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High Court of Australia |
CAPITAL DUPLICATORS PTY. LIMITED AND ANOTHER v AUSTRALIAN CAPITAL TERRITORY
AND ANOTHER [1993] HCA 67; (1993) 178 CLR 561
F.C. 93/053
Constitutional Law (Cth)
HIGH COURT OF AUSTRALIA
MASON CJ(1), BRENNAN(1), DEANE(1), DAWSON(2), TOOHEY(3), GAUDRON(3) AND
McHUGH(1) JJ
CATCHWORDS
Constitutional Law (Cth) Duties of excise - Exclusive power of Commonwealth Parliament - Territory law imposing licence fee on sellers of certain videos - Fee for initial grant or first renewal of licence calculated upon value of videos sold in month for which grant or renewal - Fee for subsequent renewals calculated upon value of videos sold in month two months preceding commencement of licence period Validity - The Constitution (63 and 64 Vict. c. 12), s. 90 - Business Franchise ("X" Videos) Act 1990 (A.C.T).
HEARING
CANBERRA, 1993, April 20-23, December 7.ORDER
Answer the questions reserved for the consideration of the Court as follows: (1) Are any, and if so which, of the provisions of the Business Franchise ("X" Videos) Act 1990 (A.C.T.) invalid as imposing, in any respect, either a duty of excise or a duty of customs or both within the meaning of s.90 of the Commonwealth Constitution? Answer: Sections 5(1)(b), 9(2)(c), 19 and 20 of the Business Franchise ("X" Videos) Act 1990 (A.C.T) are invalid as imposing duties of excise.(2) Are any, and if so which, of the provisions of that Act invalid under the Australian Capital Territory (Self-Government) Act 1988 (Cth) as being a law with respect to a "classification of materials for the purpose of censorship"? Answer: Does not arise.
(3) If the answer to any part of question (1) or (2) is "yes", are any, and if so which, further provisions of the Act incapable of being severed from those provisions and therefore invalid? Answer: No answer to question (3). The parties be at liberty to address argument on question (3).
The defendants to pay the plaintiff's costs of the questions reserved.
DECISION
MASON CJ, BRENNAN, DEANE AND McHUGH JJ In its earlier
The arguments of the parties
2. The plaintiffs submit that the reasoning of the majority in Philip
Morris Ltd. v. Commissioner of Business Franchises (Vict.)
((2) [1989] HCA 38; (1989) 167 CLR 399.) supports the conclusion that the licence
fees imposed by the Act are duties of excise. In that case, the
statutory provisions which imposed a licence fee upon the issue of a
retail tobacconist's licence were held by a majority to be relevantly
indistinguishable from the Tasmanian provisions held to be valid in
Dickenson's Arcade Pty. Ltd. v. Tasmania ((3) [1974] HCA 9; (1974) 130 CLR
177.) where the Court followed its earlier decision in Dennis Hotels
Pty. Ltd. v. Victoria ((4) [1960] HCA 10; (1960) 104 CLR 529 (where the
victualler's licence fee, calculated by reference to sales of liquor in
a period anterior to the term of the licence, was held not to be an
excise, whereas the temporary licence fee, calculated by reference to
sales during the term of the licence, was held to be an excise).). In
Philip Morris, the Court rejected, as it had done on earlier occasions,
an argument that the decisions in Dennis Hotels, Dickenson's Arcade and
H.C. Sleigh Ltd. v. South Australia ((5) [1977] HCA 2; (1977) 136 CLR 475.)
should be overruled. The reasons given by the members of the Court in
their judgments for rejecting that argument were divergent and it will
be necessary to refer to them later in these reasons. The plaintiffs'
case is that, despite the difference in the reasoning in Philip Morris,
there was a majority (Mason CJ and Deane J, Brennan J and McHugh
J) for acceptance of the proposition, based upon the unanimous
decision in Bolton v. Madsen ((6) [1963] HCA 16; (1963) 110 CLR 264.), that a
tax directly related to goods imposed at some step in their production
or distribution before they reach consumers is an excise. Hence the
plaintiffs rely upon the reasoning of four Justices in Philip Morris
and oppose a reconsideration of Dennis Hotels and Dickenson's Arcade,
having regard to the way in which, so the plaintiffs argue, those
decisions were explained by those Justices in Philip Morris. The
plaintiffs also contend that, if the Court were to hold that the
licence fees in the present case are not an excise because the Act is
regulatory in its nature by reason of seeking to exercise some control
over the sale or use of pornographic and violent videos, then the Act
is primarily concerned with censorship and must be characterized as a
law "with respect to ... the classification of materials for the
purposes of censorship" and is, accordingly, beyond the legislative
powers conferred upon the Legislative Assembly of the first defendant,
the Australian Capital Territory ("the Territory"). Section 23 of the
Australian Capital Territory (Self-Government) Act 1988 (Cth) excludes
from the legislative competence of the Assembly:
"power to make laws with respect to:
...
(g) the classification of materials for the purposes of
censorship".
3. The Territory, on the other hand, submits that the Court should
reconsider not only the decisions in Dennis Hotels and Dickenson's
Arcade, but also the interpretation of s.90 generally and adopt a
narrow definition of the expression "duties of excise" in that
section. Such a definition, so the argument runs, should reflect the
meaning of the expression as it was understood in Australia at the end
of the nineteenth century. According to the Territory, that meaning
was a duty imposed upon the producer or the manufacturer of goods
in the jurisdiction in which the duty is imposed, such a duty being
imposed by reason of, or by reference to, the production or
manufacture of the goods. This definition is similar to that adopted
by the Court in Peterswald v. Bartley ((7) [1904] HCA 21; (1904) 1 CLR 497.),
the first decision on s.90. There the Court described an excise as
((8) ibid., at p.509; see also at p.512 (where the Court referred to an
excise as "limited to taxes imposed upon goods in process of
manufacture").):
"a duty analogous to a customs duty imposed upon goodsThe definition for which the Territory argues differs from the
either in relation to quantity or value when produced or
manufactured, and not in the sense of a direct tax or
personal tax".
4. South Australia, which is an intervener, supports the argument presented
by the Territory, subject to the qualification that
an
excise is a tax on production or manufacture in Australia. The
difference between the proposition contended for by South Australia
and that put forward by the Territory is not significant for the
purposes of this case. The primary argument of the other intervening
States is that the Court should not reconsider Dennis Hotels and
Dickenson's Arcade. This argument stems from an acceptance of the
practical consequence of those decisions, namely, that the States can,
consistently with s.90, validly impose licence fees on the vendors of
liquor and tobacco. The Commonwealth, too, supported the argument
that the decisions in Dennis Hotels and Dickenson's Arcade should
stand, but only as limited exceptions to the general rule that an
excise is any tax which is, in substance, a tax on goods.
The case for reconsideration of the earlier decisions
5. The principal argument in favour of a reconsideration of the
interpretation of s.90 and Dennis Hotels and Dickenson's Arcade
is
that there is no judicial consensus as to the meaning or application
of the expression "duties of excise" in s.90. Moreover, there has
been disagreement over the question whether the different outcomes in
Dennis Hotels apply to producers as distinct from distributors ((9)
Gosford Meats Pty. Ltd. v. New South Wales [1985] HCA 5; (1985) 155 CLR 368, per
Gibbs CJ at p.380; Mason and Deane JJ at pp.384-385; Brennan J at
pp.409-410; Philip Morris (1989) 167 CLR, per Brennan J at
pp.455-458; Dawson J at p.475.). Furthermore, as the judgments in
Philip Morris establish, the Court has experienced difficulty in
reconciling the decisions in Dennis Hotels, Dickenson's Arcade and H.C.
Sleigh (the so-called "franchise cases") with the fundamental
proposition that was unanimously accepted in Bolton v. Madsen that
"taxes directly related to goods imposed at some step in their
production or distribution before they reach the hands of consumers"
are duties of excise ((10) (1963) 110 CLR, at p.271.). That
proposition was contrasted with "a tax which has no closer connexion
with production or distribution than that it is exacted for the
privilege of engaging in the process at all" ((11) Dennis Hotels
(1960) 104 CLR, per Kitto J at p.560; see Bolton v. Madsen (1963)
110 CLR, at p.271.). The distinction between a duty of excise
under the Bolton v. Madsen proposition and a licence fee which is no
more than a fee charged for the privilege of engaging in the relevant
activity is a question which has constantly arisen for decision. So,
in the view of Kitto J, the imposition of a sales tax, such that a
liability for the tax arises every time a sale of liquor is made under
a licence, would be an excise because the exaction would not be in
respect of the business generally but in respect of a particular act
done in the course of the business ((12) Dennis Hotels (1960) 104
CLR, at p.563.). Conversely, in the view of Kitto J, where the
licence fee is exacted only in respect of the business generally and
not in respect of any particular acts done in the course of the
business, the fee is not a duty of excise although it is calculated by
reference to sales made during a period before the commencement of the
licence.
6. In Bolton v. Madsen and Dennis Hotels the character of an impost on
goods, whether a duty of excise or a licence fee exacted
only
in respect of the business generally, was determined by reference
solely to the terms of the relevant legislation. By construing
the legislation, the characteristic "criterion of liability" was
identified. The criterion of liability was the means by which it was
ascertained whether an exaction was a tax "directly related to goods
imposed at some step in their production or distribution before they
reach the hands of consumers".
7. Subsequent cases have rejected both this application of the criterion of
liability ((13) Anderson's Pty. Ltd. v. Victoria
[1964]
HCA 77; (1964)
111 CLR 353, at pp.365-366; Western Australia v. Chamberlain
Industries Pty. Ltd. [1970] HCA 5; (1970) 121 CLR 1, at pp.13-17; Victoria v.
I.AC (Wholesale) Pty. Ltd. [1970] HCA 5; (1970) 121 CLR 1; Logan Downs Pty.
Ltd. v. Queensland [1977] HCA 3; (1977) 137 CLR 59, at pp.76-77; H.C. Sleigh
(1977) 136 CLR, at p.499; Hematite Petroleum Pty. Ltd. v.
Victoria [1983] HCA 23; (1983) 151 CLR 599, at pp.633, 658-659, 663-664;
Gosford Meats (1985) 155 CLR, at pp.383-384, 406.) and, as McHugh
J explained in Philip Morris ((14) (1989) 167 CLR, at pp.491-492.)
, the proposition that it is the exclusive determinant of the question
whether an exaction is an excise. Instead, in determining whether an
exaction is or is not an excise, the Court has regard to matters of
substance rather than form ((15) ibid., per Mason CJ and Deane J at
pp.433-436; Brennan J at pp.449-450; McHugh J at p.492.). That
approach, which looks to the practical or substantial operation of the
statute as well as to its legal operation, requires that a variety of
factors be taken into account ((16) "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": Anderson's Pty. Ltd. v. Victoria (1964)
111 CLR, per Barwick CJ at p.365.). The rejection of the
criterion of liability as an exclusive test has not disturbed general
acceptance of the proposition that a tax in respect of goods at any
step in the production or distribution to the point of consumption is
an excise. That is the fundamental proposition for which Bolton v.
Madsen stands as authority, subject only to the qualification that it
speaks of taxes "directly related to goods".
8. As Mr Jackson QC for the Territory points out, before the decision in
Philip Morris, disagreement over the criterion of
liability reflected the controversy which arose in relation to the
characterization of a law for the purpose of determining whether
it contravened s.92 of the Constitution and, in resolving that
controversy, the Court, in Cole v. Whitfield ((17) [1988] HCA 18; (1988) 165 CLR
360.), decided that it would reconsider the interpretation of that
contentious section. In the course of its reconsideration, the Court
adopted an interpretation of the section, based partly on historical
considerations, which gave effect to what was thought to be the
intention of the framers of the Constitution. The defendants submit
that the Court should now adopt a similar approach to the construction
of s.90 and embrace an interpretation of the expression "duties of
excise" which gives effect to the meaning of that expression as it was
understood when the Constitution was brought into existence.
9. Although the case for reopening the decisions in Dennis Hotels and
Dickenson's Arcade is based very largely on the argument
that the
interpretation of the section should be reconsidered comprehensively
with a view to returning to a narrow definition similar to the
Peterswald definition of "duties of excise", it is convenient to deal
with the two contentions separately.
Reconsideration of the wider interpretation of the section
10. The variety of views which have been expounded about the meaning of
"duties of excise" since Peterswald and the shifts in judicial
opinion with respect to s.90 reflect the fact that the critical
words of the section had no clearly established meaning when the
Constitution was brought into existence ((18) Quick and Garran, The
Annotated Constitution of the Australian Commonwealth, (1901),
pp.837-838. See also Matthews v. Chicory Marketing Board (Vict.)
[1938] HCA 38; (1938) 60 CLR 263, per Dixon J at p.293; Dickenson's Arcade (1974)
130 CLR, per Stephen J at p.230; Philip Morris (1989) 167 CLR,
per Mason CJ and Deane J at p.425.). In an attempt to fill
the void created by the absence of a clearly established meaning,
judges have sought to find elucidation in the relationship of the
section with other provisions of the Constitution and with the purpose
which the section is thought to serve.
11. Thus, the Territory and South Australia assert that the immediate
purpose of s.90 was to prevent States from imposing duties on
producers or granting bounties on the production or export of goods.
