South Burdekin Water Board and CEO of Customs [1999] AATA 74 (10 February 1999)

Last Updated: 25 February 1999

Administrative

Appeals

Tribunal

DECISION AND REASONS FOR DECISION [1999] AATA 74

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q1998/295

GENERAL ADMINISTRATIVE DIVISION )

Re SOUTH BURDEKIN WATER BOARD

Applicant

And CHIEF EXECUTIVE OFFICER OF CUSTOMS

Respondent

DECISION

Tribunal Mr K L Beddoe (Senior Member)

Date 10 February 1999

Place Brisbane

Decision The Tribunal decides that the decision under review is affirmed.

(Sgd) K L Beddoe

Decision No 74/1999 (Senior Member)

CATCHWORDS

DIESEL FUEL : Primary Production - agriculture - water conservation - pumping of water to replenish underground aquifers by State Authority

Customs Act 1901 s 164, 164(7),

Excise Act 1901 s 78A

Water Act 1926 (Qld)

Water Resources Act 1989 (Qld)

Renmark Hotel v FCT (1949) 79 CLR 10

Western Australian Turf Club v F.C.T. 78 ATC 4133

Re Brennan and Law Society of the ACT (1984) 6 ALD 428

Customs and Excise Legislation Amendment Act 1975

Australian National Railways v Customs (1985) 8 FCR 264

Customs v Pozzolanic and Anor (1993) 43 FCR 280

Australian Native Landscapes Pty Ltd v Customs (1997) 44 ALD 531

Re Queensland Railways and Customs 42 ALD 577

REASONS FOR DECISION

10 February 1999 Mr K L Beddoe (Senior Member)

1. The applicant seeks review of decisions of the respondent to reclaim diesel fuel rebates previously paid to the applicant for fuel purchased by the applicant Board after 1 July 1995.

2. Section 164 of the Customs Act 1901 ("the Act") provides for a rebate payable to a person who purchases diesel fuel for use, inter alia, in primary production. No issue arises in this case about use of road vehicles on a public road. Section 78A of the Excise Act 1901 is in the same terms. The parties agreed that the matter proceed on the basis of the provisions in the Act.

3. "Primary Production" is defined in s 164(7) of the Act to mean:

(a) agriculture;

(b) fishing operations; or

(c) forestry.

4. "Agriculture" is given an expansive definition in s 164(7). Primarily it means:

(a) the cultivation of the soil; or

(b) the cultivation or gathering in of crops; or

(c) . . . ; or

(d) . . . .

The word "agriculture" is then given an extended meaning so as to specify activities in respect of which a rebate is payable including the following paragraphs:

(l) any activity undertaken for the purpose of soil or water conservation:

(i) by a person who carries on a core agricultural activity; or

(ii) by a person contracted by that person to carry out the first-mentioned activity;

on the agricultural property where the core agricultural activity is carried on; or or [sic]

(q) the construction or maintenance of dams, water tanks, water troughs, water channels, irrigation systems or drainage systems including, without limiting the generality of the foregoing, water pipes and water piping for use in a core agricultural activity if the construction or maintenance:

(i) is carried out on the agricultural property where the core agricultural activity is carried on; and

(ii) is carried out by the person who carries on the core agricultural activity or by a person contracted by that person to carry out the construction or maintenance; or

(t) any activity undertaken for the purposes of soil or water conservation:

(i) by a person who carries on a core agricultural activity within an approved catchment area; or

(ii) by a person contracted by that person to carry out the first-mentioned activity;

within the approved catchment area; or

(u) the pumping of water solely for use in an agricultural activity if the pumping:

(i) is carried out on an agricultural property where a core agricultural activity is carried on, or at a place adjacent to that property; and

(ii) is carried out by the person who carries on the first-mentioned agricultural activity or by a person contracted by that person to carry out the pumping, other than a person so contracted that is a Commonwealth authority or a State or Territory authority; or

(v) the supply of water solely for use in an agricultural activity if:

(i) the supply is to an agricultural property where a core agricultural activity is carried on; and

(ii) the water comes from that property or a place adjacent to that property; and

(iii) the supply is carried out by the person who carries on the first-mentioned agricultural activity or by a person contracted by that person to carry out the supply, other than a person so contracted that is a Commonwealth authority or a State or Territory authority; "

5. "Core agricultural activity" is defined in s 164(7) to mean an activity referred to in paragraphs (a) (b) (c) or (d) of the definition of "agriculture" if that activity is carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale (s164(7)(zd)).

