Re Sondo Pty Ltd v the Federal Commissioner of Taxation [1991] FCA 32; 91 Atc 4203/21 Atr 1335 (15 February 1991)

FEDERAL COURT OF AUSTRALIA

Re: SONDO PTY LTD
And: THE FEDERAL COMMISSIONER OF TAXATION
No. WA G66 of 1990
FED No. 28
Sales Tax
[1991] FCA 32; 91 ATC 4203/21 ATR 1335

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)

CATCHWORDS

Sales Tax - exemptions and classifications - design of goods - relevance of manufacturer's purpose and other circumstances - pushbutton video machines - design for conversion to coin operation - whether within Sales Tax (Exemptions and Classifications) Act Second Schedule sub-item 60(1) - whether machines "the operation of which is designed to depend upon the insertion of money" - construction of sub-item 60(1) - questions of law and fact - "designed" - objective characterisation - relevant circumstances - intentions of manufacturer and purchaser - rulings - alteration of ruling - remission of unpaid tax - what constitutes alteration - s.12D Sales Tax Procedure Act.

Words and Phrases - "designed", "designed to depend upon..."

Sales Tax (Exemptions and Classifications) Act 1935 Second Schedule sub-item 60(1)

Sales Tax Procedure Act 1934 s.12D

Sales Tax Assessment Act (No. 1) 1930 ss.3, 4, 17, 19, 41

Magna Stic Magnetic Sign Pty Ltd v. Federal Commissioner of Taxation 89 ATC 5000

Feltex Commercial Interiors Pty Ltd v. Federal Commissioner of Taxation 90 ATC 4925

Hygienic Lily Pty Ltd v. Deputy Federal Commissioner of Taxation (1987) 13 FCR 396

Jedko Game Co. Pty Ltd v. Collector of Customs (NSW) (unrep Full Fed Ct; 10/3/87);

Associated Blue Metal Quarries Ltd v. Federal Commissioner of Taxation (1956) 94 CLR 509

Life Insurance Co. of Australia Ltd v. Phillips [1925] HCA 18; (1925) 36 CLR 60

Neal v. Secretary, Department of Transport (1980) 29 ALR 350

Deputy Commissioner of Taxation v. Lincolns Industrial Cleaners Pty Ltd (1975) 2 NSWLR 499

Federal Commissioner of Taxation v. Hamersley Iron Pty Ltd (1981) 37 ALR 595

Deputy Commissioner of Taxation v. Stewart [1984] HCA 11; (1984) 154 CLR 385

HEARING

PERTH
15:2:1991

ORDER

The appeal is dismissed.

The applicant is to pay the respondent's costs of the appeal.

NOTE: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

A manufacturer of video game machines sold them to its holding company across the street for resale by retail or for use in amusement centres operated by the holding company. As manufactured the machines had a push-button starting mechanism. On that basis it is said that they attracted sales tax at the general rate of 20%. They were, however, designed to be readily converted to coin operated machines, and 99% of those sold to the retailer were so converted after sale. The Commissioner of Taxation contends that as manufactured they were machines "of a kind used for the purpose of entertainment or amusement, the operation of which is designed to depend upon the insertion of money in the machines". He assessed the manufacturer for sales tax on two of them on the basis that, so characterised, they fell within sub-item 60(1) of the Second Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 and attracted a special rate of 30%. The manufacturer appealed unsuccessfully to the Administrative Appeals Tribunal and now appeals from the Tribunal to the Court on questions of law involving the proper construction of sub-item 60(1) and also that of s.12D of the Sales Tax Procedure Act relating to a claimed entitlement to remission of tax based upon the proposition that the Commissioner had altered a relevant ruling.
Factual Background

2. Avel Pty Ltd is a company which trades under the name Leisure and Allied Industries. From 1984 to 1988, it carried on the business of manufacturing electronic video game machines for sale by retail or use in amusement centres which it owns and operates under the name Timezone. The machines it manufactured during that time were coin operated, and by reason of that fact attracted liability for sales tax at the special rate of 30% under sub-item 60(1) of the Second Schedule to the Sales Tax (Exemptions and Classifications) Act 1935. On 14 July 1988, Avel requested a ruling from the Deputy Commissioner of Taxation as to the sales tax classification of the machines if constructed with a push-button rather than coin operated starting mechanism. The request, in the form of a letter from Avel's accountants, Touche Ross, was in the following terms:

"We have been requested to obtain a ruling from the
Commissioner as to sales tax classification of certain goods.
The goods consist of an amusement machine which does
not have a coin operated mechanism. The method of
initiating the operation of the machine is simply by
pushing a button. No coin mechanism is included in
the machine and its operation is not dependant (sic)
upon the insertion of money or tokens in the goods or
in a device associated with the goods.
Consequently, we seek confirmation that such machines
and accessories and parts therefore, would if sold in
taxable circumstances be subject to sales tax at the
general rate of 20%.
If you wish to discuss any aspect of this matter,
please contact Mr S. Gooden."

On 11 August 1988, the Deputy Commissioner of Taxation replied:

"We refer to your recent request on the classification
of amusement machines which operate without the need
to insert coins.
It is agreed that the amusement machines which are
manufactured by your company and are operated by
simply pushing a button, are subject to sales tax at
the general rate of 20%."

3. Following this ruling, the management of Avel decided to set up a subsidiary company to manufacture its machines with a press-button rather than coin operated starting mechanism. Sondo Pty Ltd ("Sondo") was acquired by Avel on 27 September 1988 for that purpose. It became a wholly owned subsidiary of Avel. And on the same day it applied for sales tax registration. The following day, 28 September, its accountant, Fehily Loaring Pty Ltd, wrote to the Deputy Commissioner advising, inter alia, that "on and from 27 September" Sondo would produce push-button operated electronic video games, some of which would be sold to Avel at not less than total manufactured cost plus 5%. The letter went on:

"In accordance with your ruling to Avel Pty Ltd dated
11 August 1988, sales tax will be paid upon the above
sale value at the general rate of 20%. Sondo Pty Ltd
now requests formal confirmation of the appropriate
sales tax rate of 20% applying to the push- button machine."

It was also indicated that Avel would deal with the machines purchased or leased from Sondo by:

1. Using them in its Timezone Centres or other sites as
push-button machines.
2. Selling them by retail as push-button machines.
3. Selling them by retail together with coin operated
mechanisms (taxable at 20%).
4. In most cases, attaching coin operated mechanisms
(permanently or temporarily depending upon requirements
of the user) and then using them in Timezone Centres or
other sites or for sale by retail.

It was submitted by the accountant that the attachment of a coin operated mechanism either permanently or temporarily, would not constitute manufacture for sales tax purposes. As Avel would not carry on business as either a manufacturer or wholesaler, it would not have any liability to sales tax.

4. The Deputy Commissioner took the view, expressed in a letter to Sondo of 3 October 1988, that the machine manufactured without a coin operated mechanism would nevertheless fall within sub-item 60(1) of the Second Schedule to the Sales Tax (Exemptions and Classifications) Act thereby attracting the special sales tax rate of 30%. Alternatively, he would regard the addition of a coin operating mechanism by Avel as a process of manufacture of the machine so modified within that sub-item.

5. Sondo commenced manufacturing the machines at premises at 34 Palmerston Street, Perth, described by one of its directors, Mr W. Lance, as "literally across the road" from Avel's premises at 33 Church Street, Perth. Between 27 September 1988 and 9 April 1990 it manufactured 2,610 machines which were sold to Avel. These were made with button-operated starting mechanisms. 2,584 were converted by Avel to a coin operated starting mechanism, a process that involved no more than removing a red button and plate from the machine and replacing it with a coin operated mechanism.