The broader purpose was to give the Commonwealth control over tariff
policy and to ensure equality of trade between the States. Control
over tariff policy enables the Commonwealth to decide what
differential, if any, there will be on the local as compared with the
imported product. Support for this identification of the purpose of
the section is said to be provided by the circumstance that certain
sections of the Constitution indicate that excise duties are closely
linked to customs duties and production of goods ((19) ss.51(iii), 55,
86, 87, 90, 91, 92, 93.). Thus, it is suggested that, just as duties
of customs relate to duties imposed upon goods imported into the
community, so duties of excise relate to goods produced or manufactured
within that community.
12. Of the sections falling into this category, s.93, with its reference to
"duties of excise paid on goods produced or manufactured
in a State", is consistent with the view that the necessary relation
between the taxpayer and the goods is that "the taxpayer is taxed by
reason of, and by reference to, his production or manufacture of
goods" ((20) Dennis Hotels (1960) 104 CLR, per Fullagar J at
p.555.).
13. On the other hand, ss.90 and 92, taken together with the safeguards
against Commonwealth discrimination in s.51(ii) and (iii)
and s.88, created a Commonwealth economic union, not an association of
States each with its own separate economy ((21) Philip Morris (1989)
167 CLR, at p.426.). Section 92 of the Constitution ensured that
the domestic market of each State be opened equally to goods from
interstate and goods of local production or manufacture ((22) Cole v.
Whitfield (1988) 165 CLR, at p.391.), but that would not have been
sufficient by itself to create a Commonwealth economic union.
Differential taxes on goods, if permitted, could have distorted local
markets within the Commonwealth. That possibility was averted by
ss.51(ii) and (iii), 86, 88, 90 and 92 of the Constitution which
created a single legislative authority to impose taxes on goods and to
grant bounties and required those powers to be exercised uniformly.
Sections 90 and 92 of the Constitution both came into operation when
uniform duties of customs were imposed by the Commonwealth. The
constitutional contemporaneity of those events together with the
provisions of s.51(ii) and (iii) show that the customs and excise
imposts to be paid to government in respect of particular goods and the
bounties to be paid by government on particular goods were to be
uniform throughout the Commonwealth ((23) As Deane J observed in
Hematite Petroleum (1983) 151 CLR, at p.660.).
The purpose is not difficult to detect. It was to ensure that
differential taxes on goods and differential bonuses on the production
or export of goods should not divert trade or distort competition. Of
course, trade and competition are affected by a variety of factors
but the imposition of a tax on goods is a particular way by which a
government may attract or discourage trade and distort competition.
If taxes on the distribution of goods were excluded from the operation
of s.90, the purpose which uniformity of customs, excise and bounties
was intended to achieve would be prejudiced and the Parliament would
not have effective control over economic policy affecting the supply
and price of goods throughout the Commonwealth. So it was that
Dixon J observed in Parton v. Milk Board (Vict.) that ((24) [1949] HCA 67; (1949) 80
CLR 229, at p.260.):
"(s.90) 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."
14. The purpose attributed to s.90 by Dixon J and the similarity in effect
of a tax on manufacture or production and a tax on distribution
which he identified undermined the Peterswald view that an excise was
a tax on manufacture or production and did not include a tax on mere
sale or distribution ((25) Philip Morris (1989) 167 CLR, per McHugh
J at p.489.). A tax on distribution, like a tax on production or
manufacture, has a natural tendency to be passed on to purchasers down
the line of distribution and thus to increase the price of, and to
depress the demand for, the goods on which the tax is imposed. As
Dixon J noted ((26) Parton (1949) 80 CLR, at p.260.), if:
"the exclusive power of the Commonwealth with respect toIn essence, his Honour's view of s.90 rested on the proposition that
excise did not go past manufacture and production it would
with respect to many commodities have only a formal
significance".
15. In conformity with that view of s.90, the Court decided in Parton that
a purported levy on "dairymen" who were not dairy farmers who
produced milk, calculated by reference to the quantity of milk sold or
distributed, was a duty of excise. Parton is inconsistent with the
interpretation for which the defendants and South Australia contend
and it is a decision which has not been overruled or qualified by
subsequent decisions. More importantly, ever since Parton, it has
been accepted in the subsequent cases that the exaction of a tax,
whether called a licence fee or not, on the sale or distribution of
goods by a person other than the manufacturer of the goods will or may
constitute an excise ((30) Dennis Hotels (the decision on the
temporary victualler's licence); Western Australia v. Chamberlain
Industries Pty. Ltd.; Victoria v. I.AC (Wholesale) Pty. Ltd. (1970)
121 CLR, at pp.43-44.). As mentioned earlier, in Bolton v. Madsen
it was decided unanimously that a tax on the taking of a step in the
process of the production or distribution of goods before they reach
consumers is an excise. Acceptance of either of the interpretations
put forward by the Territory and South Australia would require the
Court to overrule no less than five previous decisions ((31) Parton;
Dennis Hotels; Dickenson's Arcade; Western Australia v. Hamersley Iron
Pty. Ltd. (No.1) [1969] HCA 42; (1969) 120 CLR 42; and Western Australia v.
Chamberlain Industries Pty. Ltd.).
16. Indeed, since Parton, there has been little support for the view that
an excise is confined to a tax on, or by reference to,
the local
production or manufacture of goods. In Dennis Hotels, Fullagar J was
alone in expressing that opinion ((32) (1960) 104 CLR, at
pp.555-556.). Murphy J again was alone in stating a similar view in
Logan Downs Pty. Ltd. v. Queensland ((33) (1977) 137 CLR, at
pp.84-85; see also H.C. Sleigh (1977) 136 CLR, at pp.526-527;
Hematite Petroleum (1983) 151 CLR, at p.638; Gosford Meats (1985)
155 CLR, at pp.387-388.). And, more recently, Toohey and Gaudron
JJ expressed the same opinion in Philip Morris ((34) (1989) 167
CLR, at pp.478-480.). But that is the only support for the narrow
view of "duties of excise" that has been expressed in all the cases
since Parton.
17. Ranged against these expressions favouring a return to a narrow
definition of excise is the very substantial weight of judicial
opinion since Parton. It would be a tedious and unproductive exercise
to refer to all the cases. It will be enough to mention what has been
said in the three most recent cases in which the question has been
discussed. In Hematite Petroleum, only Murphy J supported the
Peterswald definition ((35) (1983) 151 CLR, at p.638.). Gibbs
CJ ((36) ibid., at p.615.) accepted the proposition that a duty of
excise "is a tax directly related to goods imposed at some step in
their production or distribution before they reach the hands of the
consumer". Wilson J also accepted the Bolton v. Madsen formula,
although both Gibbs CJ and Wilson J ((37) ibid., per Gibbs CJ at
pp.620-622; Wilson J at pp.644-646.) adhered to the criterion of
liability approach enunciated in that case. Mason and Deane JJ ((38)
ibid., per Mason J at p.631 (referring to the judgment of Dixon J in
Parton); Deane J at pp.664-665 (referring to the judgment of Dixon J
in Matthews v. Chicory Marketing Board (Vict.)).) expressed their
agreement with the approach taken by Dixon J, the approach which was
later followed by Barwick CJ in Western Australia v. Chamberlain
Industries Pty. Ltd. ((39) (1970) 121 CLR, at p.17.). Brennan J
((40) (1983) 151 CLR, at p.657.) considered that a tax is a duty of
excise if it is a tax, however calculated, upon a step in the process
of production, manufacture or distribution. Likewise, in Gosford Meats
Pty. Ltd. v. New South Wales ((41) (1985) 155 CLR, at pp.387-388.)
, Murphy J was once more alone in adhering to the Peterswald
definition. Gibbs CJ ((42) ibid., at pp.377-378.) perceived an
almost unanimous line of authority (Murphy J excepted) for the
conclusion that an impost "cannot be an excise unless it is a tax upon,
or in respect of, a step in the production, manufacture, sale or
distribution of goods". Mason and Deane JJ ((43) ibid., at
pp.384-385.) reiterated the view that they had expressed in Hematite
Petroleum. Wilson J ((44) ibid., at p.399.) noted that it had
"never been suggested that an essential element in the diagnosis of an
excise is the perception that an impost imposed upon the sale of a
commodity thereby burdens the manufacture of that commodity". Brennan
J ((45) ibid., at pp.404, 407.) took the view that he had earlier
taken in Hematite Petroleum. Dawson J ((46) ibid., at p.416.)
accepted that a duty of excise must be a "tax imposed upon the taking
of some step in the production, manufacture or distribution of goods".
However, Gibbs CJ and Wilson J continued to subscribe to the
criterion of liability ((47) ibid, per Gibbs CJ at pp.377-378,
though Wilson J, for the purposes of the argument, was prepared to
approach the question on the basis of the criterion of liability
"viewed as a matter of substance": at p.400.), an approach in which
Dawson J joined ((48) ibid., at pp.415-416.).
18. In Philip Morris, Toohey and Gaudron JJ stated their preference for a
narrow definition confining the prohibition in s.90 to the
imposition of duties by a State (or Territory) on goods produced or
manufactured in that State (or Territory), although they concluded,
on the weight of authority, that s.90 prohibited the imposition by
a State (or Territory) of duties on goods manufactured or produced
in Australia ((49) (1989) 167 CLR, at pp.479-480.). However,
their Honours omitted the Peterswald requirement that there should be a
relationship between the duty and the quantity or value of the goods
manufactured or produced ((50) ibid., at p.479.). No other member of
the Court shared their Honours' limited view of an excise duty. Dawson
J was alone in continuing to subscribe to the criterion of liability
as an exclusive determinant of what is or is not an excise, though his
passing reference to the Peterswald definition suggested that he might
embrace it if he were not constrained by authority from so doing ((51)
ibid., at pp.473-474.). His Honour did not express agreement with the
qualification of that definition stated by Toohey and Gaudron JJ
Mason CJ and Deane J held to the broad view of excise duty ((52)
ibid., at pp.429-431.). Brennan J likewise supported the broad view
that a tax is an excise if it is a tax on a step in the production or
distribution of goods to the point of receipt by the consumer ((53)
ibid., at p.445.) and McHugh J accepted that a tax upon the sale of
goods is an excise even though the seller is not a producer or
manufacturer ((54) ibid., at p.489.).
19. The submissions advanced by the defendants and South Australia deny the
proposition that "duties of customs and of excise"
in s.90
exhaust the categories of taxes on goods. Those submissions accept
that a tax which, in form or even in substance, imposes a duty on the
importation of goods or on the local production or manufacture of
goods would be within the scope of s.90. But a tax which does not
fall within either of those categories but which imposes a duty
indifferently on all goods (whether imported or locally produced or
manufactured) is said to be outside the scope of s.90. These
propositions were rejected expressly and, in our respectful opinion,
rightly by Dixon CJ and Windeyer J in Dennis Hotels ((55) (1960)
104 CLR, at pp.540, 600-601; cf. Western Australia v. Chamberlain
Industries Pty. Ltd. (1970) 121 CLR, at p.26; Hematite Petroleum
(1983) 151 CLR, at pp.663-664; Gosford Meats (1985) 155 CLR, at
p.383.). Moreover, they are inconsistent with the purpose which Dixon
J attributed to s.90 in Parton and which has been attributed to s.90
by subsequent judgments in this Court. Adhering to that view of the
purpose of s.90, the term "duties of customs and of excise" in s.90
must be construed as exhausting the categories of taxes on goods.
That leaves the question whether a tax on goods should be classified
as a duty of customs to the extent to which it applies to imported
goods and a duty of excise to the extent to which it applies to goods
of local production or manufacture ((56) The question is irrelevant
for the purposes of s.90 (Dennis Hotels (1960) 104 CLR, at p.601;
H.C. Sleigh (1977) 136 CLR, at p.515), but perhaps relevant for the
purposes of s.55 of the Constitution.). Some support can be found
for this distinction ((57) See the cases in fn.(55).). However, once
it is accepted that duties of excise are not limited to duties on
production or manufacture, we think that it should be accepted that the
preferable view is to regard the distinction between duties of customs
and duties of excise as dependent on the step which attracts the tax:
importation or exportation in the case of customs duties; production,
manufacture, sale or distribution - inland taxes - in the case of
excise duties ((58) This was the view of Rich J in The Commonwealth
and Commonwealth Oil Refineries Ltd. v. South Australia [1926] HCA 47; (1926)
38 CLR 408, at p.437; John Fairfax and Sons Ltd. and Smith's
Newspapers Ltd. v. New South Wales [1927] HCA 3; (1927) 39 CLR 139, at
pp.146-147; and perhaps the preferred view of Dixon J in
Matthews v. Chicory Marketing Board (Vict.) (1938) 60 CLR,
at pp.297-300; Parton (1949) 80 CLR, at pp.259-261; Dennis
Hotels (1960) 104 CLR, at pp.540-541.). It is unnecessary in this
case to consider taxes on the consumption of goods.
20. The very limited support manifested since Parton and, more
particularly, since Bolton v. Madsen, for a return to the narrow
concept of excise is a telling argument against reconsideration of
the broader interpretation which has prevailed since Parton. What
is more, the case for reconsideration invites a return to a narrow
concept of excise similar to the Peterswald definition which, for
reasons already discussed, was discarded over forty years ago.
