Lindsay Brothers Transport Pty Ltd and Commissioner of Taxation
[2005] AATA 641
•6 July 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 641
ADMINISTRATIVE APPEALS TRIBUNAL )
) No NT2003/166
TAXATION APPEALS DIVISION ) Re LINDSAY BROTHERS TRANSPORT PTY
LTDApplicant
And
COMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal Deputy President Julian Block Date 6 July 2005
PlaceSydney
Decision The Tribunal affirms the decision under review.
..............................................
Deputy President
Mr J. Block
CATCHWORDS
TAXATION – Sales tax - Entitlement to quote an exemption declaration by an unregistered person - primary production or manufacture-related activity – general-purpose road vehicle or special purpose vehicle – process or treatment – refrigeration – passing on of sales tax – decision affirmed
LEGISLATION
Sales Tax Assessment Act 1992 ss 51, 83; Schedule 1 - Table 3; Explanatory Memorandum
Sales Tax (Exemptions and Classifications) Act 1992 ss 3, 4(2)(D), 5(1), 9, 11, 13; Schedule 1 – items 2, 18, 36; Explanatory Memorandum
CASE LAW
Australian National Commission v Collector of Customs (SA) (1985) 8 FCR 264
Collector of Customs (Tas) v Davis (1989) 23 FCR 378
Davis v Deputy Federal Commissioner of Taxation (2000) 171 ALR 654
Deputy Federal Commissioner of Taxation v Stronach (1936) 55 CLR 305
Deputy Federal Commissioner of Taxation v Jack Zinader Pty Ltd (1949) 78 CLR 336
Federal Commissioner of Taxation v Brambles Holdings Ltd (1994) 94 ATC 4165
Federal Commissioner of Taxation v Hammersley Iron Pty Ltd (1980) 33 ALR 251
Federal Commissioner of Taxation v Rochester (1934) 50 CLR 225
I C I Operations PTY Ltd v Deputy Federal Commissioner of Taxation (Vic) 87 ATC 5110
IGY Manufacturing Pty Ltd v Federal Commissioner of Taxation (1999) 99 ATC 4860
Pioneer Concrete (NSW) Pty Ltd v Federal Commissioner of Taxation (1986) 85 FLR 315
Ready Mixed Concrete (Vic) Pty Ltd v Federal Commissioner of Taxation (1969) 118 CLR 177
Recoveries Trust v Federal Commissioner of Taxation 2004 ATC 2291
Robe River Mining Co Pty Ltd v Federal Commissioner of Taxation (1989) ATC 4606
State Electricity Commission of Victoria v Commissioner of Taxation (1999) 96 FCR 22
REASONS FOR DECISION
6 July 2005 Deputy President Julian Block PART A: Introduction and General
1. The objection decision under review is the disallowance by the Respondent of an objection dated 15 June 2000 against an earlier decision dated 13 April 2000 disallowing a claim for credits (aggregating $23,672.00) made by the Applicant under section 51 and Credit Ground 2A, Table 3, Schedule 1 of the Sales Tax Assessment Act 1992 (“STAA”).
2. Mr Mark Leeming of Counsel instructed by Firmstone & Feil appeared for the Applicant; Mr Roger Quinn of Counsel, instructed by Mr P. Hefford an officer of the Respondent, appeared for the Respondent.
3. The Tribunal admitted into evidence the “T-documents” pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 together with exhibits as follows;
(a) A1: Statement of Stephen John Cooper dated 29 September 2004
(b) A2: Statement of Arthur Wayne Bunks dated 13 October 2004
(c) A3: Maxi Trans Reefer picture
(d) A4: Maxi Trans B-Double Reefer Load
(e) A5: Thermo King “Smart Reefer”
(f) A6: Maxi Cube – What a Trailer Should Be …
(g) A7: Photo bearing #79, Thermo King Refrigerator unit in attached position in insulated body
(h) A8: Picture of inside of insulated body with chute
(i) A9: Picture of inside of insulated body without chute
(j) A10: Lindsay Brothers Transport documents produced under summons dated 23 February 2005.
4. This matter was listed for hearing of 30 and 31 May 2005. An application by Scotts Refrigerated Freightways Pty Ltd (“Scotts”) under NT2004/164 was listed to be heard at the same time. The Tribunal was informed that it would not be necessary for it to deal with the application by Scotts or to make any finding in relation to that application by Scotts.
5. The Tribunal was informed that confidentiality was sought only in respect of certain pricing information contained in the evidence in the evidence before it. Accordingly, the Tribunal does not intend to refer to the pricing information in any manner which would have the result that its confidentiality is not preserved.
6. In addition to the T-documents and exhibits the Applicant furnished the Tribunal with a volume entitled “Applicant’s Bundle”, and which contains extracts from STAA, extracts from the Sales Tax (Exemptions and Classifications) Act 1992 (“STEC”), and extracts from explanatory memoranda in respect of each of STAA and STEC; it also contains Sales Tax Ruling ST2350 and a considerable number of case reports.
7. Both parties furnished the Tribunal with comprehensive submissions. The term ‘AS’ refers to the Applicant’s submissions date-stamped in the Tribunal on 13 May 2005. ‘RS’ refers to the Respondent’s outline of submissions dated 27 May 2005 ; the Respondent furthermore provided the Tribunal with additional submissions dated 31 May 2005. It may be noted that clause 3 of AS indicates that there are other entities which are interested in this decision; clause 3 of AS reads as follows;
The claim referred to in paragraph 2 was a representative credit claim lodged pursuant to a “stop the clock” letter dated 20 January 1999, which had been filed by Firmstone & Feil on behalf of the Applicant (among others) to preserve any sales tax credit entitlements it might have in relation to refrigeration units, rigid insulated bodies and insulated vans, purchased during the period from 1 December 1995 (“the relevant period”).
8. Exhibits A1 and A2 are witness statements by Stephen John Cooper and Arthur Wayne Bunker respectively. Neither was required for cross-examination by the Respondent. However, Mr Quinn objected to certain parts of those witness statements; on that the basis that the Respondent reserved his rights and subject to weight, the statements were admitted and so that (again subject to weight) the evidence contained in them may be accepted. The Tribunal notes that the fact that it admitted the statements should not construed as a finding that the objections, or some of them, were without merit. The Tribunal does not believe that it is necessary to refer further to the evidentiary objections.
9. Both parties furnished the Tribunal, as I have said, with lengthy and comprehensive written submissions. Statements of facts and contentions and statements of issues were furnished in addition. The Applicant furthermore furnished the Tribunal with a document entitled “Applicant’s Glossary of Terms” (“the Glossary”). The Glossary is helpful in particular because it includes a description of the three items whose purchase in 1997 and 1998 gave rise to the claim for the refunds in this matter. These three items or goods are referred to in these reasons as “the items” or “the goods” and individually as the “Thermo King” or the “refrigerated unit” (and being references to the same item), the “rigid”, and the “reefer” respectively. The Glossary is included in the theses reasons as follows;
APPLICANT’S GLOSSARY OF TERMS
Term Description Refrigeration unit
(the first of the goods in issue)Also referred to as the “Thermo King”. An example of a refrigeration unit is pictured on page 1 of Exhibit A5.
