ACI Operations Pty Ltd v Chief Executive Officer of Customs [1998] FCA 120 (27 February 1998)

Last Updated: 4 March 1998

FEDERAL COURT OF AUSTRALIA

ADMINISTRATIVE LAW )

CUSTOMS TARIFF ) - judicial review of delegate's decision refusing a determination under s 273 of the Customs Act 1901 - whether the section and Item 43 in Schedule 4 of the Customs Tariff Act 1987 confer a discretion - whether the delegate exercised his discretion or decided the applicant was not eligible - judicial review not pedantic or concerned with exactness of expression - construction of s 273 - construction of Item 43 in the context of Schedule 4.

STATUTORY INTERPRETATION )

WORDS AND PHRASES ) - whether "may" in ss 271 and 273 of the Customs Act 1901 conferred a discretion or really imposed an obligation.

Customs Act , ss 271, 273

Customs Tariff Act 1987 , Sched 4 item 43

Finance Facilities Pty Limited v The Commissioner of Taxation of the Commonwealth of Australia [1971] HCA 12; (1971) 127 CLR 106, discussed

Mitchell v The Queen [1996] HCA 45; (1996) 184 CLR 333, distinguished

Trengove v Repatriation Commission (1994) 50 FCR 453, distinguished

Webb v Deputy Commissioner of Taxation [1993] FCA 612; (1993) 47 FCR 394, distinguished

Nashua Australia Pty Ltd v Channon (1981) 36 ALR 215, followed

Murphyores Incorporated Pty Ltd v The Commonwealth of Australia [1976] HCA 20; (1976) 136 CLR 1, applied

Minister for Industry and Commerce v Tooheys Ltd (1982) 42 ALR 260, followed

Tooheys Ltd v Minister for Business and Consumer Affairs [1981] FCA 121; (1981) 36 ALR 64, followed

Minister for Industry and Commerce v East West Trading Co Pty Ltd (1986) 10 FCR 264, followed

ACI OPERATIONS PTY LTD v CHIEF EXECUTIVE OFFICER OF CUSTOMS

NG 602 of 1996

Burchett J

Sydney

27 February 1998

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 602 of 1996

BETWEEN:	ACI OPERATIONS PTY LTD Applicant
AND:	CHIEF EXECUTIVE OFFICER OF CUSTOMS Respondent
JUDGE:	BURCHETT J
DATE OF ORDER:	27 february 1998
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

The application be dismissed with costs.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 602 of 1996

BETWEEN:	ACI OPERATIONS PTY LTD Applicant
AND:	CHIEF EXECUTIVE OFFICER OF CUSTOMS Respondent

JUDGE:	BURCHETT J
DATE:	27 february 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT

The applicant is the sole Australian manufacturer of moulded glass containers. It decided to establish at West Croydon in South Australia a new glass container manufacturing plant for the production of wine bottles for the local and export markets. Planning was under way by early 1994, and overseas orders for components of the plant dated from March 1994. The first importations were received during June. The plant comprised a number of machines, including a forming machine, furnace, annealing lehr, inspecting machine, cullet handling machine, palletiser, shrink wrapping machine and automated guided vehicles. A Tariff Concession Order was obtained operative from 14 February 1995, and upon 12 September 1995 an application was made to the Australian Customs Service for what was described as an "ITEM 43 DETERMINATION" (ie a determination under Item 43 of Schedule 4 to the Customs Tariff Act 1987 ). Upon this being refused by letter dated 19 April 1996, and after reasons had been furnished on 25 June 1996 pursuant to a request under s 13 of the Administrative Decisions (Judicial Review) Act 1977 , these proceedings were begun for judicial review of the decision of the delegate who had decided the matter.

Various questions were raised, but the critical issue that was crystallized from the argument was whether the delegate was bound, having regard to the circumstances found by him, to make a determination in favour of the applicant, or whether he was entitled, in the exercise of a broad discretion, and in the application of departmental policy, to decline to make such a determination.

