Parks Holdings Pty Ltd (Trading as Gladstone Chemicals)and CEO of Customs
[2001] AATA 562
•20 June 2001
DECISION AND REASONS FOR DECISION [2001] AATA 562
ADMINISTRATIVE APPEALS TRIBUNAL)
Nº V1999/450
GENERAL ADMINISTRATIVE DIVISION)
Re: PARKS HOLDINGS PTY LTD trading as GLADSTONE CHEMICALS
Applicant
And: CHIEF EXECUTIVE OFFICER OF CUSTOMS
Respondent
DECISION
Tribunal: Deputy President J. Block
Mr C. Ermert, Member
Mr W.G. McLean, Member
Date:20 June 2001
Place:Melbourne
Decision: The decision under review is affirmed.
. . . . . . . .(signed J Block) . . . . . . .
Deputy President
CATCHWORDS
CUSTOMS – duty – paid under protest – classification of imported goods - interpretation of Customs Tariff Act 1995 - whether valid demand – petroleum oils – whether suitable for use as a diesel fuel – whether classification to be determined objectively or by the intention of the manufacturer, exporter, importer or user
DELEGATION – error made in instrument of delegation – whether error a clerical error - whether acts of delegate valid – whether the applicant misinformed the respondent in circumstances where the principle in Malika Holdings Pty Ltd v Stretton (2001) 178 ALR 218 (as enunciated by Gummow and Callinan JJ or as enunciated by McHugh J) applies
Administrative Appeals Tribunal Act 1975 - sections 33, 37
Customs Act 1901 – sections 8, 165, 167, 203R and 273 GA
Customs Administration Act 1985 – section 14
Customs Tariff Act 1995 – schedules 2, 3
Excise Act 1901 – sections 80, 165
Public Service Regulations - regulation 116A
Balmain Association Inc v Planning Administration for the Leichhardt Council (1991) 25 NSWLR 615
Blackwood Hodge (Australia) Pty Ltd v Collector of Customs (NSW) (1979) 47 FLR 131
Briginshaw v Briginshaw (1938) 60 CLR 336
Bristol-Myers v Faulding (2000) 170 ALR 439
Chinese Food and Wine Supplies Pty Ltd v Collector of Customs (Vic) (1987) 72 ALR 591
Collector of Customs v Savage River Mines (1988) 79 ALR 258
Controller General of Customs v ACI Pet Operations Pty Ltd (1994) 121 ALR 347
Re Gissing and Collector of Customs (1977) 1 ALD 144
GJ Coles v Retail Trade Industrial Tribunal (1987) 7 NSWLR 503
Malika Holdings Pty Ltd v Stretton (2001) 178 ALR 218
Morris v Kanssen [1946] AC 459
Sandvik Australia Pty Ltd v Commonwealth of Australia & Anor (1989) 89 ALR 213
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In liq) (1999) 73 ALJR 306
Times Consultants Pty Ltd v Collector of Customs (Qld) (1987) 76 ALR 313
Re Tridon Pty Ltd and Collector of Customs (1982) 4 ALD 615
United Transport Services v Evans [1992] 1 VR 240
W B Anderson & Sons Ltd v Rhodes [Liverpool] Ltd [1967] 2 All ER 850
Professor Enid Campbell, "De Facto Officers" (1994) 2 AJAL 5
REASONS FOR DECISION
20 June 2001 Deputy President J. Block
Mr C. Ermert, Member
Mr W.G. McLean, Member
Preliminary and general
In April 1999, the Applicant, Parks Holdings Pty Ltd trading as Gladstone Chemicals (referred to in these Reasons as the "Applicant") paid customs duty under protest pursuant to section 167 of the Customs Act 1901 ("the Customs Act"). Payment was made in response to a letter of demand dated 19 May 1997 by a delegate of the Respondent for duty short paid. The duty, amounting to $435,372.20 which was paid under protest as aforesaid, related to the importation by the Applicant of a petrochemical product ("gas oil") from the Philippines on board a ship named the "Stolt Lily" in August 1996. On 26 April 1999 the Applicant applied under section 273GA of the Customs Act for a review of the decision by the Respondent to classify the product under sub-heading 2710.00.20 ("20") and to make demand for duty in consequence thereof, the Applicant having entered the product under sub-heading 2710.00.90 ("90").
(a) The T Documents in this matter referred in the main to a contest, so far as classification is concerned, between 20 and 90. At a late stage of the proceedings the Applicant contended that there was another classification which might be applicable, and being sub-heading 2710.00.30 ("30"). There is no dispute between the parties as to the fact that the product in question falls within heading 2700; the question before the Tribunal so far as classification is concerned, is simply as to whether the correct classification is 20, 30 or 90. Tariff references contained in these Reasons refer to Schedule 3 of the Customs Tariff Act 1995 (the "Tariff Act").
(b) The Applicant was originally represented by Mr J Slonim and Mr S Hamlyn-Harris of Counsel, instructed by Louis Gross & Associates, solicitors, while the Respondent was represented (throughout) by Mr K Bell QC and Mr J Lenczner of Counsel, instructed by the Australian Government Solicitor. Messrs Slonim and Hamlyn-Harris were on 26 February 2001 (only) led by Mr J Burnside QC, and thereafter by Mr N Moshinsky QC.
(c) The Tribunal had before it the T Documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act") and which were formally accepted in by the Tribunal on 19 February 2001. The Tribunal also admitted into evidence a large number of exhibits, which are listed as follows:A1Illustration outlining the refinery (distillation) process;
A2Document outlining 3 distillation processes; Rotherdam refinery, Bavarian refinery and Dunkirk refinery;
A3Chart comparing volume percentages on Kuwait Crude Oil & Iraq Export Crude Oil;
A4Document outlining initial stage of production;
A5Document titled Diesel outlining Cetane and Octane;
A6Document titled Diesel "It's Not As Good As It Used To Be" by Mr Gunn;
A7Document titled Diesel: low temperature properties;
A8Document titled "Storage Life of Diesel";
A9Minutes of Committee of Standards Association of Australia committee meeting - 25 February 1998;
A10Ampol Product Sales Specification : Diesel unmarked;
A11Substitute Copy with numbered paragraphs of Statement of Sergio Tribuzio dated 30 September 1999;
A12Document outlining components of crude oil;
A13Document outlining crude oil products and their applications;
A14Pro forma agreement between Mobil and purchaser;
A15Statutory Declaration of Sergio Tribuzio dated 20 December 1994;
A16Documents signed by the Directors regarding conditions of sale;
A17Fax from Mobil Oil regarding Centrex 70/72 Allocations, May - June 1996;
A18Pro forma Invoice of Jayta Petrochemical Private Ltd to Gladstone Chemicals P/L dated 19 July 1996;
A19Original document of copy pro forma invoice found at T25 - p79;
A20Original document of Certificate of Quality at T5 - p16 and T25 - p93, dated August 1996;
A21Original document of Certificate of Quality at T25 - p94, dated 4 August 1996;
A22Original document of Jayta Petrochemical Private Ltd Invoice at T6 - p17 and T25 - p95, dated 4 August 1996;
A23Chentech Services P/L Ship Out-Turn Report dated 27 August 1996;
A24Chemtech Services P/L Quantity Certificate dated 27 August 1996;
A25Chemtech Services P/L Survey Report dated 27 August 1996;
A26Caltex Product Guide Fuels Lubicants Specialies, February 2000;
A27Dangerous Goods (Prescribed List) Regulations 1985 (Vic);
A28Second Statement of Sergio Tribuzio dated 19 June 2000;
A29Market Distribution Diagram;
A30Internatio Muller Chemicals P/L, Solvent 98 Specification;
A31Gladstone Chemicals P/L Product Record - Ramset Steelform FRS;
A32Gladstone Chemicals P/L Product Record - Wombat Fuel Additive;
A33Gladstone Chemicals P/L Product List - update July 1992;
A34Statement of Bruce Allan McIver dated 15 July 1999;
A35Graph containing Product Comparisons prepared by Mr McIvor dated 29 May 2000;
A36Shell Marine Fuel Specifications dated December 1990;
A37Statement of Frank Russell dated 16 February 1999;
A38Amended statement (paragraph numbers added) of Donald Gunn dated 12 October 1999;
A39Further statement of Donald Gunn (undated);
A40Product Sales Specification – Bitumen Flux Unmarked;
A41Mould Release Oils (Caltex);
A42Statement of Dr Richard William Michell dated 17 June 2000;
A43Further Statement of Dr Richard William Michell dated 7 May 2001;
A44Statement of Joseph Brothers dated 2 March 2001;
A45Further Statement of Joseph Brothers dated 3 May 2001;
A46Statement of Bruce Biddington dated 19 October 1999;
A47Further Statement of Bruce Biddington dated 6 June 2000;
A48Definition of "gas oil" from "Hawley's Condensed Chemical Dictionary (11th ed)";
A49Statement of Peter Horne dated 17 December 2000;
A50Receipt for payment of customs duty for "returned gasoil" by Shell Co of Australia Ltd;
A51Caltex/Ampol Product Sales Specification – Bitumen Flux Obsolete;
A52Ingredients of "Amine plus";
A53Extract from "1996 Book of ADSM Standards";
A54Product Sales Specification – Low Emission Diesel;
A55Shell Material Safety Data Sheet for Mexflux/Bitumen Flux/Heating Oil dated March 1999 (relevant pages only);
A56Product Data Sheet for "Shell Mexflux";
A57"869131-85 Solvent AC" Material Safety Data Bulletin;
A58List of customers for the Shell products "Mexflux", "Mexcut-H", and "Mexcut-L"; it should be noted that this exhibit was and remains the subject of a confidentiality order;
A59Chromatogram in relation to sample "1139ppm diesel";
A60Chromatogram in relation to sample "96/36229 0.25/50";
A61External Standard Reports in relation to samples "1139ppm diesel" and "96/36229 0.25/50";
R1Australian Customs Service - Minute Paper - September 1993;
R2Statement of John Michael Drury dated 19 June 2000;
R3Diagram showing crude oil distillation;
R4Statement of Trevor Eric Walker dated 18 April 2000;
R5Statement from Robert Samuel Johnson dated 3 December 1999 appointing Mr Walker in his place whilst on leave;
R6Fax from Gladstone Chemicals to Ray Sidebottom of APS dated 22 October 1996;
R7Letter from Freehill Hollingdale & Page to Gladstone Chemicals dated 20 August 1996;
R8Letter from Freehill Hollingdale & Page dated 22 August 1996 with memorandum of costs;
R9Bundle of documents in answer to respondents summons dated 26 February 2001;
R10Paramins Worldwide Diesel Fuel Quality Survey 1986;
R11Shell Products data sheet;
R12Statement of Francis Ivor Kelly dated 22 June 2000;
R13Statement of John Jeffrey dated 22 September 2000;
R14Statement of Helena Romaniuk dated 19 June 2000;
R15Statement of Daniel John Finn dated 7 August 2000;
R16Statement of Dawn Webb dated 16 May 2000;
R17Statement of Carmel Mary Weaver undated;
R18Statement of Noel Hamilton dated 26 February 2001;
R19Statement of Thomas Gerard Fahy dated 9 November 2000;
R20Statement of Peter Muzeens dated 5 December 2000;
R21Specification D 396 – Heating Oil;
R22Specification for Heating Oil – Shellheat;
R23Extract from Customs Tariff;
R24Bundle of file documents in answer to summons produced on 30 March 2001 and relating to advice obtained from Peter Butler, Partner, Freehills (formerly Freehill Hollingdale & Page), Melbourne;
R25Certificate of Quality – CERTREX 70 (Mobil Oil);
R26Description of 3 Shell products: Diesoline (Automotive Diesel Fuel), Household Kerosene (Industrial and Domestic Heating Fuel), Shellheat (Heating Oil); BP Product Specification – BP Heating Oil;
R27Ampol Product Sales Specification – Bituflux;
R28Professional Opinion in respect of Three X370 Imports by Gregory Richard Shuptrine dated 4 December 1998;
R29Further Statement of Gregory Richard Shuptrine dated 20 April 2000;
R30Statement of Richard John Bryant dated 19 April 2000;
R31Statement of Barrie Seymour Magor dated 16 April 2000;
R32Statement of Andrew Troupis dated 1 May 2000;
R33Respondent's Particulars of Lack of Intention of the Applicant to Import the Goods for Sale or Use as Solvent dated 15 May 2001.
It may be noted that some of the exhibits tendered by the Applicant were objected to by the Respondent, at an early stage of the hearing, on the grounds of relevance. At that early stage, the Tribunal decided to admit the evidence tendered, on the basis that it could consider questions of relevance and weight at a later stage. In the result, some at least of the exhibits tendered on behalf of the Applicant proved to be of distinctly dubious relevance.
