Dennis Hotels Pty Ltd v Victoria
[1960] HCA 10104 CLR 529
(Judgment by: Windeyer J)
Dennis Hotels Pty Ltd
vVictoria
Judges:
Dixon CJ
McTiernan J
Fullagar J
Kitto J
Taylor J
Menzies J
Windeyer J
Subject References:
Constitutional Law (Cth)
Duties of excise
Exclusive power of Commonwealth Parliament
Victualler's licence fee imposed under State law
Fee equal to six per cent of gross amount paid or payable for all liquor purchased for the licensed premises during the twelve months preceding application for renewal of licence
Temporary victualler's licence fee imposed under State law
Fee to include sum equal to six per cent of gross amount paid or payable for all liquor purchased for sale or disposal under such licence
Validity
The Constitution (63 & 64 Vict. c. 12), s. 90
Licensing Act 1958 (Vict.) (No. 6293), ss. 7, 19 (1) (a), (b).
Case References:
Parton v Milk Board (Vict) - [1949] HCA 67; (1949) 80 CLR 229
The Commonwealth and Commonwealth Oil Refineries v South Australia - [1926] HCA 47; (1926) 38 CLR 408
Matthews v Chicory Marketing Board (Vict) - (1938) 60 CLR 263
Meredith v Fitzgerald - [1948] HCA 11; (1948) 77 CLR 161
R v Caledonian Collieries - (1928) AC 358
Griffith v Constantine - [1954] HCA 80; (1954) 91 CLR 136
Browns Transport Pty Ltd v Kropp - [1958] HCA 49; (1958) 100 CLR 117
Peterswald v Bartley - [1904] HCA 21; (1904) 1 CLR 497
Crothers v Sheil - (1933) 49 CLR 399
Hartley v Walsh - [1937] HCA 34; (1937) 57 CLR 372
Hopper v Egg and Egg Pulp Marketing Board (Vict) - [1939] HCA 24; (1939) 61 CLR 665
Atlantic Smoke Shops Ltd v Conlon - (1943) AC 550
Brewers and Maltsters' Association of Ontario v Attorney-General for Ontario - (1897) AC 231
John Fairfax
&
Sons Ltd and Smith's Newspapers Ltd v New South Wales - (1927) 39 CLR 139
Browns Transport Pty Ltd v Kropp (1958) - [1958] HCA 49; 100 CLR 117
Hughes and Vale Pty Ltd v State of New South Wales - [1953] HCA 14; (1953) 87 CLR 49
Bank of Toronto v Lambe - (1887) 12 App Cas 575
Jones v Whittaker - (1870) LR 5
Attorney-General for British Columbia v Kingcome Navigation Company - (1934) AC 45
Bergin v Stack - [1953] HCA 53; (1953) 88 CLR 248
Meredith v Fitzgerald (1948) - [1948] HCA 11; 77 CLR 161
Attorney-General (NSW) v Homebush Flour Mills Ltd - [1937] HCA 3; (1937) 56 CLR 390
John Fairfax
&
Sons Ltd v New South Wales - [1927] HCA 3; (1927) 39 CLR 139
Henriksen v Grafton Hotel Ltd - [1942] 2 KB 184
Attorney-General for Manitoba v Attorney-General for Canada - (1925) AC 561
Brewers and Maltsters' Association of Ontario v Attorney-General for Ontario - (1897) AC 231
Sharpe v Wakefield - (1891) AC 173
Reg v Flintshire County Council County Licensing (Stage Plays) Committee Ex parte Barrett - (1957) 1 QB 350
Lancashire v Staffordshire Justices - (1857) 26 LJMC 171
Judgment date: 26 February 1960
Melbourne
Judgment by:
Windeyer J
In my opinion the licence fees in question are duties of excise; and their imposition by the State of Victoria was therefore invalid. The question arises in connexion with the sum of 12,702 pounds 15s. 0d. being six per centum of the gross amount paid or payable for all liquor which during the year ended 30th June 1957 the appellant bought for its licensed premises. This sum the appellant was required by the Licensing Act to pay to the Treasurer on renewal of its victualler's licence for the year 1958. The case thus arises out of occurrences before the Licensing Act 1958 came into operation. But as the question is of far reaching and continuing importance and it is agreed that the material provisions of that Act do not differ from those theretofore in force, I shall throughout refer to the sections of that Act. If the abovementioned amount which was required to be paid as a licence fee by s. 19 (1) had not been paid in accordance with the Act the licence would have become void (ss. 22, 97). Fees paid by the appellant for temporary licences are also in question; but if the levy in respect of the victualler's licence be invalid, the others are too. So I shall deal primarily with it. It was conceded by the Solicitor-General that the impost is a tax. That was indisputable. Is it then a duty of excise within the meaning of s. 90 of the Constitution? (at p592)
