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High Court of Australia |
H C of A
27 September 1946
Williams J.
Barwick K.C. and Bruxner, for the appellant.
Maughan K.C. and Hooke, for the respondent.
Sept. 28
Williams J
. delivered the following written judgment:—This is an appeal under s. 42 (6) of the Sales Tax Assessment Act (No. 1) 1930-1940 from a decision of the Board of Review that the appellant company was rightly assessed by the respondent for £4,618 6s. 1d. on 29th January 1942. The company does not dispute that it was rightly assessed for £356 2s. and claims that the assessment should be reduced to this amount.
The company is a manufacturer and wholesaler of motor vehicles within the meaning of the Act. There were two increases in the rates of tax, the first from six per cent to eight and one-third per cent from 3rd May 1940 and the second from eight and one-third per cent to ten per cent from 22nd November 1940, and the liability of the company to pay the tax in dispute depends upon whether it treated the vehicles included in the assessment, the manufacture of which was completed prior to 3rd May, as part of its stock for sale by retail before the date of the first increase, and the balance of the vehicles, the manufacture of which was completed prior to 22nd November, as part of its stock for sale by retail before the date of the second increase.
The parties agreed that the oral and documentary evidence given before the Board should be tendered and accepted as evidence on the appeal, and Mr. Barwick on behalf of the company tendered some additional evidence by R. L. Smith, the accountant of the company, who also gave evidence before the Board. The chairman of the Board has already given in his reasons a full and accurate statement of the evidence given before the Board, and I shall therefore content myself with a summary of what appear to be the most material facts.
In April 1940 the company was carrying on in Sydney the business of importing from the United States the frames and engines of the chassis for Chrysler motor vehicles, and from England the frames and engines of the chassis for Morris motor vehicles, and of adding to these members springs, wheels, tyres, batteries and other accessories locally produced, and assembling the component parts into complete chassis. In the case of cars it also attached bodies made locally, and in the case of trucks it sometimes attached cabs and bodies made locally and sometimes sold the chassis with cabs to purchasers who attached bodies manufactured for them. The company then sold the complete cars and trucks and truck chassis by retail and wholesale but its business was predominantly a retail business, not more than five per cent of the sales being made wholesale. It sold the vehicles direct to the public through its own salesmen by retail and it also sold vehicles at retail prices, which I think should be classified as sales by retail, to the public through dealers who received a commission on the sale, and to finance companies from whom members of the public were acquiring vehicles on hire purchase. It sold vehicles by wholesale to one main wholesaler, Capper's Motors Pty. Ltd., and sometimes to Interstate Distributors Ltd.
The first information the company had of the arrival of new chassis was the receipt of the shipping documents which contained an import number and the number of frames, engines and models shipped. One set of stock books was kept for Chrysler and another set for Morris vehicles. Each set was kept on the same basis and it will be sufficient to refer, as counsel did, to the Chrysler books.
Each embryo vehicle was immediately given a separate stock number and entered in the books. As the imported and locally manufactured parts were assembled into a complete vehicle in the case of cars, or a complete vehicle or chassis in the case of trucks, the numbers of the chassis, engines, and bodies were entered against each stock number. As the vehicles were completed and sold, further entries were made of the cost, invoice, sale price and whether the sale was made by wholesale or by retail. In this way each vehicle could be identified at any stage of its history either before or after completion.
Prior to April 1940 the company kept all the vehicles in a common stock in the sense that they were not separated into stock for sale by retail or by wholesale in its books, nor were they physically separated in its buildings. The vehicles were appropriated to a wholesale or a retail sale as and when the sale was made.
Section 17 of the Sales Tax Assessment Act provides that sales tax shall be levied and paid 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. While the company kept its books, and housed and sold its vehicles in this manner, sales tax did not become payable until the moment of sale whether the vehicles were sold by wholesale or by retail, and in each month the company made a return of sales and of sales tax for the previous month. This return was made on Form No. 1, which is in the form for sales and was accompanied by the net amount of tax calculated at the rate in force at the date of sale.
