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High Court of Australia |
DICKENSON'S ARCADE PTY. LTD. v. TASMANIA. [1974] HCA 9; (1974) 130 CLR 177
Constitutional Law (Cth)
High Court of Australia.
Barwick C.J.(1), McTiernan(2), Menzies(3), Gibbs(4), Stephen(5) and Mason(6)
JJ.
CATCHWORDS
Constitutional Law (Cth) - Duties of excise - Exclusive power of Commonwealth Parliament - Tobacco retailer's licence fee imposed under State law - Fee calculated upon average monthly value of tobacco handled over six months preceding commencement of licence period - Validity - Tax on consumption of tobacco - Regulations providing for collection of tax - Commissioner to arrange with retailers for collection of tax - Prohibition of carrying on retail business without arrangement for collection - Retailers authorized to receive tax from consumer but not to demand payment - Validity - The Constitution (63 & 64 Vict., c. 12.) s. 90 - Tobacco Act, 1972 (Tas.), ss. 3, 7, 9-11, Tobacco Regulations 1972, regs. 2, 4.
HEARING
Melbourne, 1973 May 7-9;DECISION
1974, April 1.
2. The question for decision is whether the State of Tasmania, by means of
the Act, either in imposing a tax or in quantifying the
amount of the fee for
the licence to sell tobacco by retail, levies a duty of excise within the
meaning of the Australian Constitution. (at p184)
3. Some propositions of law relevant to the resolution of this question may
be taken by now to have been accepted by the Court.
They are not the subject
of any controversy between the parties to this action. But it is important to
recite them so as to expose
what to my mind is the problem posed by the
demurrer. (at p185)
4. Uniform duties of customs having long since been imposed, the Constitution now gives to the Parliament exclusive power to impose duties of excise. The exclusive control of customs and excise is at this time one of the major sources of the power of the Parliament to influence the economy of Australia. In this connexion, I have observed in my reasons for judgment in Western Australia v. Chamberlain Industries Pty. Ltd. [1970] HCA 5; (1970) 121 CLR 1, at p 17 upon the unity of the national economy. I would repeat what I then wrote and the citation from the judgment of Sir Owen Dixon in Parton v. Milk Board (Vict.) [1949] HCA 67; (1949) 80 CLR 229, at p 260, which I then made. I continue to regard the evident purpose of the grant of exclusive power to impose duties of customs and of excise as of significance both in deciding the connotation of the word "excise" in s. 90 of the Constitution and in deciding whether in its operation a State statute does impose a duty of excise. This does not involve any resort to economic theory: the question remains a legal question. But in determining both connotation and denotation, the constitutional purposes of the grant of exclusive power must be kept in mind. Of these aspects I have expressed views in earlier cases, views which, having been reconsidered by me for the purposes of the decision of this case, I repeat. See, e.g., Anderson's Pty. Ltd. v. Victoria [1964] HCA 77; (1964) 111 CLR 353, at p 365. (at p185)
5. A duty of excise for the purposes of the Australian Constitution, to use the formulation substantially as approved in Bolton v. Madsen [1963] HCA 16; (1963) 110 CLR 264, at p 273 , in its essence, is a tax upon "the taking of a step in a process of bringing goods into existence or to a consumable state or of passing them down the line which reaches from the earliest stage in production to the point of receipt by the consumer", including the step which puts the goods into consumption. There was no logical reason, in my opinion, for ending at the point of entry into consumption the area which might yield a duty of excise. But seemingly under what was considered to be the constraint of the opinion of the Privy Council in Atlantic Smoke Shops Ltd. v. Conlon (1943) AC 550, the area has been so limited. Whilst the question whether the decision of the Privy Council really required this limitation may well have been open to argument, in deference to the views expressed by other Justices, I have accepted the limitation. But this conclusion does not preclude an examination of what precisely is the limit of the area within which statutes may operate to impose a duty of excise. However, a tax upon the act of consuming goods, completely divorced from the manner or time of their acquisition by purchase, must now be regarded as outside the scope of s. 90 and within the competence of a State legislature. This conclusion, however, does not mean, in my opinion, that a State can enact a law in terms of the Tobacco Tax Act, 1940 of New Brunswick which was the subject of decision in Atlantic Smoke Shops Ltd. v. Conlon (1943) AC 550 . That case was not concerned with excise in the sense in which this Court has determined it is used in the Australian Constitution. It dealt principally with the different concept of a direct tax in the sense of the distinction between direct and indirect taxes favoured by John Stuart Mill in his Political Economy (1848). Whilst the directness or indirectness of a tax may on occasions have some influence in resolving the question whether a tax is or is not an excise, it is not definitive - see Anderson's Pty. Ltd. v. Victoria (1964) 111 CLR at p 365. (at p186)
6. The question whether a statute imposes a duty of excise is a matter of substance in which its intended operation as well as its form is of importance. Of this matter I have written in earlier cases and, again after reconsideration, would repeat what I have said. See Anderson's Pty. Ltd. v. Victoria (1964) 111 CLR, at p 365; Western Australia v. Chamberlain Industries Pty. Ltd. [1970] HCA 5; (1970) 121 CLR 1 at p 15. (at p186)
7. Further, in deciding what is the intended substantial operation of the statute, the passage, which in the last-mentioned case I cited from the judgment of Isaacs J. in the case of The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia [1926] HCA 47; (1926) 38 CLR 408, at p 423 , is relevant. The views there expressed are particularly apposite and valid in the resolution of the problem in this case. Unless those views are applied, and the substance of the operation of the statute, rather than merely its form, is treated as definitive of the relevant nature of the tax it imposes or exacts, a premium will be placed upon verbal sleight of hand and, in the end, the Constitution mocked. (at p186)
8. The question in this case, in my opinion, is whether the intended
operation of the Act is confined to the imposition of a tax
on consumption of
tobacco or whether that operation extends to impose a tax on its entry into
consumption. (at p186)
9. Before going further in the matter, it is necessary, in my opinion. to
clarify the concept of a tax on consumption, as consumption
is made a point of
reference in defining the area within which a duty of excise may be found to
be operating. In relation to foodstuffs
and the like, consumption implies
their destruction by use. Though an appropriation of goods for use may be
regarded by the economist
as an act of consumption, I do not regard it as such
in relation to the description of a duty of excise. I intended to indicate so
much when I emphasized in my reasons for judgment in Anderson's Pty. Ltd. v.
Victoria [1964] HCA 77; (1964) 111 CLR 353 that the
act of placing
the goods in the
possession of the purchaser was within the area in which a duty of
excise
could be found to exist.
Thus the act
of a vendor in making delivery of goods
sold or of the purchaser in receiving the goods
and reducing them into his
possession
are
not in my opinion acts of consumption in the relevant sense. In
relation to goods generally,
consumption for present purposes
involves,
in my
opinion, the act of the person in possession of the goods in using them or in
destroying
them by use, irrespective
of the manner
or means by which that
possession was obtained. (at p187)
10. With all these considerations in mind, I turn to examine the substantial
operation of the Tasmanian statute under challenge.
(at p187)
11. I turn first to the provisions of Pt III of the Act which in substance
prohibit the sale of tobacco by retail except subject
to the possession of a
licence so to do on the premises in which the selling takes place. Section 11
fixes the amount of the fee
payable for a licence to sell tobacco by retail on
designated premises. The fee is an amount of $2 on a sliding scale, with a
stated
minimum, calculated upon the average monthly value, over a period of
six months prior to the commencement of the period of the licence
for each
$500 at retail values of tobacco handled in the retail business on the
premises during that period. (at p187)
12. Having regard to the view I have formed and which I shall shortly
express, there is no need for me to explore in any detail
the meaning of the
expression "tobacco handled in a month" as appearing in s. 11 (3) (a). But it
must, in my opinion, mean tobacco
sold. In the light of the other words of the
paragraph the amount to which the scheduled fee of $2 per $500 is to be
applied is to
be arrived at, in my opinion, by taking the total value of sales
of the period of six months and dividing that total value by six,
thus
arriving at what the paragraph described as the average value of "tobacco
handled in a month" during that period of six months.
It is, of course,
possible to read the word "handled" as apt to include unsold purchases, a
construction which might be thought to
be aided by the expression "the monthly
stock value" in sub-s. (6). But I prefer the construction which is involved in
my suggested
method of calculating the "average value . . . of the tobacco
handled in a month". (at p188)
13. In submitting that the method of calculating the licence fee did not
involve the imposition of a duty of excise, considerable
reliance was placed
by the defendant on the Court's decision in Dennis Hotels Pty. Ltd. v.
Victoria [1960] HCA 10; (1960) 104 CLR
529 . It was there
decided by majority that the
licensing provisions of the Licensing Act 1958 (Vict.), other than
that
provision
which fixed the fee
for a temporary victualler's licence or a
temporary packet licence, did not impose duties of excise
and were
within the
competence
of the Victorian legislature. There was, however, no reason for
that decision common to the members
of the
Court who formed the majority
in
favour of the conclusion. An attempt was made by counsel for the plaintiff in
the argument
of this
demurrer to construct a reason
for decision in the sense
of the minority by aggregating views expressed by those Justices
with a
view
argumentatively attributed
to one of the Justices included in the majority.
Such a course, however, is inadmissible,
just as
a common reason for decision
could
not be constructed by adding views of single Justices to form a
conglomerate. See, e.g.
Great
Western Railway Co. v. Owners of S.S.
"Mostyn",
per Viscount Dunedin (1928) AC 57, at pp 73-74 . A composite reason so
constructed
does not furnish a reason for decision
in the sense of that
expression in relation to judicial precedent. There being no reason for
decision common to the majority of the
Justices, the Court's decision in
Dennis Hotels Pty. Ltd. v. Victoria [1960] HCA 10; (1960)
104 CLR 529 , in my opinion, is
authority only in relation
to the statutory and factual situation it resolved
and in relation
to
a case which has, if not precisely, at least substantially
and indistinguishably the same statutory and factual situation. Cf.
Lord
Haldane in Great Western Railway Co. v. Owners of S.S. "Mostyn"
(1928) AC 57,
esp at pp 71-72 . I do not consider myself bound
by
any of the several reasons
given by the individual Justices for
the conclusion to which they came: and,
in particular, I do not
regard
myself as bound to use any of those reasons as
a base on which
to construct some further or other conclusion. If to decide
this case
it were necessary to choose that view expressed in that case
which
most commends itself to me, my present inclination would
be to
prefer the
views expressed by Sir Owen Dixon, my brother McTiernan
and Sir Victor
Windeyer. (at p188)
14. However, after due consideration, I have come to the conclusion that I do
not have to make any such choice. I have been troubled
by the question whether
the statutory and factual situation in the present case is so substantially
similar to that with which the
Court dealt in Dennis Hotels Pty. Ltd. v.
Victoria [1960] HCA 10; (1960) 104 CLR 529 that I should regard the decision in the case
quite apart
from any of the reasoning of any of the Justices as
compelling a
decision in this so far as the licensing provisions
of the Act are
concerned.
Clearly enough, the draftsman, in using
his evident ingenuity in constructing
the Act, built upon the decision
in that
case in expressing the mode of
calculating the licence
fee payable under Pt III of the Act. By using an
ambiguous expression
in s.
11 (3) (a), namely "the average value . . . of the
tobacco
handled in a month" and by choosing that average for the period
during
six months before the commencement of the period of the licence,
the draftsman
thought to remove the specification of the
fee one
step further from a clear
case of an excise as found by the Court
in Dennis Hotels Pty. Ltd. v. Victoria
(1960) 104 CLR 529 , in
the instance of the temporary victualler's fee.
However, after consideration, I have come to think that the
statutory and
factual
situation in this case is so substantially similar to and not
distinguishable from the statutory and factual
situation in Dennis
Hotels Pty.
Ltd. v. Victoria [1960] HCA 10; (1960) 104 CLR 529 , the temporary victualler's and the
temporary
packet licences apart, that though,
if the matter were fully open
for decision, I would not be prepared, as at present advised, to
so decide, I
have come to think that
I ought to apply the decision
in Dennis Hotels Pty.
Ltd. v. Victoria [1960] HCA 10; (1960)
104 CLR 529 to this case and to regard that decision
as decisive of the validity of the licensing provisions in this Act.
I cannot
confess to any great satisfaction in taking that course
but, in the
circumstances, I am prepared on the authority of the
precise
decision in that
case, but as I have indicated not because
of any of its reasoning, to hold
that the provisions with respect
to the
fee payable for a tobacco vendor's
licence do not impose
a duty of excise. (at p189)
15. I now turn to consider what is the substantial operation of Pt II of the
Act and its ancillary provisions according to their
proper construction. This,
as I have said, is to my mind the problem which the case presents. The problem
cannot be solved, in my
opinion, by merely accepting at face value the verbal
appearance of the statute. (at p189)
16. The Act imposes a tax "in accordance with (the) Part", i.e. Pt II of the
Act, "on the consumption of tobacco". It is therefore
essential to determine
what Pt II does purport to do. The consumption of tobacco means, for the
purposes of the Act, the smoking
or chewing of tobacco by any person (s. 2 (2)
). The amount of the tax is said to be seven and one half per cent of the
value of
that, i.e. the consumed, tobacco. But that value must be calculated
on the amount consumed according to the price at which tobacco
of that kind
(together with any package or container in which it is ordinarily contained)
is ordinarily sold by retail. If the tobacco
consumed is not ordinarily sold
by retail, the Commissioner of Taxes appointed under the Land and Income
Taxation Act 1910 (Tas.)
shall assess the value of the consumed tobacco at
such amount as he considers just having regard to retail prices of tobacco.
Precisely
how he will obtain the basic information on which to make a just
assessment is not revealed in the Act, though perhaps the regulations
contemplated by s. 21 may afford some indication. (at p190)
17. The tax is only payable on consumption if its amount has not already been
paid (s. 3). As will appear, this really means that
the tax is not payable if
an amount equal to or greater than the amount of the tax has been paid at the
time of the purchase of the
tobacco of which the consumed tobacco formed part.
The Act does not provide for payment of or in respect of the tax at any other
time before the consumption of the tobacco. The provision in the Act itself
for collection of the tax after consumption, if an amount
to cover it has not
already been paid, is by prosecution of an offence for non-payment of the tax
within seven days of the consumption
of the tobacco with the possibility of an
order being made upon conviction for payment of the amount of the tax. (at
p190)
18. But the Crown is given power, amongst other things, to make regulations
providing for any convenient method for the collection
of the tax, for the
appointment of collectors, and for the prohibition or restriction of carrying
on retail tobacco businesses without
having made arrangements under the
regulations, i.e. for the appointment of collectors of the tax (s. 7). By a
separate provision,
the Crown is empowered to make regulations, amongst other
things, for the keeping of records and the making of returns and for the
notification of the consumption of tobacco ; but such regulations will not
apply in respect of the consumption of tobacco that has
been sold by retail
and in respect of the consumption of which the tax has been paid (s. 21 (2) ).
(at p190)
19. Tobacco is not smoked or chewed in the precise amount which is purchased,
unless the purchase be of a single cigarette or cigar.
No doubt the latter is
common enough amongst those given to the delights of cigar smoking but rarely,
I should think, even in penurious
circumstances, is a single cigarette
purchased. Generally speaking, the tobacco is purchased in packets of
cigarettes or in bulk
quantities, ready rubbed, flaked or in block. The
purchased quantity is smoked by the purchaser at intervals, their frequency
depending
on individual habit, inclination and opportunity. It is a casual
habit in the sense that no current record is kept or likely to be
kept or even
a mental impression made or retained of the occasion on which something is
smoked. Indeed, the habitual smoker may not
be conscious of the fact as
distinct from the experience of smoking. The smoker in general will not be
conscious in particular of
the time or occasion of the separate acts of
"consumption" or be capable of recollection of them after the event. Nor is
any identification
made of the thing smoked with the time and circumstances of
its acquisition, whether by purchase or by gift. Perhaps a part or, at
times,
the whole of what is purchased is given away, either on one occasion or over a
period of time. (at p191)
20. Each act of smoking is said to attract an amount of tax equal to seven
and one half per cent of the value of the amount of tobacco
smoked at that
time less, of course, the value of any "dregs", i.e. unsmoked residues or
butts, if the smoker within due time makes
an appropriate application for a
refund, see s. 3 (5). Nothing is said expressly in the Act about the
consumption of tobacco given
to the smoker though s. 4 (1) exempts from tax
tobacco brought into the State by a traveller for disposal by gift provided it
is
consumed within twenty-eight days of its being brought into the State. (at
p191)
21. The donee of tobacco, e.g. a cigarette, may but does not necessarily
identify its brand and, perhaps, in many situations, does
not care. Whether or
not the donor, or for that matter his donor, has paid an appropriate amount of
tax in respect of the cigarette
can scarcely be known. All this may equally be
true of the friend or acquaintance who is given a "fill" of his pipe. Thus, a
person
who has been given tobacco may not have the means of knowing the value
for the purposes of the Act of what he smokes. Bearing in
mind the habits of
mankind in offering cigarettes and tobacco not merely to friends but to the
merest acquaintance on social occasions,
the idea that the agreeable recipient
of the convivial cigarette or pipe fill should come under an obligation to
make a return or
give a notification of having smoked the gift and within
seven days of that event - no doubt rarely remembered at the end of an evening
of stimulating social intercourse - to pay a tax of seven and a half per cent
of the value of that cigarette or pipe fill upon pain
of a criminal
prosecution, is so ludicrous that it is to my mind inconceivable that a
legislature should so intend. Examples of a
like kind crowd in upon the mind.
