Kodak (Australasia) Pty Limited v The Commonwealth of Australia & Anor; The Commonwealth of Australia & Anor v Genex Corporation

[1992] HCATrans 103

..

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney Nos S136, Sl37 and Sl38 of 1991

B e t w e e n -

KODAK (AUSTRALASIA) PTY LIMITED

Appellant

and

THE COMMONWEALTH OF AUSTRALIA

THE_COMMISSIONER OF TAXATION

Respondents

Office of the Registry

Sydney No Sl34 of 1991

B e t w e e n -

THE COMMONWEALTH OF AUSTRALIA

THE COMMISSIONER OF TAXATION

Appellants

Kodak(3)	81	8/4/92
MASON CJ BRENNAN J DEANE J DAWSON J TOOHEY J GAUDRON J McHUGH J

and

GENEX CORPORATION PTY LTD

First Respondent

RABBIT PHOTO (SA) PTY LTD

Second Respondent

RABBIT PHOTO (WA) PTY LTD

Third Respondent

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 8 APRIL 1992, AT 10.21 AM

(Continued from 7/4/92)

Copyright in the High Court of Australia

MASON CJ: Yes, Mr Gzell?

MR GZELL:  If I might answer the question that Your Honour

Justice Deane put to me late yesterday afternoon:

the answer in our submission is yes, section 17A(l)

will apply to the circumstance postulated, but no,

it will not create an additional exigibility tax.

If I could make that observation good by the

following five observations.

First, the interpretation of section 17A(l)

for which we contend does apply on the basis that

the negatives are regarded as having been applied

by the manufacturer to his own use and thereby

cease to be goods for the purpose of the

definition, but that does not lead to a second tax

liability, because section 17A merely deems a sale

to have occurred and says nothing about exigibility

to tax.

Third, to determine whether or not that deemed

sale of the negatives gives rise to a tax

liability, one goes back to section 17. It exacts

tax on three alternative bases, but once only.

Once one of those alternatives has arisen, that is

a taxing point has been crossed, the force of

section 17 is spent.

The fourth proposition is that one arrives at that conclusion either on the basis of the

Kodak(3) 82 8/4/92

exclusion of the operation of the other

alternatives, which was the way in which

Mr Justice Williams viewed the matter in York

Motors - and I pause simply to give Your Honours a reference to what was said by Chief Justice Latham at page 476 and by Justice Dixon, as he then was,

at pages 482 and 484. I will not take Your Honours

to those passages; they are contained in the

outline of our friend, Mr Bloom.	I had only given
Your Honours a reference to what

Mr Justice Williams said at first instance. That view is not altered, in our respectful submission,

by what was said by the Full Court.

So that one arrives at the conclusion that

once one of the three alternatives is met, the
force of section 17 is spent either on that basis

of exclusion, which was the way in which

Mr Justice Williams approached the matter, or on

the basis that section 17 requires the objects to

be goods within the definition when one of the

alternative bases arises. So that at the point of

delivery of the negatives, on the scenario with

which I am presently concerned, the negatives no

longer answer the definition of "goods" and a

second taxing point does not arise.

So that the interpretation for which we

contend, to take up the distinction that

Your Honour Justice Brennan put to my learned friend, Mr Bennett, yesterday, treats the word

"goods" throughout section 17A(l) as having the

same meaning in the sense of the same denotation of
the thing, but the connotation that the thing
answer the definition is only required at the time

of manufacture.

BRENNAN J:  Would it be right to say that the alternative

way of putting it is that the negatives are not

applied by the manufacturer to its own use and that

the only taxing point that is passed is that which

is prescribed by section 17A(l)?

MR GZELL: Well, I put it just slightly differently from

that, Your Honour. I say, take the other

alternative that we have put in our submission,

that is the alternative that you do not regard the

application to own use, then we say that there is no relevant use which takes the goods out of the definition of "goods" for section 3 purposes.	shining of the light through the negative as an point of delivery. Look at section 17; what does
that deemed sale do? That deemed sale under that
scenario takes you across the taxing point of sale
under section 17(1).

Kodak(3) 83 8/4/92

GAUDRON J: Mr Gzell, could I ask you this? Is it critical

that a taxing point has been crossed or that tax is

exigible? I am thinking that the two may not be

the same if one gets to paragraph (k).

MR GZELL: Well, we would say that they are the same. It is

incumbent upon us to establish that there is an

exigibility to tax. That exigibility to tax

arises, in our submission, under three alternative

circumstances which we have called taxing points.

The happening of one or other of those three events

is what we call a taxing point. It is a shorthand

way of saying an exigibility arises under

section 17(1) by reason of one of the three

alternative bases for tax which is there set out.

GAUDRON J:  So that if one decided - does it follow on your

argument that if you came to the view that there

had been an application to the manufacturer's own
use, and that the negatives were an aid to

manufacture and they did not fall within (k), that

one would then go and apply the deemed sale

provision?

MR GZELL: My answer to that is, no. If there is an

application to own use, then one of the three
alternatives under section 17 occurs, a taxing
point is crossed, there is a liability to tax

unless there be an exemption, and that is the point

to which I am about to come in a moment, but there

is an exemption if it is an aid to manufacture.

The exemption of the aid to manufacture does not

apply if the negatives fall within paragraph (k).

They do fall within paragraph (k) because the

negatives are to be delivered to the customer in

terms of section 17A(l) and there is no reason to

confine the word "sale", or the word "sold" in (k)

to sales, in fact.

GAUDRON J: Let us assume, however, that you do not succeed

with respect to paragraph (k), what is the

consequence then?

MR GZELL: If I do not succeed in respect of paragraph (k)

and Your Honours are of the view that there is an

application to own use, we fail. If, however,

Your Honours are of the view that there is no

application to own use, then the alternative

argument that we have put succeeds and one never

needs - - -

GAUDRON J:  So the alternative is the taxing point rather

than the liability to tax?

MR GZELL:  No, the alternative is that there is a liability

to tax by reason of the crossing of a different

taxing point. If Your Honours are of the view that

Kodak(3) 84 7/4/92

there is no application to own use, and

Your Honours take the view that there is no

exclusion from the definition of goods for the

reasons that we advanced yesterday, in other words,

that the only things that amount to use or

consumption to take an object out of the definition

is something that takes it past a taxing point, if

Your Honours are with us on that, then 17A(l) deems

there to have been a sale and section 17 operates

because at the moment at which that sale is deemed

to occur the object answers the definition of goods

for the purpose of the Act. An aid to manufacture

can have no application whatsoever to that

alternative because the aid to manufacture question

can only arise if there has been an application to

own use.

GAUDRON J: Yes, I think we are talking at cross purposes.

MR GZELL:  I have not understood Your Honour and I apologize for that.