(d) Oral evidence was given by Mr Gunn, Mr Tribuzio, Mr McIver, Mr Russell, Mr Brothers, Mr Biddington, Mr Horne, and Mr Butler (a partner of Freehills, formerly known as Freehill, Hollingdale & Page) on behalf of the Applicant and by Mr Drury, Mr Walker, Mr Johnson, Mr Kelly, Mr Shuptrine, Mr Bryant and Mr Magor on behalf of the Respondent.
(e) The hearings in this matter were very lengthy. The matter was originally listed to be heard during two weeks in February and early March 2001; that period proved insufficient and further hearings took place in May and June 2001.
(a) It was clear from the outset that it was anticipated that this decision might be appealed to the Federal Court. Indeed Mr Gross, when he asked in a letter to the Tribunal that the Tribunal be constituted by a presidential member and two other members, said that this was likely. After the hearings in May 2001, the parties furnished lengthy and written submissions prior to the final hearing day (for oral submissions only) on 8 June 2001.
(b) The Applicant was good enough to furnish both extensive written submissions and also a helpful summary, styled "executive summary". The Respondent's submissions were equally helpful. To include the written submissions in the body of these Reasons would make them quite extraordinarily lengthy and unwieldy. At the same time, they proved to be so helpful that they could, by way of annexures be attached to these Reasons, in part for the benefit of the Federal Court in case of an appeal, and in part because the Tribunal can then, and in such event, conveniently refer to them; accordingly we annex to these Reasons:Annexure P - the Applicant's written submissions (referred to in brief as "the Applicant's submissions") (at page 109ff);
Annexure Q - the Applicant's executive summary (at page 220ff);
Annexure R - the Respondent's written submissions (referred to in brief as "the Respondent's submissions") (at page 230ff);
Annexure S – the Applicant's reply to the Respondent's submissions (at page 283ff);
Annexure T – the Respondent's submissions in reply (at page 323ff);
Annexure U – an additional brief submission by the Respondent as to the solvent market (at page 342ff); and
Annexure V – an additional brief submission by the Respondent as to "General Industry Usage" (at page 346ff).
(c) We propose to commence in the first instance with a review of the issues and evidence and will then proceed to consider the law in respect of the two substantive issues referred to in paragraph 4 below.
(d) Prior to the commencement of the hearings, the Tribunal issued a confidentiality order in respect of a large number of documents. On 8 June 2001, that order was, by consent, amended in such manner that it relates only to the Shell Customer List, which is Exhibit A58.
The Issues
There are basically two substantive matters to be decided by the Tribunal:
(A) The delegation of authority matter
On 19 May 1997 and 19 August 1997 Mr Trevor Eric Walker, who during that time held the positions of the relieving head of the Customs Investigation Branch and Chief Inspector in Customs Investigation Branch, issued demands to the Applicant for short payment of duty. The issue to be determined by the Tribunal is whether Mr Walker had authority, properly delegated to him pursuant to section 14 of the Customs Administration Act 1985, to issue the demands in each or either capacity pursuant to section 165 of the Customs Act. The demand dated 19 May 1997 was delivered at a time when Mr Walker was temporarily relieving Mr Robert Samuel Johnston, from 19 May 1997 to 23 May 1997 as Customs Director in the Melbourne office in charge of the Broader Compliance Branch of the Australian Customs Service. A second demand was issued by Mr Walker on 19 August 1997 in his own capacity as Chief Inspector. The term "own capacity" refers to Mr Walker in his own capacity as Chief Inspector; the term "acting capacity" refers to Mr Walker in his acting capacity as Customs Director.
(B) The tariff classification matter
The Applicant imported into Australia three shipments of gas oil from the Philippines in 1996. The first, which is the subject of this hearing, arrived in Australia on board the "Stolt Lily" in August 1996, the second arrived on board the "Stolt Sunrise" in October 1996 and the third arrived on board the "Sampet Hope" in November 1996.
The Applicant ordered the gas oil in question from a petrochemical broker named Jayta Petrochemical Private Ltd ("Jayta"), situated in Singapore. Jayta arranged for the three shipments of gas oil from the Philippines to Australia and also for Certificates of Quality to be issued by SGS (Subic Bay) Inc ("SGS") of the Philippines, following their laboratory analysis in respect of each of the shipments. No scientific analysis was conducted in Australia by the Respondent in respect of the "Stolt Lily" shipment which is the subject of this hearing. The Respondent forwarded a 4 litre sample taken from the third "Sampet Hope" shipment for testing and identification at the Australian Government Analytical Laboratories ("AGAL") and the results of that analysis on 26 November 1996 indicated that the gas oil imported on the "Sampet Hope" was consistent with it being diesel fuel. The parties have agreed that the Tribunal's decision regarding the "Stolt Lily" shipment will be applicable to the other two (subsequent) shipments of gas oil to the Applicant by Jayta.
T25 consists of a bundle of documents; it includes important and relevant documents such as orders for supply of the gas oil by the Applicant to Jayta and the resulting invoices from Jayta, plus other associated documentary evidence including the SGS Certificate of Quality for the "Stolt Lily" gas oil; documents which comprise T25 were seized by the Respondent from the Applicant under a warrant on 5 December 1996.
On the fourth day of the hearing (22 February 2001), the Applicant objected "in the strongest manner" to the Tribunal's admission of the T25 documents as evidence. It was contended by the Applicant that, pursuant to section 203R of the Customs Act, material seized under a search warrant, may be retained by the Respondent only in the circumstances set out in section 203R(1) of the Customs Act, which reads as follows:
Subdivision F–Dealing with things seized as evidential material under a search warrant or under subsection 203B(3) or 203C(3)
203RRetention of things seized under a search warrant or under subsection 203B(3) or 203C(3)
(1)Subject to any law of the Commonwealth, a State or a Territory permitting the retention, destruction or disposal of a thing seized as evidential material by an officer of Customs under a search warrant or by an authorised person under subsection 203B(3) or 203C(3), the officer or authorised person must return it if:
(a)the reason for its seizure no longer exists or it is decided that it is not to be used in evidence; or
(b) 60 days after its seizure:
(i)proceedings in respect of which the thing may afford evidence have not been started; and
(ii)an order permitting the thing to be retained has not been made under section 203S; and
(iii)an order of a court of the Commonwealth or of a State or Territory permitting the retention, destruction or disposal of the thing has not been made;
whichever first occurs.
(2)For the purposes of this section, the return of a thing requires its return to the person reasonably believed to be the owner of the thing in a condition as near as practicable to the condition in which it was seized.
Mr Hamlyn-Harris contended to the Tribunal that although the Respondent had returned the original documents approximately 11 months after seizure, there was no entitlement for the Respondent to retain copies of the seized originals which comprise T25 of the T documents. He contended that it was contrary to public policy to allow the documents which have been "illegally retained" and were thus not properly and lawfully in the possession of the Respondent to be used for the purpose these proceedings.
The Tribunal considered both the submissions of the Applicant and also those of the Respondent in respect of the retention of the T25 copies and the weight, as evidence, that we should give to these documents. The Tribunal noted that section 203R(1) of the Customs Act is prefaced by the words "Subject to any law of the Commonwealth". Under section 33(1)(c) of the AAT Act the Tribunal is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate. While there is ample authority to the effect that the rules of evidence should not be disregarded, the Tribunal is of the view that the evidence in this case, which may or may not be the best evidence, can be weighed by the Tribunal appropriately. Accordingly, the Tribunal ruled in favour of the admissibility of documents in question. Arising from that ruling by the Tribunal, the Applicant requested an adjournment to allow it to brief counsel and for arrangements to be made for an application to be made by the Applicant to the Federal Court to restrain the Tribunal from considering the T25 documents. The Tribunal agreed to the Applicant's request on the basis of an undertaking that an application would be made to the Federal Court for an injunction to restrain the proceedings during the adjournment. The Respondent objected to the grant of an adjournment, and the Respondent's counsel gave notice of his intention to issue a summons on the Applicant to produce the original T25 documents at the resumption of the proceedings. The Tribunal granted an adjournment for the purpose of an application to the Federal Court until 2:15 pm on Monday, 26 February 2001.
At the resumption of the hearing on 26 February 2001, Mr Burnside QC informed the Tribunal that he had advised the Applicant that he considered that its proposed application to the Federal Court was doomed to fail and should not be made. Accordingly, no application was made to the Federal Court by the Applicant during the period of adjournment. Having resolved the objection raised by the Applicant, in respect of the Tribunal's decision to consider the important and relevant evidence provided by the T25 documents, the Tribunal is better placed to consider and determine the appropriate tariff classification for the gas oil imported by the Applicant on board the "Stolt Lily" in August 1996. (Some of the originals of the T25 documents have since been provided to the Tribunal by the Applicant.)
The Applicant and the Respondent are in agreement that Schedule 2 of the General Rules for the Interpretation of Schedule 3 of the Customs Tariff No. 147, 1995 apply to the imported "Stolt Lily" gas oil. The parties also agree that Chapter 27 of Schedule 3 entitled "Mineral fuels, mineral oils and products of their distillation" plus the following Note 2 also applies to the August 1996 "Stolt Lily" gas oil import by the Applicant.
Notes.
…2.-References in 2710 to "petroleum oils and oils obtained from bituminous minerals" include not only petroleum oils and oils obtained from bituminous minerals but also similar oils, as well as those consisting mainly of mixed unsaturated hydrocarbons, obtained by any process, provided that the weight of the non-aromatic constituents exceeds that of the aromatic constituents.
Accordingly, the tariff classification issue to be determined by the Tribunal is whether the gas oil imported by the Applicant on board the "Stolt Lily" in August 1996 should be classified as 20 as assessed by the Respondent or as 90 as declared by the Applicant, or as some other alternative 2710 reference tariff classification (and in particular 30) provided in the following Table prescribed by Schedule 3:
Reference Number Statistical Code/Unit Goods Rate#
PETROLEUM OILS AND OILS OBTAINED FROM BITUMINOUS MINERALS, OTHER THAN CRUDE; PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED, CONTAINING BY WEIGHT 70% OR MORE OF PETROLEUMOILS OR OF OILS OBTAINED FROM BITUMINOUS MINERALS, THESE OILS BEING THE BASIC CONSTITUENTS OF THE PREPARATIONS:
2710.00.1 ---Crudes, topped or enriched:
2710.00.11 31 L ----Goods, as follows: (a) enriched crudes; (b) topped crudes for use as a petroleum refinery feedstock at a factory specified in a licence granted pursuant to section 34 of the Excise Act 1901 Free
2710.00.12 41 L ----Having the characteristics of fuel oil as defined in Additional Note 1 to this Chapter $0.07171/L NZ:$0.07171/L PNG:$0.07171/L FI:$0.07171/L DC:$0.07171/L
2710.00.19 32 L ----Other $0.34559/L NZ:$0.34559/L PNG:$0.34559/L FI:$0.34559/L DC:$0.34559/L
2710.00.20 ---Goods, as follows: (a) automotive diesel oil; (b) industrial diesel fuel; (c) marine diesel fuel $0.34559/L NZ:$0.34559/L PNG:$0.34559/L FI:$0.34559/L DC:$0.34559/L
34 35 L L Automotive diesel oil Industrial or marine diesel fuel
2710.00.30 ---Goods, as follows: (a) fuel oil; (b) heating oil; (c) lighting kerosene; (d) power kerosene $0.07171/L NZ:$0.07171/L PNG:$0.07171/L FI:$0.07171/L DC:$0.07171/L
36 27 28 29 L L L L Fuel oil Heating oil Lighting kerosene Power kerosene
2710.00.40 30 L ---Kerosene for use in aircraft $0.02528/L NZ:$0.02528/L PNG:$0.02528/L FI:$0.02528/L DC:$0.02528/L
2710.00.5 ---Gasoline and other oils having a flash point of less than 23°C when tested in an Abel (closed test) apparatus:
2710.00.51 ----For use in aircraft $0.18681/L NZ:$0.18681/L PNG:$0.18681/L FI:$0.18681/L DC:$0.18681/L01 L Aviation spirit (i.e., avgas)
02 L Spirit type jet fuel (wide-cut jet fuel)
2710.00.52 32 L ----For use in internal combustion engines and having a lead content exceeding 13 mg/L, NSA $0.36725/L NZ:$0.36725/L PNG:$0.36725/L FI:$0.36725/L DC:$0.36725/L
2710.00.53 33 L ----For use in internal combustion engines and having a lead content not exceeding 13 mg/L, NSA $0.34559/L NZ:$0.34559/L PNG:$0.34559/L FI:$0.34559/L DC:$0.34559/L
2710.00.59 04 L ----For other uses Free
2710.00.90 ---Other Free05 L Light oils and preparations containing light oils
06 L Medium oils and preparations containing medium oils
Other: .In packs not exceeding 5 L:07 L ..Mineral turpentine
08 L ..Other .In bulk or in packs exceeding 5L:
09 L ..Liquid paraffin of pharmaceutical quality
10 L ..Lubricating oils containing 2% or less by weight of additives
11 L ..Mineral turpentine
12 L ..Other
The Tribunal notes that the tariff classification number 2710 denotes that the goods are properly described in the Note 2 reference to 2710. The seventh number in either the seven or eight digit tariff code number indicates a change in sub-headings. For example, 2710.00.1 is a sub-heading as are 2710.00.20, 2710.00.30, 2710.00.40, 2710.00.5 and 2710.00.90. The Tribunal considers that should it determine that the imported "Stolt Lily" gas oil is specifically described in any one of the sub-headings from 2710.00.1 to 2710.00.59 inclusive, then it is not necessary for the Tribunal to consider the tariff classification prescribed for sub-heading 2710.00.90 – other. (We note that the Applicant contended that 2710.00.90 is also a specific classification; the rejection of that contention is dealt with later in these Reasons.)