The refrigeration unit is fitted either to a Rigid body or Reefer to produce cool air which is circulated within the Rigid body or Reefer (Cooper, paragraphs 10-11). An example of a refrigeration unit fitted to a Reefer is shown in Exhibit A3.
Rigid body (the second of the goods in issue) The Rigid body is an insulated body or box. It does not have its own mainframe, axles or wheels (Cooper, paragraph 24). (The term Rigid body is referred to in Cooper as a “rigid insulated body”. Cooper uses the word “Rigid” on its own to refer to the composite unit comprising a rigid insulated body mounted on a cab-chassis.)
An example of a Rigid body is pictured in the bottom right corner of page 7 of Exhibit A6 and was coloured yellow by the Respondent.
The Rigid body is fitted with a refrigeration unit and then mounted onto the runners of a cab-chassis and secured by 6 U-bolts and 2 fish plates (Cooper, paragraphs 8 and 24).
Reefer (the third of the goods in issue) The Reefer is an insulated trailer or an insulated van. It comprises an insulated box bolted or welded to a mainframe, which incorporates the suspension, king pins, axles, brakes, wheels and landing legs (Cooper, paragraph 25).
An example is pictured in Exhibits A3 and A4, and coloured in yellow by the Respondent above the description “Tri-Tri B-Double” on page 7 of Exhibit A6.
The Reefer is fitted with a refrigeration unit and must be coupled to a prime mover, or to an A-trailer which is then coupled to a prime mover, in order to allow transportation (Cooper, paragraph 25).
Cab-chassis The cab-chassis is a motor vehicle comprising the driver’s cabin, engine, and a frame or chassis comprising two parallel runners or rails on an undercarriage with axles and wheels. It requires a body (such as a Rigid body) to be installed on the chassis to enable it to be used as a truck for the transport of goods. The cab-chassis provides the propulsion power.
An example is pictured and coloured in pink by the Respondent above the description “Rigid Body” in the bottom right corner of page 7 of Exhibit A6.
Prime-mover The prime mover is a motor vehicle comprising the driver’s cabin, engine and an undercarriage, axles and wheels. Installed on the top of the undercarriage is a turntable, to which a trailer is coupled. The prime mover provides the propulsion power.
An example is pictured and coloured in pink by the Respondent above the description “Tri-Tri B-Double” on page 7 of Exhibit A6.
10. The exhibits which are photographs or pictorial representations of the items describe them in some detail. In a lengthy opening address Mr Leeming took the Tribunal, in detail, through that evidence so as to explain the nature and function of each item. The Tribunal considers however, that the Glossary is sufficient for this purpose.
11. The Applicant at the relevant times (when it purchased the items in 1997 and 1998) was engaged in the transportation business. The transportation business required the Applicant, and as a substantial part of its business, to carry goods of a perishable nature and over long distances, and (by way of one often cited example) from Queensland to Victoria. As significant examples of the types of goods carried, the Applicant referred to bananas and chocolate. Cadbury-Schweppes, which was at the relevant time one of the Applicant’s largest customers, accounted for a substantial part of its business. A written contract between the Applicant and Cadbury-Schweppes is an annexure to Exhibit A2. The exhibit was criticised on the basis that the contract was entered into after the relevant time and that at the relevant time the contractual terms as between the Applicant and Cadbury-Schweppes were not reduced to writing. Exhibit A2 specifies that the written contractual terms were substantially similar to those which applied previously. Again and in the end result, the Tribunal does not believe that anything very much turns on the point.
12. The evidence before the Tribunal indicated that it was necessary for drivers on long trips to make compulsory stops and so that and during an appreciable part of each journey, the refrigeration equipment operated even though the vehicle was stationary. There was also evidence before the Tribunal that in economic terms the Applicant’s pricing might be such that trip from Queensland to Victoria conveying, say bananas, might operate at a loss but that there would be a profit overall where the Applicant was able to arrange for a consignment (not necessarily of perishable goods) on the return journey. That aspect related in particular to the question of whether the duty was passed on and to enable the Applicant to seek to demonstrate that the Applicant was engaged in a competitive business such that the passing on (and whether in specific terms or otherwise) of the sales tax was not feasible. It is not in the result necessary for the Tribunal to make a conclusive finding as to whether the sales tax was passed on. The hearings dealt almost in their entirety with the question of whether or not the items were exempt. The Tribunal accepts that on the evidence before it the items were used mainly (as that term is defined) in the conveyance of product, which without refrigeration would perish or deteriorate. A figure in percentage terms of 70 per cent is contained in AS but there was other evidence which would indicate that the appropriate figure in percentage terms was 75 per cent; this percentage figure relates to the extent to which transportation related to the conveyance of goods requiring refrigeration.
13. All three items were of little use individually. Each was used as a component (albeit a substantial component) of a whole vehicle and which was, as I have said, utilised mainly for the transport of perishable goods. Thus it was that the Thermo King, which provided the refrigeration proper, was attached to either a rigid or a reefer. A rigid is an insulated box; it does not have its own mainframe, axle or wheels and would thus be mounted on a cab-chassis. A reefer is an insulated van; as a van, it does have inter alia its own mainframe and wheels. In all cases and for obvious reasons, a prime mover is required to provide propulsion power. The prime mover is described in the Glossary, which also deals (albeit briefly) with the fact that when an item is attached to another (or to a prime mover) it must be attached in such form that the two joined components will not separate.
14. In its Statement of Facts and Contentions dated 10th October 2004, the Applicant described the “Facts” in clauses 1 – 19 inclusive; except that the Respondent does not accept that the sales tax was not passed on, there does not appear to be any significant dispute as to the facts specified; I include clauses 1 – 18 (and excluding clause 19, which deals with the passing-on aspect) of the Applicant’s Statement of Facts and Contentions as follows;
“FACTS
1. During the period from December 1996 to June 2000 (“the relevant period”), the Applicant was a transport company engaged, so far as is presently relevant, mainly in the transport of temperature-sensitive food goods requiring temperature-controlled transport under contract with the primary producers and manufacturers of those goods.
Particulars
Statement of Stephen John Cooper dated 29 September 2004, particularly paragraph 43
Statement of Arthur Wayne Bunker dated 13 October 2004, particularly paragraphs 9, 10 and 16
2. On 11 May 1998, the Applicant purchased a Thermo King Refrigeration Unit (“the refrigeration unit”) and paid sales tax of $4,928.00.
3. On 19 August 1997, the Applicant purchased a Maxi-Cube Chiller Rigid Body (“the rigid insulated body”) and paid sales tax of $4,017.82.
4. On 11 December 1997, the Applicant purchased a Rear B-Double Reefer Pantechnicon (“the insulated van”) and paid sales tax of $14,727.32.
