Siltech PMR Pty Limited and Commissioner of Taxation (Taxation and business)
[2025] ARTA 26
•7 January 2025
Decision and Reasons for Decision
Siltech PMR Pty Limited and Commissioner of Taxation (Taxation and business) [2025] ARTA 26 (7 January 2025)
Applicant: Siltech PMR Pty Limited
Respondent: Commissioner of Taxation
Tribunal Number: 2024/4356
Tribunal: Senior Member R Olding
Place: Brisbane
Date: 7 January 2025
Decision: The Tribunal affirms the decision under review.
…………………SGD …………………
Senior Member R Olding
CATCHWORDS
TAXATION – GOODS AND SERVICES TAX – whether silver bangles/bracelets, electrical nodes and silver foil are ‘precious metals’ under s 195 of the A New Tax System (Goods and Services Tax) Act 1999 – whether ‘in an investment form’ – decision affirmed
LEGISLATION
A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 9-5, 9-30(1), 38-1, 38-
385, 40, 40-1, 100, 195-1, definition of ‘precious metals’
CASES
ACN 154 520 199 Pty Ltd (in liq) v Federal Commissioner of Taxation (2020) 282 FCR 455;
112 ATR 522
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384
Coleman v Power (2004) 220 CLR 1; [2004] HCA 39
Very Important Business Pty Ltd v Commissioner of Taxation (2019) 110 ATR 77
SECONDARY MATERIALS
Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998Explanatory Memorandum to the A New Tax System (Indirect Tax and Consequential Amendments) Act No. 2) 1999
GSTR 2003/10 Goods and Services Tax: What is ‘precious metal’ for the purposes of GST? (Australian Taxation Office, 18 June 2003)
STATEMENT OF REASONS
WHAT IS THIS CASE ABOUT?
This case concerns the GST classification of silver bangles/bracelets, silver electrical nodes and silver foil which, for consistency with the case materials, I will call PMM (precious metal materials).
The question for determination is whether the PMM - purchased by the Applicant, Siltech PMR Pty Limited, for their precious metal content - fall within the definition of ‘precious metal’ in s 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth). In particular, whether the PMM are, as required by the definition, ‘silver . . . in an investment form’.
Siltech submits this requirement is satisfied on the basis that the PMM are:
(a)‘silver’ - because it is sufficient that they predominantly comprise silver as denoted by the chemical symbol Ag;1 and
(b)‘in an investment form’ – because that expression would encompass any form in which silver is held with the subjective intention of generating income or profit.2
The Commissioner of Taxation submits that the definition is not satisfied, on the basis that the PMM are not:
(a)‘silver’ – because they do not have the character of silver, but rather have been physically altered from the silver from which they were manufactured, such that they have the character of the manufactured product ie jewellery, electrical nodes and rolled foil; and
(b)‘in an investment form’ – because that requires precious metal to be in a form capable of being traded on the international bullion market; that is, a bar, wafer or
1 Applicant’s Submissions, [13(b)].
2 Applicant’s Submissions, [24].
coin bearing a mark or characteristic accepted as identifying and guaranteeing its fineness and quality.
I am not persuaded that either of Siltech’s submissions is correct. It is not necessary or appropriate for me to go further and decide whether the definition of ‘precious metal’ is limited to the classes of goods submitted by the Commissioner. It is sufficient that I am satisfied the contested PMM are not ‘precious metals’ as defined.
DECISION UNDER REVIEW
Siltech applied for review of the Commissioner’s decision of 15 April 2024 disallowing the Applicant’s objection against a private ruling (PBR)3.
The question posed, and the answer stated, in the PBR are:4
Question
Are the following precious metal materials (PMM) purchased by Siltech ‘precious metals’ for the purpose of section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
a.Silver bangles/bracelets
b.Electrical nodes
c.Silver foil
d.Canadian Maple silver coins.
Answer
The silver bangles/bracelets, electrical nodes and silver foil are not precious metals for the purpose of section 195-1 of the GST Act.
The Canadian Maple silver coins are precious metals for the purpose of section 195- 1 of the GST Act.
Because the PBR was favourable to Siltech in respect of the coins, the controversy between the parties is limited to the GST classification of the bangles/bracelets, electrical nodes and foil.
3 For ‘private binding ruling’ as such rulings are commonly called.
4 T-Documents, T18.
FACTS
The relevant facts are those set out in the PBR, which are as follows:5
Relevant facts and circumstances
Siltech PMR Pty Limited (Siltech) is a precious metal refiner.
Siltech purchases, from time to time, materials for their precious metal content (PMM) including silver bangles/bracelets, electrical nodes and Canadian Maple silver coins shown below:
[Photographs omitted.]
An electrical node is a conductive juncture between or within an electrical circuit. A silver electrical node is the same thing fashioned from silver.
Siltech also purchases silver foils in rolls.
