Holden Limited and Chief Executive Officer of Customs
[2002] AATA 775
•6 September 2002
CATCHWORDS – CUSTOMS – drawback of duty on export of imported foods and in manufacture of motor vehicles – export credits used to offset duty payable – duty payable – whether includes value of export credits – whether export credits used to pay duty payable – effect of rebate, offset and refund provisions of Administrative Arrangements – decisions affirmed.
Customs Tariff Act 1995 ss. 3, 9, 15 to 20 and 22; Schedule 4 items 41A, 41B, 41E; Part 2
Customs Act 1901 ss. 4, 163 and 168
Customs Regulations 1926 rr. 126 and 129 to 137
ACIS Administration Act 1999
ACIS Administration Bill 1999
ACIS (Unearned Credit Liability) Bill 1999
Alcoa of Australia Ltd v Button (1984) 55 ALR 101
White v Elmdene Estates Ltd [1959] 2 All ER 605
Elmdene Estates Ltd v White [1960] 1 All ER 306
Brookton Co-operative Society Ltd v Federal Commissioner of Taxation (1977) 16 ALR 93
Hyundai Automotive Distributors v Australian Customs Service (1998) 51 ALD 45
DECISION AND REASONS FOR DECISION [2002] AATA 775
ADMINISTRATIVE APPEALS TRIBUNAL )
) V2002/521
GENERAL ADMINISTRATIVE DIVISION )
ReHOLDEN LIMITED
Applicant
AndCHIEF EXECUTIVE OFFICER OF CUSTOMS
Respondent
DECISION
Tribunal: Miss S A Forgie (Deputy President)
Date: 6 September, 2002
Place: Melbourne
Decision:The Tribunal affirms the four decisions of the respondent dated 14 March, 2002 in respect of claims numbered 2104221, 2200436, 2103869 and 2104285.
S A FORGIE
Deputy President
REASONS FOR DECISION
On 17 May, 2002, the applicant, Holden Limited ("Holden"), applied for review of four decisions of the respondent, the Chief Executive Officer of Customs ("CEO"), dated 14 March, 2002. Each of those decisions refused a claim that had been made for drawback of customs duty by Holden. Those claims, numbered 2104221, 2200436, 2103869 and 2104285 claimed $1,532,375.03, $946,487.98, $1,755,289.35 and $208,231.83 respectively. At the hearing, the documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 ("T documents") were admitted in evidence together with computer entries numbered 2M.1051.0092B, 4A.1163.0068K and 2M.1344.0309K. Mr Slonim of counsel represented Holden and the CEO was represented by his solicitor, Mr Kennedy.
THE ISSUE
The issue in this case is whether, upon their export, Holden is entitled to drawback of customs duty in respect of goods when it has used export credits to offset duty payable upon these goods being imported.
BACKGROUND
The Customs Act, the Tariff Act, the Customs Regulations and the PMV Plan
Part 2, comprising ss. 15 to 20, of the Customs Tariff Act 1995 ("Tariff Act") is concerned with "duties of customs" ("duty"). Pursuant to s. 15, duty is payable on the importation of goods. Sections 16 and 17 of the Tariff Act set out the calculation of duty. Although subject to qualifications that are not relevant in this case, in general terms, the duty in respect of goods is worked out by reference to the rate of duty set out in the third column of the tariff classification under which the goods are classified. Where, as in this case, a reference is made to a percentage in that third column, it is a reference to that percentage of the value of goods and the percentage is a rate of duty (Tariff Act, s. 9(1)). The value of goods means the Customs Value of the goods calculated in accordance with Division 2 of Part VIII of the Customs Act 1901 ("Customs Act") (Tariff Act, s. 3(1)). As the value of goods is expressed as a monetary amount, the effect of the calculating the percentage of the value of the goods as required by s. 9(1) is to reach a monetary amount. The duty is, therefore, expressed as a monetary amount.
