Studio Fashion (Australia) Pty Ltd and Chief Executive Officer of Customs
[2015] AATA 366
•28 May 2015
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL )
) 2014/2611
GENERAL ADMINISTRATIVE DIVISION )Re:Studio Fashion (Australia) Pty Ltd
Applicant
And:Chief Executive Office of Customs
Respondent
CORRIGENDUM TO DECISION [2015] AATA 366
The Tribunal amends its decision of 28 May 2015 by deleting the formal decision and substituting:
“The Tribunal decides to affirm the decision of the Respondent dated 8 April 2014 to recover duty paid under protest in relation to import declaration AA3AHEEG originally lodged on 1 June 2011 and later amended.”
[sgd]
S A FORGIE
Deputy President
[2015] AATA 366
DivisionGENERAL ADMINISTRATIVE DIVISION
File Number 2014/2611
ReStudio Fashion (Australia) Pty Ltd
APPLICANT
AndChief Executive Officer of Customs
RESPONDENT
DECISION
Tribunal Deputy President S A Forgie
Date 28 May 2015
Place Melbourne
The Tribunal decides to affirm the decision of the Respondent dated 8 April 2014 to demand payment of an amount of $75,445.27 as duty and an amount of $96,618.11 as goods and services tax in relation to goods imported into Australia by the Applicant between 1 January 2011 and 30 April 2013.
…[sgd] S A Forgie…..
Deputy President
CATCHWORDS
CUSTOMS DUTY – goods delivered duty paid – customs duty underpaid – collection of duty – whether applicant is “owner of the goods” – whether discretion in collecting duty – decision affirmed.
LEGISLATION
Administrative Appeals Tribunal Act 1975; section 37
Customs Act 1901; sections 4, 30, 35, 35A, 68, 71A, 71AAAD, 71AAAF, 71AAAL, 132AA, 132, 159, 161, 161J, 161K, 161L, 162, 165, 167, 181, 183, 240, 273GA
Customs Tariff Act 1995; sections 9, 10, 15, 16, 17, 18, 19, 20, Schedules 3, 4, 5, 6, 7 and 8
Sentencing (Crime of Murder) and Parole Reform Act 2003 (NT); section 19
Safety, Rehabilitation and Compensation Act 1988
CASES
Alexandra Private Geriatric Hospital Pty Ltd v Blewett (1984) 2 FCR 368; 56 ALR 265
Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223
Australian Retailers Association v Reserve Bank of Australia [2005] FCA 1707; (2005) 148 FCR 446; 228 ALR 28
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; 141 ALR 618
Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297; 35 ALR 151; 11 ATR 949; 55 ALJR 434
Finance Facilities Pty Ltd v Federal Commissioner of Taxation [1971] HCA 12; (1971) 127 CLR 106; 45 ALJR 241; 2 ATR 194
Leach v R [2007] HCA 3; (2007) 230 CLR 1; 232 ALR 325; 81 ALJR 598
Malika Holdings Pty Ltd v Stretton [2001] HCA 14; (2001) 204 CLR 290; 178 ALR 218
Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24; 66 ALR 299
Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; (2010) 240 CLR 611; 266 ALR 367; 115 ALD 248; 84 ALJR 369
Pearce v Coynes Freight Management Group Pty Ltd [2010] FCA 320; (2010) 183 FCR 540; 267 ALR 430
Re Lowth and Comcare [1999] AATA 645
Samad v District Court New South Wales [2002] HCA 24; (2002) 209 CLR 140; 189 ALR 1; 76 ALJR 871
TCN Channel Nine Pty Ltd v Australian Mutual Provident Society [1982] FCA 169; (1982) 62 FLR 366; 42 ALR 496
Wacando v The Commonwealth (1981) 148 CLR 1; 37 ALR 317
Ward v Williams [1955] HCA 4; (1955) 92 CLR 496
Wing On & Co. Ltd. v Collector of Customs (N.S.W.) [1938] HCA 71; (1938) 60 CLR 97; [1938] ALR 238OTHER MATERIAL
Australian Customs Notice – 2000/30 – Thursday, 1st June 2000
Chambers 21st Century Dictionary, 1999, reprinted 2004
REASONS FOR DECISION
Under s 165 of the Customs Act 1901, (Customs Act), a delegate of the Chief Executive Officer (CEO) issued a demand to Studio Fashion (Australia) Pty Ltd (Studio Fashion) for the payment of duty it had, in his assessment, underpaid on the import of certain goods from a supplier in China known as the Sheng Fa Knitting Garment Co Ltd (Sheng Fa). Under the arrangement between Studio Fashion and Sheng Fa, Sheng Fa undertook to deliver the goods “DDP”. The acronym “DDP” is known as an “Incoterm” and one of the Incoterms® published by the International Chamber of Commerce (ICC) and means “delivery duty paid”. The transaction may also be referred to as “Free into Store” contract. Under s 167 of the Customs Act, Studio Fashion paid additional duty under protest in relation to import declaration AA3HAHEEG but contends that it should not be required to pay it when Sheng Fa had undertaken to deliver the goods duty paid to it. I have decided to affirm the decision of the CEO dated 8 April 2014 to recover duty paid under protest in relation to import declaration AA3HAHEEG originally lodged on 1 June 2011 and later amended.
BACKGROUND
There was no disagreement between the parties regarding the essential facts in this matter. In view of that and the material lodged in the documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T documents), I have made the findings of fact set out in this section of my reasons.
Ordering and delivery of goods
On the basis of the evidence of Mr Dmitry Ruditser, a Director of Studio Fashion, I find that the goods were purchased on the basis of a DDP contract. Studio Fashion would place its order with Sheng Fa for goods at a price they agreed upon. It would receive advice from Sheng Fa that a particular order would be shipped by sea or by air as the case might be and the time of the month at which it would be shipped. Studio Fashion had no role in selecting the manner of shipment as that was arranged by Sheng Fa. It did not receive interim reports as to the stage the goods had reached in their shipment. There was never any contact between it and any customs broker or delivery company and Studio Fashion never authorised any person to act on its behalf. The order would arrive and, if the goods were of an acceptable quality, Studio Fashion would pay for them on the invoice. No money changed hands before delivery and the goods would be paid for within a month of delivery.
The audit
The Australian Customs Border Protection Service (ACBPS) conducted a compliance audit of a number of transactions which occurred between 1 January 2011 and 30 October 2012 (audit period) and in which Studio Fashion had been the purchaser. It found that, while the supplier of the goods to Studio Fashion (Chinese supplier) was always described by the name “Feng Sha” in the relevant invoices issued to that firm, “Feng Sha” was only one of the names by which it was described in other documents relating to the goods and their importation into Australia. The name “Feng Sha” was used in some documents provided to customs brokers for import clearance purposes. Other names were used on some invoices provided by the Chinese supplier to customs brokers and to freight companies for import clearance as well as on bank accounts to which Studio Fashion transferred money.
During the audit period, goods supplied by the Chinese supplier were cleared through Customs in one or other of two ways:
(1)An import declaration was communicated to ACBPS by customs brokers apparently acting on instructions and relying on documents sourced from the Chinese supplier.
(a)47 import declarations were communicated to ACBPS by four different brokers;
(b)some duty and Goods and Services Tax (GST) was paid in relation to these import declarations.
(2)Self-assessed clearances (SACs) were made by freight companies acting on the basis of documents provided, directly or indirectly, by the Chinese supplier.
(a)95 SACs were communicated to ACBPS by freight companies including DHL and UPS for shipments supplied to Studio Fashion;
(b)12 different names were used by the Chinese supplier; and
(b)the declared customs value of the goods to which each SAC related was less than $1,000.
In its audit, ACBPS compared two prices. The first were those stated in the invoices supplied by the Chinese supplier to Studio Fashion and, as confirmed by its bank transactions, paid by Studio Fashion. The second were those stated in the invoices provided by the Chinese supplier to customs brokers and to freight companies for import clearance purposes. As a result of the comparison, ACBPS concluded:
(1)The customs value shown of each of the 47 import declarations made by customs brokers and in each of the 95 SACs made by freight companies during the audit period were too low.
(2) Customs duty and GST was underpaid in relation to the 47 import entries.
(3)The customs value of the goods, which were the subject of the 95 SACs, had been wrongly declared as not exceeding $1,000:
(a)in each case the customs value of the goods exceeded $1,000; and
(b)neither customs duty nor GST had been paid in relation to any of the SACs.
