Philip Morris Limited & Ors v Commissioner of Business Franchises & Anor; Coastace Pty Limited & Anor v State of New South Wales & Ors; Harper v Minister for Sea Fisheries

[1989] HCATrans 46

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M87 of 1987

B e t w e e n -

PHILIP MORRIS LIMITED, STATEWIDE

TOBACCO SERVICES LIMITED and

G.P.M. CIGARETTE DISTRIBUTORS

(AUSTRALIA) LIMITED

Plaintiffs

and

COMMISSIONER OF BUSINESS FRANCHISES

and THE STATE OF VICTORIA

Defendants

Case stated

Registry No CB of 1987

B e t w e e n -

COASTACE PTY LIMITED

First Plaintiff

ROGER WILLIAM PETERS

Second Plaintiff

and

Philip Morris 98 8/3/89

STATE OF NEW SOUTH WALES

First Defendant

ANTHONY DANIEL CLYNE 1 CHIEF CXM1ISSIONER

FOR BUSINESS FRANCHISES LICENCES

(TOBACCO) OF NEW SOUTH WALES

Second Defendant

WAYNE DUESBURY

Third Defendant

IAN P SMITH

Fourth Defendant

Case stated

ClTl/1/PLC

Office of the Registry

Melbourne No MlO of 1988

B e t w e e n -

GEOFFREY ALAN HARPER

Plaintiff

and

MINISTER fOR SEA FISHERIES,

DIRECTOR OF SEA FISHERIES AND

THE STATE OF TASMANIA

Defendants

Demurrer

MASON CJ

BRENNAN J

DEANE J

DAWSON J

TOOHEY J

GAUDRON J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 8 MARCH 1989, AT 10.16 AM

(Continued from 7/3/89)

Copyright in the High Court of Australia

ClTl/2/VH	99	8/3/89
Philip Morris

MASON CJ:	What I am about to say reflects the view of the members
of the Court other than Justice Deane. Having
considered the arguments presented by counsel yesterday, the Court does not propose to reconsider the correctness of the actual decisions in
DENNIS HOTELS PTY LIMITED V VICTORIA, DICKENSON'S ARCADE PTY LIMITED V TASMANIA, and
H.C. SLEIGH LIMITED V SOUTH AUSTRALIA.
DEANE J:	I would not preclude counsel from arguing that the

earlier decisions were wrongly decided and should

not be followed.

MASON CJ:	Yes, Mr Charles.
MR CHARLES:	If the Court pleases. Your Honours, may I put

what I understand the position to be in order that

the Court will correct me instantly, I have no doubt,

if my understanding is incorrect. The Court will

have seen from the summary of argument that was

handed in yesterday the arguments that are intended

to be addressed on behalf of the Philip Morris

plaintiffs. Now, Your Honours, the Court will see

on page 4, after that part of the material which

deals with the legislation, both in Victoria and

Tasmania in HARPER's case, the heading "D. Submissions

as to correctness of DENNIS HOTELS."

The Court will appreciate that there were two

ways in which our arguments might have been addressed to the Court. The first and wider way which we would

have preferred, would have been to ask the Court to
reconsider in its entirety the decision in DENNIS HOTELS.

The second way, Your Honours, which does not involve

asking the Court to overturn that decision, involves
a series of arguments based upon the fact that the

plaintiffs here are wholesalers and, as to the first

of them, a producer. I would now wish to put an

argument to this Court that that fact distinguishes

the situation from the one which obtained in the

earlier cases.

(Continued on page 101)

ClTl/3/VH	100	8/3/89
Philip Morris

MR CHARLES (continuing): My understanding from what the

Court has said and in the light, for example, of the way in which the Court has approached

the DENNIS HOTELS' island, if I can so describe

it, in cases such as GOSFORD MEATS, would be

that I remain entitled to put to the Court an

argument suggesting that DENNIS HOTELS is to

be confined not merely to a scheme for licensing

the sale of tobacco and liquor but also is to

be confined in such a way as not to permit the

taxing of a producer in the course of such a

licensing scheme.

MASON CJ: Mr Charles, it is open to you to put such arguments

as you consider would justifiably distinguish

the present case from the actual decision in

any of the three cases mentioned. Whether the

argument is well founded is a matter ultimately
for us to rule upon but as long as you recognize
the distinction between distinguishing the current
case and seeking to overrule the earlier cases

then the arguments you want to presen~ would

fall within that band.

MR CHARLES: If I could assist the Court in one further

step to indicate my intentions, the course I

would propose to follow in argument follows

substantially that which is already contained

in the summary of arguments. The Court will

appreciate that the summary of arguments was

couched in terms in which we sought to argue

that DENNIS HOTELS was wrong and should be overruled.

We would now instead seek to argue that DENNIS

HOTELS should be confined and if the Court reads

"confined" rather than "overruled" then the

meaning that we will be seeking to argue will

become plain.

If the Court pleases, may I now take the

Court back to page 2 of our summary of argument

and to the legislation.

MASON CJ: Mr Charles, perhaps I should raise with you

at this stage whether it is desirable to hear

the three cases together now we have got this

preliminary question out of the road or whether

it would be preferable to hear them in succession.

I can understand that maybe the third case in

which you appear is distinct from the other
two and perhaps there are stronger reasons for
hearing that separately at the conclusion of

the argument on the first two.

ClT2/l/ND	101	8/3/89
Philip Morris

MR CHARLES:  The third case, Your Honour, is unquestionably

distinct.

MASON CJ:	Yes.
MR CHARLES:	There are, however, as I follow it, different

matters that arise in relation to the first and

second, not merely minor differences in the

legislation. I, Your Honour, have no view as to

whether it is desirable that they be heard together.

I would simply propose to proceed. It may be a

matter that the Court might wish to put instead

to my learned friend,Mr Jackson.

MASON CJ:  Yes. Well, we will hear your argument on the

first case and then we will hear what Mr Jackson
has to say about the order of events at the

conclusion of your address.

MR CHARLES:  If the Court pleases. Your Honours should

have at least two, if not more copies now, of the

Victorian BUSINESS FRANCHISE (TOBACCO)legislation

and I would invite the Court to turn to it. It

may assist if, before I start inviting the Court's

attention to precise terms of this Act, I also

hand to the Court copies of the Tasmanian legislation

that was considered by the Court in DICKENSON'S

ARCADE.

MASON CJ:	Yes.
MR CHARLES:	If members of the Court now have a copy of

that Act, it will be seen - if the members of
the Court would be good enough to turn to page 73
of the print it will be seen that Part. II deals

with a "Tax on the Consumption of Tobacco".

DAWSON J:	Page 73, Mr Charles?
MR CHARLES:	Your Honour, page 73 in the top right-hand

cotner.	It is only the third page of the
document that has been handed to the Court.

It is a tax, Your Honours, on the consumption of

tobacco.

(Continued on page 103)

ClT3/l/HS	102	8/3/89
Philip Morris

MR CHARLES (continui_ng):  Then at page 75, Part III contains

passages dealing with the licensing of retailers

of tobacco. So far as those provisions are

concerned, Your Honours, there are provisions

which introduce a calculation of the fee for
licensing purposes based upon an earlier period

and to that extent the legislation is comparable

with the Victorian legislation that is now

before the Court. The only difference I am

seeking to draw the Court's attention to at

this stage is that this is legislation dealing

with a consumption fee and the licensing of

retailers and fees payable by retailers. To

that extent, Your Honours, this legislation is

therefore considerably down the line from the

Victorian legislation which introduces what is

in effect alternative payment of the fee either

by wholesalers who may include producers and

retailers.

Your Honours, we draw attention first

to the fact that the Victorian legislation

prohibits any person from wholesaling or

retailing without first obtaining a licence.

That appears in section 6(1) on page 10 of

the print, and in section 8(1) on page 13.

The Court has been told that so far as the

legislation this year is concerned these

provisions have been amended in ways immaterial
to this case.

Next, Your Honours, the licences authorize the holder to retail or wholesale tobacco on

specified premises nominated by the licensee.

That is in section 8(3) on page 14. The

licences, Your Honours, are not transferable;

they are, of course, monthly licences. On pages 2

to 3 the Court will see the phrases "Tobacco

retailing" and "Tobacco wholesaling" defined.

"Tobacco retailing" is:

the business of selling tobacco by

retail in the course of intrastate trade

either alone or in conjunction with any

other merchandise.

And then, "Tobacco wholesaling", Your Honours,

means:

the business of selling tobacco in the

course of intrastate trade for the purposes

of resale either alone or in conjunction with

any other merchandise and includes such

business carried on as part of or in conjunction with any other business.

I put to the Court yesterday that this would

inevitably cover a producer of tobacco. We would

CIT4/l/JM	103
Philip Morris

say, Your Honours, that that must be so

so long as the producer within Victoria sells

the product and in particular we draw attention

to the inclusive words at the end of the definition.

Then, Your Honours, the licences, apart from

the retail licences, are monthly licences. That

is by virtue of section 9(1) on page 14.	So that
the wholesale licence is a monthly licence.	The

fee payable is fixed by section 10. It comprises -

on pages 16 to 17 - a small initial fee of $50

together with an amount of 30 per cent of the

value of tobacco sold by the applicant in a prior

monthly period being the next to last month.	We
draw attention, Your Honours, also to the

definition in section 1(6A) on page 4 of "relevant

period". It actually sets out, Your Honours, in

columnar version the definition.

(Continued on page 105)

CIT4/2/JM	104
Philip Morris

MR CHARLES (continuing): We draw attention

to section 10(3) and (4) and	if I may deal with
subsection (4), the case of	the wholesaler, the
Court will see that:

Where an application is made for -

such a licence -

and the applicant did not carry on tobacco

wholesaling for the whole of the relevant

period, the fee payable ..... is assessed by

the Commissioner as being just and reasonable
in the circumstances of the case having regard

to the tobacco that would have been handled

by the applicant had he been carrying on

the business in respect of which the application
for the licence was made for the whole of

the relevant period.

Your Honours, one question, obviously, that may

arise is whether that can be seen as an attempt

to fix a value for the premises. We would say
that what it does is to invent a fiction. Indeed,

if someone is starting up a new business, it would

be difficult to have any real anticipation of

the amount likely to be one in the business.

It is simply a means of ensuring that the tax

is collected on a continuing basis and can go

no way, in our submission, to suggesting a value
of the business.

Then, Your Honours, next, by section 10(1), the Court will see that in calculating the licence

fee, the value of tobacco sold in the prior period

by one licenced wholesaler to another, or purchased

in the prior period by a retailer from a licenced

wholesaler, is to be excluded which ensures that

the licence fee is only exacted once in respect
of the same tobacco. Your Honours, by section 7(3) and (8) on

pages 11 and 13, the licence fee is to be paid

at the time application is made for the licence

subject to any arrangement that may be made with

the Commissioner.

(Continued on page 106)

ClTS/1/SDL	105	8/3/89
Philip Morris

MR CHARLES (continuing):  And in the case, Your Honours, of a

licence granted under section 9(2), then the licence

fee may be payable by instalments if the Commissioner

so authorizes. The provision for that is on page 20

of the print but is not relevant for these purposes and,

Your Honours, an adjustment may be made to the amount

of the licence fee upon revocation of the licence -

that appears from section 9(3) on page 15.

We submit, Your Honours, that on its proper

construction the Act imposes a tax on the act of

selling tobacco by wholesale, that is to say a sales tax,

and then continues to provide a detailed scheme for

the collection of that tax.

Your Honours, may I now move from that to our submissions appearing on page 4. I do not think,

Your Honours, that there are any relevant facts in the

case stated to which I need at this stage to draw the

Court's attention. We commence our submissions,

Your Honours, in paragraph 14 on page 4, a submission

which is taken from many judgments .. The_Court will

recognize its appearance repetitiously throughout the

cases that the licence fees here, we would submit, are

clearly taxes, compulsorius actions for public
purposes enforceable by law and not payment for

services rendered.

Then, Your Honours, it is our submission that a

tax which is imposed on the sale of goods in the

course of their distribution is an excise duty. We

submit, Your Honours, that that has been established

as long ago as the newspaper case, JOHN FAIRFAX & SONS

LTD V NEW SOUTH WALES, and the petrol case,

COMMONWEALTH OIL REFINERIES V SOUTH AUSTRALIA, and

has been settled since PARTON V MILK BOARD.

(Continued on page 107)

ClT6/1/JH	106	8/3/89
Philip Morris

MR CHARLES (continuing):  May I take the Court very briefly to

some passages in those cases, starting with the

OIL REFINERY case, 38 CLR 408. Your Honours, so far

as the OIL REFINERY case is concerned, I invite the

Courts attention to what was said by Sir Adrian Knox

at page 420 and the Court will see that the

Chief Justice, starting on the fourth line said that:

The expression "duties of excise" had, before the enactment of the CONSTITUTION, been used in Acts passed by the Parliaments of some, if not all, of the States. For instance, by the

CUSTOMS AND EXCISE DUTIES ACT 1890 of the

State of Victoria "duties of excise" were

charged on tobacco manufactured in Victoria.

The duties so described were distinct from

the annual licence fee payable for the right

to manufacture tobacco. They were payable on all tobacco manufactured in Victoria on being

entered for home consumption, no duty being

chargeable in respect of tobacco exported. I

can find no substantial distinction in character

between the tax imposed by that Act and the

tax imposed by the Act No. 1681 on motor

spirit produced in South Australia. In each

case it is assumed or intended that the burden

of the tax is to be passed on by the person

paying it to his vendee and ultimately to the

consumer - that is to say, it is what is known

as an indirect tax. In each case the tax is

levied only in respect of goods to be consumed in the State. In the case of motor spirit the tax is, in practically every case, paid by

the producer, who is authorized by the Act
(sec. 4(3)) to add the amount of the duty
to the contract price of spirit delivered after

the connnencement of the Act in pursuance of a

contract of sale made before that time.	The
tobacco tax is, in effect, paid by the

manufacturer in all cases. In the case of

tobacco entered by him for home consumption he

pays the duty on delivering the entry. In the	case of tobacco sold by him before entry for
home consumption the price would be calculated on the footing that the purchaser would be
liable to pay the duty and would therefore be
less by the amount of duty than if the duty
had been paid by the manufacturer.

Your Honours, reference was made in that passage to the Victorian Act of 1890 and may I hand to the Court

some short extracts from that particular piece of

legislation. Your Honours, the purpose of the

submissions that I am about to make is to reinforce,

ClT7/l/BR	107	8/3/89
Philip Morris

if reinforcement is needed, the conclusion to which

this Court has come on numerous occasions that the

nature of an excise includes a tax levied on goods at any stage from the start of manufacture down to the point of reaching the consumer.

(Continued on page 109)

ClT7/2/BR	108	8/3/89
Philip Morris

MR CHARLES (continuing):  I refer, of course, to statements of

principle such as those made by Sir Frank Kitto

in DENNIS HOTELS, accepted by this Court in

BOLTON V MADSEN. In each case, Your Honours, there

has been no question that attacks levied upon sale

and upon or in respect of goods, may be an excise.

McHUGH J:	Mr Charles, in this very case, though,
Mr Justice Isaacs took a different view,page 426.
MR CHARLES:	Yes, Your Honour, I accept that.
McHUGH J:	I appreciate his view did not prevail.

MR CHARLES:  Yes, I accept what Your Honour puts to me. The

point I am seeking to make, Your Honour, is that

if one looks back to the 1890 Victorian Act, which would

of course, have been an Act well known to those

who were engaged in convention debates and as the

Judges said in the course of argument, was an Act

which was similar to legislation in each of the

other States. What it demonstrates is that it is

not merely for the purposes of the interpretation

of section 90 that it is necessary that an excise

be seen as a tax levied after manufacture and

production has ceased and continuing in relation

to sale and distribution.

Our submission, Your Honours, is that it is

necessary to the very nature of an excise itself

that that be so because an excise attaches to goods;

they become excisable in the course of manufacture

and they remain excisable goods until the tax is

paid, that is, right up to the moment when they are
in the consumer's hands. If the consumer is holding

excisable goods on which the tax has not been paid

they may be seized from him. That, Your .. Honours,

is clear; it is obvious from the very nature of

an excise, but it is clear from:looking at the scheme

of the legislation which the Court has just been

handed.

If Your Honours look at sections 183, 184, and

185 of that 1890 legislation it will be seen that,

by section 183:

No person shall grow tobacco unless he shall

have registered his name in the office of

the commissioner or in such other office as

may be duly approved by the commissioner for

the purpose, specifying the number of acres

in cultivation; and such person shall from

time to time report the amount of his crop and

where stored and to whom sold, and shall

verify such report by a statutory declaration.

ClT8/l/VH	109	8/3/89
Philip Morris

By section 184:

No person shall deal in or sell tobacco cigars

or snuff unless he shall previously have

registered his name and the place where he desires

to sell any such tobacco cigars or snuff

and shall have obtained a certificate for so

doing in form specified in any regulations
made or for the time being in force under the

provisions of this Division.

Then, in section 185, Your Honours:

Any officer of customs having a writ of

assistance or any other person duly authorized
in writing by the commissioner may enter any
land premises houses buildings or other
place whether registered or licensed under

this Division ..... or not and search for any

tobacco whether manufactured or not cigars

or snuff, and seize and take away any such

tobacco cigars or snuff upon which there has

not been paid the duty properly chargeable

thereon as may be stored or be in the

possession of any person in contravention of

this Division of this Part of this Act.

Now, Your Honours, that scheme is mirrored in any

excise legislation one cares to look at. Comparable

provisions will be found in the Commonwealth EXCISE ACT of 1901 to the extent that one needs to look at legislation of that kind to see what was an excise

as it was then contemplated.

(Continued on page 111)

ClT8/2/VH	110	8/3/89
Philip Morris

MR CHARLES (continuing): And we would submit, Your Honours,

it is a helpful guide to the way in which the

framers of the CONSTITUTION saw an excise.

What this means is that the amount of excise

duty could be seized from anyone in relation

to a bottle of whisky, say, upon which the excise

tax had not been paid. If one takes an obvious

example of a bottle of whisky which has a full

retail tax paid price of $20 upon which the

excise is $10 and if one assumes that the original

cost to the manufacturer was something like

$5 then at every point of sale down the line

into the hands of the consumer, if excise has

not been paid, the consumer will pay $10, presumably,

for that bottle of whisky.

We would say, Your Honours, it is therefore

not in the least surprising that that single
item, that bottom of whisky, should be seizable
from any person down that chain into the hands
of the consumer where the tax has not been paid.

And the purpose of that submission, Your Honours, would be to make goo~ if it were necessary for

our argument, the contention that if necessary
one could justify an argument that even a tax

on consumption is appropriately an excise having

regard to the very nature of excise legislation

and the very nature of excise.

Of course, it is not necessary for our argument

to go so far. If the Commonwealth wishes to

put it that is a separate matter. What we would

simply submit, Your Honours, is that that provides

a second and entirely separate reason for submitting

that a tax upon sale and, in particular, of

course, a sale by a producer, must be regarded

as an excise if not only the constitutional
provisions to be given effect but if one is
to have reference to the nature of an excise

duty.

Your Honours, again, in the 011 case, reference

was made to that legislation by Justice Higgins
at page 435 in slightly more detail.	Beginning

on page 43~ at point 7, His Honour said:

This provision drives us to examine the

State laws of customs and of excise as they

existed at the commencement of the CONSTITUTION: • f h II II

w at waste meaning o t e terms customs h h

and "excise" in the States? I take the

Victorian use as a good test; and the industry

of counsel has not succeeded in pointing

out any divergences in meaning in the other

States. 11 Customs duties" are defined as

duties "upon goods imported into and exported

from any part of Victoria whether by land

ClT9/l/ND	1 1 1	8/3/89
Philip Morris

or by sea". Excise duties appear in

Part 11 of the same Act, "Excise Duties -

Division 1 - Distillation." By sec. 85

in this Part 11 there is a grant to

Her Majesty of 8s upon every gallon of

spirits distilled in Victoria from malt,

grapes, etc. As for tobacco, the 17th

Schedule provides that "the following duties

of excise shall be chargeable upon tobacco

manufactured ... in any tobacco factory on

being entered for home consumption - 6d.

per lb.

It appears to me that these express

provisions of the CONSTITUTION itself,

this express reference to the existing States'

customs and excise duties, lift the question

of the meaning of sec. 90 out of the quagmire

of dictionary meanings. According to the

meaning "any toll or tax 11 ; but the denotation	Oxford Dictionary, 11 excise 11 has as its first
of the term (and, incidentally, the connotation
of the term, so far as definite) has greatly
fluctuated. The very spelling of the word
is due to a mistake as to the derivation.

Then, turning now to point 6, at page 435,

His Honour said:

(Continuing on page 113)

ClT9/2/ND	112	8/3/89
Philip Morris

MR CHARLES (continuing):

for the purpose of sec. 90 in our

CONSTITUTION as a whole, customs duty

is a duty on the importation or
exportation whether by land or by sea;
whereas excise duty means a duty on the
manufacture, production, &c., in the
country itself; and it matters not whether

the duty is imposed at the moment of actual

sale or not, or sale and delivery, or

consumption.