It could scarcely be conceived that the elderly gentleman, resting after a
life-time of labour,
eking out his days in the sunshine on park bench or wall,
quietly cutting a pipeful from a block of tobacco provided by friend or
charity, and after rubbing it to a suitable tilth, smoking it in contentment,
was intended to be required to notify his self-indulgence
and pay within seven
days, if he could but remember the occasion, a tax of seven and a half per
cent of the value of the pipeful
or perhaps of only so much of the pipeful as
he smoked before dropping off to sleep in the sun. Of course, if he could but
ascertain
it, he might find, not by direct evidence but by inference, that
someone had paid the tax at the point of purchase so that he was
after all not
liable to tax on his smoking in the sun. I cannot believe, however, that any
such operation of the Act is intended.
My incredulity of such a fanciful
operation being intended by a legislature leads me to conclude in the absence
of clear and unambiguous
words that it was not intended to tax the consumption
of tobacco in all circumstances, including the case of tobacco given to the
smoker or chewer. That means, in my opinion, that it was intended only to tax
the consumption of tobacco by or at the instance of
a purchaser of tobacco
purchased by or for him. I find nothing in the language of the Act to compel a
contrary conclusion. In the
case of tobacco brought into the State, s. 4 (1)
read with the remainder of the Act, in my opinion, intends that the tax shall
be
paid by the person introducing the tobacco unless he ensures its
consumption within the nominated twenty-eight days. Only that person
can know
of necessity the date of the introduction of the tobacco into the State. (at
p192)
22. It seems obvious enough that there is no reality in the suggestion that
returns as contemplated by the regulations should be
made or that tax on each
act of smoking could be collected by means of a criminal prosecution,
including the case of donated tobacco.
Nor is there any such reality in the
case of any tobacco where the tax is not paid as part of the purchase of the
tobacco. Indeed,
the Act recognizes the futility of its method of collection
by criminal prosecution, for it authorizes the making of regulations
for any
convenient method of collecting the tax. The intended method appears clearly
enough from the terms of the regulation-making
powers. Records and returns may
not be required in respect of purchased tobacco if the tax has been paid, i.e.
at the point of purchase.
Collectors may be appointed and the tax directed to
be paid to them ; licensed tobacco resellers may be prohibited from obtaining
or exercising a licence to sell by retail unless arrangements are made under
the regulations for the collection of the tax. In fact,
the contemplation of
the Act has been effected. Regulations, Statutory Rules No. 286 of 1972, made
a week after the assent to the
bill and operative with the commencement of the
Act, provide that tax is to be paid to a collector or authorized person where
it
is paid at the time of purchase: otherwise to the Commissioner (reg. 2).
Applicants for a retail tobacco licence must make an arrangement
with the
Commissioner for the appointment of a collector to receive on the premises to
which the licence relates the "tax payable
in respect of the consumption of
tobacco that is sold on those premises" (reg. 4). The licensee may be the
collector. Thus, the licensee
is required either to be or to have on the
premises an appointed collector authorized to collect the tax. The collector
is to be
remunerated by the right to retain the excess of the amounts
collected by him over seven and one half per cent of the value of the
tobacco
in respect of which the amounts were paid. By s. 6 (4) fractional parts of a
cent resulting from a calculation of seven and
one half per cent on the retail
price of the tobacco as packaged are to be treated as a full cent. Hence the
room for an excess with
which to remunerate the collector. (at p193)
23. Thus, it is to my mind clear to demonstration that the intention of the
Act is that what amounts of tax will be collected under
the Act will be
obtained by the addition by the retailer of tobacco to the purchase price of
the tobacco sold of an amount which
will be at least the amount of tax payable
on consumption of the whole amount of tobacco purchased. In the unlikely event
that the
purchaser of the tobacco desires and chooses to pay later, the
chances of recovery of the tax would appear to be nil. The administrative
cost
of any endeavour to recover it must certainly be disproportionate. Proof in a
criminal proceeding of the time of smoking and
the identification of what is
smoked as tobacco in respect of which tax has not been paid would not only be
difficult but, except
in some most unusual circumstances, in my opinion,
impossible. In any case, much more likely than not it would be completely
uneconomic.
(at p193)
24. Thus I conclude that, upon its proper construction, the Act imposes a tax
not upon consumption of tobacco in any and all circumstances
by any person,
but only upon the consumption by or at the instance of a purchaser of tobacco
purchased by retail. It intends that
the tax will be paid by the purchaser and
that payment will be made in anticipation of consumption at the time of
purchase and as
part of the purchase transaction. It is, in my opinion, a tax
upon the movement of the tobacco into consumption. (at p193)
25. The intended operation of the Act, upon its proper construction, is
therefore somewhat akin to that of the Tobacco Tax Act,
1940 of the province
of New Brunswick in Canada, which was the subject of decision in Atlantic
Smoke Shops Ltd. v. Conlon (1943)
AC 550 . Section 4 of that Act provided that
"Every consumer of tobacco purchased at a retail sale in the province shall
pay . .
. at the tim of making his purchase, a tax in respect of the
consumption of such tobacco . . ." Section 5 provides for the use of
tobacco
brought into the province by a provincial resident or firm carrying on
business in the province. But the consumer remains
liable for the tax until
its collection, s. 10. "Consumer" is defined as a retail purchaser of tobacco
"for his own consumption or
for the consumption of other persons at his
expense". (at p194)
26. The express provisions of the Act of New Brunswick are, of course,
different from those of the Act. But there are, in my opinion,
no express
words in the Act imposing a tax upon all acts of consumption. Certainly there
are no unambiguous provisions doing so.
If it be concluded, as I conclude,
that the tax is laid only upon the consumption by or at the instance of a
purchaser of tobacco
and intended to be collected from him at the point of and
as part of the purchase, the intended operation of the Act is scarce any
different from that of the New Brunswick legislation. (at p194)
27. The Judicial Committee decided that the tax which the provincial
legislation imposed was a direct tax: that it was imposed upon
the consumer
and not on the tobacco. As I earlier observed, their Lordships were not
concerned with the concept of an excise within
the meaning of the Australian
Constitution. Their conclusion as to the directness of the tax and that it was
upon the person rather than on the goods is not, in my opinion,
conclusive of
the question whether an Act having an intended operation to the like effect of
the New Brunswick Act imposes a duty
of excise as that expression is
understood in Australia. In my opinion, an Act in the express terms of the
provincial legislation
if enacted by a State of Australia would impose a duty
of excise. In my opinion, it would in its substantial operation tax a step
in
the process of moving the tobacco into consumption. (at p194)
28. The intended operation of the Act is that the tax is payable only by the
purchaser of the tobacco and it is intended to be collected
at the point of
purchase. Such a tax is not, in my opinion, a tax upon consumption in the
sense of the decisions of this Court. It
is not a tax, as I construe the Act,
unconnected with the purchase of tobacco; indeed, it is essentially connected
with such purchase.
In my opinion, it constitutes a tax upon a step in the
movement of the tobacco into consumption. In the relevant sense it is a tax
upon the tobacco. It is a duty of excise. (at p194)
29. Accordingly, I would overrule the demurrer so far as the same relates to
Pt II of the Act and allow it so far as relates to
Pt III of the Act. In
consequence, the regulations made in relation to Pt II, whether authorized by
s. 7 or not, are inoperative.
(at p195)
McTIERNAN J. Dickenson's Arcade Pty. Ltd., the plaintiff company, claims in
this action as against the State of Tasmania and the
Treasurer of the State,
the defendants, that the High Court should declare that certain sections of Pt
II of the Tobacco Act 1972
(Tas.), also those sections together with certain
regulations made under the Act impose a duty of excise on tobacco as defined
by
s. 2 (1) of the Act within the meaning of s. 90 of the Constitution. The
plaintiff company claims in the action as against the defendants a similar
declaration with regard to Pts III and IV of the Act, together with the
regulations and also with regard to reg. 4. The action comes before the Full
Court by way of
a demurrer on the part of the defendants to the whole of the
plaintiff's statement of claim. The substantial ground of the demurrer,
argued
before the Court, is as follows : "none of the said sections of the Act and
none of the said Regulations imposes or purports
to impose a duty of excise
contrary to s. 90 of the Constitution . . ." The preamble of the Act is as
follows: "An Act for the imposition of a tax on the consumption of tobacco and
the licensing
of retail traders in tobacco, and for purposes incidental
thereto." Section 2 (1) says : " 'tobacco' means tobacco prepared for
consumption,
and includes any article that contains tobacco and is intended to
be consumed." Section 2 (2) says : "For the purposes of this Act
the
consumption of tobacco means the smoking or chewing of tobacco by any person."
The title of Pt II of the Act is : "Tax on the
consumption of Tobacco". The
material provisions of this Part are as follows : "In accordance with this
Part a tax is imposed on
the consumption of tobacco", s. 3 (1); "The amount of
the tax imposed on the consumption of any tobacco is seven and one half per
cent of the value of that tobacco", s. 3 (2); "Where tobacco has been consumed
any tax payable in respect of that consumption that
has not been paid in
accordance with this Part may be recovered by the Commissioner in any court of
competent jurisdiction as a debt
due to the Crown incurred by the person by
whom the tobacco was consumed", s. 3 (3); "The value of any tobacco shall, for
the purposes
of this Act, be taken to be the price at which tobacco of that
kind (together with any package or container in which it is ordinarily
contained) is ordinarily sold by retail", s. 6 (1); "The Governor may make
regulations providing for any convenient method for the
collection of the tax
and, without prejudice to the foregoing provisions of this section, any such
regulations may - (a) prescribe
the persons to whom, and the manner in which,
the tax is to be paid ; (b) make provision for the appointment of collectors
and their
remuneration, either out of sums paid by way of payment of the tax
or otherwise", s. 7 (a) and (b) ; and "Except as otherwise provided
in this
Part, all sums received by the Commissioner by way of tax shall be paid into
the Consolidated Revenue", s. 8. (at p196)
2. Perhaps the first question is whether the subject of taxation under s. 3
is smoking and chewing of tobacco or whether it is tobacco
prepared for such
purposes. The section says in sub-ss. (1) and (2) that tax is imposed on the
consumption of tobacco and tax is
payable in respect of consumption in the
case mentioned in sub-s. (3) . The tax is payable by the consumer. In my view
the tax paid
by him is paid on the tobacco he has consumed. It is a tax on the
commodity rather than on his smoking or chewing it. My view of
the substance
of s. 3 is that what it would do if valid would be to impose a duty on tobacco
prepared for consumption as a commodity
or article of commerce, in relation to
value, s. 3 (2). The commodity is intended by the words of the section to be
taxed in the
hands of the consumer. In the science of political economy duty
of excise connotes a tax the burden of which falls upon the consumer.
The tax
in question here clearly has that attribute. The question for decision is what
is the meaning of duties of excise in the
Constitution. The meaning is to be
found, not so much in the use of the term "excise duties" in writings on
political economy or in dictionaries,
but in the occasion on which the term is
used in the Constitution - ss. 86, 87, 88, 89 and 90 - and the object which is
intended to be attained by s. 90. The taxation power of the Parliament under
s. 51 (ii.) extends to making laws imposing duties of excise. By s. 90 this is
a power which the Constitution gives to the Parliament of the Commonwealth
exclusively. The tax which s. 3 of the Tobacco Act 1972 (Tas.) purports to
impose would,
if the section is valid, be inconsistent with the principle of
uniform duties of excise adopted by the Constitution. (at p196)
3. The Constitution does not manifest an intention to exclude from the
operation of s. 90 a tax charged on goods in the hands of the consumer. Such a
tax is of the nature of a duty of excise. (See Adam Smith - The Wealth
of
Nations, Book V., p. 357 ; Blackstone Commentaries on the Laws of England,
Book I., p. 318.) The Constitution of the United States, Art. 1, s. 8, gives
the Congress power to levy and collect Taxes, Duties, Imposts and Excises. In
Pacific Insurance Company v. Soule [1868] USSC 76; 74 US 433,
at p 445 [1868] USSC 76; (19 Law Ed 95, at p 99)
, " ' Excise' is defined to be an inland imposition, sometimes upon the
consumption of the commodity,
and
sometimes upon the retail sale; sometimes
upon the manufacturer, and sometimes upon the vendor". The definition of
excise tax
in
Webster's Third New International Dictionary, vol. I., p. 792,
reads : "an internal tax duty or impost levied upon the manufacture,
sale or
consumption of a commodity within a country and usually forming an indirect
tax that falls on the ultimate consumer". (at
p197)
4. In 1925 the legislature of South Australia passed an Act called the
Taxation (Motor Spirit Vendors) Act. Section 7 provided:
"(1) In this section 'consumer' means any person whoThis section was called in question in the case, The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia [1926] HCA 47; (1926) 38 CLR 408 , on the ground that in substance and effect it was an attempt to impose a duty of excise. As regards the "nature of the taxation", Isaacs J. (as he then was) said (1926) 38 CLR, at p 424 : "on consumers (s. 7) it is a tax on 'users' of motor spirit for locomotion on roads". Higgins J. said in that case (1926) 38 CLR, at p 435 : "excise duty means a duty on the manufacture, production, etc., in the country itself ; and it matters not whether the duty is imposed at the moment of actual sale or not, or sale and delivery, or consumption". The judgment of the Court included a declaration of invalidity with regard to s. 7. (at p197)
uses any motor spirit . . . for the purpose of propelling any
motor vehicle . . . (3) Every consumer shall" (within the
time prescribed) "pay to the Commissioner of Taxes a tax
calculated at the rate of Three pence per gallon on every
gallon of motor spirit purchased or obtained and used by the
consumer . . . "
5. Latham C.J. said in Matthews v. Chicory Marketing Board (Vict.)
(hereinafter called the Chicory Case) [1938] HCA 38; (1938)
60 CLR 263, at p
277 that a tax
may be an excise duty within the meaning of the Constitution "if it is imposed
upon the sale or consumption of goods". Starke J. said in this case (1938) 60
CLR, at p 285 that the question
whether a tax is a duty of excise within the
meaning of the Constitution "does not depend upon the name given to the tax or
levy in the taxing Act, but upon its operation and effect, as gathered from
the
language of the Act itself". Dixon J. (as he then was) said in the same
case (1938) 60 CLR, at p 300 : "there is no direct decision
inconsistent with
the view that a tax on commodities may be an excise although it is levied not
upon or in connexion with production,
manufacture or treatment of goods or the
preparation of goods for sale or for consumption, but upon sale, use or
consumption and
is imposed independently of the place of production (cf. the
judgments of Rich J. in The Commonwealth and Commonwealth Oil Refineries
Ltd.
v. South Australia (1926) 38 CLR, at p 437 ; John Fairfax & Sons Ltd. and
Smith's Newspapers Ltd. v. New South Wales
[1927]
HCA 3; (1927)
39 CLR 139, at p 146 ). What
is decided is that to be an excise the tax must be imposed in respect of
commodities."
His
Honour Dixon
J. further said with regard to the word
"excise" (1938) 60 CLR, at pp 302-303 , "although, as it is used in the
Commonwealth
Constitution, it describes a tax on or connected with
commodities, there is no ground for restricting the application of the word to
duties calculated
directly on the quantity or value of the goods. A definition
which makes quantity and value the only basis of taxation which would
satisfy
the notion of 'excise' has no foundation either in history, economic or fiscal
principle, nor in any accepted specialization.
The basal conception of an
excise in the primary sense which the framers of the Constitution are regarded
as having adopted is a tax directly affecting commodities" and further (1938)
60 CLR, at p 304 : "If the word 'excise'
received a meaning which confined
its application to taxes the relation of which to the commodity concerned was
of some narrow and
strictly defined nature, as, for instance, by an
arithmetical relation to quantity, it would not only miss the principle
contained
in the use of the word 'excise', but it would expose the
constitutional provision made by sec. 90 to evasion by easy subterfuges and
the adoption of unreal distinctions. To be an excise the tax must be levied
'upon goods,' but
those apparently simple words permit of much flexibility in
application. The tax must bear a close relation to the production or
manufacture, the sale or the consumption of goods and must be of such a nature
as to affect them as the subjects of manufacture or
production or as articles
of commerce. But if the substantial effect is to impose a levy in respect of
the commodity the fact that
the basis of assessment is not strictly that of
quantity or value will not prevent the tax falling within the description,
duties
of excise." Latham C.J. said in Parton v. Milk Board (Vict.)
(hereinafter called the Milk Case) [1949] HCA 67; (1949) 80 CLR 229,
at p 247 : "In
the
present case the tax is not imposed upon the producer of milk, but is imposed
upon a sale
made after the producer
of milk has
disposed of the milk to a
dairyman other than the owner of a milk shop or to the owner of a milk
depot.
It is therefore
in my opinion
not a duty of excise." The majority did not
proceed upon the view of the Chief Justice. Rich
and Williams JJ. said
(1949)
80 CLR,
at p 252 : "we can see no reason why a levy should not be a duty of
excise within the meaning
of s. 90 of the Constitution although it is imposed
at some subsequent stage (to production or manufacture). It must be imposed so
as to be a method of taxing
the production or manufacture of goods, but the
production or manufacture of an article will be taxed whenever a tax is
imposed in
respect of some dealing with the article by way of sale or
distribution at any stage of its existence, provided that it is expected
and
intended that the taxpayer will not bear the ultimate incidence of the tax
himself but will indemnify himself by passing it on
to the purchaser or
consumer. As Higgins J. said in The Commonwealth and Commonwealth Oil
Refineries Ltd. v. South Australia [1926]
HCA 47; (1926)
38 CLR 408 , 'it matters not whether
the duty is imposed at the moment of the actual sale or not, or sale and
delivery,
or consumption'."
Dixon J. (as he then was) said in the Milk Case
(1949) 80 CLR, at pp 259-260 : "Only if the conception of what
is an excise
is limited
by the condition that the tax must be levied on the manufacturer,
that is to say upon the goods while they
are still in his hands,
can I see any
escape from the conclusion that the levy of the contribution is an excise. I
cannot adopt the
view that this is an
essential feature of the conception.