In order to understand the operation of Item 43, it is necessary first to go to the Customs Act 1901 , Part XVI of which is headed "REGULATIONS AND BY-LAWS". In that Part, the sections presently relevant are ss 271, 272 and 273, in which the Chief Executive Officer of Customs is referred to as "the CEO". These sections provide:

"CEO may make by-laws

271. Where:

(a) an item of a Customs Tariff, or a proposed item of a Customs Tariff, is expressed to apply to goods, or to a class or kind of goods, as prescribed by by-law; or

(b) under an item of a Customs Tariff, or a proposed item of a Customs Tariff, any matter or thing is expressed to be, or is to be determined, as prescribed or defined by by-law;

the CEO may, subject to the succeeding sections of this Part, make by-laws for the purposes of that item or proposed item.

By-laws specifying goods

272. The CEO may specify in a by-law made for the purposes of an item, or a proposed item, of a Customs Tariff that is expressed to apply to goods, or to a class or kind of goods, as prescribed by by-law:

(a) the goods, or the class or kind of goods, to which that item or proposed item applies;

(b) the conditions, if any, subject to which that item or proposed item applies to those goods or to goods included in that class or kind of goods; and

(c) such other matters as are necessary to determine the goods to which that item or proposed item applies.

Determinations

273. (1) The CEO may determine, by instrument in writing, that, subject to the conditions, if any, specified in the determination, an item, or a proposed item, of a Customs Tariff that is expressed to apply to goods, or to a class or kind of goods, as prescribed by by-laws shall apply, or shall be deemed to have applied, to the particular goods specified in the determination.

(2) The CEO may make a determination under the last preceding subsection for the purposes of an item, or a proposed item, of a Customs Tariff whether or not he has made a by-law for the purposes of that item or proposed item.

(3) Where, under this section, the CEO determines that an item, or a proposed item, of a Customs Tariff shall apply, or shall be deemed to have applied, to goods, that item or proposed item shall, subject to this Part and to the conditions, if any, specified in the determination, apply, or be deemed to have applied, to those goods as if those goods were specified in a by-law made for the purposes of that item or proposed item and in force on the day on which those goods are or were entered for home consumption."

What should be noticed at once is that the expression "an item ... of a Customs Tariff that is expressed to apply to goods ... as prescribed by by-laws" provides the link between these provisions and a tariff which may be made applicable to a particular case by virtue of their operation.

Item 43 is a tariff item expressed in terms apt to enable it to be picked up by ss 271, 272 and 273 of the Customs Act 1987 . It is an item in Schedule 4 to the Customs Tariff Act, s 11 of which provides for the application to goods of an item in that schedule. Section 25 then provides, subject to qualifications not presently applicable, that "where an item in Schedule 4 applies to goods and the amount of duty applicable to the goods under that item is less than the amount of duty ascertained in respect of the goods in accordance with [certain other sections] that, but for this section, would be payable in respect of the goods, then the duty payable under this Act in respect of the goods is the amount of duty applicable to the goods under that item." Schedule 4 is headed "CONCESSIONAL RATES OF DUTY" and, consistently with this heading, it commences with a reference to goods owned by the Commonwealth and not intended to be used for the purposes of trade, or owned by the Commonwealth "exemption from duty of which is, in the opinion of the Minister, in the national interest". These are to be admitted free, as are various other analogous categories of goods. Other goods follow in the catalogue of things scheduled, frequently qualified by the words "as prescribed by by-law", falling within categories that Parliament plainly thought appropriate for special, or "concessional", treatment. Examples are item 26, "Pictorial illustrations for teaching purposes in universities [etc]", and item 29, "Goods, for use as a prototype, as prescribed by by-law". In the last case, admission is not free, but at a duty of 2%. It is in this context that item 43, which was inserted by the Customs Tariff Amendment Act 1989 , was introduced with effect from 1 January 1988. The item was worded as follows:

"Goods, as prescribed by by-law, being original components of machinery classified under a heading or subheading in Chapter 84, 85 or 90 of Schedule 3".

The rate of duty was shown as follows:

"The rate of duty that would apply to the goods if they were the machine of which they are a component ... ."

The enactment of item 43 was preceded by an announcement by the then responsible Minister, Senator Button, issued on 25 August 1988, but indicating that the arrangements "will apply retrospectively from 1 January 1988". The announcement made reference to machinery within chapters 84, 85 and 90 of the Customs Tariff, and stated:

"The new arrangements will mean single appliances/functional units can be imported in split consignments and from separate points of departure, from separate sources and still attract a single unit rate of duty."