2. A tax payable by a trader and measured by the amount of a commodity that in the course of his business he buys or sells is, in my view, prima facie a duty of excise. If it be measured by the quantity of the goods so bought or sold it is a specific duty. If it be measured by the price or value of the trader's purchases or sales of the particular goods it is an ad valorem duty. In either event it is prima facie an excise because it is a tax laid on the commodity. Of course the taxpayer, not the commodity, pays the tax. But we need not be hypercritical about the phrase duties "on commodities", for it goes back a long way. The Act 12 Car. II c. 23 (1660) was "A grant of certain impositions upon beer, ale and other liquors". And in 1786 in a statute reciting the terms of the commercial treaty with France it was said that "other merchandises shall pay the duties payable by the most favoured nation" (26 Geo. III c. 13 s. 21). By Dr. Johnson's time the essential quality of an excise was so well known that his famous definition of excise began "a hateful tax levied upon commodities". And, omitting the opprobrium, this Court has recently expressed the essential feature of an excise in the same words. In Browns Transport Pty. Ltd. v. Kropp [1958] HCA 49; (1958) 100 CLR 117 , the matter was summed up as follows (1958) 100 CLR, at p 129 : "If an exaction is to be classed as a duty of excise, it must, of course, be a tax. Its essential distinguishing feature is that it is a tax imposed 'upon' or 'in respect of' or 'in relation to' goods: Matthews v. Chicory Marketing Board (Vict.) (1938) 60 CLR, at p 304 . It would perhaps be going too far to say that it is an essential element of a duty of excise that it should be an 'indirect' tax. But a duty of excise will generally be an indirect tax, and, if a tax appears on its face to possess that character, it will generally be because it is a tax upon goods rather than a tax upon persons. ' . . . a direct tax is one that is demanded from the very person who it is desired and intended should pay it. An indirect tax is one which is demanded from one person in the expectation and with the intention that he shall indemnify himself at the expense of another': Attorney-General for Manitoba v. Attorney-General for Canada (1925) AC 561, at p 566 ." (at p593)
3. To-day the distinction between direct and indirect taxes is not accepted as exact or satisfactory for purposes of economic analysis. The difficulties of the ideas of successive passings on and of shifting the incidence of a tax have been recognized by many economists (see e.g. Mrs. Ursula Hicks's article on the Terminology of Tax Analysis in the Economic Journal of March 1946, the essence of which is repeated in her Public Finance 2nd ed. (1955) 131 ff, and in her article on "Taxation" in the last edition of Chambers's Encyclopaedia). But there is no difficulty in the simple notion of a tax which it is intended should be borne by the consumers of a particular commodity - by smokers of tobacco or drinkers of beer for example - but which by means of a customs or excise duty is collected by the revenue authorities from an importer, manufacturer or trader through whose hands the commodity reaches the consumer, the smoker or the drinker. To quote Lord Stamp's article on "Taxation" in the Encyclopaedia Britannica 14th ed.: "The distinction between direct and indirect taxation is mainly an administrative one. It is a classification for convenience sake, adopted upon a rough observation of conspicuous, or apparently conspicuous differences in the mode of levying taxes, and nothing more. The division nevertheless cannot be passed over without mention, as it is not only a common one in economic writing, but it figures largely in budget statements, financial accounts and finance ministers' speeches - especially in the United Kingdom and France . . . Direct taxes are those finally borne by the actual payer, but where the legislation does not intend the tax to fall upon the payer, and expects him to pass it on, in price, or otherwise by altering the terms of a bargain, it is indirect". (at p593)
