Magna Stic Magnetic Signs Pty Ltd v Commissioner of Taxation

[1991] FCA 68

Re: MAGNA STIC MAGNETIC SIGNS PTY LIMITED and MAGNA STIC PRODUCTS LIMITED
And: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
Nos. G301-303 of 1990
FED No. 68
Sales Tax
91 ATC 4216/21 ATR 1367/98 ALR 604
28 FCR 39

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Davies(2), Beaumont(1) and O'Loughlin(1) JJ.

CATCHWORDS

Sales Tax - exemption - adhesive vinyl letters - whether letters exempt from sales tax as "builders' hardware" - relevance of evidence as to understanding of "builders' hardware" in building and hardware trades.

Sales Tax - remission of tax - notice of assessment issued under wrong Act - whether Commissioner "required payment of the tax" - whether notice of assessment referred to the particular tax - whether substantial compliance with remission requirements.

Sales Tax (Exemptions and Classifications) Act 1935 (Cth) Schedule 1 Division XII Item 84(2)

Sales Tax Procedure Act 1934 (Cth) - s.12B(1)

Feltex Commercial Interiors Pty Ltd v Federal Commissioner of Taxation (1990) 90 ATC 4925

Pioneer Plastic Containers Ltd v Commissioners of Customs and Excise (No. 2) (1968) 1 WLR 236

Deputy Commissioner of Taxation v Academy Plastics Pty Ltd (Kitto J., 22 March 1956)

HEARING

SYDNEY

#DATE 12:3:1991

Counsel and Solicitors for appellants: A.H. Slater instructed by

J.W. Walker and D.K.L. Raphael

Counsel and Solicitors for respondent: A.R. Emmett QC with N.R. Burns

instructed by Australian Government Solicitor

ORDER

Within 14 days the parties bring in draft short minutes of orders to reflect the reasons for judgment.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

In order to understand the issues in these three appeals from orders made by a judge of the Court (now reported at (1989) 89 ATC 5,000 and (1990) 90 ATC 4,424) it is necessary to explain the history of the matter, which arises under the Commonwealth sales tax legislation, as follows.

The background facts

1. Magna Stic Magnetic Signs Pty. Limited ("Signs"), the first appellant, manufactures adhesive vinyl letters and numbers suitable for fixing to solid surfaces ("the goods"). The goods are suitable for fixing to solid surfaces such as buildings, notice boards or vehicles. They are capable of being formed into words, such as names, warnings or instructions. The goods adhere strongly to any surface to which they are applied, so that they cannot be removed without damage to that surface. Signs wholesales the goods to a related corporation, Magna Stic Products Pty. Limited ("Products"), the second appellant. Products makes the goods up into "legends" in the form of a single word or a group of words. The legends are then sold by Products to the public, either directly or through agents.

2. On 18 February 1987, the Deputy Commissioner of Taxation purported to issue a notice of assessment to Signs under s.25(2A) of the Sales Tax Assessment Act (No. 1) 1930 ("(No. 1) Act") in these terms:
   

"You are hereby notified that you are liable to pay sales tax as shown hereunder in accordance with an assessment that has been made under the provisions of sub-section 25(2A) of Sales Tax Assessment Act (No 1) 1930, as amended. ASSESSMENT UNDER SUB-SECTION 25(2A)

OF SALES TAX ASSESSMENT ACT (No. 1) 1930, AS AMENDED In respect of self adhesive vinyl letters and numerals manufactured by you and sold or applied to your own use during the period 1 March 1982 to 31 October 1986 (both dates inclusive):-

RATES OF TAX TOTAL SALE AMOUNTS OF TAX VALUE THEREON $ $ 17-1/2% 266,479.25 46,633.87 20% 844,720.20 168,944.04 Total 215,577.91 Less Tax Previously Paid 25,741.31 Amount of Tax Now Payable 189,836.60 Additional Tax under sub-section

45(2) and 25(2B) of Sales Tax

Assessment Act (No 1) 1930 203,690.66 Total amount 393,527.26"