21. In that time, federal financial arrangements have been designed and
implemented on the basis of the interpretation given by
this Court
to s.90. To desert that interpretation now would have widespread
practical ramifications and generate extraordinary confusion. That
argument against reconsideration would not prevail if it were clear
that the interpretation for which the Territory and South Australia
contend is correct. However, that is certainly not the case. Indeed,
as we have indicated, we consider that that interpretation is
fundamentally mistaken and involves a denial of what has, since
Dixon J's judgment in Parton, been generally and (in our view)
correctly accepted as the essential nature of a duty of excise for the
purposes of our Constitution. In that regard, it must be stressed
that, putting to one side the judgments of Murphy J and Toohey and
Gaudron JJ to which we have referred, recent disagreement within the
Court about duties of excise has not been about whether the nature of
a duty of excise was correctly identified by Dixon J in Parton. It
has been about whether, in determining whether a particular statutory
impost is a duty of excise for the purposes of s.90, one should have
regard to "the substance of the operation of the statute, rather than
merely its form" ((59) Dickenson's Arcade (1974) 130 CLR, per
Barwick CJ at p.186.).
Reconsideration of Dennis Hotels and Dickenson's Arcade
22. Rejection of the case for a return to a narrow concept of excise
entails a rejection of the argument that Dennis Hotels and
Dickenson's
Arcade should be reconsidered in order to define more narrowly the
nature of a duty of excise and thereby cut back the operation of s.90
of the Constitution. It should be apparent from what has been said
above that we see more theoretical force in an argument that Dennis
Hotels and Dickenson's Arcade should be reopened for the purpose of
enabling reconsideration of the question whether, as a matter of the
substance of the operation of the relevant statutory provisions rather
than of mere form, the challenged licence fees in those cases should
be characterized as duties of excise. However, it was not argued on
behalf of any party or intervener in the present case that, even if
the Court was not prepared to adopt a narrower view of the nature of
a duty of excise, Dennis Hotels and Dickenson's Arcade should
nonetheless be reopened and overruled. Nor, on balance, do we think
that they should be. For one thing, there are some grounds for
treating tobacco and alcohol products as constituting a special
category of goods for the purpose of considering whether what purports
to be a licensing fee under a regulatory regime ((60) See Dennis
Hotels (1960) 104 CLR, per Taylor J at p.576.) should be
characterized as a duty of excise. For another, there are very strong
practical reasons why the rule of stare decisis should be observed in
relation to those decisions. Not only was the authority of Dennis
Hotels acknowledged in Bolton v. Madsen, but also that decision was
itself followed in the unanimous decision in Anderson's Pty. Ltd. v.
Victoria. Later, in Dickenson's Arcade, the Court refused to depart
from Dennis Hotels and, subsequently, in H.C. Sleigh, the Court
followed and applied the two earlier decisions. Since then, the Court
has twice refused to reconsider the correctness of Dennis Hotels and
Dickenson's Arcade ((61) Evda Nominees Pty. Ltd. v. Victoria [1984] HCA 18; (1984)
154 CLR 311; Philip Morris.).
23. In Philip Morris, the most recent instance in which there was a refusal
to reconsider the two decisions ((62) The Court also
refused
to reconsider the decision in H.C. Sleigh: see Philip Morris (1989)
167 CLR, at p.409.), the Court refused to do so by a majority of
six Justices to one ((63) Mason CJ, Brennan, Dawson, Toohey, Gaudron
and McHugh JJ; contra Deane J). After refusing to
reconsider the correctness of the earlier decisions, the Court heard
other arguments as to the effect of those decisions. In disposing of
those arguments, the members of the Court gave different reasons for
supporting the two earlier decisions. Mason CJ and Deane J
considered that the licensing of liquor and tobacco was essentially
regulatory in character and that in both cases the imposition of the
licensing fee was an element in the regulatory legislation controlling
the sale and distribution of the relevant commodity, the regulatory
regime being designed to protect the public interest in the light of
the characteristics of the relevant commodity ((64) Philip Morris
(1989) 167 CLR, at pp.438-440.). Brennan J thought that Dennis
Hotels, Dickenson's Arcade and H.C. Sleigh were simply instances of
taxes which had "no closer connexion" with production or distribution
than that they were exacted for the privilege of engaging in the
relevant activity ((65) ibid., at pp.460-461.). In distinguishing
the exactions in Philip Morris, his Honour considered that three
considerations were relevant: (1) the licensing scheme in Philip
Morris did not purport to be regulatory; (2) the incidence of tax on
sellers in the chain of distribution was variable; and (3) the rate of
tax was substantial ((66) ibid., at pp.461-462.). Dawson J, as
already mentioned, accepted the application of the criterion of
liability and supported the three decisions just mentioned on that
footing ((67) ibid., at pp.474-475.), while McHugh J regarded the
three decisions as authority for no more than the facts on which they
were decided, namely, that the legislation in question did not impose
an excise ((68) ibid., at pp.496-499.). His Honour distinguished the
three decisions on the ground that, in those cases, the length of the
licence period, the smallness of the fee, and the length of time
between the commencement of the licence period and the end of the
period by which the licence fee was calculated gave rise to a
"respectable" argument that the licence fees were for the privilege of
carrying on the business ((69) ibid., at p.500.). The diversity in
the reasons given for not disturbing the earlier decisions is not an
adequate ground for now disregarding the significance of the Court's
repeated refusal to depart from Dennis Hotels and Dickenson's Arcade.
It is true that those reasons do not support H.C. Sleigh with the same
cogency as they support Dennis Hotels and Dickenson's Arcade. All that
means, however, is that, if a fee imposed in purported conformity with
H.C. Sleigh were of sufficient magnitude to deny a regulatory
character to the law which imposes it, the validity of the fee would
require close consideration.
24. In refusing to reconsider the franchise decisions relating to liquor
and tobacco, the Court has recognized the fact that the
States
(and the Territories) have relied upon the decisions in imposing
licence fees upon vendors of liquor and tobacco in order to finance
the operations of government. Financial arrangements of great
importance to the governments of the States have been made for a long
time on the faith of these decisions ((70) Evda Nominees; Philip
Morris (1989) 167 CLR, at pp.438, 443, 489-490.). If the decisions
were to be overruled, the States and the Territories would be
confronted with claims by the vendors of liquor and tobacco for the
recoupment of licence fees already paid. That would certainly be the
case if the Court were to hold that such licence fees could not
properly be characterized as no more than the imposition of a licence
fee for the privilege of engaging in the relevant activity. Hence,
considerations of certainty and the ability of legislatures and
governments to make arrangements on the faith of the Court's
interpretation of the Constitution are formidable arguments against a
reconsideration of Dennis Hotels and Dickenson's Arcade.
25. For the reasons stated, the case for a reconsideration of those
decisions has not been made out.
26. It is convenient now to examine the legislation which is under
challenge in the present case.
The Act
27. The Act establishes a licensing regime regulating the wholesaling and
retailing of "X" videos. Under the regime it is an
offence to
wholesale an "X" video except in accordance with a wholesale
licence ((71) s.24.), or to retail an "X" video, except under and in
accordance with a retail licence ((72) s.25.).
28. Licence fees are payable on the making of an application for the
initial grant of a licence, whether wholesale or retail,
which is
granted for one month, and on its renewal at the end of each month.
The appropriate licence fee must accompany the application for grant
or renewal ((73) ss.5(1), 9(2).), the fee being refunded if the
application is refused ((74) ss.5(5), 9(5).). A licence fee consists
of a "basic fee" calculated at a rate ($50) for each premises in
relation to which the licence is to be held ((75) ss.4(1), 18.), and
either an "advance fee" (for the grant or first renewal of the licence)
((76) s.19.) or a "franchise fee" (for subsequent renewals) ((77)
s.20.). For a wholesale licence, the advance fee and franchise fee
are calculated by reference to the wholesale value of the "X" videos
supplied by a wholesale licensee during the relevant period ((78) See
below, at (a) and (b).). For a retail licence, these fees are
calculated by reference to the wholesale value of the "X" videos
offered for sale by a retail licensee during the relevant period that
were not supplied by a wholesale licensee. The rate at which the
advance fee and the franchise fee is imposed is 40 per cent of the
total wholesale value of the relevant videos.
29. The following differences should be noted between (a) wholesale
licences and retail licences; and (b) the advance fee and
the
franchise fee.
(a) A wholesale licence and a retail licence are calculated by
reference to different "X" videos. The effect of this differenceof one licence fee.
is to exclude "X" videos in relation to which a wholesale licence
fee has been paid from the "X" videos in relation to which the
fee payable by a retail licensee is calculated. A wholesale
licensee pays a fee in relation to "X" videos that it supplies by
wholesale in the relevant month ((79) ss.19(1), 20(1).); a
retail licensee pays a fee in relation only to "X" videos that it
offers for retail sale in the relevant month and which it
manufactured or which were supplied to it otherwise than in
accordance with a wholesale licence ((80) ss.19(2), 20(2).).
Thus, in effect, any "X" video is included only in the calculation
the period in relation to which the fee is calculated. The
advance fee (payable only on initial grant or first renewal of
the licence) is calculated by reference to the month for which
the licence is granted or first renewed. The applicant must
forward the estimated amount of this fee with the application for
grant or renewal ((81) ss.5(1)(b), 9(2)(c)(i).), and this is
taken to be a payment on account of the advance fee until it
becomes due and payable at the end of the relevant month ((82)
s.19(3), (4).) . The franchise fee, on the other hand, is
calculated by reference to the month which is two months prior to
the month for which the renewal is sought ((83) s.20.).
30. Section 21 is designed to prevent fees from being imposed more than
once in relation to a particular video, either on the
same
licensee or on another person to whom the video has been supplied. It
provides:
"No advance fee or franchise fee is payable in relationFor example, if a retail licensee manufactured and offered for sale an
to the supply or offer for retail sale of an 'X' video where
either such fee is payable in relation to any previous
supply, or any previous offer for retail sale, of that
video."
31. An ambiguity arises in relation to the operation of s.21 of the Act as
it stood in 1990 and the fees payable for the third
and fourth
months of a licence. The 1993 amendments to the legislation have
clarified the position and it is unnecessary to consider the ambiguity
for the purposes of this case.
32. The Act provides that an amount can be recovered from an unlicensed
person who wholesales or retails "X" videos; the amount
recoverable is equal to the fees that would have been payable if the
person had held the appropriate licences for the relevant months ((85)
s.27.). This provision is additional to any criminal liability that
such a person may incur under ss.24 and 25.
33. In addition to the payment of licence fees, an applicant or licensee
must satisfy certain conditions in order to hold or to
continue to hold a wholesale or retail licence. Essentially, the
Commissioner must be satisfied on reasonable grounds that the
applicant is a fit and proper person to hold such a licence ((86)
ss.5(2), 10(1)(g).). The Commissioner is to have regard to such
circumstances as the bankruptcy or liquidation of the applicant or
licensee, certain past convictions, and past contraventions of the Act,
the Publications Control Act 1989 (Cth), or the Taxation
(Administration) Act 1987 (Cth) ((87) ss.5(3), 10(1).). The
Commissioner is authorized to grant a licence "subject to such
conditions as he or she thinks fit" ((88) s.5(2).), and can vary such
conditions at any time ((89) s.7.). If the licensee is a body
corporate, it must notify the Commissioner of any changes in the
directors, secretaries or officers of the licensee ((90) s.14.).
Validity of the Act
34. The foregoing summary of the provisions of the Act reveals that the
legislation cannot be described merely as a regulatory
scheme in
which the licensing fees are simply an element in an overall regime
of controlling the distribution of "X" videos to the public. The
principal elements of the legislation are directed to the raising of
revenue rather than to the creation of a regulatory scheme designed to
protect the public.
35. There is no restriction whatsoever in the Act on the class of videos
which can be sold; any video, no matter how violent or
pornographic, may be sold. Nor is there any restriction on the class
of purchasers; the Act does not preclude the sale of any video to
children. Likewise, there is no restriction on advertising or
display. And the conditions to be satisfied by an applicant for a
licence under s.5 relate more obviously to the capacity of the
applicant to pay the fees than to the protection of the public in
connection with the distribution of violent and pornographic videos.
Accordingly, the Act falls outside the category of regulatory schemes
affecting liquor and tobacco which Mason CJ and Deane J held in
Philip Morris could support the exaction of a licence fee on the
footing that it is not an excise.
36. Furthermore, the size of the fee (40 per cent) is larger than the fee
exacted in the other franchise cases and clearly exceeds
the cost
of implementing the scheme. No endeavour was made to justify the size
of the fee on that score. Indeed, the true nature of the exaction is
to be discerned from s.21 which refers to the fee being "payable in
relation to the supply or offer for retail sale" of the videos ((91)
See also s.9(6).). Hence, the purpose of exacting the licensing fees
is not simply regulatory but has a very substantial revenue purpose.
37. In the view of Brennan J in Philip Morris, the fact that the
legislative scheme is not regulatory and the substantial size
of the
fee are factors which are relevant in the characterization of the
licence fee as an excise. In addition, the advance fee, being
calculated by reference to sales made under the licence, plainly is
an exaction made on a step in the process of distribution under the
licence. And, though the franchise fee is calculated by reference to
sales made in a past period, that period is no more than two months
earlier than the licence period, each being for one month only. The
proximity of the prior period to the period of the licence is a factor
pointing in the direction of an excise because the transactions in the
past period may well provide a reliable forecast of the transactions
which will occur during the currency of the licence ((92) Philip
Morris (1989) 167 CLR, per Brennan J at p.458.). Thus, the
exaction is imposed not merely on the taxpayer's past dealings with the
goods but in circumstances in which the magnitude of the past dealings
with the goods is a likely indicator of the measure of the taxpayer's
dealings with the goods during the term of the licence. With the
exception of the non-regulatory character of the licensing scheme, the
same factors would, on the view of McHugh J in Philip Morris ((93)
ibid., at p.493.), lead to the view that the exactions in the present
case are excise duties.