4. For us the importance of this distinction is that, because it has a place in the constitutional law of Canada, it has had to be defined and applied by the Privy Council. The Privy Council has recognized that the distinction is derived from John Stuart Mill (Bank of Toronto v. Lambe (1887) 12 App Cas 575, at p 582 ; Brewers and Maltsters' Association of Ontario v. Attorney-General for Ontario (1897) AC 231 ). As their Lordships pointed out in Atlantic Smoke Shops Limited v. Conlon (1943) AC 550, at p 563 , Mill's fame as an economist was established at the time the British North America Act was passed; so that for the purpose of construing the expressions direct and indirect taxation in that instrument the use of his exposition is fully justified. But our Constitution does not make this distinction, and in Matthews v. Chicory Marketing Board [1938] HCA 38; (1938) 60 CLR 263 , Starke J. went so far as to say: "The cases under the Canadian Constitution are descriptive rather than definitive of a customs and an excise duty, and they are no authority for the proposition that a tax cannot be an excise duty unless it has the characteristics of an indirect tax" (1938) 60 CLR, at p 285 . Nevertheless from Peterswald v. Bartley (1904) [1904] HCA 21; 1 CLR 497 to Browns Transport Pty. Ltd. v. Kropp, [1958] HCA 49; (1958) 100 CLR 117 this Court has considered the economic concept of indirect taxation of assistance in determining whether or not a particular impost is an excise within s. 90. But we ought not to take too much from Lord Hobhouse's reference to a duty which "enters at once into the price of the taxed commodity" (1887) 12 App Cas, at p 583 ; for whether a duty does enter at once into the price of the taxed commodity and in what sense, to what extent and for how long it does so, must depend upon how far various factors and circumstances remain unchanged and on the relative elasticity of demand and supply. The matter may be put in its simplest form by quoting further from the abovementioned article by Lord Stamp: "The distinction (i.e. between direct and indirect taxation) has little actual economic basis, because the effect of the tax in retarding production or consumption may be such as to throw the burden elsewhere, and the customer may, in consequence of the higher price, drink less beer, and the brewer, through selling less, make lower profits". Searching for the incidence and ultimate effect of a particular commodity tax may not be a fruitful economic inquiry. But that a tax on commodities levied on anyone before the ultimate consumer does ordinarily affect the price the ultimate consumer pays seems indisputable. If one assumes a state of perfect competition, inelastic demand and supply and other factors constant - an economist's dream world - then, as I understand the matter, the tax might be said in a simple sense to enter at once into the price. Those conditions do not, of course, prevail in the present case. But, in so far as the quality of an indirect tax is a characteristic of an excise duty, I can see no reason for thinking that the fee for a victualler's licence does not have it. It was argued that, because the levy is payable when a licence is renewed and is calculated in respect of purchases for a previous period, it does not enter into the price of the actual commodities sold during the period for which the licence was renewed. A hypothetical illustration in the judgment of Dixon J., as he then was, in Parton v. Milk Board (Vict.) (1949) 80 CLR, at p 263 , supports this view. But, as his Honour does not now regard it as correct, it may be put aside and the question approached afresh. The real nature of the tax has to be ascertained (see per Starke J. in Matthews v. Chicory Marketing Board (Vict.) (1938) 60 CLR, at p 285 ). This depends upon its operation and effect upon the commodity as an article of commerce. The mechanics of calculating and collecting it should, in my view, be considered so far only as they substantially affect its operation and commercial effect. That a tax is computed in respect of a trader's purchases in a particular period and is payable when he renews his annual trading licence for a different period cannot, I think, be decisive in itself. If it is, then, as my brother Menzies has pointed out, the logical consequence is that whereas the fee paid for a victualler's licence is not a duty of excise, that paid for a temporary licence is. But the two imposts are similar in their general economic consequences. To distinguish them in the way that the logical application of the proposed criterion demands appears to me to involve considerations so nice as to be artificial. Moreover, with great respect to those who think otherwise, it seems to me that this ground for denying the character of an excise to the victualler's licence fee overlooks the way in which a publican's business is conducted. A victualler's licence authorizes the holder to sell liquor upon the licensed premises. The term "victualler" in this connexion has for long been restricted to publicans, that is to "persons authorized by law to keep