The Commissioner of Taxation of the Commonwealth of Australia v Nimrod Theatre Company Ltd

[1985] FCA 67

Re: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
And: NIMROD THEATRE COMPANY LIMITED
No. G171 of 1984
Sales Tax
5 FCR 269

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Fox(1), McGregor(2) and Wilcox(3) JJ.

CATCHWORDS

Sales Tax - Scenery and stage properties made for production of play by theatre company - Whether company "manufacturer" - Whether goods applied to own use.

Sales Tax Assessment Act (No. 1) 1983 - ss. 3(1), 17(1), 17(2).

Adams v. Rau (1931) 46 C.L.R. 572 cons.

Federal Commissioner of Taxation v. Ellis and Clark (1934) 52 C.L.R. 85 ref'd to.

Federal Commissioner of Taxation v. Riley (1935) 53 C.L.R. 69 ref'd to.

Sales Tax - What constitutes manufacture - Goods made in course of carrying on business - "Manufacturer" - Scenery and props made by theatre company for use in production of play - Sales Tax Assessment Act (No 1) 1930 (Cth), ss 3(1), 17(1), (2).

HEADNOTE

Held: A. theatre which made up props and backgrounds for use in the presentation of its plays had not "manufactured" the goods within the meaning of Sales Tax Assessment Act (No 1) 1930, s 17, nor was it a "manufacturer" of the goods within the meaning of s 3(1) of the Act.

Federal Commissioner of Taxation v. Ellis & Clark (1934) 52 CLR 85, followed.

Adams v. Rau (1931) 46 CLR 572; Federal Commissioner of Taxation v. Riley (1935) 53 CLR 69, followed.

HEARING

Sydney, 1985, February 20, 21; March 8. #DATE 8:3:1985
APPEAL

Appeal from a decision of the Supreme Court of New South Wales.

T. Simos QC and R. Gelski, for the appellant.

D. G. Hill QC and K. G. L. Horler, for the respondent.

Cur adv vult

Solicitor for the appellant: Australian Government Solicitor.

Solicitor for the respondent: Moore & Bevins.

FPC

ORDER

1. The appeal be dismissed.

2. The appellant pay the respondent's costs of the appeal.

Appeal dismissed with costs

JUDGE1

This is an appeal, by leave, from a judgment of the Supreme Court of New South Wales (Hunt J.) in which he dismissed an appeal from a majority decision of No. 1 Taxation Board of Review. The appellant Commissioner of Taxation has assessed the respondent for sales tax under the Sales Tax Assessment Act (No. 1) 1930 ("the Act"). The assessment is based upon sub-secns. (1) and (2) of s. 17, on the footing that the "goods" subjected to tax had been "manufactured" in Australia by the respondent and "applied to its own use". The sales value upon which tax is to be assessed, if the Commissioner is right, is not in dispute.

The respondent presents live plays at its theatre in Sydney. The "goods" in question are a theatre set used by the respondent for the performance of a particular play. A model, produced at an early stage of preparation for the play to show what was required, was tendered in evidence. In substance, the "goods" comprised the whole of the physical background and setting for the performance of the play and included the specially prepared stage. They were made by carpenters employed by the respondent, mostly, if not entirely, from materials on hand in the company's store, some at least of which it had used in earlier plays. Components were mostly prepared outside the theatre, and were assembled in the theatre, doubtless with some minor changes and adjustments. Although the matter was raised from the Bench in the course of argument, no separate submission has been made that what was put together did not constitute "goods" in the sense of the Act. There was not full debate related to the phrase "applied to his own use".

Sub-sections 17(1) and (2) are as follows:

"17. (1) Subject to, and in accordance with, the provisions of this Act, the sales tax imposed by the Sales Tax Act (No. 1) 1930 shall be levied and paid upon the sale value of goods manufactured in Australia by a taxpayer and sold by him or treated by him as stock for sale by retail or applied to his own use.

(2) The reference in sub-section (1) to goods manufactured in Australia by a taxpayer and applied to his own use shall be read as a reference -

(a) to goods manufactured in Australia by a manufacturer in the course of carrying on a business and applied to his own use, whether for the purposes of that business or for any other purpose and whether or not the goods are of a class manufactured by the manufacturer for sale; and

(b) to goods manufactured in Australia by a manufacturer as provided in sub-section (3) and applied to his own use."

It is submitted on behalf of the Commissioner that the words of s.17(2)(a) apply naturally, in their ordinary meaning, to the facts of the case. The Nimrod Theatre, it is said, was a "manufacturer" which "manufactured" scenery and stage properties (i.e. "goods") in the course of carrying on its business of presenting plays, and applied the "goods" to its own use.

