Suzuran Japan Foods Trading Pty Ltd and Chief Executive Officer of Customs

[2002] AATA 1213

CATCHWORDS – CUSTOMS AND EXCISE – tariff classification of sake with added alcohol – whether sake with added alcohol is a fruit or vegetable wine for the purpose of tariff classification – level of duty payable – decision affirmed.

Customs Tariff Act 1995 ss. 3, 6, 7, 15, 16, 17, 18, 20 and 22;
Schedule 3:  sub-headings 22.00.30, 2600.00.1 to 2206.00.90 and 2207
Excise Tariff Act 1921 ss. 5 and 6A
A New Tax System (Wine Equalisation Tax) Act 1999 ss. 2-1, 2-5, 5-1, 5-5, 5-30, 9-5, 23-5, 31-1, 31-4, 31-7, 31-8 and 33-1
Customs Tariff Amendment Act No. 2 2001

Commissioner of Stamp Duties v Permanent Trustee Co Ltd (1987) 9 NSWLR 719
Agfa-Gevaert v Customs and Another (1994) 124 ALR 645
Mersey Docks and Harbour Board v Henderson Bros (1888) 13 AC 595
Lorimer v Smail (1911) 12 CLR 504

DECISION AND REASONS FOR DECISION [2002] AATA 1213

ADMINISTRATIVE APPEALS TRIBUNAL     )          
  )          V2002/132
GENERAL ADMINISTRATIVE DIVISION     )          

ReSUZURAN JAPAN FOODS TRADING PTY LTD

Applicant

AndCHIEF EXECUTIVE OFFICER OF CUSTOMS

Respondent

DECISION

Tribunal:                   Miss S A Forgie (Deputy President)
Date:  25 November, 2002
Place:  Melbourne

Decision:The Tribunal affirms the decision of the respondent dated 24 January, 2002.

S A FORGIE
  Deputy President

CORRIGENDUM TO DECISION

The Tribunal amends its decision and reasons for decision published on 25 November, 2002 as follows:

Reasons for decision

page 13, paragraph 29, line 9  

delete the words "This excise duty is in addition to WET."              

page 16, paragraph 40, line 6

delete the words "Both are subject to WET."

(signed DP Forgie)

S A FORGIE

Deputy President

REASONS FOR DECISION

On 6 February, 2002, the applicant, Suzuran Japan Foods Trading Pty Ltd ("Suzaran") applied for review of a decision of a delegate of the respondent, the Chief Executive Officer of Customs ("the CEO"), dated 24 January, 2002. In that decision, the CEO accepted the payment of additional duty under protest by Suzuran in respect of goods it had imported into Australia on 6 April, 2001. At the hearing, Suzuran was represented by its solicitor, Mr Gross, and the CEO by Mr Kennedy. The documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 ("T documents") were admitted in evidence.  No oral evidence was given as the facts were agreed between the parties.

THE ISSUE

1. The issue in this case is whether sake with added alcohol imported into Australia by Suzuran is properly classified to tariff classification subheading 2206.00.4 of the Customs Tariff Act 1995 ("the CT Act") as contended by Suzaran or to subheading 2206.00.59 as contended by the CEO.  That requires a consideration of whether sake is a fruit or vegetable wine for the purposes of Additional Note 6 to Chapter 22 of Schedule 3 to the CT Act ("AN6").

BACKGROUND

1. The goods that were imported by Suzaran comprised five cartons of sake.  On 6 April, 2001, the goods were entered for home consumption as duty free.  The goods were described on the invoice as:

"JAPANESE SAKE
(KARATANBA 300)
'OZEKI'
CTN/20/300ML
ALCOHOL CONTENT: 15.4% BY VOLUME
TOTAL NET WEIGHT 30.00KG" (T documents, page 5)

1. On 16 July, 2001, Suzaran's customs broker lodged a request for a tariff advice claiming that the goods should be classified under subheading 2206.00.4.  The description of the goods given in the request noted that they contained molasses/ethyl alcohol.  On 13 August, 2001, a delegate of the CEO classified the goods to subheading 2206.00.59 leading to the imposition of duty at the rate of 5% plus $54.56 per litre of alcohol. 