Senator Button added:

"I would stress however that this new concession will only apply ... for large single appliances/functional units as defined in the Customs Tariff, where, for economic and transport reasons, it is logical for industry to import such units in progressive or separate consignments. This means the concession will not extend to cover, for example a complete civil engineering project that could involve a wide range of separate functional units, pipeworks, kit buildings and the like. This concession will therefore not disadvantage local component manufacturers.

However, to ensure that there is not any misuse of this concession which might affect component manufacturers, approval to import will be determined on a case-by-case basis. Each request will be examined by the Australian Customs Service in consultation with my department and be subject to my approval."

Subsequently, a new Minister, Senator Cook, issued a statement on 4 May 1994 indicating that "no further retrospective claims will be considered except for Items 43 and 52 relating to split consignments, and then only in exceptional circumstances".

I now turn back to fill in the details of what occurred in the present case. On 19 April 1996, the delegate wrote to the applicant advising:

"I am unable to grant a Determination on the following grounds:

* This application is not for the split importation of a whole machine but a plant. Item 43 cannot be used to import a plant duty-free, nor can it be used to import duty free large numbers of components (or sub-assemblies) against a notional classification for a whole plant.

* The TCO [ie Tariff Concession Order] referred to in the application was not operative until February 1995 by which time some of the goods had already been imported. As a result the concessional rate of duty available from use of the TCO could only apply to importations made after the date the TCO was operative. In addition any Item 43 concession and the TCO can only be used together where they relate to the same goods covered by the same classification. In other words the TCO could be used only if ALL of the goods listed in the TCO, were imported after it came into effect and those goods comprised a complete item of equipment for purposes of Item 43.

* The intention of the PBL [ie Policy By-laws] scheme is to encourage investment in projects of importance to the economic well-being of Australia and to maximise Australian industry involvement in such projects. As the goods for which the Item 43 concession is sought were imported prior to the application being made, the potential benefits of Item 43 were not factored into the investment decision making process. As a result, the granting of this application would not be consistent with the policy intent of the PBL scheme.

* The application was received in September 1995 some 15 months after the first shipment of goods arrived. As a result it is retrospective.

Policy in relation to retrospectivity was originally announced in ACN [ie Australian Customs Notice] 94/27 and more recently in ACN 95/74. This latter ACN also makes it clear that it is `... the date of importation, not the date of entry for home consumption..' that will be compared to the date of receipt of an application when determining retrospectivity.

I have therefore concluded that I am unable to determine that Item 43 applies to the Glass Container Manufacturing Plant, the subject of your application."

At the beginning of this brief statement of grounds, the delegate uses the expression "I am unable to grant a Determination", and at the end he says, almost in the same words, "I am unable to determine that Item 43 applies". Literally, and at first sight, these words suggest, not the exercise of a discretion to decline, but a finding of ineligibility to receive a favourable decision. Counsel for the applicant submitted I should so read the letter. However, the issues discussed between the introductory statement and the conclusion plainly include matters of discretion. In particular, the reasoning which leads to the proposition that "the granting of this application would not be consistent with the policy intent of the PBL scheme" is entirely concerned with discretionary matters to which the policy is directed. Similarly, the remark that the application "is retrospective" could only refer to a discretionary consideration, since the legislation plainly authorizes retrospective decisions in an appropriate case. Bearing in mind that judicial review is concerned with the legality of the process by which the actual decision was arrived at, not with the exactness or elegance of its expression, I think it would be both pedantic and wrong to construe the words "I am unable to determine" as involving a restriction of the scope of the decision. Plainly, the delegate did not in fact so restrict himself. His language should be understood as a loose, almost colloquial, indication that the circumstances in which he was asked to exercise his discretion were not such as to enable him to conclude that he should exercise it in favour of the applicant.

In any case, the delegate was asked to furnish further reasons for his decision, pursuant to s 13 of the Administration Decisions (Judicial Review) Act 1987 , and he did so. The formal reasons so produced were put before me without objection, and without cross-examination. I see no reason why I should not accept this statement of reasons as a true statement, in more elaborate form, of the reasons for the decision. It is appropriate to set out in full that portion of the document which is headed "The Reasons for the Decision":

"15 Following consideration of all the information before me, I was satisfied that the imported goods, the subject of the application, are original components of a glass container manufacturing plant classified to 8475.20.00 of the Customs Tariff Act.