Some goods are entitled to concessional duty under the Tariff Act. The calculation of concessional duty is the subject of s. 18 of the Tariff Act. Section 18(1) provides:
"(1) Subject to sections 20 and 22, if an item in Schedule 4 prima facie applies to goods, that item only applies to those goods if the duty payable in respect of those goods under that item is less than the duty that, but for this section, would be payable under the tariff classification in Schedule 3 that applies to the goods."
In the context of this case, ss. 20 and 22 are not relevant. Section 18(2) goes on to provide how the amount of duty is calculated under Schedule 4. That depends upon the country in which the goods are produced or manufactured and I will set out only the first two as examples:
"(2) For the purposes of subsection (1), the amount of duty payable in respect of goods under an item in Schedule 4 is an amount of duty worked out as follows:
(a)if the goods are not the produce or manufacture of a Preference Country—by reference to the general rate set out in the third column of that item;
(b)if the goods are the produce or manufacture of New Zealand:
(i) if a rate of duty that applies in relation to New Zealand is set out in the third column of that item—by reference to that rate of duty; or
(ii)otherwise—Free;
…"
Of relevance in this case are items 41A and 41B, which provide:
"41A. Goods, as prescribed by by-law, being goods classified under a subheading of heading 8702, 8703 or 8704, including replacement 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
41B Goods, as prescribed by by-law, being vehicle components, including vehicle components imported with and forming part of vehicles that are not assembled or are not further assembled than a stage that constitutes a sub-assembly, for use as original components in the assembly or manufacture of: (i) vehicles of a kind which, if imported, would be classified under 8701.20.00, 8701.90.20, 8702, 8703, 8704 or 8705 of Schedule 3; or (ii) trailers and semi-trailers for articulated vehicles, being trailers and semi-trailers of a kind which, if imported, would be classified under 8716.31.00, 8716.39.00 or 8716.40.00 of Schedule 3 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"
What are the "export credits" to which reference is made in items 41A and 41B? They were earned under the Commonwealth's Passenger Motor Vehicle Plan ("PMV Plan"). The essential components of that plan were agreed between the parties and set out in a Statement of Agreed Facts. I have accepted that statement and, on its basis and on the Administrative Arrangements themselves, will set out the components in the following paragraphs.
The first Motor Vehicle Manufacturing Plan commenced in January, 1965 to assist the Australian automotive industry. In February, 1979, measures were proposed to facilitate the export of passenger motor vehicles manufactured in Australia. The Export Facilitation Scheme ("EFS") commenced in March, 1982.
The PMV Plan was reviewed in 1991 and, in November, 1994, the Australian Customs Service ("ACS") published the key elements of the PMV Plan under the title, "Administrative Arrangements to the Year 2000 for the Automotive Industry" ("Administrative Arrangements"). The Administrative Arrangements were amended in July, 1996. The Introduction stated that the Administrative Arrangements reflected the government's policy of encouraging the assembly or manufacture in Australia of specified passenger motor vehicles ("PMVs") and the manufacture in Australia of passenger PMV components. "Specified PMVs" are passenger cars, passenger car variants or derivatives (i.e. station wagons, utilities, panel vans and pick-ups) assembled or manufactured in Australia (clause A:1.2.1). It does so by:
"placing tariffs on imported PMVs and on imported components used in the assembly or manufacture of PMVs
·allowing, under certain conditions, duty free importation of defined PMVs and components by PMV producers to the value of 15 percent of their annual value of PMV production
·providing PMV producers, specialist component producers and vehicle importers with the opportunity to participate in the Export Facilitation Scheme." (page 1) (Administrative Arrangments)
Subject to their complying with Part B:4 of the Administrative Arrangements, PMV producers (i.e. companies assembling or manufacturing specified PMVs in Australia and which had been gazetted as PMV producers following an application to the Minister) were entitled to duty-free entry of Eligible Imports to the value of 15 per cent of their value of production of specified PMVs in any calendar year until 31 December, 2000. In broad terms, Eligible Imports were automotive components for use as original equipment ("OE") in the assembly or manufacture of specified PMVs together with specified CBUs (i.e. imported, fully assembled, vehicles covered by tariff classifications specified in clause A:1.2.2 of the Administrative Arrangements). Duty-free entry was effected through by-laws under Item 41A of Schedule 4 to the Tariff Act (clause B1.1.1). Automotive components for replacement or after-market use for specified PMVs were not eligible for duty-free entry under Part B of the Administrative Arrangements (clause B:1.1.2).
