Chief Executive Officer of Customs v Western Australian Government Railways Commission (Westr [1999] FCA 4 (7 January 1999)

FEDERAL COURT OF AUSTRALIA

Chief Executive Officer of Customs v Western Australian Government Railways Commission (Westrail) [1999] FCA 4

CUSTOMS AND EXCISE – excise duty – diesel fuel rebate – whether rebate payable with respect to fuel used in transporting coal, caustic soda and lime to an alumina refinery – whether use "... in mining operations".

Customs Act 1901 (Cth), s 164(1), (7)
Excise Act 1901 (Cth), s 78A(1)
Administrative Appeals Tribunal Act 1975 (Cth), s 44(1)

Australian Native Landscapes v Chief Executive Officer of Customs (1997) 44 ALD 531 considered
Collector of Customs v The West Australian Government Railways Commission (Westrail) (1995) 39 ALD 21 referred to
NSW Associated Blue-Metal Quarries Ltd v Federal Commission of Taxation (1956) 94 CLR 509 referred to
Hope v The Council of the City of Bathurst [1980] HCA 16; (1980) 144 CLR 1 referred to
Commissioner of Taxation v Cooper (1991) 21 FCR 177 referred to
Collector of Customs v Cliff Robe River Iron Associates [1985] FCA 96; (1985) 7 FCR 271 referred to
Abbot Point Bulk Coal Pty Ltd v Collector of Customs (1992) 35 FCR 371 referred to
District of Coober Pedy v Collector of Customs [1993] FCA 187; (1993) 42 FCR 127 referred to
Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 456; (1993) 43 FCR 280 referred to
Cowell Electric Supply Co Ltd v Collector of Customs [1995] FCA 1031; (1994) 54 FCR 1 referred to
WMC Resources Ltd v Chief Executive Officer of Customs (Lee J, Federal Court of Australia, 15 December 1997) referred to
Chief Executor of Customs v Dyno Wesfarmers Ltd (1997) 73 FCR 1 applied
Regional Director of Customs (W.A.) v Dampier Salt (Operations) Pty Ltd (1996) 67 FCR 108 referred to
Dawson Rockwater Joint Venture between Dawson Engineering Pty Ltd and Brown and Root Pty Ltd v Chief Executor of Customs (6 August 1998, Federal Court of Australia) referred to
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 186 CLR 259 applied
Federal Commissioner of Taxation v Reynolds Australia Alumina Ltd (1987) 18 FCR 29 referred to
Chief Executive Officer of Customs v WMC Resources Ltd (Full Court, Federal Court of Australia, 9 October 1998) referred to

CHIEF EXECUTIVE OFFICER OF CUSTOMS v WESTERN AUSTRALIAN GOVERNMENT RAILWAYS COMMISSION (WESTRAIL)

WAG 150 of 1997

CARR J
PERTH
7 JANUARY 1999

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAG 150 of 1997

BETWEEN:	CHIEF EXECUTIVE OFFICER OF CUSTOMS Applicant
AND:	THE WESTERN AUSTRALIAN GOVERNMENT RAILWAYS COMMISSION (WESTRAIL) Respondent
JUDGE:	CARR J
DATE OF ORDER:	7 JANUARY 1999
WHERE MADE:	PERTH

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

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAG 150 of 1997

BETWEEN:	CHIEF EXECUTIVE OFFICER OF CUSTOMS Applicant
AND:	THE WESTERN AUSTRALIAN GOVERNMENT RAILWAYS COMMISSION (WESTRAIL) Respondent

JUDGE:	CARR J
DATE:	7 JANUARY 1999
PLACE:	PERTH

1 This is an application by way of an appeal from a decision of the Administrative Appeals Tribunal. The Tribunal’s decision, made on 7 November 1997, was to set aside some ten decisions made by the respondent’s delegate to the effect that the applicant was not entitled to a rebate of duty in respect of diesel fuel purchased by it for use in transporting coal, caustic soda and lime (collectively "the materials") to an alumina refinery at Worsley near Collie in the south west of Western Australia.