The purchase of the PMM is based on a spot or market price; and consignments and batches are subject to price fluctuations dependent on purity and the precious metal markets. For example, Siltech may purchase silver bangles or silver electrical nodes of varying degrees of fineness to refine these metals further. The seller sets the price based on their declaration of purity for payment pre-delivery. On delivery, an assay is done for Siltech to determine the actual fineness of the PMM and an adjustment is made.
For the purposes of this ruling, the PMM referred to are of 99.9% fineness.
Siltech acquires the PMM from PMM sellers which are companies specialising in the aggregation and wholesale of PMM.
[Facts only relevant to the coins omitted.]
Siltech provided a document for the purchase of silver foil from Bairun Energy Investment Australia.
On acquisition, Siltech will inspect, melt, assay, report and refine the PMM amongst other steps.
The refined product may be refined granules, bars, blocks, bullion, coins, or other forms of Refined PMM.
LEGISLATIVE CONTEXT
The GST treatment of supplies of precious metals, and its rationale, were summarised by the former Administrative Appeals Tribunal, in Very Important Business Pty Ltd v Commissioner of Taxation,6 as follows:
5 T-Documents, T18.
6 (2019) 110 ATR 77.
28. Section 38-1 explains that if a supply is GST-free, then no GST is payable on the supply and an entitlement to an input tax credit for anything acquired or imported to make the supply is not affected. This is as good as it gets in the GST world. Input taxed supplies are less attractive because, as explained in s 40-1, if a supply is input taxed, then no GST is payable on the supply and there is no entitlement to an input tax credit for anything acquired or imported to make the supply. The denial of input tax credits is sometimes referred to as involving “sticky GST” in the supply chain because there is a GST cost involved.
29. It follows that the combined effect of ss 9-5, 9-30(1), 9-30(3) and s 38-385 of the GST Act is that the first sale of precious metal by a refiner of precious metal to a dealer in precious metal will be GST-free. This special arrangement was established because gold refined in Australia is sold into what is effectively a world- wide market. Australia’s gold refiners would be at a commercial disadvantage if they had to pay GST to the Commissioner on the first sale of precious metal or were unable to claim input tax credits on their feedstock, in circumstances where their international rivals were able to sell without any GST cost. Our Parliament expressly acknowledged this in the Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998, which became the GST Act, in the following terms:
Input taxing supplies of precious metals
5.125 Gold prices are internationally fixed. Gold dealers cannot pass on the GST charged on supplies of gold they make. Under the general rules there would be GST on the GST paid on the last supply. To avoid this, the first supply after the precious metal is refined is GST-free under the rules discussed below. This means that the refiner is entitled to input tax credits on the acquisitions that are used in refining the precious metal and does not charge GST on the supply of the precious metal. The result of this is that there is no GST embedded in the price of that supply. Subsequent supplies are input taxed – section 40-100. This means there is no entitlement to input tax credits on those acquisitions and no GST charged on the supply. There is no entitlement to input tax credits because there is no GST in the price of the acquisition. There is no GST on the supply so that the fixed price is not affected.
GST-free supplies of precious metals
5.126 The first supply of precious metals by a refiner after refining will be GST-free if the recipient of the supply is a dealer in precious metals. The dealer has to acquire the precious metal for investment purposes. Section 38-385. A ‘refiner’ is an entity that regularly converts or refines precious metals in carrying on its enterprise. A ‘dealer’ is an entity that regularly supplies and acquires precious metal for investment purposes as a principal part of carrying on its enterprise.7
7 Ibid, [29].
Thus, the definition of ‘precious metal’ in s 195-1 plays a crucial role in the GST classification of silver (and other precious metal) goods. That definition is as follows:
precious metal means:
(a)gold (in an investment form) of at least 99.5% fineness; or
(b)silver (in an investment form) of at least 99.9% fineness; or
(c)platinum (in an investment form) of at least 99% fineness; or
(d) any other substance (in an investment form) specified in the regulations of a particular fineness specified in the regulations.
The words ‘in an investment form’ were added after the enactment of the GST legislation. The explanatory memorandum to the amending bill stated:
In order to ensure that the correct supply of precious metal is GST-free or input taxed, the definition of ‘precious metal’ has been amended to refer to sales of precious metal in an investment form. Investment form means precious metal sold in a wafer, bar or other tradeable form which has an internationally accepted hallmark. In the case of gold, this means a hallmark that has been approved by the London Bullion Market and means that the gold can be traded on the international bullion market.8
CONSIDERATION OF THE PARTIES’ SUBMISSIONS
Since the Commissioner argues for a more restrictive construction, it is convenient to start with the Commissioner’s position and then examine Siltech’s arguments for its broader proposition.