A principal submission for the respondent is that it was not a "manufacturer" within the meaning given to that term in the Act. The terms "manufacture" and "manufacturer" are defined in sub-s. 3(1), and I set out both definitions:

"'Manufacture' includes -

(a) production;

(b) the combination of parts or ingredients whereby an article or substance is formed which is commercially distinct from those parts or ingredients, except such combination (not being a combination whereby concrete, cement mortar, lime mortar or any similar preparation of a kind used in the construction, repair or maintenance of buildings or other structures is formed, or whereby any other prescribed article or substance is formed) as, in the opinion of the Commissioner, it is customary or reasonably practicable for users or consumers of those articles or substances to undertake; and

(c) any treatment applied to foodstuffs as a process in the preparation of the foodstuffs for human consumption;

. . .

'Manufacturer' means a person who engages, whether exclusively or not, in the manufacture of goods, and includes a printer, publisher, lithographer or engraver, and a person (not being an employee) who manufactures goods, whether or not the materials out of which the goods are manufactured are owned by him, but, where one person manufactures goods for another, wholly or in part out of materials supplied by that other, and the goods are not for the use of, but are for sale by, that other, the person supplying the materials shall be deemed to be the manufacturer, and the person who so manufactures the goods shall be deemed not to be the manufacturer." (emphasis added).

A concession made by the appellant is expressed by his Honour as follows:

"The Commissioner does not argue that the Nimrod carried on the business of manufacturing theatrical scenery and stage properties, or indeed the business of manufacturing any goods. He accepts that the only business which the Nimrod has carried on is the provision of public entertainment for audiences who pay to see the plays which it produces."

In my view the principal submission to which I have referred should be resolved in favour of the respondent taxpayer. I think it is plain from the structure of the Act that when it refers to a manufacturer it is referring to someone who fairly answers that description; it is a matter of characterisation or classification. The language of sub-s. 11(1) supports this conclusion:

"11. (1) A person who becomes a manufacturer or wholesale merchant shall, within 28 days after he becomes a manufacturer or wholesale merchant, as the case may be, become registered as prescribed."

I think the duty to register under this sub-section is co-extensive with the liability or potential liability to tax under s. 17. Section 13 provides the penalty for failure to register under s. 11. These sections indicate that the inclusive part of the definition of "manufacturer" does not make a radical departure from the opening words of the definition so as to apply to isolated cases of the making of goods, by a person not otherwise "engaging" in manufacture.

A person who manufactures goods on an isolated occasion and applies the goods to his own use is not within the provision in question, nor is one who does so sporadically, or even repetitively unless he can fairly be described as a "manufacturer".

The scheme of the Sales Tax Acts, as explained by Dixon J. in Federal Commissioner of Taxation v. Ellis and Clark (1934) 52 C.L.R. 85, 89 - 92, shows that particular participants, such as manufacturers and wholesale merchants, are persons properly characterised as such (although they may also have other trades or occupations). The respondent, on the evidence, is not properly described as a manufacturer.

In my view, a solution of the present case is assisted considerably by Adams v. Rau (1931) 46 C.L.R. 572. The Act has since that decision been amended in many respects. The definition of "manufacturer" in sub-secn. 3(1) has been amended in a way I will mention, and sub-secn. 17(2) was not introduced until 1936. What is now sub-secn 17(1) was then the whole of s. 17. The term "manufacturer" was used in many places (for example, secns. 11, 13, 18, 19) but not in s.17. At the time of Adams v. Rau the definition of manufacturer was as follows:

"'Manufacturer' means a person who engages, whether exclusively or not in the manufacture of goods and includes a printer, publisher, lithographer or engraver; and where one person makes goods for another, wholly or in part out of materials supplied by that other, and the goods are not required for the private, domestic or other personal use of that other, the person supplying the materials shall be deemed to be the manufacturer and the person so making the goods shall not be deemed to be the manufacturer."

In that case transcripts of evidence and of dictation were produced by the respondents, usually at a charge or fee, as an integral part of a service of taking shorthand notes and preparing transcript from them. The taxpayer usually supplied the paper and other materials' required for the preparation of the transcripts. It was prosecuted for not registering, as a manufacturer, under s. 11.

The informations, which were laid under s. 13, charged the defendants that, being persons carrying on business as manufacturers, they did fail to become registered, and averred that the defendants were engaged in business as professional shorthand writers and typists. It is interesting to note how the concept of carrying on business or being engaged in business fell away as a legal test in the course of their Honours' consideration of the case. In the joint judgment of Gavan Duffy C.J., Starke, Dixon and McTiernan JJ. the matter posed for consideration was stated as follows (p. 577):

"The question is whether the defendants engage in the manufacture or production of goods or commodities."
Their Honours were of the view that these words should be understood in their natural and ordinary meaning, according to the received usage of English speech. This approach to construction of the language in question, or the same language in similar contexts, has become well established (see for example Re Searls Limited (1932) 33 S.R. 7 and per Windeyer J. in M.P. Metals Pty Ltd v. The Commissioner of Taxation (1967) 117 C.L.R. 631, 639). The question in Adams v. Rau was, then, one of fact, upon which a conclusion was stated as follows (p. 578):

"In this case we cannot think that the description 'manufacture or production of goods or commodities' can properly be applied to any part of the business or operations in which the shorthand writers engage."