The value of production of specified PMVs was set out in Part B:2 of the Administrative Arrangements and the value of Eligible Imports in Part B:3. Between 1 January, 1991 and 31 December, 1996, PMV producers were required to produce a model at a volume greater than or equal to the minimum annual production volume specified in Part B:4.1.5 if they were to receive the full 15% duty-free entitlement for that model (Part B:4).
Part C of the Administrative Arrangements set out the Export Facilitation Scheme Arrangements. Any exporter of eligible exports could earn export credits under the EFS (clause C:1.1.1). Organisations seeking to establish the eligibility of exports to earn export credits had to apply in writing to that effect (clause C:1.1.2). "Eligible exports" were defined as:
"… exports of any of the following which are new at the time of export:
a.Specified PMVs. (See Part A:1.2.1).
b.Australian produced (see Glossary) automotive components which are:
(i)identical to automotive components currently supplied as OE to PMV producers for incorporation in specified PMVs.
or,
(ii)substantially similar to automotive components currently supplied as OE to PMV producers for incorporation in specified PMVs. (Substantially similar components are those which are identical in most features to OE automotive components for specified PMVs).
or,
(iii)destined for incorporation as OE in vehicles which, if produced in Australia, would be considered to be specified PMVs.
or,
(iv)components destined for incorporation in vehicles falling to Chapter 87 of Schedule 3 of the Customs Tariff Act 1987, produced by firms that are significant suppliers of OE automotive components (see Glossary), the export of which will contribute to the achievement of the overall objectives of the Government's passenger motor vehicle industry policy. (See Part C:1.2.2).
c.The following products and services relating to the range of automotive products identified in Parts C:1.2.1 a. and b.:
·automotive machine tools,
·automotive tooling,
·automotive design, development and production services." (clause C:1.2.1)
Eligibility to earn export credits for the products and services identified in Part C:1.2.1c were determined according to clause C:1.2.3.
A participant in the EFS could earn export credits upon the export of eligible exports (clause C:1.3.1). Export credits were earned at a rate of $A1.00 for every dollar of eligible export performance (clause C:1.3.2). The following clauses in Part C of the Administrative Arrangements set out what amounted to "eligible export performance". They read in part:
"C:1.3.3 The level of a participant's eligible export performance is the level of Australian automotive value-added in the $A FOB Australian content of eligible exports.
C:1.3.4The $A FOB Australian content value in an eligible export is the FOB selling price of the goods less the duty-free into store cost of any imported components.
C:1.3.5The FOB selling price is the net amount, in $A terms, actually received for eligible exports.
C:1.3.6The level of Australian automotive value-added is the $A FOB Australian content value less the value of raw materials. Therefore, the following formula will apply:
FOB Selling Price
lessImported Components
equalsFOB Australian Content
lessRaw Materials
equals Value-Added
In other words the value of imported components and imported and local raw materials will not be counted as Australian automotive value-added."
The right to claim export credits lay with the exporter but scheme participants might acquire eligible exports from another firm, export the goods and thereby earn the right to claim export credits (clause C:1.4.1). The manner in which export credits could be claimed was set out in clause C:2.1.1:
"At any time subsequent to receipt of payment for the eligible exports, EFS participants may submit claims for export credits to PMV Administration, ACS. Evidence of receipt of payment must be submitted with the claim. In the case of claims for Australian automotive design, development and production services, and automotive machine tools and automotive tooling, evidence of payment for completion of contracted stages of the service activity, machine tools or tooling will be acceptable. 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)."