Finally, Your Honours, Mr Justice Rich deals

with the matter at page 437.	I mention it and
leave the case.	Your Honours, in PARTON's case,

which we would say settled the ,matter, it may

may be helpful to look at what the Chief Justice

said in dissent. Sir John Latham dealt with the

matter at pages 245 to 247. The matter to which

our submissions are directed, Your Honours, is
that bearing in mind that the Chief Justice was one

who took a more naFrow interpretation of the term it was quite clear that His Honour thought that a

tax on the first sale after production would

clearly be an excise and, of course, that,

Your Honours, is what we would say in relation to

Philip Morris is the case here.	At page 245 at
point 8 Sir John said:

in certain cases it has been held that a tax payable on the sale of

goods was a duty of excise. The

contributions payable under the

MILK BOARD ACTS are payable on the

sale of milk and it is said that therefore

they are duties of excise.

In my opinion an examination of the
cases upon which the plaintiff relies

shows that in each of them a tax payable

upon the ~ccasion of the sale of a

commodity was held to be a duty of

excise because the tax was a tax
payable by the producer of the commodity

and therefore was truly a tax upon the

production of goods. If a tax

is imposed upon the producer of goods

when he sells the goods the tax is a

tax upon production -

We strongly, Your Honours, rely upon that statement -

If, however, the tax is imposed at a

later stage after the producer has

disposed of the goods, it is a tax

merely upon sale and not upon production.

C]Tl0/1/HS	113	8/3/89
Philip Morris

Then, Your Honours, at point 4 on page 246:

If the duty were made payable upon

the sale by the producer or manufacturer,

in each case the duty would be an excise

duty, because it would be imposed upon

the production or manufacture of the

relevant article. In the present case,

however, the contribution is exacted,
not at the point of production of the

material or of disposition by the

producer, but when milk which has been
produced has already been disposed of to

a dairyman other than the owner of a milk

shop or to the owner of a milk depot who then sells it to some other person. The contribution is exacted upon the second and

not upon the first sale. It is payable
only after all processes of production
are complete and the milk has passed out
of the hands of the producer and has entered
the market.

His Honour then, at the bottom of the page, deals with the authorities and says of the PETROL case

that:

the Court held	that a tax imposed
on the first sale of petrol refined	1n
South Australia was an excise duty.	It
was so held because it was regarded	by the
Court as a tax upon production.

Then there is HOMEBUSH FLOUR MILLS.	I do not
desire to take the Court to that. (Continued on page 115)

ClTlO/2/HS	114	8/3/89
Philip Morris

MR CHARLES (continuing): Then, Your Honours, after reference

to the JOHN FAIRFAX case and to MATTHEWS, at

point 8 on page 247, His Honour said:

Thus, in the cases in which a tax upon

the sale of an article has been held to be

an excise, it has been so held because the

tax was imposed upon the producer of the

article and was a tax upon the production

of goods. In the present case the tax is

not imposed upon the producer of milk, but

is imposed upon a sale made after the producer

of milk has disposed of the milk to a dairyman
other than the owner of a milk shop or to
the owner of a milk depot. It is therefore
in my opinion not a duty of excise.

Your Honours, going very quickly to what the members of the majority said, Justices Rich and Williams

dealt with the matter at page 252 and, at point 2,

referring to PETERSWALD V BARTLEY, they say that

Chief Justice Griffith said:

that the term "duties of excise" as used
in the CONSTITUTION is limited to taxes on

goods in process of manufacture. If the

latter statement is accepted literally, a

levy on the first sale of goods produced

or manufactured in Australia is not an excise

duty. But it has been decided that such

a levy is an excise ..... It is submitted this

is because the first sale of the goods is

usually a sale by the producer or manufacturer,

so that such a tax is in effect a tax on their production or manufacture. But we

can see no reason why a levy should not be

a duty of excise within the meaning of s.90

of the CONSTITUTION although it is imposed

at some subsequent stage. It must be imposed

so as to be a method of taxing the production

or manufacture of goods, but the production

or manufacture of an article will be taxed

whenever a tax is imposed in respect of

some dealing with the article by way of sale

or distribution at any stage of its existence,

provided that it is expected and intended

that the taxpayer will not bear the ultimate

incidence of the tax himself but will indemnify

himself by passing it on to the purchaser

or consumer.

Sir Owen Dixon, Your Honours, dealt with the matter

at pages 259 and 260. It is a passage of great

consequence, Your Honours, but I know the Court

will be well aware of it.	May I simply refer
to it and pass on.

C lTl 1 /1 /SDL	1 1 5	8/3/89
Philip Morris

I should remind the Court of one short passage

on page 259, where Sir Owen Dixon said in the

middle of the page:

Again the exaction is not a tax imposed upon

a dairyman and owner of a milk depot because

they are selected as the parties to the trading

who should bear a paticular contribution

but on the contrary it is imposed on them
as the persons to pay, it being a matter
of indifference which of the parties ultimately

bears the burden and the tax having from

its nature a tendency to enter into the price

obtained for the milk.

McHUGH J: Is that all that is required, that it have a

tendency? Because the material to which we referred

to yesterday concerning that report of the New

South Wales Committee would indicate that a tax

is not necessarily passed on to the ultimate consumer

or necessarily passed backward. And, indeed,

in an inflationary period, even if it is nominally

passed on when the tax is first brought into existence,

ultimately it may not be; it may bring about

a reduction in the real profits or the real wages of

those who immediately have to pay it.

(Continued on page 117)

ClTll/2/SDL	116	8/3/89
Philip Morris

MR CHARLES:  It might, Your Honour, but we would say it is

perfectly clear that in the case of the tobacco tax,
having regard to the size of the tax and having regard

to the way in which it is calculated, that that

inevitably would be passed on to the consumer and

inevitably would enter the price.

McHUGH J:	Yes.
MR CHARLES:	We would say, Your Honour, as a matter of reality

it could not be otherwise.

McHUGH J:	Yes.
MR CHARLES:	Your Honours, it is our submission that this has

been treated as settled since PARTON. We mention it

not under any fear that the Court is likely to overturn

PARTON's case either, but simply because of the

relevance for our submissions of a sales tax as an

excise when that tax is paid by the producer, which

the first plaintiff is.

Your Honours, turning then to paragraph 16,

we submit that to be characterized as an excise duty

it is not necessary that the amount of the tax, or its

method of calculation, disclose any arithmetical

relation to the quantity or value of the goods. We

draw attention to MATTHEWS, and again, Your Honours, it

is a case which has been repeatedly applied in later

cases, the most recent, of course, being the PIPELINE

case. Your Honours, we submit that there are no

special properties of licence fees that render them

immune from characterization as an excise. In our

submission, Your Honours, this has been so from the

very first cases decided. ~ay I refer the Court

briefly to PETERSWALD V BARTLEY, (1904) 1 CLR 509?

While it is helpful to start at the beginning,

Your Honours, I do not propose to proceed wholesale

through the reports but at the bottom of page 509 point 10,

PETERSWALD V BARTLEY, Sir Samuel Griffith said:

Very likely a tax may be imposed in the form of

a licence fee, which would be, in effect, a

tax upon goods produced by the holder of the
licence.

And refers to what was said by Lord Herschell.

Lord Herschell's words are then set out at the bottom of page 510, again apparently with approval of the

High Court in this case, Your Honours, that:

"It was argued that the provincial legislature

might, if the judgment of the Court below

were upheld, impose a tax of such an amount
and so graduated that it must necessarily

fall upon the consumer or customer, and that

they might then seek to raise a revenue by

C1Tl2/l/JH	117	8/3/89
Philip Morris

indirect taxation in spite of the

restriction of their powers to the

imposition of direct taxation.	Such a case
is conceivable.	But if the legislature

were thus, under the guise of direct taxation, to seek to impose indirect

taxation, nothing that their Lordships have

decided or said in the present case would

fetter any tribunal that might have to deal

with such a case if it should ever arise."

In considering the validity of laws of this

kind we must look at the substance and not

the form.

Your Honours, we say that the question is whether the

licence fee is, in truth, a tax on goods and if it is

so then it is an excise and we refer to a number of

passages in cases in which that has been said

including the passage in Sir Isaac Isaacs' judgment

in the ?ETROL case to which, I think, Your Honour

Justice McHugh referred me some time ago.

DAWSON J:  Mr Charles, the phrase "tax on goods" is a

thoroughly confusing phrase because, as you know,

goods do not pay taxes and it must be a tax

in relation to goods and then the question arises,

"What is the relationship which is sufficient?"

I only mention that to indicate that I do not find

helpful the phrase "tax on goods" at all.

(Continued on page 119)

ClT12/2/JH	118	8/3/89
Philip Morris

MR CHARLES:  Your Honour, if I may say so, I entirely

understand it. I am, in a sense, quoting what

a number of Judges have said from time to time

in the past. We would say, Your Honour, that a

tax upon or in respect of goods means an
imposition which relates to goods in such a way that it is the goods themselves which are being

taxed rather than the person, in the sense that

an excise attaches to goods throughout their

life until they reach the hands of the consumer

having to be paid once throughout that time.

The next step, Your Honour, is that the tax is

usually imposed in relation to some step, it is

said, taken by some person in relation to those

goods and in that sense is a tax upon the goods.

BRENNAN J:  So that I can understand the direction in which

your argument is leading, what are the goods

upon which, in your submission, the licence fee

is a tax?

MR CHARLES: 

The goods, Your Honour, in relation to the

present licence now before the Court would be
the tobacco products sold. There are the cartons
of cigarettes, the boxes of cigars, if I am

answering Your Honour's questions.

BRENNAN J: Sold within what period?

MR CHARLES:  Sold, Your Honour, we would say, under the

licence, but we would say that the goods as

they are sold bear the tax at that time. The

fact that it is calculated by reference to a

different period, Your Honour, we would say is

beside the point. In our submission it is
simply an attempt to achieve a reasonable

estimation of the value of those goods at that

time.

BRENNAN J: Yes.

MR CHARLES:	It is convenient partly because for a tax paid before a licence period begins it would
ordinarily be impossible to say how many will
be sold; not invariably impossible because
someone might have a continuing arrangement
to sell so much in any particular month. amounts sold by them, it would be impossible.
Therefore, Your Honours, we say that having
regard to cases like MATTHEWS, this is a reasonable attempt to estimate the value of what will be sold and the tax is therefore paid at the start of the month covering the goods in the remainder of the month.

I appreciate that there is an alternative

which was the one put by Your Honour Justice Brennan

CIT13/l/JM	119
Philip Morris

as the form of a contingent liability and,

I think I am correct in saying, in GOSFORD MEATS.

We would certainly rely on that as an alternative,

Your Honour, but our first submission is that the

liability is not a contingent one, that this is

an estimation of the tax.

Your Honours, it is for those reasons

that we submit that in the context of a producer

and a wholesaler's tax which will fall on the

producer therefor, that a tax imposed directly

upon goods will be an excise even if - and if I

may say so in answer to Your Honour Justice Dawson,

will be upon goods even if it is a fixed sum

per month, or is calculated by reference to some

other formula such as the value of sales in a prior

period. We put it that the question is whether

the tax is imposed upon the goods in the sense we

have submitted. We say that taking the value of

the sales in a prior monthly period as the measure

of liability is usually explicable only on the basis

that what is being taxed is the taxpayer's act of

selling goods in the subsequent period and it is

the best available estimate. In so saying, Your Honours,

we rely on statements of a number of Judges of this

Court and we point to what was said last by

Justice Murphy in GOSFORD MEATS, where His Honour

pointed to the difficulty of taking anything other

than an assessment in what may be a very

recent period beforehand as a means of estimating

value.

DEANE J:	Where these cases may not help you is that they do indicate a long-standing situation in which
alcohol and tobacco were regarded as special types
of product in which there were genuine licensing provisions and that provided a context in which
one had to choose whether this was a licensing
provision or whether it was a dressed up duty of excise.

(Continued on page 121)

CIT13/l/JM	120
Philip Morris
MR CHARLES:	Your Honour, I accept irmnediately,. in relation

to selling of liquor from premises,that an entirely

different position obtains, that the selling of

liquor is prohibited in the interests of the community,

licensed premises have a very considerable value. That

value can be gained by assessing the quantity of

liquor going through the premises, and regularly is so

assessed. And in those circumstances, Your Honour,

plainly a particular situation applies to the sale of

liquor and was so held both in DENNIS HOTELS and

WHITEHOUSE.

We would say, Your Honour, that the first point

about that is that there is no question of the person

occupying premises being a producer and therefore

one has something clearly distinguishing the situation

in relation to liquor from what is now before the Court.

.As to all the cases which stand against us under the

DENNIS HQTEI..S..,. island, ,;.;ie vJOU.ld say; Your Hono.urs, that none

of them deals with a producer. The only case in

which that might be ,said.against us, Your Honours, we

would say,is H.C. SLEIGH and we will come to that

because, in our submission, it is not. We would say

that it is one thing to say that licensing a retailer

of either liquor or tobacco is something which is not to be regarded as an excise. It is quite a different matter to say that a producer of liquor or tobacco

when licensed is not being subjected to an excise.

We would say, Your Honours, that if the island

can be increased to that extent then there can be

no lake left in consequence. It is that point,

Your Honours, at which we say that the distinction

lies in answer to Your Honour Justice Deane. The

first two-and-a-half lines of our paragraph 19 must

be instantly excised, Your Honours, and we continue

after that that in holding that the lump sum fee in

HEMATITE was an excise, the majority of this Court

held that it was not necessary that there should be

an arithmetical relationship between the tax and the
quantity or value of the goods produced or sold;

still less that such a relationship should exist in a (Continued on page 122)

specified period during which the tax is imposed.

C1T14/l/BR	121	8/3/89
Philip Morris

MR CHARLES (continuing):  I :vill not take the Court to the pages.

One advantage of yesterday's proceeding~

Your Honours, is that a considerable part of my

argument has already been put to the Court and need

not be repeated. In GOSFORD MEATS we submit that three members of the Court expressly rejected the contention that a tax cannot be an excise if it

takes the form of a general licence fee, quantified

by reference to goods produced, manufactured or sold

in a prior period. We omit, Your Honours, the last

passage in paragraph 19. It is our submission,

Your Honours, that the principle for which

DENNIS HOTELS stands, that a tax cannot be an excise
if it takes the form of a general licence fee
quantified by reference to the quantity or value
of goods manufactured, produced or sold in a prior
period' it was not reg~rded as relevant to or determina·tive

of the outcome of the case by the majority.

We put this matter in argument to the Court

yesterday. Its relevance to our present submissions

is for the purpose of submitting that that case

should not be extended in its operation to cover

the wholesale licence now before this Court. We
submit that to elevate the decision . in DENNIS HOTELS
in that way misses the principle contained in the
use of the word "excise"; that section 90 is directed
at taxes which are, in substance, imposed upon or

in respect of goods in the course of their production

or distribution and we rely on what Sir Owen Dixon

said in MATTHEWS that, by making section 90

depend on matters of form, it exposes the constitutional

provision to evasion by easier subterfuges and
unreal distinctions.

Then, Your Honours, we submit that section 90 was not intended to affect a merely arbitrary

division of legislative powers. We submit that

the purpose was to give Parliament, the Federal Parliament, a real control over the taxation of commodities and to ensure uniformity of excise duties

throughout Australia and we refer, and I will not

take the Court to any of the passages,to a number

of judgments in which some such considerations have

been expressed. We submit, Your Honours, that the

relevant test is that which was advanced by

Sir Owen Dixon in MATTHEWS and, at pages 303 to 304

of the report, by Sir Garfield Barwick in ANDERSON'S

case and by Your Honour the Chief Justice and

Justices Brennan and Deane in the HEMATITE and

GOSFORD MEATS cases, the test being, we would submit,

whether, as a matter of substance, the tax is

imposed or in respect of goods at any stage of

manufacture, production or distribution.

ClTlS/1/VH	122	8/3/89
Philip Morris

DAWSON J: For my part, that test does not tell me anything.

I would have to ask then: how do you tell whether

it is imposed upon or in respect of goods?

MR CHARLES:  We would submit, Your Honour, that one way

of answering that is to say whether it is imposed

upon goods as distinct from and intended to

be borne by a particular person. In relation,

for example, to a licence fee, we would submit

that that is nowadays seen by the question whether

in the first instance the fee is a nominal one.

The fact that it is not nominal will not be decisive by itself but as the fee increases

and, certainly when it becomes enormous, as

in the case of a pipeline, then its relation

to what is being carried through it may be seen.

DAWSON J:  In that sense, in effect, if the tax is to

be passed on to the ultimate consumer it is

an excise. That is a test - direct or indirect

it is a test which has not been suggested for

a long time.

MR CHARLES:  Your Honour, I did not mean to confine myself to that at all. I was seeking to move from

that to a case where the amount -

DAWSON J:  Do not let me divert you. I just want to flag

it that that test, if that is the test, simply

does not help me.

MR CHARLES:  Your Honour, I did mean to go beyond that

to a situation where the amount of the tax or
the licence fee varies and has, in doing so,

a relationship to the value or quantity of the

commodity which is being dealt with, at whatever

step is concerned. Here, Your Honour, the step

is sale by wholesale. We would say the relationship

to the goods and what demonstrates that the fee is paid upon that action of wholesaling goods is seen by the attempt, we would say,

to draw an estimate of the value of the goods

going through the business at that time.

McHUGH J: Until HEMATITE's case it was difficult to think

of an illustration, was it not, where the tax

would be upon goods if it was not imposed by

reference to its quantity or value?

MR CHARLES:  That MATTHEWS' case, Your Honour, was really

the first case to make some distinction from

that.

McHUGH J:  Except that they saw it as having a natural

relationship to quantity or value there.

C 1 Tl 6 /1 /ND 123 8/3/89

Philip Morris

MR CHARLES:  A natural relationship, Your Honour,

although it was, of course, entirely possible

that the crop might fail. But, in any event,

Your Honour, certainly, that started the process

but it has been made much more complete by

HEMATITE and we would say, naturally, explained

further in GOSFORD MEATS.

(Continuing on page 125)

C1Tl6/2/ND	124	8/3/89
Philip Morris

McHUGH J:  But is it sufficient for your purposes that in this

case the tax is imposed by reference to values?

MR CHARLES:  By reference to value, Your Honour, yes. And

we would say it is sufficient for our purposes -

that is our submission, yes. If it is accepted that what is occurring is a continuing business

where what is likely to happen is that either

when one starts off with an estimate of the value

of the goods going through the business in the

next month when the first licence is sought and

thereafter, the tax is imposed. What naturally

happens is that all the goods that have passed

through that business are, in the course of time, taxed. So that either because it is a reasonable

estimate or because at some stage those goods

are all taxed, one way or another we would say,

Your Honour, that there is a plain relationship

to the commodity demonstrated.	In our submission,
that is enough for our purpose.

We would submit that it can be seen in relation

to a producer that if that is not an excise, then

nothing is an excise.

BRENNAN J. Mr Charles, would it be right to say that for

my part, what I said in HEMATITE and GOSFORD MEATS

would be more accurately expressed if the phrase

"of goods" were added at the end of the sentence

and removed from before the words "any stage"?

MR CHARLES:  I think probably that would be so, Your Honour,

yes. I would accept that. I can only apologize

for saying that there have been so many differing -

BRENNAN·J:  Formulae of legion?

MR CHARLES:  Yes. May I also submit in this context that it

would be wrong, in our submission, to say that

there is any dichotomy between those who stress
the criterion of liability and those who say that

one is entitled to look at the substance of

legislation because when one looks at the test

in BOLTON V MADSEN, when one looks at the way

in which Judges such as Sir Garfield Barwick have

framed the test in ANDERSON's case and in CHAMBERLAIN,
one sees the acceptance by those Judges in the
test they frame of the expression "the criterion

of liability". It remains a part of the test.

To that extent we would say that there is less

difference between the views than might have been

thought.

DAWSON J:  I had that rather in mind, you have to

define what is meant by "a matter of substance".

What is the "substance"? What is the "matter"

of the substance of which one is looking to?

C 1Tl7 /1 /SDL	125	8/3/89
Philip Morris

MR CHARLES:  Yes.

DAWSON J: And then, of course, you come back, necessarily,

to something like the criterion of liability.

MR CHARLES:  Yes, and to say that one comes back to a criterion

of liability, we would say it does not answer

the question against us at all, Your Honour.

DAWSON J: Maybe not, but you have to come back to something

else, that was the point I was making.

MR CHARLES:  Yes. Your Honours, the test - it may help

if I take the Court very briefly to the test

as expressed by Sir Garfield Barwick in ANDERSON's

case, 111 CLR, at page 365 point 6. It is said:

The question is a legal question. To conclude

that the tax is an excise because it is

in substance a tax upon the relevant step

in connexion with the goods is to find that

it is a burden on manufacture or production

and thus to satisfy economic theory, whether
or not the supposed economic consequences
of an excise can be seen to be involved in
the case in question.

But, of course, in arriving at the conclusion that the tax is a tax upon the

relevant step, consideration of many factors

is necessary, factors which may not be present

in every case and which may have different

weight or emphasis in different cases. The

"indirectness" of the tax, its immediate
entry into the cost of the goods, the proximity

of the transaction it taxes to the manufacture

or production or movement of the goods into

consumption, the form and content of the

legislation imposing the tax - all these

are included in the relevant considerations.

But in the end what must be decided is that

the tax is in substance a tax upon the relevant

step. That being the central question in

a controversy as to the nature of the tax,

it will not, in my opinion, necessarily be

resolved by the form of the tax or by identifying

what according to that form the legislature

has made the criterion of its imposition,

however important in any particular case

those matters may be.

