Federal Commissioner of Taxation v Commonwealth Quarries (Footscray) Pty Ltd [1939] HCA 5; (1939) 61 CLR 114 (24 March 1939)

HIGH COURT OF AUSTRALIA

The Federal Commissioner of Taxation Appellant; and Commonwealth Quarries (Footscray) Proprietary Limited Respondent.

H C of A

24 March 1939

Latham C.J., Rich and Starke JJ.

Wilbur Ham K.C. and Hudson, for the appellant.

Adam, for the respondent.

Hudson, in reply.

The following judgments were delivered:—

Latham C.J.

This is a case stated on an appeal to this court from a decision of the board of review under the provisions of sec. 42 (6) of the Sales Tax Assessment Act (No. 1) 1930-1935.

In a prior case between the same parties (Commonwealth Quarries (Footscray) Pty. Ltd. v. Federal Commissioner of Taxation[1]) it was held that, where the sale price of goods includes the cost of delivery, the sale value of the goods for the purposes of sec. 18 of the Sales Tax Assessment Act (No. 1) 1930-1935 is the price actually charged, including the cost of delivery. The order made on that occasion was in these terms: "Upon the proper construction of the Sales Tax Assessment Act (No. 1) 1930-1935 the sale value of the said goods for the purpose of the Act is the amount charged to its customers by the taxpayer company for such goods less the amount, if any, properly allowable under sec. 18 (5) of the Act as an amount payable in respect of sales tax."

The question which now arises for determination is: What amount if any is properly allowable under sec. 18 (5)?

Sec. 18 (5) provides: "For the purposes of this Act, the sale value of goods shall not be taken to include any amount payable in respect of sales tax," the rest of the section being immaterial for the purposes of this case.

In the present case Commonwealth Quarries (Footscray) Pty. Ltd. were vendors of metal screenings, crushed stone and the like, and the prices of its products were in fact made up as follows: The price ex quarry together with, first, the cost of delivery and, secondly, sales tax. The total charge to its customers comprised these three items, but the customers had no knowledge at all of how the charge was made up or calculated. They knew only the total price of the goods.

On the former occasion this court held that the sale value of the goods included the cost of delivery, but it left open the question as to what deduction should be allowed under sec. 18 (5).

Two contentions have been submitted in this case:—(a) For the appellant it was contended that in ascertaining the sale value of goods the amount to be deducted from the sale price is the amount charged by the company to the customer as and for the amount paid by the company for sales tax, that is, being the amount calculated in the total price to the customers. This view interprets sale value as meaning that fixed between the parties. (b) The other view refers to the amount payable in law by virtue of the Act—the proper sale value as ascertained under the Act and not according to the erroneous ideas of the parties themselves as to what the sales tax is or should be.

Sales tax is not to be charged on sales tax itself, that is, it is not to be paid on any portion of the price paid over to the revenue authority as and by way of taxation. That is the idea on which sub-sec. 5 is based. I am not professing to construe sub-sec. 5 completely but rather looking to the policy of the Act.

Sec. 18 (5) provides a rule applying to all cases. Sale value does not include sales tax, and, where in transactions no mention of sales tax is made, it is urged for the appellant that it cannot be said that any sales tax has been paid, and, no reference to it having been made, then no deduction can be allowed. In other words, the section would not apply in some cases and would in others.

But on the contrary view the section will apply in all cases. The contrary view is that the amount payable is that which accords with the law and is accordingly properly payable by the sales-taxpayer. Mr. Adam correctly stated the meaning of the word "payable" when he construed it as meaning payable in accordance with, pursuant to, and under and by virtue of, the provisions of the Act. The other construction of this word, namely, implying the words "by the purchaser" after it, would result in an arbitrary application of the provisions of the Act to different taxpayers, whereas the respondent's interpretation results in a consistent application of the law to all.

In my opinion the answer to the question in the case stated should be: Upon the proper construction of the Act, in ascertaining the sale value of the goods sold by the respondent the amount to be deducted pursuant to sub-sec. 5 of sec. 18 from the amount charged to the customer by the respondent for such goods is the amount which should have been paid by it for sales tax.

Rich J.

I would answer the question submitted thus: The amount to be deducted is the amount payable in law upon the price at which the goods were sold, that is to say, the appropriate rate or percentage of tax which, when added to the sale value, will produce that price.

Starke J.

I agree with the opinion expressed by the Chief Justice. I would only add an extract from the opinion of the board of review to what has been said by the Chief Justice. It illustrates what he has stated: "In other words, for the purpose of applying the order of the High Court, it must be considered that the sale price charged to a customer by the taxpayer company consists of only two factors, viz., sale value and sales tax, and that the latter represents the full amount of legal liability in respect of the former. Thus, if the rate of sales tax is five per cent and the sale price is £21, the amount of sales tax included in the sale price is £1."

Question referred answered by declaring that upon the proper construction of the said Act in ascertaining the sale value of the goods sold by the respondent in the circumstances of the case the amount to be deducted pursuant to sub-sec. 5 of sec. 18 from the amount charged to its customers by the respondent for such goods is the amount which should have been paid by it for sales tax on the sale value of the said goods. Case remitted to the Chief Justice for determination. Costs of case to be costs in the appeal.

Solicitor for the appellant, H. F. E. Whitlam, Crown Solicitor for the Commonwealth.

Solicitors for the respondent, Weigall & Crowther.

[1] [1938] HCA 13; (1938) 59 C.L.R. 111.