In the Court's analysis of the facts, they were of the view that (p. 578):

"The service which they (the shorthand writers) perform cannot first be disintegrated and then part of it examined while the rest is excluded entirely from consideration."

Evatt J. concurred in a separate judgment in which he said (p. 579):

"In my opinion the respondents are in nowise engaged in the manufacture or production of goods or commodities. Their transcripts come into existence as materials to be provided in the course of rendering skilled services. They do not 'produce' or 'manufacture,' their transcripts are not accurately described as 'goods' or 'commodities,' nor are they engaged in the business of selling transcripts."

In my view, if the approach to construction applied in Adams v. Rau is followed in the present case, allowing fully for the factual differences, the result is that the respondent is not liable to tax.

There is a distinction which may make the present case stronger, against liability to tax. In Adams v. Rau what was produced was saleable. In the present case the stage setting was not intended for sale nor could it readily have been sold; it was prepared only for the Nimrod theatre, and the particular play. To be removed from the theatre it would have had to be broken up. The case related to the part of s. 17 which referred to goods sold, whereas the present assessment involves the alternative of "applied to his own use". It seems to me at least arguable that that which is to be regarded as satisfying this latter phrase is something which, before application, is itself a saleable commodity. This construction would I think be more in keeping with the purpose of the Act, which is in general to impose tax on sales, or saleable goods. The making of something which is non-saleable for oneself would not seem to fall within its intended purpose. In the present case, too, the entity came into existence for the first time where, and as, it was to be used. There was, on one view, no interval between the making and the application, although counsel for the Commissioner contends that the first application to the respondent's own use came when the play was first performed. This latter view seems to me to add only another artificiality to the claim.

Federal Commissioner of Taxation v. Riley (1935) 53 C.L.R. 69 was another case dealing with sale, - in that case of photographs taken by the taxpayer. The following statement in the joint judgment of Rich, Dixon and McTiernan JJ. (p. 78) relates to the definition of "manufacture", and I believe the opening and closing parts of it offer support for the possible view just discussed:

"By the statutory definition, manufacture includes production. This description is very wide. It appears to cover all operations conducted for the purpose of bringing tangible things into existence for sale. But there are many vocations and pursuits in the exercise of which physical things incidentally come into existence, and become the property of the client or customer, although the essential character of the work is the performance of skilled services and not the supply of things. A conveyancer who makes a will and hands it over to the testator, a writer who composes an article for a journal and sends in the typescript, a shorthand writer who transcibes his notes and supplies a transcript are examples. The last was dealt with by this Court in Rau's Case (1931) 46 C.L.R. 572). To such cases the language of sec. 17 is inapplicable; one or other of the elements is lacking that are required to satisfy the description sale value of goods manufactured, or produced and sold by the taxpayer, or treated as stock for sale by retail or applied to his own use."

I have mentioned the change in the definition of "manufacturer" in sub-section 3(1). It appears by a comparison of the two definitions of "manufacturer" which I have set out. A material matter is the part in the present sub-section reading "and includes . . . a person (not being an employee) who manufactures goods." Even taking these words without qualification, the difference does not in my opinion affect the result, because it would still not be correct to describe the respondent as a company which manufactures goods. It would seem however that these words were not intended to convey any wider meaning than the opening words of the definition: "'manufacturer' means a person who engages . . in the manufacture of goods." The legislative history of the latter part of sub-secn 3(1) suggests that the words I have referred to were intended to bring in a particular type of situation where goods are manufactured with materials owned by another, such as when a client provides the cloth to his tailor.

The appellant, as I have said, based his case on the literal meaning of the language of s.17(2)(a), which was treated as being the same as the ordinary and grammatical meaning. As I have indicated, the language does not convey to me the meaning relied on. To my mind it offends the use of language, and reality, to describe the respondent as a manufacturer, or as a company engaged in the manufacture of goods, or to regard its theatre set as goods manufactured by it and applied to its own use. The submission seems in fact to depend on an abstract analysis of the words used. A principal point of difference I have with the submission is that it attempts to break down the elements of the respondent's activities in relation to its theatre operations and to attach liability, on an abstract meaning, to one part of them. This "disintegration" was what, on a different but comparable set of facts, the High Court said in Adams v. Rau was not permissible.

I am therefore of the opinion that the appeal should be dismissed, with costs.