1. Signs objected against the assessment on the grounds, inter alia, that the goods were exempt from sales tax by virtue of the provisions of Item 84(2) in the First Schedule of the Sales Tax (Exemptions and Classifications) Act 1935 ("the Exemption Act"). Item 84(2), which is in Division XII - headed "Building Materials" - in Schedule 1 to the Exemption Act, is as follows:
   

"(2) Builders' hardware (not including electrical fittings, accessories or equipment, duct work or channelling of a kind used in forced draught ventilating or air conditioning systems, or fittings, accessories or attachments for, components of, or goods designed to form part of, such duct work or channelling, or goods covered by item 12, 14 or 14A in the Third Schedule), being goods of a kind used in the construction or repair of, and wrought into or attached to so as to form part of, buildings or other fixtures, including -

Bolts, brackets, brads

Catches, ceiling ties, clips, clouts, corrugated fasteners

Decking spikes, door bells, door handles, door knockers, door sheaves and tracks, door stops and stoppers, door and cupboard catches, door and gate springs, drawer pulls, dryvins

Flush rings

Gate loops

Hasps, hinges, hooks, hooks and eyes, house numbers Knobs

Latches, letter boxes, letter plates, locks, locksets and keys therefor, loxins

Metal frames for the support of wash basins Nails, name plates, nuts

Padbolts, panel pins

Rivets

Staples, screws, scruins

Washers."

(During the period now in question, the provisions of Item 84(2) were amended with respect to duct work used in ventilating or air conditioning systems. It is common ground that these amendments are not material for present purposes.)

1. The Commissioner decided to disallow the objection. By letter dated 25 June 1987, the solicitors for Signs requested that the decision be referred to the Court. In this matter (No. G159 of 1988), the primary judge ordered that the appeal be allowed and that the notice of assessment be set aside but that an amended assessment be issued as follows:
   

Sales tax $107,788.95 Additional tax $101,845.33 Less by payment $25,741.37 Sales tax due and payable $183,892.97

1. Signs now appeals (No. G301 of 1990) from so much of the judgment and orders as ordered that an amended assessment be issued.

2. On 18 February 1987, the Deputy Commissioner also purported to issue to Products a notice of assessment under s.25(2A) of the (No. 1) Act in these terms:
   

"You are hereby notified that you are liable to pay sales tax as shown hereunder in accordance with an assessment that has been made under the provisions of sub-section 25(2A) of Sales Tax Assessment Act (No 1) 1930, as amended. ASSESSMENT UNDER SUB-SECTION 25 (2A)

OF SALES TAX ASSESSMENT ACT (No 1) 1930, AS AMENDED In respect of self adhesive vinyl letters and numerals manufactured by you and sold or applied to your own use during the period 1 March 1982 to 31 October 1986 (both dates inclusive):-

RATES OF TAX TOTAL SALE AMOUNTS OF TAX VALUE THEREON $ $ 17-1/2% 424,642.91 74,312.51 20% 1,430,628.70 286,125.75 Total 360,438.26 Less Tax assessed to Magna Stic

Magnetic Signs Pty Ltd 215,577.91 Amount of Tax Now Payable 144,860.35 Additional Tax under sub-section 45(2)

and 25(2B) of Sales Tax Assessment Act

(No. 1) 1930 154,754.71 Total Amount 299,615.06"

1. Products objected against the assessment; the Commissioner decided to disallow the objection, and the decision was also referred to the Court (No. G160 of 1988). The primary judge was of the view that the appeal should be allowed and the assessment set aside. No appeal is brought in this matter.

2. On 3 December 1987, Signs commenced proceedings in the High Court of Australia against the Commissioner seeking a declaration that it was not obliged to furnish a sales tax return in respect of the sale of the goods; a declaration that it was not liable to pay sales tax upon the sale value of the goods; an order that the Commissioner withdraw the assessment dated 18 February 1987; an injunction restraining the Commissioner from collecting the sales tax assessed; alternatively, an order that the Commissioner remit so much of the tax as related to the period prior to 21 February 1986. These proceedings having been remitted to this Court (No. G1408 of 1988), the primary judge made a declaratory order that Signs was indebted to the Commissioner in the sum of $183,892.97 in respect of sales tax and additional tax. Signs now appeals from this order (No. G303 of 1990).