5. The Applicant did not quote an exemption declaration on purchase of the goods referred to in paragraphs 0 to 0 (“the relevant goods”) within the meaning of section 83 of the Sales Tax Assessment Act 1992 (“the STAA”).
The refrigeration unit
6. The refrigeration unit was fitted by the supplier to the insulated body of Van number V145, which was supplied by the Applicant, and has been in general use from the time of acquisition until the present with that van.
7. The refrigeration unit:
(a) was fitted to the front wall of the insulated van body by means of bolts in the opening provided in the body by the body’s manufacturer and was then connected to the body’s chute, a process which took between 6 and 8 hours;
(b) provides for the flow of cool air within the van body which is designed to optimise air flow so that the desired temperature for the food goods contained therein is maintained throughout the van body;
(c) in relation to each trip, is kept running from the time the food goods are loaded until they are ready for unloading, irrespective of whether the van is in motion in the course of the transportation of the goods;
(d) operates independently of the prime mover to which the van may be coupled in the course of transporting the food goods contained therein;
(e) can, if necessary, be removed from the van body and replaced in about 4 hours;
(f) has electrical connections that enable it to be connected to a fixed power supply when the van is stationary for an extended period; and
(g) is not generally in operation when the van is travelling to collection points and returning from delivery points, except where prior cooling is required for a collection.
8. Van number V145 is registered as a semi-trailer.
9. Approximately 70% of the usage of Van number V145 (based on distance travelled) related to transporting temperature-sensitive goods.
Particulars
Statement of Arthur Wayne Bunker dated 13 October 2004, in particular paragraphs 13 and 14
10. Van number V145 can be uncoupled from the prime mover to become a portable refrigerator when the customer is not ready to unload it on arrival at the point of delivery.
The rigid insulated body
11. The rigid insulated body was fitted by the Applicant with a refrigeration unit and then to a cab chassis by 6 U-bolts and 2 fish plates (Rigid number R22) and has been in general use from the time of acquisition until the present.
12. The rigid insulated body:-
(a) does not have its own mainframe, axles or wheels;
(b) can be installed on a cab-chassis in approximately half a day;
(c) is used in conjunction with an independently-operated refrigeration unit to achieve and maintain pre-determined temperatures within the body; and
(d) has thicker and more insulated walls, floor and roof than a rigid body used for the carriage of non-temperature sensitive products.
13. Rigid R22 is registered as a rigid truck.
14. Throughout the relevant period, Rigid R22 has been used almost exclusively in collecting and delivering primary produce in the vicinity of the Applicant’s Bundaberg terminal.
Particulars
Statement of Stephen John Cooper dated 29 September 2004, particularly paragraph 8
Statement of Arthur Wayne Bunker dated 13 October 2004, particularly paragraph 15
The insulated van
15. The insulated van referred to in paragraph 0 was fitted with a refrigeration unit by the Applicant (Van number V140) and has been in general use from the time of acquisition until the present.
16. The insulated van:
(a) is fitted with its own mainframe, axles and wheels;
(b) is designed to be coupled to a prime mover for transportation;
(c) is used in conjunction with an independently-operated refrigeration unit to achieve and maintain pre-determined temperatures within the body;
(d) has thicker and more insulated walls, floor and roof than a van body used for the carriage of non-temperature sensitive products; and
(e) can be uncoupled from the prime mover to become a portable refrigerator when the customer is not ready to unload it on arrival at the point of delivery.
17. Van number V140 is registered as a semi-trailer.
18. Approximately 70% of the usage of Van number V140 (based on distance travelled) related to transporting temperature-sensitive goods.
Particulars
Statement of Arthur Wayne Bunker dated 13 October 2004, particularly paragraphs 13 and 14”
15. It is entirely conceivable that this matter will not end with this decision. The Tribunal was, as I have said, informed that the Applicant is not the only entity interested in this decision. For this reason, the Tribunal considers it desirable that it make findings as to a number of aspects in respect of the relevant exemptions and even where a given finding is strictly unnecessary because of a prior finding, and in case it is contended that the Tribunal was in error as to a prior finding. In respect of the passing-on question only, the Tribunal does not consider that a finding in final terms is necessary.
PART B: Relevant Statutory (and similar) Provisions
16. It is convenient to gather in this part B those statutory (and certain other) provisions which are or particular relevance in this matter.
17. Section 83 of STAA provides (relevantly) as follows;
“An unregistered person (“the quoter”) may quote an exemption declaration for a dealing with goods if, at the time of quoting, the quoter has the intention of dealing with the goods in any of the following ways:
(a) using the goods so as to satisfy an exemption Item that is in force at the time of quoting; …”
18. Section 51(1) of STAA provides;
51 Credit entitlements
(1) Tables 3 and 3A set out the situations in which a claimant is entitled to a credit.
19. Section 5(1) of STEC provides;
5 What the use requirement means for different Schedule 1 functions
(1) Some exemption Items require the exemption goods to be used in a particular way or by a particular person. The following Table explains what the use requirement means for each of the Schedule 1 functions set out in section 4.
[Column 3 of the Table only applies to exemption Items marked [R] and is explained in section 9.]
Use requirements for Schedule 1
Schedule 1 function Use requirement Time when exemption user must be registered Exemption if all requirements of the Item are satisfied at or before the time of the dealing [Use requirement not applicable] [Not applicable] Exemption for non‑lease AOU Intended use by the applier during the whole of the statutory period Time of AOU Exemption for grant of eligible long‑term lease Intended use by the lessee during the whole of the statutory period Time when lease granted Exemption for grant of eligible short‑term lease [Use requirement not applicable] Time when lease granted Ground for quoting Intended use by the quoter during the whole of the statutory period Time of quoting Credit entitlement for eligible long‑term lease Intended use by the lessee during the whole of the statutory period Time when lease granted Credit entitlement for eligible short‑term lease [Use requirement not applicable] Time when lease granted
Schedule 1 to STAA and in relation to Credit Ground 2A provides as follows;
Table 3: Credit grounds
[1] No. [2] Summary of ground [3] Details of ground [4] Amount of credit [5] Time credit arises CR2A Claimant has borne tax, even though entitled to quote exemption declaration Claimant has borne tax on a tax‑bearing dealing for which the claimant was entitled to quote an exemption declaration (whether or not the claimant quoted). Claimant has not sold the goods. If claimant has applied the goods to own use, the AOU would not have been taxable assuming it were an assessable dealing. The tax borne, to the extent that the claimant has not passed it on time of the tax‑bearing dealing 1. Item 36 in Schedule 1 to STEC reads relevantly as follows;
Item 36: [Subcontractors]
(1) Goods (the exemption goods) for use by a person (the exemption user) mainly in carrying out one or more activities described in subitem (1) of exemption Item 1, 2, 18, 23, 28, 29, 30, 33, 34 or 35, on behalf of one or more other persons (the principals). For this subitem to apply, either the condition in subitem (2) of this Item or the conditions in subitem (3) of this Item must be met for each activity (countable activity) that is relied on to establish that this subitem applies.