Evidence Concerning the Tariff Classification MatterMr Donald Gunn, a consultant engineer specialising in petroleum products, was called to give sworn specialised evidence by the Applicant in support of his statements dated 12 October 1999 and 8 June 2000 (exhibit A38 and exhibit A39). Mr Gunn is a graduate of the Royal Naval Engineering College (UK) in aeronautical engineering, mechanical engineering and marine engineering and is a fellow member of certain engineering professional bodies in Australia, the USA and the UK. Following his employment from 1951 to 1960 as an engineer in the Royal Australian Navy, Mr Gunn was employed from 1960 to 1996 for Shell, AMCO, BP and Ampol, in the petroleum industry, specialising in the composition, formulation and application of petroleum products.
Mr Gunn was the Chairman of the Petroleum Products Technical Committee ("PPTC") of the Australian Institute of Petroleum and also convened the working party of PPTC during the development of the Australian Standard 3570-1988, Automotive Diesel Fuel ("AS3570" or "the Standard") which came into effect in 1988.
AS3570 was developed by petroleum diesel fuel experts who wanted to make sure that their equipment would function without fault or damage, and also by farming and consumer groups concerned about automotive diesel fuel performance in all climates, and in addition by state and federal authorities concerned with environmental and legislative needs. The publication of AS3570 provided the petroleum industry with an authoritative document without ambiguity for the automotive diesel fuel manufactured and sold by oil companies.
Mr Gunn conceded, that other non AS3570 standard fuels can be used to power a diesel engine, although he believes that the more the properties of the diesel fuel deviate from those specified in AS3570, the greater the likelihood that there will be undesirable consequences arising from its use, and including possible engine damage. Other fuels may consist of a number of mixtures including petroleum fractions such as heating oil, gas oil and some unrefined crude oil.
Mr Gunn provided the Tribunal with a valuable explanation of the petroleum refining process of separating the many compounds present in crude oil. The principle which is used is that the longer the carbon chain, the higher the temperature at which the compounds will boil. During the refinery process the crude oil is heated and transformed into a gas. These gases are then passed through a distillation column which becomes cooler as the height increases. When a compound which is in a gaseous state is cooled below its boiling point, it condenses into a liquid and the cooled liquids are then drawn out of the distilling column at various heights ("cuts"), as per the following basic example:
CRUDE OIL DISTILLATION TOWER
Example of Distillation
Temperature Tower CutsDegrees C
Gasoline Vapours ) LPG
40 - 1200C )
LPG )
Naptha Gasoline
120 - 1750C
Kerosene Kerosene and Jet Fuel
175 - 2000C Diesel Distillate Diesel Fuel
Crude Oil Medium Weight
Gas Oil Cracking Motor Gasoline
200 - 3650C Heavy Gas Oil Units Jet Fuel
Diesel Fuel
Residuum Coker Industrial Fuel
Heated Crude Oil Asphalt Base
Heating Burner
Mr Gunn said that crude oil is predominantly made up of hydrocarbons and varies depending upon where it is extracted. For example, Bass Strait crude oil has hydrocarbon molecules which differ from the crude oil extracted in the Middle East and therefore, the end products (eg. percentage of kerosene to diesel fuel) may vary in the distillation process dependent upon the origin of the crude oil. Every refinery processes crude oil differently depending upon the oil used and the percentage of end product which the refinery requires to meet consumer demand.
An illustrated drawing of a distillation tower provided by Mr Gunn indicates that heavy gas oil is extracted at a temperature of between 2000C to 3650C with kerosene between 1750C to 2000C and naptha between 1200C and 1750C and benzine and gasoline between 400C to 1200C. Mr Gunn said that a change of temperature within the tower will change the various "cut points", where the type of product is extracted. A change in temperature within the distillation tower will vary the temperature at which the various products condense at each cut off point and this process is used by the refinery to vary the quantity of a particular product refined to meet marketing requirements. In order to meet consumer demands for gasoline and other high demand products, some gas oil fractions must be converted by a secondary process such as "cracking" – breaking down large molecules of heavy heating oil; "reforming" – changing molecular structures of low quality gasoline molecules; or "polymerisation" – forming longer molecules from smaller ones. Mr Gunn advised that most crude oils provide too many heavy cuts of gas oil to meet market needs, and so that a secondary process is used to crack big molecules into smaller ones and bring output into the merchantable fuel ranges required by the refinery.
Mr Gunn was referred to the Automotive Diesel Fuel Standard AS3570–1988 published by the Standards Association of Australia (T30, pages 210 to 227 inclusive). This document was prepared by the Association's Committee on Automotive Diesel Fuel under the direction of the Consumer Standards Advisory Board. It states that the request for the preparation of the Standard was made by the National Farmers Federation and the Shires Association of NSW as both organisations expressed concern about the declining quality of automotive diesel fuel.
The foreword to AS3570 (T30, page 212) refers to the concern for diesel fuel users regarding the low cetane number in the fuel and the engine problems experienced by them if the cetane number is below 48. The cetane number is a measure of the ignition quality of a fuel (T30, page 216). The important charts in AS3570 – Table 1 – "General Requirements for Automotive Diesel Fuel" and Table 2 – "Maximum Limits for Cloud Point ("CP") or Cold Filter Plugging Point ("CFPP") are set out on page 5 of the Standard (T30, page 214). The definitions of CP and CFPP are contained on page 8 of the Standard (T30, page 217). CP is the temperature point at which waxes begin to separate and appear as a cloud or haze in the fuel. The CFPP is a lower temperature than CP when more waxes will come out of the fuel solution and will begin to agglomerate. If further cooling is continued, a point is reached where sufficient wax is present in the fuel to form a mat on the filter of a diesel engine, thick enough to impede the flow of fuel. It is to be noted that (a) of 2710.00.20 in the Tariff refers to automotive diesel oil whereas AS3570 relates to automotive diesel fuel. It was agreed between the parties (and the Tribunal accepts) that for the purposes of this matter, the two terms are synonymous.
Table 1 – General requirements for diesel fuel itemises the standards for ash, carbon, cetane number, CP, CFPP, copper corrosion, density, distillation, flash point, oxidation stability, sulphur, water sediment and viscosity. Pages 7 to 9 of the Standard (T30, pages 216 to 218) provide the explanatory notes for each of the AS3570 requirement standards.
Table 2 – Maximum limits for CP or CFPP - indicates the winter grade and summer grade temperature limits for Australian Zones, divided into North, South, East and West Zones. A map of Australia (T30, page 215) depicts the relative zones established for this standard, It is noted that the winter grade limit for CP ranges between +70C in the North Zone to - 40C in the South in the winter and +150C in the North and -40C in the South in the summer. CFPP ranges from +40C in the North to -70C in the South in the winter and between +120C in the North and -70C in the South in summer. In effect, the table reveals that a certain diesel fuel may only meet the AS3570 Standard for a particular time of the year – winter 16 March to 15 September or summer 16 September to 15 March and for a particular Australian Zone, and yet that fuel is nevertheless acceptable for resale in accordance with AS3570 within the prescribed summer/winter dates and/or in the prescribed zones.
Mr Lenczner referred Mr Gunn to paragraph 36 on page 14 of his written statement which reads as follows:
Overall, solvent X370 does not meet the requirements of AS3570 in several respects. Some are minor but four of them, distillation, oxidation stability, cloud point and carbon residue are significant.
Mr Gunn's statement, (paragraphs 37 – 41), describes the minor differences of the imported gas oil on the "Stolt Lily" (ie. X370) as being specific gravity rather than density, cetane index rather than cetane number, presence of a colour clause, viscosity and copper strip corrosion at 500C rather than 1000C. Mr Gunn agreed that these minor differences have no practical effect. He said, "[i]t will still work as automotive diesel fuel but it is not automotive diesel fuel because it doesn't comply with the standards."
As there are no Australian Standards for industrial diesel fuel and marine diesel fuel similar to AS3570 for automotive diesel fuel, Mr Gunn was shown International Standard ISO 8217:1987 for petroleum products – fuels (Class F) – Specifications of Marine Fuels and Requirements for Marine Distillate Fuels and British Standard BSMA 100:1989 – British Standard Marine Series – Specification for Petroleum Fuels for Marine Engines and Boilers (exhibit A36). These specifications refer to certain prescribed standards for marine distillate fuels based upon characteristics closely resembling those standard characteristics specified by AS3570. These include acceptable standards for density, viscosity, flash point, pour point, cloud point, carbon residue, ash sedimentary extraction, water, cetane number, sulphur and vanadium.
The ISO 8217 Standard and the BSMA 100 Standard list specifications for four grades of marine diesel fuel, DMX which is the lightest and closest to automotive diesel fuel which has a cetane number of 45, DMA which is a grade of diesel fuel for use in the marine market which has a cetane number of 40, DMB marine diesel fuel with a cetane number of 35 and DMC which is a blended marine diesel fuel without a cetane number specification. Mr Gunn agreed that the SGS Certificates of Quality for the gas oil imported on board the "Stolt Lily" by the Applicant in August 1996 (T25, pages 93 and 94) indicate that the "Stolt Lily" gas oil test results were better than the ISO 8217 and BSMA 100 specifications for DMA and DMB and DMC marine fuels and therefore, would comply with the ISO and BSMA Standards as marine diesel fuel.
Mr Gunn opined that the gas oil imported on the "Stolt Lily" by the Applicant, which was rebranded Solvent X370 ("X370"), could be used as a petroleum heating fuel but could not be used in a domestic space heater. Mr Gunn confirmed that in his view X370 is appropriately specified in both the suppliers' specifications (T24) and the SCS quality analysis reports (T25, pages 93-94) as a product suitable for use as an industrial heating fuel. He defined industrial diesel fuel as a petroleum product, mostly distillate but not necessarily wholly distillate, which is intended for use as a diesel engine fuel for slow speed or larger diesel engines other than automotive diesel engines. Alternatively, industrial diesel fuel may be used as a heating fuel for continuous combustion purposes, which, he said, needs a specification either provided by the seller or agreed between the buyer and the seller. He also defined marine diesel fuel as being "essentially industrial diesel fuel intended for use in marine applications".
Mr Gunn agreed with Mr Moshinsky that if an importer of X370 intended to sell it as a solvent then he would call X370 a solvent. Because, he said, "that's what the specification says, that's what the label says". He contends that the simple invoicing out or branding of a diesel fuel oil by a manufacturer or the subsequent rebranding of the product determines its character, where such a diesel fuel product has a multipurpose use.
Mr Gunn agreed that heating oil can be used as automotive diesel fuel and that in some cases heating oil is a preferred fuel. Mr Gunn cited, as an example, a closed environment such as an underground mine where lower emissions are sought. He said that the higher cetane number of heating oil reduces the white smoke on starting the engine. White smoke is not desirable in a below ground mining environment, because it irritates the eyes and has an obnoxious odour.
Mr Gunn explained that heating oil has fewer heavy ends. Diesel fuel has a lower 90% recovered temperature. He said:
This is important in that there is less likelihood of smoke, but more importantly there is an almost total absence of polycyclic aromatics in heating oil which are more present in diesel fuel, and these are precursors that lead to carcinogens in exhaust and in an enclosed environment you don't want them.
As another example of the use of heating oil in lieu of automotive diesel fuel, Mr Gunn cited the practice in the USA, during freezing temperatures in winter, where buses use heating oil as an alternative to automotive diesel fuel. He said, "No one diesel is the preferred fuel for those applications, because it has a much lower cloud point and much better temperature properties". Mr Gunn said that the reason that heating oil is not more readily used as automotive diesel fuel is due to the lack of availability of heating oil. Heating oil provides advantages over automotive diesel fuel when starting an engine in colder climates.
