Re Comptroller-General of Customs v Robert Bosch (Australia) Pty Ltd [1991] FCA 169 (26 April 1991)

FEDERAL COURT OF AUSTRALIA

Re: THE COMPTROLLER-GENERAL OF CUSTOMS
And: ROBERT BOSCH (AUSTRALIA) PTY. LTD.
No. V G248 of 1990
FED No. 204
Statutory Construction

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Gray J.(1)

CATCHWORDS

Statutory Construction - extrinsic material - Brussels Explanatory Notes - evidence of technical meaning of words - failure to make finding whether technical meaning existed - error of law.

Words and phrases - "automatically controlling" - "varying according to the factor to be controlled".

Administrative Appeals Tribunal Act 1975 s.44.

Customs Tariff Act 1987 Schedule 3.

Bounty (Computers) Act 1984 s.3.

Acts Interpretation Act 1901 s.15AB.

HEARING

MELBOURNE
26:4:1991

Counsel for the applicant: Mr R. Finkelstein QC, Mr E. De Zilwa

Solicitor for the applicant: Australian Government Solicitor

Counsel for the respondent: Mr N. Young QC, Ms M. Kennedy

Mr K. Baker

Solicitor for the respondent: Minter Ellison

ORDER

1. The decision of the Administrative Appeals Tribunal, made on 26th July 1990, is set aside.

2. The matter is remitted to the Administrative Appeals Tribunal for reconsideration in accordance with the reasons for judgment.

3. The respondent pay the applicant's costs of the appeal.

NOTE: Settlement and entry of orders is dealt with by O.36 of the Federal Court Rules.

DECISION

By s. 44(1) of the Administrative Appeals Tribunal Act 1975, an appeal lies from the Administrative Appeals Tribunal to this Court on a question of law only. In the notice of appeal in the present proceeding, the applicant ("the Comptroller-General") sought to raise the question whether the Tribunal's decision, made on 26th July 1990, to set aside the Comptroller-General's decision, was correct and, in particular, whether certain goods are classified properly under one sub-heading or another of Schedule 3 to the Customs Tariff Act 1987. In truth, the issue on which the Tribunal's decision turned, and which was the subject of this appeal, was one of construction of one of the sub-headings in Schedule 3.

2. The Tribunal was constituted by a deputy president and two members. It reviewed a decision of a delegate of the applicant that the respondent ("Bosch") was ineligible to receive a bounty under the Bounty (Computers) Act 1984 in respect of goods manufactured by Bosch and described as central high and low control units. The Tribunal set aside the decision under review and substituted its own decision that the central high and low control units were eligible for bounty.

3. Section 3(1) of the Bounty (Computers) Act 1984 provides, so far as is relevant, as follows:

"3(1) In this Act, unless the contrary
intention appears -
...
"bountiable equipment" means -
...
(e) computer equipment that, if it were
imported into Australia and were not goods the
manufacture of a Preference Country or goods to
which Schedule 4 of the Tariff Act applied,
would be goods the duty of Customs in respect of
which ascertained in accordance with Part II of
the Tariff Act would be so ascertained by
reference to a rate of duty that does not exceed
2%, being computer equipment included in a class
of computer equipment in respect of which a
declaration under sub-section 5(1) is in force..."

The "Tariff Act" referred to is the Customs Tariff Act 1987. Various rates of duty levied under that Act are specified in Schedule 3, in various classifications under various headings. The heading which attracts attention in the present case is No. 9032, "AUTOMATIC REGULATING OR CONTROLLING INSTRUMENTS AND APPARATUS". The classification under which the Tribunal held that the central high and low control units fell was classification 9032.10.90, "Other".

4. The content of heading 9032 is expanded by note 6 to chapter 90 in Schedule 3 to the Customs Tariff Act 1987 as follows:

"6. 9032 applies only to:
(a) ...
(b) Automatic regulators of electrical
quantities, and instruments or
apparatus for automatically
controlling non-electrical
quantities the operation of which
depends on an electrical phenomenon
varying according to the factor to
be controlled."

The issues before the Tribunal were whether the central high and low control units were instruments or apparatus for automatically controlling non-electrical quantities and whether their operation depended on an electrical phenomenon varying according to the factor to be controlled. The Tribunal held in favour of Bosch on both issues.