(2) If the exemption goods were for use by the principal concerned mainly in carrying out the countable activity at the place at which the activity is to be carried out by the exemption user, the exemption goods would (in relation to the principal) be covered by the Item in which the countable activity is referred to.
20. Section 9 of STEC reads as follows;
9 Certain exemption Items available only to registered persons
Goods are not covered by an exemption Item marked [R] unless the exemption user is a registered person at the time specified in the Table in section 5.
21. Section 11 of STEC reads as follows;
11 Eligible raw materials and parts
(1) Any subitem in Chapter 1 that refers to eligible raw materials and parts in relation to specified activities is to be read as referring to the following goods:
(a) goods for use by the exemption user exclusively as raw materials in the on‑site construction of goods/equipment for use by the exemption user mainly in carrying out one or more of the specified activities;
(b) goods for use by the exemption user exclusively as parts for goods/equipment for use by the exemption user mainly in carrying out one or more of the specified activities;
(c) goods for use by the exemption user exclusively as raw materials in repairing or maintaining goods/equipment for use by the exemption user mainly in carrying out one or more of the specified activities.
(2) In this section:
goods/equipment means goods, or machinery, implements or apparatus.
22. Section 13 of STEC reads as follows;
13 Lower level operation of excluded property
(1) In deciding whether exemption Item 1, 2, 18, 23, 28, 29, 30, 33, 34, 35, 36 or 38 applies, the exemption user cannot rely on:
(a) the use of the exemption goods, so far as the use relates directly to:
(i) excluded property; or
(ii) waste products resulting from the use of excluded property; or
(b) the use of other property so far as its use relates directly to:
(i) excluded property; or
(ii) waste products resulting from the use of excluded property.
(2) In this section:
excluded property means property that is expressly excluded from the exemption Item concerned, but does not include:
(a) goods covered by exemption Item 3, 4, 5, 6, 8 or 17;
(b) goods that have been manufactured by the exemption user, but have not been applied to own use by the exemption user.
23. The following definitions are contained in section 3 of STEC;
agriculture includes:
(a) viticulture, horticulture, pasturage, apiculture, poultry farming and dairy farming;
(b) other operations connected with the cultivation of the soil, the gathering in of crops and the rearing of livestock.
mainly means to the extent of more than 50%.
parts, in relation to road vehicles, includes:
(a) bodies for those road vehicles (including insulated bodies, tank‑bodies, and other bodies designed for the transport or delivery of goods or other property of particular kinds);
(b) underbody hoists, and other equipment or apparatus of a kind ordinarily fitted to road vehicles for use in connection with the transport or delivery of goods or other property by those road vehicles.
general‑purpose road vehicle means a road vehicle of a kind ordinarily used for the transport of persons or the transport or delivery of goods or other property.
24. Item 2 of Schedule 1, entitled ‘Primary Productions Activities’ reads as follows;
Item 2: [Primary production activities] [R]
(1) Goods for use by a person (the exemption user) mainly in carrying out one or more of the following activities in the course of a primary production business:
(a) a primary production activity;
(b) an activity that is ancillary (as defined by section 10) to one or more activities covered by paragraph (a);
(c) an activity that is ancillary (as defined by section 10) to one or more activities covered by paragraph (b).
(2) Eligible raw materials and parts (as defined by section 11) in relation to activities covered by subitem (1).
(3) This Item does not cover:
(a) generally‑excluded property (as defined by section 12);
(b) a general‑purpose road vehicle, unless it is for use exclusively:
i) within premises controlled by the exemption user and used by the exemption user mainly in carrying out one or more activities covered by subitem (1); or
(ii)in going between adjacent premises covered by subparagraph (i); or
(iii) for a combination of both;
(c) goods for use mainly in connection with administrative activities (other than activities covered by paragraph (1)(b) or (c)).
[See also section 13, which sometimes denies exemption if the exemption goods are for use in connection with property covered by subitem (3).]
(4) In this Item:
primary production activity means agriculture, forestry, fishing (including fish farming) or pearling.
primary production business means a business of carrying on primary production activities.
25. Item 18 of Schedule 1, entitled ‘Manufacture Related Activities’ reads (relevantly) as follows;
Item 18: [Manufacture‑related activities] [R]
(1) Goods for use by a person (the exemption user) mainly in carrying out one or more of the following activities:
(a) a manufacture‑related activity carried out by the exemption user in the course of a business;
(b) an activity that is ancillary (as defined by section 10) to one or more activities covered by paragraph (a);
(c) an activity that is ancillary (as defined by section 10) to one or more activities covered by paragraph (b).
(2) Eligible raw materials and parts (as defined by section 11) in relation to activities covered by subitem (1).
(3) This Item does not cover:
(a) generally‑excluded property (as defined by section 12);
(b) a general‑purpose road vehicle, unless it is for use exclusively:
(i) within premises controlled by the exemption user and used by the exemption user mainly in carrying out one or more activities covered by subitem (1); or
(ii) in going between adjacent premises covered by subparagraph (i); or
(iii) for a combination of both;
and is not for use, to any extent, in any part of premises described in subparagraph (i) that is used, or for use, mainly in connection with a township, accommodation complex or similar place;
(c) (not relevant)
(d) (not relevant);
(e) (not relevant);
(f) (not relevant)
The exclusions in this subitem do not apply to goods covered by paragraph (i) of the definition of manufacture‑related activity in subitem (5).
[See also section 13, which sometimes denies exemption if the exemption goods are for use in connection with property covered by subitem (3).]
(4) The usual requirement that the exemption user must intend to use the exemption goods during the whole of the statutory period does not apply if all the following conditions are met in respect of the exemption goods:
(a) the exemption goods are for use by the exemption user mainly in applying a process or treatment to or in relation to goods (the manufactured goods) that have been manufactured, or are to be manufactured;
(b) the process or treatment is covered by paragraph (a), (b) or (c) of the definition of manufacture‑related activity in subitem (5);
(c) the exemption user intends to sell the exemption goods together with some of the manufactured goods;
(d) either:
(i) the manufactured goods are always‑exempt goods; or
(ii) the exemption goods are to be sold to a registered person who quotes for the purchase of the manufactured goods and gives evidence before the time of purchase (in a form approved by the Commissioner) that the registered person does not intend to resell the exemption goods to any person to whom any of the manufactured goods are to be resold.
