Independent Distillers (Aust) Pty Ltd and Chief Executive Officer of Customs [2003] AATA 319 (4 April 2003)

Last Updated: 8 April 2003

CATCHWORDS - CUSTOMS AND EXCISE - duty payable on ready to drink alcoholic beverages - whether calculated on basis of the quantity of alcohol they actually contain or whether calculated on their labelled quantity of alcohol - decision set aside.

Customs Act 1901 ss. 4, 134, 136, 137, 142, 146, 147 and 159

Australia New Zealand Food Authority Act 1991

Customs Tariff Act 1995 ss. 3, 6, 7, 15, 16, 17, 18, 20 and 22;

sub-headings 0406.10.00, 2402.10, 2203.00.20, 2203.00.61, 2208, 2208.90, 2208.90.10, 2208.90.20 and 4820.50.00

Customs and Excise Legislation Amendment Act 1988

Excise Act 1901 ss. 77FA and 77FB

Excise Laws Amendment Act (No. 1) 2002

Commerce (Trade Descriptions) Act 1905 ss. 3, 9, 9A and 10

Commerce (Imports) Regulations 1940 r. 7 and 8

Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 35 ALR 151

Times Consultants Pty Ltd v Collector of Customs (Qld) (1987) 76 ALR 313

DECISION AND REASONS FOR DECISION [2003] AATA 319

ADMINISTRATIVE APPEALS TRIBUNAL )

) V2002/259, V2002/625 &

GENERAL ADMINISTRATIVE DIVISION ) V2002/1026

Re INDEPENDENT DISTILLERS (AUST) PTY LTD

Applicant

And CHIEF EXECUTIVE OFFICER OF CUSTOMS

Respondent

DECISION

Tribunal: Miss S A Forgie (Deputy President)

Date: 4 April, 2003

Place: Melbourne

Decision: The Tribunal decides that s. 136 of the Customs Act 1901 does not have any application in determining the size or quantity of a component of goods. Therefore, I have decided to:

1. set aside the respondent's decisions to demand the payment of additional duty paid under protest by the applicant in respect of goods, which it had imported into Australia and which were detailed in the entries set out in the Attachments to each of its three applications; and

2. substitute a decision that the duty payable on cans of alcoholic beverages, which are known as RTDs or Ready to Drinks, is to be calculated on the basis of the alcohol by volume they contain and not on the basis of the alcohol by volume as stated on their labels.

S A FORGIE

Deputy President

REASONS FOR DECISION

On 15 March, 2002, 18 June, 2002 and 24 September, 2002, the applicant, Independent Distillers (Aust) Pty Ltd ("Independent Distillers") applied for review of a decision of a delegate of the respondent, the Chief Executive Officer of Customs ("the CEO"). Independent Distillers described that decision as being dated 14 November, 2001 and received on 19 November, 2001. It also described it as relating to the calculation of alcohol content for duty purposes in respect of entries set out in a Schedule attached to each of the three applications. The decisions that are in fact under review are the CEO's decisions to demand the payment of additional duty paid under protest by Independent Distillers in respect of goods, which it had imported into Australia and which were detailed in the entries set out in the Attachments to each of its three applications.

2. At the hearing, Independent Distillers was represented by its solicitor, Mr Gross, and the CEO by his solicitor, Mr Kennedy. The documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 ("T documents") were admitted in evidence. No oral evidence was given as the facts were agreed between the parties.

THE ISSUE

3. The issue in this case is whether duty on cans of alcoholic beverages, which are known as RTDs (i.e. "Ready to Drinks"), should be calculated on the basis of the quantity of alcohol they actually contain (i.e. 4.8% strength by volume) or their labelled quantity of alcohol (i.e. 5% strength by volume).