What probably is essential is that it should be a tax upon goods before
they
reach the consumer.
Though in The Commonwealth and Commonwealth Oil Refineries
v. South Australia (1926) 38 CLR, at p 435 ,
Higgins J. said : 'Excise
means a
duty on the manufacture, production etc. in the country itself; and it matters
not whether the
duty is a duty imposed at
the moment of actual sale or not or
sale and delivery or consumption.' In making the power of the Parliament
of
the Commonwealth
to impose duties of customs and of excise exclusive it may be
assumed that it was intended to give the Parliament
a real control
of the
taxation of commodities and to ensure that the execution of whatever policy it
adopted should not be hampered
or defeated
by State action. A tax upon a
commodity at any point in the course of distribution before it reaches the
consumer produces
the same
effect as a tax upon its manufacture or production.
If the exclusive power of the Commonwealth with respect to excise did
not go
past manufacture and production it would with respect to many commodities have
only a formal significance." He added (1949)
80 CLR,
at p 261 : "In Matthews
v. Chicory Marketing Board (Vict.) (1938) 60 CLR, at pp 287 et seq I examined
the history of the
word 'excise'
and its meaning and I shall not go over the
same ground again. It is probably a safe inference from Atlantic Smoke
Shops
Ltd. v.
Conlon (1943) AC 550 , which has since been decided, that a tax on
consumers or upon consumption cannot be an excise.
This decision
perhaps makes
it necessary to that extent now to modify the statement : 'that so far there
is no direct decision inconsistent
with
the view that a tax on commodities may
be an excise although it is levied not upon or in connection with production,
manufacture
or treatment of goods or the preparation of goods for sale or for
consumption, but upon sale, use or consumption and is imposed independently
of
the place of production' (1938) 60 CLR at p 300. The modification is with
respect to consumption." (at p200)
6. The question which arose under s. 90 in the Milk Case [1949] HCA 67; (1949) 80 CLR 229
was whether it is within the legislative power of a State to impose a tax in
respect
of goods
at the point of
sale or distribution ; it was not whether it
is within the legislative power of a State to impose a duty
in respect
of
goods in the
hands of the user or consumer. (at p200)
7. The question for decision in Atlantic Smoke Shops Ltd. v. Conlon (1943) AC
550 was whether the Tobacco Tax Act, 1940, of New
Brunswick (Canada) was
within the powers of the provincial legislation as constituting "Direct
taxation within the province in order
to the raising of a revenue for
provincial purposes" (s. 92 of the British North America Act, 1867, s. 2). The
Act is entitled "An
Act to provide for imposing a tax on the consumption of
tobacco". In the judgment of the Judicial Committee delivered by Viscount
Simon L.C. his Lordship said (1943) AC, at p 561 : "(a) In the main and
simplest form the tax is to be paid by anyone who purchases
tobacco, as
defined, for his own consumption (or for the consumption of other persons at
his expense) from a retail vendor in the
province . . . the tax is payable at
the time of making the purchase." Viscount Simon continued (1943) AC, at p 563
: "Their Lordships
must first consider whether the tax in the form (a) is a
valid exercise of provincial legislative powers. It has been long and firmly
established that, in interpreting the phrase 'direct taxation' in head 2 of s.
92 of the Act of 1867, the guide to be followed is
that provided by the
distinction between direct and indirect taxes which is to be found in the
treatise of John Stuart Mill. The
question, of course, as Lord Herschell said
in Brewers and Maltsters' Association of Ontario v. Attorney-General (Ontario)
(1897)
AC, at p 236 , is not what is the distinction drawn by writers on
political economy, but in what sense the words were employed in
the British
North American Act. Mill's Political Economy was first published in 1848, and
appeared in a popular edition in 1865.
Its author became a member of
parliament in this latter year and commanded much attention in the British
House of Commons. Having
regard to his eminence as a political economist in
the epoch when the Quebec Resolutions were being discussed and the Act of 1867
was being framed, the use of Mill's analysis and classification of taxes for
the purpose of construing the expression now under review
is fully justified.
In addition to the definition from Mill's Political Economy already quoted,
citation may be made of two other
passages as follows : 'Direct taxes are
either on income or on expenditure. Most taxes on expenditure are indirect,
but some are
direct, being imposed not on the producer or seller of an
article, but immediately on the consumer' (bk. V. ch. 3)." His Lordship
further said (1943) AC, at pp 564-565 : "There remains, on this first head,
the question whether, notwithstanding that the tax in
the form (a) is 'direct'
within Mill's test, it is none the less beyond the powers of the province to
impose as being in the nature
of 'excise' in the sense that the attempted
imposition would be an alteration of the 'excise laws' of New Brunswick which
the provincial
legislature is debarred from affecting under s. 122 of the
British North America Act. 'Excise' is a word of vague and somewhat ambiguous
meaning. Dr. Johnson's famous definition in his dictionary is distinguished by
acerbity rather than precision. The word is usually
(though by no means
always) employed to indicate a duty imposed on home-manufactured articles in
the course of manufacture before
they reach the consumer. So regarded, an
excise duty is plainly indirect. A further difficulty in the way of the
precise application
of the word is that many miscellaneous taxes, at any rate
in this country, are classed as 'excise' merely because they are for
convenience
collected through the machinery of the Board of Excise - the tax
on owning a dog, for example. Their Lordships do not find it necessary
in the
present case to determine whether this tobacco tax in the form (a) is for any
purpose analogous to an excise duty, for it
is enough to accept and apply the
proposition laid down on behalf of this Board by Lord Thankerton in the
Kingcome Case, namely,
'that if the tax is demanded from the very persons who
it is intended or desired should pay it, the taxation is direct, and that
it
is none the less direct, even if it might be described as an excise tax'
(1934) AC 45, at p 55 ." It is said in Attorney-General
(British Columbia) v.
Kingcome Navigation Co. Ltd. (1934) AC, at p 59 , "Customs and excise duties
are, in their essence, trading
taxes, and may be said to be more concerned
with the commodity in respect of which the taxation is imposed than with the
particular
person from whom the tax is exacted." The Act in question in the
present case - the Tobacco Act 1972 - may be said to be primarily
concerned
rather with the commodity tobacco as defined by the Act, than with the person
who smokes or chews the tobacco. Rich and
Williams JJ. in their joint judgment
in the Milk Case (1949) 80 CLR, at pp 252-253 said : "We accept with respect
the definition
reached by Dixon J. in Matthews v. Chicory Marketing Board
(Vict.) (1938) 60 CLR, at p 304 , where his Honour, after a very full
discussion of the subject, said : 'to be an excise the tax must be levied
"upon goods," but those apparently simple words permit
of much flexibility in
application. The tax must bear a close resemblance to the production or
manufacture, the sale or the consumption
of goods and must be of such a nature
as to affect them as the subjects of manufacture or production or as articles
of commerce.'"
They did not refer to Atlantic Smoke Shops Ltd. v. Conlon
(1934) AC 550 . This case was cited by both sides in argument. Dixon J.,
as
appears from the citation made above from his judgment, only said regarding
Atlantic Smoke Shops Ltd. v. Conlon (1934) AC 550
: "It is probably a safe
inference" from that case "that a tax on consumers or upon consumption cannot
be an excise" (1949) 80 CLR,
at p 261 . The Judicial Committee said in their
judgment, as appears from the quotation made above (1934) AC, at pp 564-565 ,
that
the word "excise" is usually, though by no means always, employed to
impose on home-manufactured articles in the course of manufacture
before they
reach the consumer. Starke J. said in the Chicory Case (1938) 60 CLR, at p 284
: " 'Excise,' however, is not a technical
term of the law, and the popular
meaning is not rigid." His Honour also said (1938) 60 CLR, at p 285 : "The
cases under the Canadian
Constitution are descriptive rather than definitive
of a customs and an excise duty, and they are no authority for the proposition
that a tax
cannot be an excise duty unless it has the characteristics of an
indirect tax." In my opinion nothing is said in the judgment in
Atlantic Smoke
Shops Ltd. v. Conlon (1934) AC 550 which renders erroneous the definition of
"excise" adopted by Dixon J. in The
Chicory Case [1938] HCA 38; (1938) 60 CLR 263 and
requires that the definition be modified "with respect to consumption". (at
p202)
8. In Browns Transport Pty. Ltd. v. Kropp [1958] HCA 49; (1958) 100 CLR 117 , the Court gave
a judgment definitive of the term
"duties of excise"
in s. 90 of the
Constitution. The judgment includes the passage (1958) 100 CLR, at pp 128-129
: "The definition of a duty of excise propounded by Griffith C.J.
in
Peterswald v. Bartley [1904] HCA 21; (1904) 1 CLR 497, at p 509 , has been found in several
later cases to be somewhat too narrow.
But the decision
in that case has
never
been doubted, and it has never been doubted that the term 'duties of excise'
in s. 90 of the Constitution does not include many classes of impost which in
England have been commonly described by that name : see, e.g. Matthews v.
Chicory
Marketing Board (Vict.) (per Latham C.J.) (1938) 60 CLR, at pp 276,
277 , and see also the general discussion of the history and
scope of the term
by Dixon J. (1938) 60 CLR, at pp 292-299 in the same case. If an exaction is
to be classed as a duty of excise,
it must, of course, be a tax. Its essential
distinguishing feature is that it is a tax imposed 'upon' or 'in respect of'
or 'in relation
to' goods : Matthews v. Chicory Marketing Board (Vict.) (1938)
60 CLR, at p 304 . It would perhaps be going too far to say that it
is an
essential element of a duty of excise that it should be an 'indirect' tax. But
a duty of excise will generally be an indirect
tax, and, if a tax appears on
its face to possess that character it will generally be because it is a tax
upon goods rather than
a tax upon persons. ' . . . a direct tax is one that is
demanded from the very person who it is desired and intended should pay it.
An
indirect tax is one which is demanded from one person in the expectation and
with the intention that he shall indemnify himself
at the expense of another'
: Attorney-General (Manitoba) v. Attorney-General (Canada), per Lord Haldane
(1925) AC 561, at p 566 ."
(at p203)
9. The passage quoted from the judgment of the Court in Browns Transport Pty
Ltd. v. Kropp [1958] HCA 49; (1958) 100 CLR 117 purports
to be a
full description of a duty
of excise within the meaning of s. 90 of the Constitution. It is dependent for
completeness on reading with it the passages referred to in the judgment in
the Chicory Case
[1938] HCA 38; (1938) 60 CLR 263
. It is sufficient to quote the following
extract, per Latham C.J. (1938) 60 CLR, at p 277 : "But the reasoning
which
led to the
conclusion in Peterswald v. Bartley [1904] HCA 21; (1904) 1 CLR 497 does not
necessarily limit the application
of the term 'excise' to taxes imposed
upon
goods at the very moment
when they are 'produced or manufactured.' A tax
possessing the
other attributes mentioned in the passage
which I have quoted
may
be an excise duty if it is imposed upon the sale or consumption
of goods.
It has been so held, in relation
to sale, in The Commonwealth
and Commonwealth
Oil Refineries Ltd. v. South Australia [1926]
HCA 47; (1926) 38 CLR 408 . If, however, a tax
has no
relation to the quantity or value (however measured) of goods, it
cannot be
said
to be an excise duty within any of the definitions
or
explanations of that term which are to be found in the decisions of this
court."
There are two passages in the judgment of Dixon
J. (as he then was)
(1938) 60 CLR, at pp 300, 304 . These are quoted above.
Besides,
his Honour
referred to what he describes as
an account of the term "duty of excise" in
Blackstone's Commentaries. (I referred
to
this earlier in my judgment.) It is
sufficient
to quote here the following words of Blackstone : "excise duty . .
. is an inland
imposition, paid sometimes upon the consumption
of the
commodity, or frequently upon the retail sale, which is the last stage before
the consumption." (at p204)
10. I regard the description of the term "excise" in Browns Transport Pty.
Ltd. v. Kropp [1958] HCA 49; (1958) 100 CLR 117 , read
with the references
to the judgments
in the Chicory Case [1938] HCA 38; (1938) 60 CLR 263 , as settling that s. 90 does extend to
a tax on the consumption of goods which has the characteristics of excise. (at
p204)
11. The final case to which I would refer is Bolton v. Madsen [1963] HCA 16; (1963) 110 CLR
264 . There the Court said (1963) 110
CLR, at p 273
: "the criterion of
liability is 'the taking of a step in a
process of bringing goods into
existence or to a consumable
state, or
passing them down the line which
reaches from the earliest
stage in production to the point of receipt by the
consumer',
to adopt
the formulation which Kitto J. made in Dennis Hotels Pty.
Ltd. v. Victoria (1960) 104 CLR, at p 559 , which was based upon
what Dixon
J.
(as he then was) said in Matthews v. Chicory Marketing
Board (Vict.) [1938] HCA 38; (1938) 60
CLR 263 , viz. 'The
tax must bear a close relation
to the production or
manufacture, the sale or the consumption of goods
and must be of such a nature
as to affect them as the subjects
of manufacture or production or as articles
of commerce' (1938) 60
CLR, at p 304 , and upon what
Dixon C.J. said in the
passage already
quoted from Hughes and Vale Pty. Ltd. v. New South Wales
(1953)
87 CLR, at p 75 ." The "formulation"
in this passage seems to have
been
adopted in subsequent cases, but it should be noted that
the "formulation" is
expressly based
upon the description of "excise"
adopted by Dixon J. (as he
then was) in the Chicory Case
[1938] HCA 38; (1938) 60 CLR 263 , without
any reference to the
Milk Case [1949] HCA 67; (1949) 80 CLR
229 . This description clearly included consumption.
Indeed, the modification
made by Dixon J. (as he then was) in
the Milk Case
[1949] HCA 67; (1949) 80 CLR 229 to his view in the Chicory Case [1938] HCA
38; (1938) 60 CLR 263 was not
cogently expressed. (at p204)
12. For this reason I think that the Court should make a declaration that the
tax imposed on the consumption of tobacco in accordance
with Pt II of the
Tobacco Act 1972 (Tas.) is not within the legislative power of a State, and
that the sections of Pt II in respect of which
a declaration is sought are
invalid. (at p205)
13. The second question is whether the fee payable according to s. 11 of the
Tobacco Act 1972 (Tas.) to the Treasurer of the State
of Tasmania by the
holder of " an ordinary retailer's licence" is of the nature of an excise
within the meaning of s. 90. The critical
section is s. 11. This section says
in sub-s. (2) that the amount of the fee "payable in respect of a licence
granted in respect
of any premises is an amount, determined in accordance with
the first schedule, by reference to the monthly stock value for those
premises
for the relevant assessment period." The section further provides by sub-s.
(3) as follows :
" (3) For the purposes of this section, in relation to a licenceIt is material to refer also to sub-ss. (5), (6) and (7) which are as follows :
granted in respect of any premises -
(a) the monthly stock value for those premises for the
relevant assessment period is the average value, over
that period, of the tobacco handled in a month in the
course of the retail tobacco businesses carried on on
those premises during that period ; and
(b) the relevant assessment period is the period of twelve
months ending six months before the commencement of
the annual period in respect of which the licence is
granted."
"(5) For the purposes of this section the value of tobacco
at any time shall be taken to be the price at which at that
time it (together with any package or container in which it is
contained) would ordinarily be expected to be sold by retail.
(6) The monthly stock value for any premises for a relevant
assessment period shall be determined by the Treasurer, and
where no retail tobacco business was carried on on the premises
during that period, or during any part thereof, or the Treasurer
is satisfied that, for any reason, it is not practicable for that
monthly stock value to be determined in accordance with
paragraph (a) of subsection (3) of this section he shall determine
that monthly stock value at such amount as he considers,
having regard to the provisions of that subsection, to be just
and reasonable in the circumstances of the case.
(7) Subject to section sixteen, a determination made by the
Treasurer for the purposes of this section of a monthly stock
value is conclusive thereof." (at p205)
15. Paragraph (1) of the 1st Sch. says : "References in this schedule to the
monthly stock value shall be construed as references
to the monthly stock
value referred to in subsection (2) of section eleven by reference to which
the amount of the fee is to be determined."
(at p205)
16. The licence fees, like the tax in Pt. II, are payable to the Treasurer,
and both must under ss. 8 and 18 go into consolidated
revenue. It is not
disputed that "the tax" and "the fee" are really taxes. The argument in favour
of the validity of the levy of
the fee is based on the judgment in Dennis
Hotels Pty. Ltd. v. Victoria [1960] HCA 10; (1960) 104 CLR 529 . For my part I do not
regard
what is
said in that case in support of the view that ss. 19 (1) (a) and 19
(1)
(b) of the Licensing Act 1958 (Vict.) do
not impose a duty
of excise
contrary to s. 90 as a precedent governing the present case.
In my opinion,
the passage of the judgment
of Dixon J. (as
he then was) in the Chicory Case
(1938) 60 CLR, at p 304 , quoted above
in my judgment, governs the question of
the
validity of s.
11 of the present Act. In this connexion I would refer also
to the statement
(1938) 60 CLR, at pp 302-303 , quoted
above in my judgment.