(Continued on page 127)

ClT17/2/SDL	126	8/3/89
Philip Morris

McHUGH J:	So why did you read that passage?
MR CHARLES:	Only, Your Honour, to demonstrate that when

Sir Garfield Barwick took what was necessary to

establish the existence of an excise it was a

part of Sir Garfield's own means of arriving at

the point that there might be a criterion of

liability. His Honour was not, as we see it,

saying that one needed to depart wholly from the

test that Sir Frank Kitto had stated in DENNIS

HOTELS, simply that one might encapsulate the

matter but by looking more at different

considerations and at matters of substance,

and matters of substance, Your Honour, go right

back to PETERSWALD V BARTLEY.

Your Honours, as to our last paragraph we

would say that nothing in BOLTON V MADSEN would

prevent this Court from confining DENNIS HOTELS

and endorsing the substantive test which we have
put to the Court. We would say that far from suggesting any narrow or formalistic approach to be taken in determining whether a tax is a duty of excise by reference to the criterion

of liability, the Court in that case approved the
approach that Sir Owen Dixon took in MATTHEWS

and the proposition that a tax is a duty of excise

when it is imposed directly upon or directly

affects goods.

Now, Your Honours, when we then turn to the

precise circumstances of the Philip Morris case,
we would submit that to label the exaction

a licence fee avoids the real issue for the

reasons we have put. In our submission, it 1s a
tax and the question is whether that tax is

imposed upon or in respect of a step in the

production or distribution of tobacco. We point,

Your Honours, to the fact that the licence relates

to and specifically authorizes one particular act,
that is the sale of tobacco at wholesale level
taken in the course, as Your Honours will recall
the definition of tobacco wholesaling, taken in
the course of a wider business and, similarly,

Your Honours, retail licences authorize the

sale of tobacco at the retail level as one act

taken in the course of a wider business.

Your Honours, the Act ignores altogether the

acts of production, manufacture or purchase by

which the wholesaler or retailer obtained the

tobacco and which formed an integral part of his

business but, inevitably, the Act must fall upon

any producer in Victoria who sells the tobacco

produced in Victoria. Your Honours, we would say

there is no way in which it could be said that

the fee has been exacted merely for the licence to

ClT18/l/HS	127	8/3/89
Philip Morris

carry on a business generally. It is exacted

in respect of sales effected in the course of the

business and, as the whole case made by the States

yesterday and no doubt shortly will demonstrate,

it is not only for that reason not a fee exacted

for a licence to carry on a business, this is a

revenue-raising statute, revenue of a very

substantial nature.

We say, Your Honours, that on its proper

characterization therefore the Act imposes a

sales tax and this Court has repeatedly said that

a sale~ tax expressly in relation to producers is

an excise.

McHUGH J:  How do you distinguish the decision in

DICKENSON?

MR CHARLES:	We distinguish the decision in DICKENSON, Your Honour, by pointing to the fact that DICKENSON
is a case dealing with retailing and consumption. any of the judgments to fall, upon a producer.
McHUGH J:	But by a parity of reasoning it must, must it not?
MR CHARLES:	Your Honour, it depends whether - if I may

say so, Your Honour, this is exactly the point

we are seeking to make, that this Court has

said that DENNIS HOTELS and DICKENSON'S are to

be confined to the actual legislation and the

actual facts of those cases.	Now, without seeking
to overturn that,	we would submit that we are

entitled to say that the island should be

confined precisely to its low-water mark at

this time.

(Continued on page 129)

ClT18/2/HS	128	8/3/89
Philip Morris

MR CHARLES (continuing): To say, Your Honour, that the decision

in DICKENSON should extend to this case would be a

dramatic enlargement of the island and we would say

a wholesale invasion of the heartland of excise duties

in relation to production and manufacture. It would

mean that Philip Morris manufacturing and producing

in Victoria its very large quantities of tobacco is

being taxed directly on that tobacco as it is sold.

McHUGH J:	But it is accidental that they are a producer.
Would it apply to any - - -
MR CHARLES:	We would say, Your Honour, that it is accidental

that other wholesalers may not be producers and relying on cases like CHAMBERLAIN, we would say that the fact that the Act may operate in some cases

in circumstances which might not amount to an excise

is irrelevant. If it acts on producers so as to be

an excise then it is invalid.

GAUDRON J:	Mr Charles, does that submission involve the proposition that DICKENSON'S ARCADE stands for
no principle?
MR CHARLES:	Your Honour, it is a difficult question of precedent

and judicial method. The Court has said that DICKENSON

may stand where the Court is again faced with the

identical legislation and the identical facts. Firstly,

Your Honour, we say that there are relevant differences

in the legislation. Your Honour now has the Tasmanian

TOBACCO ACT, 1972.

GAUDRON J: Yes, I follow that, but it really does depend very

much, does it not, on this analogy of an island in the

sea which presupposes that DENNIS and DICKENSON are

exceptions without reason to a principle. If you

approach them from another perspective and say they
perhaps mark the boundaries of the principle, you

adopt a different analogy and you accept that they

embody a principle. Now, I simply wish to know whether

your submission really is that they are exceptions

without reason.

MR CHARLES:  I do not put it in that way, Your Honour. We say

that there is to be found in DENNIS HOTELS a statement

of principle by Sir Frank Kitto which has been endorsed

by this Court in BOLTON V MADSEN and which seen in that

way may be taken as a statement of principle which has

been given continued operation thereafter. We would

say, Your Honour, that the principle did not extend

to the situation that in DENNIS HOTELS one found a

valuation for the purposes of a licence fee by

reference to sales in an earlier period. We would

submit that so far as DENNIS HOTELS is concerned, in

that case that conclusion is justified by the peculiar

circumstances of the liquor trade and licensed

ClT19/l/BR	129	8/3/89
Philip Morris

premises in that trade. When one comes instead to

DICKENSON's case, that factor, of course, is not

present to the same degree. We would say there

that to the extent that DICKENSON's case involved

the application of what Sir Frank Kitto said in

DENNIS HOTELS as followed in BOLTEN V MADSEN, to

that extent, Your Honour, there is clearly a principle

which this Court has applied and as to which minds

may differ as to the appropriate application with

differing facts.

This Court, Your Honour, has then gone further,

we would say, and decided that in relation to the

particular facts in DICKENSON's case and the

particular legislation in DICKENSON's case, the

principle that we have referred to has been given a

particular application and the Court said that it

will be allowed to maintain that precise operation if

there is a direct replication later.

GAUDRON J: What is the principle in DICKENSON outside which

you fall?

(Continued on page 131)

ClT19/2/BR	130	8/3/89
Philip Morris

MR CHARLES:  We would say, Your Honour, that in DICKENSON'S

case the application was limited to a licence fee

paid in relation to a retail business and the reason

why that falls outside the earlier principle is that

the act of retailing is a substantial difference

from, inevitably, the actions of a producer and the

actions of production and manufacture. Now,

Your Honour, we would submit that, so seen, there

is a clear distinction between both the legislation

and the facts in DICKENSON'S case and those that

are now before the Court. It is entirely a different

question whether the approach of logical reasoning

by which one gets there is regarded as satisfactory.

McHUGH J:	But is not the basis of the decision in those cases that licence fees, qualified by reference to products bought or sold during a period prior to the licence, is not a tax upon goods? Now, if that is so, how
can you distinguish it?
MR CHARLES:	Your Honour, if that is so, then, with respect,

GOSFORD MEATS was wrongly decided. If I may say so,

Your Honour, that is one of the reasons why we would

like to argue the matter. But I have to accept that

it is very difficult indeed to find a means of

explaining the decisions in DENNIS HOTELS and

DICKENSON'S ARCADE which, if it is to be applied

generally, would leave any useful operation or

operation at all for section 90 of the CONSTITUTION.

Now, I cannot put to this Court that the decisions

in DENNIS HOTELS or DICKENSON'S ARCADE were wrong

and should be overturned but, what we do say is that,

if section 90 is to have any operation then the

island must be maintained as an island because, if

the sea is removed then section 90 has been, by
the operation of this Court, we would respectfully

say, taken out of the CONSTITUTION.

GAUDRON J: Well, that depends rather, does it not, on whether

one proceeds on the test formulated in your

paragraph 23 or whether as Justice Brennan has

s·uggested it might be formulated.

MR CHARLES:  Yes, Your Honour, I certainly accept that is a

necessary step, yes.

GAUDRON J: Yes.

BRENNAN J: Is your argument of distinction this: that a tax on

wholesale sales necessarily sweeps into the net the activities of the producer, whereas a tax on retail sales does not do so?

MR CHARLES:  Yes, Your Honour, precisely. I have taken the

Court before to the definition of tobacco wholesaling;

we say that that must inevitably sweep up any person

manufacturing or producing in Victoria who sells

the products of that business other than interstate

ClT20/l/VH	131	8/3/89
Philip Morris

or for export, must inevitably do so. Now,

we would say by contrast, Your Honours, that the

description of tobacco retailing will not achieve
the same consequence because it certainly does

not follow, as a matter of inevitability at all,

that every tobacco manufacturer will retail.	Some
may, but it certainly does not follow that they
will sell by retailing. They must engage in
tobacco wholesaling if they sell in Victoria.

(Continued on page 133)

ClT20/l/VH	132	8/3/89
Philip Morris

MR CHARLES (continuing):  We would submit, Your Honours, that

that is a critical distinction between the position

that was before the Court in DICKENSON'S ARCADE

and that that is the basis upon which the matter is

to be distinguished in our argument.

DEANE J:  So the effect of the CONSTITUTION would be that if you

are going to have this sort of tax on these sort of

products the CONSTITUTION precludes you from

collecting it efficiently?

MR CHARLES:  We would say, Your Honour, that the CONSTITUTION

precludes you from imposing the tax. With respect,

I submit I am entitled to say that because there are

other areas of manufacture than tobacco, petrol and

liquor and we would say the island is at the moment

limited to those three products and to selling by

retail in relation to those products. It is our

submission, Your Honour, that properly viewed

the CONSTITUTION prohibits the States from imposing

such taxes.

DEANE J:  Thank you.

MR CHARLES:  Your Honours, I think I - - -

BRENNAN J:  Mr Charles, could we just delay you a little

longer? Do you wish to say anything further about the

distinction between GOSFORD MEATS, where the tax was
assessed by reference to the units of cattle et cetera

slaughtered·, and the case in which an overall

licence fee is calculated by reference to the value

of sales in the previous period?

MR CHARLES:  Only this, Your Honour. I would be forced to

accept that in so far as one is looking a~ let us

say an archery target, the act of processing meat
is at the very centre of any process of manufacture or

production. As one reaches away from the gold, one

finds, we would say, that the act of first sale by the

producer has always been seen as a matter clearly

appropriate when one is looking at the definition of

"excise", going back to what Sir John Latham said in

dissent in PARTON. We would say, Your Honours, that

the act of selling by a wholesaler is so close to the

act of production and manufacture itself that on any view

of the definition of ue:s:cise" a tax imposed upon it is

an excise.

There have been differences of opinion, going back certainly to PETERSWALD V BARTLEY, about whether

the question of a tax imposed in relation to a retail

sale or a tax imposed upon consumption could properly

be regarded as an excise. But, we would say,

Your Honours, that there has been no case that has ever

said that a sales tax imposed upon a producer at the

ClT21/l/JH	133	8/3/89
Philip Morris

first sale by that producer could be regarded as

other than an excise. And if this Court were so to
hold in this case, in our submission that would be

a dramatic change of path taken by the Court in

relation to the definition of "excise", the

conclusion being not merely the maintaining of the

potential for taxing in relation to the retailing of

tobacco, liquor and petrol; it would very substantially

enlarge, in our submission, that taxing power.

McHUGH J:  Mr Charles, I have forgotten the precise facts of

KAILIS' case, but do you get no assistance from that

at all? You have not referred to it.

:MR CHARLES:	Your Honour, we say we get very substantial assistance from it, indeed. If I may - - -
McHUGH J:	I do not want to take you off your argument.

I was just - - -

:MR CHARLES:  Your Honour, now if I may say so, is a perfectly

appropriate time. If we may take the Court briefly

to KAILIS' case, which is (1974) 130 CLR.

(Continued on page 135)

ClT21/2/JH	134	8/3/89
Philip Morris

MR CHARLES (continuing): May I take the Court first to

what Sir Douglas Menzies said at page 254. It
contains a helpful description, Your Honours, of

what was in issue in the case. After dealing

with the contention that DENNIS HOTELS covered

the case, Sir Douglas said:

I cannot accept this argument. I am,

of course, greatly influenced by the terms
of s.35G itself, but I do not rest my

decision entirely upon the language of that

subsection. It is to be noted further

that s.35G requires the applicant for a

new processor's licence to furnish the

Minister with particulars to enable him

to estimate "the probable extent of the

annual catches and purchases of fish for
processing" at the processing establishment.

Furthermore, the fee is not the price of a

licence. A licensee may become entitled to a

licence and receive a licence without the payment
of a fee. There is in s.35I the limitation
that a licence shall not be renewed unless the
fees due at the date of the application are
paid but the fees there referred to are past
fees. What may be described as current fees

are payable in two moieties "the first of

which shall be paid within thirty days after

the licence is granted, or as the case may

be, renewed and the other within a period of

six months thereafter".

In the circumstances to which I have

referred, the fee can hardly be described as

the price of a licence to carry on a business.

It is plain, Your Honours, therefore, that what

Sir Douglas was saying was that the situation in

DENNIS HOTELS was justified as being the price

of a licence to carry on a business. His Honour
continues: Upon the whole I have come to the

conclusion that this case is distinguishable

from DENNIS HOTELS PTY LTD V VICTORIA, where

a victualler's licence fee was, I think,

properly regarded as a tax upon persons for a franchise to carry on business, the amount of

which was merely calculated by reference to

past purchases.

To Your Honour Justice McHugh, we would say

that that is seen as the statement by one of those

in the majority in DENNIS HOTELS. There is a

critical distinction with the legislation now

in question. On no conceivable view, in our

submission, could the levies here be seen as

having any purpose of establishing a value for

a business. It is a tax collection exercise to

CIT22/l/JM	135
Philip Morris

provide money for the State. It is in that

respect, Your Honour, that we see some assistance

what Your Honour the Chief Justice said at

to be gained from KAILIS. Secondly, I think to

pages 265 to 266. Because I think I read part

of that, I will not repeat the reading of the matters today, but we rely very substantially

on what Your Honour said at those pages. In

our submission, that points out the difficulty

in giving any wider application to the results

seen to exist from DENNIS HOTELS, and a very
compelling basis for saying that that reasoning

should not be permitted to expand into the area

of a licence which a producer must have to sell

by wholesale his products.

Your Honours, I do not know that I read

Your Honour the Chief Justice's conclusions at the bottom of page 265 and following, and

believing I did not, if I may do so now.	What
Your Honour said was:

When attention is given to the fee prescribed by the FISHERIES ACT for a

processor's licence, it seems to me that

it has the characteristics of an excise.

First, it is a tax; it is not merely a

fee charged for a service provided.

Secondly, it is a tax levied at the point

of production - processing is prohibited without the benefit of a licence. It is a tax upon the goods in that it is calculated

by reference to the quantity of materials

used in the production process. It is a tax

which in the normal course of events will be

added to the price of the goods and

ultimately paid by the consumer or retail

buyer. It is therefore a tax which directly

affects the price of goods and has an

impact upon the consumption, and the

consequent demand for the production, of (Continued on page 137)

goods on which the tax is imposed.

CIT22/2/JM	136
Philip Morris

MR CHARLES (continuing): Here, Your Honours, the

wholesaler, in this case the producer, is prohibited
by the legislation from selling his goods by

wholesale and therefore, we would say, from

selling his goods at all in Victoria without

the licence upon which the fee must be paid.

And we say, Your Honour, that though there

is a direct analogy with the situation as put

by Your Honour the Chief Justice in KAILIS.

May I remind the Court before going on of

what was said by Sir Garfield Barwick in WESTERN
AUSTRALIA V HAMERSLEY, 120 CLR, and the relevant

passage is at page 56. Could I invite the Court

to look at the previous page, 55. The Court

will recall that this was the attempt to impose

a tax upon the money paid by the purchaser

after a sale and what Sir Garfield Barwick said,

in the middle of page 55, was this:

But to say that a tax upon the act by which

a purchaser discharges his obligations to
a vendor under a contract for the sale of

goods is not a tax upon the sale itself is, in my view, to play with words. In

PARTON V MILK BOARD, it was said by Rich

and Williams JJ. that although, in order to constitute a duty of excicse, the tax

must be imposed

" ... so as to be a method of taxing the

production or manufacture of goods ... the

production or manufacture of an article

will be taxed whenever a tax is imposed

in respect of some dealing with the article

by way of sale or distribution at any stage

of its existence, provided that it is

expected and intended that the taxpayer

will not bear the ultimate incidence of

the tax himself but will indemnif~ himself

by passing it on the purchaser or consumer"

In the same case Dixon J. said that

"A tax upon a commodity at any point 1n

the course of distribution before it reaches
the consumer produces the same effect as

a tax upon its manufacture or production".

These statements have been thought, possibly,

to be subject to some qualification in later
cases but it seems to me that, although
the duty imposed by the Act in respect of
the receipt of money will have a much wider
incidence than an excise duty, it is plain

enough that it will assume the character

of a duty of excise where the tax is payable,

ClT23/l/ND	137	8/3/89
Philip Morris

in effect, upon the sale price received

upon the first sale and any subsequent

sales in the course of the distribution

of goods produced in Western Australia or

elsewhere in the Commonwealth. As I see

the duty it is, in such circumstances, no

more and no less than a sales tax and, as

such, a duty of excise -

and then, Your Honours, in the last words of

His Honour's judgment -

The duty to which s. 101A purports, in such

circumstances, to subject the defendant

is, in effect, an impost imposed upon the

first sale by the company of its product

and as such it is in my ·view a duty of excise.

To the same effect, Your Honours, is what

Mr Douglas Menzies said at pages 64 and 66.

I refer to them, Your Honours, without taking

the Court's attention further to them and to

what Sir Victor Windeyer said at pages 68

and 69.

Your Honours, it is our submission that

1n Philip Morris' case the act of selling tobacco

is clearly an integral step in the manufacture

and distribution of tobacco. The sales which

Philip Morris' licence authorizes and in respect

of which the fee is exacted are the first sale

by a manufacturer of tobacco which it has produced.

May I invite the Court's attention, briefly,

to the case stated.

(Continuing on page 139)

ClT23/2/ND	138	8/3/89
Philip Morris

MR CHARLES (continuing):  Your Honours will see, on what I

hope will turn out to be page 13 of the material

before the Court, the group wholesale tobacco

merchant's licence with the names and addresses

of the licensees on the first page. If it should

be relevant, Your Honours, you may note that there is

a date stamp at the bottom showing that although

the licence entitles the licensee to carry on

tobacco wholesaling for the month of December,

1 December to 31 December, the date stamp shows

7 December, at the bottom.

The next document the Court will see is

exhibit Bon page 14, the licence for November.

Then, Your Honours, the next document is the

application, exhibit Con page 15, which is the

document which requires the applicant to set out

the sales that have been made and Your Honours

will see that so far as Philip Morris is concerned
may I point out to the Court that pages 16 and 17

are simply one page. The whole of page 17 ought

really to attach to the right-hand side of page 16.

The Court will see that the total value of tobacco

sold by Philip Morris in Victoria was $17.78m;

that the exempt sales referred to in column 6

were some $14.97m and that the main bulk of the

tobacco, therefore, upon which the licence fee

had to be paid, was that paid by the third applicant.

Your Honours will see that $4.9m was the value

of that applicant's sales and exempt sales were

a very small proportion.

McHUGH J: That is calculated on the sales for October?

MR CHARLES:  Yes, Your Honour, that is so. And that appears

from paragraph 4 on the first page - in the middle

of page 15. Your Honours, we say that those were

sales that Philip Morris was prohibited from making

without a licence; to get that licence it had

to pay the fee. We say that is a sales tax and

therefore an excise.

GAUDRON J:, Can I ask you, I am sorry, where are the provisions

about the group licence as distinct from the wholesale

licence? I see the definition.

MR CHARLES:  They are found, Your Honour, in section 2C, on page 6.

GAUDRON J: Yes. That is the definition - or that specifies

what the group is.

MR CHARLES:  Yes, Your Honour. I should have begun earlier.

Section 2A beginning on page 4;

ClT24/l/SDL	139	8/3/89
Philip Morris

a person is a member of a group of wholesale

tobacco merchants -

in the circumstances then set out. They are a

complicated set of provisions, Your Honour, which

are intended to simply produce the r,esult that

if there are a group of businesses or a group

of companies carrying on business, really, in

association or co-operation, they can act together,

obtain a joint licence and pay a joint fee.

GAUDRON:	They can?
MR CHARLES:	Yes.
GAUDRON J:	Where is the joint licence provision?

MR CHARLES: Section 9(1)(b), Your Honour, on page 14, and

the fee is calculated in accordance with

section 10(1)(b) on page 16.

(Continued on page 141)

C1T24/2/SDL	140	8/3/89
Philip Morris

GAUDRON J:  Is there any compulsion about it being a

group licence?