5. It is necessary to describe the functions and, to some extent, the methods of operation of the central high and low control units. Those units were manufactured by Bosch for installation in certain models of Ford motor cars. The high series unit was for the LTD, the Fairlane and the Fairmont Ghia. It raises and lowers the car's radio aerial to or from full height or half height. It adjusts the level of illumination in the dashboard liquid crystal display to either day level or night level, depending on whether the park lamp switch is activated. The desired level of illumination for day and night respectively can be adjusted by the driver and the last adjustment to each is retained in the memory of the control unit. The unit also turns on the car's courtesy lamp when the door is opened from outside and leaves the lamp illuminated for a period of nineteen seconds, with a fade out over a period of six seconds. When the windscreen washer switch is activated, the unit switches on the wipers and ensures their continued operation for five seconds after the washer switch has been released. It also controls the intermittent function of the windscreen wipers, causing one sweep of the wipers every seven seconds, when the intermittent wiper switch is activated. Finally, when the appropriate switch is activated, the unit switches on the rear screen demister and switches it off after ten minutes if the demister switch has not been switched off. The low series unit, which was manufactured for inclusion in Ford Falcons, performs the same functions as the high series unit, with the exception of the radio aerial function and the fade out feature of the courtesy lamp.

6. Each of the units contains a microprocessor, the read only memory (ROM) of which is programmed to perform certain functions. The microprocessor also contains a random access memory (RAM), into which can be programmed information, such as the desired level of illumination of the dashboard display for night and day levels.

7. In respect of most functions, the microprocessor simply measures time elapsed. This is the case with respect to the rear screen demister, the courtesy lamp illumination, the intermittent windscreen wiper and the wiper-washer functions. With respect to dashboard illumination, nothing is measured at all; the microprocessor merely stores information as to the desired level of illumination and performs the necessary function, depending upon whether the park lamp switch is activated or not. It is only in respect of radio aerial height adjustment that something other than lapse of time is measured. In that case, there is no device for sensing the height of the aerial. Instead, the microprocessor senses the number of cycles of the electric motor which drives the aerial up or down. When the electric motor has executed the required number of cycles, which will raise the aerial to the half-way point or to its full height, the microprocessor shuts off the electric motor. Thus, if any outside force operates to impede the raising or lowering of the aerial, the microprocessor will still count the requisite number of cycles of the electric motor and shut off the motor when that number is reached. It should be remembered that the radio aerial function is not available in the low series unit.

8. The Tribunal found that the words of heading 9032 and note 6(b) were used in their ordinary and natural meaning, were not ambiguous or obscure, and did not produce a result which was manifestly absurd or unreasonable. It therefore declined an invitation put on behalf of the Comptroller-General that it look at extrinsic materials, pursuant to s.15AB of the Acts Interpretation Act 1901. The extrinsic materials contemplated were the documents known as the Brussels Explanatory Notes, which are part of an international arrangement, designed to standardise tariff laws.

9. Applying the ordinary meaning of the legislation, the Tribunal held that each of the high and low series units was correctly described as "apparatus for automatically controlling...". It was held that, notwithstanding that the manual operation of a switch was necessary to put each function into effect, the operation of the units fell within the ordinary meaning of the word "automatic". This is clearly so. Items are described as "automatic" in common parlance, if they complete a task or series of tasks, in accordance with programmed instructions, without human intervention other than manual initiation of the process. Examples are automatic toasters and automatic washing machines. The Tribunal then went on to hold that the remaining words of note 6(b) were applicable to both the high and low series units. In the case of most of the functions, the Tribunal accepted that duration of time could be regarded as a non-electrical quantity for the purposes of the note. It found as a fact that the operation of the units depended on electrical phenomena, namely electrical current or fluctuations in electrical current and impulses within the microprocessor. The Tribunal then concluded that the electrical phenomena varied according to the factor to be controlled, namely duration of time. In relation to the radio aerial function, it was said that the non-electrical quantity was the number of cycles of the electric motor and that the electrical phenomena varied according to that number of cycles.

10. At one point in its reasons for decision, the Tribunal incorrectly rendered the phrase "varying according to the factor to be controlled" as "varying in accordance to the factor to be controlled". It did so for the purpose of distinguishing the preposition "to" from the preposition "with", i.e. to suggest that the note did not require that the electrical phenomenon vary "in accordance with" the factor to be controlled. I do not think that this error is of great significance in the reasoning of the Tribunal.