In the light of these principles, the method of calculation of the licence
fee
in the present Act does not
prevent it from being
a duty of excise. (at p206)
17. Accordingly, I would make a declaration that the provisions of Pt III of
the Tobacco Act 1972 (Tas.) in respect of which a declaration
of invalidity is
sought are beyond the legislative power of the State. (at p206)
18. For these reasons I would overrule the demurrer. (at p206)
MENZIES J. The plaintiff challenges two imposts imposed by the Tobacco Act
1972 (Tas.), contending that each of them is a duty of
excise. (at p206)
2. The first is a tax on the consumption of tobacco - Pt II of the Act. The
amount of the tax is seven and a half per cent on the
value of tobacco
consumed - s. 3 (1) and (2) . The collection of the tax is governed by
regulations made under s. 7. Regulation 2
is as follows :
"2. (1) Subject to sub-regulation (2) of this regulation,authorized
payments of tax shall be made to a collector or a person
by him to receive payments of tax on his behalf.Collectors are appointed by the Commissioner and what the regulations require is the making of an arrangement between the Commissioner and the person carrying on a retail tobacco business on particular premises under which a collector is appointed to collect the tax payable in respect of the consumption of tobacco purchased on those premises and to account to the Commissioner therefore. To carry on business in the absence of such an arrangement is forbidden. (at p207)
(2) Where tobacco is consumed without the tax on the
consumption thereof having been paid that tax shall be paid
to the Commissioner.
(3) Where the tax on the consumption of any tobacco is
paid to the Commissioner under sub-regulation (2) of this
regulation the person making the payment shall at the same
time notify the Commissioner in writing of -
(a) the name, and the place of abode, of the person by
whom the tobacco was consumed ;
(b) the quantity, type, and brand of the tobacco ; and
(c) the date on which it was consumed."
3. The second impost is a fee payable to the Treasurer by the holder of a
licence to sell tobacco by retail. Without a licence it
is prohibited (1) to
carry on, on any premises, a retail tobacco business, (2) to allow premises
to be used for the sale of tobacco
by retail, and (3) to sell tobacco by
retail - Pt III of the Act. Provision is made for the granting of ordinary
licences and occasional
licences. An ordinary licence is granted in respect of
an annual period. An occasional licence is granted otherwise than in respect
of an annual period or the balance of an annual period. Part III also deals
with vending machine licences but the requirements of
the Act in relation to
such licences are not the object of attack in these proceedings. (at p207)
4. The power to grant licences is conferred upon the Treasurer who considers
applications made in accordance with the regulations
- Pt III. If the
Treasurer refuses to grant a licence a person aggrieved may appeal to a
tribunal appointed by the Governor to hear
appeals. The determination of the
tribunal is final and without appeal. (at p207)
5. The calculation of the fee payable for an ordinary retailer's licence is
governed by s. 11 and is determined in accordance with
the 1st Sch. Section 11
provides :
"11. . . .The 1st Sch. is as follows :
(2) Subject to this section, the amount of the fee referred
to in subsection (1) of this section payable in respect of a
licence granted in respect of any premises is an amount,
determined in accordance with the first schedule, by reference
to the monthly stock value for those premises for the relevant
assessment period.
(3) For the purposes of this section, in relation to a licence
granted in respect of any premises -
(a) the monthly stock value for those premises for the
relevant assessment period is the average value, over
that period, of the tobacco handled in a month in the
course of the retail tobacco business carried on on those
premises during that period ; and
(b) the relevant assessment period is the period of twelve
months ending six months before the commencement of
the annual period in respect of which the licence is
granted.
(5) For the purposes of this section the value of tobacco
at any time shall be taken to be the price at which at that time
it (together with any package or container in which it is
contained) would ordinarily be expected to be sold by retail.
(6) The monthly stock value for any premises for a relevant
assessment period shall be determined by the Treasurer, and
where no retail tobacco business was carried on on the premises
during that period, or during any part thereof, or the Treasurer
is satisfied that, for any reason, it is not practicable for that
monthly stock value to be determined in accordance with
paragraph (a) of subsection (3) of this section he shall determine
that monthly stock value at such amount as he considers,
having regard to the provisions of that sub-section, to be just
and reasonable in the circumstances of the case.
. . ."
"FEES FOR ORDINARY RETAILER'S LICENCES (OTHER THAN(at p208)
OCCASIONAL LICENCES).
1. References in this schedule to the monthly stock value
shall be construed as references to the monthly stock value
referred to in subsection (2) of section eleven by reference to
which the amount of the fee is to be determined.
2. Where the monthly stock value does not exceed $500
the amount of the fee is $2.
3. (1) Where the monthly stock value exceeds $500 the
amount of the fee is -
(a) an amount equivalent to 30 per cent of the assessable
stock value ;
or
(b) an amount of $2,
whichever amount is the greater.
(2) For the purposes of this paragraph the assessable stock
value is -
(a) in a case where the monthly stock value is less than
$600, the amount of that monthly stock value less an
allowance equivalent to an amount of $500 reduced by
five times the amount by which that monthly stock
value exceeds $500 ; and
(b) in any other case, the monthly stock value."
6. Subject to appeal to a tribunal, a determination made by the Treasurer of
a monthly stock value is conclusive thereof. (at p208)
7. The regulations require the licensee to keep records and to furnish
returns to the Treasurer. (at p208)
8. The consumption of tobacco brought into Tasmania by a traveller for his
own consumption or to give away is exempt from tax provided
that the tobacco
brought into Tasmania is consumed within twenty-one days. The Treasurer may
exempt from the payment of tax the consumption
of tobacco required for
research and scientific purposes. Otherwise tax is payable upon any
consumption of tobacco in Tasmania. (at
p209)
9. The review of Pt II of the Act which I have made and the provisions of Pt
II of the Regulations do make it apparent that normally
the tax on consumption
will be collected by a collector at the point of retail sale and purchase. The
problem is, does this likelihood
carry with it the consequence that the tax
upon the consumption is a duty of excise? (at p209)
10. Although the decisions of this Court since Matthews v. Chicory Marketing
Board [1938] HCA 38; (1938) 60 CLR 263 have brought
within the description
of a duty of
excise taxes which earlier decisions would have excluded from
it - see the
dissenting judgment
of Fullagar J. in Dennis
Hotels Pty. Ltd. v. Victoria
[1960] HCA 10; (1960) 104 CLR 529 - the unanimous decision of the Court in
Bolton v. Madsen
[1963] HCA 16; (1963) 110 CLR 264 has
established quite definitely that "for constitutional
purposes duties of
excise are taxes directly related
to goods imposed at some
step in their production or distribution before they reach the hands of
consumers" (1963) 110 CLR, at p
271 . This decision was applied
in Anderson's
Pty. Ltd. v. Victoria [1964] HCA 77; (1964) 111 CLR
353 . The correctness of the decision in
Bolton v. Madsen (1963) 110 CLR 264
was accepted in Western Australia v.
Chamberlain Industries Pty. Ltd. [1970] HCA 5; (1970) 121 CLR 1 . A tax upon consumption is,
therefore, not
a duty of excise. It
follows that s. 3 of the Tobacco Act is
within
the constitutional power of the Parliament of Tasmania. Section
7 of
the Act is also
valid because it relates and is confined to
the collection of
taxes imposed by s. 3. (at p209)
11. It is Pt II of the regulations that makes it likely that, except in rare
cases, the tax on the consumption of tobacco will be
collected at the point of
retail sale and purchase. If the result of these regulations should be that
the tax which Parliament has
imposed as a duty on consumption has been
converted into a duty of excise, the Regulations are, of course, ultra vires.
The central
point at issue can, however, be best tested by disregarding the
legislative framework that has been adopted by the Act and regulations
and
considering whether Parliament could itself enact directly what is now
comprehended in Pt II of the Act and Pt II of the regulations.
(at p209)
12. The problem then is whether a method of collection, whereby, in most
cases, the tax will be collected at the point of retail
sale and purchase,
requires the tax to be regarded as a tax upon a step in the distribution of,
rather than as a tax upon consumption
of, tobacco. (at p209)
13. Against such a conclusion there are the following considerations :
1. The tax does not have to be paid at the point of retail sale and
purchase. A purchaser of tobacco can lawfully choose not to
pay the tax to a
collector. Should he do so, the tax is payable within seven days of
consumption taking place. Furthermore, the consumption
of tobacco not
purchased in Tasmania may attract tax.
2. If the course taken by the purchaser at the point of retail sale and
purchase is to pay tax, the character of the tax is the
same as if he chose
not to pay tax at the point in that the person who chooses to pay a collector
may recover what he has paid if
it should happen that the tobacco is not
consumed - s. 3 (5).
3. Tax falls upon all consumption in Tasmania whether of tobacco of
Australian or overseas manufacture. (at p210)
14. These considerations do, in my opinion, support the conclusion that the
tax imposed by Pt II of the Act and the regulations
of Pt II remains a tax
upon consumption and is not a duty of excise. (at p210)
15. The plaintiff's claims in relation to the tax imposed by Pt II of the Act
are as follows :
"(1) A declaration that ss. 3, 4, 5, 6, 7 and 8 of the Tobacco
Act; 1972 of the State of Tasmania impose a duty of excise
within the meaning of s. 90 of the Constitution of the
Commonwealth of Australia and accordingly are placed outside the
legislative power of the State of Tasmania and are invalid.
(2) A declaration that ss. 3, 4, 5, 6, 7 and 8 of the Tobacco
Act 1972 and regs. 2, 3, 4, 5, 6, 7 and 8 of the Tobacco
Regulations 1972 of the State of Tasmania impose a duty of excise
within the meaning of s. 90 of the Constitution of the
Commonwealth of Australia and accordingly are placed outside the
legislative power of the State of Tasmania and are invalid."(at p210)
16. By a demurrer the defendants demurred to these claims on the grounds that
:
"1. Each of the provisions of the Tobacco Act 1972 is a law
validly made by the Parliament of the State of Tasmania,
and in particular ss. 3, 4, 5, 6, 7 and 8 are validly enacted ;
2. Each of the provisions of the regulations and in particular
regs. 2, 3, 4, 5, 6, 7 and 8 made under the said Act is a
valid exercise of the power given by ss. 7, 19, 20 and 21
of the said Act, which sections are validly enacted ;
3. None of the said sections of the Act and none of the said
regulations imposes or purports to impose a duty of
excise contrary to s. 90 of the Constitution of the
Commonwealth of Australia ;
4. None of the provisions of Pt II of the said Act or of the
regulations made thereunder and under Pt IV imposes
a duty of excise contrary to the said s. 90".(at p210)
17. For the reasons which I have given I would allow the demurrer. (at p210)
18. It is not, I think, possible to determine whether Pt III of the Act
imposes a duty of excise before ascertaining with some precision
the meaning
and effect of the 1st Sch. (at p211)
19. The first figure to be brought into calculation is the monthly stock
value determined by the Treasurer subject to appeal - ss.
11 and 16 (3) . This
is normally the monthly average value over a period of twelve months ending
six months before the commencement
of the annual period in respect of which a
licence is granted of the tobacco handled at the premises. Accordingly, the
value of the
tobacco handled in that period of twelve months is divided by
twelve to obtain the monthly stock value for the premises. Where that
figure
is $500 or less the fee imposed is $2. Where that figure exceeds $500 the fee
is thirty per cent of the assessable stock value
or $2, whichever be the
greater. The assessable stock value is the monthly stock value unless that
value is less than $600. If it
be less than $600 the assessable stock value is
the monthly stock value less an allowance equivalent to an amount of $500
reduced
by five times the amount whereby the monthly stock value exceeds $500.
Thus, if the monthly stock value is $550 the assessable stock
value is $300
(i.e. $550 - ($500 - $250)). (at p211)
20. A fee of $2 for a licence to sell tobacco by retail from specified
premises would not itself be a duty of excise. Two dollars
is, however, but
the minimum fee in a graduated scale calculated by reference to the value of
an average monthly purchase of tobacco
over a previous twelve monthly period.
The problem is whether such a graduated scale of fees is a tax directly
related to goods imposed
at a point before retail sale, or a personal tax upon
a person seeking a licence to sell tobacco upon particular premises in the
future, calculated by reference to past purchases but not upon such purchases.
(at p211)
21. In my opinion Dennis Hotels Pty. Ltd. v. Victoria [1960] HCA 10; (1960) 104 CLR 529 is
authority against treating the tax
as a duty of excise.
(at p211)
22. Counsel for the plaintiff challenged the correctness of that part of the
decision in Dennis Hotels Pty. Ltd. v. Victoria [1960]
HCA 10; (1960)
104 CLR 529 , which
established that the fee imposed by s. 19 (1) (a) of the Licensing Act (Vict.)
for a victualler's
licence
was
not a duty of excise, and relied upon that part
of the decision which established that the fee for a temporary victualler's
licence
imposed by s. 19 (1) (b) of the Act, to the extent to which they were
upon the purchase of liquor produced in Australia,
were duties
of excise. (at
p211)
23. In my opinion there is no conflict between the two parts of the decision
in Dennis Hotels Pty. Ltd. v. Victoria
[1960] HCA 10; (1960) 104 CLR
529 , and this case is
governed by the first. The fees here are entirely different from the fees for
temporary licences
which were
invalidated. Those fees were a percentage of
purchases for sale. There is one particular matter to which I should refer.
Counsel
for the plaintiff sought to gain support from the judgment of Fullagar
J. but did so by what I regard as unsound reasoning.
The decision
of his
Honour was that fees payable under s. 19 (1) (a) and (b) were not duties of
excise. His judgment is authority
for the reasoning
leading to that conclusion
and for nothing else. It cannot be derived from his judgment that, had his
Honour not
reasoned as he did,
he would have come to a different conclusion,
and because his actual reasoning is now to be regarded as unacceptable,
a
different
conclusion should be attributed to him and his judgment treated as
authority for reasoning which it is said would have
supported
a contrary
conclusion to that at which he did arrive. So to use an authority is, in my
opinion, to abuse it. It is not
to be supposed
that, had Fullagar J. not taken
the course which he did involving the rejection of earlier authorities, he
would have
decided that
s. 19 imposed duties of excise. All that is or can be
known is that his Honour decided as he did for the reasons which
he gave. I
am
certainly not prepared to assume that his actual decision would have been
different had he decided to follow the authorities
which
he rejected. He
could, and I think would, have upheld s. 19 upon other grounds. (at p212)
24. In any event I would not reopen either part of the decision in Dennis
Hotels Pty. Ltd. v. Victoria [1960] HCA 10; (1960) 104
CLR 529 . It is
an important decision
upon the faith of which States have ordered their affairs for some thirteen
years.
The decision
has been recognized
both in Bolton v. Madsen [1963] HCA 16; (1963) 110
CLR 264 and in Anderson, Pty. Ltd. v. Victoria [1964] HCA
77; (1964) 111 CLR 353 . (at
p212)
25. Finally, I would say that s. 90 of the Constitution makes exclusive the
power of the Parliament of the Commonwealth to impose duties of customs and of
excise and to grant bounties upon
the production or export of goods, but
beyond this it does not go. The character of a duty of customs or of excise is
a matter for
this Court upon which the Constitution gives no guidance beyond
what is found in s. 90 itself and in ss. 55, 92, 93 and 95. The words of the
Constitution do not warrant the generalization of Rich J. in The Commonwealth
and Commonwealth Oil Refineries Ltd. v. South Australia (the Petrol
Case)
(1926) 38 CLR, at p 437 that "the Constitution gives exclusive power to the
Commonwealth over all indirect taxation imposed immediately upon or in respect
of goods, and does so
by compressing every variety thereof under the term
'customs and excise' ". Upon this aspect of the matter I would wish to add but
one consideration to what I wrote in Dennis Hotels Pty. Ltd. v. Victoria
(1960) 104 CLR, at pp 582, 585 ; it is that power to grant
bounties made
exclusive by s. 90 is likely to be co-extensive with the exclusive power to
impose duties of customs and duties of excise. The one is naturally the
corollary of the other. The former power is limited to "bounties on the
production or export of goods". I associate the word "production"
with
"excise" and "export" with "customs". These, and imports, are the particular
matters to which s. 90 relates. Its subject-matter is not indirect taxation
nor control of the economy of Australia. A wide conception of what is a duty
on production has eventually been established but that conception is still
confined to a tax directly related to goods imposed at
some step of their
production or distribution. I have already referred to what was said on this
matter in Bolton v. Madsen (1963)
110 CLR, at p 271 and I merely add a
reference to the form of words adopted by Kitto J. in Dennis Hotels Pty. Ltd.
v. Victoria (1960)
104 CLR, at p 559 , namely that an excise is a tax upon
"the taking of a step in a process of bringing goods into existence or to
a
consumable state, or passing down the line which reaches from the earliest
stage in production to the point of receipt by the consumer".
These words were
quoted with approval in Bolton v. Madsen (1963) 110 CLR, at p 273 . A tax
falling within these formulations is a
duty of excise ; a tax which does not
so fall is not a duty of excise notwithstanding that it may be indirect and
may affect the
economy. (at p213)
26. In my opinion, for the reasons stated, the licence fees imposed by Pt III
and IV of the Tobacco Act and the Tobacco Regulations Pt III are not duties of
excise ; they are personal taxes for a franchise to
sell tobacco in Tasmania.
