Mutual Pools & Staff Pty Ltd v Federal Commissioner of Taxation ("Swimming Pool Sales Tax case") [1992] HCA 4; (1992) 173 CLR 450 (12 February 1992)

HIGH COURT OF AUSTRALIA

MUTUAL POOLS AND STAFF PTY. LIMITED v. FEDERAL COMMISSIONER OF TAXATION [1992] HCA 4; (1992) 173 CLR 450
F.C. 92/002

Constitutional Law (Cth)

High Court of Australia
Mason C.J.(1), Brennan(1), Deane(2), Dawson(3), Toohey(3), Gaudron(3) and McHugh(1) JJ.

CATCHWORDS

Constitutional Law (Cth) - Laws imposing taxation - Excise - Sales tax - Tax on swimming pools constructed in situ - Swimming pools constructed in situ deemed to be manufactured goods - Tax on swimming pools manufactured ex situ an excise - Whether tax on swimming pools manufactured in situ an excise - Laws imposing duties of excise to deal with only such duties - The Constitution (63 and 64 Vict., c. 12), s. 55 - Sales Tax Act (No. 1) 1930 (Cth) s. 3 - Sales Tax Assessment Act (No. 1) 1930 (Cth) ss. 3(1c), (1D), 18(3B) - Sales Tax Laws Amendment Act 1986 (Cth), ss. 4(a), 4(f), 6.

HEARING

1991, May 9; 1992, February 12. 12:2:1992
DEMURRER.
Mutual Pools and Staff Pty. Ltd. ("the company") carried on a business which included the construction for reward of swimming pools in situ. Its construction activities included the activities referred to in the definition of "construction" in s. 3(1) of the Sales Tax Assessment Act (No. 1) 1930 (Cth). During the period from 1 September 1986 to 31 August 1990 the company paid amounts for sales tax imposed by the Sales Tax Act (No. 1) upon the sale value of swimming pools constructed by it in situ. The company and the second plaintiff, the Swimming Pool and Spa Association of Australia Pty. Ltd., brought an action in the High Court for declarations, inter alia, that: (a) the Sales Tax Act (No. 1) did not lawfully impose a tax upon a sale value of so much of a swimming pool as was constructed in situ; (b) so much of the Sales Tax Assessment Act (No. 1) which, when incorporated and read as on with the Sales Tax Act (No. 1), had the effect that the Sales Tax Act (No. 1) purported to impose a tax upon a sale value of so much of a swimming pool as was constructed in situ, was ultra vires and invalid by reason of the second par. of s. 55 of the Commonwealth Constitution; (c) s. 6 of the Sales Tax Laws Amendment Act 1986 was ultra vires and invalid by reason of the second par. of s. 55 of the Constitution. The defendant demurred to the statement of claim in so far as it alleged that the Sales Tax Act (No. 1), the Sales Tax Assessment Act (No. 1) and the Sales Tax Laws Amendment Act were ultra vires or invalid by reason of the second par. of s. 55 of the Constitution. The second plaintiff did not appear before the Court.

DECISION

MASON C.J., BRENNAN AND McHUGH JJ. We agree that the demurrer should be overruled for the reasons given by Dawson, Toohey and Gaudron JJ. We add the following comments.

2. The relevant injunction in s.55 of the Constitution is that laws imposing duties of excise shall deal with duties of excise only. Since Parton v. Milk Board (Vict.) [1949] HCA 67; (1949) 80 CLR 229, it has been accepted that a duty of excise is a tax directly related to goods, imposed on some step in their production or distribution before they reach the consumer. Hematite Petroleum Pty Ltd v. Victoria [1983] HCA 23; (1983) 151 CLR 599, at pp 615, 634, 657-658, 665; and see Philip Morris Ltd v. Commissioner of Business Franchises (Vict.) [1989] HCA 38; (1989) 167 CLR 399, at pp 430-431, 433-436, 443-446, 467-468, 473, 483-484 and especially per McHugh J. at pp 488-489. A tax on the sale of goods is, accordingly, a duty of excise. It follows that the sales tax imposed by s.3 of the Sales Tax Act (No.1) 1930 (Cth) and levied, on the sale value of goods manufactured in Australia, by s.17(1) of the Sales Tax Assessment Act (No.1) 1930 (Cth) is a duty of excise, at least to the extent that it levies a tax on the sale value of what are truly goods. Whether a tax imposed in relation to something other than goods can ever constitute a duty of excise is a question that has not arisen for decision in this Court.

3. In the context of ss.55 and 90 of the Constitution, the reference to goods as the subject of the tax must be understood in its widest sense. An excise embraces a tax on commodities produced as well as a tax on manufactured articles, as the comprehensive discussion on the topic by Dixon J. in Matthews v. Chicory Marketing Board (Vict.) [1938] HCA 38; (1938) 60 CLR 263, at pp 293-303 so clearly demonstrates. In conformity with this understanding of the concept of excise, the word "goods" is defined to include "commodities". Sales Tax Assessment Act (No. 1), s. 3(1). In determining whether particular objects are properly described as "goods" or "commodities", it may be useful to consider whether they are saleable. Although many objects which are unsaleable are not properly described as "goods" or "commodities", some objects are properly so described even though they are not saleable. Federal Commissioner of Taxation v. Totalisator Administration Board (Q.) [1990] HCA 48; (1990) 170 CLR 508, at p 511. Hence the production by shorthand writers of transcripts was held not to amount to the production of goods because they were not brought into existence for sale as a commodity, but for the purpose of enabling employers to have the benefit of services given in the course of a skilled vocation. Adams v. Rau [1931] HCA 43; (1931) 46 CLR 572, at pp 578-579. On the other hand, reinforced concrete piles manufactured under a bridge-building contract for incorporation into the structure of a particular bridge across a bay, though plainly not saleable on the market, were held to be manufactured articles, and thus goods, before they lost that character upon being incorporated into the structure and forming part of the realty. M.R. Hornibrook (Pty) Ltd v. Federal Commissioner of Taxation [1939] HCA 29; (1939) 62 CLR 272, at p 279.

