Neil Pearson & Company Pty Ltd v Collector of Customs

[1991] FCA 71

Re: NEIL PEARSON AND CO PTY LIMITED
And: COLLECTOR OF CUSTOMS
No. G386 of 1990
FED No. 71
Customs

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Morling(1), Einfeld(1) and Foster(1) JJ.

CATCHWORDS

Customs - tariff - particular items - whether or not Tariff Concession Order 8530095 applies to certain goods - definition of "dry linen capacity".

Customs Tariff Act 1982 - Schedule 3, Sub-item 84.40.2 Tariff Concession Order 8530095

Wacal Developments Pty Limited v Realty Developments Pty Limited (1978) 140 CLR 503

HEARING

SYDNEY

#DATE 8:3:1991

Counsel for the Appellant : Mr D.F. Jackson QC

with Mr D.L. Ronzanni

Instructed by : Landerer and Co.

Counsel for the Respondent : Mr D.M.J. Bennett QC

Instructed by : The Australian Government

Solicitor

ORDER

The appeal be dismissed with costs.

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

JUDGE1

This is an appeal from a decision of Wilcox J. His Honour had before him an appeal from the Administrative Appeals Tribunal constituted by Mr C.J. Bannon, QC, Deputy President. His Honour upheld the appeal in part, finding in favour of the present appellant that certain washing machines imported by it from the U.S.A. and known as "Maytag" machines were not subject to a rate of duty of 30% prescribed by Sub-item 84.40.1 of Schedule 3 of the Act, but were subject to a rate of duty of 15% prescribed by Sub-item 84.40.2. His Honour held that the machines were not entitled to the benefit of Tariff Concession Order 8530085 which, had it applied, would have resulted in a reduction of the rate of duty to 2%.

1. The only issue in this appeal is whether the Tariff Concession Order should be held to apply to these machines.

2. It is convenient to refer at this stage to those parts of Schedule 3 to the Customs Tariff Act 1982 which are involved in this appeal. Sub-item 84.40.2 covers machines not specified in sub-item 84.40.1 (to which reference need not now been made) and include:
   

".... (c) laundry and dry cleaning machinery and appliances as follows

...

(viii) washing or cleaning machines."

1. Tariff Concession Order 8530095 is in the following terms, so far as relevant:
   

" 84.40 Laundry equipment, being goods to which sub-item 84.40.2 applies, being any of the following:

(a) washing machines;

(b) washer extractors; ...

having a dry linen capacity NOT less than 10 kg/batch.

NOTE:

For the purposes of this Order, `dry linen capacity' shall be determined:

(a) in respect of washing machines and washer extractors, by the application of a divisor of 10 to volumetric cylinder capacity in L; ..."

1. The learned primary judge held, contrary to the appellant's submission, that the application of these provisions to the "Maytag" machine produced the result that it did not fall within the terms of the Tariff Concession Order and was therefore not entitled to the 2% rate of duty. In reaching this decision his Honour considered the evidence relating to the relevant aspects of the machine in light of the construction that he afforded to the wording of the Tariff Concession Order.

2. The machine contained a spin-drying basket into which the items sought to be washed were loaded before the machine was set in motion. His Honour's ultimate decision was that this basket, rather than its surrounding container was relevantly the "cylinder" to be considered in the application of the Tariff Concession Order. The agreed measurements of the basket and the calculation required by the Note to the Tariff Concession Order produced the result that the machine's "dry linen capacity" was less than 10kg/batch. Accordingly the machine was not entitled to the benefit of the Tariff Concession Order. Had the appropriate "cylinder" been the outer waterproof casing of the machine, the equivalent measurement and calculation would have produced the contrary result.

3. The appellant submits that the learned primary judge was in error, as was the learned Deputy President, in selecting the spin-drying basket rather than the outer container as being the appropriate "cylinder". The issue is a narrow one and must be determined having regard to the nature and operation of the Maytag machine. This is amply described in the evidence and this Court, by consent, has had the benefit of a visual examination of the machine.

