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High Court of Australia |
DEPUTY COMMISSIONER OF TAXATION v. HANKIN [1959] HCA 2; (1959) 100 CLR 566
Sales Tax (Cth.)
High Court of Australia
Dixon C.J.(1), McTiernan(2), Fullagar(1), Kitto(1) and Windeyer(1) JJ.
CATCHWORDS
Sales Tax (Cth.) - Sales tax levied on sale value of goods - Computation - Goods entered for home consumption - Tax payable at time of entry for home consumption - Sale value correctly stated - Tax calculated and paid at less than rate appropriate to class of goods imported - Demand by commissioner to recover balance as further tax - Action to recover - Taxpayer required to pay at time of entry sales tax actually payable according to law - Commissioner authorised to calculate tax at correct rate where calculated at wrong rate on correct sale value - Notice specifying liability and letter nominating date for payment sufficient compliance with statute - "Goods" - Onus on defendant in sales tax action to prove goods imported fall within exemptions in definition - Incontestable tax - Not imposed by sales tax legislation - Sales Tax Act (No. 5) 1930-1949 - Sales Tax Assessment Act (No. 1) 1930-1942, ss. 3, 39 - Sales Tax Assessment Act (No. 5) 1930- 1939, ss. 4 (2), 5, 9, 10.
HEARING
Sydney, 1958, December 2, 3;DECISION
February 26, 1959.2. The action is concerned with three importations of goods by the defendant. In the first case the goods arrived in Sydney in the ship "Trianon", and were entered for home consumption under the Customs Act 1901-1936 on 10th September 1947. In the second case the goods arrived in the ship "Tai Ping Yang", and were entered for home consumption on 5th November 1947. In the third case the goods arrived in the ship "Wangaratta", and were entered for home consumption on 10th November 1947. (at p572)
3. Section 9 of the Assessment Act provides (subject to a proviso which is not applicable to the present case) that the sales tax payable under s. 5 shall be paid by the importer at the time of the entry of the goods for home consumption under the law relating to the Customs. Section 7 requires the importer at the time of the entry of the goods under the law relating to the Customs to lodge with the Collector an entry in the prescribed form for the purposes of the Assessment Act. A form is prescribed by reg. 25 of the Sales Tax Regulations, and the import entry forms used in the present case appear to combine that form with the ordinary customs entry form. The defendant, on the arrival of the goods, paid the customs duty, and paid a sum by way of sales tax. The import entry form stated the sale value of the goods, and showed the amount of sales tax payable as an amount equal to ten per cent of that sum. On payment of the customs duty, and of this amount by way of sales tax, the goods were cleared through the customs. It is not disputed that the sale value of the goods was correctly stated in the import entry form. But it is also not now disputed that, under the legislation then in force, sales tax was payable on that sale value not at the rate of ten per cent but at the rate of twenty-five per cent. The amount of tax which the commissioner seeks to recover in the present action is, in respect of each of the three shipments, the amount of the difference between tax calculated at ten per cent of the sale value and tax calculated at twenty-five per cent of the sale value. Section 30 of the Sales Tax Assessment Act (No. 1) 1930-1942 which is incorporated in the Assessment Act (No. 5) by s. 12 of the latter Act, provides that sales tax, when it becomes due and payable, shall be deemed to be a debt due to the Queen on behalf of the Commonwealth and payable to the commissioner. (at p572)
4. It was not until 1950 that the commissioner took any formal step under the Act. In that year he took action under s. 10 of Assessment Act (No. 5). That section provides: - "(1) Where the Commissioner finds in any case that tax or further tax is payable by any person, the Commissioner may - (a) assess the sale value upon which tax should be or should have been paid; and (b) calculate the tax or further tax which is payable. (2) As soon as conveniently may be after an assessment is made, the Commissioner shall cause notice in writing of the assessment and of the tax or further tax to be given to the person liable to pay the tax or further tax. (3) The amount of tax or further tax specified in the notice shall be payable on or before the date specified in the notice, together with any other amount which may be payable in accordance with any other provision of this Act. (4) The omission to give any such notice shall not invalidate the assessment and calculation made by the Commissioner." It may be noted in passing that the term "further tax" in this section is apt to be a little misleading. The term has been used from time to time in the income tax legislation of the Commonwealth in at least two specialised senses. Here it seems plain that it means merely "more tax than has in fact been paid". An example of a similar use of the word "further" may be found in s. 172 of the Administration and Probate Act 1928 (Vict.). (at p573)