In April 1940 the company received information that the rate of tax was likely to be increased in the near future. The question was raised whether it would be advisable for the company to anticipate the increase by treating the greater part of the vehicles which were complete and ready for sale as stock for sale by retail. It was realized that if this was done the company, which was at the time indebted to the bank on overdraft, would have to pay a large amount of tax, estimated at £10,000, with the result that the overdraft and interest on the overdraft would be considerably increased. Consultations took place between the chairman of directors, to whom the direction of the policy of the company was entrusted by the board, and the general manager, and the general manager and the taxation expert and the accountant of the company, and it was decided that it would nevertheless be to the ultimate advantage of the company immediately to transfer such portion of the stock as was estimated would be required for sale by retail to stock for sale by retail. The manner of giving effect to the transfer was left to the general manager by the chairman of directors and the general manager left the matter to the accountant. The chairman of directors, the general manager, the accountant, and the bookkeeper and keeper of stock books, Miss Matear (as she then was), all gave evidence. A full explanation of the entries which were made by Miss Matear under the direction of the accountant, as she said, "in a hurry" to implement the decision appears in the reasons of the chairman of the Board of Review.
Shortly stated the method adopted was to open new folios under the heading, at first written in pencil, "All the foregoing unsold stock as at 30/4/40 has been transferred to stock for sale by retail with the exception of the following." This was subsequently inked over and the following words added, "Units reserved for wholesale sale and incomplete units. The particular stock number coming under the heading of Stock for Sale by Retail can be identified with the stock list as at 30/4/40." Under this heading, whilst still in its original form in pencil, Miss Matear entered the completed vehicles which the accountant considered should be reserved for wholesale, and the vehicles still incomplete on 30th April 1940. The effect of the entries was to leave the residue of completed vehicles in the stock books still unsold on 30th April 1940, 471 in number, as the stock transferred to stock for sale by retail.
In June 1940 the company made two returns for the purposes of tax. On Form No. 1 it returned as usual the sales of spare parts and accessories, new cars and chassis, trucks and bodies actually sold to 2nd May at six per cent accompanied by the net amount of tax £77 12s. 6d., and those sold from 3rd May at eight and one-third per cent accompanied by the net amount of tax £1,057 8s. 11d. On Form No. 2 headed "Return of Goods Manufactured By The Taxpayer and Treated As Stock For Sale By Retail" on 1st May 1940 it returned the 471 vehicles which had been so transferred accompanied by the net amount of tax at six per cent £8,536 2s. 1d. Between June and October, 122 further vehicles were similarly transferred to retail stock in the books and returned as stock treated for sale by retail in the following month on Form No. 2 accompanied by the net amount of tax. Between 1st and 21st November, that is, just before the second increase in the rate of tax, 262 further vehicles were similarly transferred and returned on Form No. 2 in the following month accompanied by the net amount of tax at the rate of eight and one-third per cent.
During the period 1st May 1940 to 31st August 1941, 1,201 vehicles were transferred in the books as stock for sale by retail and 967 were sold. Thirty-three of these vehicles were sold by wholesale. Of the cars not transferred in the books as stock for sale by retail, 18 were sold by wholesale and 85 by retail. The company made further returns of the 33 vehicles sold by wholesale stating that they were vehicles "incorrectly treated as stock for sale by retail" and claimed a refund of the tax already paid and paid tax at the rate in force at the date of sale.
I agree with Mr. Barwick that the scheme of the Act is to impose tax upon the last wholesale sale. A manufacturer may sell his manufactured goods wholesale to a retailer or he may be a retailer himself or he may, as in the present case, sell some of his goods by wholesale and sell the rest by retail himself. The tax becomes payable once and for all upon the occurrence of any one of the three events described in the section, namely: sale of the goods by the manufacturer, their treatment by him as stock for sale by retail, or their application by him to his own use. The third event is irrelevant on this appeal. The second event could occur either previously to or simultaneously with the first event. The crucial question on the appeal is whether the vehicles sold between 1st May 1940 and 31st August 1941 had already been treated by the company as stock for sale by retail.
