Mutual Pools & Staff Pty Limited & Anor v The Commissioner of Taxation for the Commonwealth of Australia

[1991] HCATrans 119

~

~ --~~

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S99 of 1990

B e t w e e n -

MUTUAL POOLS & STAFF PTY

LIMITED

First Plaintiff

and

THE SWIMMING POOL AND SPA

ASSOCIATION OF AUSTRALIA

LIMITED

Second Plaintiff

and

THE COMMISSIONER OF TAXATION

FOR THE COMMONWEALTH OF

AUSTRALIA

Defendant

Demurrer

Pools 1 9/5/91

MASON CJ
BRENNAN J
DEANE J
DAWSON J
TOOHEY J
GAUDRON J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 9 MAY 1991, AT 10.18 AM

Copyright in the High Court of Australia

MR D.H. BLOOM, QC:  May it please the Court, I appear with

my learned friend, DR G.A. FLICK, for the first

plaintiff. (instructed by Roger Williams)

MR D.F. JACKSON, QC:  May it please the Court, I appear with

my learned friends, MR A. SLATER and MRS. GAGELER,

for the defendant. (instructed by the Australian

Government Solicitor)

MASON CJ: Yes, Mr Bloom.

MR BLOOM:	Your Honours, might we hand up an outline of our submission.
MASON CJ:	What is the position with the other plaintiff,

Mr Bloom?

MR BLOOM:	There is some question about the locus of the other plaintiff, Your Honour, and it was thought
better not to trouble this Court with that
question, but to leave that to one side perhaps to be dealt with in the Federal Court if the matter
goes back there.
MASON CJ:	Thank you.
MR BLOOM:	I should say, Your Honours, there is attached to

that outline certain correspondence which contains

a request for concessions and for concessions made.

The case concerns, as Your Honours will see, a Commonwealth tax upon swimming pools when they have

been constructed and form part of the land. It is not, of course, disputed that the Commonwealth has power to tax land, just that they have exclusive

power to do so and, in particular, that they may do so in a statute which otherwise imposes taxes which

are duties of excise.

Your Honours, it is not disputed as we

understand it that the sales tax imposed by

section 3 of the imposition Act is a duty of

excise. It is a tax on goods, and if we could take

Your Honours to Philip Morris, just the judgment

perhaps of Justice Brennan, it would answer what

appears to be the accepted definition. The case

is in 167 CLR 399 and the relevant passage in

Justice Brennan's judgment begins at page 443 with

a reference at the bottom of the page to

Sir Owen Dixon's judgment in Matthews:

"To be an excise the tax must be levied 'upon

production of manufacture, the sale or the

goods,' but those apparently simple words

permit of much flexibility in application.

consumption of goods and must be of such a

Pools 2 9/5/91

nature as to affect them as the subjects of

manufacture or production or as articles of

commerce. But if the substantial effect is to

impose a levy in respect of the commodity the

fact that the basis of assessment is not

strictly that of quantity or value will not

prevent the tax falling within the

description, duties of excise."

In Parton v Milk Board, his Honour modified

that statement to exclude tax on consumers or

upon consumption from the category of duties

of excise. So modified, his Honour's

proposition formed the basis of the test of a

duty of excise formulated by Kitto J. in

Dennis Hotels which a unanimous Court adopted

in Bolton v Madsen. Kitto J.'s formulation

was as follows:

"a tax is not a duty of excise unless the

criterion of liability is the taking of a step

in a process of bringing goods into existence
or to a consumable state, or passing them down

the line which reaches from the earliest stage

in production to the point of receipt by the

consumer."

And then over at 445, the first paragraph after the quotes:

The continued acceptance of the test of

"tax on a step" and the continuing conflict of
opinion as to the "criterion of liability"

approach can be seen in the reasons for

judgment ..... in the latest decisions on this

point. If there be any rock in the sea of uncertain principle, it is that a tax on a step in the production or distribution of

goods to the point of receipt by the consumer

is a duty of excise.

And we add that that there is a corollary, that	attacks on something which is not goods is not,
prima facie, an excise.

Your Honours, there is a case that says that

the land tax imposed by the Land Tax Act 1956 of

New South Wales is not an excise. It is true that

there are not great reasons given for it but it is

perhaps axiomatic. The case is Ex parte

Clyne; Re Richter, (1966) ALR 853 and the argument

there apparently put by Mr Clyne was that the

Land Tax Act, which is the rating Act for land tax

in New South Wales, did impose a duty of excise.

Perhaps the unusual thing is that the case notes

that counsel for the would be respondents were

Pools	9/5/91 called upon, but it says no more than that the Act
does not impose a duty of excise.

Your Honours, the Act with which we are

concerned is Act No 99 of 1986 which is the Act

which introduced into the Sales Tax Assessment Act

the provisions with which we are concerned:

firstly, a definition of construction in relation

to a swimming pool; secondly, a deeming provision

which deemed every step necessary for the

imposition of sales tax upon completed swimming
pools. In the first place it deemed construction

of so much of a swimming pool as is constructed in

situ to be manufacturer of goods, namely so much as

is constructed in situ. It deemed the person who

does that to be the manufacturer, and therefore the

person upon whom the tax is imposed, and it deems

the occurrence of a taxing event, that is, sale or
application to own use, at the point of time when

the construction is completed.

Before taking Your Honours to the provisions,

if I might just say this. The pool, when

completed, in situ, will have been formed from

building materials, concrete and the like, which

are, in their original form, exempt from tax under

the (Exemptions and Classifications) Act, but the

tax is imposed at the point of time at which all of

those items have lost their identity and have come

together to form the swimming pool in the ground,
and we say, Your Honours, that the criterion of

liability for this particular tax is the completion

of construction of an in-ground swimming pool.	We
would also say, Your Honours, that we do not
perceive that there will be any divergence here
between criterion of liability and substance, we
say they are both the same.

Your Honours, first I should take Your Honours

to section 3 of the imposition Act, that is

Act No. 1, which imposes sales tax at the rate

which, of course, are defined in the Assessment Act	specified in section 4 upon the sale value of goods
to include commodities manufactured in Australia,
by a taxpayer and on or after 20 September 1985,
sold by the taxpayer, that is the first taxing point; treated by him as stock for sale by retail, that is the second taxing point alternatively, or
thirdly, applied to the taxpayer's own use, that is
the third taxing point.
Now, if one goes to the definition in section 3 of construction, which was inserted by
Act No. 99, do Your Honours have the Amendment Act
or the Assessment Act in front of you?

DAWSON J:	The Assessment Act.
Pools	9/5/91
MR BLOOM:	Yes, we will work on that Your Honours.

Your Honours will see there has been inserted the

definition of construction, it is on page 92,133 of

the CCH edition of the Act.

"Construction", in relation to a swimming

pool, means -

(a) the construction or erection of the walls

and floor of the swimming pool wholly or

principally from concrete -

et cetera -

(b) the construction or installation of the

coping for the swimming pool; or

which is the sides that sit on top of the land -

(c) the painting, tiling, waterproofing or
other treating or finishing of the surface of
the walls, floor and coping of the swimming

pool,

but does not include -

(d) the installation, in connection with the

swimming pool, of drainage, heating, lighting,

power supply, water supply, filtering or

pumping equipment; or

(e) the undertaking of excavation or other
earthworks or the clearing, levelling or

landscaping of land in connection with the

construction of the swimming pool.

The next relevant section that was inserted by

the amending Act is section 3(1C). That is at page

92,154 of the CCH edition:

Where a swimming pool is constructed in situ,

and the construction (including any action

mentioned in paragraph (e) -

which is the undertaking of the excavation or

earthworks, Your Honours will recall -

commences after 19 August 1986, and -

(a) the person who constructs the swimming

pool does so wholly or partly in the course of

carrying on a business; or

(b) the person who constructs the swimming

pool does so exclusively or principally for

the use of the person otherwise. than in the

course of carrying on a business and the

Pools 9/5/91

whole, or a principal part, of the labour used in the construction is provided by persons who provide their labour otherwise than

voluntarily and without remuneration,

then, for the purposes of this Act -

(c) so much of the swimming pool as is so

constructed -

that is, in situ -

shall be deemed to be manufactured goods;

(d) the construction shall be deemed to be the

manufacture of the goods;

(e) the person who constructs the swimming

pool shall be deemed to be the manufacturer of

the goods;

(f) if, at the time when the construction is

completed -

so that is the taxing point here -

the manufacturer does not ..... have the right of exclusive occupation of the land on which the swimming pool is situated, the goods shall

be deemed to be sold by retail at that time by

the manufacturer to an unregistered person;

and

(g) if paragraph (f) does not apply - the

goods shall be deemed to be -

again -

at the time when the construction is

completed, applied to the manufacturer's own

use.