3. On the same date, 3 December 1987, Products commenced proceedings against the Commissioner in the High Court seeking similar relief. These proceedings having been remitted to this Court (No. G1407 of 1988), the primary judge made a declaratory order that Products was indebted to the Commissioner in the sum of $175,549.04. Products now appeals from this order (No. G302 of 1990).

4. The primary judge, with the consent of the parties, dealt with all matters, that is, both statutory appeals and both actions remitted from the High Court, together. As has been said, appeals have now been brought in three of the matters. The appeals have been argued together since they involve some common questions.

5. Several arguments were advanced by the appellants in support of the appeals. It is convenient to consider them separately.
   Did the goods fall within exempting Item 84(2)?

6. In rejecting the claim for exemption, the primary judge said:
   

"I do not agree that the term 'builders' hardware' is to be treated as no more than a compendious description of what follows, so that it is irrelevant whether particular goods are builders' hardware in ordinary parlance. If that had been the intention, there would have been no need to use the term at all. The description could have commenced with the words 'goods of a kind...'. It is not as if item 84(2) was a definition provision, the draftsman wanting a simple term to avoid lengthy repetition. It is noteworthy that item 84(2) not only appears in a Division of the Schedule headed 'Building Materials' but is surrounded by other items used in the construction of buildings. In my opinion the intention of the draftsman was to exempt only items which fulfill three criteria: firstly, that they answer the description 'builders' hardware' in ordinary parlance, secondly, that they are 'goods of a kind used in the construction or repair of...buildings or other fixtures' and, thirdly, that they are goods wrought into or attached to buildings or other fixtures so as to form part thereof."

1. The judge referred to an unreported decision of Kitto J. dealing with the meaning of Item 84(2) (Deputy Commissioner of Taxation v Academy Plastics Proprietary Limited, 22 March 1956) (see below) and said:
   

"The Macquarie Dictionary relevantly defines 'hardware' as 'building materials, tools, etc; ironmongery'. 'Ironmongery' is defined as 'the goods, shop, or business of an ironmonger' and an 'ironmonger' is 'a dealer in metal ware, tools, cutlery, locks, etc'. The Australian Concise Oxford Dictionary relevantly defines 'hardware' more narrowly, simply as 'ironmongers' goods'. 'Ironmonger' is circularly defined as 'dealer in hardware, etc'. I take the wider definition, which includes building materials and tools. This accords with my understanding of the word 'hardware' in ordinary parlance. What is significant about that definition is its emphasis upon use in building. Of course, in the present case, this emphasis is re-inforced by the circumstance that the item is described, not as 'hardware' simpliciter, but as 'builders' hardware'. I think that the draftsman had in mind materials designed for use by builders, being materials, tools, etc. While I accept that the subject letters are capable of being affixed to buildings or other structures, it is another matter to describe them as materials designed for use by builders. The evidence suggests that the letters have a multitude of applications, mostly in advertising. It cannot be said that the product is one designed for use by builders, as distinct from others. Nor does it appear that builders are the main users of the product."

1. The judge thus concluded that the goods were not "builders' hardware". He further expressed a difficulty in accepting, within the meaning of Item 84(2), that the goods were "of a kind used in the construction...of, buildings or other fixtures". He said:
   

"To the extent that they are used in buildings at all, they are things affixed to completed buildings for convenience in use; for example, indicating an exit from the building, or that a particular room is used for a particular purpose."

1. In the Academy Plastics Case, Kitto J., in holding that a plastic article marketed as the "Tidy Towel Rack" was not exempt under Item 84(2), stated:
   

"Turning to the general words themselves, even if the words 'Builders' Hardware' were the only words to be considered, I should be of the opinion on the evidence that the Tidy Towel Rack was not within the class of goods so described. Seven witnesses of long experience in the hardware and building trades concurred in rejecting the notion that the article was builders' hardware as they understood the term and as it is understood in those trades...