1. There was no disagreement between the parties as to the manner in which sake is made. In light of that and on the basis of the table of the diagram of the production process of Ozeki Saki by the Ozeki Corporation, I find that the ingredients of sake are rice, koji and molasses alcohol. Koji is a malted rice that is produced by cultivating rice with a mould known as Aspergillus oryzae. Molasses alcohol is an alcohol made from corn or sugar. It is undenatured ethyl alcohol which, if imported separately, would be classified to heading 2207 of the CT Act.

1. The production process requires brown rice to be first polished and then washed and steamed.  To twenty per cent of the steamed rice is added koji.  That mixture is then added to the remaining 80% of steamed rice together with water and yeast.  Fermentation then takes place and it can take up to 32 days to complete.  The resulting mixture, known as mash, is concentrated and pressed.  During the concentration and pressing process, molasses alcohol is added in order to extract the aroma components from the mash and to make the resulting sake taste lighter and milder.  Fresh sake is the result of that process and it is then subject to filtration, maturization, aging, further filtration, pasteurization and bottling to obtain the final product.

LEGISLATIVE FRAMEWORK

The CT Act

1. Part II of the CT Act provides for imposition of duties of customs. Section 15 provides that duties of customs are imposed on goods imported into Australia on or after 1 July, 1996 and on goods which are imported into Australia before 1 July, 1996 and entered, or again entered, for home consumption on or after that day.  The duty payable upon such goods is worked out in the manner provided for in ss. 16, 17, 18, 20 and 22.  Section 16(a) provides that:

"if the goods are not the produce or manufacture of a Preference Country – [the duty is worked out] by reference to the general rate set out in the third column of the tariff classification under which the goods are classified;"

A reference to the tariff classification under which the goods are classified is a reference to the heading or subheading in whose third column a rate of duty is set out and under which the goods are classified (s. 6). The reference to a heading and a subheading is a reference to those appearing in Schedule 3 to the CT Act (s. 3(1)). 

1. Schedule 2 of the CT Act sets out the General Rules for the Interpretation of the Harmonized System provided for by the Convention ("Interpretation Rules"). Those Interpretation Rules must be used in working out the tariff classification under which goods are classified (s. 7(1)).  Rule 6 is concerned with subheadings and applies the rules in relation to headings mutatis mutandis to subheadings.

1. The CT Act sets out a considerable number of tariff classifications under which goods are classified. Both of the tariff classifications under consideration in this case come within Chapter 22 (Schedule 3), which is entitled "Beverages, spirits and vinegar".  That chapter is then divided into nine headings:

"2201Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter nor flavoured; ice and snow

2202Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of 2009

2203Beer made from malt

2204Wine of fresh grapes, including fortified wines; grape must other than that of 2009

2205Vermouth and other wine of fresh grapes flavoured with plants or aromatic substances

2206Other fermented beverages (for example, cider, perry, mead); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included

2207Undenatured ethyl alcohol of an alcoholic strength by volume of 80% vol or higher; ethyl alcohol; and other spirits, denatured, or any strength

2208Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80% vol; spirits, liqueurs and other spirituous beverages

2209Vinegar and substitutes for vinegar obtained from acetic acid."

1. In order to set the context, I will begin with sub-heading 2206.00.30.  Goods to which that sub-heading applies may be imported into Australia subject to a free rate of duty.  Those goods are:

"--- Beverages as follows:

(a)grape wine as defined in Additional Note 3 to this Chapter, other than goods of 2204, but not containing goods which, if imported separately, would be classified in 2208;

(b)cider or perry as defined in Additional Note 5 to this Chapter

(c)fruit or vegetable wine as defined in Additional Note 6 to this Chapter but not containing goods which, if imported separately, would be classified in 2207 or 2208;

(d)mead as defined in Additional Note 7 to this Chapter but not containing goods which, if imported separately, would be classified in 2207 or 2208;

(e)sake as defined in Additional Note 8 to this Chapter".

1. Both Additional Notes 6 and 8 are relevant.  Additional Note 6 reads:

"For the purposes of 2206.00.30 and 2206.00.4, 'fruit or vegetable wine' is a beverage that:

(a)is the product of the complete or partial fermentation of the juice or must of fruit or vegetables, or products derived solely from fruit or vegetables; and

(b)has an alcoholic strength by volume of at least 8% vol but not exceeding 22% vol; and

(c)has not had added to it, at any time, any ethyl alcohol from any other source, except ethyl alcohol from grape spirit or neutral spirit may be added, but only if the resulting beverage has an alcoholic content by volume of at least 15% vol and not exceeding 22% vol; and

(d)has not had added to it, at any time, any liquor or substance that gives colour or flavour."