6. The present appeal arises out of the sales tax assessed on two of the machines so manufactured and converted. Late in 1988, but in any event after 3 October 1988, sales tax was paid by Sondo at the rate of 20% with respect to the sale of these two machines, which were sold on 28 September 1988. On 25 January 1989 a notice of assessment issued in the following terms:

"You are hereby notified that you are liable to pay
sales tax a (sic) shown hereunder in accordance with
an assessment which has been made under the provision
of sub-section 25AA of Sales Tax Assessment Act (No.1)
1930.
ASSESSMENT UNDER SUB-SECTION 25AA OF SALES TAX
ASSESSMENT ACT (NO.1) 1930.
In respect of amusement machines (2) manufactured by
you and sold by you on 28 September 1988.
Total sale value $2,907.40
Tax payable at the
rate of 30% $872.22
Tax remitted at the
rate of 20% $581.48
Amount of tax now due $290.74
The total amount due under this assessment is $290.74.
This should be paid not later than 14 February 1989,
otherwise you will become liable for additional tax
which pursuant to sub-section 29(1) of Sales Tax
Assessment Act (No. 1) will accrue at the rate of 20%
per annum on the amount unpaid."

It is common ground that all the tax so assessed was paid.

7. On 8 February 1989, an objection was lodged against the assessment. The stated grounds of the objection were as follows:

"(a) sales tax is currently imposed at the
general rate of 20% in accordance with
section 3 and section 4(d) of the Sales
Tax Act (No. 1);
(b) the relevant goods are not covered by sub-item
60(1), 60(2) and 60(3), nor any other
item of the Second Schedule to the Sales
Tax (Exemptions and Classifications) Act;
(c) in view of (a) and (b) above, sales tax
has correctly been paid at the general
rate of 20% and no amount of sales tax is due;
(d) if tax is payable at 30%, which is not
conceded, then that further sales tax
should be remitted pursuant to section 12D
of the Sales Tax Procedure Act."

On 7 April 1989 notice of disallowance of the objection was sent to Sondo. On 13 April 1989 the company requested that, pursuant to s.41 of the Sales Tax Assessment Act (No. 1) the decision on the objection be referred to the Administrative Appeals Tribunal. The appeal was heard on 23 April 1990 and on 29 May 1990 the Tribunal affirmed the decision under review. Sondo now appeals to the Court against that decision.
Statutory Framework

8. A manufacturer of goods is liable to pay sales tax on their sale by virtue of ss.17 and 19 of the Sales Tax Assessment Act (No. 1) 1930. Sub-section 17(1) is in the following terms:

"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."

Liability is imposed directly by s.19 of the Act which provides:

"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."

The rates applicable on sales which attract liability to tax are fixed in this case by the Sales Tax Act (No. 1) 1930. Section 3 provides:

"3. Sales tax is imposed, at the rates specified in
section 4, upon the sale value of goods manufactured
in Australia by a taxpayer and, on or after 20
September 1985, sold by the taxpayer or treated by the
taxpayer as stock for sale by retail or applied to the
taxpayer's own use."

The actual rates are specified in s.4, which provided, as it stood at September 1988:

"4. The rates of the sales tax imposed by this Act are-
(a) in respect of goods covered by the Fourth
or Fifth Schedule to the Sales Tax
(Exemptions and Classifications) Act
1935 - 20%
(b) in respect of goods covered by the Third
Schedule to that Act - 10%
(c) in respect of goods covered by the Second
Schedule to that Act - 30%; and
(d) in respect of goods not covered by the
Second, Third, Fourth or Fifth Schedule to
that Act and on the sale value of which it
is not provided by that Act that the sales
tax imposed by this Act shall not be
payable - 20%."

The Third, Fourth and Fifth Schedules are not relevant for present purposes. The issue for this case is whether the goods in question are covered by the Second Schedule, and therefore attract a special rate of 30%, or the general rate referred to in s.4(d) of 20%.

9. The only general provision of the Sales Tax (Exemptions and Classifications) Act 1935 which is relevant for present purposes is s.6B(1) which provides:

"6B(1) The goods specified in a Schedule other than
the First Schedule are so specified for the purposes
of the Acts imposing sales tax upon goods so specified."

