically, Philip Morris and Coastace are not distinguishable.

McHUGH J:   I have just got a recollection.  In Gosford Meats is it not very widely - I think it refers to production.  I mean, I have not looked at it for some years, but ‑ ‑ ‑

MR SPIGELMAN:   It may be, but it would have been obiter in that case if it was because that was the slaughter of animals.  I am sorry, I am not denying the proposition.  I do not remember it, your Honour.

McHUGH J:   No, well, I may be wrong.  My recollection may be wrong.

MR SPIGELMAN:   Now, the first proposition about the - there are two bases.  We say this is a licence to carry on a business in the alternative because the business sells goods, the consumption of which is sought to be regulated for two reasons; because the goods are not good for you and, secondly, because they impose social costs and public expenditures, and the fact that it is that kind of business justifies a large size of fee and it is still, as your Honour Justice Dawson put it, still a licence fee for carrying on a business even though it is a large licence fee for carrying on that business.

BRENNAN CJ:   What regulation is there?

MR SPIGELMAN:   The regulation is precisely in the form of somehow - it is the same point as I made earlier about in substance it is a tax on consumption, namely, it is regulating the consumption by either dissuading people, price effects, from consuming, or making them pay the costs of their consumption, whether they be health costs or whatever.

BRENNAN CJ:   How is that a regulation of the business?

MR SPIGELMAN:   We submit it is a regulation of the business because that is what the business product does when consumed. 

KIRBY J:   It does not have the ‑ ‑ ‑

MR SPIGELMAN:   Your Honour has taken a more particular view of what is involved in regulation of a business in Philip Morris, but a specific one, overlapping but perhaps not identical of that of Justice McHugh, in the sense that your Honour identified some incidence of proper regulation and they were not necessarily the same as Justice McHugh but basically the same character.

BRENNAN CJ:   What I am puzzled by is, if regulation of a business is a relevant concept, has it ever been expressed in the terms that you just indicated or has it been expressed only in terms of some control as to the manner in which the licensee performs the function of a business?

MR SPIGELMAN:   No, perhaps not.  We say you can regulate a business by reason of product.  Now, that may or may not involve detailed regulation of mechanisms of sale such as, I suppose, traditional liquor licensing is, or it may involve disincentives of consumption such as perhaps this.  That is still regulating what the business does.  It is not regulating the business in the sense of closing hours and facilities the way liquor licensing traditionally does ‑ ‑ ‑

KIRBY J:   But that is the traditional way of regulating, is it not?

MR SPIGELMAN:   Yes, your Honour.

KIRBY J:   I mean, that is the way the legal profession and professions have regulated and this legislation does not have any of those indicia.

MR SPIGELMAN:   Very little of it, yes.  It has basically the one Mr Jackson drew attention to, juvenile ‑ ‑ ‑

KIRBY J:   It is asking a lot to characterise it.

MR SPIGELMAN:   But it talked about consumption, namely, discouraging juveniles from ‑ ‑ ‑

KIRBY J:   Well, that little section is in there, but all the rest of it is - I mean, we should not be too naive about this.  It is very hard to characterise it, except in perhaps a legal sense, as regulating the business.  It is a matter of revenue raising and I think we should call a spade a spade.  It has got a couple of little sections thrown in, but it does not regulate entry into it; it does not regulate the quality of the people who have to enter it; it does not have a disciplinary mechanism; it effectively requires the grant of the licence and it just does not have all the indications that you normally have for the regulation of a business.

MR SPIGELMAN:   We submit that there is no inconsistency between regulating a business and having revenue raising.

KIRBY J:   No inconsistency, but a point is reached when one is in the business of characterisation when you say, “Well, what is the true character of this?  Is it to regulate cigarette selling?”  Well, there is that little section about under‑age people, but most of that is in the Health Act, “Or is it really about revenue raising?”

MR SPIGELMAN:   Yes, or the third alternative we would propound, your Honour, “Is it really about regulating consumption?” and we say because it is a tax on consumption, that is an alternative way of looking at a tax on a business, if you like, or regulating a business and, if it is a tax on consumption, then it is outside the concept of excise and it may be that that is a more intellectually satisfactory formula than the regulating the business is as a formula.

Your Honours, it has long been acknowledged that the Dennis Hotel exceptions, if that is an appropriate description, may not be intellectually satisfactory to all members of the Court.  Some have found the nature of the commodity and its characteristics of significance, and that is something on which we would rely, either as a touchstone of regulating the business, perhaps needing to expand the words “regulating the business” in a different way to the way it has been applied before; namely, the “no closer connection than” formula on which the Chief Justice has frequently commented.             But, alternatively, a tax on consumption regulating consumption - using that word “regulating” in its broader sense - is also not within the concept of an excise.