Once claimed, export credits can be transferred between participants or sold by one participant to another (clause C:2.1.4). There are no limits on transferability. The notion of transferability includes the sale of export credits. Once a Determination for duty rebate had been issued by the ACS, a transfer of that instrument was at the prevailing duty rebate level.
Under the Administrative Arrangements, export credits became available for use immediately they were claimed and approved by the ACS and could be used up to 31 December, 2000. They could 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)." (clause C:3.1.1)
"Eligible imports" were defined as:
"a. Vehicles which are:
(1)Passenger motor vehicles;
(2)Passenger motor vehicle variants or derivatives (ie. station wagons, utilities, panel vans and pick-ups); and
(3)Light commercial/forward control and 4WD vehicles (not being derivatives of the vehicles in (1) or (2) above)
which have a G.V.W of 3.5 tonnes or less and which are classified under a subheading of:
8702, and
8702 (other than 8703.10.00), and
8704.21, 8704.31 and 8704.90b.Automotive components for all of the vehicles identified in a. above apart from those imported for use as OE in specified PMVs." (clause C:3.2.1)
Duty rebate was calculated on the basis that one dollar of credits earned a duty reduction/rebate equal to one dollar multiplied by the appropriate tariff rate (expressed as a decimal) for each of the years 1991 to 2000 specified in a table. The tariff rate was 37.5% in 1991 and reduced over each of the following years to 15.0% in 2000 (clause C:3.1.3). There were provisions for carrying over unused duty rebate from one year to the next (clause C:3.1.4). There were no limitations on the level of duty rebate that could be used during any calendar year by any participant (clause C:3.1.5).
Clause C:3.1.3 made provision for export credits when the end of the year was approaching:
"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."
Part D of the Administrative Arrangements set out the tariff reductions that would be applied for CBU imports for specified PMVs and others in the years from 1991 to 2000 inclusive.
In practical terms, the Administrative Arrangements meant that all CBUs and components that were eligible imports and were imported by PMV producers were entered for home consumption without the payment of duty. At the end of each calendar quarter, each PMV producer lodged a return with the ACS. The returns for the first three quarters of each calendar year set out details of all importations for the relevant quarter including the total Customs Value of the imported goods and the duty that was otherwise payable. The return for the fourth and final quarter for the year was an annual return setting out the cumulative totals of all relevant data for the preceding year ("annual return"). That return also set out the calculation of the duty free entitlement for the whole year together with deferred duty liability in excess of the duty free entitlement, the value of any export credits used against the excess duty and any net amount of duty that remained payable after the export credits had been acquitted. If ACS accepted the information contained in the annual return, it issued a debit notice for the remaining duty liability. That was paid as a lump sum. If any export credits were unused, they could be rolled over to the following year.
Regulations 129 to 137 of the Customs Regulations 1926 ("Customs Regulations") relate to the drawback of import duty upon the exportation of goods previously imported. Regulation 129 relates to the drawback of import duty in respect of goods, other than second hand goods and goods used in the manufacture of goods or subject to a process or treatment in Australia, that have been imported and then exported.