houses of entertainment for the public" (per Tindal C.J. in Tyson v. Smith (1838) 9 Ad & E 406, at p 423 [1838] EngR 315; (112 ER 1265, at p 1272) ). The Licensing Act requires a licensed victualler to provide meals and accommodation on the premises - in effect to keep an inn. But his licence merely authorizes him to sell and dispose of liquor in any quantity on the premises therein specified between the hours of nine in the morning and six in the evening (s. 8). The right (more strictly the immunity or privilege) which the licence thus creates arises because it is an offence to sell liquor without a licence (s. 154). The licence is granted for a year. It is renewable from year to year. Renewals are obtainable under s. 88 of the Act at the annual sitting of the Licensing Court which is held during such periods in every year as are appointed by notice in the Gazette (s. 80 (1)). Applications for renewal have to be made before the first day of the annual sittings; but apparently they may be made at any time before that day (s. 88). Technically, a renewal is not a continuance of the old licence, but a re-granting of a new licence. A licensee is, however, entitled, subject to objection, to obtain a renewal provided the licence was not liable to be forfeited or revoked (s. 88). (See per Jordan C.J. in Ex parte James; Re Furlong (1940) 40 SR (NSW) 345, at p 349; 57 WN 119, at p 120 ). It is important to note that the Victorian Act here differs materially from the law under consideration in Sharpe v. Wakefield (1891) AC 173 . (See also Reg. v. Flintshire County Council County Licensing (Stage Plays) Committee; Ex parte Barrett (1957) 1 QB 350, at pp 368, 369 ). A publican who carries on his business in a proper fashion can therefore expect to have his licence renewed from year to year. This is what the Act contemplates (see per Lord Bramwell in Sharpe v. Wakefield (1891) AC, at p 184 ). A publican's business is thus normally conducted on the basis that it will continue. Liquor stocks are replenished as the need arises and sold as demanded. The course of trading is not broken into annual periods. How much, if any, of the liquor bought in the period in respect of which the tax is computed is in stock when the tax has to be paid depends upon the course of trading. A victualler's licence relates to particular premises. It can in certain circumstances be removed to new premises (s. 120). The Act itself indicates what common knowledge makes plain, namely that a licence annexed to premises is a valuable thing. There are careful provisions to safeguard the interest of the owner or mortgagee of the premises if the licensee should fail to apply for a renewal of his licence or should cause it to be forfeited (ss. 89, 115). The owner or mortgagee can then obtain a renewal. If he does so he must pay the tax computed on the purchases made by the outgoing licensee. The tax is payable when any person applies for and gets either the grant or renewal of a victualler's licence. It is not computed on the value of the applicant's purchases - it could not be in cases when he had not previously been the licensee of the premises, and was thus applying for a grant as distinct from a renewal. It is computed on the amount paid or payable for liquor which had been purchased for the premises. The result is that, assuming the law is not altered, and assuming the premises remain licensed, a tax of six per cent must be paid upon the amount of all liquor from time to time bought for the premises, no matter when it be bought and no matter when, or by whom, or indeed where, it be sold. From a business point of view that must mean that the surcharge which the law has imposed on the cost of the liquor will, to a greater or less amount, be reflected in the price at which it is sold to the consumer. I say to a greater or less amount, because this qualification must, as I have said, always be made when the circumstances are not those of perfect competition and inelastic demand and supply. In the case of the liquor trade, the need for the qualification is very obvious. The circumstances are complex. The tax is by law apportionable between the holder of the licence and the owner of the licensed premises (s. 19 (3)). That would not prevent it being, in part at all events, passed on. Moreover, this tax has been long in operation, and there is an adage that an old tax is not tax. There is usually some measure of uniformity in the retail prices of some forms of liquor. The trade as a whole is carried on in conditions of partial monopoly. And, as was pointed out, it cannot be supposed that the retail prices of all types, qualities and quantities of liquor will reflect the burden rateably. But a commodity tax certainly does not cease to be an indirect tax, so far as that is an element in the concept of excise, because the precise extent to which the burden is "passed on" is not predictable and is not uniformly discernible in each item of the commodity sold. (at p597)