Mr Sergio Tribuzio gave sworn oral evidence in support of his written statements dated 30 September 1999 (exhibit A11) and 19 June 2000 (exhibit A28). Mr Tribuzio is a director of the Applicant company. He holds a Master of Science Degree in Inorganic and Analytical Chemistry. His prior employment positions included 2 years as National Solvents Product Manger for Petrochem, which was a division of BP Chemicals, UK, where he had responsibility for solvent heating oil and kerosene sales in Australia including all aspects of supply, marketing, pricing and strategy.
The Applicant commenced trading in 1987; its main business was to trade in petroleum solvents and some heating fuel. Products included kerosene, heating oils and a variety of petroleum and petrochemical solvents. The Applicant also blended solvents and other chemicals for can and coil coatings, marine paints and for the automotive industry. The Applicant's other business was the storage and transportation of petroleum products and it owned a site at Altona which had a storage capacity for 5.5 million litres. The Applicant sold its transport division; moreover and in February 1998 the Applicant sold its reseller solvent and other products business to another company, which in turn sold it to Solchem, which is owned as to 50% by a Mobil company.
The Applicant purchased all of its petroleum solvents from Australian refiners of crude oil until 1996. In August 1996 the Applicant commenced the importation of gas oil from the Philippines on board the "Stolt Lily". Mr Tribuzio said that for internal administration reasons he renamed the imported gas oil X370 solvent. The name "X370" was derived from the boiling range of the imported gas oil, which had an upper limit of at least 3700C Celsius. The following extract has been copied from Mr Tribuzio's Statement dated 30 September 1999 (exhibit A11) in order to ensure that his comments and opinions expressed therein, are precisely recorded in these Reasons:
. . .
12.Petroleum products which can be used as solvents have boiling points within a wide range from approximately 300C to 4000C Celsius. These include volatile solvents with low boiling points and flashpoints, such as toluene, white spirits and gasoline, as well as products from the so-called "middle distillate" cut/fraction, which includes kerosenes, heating fuels, diesel fuel and solvents.
13.The X370 solvent imported by Gladstone was a middle range distillate product.
14.Many, if not all, of these middle distillate products have wide boiling/distillation ranges that extensively overlap because they share many common chemical constituents . The specifications of various of these products are therefore similar and all of these products have more than one commercial use.
15.A second consequence of this specification overlap is that there is always a limit as to the quantity and type of middle distillate products that can be produced by any one refinery from the crude oil stock available to it. Therefore, the production of any one particular product from the middle distillate fraction results in less production, or none at all, of various competing/alternative products.
16.Overall then, the range of commercial products (ie different fractions and fraction combinations) produced and sold by a refinery is determined/influenced by a number of competing factors. The main ones are as follows.
a)The type and origin of crude oil that is available for processing. Crude oil consists of thousands of different petroleum fractions and the composition of crude from different geographical areas varies enormously, as does the suitability of particular fractions for certain uses.
b)The economics of operating a refinery both generally and in a particular location.
c)The particular demand in the local market for various products. The principal focus of most or all refineries is on the production of engine fuels, such as gasoline, for which there is a significant continuing demand. The market for other non-engine products, such as kerosene and heating oils, is more seasonal and it is uneconomical for refineries to continually adjust their output to meet the seasonal market requirements. This often results in a shortage during the winter season of heating fuels and other products that are used as solvents.
d)The competitive targeting of a larger market share.
17.The trade in petroleum products has always been monitored closely by the Australian Customs Service because Excise Duty must be paid when local products, such as gasoline, diesel, heating oils, or kerosene, are sold by the manufacturers to either consumers or wholesalers. If the products are instead imported into Australia, Customs Duty is paid on these products at a rate equivalent to the rate of Excise Duty. The highest rate of excise (and corresponding customs duty) has always applied to automotive engine fuels, such as gasoline and diesel. Lower rates of Excise Duty are imposed on products when sold for use as other types of fuel, such as kerosene and heating oil. Solvents and other chemicals are sold free of excise.
18.Prior to 1st January 1998, the amount of excise that was payable for any sale of petroleum products was determined by the use to which the product was to be put by the purchaser. This was because most, if not all, of the products were used for more than one purpose. Products satisfying the requirements of, for instance, automotive diesel fuel, heating oil, kerosene and various solvents would often be more or less interchangeable but the excise would vary depending on whether the end use was as a fuel. Use as a fuel would attract excise. However, if the use of these products was other than as a fuel, for instance as a bitumen cutter, there was no requirement to pay excise. In fact, it was common for the major refineries to sell a particular product, at different rates of excise, depending on whether the end use was as a fuel or otherwise. They would then require contractual undertakings or statutory declarations from their customers as to the intended end-use of the product.
19.It was also a common practice of the oil companies to multiple-brand the same product (ie sell under different brand names according to the intended end use of the product). Product would be sold as both a solvent (whether generic or specialised, for instance as a bitumen cutter) and as a fuel such as ADF, heating oil or kerosene.
20.During the pre-1998 period, when multiple-branding particular product which complied with the Australian Standard for ADF, the refineries also often "adulterated" such product to a nominal extent, in order to sell it for use as a non-fuel/solvent. This was done by introducing a trace contaminant. The adulteration technically altered, to an insignificant extent, at least one specification or physical characteristic of the product, for the sole purpose of allowing the product to be sold free of excise. This practice of token adulteration was formally sanctioned by the Australian Customs Service.
21.Excise By-Law 109 was originally introduced to enable chemical manufacturers to purchase excisable products without paying excise for use in the formulation of non-excisable products, such as concrete release agents. However, the by-law was commonly used by the oil companies as a mechanism for selling "adulterated" ADF as a solvent without the payment of excise. The composition of each blended product had to be approved by the Collector of Customs and approval was regularly given to products containing only a token amount of contaminant.
22.Examples of such multi-branded "adulterated" products that were widely sold as solvents included Bituflux, which as distributed by Ampol, Solvent 98, which was distributed by BP Chemicals, and Solvent AC Cutter, which was distributed by Mobil.
23.As Gladstone was only a distributor and reseller of product, and not an end-user, it was unable, when purchasing from the refineries, to identify the use to which the products which it purchased would be ultimately put. Instead, as a "middle man", Gladstone was required, when purchasing heating oil or kerosene, to sign contractual agreements with its suppliers and also to provide statutory declarations which certified that the products would not be sold by Gladstone for use as a fuel.
24.In turn, Gladstone required similar undertakings from its customers, who provided statutory declarations or letters of undertaking for every significant purchase of heating oil, solvent heating oil, kerosene or solvent kerosene. All of Gladstone's invoices also included an endorsement that: "In accordance with Regulations of the Australian Customs Service, these goods are sold on condition that they are solely for use other than as fuel in internal combustion engines."
25.There was no clear set of rules or regulations that set out the obligations and responsibilities of a seller or trader of products that could potentially be subject to the payment of excise. Joe travelled to Canberra on at least one occasion and met with senior Customs officials to discuss Gladstone's administrative procedures and safeguards, which were to the satisfaction of Customs. We also retained the services of Freehill Hollingdale & Page to advise Gladstone regarding the requirements of the Excise Act and the Australian Customs Service. We chose Freehill Hollingdale & Page because we knew them to be the solicitors for BP and we therefore assumed that they would have a thorough knowledge of the industry. When we contacted them, we were put onto a partner who told us he was an expert in this area and it was he who subsequently advised us, prior to importation, as to the appropriate tariff classification for Solvent X370.
26.Gladstone kept detailed records of all purchases and sales, which were subject to periodic inspections by officers of the Australian Customs Service. Gladstone's records were inspected on at least six occasions during 1992 – 1997 and, on each occasion, the Customs officers expressed their satisfaction or confirmed that we complied with their requirements.
27.Gladstone was successful and its sales increased rapidly for several years. The only restriction on Gladstone's continued growth and profitability was the availability of products from local suppliers. The available quantities and prices of solvents and other petroleum products fluctuated because of the economics of the refinery process and the seasonal variation in demand for different products, which can, for instance, produce a shortage in availability of heating oils and solvents during winter.
28.Gladstone's supply of product was never reliable. In 1995, Ampol, which was then Gladstone's principal supplier, completely ceased its sale to Gladstone of heating oils and solvents. Gladstone then began to trade with Mobil and BP Chemicals. Gladstone was able to continue supplying its customers but Joe and I were both concerned at the uncertainty of supply. I therefore began to investigate the possibility of purchasing product from a foreign supplier for importation into Australia. I was initially unsuccessful because we were seeking relatively small parcels of product and therefore could not source a suitable product at a commercially viable price.
29.In early 1996, Gladstone was advised by Mobil, which was then our biggest supplier, that it would be unable to continue to sell us the same quantities of Certrex 70 that we had been purchasing for some time. Certrex 70 is an example of a multiple-branded product, which can also be sold under another name as a heating oil, but whose main industrial application under the Certrex 70 brand name is as a solvent. We had been purchasing an average of approximately 1 million litres per month and Mobil was going to reduce it to 500,000 litres per month. At that time, our customers' demands for our products were either stable or increasing and it was apparent that we would not be able to satisfy their requirements. I therefore resumed my enquiries regarding the possibility of purchasing product from foreign suppliers for importation and sale within Australia.
30.I telephoned a number of companies based in Singapore that traded in petroleum products to determine whether a product was available that would meet our customers' needs and could be purchased at a price that was competitive with solvents manufactured in Australia.
31.I had previously been advised that it would not be possible to purchase product that was specifically manufactured to Gladstone's preferred specifications because I was seeking to purchase shipments of approximately 1,000 tonnes of product. No refinery would produce a specifically tailored product of this quantity, unless I could guarantee that the transaction would result in future purchases of much greater volume. In any event, a product that was specifically manufactured for Gladstone's requirements would have been far too expensive.
32.As the generic product description "solvent heating oil" was not widely recognised outside Australia, I advised potential suppliers of my preferred specifications for flashpoint, visual appearance and colour, density and boiling range. These were similar to the specifications for products, such as Certrex 70, that we had previously purchased from Australian refineries. I was not interested in any other specifications or characteristics, as they were not relevant to our customers.
33.For my purposes, the most important of these specifications were the boiling or distillation range, which broadly defined the product, and the colour and clarity, which was indicative of the purity. My initial requested specifications included a distillation range with an upper boiling limit of approximately 2700C.
34.Most of the traders that I contacted either did not respond to my initial enquiry or advised that they did not have a suitable product available for purchase, either in small enough quantities or at my price point, The only company that responded positively was Jayta Petrochemical Private Limited ("Jayta").
35.Jayta was staffed entirely by female traders who were aggressively seeking to establish their own market niche and were keen to do business. Jayta advised that it did not have an available product that met Gladstone's requirements but that it was able to source a cut that was reasonably close to my specification requirements and, most importantly, Gladstone's price point. However, the boiling range of the offered product had an upper limit which was at least 3700C Celsius.
36.I expressed some interest in the product, so my contact at Jayta immediately faxed to Gladstone's office the manufacturer's specifications for the product (the "Jayta specifications"). It is the Jayta specifications that are listed on page 46 of the Respondent's T documents (T24). Included in the Jayta specifications were various specifications or characteristics for the product that I had not asked for and about which I was not concerned. Although in my view the specifications were not ideal, I had to make a decision rapidly, as the price of petroleum products fluctuated constantly on the open market and currency exchange rates were also volatile. It was also expected that the price of the product would soon go up. Space would also have to be booked on a vessel as soon as possible, as the choice of shipping schedules and times was extremely limited, if we were to get any imported product to Gladstone in time to meet expected orders from its customers. I advised the specifications to some of Gladstone's customers, to determine whether this product was suitable for their needs, and I received their confirmation.
37.I did not want to commit Gladstone's funds without obtaining a comparative price quotation from another trader if possible. I therefore masked the heading on the Jayta specifications sheet and copied the specifications under a new, more anonymous heading, "Solvent X-370". I arrived at this name, which simply re-branded the available Jayta product, by selecting a name based on the product's boiling point and which did not reveal the origin of the specifications to Jayta's competitors. That copied document is the actual document which has been copied as the Respondent's document T24. I then faxed the rebranded Jayta specifications sheet to Hin Leong Trading, which was another Singapore trader, with a request for a quotation to enable me to compare available prices.
38.Hin Leong did not reply to my fax, so, given the time pressures, I placed an initial order with Jayta for 1,000 tonnes of X-370. The order was placed with Jayta by reference to the Jayta specifications that had previously been provided and the order was also endorsed as being subject to independent testing of the parcel, both before shipment and after arrival in Australia.
39.The parcel was ordered in accordance with the full Jayta specifications and they were also included as a condition in the contract. (Amended in trans. p.143) This was not because I was concerned with each of the specifications in its own right but, rather, because Gladstone had not previously imported product from overseas. I also did not have any independent reference for or verification of Jayta's bona fides. I therefore wanted to reduce the possibility of any contractual mistakes and confusion and I was reluctant to commit approximately $US200,000 of Gladstone's funds unless I could be certain that we would receive the same product that had been offered and quoted for.