GAUDRON J:  The point I am making is this: assume one

reaches the conclusion that there has been an

application to own use - - -

MR GZELL:	Yes.
GAUDRON J:	- - - and that there is an exclusion, and so

there is no tax payable because of the exclusion,

do you then come around and apply the deemed sale

or is that the end of the matter?

MR GZELL:  Your Honour, I need to step back again and say

that we are dealing with two different concepts

when we start talking about the aid to manufacture

aspect, because the aid to manufacture aspect only

deals with an exemption after there has been a

liability for tax. So that it is not a que:· ... ion of

going back and looking at the basis for that

liability for tax. If the basis for the liability

for tax is simply that there has been a sale, a

sale by reason of the deeming provision of

section 17A(l), then that is the end of the matter.

If there has - - -

GAUDRON J: Which does one look at first?

MR GZELL:  One looks at the question of whether there is a

liability for tax before one goes to the exemption
question, so that if one takes the view that the
liability for tax arises because, in terms of

section 17, there has been a sale, that sale being

constituted by the deeming provision in 17A(l),

that is the end of the matter, there is a liability

and the Commissioner is entitled to his tax. If,

on the other hand, Your Honours take the view that

Kodak(3) 85 8/4/92

a liability to tax arises because there has been an

application by the manufacturer to his own use, the

Commissioner would be entitled to his tax unless an exemption applies, and it is then that one goes to

the Exemptions and Classifications Act -

GAUDRON J:	What if you decide both, that because of the provisions relating to deemed sale there was both
an application to the manufacturer's use and a
deemed sale?

MR GZELL:  Yes. My answer to that is

GAUDRON J:  You have then crossed two taxing points, except

you say that they are two alternatives.

MR GZELL:  My answer to that is that that cannot happen

because either one construes section 17 as having

mutually exclusive alternatives, as

Mr Justice Williams did, with the result that once

one is crossed the other provision is spent.

GAUDRON J:  And which one do you look at first?

MR GZELL: Well, we would have thought that one looks at the

application to "own use" first because temporarily

that is the one first in time, so that if there is

an application to "own use" the later delivery

which deems a sale to occur under 17A(l) has no

effect in terms of section 17(1) because its

operation has been spent. That is the way we put

it. It is not a question of having two

alternatives occurring. So that temporarily, we

would say that one would consider the application

to "own use" before one looked at the deeming sale

position under section 17A(l).

If one takes that view that there is a

liability to tax by reason of that application to

"own use", then one has to go to the Exemptions and

Classifications Act to see whether the exemption

overrides the liability to tax, and the aid to

manufacture, if it is open to the manufacturer,

overrides the liability to tax. I am reminded

because of section 5 of the Exemptions and

Classifications Act which provides that

notwithstanding the provisions of the Assessment

Act tax will not be payable.	Does that answer
Your Honour's question?

GAUDRON J: Yes, thank you.

MR GZELL: Section 5 says:

Notwithstanding anything contained in any

Sales Tax Assessment Act, sales tax shall not, subject to this section, be payable upon the

Kodak(3) 86 8/4/92

sale value of any goods covered by any item or

sub-item in the first column of the First

Schedule, under any Act specified in the second column of that Schedule opposite that item or sub-item.

Could I just give Your Honours a reference to two

cases that I mentioned yesterday. One was

Commissioner of Taxation v Brambles Holdings Ltd,

(1991) 28 FCR 451, and Otto Australia Pty Ltd v

Commissioner of Taxation, 28 FCR 477. Then, might

I also give Your Honours a reference to the case

that I referred to in answer to Your Honour

Justice Brennan in dealing with the extent of the

hypotheses that ought to be supposed under the

statute in dealing with the section 18(3) point

that Your Honour put to me. The case is Estee

Lauder Pty Ltd v Federal Commissioner of Taxation,

80 ALR 314, and I simply refer Your Honours to the

passages at page 321 line 10 and 323 line 13.

If I could return to the summary, I was about

to address the question of exemption at

paragraph 15 of our outline. To make good the

point that I made in answer to Your Honour only arise in a situation of application to own use

by definition of the type of item concerned. If

one goes to items 113B and 113C which are the items

relied upon by the taxpayers, which appear at

page 95,741 in my edition, 113B:

Goods ..... manufactured by any person and

applied by him to his own use as aids to

manufacture or as auxiliaries to aids to

manufacture.

Likewise in 113C. So that the taxpayers cannot

have the advantage of an exemption unless it be a

circumstance in which there has been an application
to own use.	The definition of that term has been

referred to; it appears in regulation 4(1) at

page 93,503. It also appears in clause 1(1) of the

first schedule at 95,543. As Your Honours have

been told, for present purposes it is identical the

one to the other.

So that the aid to manufacture provision would

apply but for paragraph (k). Paragraph (k) has the

effect of excluding the negatives, in our

submission, from the aid to manufacture provision, because one reads paragraph (k) as being negatives
for use in connection with the manufacture for sale
of prints if the negatives are to be sold to the

purchaser of the prints.

Kodak(3) 87 8/4/92

In our respectful submission, there is no

basis for confining the word "sold" in that

paragraph to actual sales. There is no definition

of the term "sale" either in the Exemptions and

Classifications Act or in the Assessment Act.	We
know that the Assessment Act deems a number of
situations to be sales.

Your Honours have already been taken to

section 17A(l) which deems a circumstance to amount
to a sale for the purpose of that Act. There are

other provisions. I took Your Honours to one

of a computer disk and the sale of the

yesterday, which is section 3(3A) at page 92,161. manufacture

disk itself for a relatively small sum with a

relatively high licence fee to utilize its

contents, section 3(3A) deems a sale to occur in

circumstances in which that computer disk is given

away rather than sold:

Where goods to which section 18B would apply

if the goods were sold by a person to another

person are given by the first-mentioned person

to the other person, then, for the purposes of

this Act, the first-mentioned person shall be

deemed to have sold the goods to the other

person -

a circumstance in which that set of circumstances
is regarded as a sale for the purposes of the

Assessment Act.

Section 3(4) is another provision to which I

do not think Your Honours have thus far been taken.

It is at page 92,162 and it deals with the

circumstance where there is a contract for

services, but in the process of carrying out the

contract for services property passes.

Section 3(4) provides:

For the purposes of this Act, a person shall

be deemed to have sold goods if, in the
performance of any contract (not being a

contract for the sale of goods) under which he

has received, or is entitled to receive,
valuable consideration, he supplies goods the
property in which (whether as goods or in some

other form) passes, under the terms of the

contract, to some other person.

