Plessey Australia Pty Ltd v Commissioner of Taxation

[1990] FCA 97

Re: PLESSEY AUSTRALIA PTY LIMITED
And: COMMISSIONER OF TAXATION
No. N G744 of 1989
FED No. 97
Sales Tax

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Pincus(1), French(1) and Von Doussa(1) JJ.

CATCHWORDS

Sales Tax - exemptions - third schedule Sales Tax (Exemptions and Classifications) Act 1935 - computer communication system used by NRMA - construction of "in servicing" - whether equipment incidental to, or directly used in, servicing motor vehicles.

Sales Tax (Exemptions and Classifications) Act 1935, Third Schedule

HEARING

SYDNEY

#DATE 16:2:1990

Counsel for the appellant: Mr D.H. Bloom QC and

Ms H. Coonan

Solicitors for the appellant: Abbott Tout Russell and Kennedy

Counsel for the respondent: Mr R.B.S. MacFarlan QC and

Mr A.J. Sullivan

Solicitors for the respondent: Australian Government Solicitor

ORDER

The Court orders that the appeal be dismissed with costs.

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

JUDGE1

This is an appeal from Sheppard J. on a reference to his Honour of a sales tax objection. The question is whether a "Computer Aided Despatch (CAD) System" sold by the appellant is within a certain description or not. The description is "machinery, implements, apparatus and materials ... for use exclusively or primarily and principally ... in ... servicing, repairing or reconditioning ... motor vehicles". This language is taken from item 7 of the third schedule to the Sales Tax (Exemptions and Classifications) Act 1935 in the form it had at relevant times. If the system in question is within the exemption, then the rate of tax payable is substantially lessened.

1. The nature of the CAD system is comprehensively described by the primary judge and his Honour's description is admitted to be accurate. We do not repeat it here, but some explanation is necessary.

2. The system in question was sold to the National Roads and Motorists' Association (NRMA), which as is well known provides roadside service and assistance to its members. We were told that most often the purpose of the service is to remedy the inconvenience attendant on a flat battery. The CAD system is, in essence, a means of communication between the mobile service units and the NRMA office. Members telephone the office and, with the assistance of a visual display unit, the telephonist enters the information she has obtained into a computer. The job is then allocated to an appropriate despatch clerk who, again with computer assistance, causes a message to be sent to the person who is to attend the member's vehicle, the "patrolman". The system alerts the patrolman to the fact that the message has come in; he acknowledges its receipt and also lets the office know when he has done the job. If he has trouble solving the problem, he communicates via the system with NRMA headquarters, and he also asks for a towing vehicle if one is needed.

3. The system appears to be designed to make the patrolman's job safer and simpler. Means are provided (by showing a map on the screen) to help find the vehicle in question and, by pushing a button, the patrolman can inform headquarters that he is involved in an accident or exposed to danger.

4. One can see that, once those who use the CAD system have mastered its features, it is likely to be more efficient than more primitive systems - for example, use of an ordinary telephone or two-way radio. Its main functions, however, are the same as those which would be performed by those simpler means, namely directing an appropriate patrolman to the member's car and communicating with him while he is there.

5. Mr Bloom QC who led Ms. Coonan for the appellant, contended that the primary judge was wrong in holding, as he did, that the CAD system was not within the exemption. Counsel said that his Honour should have given the exemption and, in particular, the words "in servicing" a broader construction than he did and used a "robust approach". Whether or not one takes such an approach, however, a line has to be drawn somewhere. As the primary judge pointed out, in carrying out any task, there may be some equipment which is used incidentally or in a preliminary way, rather than directly; his Honour gave examples. He did not read the exemption as intended to achieve the result that, if one is carrying on a business of servicing motor vehicles, all the chattels used in the business are within the exemption; some will be and some not. For example, means of recording what work has been done in the business, on computer or more conventionally, are likely to be necessary, but one would not ordinarily describe the books which record the business' activities as materials used in servicing motor vehicles. Nor, in our view, would a telephone principally used to receive calls from motorists requiring service be within the exemption. Means of communication with the patrolman, such as that in question are, in our opinion, closer to the statutory description, particularly when one takes into account the sophisticated features of the system described in the evidence.

6. We were invited by Mr Bloom, who put his argument with his customary succinctness, to interpret the words "in servicing" rather as if they were "in connection with servicing". But we would not regard that course as useful; it simply substitutes, for the language the legislature has actually chosen, language having a slightly different meaning and one more favourable to the appellant. We do not think that, in general, devices for enabling the members' requirements to be communicated to patrolmen and enabling patrolmen to communicate conveniently with headquarters would, in an ordinary use of language, be described as equipment used in servicing motor vehicles. Mr Bloom suggested that we consider whether a trolley or other container in which tools are moved about in a mechanic's workshop is within the description. We have not attempted to mark out the precise area the exemption covers. Although the appellant's contention has some force, we are of opinion that the relationship between the CAD system and the actual work of servicing the vehicles is not such as to make it a proper use of language to say that the system is used in servicing them.

7. For these reasons, the appeal must, as we have already indicated, be dismissed, and with costs.