MR CHARLES:	I do not think so, Your Honour.
GAUDRON J:	The group elects to get a group licence, rather

than individual members electing to get a

wholesaler's licence.

MR CHARLES:  Your Honour, I will check this, but my

understanding is that a group may elect to get

a group licence. If it does not, if any part of

the group is in fact selling by wholesale it

will commit an offence and, therefore, all members

of the group have to have individual licences

unless they elect what presumably is the simpler

administrative machinery of having a group licence.

But if the Court will permit me, I will check my

understanding on that.

GAUDRON J:	Yes.
MR CHARLES:	As with all endeavours, I am wrong, Your Honour.

My instructions are that the effect of section 7

is that where persons who are members of a group

acting together, then they must obtain a group

licence. That is the effect of section 7, that

they are ineligible for a single licence,

Your Honour.

GAUDRON J:	Thank you.
MR CHARLES:	Your Honours, it is our submission then, that

taxing that step, the act of selling by wholesale

as the Act does, is to impose an excise duty for reasons which are the same as those that led the

Court to that conclusion in JOHN FAIRFAX & SONS

V NEW SOUTH WALES. We would submit that it does

not have to be postulated that every sale of
tobacco at wholesale level will be the first sale

after production has been completed and be a sale

by the producer. It is enough to invalidate the

legislation, in our submission, if some of the

sales that are covered will be of that description

and we rely for that conclusion on the two cases

referred to, the PETROL case - the reference,

Your Honours, I apologize, is incorrect at the

present time. It should have been what

Mr Justice Starke said at page 439, not page 139.

The references, Your Honours, in the CHAMBERLAIN

INDUSTRIES case I will take the Court to,

121 CLR 1. The Court will recall that this was

an Act which imposed a tax on a large number of

receipts. Some receipts were said to be exempt

but one of the points that was being made was that

only some of the receipts could properly lead to

ClT25/l/HS	141	8/3/89
Philip Morris

the characterization of an excise and that there

would be a number of receipts taxed which could

not be so characterized. Now, what Sir Garfield Barwick

said at page 14, Your Honours, beginning at the third

line, was in these terms:

It seems to me that the plaintiff's

arguments were to a considerable

extent based on the assumption that neither

Act could be held in any respect invalid

or inoperative so far as concerns s. 90

of the CONSTITUTION unless the Act

as a whole could be characterized as an

excise Act. Thus great emphasis was laid

on the great spread in the variety of the
nature of the receipts which the Act
proposed to bring to duty and to the
absence as it was said of any evident
concern of the Act with the sale of

goods as such. But reference to the

Court's decision in the COMMONWEALTH

OIL REFINERIES case is sufficient to dispose of any such assumption. That case illustrates that the question is whether the tax as it is, and in the

circumstances in which it is, imposed by

the Act is a duty of excise: it is not a

question as to the nature of the Act which

imposes the tax. If it were otherwise the

purposes of the CONSTITUTION would be

readily circumvented.

(Continued on page 143)

ClT25/2/HS	142	8/3/89
Philip Morris

MR CHARLES (continuing): His Honour then quotes from

Sir Isaac Isaacs in the PETROL case and at the top of page 15, after the quotation ceased,

His Honour said:

The plaintiffs, as I follow them, really

say that unless a tax by an Act is in all
the circumstances to which the Act is

intended to apply a duty of excise, it

cannot be a duty of excise in any of those

circumstances. Quite apart from authority,

that proposition, in my opinion, is

evidently fallacious. And as far as

authority is concerned, it is denied by the

case to which I have referred.

May I refer the Court also briefly to page 29?
May I start, Your Honours, at the bottom of page 28

where a related, but relevant, matter is raised

by Sir Victor Windeyer.	At the bottom of page 28,
His Honour said:
Two things are noticeable there.	The

Court looked to see what the exaction was

"in truth." That is a reminder of what

Starke J said in the CHICORY case and

Knox CJ said in the PETROL case. The second

thing which emerges from the passage quoted
is the implication that an exaction upon a
person who is taxed by reference to, or by

reason of, a relation between himself and a

commodity as seller thereof can be an

excise, especially if be calculated by

reference to the price which as seller he

receives.

I am unable to aceept the view that a tax

upon receipts of money for goods sold

is not an excise because all receipts of

money taxed by the same Act are not excises.

That view seems to me to be contradicted
in effect by the PETROL case.	A tax that

is an excise does,not, I think, cease to be
an excise because the Act imposing it also

imposes taxes that, considered alone, are

not excises. I appreciate the force of the

view that· to be an excise a duty must be

expressly related to, or imposed expressly
in respect of, transactions in goods.

Nethertheless$, it seems to me that an

impost which relates sufficiently directly

to such transactions among other matters

is an excise, notwithstanding that it is

expressed, as here, in general terms

covering a wide range of moneys recieved.

ClT26/l/VH	143	8/3/89
Philip Morris

Now, Your Honours, we submit that, for the purposes of section 90, no distinction exists

between a tax imposed directly on the sale of
tobacco and a compulsory licence fee which must

be paid monthly by every wholesaler before he

can sell tobacco. I do not need to take the

Court to any of the references that we have

given.	A number of them have already been
referred to this Court in argument.	We submit,

Your Honours, that the true character and

purpose of the Act, as revealed by features that

we will draw attention to, is that of a law

imposing a sales tax on tobacco.

We rely on the fact that section 10 ensures

that the ad valorem component of the licence fee

payable by wholesalers and retailers is only

exacted once in respect of the same tobacco.

Obviously enough, Your Honours, that shows that

there is no question of trying to give a value
to any particular licensed premises. It is

the commodity which is the matter -'Which is of critical

importance in bearing the duty, in our submission.

I am reminded, Your Honours, that that is a

submission which could not have been made in

DICKENSON'S ARCADE because, in that case, it was a tax which was imposed on the retailer. There

was no question there of the tax being passed on.

It was obviously easier to say, if one wished to,

that there was a direct relation to premises.

Next, Your Honours, the calculation of the

ad valorum component of the licence fee by

reference to sales affected.by the applicant in

a closely proximate month, in our submission,

discloses an intention to tax sales affected

during the term of the licence on a basis that

reflects as nearly as possible the actual value

of those sales.

(Continued on page 145)

ClT26/2/VH	144	8/3/89
Philip Morris

MR CHARLES (continuing): The legislation could not be any more

direct, we would say, because of the need to stay

within the protective screen of DENNIS HOTELS. The

relative remoteness of the 12 month period in a case

such as DENNIS HOTELS was referred to by

Sir Ninian Stephen in the passage quoted from

M.G. KAILIS. Your Honour, we submit that the overall

scheme of the Act and in particular the device of

using monthly licences, we would say, discloses a

single purpose to afford a means of taxing the sale of tobacco in the course of its distribution to the

consumer. The assumption of the Act is that the

licensed businesses are continuing ones, that the

licences will be obtained demesne in mensem and that

over an significant period actual sales are being

taxed as they occur.

We would submit, Your Honours, that the licence

fee on no view could be described as the price of a

valuable franchise. It relates to an exceptionally short period. It is not transferable or renewable. It does not purport to confer anything in the nature

of a monopoly right. The licence is freely available

to anyone who wishes to pay for it. It does not

in any way enhance the value of the premises because

new premises may be nominated or substituted at any

time without hindrance. In other words, Your Honours,

it is a simple tax collection statute. Nor can it be

said that the method of calculating the ad valorem

component is an attempt to value the business which

the licensee conducts. The value of sales in a recent

month affords no measure, we would submit, of the

profitability or value of the business.

The calculation is no more and no less than an

indirect means and the least indirect means, we would

say, available to the State of valueing or estimating
the value of sales that will be made by the licensee
during the term of the licence. Your Honours, we put

at length to the Court reasons why, in our submission,

Philip Morris as a producer falls outside the limited

scope of DENNIS HOTELS. We would submit that if the

Court were to arrive at the view that the wholesale

licensing fee	is an excise then the Act is to that
extent invalid for the reasons we have given.	I will
not take the Court back to the cases to which

reference is made save, Your Honours, that I did say

that I would go to H.C. SLEIGH because that is the

case that may be put against us as one involving a

producer.

BRENNAN J: Before you go back to that, Mr Charles, could I

ask you this question: if one were to adopt as a

test the test of an impost on a step in production,

distribution or sale,and if at the end of the day

it were necessary to identify the step on which this

statute imposes an impost, what step would you select?

ClT27/l/BR	145	8/3/89
Philip Morris
MR CHARLES:	There are really two criteria, Your Honour.	I do

not think one could say that there is one here.	We
would say that the two are the application for a

licence that will entitle one to conduct the business

of wholesaling and the fact that one then does

engage in sales. So that the two .criteria are selling

by wholesale and the carrying on of the business.

Our submission is that the critical one,which is

evident on the face of the statute, is that it is

the selling by wholesale that is the matter to which

the Act is really directed but I accept that a second,
for purposes of the intention of the legislature,

a subsidiary matter is the carrying of the business

by wholesale for which one applies for the licence.

BRENNAN J: If one chooses the sale by wholesale as the

relevant step, it is immaterial, is it not, that

the person on whom the impost falls is a producer?

MR CHARLES:  It is very material to our submission,

Your Honour, that it is a producer. We would say it

is not material that that liability may also fall on

other wholesalers who are not producers because it

will inevitably sweep up Victorian producers.	We say
the Act amounts then to an excise.

BRENNAN J:  Do you put it as a tax on production?

(Continued on page 147)

ClT27/2/BR	146	8/3/89
Philip Morris

MR CHARLES:  We say is a tax upon produc~ion and because it

lands on producers and is so closely related to the act of production - in other words the first sale -

that production could not occur unless the sale were

permitted to take place.	The legislation inhibits
sale without a licence.

BRENNAN J:	Thank you.
MR CHARLES:	Your Honours, if I may go to H.G. SLEIGH?

Your Honours, in order to ensure that the Court has

as much paper as possible we have brought to Court

the legislation also in question in H.C. SLEIGH,

if I may hand up copies of that legislation to the

Court?

MASON CJ:	Thank you.
MR CHARLES:	I do not propose, having done so, to take the

Court now to that legislation. I simply desire to

take the Court to what ·,.was said in some of the

judgments in SLEIGH, (1977) 136 CLR 475. Your Honours

will remember that in SLEIGH, what was in question

was a refinery exchange process and in the case stated, that may be helpful. At page 477 point 5, it was

said that the:

Refinery exchange was the sale and delivery by a marketer in one State of petroleum products produced at a refinery controlled by it in

that State to another marketer in that State

in consideration of the second marketer's

selling and delivering like products to the

first marketer in another State produced at

a refinery in that State, controlled by the

second marketer

Then, lower down the page at point 8 -

Mobil and Esso supplied the plaintiff by

Australia. The plaintiff did not have a

exchange purchases from a refinery in South

refinery there. Products so supplied were

delivered by Esso or Mobil or taken by the
plaintiff to distribution points in South

Australia and other States -

and at the bottom of the page -

The plaintiff carried on at distribution

points in South Australia the business of

selling petroleum products in South Australia

and delivering them to purchasers resident

and situated in Victoria.

ClT28/l/JH	147	8/3/89
Philip Morris

Then, Your Honours, there is a passage in

Sir Harry Gibbs' judgment at page 494 - Your Honours

will see in the middle of that page:

The plaintiff obtains the petroleum products

which it sells in South Australia from a

refinery operated at Port Stanvac in that

State by two other companies, Esso and Mobil. There is one other passage to which we would refer the

Court in the judgment of Your Honour the Chief Justice

at page 503 where Your Honour said at point 3:

There is in all this nothing to distinguish

the licence fee from that which was dealt

with in DICKENSON'S ARCADE. Although some

attempt was made to suggest that the

plaintiff was engaged in manufacturing

operations in that it included one or more
additives in the petroleum products which it
obtained from refiners, the prohibition is

against carrying on the business of selling

petroleum products without a licence, that is

against selling, not against manufacturing.

The case is, therefore, governed by

DICKENSON'S ARCADE.

(Continued on page 149)

ClT28/2/JH	148	8/3/89
Philip Morris

MR CHARLES (continuing):  What we take that to indicate,

Your Honours, is that there was no question of

the plaintiff Sleigh, in South Australia being

a producer. The plaintiff was simply a seller

for the purposes of this case and equally

therefore no question raised of a sale being

imposed on a producer. It is on that basis

therefore, Your Honours, that we say this case

does not stand as any authority against us.

Your Honours, we then submit that the Act

itself makes no attempt to differentiate between

wholesalers who are producers and those who are
not. This is a case of a group licence covering

in a single licence both a producer and a wholesaler.

We say the Act inevitably by these provisions must

cover producers. If, Your Honours, one were to approach

the question on what might be called the narrower

view by approaching it by reference to the criterion

of liability, we would submit precisely the same

conclusion follows. We say that that

accepts that an exaction may be an excise duty even though it takes the form of a licence fee, a matter which Sir Frank Kitto himself said

at page 563 of DENNIS HOTELS. I think the passage

has been read, Your Honours, I will not go to it.

We say that approach also accepts that the

identification of the criterion of liability of the Act is a question of substance and not mere

form and if necessary, Your Honours, we would

go back beyond the cases to which reference is

made to PETERSWALLD V BARTLEY, the passage already

cited to the Court this morning.

We would say that the features of the Act

described above demonstrate that the criterion
of liability chosen by the Act is the sale of

tobacco by wholesalers or retailers, the intention

being to tax sales during the currency of the

licence at an ad valorem rate. Alternatively,

Your Honours, then going back to the alternative,

the suggestion of contingent liability which

might follow from what Your Honour Justice Brennan

said in GOSFORD MEATS, we would submit that the

sale of tobacco during any month does create a

contingent liability in the holder of a wholesale

tobacco merchant's licence which it must pay at
the end of the next month when it applies for a

further monthly licence, a liability which can

only be avoided by not applying for a licence in

that month. We would say consequently, Your

Honours, that the making of sales in the prior

monthly period is just as much a criterion of

liability as the making of an application for a

licence in the subsequent month and it determines

the measure of the tax liability which will arise

if a licence application is made.

CIT29/l/JM	149
Philip Morris

Your Honours, for all those reasons,

in our submission, the licences imposed by

the plaintiffs in PHILIP MORRIS amount to an

excise and the scheme by which they are imposed

is invalid as a contravention of section 90.

MASON CJ:  Thank you, Mr Charles.

MR CHARLES: If the Court pleases.

MASON CJ:  Mr Jackson, is it your wish that you present

your argument now?

MR JACKSON:  Your Honours, I really have no views on the

matter. I would be perfectly happy and it

might be more convenient simply geographically
to do so after my learned friend has concluded his other argument, or for us to go afterwards.

We really do not mind.

MASON CJ:  Mr Jackson, it seems to us that it may be

convenient to hear you now.

MR JACKSON:  Yes, Your Honour. Your Honours, may I hand

to the Court copies of two outlines of submissions.

The first is a slightly expanded version of the

outline which we gave Your Honours yesterday in

relation to the matters concering excise generally.

I do not propose, may I say, to deal with those

specifically, but simply to adopt what was said

by my learned friend. The second relates to a

submission I want to put in relation to the
application of DICKENSON'S ARCADE and the other

cases.

MASON CJ: Yes, Mr Jackson?

(Continued on page 151)

CIT29/l/JM	150
Philip Morris

MR JACKSON:  Your Honours, I propose to do two things,

if I may: the first is to take Your Honours

to the terms of the enactments as briefly as

possible and then, in doing that, I will go
principally to the 1975 enactment and then indicate

the provisions of the 1987 enactment which are

more or less parallel to them; having done

that, Your Honours, may I move then to on to

our submissions in connection with the effect

of the enactment.

Your Honours, could I ask one administrative

thing first: in relation to the 1975 enactment -

and the Court has, I think, supplied by our

learned friends for New South Wales, a copy

of the 1975 Act in a consolidated form which

has the heading "Tobacco" written on it on the top right-hand corner. I am sorry, it has not

been handed to the Court yet but I understand

that that is now being done.

MASON CJ:	Yes, thank you, Mr Jackson.
MR MASON:	What I have to hand up to the Court, firstly,

is a bound volume which has the 1975 Act and

the 1987 Act in the form containing the 1975

Act with annotations of later amendments which

appear subsequently in the book but I also.am able now to hand up, in addition, as it were,

a scissors and paste exercise on the 1975 Act.

MR JACKSON:  May I ask Your Honours to disregard entirely

the 1975 enactment in the bound book and look

at the 1975 one which is loose. Your Honours,

could I go first to the terms of the 1975 Act.

It commences by providing in section 10(3),

that:

a person shall not sell tobacco unless he -

that person -

is the holder of a licence.

And Your Honours will see that at the top of the

page numbered 27.

The broad prohibition there stated relates

to a sale of tobacco and a sale of tobacco is

defined to be a sale in the course of intrastate

trade; that appears from section 3(4A). And

"intrastate trade 11 is, not surprisingly, defined

as being trade carried on in New South Wales

other than trade and commerce among the States

in terms of section 92; that appears from

section 3(4).

ClT30/l/ND	151	8/3/89
Philip Morris

Your Honours, the dealings in tobacco are

divided into two classes, that is, tobacco

wholesaling and tobacco retailing and licences

are required for both. Tobacco wholesaling,

Your Honours, is dealt with at page 26, by

section 1 (1), and tobacco retailing is dealt

with by section 10(2).

I will come to the terms of the statute

in relation to obtaining a licence in a moment

but the system of licensing, we would submit

in passing, is not designed to perform any function

other than to provide the vehicle by which,

and the occasion by which, a revenue-gathering

tax is imposed. And, in particular, Your Honours,

the enactment does not regulate the standards
of the product sold by the licensee or the standards
of hygiene of the premises in which those products

are sold or the quantities or packaging or get-up

in which the goods may be sold, Your Honours,

except in respect of an aspect relevant to

the collection of revenue, one of the later

provisions of the Act providing for there to

be a statement on an invoiee that the goods

have been purchased from a licensed wholesaler.

Your Honours, -nor does the enactment impose

the tax for any apparent purpose of suppressing the sale of tobacco and tobacco products except

that as a matter of probability increases in
the rate of the tax, or the imposition of the tax at a high rate, may cause some smokers to

desist from smoking or reduce their consumption

or perhaps send them to cheaper brands.

(Continuing on page 153)

ClT30/2/ND	152	8/3/89
Philip Morris

MR JACKSON (continuing): Your Honours, in short, the

licensing system provided for by the Act exists

to provide a basis for imposing the tax and no

other purpose.

Could I come back to the terms of the Act,

Your Honours. The term "tobacco wholesaling"

is defined by section 3(1) to mean the business

of selling tobacco other than by tobacco retailing.

That appears, Your Honours, on the page numbered 5

in the top right-hand corner.

The business of selling tobacco ..... but does not include the business of tobacco retailing.

Your Honours, "tobacco retailing" is defined on

the previous page, again by section 3(1), as:

the business of selling tobacco by retail.

Your Honours, the types of licences which may

be granted are specified in section 11(2), and

Your Honours will see that a licence may be:

(a) a wholesale tobacco merchant's licence

or a group wholesale tobacco merchant's

licence .....

(b) a retail tobacconist's licence or a group

retail tobacconist's licence.

Your Honours will see that the Chief Commissioner

is empowered to grant or to refuse to grant those

licences. That appears from section 11(1) where

it is provided that:

(a) upon application made therefor in a

form approved by him;

(b) on receipt of the particulars, if any,

required by him to be furnished by the applicant

under section 8;

(c) upon payment of -

and

(i) the fee assess by the Chief Commissioner

in accordance with section 12 -

he may -

grant to the applicant a Business Franchise

Licence (Tobacco) or refuse to grant to the

applicant such a licence.

The licence, as appears from section ll(l)(c)

is to be granted upon payment of the fee assessed

and, Your Honours, the grounds for refusal of

a licence relate only to financial matters. That

C 1T3 l /1 /SDL	153	8/3/89
Philip Morris

appears from section 11(4). Your Honours, the

amount of the licence fee is provided for by

section 12(1) and, in particular, section 12(l)(a)
provides for the rate applicable in the case of

a wholesale tobacco merchant's licence, and that

is a small fixed fee, in effect of $10, together

with a percentage, of 30 per cent -

of the value of tobacco sold by the applicant

in the course of tobacco wholesaling during

what is described as the "relevant period".

Your Honours, I will come to the meaning of the

term "relevant period" in a moment, but the provision

is framed in such a way that the wholesaler rather

than the retailer is the person who pays the fee.

That appears, Your Honours, from the terms of

section 12(l)(a), and at section 12(l)(b) and

Your Honours will see that after the first paragraph

of section 12(l)(a), there has been added the

exception in respect of tobacco purchased:

(i) from the holder of a wholesale tobacco

merchant's licence -

and Your Honours will see that also in

section 12(1)(b), the words which are typed in.

Your Honours, both those provisions refer

to what is described as the "relevant period",

and the term the "relevant period" is defined

by section 3(1). It is at the bottom of page 3

and, Your Honours, it is said to mean - and

it deals in paragraph (a) with a retail tobacconist's

licence; in paragraph (a)(i) again a retail

tobacconist's licence, and then in paragraph (c),

in the middle of page 4:

in relation to a wholesale tobacco merchant's
licence ..... the month specified in column 2

of Schedule 1 that last preceded the month -

(i) specified in column 1 of Schedule 1

opposite the firstmentioned month; and

(ii) on the 27th day of which the licence,

if granted and in force for the whole of its

term, would expire.