5. But it was said the licence might not be renewed, and the premises might thus cease to be licensed; and that in that event nothing would be payable in respect of liquor bought during the preceding period. This it seems is so. But the classification of the impost for legal purposes cannot, I think, depend upon the exceptional case. Voluntary relinquishment of a licence - as distinct from its transfer or removal - so that it goes out of existence, must be exceptional. In my opinion we should ignore unlikely single instances and take a broad view of the economic consequences of the tax. So regarded, it appears simply as a tax on all liquor bought for resale in Victoria. The fees provided by the Act (s. 19 (1)) for licences other than a victualler's licence show very plainly the general fiscal plan. All liquor (except such as a licensed vigneron sells at his vineyard) is to bear the six per cent tax. No liquor is to bear it more than once. The person who is to pay the tax is the person who sells it for consumption not for resale. The spirit merchant, the grocer, the brewer thus pay only on liquor which they sell to persons who are not themselves licensed to sell it. This is very close to Blackstone's description of an excise as "an inland imposition paid . . . frequently upon the retail sale which is the last stage before consumption". (at p598)
6. Turning now to another aspect: I was inclined during the argument to think that to be an excise duty within the meaning of s. 90 the tax must be levied upon the producer of a commodity, or at all events that the goods taxed must have been produced in the country imposing the tax. On consideration I have, however, come firmly to the conclusion that the first of these restrictions of the broad idea of an excise as a tax upon commodities cannot be sustained; and that, notwithstanding what was said in Peterswald v. Bartley [1904] HCA 21; (1904) 1 CLR 497 , the second is questionable. I am not convinced, however, that we necessarily have to decide the question for the purpose of deciding this demurrer; for we can surely assume that some of the liquor the purchase of which attracted the tax in question was brewed, distilled or fermented in Victoria. And, in the calculation of the tax that a licensed victualler must pay, the Act makes no distinction between his purchases of locally produced and of imported goods. An impost which is invalid cannot be made valid by coupling it with an impost which is valid (cf. The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia [1926] HCA 47; (1926) 38 CLR 408 ). But, to look at the question more broadly, and assuming that it has to be decided in this case, the majority opinion in Parton v. Milk Board (Vict.) (1949) 80 CLR 229 , was that a duty of excise is not necessarily a tax levied upon the manufacturer. It may be a tax on manufactured goods which have become articles of commerce. But the tax there was on a commodity which was locally produced. And, apart from the implications of the Petrol Case (The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia [1926] HCA 47; (1926) 38 CLR 408 ), there is no case in which the question directly arose whether or not a tax upon the purchase or sale in one State of the Commonwealth of goods produced either outside that State or outside the Commonwealth is a duty of excise. There is an abundance and variety of dicta more or less in point, but no decision. In the Chicory Case [1938] HCA 38; (1938) 60 CLR 263 , Dixon J., as he then was, surveyed the history of excise duties. He concluded, and I very respectfully agree with his conclusion, that: "The history of the word 'excise' does not disclose any very solid ground for saying that, according to any established English meaning, an essential part of its connotation is, or at any time was, that the duty called by that name should be confined to goods of domestic manufacture or production. The application of the word by economists and others to duties so confined is scarcely logical proof that the word is inapplicable to inland duties levied on commodities independently of the place of manufacture. But, of course, it is a factor to be weighed, and context and other considerations may show that the word is so restricted. Whether the limitation of the word 'excise' in the Constitution to duties upon commodities produced or manufactured in Australia is justified is a question which I think should be regarded as open for future decision (1938) 60 CLR, at p 299 ". (at p599)