Now, if I might take Your Honours briefly to

the correspondence that we handed up with the

outline of submissions. We sought concessions from

the defendant: firstly, that:

the construction activities referred to in

paragraph 4 of the Statement of Claim -

which simply picked up the definition in section 3

of "construction" -

are those referable to the construction by the

First Plaintiff of in-ground swimming pools.

That was admitted. Secondly:

Pools 6 9/5/91

that an in-ground swimming pool is one which

is constructed in the ground, after such

excavation foundation work as may be necessary

that was admitted. And then if Your Honours go the

reply, Your Honours will also see that the proceedings:

that a swimming pool is in situ it is a

fixture.

Your Honours, we say it is manifest from those

parts of the legislation to which I have already

taken_Jaur Honours that the tax is a tax upon

Ff§:{'I~w but this is assisted, in our respectful	submission, when one also goes to section 18(3B)
which is the subsection that gives us the sale value of the goods being so much of the swimming
pool that has been constructed in situ. It says -
it is on page 92,251:

Subject to -

two subsections which are not presently relevant -

(SA) and (5B) ..... the sale value of goods,

being so much of a swimming pool as is

constructed in situ -

and, "is", in that context, we say, means "has

been" -

is the amount which the manufacturer of the

goods could reasonably be expected to have

paid another person, being a person who

constructs swimming pools in the ordinary

course of the person's business, for the

construction of the goods if -

(a) all the materials used in or in connection

with the construction were supplied by that

other person; and

(b) the manufacturer and that other person

were dealing with each other at arm's length.

So it is the cost of construction of the swimming

pool; not the cost of the materials which go into

it, but the cost of construction; the amount

payable under what must be, in our submission, a

contract for work and labour and materials

provided, not a contract for the sale of goods.

Your Honours, in our respectful submission,

these sections take the swimming pool in question

Pools 7 9/5/91

as an object forming part of the realty, just like

a house or any other building, and seek to tax the

person who has built or constructed the swimming

pool in the ground upon the amount which the

landowner would have to pay to have that fixture

built into his land. Your Honours, the Assessment

Act is, in accordance with what Justice Deane terms

the now traditional incantation in The Second

Fringe Benefits Tax case, incorporated into the

rating Act by section 2 of the rating Act, and so

the question is whether, when read as one Act, the

rating Act infringes the constitutional injunction
that laws imposing duties of excise deal with

duties of excise only. That is, of course, in

section 55 of the Constitution, second paragraph,

which says that:

Laws imposing taxation, except laws imposing

duties of customs or of excise, shall deal

with one subject of taxation only; but laws

imposing duties of customs shall deal with
duties of customs only, and law imposing
duties of excise shall deal with duties of

excise only.

Your Honours, if we are right and the tax

imposed as a result of those amendments is a tax

upon land and is not therefore a tax upon any step

in the production, manufacture or distribution of

goods to the point where they get to a consumer,

then the second paragraph of section 55 is

offended. We remind Your Honours that - - -

BRENNAN J:	By the amending Act or by the Act as amended?
MR BLOOM:	Your Honours, we would not seek to strike down

the entirety of the Sales Tax Act, simply the

amending Act. We will come to that, but my learned

friends and ourselves are in agreement that the

proper course would be the course which this Court

took in Air Caledonie, and that would involve
treating as invalid that which Parliament had no

power to enact.

Now, there is a different attitude expressed

in Quick and Garran, and that is probably because

if you have two laws imposing different subjects of

taxation it is hard to know which of the two of

them is bad. But in a case where one has a duty of

excise and something which is not one can identify

that which is not and, in effect, take that out.

That is all we would ask the Court to do.

Your Honours, you cannot deem yourself into

power is the point we wish to make. You cannot by

deeming land to be goods treat a tax upon that land

Pools 8 9/5/91

as a duty of excise. In Waterhouse v Deputy

Commissioner of Land Tax, SA, (1914) 17 CLR 665,

Chief Justice Griffith at page 671 - - -

BRENNAN J:  Mr Bloom, does the amending Act impose any tax

save the one that you are now attacking.

MR BLOOM:  Your Honour, we do not attack the entirety of the

amending Act, only the provisions which we have set

out at page 2 of our outline, that is, those which when incorporated into the Assessment Act and then

into the rating Act as part of the Assessment Act

have the effect that there is imposed a tax upon

the swimming pools in situ.

BRENNAN J: 

My question is really designed to see whether or

not, if the amending Act considered in isolation
imposes tax only with respect to one subject, the

fact that it is then to be found in an amended Act
which contains another subject for taxation exposes

the amending Act to invalidity.

MR BLOOM: 

Yes, Your Honour, we have not looked at it that

way. It does deal also with other sorts of things

that were deemed to be "manufacture" - computer

programmes and software, that sort of thing; sound

recordings which had given problems in the past -

and this was a general amending statute which was

intended to cover those problems and also tax in-

ground swimming pools.

It amends not only the (No 1) Assessment Act,

but all of the Assessment Acts in some respects.

And we have certainly not, Your Honour, looked at

the question of whether the amending statute itself

contravenes section 55 as dealing with more than

one subject.

What we say, Your Honour, is that if

Parliament has no power to enact a statute which

contains a duty of excise and another tax, then in

so far as its amending statute seeks to bring about

that result, the amending statute is pro tanto invalid and that is the basis of our argument.

That may find some support in Clyne's case, 100
CLR, and there is another decision - I have

forgotten the name of it for the moment - of Mr

Justice Stephen. I think Your Honour the Chief
Justice agreed with that, somewhere between Clyne's
case and Air Caledonie and we will pick it out of

Air Caledonie. It was McKellar's case, 139 CLR

527, Your Honour, the relevant passages being at

pages 550 and 560. Clyne's case is 100 CLR, but I

do not have the page, Your Honours. That was the

case where Mr Clyne was successful in having part of the Income Tax Assessment Act contained in the

aending Act held invalid and it was the

Pools 9 9/5/91

amending Act or the part of the amending Act which

was declared invalid by the Court.

Your Honours, I was submitting to Your Honours

that the Commonwealth cannot deem itself into power

and at page 671 of 17 CLR in Sir Samuel Griffiths'

judgment in Waterhouse, he says:

Even apart from section 55 of the

Constitution it is not, in my judgment, within the competence of Parliament, having imposed a tax upon the owners of land, to declare that

persons who are not in any sense owners shall
be deemed to be owners for the purpose of
payment of the tax. I cannot find in the

Constitution any power to declare that the

true shall be regarded as false, or the false

regarded as true, except for the limited

purpose of definition of a word or phrase
which the Parliament used in dealing with a

subject matter wholly within its competence.

So one cannot deem land to be goods and then tax it

and say that the tax is a duty of excise and what

would be tantamount to saying the same thing, treat

that as exclusive so that the States could not,

having regard to section 90 of the Constitution

impose a similar tax.

And, Your Honours, Mr Justice Starke in

Resch's case, 66 CLR at page 213, said that:

Of course, Parliament cannot by any definition

or provision that it may adopt contravene the

provisions of the Constitution.

And in MacCormick, 158 CLR, in the joint judgment

of Chief Justice Gibbs, Justices Wilson, Deane and

Dawson, appears at page 639 and following, the last

paragraph:

A further submission was made by the

plaintiffs that recoupment tax under the

relevant legislation is an incontestable tax

and for this reason is beyond the power of the

Parliament. Recognition is to be found in the cases of the doctrine that the

incontestability of a tax may go to its

validity. The principle which lies behind the

doctrine is a more general one of elementary

constitutional law. It is simply that the

legislature cannot determine conclusively for

itself its power to enact legislation by

putting beyond examination compliance with the constitutional limits upon that power. As was
pointed out in Deputy Commissioner of Taxation

v Hankin, the point is "that which was so much

Pools 10 9/5/91

discussed in Australian Communist Party v The

Commonwealth, and which is sometimes expressed

by saying that 'a stream cannot rise higher

than its source'". In the latter case,

Justice Fullagar put the matter clearly when

he said:

"The validity of a law or of an administrative

act done under a law cannot be made to depend

on the opinion of the law-maker, or the person

who is to do the act, that the law or the

consequence of the act is within the

constitutional power upon which the law in

question itself depends for its validity. A

power to make laws with respect to lighthouses

does not authorize the making of a law with

respect to anything which is, in the opinion

of the law-maker, a lighthouse. A power to

make a proclamation carrying legal

consequences with respect to a lighthouse is

one thing: a power to make a similar

proclamation with respect to anything which in
the opinion of the Governor-General is a

lighthouse is another thing."