4. It is a typical washing machine which provides in addition to a washing operation, a spin-drying facility. Reduced to its salient features it consists of an outer waterproof metal container holding the water for washing and enclosing the spin-drying basket and the agitator arm which creates the necessary turbulence in the water to effect the wash. This latter component extends vertically from the centre of the base of the outer container into the centre of the spin-drying basket. This basket is permeable in the sense that it is very substantially perforated to enable the passage of water into it from the external container before and during the washing process and to permit water to pass from it during the washing or spin-drying processes. Quite clearly this spin-drying basket which itself occupies a very large proportion of the inner space of the outside container is an integral part of the machine. It is not merely an optional attachment readily removable if the spin-drying function is not desired. In fact its removal and replacement would require time and involve some level of difficulty.

5. We are satisfied that the machine is not to be regarded as primarily a washing machine with the additional optional function of spin-drying. The spin-drying function is an essential part of its operation. In our opinion it falls within the meaning of the term "washer extractor" appearing in the Tariff Concession Order.

6. The learned primary judge, as already indicated, upheld the view of Mr Bannon that the spin-drying basket was relevantly "the cylinder". He dealt with the matter as follows:-
   

"Mr Bannon decided that the relevant cylinder was the basket. He referred to the need to take a `purposive approach'. He said that, although the Tariff Concession Order called `for a fictional method of dividing volume by a divisor of 10 in order to arrive at a weight expressed in kilograms, it is speaking in terms of capacity to handle linen'. Mr Bannon thought:- `...that the correct meaning of the phrase volumetric cylinder capacity where occurring in the TCO is the volumetric capacity of the cylinder in which the linen is placed. In the case of a straight-out washer, it is the one and only cylinder. In the case of a washer extractor, it is the volumetric capacity of the inner cylinder or basket in which the clothes are placed'. I think that this is the correct approach. It is true that the external casing of the Maytag machine may appropriately be described as a "cylinder", although it is not precisely of cylindrical shape. But the same comment may be made about the basket. Given a choice between two objects, each of which may loosely be described as a cylinder, it makes more sense to select the one whose volume actually determines the washing capacity of the machines. In saying that I acknowledge that the note to Item 84.40 of the Tariff Concession Order created a definition of `dry linen capacity' which depended upon a theoretical exercise. But, as Mr Bannon pointed out, the exercise related to the determination of the amount of dry linen capable of being washed in a particular cycle of the machine. That capability was directly related to the volume of the basket, not the volume of the external casing. Presumably, Item 84.40 was inserted in the Tariff Concession Order because large washing machines were not being produced, or capable of being produced, in Australia. However, the drafter of the order had to determine the minimum size of the washing machines which were to be given the benefit of the order. He or she chose a dry linen capacity of 10 kilograms per batch. Judging by the evidence given in this case and noting that this machine had dimensions similar to those of locally produced domestic machines, it seems likely that it was thought that such a capacity would exclude from the operation of the order machines having dimensions similar to those locally produced. It would defeat such an approach to interpret the item as including machines which had an external casing capable of holding more than 100 litres of water, notwithstanding that there was an internal feature of the machine which could properly be described as a `cylinder' and which was the real control upon its washing capacity."

1. This approach has been criticised on the basis that it allows the term to be defined, namely "dry linen capacity", to colour the meaning of the words of the definition contained in the note, contrary to what was said in Wacal Developments Pty Limited v Realty Developments Pty Limited (1978) 140 CLR 503. We are of the view, however, that the reasoning in the above passage does not transgress the principles referred to in that case. Although minds can differ on such a fine point, we think the better view to be that the Note to the Tariff Concession Order does not define the phrase "dry linen capacity" but merely lays down a method of determining what that capacity will be in any given case. No doubt the Note was inserted to provide certainty and avoid a difference of views as to what that capacity might be. An estimate might be a highly subjective one leading to argumentative doubts about the application of the Tariff Concession Order. The fact that the Note lays down a particular method of determination does not, in our view, militate against the fact that what is being determined is the weight in kilograms of the maximum dry load which the machine could handle at any one time.

2. The machine, as a washer extractor, receives the load for the purpose not only of washing it but also of spin-drying it. The load can be received for these purposes only by its being placed in the spin-drying basket. In our view, it is not to the point that, if the spin-drying apparatus were removed, a load of different size could be placed within the confines of the watertight outside container and, presumably, be subjected to an ordinary washing process inside that container. It is clear that this was simply not the way the machine was intended to function nor the relevant tariff provisions to have effect. Accordingly, we are satisfied that the appropriate "cylinder" for measurement and calculation was the spin-drying basket.

3. Consequently, the appeal should be dismissed with costs.