But whatever meaning might be given to the expression 'Builders' Hardware' standing by itself, in item 84(2) it is confined to 'goods of a kind used in the construction or repair of, and wrought into or attached to so as to form part of, buildings or other fixtures'. Obviously these words cannot properly be applied to every article which is intended to be affixed to the fabric of a building so as to be held in a position which is suitable for its convenient use. The Tidy Towel Rack, it may be remarked, is not even of that wide description, for the support it requires may be as well provided by the end of a detached piece of furniture, such as a kitchen cabinet, as by a wall. Even if I had no assistance from evidence, I should think it sufficiently clear from an inspection of the article itself that it is not of a kind used in the construction or repair of a building. No one would ever think of such a thing, I am sure, except after the building was completed, and as a matter rather of furnishing and equipping the household than of adding to the building as a building."

1. More recently, in Feltex Commercial Interiors Pty. Limited v Federal Commissioner of Taxation (1990) 90 ATC 4,925, Lockhart J. held that certain fixing brackets were "Builders' hardware" within the meaning of Item 84(2). There was evidence from the building industry as to the meaning of the term "Builders' hardware" in the industry. One expert said that it had the meaning of stock items, i.e., items available for use by builders and able to be purchased from recognised builders' hardware stores, and did not include items made specially to suit the needs of a particular builder or client. Another expert was of the contrary view, namely that "Builders' hardware" was understood in the industry to embrace both stock and custom-built items. Lockhart J. said (at p 4,936):
   

"I regard the expression 'builders' hardware' where appearing in item 84(2) as one which is to be defined according to its natural and ordinary meaning and not by the evidence of people in the building industry. But I regard that evidence as relevant not to determine the meaning of the expression which seems to me to be a simple expression; but to identify whether certain objects fit within it as understood in the building trade. Perhaps in the end it does not matter and may come down to semantics, but the distinction is nevertheless there. In this respect I take a different view from Wilcox J. in Magna Stic at pp 5004-5005 about the use of evidence as to the meaning of the term in the building trade, but I agree with him that the expression 'builders' hardware' means materials, tools etc. which are designed for use by builders. I do not think one needs to resort to evidence within the trade for that proposition. I therefore think that the meaning which should be ascribed to the terms accords with the definition given to it by the witness for the applicant."

1. No expert opinion evidence as to the meaning of "Builders' hardware" was called in the present case so that there was no attempt to prove that there was a common commercial or trade usage in relation to the goods (see the discussion in Pearce, Statutory Interpretation in Australia, 3rd ed. at pp 72-3).

2. On behalf of the appellants, it is now contended that: (1) The phrase "Builders' hardware", in the present context, means "materials, tools etc. which are designed for use by builders" (see per Lockhart J. in the Feltex Case, cited above). Its meaning is a matter of statutory interpretation, not evidence. (2) The term is not confined to goods designed exclusively for use by builders. For instance, catches, door bells, hooks, letter plates or name plates have many possible applications by householders or by advertisers. It is sufficient to qualify for exemption that the goods are apt for use by builders in the prescribed manner. (3) The evidence shows that the goods were purchased by builders and by shopfitters; and that the goods could be purchased in the hardware department of a department store. (4) The goods appear, on inspection, to be apt for use by builders. (5) Once the goods are attached to a building, they cannot be removed without causing damage and thus they should be regarded as part of the building. (6) The character of the goods is such that they are apt and available for use in the construction and repair of buildings. This might not be their exclusive or principal use, but Item 84(2) does not require this. (7) Moreover, the goods fall within the specific descriptions "house numbers", "letter plates" or "name plates".

3. In considering these contentions, it is necessary to take the matter in stages. It is first necessary to decide, as a matter of law, whether the exempting item uses the expression "Builders' hardware" in any other sense than that which it has in ordinary speech. For this purpose, it is relevant to inquire whether the expression is defined in the Act, whether it has a technical legal signification, and whether there is any other indication in the legislation that the Parliament intended any other meaning than that which the words ordinarily have in this country and at this time. The common understanding of the words has therefore to be determined and that is a question of fact. The next question must be whether the material before the Court reasonably admits of different conclusions as to whether the goods fall within the ordinary meaning of the words as so determined. That is a question of law. If different conclusions are reasonably possible, it is necessary to decide which is the correct conclusion. This is a question of fact. See, generally, N.S.W. Associated Blue-Metal Quarries Limited v Federal Commissioner of Taxation (1955) 94 CLR 509 per Kitto J. at pp 511-2; Hope v The Council of the City of Bathurst (1980) 144 CLR 1 per Mason J. at pp 7-8.