In other words, where, as is ordinarily

the case under the Commonwealth Constitution,

the validity of the law depends upon its

characterization as a law with respect to a

particular subject-matter by reference to the

criteria which the law itself fixes for its

operation, the law cannot be so characterized

if, in effect, it goes on to provide that it

will have that .operation regardless of whether

those criteria are, in truth, satisfied.

Your Honours, finally, in Muller v Dalgety,

9 CLR in the judgment of Sir Samuel Griffith, at

page 696, speaking of the word "deemed" at about

point 7 of the page, he said:  The word "deemed" may be used in either

sense, but it is more commonly used for the

purpose of creating what James L.J. and Lord
Cairns L.C. called a "statutory

fiction" ..... that is, for the purpose of

extending the meaning of some term to a

subject matter which it does not properly

designate.

Your Honours, we say that the tax imposed upon

a swimming pool, or so much thereof as has been

constructed in the ground in situ is a tax upon

land and not a tax upon goods.

The decision of North Shore Gas v Commissioner

of Stamp Duties, 63 CLR 52, makes clear what is, no

Pools 11 9/5/91

doubt, already clear, Your Honours, that mains and

pipes of a gas company that were embedded in and

under the ground were not goods, wares and

merchandise for the purposes of the exemption in

the stamp duties legislation of New South Wales

because they were fixtures and fixtures are not

goods. That was, again, because they were in situ.

Your Honours, the relevant passages are at

page 61 in the judgment of Mr Justice Rich and at

page 67 point 7 in the judgment of Mr Justice Dixon

and also page 68 point 5 in Mr Justice Dixon's

judgment.

Your Honours, Hornibrook's case, to which we

also given Your Honours a reference, was a

slightly different case. It concerned the

construction of a bridge. It is in 62 CLR 272. A

bridge was to be constructed by the contractor, the

taxpayer, and for that purpose was to be supported

by concrete piles which were to be embedded in the

sea and support the bridge. The contractor

actually constructed the piles near the site for

the bridge - they were very heavy and certainly

back in 1939 could not be easily moved to the site

of the bridge. The question was, whether those

concrete piles themselves were goods for sales tax
purposes and there was then a question of the

operation of section 3(4) of the Assessment Act (No

1) which deems goods to be sold even where they are

not but under a contract for work and labour and

materials entitled and then passes to somebody

else.

At page 278, in the judgment of

Chief Justice Latham, the first full paragraph:

The piles were not sold as piles by the appellant to Hornibrook Highway Ltd. The

latter company certainly did not become the

owner of the piles as they lay upon the shore,	or as they were being transported, or as they
were being driven. When they were finally
fixed in position they were attached to the
bed of the sea and became the property of the Crown, which throughout remained the owner of
the bed of the sea and of the bridge, though
subject to the rights of the franchise holder.

And then a few lines down, next paragraph:

Thus there was in fact no sale of the

piles by the appellant to any person whereby

that person became owner of the piles before
they lost their character as chattels and

became part of the bridge. Therefore it is

necessary for the commissioner to rely upon

Pools 12 9/5/91

some special provision in the Act creating a

liability in such a case as the present. Such

a provision, the commissioner contends, is

found in sec. 3 of the Act. In that section

it is provided that "sale of goods by

wholesale" includes certain transactions but

does not include (inter alia) - ''(f) the

supply of goods by a person to some other

person in the circumstances specified in

sub-sec. 4" of the section. Such a supply of

goods is deemed to be a sale of goods by

retail.

Sec. 3(4) of the Act, referred to in par. £ •••.• was at the relevant time in the

following form: "For the purposes of this Act, a person shall be deemed to have sold

goods if, in the performance of any contract

under which he has received, or is entitled to

receive, valuable consideration, he supplies

goods the property in which (whether as goods

or in some other form) passes, under the terms
of the contract, to some other person."

In my opinion the commissioner is right in his contention that this provision applies

to the present case. The appellant company,

in the performance of a contract for building

a bridge under which contract it was entitled

to receive and doubtless has received valuable
consideration, has supplied goods, namely,

reinforced concrete piles. Such piles are

plainly manufactured articles.	They are
chattels.

And just pausing here, the question was of course

the liability to tax in relation to the piles as

chattels. There was no question of liability to

tax of the bridge of which the chattels form part,

whereas here, Your Honours are of course concerned

with liability of tax of the swimming pool of which

certain ingredients have formed part and have gone

out of existence.

Then, over at page 281, again talking of the

piles, Mr Justice Rich said, about point 5 of the

page:

This condition satisfies me that they

were commodities and so within the definition

of "goods" and the process brings them within
the definition of "manufacture" contained in

sec. 3.

Then there was the question of whether there was a

sale. Mr Justice Starke dealt with it at page 284,

the first full paragraph:

Pools 13 9/5/91

In my opinion the piles constructed by

the appellant for use in the bridge were goods

manufactured or produced by it within the

meaning of the Sales Tax Assessment Act.	They
were tangible articles produced by the

application of physical labour or mechanical

power and distinct from the ingredients

composing them.

If we might pause there, we would say the swimming

pool, of course, is something produced but in the

ground very much distinct from the materials

comprising it and the tax, of course, is imposed at

the point where the swimming pool has been
completed and upon the cost of construction of the

pool, not the cost of the bits and pieces - the

exempt bits and pieces in fact - that go into

making it up.

Your Honours, both those cases, North Shore

Gas and Hornibrook, involved the affixation of

identifiable or tangible chattels into the ground.

When affixed they were part of the land, as both

cases held. What we say is that, here, there is no

affixation of any pre-existing chattel; there is

simply construction on land or in land of a

swimming pool which, until constructed, does not

exist and when constructed forms part of the land.

Your Honours, that brings us to the question of how the Court should deal with it. We have

given Your Honours a reference to Quick and Garran

at page 679 in the 1901 edition; it is the last

paragraph of the commentary in relation to

section 55:

We have now to consider what will be the

consequence if Parliament should, whether by

accident or design, pass a law imposing

taxation, yet dealing with more than one

subject of taxation - a law, say, imposing an

income tax and a stamp duty. A proposal that

the tax standing first in order in the

enactment should be valid, whilst the other,
or others, next in order should be null and

void, was rejected by the Convention. No

provision is made in the Constitution,

therefore, for segregating the taxes and

providing for the validity of one and the
nullity of the others. Where the Constitution
intends that one portion of an Act only shall
be of no effect and the rest operative it is

so expressed. The only conclusion is that an

Act err~odying a plurality of taxes would be

absolutely and completely ultra vires.

Pools 14 9/5/91

In State Chamber of Manufacturers - The Second

Fringe Benefits Tax Case - in the joint judgment at

pages 342 to 343, the reference to section 55 of

the Constitution actually commences at page 340 and

then there is a reference on page 342, the last

full paragraph, to:

The second paragraph of s. 55 introduces

an additional requirement that a law imposing

taxation shall deal only with one subject of

taxation. Although the second paragraph,

unlike the first, does not spell out the

consequences of non-compliance, it is

difficult to accept as correct the view

expressed by Higgins J. in Osborne. that the

constitutional command is directory only.

Barton J.'s opinion in the same case that non-

compliance results in total invalidity is to

be preferred. As Barton J. noted, the purpose

of the second paragraph was to prevent "the

tacking together of tax Bills of different

kinds and unlimited number in one measure",

just as the first paragraph was to prevent

tacking of extraneous matter to a tax Bill.

The point of insisting on a law imposing

taxation dealing with one subject of taxation

only was to ensure separate consideration by

each House of particular kinds of taxation, so

that each would be considered on its merits

and not just as an element in an overall

package of taxes. And, as Barton J. also

pointed out partial invalidity confined to the
offending provision was not an available
option in the case of the second paragraph for
there is no means of identifying an offending

subject of taxation.

Well, Your Honours, in the context of the part

of section 55 that says "laws imposing duties of

excise shall deal only with duties of excise", it

is possible, with respect, to identify the

offending piece; namely, that which does not

impose a duty of excise. And it is possible, in

our submission - and we understand our learned

friends agree with this - to do what was done in

Air Caledonie and excise the non-excise - if I can

say that - from the amending statute.