In the English Finance (No. 2) Act 1940 by which a purchase tax was imposed the corresponding words are "where a wholesale merchant or manufacturer ... appropriates or applies any chargeable goods ... to the purposes of any business carried on by him of selling chargeable goods by retail." In B. Morris Ltd. v. Lunzer[1] the Court of Appeal said that the tax becomes payable at the end of what may be called the wholesale stage and not before, and that the scheme of the section is to fix a point of time comparable or analogous to that at which, in the normal case of the sale to a retailer, the goods are to be regarded as passing out of this stage. "In the typical case of a wholesaler who has a retail business, the point of time selected is that at which he does some act in relation to his goods which indicates that he has ceased to be a wholesaler and has become a retailer in regard to them" [2] . There is no difference in substance that I can see between the meaning of the word "appropriates" in the English Act and the word "treated" in our own Act. They are both words "of quite general import chosen as suitable to describe a variety of transactions. In the case of any particular transaction the problem is to find the particular stage in the transaction to which they most sensibly apply having regard to the facts of the case." Treat "is a wide word" : In re Masters and Duveen[3] . A number of meanings are given to it in the dictionaries. The most suitable, in the collocation in which it is used in s. 17, would appear to be that given in the Shorter Oxford English Dictionary, "To consider or regard in a particular aspect and deal with accordingly."
In my opinion a manufacturer treats his manufactured stock as stock for sale by retail when he reaches a definite decision not to sell it wholesale to another retailer but to sell it himself by retail, and he does some final and unconditional act which, in the words of the Court of Appeal, "indicates that he has ceased to be a wholesaler and has become a retailer in regard thereto."
It was not suggested on behalf of the respondent that the witnesses for the company were not honest witnesses or that the entries in the stock books were not honest entries. It is clear from the uncontradicted oral evidence that a definite decision was reached in April immediately to transfer to stock for sale by retail all complete vehicles which it was estimated would not be required to fulfil wholesale orders, and subsequently to make similar transfers whenever there was reason to believe that there would be a further increase in the rate of tax. The alteration made in the stock books was a final and unconditional act giving effect to this decision. The pencil writing at the head of the new folios was an unequivocal statement that all the unsold vehicles in the book, other than those reserved for wholesale and incomplete units, had been transferred to stock for sale by retail from a particular date.
It is true that the vehicles were not physically separated in the company's buildings or severally labelled. It is also true that there was no evidence before the Board of Review that the sales staff were informed of the change of policy. But, as Mr. Smith said in his evidence before me, he was not questioned on this point before the Board of Review by either side. He then supplemented his previous evidence by giving evidence, which I accept, that on 25th June 1940 he circulated a memorandum in writing to the heads of the sales departments stating that "at the close of business on 30th April, we have transferred most of our completed units less a few that we have reserved for Capper's to "stock for retail." We cannot ... sell by wholesale from this stock ... and that means that before we can accept an order from Capper's or from an Interstate Distributor, we must ascertain if we have the required vehicle available in our stock which has not been transferred to "stock for sale by retail." Either Mr. Chignell or myself will be able to advise you of this, on application."
It must not be overlooked that subsequent acts are only evidence of whether the crucial decision and consequential appropriations in the books were genuine or merely colourable. The chairman of the Board of Review said that both the chairman of directors (not the managing director as he called him) and the accountant admitted that it was not known for certain whether a vehicle transferred to stock for sale by retail would ultimately be sold by retail, and that 33 of the vehicles so transferred were sold by wholesale. But there is nothing in the section which prevents a manufacturer, who has genuinely treated goods as stock for sale by retail, from later selling them by wholesale if for some subsequent reason it becomes desirable to do so. The fact that the company thought that the 33 vehicles would have first to be re-transferred to the wholesale list is evidence of the final and unconditional nature of the previous transfer to the retail list. If the business of the company had been predominantly a wholesale business, a decision to treat the bulk of the stock as stock for sale by retail would have been colourable. But the decision was to apportion the stock in accordance with the realities of the business. Then there is the return in June on Form No. 2 of the stock treated as stock for sale by retail on 1st May and payment of tax on this basis. This could only be an honest return if there was as Mr. Maughan put it, an irrevocable decision on 1st May as between the company and the Commissioner so to treat this stock for the purposes of s. 17.
