Federal Commissioner of Taxation v Beard Watson & Co Ltd [1931] HCA 29; (1931) 45 CLR 272 (3 September 1931)

HIGH COURT OF AUSTRALIA

The Federal Commissioner of Taxation Plaintiff; and Beard, Watson and Company Limited Defendant.

H C of A

3 September 1931

Gavan Duffy C.J., Starke, Evatt and McTiernan JJ.

E. M. Mitchell K.C. (with him Gallagher), for the plaintiff.

Flannery K.C. (with him Jelbart), for the defendant.

E. M. Mitchell K.C., in reply.

The following written judgments were delivered:—

Sept. 3

Gavan Duffy C.J.

I agree with the judgment to be delivered by my brother Evatt.

Starke J.

The following question is stated for the opinion of the Court: "Are sales tax and additional sales tax chargeable under the Sales Tax Acts (No. 1) 1930 and the Sales Tax Assessment Acts (No. 1) 1930 upon the sale value of goods manufactured by the defendant in Australia prior to 1st August 1930, which goods were still on hand and unsold at the commencement of business on that date, and had prior to the said 1st August been treated by the defendant as stock for sale by it by retail and were on or after that date either sold to persons not registered under the Sales Tax Assessment Acts (Nos. 1 to 9) 1930 or under any of those Acts or to persons so registered but who had not under those Acts or under any of them quoted their certificate of registration?"

The answer depends upon the construction of secs. 17 and 18 of the Sales Tax Assessment Act (No. 1) 1930, as amended by the Act No. 62 of 1930. By the Acts No. 26 of 1930 and No. 63 of 1930 a sales tax is imposed at the rate of two and one-half per centum (increased after 11th July 1931 by Act No. 26 of 1931) upon the sale value of goods manufactured in Australia by a taxpayer and sold by him or treated by him as stock for sale by retail or applied to his own use. But the Sales Tax Assessment Act (No. 1) 1930 and the Sales Tax Assessment Act (No. 1A) 1930 (Act No. 62) settle the limits of that tax, and provide for its assessment and the persons chargeable therewith. Thus, in sec. 17 it is enacted that the sales tax there mentioned shall be levied and paid upon the sale value of goods manufactured in Australia by a taxpayer before or after the commencement of the Act, and on or after 1st August 1930 sold by him or treated by him as stock for sale by retail or applied to his own use. The sale value of goods in Australia is also fixed. Thus sec. 18 provides:—(1) The sale value of goods not being goods to which the next clause (2) applies which are sold on or after 1st August 1930, shall be the amount for which those goods are sold, to certain persons. (2) The sale value of goods treated by the manufacturer of the goods on or after 1st August 1930 as stock for sale by him by retail shall be the fair wholesale market price. (3) The sale value of goods manufactured by any person, and, on and after 1st August 1930, applied to his own use, shall be such amount as in the opinion of the Commissioner is the fair market value in the ordinary course of trade. Both the Tax Acts and the Assessment Acts divide the goods the subject of the tax into three classes, but the determination of the class into which the goods fall depends upon the manufacturer's acts on or after 1st August 1930. This view is borne out by sec. 21, which requires every manufacturer who during any month makes any of the sales specified in sec. 18, or treats any goods as stock for sale by him by retail, or applies to his own use any goods manufactured by him, to furnish a return thereof. It is admitted that the manufacturer had in the present case treated the goods as stock for sale by retail prior to 1st August 1930, and the argument is that the goods were thereby excluded from the second of the classes above mentioned. But if they be excluded from that class, why do they not then fall within the class of goods manufactured in Australia and sold by the taxpayer on and after 1st August 1930? Because, as I understand the argument, they had become irrevocably stamped, before 1st August 1930, with the character of goods treated by the taxpayer as stock for sale by retail. I cannot agree. The Acts give no character to the goods except in respect of acts done on and after 1st August 1930. Here we have a sale within the terms of sec. 18 (1), on and after 1st August 1930; and the taxpayer does not contend that he treated the goods on and after that date as stock for sale by retail, for that would only bring him within the provisions of sec. 18 (2).

The question stated must be answered in the affirmative.

Evatt J.

The question which arises for decision is whether the Commonwealth Sales Tax Acts (No. 1) and the Sales Tax Assessment Acts (No. 1) 1930 operate in such a way as to make the defendant Company chargeable with sales tax and additional tax upon the "sale value" of certain goods. These goods were manufactured in Australia by the defendant Company prior to 1st August 1930, and were treated by it as stock for sale in its retail business before that date. At the commencement of business on 1st August, the goods were still on hand and unsold, but they were all sold on or after that date either to persons not registered under the Commonwealth Acts mentioned or to registered persons who did not quote their certificate in respect of their purchases. Such sales by the manufacturer of goods ordinarily create a liability on his part to pay sales tax upon their sale price, but the defendant seeks to avoid that result because, prior to 1st August 1930, the goods had been treated as stock for sale by it by retail.

The Sales Tax Act (No. 1) 1930 imposes what is called a "sales tax" at the rate of 2½ per centum upon the sale value of goods which a taxpayer has manufactured in Australia, and afterwards has (1) sold or (2) treated as stock for sale by retail or (3) applied to his own use (No. 26 of 1930, sec. 3; No. 63 of 1930, sec. 4). Sec. 19 of the Sales Tax Assessment Acts provides that tax is payable by the manufacturer of the goods, the sale value of which is specified in sec. 18. The part of sec. 18, which is important for present purposes, is as follows:—

18.