The plaintiff sought a declaration that they are duties of excise. The
defendant demurred on the ground
that "none of the provisions of Pt III and Pt
IV of the said Act or of the regulations made thereunder impose a duty of
excise contrary
to the said s. 90". (at p213)
27. I would, for the foregoing reasons, uphold this demurrer. (at p213)
GIBBS J. In this action the plaintiff, which carries on business in Tasmania
as a retailer of tobacco products, seeks declarations
that the Tobacco Act,
1972 (Tas.) ("the Act") and the Tobacco Regulations 1972 ("the regulations")
made thereunder impose duties
of excise and are therefore beyond the
legislative power of the State by reason of the provisions of s. 90 of the
Constitution and are invalid. (at p213)
2. The Act and regulations impose two taxes which call for separate
consideration. The first of these, which is imposed by Pt II
of the Act, is
described as a "tax on the consumption of tobacco". Section 3 (1) provides
that "In accordance with this Part a tax
is imposed on the consumption of
tobacco". The amount of the tax is seven and a half per cent of the value of
the tobacco consumed
(s. 3 (2) ). Unpaid tax is recoverable by the
Commissioner of Taxes "as a debt due to the Crown incurred by the person by
whom the
tobacco was consumed" (s. 3 (3) ). If tax is not paid before the
expiration of seven days after the tobacco is consumed, the consumer
is guilty
of an offence (s. 3 (4) ). The provisions of s. 3 (5) are as follows :
"Where the tax has been paid in respect of the consumptionThe consumption of tobacco brought into the State by a traveller for his own consumption or for disposal by way of gift does not attract tax provided that the tobacco is consumed within twenty-eight days after it is brought into the State (s. 4 (1) ). Exemption from the tax may be granted where the tobacco is required to be consumed for educational or scientific purposes (s. 5). The value of tobacco, for the purposes of the Act, is to be "taken to be the price at which tobacco of that kind (together with any package or container in which it is ordinarily contained) is ordinarily sold by retail" (s. 6 (1) ). Where tobacco is of a kind not ordinarily sold by retail its value is to be assessed by the Commissioner "at such amount as he considers just having regard to the prices at which tobacco is sold by retail" (s. 6 (2) ). Sums received by the Commissioner by way of tax shall, except as otherwise provided (that is, apparently, in the case of refunds under s. 3 (5)), be paid into Consolidated Revenue (s. 8). (at p214)
of any tobacco and, on application being made to him within
three months of that tax being paid, the Commissioner is
satisfied that that tobacco has not been, and will not be,
consumed, he shall refund the amount of that tax to the
person by whom it was paid or, if he has died, his legal personal
representatives."
3. Provision for the payment and collection of the tax is made by the
regulations. The Commissioner is empowered to make arrangements
with the
occupier of premises on which a retail tobacco business is carried on or with
the person carrying on, or proposing to carry
on, that business, for the
collection of the tax payable in respect of the consumption of tobacco that is
sold on those premises
in the course of that business (reg. 4 (1)). It is an
offence to carry on on any premises, or cause or allow to be carried on on
any
premises a retail tobacco business unless arrangements made under this
regulation are in force in respect of that business (reg.
4 (8)). Under
arrangements thus made a collector is to be appointed who accounts to the
Commissioner (reg. 4 (2) ; reg. 5). The obvious
intention of the regulations
is that an intending consumer, who buys tobacco from a retailer, will pay the
tax to the collector,
who will no doubt be the retailer or his servant or
agent. However, a person who buys tobacco is not obliged to pay the collector.
If he does not do so he must notify the Commissioner that he has possession of
the tobacco (reg. 17) and when the tobacco is consumed
he must pay the tax to
the Commissioner (reg. 2 (2)). (at p215)
4. The second tax, imposed by Pt III of the Act, is described as a fee
payable by the holder of a licence. By s. 9 no person may
carry on on any
premises a retail tobacco business, or cause or allow any premises to be used
for the sale of tobacco by retail,
or sell tobacco by retail, unless
authorized by licence. By s. 10 the Treasurer is given power to grant two
kinds of licences - ordinary
retailer's licences and vending machine licences.
Any such licence if not granted in respect of an annual period (which means
either
a period of twelve months commencing on the first day of July next
following the grant of the licence or a period commencing on a
day specified
in the licence and ending on the thirtieth day of June next following the
grant thereof - s. 10 (5)) is called an occasional
licence (s. 10 (6) ). The
Treasurer has power, on the application of the licensee and a proposed
transferee, to transfer a licence
(s. 10 (7) ). In exercising his powers under
s. 10 the Treasurer is required to "have regard to public necessity,
convenience, and
welfare" (s. 10 (9) ). Provision is made for an appeal from a
refusal by the Treasurer to grant a licence (s. 16). A fee is payable
to the
Treasurer in respect of the grant of any licence. The fee payable in respect
of the grant of a ordinary retailer's licence
(other than an occasional
licence) is an amount determined in accordance with the 1st Sch. by reference
to "the monthly stock value"
for the premises in respect of which the licence
is granted for "the relevant assessment period" (s. 11 (2) ). For the purposes
of
this provision "the monthly stock value" for premises for the relevant
assessment period is the average value, over that period,
of the tobacco
handled in a month in the course of the retail tobacco business carried on on
those premises during that period, and
"the relevant assessment period" is the
period of twelve months ending six months before the commencement of the
period in respect
of which the licence is granted (s. 11 (3) ). The 1st Sch.
provides that where the monthly stock value does not exceed $500 the amount
of
the fee is $2 and where the monthly stock value exceeds $500 the amount of the
fee is an amount equivalent to thirty per cent
of "the assessable stock value"
or $2, whichever is the greater. For the purposes of the schedule "the
assessable stock value" is
equivalent to the monthly stock value if that is
not less than $600, but in a case where the monthly stock value is less than
$600
the assessable stock value is the amount of the monthly stock value less
an allowance equivalent to an amount of $500 reduced by
five times the amount
by which that monthly stock value exceeds $500. The effect of these provisions
is that the fee payable is two
and a half per cent of the value of the tobacco
handled in the relevant assessment period where that value is not less than
$7,200
; where that value is less than $7,200 but more than $6,000 the fee is
in effect two and a half per cent of a sum, less than that
value, calculated
as shown in the schedule, and where that value is $6,000 or less a fixed fee
of $2 is payable. The value of tobacco
sold by means of a vending machine is
not included in these calculations (s. 11 (4) ). For the purposes of s. 11 the
value of tobacco
at any time shall be taken to be the price at which at that
time it (together with any package or container in which it is contained)
would ordinarily be expected to be sold by retail (s. 11 (5) ). Section 11 (6)
provides as follows :
"The monthly stock value for any premises for a relevantAn appeal lies from the Treasurer's determination of value - s. 16 (3). Where a licence is granted in respect of an annual period not exceeding three-quarters of a year in length the amount of the fee that would otherwise be payable is reduced by one-quarter for each whole quarter of a year by which the length of the annual period is less than a year (s. 11 (8) ). The fee for a vending machine licence (other than an occasional licence) is fixed by the 2nd Sch. by reference to the capacity of the vending machine (that is, the maximum number of packets of cigarettes that it can contain), but if a licensee makes an election within the time and manner prescribed the fee is then to be thirty per cent of the monthly stock value determined in a similar manner to that prescribed in respect of an ordinary retailer's licence (s. 12). A fee for an occasional licence is fixed at a dollar, together with a further dollar for each day in respect of which the occasional licence is granted (s. 15 and the 3rd Sch.). A person who is convicted of an offence under the Act may be disqualified by the court from holding a licence (s. 17 (1) ). All licence fees payable to the Treasurer are to be paid into Consolidated Revenue (s. 18). (at p217)
assessment period shall be determined by the Treasurer, and
where no retail tobacco business was carried on on the premises
during that period, or during any part thereof, or the Treasurer
is satisfied that, for any reason, it is not practicable for that
monthly stock value to be determined in accordance with
paragraph (a) of subsection (3) of this section he shall determine
that monthly stock value at such amount as he considers, having
regard to the provisions of that subsection, to be just and
reasonable in the circumstances of the case."
5. To decide whether these imposts are duties of excise and so beyond the
legislative competence of the State it is necessary to
answer four questions
some of which are of considerable constitutional importance. The first is
whether a tax imposed on the consumption
of goods is a duty of excise. The
second, which arises if the first question is answered in the negative, is
whether the practical
or economic effect of the legislation, rather than the
criterion of liability under the statute imposing the tax, determines whether
or not the tax is a duty of excise. The third question is whether a licence
fee in respect of a business, calculated on the value
of goods bought or sold
in a previous year, is a duty of excise. Fourthly, it must be considered
whether a licence fee changes its
character, and becomes a duty of excise, if
the only, or the main, object of the licensing system is the collection of the
fee, or
if the licence adds no value to the business or premises in respect of
which it is held. If any of these questions is answered in
the affirmative it
may be necessary to consider also whether a tax which falls equally on goods
manufactured or produced outside
Australia and on goods which originated in
Australia can be a duty of excise. (at p217)
6. The question whether a duty imposed on the consumption of goods is a duty
of excise has never been the subject of any direct
decision by this Court. If
the view taken in Peterswald v. Bartley [1904] HCA 21; (1904) 1 CLR 497 had prevailed it
would have been
clear that a
duty imposed on consumption was not an excise. In
that case Griffith
C.J. said that "the fundamental conception of the
term is
that
of a tax on articles produced or manufactured in a country" (1904)
1 CLR,
at p 508 and that the word "excise" in s.
90 "is intended
to mean a duty
analogous to a customs duty imposed upon goods either
in relation to quantity
or value when produced
or manufactured,
and not in the sense of a direct tax
or personal tax" (1904) 1 CLR,
at p 509 . Although it has never been
questioned
that the Court
in that case was right in rejecting the argument
that the phrase
"duties of excise" in s. 90 is wide enough to include
all the
heterogeneous
levies that in England were called "duties of excise"
because
they happened to be collected by the Board of
Excise, the description
of
"excise" given by Griffith C.J. in Peterswald v.
Bartley (1904) 1 CLR 497 has
been expanded,
or perhaps eroded, by later decisions.
(at p218)
7. It is unnecessary to discuss in detail the authorities which led to an
enlarged conception of the meaning of the term "duties
of excise", but it
would seem, upon analysis, that there were three different lines of thought
which led to the conclusion that was
finally reached by the majority of the
Court in Parton v. Milk Board (Vict.) [1949] HCA 67; (1949) 80 CLR 229 , that the description
of "excise
duties" given in Peterswald v. Bartley [1904] HCA 21; (1904) 1 CLR 497 was too
narrow and that a tax imposed on the
distribution of a commodity
by a person
who was not its producer
or manufacturer could be an excise. First there was
the theory,
suggested by Higgins J. in The
Commonwealth and Commonwealth Oil
Refineries Ltd. v. South Australia (1926) 38 CLR, at p 435 , adopted
by Latham
C.J. in his dissenting
judgment in Matthews v. Chicory
Marketing Board (Vict.)
(1938) 60 CLR, at p 277 , and expressed
by Rich and Williams JJ. in Parton
v.
Milk Board (Vict.) (1949) 80
CLR, at p 252 in the following words :
"It" (a duty of excise) "must be imposed so as to be aIf a tax on the sale of goods can be regarded as a method of taxing their production or manufacture, it is difficult to see why a tax on their consumption should not be similarly regarded, and had it not been for the qualification, then supported by authority but more doubtful in the light of later discussion, that the tax would not be an excise unless it was expected or intended that the burden would be passed on to the purchaser or consumer, i.e. unless it was an indirect tax, this statement could have been regarded as leading logically to the conclusion that a tax on consumption is an excise. As it was, their Honours referred with apparent approval to the words of Higgins J. in The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia (1926) 38 CLR, at p 435 : "it matters not whether the duty is imposed at the moment of actual sale or not, or sale and delivery, or consumption". (at p218)
method of taxing the production or manufacture of goods but
the production or manufacture of an article will be taxed
whenever a tax is imposed in respect of some dealing with the
article by way of sale or distribution at any stage of its existence,
provided that it is expected and intended that the taxpayer
will not bear the ultimate incidence of the tax himself but will
indemnify himself by passing it on to the purchaser or
consumer."
8. A second reason that supported the decision in Parton v. Milk Board
(Vict.) [1949] HCA 67; (1949) 80 CLR 229 was that the conjunction
of the
references to
duties of customs and duties of excise in a number of sections
of the
Constitution - ss. 55, 86, 87, 90 and 93 - and a consideration of the purposes
for which s. 90 was framed, led to the conclusion that "it was intended to
give the Parliament a real control of the taxation of commodities and
to
ensure that the execution of whatever policy it adopted should not be hampered
or defeated by State action": per Dixon J., in
Parton v. Milk Board (Vict.)
(1949) 80 CLR, at p 260 . Similar views as to the purpose of s. 90 have been
expressed in other cases : The Commonwealth and Commonwealth Oil Refineries
Ltd. v. South Australia, per Rich J. (1926)
38 CLR, at p 437 ; Parton v. Milk
Board (Vict.), per McTiernan J. (1949) 80 CLR, at pp 264-265 ; Whitehouse v.
Queensland, per
Dixon C.J. (1960) 104 CLR, at p 618 ; Western Australia v.
Chamberlain Industries Pty. Ltd., per Barwick C.J. (1970) 121 CLR, at
p 17 .
In Parton v. Milk Board (Vict.), Dixon J. went on to say (1949) 80 CLR, at p
260 :
"A tax upon a commodity at any point in the course ofHowever, if it is permissible to consider the economic effect of the tax, it is impossible, in my opinion, to draw a line between the last retail sale and the act of consumption. A tax on consumption might produce exactly the same economic effect on production and manufacture as would a tax on the last retail sale. The power of the Commonwealth Parliament to tax commodities would be incomplete, and its fiscal policies possibly liable to some frustration, if the power did not extend to taxes on consumption. (at p219)
distribution before it reaches the consumer produces the same
effect as a tax upon its manufacture or production. If the
exclusive power of the Commonwealth with respect to excise
did not go past manufacture and production it would with
respect to many commodities have only a formal significance."
9. A third reason for departing from Peterswald v. Bartley [1904] HCA 21; (1904) 1 CLR 497
was that usage suggested that the expression
"duties
of excise" could not be
confined to taxes on production and
manufacture. In the course of the
discussion by Dixon J., in
Matthews
v. Chicory Marketing Board (Vict.) (1938)
60 CLR, at pp 293-299
of the history of the use of the word "excise",
reference
is made
(1938) 60 CLR, at pp 295-296 to a passage in Blackstone's
Commentaries
in which that learned author treated an imposition
paid upon
the
consumption of a commodity as an excise duty. After referring to
the doubts
raised by the history of the word as to
its meaning
in s. 90, Sir Owen went on
to refer to dicta in the judgments of Isaacs J. and Higgins J. in The
Commonwealth and Commonwealth Oil Refineries
Ltd. v. South Australia [1926] HCA 47; (1926) 38
CLR 408 , to the effect that the tax must be connected with production, and
said
(1938) 60 CLR,
at p 300 :
"But I think that it should not be overlooked that so farI consider that the statement that there is no direct decision of this question is still true. His Honour then expressed his own opinion as follows (1938) 60 CLR, at p 304 :
there is no direct decision inconsistent with the view that a
tax on commodities may be an excise although it is levied not
upon or in connection with production, manufacture or
treatment of goods or the preparation of goods for sale or for
consumption, but upon sale, use or consumption and is imposed
independently of the place of production."
"To be an excise the tax must be levied 'upon goods', butAfter this judgment had been written the Judicial Committee, in Atlantic Smoke Shops Ltd. v. Conlon (1943) AC 550 , was called on to consider the validity of a statute of New Brunswick which provided that a tax of ten per cent of the retail price should be paid at the time of making the purchase by anyone who bought tobacco for his own consumption (or for the consumption of other persons at his expense) from a retail vendor in the province. It was argued that the tax was an alteration of the excise laws of New Brunswick and was invalidated by s. 122 of the British North America Act, which provided : "The customs and excise laws of each province shall, subject to the provisions of this Act, continue in force until altered by the Parliament of Canada." Their Lordships held that the tax was valid as constituting "direct taxation within the province" within s. 92 (2) of the British North America Act even if it might be described as an excise tax. However, in the course of discussion their Lordships said (1943) AC, at pp 564-565 :
those apparently simple words permit of much flexibility in
application. The tax must bear a close relation to the
production or manufacture, the sale or the consumption of goods and
must be of such a nature as to affect them as the subjects of
manufacture or production or as articles of commerce. But if
the substantial effect is to impose a levy in respect of the
commodity the fact that the basis of assessment is not strictly
that of quantity or value will not prevent the tax falling within
the description, duties of excise."
" 'Excise' is a word of vague and somewhat ambiguousIn deference to this dictum Dixon J. modified his view that a tax on consumption might be a duty of excise. In Parton v. Milk Board (Vict.) (1949) 80 CLR, at p 261 , he referred to his judgment in Matthews v. Chicory Marketing Board (Vict.) (1938) 60 CLR, at pp 287 et seq and said : "It is probably a safe inference from Atlantic Smoke Shops Ltd. v. Conlon (1943) AC 550 , which has since been decided, that a tax on consumers or upon consumption cannot be an excise." He went on to say that the decision perhaps made it necessary to modify, with respect to consumption, the statement he had made in Matthews v. Chicory Marketing Board (Vict.) (1938) 60 CLR, at p 300 , which I have already quoted. (at p221)
meaning. Dr. Johnson's famous definition in his dictionary is
distinguished by acerbity rather than precision. The word is
usually (though by no means always) employed to indicate a
duty imposed on home-manufactured articles in the course of
manufacture before they reach the consumer. So regarded, an
excise duty is plainly indirect."
10. Since Parton v. Milk Board (Vict.) [1949] HCA 67; (1949) 80 CLR 229 no member of the
Court has dissented from, and almost
every member who
has had occasion to
discuss the matter
has expressly affirmed, the proposition that a tax imposed
on consumption
is not a duty of
excise. In Dennis Hotels Pty. Ltd. v.
Victoria
[1960] HCA 10; (1960) 104 CLR 529 , Dixon C.J. (1960) 104 CLR, at
pp 540-541 , Kitto J.
(1960) 104
CLR, at p 559 , Taylor J. (1960) 104 CLR, at
p 573 and Menzies J.
(1960) 104 CLR, at pp 588-590
all appeared to accept this view.