JUDGE2

THE COMMISSIONER OF TAXATION (The Commissioner) has appealed against a judgment of the Supreme Court of New South Wales delivered on 11 May 1984 which upheld a majority decision of the TAXATION BOARD OF REVIEW (Case Q40 (1983) 83 A.T.C. 174) that NIMROD THEATRE COMPANY LIMITED (Nimrod) was not to be liable to sales tax levied pursuant to the Sales Tax Assessment Act (No. 1) 1930 (the Assessment Act). The sales tax had been claimed on the sale value of certain scenery and stage properties constructed by Nimrod's employees for use in the production of a play in the course of carrying on the business of providing public entertainment.

The facts in this matter set out e.g. in the dissenting judgment of the Chairman of the Board of Review are not in dispute. It seems that Nimrod, since formation, has produced some 196 plays, 12 of them during the year ended 31 December 1979. During 1982 approximately 1,000 performances were given with a total audience of around 200,000. Nimrod relies very heavily on subsidy from the Commonwealth and New South Wales Governments. It has carried out the objects for which it was formed. During the relevant period, viz. year ending 30 June 1979 Nimrod was operating out of or in two separate premises, viz. a building at Surry Hills where there were two theatres - upstairs accommodating 300 people and downstairs seating only 70 - and a "workshop" at Glebe used, inter alia, for two purposes, the storing of "properties" and the "construction" of sets for use at Surry Hills by its employees. The play for which the scenery and stage properties were brought into existence, was called "The Sea". The set was designed by a freelance designer, Mr. Eastwood, whose evidence before the Board included that, generally speaking, (before designing a set) he first reads the play, then has a discussion with the director on how "the play is going to be visualised". Having agreed on a basic concept the designer then brings it "down to specifics" and there is discussion "on a scene by scene basis" of the requirements, including mechanical requirements of actors' movements, scenery changes etc. Then a scale model is built by the designer, this being "the easiest way for everybody to understand, whether it be a production manager who finally is given the job of building it, or an actor to understand where he is going to be at a given time in a scene, or the lighting designer to light it".

Once the director and designer are in agreement the scale model and a set of working drawings apparently go to the production manager of the theatre who is responsible for construction of the set. There were particular problems in relation to the set with which this appeal is concerned. It was thought necessary to give the impression of a shore line. This required that there should be "a kind of new stage floor", ignoring the original underneath it. Wave shapes were incorporated at the front and rear of the set made of laminated plywood ribs which provided the shape, strength and rigidity and were sheeted in plywood. The set was used for 45 performances over a period of seven weeks. At the end of the performances, the set was returned to the "workshop" and ultimately only the rostrum modules were retained for future use, the canvas and waves shapes being taken "to the tip". I note that Mr. McCarthy, a Member and one of the majority on the Board of Review, referring to evidence of the practice of Nimrod, said that "parts of sets are sometimes lent without charge to other theatre companies and to schools, but sets are never sold or hired out for reward"; and later, "Unless the play goes on tour or is planned to be revived, as much material as possible in the set is cut up and put into the next set."

Nimrod has conceded that the relevant scenery and stage properties were "goods" within the meaning of the Assessment Act. Accordingly, it is not necessary to discuss this aspect further. It is common ground that the so-called "goods" were applied by Nimrod for its own use.

As his Honour stated in his Reasons for Judgment sales tax is imposed by the Sales Tax Act (No. 1) 1930 and levied pursuant to the provisions of the Assessment Act. Sections of the latter Act, so far as relevant, include -

"3.(1) In this Act, unless the contrary intention appears -

. . . .

"Manufacture" includes -

(a) production;

(b) the combination of parts or ingredients whereby an article or substance is formed which is commercially distinct from those parts or ingredients, except such combination (not being a combination whereby concrete, cement mortar, lime mortar or any similar preparation of a kind used in the construction, repair or maintenance of buildings or other structures is formed, or whereby any other prescribed article or substance is formed) as, in the opinion of the Commissioner, it is customary or reasonably practicable for users or consumers of those articles or substances to undertake; and

(c) any treatment applied to foodstuffs as a process in the preparation of the foodstuffs for human consumption;

"Manufactured" and "Manufactures" have meanings corresponding to that of "Manufacture"; "Manufacturer" means a person who engages, whether exclusively or not, in the manufacture of goods, and includes a printer, publisher, lithographer or engraver, and a person (not being an employee) who manufactures goods, whether or not the materials out of which the goods are manufactured are owned by him, but, where one person manufactures goods for another, wholly or in part out of materials supplied by that other, and the goods are not for the use of, but are for sale by, that other, the person supplying the materials shall be deemed to be the manufacturer, and the person who so manufactures the goods shall be deemed not to be the manufacturer;

. . . .

"Registered person" means a manufacturer or wholesale merchant who is registered under this Act;

. . . .