(5) In this Item:
goods/equipment means goods, or machinery, implements or apparatus.
manufacture‑related activity means:
(a) applying a process or treatment to goods that are to be used as raw materials for other goods to be manufactured by the exemption user or anyone else;
[For example, purifying chemicals that are to be used in manufacturing cosmetics]
(b) applying a process or treatment to goods so that the goods, or an essential element of the goods, become an integral part of other goods that are being manufactured by the exemption user or anyone else;
[For example, applying a moulding process to plastic in order to make plastic door knobs]
(c) applying a process or treatment to goods for the purpose of bringing them into, or keeping them in, the form or condition in which they are to be marketed or used by a person:
(i) who is the manufacturer of the goods; or
(ii) in relation to whom the goods are wholesaler’s‑materials goods; or
(iii) in relation to whom the goods are qualifying goods because paragraph (ac) of the definition of that expression in subsection 3(2) applies;
whether or not the person is the exemption user;
[For example, applying a coating of grease to manufactured hand tools to prevent corrosion]
26. In respect of the Explanatory Memorandum (“EM”) referable to STAA, paragraph 5.15 reads (relevantly)as follows;
Inclusions: There will be 6 specific inclusions to the definition of ‘manufacture’:
Inclusion 1: Production. [paragraph (a)]
Reason: This represents no change to the existing law. ‘Manufacture’ and ‘production’ are often used interchangeably, although production is often thought to be the wider tern (e.g. applying to primary production. The inclusion of production is to remove any suggestion that there are production processes that are not within in the general meaning of ‘manufacture’.
Inclusion 2: The combination of parts or ingredients to produce something that is commercially distinct from the parts or ingredients. [paragraph (b)]
Reason: No change to the existing law. The inclusion is important in its demonstration of the breadth of the intended meaning of manufacture. It will catch any combination of parts or ingredients that’s results in goods being brought into existence for the first time, for example, the assembly of chairs components to form a chair.
Note: Not all combinations will be manufacture. The existing law excludes from the meaning of ‘manufacture’; a combination of parts or or ingredients if it is of a kind customarily undertaken by persons who use the ‘combined’ goods for the purposed for which the combined goods are intended to be used. This is to prevent combinations ordinarily carried out by consumers from coming within the law e.g. the assembly of goods purchased by retail in kit form. These kinds of combinations will be excluded from the new definitions of ‘manufacture’ (and are discussed in exclusions 3).
Inclusion 3: Treatment of food for human consumption.
[paragraph (c)]
Reason: No change to the existing law. It was inserted in the existing law following the High Court’s decision that cooking fish and chips was not manufacture or production
27. In respect of the EM referable to STEC, I include Paras 5.28, 5.35, 5.37, 5.38, and 5.44 as follows;
5.28 One of the general principalss underlying the proposed business inputs exemption Items will be a new approach to dealing with goods which will not be exempt under these Items. Each business inputs exemption Item will list, at subitem (3); the goods which will not be covered by the Item. This is a simplification measure which will make it possible for exemption users to identify, within the exemption Item they are using, those goods. which will be excluded from exemption. These goods will be taxable, unless covered by another exemption .item. There will be four categories of these goods:
(a) generally-excluded property - a class of excluded property which will be excluded from all business inputs exemption Items'
(b) general-purpose road vehicles which are not used exclusively within and/or in going between certain adjacent premises controlled by the exemption user,
(c) goods which are specifically excluded from that Item only;
and
(d) goods which will be excluded by the operation of the rule in clause 13 (the lower level operation. of excluded property rule) which may preclude exemption for 'goods used mainly in connection with excluded property.
5.35 Parts: Parts for excluded property will be taxable, unless covered by another exemption Item. However, there will be no specific reference to parts in the definition of generally-excluded property. .
Reason for change: Parts for excluded property will be taxable because of the rule in clause 13 which will prevent an exemption user obtaining exemption for goods used inre1ation to excluded property (see paragraph 5.44).
5.37 General-purpose road vehicles will generally be taxable, unless they are used exclusively within and/or in going between certain premises owned by the exemption user. The exclusion for general-purpose road vehic1es will be located within each new Item. Although the structure of the exclusion will change, it will have broad1y the same effect as in the existing law.
5.38 General principals: General-purpose rood vehicles will be defined as road vehicles of a kind ordinarily used for the transport of-persons or the transport or delivery of goods. This is similar to the definition in the existing law. The term does not include special purpose vehicles such as mobile manufacturing units or large mining dump trucks. General-purpose road vehicles will generally be required to satisfy two use tests in order to qualify for exemption. They must be used mainly to perform listed activities, and they must be used exclusively in travelling within and/or going between certain adjacent premises.
General-purpose road vehicles for use to any extent in a township or accommodation complex will be excluded from exemption under Items 1 and 18. Vehicles for use by mining or manufacturing employees to travel within townships or large accommodation complexes located within the exemption user’s premises will therefore be taxable. Under the existing law, general- purpose road vehicles for use in mining are taxable when for use within areas used mainly in connection with any domestic or staff amenities. This has been too restrictive, and the new test will also apply to manufacture for consistency.
5.44 An important principals in the new law will be the rule regarding the lower level operation of excluded property. In deciding whether business inputs exemption Items marked [R], and exemption Items 30, 34 and 36 apply, the exemption user will not be able to rely on uses of the exemption goods which relate directly to excluded property or waste products resulting from the use of excluded property. Nor will exemption be available for goods on the basis of their use in relation to other property which itself is used in relation to excluded property, or waste products resulting from the use of excluded property.
Reason for change: Under the existing law, there is an increasingly complex and inconsistent approach to denying exemption for goods which are used in relation to expressly excluded property. There are numerous references in the' existing law to prevent exemption for goods used in activities carried out in relation to other goods which are expressly excluded from exemption. Under the new approach, a single general rule will operate to achieve the same result.
Note: This rule applies in relation to excluded property, rather than excluded goods. The concept of property includes fixtures. In many cases, the activities described in the business inputs exemption Items will be carried out by the use of machinery, implements and apparatus etc. that are not goods. The machinery etc. may be attached to land or a building so as to become a fixture. Alternatively, the machinery etc. may have been constructed on-site, and thus never became goods.
PART C: Was the Applicant Entitled to Quote an Exemption Declaration?
28. Section 83(1) of STAA allows an unregistered person to quote an exemption declaration if at the time of quoting, that person intended to use the goods to satisfy an exemption item.
29. Section 4(2)(D) of STAA provides that an intention to satisfy an exemption is a ground for quoting. An entitlement to quote will arise if the Applicant intended to satisfy an exemption item by using the goods in a particular and during the whole of the statutory period and being the period which commences when the goods were first applied to own use and end two years after that date.
30. Davis v Deputy Federal Commissioner of Taxation (2000) 171 ALR 654 (Hill, J) indicates that the purpose will generally be that established by actual use.
31. The Applicant is faced with an (and arguably insuperable) initial difficulty. It relies on items 2 and 18 (in conjunction with item 36). Section 9 of STEC provides that “Goods are not covered by an exemption marked [R] unless the exemption user is a registered person”. Both of exemption items 2 and 18 are marked [R]. The Applicant was not registered for sales tax purposes.
PART D: Item 36
32. Item 36 is integrally linked to 2 and 18. Item 36 allows an exemption where a sub-contractor uses the goods mainly in respect of an activity carried on behalf of principals; it must be demonstrated that if the principals themselves had claimed the exemption the goods would have been covered by the exemption item in question (item 36(1)).