2 The evidence before the Tribunal (which was not challenged or otherwise in dispute) included a comprehensive and detailed statement of agreed facts, a detailed statement of evidence of the only witness, Mr Jeffrey Blunt, the Production Control Superintendent at the Worsley Alumina Refinery and some oral evidence which was given by Mr Blunt. The following is a summary of the essential facts.

3 The Worsley Aluminium Project is an operation on a very large scale which required and continues to require the commitment of large amounts of capital. It is conducted, through a corporate entity, as a joint venture. I shall refer to the current joint venturers and their predecessors (without distinguishing between them) as the "Joint Venturers". The Joint Venturers secured two agreements with the State of Western Australia which were ratified by special State legislation. I shall refer to those State agreements jointly as "the State Agreement". Under the terms of the State Agreement the Joint Venturers were granted a special mineral lease at Mt Saddleback, a site in the East Darling Ranges, where they mine bauxite. After extensive investigations and feasibility studies, the Joint Venturers undertook to establish a refinery at or near Bunbury (or at such other place as agreed) to process that bauxite into alumina. They decided to use what is known as the Bayer process. It was common ground that the sole purpose of the Joint Venturers in mining bauxite was to produce alumina extracted from it, using that process. The Bayer process involves using large quantities of caustic soda (sodium hydroxide) and lime (calcium hydroxide). The process also involves the application of heat. The Joint Venturers use coal to generate the heat (and electricity). Under the arrangements which became the subject of the State Agreement, the Joint Venturers selected the Worsley site as being a point convenient to Mt Saddleback. The bauxite is carried by a conveyor system, 51 kms in length, from Mt Saddleback to the refinery at Worsley. The Joint Venturers have a lease over the conveyor corridor and adjoining area. The Worsley site is also convenient to the Collie Coalfields and port facilities at Bunbury, and a source of lime at Coogee. The refinery uses approximately 700,000 tonnes of coal, 300,000 tonnes of caustic soda and 90,000 tonnes of lime per year. The Joint Venturers committed themselves to pay for the upgrading of the existing railway system and the construction of a rail link to the refinery to ensure that the rail system was adequate for their purpose of transporting the materials. The Joint Venturers were and are still obliged to provide the rail wagons (but not the locomotives) to enable the transport of the materials and to pay appropriate freight rates to the applicant. In return, the State of Western Australia agreed to carry out the rail construction and upgrading and to provide and operate trains to transport the Joint Venturers’ requirements, including the materials. The beneficiation process carried out at the Worsley Alumina Refinery is a continuous non-stop process that operates 24 hours a day, 365 days a year. The Joint Venturers carefully control and co-ordinate the transport of the materials to the refinery. The materials are loaded onto dedicated special-purpose rail wagons owned by the Joint Venturers. The wagons were specifically constructed for the purpose of carrying the materials to the Worsley Aluminium Refinery. Ownership of the coal and lime passes to the Joint Venturers on loading, while ownership of the caustic soda passes prior to loading. The Joint Venturers are responsible for the rail transport of the materials from the point of loading to the refinery. They control the timing and scheduling of the railway journeys. They unload the materials on arrival at the refinery. The only part played by the respondent is to provide the locomotives (and drivers) to haul the Joint Venturers’ rail wagons according to their requirements. Under the terms of the State Agreement the Joint Venturers are obliged to use the respondent’s locomotives for that purpose.

4 Section 164(1) of the Customs Act 1901 (Cth) and s 78A(1) of the Excise Act 1901 provide for rebates of customs duty and excise duty respectively. Each provides that:

5 The phrase "mining operations" is defined for the purposes of both Acts in s 164(7) of the Customs Act as follows:

6 The Tribunal decided that a rebate of duty was payable to the respondent in respect of diesel fuel purchased by it for use in transporting the materials to the Worsley Alumina Refinery in various periods between 1 July 1993 and 31 December 1996. The Tribunal held that, on the material before it, the respondent’s transportation of these materials fell within paragraph (b) of the definition of "mining operations" set out above. The Tribunal went further than that and found that those rail transport operations also fell within paragraph (a) of that definition, stating that:

7 An appeal from a decision of the Tribunal only lies on a question of law – see s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth). As I see it, the question which the Tribunal had to decide in this matter was whether the rail transport activities had sufficient nexus with the mining or beneficiation operations so that it could correctly be said that the diesel fuel was used "in" those operations. The applicant’s submissions, both before the Tribunal and before this Court, were to the effect that the term "mining operations", particularly the beneficiation referred to in paragraph (b) of the definition, is limited to the chemical process that is carried out at the Worsley Refinery site and would exclude the rail transport activities. The respondent’s submissions were that the "mining operations" relevant to this case, encompassed both the "mining for minerals" and the "beneficiation’ referred to in paragraphs (a) and (b) of the statutory definition and were not limited to the chemical process carried out at the Worsley Refinery site. In other words, on the respondent’s case, mining operations included the rail transport activities. The appeal was fought, so far as the applicant was concerned, on the issue of whether the rail transport operations fell within paragraph (b) of the definition. It was not submitted that the statutory definition was expressed in anything other than ordinary English i.e. that it had any technical meaning. In those circumstances, in my view, the question for the Tribunal involved an assessment of the degree of nexus between the rail transport operations and the beneficiation process which took place at the Worsley site. Where a question involves such assessments of degree and where different conclusions are reasonably open to a Tribunal, the Tribunal’s decision is one of fact which cannot be disturbed on appeal: see NSW Associated Blue-Metal Quarries Ltd v Federal Commission of Taxation (1956) 94 CLR 509 at 512; Hope v The Council of the City of Bathurst [1980] HCA 16; (1980) 144 CLR 1 at 7-9; Commissioner of Taxation v Cooper (1991) 21 FCR 177 at 195; Collector of Customs v Cliff Robe River Iron Associates [1985] FCA 96; (1985) 7 FCR 271 at 275; Abbott Point Bulk Coal Pty Ltd v Collector of Customs (1992) 35 FCR 371 at 378; District of Coober Pedy v Collector of Customs [1993] FCA 187; (1993) 42 FCR 127 at 141, 144; Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 456; (1993) 43 FCR 280 at 286-7; Cowell Electric Supply Co Ltd v Collector of Customs [1995] FCA 1031; (1994) 54 FCR 1 at 10; WMC Resources Ltd v Chief Executive Officer of Customs (Lee J, Federal Court of Australia, 15 December 1997) at 15 and Chief Executor of Customs v Dyno Wesfarmers Ltd (1997) 73 FCR 1 at 6. I so held in the Full Court in Chief Executive Officer of Customs v WMC Resources Ltd (Federal Court of Australia, 9 October 1998). My reading of those authorities is that to succeed in this matter, the applicant must establish that the Tribunal’s conclusion that the rail transport activities were "in mining operations" (my emphasis), as defined, was not a conclusion that was reasonably open to it. On that basis, I turn to deal with the grounds of appeal advanced by the applicant.

8 The applicant advanced eight grounds of appeal which, to some extent overlapped. They are that:

9 Central to the applicant’s submissions was the proposition that the Tribunal had erred by asking itself the wrong question. Instead of asking whether the rail transport activities were in beneficiation of bauxite, the Tribunal had, so it was put, departed from that formulation by using phraseology such as "an integrated and co-ordinated project" and like terms.

10 In my view, a fair reading of the Tribunal’s reasons shows that it did have proper regard to the definition of "mining operations" as amended by the Customs & Excise Amendment Act 1995. At paragraph 13 of its reasons the Tribunal noted that in order to attract a rebate of duty the relevant diesel fuel must by virtue of the legislation which I have set out above, have been purchased for use by the purchaser "in mining operations". It then identified the relevant meaning of the word "in" in this context as that given by the Shorter English Dictionary, namely "in the process or act of". In doing so, the Tribunal was following the decision of a Full Court of this Court in Chief Executive Officer of Customs v Dyno Wesfarmers Ltd (at 5). At paragraph 16 of its reasons the Tribunal noted that the Joint Venturers’ activity of mining bauxite at Mt Saddleback clearly fell within subparagraph (a) of the definition and that the activity of refining at Worsley fell within subparagraph (b). Neither of these matters was seriously in contention. The applicant had expressly conceded the latter proposition. The Tribunal then said, in my opinion quite correctly, that the question was whether the respondent’s transport operations whereby the materials, all of which were essential to the beneficiation process at the Worsley refinery, were transported to the refinery, fell within either of those subparagraphs? The first ground of appeal overlapped, to some extent, with the second and third grounds of appeal. The second ground of appeal was that the Tribunal did not have proper regard to the decision of Sackville J in Australian Native Landscapes. From the applicant’s submissions, it emerges that this is a reference to the observations made by his Honour in that case (at 539) in the following terms:

11 Australian Native Landscapes involved a claim for a rebate in relation to diesel fuel purchased for use in the manufacture of potting mix and other growing materials on the basis that the claimant was engaged in "horticulture" as defined for the purposes of paragraph (d) of the definition of "agriculture", which term in turn forms part of the definition of "primary production" in s 164(7) of the Customs Act. Immediately before the passage set out above, Sackville J referred to the Amendment Act as having repealed paragraph (f) of the old definition, thus removing the opportunity for persons to claim a rebate simply because their activities were "connected with" horticulture. Implicit in his Honour’s reasons at that page is an acceptance that it would have been open to the Tribunal to find that the production of potting mix by a grower for his or her own purposes (a distinction drawn by the Tribunal in that case) might well be "in" horticulture. The respondent in this matter, to some extent, relies upon that aspect of the decision in Australian Native Landscapes as indicating that, by analogy, it was open to the Tribunal here to find that the transport activity directed and controlled by the Joint Venturers was in the process of beneficiation. The respondent accepted that it was the obvious intention of the 1995 amendments to narrow the range of activities for which the rebate was payable by deleting "the sweeper provisions" in former paragraphs (c) and (ca) of the definition of "mining operations" so that activities merely "connected with" mining and beneficiation activities were no longer rebateable. It made no submission to the contrary to the Tribunal. However, so the respondent submitted, the narrowing of the range of rebateable activities by the deletion of the "connection with" provisions was irrelevant to the appeal. The respondent relied on paragraphs (a) and (b) of the definition of "mining operations" which were materially unchanged by the 1995 amendments.

12 I do not think that the Tribunal erred in law in not having "proper regard" to the decision of Sackville J in Australian Native Landscapes. It understood the test which it had to apply and can be seen to have applied that test to the facts as found by it. Furthermore, I accept the respondent’s submissions to the effect that the 1995 amendments do not narrow the range of activities for which a rebate is payable under, in this case, paragraph (b) of the statutory definition of "mining operations". To the extent (if at all) that anything in the reasons for judgment of R D Nicholson J in Chief Executive Officer of Customs v WMC Resources Ltd suggests that subparagraph (a) (and thus by implication subparagraph (b)) has been changed, I respectfully disagree. I would agree with the views expressed by Lee J on that aspect at first instance. It was not necessary for me to deal with that matter on appeal in that case. The applicant contended that the Tribunal’s decision "stripped subparagraph (c) [of the definition of "mining operations"] of any significance at all". I disagree. Most of these diesel fuel rebate cases turn (or, in my view should turn) on the particular factual circumstances. In this matter there are dedicated railway wagons, owned and co-ordinated by the Joint Venturers, travelling on railway lines enhanced at the expense of the Joint Venturers in accordance with the various arrangements set out in the State Agreement. There are the other factors which were put before the Tribunal, some of which I have summarised above. In other factual circumstances subparagraph (c) will have work to do where transportation of minerals and the like are found to be insufficiently close to, for example, beneficiation to be characterised as "in" beneficiation. I respectfully adopt, by analogy, the reasoning of Davies J in Australian National Railways Commission v Collector of Customs (SA) [1985] FCA 312; (1985) 8 FCR 264 at 269.