(7) Any person who, at any time, ceases to be a manufacturer or wholesale merchant shall be deemed to continue to be a manufacturer or a wholesale merchant (as the case may be) until he has -

. . . .

11.(1) A person who becomes a manufacturer or wholesale merchant shall, within 28 days after he becomes a manufacturer or wholesale merchant, as the case may be, become registered as prescribed.

(3) Upon registration a certificate of registration shall be issued to such manufacturer or wholesale merchant and shall, subject to this Act, remain in force until -

(a) the death or bankruptcy of the registered person; or

(b) the cancellation of the certificate in accordance with the provisions of this Act.

. . . .

(4) Notwithstanding any statement contained in any certificate in force at the date of the commencement of this sub-section in regard to the period for which the certificate shall remain in force, every certificate in force at that date shall, subject to sub-section (3A) and section 16, remain in force until the death or bankruptcy of the registered person to whom it was issued.

. . . .

(5) Certificates shall be issued by the Commissioner or by a person thereto authorized in writing by the Commissioner.

(6) Certificates under this Part shall be subject to the following conditions:

(a) That the person to whom the certificate is issued will -

(i) keep proper books or accounts for the purposes of this Act;

(ii) render true statements of all sales made by him as and when required by the Commissioner; and

(iii) duly pay all tax required by or under this Act to be paid by him; and

(b) Such other conditions as are prescribed.

(8A) In any case where, in the opinion of the Commissioner, it is necessary for the protection of the revenue to do so, he may, in writing, require any registered person to give security for compliance by that person with the conditions of any certificate issued to him under this Act, and that person shall, within twenty-eight days after the date of the requirement, give security to the satisfaction of the Commissioner, in such amount, not exceeding $2,000, as the Commissioner considers reasonable, for compliance with the conditions of the certificate.

. . . .

12. (1) A registered person shall quote his certificate in such manner and under such circumstances as are prescribed.

(2) A registered person shall not quote his certificate except as prescribed.

Penalty: $200.

13. Any person carrying on business as a manufacturer or as a wholesale merchant who is required by or under section 11 to become registered and who fails; within or at the time specified by or under that section to become registered, or fails within the time so specified to apply for a fresh certificate, or, in either case, to give security to the satisfaction of the Commissioner if so required by him, shall be guilty of a separate offence for each day during which he fails to become so registered or so to apply for a fresh certificate or so, in either case, to give such security.

Penalty: $200, for each separate offence.

14. Any manufacturer or wholesale merchant to whom a certificate has been issued under this Part who contravenes or fails to observe any condition of the certificate shall be guilty of an offence.

Penalty: $200.

. . . .

16. Any manufacturer or wholesale merchant to whom a certificate has been issued under this Part who, during the currency of the certificate, ceases to carry on the business to which the certificate relates shall forthwith notify the Commissioner in writing of his having so ceased to carry on business and shall -

(a) at the same time; or

(b) in any case to which sub-section 3(7) applies - forthwith upon being required by the Commissioner by notice in writing,

forward his certificate to the Commissioner who, upon being satisfied that the conditions of the certificate have been observed, shall cause it to be cancelled.

17.(1) Subject to, and in accordance with, the provisions of this Act, the sales tax imposed by the Sales Tax Act (No. 1) 1930 shall be levied and paid upon the sale value of goods manufactured in Australia by a taxpayer and sold by him or treated by him as stock for sale by retail or applied to his own use.

(2) The reference in sub-section (1) to goods manufactured in Australia by a taxpayer and applied to his own use shall be read as a reference -

(a) to goods manufactured in Australia by a manufacturer in the course of carrying on a business and applied to his own use, whether for the purposes of that business or for any other purpose and whether or not the goods are of a class manufactured by the manufacturer for sale; and

(b) to goods manufactured in Australia by a manufacturer as provided in sub-section (3) and applied to his own use.

. . . .

19. Sales tax shall be paid by the manufacturer of goods manufactured in Australia and -

(a) sold by the manufacturer to an unregistered person or to a registered person who has not quoted his certificate in respect of the sale;

(b) treated by the manufacturer as stock for sale by retail; or

(c) applied by the manufacturer to his own use.

. . . .

24. A person liable under this Act to pay sales tax upon the sale value of any goods -

(a) sold by him;

(b) treated by him as stock for sale by retail; or

(c) applied by him to his own use,

during a month shall, within 21 days after the close of that month, pay sales tax upon the sale value of the goods.

. . . .

48. Any person who, with intention to defraud, in any return understates the amount of the sale value of any goods shall be guilty of an offence.

Penalty: Not less than $100 and the amount of sales tax which would have been avoided if the amount stated in the return had been accepted as the correct amount, nor more than $1,000 and treble the amount of sales tax which would have been so avoided.

. . . .