33. Item 36(2) then makes it clear that in this situation the crucial question is as to whether the exemption item would apply if the relevant activity (primary production or manufacture-related activity) was carried out by the principals at the place where the Applicant carried out that activity. That place must be in the insulated vehicles.
PART E: Item 2
34. I refer in the first instance to the definition of primary production activity in item 2(4) (which includes agriculture) and then to the definition of agriculture in section 3(2) of STEC. The Respondent cited the Oxford English Dictionary definition of “primary industry, production” as
n. primary industry, production, the husbandry or use of raw materials, as in agriculture, forestry, fishing, mining, etc.; primary produce, products, the fruits of these activities; primary producer, one engaged in such industries; primary-producing adj., that produces or is the source of raw materials.
35. Under item 2(3)(b) a general-purpose road vehicle is excluded; the definition of general-purpose road vehicle makes it clear that it encompasses one ordinarily used for transport. The Applicant contends that the goods are not excluded because they do not constitute general-purpose road vehicles; the Applicant contends moreover that they may be parts of a vehicle but the definition does not in its terms include parts (in contrast with other provisions in the same statute and where there is a specific inclusion of “parts”). That contention cannot be upheld; in the first place items 2(1) and 18(2) specifically include “parts” which imports the definition in section 11 of STEC. Moreover the omission of “parts” from the definition of “general-purpose road vehicle” was plainly deliberate having regard to section 13 of STEC and paragraph 5.35 of the EM in respect of the STEC. The Applicant contends also that if the goods can be said to be included within the concept of a vehicle (and this must be so) the vehicle is not a general-purpose road vehicle but rather a special purpose vehicle. The Applicant referred in this context to paragraph 5.38 of the EM referable to STEC. That contention, which might otherwise have had some merit, is defeated by the definition of general-purpose road vehicle and more particularly the specific reference in that definition to ”transport”.
36. It follows then that if item 2 does not apply to a general-purpose road vehicle, the Applicant’s business of transportation cannot be a primary production activity carried out in the course of a primary production business. As to the fact that the word “in” should in this context be construed restrictively, see Robe River Mining Co Pty Ltd v Federal Commissioner of Taxation (1989) ATC 4606 at page 4611 as follows;
The word “in” has been judicially construed as a restrictive word: Halstead (HM Insp of Taxes) v Condon (1970) 46 TC 289 at 292, a decision of Megarry J. In the present section, the expression under consideration is associated with a series of provisions nominating expenditure “in” or “on” a site, buildings, providing water, light or power, housing and welfare, plant for treatment and other purposes, and the acquisition of mining or prospecting rights or information. Only in para (e) is there any reference, and there it is a precise and very limited reference (cf Utah Development Co v FCT (1975) 5 ALR 474 ; 75 ATC 4103 at 4116–17), to any expenditure involved in the raising of capital for prescribed mining operations. If the whole section provides a context within which individual expressions should be understood, it seems to be concerned with expenditures having a fairly direct relationship with the things and activities specified.
37. The Applicant contends that its case for exemption is supported by Collector of Customs (Tas) v Davis (1989) 23 FCR 378. In Davis’s case, a primary production producer claimed a diesel fuel rebate for an agricultural drying machine used to de-hydrate a parsley crop. The evidence indicated that drying was necessary to prevent deterioration which occurred rapidly after harvesting. The decision (by Beaumont, J) was clearly difficult; moreover it turned on different legislative wording; Beaumont J concluded that words “connected with” in the definition of agriculture in that particular statute had the effect that the drying process was connected.
38. In Davis’s case Beaumont, J referred to Australian National Commission v Collector of Customs (SA) (1985) 8 FCR 264 (also a diesel rebate case). It was there held that the transport of fertilizer to a landholder, and grain from country silos to central points on the sea board were not part of the process of cultivation or the getting in of crops or an operation connected therewith.
39. I should note that there is an initial difficulty in this case and that is that the Applicant claims to be exempt under items 2 and 18 (in each case read with item 36). Using the examples of bananas and chocolate (which were in fact used throughout the hearing) bananas might on a prima facie basis fall within agriculture (item 2) while chocolate on a prima facie basis might fall within manufacture-related activities (item 18). Put in succinct terms and given that these two commodities were referred to in conjunction with both broad categories, there was no evidence before the Tribunal which would (if this were relevant) permit an apportionment. It is clear enough that bananas could never fall within item 18 and equally, chocolate could never fall within item 2 but as to how a division is, if relevant, to be effected, was not in evidence.
40. My finding is that on any basis item 2 cannot be available because transport is not primary production and moreover having regard to item 36(2) the principals could not have made such a claim. I find in particular that the goods are part of general-purpose road vehicles and that general-purpose road vehicles are excluded. The vehicles are not special purpose vehicles having regard to the definition of general-purpose road vehicles and the reference in that definition to ”transport”
PART F: Item 18
41. The Applicant relies on item 18(5) on the basis that refrigeration constitutes a process or treatment of the product for the purpose of bringing the product into condition or maintaining the product in condition. It is necessary to focus in particular on the concept of “process or treatment”.
42. Once again a general-purpose road vehicle is excluded and all of the reasoning set out in the preceding part is again applicable.
43. A consideration of item 18(5)(a), 18(5)(b) and item 18(5)(c) makes it clear that in all cases the article is concerned with something which is done to the goods or in other words something which is active and which is integral to the manufacturing process. Refrigeration is clearly necessary for preservation but it is not active in the sense required. Some change to the goods is required and refrigeration is not sufficient. Refrigeration maintains but it does not in any way alter goods.
44. In Federal Commissioner of Taxation v Rochester (1934) 50 CLR 225 it was determined that if the temperature of goods is raised by heating (as in cooking) that did not amount to manufacture. The relevant definition was subsequently amended to include “any treatment applied to food stuffs as a process in the preparation of the food stuffs for human consumption”.
45. I agree with the Respondent’s contention that items 18(5)(a) and 18(5)(b) suggest that permanent alteration or integration is required. Item 18(5)(c) is directed at a process where by the goods are put into a condition in which they are to be marketed or used but (it is to be noted) by the manufacturer.
46. In Deputy Federal Commissioner of Taxation v Jack Zinader Pty Ltd (1949) 78 CLR 336, the High Court held that a furrier who remodelled worn fur garments in such manner that they were modernised, and then resold, was selling “manufactured goods”. It will be appreciated then that in Jack Zinader the furrier was effecting something permanent and was not merely preserving the furs.
47. The Applicant cited Federal Commissioner of Taxation v Hammersley Iron Pty Ltd (1980) 33 ALR 251 (upheld on appeal at 81 ATC 4582) in support of its contention that “refrigeration of primary products … involves a process or treatment … that … effects the nature form or condition of goods”. As to whether Hammersley supports the Applicant is doubtful. It held that treatment in its ordinary meaning means the subjection of something to chemical or physical action such as to bring about a change.