7. There is no doubt that until the nineteenth century an excise duty in England meant an inland tax levied upon goods which were either produced in or had come into the Kingdom, whereas a customs duty was levied at the quay, that is upon importation. But the distinction was mainly administrative - was the tax under the management of the Customs officials or of the Commissioners of Excise? Without repeating the history which the Chief Justice gave in the Chicory Case [1938] HCA 38; (1938) 60 CLR 263 , I would merely add that there are in the English statute book numerous illustrations of duties on imported goods called duties of excise. One, to which he referred, is the provision made by the Restoration Parliament settling a revenue on the Crown in lieu of the revenues from the military tenures which were abolished by the same Act (12 Car. II c. 24). This hereditary revenue included the proceeds of taxes on beer, ale, cider or perry and "strong water perfectly made", which were imported from beyond the seas, as well as duties on certain articles made in the Kingdom. These duties were all regularly described as "the hereditary duties of excise" in later enactments (see e.g. 10 Geo. II c. 10 s. 8; 27 Geo. III c. 13, s. 51; 1 & 2 Vic. c. 2 s. 6; I Edw. VII c. 4 s. 9 (3) ). Other examples are that when Pitt was able to accomplish what Walpole, because of public clamour, had had to relinquish, the duties on imported wines were transferred from the Customs to the Excise by being made an inland tax levied upon wholesalers (26 Geo. III c. 59 (1786) ). Excise duties were levied on imports by a system of supervised bonded warehousing, the duty being paid when the goods were taken out for home consumption. In the next year Pitt's great consolidation of the customs and excise duties described many duties on imported goods, including brandy and wine, as excises and put them under the Excise Commissioners (27 Geo. III c. 13 s. 36 and Schedule F). Blackstone said that the excise duties on coffee and tea and cocoa - all imported commodities - were paid by the retailer. The complicated history of these particular duties, in Blackstone's time and afterwards, can be traced in the statute book (e.g. 10 Geo. II c. 10; 21 Geo. III c. 55; 25 Geo. III c. 74). The interest of the Excise in goods coming from abroad during the eighteenth century is very apparent from the part which excisemen and excise cutters played in opposition to smuggling. (at p600)
8. In the nineteenth century, after the adoption of a policy of freetrade, customs and excise duties became associated as instruments of policy as well as sources of revenue. And this tended to greater definition of their respective fields - imports and exports for customs, and home manufacture for excise. When duties on foreign trade were considered to be justified only as means of revenue, and not for the protection of home industries, then, if goods dutiable on importation might also be made at home, they must be subjected to an excise equivalent to the customs duty. If not, the local manufacturer would be protected contrary to the free-trade faith. Conversely, if the revenue from excises was to be safeguarded, countervailing customs duties on exciseable commodities were required. Customs and excise duties thus used as counter-weights in fiscal or tariff policy were, as has been often pointed out, known in the Australian Colonies, in Victoria especially, before Federation. The word "excise" had by that time come to mean not so much any inland duty, its original meaning, as a duty on locally made goods, the common form of inland commodity tax once the Customs had taken over the system of bonded imports. Such a duty was commonly called in statutes a duty of excise, in distinction from the duties of customs on imported goods. For examples in Victoria see The Duties of Customs Act 1884 and 1886; The Distillation Act 1862 as amended by The Distillation Amending Act 