Item 60 of the Second Schedule applies to the following class of goods:

"60(1) Goods, being machines, instruments or devices
of a kind used for the purpose of gambling,
entertainment or amusement, the operation of which is
designed to depend upon the insertion of money or
tokens in the goods or in machines, instruments or
devices connected to, or associated with, the goods.
(2) Goods, being machines, instruments or devices,
where -
(a) the operation of the goods is designed to
depend upon the insertion of money or
tokens in the goods; and
(b) the goods are designed for use in
connection with the use of goods of a kind
used for the purpose of gambling,
entertainment or amusement.
(3) Accessories and parts for goods to which
sub-item (1) or (2) applies."

Prior to 20 September 1985, item 60 read as follows:

"60. Slot machines, coin machines and token machines
(and parts therefor), but not including weighing
machines or machines for the sale of goods."

Also relevant is s.12D of the Sales Tax Procedure Act which provides:

"12D(1) Where the Commissioner alters a ruling
previously given, then notwithstanding anything
contained in any Sales Tax Assessment Act, if the
Commissioner is satisfied -
(a) that any person has acted in accordance
with that prior ruling and that, by reason
of so acting, that person has, in respect
of any transaction, act or operation
effected or done by that person between
the date upon which the prior ruling was
given and the date upon which the
Commissioner alters the prior ruling -
(i) not paid sales tax; or
(ii) paid a less amount of sales
tax than he would have paid if
the ruling as altered had
been given at the time of the
prior ruling and he had acted
in accordance with the ruling
as altered; and
(b) that that person did not contribute to the
giving or to the continuing in force of
the prior ruling by any misstatement or
by any suppression of material fact,
the Commissioner may remit the amount of tax so
unpaid.
12D(2) The Commissioner shall be deemed to alter a
ruling where the Commissioner, a Second Commissioner
or a Deputy Commissioner gives any further ruling
which expressly or by necessary implication withdraws,
amends, modifies or qualifies so much, if any, of any
prior ruling as has not been withdrawn, amended,
modified or qualified by any intervening ruling:
Provided that where the further ruling relates to
or deals with the application of any amendment of the
law, the Commissioner shall not, to that extent, be
deemed to have altered any ruling given prior to the
commencement of that amendment:
Provided further that, for the purposes of this
section, where the further ruling is given by letter
or other communication addressed to a particular
person or to particular persons that further ruling
shall be deemed to have altered a prior ruling only in
respect of that person or those persons, and this
section shall apply in relation to any subsequent
further ruling published for general information, to
the extent to which it affects any other persons, as
if the further ruling given by letter or other
communication had not been given.
12D(3) For the purposes of this section a ruling
shall be deemed to have been given -
(a) where the ruling is published in a
newspaper - on the day next following the
date on which the ruling is first
published in any newspaper; or
(b) where the ruling is published in any book
or other publication printed by the
Government Printer - on the day next
following the date on which that book or
publication is first available for sale in
the Australian Capital Territory; or
(c) where the ruling is given by a letter or
other communication addressed to the
taxpayer at his last known place of
address in Australia - on the date on
which the letter or communication would,
in the ordinary course of the post, be
delivered at that address,
or on such later date as may be specified in the
ruling.
12D(4) In this section "ruling" means any written
ruling, decision or advice either given to a
particular person or published for general information
by the Commissioner, Second Commissioner or a Deputy
Commissioner with respect to any law relating to the
imposition, assessment or collection of Sales Tax and
whether in relation to a particular case or in
relation to any matter or class of matter."

The Tribunal's Reasons for Decision

10. The factual background set out earlier reflects the substance of the history of Sondo and its dealings with the Commissioner of Taxation. The Tribunal heard evidence from Yianni Attikiouzel, an associate professor and Head of the Department of Electrical and Electronic Engineering at the University of Western Australia. Professor Attikiouzel had carried out an examination at Sondo's premises of a machine similar to the two in question. On the basis of his evidence and that of Sondo's finance director, Mr W. Lance, and Avel's production manager, Mr Bryan Edwards, the finding was made that when the machines left Sondo's premises they were in a form which allowed them to be operated by pressing a red button. That button was surrounded by a metal plate screwed on to a cabinet door located on the front of the machine by four screws. The wiring connecting the button to the rest of the machine was secured by a clip situated immediately inside the cabinet door. The wiring secured by the clip was readily removable. The Tribunal went on:

"After the machines are transported over the road to A
Pty Ltd (Avel Pty Ltd) the metal plate is unscrewed
and the wiring is unclipped so that the button
operated mechanism can be removed. The metal plate,
red button and wiring is replaced by a metal plate of
the same size with a coin operated mechanism with
similar wiring which is clipped in the place of the
wiring which connected the button operated mechanism
and the rest of the machine. At the same time a coin
collection box is inserted on to a stand which has
been already built into the machine at the time of
manufacture by S Pty Ltd (Sondo Pty Ltd). The
Tribunal accepts the evidence of Mr Lance and Mr
Edwards that the push-button mechanism installed by A
Pty Ltd is stored at S Pty Ltd's premises after the
conversion has occurred. There is no evidence to
suggest the disused button mechanisms including the
plate are returned to or reused by S Pty Ltd." (It is
common ground that the word 'installed' should read
'removed' and that the second reference to S Ltd
should be a reference to A Pty Ltd.)

11. Reference was made to Professor Attikiouzel's evidence that the only difference between the coin and push-button operated machines is the manner in which the initiating signal is sent to a microprocessor. Where the coin mechanism is used, it is the coin which operates a signalling device. In the case of a push-button machine, it is the pushing of the button which fulfils that function. Otherwise their operation is the same.

12. The Tribunal also found that the Sondo machines had a platform in their bases constructed for the purpose of allowing a quick conversion to coin operation. Specific findings were made that the machines:

1. Are manufactured so that they can be
operated by depressing the red button on
the front of the machine. The machines
are manufactured so that that mechanism
can be readily converted so that they can
be coin operated.
2. Are converted (at least as to 99%) by
Sondo Pty Ltd's parent company Avel Pty
Ltd which is located directly opposite
Sondo Pty Ltd's premises.
3. Are manufactured so that they can
accommodate the insertion of a box to
collect the coins when the machines are so
converted."

The Tribunal concluded that the machines were "designed to depend upon the insertion of money..." within the meaning of sub-item 60(1) and were correctly assessed at the special rate of 30% applicable to goods falling within that item. It was also held that Sondo was not entitled to a remission under s.12D of the Sales Tax Procedure Act 1934 because it had paid tax at the higher rate and therefore did not come within s.12D(1)(a).

13. The Tribunal construed sub-item 60(1) so that the words "goods of a kind" apply distributively to their purposes and to their operational design. It then posed the question whether operation of the machines was "designed to depend" upon the insertion of money. That question would have arisen upon a construction of sub-item 60(1) that limited the application of the word "kind" to its first limb relating to the defined purposes only, as submitted by the applicant. In the event, the Tribunal decided that the operation of the machines was "designed to depend" upon the insertion of money. In relation to s.12D of the Sales Tax Procedure Act, it held that it was not necessary that the Commissioner's ruling should have been issued to the person seeking the benefit of that provision. Nevertheless, s.12D(1)(a)(i) and (ii) required that a person should not have paid sales tax or should have paid a lesser amount than would have been paid if the ruling had continued in effect. The Tribunal found that Sondo having paid sales tax at the higher rate of 30% did not come within s.12D(1)(a). The decision is challenged on grounds going to the proper construction of sub-item 60(1) and s.12D.
The Construction and Application of Sub-Item 60(1)