4. It may be that the constitutional conception of an excise extends to a tax on a step in the production, manufacture or distribution of items of tangible personal property that are not properly or accurately described as "goods" or "commodities". However, that conception of an excise certainly does not extend to other well-known forms of taxation such as income tax, capital gains tax, pay-roll tax and, what is germane to the present case, land tax.

5. Once it is accepted that a tax on land or something that forms part of the realty is not an excise, the outcome in the present case becomes obvious. The tax is levied when the construction of the swimming pool in situ has been completed, Sales Tax Assessment Act (No. 1), s. 3(1C)(f) and (g). The case is to be distinguished from M.R. Hornibrook where the tax was levied on the piles before they lost their character as goods upon being incorporated into the structure of the bridge. Unlike the piles, the swimming pool has no separate existence as goods, independent of the realty of which it forms part from its earliest beginnings. A swimming pool manufactured away from the site of its permanent installation would, like the piles in M.R. Hornibrook, stand in a different position. Further, for the purpose of ascertaining whether a tax is an excise, the conclusion that completed swimming pools constructed in situ are not "goods" does not mean that some of the constituent elements of a completed swimming pool, such as tiles, may not be characterized as goods although presently exempted from sales tax by the Sales Tax (Exemptions and Classifications) Act 1935 (Cth), s. 5 and Sched. 1, Div. XII.

6. In the result we would overrule the defendant's demurrer to the plaintiffs' statement of claim and make the declaration proposed by Dawson, Toohey and Gaudron JJ.

DEANE J. The legal issues arising from this demurrer, the relevant statutory provisions and the assumed facts are set out in the joint judgment of Dawson, Toohey and Gaudron JJ. Except to the extent necessary for purposes of discussion, I shall refrain from repeating them.
Constitution, s.55

2. Section 55 of the Constitution imposes three distinct requirements with respect to laws imposing taxation. The first is a general requirement that laws imposing taxation deal only with the imposition of taxation. The second and third requirements are complementary. The second applies to laws imposing taxation other than laws imposing duties of customs or excise. It is that such laws "shall deal with one subject of taxation only". The third requirement, which is that directly involved in the present case, is that laws imposing duties of customs "shall deal with duties of customs only" and laws imposing duties of excise "shall deal with duties of excise only".

3. Section 55 is not a constitutional guarantee in the ordinary sense. Its object is not to entrench particular individual rights nor to confine the content of legislative powers. Its requirements are essentially procedural in that they are merely concerned to control the manner of exercise of legislative powers. They are all aimed at protecting the Senate from possible abuse of the restriction placed upon it by s.53 of the Constitution which provides that the Senate "may not amend proposed laws imposing taxation". The first requirement prevents the tacking of extraneous matters to laws imposing taxation. See, e.g., Buchanan v. The Commonwealth [1913] HCA 29; (1913) 16 CLR 315, at p 328. The second and third requirements prevent the House of Representatives from sending to the Senate a single Bill containing a large number of unrelated taxing laws with the consequence that the Senate, being unable to amend the Bill, could reject the taxing provisions of which it did not approve only by also rejecting those of which it approved. See, generally, Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901), pp 675-679; Harding v. Federal Commissioner of Taxation [1917] HCA 13; (1917) 23 CLR 119, at p 134; Resch v. Federal Commissioner of Taxation [1942] HCA 2; (1942) 66 CLR 198, at pp 222-223. No doubt, as a matter of history, the third requirement also facilitated the distinct accounting procedures in relation to duties of customs and excise which were necessary in the early days of the federation. See, in particular, Constitution, s. 87.
"deal with one subject of taxation only"

4. In Resch v. Federal Commissioner of Taxation (1942) 66 CLR, at p 222, Dixon J. correctly observed that the decisions of the Court had "uniformly" refused to give to the words "one subject of taxation" in the second requirement of s.55 "any narrow or inflexible application". Section 55 is, his Honour added, ibid., at p 223, "concerned with political relations, and must be taken as contemplating broad distinctions between possible subjects of taxation based on common understanding and general conceptions, rather than on any analytical or logical classification". There are compelling reasons which support that broad and non-technical approach. In the ordinary case where a law imposing taxation infringes the section's second requirement, the weight of existing authority supports the view that the consequence of non-compliance is total invalidity since it will be the law as a whole which infringes the constitutional imperative. See State Chamber of Commerce and Industry v. The Commonwealth (The Second Fringe Benefits Tax Case) (1987) 163 CLR 329, at pp 342-343, 374-375. A narrow or legalistic construction of the words "deal with one subject of taxation only" would inevitably produce the result that, at the risk of total invalidity, the draftsman be required to frame and the Parliament be required to pass a multiplicity of separate Bills to deal with any variations in the nature or incidence of an overall tax which might be disclosed by close analysis. Such a result would achieve nothing but pointless inconvenience for the Parliament and, from the point of view of the citizen, an undesirable proliferation of legislation. The point is well illustrated by the first plaintiff's argument in the present case which is to the effect that s.55 requires that amending provisions aimed at removing an anomaly in the taxation of the shells of concrete swimming pools not be included in the statute creating the anomaly but be enacted separately, presumably by adding yet another two Acts to the existing twenty-seven Acts which comprise the Commonwealth sales tax legislation. See CCH, Australian Sales Tax Legislation, 9th ed. (1991).