All the members of the Board of Review were of opinion that a physical separation of the stock was not required by s. 17. But the chairman appears to have thought that all that the company had done was to treat the stock in its books, and that this had no effect upon the actual treatment of the vehicles as part of a common stock. He said that it was a necessary inference from the evidence that no differentiation between the wholesale and retail stock was ever made by way of written or other direction given to the sales staff, and that there was no room for doubt that, until the matter became an issue with the Commissioner, the only employees of the company who had any information as to the vehicles which had been selected were the accountant and his subordinates so that as between the company, its sales staff, and customers the vehicles continued to be treated as part of a common stock for wholesale or retail. As I have said the question of the knowledge of the sales staff was not investigated before the Board by either side, and Mr. Smith's subsequent evidence shows that it was erroneous to draw such inferences. The other members of the Board appear to have based their joint decision upon the view "that the treatment implied by the section is something clearly provable or necessary to be inferred from the company's conduct irrespective of any expression of intention on the part of the company's directors or officers." This places too high a burden of proof on the company. Section 39 (1) makes the assessment prima-facie evidence of the correctness of any calculations upon which the liability is ascertained. The onus of proof is therefore on the taxpayer, but he need only give sufficient evidence to weigh down the scales in his favour. These members thought that if the company had at once notified the Commissioner before the increased tax operated its position would have been unassailable. But s. 21 only requires a manufacturer who during any month treats any goods as stock for sale by him by retail to furnish a return within twenty-one days after the close of that month. I cannot agree with them that the company was in an equivocal position immediately prior to the commencement of the higher rate. It had already reached and given effect to a definite decision and it had bound itself to return the stock as stock treated for sale by retail whether the rates were increased or not.
For these reasons I am of opinion that the company did treat the vehicles included in the assessment as stock for sale by retail upon the dates the entries to this effect were made in the stock books.
I am also of opinion that the decision of the Board of Review involves a question of law within the meaning of s. 42 (6). I think that the Board erred in law in that it misconstrued the section and in that the uncontradicted facts reasonably lead only to the conclusion that the vehicles were treated as stock for sale by retail. I recently discussed the same objection and cited authorities in Federal Commissioner of Taxation v. Sagar[4] and I shall not repeat what I there said. Recent decisions on the point include, in the House of Lords, Bomford v. Osborne[5] ; Doncaster Amalgamated Collieries Ltd. v. Bean[6] ; and in this Court Federal Commissioner of Taxation v. Broken Hill South Ltd.[7] , Maughan v. Federal Commissioner of Taxation[8] , Mutual Acceptance Co. Ltd. v. Federal Commissioner of Taxation[9] , and Federal Commissioner Taxation v. West Australian Tanners and Fellmongers Ltd.[10] .
For these reasons I must allow the appeal, and order that the assessment be reduced to £356 2s. The respondent must pay the appellant's costs of the appeal.
Appeal dismissed with costs.
Solicitor for the appellant, G. A. Watson, Acting Crown Solicitor for the Commonwealth.
Solicitor for the respondent, Morton Brewster.
H C of A
17 December 1946
Latham C.J., Rich, Starke, Dixon and McTiernan JJ.
Barwick K.C. and Bruxner, for the appellant.
Maughan K.C. and Hooke, for the respondent.
Sept. 28
Williams J
. delivered the following written judgment:—This is an appeal under s. 42 (6) of the Sales Tax Assessment Act (No. 1) 1930-1940 from a decision of the Board of Review that the appellant company was rightly assessed by the respondent for £4,618 6s. 1d. on 29th January 1942. The company does not dispute that it was rightly assessed for £356 2s. and claims that the assessment should be reduced to this amount.