70E. (1) Every person who is a manufacturer or a wholesale merchant shall, for the purposes of this Act, keep proper books or accounts and shall preserve those books or accounts, including -

(a) all copies of invoices, and all vouchers, relating to his business;

(b) all documents upon which any endorsement, notice or certificate has been made or given to him upon or in connexion with the quotation of certificates by purchasers from him; and

(c) all certificates or other documents in respect of sales of goods treated by him as exempt from sales tax received by him from purchasers, and accepted by him as evidence that the goods have been sold under conditions which entitle him to exemption,

for a period of not less than 5 years after the completion of the transactions, acts or operations to which they relate.

Penalty: $200.

(2) This section shall not apply so as to require the preservation of any books, accounts or documents -

(a) in respect of which the Commissioner has notified a manufacturer or wholesale merchant that such preservation is not required.

(b) of a company which has gone into liquidation and which has been finally dissolved."

Sales Tax Regulations referred to include -

"5. A person who, by virtue of an Act under which these Regulations are made, is required to become registered as a manufacturer or wholesale merchant shall, unless the Commissioner otherwise directs, make application to the Commissioner, in accordance with Form A, for registration in each State in which he has a place of buiness as a manufacturer or a wholesale merchant.

. . . .

9. (1) Upon the cancellation of a certificate, the person to whom the certificate was issued shall, in respect of the business to which the certificate relates, cease to be a registered person.

(2) The cancellation of a certificate does not release the person to whom the certificate was issued from a liability incurred by him before the cancellation.

. . . ."

The Commissioner has appealed to this Court pursuant to s.42(10) of the Assessment Act.

Senior counsel for the appellant Commissioner submitted that the scenery and stage properties were "manufactured" by Nimrod in the course of carrying on the business of providing public entertainment for audiences who pay to see the plays it produces. Nimrod, he said, applied those "goods" to its own use by using them in the plays thus produced, i.e. applied them to its own use for the purposes of that business. In his submission the relevant "goods" fell squarely within the literal meaning of the words of s.17(2)(a) and were thus liable to sales tax upon their sale value. It was noted that the sale value was not in issue. The language of s.17(2)(a), he submitted, was clear and unambiguous; the section should be interpreted according to its literal, ordinary and grammatical meaning. He referred to Cooper Brookes (Wollongong) Pty. Ltd. v. Federal Commissioner of Taxation (1980) 147 C.L.R. 297 (Cooper Brookes) at pp. 304-305, 310-311, 319-321. I note, in passing, that it was argued for the Commissioner that the Sales Tax Assessment Acts must be construed literally in Deputy Federal Commissioner of Taxation (S.A.) v. Ellis & Clarke Ltd. (1934) 52 C.L.R. 85 (p. 86) (Ellis & Clarke). The Commissioner was unsuccessful in that appeal.

Senior counsel for the respondent Nimrod submitted that its sole business was the provision of public entertainment for audiences who paid to see the plays it produced. Counsel submitted that from the enactment of sales tax legislation in 1930 that tax has always been payable relevantly by only two classes of persons, viz. manufacturers and wholesale merchants. He submitted that the expressions used in the Assessment Act, "manufacturer" and "wholesale merchant", as amended from time to time are vocational descriptions providing an identifiable class of persons. That Act, he said, like all acts, must be read as a whole and even with the eight other assessment acts and related legislation including regulations which together form a legislative scheme. He referred to Ellis & Clarke at p. 93. Critical to the legislative scheme, he submitted, was the system of certificates of registration. Thus a person who became a manufacturer or wholesale merchant must register (s.11) and thereafter "quote his certificate" as prescribed; but not otherwise (s.12). He pointed out that to carry on business as a manufacturer without becoming registered was, by reason of s.13, an offence. He submitted that in the context of the legislative scheme a person was a manufacturer or a wholesale merchant only if his vocation or business fell into either of those descriptions. He referred to the Assessment Act. The same result, he submitted, was reached from the use of the word "engages" in the definitions of "manufacturer" and "wholesale merchant". He referred to Buntine v. Hume (1943) V.L.R. 123 at p.128; Southern Estates Pty. Ltd. v. Federal Commissioner of Taxation (1966) 117 C.L.R. 481 at pp. 484, 492 and 494. Further, he said that whether a taxpayer engaged in a business of manufacturing goods or wholesale selling would be a question of fact and degree. It would not be necessary for the business to be the taxpayer's sole business; it might have more than one business - Stuart v. Diplock (1889) 43 Ch.D. 343; A. Lewis & Co. (Westminster) v. Bell Property Trust Ltd. (1940) Ch. 345. It had not been submitted, he noted, that Nimrod carried on a business of manufacturing sets. The insertion, he said, in the definition "manufacturer" of the words "who manufactures goods, whether or not the materials out of which the goods are manufactured are owned by him" was part of a legislative attempt over the years from 1930 to 1936 to deal with the problem of makers up and retail tailors. The insertion should not be construed as extending the definition of "manufacturer" to include any person who manufactures regardless of whether he does so as a business or carries on a business of manufacture. He submitted that Adams v. Rau (1931) 46 C.L.R. 572 (Adams) and Federal Commissioner of Taxation v. Riley (1935) 53 C.L.R. 69 (Riley) at p. 79 established that it was the essential character of the vocation or pursuit of a person that has to be determined. If this essential character is the performance of services or plays then the person would not be a manufacturer nor would his business be the bringing into existence of goods as a commodity in commerce. A production of those goods will be incidental to the services provided. His submissions, he said, were not adversely affected by s.17(2) first introduced in 1936 (the present sub-section was substituted in 1978); that sub-section was concerned to ensure that no implication elsewhere in the legislation required the conclusion that the goods applied by the manufacturer to his own use were restricted only to the goods he in fact sold. He referred to the Second Reading Speech of Mr. Casey, Hansard, 19 November 1936, p.2130.

