Re Table Eight Pty Ltd; Lee Mckeand and Son Pty Ltd and Kate Madden Pty Ltd v Collector of Customs [1993] FCA 22; (1993) 17 Aar 54 (1993) 40 FCR 524 (9 February 1993)

FEDERAL COURT OF AUSTRALIA

Re: TABLE EIGHT PTY LTD; LEE McKEAND AND SON PTY LTD and KATE MADDEN PTY LTD
And: COLLECTOR OF CUSTOMS
No. N G407 of 1992
FED No. 31
Number of pages - 14
Administrative Law

[1993] FCA 22; (1993) 17 AAR 54
(1993) 40 FCR 524

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Morling J.(1)

CATCHWORDS

Administrative Law - Customs - Importation of goods - duty - whether goods dutiable at concessional rate - payment of duty at full rate - whether mistake made - whether duty paid "through manifest error of fact or patent misconception of the law" - determination by Administrative Appeals Tribunal - whether error of law in determination

Customs Act 1901

Customs Tariff Act 1987, s 25

Customs Regulations 126(1)(e)

HEARING

SYDNEY, 30 October 1992
9:2:1993

Counsel for the applicants: A. Robertson
instructed by Landerer and Co.

Counsel for the respondent: S.J. Gageler

instructed by Australian Government Solicitor

ORDER

The Court orders as follows:
1. Appeal allowed.
2. Stand over to a date to be fixed for making of formal orders.

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

DECISION

MORLING J. This is an appeal from a decision of the Administrative Appeals Tribunal, constituted by Deputy President McMahon, affirming three decisions of the Collector of Customs to refuse to refund duty paid by or on behalf of each of the applicants.

2. The questions of law which fell to be decided by the Tribunal and the facts which gave rise to them are set out with such clarity in the Tribunal's reasons for decision that a reformulation of them by me would not achieve any useful purpose. Accordingly, the following statement of them is taken almost verbatim from the Deputy President's careful reasons.

3. In all three applications before the Tribunal a quantity of fabric was imported under circumstances which, so it was alleged, entitled the applicants (who were the importers) to the benefit of a certain by-law. Because of an error on the part of the agent acting for each importer, reference to this entitlement was not made when the goods were entered for home consumption. The refund applications were in respect of duty paid at the full rate.

4. Section 25 of the Customs Tariff Act 1987 provides that if an item in Schedule 4 of that Act applies to goods and the amount of duty thereby applicable to the goods is less than the amount otherwise ascertainable, the amount referred to in Schedule 4 applies. Item 40A of that Schedule refers to "fabric, as prescribed by by-law, being fabrics classified under a heading of schedule 3 specified in the Table below." The item then specifies a number of particular headings in schedule 3 which are replicated in by-law 9040028. It is in the following terms:

"FABRICS CLASSIFIED UNDER 5007, 5111, 5112, 5208, 5210, 5212, 5407,
5408, 5512, 5513, 5515 or 5516 of Schedule 3, weighing less than 125
g/sq m, as follows:
(a) for use in a clothing factory in the manufacture of goods, as
follows -
(i) goods which, if imported, would be classified in Chapter 62
in Schedule 3 to the Customs Tariff Act 1987, other than
linings or pocketings;
(ii) bias binding;
(iii) piping;
(b) having a width of less than 115 cm, other than
fabrics containing filament yard that have a value
not exceeding $1.50/m, for use other than for any
manufacturing process."

5. The first applicant ("Table Eight") is the proprietor of a clothing factory. In April 1990, it imported fabrics in a shipment which included a fabric weighing less than 125 g/sq m, which would have complied with the terms of the by-law. It had been importing such fabrics for some years and had been returning them for by-law purposes on a monthly basis. Fabrics of the kind under consideration were not used for any purpose other than for use in Table Eight's clothing factory. Its customs agent was in receipt of standing instructions to import these fabrics under the provision of by-law 9040028. The second applicant is also the proprietor of a clothing factory. The third applicant runs a much smaller operation.

6. In all three cases, the Collector of Customs conceded that prior to the entry of the goods, the applicants had intended that the imported goods should be entered in accordance with the by-law concession but that the goods had not been so entered because of errors of their customs agents. The Collector also conceded that the goods were in fact eventually actually used in a manner which would have satisfied the terms of the by-law had they been entered in that manner.