1884; The Tobacco Act 1880; The Customs Act 1890; The Customs and Excise Duties Act 1890; The Beer Duty Act 1892. Customs duties have always been duties on imported goods. And the expression "on the imposition of uniform duties of customs" in ss. 92, 93, 94 and 95 of the Constitution refers to duties on imports into Australia. And it may well be that the word "excise" in the expression "duties of customs or of excise" in s. 90 refers only to duties upon goods locally produced. But, however this may be, it is the scope of the comprehensive expression "duties of customs or of excise" which is the critical matter. I have found nothing that leads me to the conclusion that in that expression the phrase "duties of customs" means only duties on imported goods levied at the point of importation (or release from bond) and collected from the importer, or that the phrase "duties of excise" is restricted to duties upon goods of local production imposed at the point of production and collected from the producer. And, if dictionaries be resorted to, the Encyclopedia of Social Sciences (Macmillan Company, N.Y., 1930) describes an excise as "a tax on commodities of domestic manufacture, levied either at some stage of production or before the sale to home consumers". More important, for present purposes, than dictionaries is the decision of this Court in Parton v. The Milk Board (Vict.) [1949] HCA 67; (1949) 80 CLR 229 . We should, I consider, take the judgments of the majority in that case as binding us. Accepting that, it would be a strange result if s. 90 had the effect of prohibiting the State of Victoria from imposing a purchase or sales tax on whisky or beer made in Victoria, yet leaving it free to do so on whisky made in Scotland or beer made in South Australia. But in my view it is not so. The place where a particular commodity is produced may determine whether a tax on it is best called a customs or an excise duty; but that is really unimportant since either is equally beyond the power of the State. See the various judgments in the Petrol Case [1926] HCA 47; (1926) 38 CLR 408 . Moreover, this view of the operation of s.90 accords with what has been said to be the purpose of it and its associated provisions, namely to ensure the basic unity of the Australian economy in relation to trade and commerce. (at p601)
9. The peculiar phrase "duty-paid spirituous liquor" which appears in the definition of "spirit merchant" in the Licensing Act 1958, and also in s. 11 (1) does not, I think, curtail the effect of anything I have said above. It has been carried forward from earlier Acts and apparently came into Victorian licensing legislation through the Spirit Merchants' Licences Act 1912 from the Licensing Act 1890 and the Customs and Excise Act 1890. When it first appeared the Colony of Victoria in fact levied customs and excise duties. If the expression has any meaning now, I take it it must be a reference to the Commonwealth customs, excise and distillation legislation. (at p601)
10. I have left to the last the argument which the Solicitor-General put in the forefront, because it seemed best to deal with the other matters first. What was said is briefly that the licence fee is paid for permission to carry on the trade of a publican and that the purpose of the licence is the regulation of that trade. Payment, it was said by the Solicitor-General, is "the condition of the right granted by the State to participate in a trade that is otherwise forbidden". This, of course, is true. But it seems to me no ground at all for saying that the payment is not a duty of excise. In Browns Transport Pty. Ltd. v. Kropp (1958) [1958] HCA 49; 100 CLR 117 , the Court said of the carrier's licence fee there in question: "The exaction is in truth, as it purports to be, simply a fee payable as a condition of a right to carry on a business. 