(Continued on page 155)

C1T31/2/SDL	154	8/3/89
Philip Morris

MR JACKSON (continuing):  Your Honours, I need to go to Schedule 1

at page 52. If I could ask Your Honours to look at

the schedule whilst looking also at the middle of

page 4, Your Honours will see that the relevant

period is:

the month specified in colunm 2 of Schedule 1 -

that is, May in the first instance -

that last preceded the month -

specified in column 1, which is July and -

on the 27th day of which the licence, if

granted ..... would expire.

So what it means, in effect, is that the period is

May for June, and so on. Your Honours the effect

of the reference is that one pays one month in

arrears. The Act makes provision for the duration

of the licence and that appears in section 16(3);

that appears, Your Honours, at page 39, and the:

Wholesale tobacco merchant's licence .....

shall be in force on and from the day

specified in the licence as the day from

which the licence connnences until -

where -

the licence was first in force -

on a date before the 28th of the month - the 27th

day of that month, so it may be a licence for a

period less than a month, otherwise it is the 27th
of the next month. The Act also makes provision for

the situation if, during the relevant period, the

applicant for the licence did not carry on the

business or carried on the business during the

relevant period without a licence. Your Honours,

the former situation is dealt with by section 12(2).

That provides that: 

The fee payable in respect of the licence

shall be _::-.such.amount as is assessed by the

Chief Connnissioner as being just and

reasonable in the circumstances of the case,

having regard to the tobacco that in the

opinion of the Chief Connnissioner would

have been sold ....• had he been carrying on

that business during the whole of that period,
and the relevant principles of determining

fees under subsections (1)-(lc).

Now, Your Honours, "principles" may be, perhaps, a

word of some aggrandizement to describe what is

involved in 12(1) to 12(c) which simply involves

ClT32/l/VH	155	8/3/89
Philip Morris

the value of the tobacco and so on. Your Honours,

in respect of the period when the business is

carried on without a licence, section 28A(l) at

page 47 says that:

Where a person was required by this Act

to hold a licence in respect of any period,
but did not do so, the person shall pay to

the Chief Commissioner an amount equal to the fee which would have been payable .....

together with -

twice that amount by way of penalty. The

Chief Commissioner, by section 28A(2) is empowered

to:

Assess the amount of the fee as if the

person had applied for the licence -

and notice of that assessment is to be given.

(Continued on page 157)

ClT32/2/VH	156	8/3/89
Philip Morris

MR JACKSON (continuing):  Your Honours, the terms of

section 12 fixed the amount of the tax as based on

the value of tobacco sold during the relevant period.

The Minister has power to determine the basis

for attributing of value to tobacco sold. That

appears from section 15, page 38, and Your Honours

those are the provisions to which I wish to take

the Court.	The remaining provisions appear to be
ancillary.	What emerges from them, in our

submission, is this, that that licence fee is

clearly a tax. It is a tax imposed by reference

to the quantity of tobacco sold in the activity of wholesaling and the activity of wholesaling, of course, is one of the stages leading to the

consumer.

Your Honours, wholesaling, for the purposes of the Act, is all sales other than sales by

retail. The manner of imposition of the tax,

that is as a percentage of the value of sales, is

such that, bearing in mind the level of the tax,

it is likely to be borne by the consumer, rather

than simply being treated as an overhead or passed

back, and a person carrying on the business and

continuing to carry on the business must pay the

tax. It is only if that person ceases to carry
on the business that the tax is not payable.

I will come to the other Act in just a moment, but may I say something in passing in

relation to an observation of Sir Harry Gibbs in

SLEIGH's case, 136 CLR 492 where His Honour said,

in the middle of the page:

However, this does not alter the fact

that the fee is based on the value of

goods sold during an earlier period,

and it remains true to say that under

the Act no sale of petrol, either
during the "relevant period" or during

the "licence period", creates a

liability to pay the tax.

(Continued on page 158)

ClT33/l/HS	157	8/3/89
Philip Morris

MR JACKSON (continuing):  Well, Your Honours, that is, with

respect, true and not true. Every sale under the

Act presently in question gives rise to a liability

to pay the tax in respect of that sale. The

liability to pay the tax in respect of that sale

goes only if the wholesaler ceases business within

the month after the month in which the sale takes

place.

Your Honours, the 1975 Act, if I could come to

its terms now, is in a rather more easy to read

form and its provisions are generally similar.

.Could_ I indicate to Your Honours where the

provisions are? Section 28 at page 13 of the

pamphlet copy which is reproduced in the second part

of the volume which Your Honours have once again

imposes the prohibition upon the sale of tobacco:

1mless the person is the holder of a

licence.

That is a general prohibition on sale. There is also

a prohibition on tobacco wholesaling and retailing

without a relevant licence. That appears from

sections 29 and 30. The definitions of "tobacco

retailing" and "tobacco wholesaling" cont&ined in the

Act are to be found in section 3(1) and again are

similar to those to which I referred earlier.

The types of licences are provided for by section 34

and they are - and may I take Your Honours to that

paragraph of page 15 of the pamphlet copy:

Licences are of the following kinds: -

and they are, Your Honours -

(a) a tobacco wholesaler's licence or a

group tobaccowholesalerls iieenee,

(b) a tobacco retailer's licence or a group

tobacco retailer's licence.

Your Honours, the power to grant a licence is provided

for by section 36(1) and it provides that except

the circumstances of subsection (2) the Chief

Commissioner is to grant a licence on application on

receipt of the specified particulars and on payment

of the fee.

The Chief Commissioner is given, by subsection (2)

a power to:

refuse to grant a licence to an applicant if -

paragraph (a), the applicant -

has been convicted of an offence under

section 751(1) of the PUBLIC HEALTH ACT 1902

ClT34/l/JH	158	8/3/89
Philip Morris

which is supplying tobacco to a person under the

age of 16. Your Honours, that is the only

circumstance in which the licence can be refused.

Your Honours, the duration of a licence is

provided for by section 39 and section 39 is in

terms similar to those in the prior Act. There is

provision for an automatic application for renewal

and that is provided for, Your Honours, by section 40.

That provision does not have an equivalent in the

earlier Act; perhaps it was found that the revenue

collection required that the licences be renewed

automatically. Your Honours, subsection (1) says that:

A person who holds a licence shall -

(a) subject to compliance with subsection (2)

and

(b) provided the licence is not cancelled or surrendered,

be taken to have applied for a further such

licence and to have been granted one, with

effect from the expiration of the person's

current icence -

And (2) A person who holds a licence -

(a) shall, unless the person does not wish the licence to be renewed -

pay the fee payable. Your Honours, the quantum of

fees for licences is provided for by section 41,

in particular subsection (l)(a) which says that the

fee:

for a wholesaler's licence - a fee of $10
together with an amount equal to 30 per cent
of the value of tobacco sold by the
applicant in the course of tobacco
wholesaling during the relevant period, other

than tobacco sold to the holder of a

wholesaler's licence or a group wholesaler's

licence.

(Continued on page 160)

ClT34/2/JH	159	8/3/89
Philip Morris

MR JACKSON (continuing): Your Honours, the "relevant

period" is defined rather more simply by
section 3(1) as being in relation to a licence
the month commencing two months before the
commencement of the month in which the licence
expires.

Your Honours, there is provision again for estimation of the fee where the business is not

carried on during the relevant month. That

having regard to the tobacco that would have

appears from section 43(1). Once again the

been sold by the applicant if the applicant had

been carrying on the business during the relevant

period. The Minister may determine the value

of tobacco, or the vasis by which tobacco is

to be valued. Your Honours, that is section 45.

And there is a penalty for not holding a licence

provided for by section 47 and the penalty is

the equivalent of section 28A in the prior

enactment, that is an amount equal to the licence

fee and a further penalty of twice the amount of
the licence fee.

Your Honours, those are the provisions of the statute to which I wish to refer.

~.ASON CJ: It may be a convenient time to adjourn.

Gentlemen, we will resume at 2.15.

AT 12.45 PM LUNCHEON ADJOURNMENT

CIT35/l/JM	160
Philip Morris

UPON RESUMING AT 2.16 PM:

MASON CJ: Yes, Mr Jackson.

MR JACKSON:  Thank you, Your Honours. Your Honours, may I move

on now to the substance of our argument in relation

to this matter. As is apparent in our submission

from the terms of the two statutes to which I have

referred, a tobacco wholesaler is required to pay a

tax of a substantial percentage of the value of sales

during one month by the commencement of the month
which is two months after that and the obligation to

make that payment is one which accrues on the

happening, in our submission, of each sale as it

occurs, that is, during what we have described as

month 1. It will only be defeated if the wholesaler

ceases to carry on his business before the

commencement of the third month and, of course, the

total amount which he is required to pay cannot be

known until the last day of the first month which
means that the gap is very short and the very short

gap is a further indication that what is contemplated

by the enactments is purely a tax on the sales but a

tax on sales arrived at by first of all creating the
need for a licence and then for no other purpose than
to impose the tax and then imposing a tax for the

grant of that licence.

Your Honours, could I refer Your Honours

briefly to an observation of Justice Stephen in

DICKENSON'S ARCADE, 130 CLR 235 in relation to

the submission which I have just made.

Your Honours will see in the last paragraph on that

page that His Honour indicates that: ·

(Continued on page 162)

ClT36/l/BR	161	8/3/89
Philip Morris
MR JACKSON (continuing):

Perhaps the clearest way in which a tax

may be seen to fall upon the taking of such

a step in the process of distribution is

when it is calculated by reference to the

quantity or value of purchases or sales of

goods by the taxpayer.

He goes on to say it:

is not an essential feature of a duty of

excise but its adoption provides a significant

indication that the tax is an excise because

it tends to demonstrate that what is being taxed is the step of dealing in particular

goods. The very act of measuring the amount

of tax by reference to the -

I will just pick the word "value'' -

of the goods dealt in will usually be explicable
only as disclosing that what is being taxed

is the taxpayer's dealing with those goods.

McHUGH J:  Mr Jackson, is there any way that there can be

a tax upon goods if the tax is not imposed by

reference to their quantity or value, either naturally

or directly or some way?

MR JACKSON:  Your Honour, perhaps HEMATITE provides an example

in the sense that the tax is imposed upon whatever

might be transported during a particular period.

There being references, of course, in the cases
to the fact that one of the stages in the movement
to consumption of goods which may be the subject

of a duty of excise, is the fact of movement as

distinct from a transaction involving a change

of property - a change of ownership of it.

Your Honours, just going back to the bottom of page 235, Your Honours will see that His Honour said

that that act of measurtng will usually be explicable:

only as disclosing that what is being taxed is the taxpayer's dealing with those goods.

Only exceptionally, in an appropriate context - a matter to which I will come in a moment -

will it perhaps indicate no more than that the
value of a franchise, monopoly or business
is being measured, the tax being a fee on
grant of that franchise or monopoly or a

tax on that business rather than an excise.

C1T37/l/SDL	162	8/3/89
Philip Morris

Could I come then to the cases in relation

to backdating. The cases where the backdating

principle has been applied, or has been established,

if I may say this first, have not dealt with a

case where the period has been so truncated and

where the connection between the requirement for

the licence and its only purpose being the

imposition of a tax has been quite so obvious.

Nor, Your Honours, and perhaps more importantly,

has there been a case before, in our submission,
where the purpose of the licence or the requirement
for the licence has been for nothing other than

to impose the tax.

Your Honours, could I go, in that regard,

to the cases; first of all to DENNIS HOTELS,

104 CLR 529.

(Continued on page 164)

ClT37/2/SDL	163	8/3/89
Philip Morris

MR JACKSON (continuing): Your Honours, in that case,

the licence fee, of course, was a figure of

six per cent of purchases during the financial

year - meaning by that the year ending 30 June -

preceding the date of application for the grant

or renewal of the licence. The licences appear

to have been licences granted in respect of

calendar years as distinct from the financial

year.

Your Honours, one of the features which

appears to have been of significance to the

members of the Court constituting the majority

was that the licence did confer some franchise

or monopoly rights and responsibilities and

that there was some occasion other than the

mere desire to impose a tax which provided for the need or the appropriateness of there being

a price to be paid for obtaining that right.

In that regard, may I go to the judgment of Justice Fullagar at page 550. Your Honours,

in the first paragraph of His Honour's judgment,

Your Honours will see, half-way through it,

that he says:

It is true also that the elaborate State licensing systems are designed to effectuate

a strict general control of the trade, and
not as mere machinery for the collection

of revenue. In this respect they differ

from the licensing systems which exist under

the excise legislation of the Commonwealth,

and which are designed for, and justifiable

only as incidental to, the effective collection

of revenue.	But these considerations are
not decisive.	A licence required in the

first place alio intuitu may be made obtainable

only on payment of what is found to be a

duty of excise within the meaning of s. 90

of the CONSTITUTION.

If I might pause there for just a moment, the

point I am making about it is that if one is

looking to see what these cases decide, what
they decide, in our submission, is that the
backdating mechanism or backdating approach
may be used, in our submission, where there

is to be granted a licence or right for which

a price is to be paid and where the licence

or right is something more than just the occasion

for imposition of the fee.

C1T38/l/ND	164	8/3/89
Philip Morris

MR JACKSON (continuing):  I have referred to His Honour's

observations because it indicates the context

in which the judgment was given. Your Honours,

could I go also to the judgment of Justice Kitto

at page 569 and, at the bottom of the page in the last paragraph, His Honour deals with the

fact that the liquor licensing framework,

within which the fee was imposed, was a

framework which dealt with matters other than

just the imposition of a licence fee.

Your Honours, I shall not read it out, but I

would refer Your Honours to that paragraph and

over to the next page. At page 576, L1 the judgment

of Justice Taylor, about 12 lines from the bottom

of the page, His Honour says:

In other words the requirement that liquor

shall not be sold or disposed of without

a licence appears as a substantive provision

and not merely as an adjunct to a revenue

statute.

And His Honour, before saying that, has referred

in the earlier parts of the paragraph to the fact

that dealings in liquor have historically been

controlled, not just for reasons of revenue, of
course, but also for reasons of public health and

no doubt to reduce the incidence of crime and for

other reasons and His Honour goes on to refer to

the fact, at page 576 that the:

very requirement necessarily means that partial

monopolies will be enjoyed by licensees and

that licensed premises will, as such, achieve

an enhanced value. So much is recognized by

the provrusions of section 19(3) to which

reference has already been made.

Your Honours,, the passage goes on to the end of that

paragraph. Justice Menzies, at page 591 - we

intended to refer to the whole of the first paragraph

and it is apparent when one reads the paragraph and

in particular the passage in the middle of the

paragraph containing the reference to BROWNS TRANSPORT

PTY LIMITED V KROPP that what His Honour is

is dealing with is a tax imp?sed:

upon_a,licensed victualler as the price

for his francise to carry on a business.

(Continued on page 166)

ClT39/l/VH	165	8/3/89
Philip Morris

MR JACKSON (continuing):  Your Honours, what appears, in

our submission, from those observations in the
various judgments of the members of the majority

is that the context in which the decision was

given was one in which the licence fee being

spoken about was a licence fee which involved an element of franchise, an element of value, if one likes to call it that, but gave some

privilege of a real kind for which it was

appropriate to provide a fee. The fee then

charged, of course, was one which related to

purchases in a period which was substantially

prior to the events in question. The latter,

I refer to, Your Honours, not as a matter of

principle but rather as a matter indicating

that the obviousness of the tax as being a

tax which was imposed on sales was not so clear.

Your Honours, WHITEHOUSE V QUEENSLAND,

104 CLR 60~ was again a case of a percentage

charged on gross purchases during the preceding

financial year and, Your Honours, one notes, for

example, at page 620 in the judgment of

Justice Menzies that what he says on about the

seventh line, after referring to a difference

between the method of renewal of the licence in

Queensland and that in Victoria, says:

the fees are still fees for the licences
to carry on business in the future
assessed upon past turnover and are not

taxes upon sales or purchases.

We would submit in the context of both those cases

His Honour once again is speaking of a privilege

that has something to it.

Your Honours, DICKENSON'S ARCADE,

130 CLR 177 - - -

BRENNAN J:  Mr Jackson, I am not sure that I understand the difference between the kind of franchises

as involved in those cases and the present one.

What is the characteristic, or quality, that

you say distinguishes them?

MR JACKSON:  It is this, Your Honour, if one went to the

legislation surrounding them it would give,

for example, circumstances in which the licensee

of the licensed premises would have a right to

sell from particular premises; there would be

restrictions capable of being imposed upon the

number of persons able to sell from similar premises

in the same vicinity. There would be rights given

and restrictions imposed in relation to the

types of liquor or the quantities in which it might

be sold. What I am seeking to convey by it, Your Honour,

is that the licence given is one that would be restrictive

but at the same time would give rights and privileges

that not all others were entitled to obtain.

CIT40/l/JM	166
Philip Morris

BRENNAN J:  That means it has a regulatory character

of some kind.

MR JACKSON:	Yes.
BRENNAN J:	But then you say "and for that it 1s

appropriate to charge a fee".

MR JACKSON:  Well, it is understandable that a fee might

be charged, Your Honour, because what is being
done is not just to impose a restriction but to

confer a right which has some identifiable value

and carries with it regulatory responsibilities.

Your Honour, that is a bad expression, but I think

Your Honour will understand what I mean. How I

would contrast that with the legislation in

question here is that one obtains a licence, one

has a right to obtain a licence, everyone has a

right to obtain a licence and the only ground upon

which, for practical purposes, you will not get

a licence is if you cannot - is if you have not

or you will not pay the fees. There is no

restriction in any other relevant sense,

Your Honour.

DAWSON J:  What if the fee in both cases is to raise

revenue.

MR JACKSON:	Yes, Your Honour.
DAWSON J:	You concede that.
MR JACKSON:	I am sorry, Your Honour?
DAWSON J:	You would concede that that made no difference?
MR JACKSON:	The object is to raise revenue, Your Honour. There might be some debate, perhaps, about the
purposes for which the revenue might be applied because in some of the cases in relation to liquor the licence fees have been applied over years to
compensate licensees going out of business and,
Your Honour, I cannot now recall, without looking
closely at the case, whether that applies to the
particular statutes in consideration in DENNIS HOTELS or to their predecessors that are referred to in the reasons for judgment, but the possibility of use of the funds raised for purposes which,
though public, have a private aspect exists,
but Your Honour I accept the proposition that the
funds are raised for public purposes and the funds
are raised as a tax.

ClT41/l/HS	167	8/3/89
Philip Morris

MR JACKSON (continuing): Your Honour, if I could just say

something more in answer to Your Honour Justice Brennan.

The present cases are ones where the fee is raised purely as a tax and it is open to anyone to participate in the trade and they obtain the licence if they can or will pay the money.

Your Honours, I was going to DICKENSON' S ARCADE.

Your Honours, the method of imposition of the tax,

notwithstanding, I suspect, the first paragraph of

the head-note was that the calculation of the fee was

based on the average value of tobacco handled per

month, not over the last six months, but over the

12 months which ended six months before the commencement

of the period of the licence. Your Honours, that that

is so appears at page 215 at the bottom of the page

in the reasons for judgment of Justice Gibbs:

For the purposes of this provision "the monthly stock value" for premises for the relevant assessment period is the average value, over that period, of the tobacco

handled in a month in the course of the

retail tobacco business carried on on those

premises during that period, and "the

relevant assessment period" is the period of

twelve months ending six months before the

commencement of the period in respect of
which the licence is granted.

So that, Your Honours, one is taken back, first of all I mention in passing, some distance in time.

That that is so appears also at page 236.

Your Honours, the licence in question in that case was also a licence which might be granted or refused. That

that is so appears again at page 215 in the judgment

of Justice Gibbs.

(Continued on page 169)

ClT42/l/JH	168	8/3/89
Philip Morris

l1R JACKSON (continuing): Your Honours will see ~t the paragraph corrrnencing

about a quarter of the way down the page, it is set

out there that:

no person may carry on ..... a retail tobacco

business ..... unless authorized by licence -

the Treasurer has the power to grant two kinds of

licence. And then, Your Honours, half-way down the

page:

In exercising his powers under s.10 the

Treasurer is required to "have regard to
public necessity, convenience, and

welfare" -

and there is -

Provision is made for an appeal from a

refusal by the Treasurer to grant a

licence.

And, Your Honours, I am sorry, I have just missed the

exact reference to the provision for refusal to grant
a licence but there was given by the Act provision
to refuse a licence although there was an appeal that

the considerations involved were public necessity,

convenience and welfare and one might well imagine

that with those criteria being applied, persons

otherwise appropriate to have licences might not yet

be able to obtain them. There was a difference
between that case and the present one because of that

factor, in our submission.

Your Honours, the tax, of course, in the

DICKENSON'S ARCADE was also not imposed in respect of

any particular transaction of sale. There was an

estimation by arithmetical means of what the

legislature considered a fair thing for the future.