7. In each case the error was made by the customs agent. The circumstances in which the errors arose can be appreciated from the facts in the Table Eight case. When its customs agent received the appropriate invoice from its shipping clerk to clear the goods through customs, the customs agent had several conversations with the clerk. Most of these conversations centred around the heavier fabrics that were included in the invoice. The light weight fabric, being the only one eligible for exemption under the by-law, was not discussed. The one invoice referred to 5780 metres of cloth with a stated weight of approx. 121 g/sq m and 3400 metres of heavier cloth. The customs agent entered the total shipment for home consumption and duty was paid at the full rate on the total quantity of goods.

8. The customs agent depended entirely upon the documentation given to him by Table Eight's shipping clerk. Although he had a good knowledge of fabrics, it was not possible for him to discern with the naked eye the difference between fabrics of 121 g/sq m and fabrics of 125 g/sq m. In any event he did not actually see the fabrics.

9. When it was discovered that a concessional rate had not been claimed, an application was made for refund of duty on the basis that the fabric weighing less than 125 g/sq m should have been entered for use in the manufacture of garments. A refund of duty was claimed under the provisions of reg 126(1)(e) of the Customs Regulations. The application for refund was rejected and Table Eight applied to the Administrative Appeals Tribunal to review that decision. Similar applications for review were made by the second and third appellants. It was agreed at the hearing before the Tribunal that the outcome of Table Eight's application would determine the outcome of all three applications for review.

10. The respondent contended in the Tribunal that he was not liable to make a refund for two reasons. First, it was submitted that the applicants were obliged to identify the proposed use of the fabric at the time of importation. This identification not having been made at that time, the right to a concessional rate of duty was said to have been lost. Secondly, it was submitted that the refund provisions had no application to the circumstances in which the fabrics had been imported since there was "no manifest error of fact or patent misconception of the law" as required by reg 126(1)(e) made under the Customs Act 1901. I shall later make fuller reference to the terms of the regulation.

11. Section 4 of the Customs Tariff Act requires the Customs Act to be read with it as one piece of legislation. Section 68 of the Customs Act requires any goods that are imported to be entered for home consumption, for warehousing, or for transhipment. Section 36 requires that where such an entry is made, the owner of the goods shall give appropriate particulars to the Collector in the manner prescribed. It is not until the giving of this information that the goods are to be taken as entered. Section 39 provides that only upon the making of such an entry will the respondent give authority for the goods to be dealt with in accordance with that entry. There can be only one entry (s.38) and it may be withdrawn prior to the payment of duty. Thereafter, that procedure is not available. In the circumstances of the present cases, it would not have been possible for the importers to have requested withdrawal of the entries after payment of duty on the grounds of mistake. Duty was only recoverable in accordance with the statutory provisions relating to refunds.

12. Section 167 of the Customs Act deals with disputes as to the amount or rate of duty. It requires an owner of goods to pay, under protest, the sum demanded by the respondent as the duty payable in respect of goods as to which there is a dispute. In order to recover any duty that later appears to have been wrongly paid, it is necessary for the importer to write on the entry of the goods the words "Paid under protest" and to add a statement of the grounds on which the protest is based. Hence unless protest is made at the time of payment of duty, the procedure under s.167 for recovery of duty is not available. Consequently, a classification dispute must be identified at the time of importation.

13. It was submitted to the learned Deputy President on behalf of the respondent that these legislative provisions demonstrate that it is necessary to identify an entitlement to a particular rate of duty at the time of entry of goods and that in the case of by-law 9040028 it is necessary, to claim entitlement and to show at the time of importation that the goods are for use in the manner prescribed by the by-law. Failure to do was said to deprive the importer of his entitlement under the by-law. This submission was rejected by the learned Deputy President. On the hearing of the appeal it was submitted that he erred in law in so rejecting it. It is convenient to deal with this question first, although it does not arise out of the appeal itself but rather out of the notice of cross-contention filed by the respondent.