5. On 15th August 1950 the commissioner forwarded to the defendant a notice, which said: - "Take notice that you are liable under the Sales Tax Assessment Act (No. 5) 1930-1939 to pay 363 pounds 10s. 10d. which sum became due by you for sales tax on the dates of entry for Customs of the goods referred to hereunder." Then followed "particulars" relating to the three shipments. These stated the sale value of the goods at the same figure as had appeared in the original import entry, but showed the sales tax calculated at twenty-five per cent on that sale value. The notice was accompanied by a letter which said: - "I enclose herewith a notice specifying your liability under the Sales Tax Assessment Act (No. 5) 1930-1939. You are hereby required to pay the amount owing, 363 pounds 10s. 10d., within three days of the date of this communication." (at p573)
6. Before considering the argument for the defendant it is convenient to observe that the general scheme of the Sales Tax Assessment Act (No. 5) differs in an important respect from that of the Income Tax Assessment Act and some other Tax Assessment Acts of the Commonwealth. Under the Income Tax Assessment Act the liability of the taxpayer does not come into existence until there has been an assessment by the commissioner of the tax payable and notice of that assessment has been given by the commissioner to the taxpayer. Under the Sales Tax Assessment Act (No. 5) the liability of the taxpayer does not depend on assessment or on any act of the commissioner. The liability arises directly on the importation of the goods, and the taxpayer is required by s. 9 to pay the tax at the time of the entry of the goods for home consumption under the Customs Act. It is only when no tax, or less tax than is payable by law, is paid at the time of the entry of the goods that any "assessment" or "calculation" by the commissioner under s. 10 becomes necessary or appropriate. Such an "assessment" or "calculation" indeed is perhaps never necessary. The liability of the taxpayer is created by s. 9, and is not made expressly to depend on any assessment or calculation or the giving of notice of any assessment or calculation under s. 10. It may well be - it is unnecessary to decide the point - that the commissioner could have brought this action to recover the difference between ten per cent and twenty-five per cent of the sale value without ever resorting to s. 10. The machinery provided by s. 10 is no doubt convenient and fair to the taxpayer, and one may suppose that the commissioner would normally employ it, but s. 10 says only that the commissioner may employ it, and the liability of the taxpayer may not depend on its employment. (at p574)
7. There is indeed one case in which either a notice under s. 10, or at any rate some kind of formal notice, would seem to be necessary. Section 4 of Assessment Act (No. 5) has been cited above only so far as it relates to cases (of which this is one) in which the goods are subject to customs duty. In the case of goods which are not so subject the section provides that the sale value is to be "the value upon which, in the opinion of the Commissioner, an ad valorem duty would have been calculated if the goods had been so subject." There is a proviso that, pending the ascertainment of the value for duty in any case, that value shall be taken to be the value at which the goods are entered for home consumption under the Customs Act. It would appear, therefore, that, where either (a) the commissioner was not satisfied with the value for duty at which the goods were entered, or (b) he was required to form an opinion before that value could be finally determined, it would be necessary for him to make an assessment and give notice under s. 10 or at any rate to give some formal notice to the taxpayer. It is to be noted that s. 9, which requires the importer to pay sales tax at the time of the entry of the goods, is subject to a proviso. That proviso is in the following terms: "Provided that, in the case of goods the value for duty of which is, under sub-section (2) of section four of this Act, ascertained in accordance with the opinion of the Commissioner, the person liable