Relying on s 161 of the Customs Act, a delegate of the CEO re-determined the customs values of the goods on the basis of the prices shown by the Chinese supplier in the invoices it provided to Studio Fashion. From those amounts, the delegate deducted amounts for insurance, freight and costs following importation. The delegate calculated the duty and GST payable on those goods and issued a demand for them under s 165 of the Customs Act. After some discussion between Studio Fashion and the CEO, the latter revised the amount of duty and GST demanded. The final demand issued on 8 April 2014 was for amounts of:
(1)$75,445.27 comprising:
(a)$33,343 in relation to 47 import declarations; and
(b)$42,102.27 in relation to 95 SACs.
(2)$98,618.11 for GST in respect of all goods imported during the audit period.
Payment under protest in respect of import declaration AA3HAHEEG
In respect of import declaration AA3HAHEEG, Studio Fashion paid the duty under protest. It did that in accordance with s 167 of the Customs Act. In so far as it applies to the subject matter of this case, s 167(1) provides that:
“If any dispute arises as to the amount or rate of duty payable in respect of any goods, or as to the liability of any goods to duty, under any Customs Tariff …, the owner of the goods may pay under protest the sum demanded by the Collector as the duty payable in respect of the goods, and thereupon the sum so paid shall, as against the owner of the goods, be deemed to be the proper duty payable in respect of the goods, unless the contrary is determined in an action brought in pursuance of this section.”
Section 273GA(2) permitted Studio Fashion to lodge an application for review of the delegate’s decision to make the demand under s 165 as well as any other decision forming the process of making, or leading up to the making, of the decision to make that demand. Studio Fashion lodged such an application.
The relevant information relating to the goods that were the subject of import declaration AA3HAHEEG may be summarised as follows:
Import declaration
AA3HAHEEGInvoice ZTC050
Air Waybill for consignment
Sheng Fa’s Invoice
ZTCFP107Import declaration AA3HAHEEG
(amended)Source
Lodged 1 June 2011. Duty not paid under protest.[1]
Provided by Chinese supplier to customs broker for import declaration. [2]
Provided to ACBPS by customs broker. [3]
Provided by Studio Fashion to ACBPS.[4]
Amended and paid under protest.[5]
Importer
Studio Fashion
Studio Fashion
Supplier
Sheng Fa
Sheng Fa
Sheng Fa
Delivery name/Consignee
Studio Fashion
Studio Fashion
Studio Fashion
Goods
4,632 Ladies Tops
4,632 Lady’s tops Style DD9178
4,632 Lady’s topviscose/spandex
4,632 TOP
Style DD91784,632 Ladies Tops
Tariff classification
62064000
62064000
Rate of duty
10%
Invoice terms
DDP
DDP
Invoice total/price
$5,558.40
$5,558.40
Unit price: $1.20$1.20
$19,917.60
Unit price: $4.30
(Paid by Studio Fashion to Yang Qiang.)$19,917.60 made up of:
Cost, insurance freight:
$19,243.60; and
Landing charges:
$674Total customs value
$3,413.10
$14,566.26
(after deductions)Duty
$341.31
$1,456.62
GST
$522.57
$1,749.41
[1] T documents; T3 at 16-19
[2] T documents; T8 at 49
[3] T documents; T8 at 48
[4] T documents; T7 at 40-44
[5] Attached to the CEO’s outline of submissions lodged with the Tribunal on 31 October 2014.
LEGISLATIVE FRAMEWORK: CUSTOMS ACT
Section 30 sets out when goods are subject to the control of ACBPS. Section 30(1) begins by stating “Goods shall be subject to the control of the Customs as follows …” and then sets out ten situations. The first applies if the goods are not examinable food that has been entered for home consumption or warehousing and are not excise-equivalent goods. The goods are subject to the control of Customs:
“… until either they are delivered into home consumption in accordance with an authority to deal or in accordance with a permission under section 69, 70 or 162A or they are exported to a place outside Australia, whichever happens first”.
The owner of most goods that are imported into Australia must enter them either for home consumption or for warehousing when the ship or aircraft carrying the goods first arrives or after that ship or aircraft first arrives at a port or airport in Australia at which the goods are to be discharged.[6] An entry for home consumption is made by communicating to the ACSBP either an import declaration[7] or an RCR[8] in respect of the goods.[9]
[6] Customs Act; ss 68(1) and (3). The owner of the goods may enter them for home consumption or for warehousing before the ship or aircraft arrives: Customs Act; s 68(2).
[7] An “import declaration” is an import declaration communicated to ACBPS in accordance with s 71A: Customs Act; s 4(1).
[8] An “RCR” is “… a request for cargo release communicated to Customs under section 71DB”: Customs Act; s 4(1).
[9] Customs Act; s 68(3A)
The owner
The word “owner” is defined in s 4(1) of the Customs Act:
“In this Act except where otherwise clearly intended:
…
Owner in respect of goods includes any person (other than an officer of Customs) being or holding himself or herself out to be the owner, importer, exporter, consignee, agent, or person possessed of, or beneficially interested in, or having any control of, or power of disposition over the goods.”
The agent
Subject to certain qualifications that are not relevant in this case:
“… an owner may, in writing, authorize a person to be his or her agent for the purposes of the Customs Acts at a place or places specified by the owner.”[10]
[10] Customs Act; s 181(1). The expression “Customs Acts” means Acts and instruments relating to customs in force within the Commonwealth or any part of it: Customs Act; s 4(1).
Section 181(3) makes provision for the situation in which an owner has authorised a person to be his or her agent for the purposes of the Customs Acts at a place. If that is the case:
“… the owner may comply with the provisions of, or the requirements under, the Customs Acts at that place by:
(a) except where the agent is a corporate customs broker – that agent; or
(b)where the agent is a customs broker – a nominee of that agent who is a customs broker at that place.”
Where a person claims to be an agent of an owner of goods for the purposes of the Customs Acts at a place, an ACBPS officer may require that person to produce written authority from the owner to that effect. If the person does not produce that written authority, the officer may refuse to recognise that he or she has authority to act on behalf of the owner at that place. That is the effect of s 182 of the Customs Act.
Section 183(1) provides that:
“Where a person is, holds him or herself out to be or acts as if he or she were the agent of an owner of goods for the purposes of the Customs Acts, that person shall, for the purposes of the Customs Acts (including liability to penalty), be deemed to be the owner of those goods.”
That provision must be read in light of s 183(4), which provides:
“Nothing in this section shall be taken to relieve any owner from liability.”
Import declaration
Section 71A(1) provides that an import declaration:
“… is a communication to Customs in accordance with this section of information about:
(a)goods to which section 68 applies; or
(b)warehoused goods;
that are intended to be entered for home consumption.”[11]
The import declaration can be communicated in documentary or electronic form[12] given or sent to an officer doing duty in relation to import declarations or left at a place in a Customs office for lodgement of import declarations.[13]
[11] Apart from those goods specified in ss 68(1)(d)-(j), goods to which s 68 applies are “(a) goods that are imported into Australia; and (b) goods that are intended to be imported into Australia and that are on board a ship or aircraft that has commenced its journey to Australia; and (c) a ship or aircraft that is intended to be imported into Australia and that has commenced its journey to Australia; …”: Customs Act; s 68(1).
[12] Customs Act; s 71A(2)
[13] Customs Act; s 71A(3)
Section 71A does not specify the person who may communicate an import declaration but, when it is in respect of goods to which s 68 applies:
“… the owner of the goods becomes liable to pay import declaration processing charge in respect of the declaration.”[14]
[14] Customs Act; s 71B(1)
Import declaration advice
On receiving an import declaration, the ACBPS must issue an import declaration advice relating to goods entered by that import declaration. The manner in which that import declaration advice is given depends on whether the import declaration was given in documentary form or electronically. Assuming it was given in documentary form, the import declaration advice must either be given to the owner of the goods or made available for collection at a particular place in a Customs office allocated for the collection of such advices.[15] If the import declaration was electronic, the import declaration advice is given electronically to the person who made the declaration.[16]
[15] Customs Act; s 71C(2)
[16] Customs Act; s 71C(3)
Whether given in documentary or written form, the contents of the import declaration advice must take one or other of two forms. It may be to the effect that goods are to be held in their current location or are directed for further examination. If that is not the form it takes, it must be to the effect that the goods are cleared for home consumption.[17] If the import declaration advice takes that latter form,[18] the ACBPS must give the person to whom it has given it authority to take the goods into home consumption if:
“a payment is made of any duty, GST, luxury car tax, wine tax, import declaration processing charge or other charge or fee payable at the time of entry of, or in respect of, the goods covered by the import declaration advice.”[19]
There is an exception to the general rule in circumstances in which only GST, luxury car tax or wine tax are payable.[20]
[17] Customs Act; ss 71C(2)(c) and (3)(c)
[18] Customs Act; s 71C(5)
[19] Customs Act; s 71C(4)(b)
[20] Customs Act; s 71C(7)
Goods not required to be entered
Subject to any regulations made under s 71AAAE excluding certain goods from the description, goods described in ss 68(1)(e), (f) and (i) are “specified low value goods”.[21] They are not required to be entered but are subject to the requirements of Subdivisions AA and AB of Division 4 of Part IV of the Customs Act. Among them is s 71AAAF, which requires a person to give information to Customs in the circumstances provided for in those provisions.[22] Section 71AAAF provides that the owner of low value goods, or a person acting on behalf of the owner, must give Customs a self-assessed clearance declaration containing information set out in an approved statement. The expression “low value goods” means goods that are not prescribed goods and whose value does not exceed $1,000 or such other amount as is prescribed.[23] Subdivision AB of Division 4 of Part IV of the Customs Act provides for the circumstances in which the ACBPS is required to grant an authority deal with low value goods. Subject to exceptions set out in s 71AAAL(2) and (3),[24] neither of which is applicable in this case, the ACBPS:
“… must not give an authority to deal with specified low value goods unless the duty (if any) and any other charge or tax (if any) payable on the importation of the goods has been paid.”[25]
Payment of duty
[21] Customs Act; s 71AAAD
[22] Customs Act; s 71(1)
[23] Customs Act; s 68(1)(e)(ii)
[24] Goods prescribed by the regulations and entered for home consumption are excluded from the operation of s 71AAAL(1): Customs Act; ss 71AAAL(2) and 132AA(1); Item 2. Section 71AAAL(1) does not apply in certain circumstances if the only duty, charge or tax that is payable is the Goods and Services Tax (GST), luxury car tax or wine tax: Customs Act; s 71AAAL(3).