48. Refrigeration does not involve a chemical change. As regards to processing Gobbo, J in the Victorian Supreme Court in Hamersley held that “processing” is wider than “treatment” but again a change in condition is required. The cooling of goods cannot fall within either concept.
49. See also IGY Manufacturing Pty Ltd v Federal Commissioner of Taxation (1999) 99 ATC 4860; the taxpayer in that case sold absorbent granules under the name “Dri-Cat”. The granules were crushed, dried and graded. The Federal Court held that the goods were not exempt under item 65 as they had not been subject to a process or treatment. An example of a case where a process or treatment was held to have taken place is Deputy Federal Commissioner of Taxation v Stronach (1936) 55 CLR 305 where granite was cut and moved in large blocks and then sawn.
50. Item 18(5)(c)(i) refers to the form or condition of which the goods are to be marketed. There was no evidence in this context before the Tribunal; nor was there evidence before the Tribunal as to whether the products, the subject of the process or treatment are “marketed or used by a person who is the manufacturer”.
51. The problem facing the Applicant was one which confronted the taxpayer in State Electricity Commission of Victoria v Commissioner of Taxation (1999) 96 FCR 22. The taxpayer used transformers in it business to convert voltage and current to enable it to be used for domestic or industrial consumption. The product manufactured by the Commission was electrical energy. The Full Federal Court noted at paragraph 24 that the person who is to market or use the goods has to be the manufacturer. The court held at paragraph 33 that item 18(5)(c) could have no application as ‘United’ was not the manufacturer or bearing in mind that the case applied to electrical energy, the producer of that energy.
52. Clause 46 of RS (with which I agree) is included as follows;
Thus the Applicant’s statements at paragraphs 37 and 39 of its submissions:
“The refrigeration unit and the insulated van in question were used to maintain the temperature of these goods so that they would arrive at their destination in a marketable state” (para 37)
and
“Ensuring that the goods reach their destination in a marketable state is part of both primary production and a manufacture related activity.” (para 39)
with respect incorrectly states the test to be applied. The test is whether the process or treatment was done for the purpose of bringing the goods into, or keeping them in a form in which they are to be marketed…by a person…who is the manufacturer of the goods.
PART G: General-Purpose Road Vehicles; Section 13 of STEC
53. I refer in the first instance to the definition of general-purpose road vehicle and paragraphs 5.28 and 5.37 of the EM in respect of STEC.
54. The relevant legislative provisions are contained in part B; see in particular the reference to parts in item 2(1) and 18(2). See also section 11, which provides that a reference to “parts” is to be read as referring to “goods for use by the exemption user exclusively as parts for goods-equipment for use by the exemption user mainly in carrying out one or more of the specified activities.”
55. Generally as to general-purpose road vehicles see paragraphs 5.28 and 5.37 of the EM referable to STEC.
56. Section 13 of STEC excludes the use of goods referable to excluded property and including general-purpose road vehicles. That this was intended, and so that it was thought unnecessary to make specific reference to parts in the definition of general-purpose road vehicle is demonstrated (inter alia) by paragraphs 5.35 and 5.44 of the EM referable to STEC. The Respondent referred the Tribunal to the Oxford English Dictionary definition of vehicle as follows;
“A means of conveyance provided with wheels or runners and used for the carriage of persons or goods; a carriage, cart, wagon, sledge, or similar contrivance.”
57. The definition of general-purpose road vehicle is wide enough to include insulated transport vehicles. Vehicles can include “equipment or apparatus of a kind ordinarily fitted to road vehicles”; see Pioneer Concrete (NSW) Pty Ltd v Federal Commissioner of Taxation (1986) 85 FLR 315.
58. The Applicant submits that the issue is whether the items were general-purpose road vehicles when purchased. It may be that at the time and when purchased and prior to attachment, eg to a prime mover, they were not but then equally and in that form, they could not have been said to be capable of being used in primary production or in manufacture-related activity. I note that in this context that I agree with the Respondent’s contentions as contained clauses 60 and 61 of RS, reading as follows;
This is so having regard to the fact that the entitlement to quote an exemption declaration will depend on whether the quoter had the intention of using the goods at that time to satisfy an exemption item (sec 83(1)(a)). That purpose may well be disclosed by the actual use to which the goods are subsequently put: see Davis v DFederal Commissioner of Taxation 2000 ATC 4201. Thus, if the intention was to use the goods when combined in a manner which was excluded by 2(3)(b) and 18(3)(b), i.e. as a general purpose road vehicle, then the goods would not qualify for exemption.
At paragraph 52 the Applicant submits that the “primary or essential function of the insulated van is the refrigeration of temperature-sensitive cargo.” This, with respect, is a surprising proposition given that the Applicant’s business is the transportation of goods. The submission is not supported by the sample contract at annexure AWB3 to the statement of Arthur Bunker which is described as Cadbury Schweppes Master Agreement for the supply of Freight Services and is specifically “for the supply of freight services”.
PART H: Special Purpose Vehicles
59. The Applicant contends that the goods are parts of vehicles and that the vehicles are special purpose vehicles and not general-purpose road vehicles. The Applicant referred to I C I Operations PTY Ltd v Deputy Federal Commissioner of Taxation (Vic) 87 ATC 5110 and where the primary function of the vehicles was the manufacture of explosives. The court held that transportation of materials and persons was merely incidental to the achievement of the primary purpose. In those circumstances the vehicles were not conventional road vehicles “of the kinds ordinarily used for the transport of persons or the transport of delivery of goods”.
60. Concrete mixers were considered in Ready Mixed Concrete (Vic) Pty Ltd v Federal Commissioner of Taxation (1969) 118 CLR 177; in relation to transit concrete mixers affixed to the trucks of the taxpayer. The Respondent contends that case, which was decided under income tax legislation would have been decided differently under sales tax legislation because of the definition of part and indeed this is what occurred in Pioneer Concrete. In Pioneer Concrete a truck and a mountable concrete mixer were held to be separate as a matter of functionality. Nevertheless, the mixer fell within the definition of parts of a road vehicle.
61. In Federal Commissioner of Taxation v Brambles Holdings Ltd (1994) 94 ATC 4165 the taxpayer assembled garbage trucks by attaching bodies to cab chaise. The body was there in order to lift and empty industrial bins. The court held that the attachment of the body (in the case of a new chaise and a new body) resulted in an entity which was the operational garbage truck. The Tribunal does not consider that, as contended by the Applicant, Brambles is distinguishable.