to pay sales tax upon the sale value of those goods shall, on or before the date specified in the notice by the Commissioner stating the sale value of those goods and the amount of any additional sales tax payable thereon and attributable to an excess in the value for duty so ascertained over the sale value of the goods at the time of entry, pay that additional tax." The proviso is badly drawn, and its last three lines seem to involve a confusion between "value for duty" and "sale value", but its meaning does not seem doubtful. It is to be noted that the proviso seems to contemplate that any formal notification of the commissioner's opinion will suffice. On the other hand, it does not apply to a case where the goods are subject to customs duty but the commissioner is not satisfied with the value for duty stated in the entry. (at p575)
8. The argument for the defendant was, at least as to its two main points, ingenious and clearly put, but it is possible now to deal fairly shortly with it. We do not think that there is any real substance in it. It was stated in the form of four points, of which the first two may be conveniently dealt with together. It was said that s. 9 does not create a liability on the part of the defendant to pay the sum claimed in this action. It was then said that the only other section in the Act under which such a liability could be actually created was s. 10, and either (a) s. 10 did not apply to the case, or (b) if it did, its terms had not been complied with. (at p575)
9. The reason for saying that s. 9 creates no liability here was found in the proposition that that section requires payment at the time of entry only of the amount of tax shown in the import entry form. This is not, in our opinion, a correct view of the function or effect of s. 9. What it requires is payment, at the time of the entry of the goods for home consumption under the Customs Act, of the sales tax actually payable according to law on the goods imported. This requirement is subject to two qualifications. In cases to which the proviso to s. 9 applies, the time for payment of part of the total tax payable is postponed until it is fixed by a notification from the commissioner. But the proviso has no application to the present case. The only other qualification to which s. 9 is subject is found in the first proviso to s. 4(2), which provides that, pending ascertainment of the value for duty, the value for duty shall be taken to be the value at which the goods are entered for home consumption. This also does not affect the present case. Sales tax was paid (whether it was paid "pending the ascertainment" of value for duty or not) on the basis of the value at which the goods were entered for home consumption. But it was paid at a wrong rate, and s. 9 required it to be paid at the right rate. (at p575)
10. This view makes it unnecessary to consider Mr. Byer's second point. But perhaps an opinion should be expressed upon it. It was said that s. 10 authorised the commissioner, in a case where no tax has been paid or he considers that tax has been paid on a wrong sale value, to assess the sale value and calculate the tax upon it. It does not authorise him, where tax has merely been paid at a wrong rate on a correct sale value, merely to calculate the tax at what he considers is the right rate. In other words, there is a single power to do two things, and no power to do the second thing when there is no occasion for doing the first thing. This view clearly cannot be sustained. In order to calculate the tax, the commissioner must adopt a sale value, and, if he adopts a sale value, he is assessing a sale value. It was also said that the notice given by the commissioner on 15th August 1950 was defective because it did not specify a date on or before which the tax was to be paid. But the notice must be read with the letter which accompanied it, and the letter clearly specified a date for payment. (at p576)
11. The third point arises in this way. The Assessment Act (No. 1) contains in s. 3 a definition of the word "goods", and s. 3 is one of the sections of Act No. 1 which are incorporated in Act No. 5 by s. 12 of the latter Act. It is in fact incorporated in all the other Assessment Acts. It is unnecessary to set out the definition. It is enough to say that it provides that "goods" shall include "commodities", and that this provision is followed by a long "exception", which is concerned to exclude goods which are sold as second-hand goods and are manufactured from goods which have gone into use or consumption in Australia. While there is probably no difficulty in applying this exception to goods dealt with by Act No. 1, which are goods manufactured in Australia, it would seem at best doubtful whether it is capable of being applied at all to goods dealt with by Act No. 5. However this may be, the point raised is that in the action the burden rests on the commissioner of proving that the goods imported by the defendant do not fall within the exception contained in the definition. The point is not really open on the case stated, but in any case it is impossible to sustain it. It is for the defendant to prove, if he can, that his goods come within what is clearly stated in the Act as an exception. (at p576)
