Holden Limited and Chief Executive Officer of Customs
[2004] AATA 778
•23 July 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 778
ADMINISTRATIVE APPEALS TRIBUNAL )
) No V2003/1196
GENERAL ADMINISTRATIVE DIVISION ) Re HOLDEN LIMITED Applicant
And
CHIEF EXECUTIVE OFFICER
OF CUSTOMSRespondent
DECISION
Tribunal Justice Garry Downes, President Date23 July 2004
PlaceSydney
Decision
Set aside the decision under review and remit the matter to the Chief Executive Officer of Customs for reconsideration in accordance with these reasons and for the taking of such steps as are necessary to carry into effect or perfect the entitlement of Holden Limited to drawback under s 168 of the Customs Act with respect to the items in column 3 of the table in paragraph 2 of these reasons but so as not to admit its claim with respect to drawback relating to the use of EFS credits.
.......(sgd Garry Downes) .......
President
CATCHWORDS
CUSTOMS – drawback of duty on export of imported goods and in manufacture of motor vehicles – export credits used to offset duty payable – duty payable reduced by export credits – duty paid with export credits not eligible for drawback – duty paid with ACIS credits or cash eligible for drawback – Customs Act 1901 ss 168, 273 - Customs Tariff Act 1995 s 18(2), Sch 4 items 41A, 41B - Administrative Appeals Tribunal Act 1975 s 26
Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co. Ltd (1929) 43 CLR 247
Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390
Federal Commissioner of Taxation v Angus (1961) 105 CLR 489
Whim Creek Consolidated NL v Commissioner of Taxation (1977) 17 ALR 421
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
Administrative Arrangements to the Year 2000 for the Automotive Industry
REASONS FOR DECISION
23 July 2004 Justice Garry Downes, President 1. Holden Limited imports and exports passenger motor vehicles and components. It is entitled to claim a refund (drawback) of import duty paid on imported vehicles and components subsequently exported. Holden acquitted some import duty by using credits earned pursuant to an Export Facilitation Scheme (EFS). The question in this case is whether drawback is available when duty has been acquitted by the use of EFS credits. Two matters need to be addressed. First, when EFS credits are used do they satisfy an obligation to pay duty or do they operate to reduce the amount of duty payable? Secondly, assuming EFS credits can satisfy duty payable, is there a payment which attracts drawback or can a payment only be made in cash? I have decided that Holden is not entitled to drawback of amounts acquitted by using EFS credits.
2. Four claims for drawback are before me. They were rejected in full. Some parts of the claims were rejected because EFS credits were used. The balance of the claims was rejected because Holden had not established how the duty had been paid. The financial issues have now been resolved. The four claims and how the duty is agreed to have been acquitted are as follows:
Claim No. Total Claim Duty acquitted using cash or ACIS Credits Duty acquitted using export credits 2103869 $1,755,289.35 $86,116.25 $1,669,173.10 2104221 $1,532,375.03 $1,136,567.16 $395,807.87 2200436 $946,487.98 $538,775.98 $407,712.00 2104285 $208,231.83 $115,699.95 $92,531.88 3. The only issue I need to determine is whether duty acquitted with EFS credits is subject to drawback.
4. The EFS was established in March 1982. From 1994 the scheme was administered pursuant to a document issued by the Australian Customs Service and called “Administrative Arrangements to the Year 2000 for the Automotive Industry”. The EFS came to an end on 31 December 2000 when it was replaced by a new scheme, the Automotive Competitiveness and Investment Scheme (ACIS). Transitional arrangements permitted the use of EFS credits in the 2001 year. The present claims relate to EFS credits used in that year.
5. The EFS was established pursuant to Government policy. It is not clear precisely upon what legislative basis it was established. I was informed that it might have been supported by a determination made under s 273 of the Customs Act 1901 but no such determination was put before me. However, by the time Item 41A was enacted as part of the Customs Tariff Act 1995 the scheme had legislative recognition because it is referred to in the Item. In these circumstances it seems appropriate for me to examine the characteristics of the scheme to assist me in dealing with the issues.
6. The EFS is one of two arrangements dealt with in the document called “Administrative Arrangements to the Year 2000 for the Automotive Industry”. It also deals with a different arrangement called “PMV [Passenger Motor Vehicle] Producers’ 15 per cent entitlement to duty-free importation” (The Duty Free Allowance). That is the first substantive part of the document. It is Part B. The second substantive part is headed “Export Facilitation Scheme Arrangements”. It is Part C.