5. In a case where it is suggested that a law imposing taxation deals with more than one subject of taxation, the first matter for determination is the identification, as a matter of broad characterization, of "the main or substantial subject", see Resch (1942) 66 CLR at p 223, of taxation with which the Act deals. When that has been determined, the question to be addressed is whether the law confines itself to dealing with, as distinct from imposing, that "one subject of taxation only". The fact that the law includes, either expressly or by incorporation, provisions which are incidental to its operation as a law dealing with that main or substantial subject matter will not dictate an adverse answer to that question. As Higgins J. pointed out in Osborne v. The Commonwealth [1911] HCA 19; (1911) 12 CLR 321, at p 373, the requirement is not that laws imposing taxation shall deal with only one object of taxation or that they shall only tax one subject of taxation. It is "that they shall deal with one subject of taxation only". Higgins J., ibid., at p 373, in a comment adopted by Starke J. in Resch (1942) 66 CLR at p 213, went on to say that the "words seem to allow the insertion of any provision which is fairly relevant or incidental to the imposition of a tax on one subject of taxation". Thus, the mere fact that particular provisions of a law dealing with a main or substantial subject of taxation reach into a borderline area surrounding that subject so as to define or widen the area or incidence of the tax or the liability to it will not constitute an infringement of s.55's requirement that a law imposing taxation deal only with one subject of taxation unless the connection of those provisions with, or relevance to, the main subject is so tenuous that they "have in truth introduced a new or second subject". See, generally, per Dixon J., ibid., at p 223. Put differently, the question whether a particular provision of a taxing law or of a law incorporated in such a law brings about a contravention of s.55's requirement that a taxing law deal "with one subject of taxation only" is a question of the characterization of the particular provision in the context of the law as a whole. If, in that context, the particular provision is fairly relevant or incidental to a law dealing with the main or substantial subject of the tax with the consequence that the law as a whole, including the particular provision, is a law dealing with that main or substantial subject, the law will not infringe the requirement that it deal with one subject of taxation only. In that regard, it is relevant to note that characterization for the purposes of the second requirement of s.55 is necessarily a question of primary characterization in that a secondary characterization as a law dealing with the objects upon whom or which the tax is imposed can arguably be attributed to any taxing law. If the whole of a law imposing taxation, including any impugned provisions, can fairly be characterized as a law dealing with the main or substantial subject of taxation, it is to be assumed that the law was enacted by the Parliament as a law on that subject only. See Attorney-General for Queensland v. Attorney-General for the Commonwealth [1915] HCA 39; (1915) 20 CLR 148, at p 177.
"deal with duties of excise only"

6. The exclusion of laws imposing duties of customs or excise from the second requirement of s.55 and the addition of a specific requirement relating to such laws were presumably intended to apply a less stringent regime to those laws by allowing a law imposing duties of customs or excise to deal with more than one subject of taxation provided that it dealt only with duties of customs or with duties of excise. To the extent that it is permissible to refer to the Convention Debates to identify the subject to which words of the Constitution were directed, see, e.g.,Cole v. Whitfield [1988] HCA 18; (1988) 165 CLR 360, at p 385, they confirm that that was so. See the Official Record of the Debates of the Australasian Federal Convention, Adelaide, 1897, at pp 600-603; Melbourne, 1898, at pp 2070-2075. Indeed, such reference discloses that it was only narrowly decided by the framers of the Constitution, after considerable debate, that a law should not be able to deal with both customs and excise duties. See in particular, Convention Debates, Adelaide, 1897, at pp 595-596. The consistent refusal of this Court to give to the words "one subject of taxation" a narrow or inflexible application probably means that a law dealing with both duties of excise and duties of customs (but with no other subject of taxation) would not, in any event, have been seen as dealing with more than one subject of taxation. Be that as it may, it is clear that the considerations which have led to the rejection of a narrow and legalistic construction of the words "deal with one subject of taxation only" in the second requirement of s.55 are also applicable to the corresponding words "deal with duties of customs only" and "deal with duties of excise only" in the third requirement of that section. In particular, the requirement is not that a law imposing duties of excise shall only impose duties of excise. It is that such a law shall deal with duties of excise only; that is to say, that the law can be wholly characterized as a law dealing with the single and general subject of duties of excise.