BACKGROUND

4. There was no dispute between the parties and I find that Independent Distillers imports RTDs. Two examples of those RTDs are Highland Finest Old Scotch and Dry and Woodstock Premium Reserve Bourbon and Dry. The labels on the cans in which the drinks are contained state that they are the product of Australia and, in the case of the Scotch and Dry, of Scotland, and, in the case of Bourbon and Dry, of the U.S.A. They also show that they contain alcohol. In the case of the Scotch and Dry, the label specifies "ALC 5% VOL" and in the case of the Bourbon and Dry, it specifies "5% ALC/VOL".. The volume of beverage in each can is stated on its label to be 440ml.

5. The Food Standards Code ("Code") is a collection of standards in relation to a wide variety of matters relating to food. Those matters include the composition of food, the handling and packaging of food, the advertising of food and the labelling of food. The Code is developed under a treaty between Australia and New Zealand and is implemented by legislation at the State and national level across the two countries. At the national level in Australia, it is implemented by the Australia New Zealand Food Authority Act 1991.. Standard 2.7.1 is entitled "Labelling of Alcoholic Beverages and Food Containing Alcohol".. Its purpose is to provide labelling requirements for alcoholic beverages and food containing alcohol. Clause 2 is concerned with the declaration of alcohol by volume. The label on food, including alcoholic beverages, containing more than 1.15% alcohol by volume, must include a statement of the content of alcohol in "mL/100 g or mL/100 ml of X% ALCOHOL BY VOLUME or words and expressions of the same or similar effect" (clause 2(1)). The statement must for certain foods, including alcoholic beverages containing more than 1.15% alcohol by volume, be accurate within "0.5% alc/vol" (clause 2(2)).

6. On average, Independent Distillers' RTDs, which are labelled as containing 5% alcohol by volume, contain, on average, 4.8% alcohol by volume. Consequently, its RTDs accord with the labelling requirements of the Code.

LEGISLATIVE FRAMEWORK

7. Part II of the Customs Tariff Act 1995 ("CT Act") provides for imposition of duties of customs. Section 15 provides that duties of customs are imposed on goods imported into Australia on or after 1 July, 1996 and on goods which are imported into Australia before 1 July, 1996 and entered, or again entered, for home consumption on or after that day.. The duty payable upon such goods is worked out in the manner provided for in ss. 16, 17, 18, 20 and 22. Although qualified by the other four sections, s. 16 sets out the general position in relation to the duty that is payable. Section 16(a) provides that:

"if the goods are not the produce or manufacture of a Preference Country - [the duty is worked out] by reference to the general rate set out in the third column of the tariff classification under which the goods are classified;"

If the goods are the produce or manufacture of a Preference Country (i.e. New Zealand, Papua New Guinea, a Forum Island Country, a Developing Country or Canada - CT Act, s. 3(1)), duty is payable according to the rate set out in relation to those countries in the third column of the tariff classification under which the goods are classified (CT Act, ss. 16(b) to (h)).

8. A reference to the tariff classification under which the goods are classified is a reference to the heading or subheading in whose third column a rate of duty is set out and under which the goods are classified (CT Act, s. 6). The reference to a heading and a subheading is a reference to those appearing in Schedule 3 to the CT Act (CT Act, s. 3(1)). Schedule 2 of the CT Act sets out the General Rules for the Interpretation of the Harmonized System provided for by the Convention ("Interpretation Rules"). Those Interpretation Rules must be used in working out the tariff classification under which goods are classified (s. 7(1)). Rule 1 provides that the titles of Sections, Chapters and sub-Chapters are provided for ease of reference only. Classification is determined according to the terms of the headings and any relative Section or Chapter Notes and, provided they are not inconsistent with those headings or Notes, according to particular provisions set out in rules 2 to 5. Rule 6 is concerned with subheadings and applies the rules in relation to headings mutatis mutandis to subheadings.