16 I then considered whether to exercise my discretion under subsection 273(1) of the Customs Act 1987 and determine that item 43 shall apply to the applicant's goods. In this respect, I took into account policy requirements as set out in Australian Customs Notice number 95/74, and whether the making of an item 43 determination would be consistent with Government policy.

17 As a matter of policy, an item 43 determination fundamentally relates to split consignments of imported goods. It is not intended to be used to import a plant duty-free, or to import duty free large numbers of components (or sub-assemblies) against a notional classification for large numbers of components. I found that the application was for the importation of components of a plant rather than a split consignment of a complete machine, and therefore the application failed to meet this policy requirement.

18 The intention of the PBL scheme is to reduce costs to industry thereby encouraging investment in world class projects in Australia while facilitating greater involvement in these projects by Australian suppliers. The goods for which the item 43 determination was sought were imported prior to the application being made. Based upon all of the evidence before me, I found that the potential benefits of item 43 were not factored into the investment decision making process. I formed the view that making an item 43 determination would not be consistent with the intention of the PBL scheme.

19 The application was received in September 1995, some 15 months after the first shipment of goods had arrived in Australia. Therefore the applicant is seeking that I make an item 43 determination with retrospective effect. ACN 95/74 makes it clear that it is the date of importation, not the date of entry for home consumption that will be compared to the date of receipt of an application when determining retrospectivity. It is Government policy not to grant retrospective item 43 determinations unless the circumstances are exceptional. I did not consider that the circumstances in this case were exceptional so as to justify departure from the policy requirements.

20 I determined that for these reasons, the application failed to meet the policy requirements for the making of an item 43 determination. However, I went on to consider other matters relevant to the exercise of my discretion.

21 An item 43 PBL enables components of a machine to be entered at the rate of duty applicable to the whole machine. TCO 9510981, which provides a duty free rate for imported glass container manufacturing plants, became operative on 14 February 1995. The evidence before me indicates that some of the goods were imported before this TCO became operative, and were therefore not covered by the TCO. Further, the TCO can only be used if all of the goods listed in the TCO were imported after it came into effect and those goods comprised a complete item of equipment for purposes of item 43. I found that the [sic] this was not the case.

22 I decided not to exercise my discretion and make an item 43 determination."

The delegate thus made it quite clear that his decision was grounded in policy which he accepted as guiding the exercise of his discretion, and from which he saw no reason to depart in the individual case.

That brings me to the issue noted at the commencement of these reasons, whether the determination was indeed of a discretionary nature. Sections 271 and 273 both use the word "may". Where a tariff item is expressed to apply as prescribed by by-law, the Chief Executive Officer "may" make by-laws under s 271, or "may" make a determination under s 273. It was a determination that the applicant sought. But counsel for the applicant drew attention to the well known discussion by Windeyer J in Finance Facilities Pty Limited v The Commissioner of Taxation of the Commonwealth of Australia [1971] HCA 12; (1971) 127 CLR 106 at 134-135 of those cases which illustrate the proposition that legislation using the word "may" will sometimes confer a power to be exercised as a matter of obligation when particular circumstances arise. Where the power is conditioned upon the decision-maker first finding that an exercise of it would be appropriate, or that there is a need to be met, or being satisfied that exercise of the power would be reasonable, such a construction may be plainly called for: Mitchell v The Queen [1996] HCA 45; (1996) 184 CLR 333 at 345-346; Trengove v Repatriation Commission (1994) 50 FCR 453; Webb v Deputy Commissioner of Taxation [1993] FCA 612; (1993) 47 FCR 394 at 404. But there is no context of that kind in the present case. On the contrary, the items which are picked up by ss 271 and 273 are described as "concessional", and are of a kind that might well call for the exercise of a discretion. In the case of item 43, in particular, the "mischief" which called for its enactment, and the nature of the remedy it was intended to provide, are indicated in the Ministerial statement to which I have made reference. If there be any ambiguity affecting the construction of the interlocking legislative provisions made by the sections of the Customs Act and this item of the Customs Tariff Act, I think light is thrown on the matter by that Ministerial statement.