6. "Agricultural activity" is defined in the subsection to mean an activity referred to in any one of paragraphs (a) to (2a) of the definition of "agriculture" if that activity is carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale (s 164(7)).

7. A "State or Territory Authority" is defined in the subsection to mean either an instrumentality of a State or Territory; or an authority or body established for the purpose of a State or Territory by or under a law of the State or Territory. There is no dispute in this matter that the applicant Board comes within the latter part of the definition, and I so find.

8. At the hearing of this matter Mr Turnbull of counsel appeared for the applicant Board and Mr Northcote represented the respondent. The documents lodged in the Tribunal pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 were before the Tribunal as the T documents and the following documents were tendered and marked as exhibits:

A Sworn Statement of William Charles Lowis;

B Copy letter written of behalf of the applicant Board dated 25 August 1998;

C 31st Annual Report of applicant Board;

D Copy Rate Book of applicant Board;

E Information Book issued by the applicant Board.

No oral evidence was called. Counsel did give certain explanations of the facts in his opening which was objected to by the respondent's representative. Nothing turns on this except that I said I would take official notice of the fact that it is likely an underground aquifer in the South Burdekin area that is pumped down may be replenished naturally by saline water from the Pacific Ocean unless the aquifer is replenished with fresh water. There is no evidence on the point but I am satisfied I should take official notice of that possibility in relation to the South Burdekin Delta fresh water aquifers.

9. The applicant Board was constituted by an Order in Council dated 31 March 1966 for the purpose of conducting replenishment activities in relation to underground water on the southern side of the Burdekin River Delta. That area is known as the South Burdekin Water Area and was delineated pursuant to the Water Act 1926 (Qld) ("the 1926 Act"). The replenishment activities have two goals:

(a) increase the quantity of water in the aquifer; and

(b) improve the quality of the water in the aquifer.

Such water is then available for use for irrigation, grazing, industrial and domestic purposes.

10. The applicant Board asserts, and I accept, that it was constituted pursuant to an Order-in-Council made under the 1926 Act. That Act was repealed effective from 1 February 1990 and the applicable legislation is the Water Resources Act 1989 (Qld) ("the 1989 Act"). However the applicant says that its incorporation continues from the Order-in-Council which was dated 31 March 1966 and is merely continued pursuant to the provisions of the 1989 Act. The correct position appears to be that the Board is deemed to be a board constituted under the 1989 Act until dissolved or otherwise dealt with under that Act (Act No 112 of 1989).

11. It follows, in my view, that the Board was constituted under the 1926 Act by Order-in-Council which continues to have effect by virtue of s 1.3(h) of the 1989 Act.

12. The Order-in-Council constituted a Water Board under the name South Burdekin Water Board. It was constituted for the purpose of constructing, maintaining and administering works for improvement of subterranean water supplies in the water area. The cost of construction of the works was to be met by money borrowed by the Board; by sale of debentures in accordance with the provisions of the 1926 Act.

13. The membership of the Board comprised:

(a) One member representing the Commissioner of Irrigation and Water Supply;

(b) One member representing the Ayr Shire Council;

(c) Two members representing the owners of the Inkerman Sugar Mill; and

(d) Four members elected by the Inkerman Mill Suppliers.