40.Because many of the specifications did not matter to me, Gladstone's order was stated to be conditional only on testing the X370 for three specifications/characteristics that I was interested in at that time. However, Jayta still arranged for an independent laboratory to test the shipment for every one of the Jayta specifications before shipment. I had no objection to this being done as it was Jayta, and not Gladstone, who paid for those tests.
41.When the first shipment arrived in Australia, it was tested at Gladstone's request by a local surveyor only for appearance and colour, density, distillation range and flashpoint. The product was then unloaded and transported to storage tanks at Gladstone's premises, where it was blended with solvent heating oil and sold to Gladstone's customers. Gladstone also continued to purchase available solvent product from local sources during that time and all of the imported parcel was sold to Gladstone's customers at the same price as locally sourced product, being the prevailing market price for solvent heating oil sold by the major oil companies. That price was approximately 20 cents per litre lower, (ie approximately one third lower), than the prevailing price for automotive diesel fuel.
42.The first importation was successful but, at this time, the price of both the local and overseas product was rising steadily. I therefore made further enquiries with Jayta about the possibility of blending the X-370 with another product, to obtain a product specification that was closer to my original requirements and which would also be more profitable.
43.I was particularly interested in obtaining a product with a lower density and lower final boiling point and, if possible, a higher flash point. This was because Gladstone purchased the imported product by weight but sold it by volume. A lower density would therefore be desirable because it would result in a greater volume of product for subsequent sale at the same price per litre as X370.
44.The flash point is the temperature at which product vapour can be ignited with a spark or flame. Each Australian State has restrictive regulations that govern the handling, transport and storage of products that are deemed to be highly flammable. If a product has a flash point below the statutory limit (which for the products we were selling at the time was 61.50C Celsius), it will be deemed to be flammable and subject to certain restrictions.
45.A high flash point imported product would have been commercially attractive for Gladstone, provided that the other specifications were suitable, because I could then have blended the imported product with lower flash solvent kerosene, still resulting in an overall acceptable flashpoint. At that time, compared to solvent heating oil, kerosene was in more plentiful supply and it also had a lower density than solvent heating oil. Accordingly, such a blend would have yielded a greater volume of product for sale and also met the relevant HAZCHEM requirements, without affecting the suitability of the product for use as an industrial solvent.
46.Jayta made a number of attempts to produce a blend that would meet my requirements but they were unsuccessful. As a result, to meet its customers' demands, Gladstone purchased two further parcels of X-370 in accordance with the original Jayta specifications.
47.The majority of the second shipment was also transported to Gladstone's premises and blended with local product prior to sale. Most or all of the third shipment was sold as imported. None of the imported X370 product was sold or priced by Gladstone as automotive diesel fuel.
Mr Tribuzio advised that Jayta is a trader in petroleum products saying:
They arrange a consignor which actually owns the product and the consignor, when they buy the product from the consignor they go to the bank, and for the consignor to sell them the product they have to show they have got an irrevocable letter of credit from another supplier so they can go to the consignor and buy the product, and they just take a margin off the differences between the two letters of credit.
The Tribunal considers that if the product supplied by Jayta does have inconsistencies, those inconsistencies might arise from the fact that there could be different suppliers.
The precise status of the Applicant at this time was not clear. As set out previously in these Reasons, the Applicant has sold each of its transport division and its solvent business. The Tribunal was told that the site at Altona (in Victoria) has been sold. A statement from the bar table (by Mr Slonim) indicated that the Applicant still has some assets and that there are outstanding issues, and including this matter. The word "dormant" was used in relation to the Applicant; on the other hand it does seem that the Applicant still engages in some trading activities.
Mr Tribuzio said that he regards heating oil and solvent X370 as being the same thing – "it depends on the end use". He agreed that heating oil has a dual purpose, "[i]f a customer wanted to buy the X370 solvent and use it as a heating oil, the Applicant would have to sell it to you as a heating oil and charge the excise". The Applicant sold heating oil under the name "Gladheat". Mr Tribuzio regards solvent kerosene, jet fuel and lighting kerosene all as being dual purpose kerosene. He concurred that the Applicant renamed lighting kerosene as solvent kerosene – Code SSK, used in its blending of a concrete release agent for Ramset (exhibit A31), for excise reasons. The above-mentioned clause 21 of Mr Tribuzio's statement which refers to Excise By-Law 109 reads:
Excise By-Law 109 was originally introduced to enable chemical manufacturers to purchase excisable products without paying excise for the use in the formulation of non-excisable products, such as concrete release agents. However, the by-law was commonly used by the oil companies as a mechanism for selling "adulterated" ADF as a solvent without the payment of excise. The composition of each blended product had to be approved by the Collector of Customs and approval was regularly given to products containing only a token amount of contaminant.
Mr Tribuzio said that most of the gas oil imported from the Philippines on board the "Stolt Lily" in August 1996 was sold to three companies being United, Success Freight Lines and Australian Petroleum Supplies ("APS"). He said that United runs a freight business and is also a reseller and distributor, Success Freight Lines is also a freight company and reseller/distributor and APS is also a freight company and a reseller/distributor. He does not know whether any of the three companies which purchased the gas oil are solvent users or not and Mr Tribuzio agreed that he has no idea how the companies used the gas oil. He did not conduct any inspections of the plants of the three purchasers of the gas oil to inform himself how it was being used. There was no evidence before the Tribunal specifically referable to the "Stolt Lily" product. The extent to which the gas oil was blended (with heating oil or any other product) before resale was not clarified.
Mr Tribuzio agreed that he received the following facsimile dated 18 July 1996 from Jayta offering the Applicant gas oil (T3) and that the note was written by him on the facsimile. This document refers to the importation of gas oil transported on the "Stolt Lily":
Re Gas Oil
Further to our tel. conversation just now and our gas oil offer to you yesterday. Please revert urgently your confirmation. Please note gas oil price fluctuates every day. As such we might not be able to hold the same price on daily basis.
The note on the facsimile by Mr Tribuzio was addressed to Parks Purchasing Manager and instructed him to place an order for 1000 MT of solvent X370 based upon the following conditions and upon certain specifications:
a) Bill of Lading and invoice must be marked solvent X370.
b) $200USD PMT FOB Stolt Lily V38 00 SUB. ETA Subic Bay 28/29 July.
c) Irrevocable L/C at sight
The specifications for the gas oil ordered by the Applicant were confirmed by Jayta in an undated facsimile (T25, page 69) and read as follows:
SPECIFICATION – X370
ASH, WT PCT MAX 0.01
CETANE INDEX, CALCULATED MIN 45
COLOR, ASTM MAX 2.0
SPECIFIC GRAVITY AT 60 DEG F MIN 0.82/MAX 0.86
DISTILLATION:
90 PCT RECV, DEGCc MAX 370
* FLASH POINT, PMCC DEG C MIN 61.5
POUR POINT, DEG C MAX 0
SULFUR, PCT WT MAX 0.5
VISC AT 40 DEG C, CST MIN 1.8/MAX 5.50
WATER AND SEDIMENT, PCT VOL MAX 0.05
CARBON RESIDUE, PCT WT MAX 0.05
COPPER STRIP CORR (3H/50 DEG C) MAX NO. 1
* NOTE
Mr Tribuzio admitted that he had deleted, by whiting-out, Jayta's heading above the List of Specifications and that he had typed in his alternative heading "Specification – X370". He believed that the facsimile was originally headed by Jayta as Specification for Gas Oil.
Mr Bell referred Mr Tribuzio to a pro forma invoice from Jayta to the Applicant dated 19 July 1996 (T25, page 79), upon which Mr Tribuzio whited-out a reference to gas oil or some other generic description of the product prior to sending it back to Jayta for their preparation of their final invoice (T25, page 104). Because of the whiting-out deletion, the only description of the goods remaining on the pro forma invoice was X370, and X370 accordingly became the only description of the imported gas oil shipped via the "Stolt Lily" on Jayta's final invoice to the Applicant dated 4 August 1996. Mr Tribuzio denied that he whited-out any generic description used by Jayta in their facsimile and pro forma invoice on the advice of Freehill Hollingdale and Page, a legal firm retained by the Applicant to advise it regarding the requirements of the Excise Act 1901 ("the Excise Act") and the Australian Customs Service; (see paragraph 25 of his statement extracted above). He contended that the whiting-out by him was for internal brand classification administration purposes. He also said that the whiting-out and name substitution was done in order to ensure that there would be no difficulty with the banking documents; we deal with that statement in relation to the banking documents more fully later in these Reasons. Mr Tribuzio was asked by the Tribunal if he was saying that X370 is gas oil and he replied as follows (see transcript, page 477):
Well obviously it is" … "Yes, it is gas oil. That's what they said it is. I am not disputing that was rebranded from gas oil.
Mr Tribuzio said that there was no clear division of functions between him and his division co-director, Mr Brothers, in their employment by the Applicant. He was involved in the main in marketing the more technical products and Mr Brothers was involved in administration functions and also the marketing of heating oil type products. He said that the arrangement of finance and credit to purchase products, including the "Stolt Lily" purchase of gas oil from Jayta, was a combined function. A letter of credit expressed in US dollars for the "Stolt Lily" purchase was arranged in Melbourne and provided to Jayta's Singapore Bank by the Applicant's bank.
Mr Tribuzio was asked whether it was usual or unusual for product invoices provided by suppliers to the Applicant to have the product description whited-out and another product description inserted. Mr Tribuzio replied by saying:
There would be one or two occasions where we had product descriptions for a local product. I don't – I am not – I don't recall it where I would have said define it as something else as a re-brand. We might have whited it out or crossed it out and sent it back to the supplier and say, yes, give us another system. But I don't think that – I must admit it wouldn't be something that has been done normally – per se, No.
He agreed that the Respondent was never informed that Jayta, the supplier of the "Stolt Lily" import, described the product as gas oil in the Philippines and that he had never sought a ruling from the Respondent regarding the imported product. He said that his lawyer, Mr Butler of Freehills, had never indicated to them that they should obtain such a ruling from the Respondent.
An application was made by Mr Bell on 10 May 2001 to recall Mr Tribuzio to give further evidence following the prior evidence given to the Tribunal by Mr Brothers. Mr Bell said that he desired to enquire further into the nature of information given to Mr Butler of Freehills, and in particular, the adequacy of the Applicant's assertion to Mr Bell that the gas oil, which was intended to be imported from Jayta was a product of a kind that had previously been marked as solvent – Certrex 70.
Mr Moshinsky objected to the recall of Mr Tribuzio, on the basis that it could relate only to an allegation of fraud by the Respondent.
Mr Bell contended that there was a sufficient basis in this matter for the allegation of fraud, and that there were relevant issues as to the legal advice obtained coupled with the question of whether the information provided was adequate; in addition there was an issue as to whether the legal advice was obtained in order to hide an intention to misinform the Respondent.
The Tribunal made the following decision in relation to the Respondent's application to recall Mr Tribuzio:
THE D.PRESIDENT: This case is, as Mr Moshinsky contended a matter of classification, leaving aside for the moment, but without doubting its importance and relevance, the delegation issue. Mr Moshinsky contends that intent as to use is both important and relevant in relation to the tariff classification for which the Respondent contends. However, that tariff classification is not qualified by a reference to use and so that it is possible that Mr Moshinsky's contentions in this regard are not correct. There is evidence still to be lead and lengthy argument to follow and so that it is unnecessary and undesirable for us to say any more on the subject at this stage.
That the credit of the Applicant is important in this case cannot be doubted nor can it be said that Mr Bell's contentions as to fraud are without foundation or groundless or that he is fishing for evidence. The factual matrix which arises from what might loosely be referred to as the whiting out of relevant documents, coupled with the uncertainty surrounding the legal advice, ensures that this must be so.
It was not originally intended that Mr Brothers would be a witness. The Applicant decided to call him at a comparatively late stage of these proceedings. Similarly, and at a late stage, the Applicant expanded the ambit of its case.
In the light of Mr Brothers' evidence it does not seem to us to be unreasonable that Mr Tribuzio be recalled on the basis requested by Mr Bell. It is certainly not usual that a witness be recalled a second time but this is not a case which is aptly characterised as usual.
We believe that credit is so important an issue in this case that further evidence along the lines suggested by Mr Bell may well assist us in performing our duty which is to come to the correct and preferable decision. In the circumstances, Mr Bell's application will be granted on the basis that he will be allowed to cross-examine but only on the issues to which he referred.