I have not attempted fully to set out the arguments of counsel for both parties. I accept that the construction of s.17 is a basic consideration; and that this must be approached in the context of the legislative scheme including Regulations providing for the imposition and collection of sales tax. See e.g. Canada Sugar Refining Company v. Reg. (1898) A.C. 735 at p.741 where Lord Davey said -

"Every clause of a statute should be construed with reference to the context and the other clauses of the Act, so as, so far as possible, to make a consistent enactment of the whole statute or series of statutes relating to the subject matter."

See also Cooper Brookes per Gibbs C.J. at p.304; per Mason and Wilson JJ. at pp.319, 321. Thus instructed it is convenient to proceed to a consideration of the Assessment Act (not overlooking the other Sales Tax Assessment Acts Nos. 2 to 9 and Sales Tax Regulations) in order to evaluate the submission by Nimrod that sales tax according to the legislation is to be payable only by manufacturers and wholesale merchants, being persons whose vocation or business pursuits can be so described. Counsel for Nimrod submitted, as I have noted, that a person can be said to be a manufacturer only if his vocation or business is that of a manufacturer. Certainly there is nothing inconsistent with this proposition in the definition of "manufacturer" in s.3 of the Assessment Act, widened, so it is said, to take account of the decision of Irving v. Munro & Sons Ltd. (1931) 46 C.L.R. 279. It commences -

" . . . . A person who engages . . . . in the manufacture of goods . . . ."

The word "engages" implies no mere sporadic or passing or isolated activity; but an activity which, in the context, is more than "casual or intermittent". It "connotes such a degree of employment as occupies the whole or at least a substantial part of the person's time." See Buntine v. Hume (supra) at p. 128. See also Ballentine's Law Dictionary, 3rd ed. (1969), p. 403, the references to "engaged in business", "engaged in manufacturing" and "engaged in practice". The force of the opening words of the definition is, in my view, not weakened or reduced by the classes of persons it is expanded to include.

Section 3(7) provides for what is to happen when a manufacturer or wholesaler ceases to be a manufacturer or wholesaler. To attempt to apply it to Nimrod should it give up providing entertainment by plays would produce such an odd result as to support the contention that the Assessment Act is concerned with persons who carry on the business of manufacturing, not with persons who in the course of some other activity may from time to time manufacture some goods. Section 11 is a key provision of the Assessment Act requiring registration for those who become manufacturers or wholesale merchants. No other categories or persons are required to register. The learned primary Judge stated in his reasons that "there is no alternative system of registration". I agree with his analysis of the requirement to register and its implications. It is difficult to accept that Nimrod, occupied in the production of plays, could ever be said to be a manufacturer engaged in the manufacture of goods. Section 11(6)(a)(ii) could not operate in the case of Nimrod as e.g. no sales are made by it. Section 12 of the Assessment Act provides for quotation of the certificate granted pursuant to s.11(3). There does not seem to be any occasion in which Nimrod would have to quote its certificate. The penalty provided by s.13 is for a person who -

"carrying on business as a manufacturer"

fails to become registered. In one sense it is the main enforcing provision of the Assessment Act; yet it would not be applicable to Nimrod in respect of whom there has been no submission that it is "carrying on business as a manufacturer"; nor, with respect, could such a submission be substantiated. A subsidiary penalty section is s.14; and in the same way it is not easy to envisage what conditions the certificate referred to might contain; or that a failure to observe them would result in an offence by Nimrod. Section 16 is concerned with the manufacturer ceasing "to carry on the business to which the certificate relates". Such business, in the case of Nimrod, would not be the business of a manufacturer. Sections 16 and 13 particularly support the view that "manufacturer" as used in the Assessment Act refers to a person who carries on the business of manufacturing, who has, as it were a vocation.