If I simply remind Your Honours that the

relevant passage in Air Caledonie, 165 CLR, is at

page 471, middle of the page. Perhaps I should

read it, Your Honours:

An obvious purpose of the constitutional

requirement that a law imposing taxation deal

only with the imposition of taxation was to

confine the impact of the limitations upon the

Pools 15 9/5/91

Senate's powers with respect to proposed taxing laws to provisions actually dealing with the imposition of taxation, that is to say, to prevent "tacking". That being so,

there is something to be said for the view
that, in a case where an amending Act inserts

a taxing provision in an existing Act, all

thats. 55 requires is that the amending Act

itself deal only with the imposition of

taxation. On balance, however, it seems to us

that the requirement of s. 55 should be

construed as extending to laws in the form in

which they stand from time to time after

enactment, that is to say, as extending to

Acts of the Parliament on the statute book.
That construction gives full effect to the
ordinary meaning of the words of the section.

It is also supported both by the contrast

between the reference to "laws" ins. 55 and

the references to "proposed laws" and a

"proposed law" in ss. 53 and 54 and by

considerations relating to the nature of an

amending Act which is ordinarily to be

construed as part of the principal Act and is

commonly treated as "exhausted" upon

commencement and incorporation of the

amendments which it effects in the principal

Act. Indeed, no submission disputing that

construction was advanced on behalf of the

Commonwealth. On that construction, s. 55

requires that both an amending Act imposing

taxation and the amended principal Act deal

only with the imposition of taxation.

If an amending Act purports to insert a

provision imposing taxation in an existing

valid Act which contains provisions dealing

only with other matters -

or, as we would suggest, if an amending Act

purports to insert another tax into an Act dealing

only with the duty of excise, or duties of excise -

it seeks to bring about something which the

Constitution directly and in terms forbids and

which is not within the competence of the

Parliament to achieve ...... In such a case, one cannot disregard the barrier of the

constitutional injunction against a law

dealing both with the imposition of taxation

and other matters on the basis that, once the

result which that injunction forbids has been

achieved, the second limb will rectify the

breach by invalidating all the other

provisions of the principal Act. The

injunction of the first limb co~stitutes a

restriction on legislative power. Its effect

Pools 16 9/5/91

in the present case is to invalidate the

relevant provisions of the amending Act and

one never reaches the situation where the

second limb operates to strike down all of the
provisions of the principal Act dealing with

matters other than the imposition of taxation.

If Your Honours please, those are out submissions.

MASON CJ: Thank you, Mr Bloom. Yes, Mr Jackson.

MR JACKSON:  Your Honours, may I hand to the Court copies of

our outline of submissions?

MASON CJ: Thank you. Yes.

MR JACKSON:  Your Honours, may I proceed to deal with the

first basis upon which we would seek to support the

validity of the enactment, and it is this: that the

tax bears a sufficient relationship to the

materials which go to make up that part of the pool

which is described in the relevant paragraphs in

the definition of "construction".

Your Honours, in that regard, the goods - what

we would submit is that the relevant provisions

impose a tax which has a relevant relationship to

the goods; the goods being the materials used in
the construction of the shell of the pool and the
other parts, if any, contemplated by the definition

of "construction" in section 3(1), and may I take

Your Honours to that immediately? Your Honours,

section 3(1) in the definition of "construction"

refers to a number of features; one of them is the:

the construction or erection of the walls and

floor of the swimming pool wholly or

principally from concrete, concrete blocks -

et cetera, and Your Honours will see that in

perhaps I should say, if one looks at those items,	relation to those items that - Your Honours,
one sees immediately that what is contemplates by them is that there will be utilized in the
construction or erection of the pool:

concrete, concrete blocks, sand, bricks,

metal, timber -

and other materials, all of which are goods,

whether one treats for example such items as

gravel, used to make concrete on site, cement used

to make concrete on site, sand used to make

concrete on site, all those items, they are all

items which are goods. Your Honours, so too are

the items referred to in paragraph (b) and,

Your Honours, if one goes to paragraph (c) one sees

Pools 17 9/5/91

even the use of - if one is speaking about

painting - painting ex hypothesi requires the use

of goods, namely paint.

Your Honours, if one speaks about the

application of some waterproofing compound, it requires the application of goods, namely, the waterproofing compound or some other activity.

So, Your Honours, one sees - and I will come

back to it a little later - that goods are involved

in those paragraphs of the definition.

Your Honours will also see that what is not

included in the definition of "construction" are

the two items referred to in paragraphs (d) and

(e), namely, if I could go to (e) first -

the undertaking of excavation or other

earthworks or the clearing, levelling or

landscaping of land in connection with the

construction -

that is both before and after. Also one sees all

the fitments that make a pool into a completed pool

are excluded in relation to (d), namely, drainage,
heating and so on, and it may well be that one of

the reasons for doing that is that the materials

which would be used in those applications are

materials which otherwise would in some respects be

themselves subject to sales tax.

Your Honours, that is the broad proposition we

would first seek to put. The second proposition we

would seek to advance is that the construction

contemplated by the parts of the Act in question is

the construction of items which, though for some

purposes they will become fixtures as a matter of

property law, are goods for the purposes of excise,

the excise provisions of the Constitution.

Your Honours, may I continue with the first

approach. We would submit it is clear that a duty

of excise has the distinguishing characteristic

that it is a tax which bears some relationship to

goods. The nature of the relationship can be

defined in various ways, but one description of it

used in Browns Transport Proprietary Limited v

Kropp, (1958) 100 CLR 117 at page 129 has been that

it is a tax upon or in relation to or in respect of

goods.

Now, Your Honours, that was a case in which

there was an attack upon the validity of a State

statute which was imposing a licence fee for

vehicles, the vehicles carrying loads, the licence

fee being one calculated in the manner set out at

Pools 18 9/5/91

page 127 about three-quarters of the way down the

page, that is,

an amount fixed -

by reference to -

the gross revenue derived from the licensed

service.

Your Honours, in relation to that it was held that it was not a duty of excise, and Your Honours will

see at page 129 at about point 8 on the page, it

was said that it was -

unnecessary to consider this matter -

namely, whether the exaction would be passed on to

the consumer because whether it is expected to be

passed on or not it is very clear, in our opinion,

that the tax is not a tax upon goods or in respect

of goods or in relation to goods.

Now, Your Honours will see a little further up

the page the reference to Matthews v Chicory

Marketing Board. Your Honours will see a reference

to a particular passage from it, but may I take

Your Honours to another passage in Matthews v

Chicory Marketing Board, (1938) 60 CLR, where the

nature of excise was discussed. The particular

reference commences at page 302 at the bottom of

that page where Sir Owen Dixon said that -

it describes a tax on or connected with

commodities, there is no ground for

restricting the application of the word to
duties calculated directly on the quantity or

value of the goods -

and said that the corollary to that in the first

four lines of page 303.

Your Honours, in Matthews v Chicory Marketing

Board (Viet), the duty that was held to be a duty of excise, was a duty imposed upon a grower of chicory and a grower of chicory in circumstances

where the manner of imposition was by imposing a

tax on per acre of chicory grown. It did not

matter how good the ground was in terms of its

ability to produce a larger or a smaller crop, nor

whether in the end the crop might be successful for

whatever reason, nor did it turn upon the amount

which the grower might get for the crop when it was

later sold, but that duty was held to be a duty of

excise.

Pools 19 9/5/91

Now, Your Honours will see that the nature of

it in the particular case was discussed at

page 303.	I would refer Your Honours to the whole
of that page and also to page 304.	May I indicate

a couple of passages of particular significance, in

our submission. One is at page 303, about half-way

down the page. It was said that:

the basis adopted for the levy has a natural,
although not a necessary, relation to the

quantity of the commodity produced.

Secondly, Your Honour, at the bottom of page 303,

the last five lines:

The natural or practical relations between

manufacture or production -

And then, Your Honours, on page 304, emphasis was

placed by His Honour upon the fact that it was not

necessary to have the:

arithmetical relation to quantity -

Your Honours will see that referred to in the

fourth line on page 304 and Your Honours, what is

said then in the passage commencing about six lines

down the page:

To be an excise the tax must be levied "upon

goods," but those apparently simple words

permit of much flexibility in application.

His Honour speaks particularly of there being a:

close relation to the production or

manufacture -

There is a reference also to the goods being ones

which are:

the subjects of manufacture or production -

DAWSON J: There what the tax looked to was the eventual

production of goods. What is put against you here

is that the tax looked here to the construction,

not of goods, but of a swimming pool which is part

of the land.

MR JACKSON:  Yes, Your Honour, a swimming pool which, upon

completion, will become part of the land in terms

of it being a fixture. Your Honour, I accept that,

but what I am seeking to put - - -

DAWSON J:  As I understand it, the tax is not imposed upon

the component parts which go into the construction.