38. In the result, in the light of the reasoning of the members of the
Court in Philip Morris, the conclusion is inevitable that
certain
licence fees imposed by the Act are an excise.
39. In that respect, as the basic licence fee imposed by s.5(1)(a) and s.18
is not calculated by reference to the quantity or
value of
goods supplied or offered for sale and it is not a substantial fee
($50), there is no basis for holding that it is an excise. However,
for the reasons already given, the advance fee imposed by ss.5(1)(b)
and 19 and the franchise fee imposed by s.20 are duties of excise.
Notwithstanding that the plaintiffs did not seek a declaration that
s.9(2)(c) is invalid, it follows from these reasons that it, too,
operates to impose a duty of excise.
40. Accordingly, we would answer the questions reserved as follows:
(1) Sections 5(1)(b), 9(2)(c), 19 and 20 of the Business Franchise
("X" Videos) Act 1990 (A.C.T.) are invalid as imposing duties of(2) Does not arise.
excise.
41. In relation to question (3), full argument was not addressed to the
Court on the issue of severance of other provisions of
the Act if
certain provisions were to be declared invalid. It would be
appropriate for the parties to address argument on this point to the
Court before any decision is reached as to severance of other
provisions of the Act. Accordingly, we shall not deal with that issue
now.
42. The defendants should pay the plaintiffs' costs of the questions reserved.
DAWSON J The Business Franchise ("X" Videos) Act 1990 (A.C.T.)
("the 'X' Videos Act") requires a person who wholesales
"X" videos ((94) For the purposes of the Act, an "X" video is a video
classified as an "X" film under the Classification of Publications
Ordinance 1983 (A.C.T.): s.4(1). Section 25(2) of the
Ordinance provides that a film which:
"(a) depicts, expresses or otherwise deals withshall be classified as an "R" film or an "X" film. Section
matters of sex, drug misuse or addiction,
crime, cruelty, violence or revolting or
abhorrent phenomena in a manner that is
likely to cause offence to a reasonable
adult person; or
(b) is unsuitable for viewing by a minor",
2. It is not necessary at this point to deal with the legislation in any
more detail. Clearly it was passed in reliance upon
the franchise
cases ((96) Dennis Hotels Pty. Ltd. v. Victoria [1960] HCA 10; (1960) 104 CLR
529; Dickenson's Arcade Pty. Ltd. v. Tasmania [1974] HCA 9; (1974) 130 CLR 177;
H. C. Sleigh Ltd. v. South Australia [1977] HCA 2; (1977) 136 CLR 475;
Philip Morris Ltd. v. Commissioner of Business Franchises
(Vict.) [1989] HCA 38; (1989) 167 CLR 399.) which, speaking broadly, established
that a licence or franchise fee, exacted for the privilege of carrying
on a business of selling goods, does not constitute an excise duty
where it is calculated by reference to the value of sales or purchases
during a period preceding the period of the licence. There was no
application to the Court to reopen those decisions ((97) cf. Evda
Nominees Pty. Ltd. v. Victoria (1984) 154 CLR 311.). Rather the
Court was asked by the defendants to reconsider the meaning of the term
"duties of excise" used in s.90 and to return to the view expressed in
Peterswald v. Bartley ((98) [1904] HCA 21; (1904) 1 CLR 497, at pp.509, 512.)
that it is limited to duties analogous to customs duties imposed upon
goods in relation to their local manufacture or production. The Court
departed from this view in Parton v. Milk Board (Vict.) ((99) [1949] HCA 67; (1949)
80 CLR 229.) when it accepted that an excise duty for the purposes
of s.90 went beyond a tax upon the manufacture or production of goods
and extended to a "tax upon a commodity at any point in the course of
distribution before it reaches the consumer" ((100) ibid., per Dixon J
at p.260.).
3. The exercise which the defendants seek to have the Court undertake is
similar to that undertaken in Cole v. Whitfield ((101)
[1988] HCA 18; (1988) 165
CLR 360.) in relation to s.92 of the Constitution, which provides
that on the imposition of uniform duties of customs, "trade, commerce,
and intercourse among the States ... shall be absolutely free".
Section 92, despite attempts at judicial exegesis over the years, had
never yielded clarity of meaning or certainty of operation ((102)
ibid., at p.384.). One of the major problems had been that the Court
determined the validity of laws under s.92 according to their legal
operation and not their practical operation or economic consequences
((103) ibid., at p.401.). A satisfactory test of validity under s.92
was therefore necessarily a test framed in terms of an economic
objective rather than a legal formula. Having identified the objective
of s.92 as the elimination of protection, the Court held that laws
which frustrate this objective for that very reason breach s.92.
Accordingly, s.92 proscribes laws which impose discrimination of a
protectionist kind.
4. Section 90 provides that "on the imposition of uniform duties of customs
the power of the Parliament to impose duties of customs and of
excise, and to grant bounties on the production or export of goods,
shall become exclusive". It has a history of interpretation as
unsatisfactory as that of s.92 before Cole v. Whitfield. The new
approach in Cole v. Whitfield, which eliminated the artificiality
involved in the application of a purely legal test to determine
compliance with s.92, must surely contain lessons for the proper
interpretation of s.90. In construing s.90 it is consistent with the
construction given to s.92 to identify the object of the former
section in order to ascertain the extent of the exclusive power
assigned to the Commonwealth Parliament.
5. In Peterswald v. Bartley ((104) (1904) 1 CLR, at p.509.), Griffith CJ in
delivering the judgment of the Court said that the
word
"excise" when used in the Constitution "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". This definition did not, I think,
draw upon the doctrine of reserved powers which was then current ((105)
But cf. Philip Morris v. Commissioner of Business Franchises (Vict.)
(1989) 167 CLR, at p.427.). Not only can the definition stand
independently of the doctrine, but the approach which it reflects was
adopted in The Commonwealth and Commonwealth Oil Refineries Ltd. v.
South Australia by a majority of justices ((106) [1926] HCA 47; (1926) 38 CLR 408,
at pp.419-420, 426, 436, 439.), including Isaacs J, some of whom
formed a majority in the Engineers' Case ((107) Amalgamated Society of
Engineers v. Adelaide Steamship Co. Ltd. (1920) 28 CLR 129.). The
latter case discarded the doctrine of reserved powers.
6. As I endeavoured to explain in Philip Morris Ltd. v. Commissioner of
Business Franchises (Vict.) ((108) (1989) 167 CLR, at
p.467.),
departure from the definition in Peterswald v. Bartley in subsequent
cases has been all but complete. But the most significant departure
must surely have been the extension of the constitutional meaning of a
duty of excise from a tax upon the manufacture or production of goods
to a tax upon a commodity at any point in the course of distribution
before it reaches the consumer. That departure meant that it was no
longer possible to draw an analogy or to discern a correlation between
customs duties and excise duties. As a consequence, the primary
constitutional purpose of s.90, which was to secure the customs union
binding the States, was obscured. The justification for the departure
was said to be that "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." ((109) Parton v. Milk
Board (Vict.) (1949) 80 CLR, per Dixon J at p.260; per Rich and
Williams JJ at pp.251-252; Anderson's Pty. Ltd. v. Victoria [1964] HCA 77; (1964)
111 CLR 353, per Kitto J at pp.374-375; Western Australia v.
Chamberlain Industries Pty. Ltd. [1970] HCA 5; (1970) 121 CLR 1, per Barwick CJ
at p.13; Philip Morris Ltd. v. Commissioner of Business Franchises
(Vict.) (1989) 167 CLR, per Mason CJ and Deane J at p.436.)
This justification is, I think, difficult to sustain. A tax upon the
distribution of a commodity has a markedly different effect from a tax
upon its production. Whereas a tax upon production affects the
relative price of products produced locally and products produced
overseas, a tax upon the distribution of both locally produced and
imported goods does not. And, after all, this is the very difference
with which those who framed the Constitution were concerned.
7. Moreover, the approach adopted in Parton v. Milk Board (Vict.) made it
difficult to distinguish an excise duty from other taxes.
In
an effort to provide limits the Court in Bolton v. Madsen ((110) [1963] HCA 16; (1963)
110 CLR 264, at p.273.) adopted a test formulated by Kitto J in
Dennis Hotels Pty. Ltd. v. Victoria ((111) (1960) 104 CLR, at
p.559.) which was as follows:
"a tax is not a duty of excise unless the criterion ofThat test has not been found acceptable, the criticism of it being
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".
"in arriving at the conclusion that the tax is a taxexcise duty is a tax upon goods, that is merely to state that there
upon 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."). Although everyone is agreed that an
"If taxes are to be treated as duties of excise because theySimilarly, I myself remarked in Gosford Meats Pty. Ltd. v. New South
indirectly add to costs of production or manufacture of
goods, are taxes on industrial land and payroll taxes to be
treated as duties of excise?"
"To depart from the test adopted in Bolton v. Madsen wouldOf course, in making that remark I considered myself to be bound by
be to become lost in the wilderness once again or to accept
an ever-widening conception of an excise duty which,
extended to its logical limits, would subsume all taxes, the
ultimate result of which, however indirect, could be shown
to affect the production or manufacture of goods."
8. That was not the view expressed in Peterswald v. Bartley. Nor, indeed,
is it a view which has been maintained consistently,
even
since Parton v. Milk Board (Vict.). In Dennis Hotels Pty. Ltd. v.
Victoria Fullagar J posed the question ((118) (1960) 104 CLR, at
p.555.): "What is the relation of taxpayer to goods which
characterizes a 'duty of excise' as that term is used ... in s.90?" He
continued:
"The answer to this question given by the Court inBoth in Gosford Meats Pty. Ltd. v. New South Wales ((119) (1985) 155
Peterswald v. Bartley was that the necessary relation is to
be found in the manufacture or production of goods - that
what characterizes a duty of excise is that the taxpayer is
taxed by reason of, and by reference to, his production or
manufacture of goods. ... After full consideration, and
necessarily with the greatest respect for the contrary view,
I am of opinion that the answer given in Peterswald v.
Bartley was right and should be applied in the present
case."
9. In H. C. Sleigh Ltd. v. South Australia ((121) (1977) 136 CLR, at
p.527.) Murphy J expressed the opinion that duties of excise
for the
purposes of s.90 are taxes upon goods produced or manufactured within a
State. In Logan Downs Pty. Ltd. v. Queensland he said ((122) (1977)
137 CLR, at p.84; see also Gosford Meats Pty. Ltd. v. New South
Wales (1985) 155 CLR, at p.387; Hematite Petroleum Pty. Ltd. v.
Victoria (1983) 151 CLR, at p.638.):
"In general, taxes imposed without regard to the place
of production or manufacture are neither duties of customs
nor duties of excise. The essence of each duty is the
tendency to discriminate between goods locally produced and
other goods."
10. And in Philip Morris Ltd. v. Commissioner of Business Franchises
(Vict.) ((123) (1989) 167 CLR, at p.479.) Toohey and Gaudron
JJ
suggested that in its constitutional context s.90 seems designed "to
secure to the Commonwealth the power to effectuate economic policy with
respect to Australian imports and exports". They point out that all
that is necessary to secure that purpose is "to deny to each State the
power to levy duties of customs on goods entering that State from
overseas, the power to levy duties of excise on goods produced or
manufactured in that State and the power to grant bounties on goods
produced or manufactured in that State".
11. It is in Philip Morris Ltd. v. Commissioner of Business Franchises
(Vict.) that lack of unanimity is most recently and clearly
to be
seen. In that case I was prepared to apply the criterion of liability
test to find that the licence fee there in question was not an excise
duty. Brennan and McHugh JJ were not prepared to apply that test,
at all events as an exclusive determinant, and found that the licence
fee was an excise duty. Mason CJ and Deane J also rejected
the criterion of liability test to the extent that it excluded
consideration of the "practical or substantial operation" of the law,
but they perceived a special category of franchise cases involving the
sale of alcohol, tobacco and possibly petrol, where the franchise fees
do not constitute excise duties because of the regulatory nature of
the franchise. Upon this last ground, which was expressly rejected
by Brennan J, they held that the tobacco merchant's licence fee in
question was not an excise duty. Toohey and Gaudron JJ also upheld
the licence fee, but upon the ground that, although it constituted a
tax, it did not affect the relevant goods in their character as
articles of local manufacture or production.
12. The possibility of an exercise along the lines undertaken in Cole v.
Whitfield was adverted to in Philip Morris Ltd. v. Commissioner
of
Business Franchises (Vict.). Mason CJ and Deane J said ((124)
ibid., at p.433; see also per Brennan J at pp.450-451; per Dawson J
at p.473.):
"The division of opinion which has thus arisen mirrorsAnd in the same case McHugh J said ((126) (1989) 167 CLR, at
the similar controversy which arose in relation to the
characterization of a law for the purpose of determining
whether it infringed the freedom of interstate trade
and commerce guaranteed by s.92. That controversy was
recently resolved by the unanimous judgment in Cole v.
Whitfield ((125) (1988) 165 CLR, at pp.399-400.), holding that
a law is to be characterized by reference to its practical
operation. Granted that s.92 strikes down discriminatory
protectionist laws, the conclusion reached in Cole v. Whitfield
does not dictate a similar answer in the context of s.90. But it
must be said that the characterization of a law by reference
exclusively to its strict legal operation, without regard to its
practical or substantial operation, is bound to yield, at
least in some instances, highly artificial results. In the
field of excise duties under s.90, where the Constitution is
concerned with substance not form, there is no reason at all
for contemplating artificial results."