[25] Customs Act; s 71AAAL(1)
A.General outline
Import duty must be paid at the time of entry of the goods for home consumption.[26] In most cases, the rate at which that duty is paid is the rate of the duty in force when the goods are entered for home consumption.[27] Section 15 of the Customs Tariff Act1995 (CT Act) provides:
“Duties of Customs are imposed by this Act on:
(a) goods imported into Australia on or after 1 July 1996; and
(b) goods:
(i) imported into Australia before 1 July 1996; and
(ii) entered, or again entered, for home consumption on or after that day.”
[26] Customs Act; s 132AA(1), Item 1
[27] Customs Act; s 132(1)
In general terms, the rate at which duty is payable is determined by reference to the rate set out in the third column of the tariff classification under which the goods are classified.[28] That rate is either “Free” or expressed in terms of a percentage in Schedules 3, 4, 5, 6, 7 and 8 of the CT Act.[29] Where it is a percentage:
“(a) the reference is to that percentage of the value of the goods, or that part, component or ingredient of the goods, as the case may be; and
(b) the percentage is a rate of duty.”[30]
[28] CT Act; ss 16-20
[29] CT Act; s 10
[30] CT Act; s 9(1)
B.1 Valuation of goods
The valuation of imported goods is the subject of Division 2 of Part VIII of the Customs Act. The starting point is set out in s 159(1):
“Unless the contrary intention appears in this Act or in another Act, the value of imported goods for the purposes of an Act imposing duty is their customs value and the Collector shall determine that customs value in accordance with this section.”
The remaining provisions of s 159 go on to set out various scenarios by which customs value may be determined.
Where, for example, the Collector can determine the transaction value of imported goods, their customs value is their transaction value.[31] The “transaction value of imported goods” is an amount equal to the sum of their adjusted price in their import sales transaction and their price related costs to the extent that those costs have not been taken into account in determining the price of the goods.[32] The expression “adjusted price” is the subject of s 161(2), which provides:
[31] Customs Act; s 159(2)
[32] Customs Act; s 161(1)
“In this section:
adjusted price, in relation to imported goods, means the price of the goods determined by a Collector who deducts from the amount that, but for this subsection, would be the amount of that price, such amounts as the Collector considers necessary to take account of the following matters:
(a) deductible financing costs in relation to the goods;
(b) any costs that the Collector is satisfied:
(i)are payable for the assembly, erection, construction or maintenance of, the goods;
(ii)are incurred after importation of the goods into Australia;
(iii)are capable of being accurately quantified by reference to the import sales transaction relating to the goods;
(c)Australian inland freight and Australian inland insurance in relation to the goods;
(d)deductible administrative costs in relation to the goods;
(e)overseas freight and overseas insurance in relation to the goods.”
The value of imported goods is to be ascertained in Australian dollars.[33] Where the CEO or a Collector:
“… has determined the customs value of goods in accordance with this Division, the CEO or the Collector shall cause the value to be recorded on the entry in respect of them or otherwise advise their owner of the amount.”[34]
An estimate of the value of goods may appear on a document such as an import declaration or a SAC provided in respect of those goods. If a Collector signifies his or her acceptance of that estimate in a manner prescribed by regulations, he or she is taken to have determined the customs value of the goods and to have advised the owner of that amount.[35] The owner of the goods may ask a Collector for details of the way in which their value was assessed.[36]
[33] Customs Act; s 161J(1)
[34] Customs Act; s 161K(1)
[35] Customs Act; s 161K(2)
[36] Customs Act; s 161K(3)
B. Review of determination or decision regarding valuation of goods
Section 161L also provides for the CEO to review a determination or other decision by an officer under Division 2 of Part VIII. An “officer” is a Collector or delegate of the CEO.[37] The CEO may affirm, vary or revoke the determination or other decision of an officer. If the CEO decides to revoke a determination or other decision, it may be that the CEO needs to make a consequential determination or decision. In either case, the result may be that:
“(a) an amount of duty that was levied is less than the amount that should have been levied; or
(b)an amount of duty that was refunded is greater than the amount that should have been refunded …”[38]
If one or other of those results occurs:
“… section 165 applies in relation to any demand by the CEO for the payment of the amount of duty that is unpaid or the amount of refund that was overpaid.”[39]
[37] Customs Act; s 161L(3)
[38] Customs Act; s 161L(2)
[39] Customs Act; s 161L(2)
Section 165 provides for the recovery of unpaid duty and for the recovery of drawback, refund or rebate of duty that has been overpaid to a person. In the case of an amount of duty that is due and payable in respect of goods, it:
“(a) is a debt due to the Commonwealth; and
(b) is payable by the owner of the goods.”[40]
The CEO may make a written demand for payment of that debt.[41] The demand must specify the amount of the debt and must explain how it has been calculated.[42] Unless the CEO is satisfied that the debt arose as a result of fraud or evasion, the CEO must make a demand for an amount of duty that was due and payable in respect of goods within four years from the time it was to have been paid under the Customs Act.[43]
[40] Customs Act; s 165(1)
[41] Customs Act; s 165(3)
[42] Customs Act; s 165(4)
[43] Customs Act; s 165(5)(a)
Retention of documents
Section 240 of the Customs Act imposes obligations upon certain persons to keep “all the relevant commercial documents relating to the goods that come into that person’s possession or control … that are necessary to enable a Collector to satisfy himself or herself of …” certain matters at certain times. Section 240(1) imposes the obligation on the owner of the goods at a time before, on or after entry of the goods for any purpose and until either they are not entered for home consumption and cease to be subject to the control of Customs or, if they are entered, for a period of five years after entry. The documents are those necessary to enable the Collector to be satisfied of the particulars shown in the entry. Section 240(1B)(b) is concerned with “A person who, in Australia … receives goods that have been imported into … Australia …”. The documents to be retained are those:
“… that are necessary to enable a Collector to satisfy himself or herself:
(c)whether the person is complying with a Customs-related law; or
(d)as to the correctness of the information communicated by, or on behalf of, the person to Customs (whether in documentary or other form);
for the period of 5 years from the time when the goods were imported into, or exported from, Australia.”
Section 240(4) provides:
“A person who is required by this section to keep a commercial document relating to particular goods may keep the document at any place (which may be a place outside Australia) and, subject to subsection (5), may keep the document in any form or store it in any manner.”
Only s 240(5) is relevant in this case when it provides:
“A person referred to in subsection (4) must:
(a)keep the document in such manner as will enable a Collector readily to ascertain whether the goods have been properly described for the purpose of importation or exportation, as the case requires, and, in the case of goods entered for home consumption, properly valued or rated for duty; …”
AUSTRALIAN CUSTOMS NOTICE ACN/2000/30
Australian Customs Notice 2000/30 (ACN 2000/30) is dated June 2000 but was revoked on 31 July 2014 by ACN 2014/36. After explaining certain terms, ACN 2000/30 stated:
“In a Delivered Duty Paid (DDP) contract, where there is a Customs duty liability, the overseas supplier is responsible for acquittal of that liability and will be regarded as the owner for Customs entry purposes and the importer for the purposes of the GST Act.