14. There is nothing in the Order-in-Council, nor have I found anything in the legislation that suggests the Board is other than a body established to perform statutory duties and exercise public functions (Renmark Hotel v FCT (1949) 79 CLR 10). While it is not clear to me that the Board is an arm of the Crown in the right of the State of Queensland I am satisfied that it was established to act on behalf the public and for the public benefit in the South Burdekin Water Area and was therefore established for the purpose of the State of Queensland (cf Western Australian Turf Club v F.C.T. 78 ATC 4133 and Re Brennan and Law Society of the ACT (1984) 6 ALD 428 at 436), by or under the 1926 Act.

15. For the purpose of maintaining the aquifers the Board has been granted or leased Crown lands, acquired freehold land and also acquired easements over land to enable it to carry out its functions.

16. Some of the land is used for channels and recharge pits constructed by the Board. Water is diverted from the Burdekin River to the channels and recharge pits situation in the South Burdekin Water Area.

17. The Board also engages in the construction of sand dams in the bed of the Burdekin River and maintains those dams. These dams are designed to impede the flow of water down the river and to create storage areas from which the Board can pump water. The pumps used to pump from these sand dams are located on the bank of the river upstream from the town of Home Hill. Further sand dams are constructed in the vicinity of Rita Island.

18. The water is pumped into the channels and recharge pits so as to allow the river water to percolate down into the underground aquifer or to be pumped from the channels by cane farmers for irrigation. It is claimed that a significant proportion of the water pumped from the channels by the cane farmers ultimately percolates into the aquifer.

19. Except for those farmers who draw their water requirements from the channels the cane farmers draw their water from the aquifer through pumping spears. Pumping is normally by electric pumps owned and controlled by the farmer and operated in accordance with seasonal requirements. There is no accounting for water actually pumped from the aquifer.

20. The Board charges rates based upon sugar production. It also charges an additional charge to farmers who are saved the cost of pumping from the aquifer because they can access the channels. This secondary charge is designed to equalise the costs of farmers so that those drawing from the channels incur similar costs to those pumping at their own expense from the aquifer. The rates are paid to the Board by the Sugar Mill which recoups the farmer's share from payments due by the Mill to the farmers for cane. The Board claims, and I accept, that the rates are not a charge for supply of water. There is no relationship between the rates charged and water used.

21. The Board uses diesel fuel in the Board's trucks, plant and equipment for a number of functions. These include the following:

(a) the process of constructing and maintaining sand dams in the bed of the Burdekin River;

(b) construction on Crown Land, land assigned or leased to the Board;

(c) maintenance by removal of silt, tidying of banks and removal of vegetation from the channels;

(d) construction and maintenance of channels on freehold land by agreement with owners who have granted the Board easements for this purpose; and

(e) construction and maintenance of recharge pits whether on Crown Land, assigned land or private land under easement arrangements.

22. The recharge pits are very much at the centre of the Board's operations. Construction of a pit requires the digging out of a large area similar, it seems on the material, to construction of a farm dam but not for the purpose of holding water. Maintenance of the pit involves a periodic removal of mud and silt from the pit. The pits are constructed in sand and that sand must be kept clear both to ensure that water passing through the sand is clean and that the pit continues to act as a filter. Silting makes the pit inefficient as a filter of the water being pumped into the aquifer. The silt comes to the pits in water pumped from the Burdekin River by the Board.

23. The material establishes, to my satisfaction, that the Board's functions are essential to maintaining an adequate water supply for South Burdekin sugar cane farms. There is also incidental use of water from the aquifers for other purposes including town water for Home Hill. The Board's function is to improve the quality of the water in the aquifers and to also increase the quantity of water in the aquifers. The latter function is satisfied by pumping Burdekin River water into the aquifers via the sand pit filters and by allowing some cane farmers to draw their water from the Board's channels. The latter removes the need for those farmers to pump from the aquifers. Some proportion of the water drawn from the channels does eventually find its way into the aquifers naturally after irrigation and absorption into the soil.