"No attempt was made by counsel for the parties or the
interveners to challenge the correctness of any decision in
or the ratio decidendi of any case except the franchise
cases. Accordingly, it is against this background of the
issues presented by the parties that the present case must
be decided, no matter how tempting it may be to think that
the overall state of authorities in this Court and the
consequences for State revenues of an expanding notion of
excise require a reconsideration of the whole law on excise
as it has emerged since the landmark decision in Parton v.
Milk Board (Vict.)."
13. The divergence of opinion upon the scope of an excise duty for
constitutional purposes would, I think, in itself justify a
review of
the authorities. But, having regard to the preparedness of the Court
in Cole v. Whitfield to undertake such a review in order to settle a
far from unrelated issue, it seems to me that it cannot now reject the
call for it to do so in relation to s.90. Not only is the issue a
vexed one, but it is of high consequence to the States. As McHugh J
pointed out ((127) ibid., at p.489.), "Any extension of the scope of
an excise duty inevitably affects the distribution of public revenue
within the Australian federation since it narrows the revenue base of
the States and reduces their financial autonomy." The effect of the
decision in Parton v. Milk Board (Vict.) was to establish a conception
of an excise duty which has the capacity to encompass all taxes on
commodities. This potential for expansion was checked for a time by
the application of the criterion of liability test. But that test no
longer offers any practical constraint and even the franchise cases
have been held by a majority to be artificially based and, on the view
of some, to be at best justified as an historical anomaly.
14. Nor has the state of the authorities on s.90 escaped critical
attention. It has been observed ((128) Mathews and Jay, Federal
finance: intergovernmental financial relations in Australia since
Federation, (1972), pp.317-318; see also Sawer, "The future of State
taxes: constitutional issues", in Mathews (ed.), Fiscal federalism:
retrospect and prospect, (1974), pp.199-201; Howard, Australian Federal
Constitutional Law, 3rd ed. (1985), p.437; Constitutional Commission,
Final Report, (1988), vol.1, pp.820-829; Starke, "Perpetuation of
the constitutional debates over the meaning of 'excise'", (1990)
64 Australian Law Journal 3; Hanks, Constitutional Law in
Australia, (1991), pp.242-243; Coper, "The economic framework
of the Australian Federation: a question of balance" in
Craven (ed.), Australian Federation; towards the second century,
(1992), pp.144-145.):
"The action of successive High Courts, in extending the
definition of excise taxes in such a way as apparently to
preclude the States from imposing taxes on consumption, is
not only illogical, at variance with the intention of the
framers of the Constitution, and contrary to common English
usage and the practice of other federal countries; it is
also one of the greatest impediments preventing the
achievement of a rational and lasting division of financial
powers in the Australian federal system."
15. To the extent that it is necessary to do so to determine the extent to
which departure from Peterswald v. Bartley has been
justified, I would grant leave to reconsider the decided cases.
16. It is now trite that in general usage the word "excise" has never had
any certain connotation ((129) See Matthews v. Chicory
Marketing Board (Vict.) [1938] HCA 38; (1938) 60 CLR 263, per Dixon J at p.293.) .
Even in 1901 the word was used in England to describe a miscellany ofheterogeneous taxes, not necessarily taxes upon goods, from which
"Reference to the history of s.92 may be made, not for
the purpose of substituting for the meaning of the words
used the scope and effect - if such could be established -
which the founding fathers subjectively intended the section
to have, but for the purpose of identifying the contemporary
meaning of language used, the subject to which that language
was directed and the nature and objectives of the movement
towards federation from which the compact of the
Constitution finally emerged."
17. The Convention Debates were held in an Australian setting in which
duties of excise were confined in the various colonies
to taxes on the
manufacture and production of spirits, beer and tobacco, the amount of
the tax being determined by the quantity or value manufactured or
produced ((133) See Mills, Taxation in Australia, (1925), pp.54, 81-82,
108-111, 138, 156-157, 182-183.). This was adverted to by Griffith
CJ in Peterswald v. Bartley where he said in 1904 ((134) (1904) 1
CLR, at p.509.):
"With respect to the Australian use of the term (duties ofIt has been accepted in other judgments that the term "duties of
excise), we are entitled to take notice of the sense in
which it has been understood and used in the legislation of
the various States. We know that in some of them there were
in existence for many years 'duties of excise,' properly so
called, imposed upon beer, spirits and tobacco. There were
other charges which were never spoken of as excise duties,
such as fees for publicans' licences, and for various other
businesses, such as slaughtermen's, auctioneers', and so
forth, but these were not commonly understood in Australia
as included under the head of excise duties."
18. It is against this background that the Convention Debates must be read.
Although hardly conclusive, I think that they support
the view
that "duties of excise" were understood to be duties chargeable upon
the local manufacture and production of commodities ((136) See, e.g.,
Official Report of the National Australasian Convention Debates,
Sydney, 1891, pp.361-368; Adelaide, 1897, pp.600-602, 845-849, 857-858;
Official Record of the Debates of the Australasian Federal Convention,
Sydney, 1897, pp.1065-1068; Melbourne, 1898, pp.910-912, 917-920,
923-924, 936-938, 975-980. See also Coper, "The High Court and section
90 of the Constitution", (1976) 7 Federal Law Review 1, at pp.21-25.) .
Little would be achieved by citing individual passages; it issufficient to say that the debates tend to confirm the view expressed
"Bearing in mind that the Constitution was framed in
Australia by Australians, and for the use of the Australian
people, and that the word 'excise' had a distinct meaning in
the popular mind, and that there were in the States many
laws in force dealing with the subject, and that when used
in the Constitution it is used in connection with the words
'on goods produced or manufactured in the States,' the
conclusion is almost inevitable that, whenever it is used,
it 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."
19. But it is, perhaps, instructive to advert to the fact that in the
debates held in Sydney in 1897 Mr Isaacs referred to the
fact that the
word "excise" could bear a meaning very much wider than was intended
in the Constitution. He referred to a report by Victorian Treasury
officers and continued ((138) Convention Debates, Sydney, 1897,
p.1065.):
"What we intend by excise would be covered by the definitionIn the event, no definition of "excise" appeared, although Mr Barton
in this report, 'a duty chargeable on the manufacture and
production of commodities.' The word is variously defined
in standard dictionaries. We should give attention to this
matter, so as not to be carried further than we intend to
go. In modern times, excise is used as a very wide term."
"As far as the drafting matter is concerned, I think we mayWhat is of significance is that, the matter having been raised, there
promise that we will see if there is any necessity to give
any definition of the meaning of the word 'excise'."
20. The view expressed by Griffith CJ in Peterswald v. Bartley is also
confirmed by contemporary commentators, notably, Quick
and
Garran ((140) The Annotated Constitution of the Australian
Commonwealth (1901); see also Clark, Studies in Australian
Constitutional Law, 2nd ed. (1905), p.185.). Those authors ((141)
ibid., p.837.) describe the basic principle of excise duties as being
that they were "taxes on the production and manufacture of articles
which could not be taxed through the customs house" and refer to the
expanded use of the term to cover licence fees of various kinds not
necessarily related to the production or manufacture of goods. They
continue:
"Such was the primary meaning of 'excise,' and such the
secondary and enlarged use of the term. The fundamental
conception of the term is that of a tax on articles produced
or manufactured in a country. In the taxation of such
articles of luxury, as spirits, beer, tobacco, and cigars,
it has been the practice to place a certain duty on the
importation of these articles and a corresponding or reduced
duty on similar articles produced or manufactured in the
country; and this is the sense in which excise duties have
been understood in the Australian colonies, and in which the
expression was intended to be used in the Constitution of
the Commonwealth."
21. Nor was it a matter of accident that the term "duties of excise" was
chosen as an expression bearing a confined meaning.
The
particular problem confronting those responsible for the drafting of
the relevant provisions arose from the desire to create a common
external tariff which would bind the States together in a customs
union while at the same time creating a free trade area amongst
the States by the elimination of internal customs duties and other
restrictions. The protectionist effect of a common external tariff,
which was the necessary feature of a customs union, could be
undermined by the imposition, State by State, of differing duties of
excise upon locally produced goods. The imposition of excise duties
would diminish or extinguish the protection which customs duties were
intended to confer upon locally produced goods. Although there was no
consensus at federation on the desirable level of protection, there
was consensus that setting a level should be a federal matter ((142) La
Nauze, The Making of the Australian Constitution, (1972), p.41; McMinn,
A Constitutional History of Australia, (1979), p.106.).
For similar reasons, with certain limited exceptions, it was necessary
to place within the exclusive province of the Commonwealth bounties
on the production or export of goods. Thus, what I have called
elsewhere ((143) Philip Morris Ltd. v. Commissioner of Business
Franchises (Vict.) (1989) 167 CLR, at p.466.) the twin objectives
of a common tariff and interstate freedom of trade were to be served by
ss.90 and 92 operating in conjunction ((144) See also Cole v. Whitfield
(1988) 165 CLR, at pp.385-387.).
22. The difference between excise duties and other taxes within the context
of s.90 is to be seen in the purpose served by that section.
That purpose is to secure the customs union to which the States agreed
in the Constitution by ensuring a uniform policy with respect to
external tariffs, whether free trade or protectionist. A tax should
be characterized as an excise duty if it imposes a different level of
tax on goods produced overseas and home-produced goods. It is this
difference which determines the extent of protection (if any) for
local production and manufacture.
23. In Dickenson's Arcade Pty. Ltd. v. Tasmania ((145) (1974) 130 CLR, at
pp.218-220.) Gibbs J identified three different lines
of thought
which led to the conclusion finally reached in Parton v. Milk Board
(Vict.) that the description of "excise duties" given in Peterswald v.
Bartley was too narrow and that a tax imposed upon the distribution of
a commodity by a person who was not its producer or manufacturer could
be an excise.
24. First, there was the theory, to which I have already referred, that a
tax on the sale of goods can be regarded as a method
of taxing
their production or manufacture ((146) See The Commonwealth and
Commonwealth Oil Refineries Ltd. v. South Australia (1926) 38 CLR,
per Higgins J at p.435; Matthews v. Chicory Marketing Board (Vict.)
(1938) 60 CLR, at p.277; Parton v. Milk Board (Vict.) (1949) 80
CLR, at p.252.). Most recently the same theory was given voice by
Mason CJ and Deane J in Philip Morris Ltd. v. Commissioner of
Business Franchises (Vict.) ((147) (1989) 167 CLR, at p.436; see
also per McHugh J at p.493.):
"In the end the reason why a tax upon any step in theOne may, of course, comment upon this view that it should logically
production, manufacture, sale or distribution of goods is
held to be a duty of excise is that such a tax has a general
tendency to be passed on to persons down the line to the
consumer and will prejudice the demand for the goods
burdened by the imposition of the tax."
25. In truth, every tax paid by a producer or distributor of goods has a
tendency to be passed on to the extent that market forces
allow
and to increase the price of the goods. The effective, or economic,
incidence of a tax is seldom, if ever, the same as its legal
incidence ((149) See New South Wales Tax Task Force, Review of the
State Tax System, (1988), pp.75-76.). That may be said of taxes such
as land tax, payroll tax and even income tax levied upon the producers
or distributors of goods. The tendency of a tax to be passed on and to
increase the price of goods does not, therefore, serve to differentiate
between excise duties and other taxes ((150) See Philip Morris Ltd. v.
Commissioner of Business Franchises (Vict.) (1989) 167 CLR, at
p.471.).
26. A different emphasis was placed on the matter by Dixon J in Parton v.
Milk Board (Vict.) and represents the second line of
thought
identified by Gibbs J in Dickenson's Arcade Pty. Ltd. v.
Tasmania ((151) (1974) 130 CLR, at pp.218-220.). It is expressed
as follows ((152) (1949) 80 CLR, at p.260.):
"In making the power of the Parliament of the CommonwealthIt may be observed, with the greatest of respect, that his Honour's
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."
27. On the other hand, the opposite view is to be found, cogently
expressed, in the cases. In Dennis Hotels Pty. Ltd. v. Victoria
Menzies J said ((154) (1960) 104 CLR, at pp.582-583.):
"I cannot find in the Constitution any indication thatIn Dickenson's Arcade Pty. Ltd. v. Tasmania ((155) (1974) 130 CLR,
duties of customs and of excise were grouped together as
a comprehensive description of any taxation in respect of
goods so as to exclude the States altogether from that
field. The import, export, and production of goods seem
to me to constitute such a cohesive subject matter that
considerations of policy as well as of revenue might well be
thought to warrant a grant of exclusive taxing power to the
Commonwealth with regard thereto without going further to
extend that grant to cover taxation in respect of all
dealings in goods."
28. In Hematite Petroleum Pty. Ltd. v. Victoria ((157) (1983) 151 CLR, at
pp.616-617.) Gibbs CJ pointed out that upon any view
s.90 confers
upon the Commonwealth Parliament only a very limited power to control
the economy. Clearly within the province of the States are various
taxes, such as payroll tax, or controls, such as quotas on production,
which can affect the production or manufacture of goods. Moreover,
there are measures available to the States, such as tax concessions,
reduced freight charges or assistance in the provision of
infrastructure, to encourage production.