Additional Note 8 provides that:

"For the purposes of 2206.00.30, 'sake' is a beverage that:

(a)has an alcoholic strength by volume exceeding 1.15% vol; and

(b)is the product of the complete or partial fermentation of rice; and

(c)has not had added to it, at any time, any ethyl alcohol from any other source; and.

(d)has not had added to it, at any time, any liquor or substance that gives colour or flavour."

1. Sub-heading 2206.00.4 is the sub-heading contended for by Suzaran.  It applies to:

"--- Beverages, containing goods which, if imported separately, would be classified in 2207 or 2208, as follows:

(a)grape vine as defined in Additional Note 3 to this Chapter, other than goods of 2204;

(b)fruit or vegetable wine as defined in Additional Note 6 to this Chapter;

(c)mead as defined in Additional Note 7 to this Chapter".

Goods coming within this sub-heading are subject to a general rate of duty of 5% if they contain goods which, if imported separately, would be classified to 2207 or 2208 (sub-headings 2206.00.41 and 2206.00.42). A lesser rate of duty applies if the goods are imported from countries and places listed in Part 2 of Schedule 1 to the CT Act.

1. Sub-heading 2206.00.5 applies to "Beverages, NSA, containing goods which, if imported separately, would be classified in 2207".  Various rates of duty are prescribed depending upon the alcoholic content of the beverage.  Sub-heading 2206.00.59 provides for a rate of duty of 5% and $51.81 per litre of alcohol for "Other".  Sub-heading 2206.00.59 appears in the table set out in s. 19 of the CT Act. It provides that, if s. 6A of the Excise Tariff Act 1921 ("ET Act") has the effect of increasing a rate of duty of an excise item, the rate of duty set out in the rate column of Schedule 3 of the sub-heading set out next to that excise item is increased by the same amount.

CONSIDERATION

1. It is agreed between the parties that the addition of molasses alcohol or ethyl alcohol means that the sake imported by Suzaran does not come within the definition of sake in Additional Note 8.  Consequently, it cannot be imported free of duty under sub-heading 2206.00.30 of the CT Act on the basis that it is sake. It is also agreed that, if ethyl alcohol were imported separately, it would be classified to heading 2207.

1. That brings me to the heart of the issue between the parties.  Is sake with added alcohol a "vegetable or fruit wine" as that expression is used in subheading 2206.00.4?  Mr Gross referred me to the ordinary meanings of the words and to the standards set for the composition of certain foods.  In light of those, he submitted, sake is a vegetable or fruit wine within the meaning of the subheading.  I will begin with the definitions of "vegetable" and "fruit".  I will start with those definitions.

1. Those relating to "vegetable" are:

"… 1 Living and growing as a plant. … 2 Of, pertaining to, or derived from a plant or plants; having the nature or characteristics of a plant; consisting of plants. …" (The New Shorter Oxford English Dictionary, 3rd edition, 1993) 

"…1 any herbaceous plant, annual, biennial, or perennial, whose fruits, seeds, roots, tubers, bulbs, stems, leaves, or flower parts used as food, as tomato, bean, beet, potato, asparagus, cabbage, etc. 2. the edible part of such plants, as the fruit of the tomato or the tuber of the potato.  3. any member of the vegetable kingdom; a plant. …" (The Macquarie Dictionary, 2nd edition, 1991)

Those relating to "fruit" are:

"… 1 Vegetable produce in general.  Also fruits of the earth or ground.… 2 The edible product of a tree, shrub, or other plant, consisting of the seed and its envelope, esp. when sweet, juicy, and pulpy.  Also loosely, another sweet juicy part of a plant, as the stalks of rhubarb, eaten similarly. … b A fruit course of a meal; dessert. … 3 A fruit tree.  Also, a food-plant. … 4 Bot. The seed-bearing structure (the matured ovary) of a plant, as a means of reproduction etc. …" (The New Shorter Oxford English Dictionary, 3rd edition, 1993)