9. Schedule 3 of the CT Act sets out a considerable number of tariff classifications under which goods are classified. Various methods of calculating duty are specified. In relation to some goods, the rate of duty that is specified is calculated by multiplying a dollar figure by the weight of the goods to be imported. That is the case, for example, in relation to fresh (unripened or uncured) cheese, including whey cheese, and curd classified to sub-heading 0406.10.00.. In others, it is calculated by reference to a percentage of the value of the goods (e.g. albums for samples or for collections classified to sub-heading 4820.50.00). The "value" of imported goods is their "customs value" determined in accordance with s. 159 of the Customs Act 1901 ("the Act") and with Division 2 of Part VIII generally. In others, such as cigars, cheroots and cigarillos, containing tobacco, duty is calculated on the basis of an amount of money per stick and the amount of money depends upon the weight of tobacco content per stick (sub-heading 2402.10).

10. In relation to beverages, spirits and vinegar, which are classified under Chapter 22 of Schedule 3, duty is calculated either by reference to a percentage of the value of the goods or by reference both to the value of the goods and an amount of money per litre of alcohol. That Chapter is entitled "Beverages, spirits and vinegar" and is divided into nine headings. Taking heading 2208 as an example, it reads:

" UNDENATURED ETHYL ALCOHOL OF AN ALCOHOLIC STRENGTH BY VOLUME OF LESS THAN 80% VOL; SPIRITS, LIQUEURS AND OTHER SPIRITUOUS BEVERAGES".

Sub-heading 2208.90 reads "Other" and sub-heading 2208.90.20 reads "Having an alcoholic strength by volume exceeding 1.15% vol but not exceeding 10% vol". The general rate of duty is 5% and a sum of money per litre of alcohol.

11. The rate of duty for beer made from malt is free if it has an alcoholic strength by volume not exceeding 1.15% vol (sub-heading 2203.00.20). If it has "...an alcoholic strength by volume exceeding 1.15% vol but not exceeding 3% vol" and comes under sub-heading 2203.00.61, the general rate of duty is a sum of money per litre of alcohol but if it has "...an alcoholic strength by volume exceeding 3% vol but not exceeding 3.5% vol", the general rate is a different, but greater, sum of money per litre of alcohol.

12. Note 2 to Chapter 22 provides that the "alcoholic strength by volume" shall be determined at a temperature of 20 °C. The Additional Notes are also relevant and provide:

"1. For the purposes of this Chapter except for 2207, a reference to `alcoholic strength by volume' is a reference to the strength by volume of ethyl alcohol.

2. For the purposes of this Chapter ... specific gravity calculations for determining the volume of alcohol, or the alcoholic strength by volume, shall be made on the basis that, at a temperature of 20 °C and in vacuum, the specific gravity of ethyl alcohol is 0.79067."

13. The provisions of the CT Act are complemented by those of the Act. The duty payable is the subject of Part VIII of that Act and Division 1 of that Part is concerned with the payment and computation of duties generally. Consideration is given to the manner in which weights and measures (s. 134), measurements (s. 142) and volumes (s. 137) are determined. Of particular relevance in this case are the provisions of s. 136:

"Whenever goods (other than beer this is entered for home consumption after 31 January 1989) are sold or prepared for sale as or are reputed to be of a size or quantity greater than their actual size or quantity duties shall be charged according to such first-mentioned size or quantity."

The word "goods" is defined in s. 4... to mean "... moveable personal property of any kind and, without limiting the generality of the expression, includes documents, vessels and aircraft".

14. Beer, which is excepted from the application of s. 136, is the subject of s. 137. Section 137 provides for the manner of determining the volumes of beer according to whether it is imported in bulk containers (i.e. containers with a capacity to have packaged in it more than two litres or beer) or otherwise. The practical effect of this section was explained in the Second Reading Speech delivered by the then Minister for Science, Customs and Small Business:

"Technological improvements in the manner in which bulk vessels are manufactured and filled means that it is now possible to measure beer more accurately. As from 1 February 1989, it is proposed to assess duty on bulk containers, that is, vessels in excess of two litres capacity, according to the quantity of beer nominated by the manufacturer as being in the bulk container providing that the actual contents do not exceed 101.5 per cent of the nominated quantity of the beer. As from 1 July 1991, the 1.5 per cent overfill tolerance just discussed will be reduced to one per cent.