1. There is no indication in the legislation that the expression "Builders' hardware" is used in the Item in any special or technical sense. We may then take it that the term was intended to have its ordinary meaning.

2. The Macquarie Dictionary defines "builder" as: "1. a person who builds. 2. a person who contracts for the construction of buildings and supervises the workmen who build them." The Dictionary relevantly defines "build" and "building" as: "1. to construct (something relatively complex) by assembling and combining parts: build a house....8. to engage in the art or business of building." The Macquarie relevantly defines "hardware" as: "1. building materials, tools, etc.; ironmongery. 2. the mechanical equipment necessary for conducting an activity, usu. distinguished from the theory and design which may make the activity possible..." The Macquarie definition of "ironmongery" includes the goods of an "ironmonger". An "ironmonger" is defined as "a dealer in metal ware, tools, cutlery, locks etc." Thus, in ordinary speech, "Builders' hardware" denotes the building materials, metal ware, tools and locks used by persons who contract for the construction of buildings and who supervise the workmen who build them.

3. As Kitto J. pointed out in the Academy Plastics Case, whatever meaning might be given to the expression "Builders' hardware", standing by itself in Item 84(2), it is confined to "goods of a kind used in the construction or repair of, and wrought into or attached to so as to form part of, buildings or other fixtures". Kitto J. observed that, obviously, these words cannot properly be applied to every article which is intended to be affixed to the fabric of a building so as to be held in a position which is suitable for its convenient use.

4. The next question is whether the material before the Court reasonably admits of different conclusions as to whether the goods fall within the ordinary meaning of the words as understood in ordinary speech. In our opinion, only one conclusion is reasonably open. It is, as the primary judge held, that the goods do not fall within the statutory description. For this purpose, it is relevant to consider the nature of the goods, the uses for which they were designed and the uses to which they could be put (see Pioneer Plastic Containers Ltd. v Commissioner of Customs and Excise (1967) 1 Ch 597 per Buckley J. at p 601; see also Federal Commissioner of Taxation v Thomson Australian Holdings Pty. Ltd. (1989) 87 ALR 682 at pp 683-4, pp 687-8; p 690). In our view, it is not possible to characterise the goods as the building materials, metal ware, tools and locks used by builders and of a kind used in the construction or repair of, and wrought into or attached to, so as to form part of, buildings or other fixtures. For one thing, the goods are not "hardware", even if, as Davies J. has pointed out, it may be arguable that some plastic articles, e.g. a door knob, may now fall within that description (cf. Pioneer Plastic Containers Ltd. v Commissioner of Customs and Excise (No. 2) (1968) 1 WLR 236 per Pennycuick J. at p 240 where a plastic lid was held not to be "hardware"). For another, the goods are used for many purposes, some of which have no connection with builders or buildings (cf. Customs and Excise Commissioners v Westbury Developments (Worthing) Ltd. (1981) STC 72 per Ackner L.J. at p 76, where it was held that carpets were not exempt from value added tax as "materials" because carpets were not normally used for building purposes). The goods are not normally used as building materials and that is the present statutory context.

5. In our opinion, the judge correctly held that the goods were not exempt. It follows, in our view, that the appeals in matter No. G301 of 1990 and matter No. G303 of 1990 should be dismissed.
   Did s.12B(1) of the Sales Tax Procedure Act 1934 apply so as to require the remission of tax unpaid by Products?

6. By s.12B(1) of the Sales Tax Procedure Act 1934, it is provided, relevantly, that where tax in respect of any transaction, act or operation, effected or done in relation to any goods has not been paid at the expiration of a period of three years from the close of the month in which the transaction, act or operation was effected or done, the Commissioner may remit that tax unless he has required payment of the tax. A question arose for decision by the primary judge whether the purported notice of assessment issued to Products under the (No. 1.) Act dated 18 February 1987 set out above, amounted to a requirement of payment of unpaid tax within the meaning of s.12B(1). The judge held that it did and Products now appeals from this order.