14. Sub-item 60(1) of the Second Schedule to the Sales Tax (Exemptions and Classifications) Act is to be construed according to its own terms. There is no golden thread of principle informing the texts of the various and disparate items that make up the Second and other Schedules to the Act. Authorities on items of analogous grammatical structure are of limited assistance, although they tend to support the view that the word "kind" in sub-item 60(1) is defined only by reference to the purposes for which the machines are used, i.e. gambling, entertainment or amusement and does not extend to their operational design. Analyses confining the application of the word in items where there is more than one limb describing the relevant goods were adopted by Wilcox J. in Magna Stic Magnetic Sign Pty Ltd v. Federal Commissioner of Taxation 89 ATC 5000 at 5003 and Lockhart J. in Feltex Commercial Interiors Pty Ltd v. Federal Commissioner of Taxation 90 ATC 4925 at 4933-4934. These cases respectively refer to items 84(2) and 83(2) of the First Schedule to the Act. In Hygienic Lily Pty Ltd v. Deputy Federal Commissioner of Taxation (1987) 13 FCR 396 at 399, Gummow J. defined "kind" in the phrase "goods of a kind ordinarily used for household purposes" in item 1 of the Third Schedule to the Act as being:

"... directed not to the use for which the particular
goods in question were designed or manufactured, nor
to the purpose to which it is intended those
particular goods shall be put, but rather to the
nature, quality and adaptation of the goods in the
class or genus in question."

If so construed and distributively applied to the whole of sub-item 60(1), the word "kind" would suggest a class of goods not limited to those actually operated by the insertion of money, but extending to machines of that kind. And that would support an argument that machines capable of conversion to coin operation are caught by this item. But in my opinion the word does not apply distributively. On its most natural reading, the sub-item defines a class of goods described as "machines, instruments or devices of a kind used for the purpose of gambling, entertainment or amusement". It is a class which, on the approach adopted in the Hygienic Lily case, may not be limited to goods actually used or intended to be used for these purposes. The second limb selects out from that class machines, instruments or devices "the operation of which is designed to depend upon the insertion of money or tokens in the goods or in machines, instruments or devices connected to or associated with the goods". To be caught by the sub-item therefore, a machine must have an operation of the requisite design. It is not sufficient that it be "of a kind" whose operation is so designed. The Tribunal's construction was to the contrary and in my opinion was wrong in law.

15. The question that follows is whether the Tribunal erred in its construction of the second limb relating to operational design. In essence, Sondo's submission was that a machine constructed with a push-button starting mechanism was not one "the operation of which is designed to depend upon the insertion of money". The ordinary meaning of the word "depend", it was said, is "to be conditioned or contingent to, to hang from, to follow or flow from". Coin operation had to be essential to the functioning of a machine at the taxing point in order to bring it within the sub-item. A mere capacity to convert to coin operation could not, on this submission, meet that condition.

16. It was submitted for the Commissioner that the application of the second limb involves the ordinary meaning of non-technical words, a matter of fact on which no appeal lies from the Tribunal. I am satisfied, however, that the issue is one of the construction of a phrase and not mere interpretation of words. In that sense it raises a question of law. To determine the meaning of a word, or its non-legal technical meaning, is to determine a question of fact - Jedko Game Co. Pty Ltd v. Collector of Customs (NSW) (unrep Full Fed Ct; 10/3/87); Associated Blue Metal Quarries Ltd v. Federal Commissioner of Taxation (1956) 94 CLR 509 at 512; Life Insurance Co. of Australia Ltd v. Phillips [1925] HCA 18; (1925) 36 CLR 60 at 78; Neal v. Secretary Department of Transport (1980) 29 ALR 350 at 361-2. But the question of the effect or construction of a term once its meaning or interpretation is established is a question of law. As Isaacs J. said in Life Insurance Co. of Australia v. Phillips (supra) at 78:

"The 'meaning of the words' is what I call
interpretation, whether the words to be interpreted
into ordinary English are foreign words or code words
or trade words or mere signs or even ordinary English
words which on examination of surrounding
circumstances turn out to be incomplete. Their effect
when translated into complete English is construction.
If that distinction be borne in mind very little
difficulty remains."

17. In aid of its propounded construction the applicant referred to the explanatory memorandum circulated when sub-item 60(1) was introduced in its present form in 1985. The memorandum said in the relevant parts:

"Sub-item (1) of the proposed item will bring within
its scope machines, instruments and devices that are
operated by the insertion of money or tokens and that
are of a kind used for the purpose of gambling,
entertainment or amusement...."