29. In Philip Morris Ltd. v. Commissioner of Business Franchises (Vict.)
Mason CJ and Deane J extended the dictum of Dixon J
concerning Commonwealth control of the taxation of commodities ((158)
(1989) 167 CLR, at p.426.). In their view ss.51(ii), 51(iii), 88,
90 and 92:
"ordain that the Commonwealth be an economic union, not anBut it does not appear that the Commonwealth was intended to have
association of States each with its own domestic economy ...
Customs duties, excise duties and bounties are measures
which are designed to affect domestic production and
manufacture of goods and the supply of goods to the domestic
market. The Commonwealth having exclusive power over these
aspects of fiscal policy, the sources of State revenue in
relation to commerce in goods are correspondingly confined."
30. I might add that it has never been suggested, nor could it be, that the
aim of federation was to create economic unity within
the
Commonwealth. As Stephen J said in Seamen's Union of Australia v.
Utah Development Co. ((159) [1978] HCA 46; (1978) 144 CLR 120, at pp.140-141; see
also per Gibbs J at p.133, per Mason J at pp.148-149.):
"It was no part of the federal compact that this vitalState policies which legitimately affect resource allocation
function of colonial governments, the development of the
economies of their respective communities, should pass,
on federation, to the Commonwealth. Accordingly, the
Commonwealth was granted no express head of power to
legislate on this subject matter. That Australia as a whole
should be an area of free trade was, no doubt, one great aim
of federation: hence the Commonwealth's exclusive power
over customs, excise and (subject to s.91) bounties. But
the promotion of free trade between the States did not also
require that the States should surrender their function of
encouraging otherwise than by direct pecuniary bounties, the
production and export of goods."
31. In interpreting s.90, it is not to the point that the Constitution was
designed to achieve an "economic union" ((162) cf. Philip Morris
Ltd. v. Commissioner of Business Franchises (Vict.) (1989) 167 CLR,
at p.426.). An economic union by definition is not a unitary state
and involves distortions between state economies ((163) Balassa, The
theory of economic integration, (1961), p.2; Canada, Royal Commission
on the economic union and development prospects for Canada, op.cit.,
p.109; Robson, The economics of international integration, 3rd ed.
(1987), p.2; El-Agraa, International economic integration, 2nd ed.
(1988), p.2; Jovanovic, International economic integration, (1992),
p.9.). An economic union which involves partial integration between
state economies may well yield most of the benefits of economic
integration even though its members' economies remain separate and
distinct ((164) Whalley, "Induced distortions of interprovincial
activity: an overview of issues", in Trebilcock et al., op.cit.,
p.161; Silzer and Krasnick, "The free flow of goods in the Canadian
economic union", in Krasnick (ed.), Perspectives on the Canadian
economic union, (1986), pp.157-158.). Indeed, many federations and
federal systems have state-based taxes upon the distribution of
goods ((165) e.g. Canada: see Trebilcock et al., "Provincially
induced barriers to trade in Canada: a survey", in Trebilcock et al.,
op.cit., p.266; United States of America: see Rotunda and Nowak,
Treatise on Constitutional Law, 2nd ed. (1992), vol.2, p.265;
European Community: see Easson, "The Internal market and the
elimination of fiscal frontiers", (1990) 10 Yearbook of European
Law 147; and see generally McLure (ed.), Tax assignment in
federal countries, (1983).), these being regarded as less significant
barriers to free trade than some matters within the competence of the
Australian States ((166) Emerson et al., "The economics of 1992",
(1988) 35 European Economy, pp.44-46.).
32. Indeed, the wider view of excise duties has in fact produced
economically undesirable results. Gibbs CJ refers with
approval ((167) Hematite Petroleum Pty. Ltd. v. Victoria (1983) 151
CLR, at p.617.) to the view that the extension of the definition
of "excise" made in the cases since Peterswald v. Bartley has impeded
the achievement of a rational and lasting division of financial powers
in the Australian federal system and has led the States to impose some
forms of taxation which "although constitutionally permissible, are
less economically desirable than taxes now categorized as duties of
excise" ((168) Mathews and Jay, op.cit., pp.317-318; see also
Commonwealth, Industry Commission, Draft Report: Impediments to
Regional Industry Adjustment, (1993), vol.1, pp.192-198 and the
reports there cited.). Wilson J adopted a similar approach ((169)
Hematite Petroleum Pty. Ltd. v. Victoria (1983) 151 CLR, at
pp.648-649.) and in Gosford Meats Pty. Ltd. v. New South Wales ((170)
(1985) 155 CLR, at p.402.) warned against looking beyond the
Constitution in order to mould the concept of an excise duty to fit
"subjective understandings of desirable contemporary economic or
political goals". In Philip Morris Ltd. v. Commissioner of Business
Franchises (Vict.) ((171) (1989) 167 CLR, at pp.469-470.), I
expressed my agreement with these views.
33. The third reason for departing from Peterswald v. Bartley was said to
be that the expression "duties of excise" could not
be confined to
taxes on production and manufacture ((172) Dickenson's Arcade Pty. Ltd.
v. Tasmania (1974) 130 CLR, at p.219.). There is, I think, no
need to dwell upon that reason here. Whilst it is true that the
expression can be given a wide meaning and was initially treated by
Dixon J in Matthews v. Chicory Marketing Board (Vict.) ((173) (1938)
60 CLR, at p.304.) as not only a tax upon the production,
manufacture or sale of goods but also a tax upon consumption, he later
modified that view, in deference to the decision of the Privy Council
in Atlantic Smoke Shops Ltd. v. Conlon ((174) (1943) AC 550.), to
exclude a tax upon consumption ((175) See Parton v. Milk Board (Vict.)
(1949) 80 CLR, at p.261.). Since Parton v. Milk Board (Vict.) it
has been accepted that an excise duty does not extend to a tax upon
consumption. Indeed, the criterion of liability test adopted in Bolton
v. Madsen ((176) (1963) 110 CLR, at pp.271, 273.) expressly stopped
short at "the point of receipt by the consumer" in its definition of an
excise duty. Once it is accepted that s.90 must be confined, the only
safe guide to its true meaning is the purpose which lies behind s.90.
That purpose is indicated by the history of the section, its context
and even by the express words of s.93 which, in speaking of duties of
excise, restrict them to "duties of excise paid on goods produced or
manufactured in a State".
34. I have already referred briefly to the view expressed by Murphy J but
it is necessary to return to it in more detail because,
although
it departs from authority, it reflects, in my opinion, a correct
interpretation of s.90. In Hematite Petroleum Pty. Ltd. v. Victoria
he said ((177) (1983) 151 CLR, at p.638.):
"In the Australian Constitution an excise is a tax onThat view conforms, I think, with the decision in Peterswald v.
production (including manufacture). State excise is a tax
on production within the State. State customs duty is a
tax on goods produced outside and (then) imported into
the State. Section 90 prohibits State taxation which
discriminates between goods produced in the State and those
produced outside the State, and prohibits State bounties on
production (or export). The constitutional concept of
excise forbidden to the States is limited to taxes on
production within the State; it does not extend to taxes on
distribution or consumption unless these are in substance
taxes on production within the State. In general, a tax on
wholesale or retail sale which does not discriminate between
goods on the basis of their production within or without the
State, is neither customs nor excise. In general a sales
tax applied indiscriminately on all goods or on a class or
classes of goods, wherever produced, would not contravene
s.90 as an excise or a customs duty. I say in general,
because a tax may in reality be a tax on production, even
if expressed to be a sales tax. For example, a sales tax
restricted to a particular commodity produced only or
substantially only in the State, might be in substance,
though not in form, a tax on the production of that
commodity in the State."
35. The view expressed by Murphy J is also in accordance with the view
expressed by McTiernan J in Parton v. Milk Board (Vict.)
((179)
(1949) 80 CLR, at pp.264-267.) and by Fullagar J in Dennis Hotels
Pty. Ltd. v. Victoria. In the latter case Fullagar J said ((180)
(1960) 104 CLR, at p.556; see also The Commonwealth and Commonwealth
Oil Refineries Ltd. v. South Australia (1926) 38 CLR, at pp.419-420,
426, 439.):
"The duties of customs and duties of excise contemplated
by the Constitution are, I think, alike duties which are
imposed as a condition of the entry of particular goods into
general circulation in the community - of their introduction
into the mass of vendible commodities in a State. When once
they have passed into that general mass, they cease, I
think, to be proper subject-matter for either duties of
customs or duties of excise."
36. The criterion of liability test having been abandoned by other members
of the Court as the determinant of an excise duty and
the
so-called substance of an excise duty - otherwise than as a tax
tending to find its way into the price of a commodity - remaining
unidentified, I would now accept the view expressed by Murphy J in
the passage which I have just cited. In my opinion it represents a
return to the true purpose of s.90 having regard to its origin and the
function which it was intended to perform.
37. I would, however, query whether an excise duty is confined to a tax
upon production within the relevant State. Of course,
following
upon Capital Duplicators Pty. Ltd. v. Australian Capital Territory
(No.1) ((181) [1992] HCA 51; (1992) 177 CLR 248.), the imposition of excise duties
is denied to a Territory and I can see no reason, questions of power
and the application of s.92 aside, why a State tax upon the local
production of goods, albeit production outside the State, should not
constitute a duty of excise. Such a tax may interfere with the intended
effect of an external tariff on goods of the same kind no less than a
tax upon goods produced within the State and so be within the aim of
s.90. But it is a question which is not, practically speaking, likely
to arise and may be left for another day.
38. For constitutional purposes an excise duty is a tax which falls
selectively upon the local production or manufacture of goods.
Where
the tax is imposed by reference to a step taken in the production or
manufacture of goods, its character as an excise duty will ordinarily
be clear even if the duty is not payable until after the step has
been taken. But a tax may be expressed to be imposed upon a step
subsequent to production or manufacture and yet in substance be a tax
upon production or manufacture and so be an excise duty. For example,
a tax upon sale by a producer or upon the first sale after production
may be an excise duty if it selects only sales by the local producer
or sales which are linked to local production so that the basis of the
selection is local production. On the other hand, a tax upon all
sales does not tax production or manufacture and for that reason is
not an excise duty. This approach is to be seen in the judgments of
the majority in The Commonwealth and Commonwealth Oil Refineries Ltd.
v. South Australia ((182) [1926] HCA 47; (1926) 38 CLR 408.). For example, the
following passage appears in the judgment of Isaacs J ((183) ibid., at
p.426.):
"Licences to sell liquor or other articles may well comeIt may be added that a tax on all sales of a particular class of goods
within an excise duty law, if they are so connected with the
production of the article sold or are otherwise so imposed
as in effect to be a method of taxing the production of the
article. But if in fact unconnected with production and
imposed merely with respect to the sale of the goods as
existing articles of trade and commerce, independently of
the fact of their local production, a licence or tax on
the sale appears to me to fall into a classification of
governmental power outside the true content of the words
'excise duties' as used in the Constitution."
39. The actual decisions of the Court since Dennis Hotels Pty. Ltd. v.
Victoria would, interestingly enough, have been little
different if
the scope of an excise duty for constitutional purposes were confined
as in my view, freed from the authority of Parton v. Milk Board
(Vict.), it ought to be ((184) See Coper, (1992), op.cit., p.145.).
True it is that Western Australia v. Chamberlain Industries Pty. Ltd.
((185) [1970] HCA 5; (1970) 121 CLR 1.) could not stand. In that case, the
relevant Western Australian legislation required a receipt to be issued
for all moneys received and to be stamped with duty at a specific rate.
Clearly that tax, even when the receipt was in respect of the sale ofgoods, would not constitute an excise duty upon the view which I have
40. On the other hand, the levy in Logan Downs Pty. Ltd. v. Queensland
((187) [1977] HCA 3; (1977) 137 CLR 59.), the licence
fee in M. G.
Kailis (1962) Pty. Ltd. v. Western Australia ((188) [1974] HCA 10; (1974) 130 CLR
245.) and the licence fee in Gosford Meats Pty. Ltd. v. New South
Wales ((189) [1985] HCA 5; (1985) 155 CLR 368.) were considered by the majority
in each case to be a tax upon the local production or manufacture of
goods (and not upon imported goods) and would be regarded as excise
duties even upon the more confined view. Similarly, the pipeline fee
in Hematite Petroleum Pty. Ltd. v. Victoria ((190) [1983] HCA 23; (1983) 151 CLR
599.) was regarded by the majority as a tax upon a step in the local
production of refined petroleum products. On the other hand, the stamp
duty on hire-purchase agreements which was held in Anderson's Pty. Ltd.
v. Victoria ((191) (1964) 111 CLR 353.) not to be an excise duty
was clearly not a tax upon production or manufacture and would not be
an excise duty upon the narrower view. I note by contrast that in Cole
v. Whitfield the Court overruled an interpretation of s.92 which had
been applied by the Court with more or less enthusiasm in a large
number of cases between the Bank Nationalisation Case ((192) The
Commonwealth v. Bank of N.S.W. (1949) 79 CLR 497; (1950) AC 235.)
and Miller v. TCN Channel Nine Pty. Ltd. ((193) [1986] HCA 60; (1986) 161 CLR 556.).