12. The last point raised is that, if the defendant's first and second points are rejected, the effect of the Assessment Act, in conjunction with the Tax Act, is to impose an "incontestable" tax. That is to say, the Acts, having imposed a tax, give to the commissioner in effect an exclusive and conclusive power to determine whether in a particular case the tax is payable, and what amount of tax is payable. This, it is said, is unconstitutional. The constitutional point raised seems to be in essence that which was so much discussed in Australian Communist Party v. The Commonwealth [1951] HCA 5; (1951) 83 CLR 1 , and which is sometimes expressed by saying that "a stream cannot rise higher than its source". It is unnecessary to consider whether, if the Acts did impose an "incontestable" tax, the effect would be to make them or any part of them unconstitutional. For the Acts do not, in our opinion, have the effect of imposing an "incontestable" tax. (at p577)
13. In order to ascertain the tax payable by any person, it is necessary to determine two factors. The first is the sale value of the goods, and the second is the rate of tax. Questions may arise in connection with the determination of either, and a preliminary question may arise whether the goods are subject to tax at all. So far as sale value is concerned, Assessment Act (No. 5) provides for an appeal from a decision of the commissioner to a board of review, and an appeal from a decision of the board on a question of law to this Court: see ss. 40-44 of Assessment Act No. 1, which are incorporated in Act No. 5. But on a question whether the goods are subject to tax at all, and on a question as to the rate of tax, it is said that a decision of the commissioner under s. 10 is made conclusive by the Act. This result is said to follow from s. 39(1) of Assessment Act (No. 1), which is incorporated in Act No. 5. Section 39(1) is in the following terms:- "The production of any document or a copy of a document under the hand of the Commissioner . . . purporting to be a notice or a copy of a notice specifying any liability of a taxpayer under this Act shall be conclusive evidence of the due exercise of any act required by this Act to be done or performed by the Commissioner . . . for the purpose of ascertaining the liability so specified and (except in proceedings on appeal when it shall be prima facie evidence only) shall be conclusive evidence of the correctness of any calculations upon which that liability is ascertained." (at p577)
14. Section 39(1) has not, in our opinion, the effect attributed to it. It must, of course, be strictly construed. It ought not to be construed as having the effect suggested unless it appears clearly from its terms that it has that effect. It differs conspicuously from s. 177 of the Income Tax and Social Services Contribution Assessment Act and s. 22 of the Estate Duty Assessment Act, the plain object of which is to make an assessment conclusive as to everything unless the prescribed procedure by way of objection and appeal is followed. One cannot help thinking that there has been some slip in drafting it, because it does not, as one would have expected it to do, make an assessment conclusive as to sale value except on appeal. The very curious expression "the due exercise of any act" can only refer to the observance of any required formality, and the word "calculations" ought not to be construed as referring to more than the bare arithmetic involved in the making of the assessment. If it be said that this leaves the taxpayer at the mercy of a notional mathematical infallibility on the part of the commissioner, and that this is enough to invalidate the Act, the answer must be that the latter part of s. 39(1) is plainly severable. The whole Act cannot be held invalid because the commissioner might add two and two together and make five. The Assessment Act is not a law imposing taxation, and s. 55 of the Constitution has no application to it. (at p578)