The company is a manufacturer and wholesaler of motor vehicles within the meaning of the Act. There were two increases in the rates of tax, the first from six per cent to eight and one-third per cent from 3rd May 1940 and the second from eight and one-third per cent to ten per cent from 22nd November 1940, and the liability of the company to pay the tax in dispute depends upon whether it treated the vehicles included in the assessment, the manufacture of which was completed prior to 3rd May, as part of its stock for sale by retail before the date of the first increase, and the balance of the vehicles, the manufacture of which was completed prior to 22nd November, as part of its stock for sale by retail before the date of the second increase.
The parties agreed that the oral and documentary evidence given before the Board should be tendered and accepted as evidence on the appeal, and Mr. Barwick on behalf of the company tendered some additional evidence by R. L. Smith, the accountant of the company, who also gave evidence before the Board. The chairman of the Board has already given in his reasons a full and accurate statement of the evidence given before the Board, and I shall therefore content myself with a summary of what appear to be the most material facts.
In April 1940 the company was carrying on in Sydney the business of importing from the United States the frames and engines of the chassis for Chrysler motor vehicles, and from England the frames and engines of the chassis for Morris motor vehicles, and of adding to these members springs, wheels, tyres, batteries and other accessories locally produced, and assembling the component parts into complete chassis. In the case of cars it also attached bodies made locally, and in the case of trucks it sometimes attached cabs and bodies made locally and sometimes sold the chassis with cabs to purchasers who attached bodies manufactured for them. The company then sold the complete cars and trucks and truck chassis by retail and wholesale but its business was predominantly a retail business, not more than five per cent of the sales being made wholesale. It sold the vehicles direct to the public through its own salesmen by retail and it also sold vehicles at retail prices, which I think should be classified as sales by retail, to the public through dealers who received a commission on the sale, and to finance companies from whom members of the public were acquiring vehicles on hire purchase. It sold vehicles by wholesale to one main wholesaler, Capper's Motors Pty. Ltd., and sometimes to Interstate Distributors Ltd.
The first information the company had of the arrival of new chassis was the receipt of the shipping documents which contained an import number and the number of frames, engines and models shipped. One set of stock books was kept for Chrysler and another set for Morris vehicles. Each set was kept on the same basis and it will be sufficient to refer, as counsel did, to the Chrysler books.
Each embryo vehicle was immediately given a separate stock number and entered in the books. As the imported and locally manufactured parts were assembled into a complete vehicle in the case of cars, or a complete vehicle or chassis in the case of trucks, the numbers of the chassis, engines, and bodies were entered against each stock number. As the vehicles were completed and sold, further entries were made of the cost, invoice, sale price and whether the sale was made by wholesale or by retail. In this way each vehicle could be identified at any stage of its history either before or after completion.
Prior to April 1940 the company kept all the vehicles in a common stock in the sense that they were not separated into stock for sale by retail or by wholesale in its books, nor were they physically separated in its buildings. The vehicles were appropriated to a wholesale or a retail sale as and when the sale was made.
Section 17 of the Sales Tax Assessment Act provides that sales tax shall be levied and paid 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. While the company kept its books, and housed and sold its vehicles in this manner, sales tax did not become payable until the moment of sale whether the vehicles were sold by wholesale or by retail, and in each month the company made a return of sales and of sales tax for the previous month. This return was made on Form No. 1, which is in the form for sales and was accompanied by the net amount of tax calculated at the rate in force at the date of sale.