7. It follows that, in a case where it is suggested that a law which imposes duties of excise infringes the constitutional requirement that it deal with duties of excise only, the correct approach is not to determine whether it is possible to identify some item of tax which, if viewed in isolation, would not satisfy some predetermined definition of what constitutes a duty of excise. The correct approach is to see whether the inclusion of the particular item or items is "fairly relevant or incidental" to the operation of the law as a law dealing with the main and substantial subject of duties of excise. See footnotes (18) and (19) supra. That question, like the corresponding question with respect to the second requirement of s.55 of the Constitution, is essentially a question of primary characterization. It differs from characterization for the purposes of s.51 of the Constitution in that, if a law's primary characterization is that of a law dealing with excise duties, it will be irrelevant for the purposes of the third requirement of s.55 that part of it could also, if characterization for the purposes of s.51 was involved, arguably be seen as having a secondary character as a law dealing with some other item with which the law incidentally deals. The reason why that is so is that, provided that other item is, to use Higgins J.'s words, "fairly relevant or incidental" to the main or substantial subject of duties of excise, its inclusion will neither alter the character of the law as a law dealing with that subject nor introduce a separate subject. Thus, the mere fact that a law imposing duties of excise contains provisions dealing with a borderline area between what clearly is and what clearly is not a duty of excise will not, to the extent that it may reach beyond the precise boundary, cause it to cease to be a law dealing with duties of excise or to assume a second or new character of a law dealing with a subject other than duties of excise. Such provisions in borderline areas may be necessary for a variety of truly incidental purposes, such as to ensure consistency of treatment of taxpayers in comparable circumstances, to prevent avoidance or evasion or to facilitate the definition of the area or incidence of the tax or to assist in its collection. They can properly be seen as "fairly relevant or incidental" to the imposition of duties of excise and as part of a law dealing with duties of excise as its only subject. The point can be illustrated by Dixon J.'s explanation in Resch of why it had been held in past cases that a law imposing land tax did not infringe the second requirement of s.55 when it imposed a tax upon persons whose relevant asset consisted of shares in the capital of a company which owned some land. His Honour said (1942) 66 CLR, at p 223:
"It having been ascertained that the subject of the land
tax was the unimproved value of interests, whether legal,
equitable or substantive, of certain kinds in land when
aggregated, no difficulty was felt in saying that no new
subject was introduced by a provision requiring the
inclusion in the assessment of a shareholder of so much
of the unimproved value of the company's land as bore the
same proportion to the whole as his interest in the paid-up
capital of the company did to the whole paid-up capital
..."

8. The law imposing duties of excise in the present case is the Sales Tax Act (No.1) 1930 (Cth) ("the Taxing Act"). It adopts the traditional approach of Commonwealth taxing legislation of this kind in that it incorporates s. 2 a related Assessment Act. Its main and substantial operation is to impose duties of excise. The provisions defining liability and dealing with the collection and recovery of tax and other relevant matters are contained in the incorporated Sales Tax Assessment Act (No.1) 1930 ("the Assessment Act") which had already been enacted and which is not a law imposing duties of excise (or other taxation) for the purposes of s.55 of the Constitution. See Deputy Commissioner of Taxation v. Hankin [1959] HCA 2; (1959) 100 CLR 566, at p 578; and, generally, Re Dymond [1959] HCA 22; (1959) 101 CLR 11, at pp 18-21. The general scheme of the Taxing Act is disclosed by its title. It is to impose duties of excise "upon the Sale Value of Goods manufactured in Australia, and sold by the Manufacturer or treated by him as stock for sale by retail or applied to his own use". Under that general scheme, the liability to tax falls upon the "manufacturer" in the obvious expectation, made manifest by the overall scheme of the Commonwealth sales tax legislation, that it will eventually be passed on to the consumer.

9. The shell (i.e. the treated and finished floor, sides and top coping) of a concrete swimming pool is a manufactured product. It can be manufactured ex situ as an independent product for subsequent installation in an excavation in the ground. Alternatively, it can be manufactured in situ, that is to say, in such an excavation. It is clear, and not contested, that, under its general legislative power with respect to taxation. Constitution, s. 51(ii), the Commonwealth Parliament can impose a tax upon the manufacture and supply of the shell of a concrete swimming pool (whether manufactured ex situ or in situ) calculated by reference to an actual or notional "sale value" attributed to the shell. Prior to 1986, the Parliament had, by the combined operation of the Assessment Act and the Taxing Act, imposed such a tax in respect of the shells of concrete swimming pools manufactured ex situ. By the Sales Tax Laws Amendment Act 1986 (Cth) s. 4 ("the Amending Act"), it purported to amend the Assessment Act so that the Taxing Act would impose a similar tax upon a "manufacturer" in respect of the shell of a concrete swimming pool manufactured in situ. Ultimately, the critical question in the case is whether the effect of that purported amendment of the Assessment Act would be that the Taxing Act ceased to be a law dealing only with duties of excise for the reason that it assumed a second character of a law dealing with some subject other than duties of excise. If the answer to that critical question is in the affirmative, the relevant provisions of the Amending Act are invalid. See Air Caledonie International v. The Commonwealth [1988] HCA 61; (1988) 165 CLR 462, at p 472.

10. The first plaintiff's argument that the tax on the shell of an in situ pool was invalid proceeded on the assumption that any law imposing duties of excise will infringe s.55 if there are any circumstances where any tax which it imposes does not, if viewed in isolation, satisfy the requirements of a predetermined definition of a duty of excise. The tax on the manufacture and supply of the shell of a concrete swimming pool erected in situ could not, so it was argued, be characterized as a duty of excise for the reason that such a tax is not a tax "on goods" but a tax "on land". That argument seems to me to be badly flawed for two distinct reasons. For one thing, for the reasons which I have explained, it asks and answers too narrow a question. Even if the tax on the shell of an in situ pool is not properly to be characterized as itself a duty of excise, it does not necessarily follow that its inclusion would involve an infringement of s.55. The correct question is whether the provision imposing a comparable tax in respect of the shell of an in situ pool is so connected with or relevant to the main subject of the Taxing Act as a law dealing with duties of excise that it does not alter the character of that Act by introducing a new and second subject. For another thing, the first plaintiff's argument gives insufficient weight to the consideration that whether a particular tax is properly to be characterized as a duty of excise is a question of substance. I turn to explain the second of those reasons before reverting to the first.
Is the tax on an in situ shell a duty of excise?