13 In his third ground of appeal, the applicant contended that although the Tribunal had correctly identified the meaning of the word "in", it had subsequently misdirected itself in applying the legal test when it had regard to what the applicant contended was an irrelevant consideration. That was a reference to the following paragraph of the Tribunal’s reasons:

14 The applicant submitted that the diesel fuel was used in the transportation of the materials and that the Tribunal should have determined that purpose as precluding a finding that the fuel was used "in" beneficiation. The applicant went further. He submitted that the Tribunal erred in law in having regard to the State Agreement because that was an irrelevant consideration. I do not accept those submissions. In my view, the rights and obligations conferred and assumed by the Joint Venturers under the State Agreement provided a most appropriate factual context in which the Tribunal could assess whether the transport activity was "in" beneficiation. As the Tribunal noted, the State Agreement obliged the Joint Venturers to take various steps to improve and add to the railway system and to engage the respondent in the transport activities to bring the necessary materials to Worsley. There are several cases which stand as authority for the proposition that the degree of integration of the relevant activity with an integrated mining operation is a relevant consideration to be taken into account. They include Lee J in Westrail at 27 and 28; Regional Director of Customs (W.A.) v Dampier Salt (Operations) Pty Ltd (1996) 67 FCR 108 at 120; Dyno Wesfarmers at 6 and Dawson Rockwater Joint Venture between Dawson Engineering Pty Ltd and Brown and Root Pty Ltd v Chief Executor of Customs (Merkel J, 6 August 1998, Federal Court of Australia at 8). Mr G J Gibson QC, senior counsel for the applicant, complained about the Tribunal’s reference to "the Worsley Alumina Project" rather than to a single integrated process. In my view, that objection falls into the impermissible area of objection identified by the High Court of Australia in Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 186 CLR 259 at 272. It can be seen from the New Shorter Oxford English Dictionary (at 1386) that something is "integral" if it belongs to or makes up a whole and is not merely attached. Similarly the Macquarie Dictionary (at 913) refers to integral as "belonging as a part of the whole; constituent or component" or "necessary to the completeness of the whole". In my opinion, both in terms of authority and in terms of ordinary dictionary definitions, when the Tribunal decided that the transport activities in this case were "in" beneficiation it did not err in law by misdirecting itself as to the legal test to be applied. It was fully justified, in my view, in taking into account as a relevant consideration the integration of the relevant transport operations with the overall integrated and co-ordinated Worsley Project for the recovery of alumina. As part of that process it was also entitled, in my opinion, to take into consideration the State Agreement. The State Agreement showed that the Joint Venturers had no choice of transporter or method of transport. It also showed the degree of integration between the transport of the materials and the beneficiation of the bauxite. Furthermore, the Tribunal was entitled to place great weight (as it can be seen to have done) on what was described by the applicant as obiter dicta in the decision of Lee J in Westrail at 28. I should interpolate that in Westrail his Honour first decided whether the same transport activities which are the subject of this matter could reasonably have been found by the Tribunal to be "connected with" a mining operation. This was under the pre-1995 provisions. His Honour held that it was plainly open to the Tribunal to be so satisfied. Apparently after his Honour reserved judgment in that matter, he invited submissions from the parties as to whether the 1995 amendments might apply retrospectively to the rebates claimed in that case. It was thus on that basis that his Honour came to consider the application of s 164(1)(b), which he did in these terms (at 28-29):

15 The applicant contended that the words underlined above amounted to a finding on appeal of a fact not found by the Tribunal at first instance in that matter. There is no such problem in the present case. Mr Blunt’s evidence, both in his statement and orally, filled any evidentiary gap. Counsel for the applicant pointed to the fact that in Dyno Wesfarmers the Full Court of this Court was careful not to endorse as correct the above passages from Lee J’s reasons in Westrail. That is true, but I would not read into that any criticism of his Honour’s conclusions. In my view, the Tribunal was entitled to take them into account in the manner in which it did so. Furthermore, in Dyno Wesfarmers (at 6-7) the Full Court rejected criticism of the Tribunal’s use of the adjective "integral", saw no error in such use and said that:

16 The next ground of appeal [ground (d)] was that the Tribunal again misdirected itself as to the legal test to be applied, because it failed to have regard to whether the diesel fuel was used "in beneficiation ... as an integral part of the recovery of alumina".