In that case
Kitto J. summed up the effect
of the authorities as follows (1960) 104 CLR, at
p
559 :
"What is insisted upon may, I think, be expressed by sayingIn Bolton v. Madsen (1963) 110 CLR, at p 273 , a Court of six Justices unanimously adopted this statement of principle. Expressions to a similar effect are to be found in the later cases : Anderson's Pty. Ltd. v. Victoria, per Barwick C.J. (1964) 111 CLR, at pp 364-365 ; Western Australia v. Chamberlain Industries Pty. Ltd., per Barwick C.J. (1970) 121 CLR, at p 13 , per Windeyer J. (1970) 121 CLR, at p 28 , and per Walsh J. (1970) 121 CLR, at p 35 . It might be said that these expressions of opinion are not binding because it was not necessary to decide in any of these cases whether a tax imposed on consumption was an excise, but the very greatest weight should be given to the fact that on this issue unanimity has been reached after a fluctuation of judicial opinion. Although the expression "excise" has, as I have said, sometimes been used to include taxes on consumption, a more precise definition of the word is that given by the Encyclopaedia Britannica, 11th ed., vol. 10, and adopted by the Oxford English Dictionary : "a term now well known in public finance, signifying a duty charged on home goods, either in the process of their manufacture or before their sale to the home consumers" (see Parton v. Milk Board (Vict.) (1949) 80 CLR, at p 259 ). To the same effect is the definition from the Encyclopedia of Social Sciences, cited by Windeyer J. in Dennis Hotels Pty. Ltd. v. Victoria (1960) 104 CLR, at p 601 : "a tax on commodities of domestic manufacture, levied either at some stage of production or before the sale to home consumers". Once it is accepted, as it must be, that "duties of excise" for the purposes of s. 90 cannot include all the miscellaneous taxes that have been regarded in England, and in some cases arising under the Constitution of the United States, to be excises, it seems to me that established usage (notwithstanding some divagations) favours the conclusion that a tax on the consumption of goods is not a duty of excise within the meaning of that expression as used in s. 90 of the Constitution. To say that the control by the Commonwealth Parliament of the taxation of goods will not be complete, or that its fiscal policy may be hampered, if the States can impose a tax at the point of consumption, is in my opinion not decisive against this view. The question cannot be answered by having regard to the position of the Commonwealth alone. The Constitution is a federal constitution, and s. 90 is intended to effect a distribution of the power to impose taxation between the Commonwealth and the States. Of course, the section confers no power on the Commonwealth, which derives its power to impose taxation from s. 51 (ii.), but it denies power to the States. The extent of the denial must be found in the words of the section themselves rather than in economic, social or political theory. Section 90 does not refer to taxes on goods but to duties of customs and of excise. Upon its proper construction s. 90 stops short of denying power to the States to impose taxes on consumption. (at p222)
that a tax is not a duty of excise unless the criterion of liability
is the taking of a step in a process of bringing goods into
existence or to a consumable state, or passing them down the
line which reaches from the earliest stage in production to the
point of receipt by the consumer."
11. In reaching this conclusion I have not derived any assistance from the
theory that a duty of excise would generally be an indirect
tax, i.e. a tax
"which is demanded from one person in the expectation and with the intention
that he shall indemnify himself at the
expense of another" : Attorney-General
(Manitoba) v. Attorney-General (Canada) (1925) AC, at p 566 , cited in Browns
Transport Pty.
Ltd. v. Kropp (1958) 100 CLR, at p 129 . One would have
thought, had it not been for suggestions to the contrary in decisions given
on
the British North America Act, that a tax on consumption could never be an
indirect tax. However that may be, I share the regret,
expressed by Fullagar
J. in Dennis Hotels Pty. Ltd. v. Victoria (1960) 104 CLR, at pp 553-554 , that
a discussion of the difference
between direct and indirect taxation, which in
relation to Canada is rendered necessary by the words of s. 92 (2) of the
British
North America Act, should ever have been thought to be relevant or
useful in relation to s. 90. (at p223)
12. I turn now to the second of the constitutional questions which I consider
to be raised by the present case. In Bolton v. Madsen
(1963) 110 CLR, at p 271
, the Court said: "It is now established that for constitutional purposes
duties of excise are taxes directly
related to goods imposed at some step in
their production or distribution before they reach the hands of consumers."
The Court went
on to make it clear that in its opinion it is the criterion of
liability that determines whether or not a tax is a duty of excise.
It is not
enough that the imposition produces a similar, or even the same, economic or
practical effect as that which a duty of excise
would have produced. The tax
will only be an excise if the person taxed is, under the legislation in
question, rendered liable because
he has taken a step in the production or
distribution of goods. In my opinion the latest decision of this Court -
Western Australia
v. Chamberlain Industries Pty. Ltd. [1970] HCA 5; (1970) 121 CLR 1 -
provides no authority contrary to Bolton v. Madsen (1963)
110 CLR, at p 271
.
The three members of the Court
who were in a minority in that case all
accepted the view that the criterion of
liability determines
whether the tax
is an excise
(see per McTiernan J. (1970) 121 CLR, at p 18 , per Kitto J.
(1970) 121 CLR, at
p 20 and per Walsh
J. (1970) 121 CLR, at pp 35-38
) and
one member of the majority, Menzies J. (1970) 121 CLR, at p 25 , differed
from
the minority
not on this ground but only because
of the different view that he
took of the effect of the statute in question.
In my opinion the
statement in
Bolton v. Madsen (1963)
110 CLR, at p 271 should be accepted as an
authoritative expression of principle.
In deciding
whether a tax is a duty of
excise
the Court must identify the criterion of liability under the statute
which imposes
the tax. Of
course, as Walsh J. pointed out in
Western Australia
v. Chamberlain Industries Pty. Ltd. (1970) 121 CLR, at p 37 , it
is necessary
to examine the provisions of the
taxing statute to determine their legal
effect according to their proper construction,
"whatever
their form may be and
whatever label
may be attached by the Act to the duty which is imposed by it".
However, I respectfully
agree
with the further statement by Walsh
J. (1970)
121 CLR, at pp 37-38 :
"The duty so imposed cannot be characterized as being 'in(at p224)
reality' a duty imposed upon the act or transaction of selling
goods and as, therefore, being an excise, unless it can be seen
upon an examination of the provisions of the Act that it is
that act or transaction which has been made the condition of
the liability of the vendor to pay it."
13. It is now possible to consider the validity of the tax imposed by Pt II
of the Act. The label given to it - "Tax on the consumption
of tobacco" - is
not of importance. However, in my opinion Pt II on its proper construction
does impose a tax which is correctly
described by that label, that is, a tax
on consumption. It is true that the retailer can only lawfully carry on
business if he makes
arrangements to collect the tax and that for practical
reasons a purchaser is likely to pay the tax to the retailer or his agent
at
the time when he buys his tobacco. However, the purchaser is not bound to make
payment until he has in fact consumed the tobacco
and the retailer is not
liable for any tax which he does not collect. It is, in my opinion, impossible
to say that Pt II, when properly
construed, imposes a tax on the last retail
sale of tobacco. It is immaterial, if in fact it is true, that the tax has
substantially
the same practical effect as a tax imposed on the last retail
sale. The criterion of liability is consumption. The tax is not an
excise. (at
p224)
14. I now turn to the validity of Pt III of the Act. There are to be found in
the authorities statements which, taken out of context,
might suggest that a
fee paid for a licence to carry on a business is not a duty of excise. Thus in
Matthews v. Chicory Marketing
Board (Vict.) (1938) 60 CLR, at p 300 , Dixon J.
said: "A tax imposed upon a person filling a particular description or engaged
in
a given pursuit does not amount to an excise." However, to say that a
licence fee is "a tax on the carrier because he carries goods
by motor
vehicle" (Hughes and Vale Pty. Ltd. v. New South Wales (1953) 87 CLR, at p 75
) or "a fee payable as a condition of a right
to carry on a business" (Browns
Transport Pty. Ltd. v. Kropp (1958) 100 CLR, at p 130 ) or a fee "payable by
the licensed victualler
for the right which his licence confers upon him"
(Dennis Hotels Pty. Ltd. v. Victoria (1960) 104 CLR, at p 575 ) may be
perfectly
true but in my opinion it does not in itself provide an answer to
the question whether the fee is a duty of excise. The critical
question is
whether the fee (assuming it to be a tax) is a tax directly related to goods.
Although in the leading case of Dennis
Hotels Pty. Ltd. v. Victoria (1960) 104
CLR 529 there was a difference of opinion as to the result, all the members
of
the Court
in my opinion recognized that a licence fee payable
for the right to
carry on a business might nevertheless be a duty
of excise if
it was a tax
imposed upon goods, or, in other words,
that a licence might be obtainable
only on payment of a duty of
excise: see
per Dixon C.J. (1960) 104 CLR, at pp
539-540 ; per McTiernan
J. (1960) 104 CLR at p 549 ; per Fullagar J. (1960)
104
CLR, at p
550 ; per Kitto J. (1960) 104 CLR, at pp 559-560 ; per Taylor
J. (1960) 104 CLR, at p 576 ; per Menzies J. (1960) 104
CLR, at
p 591 ; per
Windeyer J. (1960) 104 CLR, at pp 601-602 . Fullagar
J. differed from the
other members of the Court in thinking
that
Peterswald v. Bartley [1904] HCA 21; (1904) 1 CLR
497 correctly decided that a tax would only be a duty of excise if the
taxpayer
is taxed by reason
of, and by reference
to, his production or
manufacture of the goods (1960) 104 CLR, at p 555 - a view that is
understandable but
no longer tenable -
whereas the other members of the Court
considered that the impost would be an excise if it
was a tax upon the
taking
of a step in
the process of producing or distributing goods before they
reached the consumer. Taylor J.
more than any other
member of the Court
relied
on the fact that the licensing legislation was a traditional way of regulating
the
liquor trade and that
the licence gave
the holder a partial monopoly
(1960) 104 CLR, at pp 569, 576-577 . I myself would respectfully
doubt the
relevance
of these considerations.
Kitto J., who was one of the majority in
that case, said (1960) 104 CLR, at p 563 :
"The fact which makes
a licence
fee not a duty
of excise is not that the exaction is for the licence ; it is
that the exaction is
only in respect of the
business generally, and
not in
respect of any particular act done in the course of the business." In my view
this statement was correct
and it is significant
that Dixon C.J., who was one
of the dissenting Justices, expressed what is in essence
the same view (1960)
104 CLR, at p 547 :
"The fact that the licensing of a licensed victualler and for(See also per Dixon C.J. in Whitehouse v. Queensland (1960) 104 CLR, at p 618 .) It must in my opinion follow that even if the licensing system is brought into existence primarily as a means of imposing a tax and even if the licence adds no value to the land or business in respect of which it is granted, the fee will still not be a duty of excise unless it is directly imposed upon or in respect of goods. (at p226)
that matter the registration of a club forms part of the method
of controlling the sale of liquor, the conduct of hotels and so on
appears to me quite immaterial, as does the question whether
the licence in the hands of the licensee is a valuable privilege
for which the payment of the tax may be regarded as part of
the consideration. Section 90 is quite unconcerned with the
position of the individual. It is concerned wholly with the
demarcation of authority between Commonwealth and State
to tax commodities."
15. The essential question in the present case, therefore, is not whether the
licence adds to the value of the business or whether
the only object of the
licensing system is to collect a tax but whether the tax answers the test now
laid down by Bolton v. Madsen
(1963) 110 CLR, at p 271 as decisive - is it a
tax directly related to goods imposed at some stage in their production or
distribution
before they reach the hands of the consumer? (at p226)
16. Dennis Hotels Pty. Ltd. v. Victoria [1960] HCA 10; (1960) 104 CLR 529 is authority for
the proposition that legislation which
provides for
the grant of a licence to
sell goods, on
payment of a licence fee, the quantum of which is based on the
value of the
goods purchased
for the premises in a previous year,
does not
impose a tax directly related to the goods. The majority of the Court
held
that under
such legislation no purchase in the
earlier year and no sale during
the currency of the licence attracts a liability
to tax. It was
submitted that
the decision should
not be regarded as a binding authority because the reasons
of Fullagar J. cannot
be regarded as
fully acceptable and the other members
of
the Court were equally divided in opinion. This, in my view, is an incorrect
approach to
the doctrine of precedent. The case is
authority for what was
decided, namely, that a licence fee quantified by reference
to the
amount paid
or payable for goods purchased
during a period preceding that in respect of
which the licence was granted was
not a duty
of excise. The same result would
clearly
follow if the quantification were by reference to the amount obtained
from the
sale of goods
during a preceding period. No doubt
these questions, if
undecided, would be very arguable but that is no ground for
re-opening the
decision. The close division of opinion
in that case was not on any question
of constitutional principle but on the
application of
the principles to a
particular form of
licence fee. The decision having been pronounced by a
majority of a Full Bench
of the Court,
after full consideration, should be
regarded as settling the question. In any case the later authorities cast no
doubt
upon its correctness.
(at p226)
17. It remains to apply these principles to the licensing provisions of Pt
III of the Act. I am prepared to assume, notwithstanding
the fact that the
Minister has power to have regard to the public welfare in deciding whether to
grant a licence, that the only,
or at least the main, function of the
licensing provisions is to enable the tax to be collected. I shall also
assume, perhaps with
a little more hesitation, that a licensing system of this
kind is not a traditional way of controlling the tobacco trade and that
the
possession of a licence adds no value to the premises or the business of the
licensee. These facts are in my opinion irrelevant.
The question is whether
the fees are taxes directly related to goods. It is not in dispute that they
are taxes. The fee for an occasional
licence, being a fixed sum having no
relation whatever to the goods sold under the licence, is very clearly not an
excise. The fee
for an ordinary retailer's licence will also be a fixed sum if
the monthly stock value - i.e. the average value of the tobacco handled
in a
month over the relevant assessment period - does not exceed $500 but where the
monthly stock value exceeds that amount the fee
payable does bear a
proportionate relationship to the monthly stock value, although the position
is rather more complicated where
the monthly stock value is between $500 and
$600. However, it is sufficient to concentrate on the case in which the
monthly stock
value does exceed $600, for if the plaintiff fails in relation
to that, its arguments in relation to the case where the monthly stock
value
is of a lesser amount would have no prospect of success. The word "handled" in
s. 11 (3) of the Act is somewhat ambiguous but
it must, I think, mean passing
through the licensee's hands in the course of his business. However, it is
immaterial whether the
monthly stock value is assessed by reference to tobacco
coming into the business or by reference to tobacco turned over, i.e. bought
and sold. In either case the monthly stock value is the monthly average over a
period of twelve months ending six months before the
period in respect of
which the licence is granted. If no business was carried on during the
previous period the Treasurer has a wide
discretionary power to fix the amount
of the monthly stock value. The reasoning for which Dennis Hotels Pty. Ltd. v.
Victoria [1960]
HCA 10; (1960)
104 CLR 529 is authority leads to the conclusion that the fee
is not a tax on any purchase or sale of tobacco. The
licence
fee is
fixed when
the licence is granted and although there is a right to a proportionate refund
if business is not carried
on for
the whole
period, the fee does not increase
or abate if tobacco handled under the licence proves to be more or less than
it
was during
the
relevant assessment period. There is no necessary relation
between the fee and the amount of the sales made during
the currency
of
the
licence. No handling of tobacco before or during the currency of the licence
creates a liability to the tax.
The person liable
to pay the fee in respect of
the grant of a licence may have handled no tobacco in the past, and a person
who handles
tobacco may
not subsequently apply for a licence. In the case of a
vending machine licence the fee paid is fixed primarily by reference
to the
capacity of the machine irrespective of the extent to which the actual sales
fall below the maximum capacity. However, the
licensee
can elect to pay a fee
proportioned to the monthly stock value and what has already been said in
relation to an ordinary
retailer's
licence is completely applicable to that
situation. None of the licence fees in my opinion can be said to be imposed
upon,
or in
relation to, any dealing in goods. Therefore none of the fees is
an excise. (at p228)
18. It remains to add that the Act applies to all tobacco whether
manufactured or produced within or outside Australia, but having
regard to the
conclusion I have reached it is unnecessary to decide upon the correctness of
the statement that "an inland tax upon
goods of a class manufactured in
Australia and abroad, imposed without regard to their place of origin, is an
excise" (Dennis Hotels
Pty. Ltd. v. Victoria (1960) 104 CLR, at p 540 ). It
should not be taken from this observation that I intend to cast doubt on that
proposition ; I express no view upon it. (at p228)
19. For the reasons I have given, I hold that the Act was within the
competence of the Legislature of the State of Tasmania. I would
allow the
demurrer to the whole of the statement of claim. (at p228)
STEPHEN J. The present challenge to the constitutional validity of the
Tobacco Act 1972 (Tas.) raises two distinct problems, each
concerned with what
is said to be an intrusion by this legislation into the field from which the
taxing powers of the States are
excluded by s. 90 of the Constitution. By that
section the power of the Parliament of the Commonwealth to impose duties of
excise is made exclusive and the question is
whether two imposts enacted by
this legislation, the one described as a tax upon the consumption of tobacco
and the other as a licence
fee payable by retail tobacconists, are in truth
duties of excise, a form of taxation denied the States. (at p228)
2. The Tobacco Act consists of four parts of which Pt II, containing sections
3 to 8, is headed "Tax on the consumption of tobacco".