11. The argument that a tax on the manufacture and supply of something as a fixture to land cannot be a duty of excise for the reason that it is not a tax "on goods" has undeniable superficial appeal. For some legal purposes, a manufactured product which is or becomes affixed to land is part of the land. Obviously enough, a tax imposed on such a manufactured product merely in its capacity as part of the land or as an improvement to the land would not be an excise duty. On the other hand, such a manufactured product retains its essential character as a manufactured commodity. It is not itself land in any real sense; it is a manufactured commodity attached to land. At least theoretically, it can be physically detached from the land. The mere fact that, for some legal purposes, a manufactured product affixed to the land is treated as part of the land does not justify a generalization that a tax on the manufacture of a product affixed to the land can never be a duty of excise. Whether such a tax is a duty of excise must depend upon whether, as a matter of substance, the fact that the product is affixed to land relevantly prevents it from being seen as a tax upon the manufacture of goods or commodities. Thus, for example, a tax imposed upon manufacturers in respect of the "sale value" of all bookshelves and cupboards manufactured and supplied, including bookshelves and cupboards built in situ, would, in my view, be a duty of excise notwithstanding that it applied indifferently to bookshelves and cupboards manufactured as independent items and bookshelves and cupboards which were manufactured as fixtures in situ and which, although demountable, may have never had and may never have any independent existence. Such a tax is, as a matter of substance, a tax upon bookshelves and cupboards in their capacity as manufactured commodities. Again, a tax imposed upon a primary producer by reference to the produce of his or her land at a stage when that produce still formed part of the land could, depending upon the context, properly be characterized as a tax on goods and a duty of excise. Thus, in Matthews v. Chicory Marketing Board (Vict.) [1938] HCA 38; (1938) 60 CLR 263, it was held that a levy of 1 pound for every half acre of land planted with chicory was a duty of excise on chicory notwithstanding that it was payable by a producer by reference to the area of land planted and regardless of whether any, and if so how much, chicory was produced.

12. If the tax in the present case had been simply imposed upon the overall charge for the construction of a swimming pool in situ, including the excavation and shaping of the land, it would, in my view, have been neither an excise duty nor fairly incidental to a law dealing with excise duties. In fact, however, the Parliament has made clear that the tax imposed is not imposed either upon the overall construction or upon the land itself in its altered state. The deemed "manufactured goods" upon which the tax is imposed are confined to the treated and finished concrete shell, i.e. the manufactured floor, walls and top coping after painting, tiling, water proofing and other treatment and finishing: see the Assessment Act, s. 3(1C) and (1D) and the definition of "construction" in s.3(1). The installation of drainage, heating, lighting, power supply, water supply, filtering or pumping equipment and the excavation, clearing, levelling or landscaping of the land are expressly excluded, ibid. It was argued on behalf of the plaintiffs that, in the case of an in situ pool, the tax on the finished shell is effectively a tax on the construction of the shell. That argument is, however, unpersuasive. The tax is imposed on the deemed "sale value" of the concrete shell in the case of both an in situ pool and an ex situ pool. In the case of an in situ pool, the deemed "sale value" will reflect the value of material used in manufacture, the cost of manufacture and, no doubt, a component representing the manufacturer's profit. See, e.g., the Assessment Act, s. 18(3B)(a). The same can be said of the "sale value" of the shell of an ex situ pool. Indeed, as a matter of economic reality, the "sale value" of any manufactured product will ordinarily reflect those three elements. See the Assessment Act, s. 18(1) It will certainly do so in the case of most of the "deemed" sales to which the Assessment Act and the Taxing Act apply. See, e.g., the Assessment Act, s. 17A.

13. In these circumstances, it seems to me that, in the context of a statutory scheme providing for the imposition of duties of excise upon the actual or deemed "sale value" of manufactured goods which have been or are deemed to have been sold by the manufacturer, the better view is that the tax imposed in respect of the "sale value" of the shell of an in situ pool is properly to be characterized as a duty of excise. That tax is not imposed as a tax on land or on the use of land. It is not calculated by reference to the value or enhanced value of the land. It is calculated by reference to the deemed value of the finished shell itself as a manufactured product. Nor is the tax imposed upon the land owner or occupier. It is a one-off tax imposed upon the manufacturer of the finished shell. As a matter of both substance and form, it is a tax imposed on the deemed sale value of the finished shell in its capacity as a manufactured commodity.
Does the tax on ex situ shells cause the Taxing Act to cease to "deal with duties of excise only"?

14. As has been seen, however, a negative answer to the question whether the tax on the sale value of the shell of a concrete swimming pool manufactured in situ is itself an excise duty would not have been decisive of the present case. The requirement of s.55 that a law imposing duties of excise deal only with duties of excise will not be infringed merely by reason of the inclusion of an incidental provision dealing with a situation which falls within the borderline area between what clearly is and what clearly is not a duty of excise. Such a provision does not detract from the overall character of the law as a law dealing only with duties of excise. To the contrary, it is a true incident of such a law and itself partakes of that character. Regardless of whether the tax upon a manufacturer in respect of the manufacture of the finished shell of an in situ pool is technically to be characterized as a duty of excise, it falls within the borderline or grey area between what clearly is and what clearly is not such a duty. The extension of the Taxing Act into that area to produce conformity in the taxation of the manufacture of the shells of concrete swimming pools is, in my view, relevant or incidental to the operation of the Taxing Act as a law dealing only with duties of excise. That being so, the Amending Act does not detract from the character of the Taxing Act as a law dealing with duties of excise or impart to it a distinct character as a law dealing with some new or second subject.