All of those circumstances are regarded as sales for the purpose of the Assessment Act and there is

no basis, in our respectful submission, why those

circumstances should not be regarded as falling

within the word "sold" in paragraph (k), either

because the entirety of the legislat~on is a scheme

Kodak(3) 88 8/4/92

which has to be read together, as Sir Owen Dixon

said in Ellis & Clark, 52 CLR 85, and the passage

upon which we rely is at page 89, the commencement

of the first full paragraph on that page:

Because of some apprehension as to the

possible effect of sec. 55 of the Constitution

on its validity, if the sales tax legislation

were enacted in one assessment Act and one

taxing Act, it was passed in the form of nine separate machinery statutes and nine separate taxing Acts. They constitute, however, a

single legislative scheme to the complete

operation of which all are necessary, and they

should be construed together. Moreover, the

legislation depends in a remarkable degree

upon the regulations made under the power

which it confers on the Executive. Without

the regulations, not only is it unworkable,

but the expression of legislative policy is so

inadequate as almost to be unintelligible.

The point I rely upon is the observation that they ought to be construed together. On that basis the

circumstances which are treated as sales for the

purpose of the Assessment Act should also fall

within the purview of paragraph (k). The other

alternative basis of arriving at that conclusion is

by force of section 3(1) of the Exemptions and

Classifications Act, which is at page 95,511 in the edition that Your Honours have:

Any expression used in this Act shall, unless the contrary intention appears, have the same

meaning as in the relevant Sales Tax

Assessment Act.

So that, in our respectful submission, in the

absence of a definition of the term "sale" those

matters which are encompassed within the notion of

a sale are included.

If the argument that an actual sale is

required to invoke the operation of paragraph (k)

is correct, then the 1986 amendments miscarried

because the negatives are owned by a customer and

can never be the subject of an actual sale. So

that if one confines paragraph (k) to an actual

sale, as our friends would have the Court do, the

amendments in 1986 which deliberately extended the

definition of "manufacture" to include the

production of the negatives, must have misfired,

because paragraph (k) on that hypothesis would

never operate and the consequence was that the

extension of the definition had no effect at all,

because the definition might have extended the

notion of "manufacture" to create a liability under

Kodak(3) 89 8/4/92

section 17(1), but it was always in the face of an

"aid to manufacture" exemption which would have

overridden that operation, and we say that that conclusion adds weight to the preferment of the

interpretation that we put to Your Honours.

The second observation I make about the

language in the schedules is that it is not always

precise. Since an aid to manufacture must, by

definition, have been something which has been

applied to the manufacturer's own use, it has gone
into use or consumption and no longer answers the
definition of goods in section 3 of the Act. Yet

in the Exemptions and Classifications Act the word

"goods" are used, and it is used, and must be

understood to be used, only in the sense of

requiring a connotation of answering the
description in the definition at the time of

manufacture and maintaining a denotation

thereafter.

So that the same argument that we apply in

relation to 17A(l) must, of necessity, be applied

to the use of the word "goods" in the aids to

manufacture exemption. Take, for example,

item 107, which is at page 95,731:

Goods for use, for business or industrial

purposes, in the production of motion picture
films (other than films for the private,

domestic or personal use of the person by or

for whom they are produced), namely:

(a) unexposed cinematograph film;

(b) cinematograph film that has been exposed

but has not been developed;

(c) negatives, positives and reversals -

The negative will not answer the description of

goods at the time it has become an aid to

manufacture, because at that point in time it has
been applied to the manufacturer's own use and has,

to use our terminology, crossed a taxing point. So that the word "goods", as used in item 107, must be

construed similarly to the construction that we

place on section 17A(l), and a like conclusion must

be drawn in relation to items 113B and items 113C

which are the items relied relied upon:

Goods ..... manufactured by any person and

applied by him to his own use -

must, of necessity, have ceased to be goods, so

that the word must be confined to having the

required connotation answering the definition only

Kodak(3) 90 8/4/92

at the point of manufacture, and what happens

thereafter does not alter the circumstance.

If one looks at paragraph (k), the phrase:

first-mentioned goods -

can never be goods if the full rigor of the

definition must apply at that point for exactly the

same reason. Paragraph (k) says:

goods for use in connection with the
manufacturer for sale of goods, if the
first-mentioned goods are to be sold -

first-mentioned goods are the negatives, at that point in time they could not possibly answer the

description of goods by definition, and in

consequence one must, if one is going to have any

scope for the operation of paragraph (k) at all,

construed on the basis that the connotation under

the definition is only required at the point of

manufacture, for otherwise the consequence is that

paragraph (k) misfired from the moment of its

introduction into the Act.

To make good that proposition, suppose that

one has a manufacturer who makes an expensive

master cutting for an issue of CDs, and he makes

that master cutting from his own materials, so
there is no additional element of section 17A(l),

and he uses the master cutting for the purpose of

creating the CDs and he sells the CDs and the

master cutting to the customer. He has applied the

master cutting to his own use for the purpose of
making the CDs; the master cutting has thereby

passed a taxing point under section 17(1) and it is
excluded under paragraph (k) from aids to

manufacture not withstanding, in our respectful

submission, that the master cutting at that point

no longer answers the definition of goods.

If the alternative construction for which our

friends contend is correct, it would mean that

paragraph (k) had no operation when it was

introduced. In our respectful submission, it

matters not whether it is a question of that master

cutting being fabricated from the manufacturer's

own goods or fabricated from goods supplied by the

customer invoking the deemed sale provisions of

section 17A(l).

Your Honours, we are comforted in that

conclusion as a matter of interpretation by what

was said in the second reading speech when

paragraph (k) was introduced, and sensitive of the

imprimatur and the authorities that my learned

Kodak(3) 91 8/4/92

friend, Mr Bloom, drew Your Honours' attention to

yesterday, of Bryan and Bolton, we use the second

reading speech only as a matter of comfort to the

construction that I have put forward in my

submission. If Your Honours go to tab 8(ii) in the

additional material that we supplied yesterday - it

has a number 48 at the top - have Your Honours got

that?

MASON CJ: Yes.

MR GZELL: If I take Your Honours back to 47, which is under

tab 8, to make good the observation that we are
dealing with paragraph (k), Your Honours will see

that section 3 of the amending Act introduced as a

paragraph (j), what is paragraph (k):

goods for use in connection with the

manufacture for sale of goods (not being goods

covered by any item or sub-item in this

Schedule) if the first-mentioned goods are to

be sold to the purchaser of the goods so

manufactured.

It was introduced in that form as paragraph (j),

and then if I can take Your Honours to the second
reading speech and, in particular, to page 49 in

the additional material, this is what was said.

The first full paragraph on that page is:

As I indicated earlier, the bill contains

one provision which is not of a concessionary
character. Since the 13th September, 1945,

the law has provided for the exemption of

"aids to manufacture" in the form of

machinery, implements and apparatus. The

object of this concession was to obviate

double taxation such as had previously

occurred by virtue of taxing the cost of these

"aids to manufacture" as well as the value of

the manufactured goods which are produced with
their aid.	The value of the manufactured

goods would normally take into account the

cost of the "aids". Among the goods covered

by the exemption of "aids to manufacture" are

master cuttings and matrices for use in the

production of gramophone or broadcast records.