"… 1. any product of vegetable growth useful humans or animals.  2. Botany a. the developed ovary of a seed plant with its contents and accessory parts, as the peapod, nut, tomato, pineapple, etc.  b. the edible part of a plant developed from a flower, with any accessory tissues, as the peach, mulberry, banana, etc. …" (The Macquarie Dictionary, 2nd edition, 1991)

1. Without having regard to the context in which they are used and given the breadth of the definition of "vegetable" rice must fall within it.  At its most general, rice belongs to the vegetable kingdom in that it is devoid of animal life.  At a less general level, it is harvested from a herbaceous plant grown for food and is the seed of that plant.  That follows from the fact that it comprises "… the grain of the grass Oryza sativa, a major world cereal. …" (The New Shorter Oxford English Dictionary, 3rd edition, 1993). 

1. It may also be possible to say that rice falls within the definition of "fruit".  In the most general sense in which that word is used, rice is a vegetable product that is fit for food for people and animals.  At a less general level, it may be said to be a fruit for it is a seed with an envelope even though its envelope cannot be described as juicy and pulpy. 

1. The definition of "rice" also leads to a consideration of the word "grain".  That is defined, in so far as it is relevant, as:

   "I. Seed; corn. 1 A single seed of a plant, esp. one which is small, hard and roundish.  Later, the stone or pip of a fruit. … b The fruit or seed of a cereal. 2 Wheat or the other cereal grasses; the fruit or seeds of these plants; corn. …" (The New Shorter Oxford English Dictionary, 3rd edition, 1993)

   "…1. a small hard seed, esp. a seed of one of the cereal plants: wheat, rye, oats, barley, maize, or millet.  2. the gathered seeds of cereal plants in the mass. …" (The Macquarie Dictionary, 2nd edition, 1991)

It can be seen from the definition of "grain" that there is overlap between what may be a fruit and a grain for seed may be regarded as a fruit.

1. I should also consider the definition of "wine" for the whole expression that I must consider is "fruit or vegetable wine".  It is apparent from its meanings that it may encompass liquor from fruits, when used in its most general sense, or grains and are the following:

"… 1 Alcoholic liquor produced from fermented grape juice; (with specifying wd) a type of this; a drink of this. … 2 Alcoholic liquor resembling wine made from the fermented juice of other fruits, or from grain, flowers, the sap of various trees, etc. …" (The New Shorter Oxford English Dictionary, 3rd edition, 1993)

"… 1. the fermented juice of the grape, in many varieties (red, white, sweet, dry, still, sparkling, etc.) used as a beverage and in cookery, religious rites, etc.  2. a particular variety of such fermented grape juice: port and sherry wine.  3. the juice, fermented or unfermented, of various other fruits or plants, used as a beverage, etc.: gooseberry wine, currant wine. …" (The Macquarie Dictionary, 2nd edition, 1991)

1. Mr Gross referred me to the Food Standards prepared by Food Standards Australia and New Zealand ("the Food Standards").  Food Standards Australia and New Zealand is a bi-national independent statutory authority that develops food standards for composition, labelling and contaminants, including microbiological limits.  The Food Standards it develops apply to all foods produced or imported for sale in Australia and New Zealand.  Food Standard 2.7.3 sets out the compositional requirements for fruit wine and vegetable wine.  It defines "fruit wine and/or vegetable wine" to mean:

"… the product prepared from the complete or partial fermentation of fruit, vegetable, grains and/or cereals or preparations of those foods, other than that produced solely from grapes."

1. Mr Kennedy began his submissions with a consideration of the wine equalisation tax ("WET") imposed under the A New Tax System (Wine Equalisation Tax) Act 1999 ("WET Act"). In the following paragraphs, I will set out the framework for the imposition of WET. Although sake without added alcohol may be imported free of duty, it is subject to WET under the WET Act. The WET Act, which came into operation on 1 July, 2000, is said by s. 2-1 to be "… about the wine equalisation tax …", which is also known as the "wine tax" and which is a "… single stage tax applying (in most cases) to dealings in wine at the wholesale level.  In almost all dealings to which it applies, the GST will also apply."  Section 2-5 provides that "Part 2 sets out the rules that establish the liability for the wine tax.  The broad aim of the wine tax law is to tax the last wholesale sale of wine (usually the sale from the last wholesaler to the retailer)." 