14. In my opinion the Deputy President's decision on this point was correct. The by-law renders duty free a fabric which weighs less than the stipulated amount and which is to be used in a clothing factory in the manufacture of certain nominated goods. I agree with the learned Deputy President that the word "for" in the by-law is used in the sense of "with the object or purpose of". It is thus a requirement of the by-law that, at the relevant time, the importer must intend to use the goods in a clothing factory in the manufacture of prescribed goods. As the learned Deputy President observed in his reasons:

"In the terms of the by-law, the fabric need not be necessarily used by
the importer. However, it seems to me that the importer is bound by the
use of the word 'for' and must be able, therefore, to show that he or
the proposed manufacturer had the object or purpose of manufacturing the
prescribed goods. For this reason it seems to me that compliance must
be demonstrated at the time of importation. The emphasis is not so
much on use as on for.
...
Provided however that the necessary object or purpose (referred to
for the sake of brevity as intention) is present at the time of
importation, I am unable to see how it can be lost by a failure to
declare that object or purpose at the time of entry."

15. I respectfully agree with this reasoning. Counsel for the respondent relied upon Times Consultants Pty Ltd v Collector of Customs (1987) 16 FLR 449 at 462 but I do not think that decision assists the respondent's argument.

16. I therefore reject the argument that the benefit of the by-law was not available to the applicants because of their failure, at the time of importation, to state the purpose for which the fabric was being imported.

17. I turn now to consider the second argument advanced on behalf of the respondent, namely, that the applicants were not entitled to refunds because the duty had not been paid "through manifest error of fact or patent misconception of the law". The learned Deputy President found for the respondent on this question. In my opinion the finding on this question involved a question of law. I did not understand the contrary to be asserted.

18. The legislative framework for the making of claims for refunds of duty is found in s. 163 of the Customs Act and regs. 126-128A made under that Act. Sub-section 163(1) reads as follows:

"s 163(1) Refunds, rebates and remissions of duty may be made -
(a) in respect of goods generally or in respect of the goods
included in a class of goods; and
(b) in such circumstances, and subject to such conditions and
restrictions (if any), as are prescribed, being circumstances,
and conditions and restrictions, that relate to goods
generally or to the goods included in the class of goods."

19. The circumstances referred to in s.163(1) are prescribed by reg 126 which provides, inter alia, that refunds, rebates and remissions may be made where "duty has been paid through manifest error of fact or patent misconception of the law": vide reg 126(1)(e). The learned Deputy President was of the opinion that the facts of the present cases did not establish that duty had been paid through any misconception of the law. He thought there was a genuine dispute between the applicants and the respondent as to the rate of duty applicable, this dispute arising out of the respondent's contention that the applicants had lost their right of free entry because of their failure to make the required declaration of intention to use the goods for the purpose prescribed in the by-law. He thought that, under these circumstances, there was no patent misconception of the law and that what the applicants were seeking to do through the refund procedure was to seek an alternative forum for the ventilation of a dispute as to the classification of imported goods. In his opinion, a dispute as to the amount of duty payable, whether it arises out of a dispute as to classification or not, is not the type of dispute intended to be ventilated by reg 126(1)(e).

20. I am unable to agree with this reasoning. I do not think there is any mutual exclusivity between a dispute and a mistake. The mere fact that a claim for a refund is rejected by the respondent does not mean that there cannot be a patent misconception of the law. If it were otherwise, an unreasonable or irrational refusal by the respondent to grant a refund would deprive an importer of the benefit of the refund provisions in the legislation. I therefore think the view taken by the Collector, namely that the applicants had lost their entitlements under the by-law in failing to make declarations of purpose at the time of importation, was a patent misconception of the law.

21. However this does not mean that the applicants are entitled to refunds under reg 126(1)(e). In order to satisfy the requirements of reg 126(1)(e) there must be a causal relationship between the error made and the (over) payment of duty. In the present cases the law was misconceived by the Collector not at the time of payment but when later rejecting the applicants' claims for refunds. In these circumstances it cannot be said that the duty was paid through "patent misconception of the law".