In April 1940 the company received information that the rate of tax was likely to be increased in the near future. The question was raised whether it would be advisable for the company to anticipate the increase by treating the greater part of the vehicles which were complete and ready for sale as stock for sale by retail. It was realized that if this was done the company, which was at the time indebted to the bank on overdraft, would have to pay a large amount of tax, estimated at £10,000, with the result that the overdraft and interest on the overdraft would be considerably increased. Consultations took place between the chairman of directors, to whom the direction of the policy of the company was entrusted by the board, and the general manager, and the general manager and the taxation expert and the accountant of the company, and it was decided that it would nevertheless be to the ultimate advantage of the company immediately to transfer such portion of the stock as was estimated would be required for sale by retail to stock for sale by retail. The manner of giving effect to the transfer was left to the general manager by the chairman of directors and the general manager left the matter to the accountant. The chairman of directors, the general manager, the accountant, and the bookkeeper and keeper of stock books, Miss Matear (as she then was), all gave evidence. A full explanation of the entries which were made by Miss Matear under the direction of the accountant, as she said, "in a hurry" to implement the decision appears in the reasons of the chairman of the Board of Review.
Shortly stated the method adopted was to open new folios under the heading, at first written in pencil, "All the foregoing unsold stock as at 30/4/40 has been transferred to stock for sale by retail with the exception of the following." This was subsequently inked over and the following words added, "Units reserved for wholesale sale and incomplete units. The particular stock number coming under the heading of Stock for Sale by Retail can be identified with the stock list as at 30/4/40." Under this heading, whilst still in its original form in pencil, Miss Matear entered the completed vehicles which the accountant considered should be reserved for wholesale, and the vehicles still incomplete on 30th April 1940. The effect of the entries was to leave the residue of completed vehicles in the stock books still unsold on 30th April 1940, 471 in number, as the stock transferred to stock for sale by retail.
In June 1940 the company made two returns for the purposes of tax. On Form No. 1 it returned as usual the sales of spare parts and accessories, new cars and chassis, trucks and bodies actually sold to 2nd May at six per cent accompanied by the net amount of tax £77 12s. 6d., and those sold from 3rd May at eight and one-third per cent accompanied by the net amount of tax £1,057 8s. 11d. On Form No. 2 headed "Return of Goods Manufactured By The Taxpayer and Treated As Stock For Sale By Retail" on 1st May 1940 it returned the 471 vehicles which had been so transferred accompanied by the net amount of tax at six per cent £8,536 2s. 1d. Between June and October, 122 further vehicles were similarly transferred to retail stock in the books and returned as stock treated for sale by retail in the following month on Form No. 2 accompanied by the net amount of tax. Between 1st and 21st November, that is, just before the second increase in the rate of tax, 262 further vehicles were similarly transferred and returned on Form No. 2 in the following month accompanied by the net amount of tax at the rate of eight and one-third per cent.
During the period 1st May 1940 to 31st August 1941, 1,201 vehicles were transferred in the books as stock for sale by retail and 967 were sold. Thirty-three of these vehicles were sold by wholesale. Of the cars not transferred in the books as stock for sale by retail, 18 were sold by wholesale and 85 by retail. The company made further returns of the 33 vehicles sold by wholesale stating that they were vehicles "incorrectly treated as stock for sale by retail" and claimed a refund of the tax already paid and paid tax at the rate in force at the date of sale.
I agree with Mr. Barwick that the scheme of the Act is to impose tax upon the last wholesale sale. A manufacturer may sell his manufactured goods wholesale to a retailer or he may be a retailer himself or he may, as in the present case, sell some of his goods by wholesale and sell the rest by retail himself. The tax becomes payable once and for all upon the occurrence of any one of the three events described in the section, namely: sale of the goods by the manufacturer, their treatment by him as stock for sale by retail, or their application by him to his own use. The third event is irrelevant on this appeal. The second event could occur either previously to or simultaneously with the first event. The crucial question on the appeal is whether the vehicles sold between 1st May 1940 and 31st August 1941 had already been treated by the company as stock for sale by retail.