In a Delivered Duty Unpaid (DDU) contract where the goods are duty free (either substantively or under a concession), or where parties are using the Incoterm DDP for goods that are duty free, either party can enter the goods for home consumption and thus take responsibility for Customs clearance and acquittal of the GST. Whichever party takes this responsibility will be regarded as the owner for Customs entry purposes and the importer for the purposes of the GST Act.
In all cases the Customs Broker must be authorised by the owner of the goods, the entity named as owner of the Customs entry, to enter the goods on their behalf.”
Later, ACN 2000/30 set out a commentary on ss 240 and 165 of the Customs Act:
“Section 240 – Owner’s responsibility to retain commercial documents
Generally, the entity shown as owner on the customs entry is liable to retain all relevant commercial documents (originals or certified copies) for the period specified in section 240. It is not practical, however, to require the overseas supplier to retain these documents. In these cases, therefore, the broader definition of owner in section 4 and the provisions of section 183 are considered sufficient to require the owner’s agent in Australia (ie overseas’ supplier’s agent) to retain all relevant commercial documents (originals or certified copies) for the period specified in section 240.
Section 165 – Owner responsible to pay duty short paid or erroneously refunded
Where post entry action is necessary, the owner shown on the entry is the person on whom any section 165 demand will be made. Should this person deny liability as not being the legitimate owner (ie not having legal title to the goods and not having held themselves out to be the owner in terms of Customs Act section 4), the owner’s agent is considered, for the purposes of Customs Act sections 4, 165 and 183(1), to be the person on whom the demand should be made.”
INCOTERMS®
The ICC has amended its Incoterms® from time to time but, during the audit period, the 2010 edition was relevant. Its definition of “DDP” reads:
“‘Delivered Duty Paid’ means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export, but also for import, to pay any duty for both export and import and to carry out all customs formalities.”[44]
[44] Letter written by Dr Bergami dated 9 September 2014 at 3
Dr Roberto Bergami is a Senior Lecturer in International Trade at Victoria University. He confirmed the usage of Incoterms® by those engaged in international trade. He also addressed various issues regarding ownership of goods all of which depend on the terms of a particular contract between buyer and seller.
THE SUBMISSIONS
Mr Hegeman’s submissions on behalf of Studio Fashion are summarised in the concluding paragraph to Studio Fashion’s Statement of Facts and Contentions:
“It is SFA’s contention that Wednesbury’s test of the principle of unreasonableness (Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948]) is relevant and should be considered, in this matter. The administrator (ACBPS) is seeking to enforce legislation unfairly and unreasonably in contradiction of its own published policy guidelines with respect to identifying the party that is responsible for making recompense in situations where short payment of duty and taxes exist in a DDP transaction.
This notion of unreasonableness is firmly supported by the views of industry experts and their interpretation of the facts surrounding this matter, as well as having regard to their expert understanding of what constitutes an owner and that owner’s obligations, as established in any DDP transaction.”[45]
[45] Statement of Facts and Contents at [38]
Mr Hegeman had developed these propositions earlier in his submissions. Studio Fashion, he submitted, had never had any role to play in the Customs clearance and delivery of the goods to it. It had not entered any contractual arrangements with the companies engaged by Sheng Fa to perform the Customs clearance and/or to deliver the goods to it. ACBPS should pursue the party who is alleged to have committed fraud by undervaluing the goods, or its representative. It should not choose to pursue Studio Fashion on the basis that it is easier to pursue recovery action from an entity located in Australia than from an entity located in another country. ACBPS should be required to consider and apply all relevant policy guidelines before making any demand under s 165 against Studio Fashion when it paid all amounts for the goods in good faith and on the understanding that all duty and GST that was due and payable had been paid. Those amounts were included in the price it paid to Sheng Fa for the goods.
Mr Hegeman was also critical of the recommendations made by ACBPS in its audit report regarding the documents Studio Fashion should keep. As Studio Fashion was not the owner of the goods, he continued, it was neither entitled to, nor held, import declarations made in respect of the goods or to documentation issued by ACBPS when clearing the goods for import.
On behalf of the CEO, Mr Northcote submitted that Studio Fashion was and is one of several persons who come within the description “owner of the goods” for the purposes of s 165(1). The word “owner” is defined in broad terms in s 4(1) and there is nothing in the context of s 165 that suggests that this broad meaning should not be applied. Indeed, the context suggests otherwise for the purpose of s 165 is to recover unpaid duty and protect the revenue. He cited the cases of Wing On Co. Ltd. v Collector of Customs (N.S.W.)[46] (Wing On), Malika Holdings Pty Ltd v Stretton[47] (Malika Holdings) and Pearce v Coynes Freight Management Group Pty Ltd[48] (Pearce). The contractual liability that the Chinese supplier owed to Studio Fashion does not alter Studio Fashion’s statutory liability under s 165(1). The consignee of the goods is statutorily liable to pay duty regardless of the contractual arrangements it made with the Chinese supplier and regardless of whether it had any involvement in underpaying the duty and regardless of whether any person has engaged in fraudulent behaviour.
[46] [1938] HCA 71; (1938) 60 CLR 97; [1938] ALR 238; Starke J and, on appeal, Latham CJ, Rich and Dixon JJ
[47][48] [2010] FCA 320; (2010) 183 FCR 540; 267 ALR 430; Dodds-Streeton J
Mr Northcote conceded that ACN 2000/30 incorrectly states that, should a person shown on the entry not have legal title to the goods, the owner’s agent is considered to be the person upon whom a demand under s 165 may be made. ACN 2000/30 is, however, a policy document and cannot restrict or alter the statutory powers conferred under the Customs Act. In any event, Import Declaration AA3HAHEEG does not come within the terms of ACN 2000/30 as it did not require, and did not state, an owner of the goods.
It was appropriate to demand the duty against Studio Fashion, Mr Northcote submitted, for a number of reasons. They included: there being poor prospects of recovery from the Chinese supplier; the variety of ways in which the goods had been imported with four different brokers being used to lodge 47 import declarations and a number of freight companies responsible for the lodgement of 95 SACs leading to the greater part of the shortfall in duty; Studio Fashion is the only person within Australia against whom a demand could be issued for the entire shortfall amount during the audit period; it was efficient to proceed against Studio Fashion which would presumably have contractual rights against the Chinese supplier to claim the amount of duty and GST demanded of Studio Fashion; and Studio Fashion, rather than the brokers or freight companies, was responsible for the importing the goods on a DDP basis. Mr Northcote acknowledged that Studio Fashion has since engaged a customs broker and altered the contractual basis on which it does business with the Chinese supplier.
CONSIDERATION
Status of an Australian Customs Notice
In Re Lowth and Comcare,[49] I considered a case in which a serviceman had been injured while engaged in a sport approved by his section commander. Comcare had denied liability on the basis that his injuries arose out of his sport and did not arise out of or in the course of his employment. Mr Lowth relied on a brochure distributed by the Military Compensation and Rehabilitation Section of the Department of Defence to argue that he was entitled to compensation because he had obtained the appropriate authorisation and that Comcare was estopped from arguing otherwise. The brochure stated that a:
“… member authorised in writing to participate in sport within the terms of the DI(G) [Defence Instruction (General) PERS 14-2] is deemed to be on duty and will be covered for compensation.”
[49] [1999] AATA 645
In considering the submission made on Mr Lowth’s behalf, I considered the doctrine of estoppel in the following passages. I adopt my reasons in concluding that the doctrine could not fetter Comcare’s statutory duty to consider Mr Lowth’s claim according to the Safety, Rehabilitation and Compensation Act 1988 and nor could it fetter the Tribunal’s duty to review Comcare’s decision according to that legislation. My reasons were:
“35. There are a number of authorities that have considered the doctrine of estoppel. The conceptual foundations of the doctrine of estoppel was summarised by Deane J in The Commonwealth v Verwayen (1990) 170 CLR 394 (Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ) at pages 443-446 (see also Waltons Stores (Interstate) Ltd. v Maher (1988) 76 ALR 513, Mason CJ, Brennan, Deane and Gaudron JJ).