It was conceded that this supports a construction of the item that applies only to "machines, instruments and devices that are operated by the insertion of money or tokens". Counsel for the Commissioner on the other hand pointed to the former item 60 which was plainly limited in its application to "slot machines, coin machines and token machines". Sub-item 60(1), it was said, reflected an intention to widen the class so far as it was described by reference to design features. In my opinion the primary guide must be the language of the item itself. The inquiry demanded by the term "designed to depend" is not satisfied by merely examining the current functioning of the machine in question, nor by a consideration limited to the subjective intentions of the manufacturer. The relevant ordinary English meaning of the word "design" is that adopted by the Tribunal from the Shorter Oxford English Dictionary, namely "marked out; planned, purposed; drawn, outlined; fashioned according to design". Implicit in that definition is the intention to be attributed to a designer. But the imputation of that intention is a matter of objective characterisation. It is analogous to the analysis which must be undertaken in applying the words "to be used for" which is a collocation appearing frequently in other items scheduled to the Act. Judicial attitudes to the construction of that phrase have varied from an apparent rejection of any consideration of subjective intention in Deputy Commissioner of Taxation v. Lincolns Industrial Cleaners Pty Ltd (1975) 2 NSWLR 499, to a recognition of its relevance in Federal Commissioner of Taxation v. Hamersley Iron Pty Ltd (1981) 37 ALR 595 at 605. The question in that case was whether parts purchased by the operator of iron ore mines for equipment used to mix different types of ore were "... for use in the mining industry in carrying out mining operations and in the treatment of the products of those operations". Acceptance of the relevance of the purposes of manufacturer and purchaser was evident in the judgment of Lush J. (Kaye and Brooking JJ. agreeing) at 605:

"The machines in question in this case were intended to
perform, built to the respondent's order to perform,
and did perform particular operations in a continuing
process. The expression "for use in" is purposive,
and this conjunction of facts, all relevant to
purpose, leads to the conclusion that, if the
operations of the machines constituted in a
significant degree 'treatment', the machines and parts
were 'for use in treatment'."

In Deputy Commissioner of Taxation v. Stewart [1984] HCA 11; (1984) 154 CLR 385, the issue was whether lottery ticket vending machines supplied free of charge on a non-exclusive basis to public benevolent institutions, were exempt under item 81(1)(c) of the First Schedule as "Goods for use...and not for sale, by...a public benevolent institution". Gibbs C.J., which whom Dawson J. agreed, noted at 390 that the items in the First Schedule describe exempted goods in two main ways - by reference to their nature and by reference to the use to which it is intended to put them:

"In many cases of the second kind the words 'for use'
indicate the purpose to which it is intended the goods
shall be put, rather than the use for which the goods
were designed."

The relevance of the intention of the manufacturer seems to have been accepted by both Gibbs C.J. and Brennan J. Deane J. at 401 said:

"While the subjective intentions of manufacturer or
purchaser are relevant and may well be conclusive,
what is required is an objective characterization of
the goods themselves in the light of all the relevant
circumstances. That characterization must be made as
at the time when liability to sales tax would
otherwise attach. It will, in an appropriate case, be
made with the benefit and in the context of knowledge
of the actual use which was subsequently made of the goods."

In my opinion, and consistently with that general approach, characterisation of goods by reference to their design in the context of sub-item 60(1) of the Second Schedule will depend upon an objective assessment which has regard to their intrinsic characteristics, the intention of the manufacturer and that of the person, if any, for whom the goods are manufactured. While this may involve the imputation of some intention or purpose to the manufacturer, it does not require a judgment based solely upon subjective states of mind. In the context of this case and the policy of the provision, the Tribunal was entitled to look at all relevant circumstances in determining whether the machines in question were "designed to depend upon the insertion of money or tokens". Notwithstanding its erroneous construction of the application of the word "kind" in sub-item 60(1), the Tribunal did adopt that approach. The finding that it made in the application of that test was a finding of fact and one which, in my opinion, was supported by the evidence.
Remission of Sales Tax

18. Sondo maintains that if the 30% sales tax rate is applicable, it is nevertheless entitled to a remission to 20% by virtue of s.12D of the Sales Tax Procedure Act. It submitted that the Tribunal erred in holding that s.12D did not apply in this case simply because Sondo did not pay a lesser amount of tax than the full rate. The notice of assessment, it was said, had made it clear that further tax was being assessed. The letter from the Australian Taxation Office accompanying the assessment insisted on payment. The subject of the proceedings before the Tribunal was the decision to object to that assessment. It was said to be absurd and oppressive for the Commissioner to claim that because the taxpayer has complied with a demand for payment it had been deprived of a remedy for which s.12D provides.