Where a person contracts to make a record for

another it is first necessary for him to
obtain or make a master cutting and a matrix,
and the cost of these articles is far greater
than the cost of producing the finished
records therefrom. It is a trade custom that
the master cutting and matrix are handed over

with the finished records to the customer for

whom they are made, and it is contended that

Kodak(3) 92 8/4/92

there is a sale of the master cutting and

matrix.

Pausing there, that is a situation in which 3(4)

would deem the sale to occur. Another way perhaps

of looking at it is to say that it was an implied

term of the contract that there should be the
passing of the goods, but in any event the bill was

being introduced to the House on the basis of what

might have been a deemed sale rather than an actual

sale. It goes on:

Some manufacturers adopted the practice of separately invoicing the master cuttings and matrices and the records, and of paying tax

only on that part of the charge which is

attributed to the records. In this manner,

tax would be paid in respect of the records

upon a value of a few shillings only, whereas

the actual cost of production of the records

would be several pounds.

The existing law is open to similar loss

of revenue in respect of blocks for use in the

production of taxable printed matter. The

procedure referred to is an abuse of the

exemption of "aids to manufacture", which was

granted on the understanding that tax would be
paid on the full wholesale selling value of

the manufactured goods. This value would

normally reflect the cost of "aids" used in

production. A provision has accordingly been

inserted in the bill to exclude from the

exemption of "aids to manufacture" any "aids"

which are to be sold to the purchaser of goods

made therewith.

Your Honours, in our submission, the two approaches

that we have put to the Court produce a congruent

result which complies with the scheme of the sales

tax legislation that all goods should be taxed, but
they should be taxed once only.	If there is no

relevant use of the negatives to make prints, the

negatives cross the taxing point on delivery to the

customer and are thereafter second-hand goods which

attract no further tax if redelivered for print

making.

The taxpayers' case, on the other hand, is

that only negatives which have not been used to

make prints cross that taxing point and that

negatives used for the only purpose for which they

are produced, that is to make prints, escape tax

entirely. In our submission, it is unlikely that

that lacuna was intended.

Kodak(3) 8/4/92

The other alternative approach to the matter

is that if one regards the making of prints as a

relevant use of the negatives, the manufacturer

applies them to his own use. They thereby cross a

taxing point, do not escape the net, as the
taxpayers contend, as aids to manufacture because

of the deliberate exclusion in paragraph (k), nor is there any question of double taxation because, having crossed that taxing point, the operation of

section 17 is spent. Those are our submissions, if

the Court pleases.

MASON CJ: Thank you, Mr Gzell. Yes, Mr Bennett?

MR BENNETT:  Your Honour, I have prepared a summary of

submissions in reply, and I hand a bundle of copies

to Your Honours. What I have done in each case is

set out my learned friend's submission first, and then prefaced my reply to it with the word "but". There are two preliminary matters I should mention.

The first is that my learned friend has given

Your Honours a large bundle of explanatory material

but has referred to very little of it. We simply

make this submission, that if Your Honours are to

refer to it, Your Honours would of course need to

be satisfied that section lSAB applied. We have

not of course dealt with individual issues which

might be raised in that material.

The other matter is that I confirm to

Your Honours that all three parties are in

agreement with what was said by both my learned

friends in relation to what Mr Justice Hill said

about sale value.	We all agree that that is a
matter which would be affected by evidence.	It was

not argued before His Honour, and we certainly

would respectfully ask Your Honours not to express

any view on that issue.	It does not arise in the
appeal.

DEANE J:  Mr Bennett, was there any discussion in the

Federal Court as to whether the Federal Court should simply follow the decision of the Court of

Appeal?

MR BENNETT:  I was not there. My learned friend, Mr Bloom,

was in that case.

DEANE J: But it is an extraordinary situation where you

have two intermediate appellate courts in the same

appellate structure expressing diametrically
opposed conclusions as to the operation of the same

piece of federal legislation. What is the taxpayer

supposed to do?

MR BENNETT:  Come to this Court, Your Honour.

Kodak(3) 94 8/4/92

DEANE J: Well, in other words, create a situation in which

a case such as this which really involves no

question of principle has to come to this Court

because one intermediate appellate court does not

follow the other.

MR BENNETT: Well, may I respectfully put three things in

the Federal Court's defence, Your Honour.

DEANE J:  I am not attacking the Federal Court. I am just

saying it is a strange situation.

MR BENNETT: Well, Your Honour, may I just say these three

things: first, at the time of the Federal Court

proceedings this Court had adjourned our

application for special leave to appeal because of
the pendency of those proceedings, so the Court was

aware that there was a possibility of the issue

coming to this Court.

DEANE J:  And the court could well have understood that this

Court was giving it an opportunity to express its view for the assistance of this Court.

MR BENNETT:  I have a recollection, Your Honour, that

something like that was said on the first leave

application by us, and probably was conveyed to the

Federal Court.

DEANE J: Well, that answers my question, Mr Bennett.

MR BENNETT:  The second matter is, Your Honour, that the

Court of Appeal did not deal with the main question

on which the Federal Court found in the taxpayers'

favour, and we respectfully submit, by some sort of

oversight; and the third is, we submit, the Court

of Appeal was clearly wrong.

Your Honours, on page 1 dealing first with the question of manufacture, my learned friend relied

on the WEA case and suggested there was an analogy.

But, of course, one is dealing with a totally

different situation. There, the two products were

blank tape and a tape with some music or some

performance of some kind placed on it. Here, one

is dealing with exposed film which already has the

latent image on it and a negative made by the

development of that film. That is a totally

different situation. The analogy from the WEA case

to this one might be between the initial unexposed
film and the ultimate negative but, of course,

there the main part of the process is something

done privately by the customer and is in quite a

different situation.

In the WEA case the two products are

commercially quite different. Obviously a blank

Kodak(3) 95 8/4/92

tape is a very different produce to a tape with

something on it which the customer wants to hear or

see. It is a totally different commercial item.

It is not a question of one necessarily becoming

the other. The tape could be used for any one of a

dozen different things. It could be an infinite

number of different things. It could be used for

any particular musical or video production, or it could be sold to the customer as a blank tape for

him to place things on as desired. It has a

totally different commercial thing. It is not

destined from birth to have the particular course

mapped out for it. Here, the exposed film has

only one possible thing that can happen to it, what

has always been intended to happen to it, namely,

that it could go from exposed film to negative.

And it is like the caterpillar which has only one

thing it can become. It is not a change in its
nature. It is simply the object going through a
step which is part of the necessary development of

the object.

It is like the caterpillar, which has only one

thing it can become. It is not a change of its nature, it is simply the object going through a

step which is part of the necessary development of

the object.

BRENNAN J:  I do not understand that argument or that

analogy. If one has a living thing, then change is

a function of the life. If, however, one has an

inanimate thing, change is the subject of some

activity which takes place with respect to it, and

if there was a sale, for example, of metal which

could be used for the crafting of a piece of

jewellery and it had to be of a particular kind in

order to be satisfactory for jewellery making,

would one say that one cannot exact any tax on the

sale of the metal because it will in due time be

turned into jewellery and that is the only function

that it has?