7. In an Introduction the Duty Free Allowance is described as relating to “duty free importation” and the EFS is described as providing “the opportunity to participate in the Export Facilitation Scheme”. The Duty Free Allowance is further described as an arrangement under which “PMV producers can, under certain conditions, import 15 per cent of their value of production duty-free”.
8. Examination of Part B relating to the Duty Free Allowance shows that emphasis is placed upon the duty-free nature of this scheme. The phrase “duty-free” appears a number of times.
9. The provisions of Part C relating to the EFS do not appear to place emphasis on the scheme as a scheme to reduce or avoid duty. However, not all the material in the document is one way.
10. When dealing with eligibility to earn export credits the document states that exporters will “receive the full benefit of any export credits earned” (C:1.1.1). Under the heading “Earning Export Credits” (C:1) the document provides that credits are earned upon the export of eligible exports (C:1.3.1) being the level of Australian automotive value added content which is the “FOB selling price of the goods less the duty-free into store cost of any imported components” (C:1.3.4). EFS credits are calculated in money.
11. An important section of the document is the section headed “Claiming Export Credits” (C:2). This includes a number of references to “duty rebate” as follows:
“For duty offset purposes, Determinations will be issued by PMV Administration, ACS specifying an $A value of duty rebate (derived from the value of export credits earned).” (C:2.1.1)
“When submitting claims for export credits, the following information should be supplied to PMV Administration, ACS:
(f)details of the beneficiary of the credits (to minimise transfers of Determinations of duty rebate amounts);” (C:2.1.2)
“For exports which are eligible to earn export credits under this scheme and also eligible for bounty assistance, if a bounty is claimed on those exports the value of any duty rebate derived from export credits earned will be reduced by the amount payable under the bounty scheme.” (C:2.1.3)
“Once claimed, export credits can be transferred between participants or sold by one participant to another. There are no limits on the transferability or sale of export credits between participants in any year. Once a Determination for duty rebate has been issued, any transfer of that instrument will be at the prevailing duty rebate level.” (C:2.1.4)
It is to be noted that export credits can be converted into cash by sale.
12. Reference to the scheme leading to a “duty rebate” also appears under the heading “Using Export Credits” (C:3). The relevant paragraphs are as follows:
“C:3.1 Use of Export Credits to Obtain Duty Rebate
C:3.1.1Export credits may be used to obtain a rebate on the duty payable on the importation of Eligible Imports as defined in Part C:3.2. The duty rebate derived from export credits can also be used by PMV producers to offset the duty payable on Eligible Imports in excess of their 15 per cent duty-free entitlement in any calendar year (see Part B:1.1.4).”
“C:3.1.3Duty rebate will be calculated from the value of export credits as follows:
one dollar of credits will earn a duty reduction/rebate equal to one dollar multiplied by the appropriate tariff rate (expressed as a decimal) for the year of use …
Where claims are made for credits on shipments exported towards the end of a calendar year and it is the following year before the actual Determination is issued, the ACS will give a retrospective validity date to the instrument. This will enable the claimant to gain the maximum benefit from the credits earned by obtaining refunds of duty paid during the period covered by the instrument.”
“C:3.1.5There are no limitations on the level of duty rebate that can be used during any calendar year by any participant.”
13. It is agreed that EFS credits can also be used to obtain refunds of duty already paid or redeemed by paying cash when they have already been used.
14. It is to be noted that the reference to “duty reduction/rebate” in para C:3.1.3 leaves open the inference that the effect of the scheme is to reduce duty. Such an approach is also supported by the definition of “Export Facilitation Scheme” in the document which is: “[a] scheme whereby eligible organisations can earn export credits to permit duty-free entry of eligible goods”. A definition of “Item 41A” contains a similar reference.
15. Notice of the termination of the EFS was given by Customs Notice No. 2000/38 in August 2000. The notice contained the following statement: “Determinations made for the purposes of this concession will allow export credits to be used to offset duty payable on eligible imports up until [31 December 2001]”.