For beer in bottles and cans up to two litre capacity that are entered for home consumption as from 1 February 1989, duty will be based on the labelled contents of the container providing the actual contents do not exceed 101.5 per cent of the labelled contents of the container." (Hansard, House of Representatives, 7 November, 1988, page 2483)

15. Sections 146 and 147 are concerned with the strength of spirits and obscuration respectively and provide:

"The strength of spirits may be ascertained for the purposes of duty by means of an hydrometer approved by the CEO." (Act, s. 146)

"If in the opinion of the Collector the strength of any spirits cannot immediately be accurately ascertained by hydrometer the strength may be ascertained after distillation or in any prescribed manner." (Act, s. 147)

16. The Customs Working Tariff is an annotated version of Schedule 3 of the CT Act. It describes headings and sub-headings as reference numbers. In relation to each, it sets out the statistical code and unit, the goods and the rate. In relation to Chapter 22, the unit is described as "L al", which is defined at the foot of each page to mean "Litres of alcohol calculated on the total alcohol content of the goods".

THE SUBMISSIONS

17. Mr Gross submitted that s. 136 has nothing to do with the calculation of the quantity of alcohol in an alcoholic beverage but to the volume, and so the quantity, of alcoholic beverage being imported. This is evidenced, he continued, by the history of the amendments to the section.. Prior to 1 February, 1989 when an amendment effected by the Customs and Excise Legislation Amendment Act 1988 ("1988 Amendment Act") came into force, s. 136 did not contain any exclusion in relation to beer. The size or quantity of beer imported was determined in accordance with the general principles in s. 136.. The exclusion of beer from the application of those general principles after 1 February, 1989 recognised that it was now possible to measure the quantity of beer with accuracy. This was reflected in the enactment of s. 137, Mr Gross continued. That this is the correct interpretation, he submitted, is reinforced by the extract from the Second Reading Speech and the following passage from the Explanatory Memorandum explaining the amendment to s. 136:

"Clause 9 is a technical amendment to Section 136 of the Principal Act to make clear that the method used to determine the amount of customs duty payable on goods that are entered according to the good's reputed quantity (as prescribed by section 136), does not apply to beer entered for home consumption after 31 January 1989, when the new section 137 (added by clause 10 below) commences operation."

The interpretation is also supported by ss. 146 and 147 which provide a specific methodology for the calculation of the strength of spirits.

18. Mr Gross also referred to the Excise Act 1901 ("Excise Act"). It does not have an equivalent to s. 136.. For excise purposes, duty is calculated on the basis of the actual quantity of alcohol contained in the particular can. An amendment to the Excise Act was effected by the Excise Laws Amendment Act (No. 1) 2002 with effect from 14 May, 2002. It added ss. 77FA, which enables duty to be calculated on the basis of the labelled alcoholic strength of certain beverages in certain circumstances. Those circumstances occur if:

"the percentage by volume of the alcoholic content of the alcoholic beverage indicated on the label of the beverage exceeds the actual percentage by volume of the alcoholic content of the beverage" (Excise Act, s. 77FA(1)(b)).

19. Section 77FB has also been added to the Excise Act. It provides that the Chief Executive Officer ("CEO") may, in relation to an alcoholic beverage included in a class of alcoholic beverages, determine the rules for working out the percentage by volume of alcohol in the beverage (Excise Act, s. 77FB(1)). Without limiting the generality of his power, s. 77FB(2) provides that:

"... rules determined by the CEO for working out the percentage by volume of alcohol in an alcoholic beverage:

(a) may specify sampling methods; and

(b) may, for the purposes of working out the excise duty payable, permit minor variations between the nominated or labelled volume of alcohol in the beverage and the actual volume of alcohol in the beverage so as to provide for unavoidable variations directly attributable to the manufacturing process."