15. I would allow the demurrer.

DAWSON, TOOHEY AND GAUDRON JJ. Under s.3 of the Sales Tax Act (No.1) 1930 (Cth), sales tax is imposed upon the sale value of goods manufactured in Australia by a taxpayer and sold by him, treated by him as stock for sale by retail or applied to his own use. Thus sales tax is imposed upon swimming pools which are not constructed in the ground, that is to say, prefabricated swimming pools. That is because swimming pools of that kind comprise a shell which has a separate existence from the land, at all events before it is placed in the ground, and so fall within the description of goods. On the other hand, swimming pools which are constructed in the ground, or in situ, have in the past not attracted sales tax. In order to bring the taxation of swimming pools constructed in situ into line with that of prefabricated swimming pools, the Sales Tax Assessment Act (No.1) 1930 (Cth), which is incorporated and to be read as one with the Sales Tax Act (No.1) Sales TaxAct(No. 1), s. 2, was amended in 1986 by deeming swimming pools constructed in situ to be manufactured goods.

2. The plaintiff, Mutual Pools & Staff Pty. Limited, carries on the business of constructing swimming pools in situ and contends in these proceedings, which are by way of demurrer to the statement of claim, that the amendment to the Sales Tax Assessment Act (No.1) fails in its purpose. The plaintiff argues that a sales tax upon goods is a duty of excise but that a sales tax upon something which cannot be described as goods, even though deemed by the legislation to be goods, is not a duty of excise. Under s.55 of the Constitution it is provided that laws imposing duties of excise shall deal with duties of excise only and the plaintiff says that in amending the Sales Tax Assessment Act (No.1) so as to deem swimming pools constructed in situ to be manufactured goods, and thereby to subject them to sales tax, the legislature is purporting to have the Sales Tax Act (No.1) deal with something other than a duty of excise. That, says the plaintiff, is something which s.55 forbids.

3. The Act which purports to amend the Sales Tax Assessment Act (No.1) is the Sales Tax Laws Amendment Act 1986 (Cth). Among other things s.4(f) of that Act inserts new ss.3(1C) and 3(1D) into the Sales Tax Assessment Act (No.1). They are as follows:

"(1C) Where a swimming pool is constructed in situ, and
the construction ... commences after 19 August 1986, and -
(a) the person who constructs the swimming pool does
so wholly or partly in the course of carrying on
a business; or
(b) the person who constructs the swimming pool does
so exclusively or principally for the use of the
person otherwise than in the course of carrying on
a business and the whole, or a principal part, of
the labour used in the construction is provided
by persons who provide their labour otherwise than
voluntarily and without remuneration,
then, for the purposes of this Act (other than sub-section
17(2) and section 17A) -
(c) so much of the swimming pool as is so constructed
shall be deemed to be manufactured goods;
(d) the construction shall be deemed to be the
manufacture of the goods;
(e) the person who constructs the swimming pool shall
be deemed to be the manufacturer of the goods;
(f) if, at the time when the construction is completed,
the manufacturer does not (whether alone or jointly
with any other person or persons) have the right
of exclusive occupation of the land on which the
swimming pool is situated, the goods shall be
deemed to be sold by retail at that time by the
manufacturer to an unregistered person; and
(g) if paragraph (f) does not apply - the goods shall
be deemed to be, at the time when the construction
is completed, applied to the manufacturer's own
use.
(1D) For the purposes of paragraph (1C)(b), where a
swimming pool is constructed by a person and that person
works on the construction, the person shall be deemed
to provide his or her labour voluntarily and without
remuneration."

The definition section of the Sales Tax Assessment Act (No.1), s.3, was also amended by the Sales Tax Laws Amendment Act s. 4(a) by the addition to s.3(1) of the following:

"'Construction', in relation to a swimming pool, means -
(a) the construction or erection of the walls and floor of
the swimming pool wholly or principally from concrete,
concrete blocks, sand, bricks, metal, timber or other
prescribed material to form the shell or container;
(b) the construction or installation of the coping for the
swimming pool; or
(c) the painting, tiling, waterproofing or other treating
or finishing of the surface of the walls, floor and
coping of the swimming pool,
but does not include -
(d) the installation, in connection with the swimming pool,
of drainage, heating, lighting, power supply, water
supply, filtering or pumping equipment; or
(e) the undertaking of excavation or other earthworks
or the clearing, levelling or landscaping of land in
connection with the construction of the swimming pool".

And s.18(3B) was added to the Sales Tax Assessment Act (No.1) by the Sales Tax Laws Amendment Act s. 6. That sub-section reads, so far as is relevant:

"the sale value of goods, being so much of a swimming
pool as is constructed in situ, is the amount which the
manufacturer of the goods could reasonably be expected to
have paid another person, being a person who constructs
swimming pools in the ordinary course of the person's
business, for the construction of the goods if -
(a) all the materials used in or in connection with the
construction were supplied by that other person;
and
(b) the manufacturer and that other person were dealing
with each other at arm's length in relation to the
construction".

4. By defining the construction of a swimming pool constructed in situ so as to exclude the associated earthworks, the legislature has attempted to tax only that which would be regarded as the shell of the pool if it were prefabricated. Whether the two are properly equated is doubtful in that the cost of construction of a swimming pool constructed on site, even confining it to the shell, may to some extent be dictated by the configuration of the land and nature of the earthworks required. However, it is clear that what the legislature sought to do was to impose sales tax upon a swimming pool constructed in situ only to the extent that it might be treated in the same way as an off-site swimming pool in its character as goods.