19. The Commissioner filed a notice of contention challenging the Tribunal's finding that it was "not necessary that the ruling be given to the applicant...". The notice also contended that the Tribunal erred in law in holding that Sondo had relied upon the ruling of 11 August 1988. In argument it was submitted for the Commissioner that where a ruling is given to a particular person, that is to say it is a private rather than public ruling, then it is only that particular person who may rely upon s.12D. And on the question whether payment of the full amount assessed prevented the taxpayer from taking advantage of the section, it was argued that the word "remit" in s.12D(1) means to refrain from exacting a payment, on which interpretation the Commissioner could remit only by refraining from pursuing unpaid sales tax. It would not extend to a refund of tax that had been paid.

20. It is clear that s.12D applies to rulings addressed to particular persons. It also applies to rulings of general application. And it may be the case that a person could be said, for the purposes of the section, to have relied upon a ruling directed to another. But if that ruling be altered by a subsequent ruling directed to the original addressee, then sub-s.12D(2) has the effect that the alteration cannot be invoked to attract the benefit of the section to a third party whether or not they have relied upon the original ruling. In this case however, the question of alteration of a prior ruling simply did not arise. The Tribunal seems to have proceeded on the assumption that it did, treating the ruling directed to Sondo on 3 October 1988 as an alteration of that sent to Avel on 8 August 1988. Generally speaking, however, where a ruling states some principle, whether as a conclusion about the law or a guideline for action, and the conclusion is based upon some hypothesis which is expressed in or necessarily implied by the terms of the ruling, then the ruling can only be said to be altered if the new conclusion or guideline rests on the same hypothesis. The proposition is expressly recognised in relation to the statute law that underlies a particular ruling. For s.12D(2) provides that where a further ruling relates to or deals with the application of any amendment of the law, the Commissioner shall not, to that extent, be deemed to have altered any ruling given prior to the commencement of that amendment. It may be that circumstances arise where a ruling may have been altered in spite of a change in the underlying factual hypothesis. And, of course, a factual hypothesis supporting a ruling may be posited at a level of generality that makes the ruling applicable to a wide variety of factual situations.

21. In the case of a ruling directed to a particular person, the factual hypothesis may be found in antecedent correspondence or other communications between the taxpayer and the Commissioner. The same general principle applies. In this case the factual basis of the ruling of 3 October was different from that underlying the ruling of 3 August. The ruling directed to Avel was therefore not altered, in any relevant sense, by what was later said to Sondo. In my opinion, on the facts as found by the Tribunal the section would have no application to Sondo regardless of the fact that it paid the full 30% sales tax.

22. It is not necessary to deal with the question whether the fact that Sondo paid the additional 10% of tax assessed on the basis of the ruling of 3 October 1988 would have prevented it from taking the benefit of the section had that ruling in fact reflected an alteration of the ruling of 3 August. It may be that where tax is underpaid on the basis of the primary ruling, and additional tax paid later in answer to a demand made under an altered ruling, the section could still be invoked. For on one view of the section, the necessary condition of an underpayment in reliance upon the original ruling is satisfied. It is true that the ordinary English meaning of the word "remit" includes "to abstain from exacting (a payment or service of any kind); to allow to remain unpaid (or unperformed)". But as the dictionary definition shows, it also has the sense of "send back" or to "give up, resign, surrender (a right or possession)". I am inclined to the view that the section can be applied to the posited case. It is however unnecessary to express a concluded view on that point.

23. In the event, and for the reasons which I have given, this appeal will be dismissed.