7. It was, and is, common ground that between 1 March 1982 and 31 October 1986, Products sold goods not manufactured by it such that it incurred a liability for sales tax pursuant to s.3 of the Sales Tax Assessment Act (No. 2) 1930 "(No. 2) Act") and that apart from the said purported notice of assessment, the Commissioner did not, within the statutory three year period require Products to pay the tax for which Products was liable.

8. Before going to the point which now arises for decision, it is necessary to refer to the general scheme of the (No. 2) Act. By s.3 of that Act, the sales tax imposed by the Sales Tax Act (No. 2) 1930 shall be levied and paid upon the sale value of goods manufactured in Australia and sold by a taxpayer who purchased them from the manufacturer. The sale value of goods is determined in accordance with the provisions of ss. 4, 4A or 4B. By s.5, where a person (being a registered person or a person required to be registered) who has purchased goods manufactured in Australia from the manufacturer of the goods sells the goods to an unregistered person or to a registered person who has not quoted his certificate in respect of that purchase, sales tax shall be paid by the firstmentioned person. By s.7, every person who during any month makes any of the sales specified in ss.4, 4A or 4B shall, within 21 days after the close of that month, furnish to the Commissioner a return of those sales. By s.9, every person liable to pay tax under s.5 upon the sale value of any goods sold by him during any month shall, within 21 days after the close of that month, pay sales tax upon that sale value. Where (a) a person makes default in furnishing a return; (b) the Commissioner is not satisfied with a return; or (c) the Commissioner has reason to believe or suspect that a person (although not having furnished a return) is liable to pay sales tax, the Commissioner may determine an amount to be the amount upon which, in the opinion of the Commissioner, sales tax should be paid and may make an assessment in relation to that person (s.10(2A)). As soon as conveniently may be after an assessment has been made, the Commissioner shall cause notice in writing of the assessment to be served on the person liable to pay the tax (s.10(3)).

9. As has been said, s.12B(1)(c) provides that the Commissioner may remit unpaid tax unless he "has required payment of the tax prior to the expiration of (the statutory three year) period." By s.12B(3), it is provided that, for the purposes of that section, the Commissioner shall be deemed to have required payment of tax if he, or an officer acting on his behalf, has served upon any person a notice in writing specifying that an amount of tax is payable by that person in respect of the relevant transaction, act or operation. By s.12B(4), for the purposes of that section, "tax" includes any further tax payable under any Sales Tax Assessment Act and any additional tax for which the person is liable under the Sales Tax Procedure Act or under any Sales Tax Assessment Act. It should also be noted that by s.3 of the Sales Tax Procedure Act, "sales tax" or "tax" is defined to mean any tax imposed under the name of sales tax by an Act.

10. The primary judge said:
    

"...it is true that the 'tax' referred to in para (c) is the tax described in the opening words of the subsection. But, significantly in my view, that tax is not described in terms of its exigibility under a particular Act but rather its connection with 'any transaction' etc. The subsection relates to any 'tax' payable in connection with a transaction etc, without any further express limitation. Even in the absence of a definition of 'tax', it would, no doubt, be implied that the subject tax must be a sales tax; but in fact the Act contains a definition which makes this clear.

The definition section, s.3, provides that, unless the contrary intention appears: 'Sales tax or tax means any tax imposed under the name of sales tax by any Act'. There is no indication that this definition is inapplicable to s.12B. Accordingly, the opening words of subs. (1) should be read as if they said: 'Where any tax imposed under the name of sales tax by any Act in respect of any transaction' etc 'has not been paid'. The subject tax was imposed under the name of sales tax by an Act, namely the No. 2 Act, and all of it remained unpaid at the expiration of three years from the close of each of the months in which the relevant transactions were effected. Consequently, the subject tax is described by the opening words of the subsection. The question, then, is whether the Commissioner required payment of that tax - that is, the tax payable in respect of the relevant transactions - before the expiration of the three years. There can be only one answer to that question. The Commissioner did so require, albeit that he mistakenly claimed that the tax was payable under the No. 1 Act rather than the No. 2 Act."

With respect, we have difficulty in accepting this analysis.