It is imposed upon the actual construction so the

Pools 20 9/5/91

tax is not looking to the eventual production of

any goods.

MR JACKSON: Well, Your Honour, I do propose to come to the

provisions which deal with that more specifically,

but may I submit in relation to it that whilst it

is right to say that as a shorthand way of

describing what the Act does, when one looks at the

particular provisions, it is clear that what is

being done is to impose a tax by reference to a

cost which consists of a cost related to the

materials which go into the item and the cost of
putting them into the item and it is imposed, not
upon the person who is the consumer of the finished

product, but upon the person who is utilizing items

by putting them into making something more.

Now, Your Honour, why I have referred

particularly to the fact that the tax does not have
to bear an absolutely direct or arithmetical

relationship to the question of cost, is because it

does not mean that it is not an excise because the

way of calculating the price, or calculating the

sale value, is one which, though related to the

cost of materials, includes the cost of doing

something else. And, Your Honour, may I deal with

that a little further later?

DAWSON J:  You will deal with that when you come to section 3(1C).

MR JACKSON:  Yes. And, Your Honour, section 18(3A), of

course. Now, I was referring, Your Honours, to

page 304, and I would refer Your Honours

particularly to the.last sentence of that

paragraph:

But if the substantial effect is to impose a

levy in respect of the commodity the fact that

the basis of assessment is not strictly that

of quantity or value will not prevent the tax

falling within the description, duties of

excise.

Now, can I refer Your Honours also to page 286 in

the judgment of Justice Starke.

Your Honours, if I could go then to the

present case: the starting point is the Act but of
course the starting point is not, in a sense, the

only criterion because one is entitled to look at

the substantial effect of it and, Your Honours,

could I in that regard, without taking Your Honours

to the passages, give Your Honours references to

Philip Morris Ltd v Commissioner of Business

Franchises, 167 CLR 399 at pages 433 to 435 and 436

and at pages 448 and 492. At page 492, Your Honour

Pools 21 9/5/91

Justice McHugh referred to a matter upon which I

have made a submission already, and that is in the

paragraph commencing at the middle of the page

where after saying that:

Regard must be had to the substance of the

operation of the statute -

Your Honour said -

Moreover, it is not essential that there

should be a proportionate relationship between

the tax and the value or quantity of the

goods.

Now, Your Honours will see, if I could go to the

Act, that section 17(1) of it is really the

starting point and it says that:

the sales tax imposed by the Sales Tax Act

(No. 1) 1930 shall be levied and paid upon the

sale value of goods manufactured in

Australia ..... and sold by him or treated by

him as stock for sale by retail or applied to

his own use.

Now, Your Honours, from section 17 one goes to

section 18 which, in its subsections, defines the

meaning of the term "sale value" as used in

section 17(1) in a number of different situations.

And, Your Honours, the provisions of section 18

adopt some concepts which are common. One of them

may be first seen in section 18(1), which is,

Your Honours, at page 92,223, I think, and

Your Honours will see that it deals with a

particular case:

where goods ..... have been sold by the

manufacturer to an unregistered person or to a

registered person who has not quoted his

certificate in respect of the sale.

Now, in that case, the sale value of the goods

falls into one of two categories.	The first is in
paragraph (a) :

if the goods were sold by wholesale - the

amount for which the goods were sold -

but then paragraph (b) -

if the goods were sold by retail -

and one is speaking about sale by a manufacturer by

retail -

Pools 22 9/5/91

the amount for which the goods could

reasonably be expected to have been sold by

the manufacturer by wholesale.

Now, Your Honours, it is that expression:

could reasonably be expected to have been sold

by the manufacturer by wholesale -

which recurs through the subsequent provisions.

Could I refer Your Honours, in that regard, to

section 18(1A) and then at paragraph (a)(ii),

18(1B)(a), 18(1C) and, Your Honours, it appears

also in 18(2), 18(3), 18(3A).

Now, Your Honours, before I come to 18(3B), could I pause at that point to say that the concept

to which I have so far referred incorporates two

notions which are germane for present purposes.

The first is that the amount in question, falling

within a description of that kind, will be an

amount which is likely to include a provision for a number of factors and if I could indicate what they

are, Your Honours. They are the cost of materials

to the manufacturer, the direct labour costs of the

manufacturer, the manufacturing overheads, the

indirect overheads of the manufacturer, the selling

costs, the profit and, subject to section 18(5) of

the Act, other indirect taxes.

So, Your Honours, the point which I am seeking

to make, in passing, at the moment is that when one

speaks about any goods which are goods subject to

Act No 1, what one is speaking about is goods, the
value of which is a value which is likely to take

into account not merely the cost of materials to

the manufacturer, but also the cost of doing

something to them, together with the other costs

which the manufacturer has to bear.

TOOHEY J: Mr Jackson, I take it it is apparent, is it, that

the components referred to in the definition of

"construction", if not exempt by reason of the

legislation to which you are taking to us, would

constitute goods for the purposes in the Act.

MR JACKSON:  Yes, Your Honour.

TOOHEY J: That is true in the case of raw materials, is it,

such as sand?

MR JACKSON:  Yes, because, Your Honour, the way in which the

Act deals with it, is to speak of - perhaps,

Your Honour I should say this: they are all goods.

In respect of many of the goods they would

themselves be goods which would be manufactured

goods. Now, the exemption Act specifically exempts

Pools 23 9/5/91

large numbers of building materials which
werethethings one would probably ordinarily
describe as being the more raw materials parts of

things rather than the pieces that themselves are

manufactured, for example, windows and things of

that kind, but Your Honour, they are all goods by

any concept, we would submit.

TOOHEY J:  I understand that. I was thinking of something

quite basic, like sand, that is simply dug out of

the ground and trucked to a site and dumped.

MR JACKSON: Your Honour, it is goods for sale. It is like,

for example, the product of mining. Once one has

removed ore from the ore body, it then becomes

goods capable of being sold.

TOOHEY J: Well, that is true, but I was trying to focus on

something that did not involve any activity other

than the removal of the material from the site and

its disposition to somewhere else.

MR JACKSON:  Your Honour, it is very difficult, with

respect, to think of any building material which

would fall in that pure form, with respect, because

even if one took sand, the sand has to be obtained

from somewhere. The sand has to be of a particular

quality and character to be used for, say, the

purpose of making concrete or to make mortar or

whatever it is being used for. Having been

removed, it then has to be perhaps stored, then

moved from the place where it is being stored, by

truck, perhaps put in bags, and then removed to the

site where it is used as a stockpile - that is if

the concrete is being made on site. Of course, otherwise, if one is using, as probably is more common these days, concrete pumped from a truck,

then the concrete has already been made into

something which is goods.

DAWSON J: But, looking at the provision for sale value, the

sale value is fixed not by reference only to the

goods which go into a swimming pool as component

parts of it, but by reference to the construction

costs using those goods - - -

MR JACKSON:	Yes, Your Honour.
DAWSON J:	- - - and the construction costs, if the

swimming pool is not goods in the end, has nothing

to do with goods.

MR JACKSON: Well, Your Honour, it has a relationship to

them because it is one of the ways in which goods

of those kinds may be utilized. And, Your Honour,

there would be no particular reason why one could

not say that in respect of any goods that the

Pools 9/5/91

quantification of an excise duty in respect of them

was a quantification which was to be arrived at by

the cost of manufacture of those goods and by a

cost which it would take to put those goods into a

particular use.

DAWSON J: All it does is say that you are looking to not

only the goods themselves but to the use to which

they could be put.

MR JACKSON:  Yes, and, Your Honour, the fact that one is

able to have a double characterization does not

mean that the tax has neither character.

DAWSON J:  It is an odd conception that you can tax a house.

MR JACKSON: Well, Your Honour, one could tax the cost of

construction of the house in a manner like this, as

an excise. It would be a different thing

altogether if what was being done was then to try

to tax it as rates in the ordinary way.	The
question would then be - - -

DAWSON J: Taxing the cost of construction merely because

you are using goods in the process of construction

would seem at least in part not to be a tax upon

goods but upon an activity.

MR JACKSON: Well, Your Honour, it may be both.

DAWSON J:	I wonder.
MR JACKSON:	The question in the end is whether it is a tax

which has a sufficient relationship to the goods.