'What I mean by that, Your Honours, is this: that in

respect of the present legislation it is possible

a tax being payable unless the business is given up.	to say that every transaction of sale will result in
In respect of the method of calculation of the tax in DICKENSON' S ARCADE, that was not so, because
the transactions in respect of the particular period
were aggregated and an average taken, and whilst one
might be able to see an economic equivalence between
the two, it was not possible to say in respect of any
particular transaction that the sale price obtained
by reason of that would itself attract a particular
tax.

Your Honours, I should say that I am conscious in

making the submission that in that case Justice Gibbs

did not regard the question of the licence having any
value as being a consideration which was a material one

or which he thought might be material.

ClT43/l/BR	169	8/3/89
Philip Morris

MR JACKSON (continuing): Your Honours, that appears at

page 225 and, at the bottom of the page,

His Honour says:

It must in my opinion follow that even if

the licensing system is brought into

existence primarily as a means of imposing

a tax and even if the licence adds no value

to the land or business in respect of which

it is granted, the fee will still not be

a duty of excise unless it is directly

imposed upon or in respect of goods.

Your Honours, that is, with respect, slightly

delphic but His Honour suggests - His Honour's

observation contains the suggestion, in our

submission, that he would not have regarded

the proposition I was putting as correct. That

view does not seem to have been adopted one

way or the other by other members of the Court.
The other members of the Court appear simply -

I do not mean that in the slightest degree offensively -. appear simply to have treated the case, in the end, as analogous to DENNIS

HOTELS.

Your Honours, H.C. SLEIGH LTD, 136 CLR 475,

was a case where the tax was a percentage of the value of goods sold over a prior period.

The prior period was again some time before - meaning by that some relatively considerable time before~ and it was slightly more

complicated than .the instances which I have

already given. At page 490, Your Honours will

see the method of calculation of the fee there

set out, commencing about 10 lines down the

page:

The fee payable for any licence comprised a fixed sum of money and a further amount

which was "the prescribed percentage of

the value of the quantity of petroleum products

sold by the applicant during the relevant
period reduced by the quantity of any
petroleum products non-accountable in respect

of that period":  The "relevant period"

meant, in relation to a licence to be in
force during the first licence period, the
financial year ending on 30th June 1974,
and in relation to a licence to be in force
during the second licence period, the financial
year ending on 30th June 1975.

The two periods to which those nominated periods related are set out further up the same page

Cl T44/l /ND	170	8/3/89
Philip Morris

and the result of it was, Your Honours, that

the first relevant period was the financial
year ending 30 June 1974 in respect of a
licence period commencing 24 March the next

year; the second one was 30 June 1975 in respect

of a briefer period, that is, commencing
24 September 1975 - a briefer gap, I mean,

Your Honours.

(Continuing on page 172)

ClT44/2/ND	171	8/3/89
Philip Morris

MR JACKSON (continuing):  Your Honours, the licence was,

in our submission, once again a right to which

not all were entitled and was of some value.

Your Honours at the bottom of that page, page 490,

His Honour sets out the fact that:

the Commissioner might refuse to grant

a licence notwithstanding that the

fee was paid.

Your Honours have been given already, I think,

copies of the statute in that case and section 19(1)

does bear out, of course, what His Honour has there

said, and His Honour went on to say that:

The Act did not lay down any criteria

to guide the Commissioner in deciding

whether to grant or refuse a licence,
when the application had been made in

due form and the fee had been paid.

There was provision for an appeal. Your Honours,

the other reasons for judgment again pleaded the

case as one where there was not any relevant ground

for distinction from DENNIS HOTELS and could I give

Your Honours references to pages 496, 501 and 524,
Your Honours, by way of example, and Your Honours

have had before page 524 mentioned in the case.

That is where Justice Jacobs said:

Where on an examination of the

legislation as a whole it appears that
the purpose of the licensing is the
facilitation of the collection of the

tax and not the control of commercial

operations in respect of the product in

its course from production to consumption,
then at least the tax will be a duty

of excise within the meaning of s. 90.

Your Honours, we would submit if one is looking to

see what those cases decide, they decide that a

licence fee, based on prior transactions, to put it

loosely, will not be a duty of excise if the licence

exists for some purpose other than being the

occasion of imposition of the tax, but we would

say the obverse of that is that if there is not

such an occasion and if the tax is, as here, purely

on the sales, then the case is one of a duty of

excise in terms of section 90.	Your Honours,
those are our submissions.

MASON CJ:	Yes, thank you, Mr Jackson.
MR CHARLES:	Would Your Honours permit me to take up five

minutes of the Court's time to correct a matter

that I think I may have accidently misled the Court

on in my submissions this morning?

ClT45/l/HS	172	8/3/89
Philip Morris

MASON CJ:	Certainly.
MR CHARLES:	Your Honours, I may have misled the Court into thinking that the connection between the legislation
in the Victorian BUSINESS FRANCHISE ACT is closer
than is shown to be the case on a careful examination of the legislation both in Tasmania in
DICKENSON'S ARCADE and in H.C. SLEIGH. I did not
have the legislation last night when I suggested
that there was a close proximity between those
pieces of legislation.

The relevant difference, Your Honours, in

relation to the legislation in Tasmania, the

TOBACCO ACT 1972 has been touched on by my friend,

Mr Jackson, just now, but not completely. There

are a series of indications, Your Honours, in that

legislation that what is being paid for in the

licence in DICKENSON'S ARCADE is a fee for a right

to carry on a business arguably, rather than a tax

on the percentage of the value of sales.

There are three matters, Your Honours, that might

lead to that conclusion. The first of them is

that the licence is annual and not month in, month

out - that is by section 10(2) of the 1972 Act -

the second is that it is transferrable under

section 10(7) and section 14, and the third matter,

Your Honours, the most important, is that the amount
payable for the licence is not calculated as a
percentage of the value of sales made in a period

of equivalent duration to the licence term, rather

it is a fee payable at 30 per cent of what is

described as the monthly stock value.

(Continued on page 174)

ClT45/2/HS	173	8/3/89
Philip Morris

MR CHARLES (continuing): That, Your Honours, is obtained by

section 11 of the 1972 Act; it is at page 76 of the print, if members of the Court wish to look

at it. By subsection (2):.

The amount of the fee referred to in subsection (1) of this section payable in respect of a licence granted in

respect of any premises is an amount,

determined in accordance with the first

schedule, by reference to the monthly

stock value for those premises for the

relevant assessment period.

And then there is a definition of the monthly stock

value in subsection (3)(a) as being:

The monthly stock value for those premises

for the relevant assessment period is the

average value, over that period, of the

tobacco handled in a month in the course of the retail tobacco businesses carried on on

those premises during that period; and

(b) the relevant assessment period is the

period of twelve months ending six months

before the commencement of the annual period

in respect of which the licence is granted.

And that, Your Honours, is fortified by looking at

schedule one at page 82 of the print, which sets

out what the assessable stock value is to be.

Now that means,that rather than look at the value

of sales, you look at the monthly stock held over

a period of 12 months and you take an average,

dividing by 12, to achieve a monthly average for

that year of stock value. So it has got nothing

to do with sales and you then take 30 per cent

of that to achieve the licence fee.

Now, Your Honours, in relation to H.C. SLEIGH,

the matter to which I would draw attention is that

the relevant provisions of that legislation

produce the conclusion that a manufacturer would
pay the licence fee in extremely rare circumstances

because the manufacturer pays the licence fee based on an assessment of earlier sales after non-accountable sales have been taken out of his

total sales. Non-accountable sales are those that

the manufacturer has made to other persons holding
a licence and every seller has to have a licence
so that, in other words, if the manufacturer sells

to a wholesaler or to a retailer, either of those

must have a licence and all of those will be

non-accountable sales so that the only value of

sales would be the onesin which the manufacturer paid

direct. That is obtained by an examination of

a variety of the sections but, in particular,

ClT46/1/VH	174	8/3/89
Philip Morris

section 11, sections 12 and 4 and sections 10 and

14.       I can amplify that at some later time, if

the Court wishes, but I thought it would be desirable

to put that before any of those who answer the

arguments for the plaintiffs commence their

arguments. Your Honours, I am told that it might

be a convenient course for the Court if the

Solicitor-General for the Commonwealth followed

counsel for the plaintiff because I understand that

what is to be put on behalf of the Commonwealth

may favour the plaintiff rather than the other

parties.

MASON CJ: Yes, we had assumed that that would be so.

MR CHARLES: If the Court pleases.

MASON CJ: Yes, Mr Solicitor for the Commonwealth.

MR GRIFFITH:  If the Court pleases, we have yet another set

of contentions for the present circumstances.

MASON CJ:	Thank you.	More succinct than yesterday.
MR GRIFFITH:	Yes, Your Honour.	Perhaps if we could adopt

by reference what we had in yesterday's, Your Honours,

in so far as it is relevant but, in the context

of the Court's ruling this morning, we would submit

that the validity of the Victorian Act - if we

could turn to that first - and_ substantially the same

point can be made so far as the New South Wales

Act is concerned - would submit that in its

application to goods produced by Philip Morris

it is not covered by the DENNIS ROTELS'

authority, and we would include in that DICKENSON

and H.C. SLEIGH, of course.

ClT46/2/VH	175	8/3/89
Philip Morris

MR GRIFFITH (continuing):

It is our submission that there is no

legislation in the H.C. SLEIGH

decision that DENNIS HOTELS covers a licence construction of the
fee on the sale of goods in so far as the

legislation applies to an ordinary producer.

case and that may be useful to elucidate the

reference by Your Honour the Chief Justice at

page 503, which has already been read to the

Court, where Your Honour equated the position

of the plaintiff in that case with a seller

and regarded the legislation as being against
sellers rather than against manufacturers or

producers. In that case, of course, the plaintiff

was not a producer as such, but apparently sought

to argue that he should be regarded as a producer

or manufacturer because he added an additive to

a product which was in fact bought from a refiner

who might be regarded as the manufacturer.

Your Honour, in Your Honour's judgment,

regarded the plaintiff in that context as being
equated with a seller and we would note that

His Honour Sir Garfield Barwick as page 488

agreed with Your Honour's judgment and that

Their Honours Justices Gibbs and Stephen,. in

holding that DENNIS applied,did not specifically

mention this producer-manufacturer point.

Justice Murphy decided on a different ground

and Justice Jacobs dissented and did not follow

DENNIS even in respect of sellers. So that,

in our submission, the question whether or not the

tax is an excise remains to be determined absent

We hesitate to say'DENNIS HOTELS principle 11 application of any application of DENNIS HOTELS.

because it is our basic submission that DENNIS HOTELS

is not a decision of this Court which determines
any principle,	it is a decision, we would submit,

on its facts, which have been applied for the

purpose of present argument to further related

fact situations, namely in the DICKENSON'S case

and the H.C. SLEIGH case.

McHUGH J:  Mr Solicitor, it must be at least an authority

for the proposition that a licence to carry on
business, the price of which is calculated by

reference to a previous years sales is not a tax

upon goods and is therefore not an excise?

MR GRIFFITH:  Your Honour, it is a question of how general

that proposition is. My learned friend, Mr Charles,

made the point it is limited to impost in respect

CIT47/l/JM	176
Philip Morris

of tobacco and petrol. Now that might be a

matter for further determination. It has not

been taken beyond that but, Your Honour, when

one goes to the decision itself one finds

perhaps three Justices that could be regarded

as concurring in that approach, by reference

to a factual situation of the years previous sales.

That is Justices Kitto, Taylor and Menzies, but

Mr Justice Fullagar might be thought to have determined the case itself on a different ground.

So that it may well be one - - -

McHUGH J:  You may say that about DENNIS, but what about

DICKENSON, and what about SLEIGH?

MR GRIFFITH: Your Honour, DICKENSON:what we say is that	in so far as the DENNIS HOTELS 1 principle, if
we could call it that, is to be applied, it was
held by the Court that DENNIS is authority to
apply it in that situation. We still have the
question, Your Honour, for what DENNIS HOTELS is authority and for the purpose of present contention, Your Honour, within the confines -
and this is the problem of dealing with logical
consequence of analysis of results of cases,
Your Honour - in the confine of the limitation
arising from the direction given this morning
by the Chief Just ice~: Your Honour, it is our
submission that one can take it no further than indicate that the DENNIS HOTELS'principle,
if we may call it that, applies no more than
in a situation where there is a reference to a licence fee calculated one year in arrears. NoK, DICKENSON takes it to six months in arrears.
We submit, Your Honour, there is no authority
taking it further than that. In fact, SLEIGH
was further ba.ck, despite the headnote, Your Honour. The headnote is somewhat misleading; it is
12 months before the previous six months, so
that it is a further period back. It does not
advance it any closer.

We really pick up two submissions from that,

Your Honour. One, we say that inasmuch as

DENNIS HOTELS might be regarded to have imposed

some limitation upon the general principle that

we refer to that the question of whether a tax

is an excise is one of substance rather than

form, it has not, in our submission, transgressed

into this area where there is a direct impost

on the producer rather than an impost on the sale.

Our submission as to that, Your Honour, is that

a tax which in substance is a tax on sales of goods,

particularly, is an excise, Your Honour. When it

is on an impost on the first sale by the producer,

we submit, Your Honour, it must be an excise and

we refer to WESTERN AUSTRALIA V CHAMBERLAIN INDUSTRIES

as authority to that. We give the page reference to

four of the Justices' judgments in paragraph 4 of this

contention, so we submit that is settled.

CIT47/2/JM	177
Philip Morris
MR GRIFFITH (continuing):	We submit that if one characterizes

the impost here in respect of PHILIP MORRIS as being

an impost on the producers first sale, that is

not embraced within the DENNIS HOTELS doctrine and

we then submit, Your Honour, that DENNIS HOTELS

should not be regarded as authority, one should

have regard to what we say is the conventional

principle, that it :Ls a matter of substance rather than

form. In that way, Your Honour, it is our submission

that it is appropriate to characterize the impost as,

in effect, being an impost on the goods; in this case

by reference to the calculation, Your Honour. But,

perhaps if we could make it clear, Your Honours, it

is our submission that to be an excise one does not

have to refer to a particular Act in respect of

which the impost is imposed, be it production,

manufacture, buying produce to manufacture, the first

sale by the retailer, wholesale sale, retail sale

or consumption.

Our submission is that the issue of whether one

has an excise is to be characterized by whether there

is an impost on goods. Now, the immediate question,

of course, and one that Your Honour Justice Dawson

has raised this morning, as well as in Your Honour's judgments, is that that is all very well to say that

but what content can one give to that meaning?

McHUGH J:  But the point you just make then makes the

distinction that you seek to make in respect of

DENNIS HOTELS rather artificial because in DENNIS HOTELS,

if you look at the substance of it, as you would say,

it is a tax on the retail sale of goods and that would

be sufficient in itself to make it an excise. So, it

is hardly a point of distinction and in that case it

did not effect the producer.

MR GRIFFITH:  Your Honour, we indicated in our submission

yesterday that if permitted to reargue DENNIS HOTELS,

we would say it was plainly wrong, so we have got no

distinctions to make. But in the context, Your Honour,

that we accept that it is there, we will not go

back to - - -

McHUGH J:  Well, the point is, from our point of view, that

the Court has ruled in a certain way. The question

is how we can, in principle, deal with it?

MR GRIFFITH:  Well, Your Honour, we have two propositions to

make to say why DENNIS HOTELS should not be regarded

as controlling this situation. We submit, Your Honour,

it is not appropriate at the moment for the Court to

go any further than that.

Our first submission, Your Honour, is that we say

that this Court in Western Australia in CHAMBERLAIN

INDUSTRIES confirmed that a tax on the first sale by

C1T48/1/JH 178 8/3/89

Philip Morris

a producer is an excise. And we say, Your Honour,

that controls the matter and the approach of

DENNIS HOTELS, we say, Your Honour, cannot affect

that result. It does not, by its terms, and we say

in principle it cannot, Your Honour, because in

form and in substance, Your Honour, we say an impost

on a producer's first sale is an excise.

The second way, Your Honour, we would make the submission

in this matter is because of the compression of the

time-scale, if w~ could refer briefl; to that.

We would, with respect, accept the statement by

Your Honour the Chief Justice and Justice Deane in

GOSFORD MEATS, (1985) 155 CLR 385, where Your Honour

stated:

a general proposition that a tax cannot be

a duty of excise if it takes the form of a
licence fee that is quantified by reference
to goods produced, manufactured or sold
during some period prior to the actual
period of the licence is simply

inconsistent with the well established and fundamental principle ..... namely, that the

question whether a tax is a duty of excise

must be determined by reference to substance

rather than form.

We would submit that when one has an impost in respect

of sales payable 30 days after the last sale, which

is the case here, that this really is embraced

by the prediction that Justice Murphy made in

GOSFORD MEATS at page 389 when he said:

(Continued on page 180)

ClT48/2/JH	179	8/3/89
Philip Morris
MR GRIFFITH (continuing):

The notion of a fee based on a previous period

being valid, but not a fee based on a current

period, is irrational as a constitutional

discrimen. Why not the previous month or
the previous week? With the advent of computers,

why not the previous day or even the previous

hour?

DEANE J:. Mr Solicitor, the problem, it seems to me, with

what you are putting is that having accepted, as

you are per force accepting,. the decision in DENNIS

HOTELS and DICKENSON'S, all you are really now

doing is to say, ·"It's all right but only if

what those cases say is a licence fee is calculated

in the most difficult way and is collected with

the most paperwork, as it is, and with ~he greatest

aura of artificiality." The alternative would

be, would it not, to see alcohol and tobacco as

traditional licensing areas where a licence fee

was exacted and treat these cases - I put aside

SLEIGH because I do not quite understand what

happened there - but treat these cases as confined

to that area and possibly do away with the nonsense

of calculating fees 12 months before or 3 months

before.

MR GRIFFITH:  With respect, Your Honour, that may be an

attractive approach absent the words of the

CONSTITUTION and what we clearly can see from

the course of the drafts of the constitutional

bill and the CONSTITUTION debates in that if one

went to the material that my learned friend, the before the Court - we have not gone to it,

Your Honour - one sees there an indication that

what was referred to in respect of excise was

arguably, as my learned friend would put it, no

more than jmpost in respect of those three

categories.

Your Honours, one could then really be forced

to say on any view that it was impost on those

goods which were intended to go across to the

exclusive control of the Commonwealth Parliament.

Your Honours, of course, when one opens up that

issue one is getting into the area which is covered

by my learned friend, Mr Doyle's, contentions

and which were covered by our general contentions

which we gave to the Court yesterday to indicate

the ambit, as we saw it, of re-examination.

Your Honours, there is a problem with, we

call it the DENNIS HOTELS exception, in that it

is an exception which, if allowed to go down to

a lower and lower tide level, might creep along

the bottom and emerge at the periphery of the

definition of "excise" itself.

C1T49/1/SDL	180	8/3/89
Philip Morris

We would submit, Your Honours, that it is

unsatisfactory to seek to say, "Well, let's do directly that which the DENNIS HOTELS exception permits to be done indirectly". It has been confined,

Your Honours, on an intellectual basis as compared

with, perhaps, a political pragmatic basis.

We would submit that when one looks at this principle,

well, to use Your Honour's words with the Chief Justice in GOSFORD MEATS, "it flies in the face of principle and authority" to accept that abrogating

the principle absent DENNIS HOTELS that a tax
which is in substance a tax on sale of goods should

not be regarded as a tax on sale of goods.

So that the difficulty is the inhibition

on reconsideration of DENNIS HOTELS but in that

confine, in our .submission, it is appropriate

for the Court to ensure, absent a general

re-examination of "excise" which, as we submitted

yesterday, could occur in a non-DENNIS HOTELS

context, that absent that reconsideration it is

our submission, Your Honours, that the confines

to the three revenues of liquor, beer and tobacco

is an appropriate limitation.

DAWSON J:  You speak of DENNIS HOTELS as an exception,

Mr Solicitor, an exception to what?

MR GRIFFITH:  Your Honour, we say an exception to the general

rule that duties of customs and excise means, in
respect of duties of customs,impost on the act
of importation and exportation of goods, and in

respect of excise, it is our general submission,

Your Honour, that includes all other imposts on

goods whether in manufacture, production,

distribution, sale -

(Continued on page 182)

C1T49/2/SDL	1 8 1	8/3/89
Philip Morris

DAWSON J:	Then it is an exception to your conception of an excise but it is not an exception to what appears in the cases.
:MR. GRIFFITH:	Your Honour, we would submit that when one goes

to the accepted principle and we refer to the

authorities in our contentions as to it is a matter

of substance rather than form.

DAWSON J: I see that. Substance of what?

:MR. GRIFFITH:  Your Honour, we say substance as to whether it

is an impost on goods.	We say that is a matter of
fact.

DAWSON J: That is just circular, that is repeating the

argument. If you say the test in, for instance,

BOLTON V MADSEN is to be applied in a way which has

regard to substance rather than form, I understand

that. If you say that some other test is to be

applied having regard to substance rather than form,

I understand it perhaps. But I do not understand a

statement baldly that one must have regard to
substance rather than form.