The Commissioner’s preferred construction in the proceedings follows his public ruling,
GSTR 2003/10, which states in paragraph 29 that:9
for gold, silver or platinum to be in an investment form for the purposes of the GST Act, it must be in a form that:
·is capable of being traded on the international bullion market, that is, it must be a bar, wafer or coin;
·bears a mark or characteristic accepted as identifying and guaranteeing its fineness and quality; and
8 Explanatory Memorandum to the A New Tax System (Indirect Tax and Consequential Amendments) Act No.
2) 1999.
9 GSTR 2003/10 Goods and Services Tax: What is ‘precious metal’ for the purposes of GST? (18 June 2003) [29].
·is usually traded at a price that is determined by reference to the spot price of the metal it contains.
The Commissioner noted that those requirements in GSTR 2003/10 were referred to by the Full Federal Court in ACN 154 520 199 Pty Ltd (in liq) v Federal Commissioner of Taxation.10 However, as the Commissioner pointed out, the Court went on to note that:
It was common ground before the Tribunal that the above view of what constitutes “investment form” was generally accepted; the parties also agreed that, absent a recognised mark and indication of fineness, a bold bar will not be “precious metal” irrespective of its degree of metallic purity . . .11
As has been observed at the highest judicial level, cases are only authority for what they decide.12 A case can have no wider ratio decidendi than the Court’s reasoning on what was in issue in the case. Accordingly, I do not regard these observations as creating binding legal precedent or even, for that matter, persuasive dicta. Nor, as I have foreshadowed, is it necessary for me to decide whether the Commissioner’s preferred construction sets the outer limits of the definition. The current matter can and should be resolved by determining whether the objection should have been allowed on the basis put forward by Siltech.
As to its submission that the PMM are ‘silver’, Siltech submits that:
because the Definition specifies the form of the metal silver, it is sufficient for the first limb to merely demonstrate that, the things imported [ie the PMM] is (sic) constituted in alloy predominantly comprising Ag.
No authority or reasoning is offered by Siltech for the selection of the arbitrary delineation of goods as silver on the basis that they comprise predominantly silver. There is no basis in the legislation for determination that goods that comprise or are manufactured from up to almost 50% materials other than silver could be characterised as silver.
More importantly, it is clear that the PMM in this case have been transformed from silver, and probably other materials though I need not decide this, into goods of another character. It would, in my view, be quite unrealistic to characterise bangles/bracelets as ‘silver’; their obvious and most natural characterisation is as jewellery or, more specifically,
10 (2020) 282 FCR 455; 112 ATR 522.
11 Ibid, [28].
12 Coleman v Power (2004) 220 CLR 1; [2004] HCA 39, [79].
bangles/bracelets: that is undeniably what they are. Similar observations apply in respect of the other PMM in issue.
For these reasons, I am not persuaded that the PMM are properly characterised as silver, whether or not in an investment form.
As to Siltech’s argument that the PMM is in an investment form, I accept Siltech’s uncontroversial submission that it is the words of the legislation which must be construed and the terms of the legislation cannot be displaced by the commentary in the explanatory memorandum. The now orthodox approach to statutory interpretation requires attention to the text of the legislation considered in its context in the broadest sense and having regard to the evident policy of the provisions determined by permissible means. Importantly, a proposed construction, in order to be preferred, must be reasonably open.13
The construction proposed by Siltech is, in my view, not reasonably open. Siltech essentially promotes a construction that would give the qualifier ‘in an investment form’ a meaning that, in fact, would have no regard to the ‘form’ of the PMM. Provided it meets the fineness requirement, under Siltech’s construction an item of goods comprised predominantly of silver would meet the definition if the acquirer intends to use it as an investment. There is nothing in the wording of the definition that suggests an intention test, or that a ‘form’ requirement would be met by the holding of a subjective intention.
In the context of a tax intended to be administered on a daily basis by businesses large and small, it would be an unlikely intention to attribute to the legislature, without clear words to that effect, that a supplier’s liability should depend upon the subjective intention of its customer. Here, the text admits only of an altogether different intention that Parliament must be taken to have intended: the classification depends on the form of the goods. That can only be a reference to physical form. Siltech did not suggest any other ‘form’ was intended.
There is nothing in the form of jewellery, or the other contested PMM, that suggests it is in an investment form. On Siltech’s construction, the investment form requirement would be met by silver in any form that predominantly comprises silver of the requisite fineness if
13 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384, 408.
intended or expected to be used to generate a profit. That, in my view, would substitute an intention test for the form test chosen by Parliament.
CONCLUSION
For these reasons, I am unable to accept Siltech’s submissions. It follows that the decision under review must be affirmed.
I certify that the preceding 25 (twenty- five) paragraphs are a true copy of the reasons for the decision herein of Senior Member R Olding.
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Associate
Dated: 7 January 2025
Date of hearing: 29 October 2024
Applicant’s representative: V Elias, Infinity Financial
Respondent’s representative: M Lee, ATO Litigation & Legal Services
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