1. "Wine" is defined to mean grape wine, grape wine products, fruit or vegetable wine, cider or perry, mead or sake but does not include beverages that do not contain more than 1.15% by volume of ethyl alcohol (WET Act, s. 31-1). Each product is defined in the WET Act and the regulations may specify requirements for each (WET Act, s. 31-8).  "Fruit or vegetable wine" is defined to mean:

"… a beverage that:

(a)is the product of the complete or partial fermentation of the juice or must of:

(i)fruit or vegetables; or

(ii)products derived solely from fruit or vegetables; and

(b)has not had added to it, at any time, any ethyl alcohol from any other source, except as specified in the regulations; and

(c)has not had added to it, at any time, any liquor or substance that gives colour or flavour, except as specified in the regulations; and

(d)contains at least 8% by volume of ethyl alcohol, but not more than 22% by volume of ethyl alcohol; and

(e)complies with any requirements of the regulations, made for the purposes of section 31-8, relating to fruit or vegetable wine." (WET Act, s. 31-4)

"Sake" is defined to mean:

"… a beverage that:

(a)is the product of complete or partial fermentation of rice; and

(b)has not had added to it, at any time, any ethyl alcohol from any other source, except as specified in the regulations; and

(c)has not had added to it, at any time, any liquor or substance that gives colour or flavour, except as specified in the regulations; and

(d)complies with any requirements of the regulations, made for the purposes of section 31-8, relating to sake." (WET Act, s. 31-7)

1. "Liability for wine tax centres around the concept of an assessable dealing …" (WET Act, s. 5-1).  The Assessable Dealings Table following s. 5-5 ("the AD Table") sets out all the assessable dealings that can be subject to WET (WET Act, s. 5-5(1)).  They are set out in column 4 of the Table.  If no exemption applies under Division 7 of Part 2, it is a taxable dealing.  Provided, the entity specified in column 3 is registered or liable to be registered, that entity is liable to pay WET and the tax becomes payable at the time of the dealing as specified in column 4 (WET Act, s. 5-5(2)).  A customs dealing, which is defined to include Assessable Dealing AD10 ("AD10") (WET Act, s. 33-1), is an assessable dealing regardless of whether the person is registered or liable to be registered.  Although the amount of WET is reduced for some importations, generally the amount of WET, is calculated by multiplying the taxable value calculated under Division 9 of Part 2 by 29% (WET Act, s. 5-5(3)).  The general rules for calculating the taxable value are set out in the AD Table itself (WET Act, s. 9-5(1)).   

1. Part A of the Table is concerned with Australian wine i.e. wine manufactured in Australia (WET Act, s. 33-1).  Taking the wholesale sale of Australian wine by an entity that manufactured the wine in the course of any business the seller is liable at the time of the sale.  WET is 29% of the price (excluding wine tax and GST ) for which the wine was sold (WET Act, s. 5-5 and AD1a). 

1. Part B of the Table is concerned with imported wine i.e. wine that has been imported regardless of whether or not it was manufactured in Australia (WET Act, s. 33-1).  AD10 is concerned with "local entry".  What amounts to a "local entry" of imported wine for the purposes of the WET Act is set out in s. 5-30.  The table at the end of that section defines each situation amounting to a local entry by reference to the Customs Act 1901.  AD10 provides that local entry of an imported wine is an assessable dealing.  The entity that makes that local entry is liable to pay the WET at a time at which WET is payable under s. 23-5.  The normal taxable value is the GST importation value, which, in the case of "… a local entry is an amount equal to what would be the value of the local entry (disregarding any wine tax payable in respect of the local entry), for the purposes of the GST Act, if it were a taxable importation within the meaning of section 195-1 of that Act" (WET Act, s. 33-1).

1. In view of the definition of "sake" in the WET Act and the application of the provisions of that legislation, sake without added alcohol manufactured in Australia comes within the definition of "wine" and is subject to WET at the rate of 29% sake.  So too is sake without added alcohol manufactured outside Australia.  The practical effect is that imported and locally manufactured sake without added alcohol are subject to the same rate of tax for imported sake without added alcohol is imported free of duty. 