MR BENNETT: 

Your Honour, it would depend whether the metal

could be made into different items of jewellery, or
if it was something which could only be used for

the purpose of producing a particular type or
particular object of jewellery. It is the

difference, perhaps, between assembling a kit on

the one hand, where there is only one thing you can
do with it and, on the other hand, a raw material

which is made into something different.

BRENNAN J: Well, does that mean that if one has a kit for

the construction of a house and it is sold to a

builder, perhaps not a construction of a house -

construction of something which is goods - and it

is sold to an assembler and the assembler then

Kodak(3) 96 8/4/92

assembles it and sells it, that there is not a tax

exigible with respect to both transactions?

MR BENNETT:  Your Honour, if the kit is something which

cannot be used for any other purpose, there may

well be a difficulty in describing it as

manufacture. Your Honour recalls the motor cycle

case, it was Irving v Munro, where motor cycles

were imported from England in component parts and were assembled in Australia by being put together
with a workman with a spanner and putting nuts on

and so on and making these parts into motor bikes

and it was necessary for that step to be gone

through, of course, before one could use it, but
there was nothing else you could use the kit for,

and that was held not to be manufacture. In a

sense it is ultimately a question of degree.

If Your Honour takes the view, contrary to my

submission, that it is possible for the mere

assembly of a kit, or the putting together - the

development of an object which cannot be made into

anything else, to be manufactured, if Your Honour

takes that view against what I put, we would still

put that where one has a borderline case between

manufacture and mere alteration of an object, the

fact that it is part of a preordained course, and

there is no other preordained course available, is

something which would militate in favour of it

being alteration rather than manufacture.

BRENNAN J: Would you give me a reference to the motor bike

kit case?

MR BENNETT: Yes. It is in, I think, the 1930s in this

Court. I will have that found, Your Honour. I

will do it, Your Honour, in a moment.

BRENNAN J: That will be sufficient.

MR BENNETT:  I am told it is 46 CLR 279. I should say there

was an additional factor in that case, in fairness,
but it is not clear that that factor was part of

the ratio, and that is that the motor cycle had

been assembled in England and then dismantled
before shipping, but it was dismantled in a number

of very small parts and put together in a way which

one might have thought, if the parts were

independently gathered by the person putting them

together, would have constituted manufacture. In
other words, if in that case the facts had been

that the manufacturer had gone out and bought a

wheel and bought some brakes and bought some

handlebars and then screwed them together to make a
motor cycle, the case would have been different

from the case where he acquires a motor cycle kit

Kodak(3) 97 8/4/92

with all the parts there, and like a meccano set

screws them together.

BRENNAN J:  The judgment is hardly instructive of principle?

MR BENNETT: It is not, Your Honour, but what one does is

one has to read the stated case, which sets it out

in some detail, look at the arguments and then see

the way - one can draw from that what the Court

seems to be saying. But I agree with Your Honour,

it is not the most helpful of judgments one can

find.

BRENNAN J: Is that the best you have got?

MR BENNETT:  On that point, Your Honour, there is no

authority either way.

BRENNAN J: Yes.

MR BENNETT:  My friend has authority the other way. My

friend relies on Jack Zinader but of course there
there was no pre-ordained course. No one could say

that these old fur garments were, inevitably, going to be made up in a particular way to the particular

new garments, there was nothing like that there.

Here you have this object that goes into - it is

sold to the customer as unexposed film and sold to the customer for one purpose only, to go through a cycle of three further steps, one of which the

customer does and two of which it goes back to

Kodak for. And, in my respectful submission, that

is simply different to other cases.

At paragraph 3, my friend said the process is

not simple. We say the simplicity of the process

is not what matters it is, no doubt, a highly

technical and complex chemical process which, while

no doubt capable of being performed by an

enthusiastic amateur, is usually performed by a

professional.	But the test does not depend on the
complexity of the process, the question is: is

something relevantly different created, and if the

process is important it is the degree of alteration

of the object that matters not the simplicity or

complexity of the process.

One should also note, of course, and generally

in relation to this argument, that the purpose of

the amendment being added was that the legislature

clearly took the view that my learned friend was

erroneous in his submission. The legislature

clearly took the view that it was not manufacture

according to ordinary concepts and needed to make

the amendment to add it.

Kodak(3) 98 8/4/92

On the second question, whether shining the

light through is an application to own use, we make

these submission: first, my friend said there is

no double taxation because if what Mr Justice Hill

said in obiter were right there might be, but the

Court is not in a position to decide that either

way and we do not ask it to do so, but the question

of double taxation does not matter in a sense. My

friend says, "Well, here is a gap, on one view of

it", he says, "We are taxing this bit and we are

taxing this bit and here is something in the middle

we are not taxing. There is something wrong, the

policy of the legislation is that we catch

everything" .

The answer to that, of course, is that sales

tax is not a value added tax, it is not a goods and

services tax, it is a very specific, very

complicated scheme of taxation which has a lot of

anomalies in it and which does not, necessarily,

attach to every moment in every process and, in our

respectful submission, it is weak reasoning to

suggest with this legislation that because

something is left out in the manufacture of

something, or in some line something must be wrong.

My friend then made a submission - this is in

paragraph 3 of his outline - that paragraph (a) of

the definition of goods is an exclusion relating to
second-hand goods. I do not want to spend a lot of time on that, but we would respectfully submit that

that is not an assumption one should make, that it

may be broader, it may be narrower in some respects

than second-hand goods. There are specific
provisions, for example, in paragraph (b) of the

exclusion dealing with specific aspects of second-

hand goods, and that would be unnecessary if

paragraph (a) was simply an exclusion of

second-hand goods.

There are also references in other provisions,

for example, section 3(8) assumes that there can in

certain circumstances be second-hand goods which

might or might not fall within the definition, but

one should not simply make that assumption.

One of my friend's central submissions is that

manufacture necessarily leads to goods. One

wonders, if that is right, why there are separate

definitions of manufacture and goods. We would

respectfully submit that there are two concepts:

the sales tax in the relevant provision requires

both, and one must see if both are satisfied.	One
should not assume that every time there is

manufacture, at the end of it there is something

called goods or, more importantly, that every time

there is manufacture there are goods which are

Kodak(3) 99 8/4/92

different goods to the goods which were used to

make the object. That may be the case in most
cases but there are exceptional products and we

would submit that the two are not total

correlatives.

The third issue concerned the purchase and use

of unexposed film and whether that was use or

consumption. The first point is really just a

reference to a sentence and a judgment, but my

friend referred to the sentence in Jack Zinader

at 349 point 7 - I will not take Your Honours to

it. We would simply note that it does use the word

"goods" which rather suggests the contrary of what my friend says, and I will not spend time on that.