Your Honour, I will come to the terms of

section 18(3B) in just a moment, but Your Honours

will see specifically that a matter which is

referred to in it is the materials. Now,

undoubtedly, the way in which the tax is quantified

- and, Your Honour, that is, with respect, an exact

description of what occurs - is to aggregate what

one would expect to be the cost of all the

materials used in it, concrete, reinforcing rods,

all that sort of thing, and then say that, in

respect of those goods, the tax which is to be

imposed is a tax which is based upon the cost of

those goods together with the cost of using it in a

particular application. Now, it follows, of course

DAWSON J: In a particular application which is not the

production of goods.	So that is the point, you
see.	When the Sales Tax Act talks about the cost

of manufactured goods, of course, it talks about
the cost of manufacturing those goods and you can

impose a tax on those goods. But here you not only impose a tax on the goods which have otherwise been

Pools 9/5/91

exempt, but you impose a tax on an activity in

relation to those goods. That is what is put

against you.

MR JACKSON: Well, Your Honour, I am sorry, but it is a

question, I suppose, of how one identifies it.

What really occurs, we would submit, is that one

takes an activity if one likes. One takes an

activity but the activity is one of a kind which

involves inherently the use of large quantities of

goods. Instead of saying, "Take those goods

individually and we impose a tax in respect of each

of those items or goods", he says, "What's the

whole lot of the goods?" Namely, all of the

material brought on-site, pumped in, carried in -

all that sort of thing. And, having done that the

quantum of the tax is the cost which one would

reasonably expect to see those goods used - the

purpose.

DAWSON J:  What is the difference between that and a

consumption tax?

MR JACKSON:	The consumption tax is a tax - it depends what one calls a consumption tax, I suppose; the
starting line.

DAWSON J:  The use of the goods. It is a tax on the use of

the goods. It is a tax on the goods.

MR JACKSON: Well it may be, Your Honour, but one has not

got to that point in this case; it is the tax on

the manufacturer; it is a tax on the swimming pool.

DAWSON J: That is what it is.not; it is not a tax on the

manufacturer of the goods, it is a tax on the user

of the goods.

MR JACKSON:  No, Your Honour. One has - it is a tax - - -

DAWSON J: Unless you say that the swimming pool is the

goods, but you do not - - -

MR JACKSON: Well, Your Honour, it is right to say that the

person who constructs the swimming pool is a user

of the goods, but he is not the final user of what

the goods go into and Your Honour, that is why it

is not a consumption tax and Your Honour, the only

relevant question is whether the duty is a duty of
excise; it is not a question of whether it is a tax

on consumption or not, with respect, but if it is a

duty, that is a duty that has a sufficient

relationship to the materials, then we would submit

it is a duty of excise but, Your Honour, may I come

back to that, to the extent to which I have not

dealt with it already.

Pools 26 9/5/91

Your Honours, the second thing I want to say

before going to section 18(3B) was that, if one

looks at the use of the expression, "the amount for

which the goods could reasonably be expected to be

sold by the manufacturer by wholesale", what one

has to bear in mind is that an element inherent in

the concept of such a reasonable price is the fact

that one of the elements of the calculation will be

the cost of putting materials to a use, which is

one of the uses for which they are appropriate,

that is, conversion into a mixture or a composite

and if one took a car, for example, then of course

one sees that the cost of the car by wholesale includes the cost of using individual items to

produce a result. So too, the cost of a spanner,

and Your Honours, it cannot matter, we would

submit, that the reasonable price is the total

figure brought about by a manufacturer or

calculated in some other way related to it, rather

than by taking simply the elements which go to make

it up.

Your Honours, could I go to section 18(3B).

It performs, in our submission, a number of

functions: the first, and Your Honours if I could

speak broadly, initially, is that section 18(3B)

provides that the sale value for the purposes of

section 17(1) is to be a deemed cost of

construction but, Your Honours, what is made clear

by the concepts comprehended in section 18(3B) is

that the sale value is, once again, a figure
representing a value of materials and, amongst

other things, a cost of turning them into a use for

which they were made. Your Honours, could I take

Your Honours to the terms of section 18(3B) and

Your Honours will see that it refers to:

the sale value of goods, being so much of a

swimming pool as is constructed in situ, is

the amount which the manufacturer of the goods

could reasonably be expected to have paid

another person, being a person who constructs

swimming pools in the ordinary course of the

person's business, for the construction of the

goods if -

(a) all the materials used in or in

connection with the construction were supplied

by that other person;

And Your Honours, I do not want to dwell on that

point, but the Act does not omit consideration of

the materials and the cost of materials and it goes

on to say:

Pools 27 9/5/91

(b) the manufacturer and that other person

were dealing with each other at arm's length

in relation to the construction.

Now Your Honours, having referred specifically to

the materials used in or in connection with the
construction and the supply of them by other

person, a matter which comprehends, because of its

very nature, that there will be a relationship

between the sale value and the cost of the

materials, Your Honours, one then goes back to the

terms of the concept of construction in the

definition in section 3, because it is the
construction contemplated by that provision, which
is the construction dealt with in section 18(3B),

the cost of that.

Now, Your Honours, what that is, is, as

Your Honours will have seen, that all works on the

land, before or after completion of the shell, in

effect, are excluded; that is from paragraph (e),

and the materials referred to in paragraph (a),

dealing with the walls and floor of the pool, what

is involved there, is the use of materials and

similarly, Your Honours, in relation to

paragraphs (b) and (c). But, Your Honours, in

paragraphs (a), (b) and (c), what is involved is

the use of materials for a designed purpose. Now,

Your Honours, it is true to say that the quantum of

the tax depends in part on the cost of getting the
materials into the shell, to put it shortly, but
the fact that a tax is imposed on something in

addition to the cost of the materials does not

mean, we would submit, that it ceases to be the

duty of excise. Could I give Your Honours a number

of references -

McHUGH J: The cost under 18(3B) require you to take into

account all sorts of things? I mean difficulty of

the site, for example, would all go into the

question of the cost of construction.	You just
would not know what the value of the materials was

in relation to the overall cost, would you?

MR JACKSON:	Your Honour, can I just say this? It is true to say that perhaps the difficulty of access to the
site in bringing materials in might be a factor in
what would be a reasonable price. A large part of
the costs of difficulty occasioned by the site
would be removed because of paragraph (e) of the
definition. There will be - all the what one would
normally call the site works, in effect, other than
construction of the shell and the coping and finishing off of it would not be included; nor, of course, would be included the things for which the - one would tend to find - the highest prices
being charged, the tradesmen, plumbers and so on,

Pools 28 9/5/91

in relation to it, but, having said that, what

Your Honour says is right.

Your Honours, that is true, of course, in relation to fixing the sale value of any

manufacturer goods, because you have to look at the

cost as which the goods could reasonably have been

expected to have been sold by the manufacturer by

wholesale. Now, one has to look at the location of

the manufacturer, the difficulty in obtaining goods

at a particular time, the market to some extent.

Your Honour, many factors are taken into account:

cost of labour, difficulty in obtaining labour. So, Your Honour, to say that things will change

from occasion to occasion does not do any more than

say that the facts will change - in determining

what is a reasonable price - the price will change

depending on the facts.

McHUGH J: Ultimately it may have nothing to do with the

case, but what makes me feel a bit uneasy at the

moment is we just do not have any materials to tell
us what proportion of the basic costs of the materials would, on the average, go into the

construction of pools. I would suspect that the

mark-up would be very excessive.

MR JACKSON:  I am sorry, I did not hear the last word

Your Honour said.

McHUGH J:  I would suspect that the mark-up for work and

labour and general skill would be the bulk of the

construction cost.

MR JACKSON:  It would depend on the economic conditions, for

example, and probably at the moment pool builders

would be beating the door down to have something to

do. But all those things vary, Your Honour, but

that happens with every type of goods or work.

BRENNAN J: Mr Jackson, could I just ask you: is fibreglass

prescribed material for the purposes of

paragraph (a) of the definition of "construction"?

MR JACKSON:  No, Your Honour, nothing is prescribed.

BRENNAN J: Nothing is prescribed.

MR JACKSON: But, Your Honour, the occasion of introduction

of these provisions was because fibreglass pools

made off site were the subject of sales tax;

shells made on site were not. Certain economic

equivalence - if I can use the expression.

What I was going to do was seek to refer

Your Honours to a number of passages which support

the proposition that the tax, or the manner of

Pools 29 9/5/91

imposition of the tax, is one which does not affect its characterization as an excise if that otherwise

be a correct description of it.

Your Honours, I have referred already to what

was said by Your Honour Justice McHugh in

Philip Morris, 167 CLR at page 492 and I shall not

go back to that. May I take Your Honours to the

Hematite Petroleum case: Hematite Petroleum

Pty Ltd v Victoria, (1982) 151 CLR 599 at page 632.