Section 17(1) provides, as I read it, for tax to be paid upon the sale value of goods produced by a manufacturer. It deals with the three ways in which such goods may be used so as to attract its operation, i.e. sale, treated as stock for sale by retail (which implies ultimate selling), or applied to the manufacturer's own use. This last application of the goods will, I suggest, make tax payable by the manufacturer of goods which it then sells; or treats as stock for sale by retail; or, out of that stock of goods, applies some to his own use. Presumably a person engaged in the business of manufacturing electric light globes, which he treated as goods for sale, for his own use might apply some of them to light his own factory. If such goods were not allocated to the business of the manufacturer or for its own purposes, the manufacturer would need to purchase them from others. This transaction could thus attract tax. That the application to own use in s.17(1) is by a manufacturer and in the course of carrying on business as such, is, I suggest, consistent with the provisions of s.17(2)(a), it is unnecessary to imply a term to that effect in s.17(1). His activities are, I consider, in the context of carrying on a business of manufacturing.

In a general sense I suggest that the words in Riley at pp. 78-79 are apposite -

"By the statutory definition, manufacture includes production. This description is very wide. It appears to cover all operations conducted for the purpose of bringing tangible things into existence for sale. But there are many vocations and pursuits in the exercise of which physical things incidentally come into existence, and become the property of the client or customer, although the essential character of the work is the performance of skilled services and not the supply of things."

Section 19 attributes the liability to pay tax to the manufacturer of goods sold by him to an unregistered person or to a registered person who has not quoted his certificate; or treated by the manufacturer as stock for sale by retail; or applied by the manufacturer to his own use. Part V is headed Returns". Presumably it must be regarded as a fundamental section since the furnishing of a return is part of the process of collection and recovery of tax.

It would, in my opinion, be difficult to apply s.70E to Nimrod. Its application would depend on assuming that Nimrod was a manufacturer (or wholesale merchant). Section 70E(1)(b) and (c) would then have no operation since they envisage that the relevant taxpayer will be dealing with purchasers; and (c) contemplates a contention that some goods will be exempt, whereas Nimrod is not involved in such activities as to be concerned either with purchasers or exempt sales.

The legislative scheme includes regulations. In this regard, Dixon J. (as he then was) said in Ellis & Clarke at p.89 that " . . . . the legislation depends in a remarkable degree upon the regulations made under the power which it confers on the Executive." Regulation 5 of the Sales Tax Regulations provides that a person who is "required to become registered as a manufacturer" must make application to the Commissioner in terms of Form A and further requires that this shall be done -

" . . . . in each State in which he has a place of business as a manufacturer."

Form A headed "APPLICATION FOR REGISTRATION AS MANUFACTURER OR WHOLESALE MERCHANT" requires a statement of the name under which the "business as manufacturer . . . is or will be carried on". Nimrod, clearly, I suggest, has no place of business as a manufacturer nor business as a manufacturer. Its activity is in the production of plays for entertainment at a theatre. Where it "manufactures" its sets could not be described as its place of business. Regulation 9 relating to the cancellation of a certificate of registration and the ceasing of the business to which the certificate relates could be applied to Nimrod in the circumstances it envisages only upon an assumption that it had been granted a certificate in respect of a business which was, or included, a business of manufacturing. See also Regulation 23.

This reference to the context in which sales tax is imposed satisfies me that s.17 is to be read as requiring sales tax to be levied on and paid so far as a manufacturer is concerned by persons engaged in the business of manufacturing, and not entities who are engaged in a different business, e.g. such as Nimrod - accepting for present purposes that Nimrod is engaged in a business - but as part of such occupation produces goods for its own use in that occupation. The concept of Nimrod, a producer of plays, as engaged in manufacturing so as to be liable to sales tax on its sets is incongruous to the point of being bizarre; and it is not surprising that, upon analysis, the Assessment Act does not support such a proposition. One may note what was said in Adams. That authority was concerned with professional shorthand writers who were charged that, carrying on business as manufacturers within the meaning of the Sales Tax Assessment Act (No.1) 1930 (a predecessor of the present Assessment Act) they did, inter alia, fail to become registered. The Court said (p. 578) -

"The service which they perform cannot first be disintegrated and then part of it examined while the rest is excluded entirely from consideration. Doubtless the transcript 'produced' by the typist from the shorthand writer's dictation is a new entity, and is not the same thing as the pieces of paper on which it was made. Doubtless it is capable of sale. But it is brought into existence, not for sale as a commodity, but for the purpose of enabling the employers to have the benefit of services given in the course of a skilled vocation."

I suggest the activities of Nimrod, in the same way, should not be "disintegrated".

In my opinion the decision of the Supreme Court was correct. I propose that this appeal be dismissed with costs.

JUDGE3

In my opinion, for the reasons expressed by Fox and McGregor JJ, the appeal should be dismissed.