My friend said that sections 18B and 3(3A)

explain the references in paragraphs (e) and (f) of the definition of "manufacture", but what my friend

did not answer, we would respectfully submit, is

the force of the expressio unius argument in

relation to paragraphs (e) and (f). Your Honours

see that paragraphs (e) and (f) on page 92,142 end

with the words in parentheses:

including goods and commodities of the kind

referred to in paragraph (a) of the definition

ie, something that would otherwise be excluded from

the definition of goods, yet those words were not

put in paragraph (d) and, in my respectful

submission, my friend has not addressed that which

was the principal point made by my learned friend,

Mr Bloom, in relation to those paragraphs.

My friend referred to Mills v Meeking. We

simply say that is a case that did not expound what

Cooper Brookes meant, it simply referred to it.

Cooper Brookes, we would submit, only applies to

particular types of misfiring. It does not enable

the Court to say, "Well, here was legislative

intention; they haven't achieved it so we'll read

the Act so as to achieve it". It is not as broad
as that. It was a case concerning a very narrow

and very obvious and very clear mistake and, as I

said in-chief, it is like a superfluous "not" or an

omission of the word "not". It is a procedural

error in drafting rather than an error in the
overall hoped for effect or plan in relation to the
legislation.

Your Honour Justice Deane asked my learned friend a question about cutting up the negatives.

There was some evidence in the Genex case, but no evidence in the Kodak case, about that issue, and

the evidence in Genex was that in the mini-labs

Kodak( 3) 100 8/4/92

which Genex operates negatives are cut up after

they have had the light shone through them. Now,

there are a number of matters that we would submit

about that.

The first is that the negatives were

manufactured and, in our submission, went into use

or consumption in Australia before that occurred.

In that sense, manufacture is complete before cutting up. Slicing up the cake, we submit, is not

part of its manufacture, even if it is done by the

baker; it is really part of the packaging process.

If Your Honours accept what I put about

negatives, that the primary function, what we are

really talking about in 99.9 per cent of cases, is

the making of the print from it, and really giving
the negatives back to the customer as sort of an
insurance policy that the odd customer may require
in the odd case, really, cutting up the negative

afterwards is little more than a convenient form of

packaging for the customer of something one may as

well give to him.	It is not the real purpose of
the transaction at all.	The goods, the important

goods, if one is drawing that line, are when the

negative is made.

The other answer, the one I have put first in

the paragraph, is that there may be cases where

some aspects of manufacture do continue after sale.

An example we thought of is bespoke shoes. It may be that a manufacturer of bespoke shoes wishes to

put some sort of firming agent or hardening agent
on the leather, after they have been worn by the

customer for a day or two, as part of the

manufacture of the shoes. Assume therefore that

the manufacturer says to the customer, "I want you
to pay me when I deliver the shoes to you in their

soft state. Wear them for a couple of days then

bring them to me and I'll complete the manufacture

you when I give you the shoes". by adding the hardening agent, but they're sold to Now, in that sort of case one may say, I

suppose, that manufacture continues after sale, but

that does not create any problem. The relevant

taxing point is sale and what is sold, I suppose,
there, is the shoes as they are going to be in

their future state. It rather indicates, though,

that manufacture and goods are not correlatives,

because there the goods may be the relevant goods

at the time they are delivered and sold, but the

manufacture may continue for some further period.

And one could perhaps think of other examples, but

it does not help a great deal in this case, we

would respectfully submit. At any rate, there is

Kodak(3) 101 8/4/92

no evidence as to whether that applies in relation

to Kodak.

The fourth question is application to own use.

We respectfully adopt the argument implicit in the

example Your Honour Justice Brennan put to my

learned friend about whether section 18(3) shows

that "own use" requires ownership. We would add to

that reference a reference to section 18(3B).

Although that may have been held to be invalid,

that does not prevent us using it as an aid to

construction. It is fairly clear there that it can

be applied to "own use" without being owned,

because the reference is to:

the amount which the manufacturer of the goods

could reasonably be expected to have paid

another person, being a person who constructs

swimming pools.

So it talks about someone else being the person for

whom it is done, whereas our provision does not do

that.

Secondly, my friend submitted that the Stewart case shows that one can have concurrent use.

Stewart, Your Honours recall, were the vending

machines put in the childrens hospital which sold

lottery tickets and they are supplied free, but the

manufacturer and the childrens hospital both get

some benefit from the sale of lottery tickets.

That was in the context of the word "use" in

item 81(1). It was held that the machines were

applied by their owner to its own use when it gave

them to the hospital for it to sell tickets for the
joint benefit of the parties and that that was not

inconsistent with their being used by the hospital

within the meaning of item 81(1).

That does not suggest that application to

one's own use is in the same category. It simply

makes the very obvious proposition:  two people can

be using something. Of course they can. One can

think of lots of situations where two people use something simultaneously, but that does not deal

with the problem we are dealing with.	Otto and
Brambles are in the same category.	Use under

item 78 can of course be concurrent use.

My friend then said that section 17A showed

that goods may not be owned at the time of

manufacture.	The definition of "manufacturer"
shows the same thing.	We have for Your Honours -

my friend did not provide them in his volume - the

second reading speech in 1934 when these provisions

were introduced. I will not take Your Honours to

Kodak(3) 102 8/4/92

it in detail, but what is significant is that the

example given, as I think Mr Justice Hill said, is

the example of bolts of cloth given to tailors.	It
is a very different position to the sort of

position one has here where the item of property is

dealt with in a very different sort of way.

Paragraph 5, my friend talked about the

template for the bespoke wheeled refrigerator.	I
am not sure that example did not become a little
too convoluted as my friend's development of my
example, but we would say it would be used and

perhaps applied to use, but it would not be applied
to the manufacturer's own use if it was not his

property.

My friend says section 17A is subsidiary to

section 17(1), it does not fix the time of the

taxing point. We say if that were so, what is the

point of referring to time in section 17A? Clearly it is to fix the moment of occurrence of the taxing point.

Paragraph 7 I need to say a little more about

and there is a typographical error in the first

line. I obviously was so impressed with my

friend's suggestion that use and consumption is a

combined phrase or a hendiadys that I confused it

with the phrase "use or occupation". He says there

is no entry until there is a taxing point. That is

a very novel proposition, and in my respectful

submission, it is quite wrong.

The clearest illustration is that the normal

taxing point is the last wholesale sale, not the

sale by the retailer. So in the normal case where

the last wholesale sale takes place, on no view of

it have the goods gone into use or consumption in

Australia. They are certainly not second-hand.

They have simply gone to the retailer's shop.	And
yet my friend would say, if his submission is
right, that there has been an entry into use or
consumption when the retailer gets them. That,
with respect, just cannot be right, Your Honour.