24. I am satisfied that the Board's water conservation activities are integral to the production of sugar cane in the South Burdekin area. Without these activities the sugar cane production would be substantially lessened in most seasons.

25. Exhibit A sets out the applicant's analysis of the consumption of diesel fuel in its various activities.

26. The analysis is based upon the year ended 30 June 1998 and is as follows:

(a) use of diesel fuel in trucks, plant and equipment for

the construction and maintenance of sand dams in

the bed of the Burdekin River including upstream

from Home Hill near the Board's Pumping Station

and also in the vicinity of Rita Island: 4,529 litres (13%)

(b) use of diesel fuel in trucks, plant and equipment for

the construction and maintenance of Board Channels

on Crown land or land leased by the Board from the

Crown: 9.756 litres (28%)

(c) use of diesel fuel in trucks, plant and equipment for

the construction and maintenance of recharge pits on

Crown land or land owned by the Board or land

leased by the Board from the Crown: 6,968 litres (20%)

(d) use of diesel fuel in trucks, plant and equipment for

the construction and maintenance of channels on land

owned by private farmers and made available to the

Board under easement arrangements: 9,407 litres (27%)

(e) use of diesel fuel in trucks, plant and equipment for

the construction and maintenance of recharge pits on

land owned by private farmers and made available

to the Board by easement arrangements: 2,439 litres (7%)

(f) other: 1,743 litres (5%)

27. Exhibit A also establishes that the water supply drawn from the South Burdekin Delta aquifers is essential to the sugar cane farming on the delta. I am satisfied that the water conservation activities of the applicant are an essential element of the cane farming operations on the delta, and I so find.

28. The respondent took the view that the applicant was engaged in supplying water to farmers on the South Burdekin Delta which was achieved by operations already described. The respondent conceded that the applicant's operations were connected with agriculture and that the claim would have been conceded prior to 1 July 1995.

29. The Customs and Excise Legislation Amendment Act 1975 came into operation on 1 July 1995. That Act removed the "for use in operations connected with" agriculture test as it had applied to that date. The respondent concluded that:

(a) the applicant's operations did not come within the definition of "agriculture" and consequently the fuel was not for use in "primary production".

(b) The water was not solely for use in agriculture because some was used for industrial and domestic purposes; and

(c) the applicant is a State Authority and therefore expressly excluded by paragraphs (u) and (v) of the definition of "agriculture".

31. The respondent submitted that the amendment of the legislation in 1995 to exclude activities "connected with" agriculture showed a clear intention on the part of Parliament to exclude from the rebate activities such as those carried on by the Board. It is submitted that the intention is clear by considering the terms of the legislation itself. It is also said, in effect, that the mischief sought to be corrected is to remove the subjective test as to whether a particular activity can be said to be "connected with" the agricultural industry. Reference was also made to the second reading speech and the Explanatory Memorandum relating to the 1995 amendments but it is not necessary that I refer to those materials.

32. In my view the definition of "agriculture" is exhaustive. It is defined to mean paragraphs (a)(b)(c) and (d) which are to expressly include the activities set out in paragraphs (e) to (Zba) but not to include activities at paragraphs (Zc) and (Zd) of the definition. Some of the "inclusive" paragraphs are also expressed to exclude certain activities.

33. The task is therefore to consider whether the relevant activities come within the positive limb of one of the inclusive paragraphs given that the relevant activities cannot be said to come within paragraphs (a) to (d).

34. It is now well established that the mere fact of essentiality of certain activities to the carrying on of primary production does not therefore bring that activity within the relevant definition - in this case "agriculture". Section 164 allows the rebate for diesel fuel "for use" by the purchaser in primary production. The test is not whether the purchaser is engaged in relevant activities but whether the fuel is purchased for use in relevant activities (Australian National Railways v Customs (1985) 8 FCR 264; Customs v Pozzolanic and Anor 43 FCR 280 @ 289-90). That general proposition is however qualified by the definition of agriculture in those paragraphs that limit the relevant activity undertaken to activity undertaken by a person who carries on a core agricultural activity.