In the English Finance (No. 2) Act 1940 by which a purchase tax was imposed the corresponding words are "where a wholesale merchant or manufacturer ... appropriates or applies any chargeable goods ... to the purposes of any business carried on by him of selling chargeable goods by retail." In B. Morris Ltd. v. Lunzer[11] the Court of Appeal said that the tax becomes payable at the end of what may be called the wholesale stage and not before, and that the scheme of the section is to fix a point of time comparable or analogous to that at which, in the normal case of the sale to a retailer, the goods are to be regarded as passing out of this stage. "In the typical case of a wholesaler who has a retail business, the point of time selected is that at which he does some act in relation to his goods which indicates that he has ceased to be a wholesaler and has become a retailer in regard to them" [12] . There is no difference in substance that I can see between the meaning of the word "appropriates" in the English Act and the word "treated" in our own Act. They are both words "of quite general import chosen as suitable to describe a variety of transactions. In the case of any particular transaction the problem is to find the particular stage in the transaction to which they most sensibly apply having regard to the facts of the case." Treat "is a wide word" : In re Masters and Duveen[13] . A number of meanings are given to it in the dictionaries. The most suitable, in the collocation in which it is used in s. 17, would appear to be that given in the Shorter Oxford English Dictionary, "To consider or regard in a particular aspect and deal with accordingly."
In my opinion a manufacturer treats his manufactured stock as stock for sale by retail when he reaches a definite decision not to sell it wholesale to another retailer but to sell it himself by retail, and he does some final and unconditional act which, in the words of the Court of Appeal, "indicates that he has ceased to be a wholesaler and has become a retailer in regard thereto."
It was not suggested on behalf of the respondent that the witnesses for the company were not honest witnesses or that the entries in the stock books were not honest entries. It is clear from the uncontradicted oral evidence that a definite decision was reached in April immediately to transfer to stock for sale by retail all complete vehicles which it was estimated would not be required to fulfil wholesale orders, and subsequently to make similar transfers whenever there was reason to believe that there would be a further increase in the rate of tax. The alteration made in the stock books was a final and unconditional act giving effect to this decision. The pencil writing at the head of the new folios was an unequivocal statement that all the unsold vehicles in the book, other than those reserved for wholesale and incomplete units, had been transferred to stock for sale by retail from a particular date.
It is true that the vehicles were not physically separated in the company's buildings or severally labelled. It is also true that there was no evidence before the Board of Review that the sales staff were informed of the change of policy. But, as Mr. Smith said in his evidence before me, he was not questioned on this point before the Board of Review by either side. He then supplemented his previous evidence by giving evidence, which I accept, that on 25th June 1940 he circulated a memorandum in writing to the heads of the sales departments stating that "at the close of business on 30th April, we have transferred most of our completed units less a few that we have reserved for Capper's to "stock for retail." We cannot ... sell by wholesale from this stock ... and that means that before we can accept an order from Capper's or from an Interstate Distributor, we must ascertain if we have the required vehicle available in our stock which has not been transferred to "stock for sale by retail." Either Mr. Chignell or myself will be able to advise you of this, on application."
It must not be overlooked that subsequent acts are only evidence of whether the crucial decision and consequential appropriations in the books were genuine or merely colourable. The chairman of the Board of Review said that both the chairman of directors (not the managing director as he called him) and the accountant admitted that it was not known for certain whether a vehicle transferred to stock for sale by retail would ultimately be sold by retail, and that 33 of the vehicles so transferred were sold by wholesale. But there is nothing in the section which prevents a manufacturer, who has genuinely treated goods as stock for sale by retail, from later selling them by wholesale if for some subsequent reason it becomes desirable to do so. The fact that the company thought that the 33 vehicles would have first to be re-transferred to the wholesale list is evidence of the final and unconditional nature of the previous transfer to the retail list. If the business of the company had been predominantly a wholesale business, a decision to treat the bulk of the stock as stock for sale by retail would have been colourable. But the decision was to apportion the stock in accordance with the realities of the business. Then there is the return in June on Form No. 2 of the stock treated as stock for sale by retail on 1st May and payment of tax on this basis. This could only be an honest return if there was as Mr. Maughan put it, an irrevocable decision on 1st May as between the company and the Commissioner so to treat this stock for the purposes of s. 17.