15. The result is that a taxpayer, who is dissatisfied with an assessment of the commissioner, may refuse to pay the amount assessed, and, when he is sued by the commissioner, may take any objection to the assessment other than the objection that some required formality has not been observed. No liability to pay tax is "incontestably" imposed. (at p578)
16. The question asked by the case stated is - Whether the plaintiff is entitled in law to recover from the defendant the sum of 554 pounds 15s. 8d. The answer to this question should be - Yes. (at p578)
McTIERNAN J. Two questions are preliminary to the others which emerge from the argument. The first concerns the meaning of "goods", and the second the rate of tax. For the meaning of "goods", you refer to s. 3 of the Sales Tax Assessment Act (No. 1). The relevant provision of this section says, in effect, that all goods, including commodities, shall be taxable, except the goods described in the two paragraphs, (a) and (b). I do not agree with the argument that the plaintiff has the onus of proving that the machines concerned in the case are not within par. (a) or (b). Each of these paragraphs is a true exception. The correct principle, therefore, is that the defendant has the onus of proving that the machines are within either paragraph, Metropolitan Coal Company v. Pye [1934] HCA 9; (1934) 50 CLR 614; (1936) 55 CLR 138 . It is enough for the purposes of the plaintiff that the machines are "goods" according to the ordinary general meaning of the word; there is nothing in the case stated to bring the machines within par. (a) or (b). The second question depends upon whether the machines belong to any of the classes of goods covered by item 18(2) of Div. (VI) of the third schedule to the Sales Tax (Exemptions and Classifications) Act 1935-1947. From the descriptions in the case stated I think it follows that the machines fall within item 18(2). They were imported since 15th November 1946. The result is that by s. 3 of the Sales Tax Act (No. 5) sales tax at the rate of twenty-five per cent was imposed upon the sale value of the machines. (at p578)
2. It seems to me therefore that this case stated has to be determined upon the basis that the defendant is chargeable under the Sales Tax Assessment Act (No. 5), with sales tax at the rate of twenty-five per cent of the sale value of the machines. The defendant paid sales tax on the entry of each lot for home consumption at the rate of ten per cent of sale value. He is liable to pay 363 pounds 10s. 10d. in order to discharge his liability under s. 5 of the Act. It is contended for the defendant that in order to make this amount due and payable an assessment of sale value and a calculation of further tax needed to be made. The plaintiff relied primarily upon s. 9 to establish that the sum of 363 pounds 10s. 10d. is due and payable. It has been contended for the plaintiff that s. 9 makes the full amount of sales tax which a taxpayer is liable to pay under s. 5 due and payable at the time of the entry of the goods for home consumption and therefore that nothing needed to be done under s. 10, in the present case. The performance of the duty laid by s. 9 upon the importer is not made subject to assessment or other calculation by the commissioner. Nevertheless it is implicit in the section that it imposes upon the taxpayer an obligation to pay a specific sum. The question is how is the sum ascertained? If not by some act of the commissioner, by whose act? (at p579)
3. The object of the section is to provide for the collection of sales tax at the time of the entry of the goods. In order that this object might be attained, it may be presumed that the section refers to a sum of sales tax then ascertained. In my opinion what s. 9 refers to is the sales tax ascertained upon the face of the entry lodged in conformity with s. 7. It seems to me that it is straining s. 9 beyond its intended operation to construe it as making the total liability of the importer under s. 5 of the Act a debt due and payable at the time of the entry of the goods for home consumption. Such a construction would lead to the result that sales tax may be made payable on two different dates, one fixed by s. 9, and another fixed under sub-s. 3 of s. 10. I am therefore of the opinion that an assessment of sale value and a calculation of further tax pursuant to s. 10 was needed to make the sum of 363 pounds 10s. 10d. due and payable. (at p579)