PART I: Section 13 of STEC and the “lower level”
62. I refer to section 13 of STEC and to paragraph 5.44 of the EM referable to STEC.
63. I do not consider that I need deal in detail with the Applicant’s submissions in this context. I agree with the Respondent’s contentions that if the combination constitutes a general-purpose road vehicle it is unnecessary to consider section 13 of STEC. But in case it is necessary there is in my view the necessary direct relationship; see paragraph 73 of RS with which I agree, and which is set out in full in this decision as follows;
In any event there inheres the requisite direct relationship between the exemption goods and the excluded property:
(a) The insulated bodies are affixed to the runners of a host cab-chassis (Statement of Stephen Cooper dated 29 September 2004 at para 24) and are integrated into a general purpose road vehicle whose primary purpose is the conveyance of goods. There is a direct and contiguous relationship between the insulated body and the excluded property, at least by reason of the fact that it becomes a part of a general purpose road vehicle. The insulated body, apart from providing a contained space into which goods are packed for carriage, by its design assists in providing a suitable environment within the general purpose road vehicle, so the condition of goods will be maintained during transport. The insulated body therefore directly relates to the excluded property.
(b) The insulated vans are bolted or welded to an undercarriage which incorporates, suspension, axles, brakes, wheels and designed to be hauled by a prime mover; (Cooper para 25). Again the vehicle resulting from this process is a general purpose road vehicle and the relevant goods relate directly to the excluded property by inter-dependent juxtaposition. As is the case with the insulated body, the insulated van provides a space where the load is contained and by its design assists in providing a suitable environment within the general purpose road vehicle, for maintaining the condition of temperature sensitive goods during transport. The insulated van therefore directly relates to the excluded property
(c) The refrigeration unit is specifically designed for use on road transport vehicles. It is made to attach to the front wall of the rigid insulated body or van which is constructed with an opening to accommodate the unit; (Cooper para 15). The size of the refrigeration units will be determined by the size of the insulated body or van; (Cooper para 10).
(d) The refrigeration units are designed to incorporate aero-dynamic features which facilitate the minimisation of wind resistance around the trailer body (T7-31);
(e) The refrigeration unit cannot operate in the absence of an insulated body or van (para 60 of the Applicant’s submissions).
(f) The refrigeration unit when attached to the insulated body or the insulated van are functionally inter-dependent. Specially designed chutes (which attach to the unit) mounted on the ceiling of the vans, and sensor points (also on the ceiling) distribute the cool air and control the temperature within the insulated body or van. By this design cool air is reflected from the back door under the pallets “through the air flow floor and back to the bottom side of the refrigeration unit and is re-circulated as cold air”; (Cooper paras 16 and 17).
(g) In some cases the refrigeration units share the fuel in the vehicle’s tank and share the vehicle’s battery; (Cooper 19).
(h) The refrigeration units have a direct relationship to the excluded property, firstly by incorporation into a general purpose road vehicle, and secondly by their singular and only function, which is to generate a suitable environment in the general purpose road vehicle to maintain the condition of goods during transportation.
PART J: The Passing-on of the Sales Tax
64. The Respondent contends that there is insufficient evidence as to the fact that the tax was not passed on. My own view is that there may be sufficient evidence. The Respondent agreed to the admission of exhibits A1 and A2 on the basis that the witnesses in question were not required for cross-examination. Although the Respondent objected to certain aspects of that evidence, it is difficult for him now to complain that that evidence is not sufficient. The evidence of Mr Bunker was criticised on the basis that he is not a director of the Applicant; however he is a senior executive with many years of experience. His evidence is that the transportation in question is very competitive, and so much to that to pass on the sales tax is not feasible. It is, I think, significant that the evidence shows that return trip consignments of almost anything will be accepted in order to ensure that the entire round trip is in aggregate profitable.
PART K: Summary and Conclusion
65. The Applicant was not entitled to quote an exemption because the parts were not intended for use in respect of exemptions which were available.
66. The Applicant was not entitled to claim under items 2 and/or 18 (and in either case in combination with item 36) because the activities in question did not fall within primary production or manufacture-related activities.
67. In particular, and in relation to manufacture-related activity there was no process within item 18(5)(c).
68. Item 36 cannot apply because if the principals had carried out the relevant activities in the place (i.e. the insulated vans) they would not have been entitled to claim the exemptions.
69. The goods constituted parts of what on assembly were general-purpose road vehicles and not special purpose vehicles; a contention by the Applicant that parts are not included within general-purpose road vehicles and in particular, that the definition of “parts” does not apply to items 2 and 18, cannot be accepted.
70. Section 9 of STEC is fatal to the Applicant in that items 2 and 18 are both marked [R] and as such available only to a registered person and the Applicant was not a registered person.
71. I have not made a conclusive final finding as to whether the sales tax was or was not passed on but I incline to the view (and on a prima facie basis) that it was not.
72. At the end of the second day mention was made of the fact that the Applicant might be able to point to old sales tax rulings which would lend support to its contention that refrigeration is a process of manufacture. An adjournment until 17 June 2005 was granted to the Applicant within which to do so. In the result and on 17h June 2005 the Tribunal was informed at the beginning of that morning that no further hearing would be required an the hearing date was vacated. In any event sales tax rulings were never binding public rulings, and for that matter cannot even at this date be binding, except in limited circumstances and where specifically there is reliance, because sales tax was an indirect tax. See in this context Recoveries Trust v Federal Commissioner of Taxation 2004 ATC 2291. The Tribunal was furnished with ST2350 and which forms part of the Applicant’s bundle. It is difficult to see why that ruling assists that Applicant; paragraphs 7 and 8, which constitutes the ruling proper in respect of ST2350 read as follows;
Ruling
7. The definition of "parts" in relation to road vehicles was considered by the. Supreme Court of New South Wales, in Pioneer Concrete (NSW) Pty Ltd v FC of T 86 ATC 4435, The issue in that case was whether a transit concrete mixer attached to a road vehicle was a part for that vehicle; The Court held that the transit mixer was a part for a road vehicle within the definition of "parts". The expression "in connection with" in the definition of "parts" was said to involve a substantial, relation in the practical sense between the equipment and the transportation or delivery of goods. Further, the connection need not be the only connection so long as it was not incidental. Although the transit mixer was directly involved with the manufacture of concrete, it still carried out an important function in the transport and delivery of the concrete.
8. A similar position applies with the refrigeration units. While they maintain the refrigerated goods for delivery in a marketable state, the units are also for use in connection with the transport or delivery of goods. The refrigerated goods could not be delivered without the refrigeration units. The units are other equipment or apparatus of a kind ordinarily fitted to road vehicles used in connection with the transport or delivery of goods and come within the definition of "parts". As parts for road delivery vehicles they are excluded from exemption under the aids to manufacture provisions and are taxable at the rate of 20%.
It is of course trite law that there can be no estoppel against the Respondent.
73. The Tribunal would not like to end these reasons without expressing its appreciation of the excellent paper work produced by both parties. The Agreed Bundle produced by the Applicant was particularly helpful.
74. In all the circumstances the objection decision under review must be affirmed.
I certify that the 75 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President Julian Block
Signed: ..............................................................................
Niamh Kinchin AssociateDate/s of Hearing 30, 31 May 2005
Date of Decision 6 July 2005
Counsel for the Applicant Mr Mark Leeming
Solicitor for the Applicant Mr Adrian Firmstone
Counsel for the Respondent Mr Roger Quinn
Solicitor for the Respondent Mr Peter Hefford
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