35. Mere connection with defined activities is no longer sufficient. As Sackville J observed in Australian Native Landscapes Pty Ltd v Customs (1997) 44 ALD 531 at 539 the legislation was amended specifically remove the opportunity for persons to claim a rebate simply because their activities are "connected with" horticulture (as in that case). The same reasoning applies in relation to "agriculture".

36. The definition of "agriculture" is in the form of a "means and includes" definition. It is therefore in the same form as the definition of "mining operations" also in s 164(7) of the Act. I repeat what was said in Re Queensland Railways and Customs 42 ALD 577 at 583/585 :

"30. Where a word is defined in terms of "includes", the definition may generally be treated in one of two ways. In an appropriate context, it may be treated as enlarging the ordinary meaning of the word so that the word is not only given its ordinary meaning but also those said to be included (see Deeble v Robinson [1954] 1 Q.B. 77 at 81-82, Sherritt Gordon Mines Ltd v Federal Commissioner of Taxation (1976) 10 ALR 441 at 455 followed in Douglas and Another v Minister for Aboriginal and Torres Strait Islander Affairs (1994) 34 ALD 192 at 203).

31. This first treatment of the word "includes" in a definition is illustrated by the case of Favelle Mort Ltd v Murray (1975-1976) 133 CLR 580). The High Court considered section 6 of the Workers' Compensation Act 1926 (NSW) which defined the word "injury" as

"personal injury arising out of or in the course of employment and includes -

(a) a disease which is contracted by the worker in the course of his employment whether at or away from his place of employment and to which the employment was a contributing factor."

Barwick CJ said of the definition:

"... that there is no rule of construction which requires inclusive words to be read as exclusive of any elements which otherwise fall within the meaning of the word or expression being defined. Of course, if the matter included by extension of the definition does not otherwise or in any sense fall within the connotation of the word or expression being defined, the inclusion of such matter will not go beyond the terms in which the inclusion is expressed. Thus, if no reception of any disease falls within the connotation of the word 'injury' in the Act in its normal sense, the extension in par. (a) will only include in that connotation such diseases as satisfy the condition expressed in the extension. In a sense, all other diseases would be excluded, i.e. because not included.

But if the contraction of a disease by external cause or excitement is within the connotation of the word 'injury' in legislation of this kind, an extensive paragraph such as par. (a) is not required by any rule of construction to be read as exclusive of some part of the ordinary connotation of the word whose connotation is being extended by inclusive words." (588-589)

32. Depending on the context, the word "includes" may have been used

"... not so much to extend the ordinary meaning of the defined term as to specify as falling within the definition that which might otherwise have been in doubt: (Lilyman v Pinkerton (No 2) (1982) 71 FLR 135 at 138." (Hepples v Commissioner of Taxation (1990) 22 FCR 1 at 21)

33. We have said that the word "includes" generally leads to one or other of these two interpretations for we are mindful that there are cases in which the word "includes" has led to the conclusion that the definition was exhaustive (see, for example, YZ Finance Co Pty Ltd v Cummings [1964] ALR 667 and Lamont v Commissioner for Railways (1963) 80 WN (NSW) 1242). Whether or not the word "includes" will be taken to indicate an inclusive or an exhaustive definition depends on a number of factors including the terms used in other definitions in the particular legislation and whether meanings other than those listed could ordinarily be regarded as coming within the term defined (see, for example, Re Gray (Judge of the Federal Court of Australia), Adamson and AMWU; Ex parte Marsh and Another (1985) 62 ALR 17 at 27 per Barwick CJ).

34. Where a word or expression is defined in terms of "means" the definition is taken to be exhaustive. This was the conclusion expressed by McInerney J in the Sherritt case (at 455).