[diamond] by making the finding in paragraph 22 of its reasons (which I have set out above); and

[diamond] then proceeding to equate "the integrated and co-ordinated Worsley Project" to a beneficiation process and a mining operation falling within both paragraphs (a) and (b) of the definition;

the Tribunal had held that the overall "Worsley Project" was a "beneficiation process" because it was an integrated project encompassing the mining of bauxite and its transport to the Worsley Refinery.

18 The applicant attacked this finding on the basis that it was reached by taking into account irrelevant considerations, was not supported by any evidence and was so unreasonable that no reasonable Tribunal could have made it.

19 I think that this is to give too harsh a reading to paragraph 22 of the Tribunal’s reasons. At the end of that paragraph the Tribunal made a finding of fact that the transportation of the coal, caustic soda and lime to the Worsley Alumina Refinery from the Collie Coalfields, the Port of Bunbury and Kwinana respectively (being materials essential to the carrying out of the "Bayer process" of beneficiation at the Refinery) were some of a number of integrated steps between excavating the bauxite at Boddington and recovering alumina at Worsley. In my view that finding was clearly open to the Tribunal on the evidence before it.

20 A very important part of the applicant’s argument was that the Bayer process defined and limited what amounted to beneficiation. Anything which was not a step in the Bayer process could not, so it was put, be "in" beneficiation. The applicant went so far as to say that it was an abuse of the English language to characterise the haulage of the materials as a technical process in the mining and metalurgical industries. It was plainly erroneous, so it was submitted, to characterise the haulage of the materials per se (as) effecting an improvement of the physical and chemical properties of the bauxite. In my view, such a submission flies in the face of cases such as Federal Commissioner of Taxation v Reynolds Australia Alumina Ltd (1987) 18 FCR 29. That case was concerned with the question whether the conveyor which brought the bauxite from Mt Saddleback to Worsley was exempt from sales tax as being for use in the mining industry in carrying out mining operations. Beaumont J (at 35) observed that the ultimate question of characterisation was one of degree i.e. whether the conveyor facility "should be perceived as something which stands apart from, and is independent of, the activities at the mine site". At the same page his Honour said:

21 I reject the applicant’s "no evidence" submission. The Tribunal had before it a comprehensive statement of the agreed facts which set out how the chemical ingredients of the Bayer process found their way to Worsley. In my view, it was open to the Tribunal to find that the transport activities which had that result were "in" the beneficiation process. To the extent that ground (g) of the applicant’s grounds suggests that it did not so find, that is not a proper way of reading its reasons for its decision.

22 The final ground of appeal was that by having regard to three previous decisions of the Administrative Appeals Tribunal, which the Tribunal found to be materially indistinguishable and the ratio of the decision of Lee J in Westrail, the Tribunal’s decision was unreasonable. That was a reference to the fact that the Tribunal in the earlier Westrail decision said, in passing, that it was disposed to the view that the rail operation could not properly be regarded as part of the beneficiation process itself. That was a differently constituted Tribunal which was only considering that question as an aside. The main question was whether paragraph (ca) of the definition of "mining operations" in s 164(7) applied. In my view, the question for the Tribunal in this matter was one of fact, not of law. It was not bound to find in the manner contended for by the applicant in this ground. Its factual finding was, in my view, open to it for the reasons which I have already given. The Tribunal’s decision was not unreasonable in the relevant sense, or at all.

23 For the above reasons I consider that the Tribunal did not err in law in any of the ways contended for by the applicant. The application should be dismissed with costs.

I certify that the preceding twenty three (23) numbered paragraphs are a true copy of the Reasons for Judgment of Justice Carr

Counsel for the Applicant:	Mr G J Gibson QC with Mr R G Maguire

Solicitor for the Applicant:	Australian Government Solicitor

Counsel for the Respondent:	Mr W S Martin QC with Mr G J Cotterill

Solicitors for the Respondent:	Messrs Mallesons Stephen Jaques

Date of Hearing:	5 October 1998

Date of Judgment:	7 January 1999