Again, if one looks at York Motors,

73 CLR 459, but Your Honours need not go to

it - that was a case on goods being treated by the

retailer as stock for sale by retail. What was

done there was all that happened was York Motors'

accountant made an entry in York Motors' own books,

and that entry was held to constitute a treating of

stock as stock for sale by retail. My learned

friend would say as the accountant writes those

figures in the book, suddenly 50 motor vehicles go

into use or consumption in Australia. That cannot

be right, with respect.

Kodak(3) 103 8/4/92

So in relation to two of the three taxing

points, it is just wrong. Why should it be right

in relation to the third taxing point of

application to own use? Why should one fix on the

word "use" which happens to appear in both phrases

and say it must mean the same thing.

One can give other examples. If goods are

stolen they may go into use or consumption, but

they never reach a taxing point.	The same applies
if the goods are destroyed.	They are consumed, but
they may never reach a taxing point.	The same

applies if they are given away for pure benefaction

with no ulterior purpose. Stewart, of course, was

giving away for an ulterior purpose which is

application to one's own use. But if they are

given as in Taubmans, or Hornibrook or perhaps Max

Factor - if one gives away for pure benefaction

there is never a sales tax exigible, not because of

an exemption, but because the goods never reach a

taxing point. That is referred to in a case I have

given Your Honours a reference to. It is a Board

of Review case and I will not trouble Your Honours

with it. It is a unanimous decision, but it is

obiter, but it is said there that giving away goods

for pure benefaction does not attract the taxing

point. We would submit that is fairly obvious in

any event.

So my friend's submission, we submit, is

simply contrary to the direct words, "use or

consumption", it is not supported by two of the

three examples of crossing a taxing point, and it

is not even supported universally in relation to

the third. It is based simply on saying, "Well,

here we have a block of legislation. This might be

a nice way to make it all fit together as a

convenient whole. Let us construe it this way so

as to help it along." In my respectful

submission, that is not and never has been an

appropriate method of legislative interpretation.

BRENNAN J:  Mr Bennett, if one is attracted by a bolt of

Thai silk in Bangkok, brings it home for the

purpose of having some shirts made and has them

made by a tailor, is there any tax exigible in

respect of the manufactured shirts?

MR BENNETT:	Your Honour, that would be the classic section 17A case.
BRENNAN J:	Has there been any application or any use of the

cloth by the tailor?

MR BENNETT:  He has not applied it to his own use. He has

used it but he has not applied it to his own use.

The taxing point there would be the deemed sale to

Kodak(3) 104 8/4/92

the customer when the suit is delivered under

section 17A and that is the first taxing point.

There may have been a tax on the importation; that

would depend on whether it was within a personal

exemption or not, but leaving that aside there is

no taxing point until it is delivered to the

customer under 17A. That is the case, we

respectfully submit, that 17A was introduced to

deal with - that type of case.

Finally, in relation to my friend's

submissions yesterday, before I come to his
submissions today, my friend referred to the
possibility of one of Mr Zinader's models trying on

a new fur for the purpose of modelling it or

assisting in the process of getting it right, and

my friend said, "Well, if we are right that is

applied to the manufacturer's own use". We would

submit clearly, it is not. First one might say

that conduct is simply part of the manufacture; it

is not using it at all. It is part of the process

of manufacture that the model puts it on to adjust

it. Secondly, one could say it was de minimis and

not used for that reason - not going into use or

consumption - and thirdly, as a matter of ordinary

English one would not say that that fur coat has

gone into use or consumption in Australia. In our

respectful submission, the example just does not

work.

Now, may I move to my friend's submissions today which I can deal with somewhat more briefly.

The first matter I need to deal with his aids - the

only matter is "aids to manufacture". My friend

submitted that if paragraph (k) does operate an

exclusion, the 1986 amendments misfire. We submit

they do not because if the negatives are then

supplied back to the customer without light having

been shone through them, then there is no question

of use or consumption and therefore one is left

with a simple application of section 17A. One

would not get to the exclusions if section 17A

otherwise applied.

My friend referred to the goods in item 107

and submitted that they raised the same problem

but, of course, those goods would not necessarily
cross a taxing point and one would have, in most

cases, the taxing point at the same moment as the

time one is looking at for the purpose of the item.

In relation to the second reading speech concerning paragraph (k), we would submit that one

cannot construe a pre-existing provision of the

legislation by reference to a subsequent second

reading speech. Again, at worst, it indicates that

Kodak(3) 105 8/4/92

the legislature did not think of the exclusion when

they imposed the provision, but it cannot go

further than that and, as we have said, it does

still have some operation.

Finally, may I simply say this to

Your Honours. Your Honours may have noticed that

my learned friend's submissions, if Your Honours

have them, on page 1 are described as:

Outline of Submissions of The Commonwealth of
Australia and the Commonwealth of Taxation.

That may well be an appropriate description of the country we live in if some of my friend's

submissions are correct. May it please the Court.

MASON CJ: Thank you, Mr Bennett. Yes, Mr Bloom?

MR BLOOM:	Your Honours, if I might just briefly also refer to the WEA case to distinguish it. That was a case
where one took a blank tape and put something upon
it, much as one may take blank pages and by
printing upon them turn them into a book, the book
being a saleable item.
Here one has the exposed film with the images upon it and in order to bring forth or develop
those images in negative form one passes them through a chemical process. So, the images are already there; they are latent, and one simply
develops them, and that is the process. It is our
case, with respect, that the process of development
is not manufacture.

Your Honours now have before you the 1934

explanatory memorandum and if I could direct

Your Honours to page 1095 of that, Your Honours

will see that Mr Casey referred to the

Fish-and-Chips case, Rochester. Now, the

Commissioner had, of course, argued that the vendor

of fish and chips was a manufacturer of goods,

being fish and chips, in Rochester's case, and that

was, of course, different to potatoes and uncooked

fish, and the High Court held that that was not so,

that it was not a process of manufacture,

notwithstanding the difference in the result from

that with which one started. And so, the cases on

manufacture do not simply look at whether there is

a difference at the end from the beginning. There

must be a process which fairly answers the

description "manufacture" and that is not the

process here, with respect, Your Honours.

If I might also give Your Honours a reference

to passages in Jax Tyres, 5 FCR at pages 263 and

264, the judgment of Mr Justice Lochart, where

Kodak(3) 106 8/4/92

His Honour is dealing, of course, with retreaded

tyres.

Your Honours, our learned friend, Mr Gzell, said that Mr Justice Hill did not form a concluded

view as to whether or not the creation of the

negative was a process of ordinary manufacture.

His Honour said that he did not to, but then he most certainly, at page 55 point 5, went ahead and

did so and formed a concluded view that it was not

a process of manufacture.