16.Item 41A in Schedule 4 of the Tariff Act is as follows:
41A Goods, as prescribed by by-law, entered for home consumption on or before 31 December 2001, being goods classified under 8702, 8703 or 8704 of Schedule 3, including components therefor, imported by the owner of a determination issued under the Export Facilitation Scheme for certain motor vehicles and components An amount equal to the amount of duty assessed in accordance with Part 2 of this Act, less any amount of export credits issued to the owner of the goods
NZ/PNG/FI/DC/DCS: An amount equal to the amount of duty assessed in accordance with Part 2 of this Act, less any amount of export credits issued to the owner of the goods
17. Item 41B, which applies in related circumstances, is relevantly in a similar form.
18. Customs duty is ultimately payable under s 15 of the Tariff Act on goods imported into Australia. Section 16 sets out the usual method of calculation of duty. The section relevantly provides for duty to be calculated by reference to the “general rate set out in the third column of the tariff classification under which the goods are classified”. Section 18 provides for concessional rates of duty in respect of certain goods referred to in an item in Schedule 4 of the Act. Item 41A of Schedule 4 is such an item and applies with respect to the goods the subject of these proceedings. Relevantly, s 18 provided that “the amount of duty payable in respect of goods under an item in Schedule 4 is an amount of duty worked out … by reference to the general rate set out in the third column of that item”.
19. The argument put on behalf on behalf of the Chief Executive Officer of Customs on the first issue is that the relevant amount of duty payable in this case is the amount derived by subtracting the value of the EFS credits from the duty otherwise payable. It follows that the amount of duty payable is the reduced amount. It is accordingly submitted that when EFS credits are used they do not satisfy an obligation to pay duty but rather operate to avoid the obligation to pay duty with the consequence that the amount of duty payable is the reduced amount.
20. Holden argues that the matter is not so simple. It points to the text of the document describing the EFS and to what it says is the “context, the general purpose and policy of [the] provision and its consistency and fairness” (Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397 per Dixon CJ approved in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 per McHugh, Gummow, Kirby and Hayne JJ).
21. Addressing the statutory provisions literally, subs 18(2) of the Tariff Act provides that, where applicable, Schedule 4 prescribes “the amount of duty payable”. In the present case Item 41A in Schedule 4 answers the question: what is the duty payable? The answer is:
“an amount equal to the amount of duty assessed in accordance with Part 2 of this Act, less any amount of export credits issued to the owner of the goods.”
The amount is described by reference to the result of a subtraction. The result of the subtraction is the amount left after the amount of ESF credits has been deducted from the basic duty. Literally read, there cannot be any doubt that the duty payable when EFS credits are employed, is the amount remaining after the EFS credits are used to reduce the amount of duty rather than the amount before the subtraction. If this is the final position then the duty payable and paid for the importation of the relevant goods does not include the EFS credits amount.
22. Holden seeks to make a substantial case that this cannot have been the legislative intention. It points out that Item 41A refers to “the amount of duty in accordance with Part 2” which does not take account of EFS credits. It points out that if Customs is right one can never know what is the amount of duty until after payment has been made. That is because up until the time of payment it is open to the importer to change the amount of export credits tendered under Item 41A. Even worse, the amount of duty can subsequently change if EFS credits are later used in return for a cash refund or redeemed in return for a cash payment. Holden also points to the fact that EFS credits can be bought and sold. If Holden sold EFS credits and used the cash to pay duty then the duty payable would include that amount. Alternatively, Holden might buy for cash EFS credits which would not be part of the duty payable even though cash had been outlaid. Holden also points to the references in the Customs document describing the EFS which do not refer to duty being reduced but rather being rebated as well as to the other provisions I have identified above and to the document as a whole including some provisions to which I have not made express reference.
23. Holden also points out that under the present scheme the equivalent of EFS credits are treated as satisfying payable duty. Both parties rely on this fact. I do not think I can place much weight upon the proposition either that the legislature should be seen as correcting the earlier scheme or that it should be seen as continuing it. Although I have carefully considered these submissions they do not affect the conclusions I have reached.
24. I find the argument of fairness and consistency presented by Holden to be compelling. But is it enough to displace what appear to be clear words in Item 41A? I regret to say that I do not think that it is. There are occasions when legislative statements are so clear that matters of purpose and policy and the like cannot lead to a different result. I think this is such a case.
25. There are also some qualifications that need to be made to the powerful submissions put on behalf of Holden. First, the use of the word “rebate” in the EFS document does not describe the scheme Holden contends for as clearly as it might. Although the concept of rebate implies that duty was paid and payable it also implies that some part of that duty is repayable and has been repaid. So far as the argument associated with the sale of credits is concerned there is no evidence before me relating to the market for those credits. It is possible that they are sold at less than face value and it may even be the case that their value is affected by the limitations which Customs suggests that they are subject to. I note, however, that Holden contended in the hearing that they are sometimes sold at a premium apparently because of tax considerations.