Your Honour the Chief Justice, in the last

paragraph on page 632, referred to the fact that:

To justify the conclusion that the tax is

upon or in respect of the goods it is enough

that the tax is such that it enters into the cost of the goods and is therefore reflected

in the prices at which the goods are

subsequently sold. It is not necessary that

there should be an arithmetical relationship

and so on -

still less that such a relationship should
exist in a specific period during which the

tax is imposed.

Your Honours, at page 657, Your Honour

Justice Brennan, at the first new paragraph on the

page, said that:

Though the presence or absence of a

proportionate relationship between a tax -

and so on, and this is the fourth line of the

paragraph -

such a relationship is neither an exhaustive

nor an universal criterion for determining

whether a particular tax is a duty of excuse.

Then Anderson's case was referred to and Hamersley

Iron and then, Your Honours, at the end of that quotation:

In principle, it is sufficient to

establish that a tax is a duty of excise if it
is a tax, however calculated, upon a step in

the process of production, manufacture or

distribution.

Your Honours, at page 665, Your Honour

Justice Deane, in the first new paragraph on the

page, set out Your Honour's view of the substance

of a duty of excise. I shall not read it out but

may I refer Your Honours to the whole of that

paragraph including, particularly, the last

Pools 30 9/5/91

sentence. And also the reference to a step in the

distribution of the finished product.

Your Honours, in MacCormick v The Commissioner

of Taxation, (1984) 158 CLR 622, there is a

reference in the joint judgment of

Chief Justice Gibbs and Justices Wilson, Deane

and Dawson, to the fact, Your Honours - it is about

the middle of the page:

The fact, as was urged by counsel for the

respective plaintiffs, that the connection may
be remote in some instances or that the tax
may operate harshly upon those who received

little or no benefit from a transaction is not

to the point.

Your Honours, and at page 650, about the middle of

the page, the reference to the statement of

Justice Aickin and:

General Practitioners Society v The

Commonwealth . .... that "the tax power is not limited to older or well-known taxes but

extends to any form of tax which ingenuity may

devise".

Your Honours, and at page 654, Your Honour

Justice Brennan, towards the bottom of the page,

said that:

A search for a sufficient connection

between the subject or subjects of recoupment

taxes and the objects would put us on a false

trail ..... The circumstance that some of the

criteria are unrelated to other criteria (if

in truth they be unrelated) is immaterial to

validity, for the power to impose taxation is

not conditioned upon the selection of related

criteria -

and Your Honour referred to the observation in
General Practitioners Society again.	Your Honours,

one must qualify that, of course, by the fact that

one is looking to see whether there is an excise or

not in the particular case.

Your Honours, could I refer also to Deputy

Commissioner of Taxation v Truhold Benefit

Proprietary Limited, (1985) 158 CLR 678, and at the

bottom of page 685 and the top of page 686, there

are similar observations. Could I refer also to

the short concurring judgment of Your Honour

Justice Brennan at page 688 referring to the

Parliament's power:

to select such criteria as it chooses.

Pools 31 9/5/91

Your Honours, I do not want to labour the

point that the capacity to characterize something
in more than one way does not deny the existence of

each character. Could I give Your Honours simply

one reference that may be germane - Victoria v The

Commonwealth, (1971) 122 CLR 353. At page 404,

Justice Windeyer, commencing in the second line, referred to the capacity to characterize laws with

respect to taxation as being also laws with respect

to other things. That goes to about a quarter of

the way down the page and, Your Honours, it does

not deny a law imposing a tax which has a

relationship to goods. Its character as a duty of

excise - the amount of the duty is calculated by

reference to other matters as well. It does not deny it, its character is a duty of excise if at the same time it may be characterized as also a

duty upon construction.

The power, of course, to impose taxes as such

is plenary and one must give it its full capacity

in that regard and, Your Honours, provided that the

duty is one which has a sufficient relationship

with goods, that is sufficient. As to the plenary

nature of the taxing power, could I give Your

Honours a reference to Fairfax v Commissioner of

Taxation, (1965) 114 CLR 1 at pages 12 to 13. I

will not take Your Honours to the passage.

So, in summary, we would submit that the tax is one which is imposed on or by reference to the

costs of materials used in the construction of the
pool; it includes the price to put them to that

use; it is upon or-in respect of the materials

which themselves are goods; and it is, in

consequence, an excise.

Now, Your Honours, the second proposition

which we would seek to advance is that the items

constructed, namely, the shell or container of the

pool, and the other items referred to in

paragraphs (b) and (c) are themselves goods in the

context of excise. Your Honours, goods are taxed by duties of excise because they are the subjects of manufacture or production or because they are

articles of commerce. Could I refer Your Honours

in that regard to the observations of Justice Gibbs

in Logan Downs Pty Ltd v Commonwealth,

(1977) 137 CLR 59 at page 65. Your Honours, about

half-way down the page - perhaps I should start a

little further up - Your Honours will see a bit

above half-way:

Further, in my opinion a tax on the ownership
of goods used for the purpose of the

production of articles of commerce, but not

Pools 32 9/5/91

themselves intended to be passed on to

consumers, would not be an excise. For

example, a tax on plant or tools of trade

owned by manufacturers -

et cetera -

would not be an excise. Such taxes would not

affect the goods taxed ''as the subjects of

manufacture or production or as articles of

commerce", to use the words of Dixon J. in

Matthews v Chicory Marketing Board.

And I would refer Your Honours to the remainder of

that paragraph where the same conception, that is,

goods taxed are -

subjects of manufacture or production or as

articles of commerce.

Your Honours, there is no particular reason

why, in our submission, one should not regard items
such as the shell of a pool which is constructed in
situ and put in in the base of it constructed and
then it later filled in, and so on, as being items
which are objects of manufacture, et cetera, for
the purposes of duties of excise.

Now, Your Honours, there is no relevant difference, in our submission, between a contract,

for example, to provide a stove which has to be

screwed in and become a fixture in premises; nor,

Your Honours, any other item that in premises will

become a fixture. Nor, Your Honours, does one have

a position - I am sorry, Your Honours, perhaps I

should say simply this, that the fact that one has

an item which, when the construction of it is

completed, will be something which is a fixture

does not mean, in our submission, that a tax based

upon the cost of making it in situ is not a tax

relating to it as being a subject of manufacture or

production or as an article of commerce.

Now, Your Honours, I referred to His Honour

Justice Gibbs in Logan Downs; could I give the

reference also to Philip Morris, 167 CLR 483,

where, in the judgment of Your Honours

Justices Toohey and Gaudron at about point 4, Your

Honours said that:

"a duty of excise is, at bottom, a burden upon

home production or manufacture".

Now, Your Honours, what we would submit, in that

regard, is that the pool maker manufactures by a

fabrication the items and it is not material, but

upon completion of the whole construction,

Pools 33 9/5/91

including the works in (d) and (e) of the

definition, the pool will become a fixture.

Your Honours, could I say, finally, that in dealing with section 55 the Court will not rush, in

our submission, to hold that a statute contravenes

the provisions of section 55. Could I refer

Your Honours, in that regard, to what was said by

the Court in State Chamber of Commerce and Industry

v Commonwealth, (1987) 163 CLR 329, at page 343

going on to page 344.

Now, Your Honours, at page 343 there is a

reference to Resch's case. The passages to which I

would refer Your Honours commence at the first new

paragraph on page 343:

Later in Resch -

and go through to the next page at 344 and conclude

half-way down the page; and in the last paragraph

of that part, to which I have referred,

Your Honours will see that it was said that:

The Court should not resolve such a question

against the Parliament's understanding with

the consequence that the statute is

constitutionally invalid, unless the answer is

clear.

Now, Your Honours, if I could pause for a moment,

Your Honours will see that section 55 does a number

of things. Section 55, so far as duties of customs

and excise are concerned, had a slightly different

operation from the operation it has in respect of

other laws imposing taxation.

In that regard, Your Honours will see that the

first paragraph of section 55 says the:

Laws imposing taxation shall deal only with

the imposition of taxation, and any provision

therein dealing with any other matter shall be

of no effect.

And then the second paragraph, in relation to taxation generally, says that:

Laws imposing taxation ..... shall deal with one subject of taxation only -

but the excepting words in that provision -

except laws imposing duties of customs or of

excise -

Pools 34 9/5/91

relieve, in effect, the Parliament from that

requirement. No doubt the reason for that was that

duties of customs and excise are commonly seen as a

matter of form imposed by statutes which contain

lists and schedules and so on, and the view taken

was no doubt that there might be a view that there
would have to be a separate Act in respect of each

item which was to be the subject of taxation of the

kind which is customs or excise, and so the

requirement of the opening words of the second

paragraph of section 55 is relaxed, in a sense, in

respect of:

duties of customs or of excise -

but the limitation remains, that one has to have

customs laws dealing with duties of customs only

and duties of excise dealing with duties of excise

only. I mention that simply in passing.