36. In Minister for Immigration and Ethnic Affairs v Kurtovic (1990) 92 ALR 93 (Neaves, Ryan and Gummow JJ), Gummow J considered estoppel in the context of administrative law. Relying on various authorities, including Formosa v Secretary, Department of Social Security (1988) 81 ALR 687 (Davies, Burchett and Gummow JJ), his Honour concluded that, as a general principle:
‘The principles governing the application of estoppel by representation, or promissory estoppel, and related doctrines, have evolved largely in the context of private law. Difficult issues arise as to the extent to which those principles are to be applied in administrative law. The generally accepted proposition is that:
‘Estoppel cannot operate to prevent or hinder the performance of a positive statutory duty, or the exercise of a statutory discretion which is intended to be performed or exercised for the benefit of the public or a section of the public.”’ (page 109)
37. Gummow J proceeded to consider the foundations of the general proposition he had stated and the exceptions to it. He considered it in the context of statutory duties and discretions. Putting to one side situations in which there is an issue of ultra vires or illegality, the doctrine of estoppel is only relevant in the context of a public agency’s making operational decisions as opposed to decisions which are subject to a statutory discretion. Without wishing to set out his Honour’s analysis in detail, there is a consistent theme in it that executive action is subordinate to the terms of any legislation which may be applicable and that the doctrine of estoppel cannot be used to change that relationship.
38. In considering whether or not the representations of an officer of the Immigration Review Tribunal estopped the Minister for Immigration from contending that an applicant’s application was out of time, Merkel J concluded in Wang v Minister for Immigration and Multicultural Affairs (1997) 45 ALD 104 that:
“… the doctrine of estoppel cannot be relied upon by a court so as to relieve against non-compliance with a requirement that the statute intends be satisfied: see s 478(2), Formosa v Secretary, Department of Social Security (1988) 46 FCR 117 at 124-5; 15 ALD 657; 81 ALR 687 per Davies and Gummow JJ and Minister for Immigration and Ethnic Affairs v Polat (1995) 57 FCR 98 at 104-7; 37 ALD 394 per Davies and Branson JJ and at FCR 111 per Whitlam J.
In any event estoppel cannot operate, directly or indirectly, to confer any jurisdiction or power on a court or public authority which it does not otherwise have: see Wade and Forsyth, Administrative Law, 7th ed, 1994, pp 270 and 392.” (page 109)
Merkel J applied similar principles in Mr B v Minister for Immigration and Ethnic Affairs (1997) 50 ALD 120. Those principles led him to conclude that any erroneous advice of a departmental official which led Mr B to fail to comply with a necessary legislative requirement did not estop the Minister from relying upon that non-compliance.
39. In this case, I am not concerned with representations regarding procedural matters but with statements which have been made by officers of the Defence Force and which are said to represent to Mr Lowth that he is entitled in any event to compensation under the Act should he be injured in the course of his motorcycling activities. Even if those statements were representations of a kind that might raise the doctrine of estoppel in other circumstances (and I make no finding one way or the other), it is clear from the principles I have set out that the doctrine of estoppel cannot be applied to fetter Comcare’s statutory duty to consider whether or not it is liable according to the provisions of the Act. In particular, the doctrine cannot apply to fetter Comcare’s statutory duty to consider whether or not Mr Lowth suffered an injury within the meaning of the Act and whether it is liable to pay him compensation in accordance with the Act. Similarly, the statements cannot fetter the Tribunal’s power to review Comcare’s decision.”
ACN 2000/30 issued by ACBPS is in the same category. It was, unfortunately, incorrect but it cannot be relied upon to fetter the application of the Customs Act.
In this context, I have also considered Mr Hegeman’s submission that ACBPS is seeking to enforce legislation unfairly and unreasonably in contradiction of its own published policy guidelines. He relied on the case of Associated Provincial Picture Houses Ltd v Wednesbury Corporation[50] (Wednesbury). A summary of the principles in that case appear in the judgment of Weinberg J in Australian Retailers Association v Reserve Bank of Australia:[51]
“ In Associated Provisional Picture Houses, Limited v Wednesbury Corporation [1948] 1 KB 223 (‘Wednesbury’), the Court of Appeal upheld as valid a condition attached to a cinema licence that no child below the age of fifteen be admitted to a Sunday performance. The licensing authority in that case was an elected local body, empowered to attach such conditions at it thought fit to impose. There was no provision for any appeal from such a determination. The classic dictum of Lord Greene MR, allowing for review on the basis of unreasonableness, was expressed in narrow terms. His Lordship said, at 230:
‘It is true to say that, if a decision on a competent matter is so unreasonable that no reasonable authority could ever come to it, then the courts can interfere.’(emphasis added)
However, his Lordship went on to say, also at 230, that to ‘prove a case of that kind would require something overwhelming’.”[52]
[50] [1948] 1 KB 223
[51] [2005] FCA 1707; (2005) 148 FCR 446; 228 ALR 28
[52] [2005] FCA 1707; (2005) 148 FCR 446; 228 ALR 28 at [544]-[545]; 582; 158
Weinberg J then went on to discuss the way in which these principles had developed in Australia with there being a narrower formulation, reflecting the words of Lord Greene MR and a broader formulation. He said:
A similarly narrow formulation of the scope of Wednesbury unreasonableness appears in Peko-Wallsend [Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24] per Mason J at 41. To the same effect are the decisions of the Full Court in Cubillo v Commonwealth (2001) 112 FCR 455 at [254] and Inglewood Olive Processors Limited v Chief Executive Officer of Customs [2005] FCAFC 101 at [46].
On the other hand, the applicants contend that the test for Wednesbury unreasonableness, whether at common law, or as reflected in s 5(2)(g) of the ADJR Act, extends to the process leading up to the making of the decision. They refer, in that regard, to Prasad v Minister for Immigration and Ethnic Affairs (1985) 6 FCR 155 at 169 where Wilcox J observed that s 5(2)(g) is concerned with the manner of exercise of the power, and not just the final decision. His Honour came to a similar conclusion in Taveli v Minister for Immigration, Local Government and Ethnic Affairs (1989) 86 ALR 435 at 453. His Honour’s approach in Prasad was cited with approval by Mason CJ and Deane J in Minister for State and for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273 at 289-290. A similarly broad view was taken by the Full Court in Luu v Renevier (1989) 91 ALR 39 at 50, and again in Singh v Minister for Immigration (2000) 105 FCR 453 at 463-6.
The applicants submit that the decisions of the High Court in Eshetu at 626-8, 640, 649-654, 659 and 669, and S20 at 61-63, 66-67 and 75-76 (‘S20’) also provide support for their broader contention.”[53]
[53] [2005] FCA 1707; (2005) 148 FCR 446; 228 ALR 28 at [546]-[548]; 582; 158
Weinberg J did not need to decide whether he preferred the narrower or broader formulation. I do not think that I should attempt to do so for it is not relevant in this case. Whether notions of Wednesbury unreasonableness are relevant in examining the process leading up to my making a decision or are confined to an examination of the decision actually made, they have no place in ascertaining, in the case of an administrative body, or determining, in the case of a court, what the law is. There may be doubt about what the law is and there may be difficult issues to be resolved in ascertaining or determining it but notions of Wednesbury unreasonableness have no place in that task. The point is illustrated by reference to the judgment of Gummow ACJ and Kiefel J in Minister for Immigration and Citizenship v SZMDS[54] when they distinguished between facts that are found on the evidence in order to determine jurisdiction, to which Wednesbury principles are not applicable, and other facts found in determining whether a discretion should be exercised one way or another and to which Wednesbury principles do apply.
[54] [2010] HCA 16; (2010) 240 CLR 611; 266 ALR 367; 115 ALD 248; 84 ALJR 369 at [39]; 624; 376; 257 per Gummow ACJ and Kiefel J in dissent but not on this point.
In this case, whether or not Studio Fashions is an “owner” of the goods and a person against whom the CEO may make a demand under s 165 for payment of duty that is due and payable on those goods are jurisdictional facts. They are facts that must be found before any question regarding whether or not it is appropriate to exercise any discretion to make a demand under s 165 arises. Therefore, it is inappropriate to consider whether, in light of ACN 2000/30, the CEO is unreasonable in making the demand when the law, and so the scope of the CEO’s power, must first be ascertained.
“Owner”: the authorities
I have considered the meaning of “owner” The earliest of the three cases to which I was referred, Wing On, considered where liability for the payment of duty fell. During the years 1934 and 1935, a seaman brought cigarette papers into Australia but none of them was entered as required by the Customs Act. Wing On & Co Ltd purchased 50 boxes of cigarette papers for £41 6s and sold them to a hotel keeper for £46 5s. The seaman and Wing On & Co Ltd entered two further transactions for the purchase of cigarette papers. Wing On & Co Ltd then sold a considerable number of them to the hotel keeper. At all times, Wing On & Co Ltd knew that they had not been entered for customs and that duty had not been paid. In all, the duty payable on the cigarette papers amounted to £345 15s.
At the time, s 153 of the Customs Act provided that all duties shall constitute debts to the Crown charged upon the goods in respect of which they were payable. They were payable by the owner of the goods and recoverable at any court of competent jurisdiction.[55] Section 4 provided that, except where otherwise clearly intended, the “owner” in respect of goods included any person (other than an officer of customs) being or holding himself or herself out to be the owner, importer, exporter, consignee, agent or person possessed of or beneficially interested in or having control of, or power of disposition, over the goods. The duties were charged upon the goods and became a debt due to the Crown immediately upon importation.