Before adjourning to consider Mr Bell's application for the recall of Mr Tribuzio we noted that we had not heard evidence from Mr Butler and invited the parties to consider whether his evidence might not assist, although we indicated that we did not intend having regard to the counsel involved in this matter, to call him ourselves. We note also that it does not appear to us that there will be evidence by either Jayta, who supplied the product, or SGS, who tested it, although that evidence might also well be of assistance and value to the Tribunal.
We do not wish to be thought to be instructing the Applicant as to how to run its case; we note merely, that if Jayta or SGS or Butler is likely to be called, then it might well be prudent and appropriate to delay the recall of Mr Tribuzio until that relevant evidence has been given. But if the Applicant or the Respondent in the case of Mr Butler decides not to call any of that evidence, for whatever reason, then Mr Tribuzio should be recalled on the basis set out previously.
Mr Tribuzio said that he could not remember the "fine details" of the information provided to Mr Butler of Freehills. He was shown exhibit R25, which is a certificate of quality published by Mobil Oil Australia Ltd which sets out the characteristics and specifications of the product Certrex 70. Mr Tribuzio agreed that Certrex 70 is a heating oil product. Mr Tribuzio was referred to T24 which sets out the Jayta specifications of the gas oil imported on board the "Stolt Lily", and which he altered by whiting-out the heading and retyping it to read "Specification – X370". Mr Tribuzio agreed that he had not provided Mr Butler with the specifications for X370 and said:
Well, I mean, we discussed them generally, middle distillate products that we could be importing for us in the same sort of market as Certrex 70 and he accepted the fact that anything of a like nature, his decision would be based on that basis. He didn't ask for any specifications. He didn't require us to submit any specifications at all. And he didn't say, tell me what you are importing. He said, is the middle distillate, is it similar to Certrex 70. Certrex 70 was known as a – for heating oil. He said it didn't matter. He read the Customs tariff exactly like he thought the excise tariff was. We asked him on the excise tariff that products were transposable in terms of excise and use. And any of these products, whether it is similar to X370, Certrex 70, kerosene or what not, in the excise tariff – we went with him in detail regarding the transposibility and exciseability of it. We said to him, if we import a light product solvent under the Customs tariff similar to products that use as a solvent under the excise tariff, is it suitable to be imported under that classification. And he replied, Yes, it wasn't relevant for him to know the technical issues of it. It wouldn't matter what they were.
Mr Tribuzio said that he did not tell Mr Butler that the product he intended to import was suitable as an automotive diesel fuel.
Mr Joseph Brothers gave sworn oral evidence in support of his written statements dated 2 March 2001 and 3 May 2001 (exhibits A44 and A45). Mr Brothers has no formal technical qualifications. However, he studied engineering for a couple of years in the Australian Navy as an apprentice shipwright engineer. The following extracts have been copied from Mr Brothers' written statements in order to ensure that his comments and opinions expressed therein are precisely recorded in these reasons for decision:
I, JOSEPH BROTHERS, of 145 Green Street, Bulla, Victoria, state as follows—
1.I have been a shareholder and director of Parks Holdings Pty Ltd t/a Gladstone Chemicals ('Gladstone') since its inception in 1987. I have been actively involved in the marketing, purchasing and administrative functions within the company since that time. I have also taken a general responsibility for statutory compliance in areas such as Health and Safety, Taxation, Excise and Customs. I have no particular expertise in any of these areas and I rely heavily on the advice given to Gladstone by experts in each of these fields. That advice, when received, would sometimes then be discussed with my partner Sergio and decisions and actions taken and made on the merits or otherwise of that advice.
2.From the period 1987 to 2000 Gladstone was involved in the sale of Heating Oil, Kerosene and many other solvents and solvent blends and petrochemicals. We became recognised over time as one of the largest independent solvent distributors and re-sellers in Australia. Our main suppliers during this period were Mobil, BP and Ampol. In the period leading up to our decision to import solvent X370 our supplies of Mobil solvent Certrex 70 and BP solvent 99 and 99L became increasingly limited. We relied heavily on the sales of these products and naturally it was important to us that we secured a reliable supply.
3.During the period July 96 through October 1996 the sales we made of Solvent 1H were supplemented by our imports of Solvent X370. During that 3 to 4 month period Solvent X370 constituted about 30 per cent of our supply of Solvent Heating Oil. Following the discontinuation of our importations we continued to supply these solvents wholly from local supply with no major change until the business ceased trading in July 2000.
4.During the nine years in which we had been selling solvents, prior to the importations of Solvent X370, we were contacted on at least five occasions by the ACS. Regular requests were made for details of Gladstone's customers and the product types and volumes that were sold to them. Most of our suppliers, which included major oil companies and customers, were regularly contacted.
5.As we often sold both products that attracted excise and products that were excise free, the ACS would visit from time to time and check that our sales and procedures complied with the requirements of the Excise Act. As our sales of excise free solvents were increasing and we were also blending products for customers I felt it necessary to seek clarification and to make sure we were not exposed to excise duty or penalties for some error or omission. I initially made inquiries of representatives of the ACS who visited our offices and they informed us that our procedures were satisfactory. However, as the requirements became more complex I decided that we needed legal assistance.
6.I was aware that BP Chemicals used Freehill Hollingdale and Page for legal advice so in mid-1994 I contacted the firm. I asked to speak with someone who was expert in customs matters and I was put through to Mr Peter Butler. He was identified on his business card as a partner and a specialist in customs matters. I explained to Mr Butler that we were concerned to ensure our procedures and treatment of Gladstone's products was in accordance with the law. After I provided a detailed explanation of our business, both in conference and in correspondence Mr Butler and one of his more junior solicitors confirmed that Gladstone's procedures complied with the ACS requirements. Mr Butler also assisted us in negotiating the terms of an agreement with Mobil regarding the purchase of excise free solvents.
7.When we began to consider the importation of Solvent X370 I consulted with Mr Butler to ensure that we would classify the imported product correctly. Sergio informed me that he had been advised by both BP Chemicals and Exxon that it was usual for solvents to be imported under the classification No. 2710.00.90. I put this to Mr Butler and we discussed the differences between the excise tariff and the customs tariff. Peter told me that he believed the excise tariff and the customs tariff were closely aligned with regard to these products. He said that there was some possibility of confusion within the customs tariff, but he advised that if the product was clearly defined, then if there was any query the relationship between the customs tariff, the excise tariff and by-law 109 would serve to clarify the entry or query. He quoted a number of cases and I recall one being the Savage River Mines case.
8.All of this information was given to me verbally, and at times was complicated. At no time in my discussions with Mr Butler did he suggest that we ask for a customs ruling prior to the first importation. After the meeting I rang Mr Butler and asked him to confirm his advice in writing. After some chasing on my part he did so. His letter confirmed the advice he had given earlier, although it was not quite as clear. Given the difficulties I had getting the letter out of him in the first place I relied on my general recollection and understanding of his advice in conference. I advised Sergio to proceed with that classification, and told him that the product should be clearly described so as not to cause any confusion or misinterpretation on entry. Naturally, since we were selling an excise free locally produced product we did not wish to pay duty on any imported product of the same nature.
9.On arrival of the first shipment on the Stolt Lily, the first part of the shipment was immediately transported to our site at Altona and unloaded into the Solvent 1H tank. The main reason for this was that the tank capacity at our rented tanks at the wharf could not accommodate the entire shipment. Our original intention was to mix all of the incoming Solvent X370 with locally produced product. The purpose was to keep the dilution rates as low as possible and remain fairly close to the product specification for the local product. It later became apparent that this was unnecessary as the main customers that purchased the product were happy to take it in its imported state. This did not surprise or concern me because our major buyers were resellers and may have been blending the product themselves or selling it to companies who used the product in manufacture. We had been dealing with all of these companies for a number of years and had a solid relationship with them. We also had no reason to suspect that the eventual end use was other than a solvent application as assured to us by our customers. To this day no evidence to the contrary has been produced to us.
10.The blended product and the Solvent X370 were sold locally under the name Solvent 1H. This was a name our customers readily identified with and our stock system was set up to deal with this product. As we would often blend Mobil product with BP product or Ampol product of or the same or a similar specification the addition of Solvent X370 to the final product mix of Solvent 1H was simply an extension of our normal practice.
11.I deny that either Sergio or myself has ever knowingly misdescribed product or committed or attempted to commit any fraud whatsoever, whether in relation to the importations of X370 or any other excisable product.
FURTHER STATEMENT OF JOSEPH BROTHERS
1.I refer to my previous statement filed in this proceeding and further state as follows.
2.From 1989 to 1992 I was on the State Executive of the Australian Petroleum Distributors Association ("APADA"). As an Executive Member and Treasurer I was also involved in ongoing industry liaison with, and representations to, Customs regarding proposals for and the implementation of regulations and compliance procedures for the sale and distribution of excisable products.
3.I had general responsibility within Gladstone for maintaining the integrity and accuracy of Gladstone's compliance and record keeping procedures. I supervised staff in relation to these issues. Sergio Tribuzio's principal roles within the company related to the supervision of all manufacturing and blending of Gladstone's own products, the testing of products and the sale of the more specialised products. Business decisions were made by the two of us jointly.
4.In paragraph 2 of my previous statements, I referred to Gladstone's long trading history as one of the largest independent solvent distributors and re-sellers in Australia. Many of the products Gladstone purchased could be subject to more than one rate of excise duty, depending on the intended use for which Gladstone purchased the products and/or the intended use of the products by Gladstone's customers. It is a usual industry practice adopted by all refineries, manufacturers and resellers to re-brand product to identify the seller and its use. For example, heating oil type product is branded differently by the oil companies, and also by Gladstone when selling it to its customers, depending on the intended use. Different manufacturers and distributors adopt their own individual brand names to differentiate their product from that of their competitors. When sold for heating purposes, Mobil Oil Co calls the product Mobil Heat and Mobil Chemicals Co calls it Certrex 72, while Gladstone's own brand name for the product was Gladheat. When sold excise free for use as a solvent, Mobil Chemicals Co calls it Certrex 70 and Gladstone's branding from about 1994 to 2000 was solvent 1H.
5.It is a common industry practice that, when selling non-excisable product, oil companies and manufacturers will require statutory declarations or agreements from their customers confirming that the product will not be sold or used by the purchaser for excisable purposes. Resellers like Gladstone then in turn require similar declarations or agreements from their customers. In fact, at Gladstone there was a standing instruction to all staff that they were not to sell Solvent 1H without first obtaining a statutory declaration or agreement from the customer. This resulted from the need to ensure that the declared end use of multi-functional products was the actual end use. Customs were at all times aware of this practice and to my knowledge endorsed it.
6.Because of the different applications and duty rates that can apply to the same product, some companies store the product in the same tanks but then keep records of the quantities that relate to different duty rates. However, at Gladstone, where possible, we actually stored the product in different tanks according to use and applicable duty rate, as well as maintaining detailed records enabling the tracing of all product, via both the tank and stock control records.
7.I refer to paragraph 8 of my previous statement and say that the letter to which I referred was the letter from Freehill Hollingdale & Page to Gladstone dated 20 August 1996, being the Respondent's exhibit R7.
8.I also say that the actual advice given in conference was that Mr Butler had researched several cases that were relevant to what would happen if the classification was challenged. He asked us what the product was and what its characteristics were. We explained that the characteristics were similar to the product that we were selling locally, which he was familiar with from previous discussions. He said that because of the similarities between the different product descriptions in that part of the Tariff, it was important that we clearly describe the product when importing it. He said that if its solvent nature was made clear and it was clearly described as a solvent, then entry under heading 2710.00.90 was appropriate.
9.I refer to paragraph 3 of my previous statement wherein I discussed Gladstone's importation of Solvent X370. The Solvent X370 was imported for the sole purpose of supplementing our local supplies of solvent heating oil, which at that time were mainly purchased from Mobil (Certrex 70) and BP (Solvent 99L). During the five months period from August to December 1996, the Solvent X370 was usually blended with solvent heating oil purchased from Mobil and BP Chemicals. Over that period, approximately 11.13 million litres of Solvent 1H was sold to our customers. This included a total of 3.77 million litres of rebranded Solvent X370 in the months of August, October and November. For the 12 month period from July 1996 to June 1997, purchases of Solvent X370 represented only about 15% of our total supply of Solvent 1H.
10.All of Solvent X370 was sold to Gladstone's customers under the "Solvent 1H" brand, not as Solvent X370. However, the imported product had to be given its own individual branding for internal stock and quality control reasons to cover the period up until it was blended and or rebranded as Solvent 1H for sale to customers. The Solvent X370 name served this purpose. It was necessary for Gladstone to be able to identify the source of each product or component and the quantity that was available and the margin that it was making on each batch of product. Gladstone was also accredited for quality assurance purposes under International Standard ISO 9002, which required the maintenance of internal specifications for each product that was either used or sold by Gladstone, so that quality control problems could be traced to their source and identified. This is also usual industry practice.