1. In our opinion, when s.12B(1)(c) is read in the light of the interpretation provision, s.3, it is clear that s.12B is intended to have a distributive operation. That is to say, whilst s.12B(1) is potentially capable of applying to the tax imposed under any of the Sales Tax Acts, s12B(1)(c) contemplates remission of the particular tax of which payment has been required. That is to say, s.12B(1)(c) does not apply to any tax, for instance, tax imposed under a different Sales Tax Act.

2. A purported requirement of the payment of the tax which is substantially accurate, where the mistake was evident and could be safely ignored and corrected by the recipient may yet be a valid requirement for the purposes of s.12B(1)(c) (see, e.g. Wingadee Shire Council v Willis (1910) 11 CLR 123 per Isaacs J. at p 144). Errors of this kind are not fatal to the rights of the Commissioner (see the Wingadee Case per Higgins J. at p 148). In such cases, it is proper to apply the maxim "falsa demonstratio non nocet". But can it be said that the demand now relied upon substantially complies with the requirements of s.12B(1)(c)? Was the mistake evident so that it could be safely ignored and corrected by the recipient?

3. In our opinion, it is not possible, as a matter of form or substance, to characterise the assessment issued to Products on 18 February 1987 as a requirement for the payment of the tax for which it was liable under the (No. 2) Act. The notice referred to the (No. 1) Act and asserted that Products had manufactured the goods. The notice purported to allow Products a credit for tax assessed to Signs under the (No. 1 Act). These were significant departures in form from the true position and substantial errors in substance, since Products did not manufacture the goods and could only be liable under the (No. 2) Act. In the circumstances, in our view, the provisions of s.12B(1)(c) were not complied with. It follows, in our opinion, that the appeal in matter G302 of 1990 should be allowed.
   Orders and costs

4. Since the parties have agreed on certain other matters, we think that it is appropriate that a direction be given that the parties submit draft short minutes of orders to reflect these reasons in the light of their agreement. We further propose that the parties may, if any of them wish, make a submission in writing in respect of costs.

JUDGE2

The first issue in these appeals is whether certain goods were exempt from sales tax as being goods within Item 84(2) in Division XII of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 (Cth). Magna Stic Magnetic Signs Pty Limited ("Signs") manufactures adhesive vinyl letters and numerals suitable for fixing to solid surfaces such as buildings, notice boards or vehicles and capable of being formed into words such as names, addresses, warnings or instructions. The letters adhere strongly to any surface to which they are applied. Signs wholesales these letters to Magna Stic Products Pty Limited ("Products"), which in the years in question was not a registered person, and Products sells the letters and numbers to the public on individual orders. Thus a customer wishing to make a sign will specify to Products the style, height, colour and other details of the letters and numbers required and Products will make up the order from the stock which it holds.

1. Item 84(2) specifies:-
   

"Builders' hardware ... being goods of a kind used in the construction or repair of, and wrought into or attached to so as to form part of, buildings or other fixtures."

The item goes on to specify particular goods such as:-

"Bolts, brackets, brads" and "Catches, ceiling ties, clips, clouts,

corrugated fasteners."

Item 84(2) appears in a group of items, all of which appear to be used in or associated with the building or repair of buildings and fixtures. It specifies goods which have the character of builders' hardware and are goods of a kind used in the construction and/or repair of, and wrought into or attached to so as to form part of, buildings or fixtures.

1. The trial Judge, in a passage which was subsequently cited with approval by Lockhart J. in Feltex Commercial Interiors Pty Ltd v Federal Commissioner of Taxation (1990) 90 ATC 4925 at p 4936, expressed the view that the Item applied to goods such as "building materials, tools etc. which are designed for use by builders." But building materials generally are dealt with in other items and tools are not wrought into or attached to buildings or fixtures. Item 84(2) applies to a more limited class of goods, many examples of which are specified in the item.

2. As the item does not use the words "primarily and principally" or "exclusively", the words "of a kind used in" would themselves require no more than that the goods have a sufficient use in the construction and repair of buildings and fixtures to confer upon them the character of being so used. See Deputy Commissioner of Taxation v Stewart (1984) 154 CLR 385 at 390, 397, 401-2.