:MR. GRIFFITH:  Your Honour, could I use the words of

Justice Fullagar in DENNIS HOTELS to seek to perhaps explain more lucidly than the way I put it,

Your Honour. That is at 104 CLR 554. There

His Honour referred to this issue. He said:

Probably no one would dissent from the

broad proposition that it is an essential

element in the character of a duty of excise

that it should be a tax "upon goods". But the

whole weight of that expression is carried by,

and ambiguity lurks in, the humble preposition,

for which is sometimes substituted a

prepositional phrase such as "in respect of",

or "in relation to". Taxes may be charged

upon property, real or personal, in the sense

that there is a direct remedy against the

property for recovery of the tax. But

nothing of that kind is meant when we speak, in

the present universe of discourse, of a tax

"upon goods".	Goods as such cannot pay taxes:
there must be a person to pay them.	And what

is meant by saying that a tax is a tax upon

goods is that the person by whom the tax

is payable is charged by reason of, and by

reference to, some specific relation

subsisting between him and particular goods.

A tax will be rightly regarded as a tax upon

goods if the person upon whom it is imposed

is charged by reason of and by reference to

the fact that he is the owner, importer,

ClTS0/1/BR	182	8/3/89
Philip Morris

exporter, manufacturer, producer, processor,

seller, purchaser, hirer or consumer of

particular goods. This list may not be

exhaustive.

It is our submission, Your Honour, that when one

engages in that inquiry, in essence one engages in

an inquiry of fact to ascertain as best one may be

as to whether or not one may characterize the impost
as being in substance, not a matter of form, but in

substance on goods in that context.

McHUGH J:  Does it not mean it is not an exception but an

application of an anterior principle?

MR GRIFFITH:  DENNIS HOTELS?

McHUGH J: Yes, DENNIS HOTELS is a precise decision but in the

circumstances of that case it was not a tax upon goods.

It is an application of the PARTON principle.

MR GRIFFITH: 

Your Honour forces me to repeat the words of

Their Honours Justice Mason and Justice Deane that
it flies in the face of both principle and authority.

McHUGH J: That may be the same but all I am putting to you is

that it purports to be an application of the principle,

it is not an exception.

MR GRIFFITH:  Your Honour, one can say it applies for a 12-month

period, a rermter period, Your Honour. We would submit

that when one has regard to the nature of the temporal

context here one, in effect, Your Honour, is - if I may use the expression "substance" - the imposition

here is an impost on sales at the rate of 30 per cent payable within 30 days. Indeed, this was the view of

Justice Jacobs in the SLEIGH decision at 136 CLR 525.

There His Honour said at about point 2:

The liability to pay does not accrue from sale to sale in that period so that there is not

the sanction that it may be recovered by action.

Instead there is the sanction of a
compulsory cessation of trade if it is not paid
at the end of the period. Such an operation of
the statute is the imposition of a tax on

petroleum products. The legal effect is no

different from what it would have been if the

statute had without requiring any licence

provided that no person should sell a

petroleum product unless a tax had been paid
or was due to be paid to the State (not

necessarily by him but by someone) on all

petroleum products sold by him during a

specified preceding period. When the statute

at the same time provices a mechanism whereby
the tax can be collected, surely the tax is on
the products of that preceding period.

ClT50/2/BR	183	8/3/89
Philip Morris

So perhaps to refer to a matter that Justice Brennan

inquired of earlier today, we would submit that

really it is of no consequence so far as -

characterization is concerned to regard this impost as,

in fact, when one has regard to the monthly in-arrears

payment, to regard the impost as being an impost on the

sale made last month rather than regard it as an impost

being in respect of which the licence for the

permission to sell next month is given.

(Continued on page 185)

ClTS0/3/BR	184	8/3/89
Philip Morris

MR GRIFFITHS (continuing):  In this context, it is our

submission the reduction of the temporal period

does enable a different approach to characterization

to be made by the Court.

DEANE J: Can I just bring you back to the problem I was

addressing, my question to you, and that is

assume for the sake of the question and contrary

to the view underlying Justice Dawson's questions
to you, assume for the sake of the question

that your approach be accepted, that is, that

somewhere one does have an anomaly that is out

of accord with principle that says, "Provided

you make it difficult enough and provided you

dress it up and provided you make the reference

point the sales of 12 months before instead

of the sales during the period and provided

you call it a licence, we are going to be out

of the area of excise duty in so far as the

decisions of DENNIS HOTEL and DICKENSON apply."

What I was really querying was, putting ·SLEIGH aside, what would you say or submit was the

preferable- approach, to either say, "Wel 1, the

anomaly is, as long as you calculate by reference

to a previous period and call it a licence you

escape from the excise field", or, "The anomaly

is in the special areas of alcohol, tobacco

and, conceivably, petrol~ There is a special

entrenched approach that these sort of fees

will be tre_ted as licence fees and not excise	II ?
d	uty. .

MR GRIFFITH:  Your Honour, may I put out both hands and

say , "Both" . We w o u 1 d s u bm i t , Your Honour ,

it would be satisfactory for this Court to make

it clear that it was limited to those additional

areas. That has not yet been determined. One

can imagine the argument that might be put against

that. But we would submit that that is an appropriate

limitation.

DEANE J:	But there is a problem in denying both areas if you are to accept what DICKENSON says and
that is - or what the Chief Justice, at least,
said there, "I am going to apply the decision
to another field."
MR GRIFFITH:	Yes - another field, Your Honour, in that

it is still in the traditional field, we would

submit. But, Your Honour, we would submit

the appropriate approach of this Court is to

approach from the viewpoint of saying, "Is this

an impost on goods in substance?" We say that

is the traditional approach of the Court. However

one defines "excise" we say that is the issue,

Your Honour. Having approached to that point,

we submit the inquiry is, "Is there any authority

ClTSl/1/ND	185	8/3/89
Philip Morris

in DENNIS HOTELS - DICKENSON and SLEIGH, if

you like - which would inhibit .a result which

the application of having regard to substance
rather than form would, as a matter of obvious

application, direct the Court to make.

Your Honour, it must be a matter of value

judgment to define the point of inhibition.

We, Your Honour, must accept that 12 months

in arrears, or 6 months before 12 months or
even 6 months in arrears in DICKENSON is regarded

as sufficient to make the difference. Having

regard to the circumstances here, and perhaps

dealing with the difficult_ area where one cannot

apply principle and logical argument to get

entirely satisfactory results, one should just

resolve the case before one. We would submit,

Your Honour, the two issues which have been

referred to: firstly, the fact that the impost

here is directly upon the first sale by the

producer of the goods; and, secondly, that the

time scale was so abbreviated that in fact one

of the previous month 1 s sales, within 30 days. can characterize the payment as being payment

(Continuing on page 187)

ClTSl/2/ND	186	8/3/89
Philip Morris

MR GRIFFITH (continuing):  We would submit, Your Honour,

wherever the line is in betwee~ that should be

regarded, perhaps individually but certainly

together, as taking across it. Now, having

said that, Your Honour, it does not give a

satisfactory basis for future operation of these

matters of great fiscal importance between the

Commonwealth and the States as to the extent of

exclusive power but, Your Honour, it is difficult

to take it any further unless one addresses - - -

DAWSON J:  Could I take up what Justice Deane was putting

to you. If what he said is right it would make no

difference if the licence fee in DENNIS HOTELS was

calculated by means of an estimate of sales

during the period of the licence and then

readjusted at the end of the period to coincide

with actual sales, would it?

MR GRIFFITH:  Your Honour, we would submit that one then

really finds it very difficult to get past this

question of substance. In substance one is

imposing an impost on the sale in that circumstance,

and we would submit, Your Honour, it is not

appropriate to regard DENNIS as covering that

situation.

DAWSON J:	What I say is right, is it not?
MR GRIFFITH:	We would not concede that as right,

Your Honour, no. It is our submission, Your Honour, that DENNIS should be regarded as being authority with

respect to no more than, in the case of

as modified by DICKENSON, reference to licence

fees in respect of these traditional areas

calculated by reference to the previous six or

12 month period, and we have made the point,

Your Honour, that we would say that if there is

a calculation which is by reference to the current

period we would submit that it comes within

CHAMBERLAIN and comes within the traditional view

of being a sales tax and we would submit that any	sales tax is regarded as an excise on the present
authorities of this Court. We just say that as
an established proposition.

Now, it is argued that DENNIS HOTELS and

DICKENSON enable what one might say in substance uninfluenced by those authorities is a tax on sales

to be characterized as not a tax on sales. Now,

inasmuch as that has been determined by those cases well within the parameters of the Court's

direction, that must be accepted, but apart from

the inhibition which it is for the Court to

interpret and place that DENNIS HOTELS and

DICKENSON place on what we say is the proper

meaning of excise having regard to substance

rather than form, it is our submission that

ClT52/l/HS	187	8/3/89
Philip Morris

the ordinary provision of the construction of

section 90 and the exlusive power it vests in

the Commonwealth prevails.

We would submit that DENNIS HOTELS impinges

on what otherwise is the construction, but

whilst it remains then it is necessary for the

Court to.mark it out. We can but make submissions

to the Court as to where the point of marking out

is but, in our submission, to get to the

conundrum which really was exposed by Your Honour

the Chief Justice and Justice Deane in the GOSFORD

MEATS, as one moves away from what were the narrow facts in DENNIS HOTELS and DICKENSON, the

more difficult it is to be happy with the logical

result that one moves to, and that in that case,

for example, Your Honours had no difficulty in

making the characterization so far as the fee

there was imposed in respect of the buying of

produce and, of course, in the circumstances were

able to say that it was not controlled by

DENNIS HOTELS.

Now, different Justices might be of a

different view in that situation, but in our

submission there are two clear elements here, the

time factor and the fact that it is impost on

producers that we submit enable what we say is

the opposite characterization to be made, that

it is an impost on sales and therefore it is an

excise. If the Court pleases.

MASON CJ:  Thank you, Mr Solicitor. Mr Solicitor for

Victoria.

MR BERKELEY:  Your Honours, I was not prescient enough

to come up with any contingent contentions so I will

have to hand up the ones that I drafted in

Melbourne last week, but in view of the course

this case has taken, the last page and a half

wi 11 be otiose.

(Continued on page 189)

ClT52/l/HS	188	8/3/89
Philip Morris

MASON CJ: Well, paragraph 17 is a rerrmant from yesterday, is it? You did not hand it up yesterday when we were debating

that point.- - -~

MR BERKELEY:	Well, it would have been proleptic.
:tvlASON CJ:	- but you have favoured us with it now. that the point has

been decided.

MR BERKELEY:	Yes.
MASON CJ:	Yes.
MR BERKELEY:	Your Honour, our argument is two-fold: firstly,

that the tax in this case is covered by DENNIS HOTELS

and, secondly, if it is not covered by DENNIS HOTELS

it is still not an excise within the meaning of

section 90. Now, somewhere between KAILIS

and DENNIS HOTELS there is a line and it will not be

necessary, in our submission, for the Court to draw

that line in this case. Our submission is that we

are on the right side of the line and it will be necessary to identify exactly what it is that is

taxed because what is taxed in this case is goods,

the sale of goods sold by retail or the sale of goods
sold by wholesale in a condition, in a retail

condition; that is, ready to be sold to the consumer.

It will not be necessary for the Court to

decide in this case whether all wholesale sales -

that is, for instance, the wholesale sales of raw

materials - could be covered by the case of

DENNIS HOTELS. All that we will haveito ask the

Court to say is, "Ia a wholesale sale of a packet of cigarettes in the condition in which they are

sold to the unfortunate smoker -is a tax on that an

impost of the kind that was covered by DENNIS HOTELS?"

BRE!'-l"NAN J:  You ac<iept that it is a tax on that sale.

MR.BERKELEY: I was speaking loosely, Your Honour, but when I

said "tax" I should have said "franchise fee,"

Your Honour. That makes the distinction which I

want to make because for the first part of my

argument I shall describe it as a "franchise fee."

That is the argument that is within DENNIS. If I

am wrong about that then I shall have to accept that

it is a tax. The question is, is that tax an excise?

Now, the first point to make is this: I

have listened carefully to the textual distinctions

which my learned friends have made betwen the

legislation we are considering and the legislation

in the earlier cases and I only want to make one

general comment about them: this is not the stuff

of which constitutional decisions are made. The

constitutional question in this case is when a

producer sells her goods by wholesale in the

ClT53/l/VH by	189	8/3/89
Philip Morris

circumstances of this legislation, is that covered

by DENNIS HOTELS? And I use the female pronoun

once only in this case, because my learned junior

was kind enough to point out that this is

International Women's Year today.

Could I take the Court, then, before I go to SLEIGH, to the terms of the South Australian Act

which has already been handed up and take Your Honours

first of all to section 4(1). That sets out firstly,

as the first definition, various classes of licences

and the licence which was in question, apparently,

in SLEIGH's case was a Class 5 licence,page 423~

Your Honour. The licence which was in issue in

SLEIGH's case was a:

"Class 5 licence" means a licence that

authorizes the licensee to carry on the

business of selling petroleum products

manufactured by him and petroleum products

not manufactured by him and to sell them

to other licensees.

There are other licenoes further on which are appropriate where the licensee wants to sell only

goods that are not manufactured by him. But this

is a type of licence appropriate to be obtained by

a person who is selling his own goods, manufactured

by him, as well as the goods of other people.

Then in section 11:

A person shall not carry on the business of selling petroleum ..... unless he is the holder of a licence.

And then section 14 there is the DENNIS HOTEL

provision that the fee is assessed by reference to

the amount sold in the prior period and subsection (1)

is rather difficult but, as I read it, it excludes
from the amount assessed to the fee the amount sold

to other licensees.

Could I turn from that, then, to 136 CLR, to

SLEIGH's case, and try to ascertain from what appears in the report what the facts of the case were.

(Continued on page 191)

ClT53/2/VH	190	8/3/89
Philip Morris

MR BERKELEY (continuing):  At page 476 at the bottom of

the page, there is a paragraph from the statement of

claim. It is quite apparent that the plaintiff and

others all operated refineries, either by themselves

or through related companies; the refineries

were located in various States. Then, at the bottom

of page 477, there is a passage my learned friend

read out that:

Mobil and Esso supplied the plaintiff

by exchange purchases from a refinery in

South Australia.

Then, if I could go over the page, page 478,about eight

lines from the top of the page:

It was alleged that the sales referred to -

in the statement of claim -

were sales within the meaning of the Act.

Then, if I could go down to argument put by

Mr O'Callaghan, counsel for SLEIGH, at page 479, about four lines from the top of the page:

The Act has the effect of requiring the

plaintiff to obtain a class 5 licence.

On page 480, about three-quarters of the way down the

page, there is a paragraph which says:

The tax imposed by the BUSINESS FRANCHISE ACT -

that is the SOUTH AUSTRALIAN ACT -

is an excise. It is indistinguishable from

the tax in M.G. KAILIS -

that is, it was a tax upon producers. Now, reference

has been made, but I would like to go again to

page 503 because none of Their other Honours dealt

expressly with it, but Your Honour the Chief Justice

at that page said, about a quarter of the way down

the page:

There is in all this nothing to distinguish

the licence fee from that which was dealt

with in DICKENSON'S ARCADE. Although some

attempt was made to suggest that the

plaintiff was engaged in manufacturing

operations in that it included one or more
additives in the petroleum products which
it obtained from refiners, the prohibition
is against carrying on the business of

selling petroleum products without a licence,

that is against selling, not against

manufacturing. The case is, therefore,

governed by DICKENSON'S·ARCADE.

ClT54/l/JH	191	8/3/89
Philip Morris

Now, our submission is that SLEIGH was a manufacturer

of petroleum products; the licence which it was

required to obtain was a licence for a manufacturer

that was going to sell its own products as well as

that of other people and the argument that was put

to the Court was that the earlier cases did not

apply because the plaintiff was a manufacturer and

there was a reference to KAILIS. This passage
that I have read out from Your Honour's judgment

clearly indicates that that argument was put

and despite that all the Justices except

Mr Justice Jacobs, I think, decided that it was not

a duty of excise although this particular argument

was not expressly dealt with in their judgments.

Your Honour the Chief Justice dismissed the

argument not because the facts were against the

plaintiff, that is not because the plaintiff was not

a manufacturer, Your Honour said whether or not

the plaintiff is a manufacturer is not being taxed

as a manufacturer, it is being taxed as a producer.

(Continued on page 193)

ClT54/2/JH	192	8/3/89
Philip Morris

DAWSON J:	As a seller.
MR BERKELEY:	I am sorry, Your Honour, thank you, yes. That would

not do at all.

Our submission is this case is a clear authority for the proposition that the

principle in DICKENSON applies to a person who

is taxed as a seller and it is irrelevant

that he also happens to have produced some of
the goods that he sells.

Could I then ask Your Honours to look at the Victorian Act that is under consideration in

this case? First of all, could I take Your Honours

to page 2, the definition section? There is an

important definition there which has not been

referred to yet, and that is the definition of

"Tobacco":

"Tobacco" means tobacco prepared for

consumption and includes any mixture that

contains tobacco and is intended to be

consumed.

This Act does not apply to tobacco leaf, or

tobacco in the course of production. It applies to tobacco in the condition in which it normally

goes up in smoke, and that is the condition

in which it is sold by retail. That is its only

dealings v.tlth tobacco in that condition which

are subject to franchise fees under this Act.

If we could then go to section 6, on page 10:

A person shall not ..... carry on -

a business of -

tobacco wholesaling unless he is the holder

of a wholesale tobacco merchant's licence.

I should, perhaps in what is an entirely irrelevant

aside, say since COLE V WHITFIELD that section has
been repealed and there is now no obligation
on the wholesaler to become licensed, although he

is entitled to become licensed, and, as I have

been told, every wholesaler in Victoria has

volunteered to be licensed.

In any event, as far as is relevant to this

case, at that relevant time subsection (1) was

there and it says you cannot sell by wholesale

unless you have got a licence. So every wholesaler

who buys tobacco in Victoria is the holder of

a licence. If we could then go to section 10,

the fees paid are the ad valorem fee,which I think

nobody suggests is an excise, plus:

CITSS/1/JM	193
Philip Morris

an amount of 30 per centum of the

value of tobacco sold by the applicant

..... (other than tobacco sold to the
holder of a wholesale tobacco merchant's
licence or a group wholesale tobacco

merchant's licence).

So the only sales which are taken into account for
the purpose of calculating the licence fees are

sales to retailers of tobacco ready for consumption.

Could I then go from that to the facts of

this case and take Your Honours to paragraph 12

of the stated case? Paragraph 12,

Philip Morris carries on the business of "manufacturing,

importing, distributing and sellinR tobacco products

for human consumption~ and 13, the manufacturing

operations take place at a single manufacturing

facility'at Moorabbin. Then, may I go from that

to paragraph 15 on page 5, the last part of

paragraph 15.

(Continued on page 195)

CIT55/2/JM	194
Philip Morris

MR BERKELEY (continuing):

After cigarettes have been packaged and

placed in containers at the Moorabin facility,

they are then transported to PLM's central

warehouse facility at Noble Park in Victoria,

or to similar facilities maintained by PML

in other States. At these warehouse

facilities, the packaged cigarettes are

placed in bonded stores.

There is a separation between the plaintiff's

manufacturing activities and its wholesale activities.

And then, paragraph 18, there is a breakdown
on sales and the last sentence of paragraph 18,

on page 6:

PML only pays a Licence fee under the Act

based upon its sales in Victoria of tobacco

products to retail vendors.

19.       As well as distributing and supplying

cigarettes manufactured

by itself Philip Morris also imports finished

tobacco products which it distributes, sells

and supplies throughout Australia.

And then, if I could go to paragraph 23,

without reading it, that is the second plaintiff

which indicates that that plaintiff also only

pays the franchise fee calculated on sales to retail vendors. And paragraph 25, the third-

named plaintiff does not carry on any business

at all so, presumably, does not get taxed.

It is therP, as my learned friend says, as

a matter of form and not substance because it

is a member of the wholesale group.

For those reasons, in our submission, this

case is covered by DENNIS HOTELS and the subsequent

cases. Can I then turn to the second limb of

our case which is that even if the Court is

not with us on that, our argument is that a

retail sales tax - and by that I mean a tax

on a retailer in respect of goods which are

in a condition in which they are sold to the

consumer - is not an excise within the meaning

of section 90, nor is a tax on wholesalers on

the same type of goods. And it is not necessary

for me to go any further than that.

McHUGH J:  Mr Solicitor, does this mean you challenge

PARTON's case?

ClT56/l/ND	195	8/3/89
Philip Morris

MR BERKELEY:	I think, Your Honour, I can distinguish that but if I cannot we will be saying there
is an inconsistency between PARTON's case and what was decided in COLE V WHITFIELD which will
have to be r_econc-iled by this Court in some
way.

What I would like to do to start off with,

Your Honour, is to outline briefly the way

we are going to put this argument and then

Your Honour can see which way we are going.

McHUGH J:  It is not clear to me from your contention.

MR BERKELEY:  Yes, Your Honour. I will answer that very

briefly as this: when we have gone through the

whole of the authorities, the bottom line is

this, that an excise is - or there are two

distinctions, a tax which is an excise and a

tax which has the same effect as an excise.

A tax which has the same effect as an excise

is one •that interferes with the differential,

if any, which is placed by the Commonwealth

on imported and local goods and that a tax which

taxes retail sales irrespective of their origin

is not such a tax and that PARTON's case - any

tax on a group of manufacturers, any State tax, has to be a tax on local manufacturers

so that would be contrary to what we submit

is a - that would be an excise within the definition

we are putting forward.