Section 3 (1) of that
part imposes a tax "on the consumption of tobacco" the amount of which is, by
sub-s. (2) of that section, declared
to be seven and a half per cent of its
value ; by sub-s. (3) unpaid tax may be recovered as a debt due to the Crown
and failure to
pay tax within seven days of consumption is an offence under
sub-s. (4). Sub-section (5) then provides for a refund of tax in the
case of
tobacco on which tax has been paid before consumption but which is not
subsequently consumed. Section 4 affords exemption
for the consumption of
tobacco brought into the State by travellers and s. 5 exempts from tax the
consumption of tobacco for scientific
and like purposes. By s. 6 the taxable
value of tobacco is taken to be its retail sale price. (at p229)
3. The last two sections of the part, ss. 7 and 8, are concerned with
collection and payment of the tax ; s. 7 confers wide regulation-making
power
to provide for any convenient method for the collection of the tax, including
power to make arrangements with any persons with
respect to the collection of
the tax and to prohibit the carrying on of a retail tobacco business unless
"arrangements made under
the regulations are in force in respect of that
business or the premises on which it is carried on". Section 8 requires tax
proceeds
to be paid by the Commissioner into the consolidated revenue of the
State. (at p229)
4. These provisions, supplemented by the miscellaneous and supplementary
provisions of Pt IV of the Act and by s. 2 of the Act,
which defines "tobacco"
and gives to the phrase "the consumption of tobacco" the meaning of "the
smoking or chewing of tobacco by
any person", make up that part of this taxing
measure which is described in the long title to the Act as "the imposition of
a tax
on the consumption of tobacco". Part III of the Act, comprising eleven
sections, is concerned with the distinct topic of the licensing
of retailers
of tobacco ; it provides for a licence fee which, like the tax on consumption,
is challenged as being a duty of excise
and for the moment I will defer
consideration of its effect. (at p229)
5. If, on its true construction, the tax imposed in Pt II of the Act is a tax
only upon the consumption of tobacco and not upon
its purchase by the consumer
or its sale by the retailer I do not regard it as within the field of
exclusive Commonwealth taxing
power, described in s. 90 as encompassing duties
of customs and of excise. (at p229)
6. The first judicial pronouncement upon the subject, in Peterswald v.
Bartley [1904] HCA 21; (1904) 1 CLR 497 , gave to the phrase
"duties of
excise", or rather to
"the Australian use of the term", a special meaning when
found in our
Constitution "framed in Australia by Australians and for the use of the
Australian people" - per Griffith C.J. (1904) 1 CLR, at p 509 . In the
course
of time and with the passage through the Court of a great variety of
challenged State legislation the meaning of the phrase
in its context in the
Constitution developed and expanded until a point was reached, in Bolton v.
Madsen [1963] HCA 16; (1963) 110 CLR 264 , when it was possible for
the Court, in
a joint
judgment in which six members participated, to declare (1963)
110 CLR, at p
271 that :
"It is now established that for constitutional purposes dutiesSince Bolton v. Madsen [1963] HCA 16; (1963) 110 CLR 264 this meaning has not been departed from in any relevant respect and the subsequent judgments of this Court have reflected the view that what is for constitutional purposes a duty of excise stops short of a tax imposed upon the act of consumption. It is to taxes imposed at any stage along what may be described as a line reaching from the earliest stage in production to the point of receipt by the consumer that duties of excise have now come to be confined ; so Barwick C.J. said in Anderson's Pty. Ltd. v. Victoria (1964) 111 CLR, at p 365 , "the step which puts the goods into consumption is still in the line, albeit at the end of the line". (at p230)
of excise are taxes directly related to goods imposed at some
step in their production or distribution before they reach the
hands of consumers."
7. No absolute is to be discovered in a search for the meaning of "duty of
excise" ; no ultimate truth lies concealed in the phrase
"duty of excise",
there awaiting recognition by the judicial fossicker ; the word excise "has
never possessed, whether in popular,
political or economic usage, any certain
connotation and has never received any exact application" - per Dixon J. in
Matthews v.
Chicory Marketing Board (Vict.) (1938) 60 CLR, at p 293 . The
degree of certainty which has been conferred upon the phrase, at least
in
relation to that point on the journey of goods from producer to consumer
beyond which a tax is no longer viewed as an excise,
has been hard won and
should not lightly be disturbed in this important aspect of constitutional law
concerned with the delineation
of the boundary between State and federal
legislative competence in the taxation of the citizen. (at p230)
8. No convincing reasons have, in my view, been advanced before us for the
adoption now of any new meaning of the phrase "duty of
excise" so as to
include a tax on consumption. That the economic effect of such a tax is, like
that of acknowledged duties of excise,
reflected back upon the manufacturer or
producer is no doubt true ; however this affords no demonstration that such a
tax is a duty
of excise. This economic effect cannot constitute any conclusive
determinant of the character of a tax as an excise, indeed counsel
for the
plaintiff did not ultimately urge that all consumption taxes, though
possessing this feature, should be regarded as duties
of excise. (at p230)
9. A consumption tax is a direct, not an indirect, tax : Atlantic Smoke Shops
Ltd. v. Conlon (1943) AC, at p 563 . It is of a kind
which Griffith C.J.
described in Peterswald v. Bartley (1904) 1 CLR, at p 509 as "a direct tax or
personal tax". Whatever may now
be thought to be the relevance, for the
purposes of s. 90, of this distinction between direct and indirect taxes, it
remains true that indirect taxes tend to be more concerned with the commodity
and less with the particular taxpayer than are direct taxes - Attorney-General
(British Columbia) v. Kingcome Navigation Co. (1934)
AC, at p 59 ; hence
direct taxes are inherently less closely related to goods than are indirect
taxes and are to that extent less
likely to be found to be duties of excise,
to be taxes "directly related to goods" - Bolton v. Madsen (1963) 110 CLR, at
p 271 .
Consistently with this, Dixon J. said in Matthews v. Chicory Marketing
Board (Vict.) (1938) 60 CLR, at p 300 , in a passage subsequently
cited by
this Court in Browns Transport Pty. Ltd. v. Kropp (1958) 100 CLR, at p 130 ,
that a tax imposed upon a person filling a
particular description or engaged
in a given pursuit did not amount to an excise. Moreover a tax on consumption
cannot, of course,
be passed on and therefore lacks that common feature of an
excise and, as was pointed out in the Kingcome Navigation Co. Case (1934)
AC,
at p 59 , in a passage cited by Dixon J. in Parton v. Milk Board (Vict.)
(1949) 80 CLR, at p 259 , both customs and excise duties
are duties imposed in
respect of commercial dealings in commodities and are, in their essence,
trading taxes ; a tax on consumption
is of its nature not such a tax. (at
p231)
10. In Parton v. Milk Board (Vict.) (1949) 80 CLR, at p 260 Dixon J.
described as an essential feature of the conception of an
excise "that it
should be a tax upon goods before they reach the consumer" ; the significance
of this feature now finds expression
in that passage which I have earlier
cited from the joint judgment in Bolton v. Madsen (1963) 110 CLR, at p 271
and should in my
view conclude the present question in favour of the
respondents. (at p231)
11. If then a tax upon the act of consumption of consumable goods is not, for
constitutional purposes, itself a duty of excise,
is the tax with which Pt II
of the Tobacco Act is concerned a tax upon consumption? (at p231)
12. The imposition of the tax on the act of consumption and upon no other act
on the part of the taxpayer is clear enough ; s. 3
(1) of the Act, when
expanded by reference to s. 2, imposes the tax upon the smoking or chewing by
any person of tobacco prepared
for consumption. It is the person who actually
consumes the tobacco who is liable for the tax - s. 3 (3) and (4) , regardless
of
how he comes into possession of it ; no liability to tax arises until
consumption occurs and it then arises only in respect of the
amount consumed
by the act of smoking or chewing it. To purchase a packet of cigarettes or a
quantity of pipe or cigarette tobacco
involves no tax liability on the part of
the purchaser ; nor is he liable in respect of any cigarettes or tobacco which
he gives
to others to smoke or which he preserves from consumption or destroys
otherwise than by smoking or chewing, nor is there any tax
payable on the
unconsumed tobacco represented by cigarette butts or pipe dottles. (at p232)
13. All this seems clear enough ; the tax, imposed by Pt II of the Act, is
manifestly upon consumption only although it may appear
to be a tax difficult
to collect, easy to evade and inordinately troublesome to pay. It was no doubt
those very features that explain
the contents of Pt II of the Tobacco
Regulations 1972. While they contemplate that tax may be paid by the consumer
to the Commissioner
after consumption, in which case full details of the act
of consumption must accompany the payment : reg. 2 (2) and (3) , they also
provide, in reg. 2 (1), for payment of tax to collectors or other authorized
persons and by reg. 4 provision is made for the making
of arrangements with
retail tobacconists for the collection of the tax by them at the time of sale
and they are required to enter
into such arrangements as a condition of
carrying on their businesses. Regulation 17 requires an intending consumer of
tobacco to
notify the Commissioner in writing when he obtains possession of
any tobacco upon which tax has not already been paid. (at p232)
14. Thus a smoker, should he appreciate that this tax is imposed upon the act
of consumption and accordingly determine not to avail
himself of the
opportunity of paying tax, in advance of consumption, to the retail
tobacconist from whom he buys it, finds himself
burdened with at least two
obligations under the regulations; he must supply to the Commissioner written
particulars both when he
gets possession of the tobacco and again when he
consumes it and if he disposes of it otherwise than by consumption he must
also
notify the Commissioner. In any event he must pay the tax when he
consumes the tobacco. (at p232)
15. The obligation to comply with these requirements in the case of tobacco
on which tax has not been paid in advance at the time
of its purchase no doubt
provides a strong incentive to pay the tax to retail tobacconists when
supplies are bought, thus avoiding
all need for the making of written returns
to the Commissioner. It was urged that in truth the legislative plan, viewed
as a whole
and consisting both of the Act and of the Regulations, disclosed
that this was not a tax upon consumption but upon the transaction
of sale and
purchase whereby the consumer acquired the tobacco from the retailer. (at
p232)
16. Such a submission is only tenable, if at all, because of the form taken
by the Regulations. There is, in my view, nothing in
the Act which would
justify its characterization as anything other than a tax upon consumption. If
the regulations do themselves
operate as to impose a duty of excise the
position will resemble that referred to by Latham C.J. in Parton v. Milk Board
(Vict.)
(1949) 80 CLR, at p 241 and the Act "should not be construed as
purporting to authorize an unlawful regulation. . . . Unlawful action
under a
statute which is not unlawful in its own terms does not invalidate the
statute." Only the regulations in the form they take
would then be ultra vires
the regulation-making power in s. 7 of the Act, the Act itself would stand
unaffected. (at p233)
17. However there is, I think, nothing in the form which the regulations take
which involves them in an attempted imposition of
an excise. The attack upon
them is, essentially, that, by discouraging smokers from deferring payment of
tax until after consumption
and by offering a far more convenient alternative
mode of payment at the time of the retail purchase, they ensure that tax will
in
fact be paid on purchase and seldom, if ever, on consumption ; this, it is
said, gives to the tax the character of a tax upon goods
at "the point of
receipt by the consumer" (per Barwick C.J. in Western Australia v. Chamberlain
Industries Pty. Ltd. (1970) 121 CLR,
at p 13 ), and renders the tax an excise.
(at p233)
18. This is a contention analogous to that which, in the light of the
particular legislation there in question, succeeded in Attorney-General
(N.S.W.) v. Homebush Flour Mills Ltd. [1937] HCA 3; (1937) 56 CLR 390 , but the foundation
for it disappears when the form taken
by the present
regulations is examined.
There is here
no harsh sanction imposed so as to deter adoption of that course
not desired
by the legislature,
but which alone it may lawfully
require to be
followed, and so as to ensure instead that the taxpayer will adopt
the
alternative
course, desired by the legislature
but which it is forbidden to
enforce upon the taxpayer. Instead the very considerable
inconveniences
attendant upon payment of tax
after consumption arise naturally from the
inherent nature of such a tax when imposed
upon consumables
such as tobacco
or, for that
matter, food or drink. (at p233)
19. There is nothing which can be seen on its face to be artificially and
purposely onerous in the requirements which govern payment
of this tax after
consumption. A consumption tax falling upon the consumer of a relatively cheap
substance like tobacco, which, particularly
in the form of cigarettes, is
traditionally the subject of frequent gifts by the retail purchaser of
individual cigarettes to friends
and acquaintances and which is consumed in
small portions at frequent intervals, is necessarily a most irksome
imposition. The reasonable
enough requirement that the Commissioner be
furnished with full particulars of any quantity of tobacco when it first comes
into the
prospective consumer's hands and, again, when he consumes it or
disposes of it and the not unreasonable insistence upon payment of
tax weekly,
that is within seven days of the date of consumption, are not, in themselves,
other than what the efficient administration
of any legislation imposing a tax
upon consumption might be thought sensibly to call for. It is only the nature
of the goods the
consumption of which is here taxed which makes the
regulations so potentially inconvenient in their operation. A tax payable,
say,
on first use by a consumer of relatively durable consumer goods after
their purchase from the retailer might well, for its effective
collection, be
thought to require the supply of similar information to the tax collecting
authority as do the Tobacco Regulations
but would not of course present the
same difficulties for the taxpayer. (at p234)
20. If, then, the provisions of the regulations associated with the deferment
of payment of tax until after consumption are not
such as may be seen to be
contrived especially as a deterrent against deferment of payment I see no
reason for regarding the taxing
measure viewed as a whole, with its concept of
payment after consumption, as other than what it purports to be, the
imposition of
a consumption tax. The existence of those regulations which
offer an alternative and more convenient mode of payment in cases where
the
tobacco consumed was originally purchased in Tasmania, but which leave
unaltered the nature of the act, consumption, on which
tax is payable and
provide for application for a refund of tax if no consumption eventuates,
provides no ground for regarding them
as ultra vires as involving any duty of
excise. The provision of a more convenient way of paying and collecting the
tax cannot, in
my view, result either in the imposition of a tax bearing a
different character from that which the terms of the Act imposing it
gives it
or in the conversion of an originally valid tax into an invalid duty of
excise. (at p234)
21. I accordingly conclude that neither Pt II of the Act nor the regulations
relating to its provisions involve any duty of excise.
(at p234)
22. The provisions of Pt III of the Act deal with what the long title to the
Act describes as "the licensing of retail traders in
tobacco". The terms of Pt
III appear sufficiently from other judgments. The licence fees which it
provides for will be a duty of
excise if they are a tax upon goods imposed at
some stage in their movement from production into consumption. That Pt III
imposes
a tax is clear enough ; but is that tax imposed upon goods in the
relevant sense? (at p235)
23. It is not, I think, a question of choosing between two possible
characterizations of the tax, as licence fee or as duty of excise
; there are
no special properties of licence fees which render them immune from
characterization as duties of excise. In the Dennis
Hotels Case (1960) 104
CLR, at p 563 Kitto J. observed that even an exaction in the nature of a quid
pro quo for a statutory licence
to carry on a business might take the form of
an excise duty and Fullagar J. said (1960) 104 CLR, at p 550 , that a licence
required
in the first place alio intuitu might be made obtainable only on
payment of what was found to be a duty of excise ; like views were
expressed
by other members of the Court. (at p235)
24. Instead of the making of such a choice, the task is to determine whether
the present tax, here imposed after production and
before consumption, is one
directly related to goods in the sense that what renders the taxpayer liable
to the tax is "the taking
of a step in a process of" passing goods "down the
line which reaches from the earliest stage in production to the point of
receipt
by the consumer" : per Kitto J. in the Dennis Hotels Case (1960) 104
CLR, at p 559 , approved by the Court in Bolton v. Madsen (1963)
110 CLR, at p
273 . (at p235)
25. If the step which renders a retail tobacconist liable to the tax is
either the purchase of his supplies from the wholesaler
or their subsequent
sale by retail to customers it will be a duty of excise even if it takes the
form of a fee for a licence to carry
on the business of tobacco retailer. (at
p235)
26. Perhaps the clearest way in which a tax may be seen to fall upon the
taking of such a step in the process of distribution is
when it is calculated
by reference to the quantity or value of purchases or sales of goods by the
taxpayer. This method of calculation
is not an essential feature of a duty of
excise but its adoption provides a significant indication that the tax is an
excise because
it tends to demonstrate that what is being taxed is the step of
dealing in particular goods. The very act of measuring the amount
of tax by
reference to the number, weight, volume or value of the goods dealt in will
usually be explicable only as disclosing that
what is being taxed is the
taxpayer's dealing with those goods. Only exceptionally, in an appropriate
context, will it perhaps indicate
no more than that the value of a franchise,
monopoly or business is being measured, the tax being a fee on grant of that
franchise
or monopoly or a tax on that business rather than an excise. (at
p235)
27. In Pt III of the Act, however, the tax is not in fact measured in this
way. The basis for measurement of the fee is "the monthly
stock value for
those premises for the relevant assessment period", s. 11 (2) ; that is, the
retail value of tobacco handled in a
month in the course of the retail tobacco
business carried on in the relevant premises averaged over the period of
twelve months
ending six months before the commencement of the period of the
annual licence, s. 11 (3) and (4) . (at p236)
28. Whatever may be the precise meaning of "handled", in s. 11 (3), it is
clear that current dealings in tobacco play no part in
determining the amount
of licence fee and, quite apart from authority, I would not regard this
measure of the fee as demonstrating
that what is being taxed is the taking of
a step in dealing with particular quantities of tobacco, rather the contrary.