3. However, the item commences with the generic description "Builders' hardware". The apostrophe shows that the hardware must have the character of hardware pertaining to builders. The item is looking at hardware of a kind "designed for use by builders", to use the expression adopted by the trial Judge and by Lockhart J., or "ordinarily installed by builders as fixtures" to use one of the expressions which was considered in Pioneer Plastic Containers Ltd v Commissioners of Customs and Excise (No. 2) (1968) 1 WLR 236. In that case, Pennycuick J., applying the definition in the Oxford Dictionary of "hardware", held that the term was limited to ironmongery and such like metal objects and did not include plastic articles. In this country, at the present time, the term has a wider denotation and would include wooden and plastic knobs, handles etc. Nevertheless, the traditional meaning of the term is not to be overlooked when new products are under consideration.

4. Very little evidence was given to the trial Judge to assist him in determining whether the goods fell within the classification. I would therefore pause to observe that, in a classification case, it is better to have too much rather than too little information. Evidence as to the relevant industry and as to the use therein of language provides a judge with a background against which and with relevant information on which he may make a decision. Lockhart J. in Feltex at p.4936 and the trial Judge held that the term "Builders' hardware" carries the meaning which it has in ordinary language. The contrary has not been contended in the appeal. But that is not to say that evidence as to what goods are understood in the building and hardware trades to be builders' hardware would not be relevant and helpful. The term "Builders' hardware" is not one of general application but refers to goods dealt with in the trades. Evidence by persons experienced in the building or hardware trades that certain goods were or were not understood to be builders' hardware and were or were not sold as such by merchants of builders' hardware would be evidence tending to demonstrate the character of those goods. Thus, in Deputy Commissioner of Taxation v Academy Plastics Pty Ltd (unreported 22 March 1956) Kitto J said:-
   

"Turning to the general words themselves, even if the words `Builders' Hardware' were the only words to be considered, I should be of the opinion on the evidence that the Tidy Towel Rack was not within the class of goods so described. Seven witnesses of long experience in the hardware and building trades concurred in rejecting the hardware as they understood the term and as it is understood in those trades ..."

Likewise in the Feltex case, at p 4936, Lockhart J. said:-

"I regard the expression `builders' hardware' where appearing in item 84(2) as one which is to be defined according to its natural and ordinary meaning and not by the evidence of people in the building industry. But I regard that evidence as relevant not to determine the meaning of the expression which seems to me to be a simple expression; but to identify whether certain objects fit within it as understood in the building trade".

A judge would be hesitant to hold that goods were not builders' hardware if they were so regarded in the building and hardware trades. And a judge would be reluctant to hold that goods were builders' hardware if they were not understood to be so in those trades. No evidence of that type was given in this present case.

1. Examples of the goods themselves were in evidence. They were letters or numbers with an adhesive backing. Evidence was given that similar goods were sold in hardware shops in Sydney and were found on shelves located amongst building items. But that evidence was of little use having regard to the vast range of goods now sold by hardware stores. Two photographs were in evidence showing examples of the use of the letters and numbers. All examples were of signs on the frontage of a building. Many of the examples showed the number or address of the building and the name of the building or of its occupant, but many advertised the wares or services of the occupant.

2. Most of the customers were signwriters or shopfitters. There was in evidence a bundle of 20 purchase orders and this bundle contained only one invoice directed to a building contractor. As the trial Judge held, the evidence suggested that the letters had a multitude of applications, mostly in advertising. They were not limited to use on buildings and fixtures for they were suitable for use on signboards, motor vehicles and other personalty. The goods were as suitable for use for advertising purposes as they were in the construction and repair of buildings and fixtures.

3. Counsel for the appellants submitted that it was sufficient for characterisation under Item 84(2) that the goods be appropriate for use by builders. But that is not the meaning of the term. To fall within the description, goods must have a sufficient association with builders and with the construction and repair of buildings and fixtures to gain the character of builders' hardware used in that activity. The uses to which the letters and numerals could be and were put appear to be too wide to confer upon the goods the limited character which Item 84(2) specifies.

1. I agree with the trial Judge that the goods were not exempt from sales tax.

2. On the second issue in the appeals, that arising under s.12B of the Sales Tax Procedures Act 1934 (Cth), I agree with the views expressed by Beaumont and O'Loughlin JJ. and have nothing to add thereto.

3. I agree with the order proposed by Beaumont and O'Loughlin JJ.