[55] Section 153 equates with s 165 in the Customs Act as presently drafted.
Wing On & Co Ltd contended that the owner of the good liable for the duties is the person importing them into Australia and that the duties only become payable upon their entry for home consumption. At first instance, Starke J observed that:
“… the cigarette papers were at all times material subject to the control of customs (See sec. 30), and it was the duty of the owner to enter them at the customs (See secs. 68-71 and sec. 37). It would seem that a person possessed of or having any control of or power of disposition over goods subject to the control of the customs could not move or interfere with them except in accordance with the Act (See sec. 33). And such a person can and should enter the goods at the customs, because he is the owner thereof within the meaning of the Act. Now when sec. 153 charges the duties upon the goods in respect of which the same are payable, and the word ‘owner’ should not have the extended meaning given to it by sec. 4 and include persons possessed of or having control of or power of disposition over goods. In my judgment these words are not limited to an owner, within the extended meaning of the Act, at the moment of importation, but extend to all persons who have goods in their possession, control or disposition charged with customs duties which have not been paid.
The defendant became possessed of uncustomed goods and exercised control and a power of disposition over them, and thus, in my opinion, became liable for these duties. … it was the duty of the defendant when it became possessed of uncustomed goods to enter them at the customs, and it cannot excuse itself by neglecting to perform this duty.”[56]
[56] [1938] HCA 71; (1938) 60 CLR 97 at 100
The Full Court of the High Court dismissed an appeal from the judgment of Starke J. The reasons for judgment of each of Latham CJ, Rich and Dixon JJ are to the same end. This passage from the judgment of Latham CJ summarises his position. His Honour referred to s 153 of the Customs Act:
“… The duties are declared to be Crown debts charged upon the goods ‘in respect of which the same are payable.’ The duties are so charged so long as they remain payable, that is, until they have been paid by some person. By whom then are the duties so charged to be paid? They are ‘payable by the owner of the goods.’ The charge on the goods follows the goods until the duties are paid, and the liability of the owner to pay, if he becomes liable to pay at all, lasts until the duties are paid. So, also, a personal liability arises in the case of any person who becomes owner of the goods before the duties are paid. That liability continues to exist until it is discharged by some person satisfying the obligation to pay the duties. I can see nothing in this section to support a contention that the importer or any other person who becomes liable by virtue of the section can be freed from that liability in any other way. The liability to pay the duty follows the goods as a charge and also follows the ownership of the goods as a personal liability until the duty ceases to be payable.”[57]
[57] (1937) 60 CLR 97 at 106-107
Rich J expressed his opinion in this way:
“… Ownership of commercial goods is a transferable and, therefore, a transient condition or relation. This is so even when ‘owner’ is used in the extended sense of sec. 4. The suggested meanings among those which we are to choose are: (a) ‘owner at the time of arrival,’ (b) ‘owner at the time of entry,’ (c) ‘owner for the time being until the control of the customs ends,’ and (d) ‘each and every owner from arrival until the control of the customs end.’ It is not possible to make the choice without misgiving, but I think a clue is to be found in the manner in which the section constitutes the duty a charge upon the goods and immediately proceeds to make it payable by the ‘owner.’ This suggests that the mind of the draftsman was, first, that the duty should be a debt, next, that the debt should follow and be answerable out of the goods and, third, that the obligation to discharge it should follow ownership. It is unnecessary to say whether this indication carries the fourth of the four meanings in its full application, as the Crown contended. But it does show that it was intended that until the goods were entered for home consumption at least none was to take ownership except cum onere, and that if he enjoyed full ownership he should pay the charge, i.e., the duty. …”[58]
[58] (1937) 60 CLR 97 at 106-107
In his judgment, Dixon J also noted that, consistently with the terms of the legislation, the word “owner” was used to signify the owner at various stages from the time of importation, through successive owners and until duty is paid or the goods are entered for home consumption. His Honour noted that the appeal had been argued on the basis that the Court would decide, as a general proposition, whether liability to pay duty fell upon a person who, having no part in the introduction of the goods into Australia, obtained property or possession in those goods by a transaction either with the smuggler or with someone else after the smuggling is complete. In the way the matter was argued, Dixon J observed, it would make no difference whether the ultimate owner was a bona fide purchaser for value so long as the goods remained, in point of law, liable to the control of Customs because they had not been entered for home consumption.
The facts, however, presented a different and much narrower question, he continued. The evidence showed that there was clearly some connection between Wing On & Co Ltd and the importation of the goods. Although, the precise nature of that connection was not apparent, it was apparent that there was an understanding between the company and the Chinese seaman that the latter would buy the goods without their having been cleared by Customs and without the payment of duty. Wing On & Co Ltd would then sell them and its intention was to defeat the revenue. At all times, Dixon J said, the goods were still legally subject to the control of Customs and so liable in law to the exercise of physical control by Customs officers who might deal with them to ensure payment of duty. The goods were the subject of forfeiture and sale and, if sold, the proceeds of that sale would have been applied to the payment of the duty, or part of it. At this point in his judgment, Dixon J made the general statement:
“… When sec. 153 charges the duty upon the goods, it means, I think, to impose a specific charge upon the goods which shall bind all persons taking them, at all events unless they are bona-fide purchasers for value.”[59]
[59] (1937) 60 CLR 97 at 109-110
Having stated a qualification regarding a bona fide purchaser for value, Dixon J’s discussion of the application of the general principles to the particular facts of the case before the Court do not reflect that qualification:
“ In the present case the defendant company acted with the intention of defeating the charge and realized the goods and pocketed the proceeds, except as to forty-one packets seized by the customs. Without entering on any wider question as to the meaning and extent of the application of that provision that the duty shall be payable by the owner, it appears to me that it at least means that, after the charge has attached, every person whose title to the goods is subject to the charge shall be liable to pay the debt and cannot defeat the liability by selling the goods and applying the proceeds to his own use.”[60]
[60] (1937) 60 CLR 97 at 110
The case of Malika Holdings required the High Court to consider whether Malika Holdings Pty Ltd was, in an action brought by the Collector in the Supreme Court of Victoria for recovery of duty, entitled to dispute the amount of that duty when it had neither paid it under protest under s 167(1) of the Customs Act nor brought an action under s 167(2) to recover the amount. The High Court held that an owner of goods sued by the Collector for the recovery of a debt for duty due and owing but unpaid was not required to follow the procedure set out in s 167 in order to dispute it.
McHugh J considered the roles of ss 153 and 165 concluding that whether or not s 165 could be relied on to recover duty when the initial charge had been “nil”, s 153 could be relied on without the time limit restrictions found in s 165. Citing Wing On, McHugh J went on to say:
“ Whether or not s 165 applies to cases where the amount charged is nil, it seems clear enough that there may be many cases where the Collector may sue for duty long after the goods have been imported. Indeed, he or she may sue for the duty long after they have ceased to exist. And the person the Collector sues need not be the original owner or the person who imported the goods. Any person who is in possession or control of the goods on which duty is payable, but unpaid, can be sued under s 153 for that duty. …”[61]
[61] [2001] HCA 14; (2001) 204 CLR 290; 178 ALR 218 at [41]; 302; 227
In their joint judgment in Malika Holdings, Gummow and Callinan JJ noted that the reach of the definition of the term “Owner”:
“… is not limited to persons having control and custody of the goods at the time of importation. …”[62]
The scope of the decision in Wing On to catch bona fide purchasers of goods bearing the charge imposed by s 153 did not arise, though, for the appellant in Malika Holdings was also the importer.[63]
[62] [2001] HCA 14; (2001) 204 CLR 290; 178 ALR 218 at [71]; 313; 236
[63] [2001] HCA 14; (2001) 204 CLR 290; 178 ALR 218 at [71]; 313; 236
The case of Pearce illustrates that, as broad as the definition of the word “owner” is, it does not necessarily capture every person who may have possession of the goods. In Pearce, Dodds-Streeton J considered a demand made by Mr Pearce, a Customs officer, that Coynes Freight Management Group Pty Ltd (Coynes) pay duty of $216,003.26[64] in respect of vodka that it held in its warehouses on behalf of the vodka’s importer, Armik Pty Ltd (Armik). As a Collector, Mr Pearce made that demand under s 35A. Coynes was a warehouse licensee under s 79 of the Customs Act. The vodka was subject to duty under ss 15 and 16 of the CT Act. Some six months before Mr Pearce’s demand, 849 cartons of the vodka had been stolen from Coynes’ warehouses. Relying on s 163, Coynes asked for a remission of duty in respect of the stolen vodka.