11.Gladstone had an ongoing customer base for Solvent 1H and also used it in the production of various Gladstone's own formulated solvent products. I was usually responsible for sales of this particular product. Pages 174-177 of T25 of the T documents contain a list many of Gladstone's customers for Solvent 1H. The two largest customers for Solvent 1H during the time it included the Solvent X370 were Success Freight Lines Pty Ltd ('Success') and Australian Petroleum Supplies ('APS').
12.Success operates a truck fleet that transports petroleum products and is also a major distributor and reseller of both fuel and non-fuel products Australia wide. Before Esso was taken over by Mobil, Success was also an authorised distributor of Esso fuel and non-fuel products. Success was required by Gladstone to provide a statutory declaration acknowledging that Solvent 1H was to be used only for non-fuel uses and that, if onsold by Success, a similar statutory declaration would be obtained by Success from its own customers. The statutory declaration also included an indemnity to Gladstone against liability. Attachment A is a copy of the statutory declaration.
13.APS ran both a transport company and a distributorship of both fuel and non-fuel products in northern Victoria, as well as operating an independent refinery in Moama. It executed an agreement with Gladstone in which it undertook not to use the Solvent 1H, and several other products, as an engine fuel, and also indemnified Gladstone. Attachment B is a copy of the agreement.
14.In terms of the origin of the Solvent X370, I note that it was sold to Gladstone by Singapore commodity traders, it was shipped to Australia from the Philippines and payment by Gladstone was required to be made both to the commodity trader and to the Petroleum Authority of Thailand. Gladstone was never informed what the country of origin of the crude oil was, what refinery(ies) or country had produced it or whether it constituted a blend of more than one product. Jayta's source might have been an oil company refinery or just another trader.
15.In about 1997, after the importation of the Solvent X370, I was visiting Singapore and actually met with a number of potential suppliers of product, including Jayta. Jayta consists of about 4 women who run their company largely by telephone and fax machine. They are general commodity traders operating out of Singapore and have a wide network of contacts throughout the whole of Asia. They deal in parcels of any type of product which comes their way. They have no particular expertise in petroleum products and they had nothing to do with the manufacture or refining of the Solvent X370. The product specification for the 'gasoil' that Jayta sold to Gladstone would have been written by someone else and given to them with the product. In fact, during our meeting in Singapore, they offered me a wide variety of different products including uniforms and bicycles. I asked them about the Solvent X370, where it had come from and whether it had been blended, but they would not tell me anything about the product. Rather, they told me that that was their 'business' and that they would not reveal the source of the product in case I tried to cut them out as middlemen and went directly to their source for future product.
The point of Customs' reference to the 1997 amendments (from as early as 20 February 2001: T91) was to demonstrate how different was the language of a use-based provision by comparison with a provision expressed in objective terms. It is respectfully submitted that the Gladstone Chemicals' submissions do not, because they could not, meet that point.
(e)"Automotive diesel oil" and "other" not of equal standing and "other" is a category of last resort
Contrary to par 109 of Gladstone Chemicals' submissions, there are authorities on the proper construction of the "other" category", and these are analysed in pars 93-96 of Customs' submissions. The authorities establish that the "other" category is one of last resort, a "drag net" category in the words of Isaacs J (see par 93).
The letters "NSA" to which reference is made in s7(2) of the Customs Tariff Act appear to mean "Not Specified Above". These letters are sometimes specified in sub-headings of the Customs Tariff to indicate that the goods described do not include any good prima facie classified under a previous sub-heading. The instances are few, but examples are contained in heading 2710 (see sub-heading 2710.00.52 and 2710.00.53). The specification of the letters "NSA" serves to ensure that goods are not to be classified in more than one substantive sub-heading of a heading. Where not specified, goods may be so classified under different substantive sub-headings, which would bring the Interpretive Rules into operation. The specification of the letters "NSA" brings about a different result. They serve to indicate that the Interpretative Rules are not relevantly to apply
Section 7(2) does not operate logically with respect to the "other" category. There are no instances in the Customs Tariff in which the letters "NSA" are specified in relation to an "other" category. The instances of specification all relate to substantive sub-headings. The specification of the letters "NSA" in an "other" category would be illogical because the "other" category already operates in the usual case only in circumstances where goods are not able to be classified into a prior sub-heading of the relevant heading (see the authorities mentioned in pars 93-96 of Customs' primary submissions). Section 7(2) does not suggest that the "other" category operates in any other way.
Section 7(2) was introduced with the 1982 consolidation of the Act: see s7(4) of the Customs Tariff Act 1982 (Cth). It was not previously in the Act: see eg the 1973 consolidation. "Other" categories were of course extensively used in the Act from its inception. The function of these categories was not altered by the introduction of s7(2).
Gladstone Chemicals relies upon Rheem (par 113). It was in Rheem that Wilcox J and Burchett J made the statements set out in par 95 of Customs' primary submissions. These statements show that their Honours attributed to the "other" category an operation that in the usual course is of the kind for which Customs contends.
Rheem was an unusual and complex case the actual outcome of which was produced by the application of the Interpretive Rules to the classification of goods comprised of a mixture of substances belonging to different sub-headings. The application of the substantive item (item 39.01.13), the "other" item (item 39.01.19) and Interpretive Rule 3(1) was greatly influenced by the mixed nature of the goods. There is no such complication in the present case. The goods are one thing: diesel fuel.
Gladstone Chemicals also relies upon the decision in Re Impco (par 116). But that too is a case concerned with competing sub-headings relating to different components of the same goods. Nonetheless the passage relied upon by Gladstone Chemicals would appear to assist Customs' case. It emphasises the differences between a case dealing with composite goods and a case, such as the present, dealing with "a singular unit of goods".
Gladstone Chemicals attempts to relate the present case to Rheem and Re Impco (par 118). Faced with the fact that the present case does indeed concern "a singular unit of goods" Gladstone Chemicals argues that sub-headings 2710.00.20 and 2710.00.90 are competing because of the inherent functional differences in the same good (ie, "X-370"). But sub-headings 2710.00.20 and 2710.00.90 are not organised in terms of competing functions. Sub-heading 2710.00.20 refers to particular kinds of diesel fuels. Sub-heading 2710.00.90 simply says "other". This means all "other" goods of heading 2710 not previously described.
Gladstone Chemicals' submissions do not demonstrate that the "other" category is anything other than a residual category that applies only in circumstances where goods of heading 2710 are not to be classified to a previous sub-heading of that heading. As the goods do fall to be classified to a previous sub-heading (sub-heading 2710.00.20), the "other" category (sub-heading 2710.00.90) does not apply.
(f) Evidence of general industry usage
Customs disputes aspects of section A.2.2.3.1 of Gladstone Chemicals' submissions and its interpretation of aspects of the evidence set out in that section. It will supply its reply on these matters in a separate document.
B. THE APPLICANT'S BONA FIDE INTENTION
Customs agrees with the substance of the submissions made in section B1 as to the proper approach of the Tribunal to this aspect of the case.
Customs has set out a detailed case in its primary submissions (section B(6)) as to why Gladstone Chemicals should be found not to have a bona fide intention. The submissions set out Customs' evidentiary case on fraud, negligence, misdescription and misinforming. Customs relies upon these submissions and joins issue with Gladstone Chemicals on this matter.
Customs does wish to make reference to the evidence in reply to Gladstone Chemicals' submissions in section B.2.4 (the solvent market). These will be supplied separately.
DELEGATION
(a) General factual matters
As to the circumstances of the demand (Gladstone Chemicals' submissions, section C.1.2.), Customs submits that the evidence of Mr Johnson is uncontradicted that he had obtained oral approval from Ms Stretton to appoint Mr Walker to act in his position before 19 May 1997 (T404).
Gladstone Chemicals did not seek to cross-examine Ms Webb as to her statement (Exhibit R16) or Ms Weaver as to hers (Exhibit R17). These witnesses explained the operation of the Nomad system and the significance of Ms Stretton's confirmation of approval inputted on 2 June 1997.
Mr Walker's demand was delivered pursuant to his instructions at a time when he was acting in Mr Johnson's position and therefore it took effect at that time.
(b) Existence and significance of clerical error in delegation
As to Gladstone Chemicals' submissions in section C3.1.2 Customs submits that the Tribunal has not been asked to rectify an error. It is agreed that it does not have jurisdiction to issue such relief. This is not the nature of Customs' case. Customs' case is that the Tribunal should interpret the document, not rectify it.
In par 26 Gladstone Chemicals refers to the issue of other errors in the delegation and the failure of Customs to explain these. Ms Romaniuk explained the errors in relation to Mr Walker's position and she was not called for cross-examination. The existence of other errors is not relevant to the explanation of how the error occurred in relation to Mr Walker's position. Alternatively, it is to be inferred that the same explanation applied to these errors.
How the clerical error occurred was explained in the evidence of Mr Drury, Mr Kelly and Mr Jeffrey (Exhbit R13, par 4), among other witnesses.
In respect of the allegations in par 30 of Gladstone Chemicals' submissions, Mr Kelly said (T615) that he intended to act in accord with the recommendations of his various managers and that "it was [his] intention to give effect to the recommendations that had been put to [him]". It was therefore his intention to delegate power under s165(1) to the position held by Mr Walker.
It is submitted that the Tribunal is entitled to examine the circumstances surrounding the execution of the instrument of delegation: see BHP Petroleum at 297 referred to in par 161 of Customs' primary submissions. The conclusion in that case that an error had been made was arrived at by Beaumont J upon the basis of "reading the whole of the correspondence in its context". The context of the present case points strongly to the existence of an error.
Customs does not submit that the delegation should be construed loosely (par 44 of Gladstone Chemicals' submissions refers). It contends that the instrument should be interpreted appropriately in the light of received authority to the effect that obvious clerical errors may be taken into account.
(c) De facto officer
The ambit of the de facto officer principle was not defined exhaustively in G J Coles (par 70 of Gladstone Chemicals' submissions refers). That case is to be distinguished on the facts.
If Mr Walker acted in the absence of a proper delegation his demand was nonetheless entitled to the protection of the de facto officer principle. Both Customs and Gladstone Chemicals assumed that he was properly authorised. The assumption by Customs that he was properly authorised led to no further demand being made (T401). Gladstone Chemicals relied upon the making of the demand for the purpose of making a payment under protest and applying to the Tribunal. The principle is not entirely based on the protection of the interests of the public. Generally Customs relies upon the decision in Byrne (see pars 163-164 of Customs' primary submissions).
(d) Malika Holdings
Gladstone Chemicals' case in relation to the decision in Malika Holdings is summarised in par 86 in the following terms:
(a)Customs' submissions raise issues that go beyond the jurisdiction of the Tribunal.
(b)Customs has misconstrued the relevant passage in Malika Holdings and failed properly to interpret it in context.
(c)The Tribunal should be satisfied that the conditions for the application of the judgment of Gummow and Callinan JJ do not exist in this case.
(a)Jurisdiction of Tribunal
Customs has submitted that the Tribunal has jurisdiction in this application under s167(1) and s273GA(2) of the Customs Act (see pars 135-143).
As Customs understands them, Gladstone Chemicals' submissions are to the following effect:
·A demand under s165 is necessary before Customs can recover unpaid duty.
·Such demand can only be made by a proper delegate.
·Since Mr Walker was not a proper delegate (his delegation being defective), the necessary demand was not made.
·The decision at issue is Mr Walker's demand under s165(1) and no other.
·The decision to make the demand should therefore be reviewed in favour of Gladstone Chemicals in the exercise of the Tribunal's jurisdiction under s167(1) and s267GA(2).
Customs' response to these submissions is as follows:
· Malika Holdings establishes that, in the circumstances of the present case, no demand under s165 was necessary before unpaid duty could be recovered.
· Customs could have sued for recovery under s153 but by agreement Gladstone Chemicals paid duty under protest in respect of the Stolt Lily shipment and made application for review under s167(1) and s267GA(2) to test the issue of liability.
· There exists a decision of the Collector to demand a sum of unpaid duty in the broad sense contemplated by s167(1) and s267GA(2) (see par 141 of Customs' primary submissions). The decision was Mr Walker's.
· Any want of authority on the part of Mr Walker to make a demand under s165(1) did not destroy the existence of a decision by the Collector to demand unpaid duty of Gladstone Chemicals.
· The issue before the Tribunal is whether the decision of the Collector to demand that unpaid duty be paid is reviewable by the Tribunal but was correct.
The decision under review in the present case is not, as Gladstone Chemicals would have it, the decision of the CEO to make a demand under s165(1). The making of a demand under that section is a consequence of the decision of the Collector that duty was owing and payable and, where s165(1) applies, it is a condition precedent to recovery action. Gladstone Chemicals' submissions fails to distinguish between the requisite procedural step of the demand by the CEO under s165(1) from the underlying substantive decision of the Collector that duty is payable.