When the
calculated monthly stock value is less than $500 a fixed fee is
payable by the tobacconist, quite unrelated to any dealings in tobacco,
past
or present. Only when a larger trade than this is done in tobacco, with sales
volume in excess of almost $17 per day, on a seven
days a week trading basis,
does the fee bear some relationship to the monthly stock value. Even then the
effect of this method of
computation of the licence fee is only to ensure that
its amount cannot bear other than a coincidental relationship to the goods
dealt in during the period in respect of which the licence is current, that
coincidence arising only if the amount of tobacco handled
during the licence
period happens to be the same, or of the same total retail value, as was
handled during the earlier period used
for purposes of computation of the
monthly stock value. (at p236)
29. It may be observed in passing that it would seem seldom to be convenient,
in the administration of an Act imposing annual licence
fees, to measure the
amount of fee by current dealings in goods ; that fee will usually be payable
on issue of the licence or at
least before the end of the relevant year and,
unless resort is had to a relatively complex system involving pre-payment of
licence
fees on an estimated basis subject to ultimate adjustment when the
actual quantity or value of dealings during the year of licence
is known, some
other measure of the fee will have to be adopted. (at p236)
30. The view which I take of the significance of the basis upon which licence
fees are to be calculated under Pt III of the Act
is supported by the
authority of the Dennis Hotels Case [1960] HCA 10; (1960) 104 CLR 529 , a decision the
authority of which has
been fully acknowledged
in subsequent cases in this
Court. In this regard
I would adopt what is said in the reasons for judgment
of Menzies J., which I have
had the advantage of reading. (at p236)
31. If the basis upon which fees in the present case are to be calculated
does not of itself suggest the taking of a step in the
distribution of the
goods, there is, I think, no other sufficient indication in the legislation
that this is an excise. The provisions
of s. 11 (6), which give to the
Treasurer a wide discretionary power to fix the amount of a monthly stock
value in certain instances,
is equivocal and the remaining provisions of Pt
III, so far as they throw any light on the matter, point rather in a contrary
direction.
(at p237)
32. Accordingly I conclude that Pt III of the Act does not involve the
imposition of a duty of excise in the shape of the licence
fee which it
prescribes. (at p237)
33. No doubt the legislation as a whole has been framed with the pitfalls of
s. 90 of the Constitution clearly in view and is designed to produce revenue
from forms of taxation which are in some respects related to duties of excise
although, as I have concluded, not actually encroaching upon that forbidden
field. That this should be so is no more than the inevitable
outcome of the
reservation to the Commonwealth of particular fields of taxation and of their
definition by descriptions such as those
provided by s. 90 of the
Constitution. While careful examination of such legislation is called for when
it is challenged it is not, I think, to be approached upon any
more critical
basis than that ; the States may validly impose taxation so long as it does
not answer the description of a customs
duty or a duty of excise as this Court
has construed those expressions and, once satisfied that the tax which the
legislation imposes
and to which it gives its particular character is neither,
the validity of the tax is no longer in doubt. (at p237)
34. I would allow the demurrer to the whole of the statement of claim. (at
p237)
MASON J. Are the taxes imposed by Pt II and the licence fees prescribed by
Pt III of the Tobacco Act, 1972 (Tas.) properly to be characterized as duties
of excise within the meaning of s. 90 of the Constitution? That is the issue
for determination. Its resolution requires, first, a consideration of the
content of the expression "duties of
excise" and, secondly, an examination of
the provisions of the Tasmanian statute. (at p237)
2. In Peterswald v. Bartley [1904] HCA 21; (1904) 1 CLR 497 , the Court was called upon to
decide whether an excise meant a tax
on the production
or manufacture of goods
or
whether it should be given the more expanded meaning which it had acquired
under English
statutes, that
is, "almost all kinds of
inland revenue imposts".
The Court rejected the wider meaning in favour of the view that
an excise is a
duty "imposed upon goods
either in relation to quantity or value when produced
or manufactured". In coming to that
conclusion it
was influenced by the
doctrine
of implied prohibitions, the restricted notion of excise duties
according to popular
understanding
in the Australian colonies at
the time of
Federation and the reference in s. 93 to excise duties "paid on goods produced
or manufactured in a State". (at p238)
3. The foundations for the conclusion then reached eroded with the passage of
time. The doctrine of implied prohibitions was discarded
and the restricted
notion of excise popular in the colonies at the end of the nineteenth century
was replaced by an acceptance of
a wider concept of excise derived in part
from English and United States sources (The Commonwealth and Commonwealth Oil
Refineries
Ltd. v. South Australia (1926) 38 CLR, at pp 434-435 ). In place of
the doctrine of implied prohibitions and the emphasis which it
gave to the
language of s. 93 there came an appreciation of the constitutional
significance of the denial to the State of legislative power with respect to
duties
of customs and excise duties. In Parton v. Milk Board (Vict.), Dixon J.
(as he then was) said (1949) 80 CLR, at p 260 :
"In making the power of the Parliament of theMcTiernan J. said (1949) 80 CLR, at p 265 that "the object of the section is a uniform fiscal policy for the Commonwealth". (at p238)
Commonwealth to impose duties of customs and of excise exclusive it
may be assumed that it was intended to give the Parliament
a real control of the taxation of commodities and to ensure
that the execution of whatever policy it adopted should not
be hampered or defeated by State action. A tax upon a
commodity at any point in the course of distribution before it
reaches the consumer produces the same effect as a tax upon
its manufacture or production. If the exclusive power of the
Commonwealth with respect to excise did not go past
manufacture and production it would with respect to many
commodities have only a formal significance."
4. In the light of these developments, inevitably as it may seem, the Court
has accepted that the concept of an excise extends to
a tax on the sale of
goods, levied on a person who is not the producer or manufacturer, at least
when the tax is "directly related
to goods imposed at some step in their
production or distribution before they reach the hands of consumers" (Bolton
v. Madsen (1963)
110 CLR, at p 271 ). (at p238)
5. If the absence of a power to control taxes on the sale of goods deprives
the Commonwealth Parliament of a real power to control
the taxation of
commodities, the absence of a power to control taxes on the consumption of
goods might be thought perhaps to constitute
an unacceptable limitation on the
power of control which it was the purpose of the section to repose in the
Parliament. Yet, apart
from the remarks of Dixon J. in Matthews v. The Chicory
Marketing Board (Vict.) (1938) 60 CLR, at p 300 , later qualified in Parton's
Case (1949) 80 CLR, at p 261 in the light of the observations in Atlantic
Smoke Shops Ltd. v. Conlon (1943) AC, at p 565 , it has
not been suggested
that an excise extends to a tax on consumption of goods : cf. The Commonwealth
and Commonwealth Oil Refineries
Ltd. v. South Australia (1926) 38 CLR, at p
435 . (at p239)
6. Whatever differences may be detected in the judgment of members of this
Court in recent decisions, they all agree in defining
or describing an excise
duty in such terms as would exclude a tax imposed on goods after they have
passed into the hands of a consumer
(see Bolton v. Madsen (1963) 110 CLR, at p
271 ; Anderson's Pty. Ltd. v. Victoria [1964] HCA 77; (1964) 111 CLR 353 ; Western
Australia v. Hamersley
Iron Pty. Ltd. (No. 1) [1969] HCA 42; (1969) 120 CLR 42 ; Western
Australia v. Chamberlain Industries Pty.
Ltd. [1970] HCA 5; (1970) 121 CLR 1 ). These
statements
must, I think, be regarded as establishing at this time that a tax
on consumption
of goods
is not an excise. The limitation which
they place on
the concept necessarily involves a restriction on the power of the
Commonwealth
to control the taxation of commodities.
However, as a tax on
consumption which is not also a tax on sale of goods is
a phenomenon
infrequently encountered, the restriction
concedes to the Commonwealth a large
measure of control. The justification
for the restriction
is evidently based
on the notion that
consumption is not sufficiently proximate to the production
and manufacture
of goods - a concept
of proximity which it derives from
the
reference in s. 93 to "taxes paid on the production and manufacture of goods"
and from the circumstance that s. 90 deals with bounties on production as well
as duties of excise. (at p239)
7. As this conclusion does not by any means dispose of the tax imposed by Pt
II, let alone the licence fees prescribed by Pt III, I have now to consider
more closely the characteristics in virtue of which a tax, whether described
as a licence fee or not, may
be recognized as a tax on goods and therefore as
an excise duty. Much has been said on this topic, but it is unnecessary to go
beyond
the more recent cases. (at p239)
8. In Dennis Hotels Pty. Ltd. v. Victoria [1960] HCA 10; (1960) 104 CLR 529 , the licence
fee prescribed by s. 19 (1) (a) of the
Licensing Act
1958 (Vict.) was held not
to impose a duty
of excise and the licence fee prescribed by s. 19 (1) (a)
(b) was held to
impose such
a duty. The licence fee prescribed by s. 19
(1)
(a) was calculated by reference to a percentage of the gross amount paid
or
payable
for liquor purchased for the premises during
a period of twelve months
ending on the last day of June preceding the date
of application
for grant or
renewal of the licence. The
licence fee prescribed by s. 19 (1) (b) was
calculated by reference to a
fixed amount per
diem whilst the licence was in
force, together
with a percentage of the amount paid or payable for liquor
purchased
under the licence.
(at p240)
9. Dennis Hotels [1960] HCA 10; (1960) 104 CLR 529 is not authority for the universal
proposition that, in order to constitute
an excise, a licence
fee must be
calculated by reference to the quantity of goods sold under the licence,
thereby enabling the duty
to be passed on to
a purchaser
and that it is not
enough that the licence fee is calculated by reference to the quantity of
goods
sold by the licensee
or on the
premises before the licence commenced to
operate. The decision related to fees prescribed for a licence
to sell liquor
by retail
; it has no necessary application to fees prescribed for a licence
to manufacture or process goods to which
in my opinion
different
considerations apply. (at p240)
10. Although I doubt whether I should have been inclined, even in the context
of the Licensing Act 1958 (Vict.) to draw a distinction
between licence fees
prescribed by reference to the quantity of goods sold under the licence and
those prescribed by reference to
goods sold in an antecedent period, this
circumstance does not warrant my declining to follow the authority of Dennis
Hotels [1960]
HCA 10; (1960)
104 CLR 529 in its application to licence fees of a like kind.
The decision has been accepted as authoritative in
later
cases. The
narrowness
of the majority and the manner in which it was composed are not enough to
warrant a reconsideration of
the
decision. Consequently,
unless the licence
fees imposed by Pt III of the Tobacco Act, 1972 (Tas.) can be distinguished
from the
licence
fee prescribed by
s. 19 (1) (a) of the Licensing Act 1958
(Vict.) its validity must be governed by the decision in Dennis
Hotels
[1960] HCA 10; (1960)
104 CLR 529
. (at p240)
11. In Bolton v. Madsen [1963] HCA 16; (1963) 110 CLR 264 it was held that fees for permits
issued under a State statute were
not duties of excise.
The statute prohibited
the use of vehicles for the carriage of goods unless they were carried in
accordance
with a permit issued
in respect of the vehicle.
The fee was
calculated at the rate of threepence per ton mile on the registered carrying
capacity of the
vehicle. (at p240)
12. The Court in its judgment said (1963) 110 CLR, at p 271 :
"It is not enough that Turner, the owner-carrier, could by
a simple calculation determine the cost to him per bale of
carrying his wool from his station to the wool store for sale.
It is not enough because it is the criterion of liability that
determines whether or not a tax is a duty of excise. The tax
is a duty of excise only when it is imposed directly upon goods
or, to put the same thing in another way, when it directly affects
goods, and to establish no more than that its imposition has
increased the cost of putting goods upon the market by a
calculable amount falls short of establishing the directness of
relation between the tax and the goods that is the essential
characteristic of a duty of excise." (at p241)
13. Although this passage gives expression to what is described as an
essential characteristic of an excise, it has not always been
accepted that it
should be regarded as a precise definition, notwithstanding its repetition by
some members of the Court in the subsequent
cases. In the later cases Barwick
C.J. has said that the criterion of liability to tax "will not be found
exclusively in the verbal
formulae of the statute" (Western Australia v.
Chamberlain Industries Pty. Ltd. (1970) 121 CLR, at p 15 ). And it is apparent
that
neither Windeyer J. nor Owen J. considered the criterion of liability to
tax as precluding an examination of the substance and effect
of the tax
thereby imposed. In these circumstances I am not bound to accept what was said
in Bolton v. Madsen (1963) 110 CLR, at
p 271 as a precise definition of a
broad expression used in the Constitution to denote taxes on goods. (at p241)
14. I find myself in agreement with the observations of the Chief Justice in
Western Australia v. Chamberlain Industries Pty. Ltd.
(1970) 121 CLR, at p 15
, to which I have already referred, and with his earlier observations in
Anderson's Pty. Ltd. v. Victoria
(1964) 111 CLR, at p 365 , where he said :
". . . in arriving at the conclusion that the tax is a tax uponp241)
the relevant step, consideration of many factors is necessary,
factors which may not be present in every case and which may
have different weight or emphasis in different cases. The
'indirectness' of the tax, its immediate entry into the cost of
the goods, the proximity of the transaction it taxes to the
manufacture or production or movement of the goods into
consumption, the form and content of the legislation imposing
the tax - all these are included in the relevant considerations." (at
15. I turn now to the provisions of the Tobacco Act, 1972 (Tas.), in
particular those provisions which relate to the imposition
of the tax imposed
by Pt II. The title to the Act describes it as "An Act for the imposition of a
tax on the consumption of tobacco".
This description of the tax is reinforced
by s. 3 which imposes a tax of seven and a half per cent of the value "on the
consumption
of tobacco". Consumption of tobaccois defined as meaning the
smoking or chewing of tobacco (s.2). There is no provision in the Act
which
makes the tax so imposed payable at the time of the last retail sale or at a
time before consumption takes place. The Act does
not contain a provision
fixing the time at which the tax becomes payable, although it provides that if
the tax is not paid before
the expiration of seven days after consumption the
consumer commits an offence punishable by fine (s. 3 (4) ). Tax payable in
respect
of consumption that has not been paid is recoverable by the
Commissioner as a duty due to the Crown (s. 3 (3) ). A right to a refund
of
tax paid on tobacco not consumed is given (s. 3 (5) ). (at p242)
16. Had these provisions stood alone I should have thought that the tax
imposed by Pt II of the Act is a tax on the consumption
of goods and therefore
not an excise. However, it is necessary to consider s. 7 and the regulations
which have been made in the exercise
of the power which it confers. The
section enables the making of regulations for the collection of the tax. In
particular it authorizes
the making of regulations prescribing the persons to
whom, and the manner in which, the tax is to be paid and the appointment of
collectors. The power extends to authorizing or requiring the Commissioner to
make arrangements with other persons with respect to
the collection of the tax
and to the making of provision for the prohibition or restriction of the
carrying on of a retail tobacco
business unless arrangements made under the
regulations are in force in respect of that business or the premises on which
it is carried
on. (at p242)
17. The Tobacco Regulations 1972 made under the Tobacco Act contain a series
of provisions relating to payment and collection of
the tax, and the making of
arrangements with retailers for collection of tax. There is a prohibition
against the carrying on on any
premises of a retail tobacco business unless
arrangements made under the regulations are in force in respect of the
business (reg.
4 (8) ). The same regulation authorizes the Commissioner to
make arrangements with the proprietor of the business or the occupier
of
premises in which a retail tobacco business is carried on for the collection
of the tax payable in respect of the consumption
of tobacco sold on the
premises in the course of the business (reg. 4 (1)). When application is made
to the Commissioner with respect
to such a business, the Commissioner is
required to enter into arrangements with the applicant so that a collector is
appointed for
the purpose of receiving sums paid by way of tax in respect of
the consumption of tobacco sold by retail on the premises in the course
of the
business (reg. 4 (2)). (at p242)
18. Regulation 2, which deals with the payment of tax, provides that tax
shall be paid to a collector or a person authorized by
him to receive payments
of tax on his behalf, and that where tobacco is consumed without the tax on
the consumption having been paid
the tax is to be paid to the Commissioner.
(at p243)
19. It is evident then that the regulations require that arrangements be made
between the Commissioner and every proprietor of a
retail tobacco business or
the occupier of the premises in which that business is carried on, for the
appointment of a tax collector
in respect of the premises whose duty it is to
receive payments of tax made at the time when tobacco is sold by retail to
buyers.
Consequently, the tax which is imposed by the Act is levied at the
time of the last retail sale at the place at which the tobacco
is sold. It is
levied before or at the time of delivery to the purchaser, who will in many
circumstances be a person other than the
ultimate consumer. The tax is
therefore levied in respect of the goods before they pass into the hands of
the consumer and it is
calculated by reference to their value according to the
retail sale price. The amount of the tax is paid directly by the purchaser.
(at p243)
20. Once the provisions of the regulations are taken into account, the effect
of the tax, so it seems to me, is that it is an excise.
It is a levy on the
sale of goods calculated by reference to their value and imposed before they
pass into the hands of the consumer
in circumstances where the amount of the
tax is paid by the ultimate purchaser. In accordance with what I have already
said, that
is sufficient to bring it within the prohibition contained in s. 90
of the Constitution. (at p243)
21. The conclusion which I have reached is based on the scheme contained in
the regulations for the collection and payment of the
tax, not upon the
provisions of the Act itself. Accordingly, the regulations should be regarded
as falling outside the regulation-making
power conferred by s. 7. That section
should be interpreted in the light of the constitutional prohibition so as not
to extend to
a series of provisions which would have the effect of making the
tax imposed by the Act an excise within the meaning of s. 90. I
would overrule
the demurrer so far as it relates to regs. 2 to 8 (inclusive) and declare that
they are invalid. (at p243)
22. The provisions of Pt III of the Act and the regulations made in pursuance
of s. 19 have been sufficiently set forth elsewhere.
It is evident that the
part has been modelled on the corresponding provisions of s. 19 (1) (a) of the
Licensing Act 1958 (Vict.)
the validity of which was upheld in Dennis Hotels
[1960] HCA 10; (1960) 104 CLR 529 . I am unable to discern in the Act or the regulations
any
provisions
which would enable me to distinguish the
nature and character of
the licence fee prescribed by Pt III from that prescribed
by s.
19 (1) (a) of
the Licensing Act 1958. (at
p244)
23. Accordingly, I would allow the demurrer, except in so far as I have
already indicated that it should be overruled. (at p244)
ORDER
The defendants' demurrer allowed except in so far as it relates to regulations 2 to 8 (inclusive) of the Tobacco Regulations 1972 made under the Tobacco Act 1972.
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