35. When an expression is defined by reference to "means ... and includes..", then

"As a general proposition, the use of the expression "means and includes" indicates an exhaustive explanation of the meaning which for the purposes of the statute must be attached to the term the subject of the definition, and conveys both the idea of enlargement and exclusion: Dilworth v Commissioner of Stamps [1999] AC 99 at 105-106; YZ Finance Co Pty Ltd V Cummings (1964) 109 CLR 395 at 398-399. 401-402, 405)" (Hepples case at 21)

36. The definition of "mining operations" has been defined by reference to "means ... and includes". When regard is had to the other definitions in sub-section 164(7) it is apparent that Parliament has adopted that form in relation to some definitions (e.g. "agriculture" and "forestry" and see also those such as "fishing operations" and "residential premises" which adopt the related approach of "means ... but does not include"). In relation to other definitions, it has expressed the definition in terms of "means" (e.g. "earthworks", "agricultural activity", "minerals" and "primary production"). Finally, Parliament has also defined certain terms by reference simply to "includes" (e.g. "transport networks" and "live-stock").

37. The definition of "mining operations" "includes" an extensive range of activities expressed in some twenty paragraphs. This factor, together with the careful use of the words "includes", "means", "means ... and includes" and "means ... and does not include" throughout sub-section 164(7) persuades us that the definition of "mining operations" is intended to be exhaustive. That is to say, we cannot have regard to the ordinary meaning of that term but are limited by the meaning given in the definition."

37. I am satisfied on the material before me that the essential functions of the Board are for the purpose of water conservation so that the activity comes within s 164(7) paragraph (l) of the definition of "agriculture". I am not satisfied however that the Board is a person who carries on a core agricultural activity as defined, nor is the Board contracted by the farmers to carry out the water conservation activity. It does so because of its statutory obligations - not because of any contractual relationship between the Board and farmers. Furthermore, as a general rule, the Board's water conservation activities are not a core agricultural activity carried on on agricultural property. They are not carried out on the farming properties where core agricultural activity is carried on by farmers in the South Burdekin Delta. I am satisfied paragraph (l) has no application on the facts of this case.

38. In particular I am not satisfied that paragraph (l) is to be read disjunctively so that it is sufficient that a person other than a person covered by subparagraphs (i) and (ii) undertakes the activity for the purpose of water conservation. To adopt such a disjunctive interpretation would be to make subparagraphs (i) and (ii) otiose.

39. Nor am I satisfied that paragraph (l) should be interpreted so as to include water conservation activity not undertaken on the agricultural property. There is, in my view, a clear intention in the paragraph that it only applies to water conservation activity undertaken so as to effect water conservation on the agricultural property where a core agricultural activity is carried on. It seems to me that replenishment of underground aquifers does not have a sufficient connection to characterise that replenishment as an activity for the purpose of water conservation on an agricultural property. Certainly it is an activity for the purpose of water conservation. It is more correctly characterised however as conservation of the general underground water supply as distinct from conservation on an agricultural property.

40. As already discussed I am satisfied that the Board is an Authority of the State of Queensland and is therefore a "State or Territory Authority" as defined. It follows that inclusive paragraph (u) of the definition of "agriculture", which might otherwise have applied, cannot apply because of the exclusion of operations contracted by the farmer that is carried out by a State or Territory Authority. As already indicated I am not satisfied that there is a contractual relationship between the farmers and the Board 's activities in relation to its water conservation activities.

41. It follows that I am not satisfied that the diesel fuel purchased by the Board was for use by the Board in primary production so as to bring the Board within the terms of s 164(1) of the Act.

42. For these reasons the decision under review will be affirmed.

I certify that this and the fourteen (14) preceding pages are a true copy of the decision and reasons for decision herein of Mr K L Beddoe (Senior Member)

Signed: .....................................................................................

Secretary

Date/s of Hearing 26 November 1998

Date of Decision 10 Februry 1999

Counsel for the Applicant Mr Turnbull

Solicitor for Applicant Dickenson Simoeni & Robins

Respondent Mr Northcote