26. Holden also emphasised the fact that Item 41A did not describe a rate in conventional terms. It is argued that the words in the third column of Item 41A were not a rate of duty as specified by s 10 of the Tariff Act because the section recognises that a contrary intention may be inferred and a contrary intention is shown here. The link between the words of s 18 and the words of Item 41A is so close that I do not think that anything turns on characterisation or whether Item 41A contains something which can be described as a rate.
27. One matter which causes me some concern is the reference in Item 41A to “the amount of duty assessed in accordance with Part 2 of the Act”. The item does not say “which would otherwise be the amount of duty assessed …” However, the words are preceded by: “An amount equal to…” I think that clearly shows that the amount payable under the Item is the result of the subtraction which follows and not the amount from which the subtraction is made.
28. I accordingly conclude on the first matter which arises in these proceedings that EFS credits do not satisfy an obligation to pay duty but rather operate to reduce the amount of duty payable.
29. That is not an end to the matter. The ultimate question for my consideration is whether Holden is entitled to claim drawback with respect to the use of EFS credits however that use is to be characterised. This requires an examination of s 168 of the Customs Act. The section relevantly provides:
“The regulations may make provision for and in relation to allowing drawbacks of duty paid on goods imported into Australia.”
The relevant regulation refers to “goods … on which import duty has been paid”. The question I must determine is whether the use of the EFS credits can be described as resulting in “duty paid on goods imported into Australia”.
30. Two questions arise. First, do the conclusions I have already reached require me to find that the use of the EFS credits has not resulted in “duty paid”? Secondly, can duty only be “paid” by the use of cash?
31. Item 41A addresses what is payable. Regulations made under s 168 relate to what is paid. If I had been able to place weight on the rebate concept appearing in the EFS document an issue might have arisen as to whether there was duty paid even though it had somehow been rebated. If I had concluded that the reference to “duty assessed in accordance with Part 2” in Item 41A was determinative, I would have had to address the possibility of there being a relevant distinction between what was payable and what was paid. However, I have not found that the matters pressed by Holden including these matters determined what was payable. It also seems to me that the subtlety of the argument associated with the use of the word “rebate” is such that it would not assist in arriving at a construction of s 168 which departs from its clear words. Duty paid will not be greater than duty payable. It follows that because the duty payable under Item 41A is the result of the subtraction provided for in the Item there is no duty paid with EFS credits and there can be no drawback with respect to EFS credits.
32. In these circumstances the second question which arises with respect to s 168 does not arise. However, payment is not always effected by cash. Were that not so, the phrase “payment in cash” would be a tautology and the phrase “payment in cash or kind” would be a contradiction. There are many cases in which something other than payment in cash has been regarded as payment. The set-off cases are examples. I refer generally to Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co. Ltd (1929) 43 CLR 247 at 263, Federal Commissioner of Taxation v Angus (1960) 105 CLR 489 at 503, 504 and Whim Creek Consolidated NL v Federal Commissioner of Taxation (1977) 17 ALR 421 at 425. Payment is not defined in the Customs legislation. Had I been required to answer the question whether the use of EFS credits amounted to a payment my present inclination is that I would have found that they did. However, I cannot offer a concluded view on this matter because it depends in part upon the way Item 41A is to be characterised and I have characterised Item 41A in a way which is inconsistent with the use of EFS credits being regarded as a payment.
33. As I understand it the decisions under review presently deny drawback with respect both to payments in cash as well as to claims based on the use of the EFS credits. Section 26 of the Administrative Appeals Tribunal Act 1975 has precluded the original decision-maker from altering the decision under review even though the parties have reached agreement with respect to the amount of duty paid using cash or credits under the ACIS. It is accordingly not appropriate for me to affirm the decision under review. As I understand it the parties are agreed that the amounts identified in the third column of the table in para 2 of these reasons are all subject to drawback. The consequence of my decision is that none of the items in the fourth column are eligible for drawback. I accordingly set aside the decision under review and remit the matter to the Chief Executive Officer of Customs for reconsideration in accordance with these reasons and for the taking of such steps as are necessary to carry into effect or perfect the entitlement of Holden Limited to drawback under s 168 of the Customs Act with respect to the items in column 3 of the table in para 2 of these reasons but so as not to admit its claim with respect to drawback relating to the use of EFS credits.
I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Justice Garry Downes, President
Signed: .......(sgd Shamus Toomey) .......
AssociateDate of Hearing 25 & 26 May 2004
Date of Decision 23 July 2004Counsel for the Applicant AL Cavanough QC with J Slonim
Solicitor for the Applicant MahonysCounsel for the Respondent GT Pagone QC with W Harris
Solicitor for the Respondent Australian Government Solicitor
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