5. An excise duty is a tax upon goods. Of course, goods do not pay taxes. That means an excise duty is a tax upon persons in relation to goods. There is no need in this case to examine the precise relationship between a tax and goods which will be sufficient to constitute the tax a duty of excise. That is a vexed question and the present state of the authorities was recently examined by the Court in Philip Morris Ltd. v. Commissioner of Business Franchises (Vict.) [1989] HCA 38; (1989) 167 CLR 399. For the purposes of this case it is enough to recognize that an excise duty is "a tax imposed 'upon' or 'in respect of' or 'in relation to' goods": Browns Transport Pty. Ltd. v. Kropp [1958] HCA 49; (1958) 100 CLR 117, at p 129. "Goods" is not a word of precise meaning but, in the context of excise duties, it signifies articles of commerce or things which, even if not saleable or without any discernible sale value, Federal Commissioner of Taxation v. Totalisator Administration Board (Q.) (1990) 170 CLR 508, at p 511, may be the subject of trading or commercial transactions. See Matthews v. Chicory Marketing Board (Vict.) [1938] HCA 38; (1938) 60 CLR 263, at p 300, where Dixon J. said "to be an excise the tax must be imposed in respect of commodities". See also Kitto J. in Anderson's Pty Ltd v. Victoria [1964] HCA 77; (1964) 111 CLR 353, at p 374, and Western Australia v. Hamersley Iron Pty Ltd (No. 1) [1969] HCA 42; (1969) 120 CLR 42, at p 63, where he described "goods" as "subjects of commerce" and as "the subjects of manufacture or production or ... articles of commerce", respectively. Under s.3(1) of the Sales Tax Assessment Act (No.1) "goods" includes commodities.

6. Quite clearly, while the materials which are used in the construction of a swimming pool constructed in situ may be goods, the finished product is not. On the contrary, a swimming pool constructed in situ forms part of the land and is denied the character of goods. Indeed, the Commissioner of Taxation concedes that a swimming pool constructed in situ is a fixture although "fixture" is, perhaps, not an appropriate term because an in-ground swimming pool constructed in situ never has any separate existence as a chattel apart from the land. That is why the legislature found it necessary to deem a swimming pool constructed in situ to be manufactured goods. In doing so it recognized that it was not that. As Cave J. observed in Reg. v. The County Council of Norfolk (1891) 60 LJQB 379, at pp 380-381:

"generally speaking, when you talk of a thing being deemed
to be something, you do not mean to say that it is that
which it is to be deemed to be. It is rather an admission
that it is not what it is to be deemed to be, and
that, notwithstanding it is not that particular thing,
nevertheless, for the purposes of the Act, it is to be
deemed to be that thing."

It is true that a deeming provision does not always create what has been called a "statutory fiction". It may be used for the purpose of definition or for expressing a conclusion. Hunter Douglas Australia Pty Ltd v. Perma Blinds [1970] HCA 63; (1970) 122 CLR 49, per Windeyer J. at pp 65-66. But in this case there can be no doubt that, in deeming a swimming pool constructed in situ to be manufactured goods, the legislature was deeming it to be something which it is not and never has been.

7. The Commissioner pointed to the plenary nature of the taxation power conferred upon the Commonwealth Parliament by s.51(ii) of the Constitution. Fairfax v. Federal Commissioner of Taxation [1965] HCA 64; (1965) 114 CLR 1, at pp 12-13. The point is, however, not whether the imposition of a tax upon swimming pools constructed in situ is within the legislative power of the Commonwealth but whether such a tax when imposed constitutes a duty of excise.

8. It may be, and it is unnecessary to decide the point in this case, that there are things not ordinarily within the concept of goods which may be brought within that concept by a deeming provision which widens the definition of goods in such a way that the imposition of a tax upon those things may nevertheless remain a duty of excise. If that is so it will be because the tax is in the nature of a tax upon goods even though imposed upon things not ordinarily within the concept of goods. But in this case, the deeming provision does not seek merely to extend the definition of goods or manufactured goods; it seeks to bring within that definition things which are plainly not goods - swimming pools constructed in situ. The tax imposed by the use of the deeming provision is not a tax upon goods but a tax upon land.

9. In Waterhouse v. Deputy Federal Commissioner of Land Tax, S.A(1914) [1914] HCA 16; 17 CLR 665, the Court considered s.36 of the Land Tax Assessment Act 1910 (Cth) which provided that where a husband or wife transferred land to one another in trust they should be deemed to be joint owners of all the land owned by either of them unless the Commissioner was satisfied that the transfer was not for the purpose of evading land tax. The section was held to be beyond the power of the Parliament because, as was pointed out in MacCormick v. Federal Commissioner of Taxation [1984] HCA 20; (1984) 158 CLR 622, at pp 637-638, it lacked the character which in the circumstances of the case was essential to its validity, namely, that of a law with respect to land tax. It purported, contrary to the facts, to deem a person to be an owner of land with the consequence that he became liable to pay land tax which was imposed elsewhere in the legislation upon owners of land. The provision in question did not operate to impose a tax. It dealt with facts so as to give an existing tax a different incidence. For that reason it was not a law with respect to taxation and so was beyond power. Isaacs J. said (1914) 17 CLR, at pp 677-678:

"The use of the word 'deemed' is a common legislative
expedient to safeguard and enforce enactments, by making
certain facts conclusive evidence. ...
In this case - as by the proper construction of the
Statute, the legislature has excluded all idea of acting
upon any power but that of enacting a land tax - we are, I
think, restricted to the single enquiry whether sec. 36 is
really incidental to such a tax. In my opinion it is not,
because the fiction it creates, namely, that the given
person is to be deemed owner of certain land not in his
name, is accompanied by an acknowledgment on the very face
of the section itself, that the person in question has no
interest whatever in the land."