20. Mr Kennedy submitted that the meanings of the word "quantity" include size, extension, weight, amount or number and those for the word "size" include dimensions and magnitude. At the time that s. 136 was enacted in 1901, the CT Act levied duty on spirits at 14 shillings per gallon, on beer in bulk at 1 shilling per gallon, on shingles at 3 shillings per thousand, on half pints of oil at 2 shillings per dozen and on butter and cheese at 3^d per pound. On occasion, the components of goods were relevant in determining the rate of duty that was applicable but duty was not assessed by reference to the size or quantity of that component. Taking rum or wine as an example, the general tariff varied according to whether the percentage of proof spirit was less or more than 25% proof. If less, it was charged at 3/6 per gallon and, if more, at 7 shillings per gallon of rum or wine.

21. In 1901, s. 136 would have applied in relation to all of the sizes and quantities specified in the CT Act at that time. Therefore, a dozen containers of oil sold or prepared for sale as containing or reputed to contain half a pint would be dutiable as if they contained half a pint even if they contained only a quarter of a pint. It had no reference to the components in dutiable goods because the tariffs were not structured on the basis of components of goods but on goods as a whole. In 1901, duty was not levied on the basis of the customs value of the goods.

22. Since 1901, the CT Act has moved from levying duty for goods on the basis of quantity or size to levying it on most goods on the basis of the Customs value of the goods. In some instances, it continues to be levied on the basis of quantity or size, whether of the goods themselves or of a component of the goods. Section 136 continues to have application to both the goods and the components of goods where, as in this case both are relevant in calculating the amount of duty that is payable. If it were applicable only to the RTDs but not to its component alcohol, it would affect only one of the two variables that is relevant in calculating the duty that is payable.

23. Mr Kennedy submitted that a literal interpretation of s. 136 would lead to an irrational outcome as it would lead to the result that an overstatement in relation to the quantity of an alcoholic beverage would have consequences in calculating the duty payable but an overstatement in relation to a dutiable component would not have any consequences. He referred to passages from the judgement of Gibbs J in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 35 ALR 151 at 304, of Stephen J at 310-311 and of Mason and Wilson JJ at 321.

CONSIDERATION

24. For all practical purposes, the scheme established for the imposition of duty has four steps. The first two are concerned with the classification of the goods. They are to identify the goods that are imported and to select the tariff item, sub-item or division appropriate to those goods. Morling and Wilcox JJ said in Times Consultants Pty Ltd v Collector of Customs (Qld) (1987) 76 ALR 313:

"... the classification of goods for tariff purposes is a practical `wharf-side' task. ... It ought normally be possible to classify goods merely by looking at them and by considering their nature and the function which they were designed to serve. ..." (page 328)

It cannot, however, always be so for the classification of some goods is dependent upon certain characteristics that cannot always be ascertained simply by looking at them. Beer provides an example. Its alcoholic content may determine the heading or sub-heading to which it is classified. A spirit, for example, that is not otherwise classified under heading 2208, is classified to sub-heading 2208.90.10 if its alcoholic content does not exceed 1.15% but is classified to sub-heading 2208.90.20 if its alcoholic content exceeds 1.15% but does not exceed 10%. The rate of duty for the former is calculated on an ad valorem basis but on a combination of ad valorem and an amount of money per litre of alcohol if the latter.

25. The next step is to ascertain the rate of duty. The final step is to determine the amount of duty. If the goods are subject to ad valorem duty, their value must be determined and, together with the rate, used to determine the amount of duty charged. If they are subject to duty on another basis, that basis will be dependent upon physical or other characteristics of the goods and those physical or other characteristics must be determined. I have referred to examples of such characteristics above and they include characteristics such as weight and numbers of units as well as percentage of a certain component such as alcohol.

26. The physical or other characteristics may affect the amount of duty that is ultimately payable in one or both of two ways. The first way arises because they may affect its classification and the second arises because the rate of duty may be based on a formula that takes into account the physical or other characteristic of the goods and multiplies it by an amount of money to ascertain the duty payable.