On the exportation of specified goods, r. 131 permits the drawback of import duty in respect of:
"(a) the imported goods used in the manufacture of the specified goods; or
(b)the imported goods that were subjected to a process or to treatment for the purpose of producing the specified goods;
as the case may be, and also in respect of any imported goods lost or wasted in the manufacture of the specified goods." (r. 131(2))
"Specified goods" are either manufactured goods in the manufacture of which imported goods have been used or imported goods that have been subject to a process or to treatment in Australia (r. 131(1)(a) and (b)). "Imported goods", in relation to specified goods, means:
"… imported goods:
(a)on which import duty has been paid; and
(b)that have not been used in the Commonwealth otherwise than:
(i)in the manufacture of the specified goods or in being subjected to a process or to treatment for the purpose of producing the specified goods, as the case may be; or
(ii)for the purpose of being inspected or exhibited." (r. 131(1))
As set out in the Statement of Agreed Facts, the export credits were recorded in the following way:
"Export credits accounts were maintained by Customs using 2 computer systems, Tarcon and Compile. Tarcon was a front end loader of data for compile. Credits were initially recorded as a balance against the name of the owner of the credits in Tarcon. These balances were transferred to Compile. When goods were imported using export credits, the owner's code for their export credit account would be entered in the appropriate field, and their balance of export credits recorded on Compile would be adjusted. This adjusted balance would then be recorded in the Tarcon computer. When credits were claimed or reinstated the new credits were entered into the Tarcon computer, and the owner's account in Compile was automatically updated." (paragraph 12)
The Customs Act, the Tariff Act, the Customs Regulations and the ACIS Scheme
From 1 January, 2001, the PMV Plan was replaced by the Automotive Competitiveness and Investment Scheme ("ACIS Scheme") established by the ACIS Administration Act 1999 ("ACISA Act"). As stated in the Explanatory Memorandum to the ACIS Administration Bill 1999 and the ACIS (Unearned Credit Liability) Bill 1999, the ACIS Scheme is intended to encourage new investment to help position the industry in the global market. It provides incentives in the form of duty credit ("ACIS credit"). Motor vehicle producers, Automotive Component Producers, Automotive Machine Tool, Tooling Producers and Automotive Service Providers are able to claim duty credits according to the provisions of the ACISA Act. ACIS credits can be used to offset Customs duty on eligible imports. Rebates or refunds can also be obtained in exchange for ASIC credits. Duty is levied and acquitted when goods are entered for home consumption. There is no longer a duty-free entry of Eligible Imports and so there is no longer any system of quarterly returns.
Consequential amendments were made to the Customs Act, Tariff Act and the Customs Regulations to facilitate the operation of the ACIS Scheme. In particular, s. 168 of the Customs Act and r. 126(1)(z) of the Customs Regulations were amended. Section 168(1) provides that the Customs Regulations may make provision for, and in relation to, allowing drawbacks of duty paid on goods imported into Australia. Section 168(2) provides that:
"For the purposes of this section and of any regulations made for the purposes of this section, the amount of duty paid on goods that are imported into Australia under item 41E of Schedule 4 to the Tariff is to be taken to be the sum of:
(a)the amount of money (if any) paid as customs duty on the importation of those goods; and
(b)to the extent that duty credit issued under the ACIS Administration Act 1999 has been offset against customs duty that would otherwise have been payable in respect of those goods – the amount of customs duty offset by the use of the credit."
Item 41E was added to Schedule 4 of the Tariff Act:
"41E Goods, as prescribed by by-law, being goods classified under a subheading of heading 8702, 8703 or 8704, including components therefor, imported by a person who owns duty credit under the Automotive Competitiveness and Investment Scheme set out in the ACIS Administration Act 1999 that can be applied in respect of the importation of those goods and who applies that credit to that importation An amount equal to the amount of duty assessed in accordance with Part 2 of this Act, less any duty credit owned by the owner of the goods that can be and is applied to the goods NZ/PNG/CAN/DC/DCS: An amount equal to the amount of duty assessed in accordance with Part 2 of this Act, less any duty credit owned by the owner of the goods that can be and is applied to the goods."
Section 163 of the Customs Act provides for the refund, rebate and remission of duty in respect of goods in such circumstances and subject to such conditions and restrictions as are prescribed (s. 163(1)). Regulation 126, which prescribes circumstances in which refunds are made has been amended to add r. 126(z), which reads:
"(1) Each of the following circumstances is prescribed for the purposes of section 163 of the Act, namely where:
…
(z)the following conditions are satisfied:
(i) duty has been paid on goods that:
(A) are classified under a subheading of heading 8702, 8703 or 8704 of Schedule 3 to the Customs Tariff Act 1995 or are components for such goods; and
(B) are prescribed by a by-law made for item 41E of Schedule 4 of the Customs Tariff Act 1995; and
(C) were entered for home consumption on or after 1 January 2001;
(ii)the owner of the goods has transferred to the Commonwealth an amount of duty credit under the Automotive Competitiveness and Investment Scheme set out in the ACIS Administration Act 1999 (whether or not the owner of the goods owned the credit when the duty was paid);
(iii)a refund of duty paid on other goods has not been made because of the transfer of the credit."