Mr Walker was a Collector: see the definition in s8(1)(a)(iii).
For these reasons the Tribunal has jurisdiction in this matter. It should affirm the decision of the Collector that the goods fall to be classified to sub-heading 2710.00.20 of the Customs Tariff.
(b)Misconstruction of judgment of Gummow and Callinan JJ in Malika Holdings
It is submitted that the passage in par [77] of the judgment of Gummow and Callinan JJ (with which Gleeson CJ agreed at par [1]) is quite clear and speaks for itself. It means that s165(1) has no application where Customs is misinformed by the importer. It is concerned with redressing mistakes made by Customs.
In the present case Customs was misinformed because Gladstone Chemicals did not specify the correct sub-heading of heading 2710 in the entry documents or bring the issue of proper classification to Customs' attention.. Customs relied upon Gladstone Chemicals' description because the system is based on self-assessment. Customs made no error that it had to correct within the 12 month time limit in s165(1).
Gladstone Chemicals' submissions in pars 92-102 place an untenable construction on the judgment of Gummow and Callinan JJ in par [77]. Their Honours quite deliberately chose the word "misinformed", not "fraud", "careless misdescription", "reckless" or similar such words. They referred to the work of Dr Wollaston earlier (par [74]) and could have adopted his formulation but chose not to.
Customs' submissions do not imply that the High Court in Malika Holdings disregarded the express provisions of s165(1). The submissions rely on the High Court's decision as to the proper interpretation and consequent operation of that provision.
(c) Non-fulfilment of conditions in Malika Holdings
Customs agrees with Gladstone Chemicals that the Tribunal should decide whether the company was guilty of material fraud or careless misdescription, but for the following reasons.
Customs submits that Malika Holdings establishes that s165 does not apply where Customs has been misinformed by the importer and made no mistake itself (see above). If this is correct, it would not be necessary for the Tribunal to determine whether Gladstone Chemicals had been guilty of fraud or careless misdescription. If the company had failed to specify the correct sub-heading on the entry documentation and did not bring the issue of proper classification to Customs' attention, this would of itself exclude the operation of s165. If Gladstone Chemicals accepted that this submission was correct, the issue of fraud and careless misdescription would have been irrelevant except as to the issue of intended use.
However Gladstone Chemicals rejects the correctness of these submissions. It contends that the principle expounded by Gummow and Callinan JJ in Malika Holdings requires Customs to establish fraud or careless misdescription. Customs has responded by attempting so to do. It submits that it has done so. The issue having been raised by the parties, it should be determined by the Tribunal.
Customs submits that the Tribunal should decide the case on this point at both levels:
It should decide whether s165(1) does not apply because Gladstone Chemicals misinformed Customs and Customs made no mistake itself.
Lest it be found hereafter to have been necessary, it should also decide whether s165(1) does not apply because Gladstone Chemicals was guilty of fraud or careless misdescription.
Customs does put its case against Gladstone Chemicals at both levels (par 104(d) of Gladstone Chemicals' submissions refer). It contends for the reasons set out in section B(2) of its primary submissions that Gladstone Chemicals misinformed Customs and was guilty of fraud or careless misdescription.
As to par 104(e)-(f) of Gladstone Chemicals' submissions, it is submitted that the existence of misinforming or fraud wholly excludes the operation of s165(1). In such case Customs is alleviated from the requirement to make a demand within the 12 month time limit. The importer who misinforms or defrauds entirely loses the benefit of that procedural safeguard. The operation of s165(1) having been extinguished by the importer's conduct, the operation of the provision is not resuscitated because Customs is fortunate enough to discover the true situation within time. So, for example, the importer does not recover the benefit of the provision because, after entry, an honest informer brings the true character of the imported goods to the attention of Customs.
ANNEXURE U
Evidence - Solvent Market (B.2.4 in the Applicant's Submissions
par 67-72 pages 55-62)
1.The material referred to by the Applicant to support the proposition that the market for the imported product was considerable (par 69(a)) does not support that contention.
2.The Applicant led no evidence from any person to the effect that any of the goods it had imported in the three shipments, Stolt Lily, Stolt Sunshine and Sampet Hope, were actually used in the solvent industry.
3.The evidence referred to in the above submission is to the effect that there existed various possible uses for a product with specification of X-370 but no evidence was given of any market willing to use X-370 as solvent.
Mr Biddington
·said that X-370's high boiling point would inhibit evaporation so that in use as bitumen cutter it was less desirable if the consumer required it to evaporate it quickly (T909)
·X-370 could suitably act in concert with other products in the mould release oil application. Mould release oil application was not considered by Mr Bryant to be a solvent (T1155). It was not the applicant's case that there was any intention to market the product for non-fuel uses as opposed to as solvent. The product was described in commercial documentation and entered as solvent. Mr Butler thought that the intention of the Applicant was to import a product for use as a bitumen cutter (T1130) and possibly other unspecified applications.
·referred to flux which had a high boiling point like X-370 (T909 and 918). He said at T920, flux was more likely to "hang around".
·said that bitumen cutter was mainly used by major companies which dealt with the larger suppliers (T922-4). He said that a few minor companies dealt with recovered oil.
·said that while most purchases were made from major companies, traders did have a part to play in the industry (T925), if a trader could sell at a cheaper rate (T936).
·referred to Cetrex 70 and X370 as different but similar (T929).
·suggested a mould release agents as one of the biggest possible users of an X370 type product (T943) and acknowledged X-370 looked like an automotive fuel (T944).
Mr Horne
·worked for Solchem, a company that took over the retail aspects of the Applicant in 1998 (Exhibit A49 Par 5).
·Solchem did not sell products with the specification of X-370. A description at para. 18 of Exhibit A49 discloses the brands sold to former customers of Gladstone Chemicals. The products are not X-370 products.
·Contrary to Mr Biddington's evidence he denied that the market for mould release agents would have been a major market of X-370 products (T1019) and had not heard of Australian Petroleum Suppliers and/or Success Freightlines (T1029-1030). Although he acknowledged that he was not familiar with the Applicant's customers for bulk business (T1030) he appeared to be aware of the Applicant's customers when the business was purchased he said that if the above were major customers he would have known about them (T1030).
Mr Bryant
·acknowledged a lack of expertise in the low grade solvent market (T1153) but said that he had spoken to a colleague within Shell who had experience in the bitumen market. The evidence he gave in relation to the limited nature of that market for a product with the specifications of X-370 comes from that source (T1178) (Exhibit R30 par 11).
·The Respondent produced a list of clients of Shell for various bitumen type materials (Exhibit A58) (on a confidential basis) none of which included Australian Petroleum Suppliers nor Success Freightlines. If Australian Petroleum Suppliers or Success Freightlines were major marketers of X-370 type product as solvent one might expect those companies to have a reputation as marketers of such solvent. The evidence does not suggest that inference.
·Mr Bryant was able to say from his experience with transport companies that it was unusual for transport companies to sell fuel and solvent products (T1168). This was information that he had obtained in the 1980's when marketing solvent products throughout Victoria and speaking to distributors.
·Mr Bryant confirmed that large companies generally used tender processes to identify the cheaper suppliers (T1165) and confirmed that specifications such as Cetane and Index Carbon Residue Ash Colour were specific to fuels (T1146).
ANNEXURE V
Evidence of General Industry Usage – Par 43 of the
Respondent's Submission in Reply
The proposition in paragraph 35(e) of the Applicant's Submission is factually wrong. It was not the "consistent and largely uncontested evidence that … the identify and description of the product is determined by the intended use for which the product is either marketed or purchased".
(a)Mr Gunn
·Mr Gunn said that a product was to be classified by reference to description on the invoice (T763 L6-8). That evidence reflects adversely on Mr Gunn's evidence on this issue. If correct, there would be no need to identify the goods by reference to the intention of the user.
·Mr Gunn in evidence at T716-737 agreed that ASTM396 identified different grades of heating fuels (T717); that that standard has application in Australia, (including with the Australian Institute of Petroleum (T25/48)); automotive distillate was a heavier product than heating oil (T720); particular boiling points and specifications meant that the product did not meet specification for heating oil (T722).
·The industry treated heating oils as different product from a product with the specifications of X-370 (T721).
·If the analysis of the Applicant be right, the difference between sub-heading 2710.00.20 and sub-heading 2710.00.30 would be sufficiently constituted by the intention of a particular user to use a product as heating oil or diesel fuel. This is not the position argued for by the Applicant in relation to classification to sub-heading 2710.00.30.
·Mr Gunn accepted that X-370 would not meet the specifications of heating oil (T731, T1222-4).
-Mr Gunn accepted that fuel oil was product which was burnt in continuous combustion (T733) and appeared to have understood the qualification introduced by the note in paragraph 1(a) to (c) to the Chapter so as to exclude the imported product from the category of fuel oil in 2710.00.20 (T733-5). If the Applicant be right that note should be ignored if the intention of the customer was to use a product as fuel oil.
·What marketers of various products choose to call products does not change the characteristics of the product for the purpose of the tariff.
·Mr Gunn gave contradictory answers as to the importance of each criterion in AS3570 (T659-668 and exhibit A38 pages 14-21).
(b) Mr Bruce McIver
-The passage in paragraph 42(c)(iii) referring to Mr McIver's statement (Exhibit A38 par 11) after word "material" includes "and listing test results for all the required properties".
·Paragraphs 42(b) and (c) focus on relevant specifications "which classify the product for sale". It follows therefore that if the specification is of diesel fuel, the product is a diesel fuel.
·In sub-paragraph (c) he makes reference to specifications and certificates of quality identifying the particular material and listing test results for all the required properties.
·Presumably specifications and certificates of quality are necessary to ensure that the product functions in industrial or commercial context eg a diesel engine if it is a diesel fuel irrespective of intended use.
-The Applicant's technical witnesses, including Mr McIver at least initially required that all the specifications of AS3570 be satisfied before a product was to be classified as automotive diesel fuel (T506).
-There would be no point in the industry being concerned with specifications and waivers if a product was defined by reference to intended use.
-Mr McIver said that while automotive diesel fuels could be sold as marine diesel fuel automotive diesel fuel specification were "tighter" (T523). It follows that there is a distinction to be drawn between different products within the diesel fuel categories by reference to different specifications which enable the product to work in different type engines. This evidence does not suggest that Mr McIver intended to define goods in issue by reference to intended use (T523).
(c) Dr Richard Michell
-At paragraph 47 of the Applicant's submissions reference is made to products falling within the category of "Specialised Products for Particular Use" presumably because that product contains some specifications which suited it for that use. By way of example when referring to mould release agents and bitumen cutters, he makes reference to only three or four properties (Exhibit 42 par 14). Intention to use is not one of them. i.e. he refers to properties which render the product suitable for particular use. No doubt customer's intended use is important. It enables Dr. Michell to determine which product is suitable for the customer's needs. That intent does not define the product.
·References to specifications (T772 and 776) constitute a recognition that particular goods are known in the industry as particular goods because they possess certain objective characteristics.
(d) Mr Biddington
·Mr Biddington was concerned with marketing of petroleum products (Exhibit A46 par 2).
·He identified products by reference to specifications (T930-4).
·His evidence confirms the analysis that the issue of intention of a particular user is not a factor in defining the goods, particularly exhibit A46:
"Each of these multi purpose products would have a detailed manufacturer's specification, par 10 … the product data sheet would only list the typical values of the parameters that characterise its suitability for a particular use … par 13. Products that were manufactured by Mobil for sale in Australia were usually produced for particular end uses and the specifications were developed around those requirements…"
·At par 16 Mr Biddington makes the point that a customer's intended purpose or use for a product may involve variation from the manufacturer's specifications. By implication the specification would be referable to a particular product identified in the industry. i.e. a customer may require automotive diesel fuel but with some particular additions which make it suitable for a particular purpose. The product will remain automotive diesel fuel up to the point when the variation from automotive diesel specification is so great that it ceases to be a product suitable for powering of a vehicle in which case it ceases to be automotive diesel fuel. Mr Frank Russell's evidence (exhibit A37) is to like effect.
(e) Mr Shuptrine
-Mr Shuptrine, as acknowledged by the Applicant at paragraph 51, has an expertise in the manufacture of petroleum products but as well has a broad range of experience in the industry.
·His evidence was in the terms of identification of diesel fuels by reference to suitability for use and specifications and qualities as determining suitability for use.
·He confirmed that the Stolt Lily product was not a fuel oil (T1107) and was compliant with specifications for marine diesel fuels (T1108-1109); also reference to T1109 for the distinction whether the product fell within sub-heading 2710.00.20 or sub-heading 2710.00.30.
·The Respondent refers to its submissions in relation to Mr Shuptrine's evidence as confirmatory of denial of identification of diesel products by reference to the intended use of a customer.
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