In relation to application to own use and the

need to be the owner of the goods so applied,

Your Honour Justice Brennan asked my learned

friend, Mr Gzell, how he accounted for

section 18(3), the sale value provision. My

learned friend's reply was to refer Your Honour to

other hypothetical sales in the sale value

provisions of section 18. The one he selected, in

fact, was a sale by retail where the hypothetical

wholesale price is the sale value. That is dealt
with, Your Honours, in section 18(l)(b) which is

at 92,223 in the edition that Your Honours have, where goods have been sold by the manufacturer -

there is no hypothesis there:

(a) if the goods were sold by wholesale - the

amount for which the goods were sold; or

(b) if the goods were sold -

again, no hypothesis

by retail -

then the hypothesis goes to the price for sale

value purposes.

The Estee Lauder case involved a situation

where there could be no fact, only hypothesis and

it involved a situation where it was necessary to

select every relevant matter as a matter of

hypothesis, but that is a rare case.
Section 18(3), section 18(1) and, indeed,
section 18(2) which deals with the only other

taxing point, that is, treatment of "stock for sale

by retail". It uses exactly the same words

as 18(3). At 92,244, 18(2) says:

For the purposes of this Act the sale value of

goods treated by the manufacturer of the goods

as stock for sale by retail shall be the

amount for which those goods could reasonably

be expected to be sold by the manufacturer by

wholesale -

Kodak(3) 107 8/4/92

he now intending to sell them, in fact, by retail,

"he" being the owner of them.	They are the same
words in 18(3), Your Honours.

Your Honours, the next argument is a rather

difficult one for our learned friends. It is the

argument that says that you, the Court, should

limit the general words in the exclusionary provision in section 3 in the definition of

"goods". That definition, Your Honours, is at

92,141, and Your Honours recall that the exclusion

in paragraph (a) is goods which have, either

through a process of retailing or otherwise, gone

into use or consumption - "or otherwise gone into

use or consumption", very wide words. They do not

mean merely second-hand because, if Your Honours

glance at paragraph (b), there the word

"second-hand" appears, and one presumes that if the

legislature had intended to use the word

"second-hand", that is the word it would have put

into paragraph (a).

For the first time in this Court the

Commissioner now submits that those words should be

read down so that they are equivalent to the three

taxing points. Once again, Your Honours, when this

definition was amended by the insertion of
paragraph (a), those three taxing points were

identified clearly in terms in at least three

sections in the legislation which forms the scheme.

Now, what is said is that the draftsman ignored the formulation, the specific formulation

in several places, of those three events and used

these wide words - "gone into use or consumption,

whether by a process of retailing or otherwise" -

but meant the same thing. With respect, that

limitation should not be implied, and it should not

be implied in this case because the way the
Commissioner comes at it is this.	He says, "Now

that the legislature has defined negatives as

manufactured goods, section 17A should apply beyond

those cases where the negatives are returned to the

customers". Why? Because more tax will be raised.

Now, he says, on its terms section 17A cannot apply because if the word "goods" is given its

defined meaning, ie, in section 3, they will not be

goods at the point of delivery and there will be no

deemed sale. So he says do not give "goods" the

defined meaning, and the way he says it is that we

the taxpayer are somehow exposing a lacuna in the

legislation but the truth is that he, the

Commissioner, is seeking to take a step which the

legislation has not taken for him, and it is that

step which he wants the Court to take by reading

Kodak(3) 108 8/4/92

down the wide words in the general provision in
section 3.

And, with respect, that is not the function of the Court and that is not an exercise of what this

Court did in Cooper Brookes, where the reading of the section was done in such a way as to apply it

to the only matter for which it could ever have

been fit, the only matter to which it could ever

apply. Here we are dealing with the general

definition of "goods" applicable throughout all of

the Sales Tax Assessment Acts and the Sales Tax

Exemption Classifications Act.

Your Honours, in our submission, the word

"use" in that definition is not limited to
application to own use, although it covers that.

The wide words chosen by the legislature should not be artificially restricted, to use the words which

this Court used in Queensland TAB, and they appear

at 170 CLR at page 512 in the last paragraph. The

negatives here are used, they are used to print

photographs, and that is their only use.	They are
therefore used within the exclusion in the
definition of "goods".

In relation to what my learned friend put to

Your Honours today, firstly Your Honour

Justice Gaudron asked what was, with respect, a

very fair question. When, for the purpose of

formulating the reading down of the definition of

"goods" in section 3, one says "confine it to

passing a taxing point", does that mean passing a
taxing point and being taxed, or does it mean just

passing a taxing point whether one is taxed or not?

And Your Honour got two answers: yes and no. And I

am not sure where we ended up.

On our argument, of course, Your Honours, once

these goods have been used, they are no longer	goods, so that when we get into section 17A - not	for the reasons my learned friend gives, but when
we get into section 17A they are no longer goods,
so that at that point of delivery there can be no
taxation of them.

Your Honours, lastly, in relation to the

paragraph (k) exception from the definition of
"application to own use", the word that one has to
construe in paragraph (k), my learned friend says,

is the word "sold" but, with respect, it is not

that word, it is the expression "to be sold" which

has about it an element of futurity. One cannot

say that goods are to be sold is equivalent to
saying, they are to be dealt with in such a manner

that when that has taken place they will have been

deemed to have been sold.

Kodak(3) 109 8/4/92

Secondly, Your Honours, there is a decision of

Mr Justice Samuels, which was on our list, it is a

decision of Woodlock - I will simply give

Your Honours the reference to it - 5 ATR 57 at

pages 59 to 60. His Honour was reversed on appeal

in the same volume at page 486 but not on this

point, and what His Honour said is that it is a bad

form of construction to mount one fiction upon

another, and that is really what the Commissioner

is asking the Court to do here.

My learned friend then says to Your Honours, "Well, having strained section 17A and having read

down the definition of 'goods' in section 3, both general provisions, would Your Honours now please

strain paragraph (k) otherwise, again, these 1986

amendments will not hit their mark". They hit the

mark of taxing negatives that are returned to the

customer without printing if the Federal Court is

correct. That they do not hit the greater mark is quite clear because they were not intended to, and

one should not be asked as a court to strain three

parts of the general provisions in order to enable

the Commissioner to achieve that result when the

legislature could have done so themselves.

Lastly, Your Honours, my learned friend said that paragraph (k) itself, when it was introduced

as paragraph (j), would misfire from the outset if

we were correct because the goods for sale would no

longer be goods. But that misconstrues the

function of paragraph (k), with respect, which is

to take out of the exemption of aids to

manufacture, goods which fall within paragraph (k).

So that if you can say of the goods now while they

are goods that they are in the future to be sold,
not as goods, but are to be sold, they come out of

paragraph (k), they are therefore taxed at the

earlier point, at the point where they are applied to own use, they are not exempt there because they are in the future to be sold. They will not be

taxed when they are sold because you bring it

forward and you tax them at the point that they are

applied to own use.

Your Honours, those are our submissions in

reply.

MASON CJ: Yes, thank you, Mr Bloom. The Court will

consider its decision in this matter.

AT 11.49 AM THE MATTER WAS ADJOURNED SINE DIE

Kodak(3) 110 8/4/92