McHUGH J:   Mr Solicitor, the passage that I had in mind in Gosford Meats in fact is in your favour, as opposed to ‑ ‑ ‑

MR SPIGELMAN:   This is at 383?

McHUGH J:   It is 383, yes, it is:

A duty of excise is a tax upon internally produced or manufactured goods.

MR SPIGELMAN:   Yes.  That was in the joint judgment of Justices Mason and Deane.

McHUGH J:   Yes.

MR SPIGELMAN:   We submit that this step of taking it beyond - 383, in Gosford Meats, confirms the Anderson kind of analysis, and we say that the step of going beyond “internally produced or manufactured goods” in terms of excise is a step that has been taken in reasoning, perhaps, of the cases which are like the licence cases, but in which one was not focusing on “internally produced” as a relevant discrimin in any of those cases.

Now, in terms of the franchise cases, we say that Philip Morris and Coastace are not relevantly distinguishable.  Basically, your Honours, the Chief Justice and Justice McHugh in Philip Morris were in the minority on saying that the increase in the rate of tax to 30 per cent was determinative, or at least a particularly relevant consideration - not the only one, but one that was given particular weight - but for one matter, that is the only test submitted here; namely, if from 5 per cent or 10 per cent to 30 per cent was bad, from 30 per cent to 100 per cent is no less bad.  But your Honours, on that occasion, were in the minority in terms of that being a significant aspect of the test.

McHUGH J:   What about 41(3)?

MR SPIGELMAN:   Yes, 41(3) is a different matter and, when I say that, 41(3) to us - perhaps I could deal with them in turn.  Could I first establish what the test is.  The question is whether Coastace or Philip Morris is reasonably distinguishable.  That test is in accordance with what your Honour the Chief Justice said in Philip Morris at 460 - whether or not it is substantially the same as your Honour’s formula; a similar formula in Dickenson’s Arcade 130 CLR 188 by the then Chief Justice Sir Garfield Barwick. Of course, reasonably distinguishable was your Honour Justice McHugh’s test in Re Tyler; Ex parte Foley 181 CLR 37.

The first question is whether or not the size of the fee is a relevant matter.  We say no, the increase does not change the quality of the impost.  It is still not a tax on a step.  It is not correct to say that you can only regulate a business, we submit, contrary to what your Honour the Chief Justice found.  The fee is in some way related to the cost of regulating the system.  One can have other objectives of regulation.  In this case, they are to deter use, and to increase and recoup social costs.  That is all within the concept of “reasonably regulation”.

Hematite, we say, does not turn on the size of a fee, we say it turns on the question of a step in production, and we give references as follows:  Justice Mason, 634, fees payable “before an essential step in the production”; your Honour the Chief Justice, 659 point 8, before “a step in the production”; Justice Murphy, 639 point 9 to 640, transportation was “an integral step” in production; Justice Deane at 669, imposed at the stage of manufacture and production “before an essential step”.  We say that what Hematite was about, and we say that the percentage increase is not determinative of the character.

In terms of the other provisions to which my friend drew attention, such as 41(3) and 44 and 45, 44 and 45 use words like “tobacco sold”.  The difference in 41(3) is in respect of “that tobacco”.  However, 41(1) has always been in the form of “value of tobacco sold”.  That is exactly the same as 44 and 45.  “Tobacco sold” is the incidence of the tax is more clearly identified in 41(1).  41(3) in respect of “that tobacco” is not clearly identified with tobacco in the period in which the tax is paid.  What “that tobacco” is, we submit, is capable of referring back to the tobacco of the previous period.  41(1) in Coastace and Philip Morris, relevantly, always made reference to value of tobacco sold.  That is the provision that has been upheld.

There has always been a link with the sale of tobacco.  There has always been that degree of association, if I might put it this way, with the commodity itself as distinct from the business.  We do not submit that 41(3) changes the incidence in any way to make the connection with the commodity any closer than the prior cases.  On that basis, we submit, the prior cases ought be followed.  Prospective overruling, your Honours ‑ ‑ ‑

BRENNAN CJ:   Mr Spigelman, could I just interrupt you for a moment.  One of the passages that you cited to us from Anderson’s in the judgment of Justice Kitto contains the proposition that:

Not so obviously but just as certainly, it is such a burden -

MR SPIGELMAN:   Could your Honour just tell me what page your Honour ‑ ‑ ‑

BRENNAN CJ: At 111 CLR 374, at about point 3 or 4.