41. The first of the questions reserved for the consideration of the Court
is: "Are any, and if so which, of the provisions of
the
Business Franchise ('X' Videos) Act 1990 (A.C.T.) invalid as imposing,
in any respect, either a duty of excise or a duty of customs or both
within the meaning of s.90 of the Commonwealth Constitution?" Upon
the assumption that the fees charged by the "X" Videos Act for a
licence to wholesale or retail "X" videos are taxes upon goods, they
are taxes upon sale or hire (both wholesale and retail include hiring
by definition) and apply whether the goods sold or hired are locally
manufactured or produced or imported. For that reason, the tax is a
tax upon "the sale of the goods as existing articles of trade and
commerce, independently of the fact of their local production" ((194)
See The Commonwealth and Commonwealth Oil Refineries Ltd. v. South
Australia (1926) 38 CLR, at p.426.) and is not an excise duty. In
fact, it does not appear whether the "X" videos sold or hired in the
Australian Capital Territory are wholly produced or manufactured
locally or whether they include imported items. However, that is of no
consequence because the legislation does not impose the tax, either in
substance or in form, upon local manufacture or production. Similarly,
the tax is not a customs duty because it is not imposed upon goods in
their character as articles of overseas production. I would answer the
first question in the negative.
42. The second question is: "Are any, and if so which, of the provisions
of (the Act) invalid under the Australian Capital Territory
(Self-Government) Act 1988 (Cth) as being a law with respect to a
'classification of materials for the purposes of censorship'?"
43. Under the Australian Capital Territory (Self-Government) Act 1988
(Cth), s.23(1)(g), the Legislative Assembly of the Australian
Capital Territory has no power to make laws with respect to "the
classification of materials for the purposes of censorship". Under
s.37, the Executive has the responsibility of governing the Territory
with respect to those matters specified in Sched.4. Schedule 4
includes "Territorial censorship, except classification of materials".
The plaintiffs contend that s.4(1) of the "X" Videos Act, which
attaches consequences to material classified as an "X" film under
the Classification of Publications Ordinance 1983 (A.C.T.) ("the
Classification Ordinance"), is a law with respect to the
classification of materials for the purposes of censorship and for
that reason is beyond the power of the Australian Capital Territory
legislature.
44. It may not be immediately apparent that the purposes of the "X" Videos
Act include censorship, but that question may be put
to one
side. The primary meaning of "classification" is the act of arranging
or distributing in classes according to common characteristics or
affinities ((195) See Oxford English Dictionary, 2nd ed. (1989), vol.3,
p.283.). Section 25 of the Classification Ordinance prescribes
classes for films, one of which is "X", the others being "G" (suitable
for general exhibition), "PG" (parental guidance recommended for
persons under the age of 15 years), "M" (not recommended for viewing by
persons under the age of 15 years) and "R" (likely to cause offence to
a reasonable adult person, or unsuitable for a minor). The
Classification Ordinance remains in force in the Territory after
self-government, but may not be amended by the Legislative Assembly
((196) Australian Capital Territory (Self-Government) Act, s.34(5),
(7), Scheds 3, 5.). The classification of films under the
Classification Ordinance is adopted for the purposes of the States and
the Northern Territory under an agreement between them and the
Commonwealth ((197) See, e.g., Classification of Films and Publications
Act 1990 (Vict.), s.4.), although the consequences attaching to the
classification may vary under State or Territory legislation ((198)
cf., e.g., ibid., s.24 and Film and Video Tape Classification Act 1984
(N.S.W.), s.21.). The inability of the Legislative Assembly of the
Australian Capital Territory to amend the Classification Ordinance
would suggest an intention to perpetuate a uniform system of
classification throughout Australia.
45. The adoption by the "X" Videos Act of the classification of "X" films
under the Classification Ordinance does not mean that
the
"X" Videos Act is a law with respect to the classification of
materials. To attach consequences to an existing classification of
materials is not to classify them - to arrange or distribute them into
classes. The classification takes place under the Classification
Ordinance which provides the method or system for doing so.
The "X" Videos Act does not move films which are assigned an
"X" classification under the Classification Ordinance to or from that
classification, nor does it attempt any subdivision of that
classification. In my view the "X" Videos Act is not a law with
respect to the classification of materials and does not lie beyond the
power of the Legislative Assembly. I would answer the second question
in the negative. It is unnecessary to answer the third question.
TOOHEY AND GAUDRON JJ On 23 March 1993 the Chief Justice reserved
certain questions ((199) Question 1 is as amended during the course of
the hearing.) for the consideration of the Full Court:
(1) Are any, and if so which, of the provisions of the
Business Franchise ("X" Videos) Act 1990 (A.C.T.)
invalid as imposing, in any respect, either a duty of
excise or a duty of customs or both within the meaning
of s.90 of the Commonwealth Constitution?
(2) Are any, and if so which, of the provisions of that
Act invalid under the Australian Capital Territory
(Self-Government) Act 1988 (Cth) as being a law with
respect to a "classification of materials for the
purposes of censorship"?
(3) If the answer to any part of questions (1) or (2) is
"yes", are any, and if so which, further provisions of
that Act incapable of being severed from those
provisions and therefore invalid?
2. The principal question for determination is whether any of the
provisions of the Business Franchise ("X" Videos) Act 1990 (A.C.T.)
("the Act") ((200) The Act was amended by the Business Franchise ("X"
Videos) (Amendment) Act 1993 (A.C.T.) which came into operation on
1 April 1993 but these amendments do not arise for consideration
in the present case; in relation to those amendments see
Rainsong Holdings Pty. Ltd. v. Australian Capital Territory,
unreported, High Court of Australia, 7 December 1993.) imposes a duty
of excise for the purposes of s.90 of the Constitution.
The Act
3. The Act is concerned with the wholesaling and retailing of "X" videos.
An "X" video is defined as a video classified as an
"X" film under the Classification of Publications Ordinance 1983
(A.C.T.) ((201) See s.4(1) of the Act and s.25(2) of the Ordinance.
The Ordinance requires that a film answering the description in
par.(a) or (b) of s.25(2) be classified as an "R" film or an
"X" film. The Ordinance provides no criteria for distinguishing
an "R" film from an "X" film, save to the extent that a
distinction can be drawn from the additional restrictions placed
on the sale, delivery and display of the latter.).
4. A person shall not "wholesale" "X" videos, a term which is defined
((202) s.4(1).) to include hiring to another person for
the
purpose of retail or wholesale trade and carrying on the business of
wholesaling, unless he or she is the holder of a wholesale licence and
wholesales "X" videos in accordance with that licence. A person shall
not "retail" "X" videos, a term which is defined ((203) s.4(1).) to
include hiring to another person in the course of retail trade and
carrying on the business of retailing, except in accordance with a
retail licence.
5. Penalties are imposed on persons who wholesale "X" videos without a
licence or who wholesale or retail "X" videos otherwise
than in
accordance with a licence. The sanctions are by way of fine or
imprisonment ((204) ss.24, 25.).
6. The Act imposes a regime of licence fees on the holders of wholesale and
retail licences, calculated by reference to the quantum
of trade in "X" videos. Wholesalers pay tax on "X" videos supplied
during the licence period and retailers pay tax on stock offered for
sale in relation to which tax has not already been paid, either by a
wholesaler or by the retailer in a previous licence period. It is the
character of these licence fees that is at the centre of the dispute.
The Legislative Assembly of the Australian Capital Territory is not
empowered to impose a duty of excise ((205) Capital Duplicators Pty.
Ltd. v. Australian Capital Territory (No.1) [1992] HCA 51; (1992) 177 CLR 248.).
The plaintiffs contended that the licence fees are duties of excise.
The terminology "Business Franchise", employed in the title of the Act,
has no doubt been borrowed from similar language used in State
legislation. This terminology, however, gives "franchise" a rather
different meaning to that which is generally understood.
7. It is necessary to say a little more about the way in which licence fees
are assessed. An applicant for either a wholesale
or a
retail licence must pay a basic fee of $50 for each premises to which
the licence relates ((206) ss.4(1), s.18.). The applicant must also
pay at the time of application an amount estimated as equal to the
advance fee, which is calculated as 40% of the wholesale value of the
relevant "X" videos in the initial month-long licence period ((207)
s.19.). The advance fee itself is due and payable at the expiration
of the licence period but the amount paid upon application is held on
account of the advance fee. An application for the first renewal of a
licence must also be accompanied by an estimate of the advance fee
(calculated by reference to the second month of the licence); again it
is payable in full at the expiration of that licence period ((208)
s.19.).
8. For the second and subsequent renewals, the Act prescribes franchise
fees referable to, in the case of a wholesale licence,
40% of the total wholesale value of the "X" videos supplied by
wholesale in the month which is two months prior to the month for
which the renewal is sought. In the case of a retail licence the fee
is 40% of the total wholesale value of the "X" videos manufactured by
the licensee and the "X" videos supplied to the licensee otherwise
than in accordance with a wholesale licence, being videos offered for
retail sale by the licensee in the month which is two months prior to
the month for which the renewal is sought ((209) s.20.). It should be
noted that no franchise fee is payable in relation to the supply or
offer for retail sale of an "X" video where such a fee is payable in
relation to any previous supply or offer for retail sale of that
video ((210) s.21.).
The issues
9. It is not in issue that the licence fees made payable by the Act are
taxes ((211) Matthews v. Chicory Marketing Board (Vict.)
[1938] HCA 38; (1938)
60 CLR 263, at p.276; Air Caledonie International v. The
Commonwealth [1988] HCA 61; (1988) 165 CLR 462.); the question is whether they are
also duties of excise.
10. The plaintiffs took the decision of the Court in Philip Morris Ltd. v.
Commissioner of Business Franchises (Vict.) ((212)
[1989] HCA 38; (1989) 167
CLR 399.) as a starting point in their argument that the licence
fees imposed by the Act are duties of excise. It was held in that case
that a monthly licence fee imposed on the sale of tobacco, calculated
by reference to the value of tobacco sold in the last preceding month
but one, was not a duty of excise under s.90 of the Constitution.
Although the reasons which led the members of the majority (Mason CJ,
Deane, Dawson, Toohey and Gaudron JJ) to that conclusion diverged, the
plaintiffs submitted that the tests adopted by Mason CJ and Deane J
(jointly), who were part of the majority, and by Brennan J and McHugh
J (constituting the minority) combined to render the licence fees in
the present case an excise. Perforce, the plaintiffs argued that the
test which we applied in Philip Morris should not be followed.
11. The plaintiffs further argued that if the fees were held to be
regulatory within the "exception" formulated by Mason CJ and
Deane J in Philip Morris, it would follow that the Act was concerned
with censorship and hence beyond the powers conferred upon the
first defendant, the Australian Capital Territory. Underlying
this submission is s.23(1) of the Australian Capital Territory
(Self-Government) Act 1988 (Cth) which provides that the Legislative
Assembly for the Australian Capital Territory "has no power to make
laws with respect to:
...
(g) the classification of materials for the purposes of
censorship".
The meaning of excise
12. It is necessary for the Court to look yet again at s.90 of the
Constitution, the opening paragraph of which reads:
" On the imposition of uniform duties of customs the
power of the Parliament to impose duties of customs and of
excise, and to grant bounties on the production or export
of goods, shall become exclusive."
13. In Peterswald v. Bartley, Griffith CJ, delivering the judgment of the
Court, said of "excise" ((213) [1904] HCA 21; (1904)
1 CLR 497, at
p.508.)
:
"The fundamental conception of the term is that of a tax onGriffith CJ amplified this view later in the judgment when he
articles produced or manufactured in a country."
"(T)he conclusion is almost inevitable that, whenever
(excise) is used, it 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".
The meaning of excise: history
14. The decisions touching s.90 necessarily concern the meaning to be
attached to excise. The Court was furnished with a great deal of
material relating to the use of the term "excise" in the Australian
colonies before 1901. It is apparent from that material, which
includes statutory provisions and financial statistics, that excise
was a term applied to taxes on the local production of goods. As the
Solicitor-General for South Australia observed in the course of his
argument, there appears to be no instance of the term being applied
to a tax imposed on later steps in the process of distribution. This
understanding is reflected in the Convention Debates to which
Dawson J has referred in his judgment.
15. In England a wider meaning was attributed to the term "excise" but it
was the Australian context which led Griffith CJ to
identify
excise in the way he did in Peterswald v. Bartley, saying of the
term ((215) ibid.): "we are entitled to take notice of the sense in
which it has been understood and used in the legislation of the
various States". There can be no doubt as to the general understanding
at the time of federation. If further support be needed, it can be
found in the comment of Quick and Garran ((216) The Annotated
Constitution of the Australian Commonwealth, (1901), p.837.) that
"(t)he basic principle of excise duties was that they were taxes on the
production and manufacture of articles which could not be taxed through
the customs house".
The meaning of excise: authority
16. At the forefront of the debate in the present case is whether, as the
defendants contended, the Court should return to the
meaning
attached to "excise" in Peterswald v. Bartley and thereby reject the
departures from that approach that have taken place, particularly
the decision in Parton v. Milk Board (Vict.) ((217) [1949] HCA 67; (1949) 80 CLR
229.). That decision broadened the concept of excise to include any
tax upon a commodity at any point in the course of manufacture and
distribution before it reaches the consumer. This broad definition has
been called upon regularly in the numerous cases since Parton was
decided. However, another view, more akin to the approach in
Peterswald v. Bartley, has maintained a voice in the Court.