The transitional arrangements
Export credits earned under the Administrative Arrangements could be claimed until June, 2001 and could be used until 31 December, 2001. During the period from 1 January, 2001 to 31 December, 2001, the operation of the transitional arrangements with those of the ACIS Scheme meant that PMV producers could:
until June, 2001, claim export credits earned prior to 31 December, 2000;
use export credits;
sell or otherwise transfer export credits;
earn and claim ACIS credits;
use export credits to offset duty previously acquitted with ACIS credits and obtain a refund of the ACIS credits;
use ACIS credits to offset duty previously acquitted with export credits and obtain a refund of the export credits.
The dispute
Holden imported CBUs and automotive components throughout 2001 ("the 2001 shipments"). Approximately 75% of the components were used in the manufacture of vehicles and engines for domestic sale and 25% were used in the manufacture of engines and vehicles that were subsequently exported within the same year.
The parties agreed that the "… duty liability for the 2001 shipments was acquitted with a mixture of electronic funds, export credits and ACIS credits."
In November, 2001, Holden lodged a claim for the drawback of duty that was paid on the importation of components that were subsequently exported in manufactured engines. In December, 2001, Holden lodged a further twenty one claims for drawback. All of the claims were calculated using a representative shipment method. This is a form of assessment that utilises representative data rather than the figures from the individual shipments.
CONSIDERATION
The issue in this case centres on the drawback provisions. The word "drawback" is defined in s. 4 of the Customs Act to include bounty or allowance but is not itself defined. In the context of customs and excise, the term "drawback" has an accepted meaning:
"… A refund of excise or import duty when the imported item is subsequently exported or used in producing an export. …" (The New Shorter Oxford English Dictionary, 3rd edition, 1993 and see also The Macquarie Dictionary, 2nd edition, 1991)
Given the context of r. 134 and of the Customs Act and Regulations generally, this would seem to be the meaning to be attributed to it in r. 134. Indeed, it was the meaning attributed to the word in that context by Woodward J in Alcoa of Australia Ltd v Button (1984) 55 ALR 101 at 102 and see also 107.
It is also apparent from the legislative provisions that drawback is only payable if the "records … show … that duty has been paid on the goods". What is meant by "paid" in this context? The word "paid" is not defined in either the Customs Regulations or in the Customs Act. As a verb, the word "pay", from which "paid" is derived, is defined, in so far as it is relevant, to mean:
"… 1 … Appease, pacify; satisfy; please, gratify; be acceptable to, meet with approval of. Usu. in pass. … 2. a Give (a person) money etc. that is due for goods received, a service done, or a debt incurred; remunerate. Also, hand over or transfer (money etc.) in return for something (foll. by to the recipient). Also w. double obj. (pay a person money etc.). … b Hand over or transfer money in discharge of (a debt, fee, wage, etc.); hand over or transfer the amount of (a price). …" (The New Shorter Oxford English Dictionary, 3rd edition, 1993)
"…1. to discharge (a debt, obligation, etc.), as by giving or doing something. 2. to give (money, etc.) as in discharge of debt or obligations. 3. to satisfy the claims of (a person, etc.) as by giving money due. 4. to defray (cost or expense). …" (The Macquarie Dictionary, 2nd edition, 1991)
The ordinary meanings of the word "pay" suggest that payment need not always be made in money but may be made in kind. It has been accepted that:
"… the word 'payment' in itself is one which, in an appropriate context, may cover many ways of discharging obligations. It may even … include a discharge, not by money payment at all but by what is called 'payment in kind'. …" (White v Elmdene Estates Ltd [1959] 2 All ER 605, Court of Appeal per Lord Evershed, MR at pages 610-611 and affirmed on appeal to the House of Lords (Elmdene Estates Ltd v White [1960] 1 All ER 306))
At the heart of Mr Slonim's submission on behalf of Holden is that it paid the duty payable on the imported goods with the export credits or with a mixture of export credits and money. The export credits have value and can be ascribed a monetary value. The parties have agreed that the "… duty liability for the 2001 shipments was acquitted with a mixture of electronic funds, export credits and ACIS credits" (Statement of Agreed Facts, emphasis added). The choice of the word "acquit" is an interesting one for it encompasses amongst its meanings the notion of "pay" (The New Shorter Oxford English Dictionary, 3rd edition, 1993) but also the notions of discharge or settle a debt, obligation or claim (see also The Macquarie Dictionary, 2nd edition, 1991). It is clear from the submissions that Mr Kennedy made on behalf of the CEO that he does not accept that Holden has "paid" duty with export credits. At the heart of his submission is the contention that export credits must be deducted from the duty that would otherwise be payable before the amount of duty that is payable can be determined. They are not otherwise used to pay the duty.