(Continuing on page 197)

ClT56/2/ND	196	8/3/89
Philip Morris

MR BERKELEY (continuing):  PARTON's case, when one looks

at it, is a tax on local manufacturers or, at

least, solely on goods produced in Victoria and

to that extent it would upset the differential
placed by the government upon imported and local
goods. Therefore we would say it is rightly decided

although we would ask the Court to disregard some

of the reasoning in that and that is for this

reason; that when you go on to ask what tax has
the same effect as an excise, you have to say,

and when you go through the cases there is no

"What effect is an excise intended to have?"

common view amongst the Judges of this Court as

to what purpose section 90 is intended to have

and, certainly at this stage in the Court's history,

there is no common view of a majority of this

Court as to what purpose section 90 has to have and, in those circumstances, in our submission,

we are entitled to put to the Court what, in our
submission, is the correct view of the purpose

of section 90.

DEANE J:	Does this involve attacking DENNIS HOTELS?
MR BERKELEY:	I think yes, Your Honour, but when Your Honour

the Chief Justice said that we were not to attack

DENNIS HOTELS, what I understood Your Honour to mean, and what one does mean when talking about

DENNIS HOTELS, is the bit that says "franchise

fees are all right". It may be a consequence

of our argument that the second limb of DENNIS

HOTELS was not properly decided - that may be a consequence of that, Your Honour.

MASON CJ:  The statement I made this morning had no

qualification attaching to it.

MR BERKELEY: Yes, Your Honour. All I can do in that case,

Your Honours, is I would still, in our submission,

be entitled to point out to the Court the

inconsistencies which exist between the actual

effect of that decision and subsequent cases decided

by this Court.

MASON CJ:	Yes, you can proceed to do that.
MR BERKELEY:	Yes, Your Honour, and where that leads to

we shall see, Your Honour.

McHUGH J:  But so I can follow your contention, can I just

get your answer to this question:  do you challenge

the proposition that a duty of excise is a tax

directly related to goods imposed at some step

in their production or distribution before they

reach the hands of the consumer?

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MR BERKELEY: Yes, Your Honour. That is a direct result

of COLE V WHITFIELD, in our submission. We would

also be submitting this - I am sure Your Honour

will not take it as a personal observation - but

the expression "tax on goods" itself does not

have any meaning and it has led to all sorts of

trouble and we ought to try and avoid it. That

will be our submission.

McHUGH J: The passage I read to you is from the judgment

of Mr Justice Gibbs in HEMATITE and he accepted

the PARTON proposition.

MR BERKELEY:	Yes, Your Honour.
BRENNAN J:	So what you say is that the decision in DENNIS

HOTELS is inconsistent with the constitutional

doctrine expressed in COLE V WHITEFIELD?

(Continued on page 199)

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MR BERKELEY:	The second limb, yes, Your Honour.	The first

limb is consistent with it - the first limb of

DENNIS - and one cannot say the reasoning in

DENNIS because one cannot extract any reasoning from
DENNIS, not any reasoning which appealed to the

majority who gave judgment - there were four one

way and four the other way and Mr Justice Menzies

was the - - -

DAWSON J: Could you just remind me the first limb and the

second limb in DENNIS.

MR BERKELEY:  The second limb was the booth fee where you

paid the fee in respect of sales under the licence.

DAWSON J: A temporary licence?

MR BERKELEY:  Yes, and Mr Justice Menzies held that that was an

excise, but if one looks at the majority, the four

Judges in the majority in each limb, as far as we

can see, with respect, there is no common basis

for the judgments to be extracted from them.

DAWSON J: Except that if something common does emerge - - -

MR BERKELEY: There is the actual decision in which was - - -

DAWSON J: And what Justice Kitto said was accepted

subsequently.

MR BERKELEY:  Yes, Your Honour, and the actual decision was

taken further in the later cases. There is perhaps

one observation I ought to make before I start and

my learned friend, Mr Charles, cited HAMERSLEY, 120 CIR

this morning and the only thing we want to
point out: that was a decision where the Court was
equally divided. Before I go to the authorities
may I shortly outline the way we are going to put

the first half of our argument and it is this: in

our submission, a duty of customs is a tax upon

an importer because he engages in the activity of

importing and an excise is a duty, a tax upon a

manufacturer or producer because he engages in the

activity of manufacturing.

In 1900, I think, invariably that tax was

measured either by the quantity or the value of the

goods involved although, in our submission, that is

not a necessary characteristic of a duty in either
case. But the Court soon came to ask itself, "What

taxes have the same effect as an excise?" And it is

perhaps important to consider why the Court asked

that question. For instance, under section 51 of the CONSTITUTION the Court has power to legislate

with. respect to insurance and in many instances a

guarantee would have the same effect as an indemnity

but nobody suggests for that reason that the

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Commonwealth can legislate with respect to guarantees.

And the reason why the Court has taken the approach

it has in this case is because this is a constitutional

prohibition and so is section 92. It is not inherent

in the concept of excise in 1900 that it should apply

to a tax on land of the sort that was applied in

MATTHEWS' case. But that tax, in our submission, was

not an excise as understood in 1900 but it was

certainly a tax which had the same effect as an

excise because it was levied upon manufacturers

because they engaged in the activity of manufacturing.

So the concept of what has the same effect as

an excise is a rule, a constitutional rule, which has

been developed by this Court to prevent the States

avoiding or evading the prohibition contained in

section 19 and section 92 of the CONSTITUTION. By

that means a tax soon came to be defined in PARTON's

case, for instance, 80 CLR 260, Sir Owen Dixon:

A tax upon a commodity at any point in the

course of distribution before it reaches
the consumer produces the same effect as a
tax upon its manufacture or production.

That had the ability, that definition, of reaching taxes which nobody would ever assume to be excises and the width of the definition was tempered at that

stage by the courts adopting a characterization of

State legislation which was called the "Criterion of

Liability".

(Continued on page 201)

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MR BERKELEY (continuing):  One saw the same process

either caused by or caused the idea that both

taking place 1n relation to section 92.

section 90 and section 92 were a source of

individual rights, that is not a matter of
inter-governmental relations, but a trader had

the right to carry on his interstate trade free

from any burdens imposed by State or Commonwealth

law and a manufacturer or producer had the

right to carry on manufacturing free from any

burdens imposed by State taxation.

Can I go then first of all to a couple of the early cases. In PETE:tSWALD V BARTLEY it is

clear enough - the Court wi 11 no doubt know - that

excise was defined in a very narrow way and the

Court said it is limited to taxes imposed upon

goods in the process of manufacture. We do not

suggest that that should bind the Court in

considering what taxes have the same effect as

an excise, but it is quite clear that when one

looks at those early cases, that is PETERSWALD

V BARTLEY and the COMMONWEALTH OIL REFINERIES V

SOUTH AUSTRALIA, that, as used in the CONSTITUTION

and as understood by the Judges who were involved

in the drafting of the CONSTITUTION,excise was

limited to a tax upon a manufacturer or producer

in relation to the activity of manufacturing or

production, although as early as COMMONWEALTH

OIL REFINERIES the Judges were saying this was

not to be defeated by the form of the legislation. and the Court was to look at the substance of it.

Now the COMMONWEALTH OIL REFINERIES case - may I go to that report at 38 CLR 408, at page 411,

paragraph 1:

The following fact were, for the purpose of the case, admitted by the defendants:-

1. That motor spirit ..... is imported

into the State from the United States of

America and other places beyond the seas

in cases and tins.

2. That in some cases the first sale
of such motor spirit subsequent to its

importation into the said State of South
Australia is made by the person importing

the same -

1n the same containers

3. That the Commonwealth Oil Refineries of refining crude petrol oil -

ClT59/l/HS	201	8/3/89
Philip Morris

that is a manufacturer -

from places beyond the seas, and

treats and refines the same in the State

of Victoria and then consigns the

refined oil ..... to its agents in

South Australia as well as to other

States, and such agents in some cases sell the same in the cases and tins.

So Commonwealth Oil Refineries was a manufacturer

of refined oil and it sold that product via its

agents in South Australia. Could I go first to

the judgment of Justice Isaacs, at page 425,where

His Honour points out the first limb, that is -

there were two limbs of the definition of "vendor";

one defined the vendor as an importer and the

other as a producer, but His Honour points out

that the first limb was defeated by the operation

of section 92 of the CONSTITUTION.

(Continued on page 203)

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Philip Morris

MR BERKELEY (continuing): Then, at page 430 - perhaps

before I go to that, could I go back to page 426,

about 10 lines from the top of the page, His Honour
says:

Licences to sell liquor or other articles may well come within an excise duty law,

if they are so connected with the production

of the article sold or are otherwise so

imposed as in effect to be a method of

taxing the production of the article.

That is the passage which was cited and relied

upon by Sir Owen Dixon in PARTON's case.
But Justice Isaacs goes on:

But if in fact unconnected with production and imposed merely with respect to the sale

of goods as existing articles- of trade and

connnerce, independently of the fact of
their local production, a licence or tax

on the sale appears to me to fall into

a classification of governmental power

not "withdraw-n" from the States, however they

outside the true content of the words

"excise duties" as used in the CONSTITUTION.

might stand in presence of relevant Connnonwealth

legislation respecting foreign or inter-State

trade. I agree with the reasoning in

PETERSWALD V BARTLEY.

MASON CJ:  And you are going to refer us to the passage,

presumably, at the bottom of page 430?

MR BERKELEY:  Yes, Your Honour.

MASON CJ: About 10 lines from the bottom, "The second limb

of the definition"?

MR BERKELEY: Yes, Your Honour:

The second limb of the definition is also

a contravention of section 90 of the

CONSTITUTION, even on the more limited field

of excise duties that I adopt. The first sale

of motor spirit, after its production either
by primary or later processes, is naturally
and in the ordinary course of business a sale

by the producer, and a sale by him is certainly

included. A tax on that sale, so described,

is essentially a burden and a tax on the

production of the goods.

I will be saying something further about that later

because the concepts which His Honour referred to

in some extent, and it appears from the judgments

of the other Judges, based upon what had been

CIT60/1/JM	203
Philip Morris

decided in the United States about the import

and export clause, that is, the States are

prohibited by the United States Consti~ution

from imposing imposts or duties on imported

goods. Although His Honour says that, in our

respect, one has to make a distinction. It

depends, Your Honour, if this is a sale by

producer as producer, or by producer as

wholesaler. The distinction which arises in

this case did not exist in the COMMONWEALTH

OIL REFINERIES case, that is, all that is taxed

in this case are goods sold to a retailer in the

condition in which they will be sold by retail,

and that is not naturally and in the ordinary

course of business a sale by the producer.

BRENNAN J:  Why not? Why do you say that?

MR BERKELEY:  Your Honour, a line has to be drawn, Your Honour,

if possible, between what is prohibited to the

States and what is within the taxing powers of the

States. The question in this case is complicated

by the existence of the word "customs". "Customs"

is a much more precise concept than "excise" and

the connotation of "customs" includes only a

tax upon imported goods.

(Continued on page 204)

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Philip Morris

MR BERKELEY (continuing):  But there comes a time when goods

cease to be imported goods and they become part of

the general stock of merchandise available for sale

in the community. One can see something, obviously,

on one side of the line because if they were sold and

then resold as second-hand nobody would suggest that
tax on that sale was an excise but· the line can be

drawn back even further. Now, because of this

rather more precise connotation. of excise, we will

be submitting that there is, in fact, a line to be

drawn when imports cease to be imported goods and they

become part of the local stock in trade.

When you have the conjunction of customs and

excise in section 90, in our submission, the same

approach should be taken to excise because otherwise

you are going to get irrational distinctions and

there are already enough irrational distinctions or

distinctions that might be thought to be irrational

in this area of the law and the Court should say

that there is a stage where manufactured or produced

goods cease to be manufactured or produced goods and

become part of the general stock in trade of goods

available for retail sale in the community.

BRENNAN J:  And do you say that stage is reached when the goods

are in a state fit for retail sale?

MR BERKELEY:	And sold to a retailer.
DAWSON J:	You do not introduce an element of discrimination

at that point and say that where we used to

discriminate against the locally produced goods, it

is an excise, but otherwise it is not?

MR BERKELEY:  That is a separate point, Your Honour. one does tha~ it has the same effect as an excise Where

and I will be coming to that aspect of the matter in

due course.

McHUGH J:  In this very case, Mr Justice Rich took the view

that an excise covered the case of a tax on the

distribution of goods.

MR BERKELEY:	Yes, Your Honour, but as Justice Menzies pointed out in FAIRFAX, (1927) 39 CLR 147, Mr Justice Rich
recognized that the view of the majority in this case
was that a general sales tax was not an excise. I
do not know if I need go to the passage, it is there,
Your Honour.  Now, if I could go to page 433,
the judgment of Justice Higgins, about a third of the
way down the page, at page 432:

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Philip Morris

MR BERKELEY (continuing):

Counsel for the State contend, however, that
the tax, under ..... is not a duty of customs
or of excise within section 90 ..... that under
sections 106 and 107 ...... the powers of the

States remain - subject to the CONSTITUTION;

and that power of the State to tax any

property begins as soon as the commodity

has actually entered the State. This

argument · _ treats customs taxation as

ending when the commodity has actually passed

within the State boundary.	I do not think
that this is the true discrimen.	A tax

imposed after entry ..... would be as effectual

in the way of hampering commerce between

State and State, or between foreign countries

and the State as tax imposed on entry.

The discrimen is certain wrong if the reasoning

of the Supreme Court of the United States

in BROWN V MARYLAND is right. -

It would appear from the next couple of paragraphs

that, in His Honour's opinion that BROWN V MARYLAND

was right and the principle was to be applied to

the consideration of section 90 of the CONSTITUTION,

and BROWN V MARYLAND - it is stillgood authority -

I will be referring to a couple of American cases

which indicate it is still good authority in the
way that principles has developed. But BROWN V

MARYLAND made this point: that although the States

were prohibited in placing any tax or impost on

duty, a stage was reached where the goods ceased to

be imports.

Now, in BROWN V MARYLAND there was a rule of

thumb laid down by Chief Justice Marshall, that, as

long as the imports were iri their original package

and not in a state where they could be sold by

retail, they were imports but, once the wh0lesaler

had broken bulk and put them on his shelf so they

were part of the local stock in trade, they ceased to be imports. The later cases which we have cited here show

that that statement of fact came to be regarded,

in effect, as a statement of law and the more

recent decisions of the supreme court point out that

it is only a test of fact and the real question is,

have they become part of local corrnnerce and cease

to be imports.

Mr Justice Higgins, in considering the tax in

this case, cited BROWN V MARYLAND with approval and

despite that His Honour held that the tax in this

case was an infringement of section 90.

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Philip Morris

MR BERKELEY (continuing):  In our submission, it is clear

that His Honour was not saying that all general

taxes on sales are excises. All that His Honour was

saying was that, at the stage when this was taxed,

it was an excise but it would be possible for

there to be taxes on sales generally which were

not excises in accordance with the principle

in BROWN V MARYLAND. The same sort of approach

was taken by Mr Justice Powers in a short judgment

at page 436. Mr Justice Rich, as has been pointed

out, dissented and Justice Gavin Duffy dissented

and the Chief Justice and Mr Justice Starke dealt

with the matter without referring to this aspect

of it.

So we would say, with respect, that when

one looks at this case it is not authority for

the proposition that any general retail sales

tax is an excise within the meaning of section 90.

BRENNAN J:  Mr Berkeley, is all this leading to an attack upon some case of present authority in the Court?

MR BERKELEY:  No, Your Honour. I do not want to mislead

Your Honour. It will, if our argument is right,

lead to the consequence that - I think one would

have to say it would lead to the consequence that

CHAMBERLAIN's case was wrongly decided.	But I
think that is probably the only one.

BRENNAN:J:	Do you seek to reargue CHAMBERLAIN's case?
MR BERKELEY:	Could I think about that till tomorrow morning,

Your Honour? I am not sure if it is necessary

for me to do that directly.

McHUGH J:  But your argument does involve an attack on what

has been regarded as a settled principle since

PARTON's case, does it not?

(Continued on page 208)

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Philip Morris

MR BERKELEY:  Your Honour, when we have finished looking

at the cases, Your Honour will see it is not

a simple principle because ail this depends

upon what the Courts say the purpose of

section 90 is. It started off without the Courts

adverting to it and then it was said the.purpose

of it was to give effect to the Commonwealth

fiscal policy, real control over the taxation

of commodities, and then, as a matter of bare

assertion in some of the judgments, particularly of

Sir Owen Dixon~ control over economic policy

and then, a real control over economic policy.

But that is not the view of the Court this time.

When one looks at HEMATITE, one gets four or

five different statements in the judgments of

different Judges as to what the purpose of

section 90 is and all these cases depend upon

what the purpose of section 90 is.

So we are entitled, in our submission, to

point this out to the Court and to canvass

what is at this day seen to be the purpose of

section 90.

McHUGH J:  But the formulation of the principle in BOLTON

V MADSEN picked up the PARTON formula, did it not? You would have to say that the formula

in BOLTON V MADSEN is wrong.

MR BERKELEY: It is wrong - this Court has said it is wrong

because - 0ith respect, Your Honours, BOLTON

V MADSEN was the apogee .of the criterion of

liability and the Court is now saying, "We look

at this substantial or practical operation of the law. 11 Our submission is that those two

approaches, that is -;~here are two things involved

under section 90: one is, what does the CONSTITUTION

mean and, the second, what is the ef feet of the

State Act? They are interrelated,those two

c on c e p t s, be c a u s e i f you ha v e a w i de v i e w o f

the CONSTITUTION	you tend.to have a narrow view
of what the State Act does and vice versa.
So that, the characterization of a State

Act by the application of the criterion of liability

is one thing, the characterization of the State

Act by looking at the substantial or practical

operation of it is another thing and our submission

is that those two approaches are diametrically

opposed to each other. So the Court's approach

now is - and we accept it, we welcome it, if

I might say so, with respect - ls to look ·at the substantial or pr~ctical operation of the Act.

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Philip Morris

BRENNAN J:  Is what you say consistent with what

Chief Justice Barwick said in ANDERSON'S in Victoria?

MR BERKELEY: That was the hire purchase case, Your Honour.

Would Your Honour remind me about it?

BRENNAN J:  It is at 111 CLR. The passages are at 364 and 365

where His Honour was prepared to deal with the case
on the footing of what Mr Justice Kitto had said

with the view that was expressed in BOLTON V MADSEN

and went on to consider the method by which one

applied the criterion therein expressed.

MR BERKELEY:  Yes. Your Honour, it is not consistent. I mean,

Mr Justice Kitto consistently applied the criterion

of liability.

BRENNAN J: This is the Chief Justice, Chief Justice Barwick.

MR BERKELEY:  I understand that, Your Honour, but when one looks

for instance. say, at CHAMBERLAIN, Chief Justice Barwick

adopted a hybrid approach. His Honour was applying

the criterion of liability and saying, "But you also

have to look at the substance."

BRENNAN J:  I confess I do not understand why it is that you

are endeavouring to determine whether this is in truth

an impost on a step in production or distribution;

that that question is somehow vitiated by saying,

"But I am not going to look at the criterion of

liability, I am going to look at the substance of it."

You are looking at the substance in order to answer the test, are you not?

MR BERKELEY: But, Your Honour, we get into distribution by

saying that a tax on distribution has the same

effect as a tax on manufacture, but that is an

ambiguity because one asks, "What sort of effect?",

and it is not an emotional effect. Some Judges

have said an economic effect; some have said a

fiscal _ effect;	some have said a financial effect.
And at the moment there is no majority in the Court

for any particular sort of effect because if one

talks about economic effect. you say an excise is

a tax which affects the demand for goods. But if

you talk about fiscal effect, you say an excise is

a tax which alters the differential between local

and imported goods from the condition in which they

have been left by the Connnonwealth.

(Continued on page 210)

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BRENNAN J: That is if you start by looking at whether or not the impost is one which is ultimately to be

attributed to the manufacture of the goods.

MR BERKELEY:  Yes, Your Honour. I understand - - -

BRENNAN J:	But if you start with what Mr Justice Kitto said in DENNIS HOTELS, you are relieved of that
problem, are you not? You simply look to see whether or not it is a taking of a step in the
process of bringing goods into existence or to
a consumbable state or passing them down the line
which reaches from the earliest stage of production to the :point of receipt by the consumer.
MR BERKELEY:	But His Honour got to that statement by asking

himself, either implicitly or explicitly - I think

at that stage of the development of this part

of the law, implicitly - what is it that has the

same effect as a tax on manufacture.

BRENNAN J: Whatever the path may be by which that destination

was reached, it is a destination which has been

reached, is it not?

MR BERKELEY: Well, Your Honour, with the greatest respect,

I am not sure that that is so when you look at

the latest pronouncements of the Court.

MASON CJ:  Yes, but I think the witching hour has now

definitely arrived, Mr Solicitor. Could I suggest

to you that it may be possible to proceed through
the cases a little more quickly than we have managed
to do with COR. Admittedly, that is not entirely

your fault, by any means, but it ought to be possible

to extract from the cases what you want to support

your argument without going right through them

in the manner you have dealt with COR.

MR BERKELEY:  I do not generally cite cases at length,

Your Honour.

MASON CJ:  Very well. We will now adjourn until 10. 15 tomorrow.

AT 4. 18 PM THE MATTER ADJOURNED

UNTIL THURSDAY, 9 MARCH 1989

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