That case is a difficult one but it illustrates the point that the Parliament cannot bring legislation within power by deeming facts to be as they are not or by deeming things to have a character which they do not bear. No more, in our view, can a restriction imposed by the Constitution - as by s.55 - be avoided by deeming facts to be as they are not. And if the application of the second paragraph of s.55 could be avoided by the use of a deeming provision to bring things within the description of an excise duty which otherwise fall quite outside that description, it is difficult to see why a State could not in legislation deem goods not to constitute goods so as to avoid the consequence that a tax upon those goods is a duty of excise in contravention of the exclusive power of the Commonwealth to impose duties of excise under s.90 of the Constitution. But as Starke J. observed in Resch v. Federal Commissioner of Taxation [1942] HCA 2; (1942) 66 CLR 198, at p 213:
"Parliament cannot by any definition or provision that it may adopt contravene the provisions of the Constitution".

10. The Commissioner contended that the tax in question is a duty of excise as it is a tax upon the goods used in the construction of a swimming pool constructed in situ; in other words, that it is a tax on the concrete, sand, gravel, reinforcing steel and the like. These goods are, apparently, treated as exempt from sales tax under Sched.1, Div.XII (headed "Building Materials") of the Sales Tax (Exemptions and Classifications) Act 1935 (Cth). However, the tax in question is not levied upon these goods, but upon a swimming pool when construction is completed. Thus the sale value for the purpose of calculating the tax is not just the total value of those goods, but includes the cost of construction of the pool.

11. Alternatively, the Commissioner contended that the tax imposed upon a swimming pool constructed in situ is a tax imposed upon the manufacture of, and calculated by reference to the market value of, the swimming pool as a distinct article of commerce. He submitted that the circumstance that the swimming pool when constructed becomes, upon completion, affixed to and (for other purposes) part of the land does not cause it to cease to be an article of commerce. But, as we have indicated, a swimming pool constructed in situ cannot truly be regarded as a fixture because it has no existence apart from the land in which it is constructed. The fact that a swimming pool can be prefabricated and so have a separate existence is not to the point. Of necessity, a swimming pool constructed in situ is not prefabricated and is, for that reason, never of itself an article of commerce separate from the land of which it forms a part.

12. The first paragraph of s.55 of the Constitution provides that laws imposing taxation shall deal only with taxation and any other provision therein dealing with any other matter shall be of no effect. That paragraph thus prescribes the effect of a failure to comply with its requirement - a provision dealing with any other matter shall be of no effect.

13. The second paragraph of s.55 provides that laws imposing taxation, except laws imposing duties of customs or excise, shall deal with one subject of taxation only, but does not specify what is to happen if a law offends against that requirement. However, the better view is that contravention will lead to the entire law being invalid. In Osborne v. The Commonwealth [1911] HCA 19; (1911) 12 CLR 321, at p 353. Barton J. expressed that view saying:

"where the tax Bill deals with more subjects than one, there
is ordinarily no means, as there is in respect of Bills
within the first paragraph, of casting out that which
offends against the Constitution, as there is no means of
knowing which subject of taxation represents more than the
other or others the will of Parliament".

That passage was approved by the Court in The Second Fringe Benefits Tax Case. State Chamber of Commerce and Industry v. The Commonwealth (1987) 163 CLR 329, at pp 342-343.

14. The second paragraph likewise does not spell out the consequence where a law which imposes duties of excise deals with something other than duties of excise. But that situation is closer to that dealt with by the first paragraph and, although the words "and any provision therein dealing with any other matter shall be of no effect" do not appear at the end of the second paragraph, we think that it should be read in an appropriate case as if they do. The second paragraph of s.55 proceeds upon the assumption that duties of customs or of excise may involve more than one subject of taxation. Thus, where duties of excise are imposed by a law, the law may deal with more than one subject of taxation provided the law is confined to duties of excise. Any other subject is impermissible. The situation, at all events in a case such as the present one, is unlike that referred to by Barton J. in Osborne v. The Commonwealth, where a law imposing taxation deals with more than one subject and there is no means of saying that it was the inclusion of one subject as opposed to another which led to the contravention of s.55. When a law imposing excise duties also deals with something other than excise duties, it may be possible to say that it is that other subject which offends against the Constitution. This is the case here.

15. The law imposing taxation in this case is the Sales Tax Act (No.1). As we have previously said, by virtue of s.2 of that Act the Sales Tax Assessment Act (No.1) is to be incorporated and read as one with it. The Sales Tax Assessment Act (No.1) does not impose tax although, for the reasons which we have given, after amendment by the Sales Tax Laws Amendment Act it relevantly deals with more than one subject of taxation, not being a subject which falls within the category of duties of excise. Accordingly, when incorporated and read as one with the Sales Tax Act (No.1), the Sales Tax Assessment Act (No.1) as amended produces the effect that the Sales Tax Act (No.1), which is the Act imposing duties of excise, deals not just with duties of excise but also with something other than duties of excise. The provisions of the Sales Tax Assessment Act (No.1) as amended which produce that result should, therefore, when read as part of the Sales Tax Act (No.1), be treated as of no effect.

16. The demurrer should for these reasons be overruled. The plaintiff is entitled to a declaration that the provisions of the Sales Tax Assessment Act (No.1) which, when incorporated and read as one with the Sales Tax Act (No.1), would have the effect of imposing a tax upon a sale value of so much of a swimming pool as is constructed in situ, are of no effect.

ORDER

Demurrer overruled.

Declare that the provisions of the Sales Tax Assessment Act (No. 1) 1930 (Cth) which, when incorporated and read as one with the Sales Tax Act (No. 1) 1930 (Cth), would have the effect of imposing a tax upon a sale value of so much of a swimming pool as is constructed in situ are of no effect.

Order that the defendant pay the costs of the first plaintiff.