MR SPIGELMAN:   Yes.  I thought I had read that sentence.

BRENNAN CJ:   You have.  The question I wanted to ask you is this, what do you say about his Honour’s proposition that goods when they come into existence are subject to a sales tax such that:

The law makes it inherent in their nature, as goods requiring distribution in order to become available to fulfil their purpose, that the tax shall be paid.

MR SPIGELMAN:   All we submit his Honour is saying is that the goods will be distributed in some way and that as a matter of substance, if one looks to the previous passage, it is such a burden, your Honour sees - he is referring back to it being a burden on home production and we say exclusively on home production.  This passage ‑ ‑ ‑

BRENNAN CJ:   I appreciate the home production point but the point I am drawing your attention to is that a tax on distribution is just as certainly a tax upon production.

MR SPIGELMAN:   We do not submit that that is always the case because one can tax distribution, we submit, in a way which is forward‑looking to consumption.  I appreciate that that is a question of substance and not form and that that is a matter on which one can have difficult decisions to make.

BRENNAN CJ:   All that means is this, is it not, that a tax on a step in distribution can be referable logically either to production or to consumption?  If referred to production, it may come within excise.

MR SPIGELMAN:   As a matter of substance if it does, yes.

BRENNAN CJ:   If it is referable to consumption, it is outside excise.

MR SPIGELMAN:   If one looks at the particular commodity in - I hate to say it - all the circumstances of the case, then one can conclude that as a matter of substance it impinges on production or consumption, given the abstract nature of the question your Honour puts to me.

GUMMOW J:   But can only have one substance.  This is what eludes me.

MR SPIGELMAN:   Perhaps I should say that in this case we would submit so, yes, but, if it can have two, then it is sufficient for it to impinge on home production - and this is crucial to us I think at this stage of the argument - in a manner differential to the combined effect of home production and imports.

DAWSON J:   I was wondering when you were going to get to that because that is crucial.  It does not matter if in substance it is a tax on production, so long as it is also a tax on goods across the board, imported and home production.

MR SPIGELMAN:   The references to home production in this decision is something we rely on.  I appreciate this is not the last word on the subject but it is a post‑Bolton v Madsen word on the subject.  In the course of authority, it perhaps indicates that the number of cases that need to be overruled in this Court and the amount of decision that has to be reviewed is more limited than if one just took the Parton formula and added up the number of cases which had used the formula.  That was the basic reason for taking your Honours to Anderson’s.  As your Honour Justice McHugh put to me, it was repeated in Gosford Meats.

BRENNAN CJ:   Could I ask you whether there is any undermining of whatever validity there is in that proposition if it is applied equally to goods of foreign and goods of domestic manufacture?

MR SPIGELMAN:   No, when you say which proposition, the distribution?

BRENNAN CJ:   The proposition expressed by Justice Kitto, namely, that once you have a tax upon a step in the distribution of goods intended for sale it is a tax upon their production, wherever that production may have taken place.

MR SPIGELMAN:   No, because what we say is that this is focussing and focussing only on home production.  It would be trite to say that any goods need to be distributed and we submit his Honour was here identifying home production as a specific area and it was not ‑ ‑ ‑

DAWSON J:   But you are not answering the question.  The answer is it makes no difference.  Of course a tax on distribution will be referable to production, so would any other tax for that matter, payroll tax, but that is not the question which you pose.  The question you pose is whether the tax which is imposed is imposed alike on goods which are imported and goods which are of home production and that throws no doubt on the proposition which Justice Kitto puts in that case.  It is just that the test is a different one from the one he had in mind as to what is an excise.

MR SPIGELMAN:   Yes, well, we think it is a different one, but if I have not ‑ ‑ ‑

BRENNAN CJ:   Well, I do not propose to continue asking it.

MR SPIGELMAN:   Yes, if your Honour pleases.  I have answered your question to the best of my ability.  I am not suggesting for a moment that what your Honour Justice Dawson did not say was also an answer but consistent with our submissions.  Your Honours, I do want to refer briefly to the question of prospective overruling.  This is outlined in our original written submissions.

GUMMOW J:   It seems to be the last gasp of the legal realist movement in the United States in the 1930s; it seems to have arrived here after it has expired in the United States.