Your Honours will have seen that in State

Chamber of Commerce and Industry v The Commonwealth

there was a reference to Resch's case. One passage

in Resch's case which is not referred to in State

Chamber of Commerce and Industry case is a passage

which appears in 66 CLR 198 at page 223. It deals
with the question of identification of a "subject of taxation" for the purposes of the earlier part of section 55 and Your Honours will see that that question is discussed in the three new paragraphs

on page 223 and when one comes to the last of those

paragraphs what one sees is this:

Where the main or substantial subject of

the tax has thus been ascertained, then the
question whether particular provisions
directed at defining or widening the area or
incidence of the tax or the liability to it or
preventing avoidance ..... have in truth
introduced a new or second subject must be

determined by considering their natural

connection with or relevance to the main

subject.

Now, Your Honours, that is dealing, of course, with

a different provision but it does, in our

submission, provide some guidance, because what is

apparent is that in the present case one had the

Sales Tax Acts dealing already with the question of

there being sales tax, including a sales tax upon

the manufacture of pools, the shells of which were

not manufactured in situ, but were manufactured

elsewhere and then delivered to the site and that,

of course, one would think, places the

manufacturers of those pools and persons who use

them or choose to use them, at a competitive

disadvantage compared relevantly with those who

Pools 35 9/5/91

manufacture the pool shells in situ, and we would
submit that in those circumstances one would be

inclined to see a similarity between the nature of the two taxes being imposed: the one in respect of the pools made off site and the one in respect of

the pools being made on site and, Your Honours, the

observations in Resch's case are, to some extent,

germane.

BRENNAN J:  Mr Jackson, you place some emphasis, and

understandably, upon the manufacture of the goods.

Is the tax which is imposed, in this case, tax upon

the consumption of the goods.

MR JACKSON:  No, Your Honour, because the consumer - if one

is speaking about a swimming pool, to put it
broadly for the moment, what one sees is that the

consumer of the pool is the person for whom the

pool is being built and who will be using the pool.

One has a situation, in the case of the particular

tax, that the tax is imposed, not upon that person,

but upon rather the person who is engaged in

manufacturing the pool.

DAWSON J: But you say the tax is not imposed on the pool,

you say it is imposed upon the goods which went

into the making of the pool.

MR JACKSON: Well, Your Honour, it is imposed by reference

to those goods.

DEANE J: For this argument though, you are saying the tax

is imposed on the constructed pool - - -

MR JACKSON:	Yes, Your Honour, that is the second argument.
DEANE J:	- - - which is an object upon which excise tax can

be levied.

MR JACKSON:  But so far as the first argument is concerned,

what I was submitting was that it is imposed by

reference to the goods used in the construction of

the pool shell, and -

BRENNAN J:  Do you say that an excise tax can be levied upon

the pool as constructed?

MR JACKSON: Well, Your Honour, it can be levied in the way

in which this has. I would not suggest that a tax

could be imposed and be an excise simply by

reference to ownership of the pool. By that I mean

that if one had a pool, the tax imposed by

Commonwealth or State upon the owner of the pool by reason of having a pool would not fall in that category.

Pools 36 9/5/91

BRENNAN J:  What do you describe precisely as the goods in

order to identify this as a duty of excise?

MR JACKSON:  Your Honour, may I do it first in relation to

the first argument we are advancing? The goods in

relation to which the tax is imposed are the goods

used in the construction of the pool. So far as

the second argument is concerned, the goods are the

shell of the pool and the other items referred to
in the paragraphs (a), (b) and (c) of the

definition.

BRENNAN J:  Do you have to establish that the shell of the

pool is, under the general law, goods?

MR JACKSON: Well, Your Honour, what we have to establish is

that the shell of the pool is goods in the sense in

which one uses that in terms of excise, but what

one means by goods in the sense which is used in

excise is that goods is a shorthand expression for

what was described in the passages to which I

referred from Logan Downs and so on. Your Honour

there is a reference to what is a tax on

consumption in some observations of Your Honour the

Chief Justice in Dickenson's Arcade Pty. Ltd. v

Tasmania, (1974) 130 CLR. Could I just give

Your Honours the relevant page, it is at page 239,

in the first new paragraph on the page.

Now, Your Honours, could I just say one or two

further things? I was going to refer simply to the

explanatory memorandum simply to indicate the

reason why the provision was introduced, and

Your Honours have an extract which contains, I

think, three pages; one is the covering page, the

second is an introductory page under the heading "General Outline" and it is the paragraph in the middle of the page above the heading, "Sales Tax

Laws Amendment Bill 1986" and then, Your Honours,

page 13, under the heading "Swimming Pools", and

Your Honours there is that - I think I have already

indicated what the substance of that is.

Your Honours also have a copy of the second

reading speech. It simply speaks in the broadest

fashion and says at the bottom of the second page:

The bill will also change the sales tax

treatment of swimming pools that are

constructed on site.

In the past, these pools, which are at the top

end of the market, were not subject to sales

tax.

Your Honours, could I just say one other thing in relation to my learned friend's submissions. The

Pools 37 9/5/91

first is this: in the North Shore Gas case, the

majority view was that the gas pipes were not goods

because whatever their ownership, they were part of

the gas company's fixed plant which itself was not

goods. Your Honours, could I give the references

to Justice Starke, page 65 point 5; Justice Dixon,

page 67 point 8. Mr Justice Rich, it is right to

say, seems to have been of a different view at

page 62 point 6.

Your Honours, the second thing is this: the

issue in this case is not ultimately, in our
submission, whether the tax is or is not imposed on

land or on fixtures, but rather simply whether it

satisfies the test for an excise.

DEANE J:  What is the reference for the North Shore Gas case

please?

MR JACKSON: It is (1940) 63 CLR 52, Your Honour.

Your Honours, those are our submissions.

MASON CJ: Thank you, Mr Jackson. Mr Bloom.

MR BLOOM:  Your Honours, my learned friend's case as first

put is that the relevant goods are the materials

which go to comprise the completed pool. There are

two answers to that, with respect. The first is

this: as a matter of construction of the relevant

legislation what is taxed is what is deemed to be

goods, namely, the completed swimming pool. So

that the tax is imposed at the point where the

materials going to form the pool have lost their

separate identity and have become something else,

part of the land, and that land, of course, belongs

to the owner of the land. That is why it is

correct to say, with respect, that if the tax is

imposed upon those goods it is imposed upon them at

the point where they have been consumed.

But there is a second reason, with respect,

Your Honours, and that is that Parliament is

unlikely to have intended to enact legislation

which is sterile. Section 5 of the (Exemptions and

Classifications) Act, which is at page 95,522 of the CCH publication, says that:

Notwithstanding anything contained in any

Sales Tax Assessment Act, sales tax shall not,

subject to this section, be payable upon the

sale value of any goods covered by any item or

sub-item in the first column of the First

Schedule -

It is not contested that all the materials which, on my learned friend's first argument, are said to

be the relevant goods axe-exempt. And·that must

Pools 38 9/5/91

mean that section 5 of the (Exemptions and

Classifications) Act would prevail and it would

mean that if the tax is, in truth - that is the tax

which we are disputing - a tax upon those

materials, it would have no effect because section

5 of the (Exemptions and Classifications) Act would

prevail.

I also draw Your Honours' attention, while

with that Act, to section 6A which is a section

dealing with prefabricated buildings which are made

on site and which taxes the sale value of those

prefabricated buildings but excludes the cost of

any exempt items which go to make it up. My

learned friend's argument is that a swimming pool
constructed from exempt items is taxed upon the

cost of its construction with no allowance for the

exempt cost of goods. With respect, that shows no

legislative commonality of intention at all.

Your Honours, I mentioned in my earlier

submissions that it was our contention that the

contract for construction of a pool, like a

contract for the construction of a house, is a

contract for work, labour and materials. Can I

just give Your Honours a reference to Hewett v

Court, 149 CLR 639, and the relevant pages in the

judgment of Sir Harry Gibbs at 646 to 647.

Your Honours, in so far as the second argument

of my learned friend is concerned, it is quite
clear that if the tax is a tax upon the swimming
pool then it is a tax upon land and that is not a

tax upon goods and, hence, not a duty of excise.

If Your Honours please.

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

consider its decision in this matter and will

adjourn until 9.30 am tomorrow in Sydney.

AT 12.08 PM THE MATTER WAS ADJOURNED SINE DIE

Pools 39 9/5/91