11. I must confess to being assailed by great doubts as to the correctness of the Tribunal's decision in relation to the ordinary meaning of the words of note 6(b). I have doubted whether the duration of time can properly be regarded as a non-electrical quantity, and whether a change in an electrical phenomenon which merely occurs after a pre-determined lapse of time can be said to vary "according to" the lapse of time. In other words, it is not altogether clear to me that devices which are, in substance, nothing but time delay switches, are intended to be covered by note 6(b) and therefore by heading 9032. Despite these doubts, I have decided that the Tribunal's reasoning, on the ordinary meaning of the words, should be accepted. There was evidence on which the Tribunal could base its conclusion that duration of time was a non-electrical quantity. There is nothing in note 6(b) to specify that the electrical phenomenon contemplated must be capable of varying both up and down according to the factor to be controlled. Variation in one direction only, and at a uniform rate, appears to fall within the ordinary meaning of the words. I am not therefore prepared to say that the Tribunal erred in law in reaching the conclusion that it reached in relation to the ordinary meaning of the words of note 6(b).

12. There was, however, a step which the Tribunal does not appear to have taken. It had before it evidence from three independent experts, two on behalf of the respondent and one on behalf of the applicant. All were agreed that the phrase "automatic control" or "automatic controller" has a technical meaning in a discipline known as process control. A definition, or definitions, of that technical meaning constituted part of the evidence before the Tribunal. It might be said that the evidence of the existence of such a technical meaning was uncontradicted. Despite this, the Tribunal did not make a finding as to whether there was or was not a technical meaning. Counsel for Bosch endeavoured to argue that, by choosing the ordinary and natural meaning, the Tribunal must be taken to have rejected any technical meaning. I cannot accept this submission. There is no indication in the reasoning of the Tribunal that it either rejected the evidence that a technical meaning existed, or found the existence of a technical meaning but, after proper consideration, rejected it in favour of the ordinary and natural meaning. The Tribunal's reasoning makes it clear that it resorted directly to the ordinary and natural meaning. It simply said, "The words of the tariff appear to have been used in their ordinary sense."

13. In my view, it was necessary for the Tribunal to make a finding on the evidence concerning the existence of a technical meaning. If it found that a technical meaning existed, the Tribunal would then have found it necessary to determine whether the words of note 6(b) and heading 9032 were ambiguous. In so doing, the Tribunal ought to have "acknowledged that in a statute such as the Customs Tariff, the Court will the more readily conclude that items have been described according to common commercial or trade usage and that the words have not been used in the natural and ordinary sense...". See D. and R. Henderson (Mfg) Pty. Ltd. v. Collector of Customs for the State of New South Wales (1974) 48 ALJR 132, at p 135. If it concluded that there was an ambiguity, the Tribunal could then have availed itself of extrinsic materials, pursuant to s.15AB of the Acts Interpretation Act 1901. In so doing, it may have concluded that it would be proper to look at the Brussels Explanatory Notes. See Gardner Smith Pty. Ltd. v. Collector of Customs, Victoria (1986) 66 ALR 377 at pp 383-384.

14. In failing to embark on this chain of reasoning, the Tribunal erred in law. Its initial error was the failure to make a finding of fact. In this appeal, the Court cannot make that finding. It is therefore necessary to set aside the decision of the Tribunal and to remit the matter to the Tribunal for reconsideration, in accordance with these reasons for judgment.

15. The Brussels Explanatory Notes were tendered to the Court, without objection. I have not examined them, for the purposes of this judgment, because their content does not arise in this appeal. As I have said, whether or not they are to be examined depends upon the extent to which the Tribunal is led down the chain of reasoning which I have described, if it should find in accordance with the evidence that a technical meaning existed and should conclude that the words of heading 9032 and note 6(b) are ambiguous.

16. There was also some discussion, and written submissions were forwarded, as to other possible classifications within Schedule 3. This discussion arose out of the possibility that the high series unit might qualify in part within the ordinary meaning of the words of note 6(b), because of the radio aerial function, but might otherwise fail to satisfy the criteria in that note. As I have held that the Tribunal's reasoning in relation to the ordinary meaning of the words was correct, the question does not arise. If it should arise upon reconsideration by the Tribunal, then the Tribunal will be in a position to make any necessary findings of fact for the purpose of alternative classifications.