[64] The amount was made up of $194,519.64 for duty and $21,483.62 for GST.
Section 163 is concerned with refunds, rebates and remissions of duty but s 35A allows a demand to be made not for duty from a person in Coynes’ position but for an amount of the duty of customs which would have been payable on goods had they been entered for home consumption. Section 35A permits a demand of that sort to be made if the person has, or has been entrusted with, the possession, custody or control of dutiable goods which are subject to the control of the ACBPS and either fails to keep those goods safely or, when so requested by the Collector, does not account for them to the Collector’s satisfaction.[65]
[65] Customs Act; s 35A(1)
Coyne’s primary case was that, as a warehouse licensee, it was concurrently liable under both s 35A and s 153 and was, therefore, entitled to a remission under s 163. I have referred to s 153 of the Customs Act provided that all duties shall constitute debts to the Crown charged upon the goods in respect of which they were payable. They were payable by the owner of the goods and recoverable at any court of competent jurisdiction. Dodds-Streeton J analysed the structure of the Customs Act and refuted the argument put forward by Coynes. She pointed to the fact that ss 35A and 153 referred to demands for amounts of different character. The latter was for duty but the former was for a payment of an amount equal to the amount of duty foregone when a person such as a warehouse licensee does not, among other things, keep the goods safely. Therefore, a provision that allows for remission of duty will not apply to an amount demanded under s 35A.[66]
[66] [2010] FCA 320; (2010) 267 ALR 430 at [193]; 462
Dodds-Streeton J also considered whether a warehouse licensee would be regarded as an “owner” saying:
“ The legislative history of the function, obligations and liability of a warehouse licensee fortifies the conclusion that, under the current statutory regime, they are not primarily liable to pay duty as owners, but rather, are only liable to pay an amount under s 35A.
In my opinion, it is unlikely that the current legislative scheme contemplates that the same person would be liable to pay both duty and an amount in compensation for its loss. In Southern Shipping [Collector of Customs (NSW) v Southern Shipping Co Ltd (1962) 107 CLR 279], Dixon CJ expressly doubted whether s 60 (ie s 35A) applied to the owner/consignor of the goods (at 287). Although Goldberg J held in Sidebottom & Ors v Giuliano [2002] FCA 1262; (2002) 123 FCR 594 that s 60 of the Excise Act and prosecution for reparation of duty were not mutually exclusive regimes, those regimes imposed liability to pay reparation for, or an amount equivalent to, duty.
In Moama [Moama Refinery Pty Ltd v Chief Executive Officer of Customs (2001) 115 FCR 205], Ryan J’s observation that successive ‘owners’ could be subject to a demand under s 60 of the Excise Act, applied Southern Shipping’s analysis of successively liable owners to s 60 of the Excise Act, but his Honour did not specifically consider whether an owner under s 4(1) of the Act could be liable under s 35A.
If s 35A imposes liability only on persons who are not ‘owners’ within the s 4(1) definition, it does not follow that ‘double recovery’ of both duty and an equivalent amount is permitted. As Dixon CJ stated in Southern Shipping, s 35A(4) recognises that there is a primary liability which is unaffected by the liability under s 35A. It does not mean that Customs could collect both the duty and compensation for it. While Dixon CJ recognised that persons could be liable concurrently under both provisions, his Honour did not state that concurrent liability under both provisions could subsist in the same person. Such a conclusion would appear contrary to his recognition of primary and essentially collateral nature of the different liabilities.”[67]
[67] [2010] FCA 320; (2010) 267 ALR 430 at [185]-[188]; 461
Is Studio Fashion liable to pay duty?
Section 15(a) of the CT Act imposes duty “on … goods imported into Australia …”. The duty is not imposed on a person but on the goods. As a matter of contract between Studio Fashion and Sheng Fa, Sheng Fa was liable to pay the duty properly assessed on those goods according to the rate of duty applicable to their classification under the CT Act and their value. Neither Sheng Fa nor any other person paid the appropriate amount of duty. Therefore, the effect of s 15 of the CT Act is that the goods continued to have duty imposed upon them (at least to the extent that it had not been paid) when they were entered into home consumption whether by way of an import declaration or a SAC. That continued to be the case when those goods were delivered to Studio Fashion. There is nothing in the Customs Act, or the CT Act, that relieves those goods of the duty that has been imposed on them. This analysis is consistent with that in Wing On for, although the arrangement of the Customs Act and the precise formulation of some of its provisions has changed, its substance has not.
The amount of that duty that has been imposed on the goods is a debt due to the Commonwealth by virtue of s 165(1)(a) of the Customs Act. It is a debt imposed on the “owner” of the goods by virtue of s 165(1)(b). The word “owner” has a very wide meaning but there is no need to draw the distinctions that Dodds-Streeton J had to draw in Pearce for I am concerned with a debt that comprises duty and not with an amount equal to an amount of duty which would have been payable had they been entered for home consumptions. The goods delivered to Studio Fashion had been entered for home consumption even though insufficient duty had been paid on them.
Studio Fashion comes within the definition of “owner” as consignee of the goods in the first instance. It appeared as such on the delivery documents. It also comes within that description as “owner” of the goods for, even if Studio Fashion did not acquire title until delivery, title had passed and it had become their owner before the demand was made under s 165. That remained the case even if it had disposed of the goods before the CEO made the demand under s 165 for the amount of duty that was due and payable.
The CEO’s power to make a demand for payment of an amount of duty due and payable
Section 165(3) is framed in terms that the CEO “may” demand payment of an amount that is a debt due to the Commonwealth. That raises a question whether the CEO must exercise that power. If the CEO is not required to exercise it, then the question arises whether regarding the circumstances in which a demand should be made and, in the circumstances of this case, whether it should have been made.
A. General principles
The word “may” is generally not a prescriptive word but a word “used to express permission”.[68] If the word is used in a legislative context to express permission, it will mean that it is used to confer authority but not to impose an obligation. There are occasions, however, in which the word “may” is interpreted as not only conferring authority but as conferring an obligation to exercise that authority.
[68] Chambers21st Century Dictionary, 1999, reprinted 2004
A passage from the judgment of Gummow, Hayne, Heydon and Crennan JJ in Leach v R[69] illustrates the different uses of the word. The context of the High Court’s consideration was s 19(5) of the Sentencing (Crime of Murder) and Parole Reform Act 2003 (NT). It provided that:
“The Supreme Court may refuse to fix a non-parole period if satisfied the level of culpability in the commission of the offence is so extreme the community interest in retribution, punishment, protection and deterrence can only be met if the offender is imprisoned for the term of his or her natural life without the possibility of release on parole.”