1. Sake with added ethyl alcohol does not come within the definition of "wine" in the WET Act. Therefore, unless it is regarded as a fruit or vegetable wine as defined in the WET Act, it is not subject to WET under the WET Act. That is so whether it is manufactured inside Australia or outside Australia and subsequently imported. If it is a fruit or vegetable wine, it is subject to WET at the rate of 29% of the value as previously set out.

1. If alcoholic beverages are manufactured in Australia, regard must be had to the ET Act. Excise duty is imposed in accordance with the rates specified in the Schedule to the ET Act (ET Act, s. 5). While beverages such as beer, brandy, fruit brandy, whisky, rum and liqueurs are specifically provided for, most are not. Those that are manufactured in Australia and that come within the description "Beverages (other than beverages comprised solely of fortified wine) containing distilled alcohol, n.e.i." in Article 2H of the Schedule.  The expression "n.e.i." means "not elsewhere included".  The rate of excise duty in April, 2001 was $54.56 per litre of alcohol.  This excise duty is in addition to WET.

1. Fruit or vegetable wines imported to Australia are subject to customs duty.  The rate of duty is 5% if they contain, as in this case, goods which, if imported separately, would be classified to 2207 or 2208 (sub-headings 2206.00.41 and 2206.00.42). Customs duty is paid in addition to WET. The rate is not affected by s. 19 of the CT Act as sub-headings 2206.00.41 and 2206.00.42 do not appear in the table in that section.

1. Mr Kennedy referred also to the Explanatory Memorandum that accompanied the Customs Tariff Amendment Act No. 2 2001 ("CT Amendment Act") that inserted Additional Notes 3 to 8 to Chapter 22 in Schedule 3 in the CT Act as well as subheadings 2206.00.1 to 2206.00.90.  That Explanatory Memorandum explained that the context of the reform was as follows:

"2.17   The August 1998 policy document entitled ANTS outlined the following changes to the existing taxation treatment of alcoholic beverages to take effect on and from 1 July 2000:

·increase excise on beer and other alcoholic beverages (not covered by the WET) to offset the removal of the 37% WST; and

·apply excise to other alcoholic beverages, which are currently non-excisable and not subject to the WET.

2.18 The changes to the Customs Tariff Act give effect to these policies by introducing a new tariff structure and customs duty rates for imported alcohol and alcoholic beverages. Complementary changes are made to the Excise Tariff Act to ensure uniform duty treatment with Australian manufactured products."

1. At clause 2.19, the Explanatory Memorandum described the new law relating to imported alcoholic beverages other than those subject to WET:

"All imported alcoholic beverages other than those subject to WET will be subjected to a customs duty that is equal to the rate of excise duty for the relevant goods, as follows:

·beverages not exceeding 1.15% by volume of alcohol are exempt from that duty;

·beverages exceeding 1.15% alcohol, but not exceeding 10% by volume of alcohol, will be subjected to a custom duty that is equal to the rate of excise duty for full strength beer; and

·beverages exceeding 10% by volume of alcohol will be subjected to a customs duty that is equal to the rate of excise duty for spirits."

1. Additional Notes 3 to 8 were added as:

"… Each of the Notes defines the different type of wine products that are now subject to WET. As WET is applied to the same imported wine and wine products as their Australian equivalents, these Additional Notes replicate the definitions for similar locally made products contained in Subdivision 31A of the WET Act to ensure uniform tax treatment."

With regard to the addition of new subheadings, the Explanatory Memorandum stated:

"2.24   … new tariff subheadings have been provided for each category of beverage classified within these headings, to apply the requisite excise equivalent rate of duty.  This procedure has ensured uniform duty treatment for imported and locally produced alcoholic beverages. …"

1. It is apparent from these paragraphs that there is meant to be a correlation between the WET Act and the CT Act and the ET Act. The Treasurer intended alcoholic beverages that are not subject to WET would be subject to the same rate of duty whether they be imported or locally manufactured beverages. That indicates that the pieces of legislation, or parts of them, form a scheme. In view of that, it is permissible to have regard to one or other of those pieces of legislation in construing another piece. This approach was endorsed by Kirby P, as he then was, in Commissioner of Stamp Duties v Permanent Trustee Co Ltd (1987) 9 NSWLR 719 (New South Wales Court of Appeal):