Given the submissions made on behalf of each of the parties, I accept that their Statement of Agreed Facts reflects the manner in which they see the situation in practical commercial terms but I must determine whether duty has been paid according to the legislative provisions. When I do that, it seems to me that the starting point must be the "amount of duty payable" on the imported goods. That follows from my assumption that, barring some sort of error by one party or the other or barring a rebate or refund to which I will return, Holden will have paid the duty that is payable; neither more nor less. That is what the Tariff Act requires and it is what good commercial and administrative management requires.
The word "payable" means "… that is to be paid; falling due … (The New Shorter Oxford English Dictionary, 3rd edition, 1993) or "… owed; to be paid; due …" (The Macquarie Dictionary, 2nd edition, 1991). As I have said, the form or manner in which what is payable is paid may, in an appropriate context, not necessarily be made in money. The manner of payment, though, does not determine what is payable. To determine what is payable in the context of this case, regard must be had to Part 2 of the Tariff Act and the combined effect of s. 18, Schedule 4 and items 41A and 41B. The combined effect of those provisions is that the "duty payable" is "An amount equal to the amount of duty assessed in accordance with Part II of this [Tariff] Act, less any amount of export credits issued to the owner of the goods". This means that the duty payable is $x, being the monetary amount of duty assessed under Part 2, less $y, being the monetary value of the export credits. The resulting figure, being $(x-y), is the duty payable. It is the duty that is owed, to be paid or due by Holden. The duty payable is not $(x+y). Therefore, although export credits are used to determine the duty payable, the amount of the duty payable does not include a monetary amount representing the value of Holden's export credits. It follows that the duty paid by Holden does not include the monetary amount of those export credits.
Although the value of the export credits is not reflected in the duty payable, has Holden used export credits to pay the duty payable? There is nothing in either the Customs Act or the Customs Regulations that specifies the manner in which customs duty must be paid. That is to say, there is nothing to say that customs duty must be paid in money and may not be paid in kind. Rebate is provided for by s. 163 of the Customs Act and in the circumstances set out in r. 126 of the Customs Regulations. The word "rebate" is not defined in either the Customs Act or in the Customs Regulations. Its ordinary meaning is "A deduction from a sum of money to be paid; a discount. Also a partial refund of money paid" (The New Shorter Oxford English Dictionary, 3rd edition, 1993 and see also The Macquarie Dictionary, 2nd edition, 1991). It was considered in Brookton Co-operative Society Ltd v Federal Commissioner of Taxation (1977) 16 ALR 93, Helsham CJ said:
"In my view the word 'rebate', given its ordinary meaning, imports a notion of something paid by way of reduction or return or refund upon what has previously been paid or contributed, a deduction or discount referable to what has been paid." (page 111 and approved in Hyundai Automotive Distributors v Australian Customs Service (1998) 51 ALD 45 at 54, Hill, Sackville and Madgwick JJ)
An examination of s. 163 and of r. 126 shows that their rebate provisions do not apply to export credits. They apply only to ACIS credits. The rebate provisions having regard to export credits are to be found solely in the Administrative Arrangements. In the context of those arrangements and particularly of C:3.1.1, the meaning of rebate does not import the notion of the return of part of what has been paid as explained in Brookton and Hyundai but does import the notion of a reduction of what is to be paid. That is to say, the rebate is a deduction from the sum of money to be paid and not a partial refund of money paid. This is clear from clause C:3.1.1 which specifies that the rebate is on the duty payable. That clause does not specify that it is a rebate on duty paid. Therefore, pursuant to clause C:3.1.1, export credits were used to reduce the duty payable by Holden as a matter of administration. The legal basis for this is not clear from the material but, whether there is a proper legal basis or not, the consequences of the rebate provisions of the Administrative Arrangements remain unaltered. The export credits were not used to pay the duty or any part of it under the rebate provisions of clause C:3.1.1 of the Administrative Arrangements.