27. That brings me to s. 136 for it is referring to size and quantity which may both be regarded as physical or other characteristics of goods. It is doing so in the context of the duties that will be charged. What is the meaning of the words "size" and "quantity"? Beginning with the word "size", it has many meanings but, in its context, only the following would appear relevant:

"... The relative bigness or extent of a thing ... the dimensions of a thing ..." (The New Shorter Oxford English Dictionary, 3rd edition, 1993)

"... the dimensions, proportions, or magnitude of anything ..." (The Macquarie Dictionary, 2nd edition, 1991)

The meanings of the word "quantity" include"

"... A (specified) portion or amount of an article, commodity, quality, etc., or a (specified) number of things; the portion, amount, or number (of something) present in a particular instance ..." (The New Shorter Oxford English Dictionary, 3rd edition, 1993)

"... magnitude, size, volume, area, or length ..." (The Macquarie Dictionary, 2nd edition, 1991)

28. Applying these meanings to s. 136, the effect of the section is that regard must be had to the dimensions, magnitude (determined by reference to such things as weight or volume) or portions in which the goods are sold, prepared for sale or reputed to be for sale. Regard is then had to their actual dimensions, magnitude or portions. If their actual dimensions, magnitude or portions are smaller than that which they are sold, prepared for sale or reputed to be, duty is charged as if they were what they claim to be and not what they actually are.

29. The rationale behind this provision was explained by HNP Wollaston in his book Customs Law and Regulations (with notes and references) (1904):

"Frequently articles are put up in packages, bottles, etc., labelled or marked, e.g., one pound or one quart, which are actually less than those quantities. This is one of those instances of flagrant dishonesty which is too common, and which, unfortunately, is defended on the ground that such a practice is recognized in the trade, who well know that an actual pound, etc., is not enclosed. In such cases duty is levied on the ostensible quantity; where, however, there is a plain indication [such as the words "one pound gross"] on the package that net weight is not intended to be or can be inferred, and the goods are not, as a matter of fact, sold or reputed to be of greater quantity than the actual contents of the package, duty will be accepted on the latter." (Act, s. 136, footnote 2, page 80)

30. This rationale may be thought to be equally applicable to "short changing" a potential purchaser in respect of the quantity of a component as stated on the goods' label as short changing them in the amount of the goods themselves. That a potential purchaser may be misled as to the components as well as to the size or quantity of the goods themselves does not, however, lead to the conclusion that s. 136 should be read as applying to components. I think that it should not be read in this way.

31. My first reason for reaching that conclusion is based on the word "goods" itself. Its definition as "... movable personal property of any kind ..." is very broad but it is not so broad as to include components of movable personal property that may themselves be movable personal property if they were separated from the goods but which are not separated from them and, indeed, are an integral part of the goods. Such is the case with alcohol in an alcoholic beverage. Section 136 refers to "goods" and not to the components of goods.

32. The second is based on the exclusion of beer from s. 136 and the way in which it has been addressed in s. 137 since 1 February, 1989. Section 137 is concerned with ascertaining the volume of beer. It is not concerned with calculating the volume of any one of its components, including alcohol, or the percentage of the whole which one of its components comprises. The classification to which beer is assigned depends, in part, upon its alcoholic content. Were it the case that s. 136 applied to both goods and the components of goods, one would wonder why beer were totally excluded from its operation. The answer would seem to be that s. 136 was intended to provide only for issues relating to the size or quantity of goods, and not with their components, and that s. 137 was intended to make provision for the particular requirements of ascertaining the size or quantity of beer. In the context of a liquid such as beer, size or quantity meant its volume.