Section 273 of the Customs Act is not free of authority which, it seems to me, having regard to the context of the sections, must also apply to s 271. The first case I will cite is Nashua Australia Pty Ltd v Channon (1981) 36 ALR 215, a decision of Lee J of the Supreme Court of New South Wales. His Honour referred (at 227) to the making of determinations and their revocation. He said:

"Most of the considerations would be related directly to protection of locally produced goods and the economy of this country, but some would not. Policy plays a predominant role at all points and it is not for the court to require that the policies applied be justified. ... It would be impossible to set out all the considerations which might properly be taken into account in any given case by the Minister or his delegate and one can only state that fact and attempt no further specification of the width of the discretion conferred."

His Honour went on to make it clear that he thought the remarks of Mason J in Murphyores Incorporated Pty Ltd v The Commonwealth of Australia [1976] HCA 20; (1976) 136 CLR 1 at 24 (see also, per Stephen J, at 14) were applicable to s 273. Mason J, in the passage cited, was referring to a discretion "not expressed to be subject to any limitation", and he held it "was intended to be wide enough to embrace every consideration reflecting advantage or disadvantage, benefit or prejudice to Australia, flowing from the approval or refusal of an application."

Section 273 was again considered, this time by a full court, in Minister for Industry and Commerce v Tooheys Ltd (1982) 42 ALR 260. In that case, Bowen CJ, Northrop and Lockhart JJ, in a joint judgment, referred (at 264) to a determination under s 273 as having the same effect as a by-law. Their Honours expressed (at 265-266) their agreement with a passage which they quoted from the judgment of Ellicott J at first instance: Tooheys Ltd v Minister for Business and Consumer Affairs [1981] FCA 121; (1981) 36 ALR 64 at 74. That passage included the following:

"Obviously Parliament decided that it could be desirable, where a suitable equivalent of goods was not reasonably available from goods of Australian production or manufacture [this was the subject of item 19, the item expressed to apply as prescribed by by-laws which was there in question], that the goods should be allowed in duty free or at a lower rate of duty than would otherwise be payable. Parliament could not possibly determine in advance the goods to receive this particular benefit. It therefore decided to confer on the Minister a discretion to determine what particular goods should have it. The discretion so conferred was not confined to a decision as to whether particular goods satisfied the description in item 19 of the Tariff but a decision on this matter was made basic to the exercise of the discretion."

Section 273 came before a full court once again in Minister for Industry and Commerce v East West Trading Co Pty Ltd (1986) 10 FCR 264. Fox J referred (at 269) to the Minister's "wide discretion". Morling and Beaumont JJ, in a joint judgment said (at 277):

"The discretion vested in him [ie the Minister] by s 273(1) is a broad one: see Murphyores Incorporated Pty Ltd v Commonwealth of Australia [1976] HCA 20; (1976) 136 CLR 1 per Stephen J at 14; per Mason J at 24."

I accept that, as counsel for the applicant pointed out, none of these decisions concerns the precise relationship between item 43 and ss 271 and 273 which confronts me in this case. Nevertheless, they show that the sections of the Customs Act in question and the schedule of the Customs Tariff which their language picks up are apt to confer, and did in the instances dealt with in the cases confer, a very wide discretion. In my opinion, a similarly wide discretion was involved in the present case. The ambit of the considerations the delegate was entitled to take into account certainly included the issue of retrospectivity and the question whether an entire plant fell within the policy intent of an item referring to "components of machinery". Accordingly, no error of law has been demonstrated in the delegate's approach to the task of decision, and the application must fail.

I should add that there may be much to be said for the proposition that a whole plant including many machines could not fall within the language of the provision, so as to permit the exercise of a discretion. But I have concluded that this was not the basis on which the delegate declined to make a determination, and therefore it is unnecessary to say any more about it.

The application will be dismissed with costs.

I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Burchett

Associate:

Dated: 27 February 1998

Counsel for the Applicant:	Mr P Roberts
Solicitor for the Applicant:	Baker & McKenzie
Counsel for the Respondent:	Mr D Yates
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	26 June 1997
Date of Judgment:	27 February 1998