The Administrative Arrangements also provided for PMV producers to offset the duty payable on Eligible Imports in excess of their 15% duty-free entitlement in any calendar year (clause C:3.1.1). The term "offset" is not defined. Its ordinary meanings are numerous. In so far as they are relevant in these proceedings, they are:
"… Set off as an equivalent against; cancel out by, balance by something on the other side or of contrary nature; counterbalance, compensate …" (The New Shorter Oxford English Dictionary, 3rd edition, 1993 and see also The Macquarie Dictionary, 2nd edition, 1991)
Having regard to the ordinary meaning of the word and the context in which it is used in the Administrative Arrangements, I have concluded that the export credits might be used by PMV producers to counterbalance or to cancel out the duty payable on Eligible Imports. Counterbalancing or cancelling the liability is a different matter from paying the duty. It effectively reduces the liability and the duty that remains to be paid is the remainder of the amount of duty payable after the deduction of the monetary equivalent of the export credits used to offset the duty payable. It cannot be said that the export credits are used to pay the duty.
Finally, I have had regard to the refund provisions in clause C:3.1.3. They have no impact upon the duty paid by Holden. They were an administrative means of enabling a claimant, such as Holden, to obtain advantage of export credits accrued towards the end of a calendar year but not officially recognised, as it were, by a Determination until the next year. In practical terms, the effect of clause C:3.1.3 was to enable the claimant to obtain a refund of an amount of duty which it had paid during the previous year and which equated to the monetary value of the export credits recognised in a subsequent Determination. While the amount returned to Holden as refund was certainly paid by it in the first place to meet the duty payable by it, it does not follow that Holden can be said to have used the export credits as payment. Clause C:3.1.3 simply enables export credits to be used retrospectively. It enables them to be used either as a rebate or as an offset under clause C:3.1.1. In enabling them to be used retrospectively, a refund is provided for to enable the claimant and the CEO to be restored to the positions that they would have been in had it been possible for the Determination to have been made contemporaneously rather than retrospectively. It does nothing more than that.
It follows that I do not consider that the import duty paid by Holden on goods that it has imported and used in the manufacture of specified goods has comprised export credits accrued by it under the Administrative Arrangements. Therefore, it is not entitled to drawback of import duty paid in respect of those imported goods upon the exportation of the specified goods.
For these reasons, I affirm the four decisions of the respondent dated 14 March, 2002 in respect of claims numbered 2104221, 2200436, 2103869 and 2104285.
I certify that the forty-four preceding paragraphs are a true copy of the reasons for the decision herein of
Miss S A Forgie (Deputy President),Signed: …………………………………..
Paul Paczkowksi AssociateDates of Hearing 19 August, 2002
Date of Decision 6 September, 2002
Counsel for the Applicant Mr Slonim
Solicitor for the Applicant Holden Legal Unit
For the Respondent Mr Kennedy
Solicitor for the Respondent Australian Government Solicitor
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