22. Nevertheless it became apparent in the course of proceedings that the applicants' real claim for relief rested on the alternate basis in reg 126(1)(e) namely that the duty was paid through "manifest error of fact". Counsel for the applicants contended that the Deputy President erred in law when he decided that the mistake in entering the goods under the wrong classification was not a "manifest error of fact". The Deputy President's reasoning on this matter appears from the following passage in his reasons:

"One must therefore ask whether there has been a manifest error of
fact in the present circumstances. In my view, a failure to claim
exemption is no different in principle from the entry of the goods under
a classification later thought to be inappropriate. To what other
manifest error can any of the applicants point? It was not asserted on
the entries that the relevant intention to use the goods did not exist.
Indeed the actual intention of the importers would have been unknown to
the agents. Where is the positive error of fact? I am unable to see
one, except that the agents in each case mistakenly entered the goods
under the wrong classification and tendered the wrong amount of duty.
There have been so many decisions of this Tribunal that such conduct
does not amount to a manifest error of fact that it would require a
decision of higher authority to persuade me to the contrary. The acts
of the agents, like the act of the agent in Dahlia Mining Co Limited and
Another v Collector of Customs 90 ALR 193, are not aptly described as
payments through manifest of error of fact or patent misconception of
the law." (emphasis added)

23. I am unable to agree with this reasoning. It appears to proceed upon the basis that there is mutual exclusivity between a mistaken entry of goods under the wrong classification and the payment of duty through manifest error of fact. I can see no reason why, in an appropriate case, it could not be found that duty was paid through manifest error of fact causing goods to be entered under a wrong classification. Indeed, that is what the applicants claim happened in the present cases.

24. In Re Halifax Group Pty Ltd v Collector of Customs (1984) 5 ALN N427 the Tribunal observed (at N429) that the legislative provisions relating to refund of duty should not be seen as an alternative forum for the ventilation of a dispute as to the classification of imported goods. I agree with this as a general observation. But it is to be observed that s.167 of the Customs Act, which deals, inter alia, with disputes as to classification of goods, also deals with claims for refunds of duty. I see no reason therefore why the subsequent occurrence of a dispute as to classification changes the nature of the original mistake. If the error, when originally made, can properly be identified as a manifest error of fact and if the error led to payment of duty, a claim for refund can be made.

25. The respondent concedes that, had the custom agent not erred in failing to claim the concession at the time of entry, the applicants would have been entitled to a lower rate of duty under by-law 9040028. Hence there is no dispute that an error of fact occurred through which duty was mistakenly paid at the full rate. The issue between the parties is therefore whether the error of fact made by the custom agent in entering the goods under the wrong by-law classification was a manifest error of fact.

26. It was submitted by Mr Gageler, counsel for the respondent, that for an error to be manifest it must be observable by some hypothetical objective bystander at the time the mistake was made. He argued that the purpose for which the importers intended to use the goods and their entitlement to the benefit of the by-law were not known to third parties. Hence the custom agent's error in paying duty at the full rate was not "manifest".

27. Mr Robertson, counsel for the applicants, rejected this "wharf-side observer" test. He argued that it was not warranted by the language of the legislation. He submitted that "manifest" is a measure of the quality or clarity of the error rather than its observability. The test is therefore whether duty was overpaid as a result of a clear and unambiguous error.

28. If Mr Gageler's argument were to be adopted the operation of the refund provisions would be severely limited. It would be rare indeed for an importer or his agent to make an error so egregious that it was manifest to a bystander and not to the importer or agent himself. Moreover, it is difficult to see how a wharf-side observer test would operate where the nature of the goods (such as chemicals) might render their identity physically unobservable. Further, if the respondent is right in the meaning it attributes to "manifest", then reg 126(1)(e) would rarely, if ever, provide relief in cases where duty is paid on goods which could have been entered under "end use" by-laws such as 9040028. In such cases the intended end use of the goods will be known only to the importer or his agent.

29. In general therefore an error of fact will be "manifest" where it is clear and unambiguous that a mistake has been made. In making this evaluation of the quality of the error one is not limited to objectively ascertainable facts such as may be observable to some hypothetical bystander, rather one should have regard to all the "true facts" (see Re General Computing Services Pty Ltd v Collector of Customs (1983) 5 ALD 205 at 211) including, if relevant, the intention of the party concerned, provided of course that such can be proved.

30. In the present cases, I think the facts as to which there was no dispute demonstrate that the payments of duty were made through manifest error of fact. Given that the fabric weighed less than 125 g/sq m and was intended for a by-law 9040028 end use, it was a clear and unambiguous mistake to enter it as fabric weighing more than 125 g/sq m and pay the corresponding full rate.

31. For the above reasons, I am of the opinion that an error of law was made by the Tribunal in reaching its decision. The appeal should therefore be allowed. I will hear the parties as to the form of orders which should be made to give effect to these reasons.