MR SPIGELMAN:   If that is the kindest thing your Honour eventually says about it, I will get off lightly.  The submissions are as originally formulated at pages 7 and following.  We put in some additional submissions on this matter.  Could I particularly add some references to our additional submissions.  It was a four‑page document entitled “ADDITIONAL DEFENDANTS’ SUBMISSIONS” dated 24 February.  In paragraph 4 we referred to your Honour the Chief Justice’s comments in Theophanous to the effect that statutory and constitutional interpretation may be in quite a different position to developing the common law on a prospective basis.  We gave some references there, including Commonwealth v Kreglinger.  Could I add to that - I am sorry, do your Honours have the document?

BRENNAN CJ:   Yes.

MR SPIGELMAN:   Because it may be convenient to give the additional references at the point they are relevant on the written submissions.

TOOHEY J:   Presumably that document headed “AMENDED DEFENDANTS’ WRITTEN SUBMISSIONS” is in substitution for the earlier outline of the defendants ‑ ‑ ‑

MR SPIGELMAN:   Yes, there was a much shorter document.

TOOHEY J:   ‑ ‑ ‑ and we can just discard that earlier one.

MR SPIGELMAN:   That can be discarded, your Honour.  Your Honours, there we indicate that we gave your Honours a reference to Justice Isaacs in Kreglinger about advancing frontiers, and could we add to that a reference to the passage in Victoria v Commonwealth 122 CLR, a payroll tax case, passages in the judgment of Justice Windeyer at 346 to 347, which I read to your Honours last week, about the interpretation of a written Constitution may vary and develop in response to changing circumstances. This is the passage in which his Honour explained the Engineers’ Case as adjusting to the development of the nation after a period of 20 years, including the First World War.

There is also a reference to be added at the bottom of paragraph 5 on the position in Europe.  The European takes this matter and describes it perhaps in a more appropriate form than prospective overruling, that is, that it is a question of temporal limitation.  The reference is (1996) 112 Law Quarterly Review; there is an article at 95 and a reply at 411, and the particular passage is 413 to 414.  It just describes the European use of temporal limitation.

Your Honours, whenever the Court applies the doctrine of stare decisis it is, in effect, saying, “We’re not going to look at this even if it’s wrong”, namely, “We are bound by precedent and the doctrine is applied in circumstances in which otherwise new judges may say the law is different”.  And that is its purpose and it is restrained due to the circumstances, namely, we say reliance or whatever, the various purposes served by the doctrine of stare decisis and the certainty in the law.

The doctrine of the proposal to contemplate prospective overruling is, we submit, simply a development in the stare decisis as a rule of common law, and we are seeking a development of that rule for the reasons outlined.  We appreciate there are difficulties and we have attempted to grapple with the difficulties.  Could I just reiterate again in terms of criminal penalties that your Honour Justice McHugh had asked me about in the context of overruling?  That, of course, applies here as well.  Conspiracy to defraud was always available at each stage, as was the existence of fines in the various Acts as mechanisms of enforcement.  Those Acts included the Acts considered in Philip Morris, Coastace, this is not new, and we say that that was available at all times.

MR MEADOWS:   We do not put it to the Court on the basis that this was the opinion of the people who were discussing it.  We are putting it to the Court as to the meaning of the word as understood by those who were there.  There are two other matters that I wanted to - the first of these is how we would formulate the meaning of “excise”.  If I could take the Court to paragraph 2.2 of our submission, we would say that that is a proper formulation of the definition or the test.  That is, that a duty of excise is a tax on commodities imposed in respect of their production or manufacture in Australia.  Attacks on commodities will be imposed in respect of their production or manufacture in Australia where the tax discriminates against commodities produced or manufactured in Australia as against those commodities when imported.

GUMMOW J:   Does that differ from New South Wales’s formulation?

MR MEADOWS: Not in substance, if I might say, your Honour, but it is a formulation of the same test, and it is this question of discrimination which is the way in which the line is to be drawn. Your Honour the Chief Justice asked the question, “How is the line to be drawn?” Might I point out that the use of the test of discrimination is an identical test to that which is used in relation to section 92. It may not always be easy to draw the line, but one looks at the discriminatory effect in order to determine the nature of the tax.

GUMMOW J:   Mr Spigelman’s proposition, which is paragraph 2 of his written outline, does not have any criterion of discrimination ‑ ‑ ‑

MR MEADOWS:   But the way in which he has espoused the nature of ‑ ‑ ‑

GUMMOW J:   If there is a clear joint submission by the States on the matter, I need to know it.