33. The third reason is based on my not being persuaded that the interpretation that I have adopted would lead to an irrational outcome. Indeed, it seems to me the interpretation that is rational in the context in which s. 136 appears. The scheme for the imposition of duty is not generally concerned with the protection of the consumer or the purchaser of the goods but with the collection of revenue. On the interpretation of it that I have adopted, s. 136 is but a moment when it glances away from revenue collection which is generally the focus of its attention. It does so in order to discourage the importer or owner of the goods from "short changing" the consumer because duty will be calculated on the basis that it has not done so. Other exceptions are found not in the Act but in the Commerce (Trade Descriptions) Act 1905 ("CTD Act"). In relation to imports, it provides that the regulations may prohibit the importation of goods not bearing prescribed trade descriptions (CTD Act, s. 7). It also provides that a person may not import any goods to which a false trade description is applied (CTD Act, s. 9).

34. Regulation 7 of the Commerce (Imports) Regulations 1940 ("Regulations") sets out the goods whose importation is prohibited unless a trade description is applied in accordance with those Regulations. Among those goods are "articles used for food or drink by man ..." (r. 7(1)(a)). The expression "trade description" is defined in the CTD Act to mean, in so far as it is relevant:

"... in relation to any goods, ... [a] description, statement, indication, or suggestion, direct or indirect:

(a) as to the nature, number, quantity, quality, purity, class, grade, measure, gauge, size, or weight of the goods;

...

(e) as to the material or ingredients of which the goods are composed, or from which they are derived;

..." (CTD Act, s. 3)

In general terms, r. 8 requires a trade description to be affixed in the form of a principal label or brand affixed in as permanent a manner as possible and in a prominent position on the goods or on their packages.

35. A "false trade description" means:

"... a trade description which, by reason of anything contained therein or omitted therefrom, is false or likely to mislead in a material respect as regards the goods to which it is applied, and includes every alteration of a trade description, whether by way of addition, effacement, or otherwise, which makes the description false or likely to mislead in a material respect." (CTD Act, s. 3)

All imported goods found in Australia and bearing a false trade description are deemed to have been imported in contravention of the CTD Act unless the contrary is proved (CTD Act, s. 9A). Their importation is prohibited (CTD Act, s. 10(1)) and, if imported, are forfeited to the Crown (CTD Act, s. 10(2)). If the CEO is satisfied that their importation was not intentional or reckless, he may give written notice to the owner or importer of the goods to correct the false trade description. If the false trade description is corrected, the goods are no longer subject to forfeiture under s. 10(2).

36. If follows from the provisions of the CTD Act that, should goods be imported with a trade description that is false or likely to mislead in a material respect as to the nature, number, quantity, quality, purity, class, grade, measure, gauge, size, or weight of the imported goods, the goods are liable to forfeiture. That is so whether they are dutiable or not. It would follow that, if the RTDs were found to contain less than their stated alcohol content of "ALC 5% VOL" or "5% ALC/VOL" and if the understatement were such as to lead to the conclusion that their trade description was false or misleading in a material particular, that would lead to certain consequences under the CTD Act. Those consequences are intended to protect the consumer or purchaser of the goods. Arguably, the Code would be relevant in considering whether or not the trade description was false or misleading in a material particular.

37. Section 77FA of the Excise Act specifically provides for the result sought by Mr Kennedy in this case. That it does so does not alter the interpretation to be given to s. 136 and for the reasons I have given, I have decided that s. 136 does not have any application in determining the size or quantity of a component of goods. Therefore, I have decided to:

1. set aside the respondent's decisions to demand the payment of additional duty paid under protest by the applicant in respect of goods, which it had imported into Australia and which were detailed in the entries set out in the Attachments to each of its three applications; and

2. substitute a decision that the duty payable on cans of alcoholic beverages, which are known as RTDs or Ready to Drinks, is to be calculated on the basis of the alcohol by volume they contain and not on the basis of the alcohol by volume as stated on their labels.

I certify that the thirty-seven preceding paragraphs are a true copy of the reasons for the decision herein of

Miss S A Forgie (Deputy President)

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

P. Paczkowski Associate

Date/s of Hearing 18 November, 2002

Date of Decision 4 April, 2003

Solicitor for the Applicant Mr L. Gross,

Louis Gross and Associates

Solicitor for the Respondent Mr L. Kennedy,

Australian Government Solicitor