[69] [2007] HCA 3; (2007) 230 CLR 1; 232 ALR 325; 81 ALJR 598; Gleeson CJ dissenting
Their Honours concluded that the word “may” was not used to convey a discretion but to confer a power that a court was obliged to exercise once it was satisfied of the matters specified in s 19(5).[70] They referred to a passage to the same effect from the judgment of Windeyer J in Finance Facilities Pty Ltd v Federal Commissioner of Taxation.[71] His Honour had considered whether the Commissioner of Taxation was obliged to allow a rebate when satisfied that certain conditions had been met as to the non-payment of dividends. As explained by Gleeson CJ and McHugh J in Samad v District Court New South Wales,[72] the High Court in Finance Facilities Pty Ltd v Federal Commissioner of Taxation had decided that:
“… The context indicated that it was not intended that the Commissioner should have a discretionary power to defeat that right or entitlement. The word ‘may’ conferred a power; and the statutory intention was that the power be exercised if the condition was fulfilled. …”[73]
[70] [2007] HCA 3; (2007) 230 CLR 1; 232 ALR 325; 81 ALJR 598; at [35]; 16; 337; 606
[71] [1971] HCA 12; (1971) 127 CLR 106; 45 ALJR 241; 2 ATR 194; Barwick CJ, Windeyer and Owen JJ; McTiernan J dissenting
[72] [2002] HCA 24; (2002) 209 CLR 140; 189 ALR 1; 76 ALJR 871; Gleeson CJ, Gaudron, McHugh, Gummow and Callinan JJ
[73] [2002] HCA 24; (2002) 209 CLR 140; 189 ALR 1; 76 ALJR 871 at [34]; 152-153; 11; 878
When a statutory power is conferred by words of permission, Gleeson CJ and McHugh J said, questions whether it is a mandatory or discretionary power and, if discretionary, the issues that may be taken into account in its exercise:
“… are to be resolved as a matter of statutory interpretation, having regard to the language of the statute, the context of the relevant provision, and the general scope and objects of the legislation …”[74]
[74] [2002] HCA 24; (2002) 209 CLR 140; 189 ALR 1; 76 ALJR 871 at [32]; 152; 10; 878
Gleeson CJ and McHugh J cited the judgment of the High Court in Ward v Williams[75] with approval. I will refer to one passage from that judgment:
“… One situation in which the conclusion is justified that a duty to exercise the power or authority falls upon the officer on whom it is conferred is described by Lord Cairns in his speech in the same case [Julius v Bishop of Oxford (1880) LR 5 AC 214 at 235]. His Lordship spoke of certain cases and said of them ‘[they] appear to decide nothing more than this: that where a power is deposited with a public officer for the purpose of being used for the benefit of persons who are specifically pointed out, and with regard to whom a definition is supplied by the Legislature of the conditions upon which they are entitled to call for its exercise, that power ought to be exercised, and the Court will require it to be exercised.”[76]
[75] [1955] HCA 4; (1955) 92 CLR 496; Dixon CJ, Webb, Fullagar, Kitto and Taylor JJ
[76] [1955] HCA 4; (1955) 92 CLR 496 at [8]; 505-506
The principles to be drawn from these cases require me to look to the purpose for which the CEO was given power to make a demand under s 165(3). I should do that having regard to the principle stated by Mason and Wilson JJ in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation:[77]
“... The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction.”[78]
[77] [1981] HCA 26; (1981) 147 CLR 297; 35 ALR 151; 11 ATR 949; 55 ALJR 434; Gibbs CJ, Stephen, Mason and Wilson JJ; Aickin J dissenting
[78] [1981] HCA 26; (1981) 147 CLR 297; 35 ALR 151; 11 ATR 949; 55 ALJR 434 at 320; 169-170; 966; 443
Regard may be had to the context in which legislation was enacted to ascertain the mischief that Parliament intended to remedy and so ascertain the legislative intent:
“ It is well settled that at common law, apart from any reliance upon
s 15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure …. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy …. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363 at 388, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intention …”[79][79] CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; 141 ALR 618 at 408; 634-5 per Brennan CJ, Dawson, Toohey and Gummow JJ and see also Wacando v The Commonwealth (1981) 148 CLR 1; 37 ALR 317 at 25-26; 335-6 per Mason J; TCN Channel Nine Pty Ltd v Australian Mutual Provident Society [1982] FCA 169; (1982) 62 FLR 366; 42 ALR 496 at 379-380; 507-508 per Bowen CJ, Lockhart and Ellicott JJ and Alexandra Private Geriatric Hospital Pty Ltd v Blewett (1984) 2 FCR 368; 56 ALR 265 at 375-6; 271-2 per Woodward J
B. The CEO’s power is discretionary
In the context in which it is given, I have concluded that the power given to the CEO to make a demand for payment of duty that is due and payable is a discretionary power. The use of the word “may” is only one of the factors that lead me to that conclusion. Two facts are more important. One is the fact that the customs regime is directed to the collection of revenue. The other is the nature of the debt that the CEO is given power to recover. It is a debt that attaches to goods and not to a person. It is a debt that follows those goods as they pass through the hands of various persons. Some of those persons will be party to the transactions leading to their being imported into Australia and entered for home consumption. They may be agents engaged to transport the goods or to arrange their clearance through ACBPS. Others may be party to smuggling operations so that they are never entered for home consumption or may be party to transactions that turn a blind eye to the manner of their importation. Yet others may be party to none of the transactions and have no hint of how the goods came to be in Australia before they purchased them.
These are but a few examples of persons into whose hands the goods may come and who will come within the meaning of the word “owner” and against whom a demand can be made. It cannot be intended that the CEO is required to demand payment from each and every person through whose hands the goods have travelled regardless of the circumstances. It cannot be intended that the CEO is required to do that regardless of practical matters such as the amount that would be recovered from a person when the goods have been sold in Australia on the retail market and the ability of a person to pay. Therefore, in the context of the Customs Act, I have concluded that the power given to the CEO under s 165(3) is a discretionary power.
C. Factors relevant in deciding whether to exercise the power to make a demand
The CEO’s exercise of the discretionary power given by s 165(3) is not without boundaries. Those boundaries are found within the relevant enactment where they are either expressly stated or identified by reference to the subject matter of the enactment under which the decision is made as well as from its object and underlying policy.[80]
[80] Alexandra Private GeriatricHospital Pty Ltd v Blewett (1984) 2 FCR 368; 56 ALR 265 at 375; 272 per Woodward J and see also Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24; 66 ALR 299; Gibbs CJ, Mason, Brennan, Deane and Dawson JJ at 39-40; 308-309 per Mason J with whom Gibbs CJ and Dawson J agreed
There are no express boundaries set by s 165 or elsewhere in the Customs Act but I have already referred to some of them that are inherent within it. In essence, it is revenue raising legislation. It imposes duties and provides for their recovery. As the duties it imposes are on goods, s 30(1)(a) provides that the ACBPS has control of goods from the time of their importation and s 35 provides that the same is the case when goods are imported by post. Provision is made for the safe-keeping of dutiable goods which are subject to the control of Customs. Section 35A imposes a liability upon a person who has been entrusted with the possession, custody or control of dutiable goods subject to Customs control and does not keep them safely or does not account for them to the Collector’s satisfaction. The liability takes the form of an amount equal to the payment of duty that would have been payable on them had they been entered for home consumption. That is an amount that is a debt to the Commonwealth under s 35A(2). In circumstances set out in s 162, a person is permitted to take delivery of goods upon giving a security or an undertaking to the Collector for payment of any duty, GST or luxury car tax. Refunds, if applicable, may be applied against unpaid duty.
In summary, the Customs Act provides a very precise and close framework within which revenue is collected from duties imposed on goods. It is a framework that permits recovery from a broad range of persons. As I said, those persons may have owned or been possessed of the goods in a broad range of circumstances. In exercising the power to demand payment, the CEO must have regard to the circumstances of those persons but must do so being very aware that Parliament has put in place a range of measures to ensure that the goods are preserved and that the amount of duty that is due and payable is paid.
D. Should the power to demand payment be exercised?
That brings me to the circumstances of Studio Fashion. I accept that it was not the owner of the goods it bought from the Chinese supplier until they were delivered. It was not aware of the arrangements made by others to avoid either the payment of duty at all or the full amount of duty that was payable on those goods. I also accept that it was not a party to those arrangements and agreed with the Chinese supplier that the price it paid was inclusive of duty. From the invoice it received, Studio Fashion would not have known that incorrect information had been given to ACBPS officials.
At the same time, Studio Fashion entered a DDP contract that had both a positive and negative flavour. For them, it meant that it did not have to deal with ACBPS or engage a broker. It knew at that stage what its total costs would be although it would have been able to estimate them accurately had it arranged for the goods to be entered and the duty paid separately. The negative flavour of the arrangement that Studio Fashion had with the Chinese supplier comes from the fact that it had no role to play in the entry of the goods into Australia. Studio Fashion could not check that the appropriate value of the goods was declared to the ACBPS. It took its decision to enter a contract with the Chinese supplier on a DDP basis in an environment in which ACBPS could turn to it for any shortfall in the amount of duty paid. That was a decision that it took voluntarily even if it were not fully aware of the liability that would be imposed on it were the Chinese supplier and others not to pay duty as agreed.
Reliance is placed on the incorrect information in ACN 2000/30 but Mr Ruditser did not mention that he relied on that document or that he even knew about it. He said that Studio Fashion believed that the Chinese supplier was responsible for everything. That is not the same thing. I am not satisfied that ACN 2000/30 played any part in Studio Fashion’s decision to enter into a contract on a DDP basis.
I do not have the contract that Studio Fashion entered with the Chinese supplier. It would be usual to provide for some means by which Studio Fashion could bring an action against the Chinese supplier for recovery of the duty but I cannot go beyond that.
Having regard to all of these matters, I have come to the view that the CEO acted appropriately in making a demand for payment under s 165(3) of the Customs Act. There is nothing in the circumstances in which Studio Fashion finds itself that outweighs the interest in protecting the revenue. For these reasons, I have decided to affirm the decision of the CEO dated 8 April 2014 to recover duty paid under protest in relation to import declaration AA3HAHEEG originally lodged on 1 June 2011 and later amended.
I certify that the eighty two preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: ………..…[sgd]...........................................
Associate
Date of Hearing 2 February 2015
Date of Decision 28 May 2015
Representative for the Applicant Mr A Hegeman
Interglobal Freight Management Pty Ltd
Solicitor for the Respondent Mr R Northcote
Legal Services Branch, Customs
[2001] HCA 14; (2001) 204 CLR 290; 178 ALR 218; Gleeson CJ, McHugh, Gummow, Kirby and
Callinan JJ
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