MR MEADOWS:   I beg your pardon, your Honour?

GUMMOW J:   If there is a clear joint submission on the States as to the proposition, I would like to know it.  If it is not clear and if it is not united, I would like to know that too.

MR MEADOWS:   Yes.  Perhaps we could give some thought to putting our heads together on that.  These submissions, of course, were each prepared individually.

GUMMOW J:   That is right, but now it has all got to come together; that is why we are here.

MR MEADOWS:   I accept what your Honour puts to us and I am sure that we will give it some consideration.

BRENNAN CJ:   What if there is no commodity which is imported?

MR MEADOWS:   We would say that the same test applies.  As long as the tax does not discriminate against imported goods if ever they were to come into the country, it is not an excise.

BRENNAN CJ:   What if the goods were of a character that could never come into the country, for example, goods that are mined in Australia?

MR MEADOWS:   You assume that there is no other mineral of that nature in the world but, as long as the tax does not seek to discriminate, then that is sufficient in order to take it out of the realm of an excise.

DAWSON J:   Or to put it at a higher level, so long as it does not impair the tariff barrier which is in place.

MR MEADOWS:   Exactly, your Honour, and we then have to come back to the purpose of section 90 being tariff based.

BRENNAN CJ:   So that a tax which was imposed directly on production by a State in respect of a product of that State is not an excise unless there happens to be an import of the same character.

MR MEADOWS:   No, your Honour, because that is clearly a tax on production, the example you cited.

BRENNAN CJ:   Or it might not have any effect on the tariff; there is no tariff to consider.

MR MEADOWS:   If one takes it a level up to a sales tax, as we have been discussing, and there is no question of that tax discriminating on goods, whether they are goods from within Australia or outside, then it is not an excise.

BRENNAN CJ:   I appreciate your argument about sales tax but I want to ask you the question about what an excise is.  If you are defining an excise by reference to that which is susceptible of affecting the tariff, what do you say about a tax on production which does not affect the tariff?

DAWSON J:   I do not want to answer it for you, but where you have external tariffs, customs duties, you either have a customs duty or you do not; but, if you do not have a customs duty on that particular set of goods, then it nevertheless is part of the tariff policy and an excise will affect it, customs duty or no customs duty.

MR MEADOWS:   I accept that proposition, your Honour. There is one other matter that I wanted to address before I conclude and that was a matter which your Honour Justice Kirby raised earlier today about the use of the word “bounty” and the way in which it is said to relate to production or export. We say that it was not necessary in section 90 to qualify the word “excise” in the same way by using the words “production” or “export” as the term “excise” was understood as comprehending only taxes on production or manufacture.

On the other hand, it is quite clear that the term “bounty” is not so limited.  If I could refer to the Macquarie Dictionary which has, I would suggest, a rather more modern exposition of the term.  It is described as a “premium or reward esp one offered by a government” and it is not restricted to manufacture or production.  But if one also goes to the Oxford Dictionary, this is Oxford English Dictionary, the 2nd Edition, one sees that the relevant definition is “a sum of money paid to merchants for manufacturers for the encouragement of some particular branch of industry.

So it is clear that a bounty can be for things other than a mere production or manufacture. So what we would say from that, your Honour, is that one cannot draw an inference from the qualification which is to be found in the context of bounties as providing any assistance in the understanding of what the term “excise” means in section 90.

McHUGH J: What does “customs” mean in section 90?

MR MEADOWS:   “Customs” means a duty imposed on imports.

McHUGH J:   Imports from where?

MR MEADOWS:   Outside of Australia.

McHUGH J:   How do you reconcile that with section 95 and 93 where “customs” is plainly used to include charges as at the border?

MR MEADOWS:   Well, that is in the first five years when there was going to be some continuing operation ‑ ‑ ‑

McHUGH J: I know, but does not section 90, when it talks about “customs”, refer to charges at the border, whether they are inland, and the words of section 92, whether they are by “internal carriage or ocean navigation”?

MR MEADOWS: It is quite plain, in our submission, that in the context of section 90 customs duties are duties which are imposed on imports into Australia. Now, I suppose a State could seek to establish a customs duty at the border, but that would be precluded. May it please, your Honours.

BRENNAN CJ:   Thank you, Mr Solicitor.  The Court will adjourn until 10.15 tomorrow morning.

AT 4.16 PM THE MATTER WAS ADJOURNED
UNTIL THURSDAY, 13 MARCH 1997