"…in construing the legislation under consideration here, I will prefer that construction which is available in the language used and which facilitates the sensible operation together of the four statutes mentioned, avoiding inefficiency and the capricious operation of revenue law which would seriously impede or discourage the availability of beneficial statutory provisions for the sale or partition of property held by co-owners.  In the case of ambiguity of the legislation I consider this to be the modern approach which this Court should adopt in implementing the will of Parliament.  We should presume that Parliament intended its legislation to operate rationally, efficiently and justly, together." (pages 723-724)

1. I will return to this aspect shortly but consider that the matter can be resolved in the first instance by having regard to the CT Act and, in particular, Schedule 3 of that Act without regard to the WET Act. As was said by Gummow J in Agfa-Gevaert v Customs and Another (1994) 124 ALR 645 (Ryan, Gummow and French JJ), it is necessary to construe the expression with which I am concerned as a whole. That is consistent with the approach taken in cases such as Mersey Docks and Harbour Board v Henderson Bros (1888) 13 AC 595 in which Lord Halsbury warned against severing a phrase into its several parts and construing the meaning of each part (pages 599-600, approved by Barton J in Lorimer v Smail (1911) 12 CLR 504 at 510). If the words do not have an accepted meaning in the technical or trade community, it is "… incumbent on the tribunal to identify, as a matter of fact, the meaning of the composite phrase as a collection of ordinary English words" (per Ryan J, page 646). Furthermore, I must do so first in the context of the CT Act.

1. Beginning with Chapter 22, it is apparent that a distinction has been drawn between fruit or vegetable wine and sake without added alcohol in the context of subheading 2206.00.30 for that is the effect of Additional Note 8.  It does not follow from the distinction's being made that sake cannot be regarded as a fruit or vegetable wine.  The only conclusion that can be drawn is that sake without added alcohol is not regarded as a fruit or vegetable wine in the context of that subheading.

1. There is no other assistance to be gained from Chapter 22.  Certainly, it deals with particular beverages that may or may not be said to have been made from fruit or vegetables.  So, for example, perry is made from pears and cider is, in the modern world, made from apples.  Both perry and cider are accepted as fruits.  Chapter 22 also deals with alcoholic liquors produced by the fermentation of what are generally described as grains e.g. beer and whisky.  The fact that it deals with particular alcoholic beverages, some of which are made from fruit and some from grains, does not take me any further.

1. I have then turned to the wider context of Schedule 3 of the CT Act. That wider context shows that Chapter 7 is concerned with edible vegetables and certain roots and tubers, Chapter 8 is concerned with edible fruit and nuts and the peel of citrus fruit or melons, Chapter 9 with coffee, tea, mate and spices and Chapter 10 with cereals.  Rice is dealt with not in Chapters 7, 8 and 9 but is dealt with in Chapter 10 where it is the subject of heading 1006.  Its grouping with cereals is consistent with its being a grain as that word is normally understood.  It seems to me that the manner in which vegetables, fruit and cereals are dealt with separately in these Chapters influences the manner in which the words "fruit" and "vegetable" must be construed when used in Chapter 22. Unless specifically defined for the purposes of a Chapter, heading or sub-heading, it is to be expected that the CT Act will use words consistently.

1. In view of that, I have concluded that the words "fruit" and "vegetable" have been used in Additional Note 6 in a manner consistent with the remainder of the CT Act. In view of that, I have concluded that they do not include grains. As sake is made from a grain, it cannot be regarded as a fruit or vegetable wine within the meaning of Additional Note 6. 

1. I note that the practical effect of the interpretation I have adopted means that sake with added alcohol is properly classified to subheading 2206.00.59 with the result that customs duty will be imposed at the rate of 5% plus $54.56 per litre of alcohol. That is consistent with the application of the ET Act to Australian manufactured sake with additional alcohol which is also subject to excise duty at the rate of $54.56 per litre of alcohol. Both are subject to WET.

1. For the reasons that I have given, I affirm the decision of the respondent dated 24 January, 2002.

I certify that the forty-one preceding paragraphs are a true copy of the reasons for the decision herein of
Miss S A Forgie (Deputy President)

Signed:          ...............................................................
  P. Paczkowski  Associate

Date of Hearing  23 September, 2002
Date of Decision  25 November, 2002
Solicitor for the Applicant           Mr L. Gross
  Louis Gross & Associates
Solicitor for the Respondent        Mr L. Kennedy
  Australian Government Solicitor