All the members of the Board of Review were of opinion that a physical separation of the stock was not required by s. 17. But the chairman appears to have thought that all that the company had done was to treat the stock in its books, and that this had no effect upon the actual treatment of the vehicles as part of a common stock. He said that it was a necessary inference from the evidence that no differentiation between the wholesale and retail stock was ever made by way of written or other direction given to the sales staff, and that there was no room for doubt that, until the matter became an issue with the Commissioner, the only employees of the company who had any information as to the vehicles which had been selected were the accountant and his subordinates so that as between the company, its sales staff, and customers the vehicles continued to be treated as part of a common stock for wholesale or retail. As I have said the question of the knowledge of the sales staff was not investigated before the Board by either side, and Mr. Smith's subsequent evidence shows that it was erroneous to draw such inferences. The other members of the Board appear to have based their joint decision upon the view "that the treatment implied by the section is something clearly provable or necessary to be inferred from the company's conduct irrespective of any expression of intention on the part of the company's directors or officers." This places too high a burden of proof on the company. Section 39 (1) makes the assessment prima-facie evidence of the correctness of any calculations upon which the liability is ascertained. The onus of proof is therefore on the taxpayer, but he need only give sufficient evidence to weigh down the scales in his favour. These members thought that if the company had at once notified the Commissioner before the increased tax operated its position would have been unassailable. But s. 21 only requires a manufacturer who during any month treats any goods as stock for sale by him by retail to furnish a return within twenty-one days after the close of that month. I cannot agree with them that the company was in an equivocal position immediately prior to the commencement of the higher rate. It had already reached and given effect to a definite decision and it had bound itself to return the stock as stock treated for sale by retail whether the rates were increased or not.
For these reasons I am of opinion that the company did treat the vehicles included in the assessment as stock for sale by retail upon the dates the entries to this effect were made in the stock books.
I am also of opinion that the decision of the Board of Review involves a question of law within the meaning of s. 42 (6). I think that the Board erred in law in that it misconstrued the section and in that the uncontradicted facts reasonably lead only to the conclusion that the vehicles were treated as stock for sale by retail. I recently discussed the same objection and cited authorities in Federal Commissioner of Taxation v. Sagar[14] and I shall not repeat what I there said. Recent decisions on the point include, in the House of Lords, Bomford v. Osborne[15] ; Doncaster Amalgamated Collieries Ltd. v. Bean[16] ; and in this Court Federal Commissioner of Taxation v. Broken Hill South Ltd.[17] , Maughan v. Federal Commissioner of Taxation[18] , Mutual Acceptance Co. Ltd. v. Federal Commissioner of Taxation[19] , and Federal Commissioner Taxation v. West Australian Tanners and Fellmongers Ltd.[20] .
For these reasons I must allow the appeal, and order that the assessment be reduced to £356 2s. The respondent must pay the appellant's costs of the appeal.
Appeal dismissed with costs.
Solicitor for the appellant, G. A. Watson, Acting Crown Solicitor for the Commonwealth.
Solicitor for the respondent, Morton Brewster.
1. (1942) 1 K.B. 356, at p. 360.
3. (1923) 2 K.B. 729, at p. 734.
4. [1946] HCA 6; (1946) 71 C.L.R. 421.
7. [1941] HCA 33; (1941) 65 C.L.R. 150.
8. [1942] HCA 32; (1942) 66 C.L.R. 388.
9. [1944] HCA 34; (1944) 69 C.L.R. 389.
10. [1945] HCA 21; (1945) 70 C.L.R. 623.
11. (1942) 1 K.B. 356, at p. 360.
13. (1923) 2 K.B. 729, at p. 734.
14. [1946] HCA 6; (1946) 71 C.L.R. 421.
17. [1941] HCA 33; (1941) 65 C.L.R. 150.
18. [1942] HCA 32; (1942) 66 C.L.R. 388.
19. [1944] HCA 34; (1944) 69 C.L.R. 389.
20. [1945] HCA 21; (1945) 70 C.L.R. 623.
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