(1)

For the purposes of this Act, the sale value of goods, not being goods to which the next succeeding sub-section applies, which are sold on or after the first day of August one thousand nine hundred and thirty, shall be the amount for which those goods are sold to an unregistered person, or to a registered person who has not quoted his certificate in respect of that sale.

(2)

For the purposes of this Act, the sale value of goods treated by the manufacturer of the goods on or after the first day of August one thousand nine hundred and thirty as stock for sale by him by retail, shall be the amount which would be the fair market value of those goods if sold by him by wholesale.

Sec. 17 of the Sales Tax Assessment Acts defines the subject matter of sales tax as the sale value of goods manufactured by the taxpayer (whether before or after the commencement of the Act) where the goods are (a) sold on or after 1st August 1930, or (b) treated by him as stock for sale on or after 1st August 1930, or (c) applied to his own use on or after 1st August 1930. These three descriptions clearly identify the three classes of manufactured goods struck at by the Act. Sec. 18 then enacts that a sale value will attach to the goods in the manufacturer's hands upon his performing—on or after 1st August 1930—any one of three acts—selling, treating as retail stock, or applying to his own use. The performance of one of these acts at once creates and measures the manufacturer's liability.

The argument for the taxpayer is that there is no liability to taxation if the goods have been sold or applied to the taxpayer's use prior to 1st August 1930, and that, by parity of reasoning, a treatment of goods as retail stock prior to that date should have a similar result. It is not disputed that if (as he might) the manufacturer sold the goods by retail on or after 1st August 1930, without any prior treatment of such goods as stock for sale by retail, he would be liable.

The taxpayer's contention necessarily involves the assertion that the words "not being goods to which the next succeeding sub-section applies," which occur in sec. 18 (1), indicate an exclusion or exception from sec. 18 (1) of all goods which are sold after treatment as stock for retail sale, whether such treatment occurred before or after 1st August 1930.

But this is opposed to the language used. The goods to which sec. 18 (2) applies are not all goods which are or have been treated by the manufacturer as stock for sale retail, but only those goods which are so treated on or after 1st August 1930. The object of the exclusion in sec. 18 (1) is reasonably clear. A manufacturer who sold goods retail after August 1st would, as a rule, have also treated such goods as stock for retail sale after August 1st. By sec. 18 (2) such act of treatment exposes him to a liability measured by the fair wholesale value of the goods at the time of treatment. But by sec. 18 (1), the subsequent act of selling would expose him to a second liability measured by the actual sale price, were it not for the express insertion in the sub-section of the exception mentioned.

The plain terms of sec. 18 (1) of the Sales Tax Assessment Acts therefore show that a sale value attaches to manufactured goods sold by the manufacturer on or after 1st August 1930, unless such goods were, prior to sale, but on or after 1st August 1930, treated by him as stock for retail sale. This contention is in strict accordance with the terms of sec. 17 and of the Rates Acts.

There being no exemption applicable to the case, the defendant is liable to pay taxation assessed by reference to sec. 18 (1) of the Assessment Act, and the question should be answered Yes.

McTiernan J.

I am of opinion that the question should be answered in the affirmative. The Sales Tax Assessment Acts (No. 1) 1930 levies the sales tax which is imposed by the Sales Tax Acts (No. 1) 1930 upon the sale value of goods manufactured in Australia before or after the commencement of the Act, and establishes three categories into which goods to which the Act applies may be put by the act of the manufacturer, which is done in relation to them. Briefly the categories are (1) goods sold by him, (2) goods treated by him as stock for sale by retail, and (3) goods applied to his own use (see sec. 17). The manufacturer of such goods is the taxpayer (sec. 19). As the tax is levied by the statute upon the sale value of the goods, the statute prescribes a method for assessing the sale value of the goods in each category, and the method differs according to the category into which the goods are put by the act of the manufacturer (see sec. 18). The goods in respect of which tax is claimed in the present case had been treated by the defendant prior to 1st August 1930 as stock for sale by it by retail. There is no special category established by the statute to which goods which had been thus treated prior to 1st August 1930, should be assigned, and no special method is prescribed for specifying the sale value of goods in that position. But the goods had been sold on or after 1st August 1930 by the manufacturer under the conditions mentioned in the special case, that is to say, to unregistered persons, or to registered persons who had not quoted their certificate; and a method is prescribed for determining the sale value of goods which the manufacturer has sold during that time and under those conditions. The goods having been sold by the manufacturer at the time and in the manner which have been stated, it appears to me that all the conditions mentioned in sec. 18 (1) were fulfilled and the sub-section operated and determined the amount at which the sale value of the goods should be assessed for the purposes of taxation and upon that sum sales tax was levied and is payable (sec. 17). The only ground of exception mentioned in sub-sec. 1 of sec. 18 to that amount becoming the sale value of any goods to which the section refers, and which are sold on or after 1st August, is that sub-sec. 2 of sec. 18 applies to the goods. That sub-section obviously does not apply to the goods in this case. Sec. 18 (1) being applicable to the goods in respect of which tax is claimed by the plaintiff, it does not appear to me relevant or material that they may be said to belong to a category, namely, goods treated by the manufacturer before 1st August 1930 as stock for sale by him by retail, and the Legislature has not provided any special method for determining the sale value of goods in that category. In my opinion, there is no expression or implication of any legislative intention in the Act that the goods, in respect of which sale tax is claimed should not be within its scope, or that an exemption has been granted in respect of them.

Question answered: Yes.

Solicitor for the plaintiff, W. H. Sharwood, Crown Solicitor for the Commonwealth.

Solicitors for the defendant, R. N. Henderson & Co.