4. Exhibit L purports to be a notice of the assessment of the sale value of each lot of machines and a calculation of further sales tax payable in respect of them. The amount at which the sale value is assessed in the case of each lot is equivalent to the amount disclosed by the entry lodged in relation to such lot pursuant to s. 7. I do not agree with the contention of the defendant that, because of this equivalence, exhibit L is not a notice of assessment of sale value. In my opinion it is a notice of an assessment of sale value and of calculation of further tax which the commissioner is empowered by s. 10 to make. Exhibit L does not specify a date on or before which the further tax calculated thereby, that is, the sum of 363 pounds 10s. 10d., shall be payable. But exhibit K does so. The date specified is in that letter "within three days of the date of this communication". It is dated 15th August 1950. Exhibit L was sent with exhibit K to the defendant. The two documents, in my opinion, are, taken together, a notice in writing within the terms of sub-s. 2 of s. 10, and satisfy the requirement of sub-s. 3. The production of these documents has, in my opinion, the consequences which s. 39 of the Sales Tax Assessment Act (No. 1) attaches to a document, under the hand of a deputy commissioner, specifying a liability of a taxpayer for tax. The provisions of s. 39 apply in the manner provided in s. 12 of the Sales Tax Assessment Act (No. 5) in relation to the imposition, assessment and collection of sales tax under this Act. The consequence is that the production of exhibits K and L provides conclusive evidence of the due assessment of sale value and the calculation of tax, because these are acts which are required under s. 10 to ascertain the liability of 363 pounds 10s. 10d. specified in the documents; and their productions also provides conclusive evidence of the correctness of the calculations in exhibit L upon which that liability is based. It would follow from the production of these documents that the plaintiff proves that he is entitled to recover the sum of 363 pounds 10s. 10d. (at p580)
5. The right of the taxpayer under s. 41 of the Sales Tax Assessment Act (No. 1) to object extends only to the question of sale value and this limitation therefore governs his right to appeal to this Court. The right is given by sub-s. 6 of s. 42. Sections 41 and 42 apply as provided in s. 12 of the Sales Tax Assessment Act (No. 5) in relation to the imposition, assessment and collection of sales tax under this Act. I think that the questions whether these machines were imported since 15th November 1946 and whether they belong to any class of goods enumerated in item 18(2), mentioned above, are questions of fact. The decision whether the rate of tax is ten per cent or twenty-five per cent raises only those two questions. The decision therefore involves no question of law. In my opinion the limitation of judicial review to the question of sale value does not make the power which is given to the commissioner to determine conclusively for the purposes only of assessment the rate of sales tax a usurpation of judicial power. In this view, the validity of the sales tax imposed by s. 3 is not impeachable on constitutional grounds. (at p580)
6. In regard to the sum of 191 pounds 4s. 10d., the commissioner bases his claim to this sum on s. 29 of the Sales Tax Assessment Act (No. 1). The sections 24 and 25, mentioned in s. 29, should, by reason of s. 12 of the Sales Tax Assessment Act (No. 5), be read as ss. 9 and 10 of that Act, and the provisions of s. 29, thus amended, apply by force of s. 12, as therein provided, to the imposition, assessment and collection of tax under the last mentioned Act. Applying the provisions of s. 29 with these modifications, it would appear that additional tax became payable under its provisions from 18th August 1950 at the rate of ten per cent per annum. This was the date which the commissioner specified pursuant to s. 10. Such tax, calculated up to 24th November 1955, amounts to the sum of 191 pounds 4s. 10d. This action was commenced on the 29th November 1955. The sum of 191 pounds 4s. 10d. was, in my opinion, payable by way of additional tax at that date. (at p581)
7. The action is founded upon the provisions of s. 30 of the Sales Tax Assessment Act (No. 1) as applied in the manner provided in s. 12 of the Sales Tax Assessment Act (No. 5) for the purposes of this Act. As both sums claimed in the action became due and payable, as has been stated in the course of these reasons, it follows from the provisions of s. 30 that the total amount is deemed to be a debt due to the Commonwealth, and that the plaintiff has a statutory right to sue for, and recover it in this action. For these reasons I answer the question stated for the opinion of the Court: "Yes". (at p581)
ORDER
Question in the case stated answered - Yes. The defendant to pay the costs of the case stated.
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