Furthermore, the broad definition has been the subject of differing
applications. One approach was to apply that definition in a manner
which focused on the "criterion of liability" by which the tax was
levied ((218) See Dennis Hotels Pty. Ltd. v. Victoria (1960) 104 CLR
529, per Kitto J at p.559; Bolton v. Madsen [1963] HCA 16; (1963) 110 CLR 264, at
p.271.). The interpretation of s.90 since Parton, therefore, has been
a tussle between three strands of authority:
- the view of excise duties which denies to the States only thoseThe three strands of authority are categories only but they
taxes imposed on local production or locally produced goods;
- the view which denies to the States all taxes imposed on the
goods at any stage of their production and distribution; and
- the view which adopts the broad definition but applies the test
in such a way that only those taxes which are directly imposed
on goods infringe s.90 of the Constitution.
17. The prime example of the differing approaches is to be found in Dennis
Hotels Pty. Ltd. v. Victoria ((219)
[1960] HCA 10; (1960) 104 CLR
529.)
which involved a scheme of retrospective licence fees imposed on
sellers of alcohol. The form of the scheme was much the same as that
of the impugned legislation in Philip Morris and indeed in the present
case. In Dennis Hotels, Dixon CJ ((220) ibid., at p.540.),
McTiernan J ((221) ibid., at p.549.) and Windeyer J ((222) ibid., at
p.592.) applied the broad definition and would have struck down the
scheme as a tax on goods. Fullagar J ((223) ibid., at pp.554-555.)
and Menzies J ((224) ibid., at p.582.) applied the approach taken in
Peterswald v. Bartley and would have upheld the legislation because it
was not a tax on local production or manufacture. Kitto J ((225)
ibid., at pp.559, 563.) and Taylor J ((226) ibid., at p.575.)
adopted the broad definition of excise but held the scheme valid as the
holding of a licence rather than the goods was the criterion of
liability ((227) The division of opinion in Philip Morris is
reminiscent of the debate in Dennis Hotels: Mason CJ, Brennan, Deane
and McHugh JJ applied the broad definition although Mason CJ and
Deane J declined to strike down the licence fee on tobacco. Dawson J
applied the criterion of liability approach. We applied the view taken
in Peterswald v. Bartley.). Therefore the decision in Dennis Hotels
reflected two different strands of authority agreeing in the result.
Notwithstanding this conglomerate ratio in Dennis Hotels, the decision
has stood as authority for the validity of retrospective licence fees
and was the first of the so called trilogy of cases which upheld the
constitutional validity of the taxes in relation to alcohol, tobacco
((228) Dickenson's Arcade Pty. Ltd. v. Tasmania [1974] HCA 9; (1974) 130 CLR 177.)
and petrol ((229) H.C. Sleigh Ltd. v. South Australia [1977] HCA 2; (1977) 136CLR 475.) upon which a substantial proportion of State revenue is
18. The Court was not invited by the plaintiffs to reconsider these cases,
but the defendants argued that Dennis Hotels and
Dickenson's Arcade Pty. Ltd. v. Tasmania ((230) [1974] HCA 9; (1974) 130 CLR 177.)
should be reconsidered as falling within the concept of excise for
which they contended. For the most part the interveners opposed any
reconsideration of these decisions.
19. Having acknowledged that in a number of decisions the Court has moved
away from the meaning attached to excise in Peterswald
v.
Bartley, there is no point in discussing further those decisions
which, in any event, are canvassed in the various judgments in
Philip Morris. Furthermore, the matter is not resolved merely by a
tally of the judgments delivered in those cases. In the light of
the arguments now presented to the Court, the essential question is
whether the move away from the view of s.90 taken in Peterswald v.
Bartley truly reflects the operation of s.90. Further it must be
considered whether the reasoning underlying that move is consistent
with what the Court said in Cole v. Whitfield ((231) [1988] HCA 18; (1988) 165 CLR
360.).
The meaning of excise: principle and purpose
20. The constitutional discussion has also been on a wider plane, namely,
the place of s.90 within the political and economic framework
of the Constitution. Section 90 does confer a power on the
Parliament ((232) Parton (1949) 80 CLR, at p.260.) but it is a
power with a purpose, namely, the power to effectuate economic policy
with respect to Australian exports and imports. To secure that purpose
it is necessary only to deny to each State the power to levy duties of
customs on goods entering that State from overseas, the power to levy
duties of excise on goods locally produced or manufactured and the
power to grant bounties on goods produced or manufactured in that
State. To deny the States (and the Territories) those powers ensures a
uniform policy in regard to external tariffs.
21. The point was made by Murphy J in Logan Downs Pty. Ltd. v. Queensland
((233) [1977] HCA 3; (1977) 137 CLR 59, at p.84.)
that taxes imposed
without regard to the place of production or manufacture are neither
duties of customs nor duties of excise for they do not discriminate
between commodities locally produced and other commodities.
22. In Philip Morris we sought, as did Dawson J, to point out that once
excise is regarded as embracing not only a tax upon manufacture
or production but also a tax upon a commodity at any point before it
reaches the consumer, the correlation between duties of customs and
duties of excise is lost, a correlation which the Constitution
demands. The argument is advanced that a tax upon a commodity at any
point before it reaches the consumer produces the same effect as a tax
upon its manufacture or production ((234) Parton (1949) 80 CLR, per
Dixon J at p.260; Philip Morris (1989) 167 CLR, per Mason CJ and
Deane J at p.436.). But it is apparent that a tax upon the
distribution of goods may have different consequences from a tax upon
their production. For example, a tax upon production has an impact
only on goods produced locally, thereby affecting the price of those
goods as compared with goods produced overseas; a tax on the sale of
goods impacts on both and, if non-discriminatory, on both equally.
23. In Parton Dixon J, having spoken of the perceived intention of s.90 "to
give the Parliament a real control of the taxation of
commodities", added ((235) (1949) 80 CLR, at p.260.):
"A tax upon a commodity at any point in the course ofBut, as we observed in Philip Morris ((236) (1989) 167 CLR, at
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."
"On this view it is difficult to see any basis forThe point had been made earlier by Gibbs J in Dickenson's
distinction between taxes imposed during the course of
production or manufacture and those imposed at any
subsequent point, including the point of consumption."
24. Further, if an excise is regarded as an impost on goods by virtue of
their local production rather than an impost on the local
production itself, the apparent difficulty is avoided.
25. Once again, to borrow from our judgment in Philip Morris ((238) (1989)
167 CLR, at pp.478-479.):
"If the relevant goods include both goods produced or
manufactured in Australia and goods produced or
manufactured overseas then the significance of a reference
to production or manufacture lies only in its serving to
restrict the concept of duties of excise to articles of
commerce. In that event the relevant connexion might well
be constituted by any relationship affecting the goods as
articles of commerce. On the other hand, if the relevant
goods are goods produced or manufactured in Australia,
there is no self-evident reason why the relevant connexion
should extend beyond a relationship affecting those goods
as items of Australian production or manufacture."
The treatment of particular commodities
26. There are of course judgments in the Court which have attributed
particular qualities or characteristics to certain commodities,
alcohol and tobacco in particular. The characteristics are said to
invoke the need for their regulation, with the consequence that those
commodities do not in any event fall within the operation of excise.
There are, we suggest, considerable difficulties in that approach,
particularly if a distinction is to be made on the basis of their
harmfulness.
27. In terms of the harm that a particular commodity may cause, a
distinction between alcohol and tobacco on the one hand and
"X" videos
on the other would be very tenuous indeed. And to draw such a
distinction, whether by reference only to physical harm or otherwise,
would be to make a value judgment which the Court is not equipped to
make on the basis of any material presented in this case. It is true
that the absence, in the subject legislation, of controls over the
sale of "X" videos does support an argument that the legislation is
not concerned with the protection of the public. But the argument can
go no further; videos are already subject to registration, censorship
and control in all States and Territories ((239) Classification of
Publications Ordinance 1983 (A.C.T.); Film and Video Tape
Classification Act 1984 (N.S.W.); Classification of Publications and
Films Act 1985 (N.T.); Classification of Publications Act 1991 (Q.);
Classification of Publications Act 1974 (S.A.); Classification of
Publications Act 1984 (Tas.); Classification of Films and Publications
Act 1990 (Vic.); Censorship of Films Act 1947 (W.A.). See generally
Australian Law Reform Commission, Report No.55, Censorship Procedure,
(1991).). The point is simply that the commodity to which the legislation
relates, that is "X" videos, affords no basis for distinguishing
it from
alcohol or tobacco. In truth, any such distinction has no surer foundation
than the special position attributed to the latter
in Dennis Hotels and
Dickenson's Arcade.
Reconsideration of Dennis Hotels and Dickenson's Arcade
28. So far as those two decisions are concerned, we have considered the
arguments for and against their reconsideration. For
the reasons
we gave in Philip Morris ((240) (1989) 167 CLR, at pp.481-485.),
these decisions should be treated as anomalous exceptions to the
concept of excise duties. It is unnecessary to repeat those reasons.
In any event, our approach to s.90 would have upheld the validity of
the legislation considered in those cases.
Discrimination
29. Before the decision of the Court in Cole v. Whitfield, Murphy J had
adopted a concept of discrimination in relation to s.90.
In Logan
Downs, his Honour said ((241) (1977) 137 CLR, at p.84.):
" In general, taxes imposed without regard to the placeIn our view this approach to s.90 is correct. We would add that in
of production or manufacture are neither duties of customs
nor duties of excise. The essence of each duty is the
tendency to discriminate between goods locally produced and
other goods."
30. Later, in Hematite Petroleum Pty. Ltd. v. Victoria ((242) [1983] HCA 23; (1983) 151
CLR 599.) Murphy J spoke of s.90 as
prohibiting State
taxation
which discriminates between goods produced in the State and those
produced outside. His Honour added ((243) ibid., at p.638.):
"The constitutional concept of excise forbidden to the
States is limited to taxes on production within the State;
it does not extend to taxes on distribution or consumption
unless these are in substance taxes on production within
the State."
31. We said in Philip Morris ((244) (1989) 167 CLR, at p.479.):
" There is much to be said for the view that the text ofHowever, we acknowledged ((245) ibid., at p.480.) that "the
the Constitution favours the identification of goods which
are the subject of duties of excise forbidden to a State by
s.90 as goods produced or manufactured in that State."
32. This debate as to whether s.90 prohibits taxes which discriminate
against goods produced in a State or goods produced in Australia
warrants further consideration. The approach taken by Murphy J,
which is reflected also in his Honour's judgments in H.C. Sleigh Ltd.
v. South Australia ((246) [1977] HCA 2; (1977) 136 CLR 475.) and in Gosford Meats
Pty. Ltd. v. New South Wales ((247) [1985] HCA 5; (1985) 155 CLR 368.), results
from what his Honour saw as jurisdictional constraints. In particular,
as Murphy J saw it, a State is not competent to legislate outside its
jurisdiction and cannot therefore legislate regarding the production of
goods in another State. Furthermore, a tax on goods entering a State
would discriminate against their production outside the State and
therefore "be a duty of customs prohibited by s.92" ((248) H.C. Sleigh
(1977) 136 CLR, at p.527.) of the Constitution.
33. There are difficulties with this approach. The first is that it
assumes that an excise is a tax on the production of a commodity
rather than on a commodity. In Philip Morris ((249) (1989) 167 CLR,
at p.482.) we referred to the dictum of Dixon J in Matthews ((250)
(1938) 60 CLR, at p.304.) that for a tax to constitute a duty of
excise it "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" ((251) The reference to "consumption" must be seen in the
light of Dixon J's later revision in Parton (1949) 80 CLR, at
p.261.). The dictum identifies an excise as a tax on goods, imposed
within jurisdiction, the goods themselves being identified by their
place of production or manufacture. It is not a tax on the process of
production or manufacture itself and therefore the place of production
or manufacture raises no jurisdictional issues. On the view taken by
Murphy J, a State tax on goods produced outside the State could not
infringe s.90 of the Constitution. But, on the view we express, such
a tax may infringe s.90. If this were not the case, one or more
States could combine to destroy federal governmental policy by
imposing a sales or consumption tax which would frustrate Commonwealth
tariffs. For example, a State tax on automotive parts of Australian
manufacture (regardless of State of origin) in an amount equivalent to
the customs duty imposed on imported automotive parts would negate
Commonwealth policy, a result the founders of the Constitution were at
pains to avoid.
34. The second difficulty inherent in the approach of Murphy J is that it
denies the possibility of overlap, duplication and
reinforcement in the Constitution. There is nothing in the
Constitution that dictates that Commonwealth or State legislation may
infringe only one constitutional principle at a time. It is clearly
possible that a State tax may infringe both s.90 and s.92, and
possibly other constitutional restraints as well. Sections 90 and 92
have related purposes but those purposes may, in one case, overlap
and, in another, diverge.
35. The approach we have taken to the meaning and operation of excise is
consistent with the approach taken in Cole v. Whitfield,
namely,
to identify the purpose of the section which, in the case of s.92,
is to strike down laws which impose discrimination of a protectionist
nature. Likewise, s.90 strikes down such laws in relation to
Australian exports and imports, that is, State taxation measures which
discriminate against goods manufactured or produced in Australia.
36. The licence fees imposed by the Act are taxes upon commodities but they
are imposed whether the videos sold or hired are manufactured
locally or whether they are imported. There is therefore no
discrimination involved and the tax does not constitute a duty of
excise. The first question should therefore be answered in the
negative.
37. As to the question whether any of the provisions of the Act is invalid
as being a law with respect to a "classification of
materials
for the purpose of censorship", we agree with the judgment of
Dawson J in answering that question also in the negative.
38. It is unnecessary to answer the third question.
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