'A tax imposed upon a person filling a particular description or engaged in a given pursuit does not amount to an excise'". (1958) 100 CLR, at p 130 . If the context of these statements be disregarded, then they do in terms support the proposition that a licence fee is not an excise. But it is, of course, necessary to read them in relation to the circumstances out of which they arose. All that they really establish is that a fee payable for an authority to make or trade in a commodity is not, as such, an excise duty. But, if a licence fee be calculated in reference to the quantity or value of the goods made or traded in, then it seems to me to be an excise duty, and not the less so because it is a licence fee. Lord Herschell's observations in the Ontario Brewers and Maltsters' Case (1897) AC, at p 237 quoted by Dixon J. in the Chicory Case (1938) 60 CLR, at p 302 are significant. And as Starke J. said in that case, the real nature of a tax does not depend upon the name given to it in the taxing Act, but upon its operation and effect, as gathered from the language of the Act (1938) 60 CLR, at p 285 . And Knox C.J. said in the Petrol Case [1926] HCA 47; (1926) 38 CLR 408 : "If it is in truth a duty of excise, the State Parliament has no power to impose it by whatever name it may be called" (1926) 38 CLR, at p 421 . Here the tax is called a licence fee and, as payment of it is the price of a licence, that name is apt. But, if its operation is that of an excise - and the Act, I think, shows that it is - then the name "excise" is apt too. (at p602)
11. As Mr. Gowans showed, in tracing the history of the statutory provisions for licence fees, what has happened is that the legislature has substituted for a licence fee which was not a duty of excise a licence fee which is. The course of events, as outlined by Mr. Gowans, may be summarized. Immediately before Federation the Colony of Victoria levied duties on beer brewed and spirits distilled within the colony, and also duties on imported liquor (Customs Act 1890 and Customs and Excise Duties Act 1890; Beer Duty Act 1892; Duties of Customs Act 1892). And it had then, and had always had, licensing laws regulating the sale of liquor (see Licensing Act 1890, s. 17). The fees that were then payable annually for liquor licences were fixed sums, except that in the case of victualler's licences the fee ranged from 15 pounds to 50 pounds depending on the assessed annual value of the premises. Fees paid for licences under the Licensing Act went to the credit of a "trust fund" in the Treasury. From this fund came the moneys necessary to pay compensation when the number of licensed premises was reduced in accordance with the law then prevailing. In so far as the licence fees did not yield enough for this purpose the fund was to be replenished from the duties on liquor (Licensing Act 1890 s. 200). After the Commonwealth came into existence and uniform duties of customs had been imposed on 8th October 1901, the Victorian duties of customs and excise ceased to have effect. The Licensing Act continued, but at the expiration of five years the State of Victoria was not in receipt of any customs or excise duties from which the trust fund could be supplemented. However, in 1906 a new Licensing Act was passed. It transferred the moneys then in the trust fund to a new fund to be called the Licensing Fund, and set up another fund called the Compensation Fund. To create this victuallers had, when renewing their licences each year, to pay a "compensation fee" in addition to the ordinary licence fee under the 1890 Act. This additional fee was three per cent of the gross amount paid or payable for all liquor purchased for the licensed premises for the twelve months ended on the thirtieth September preceding the date of application for renewal of the licence. By a provision like s. 19 (3) of the present Act a licensee who was a tenant could throw two thirds of the burden of this new percentage impost on his landlord (Licensing Act 1906, ss. 108-111). (at p603)
12. The result at this stage, so far as the holder of a licensed victualler's licence was concerned, was that he had each year when he renewed his licence to pay the ordinary fee of 15 pounds to 50 pounds, depending on the annual value of his premises, and also the compensation fee calculated on his purchases in a preceding period. It is unnecessary to consider what would have been the fate of this compensation fee if its validity had been challenged on the ground that it was a duty of excise. It had most of the characteristics of the present tax; but it was only payable by the holders of victualler's licences, and it went to replenish the compensation fund and not to the general revenue of the State. In 1916 a considerable change was made. In place of the old fixed fee and further compensation fee, one fee only was to be paid for a victualler's licence. It was a six per cent tax, calculated in exactly the same way as the one now in question. And fees similar to those now in operation were made payable in respect of other forms of licences also, including brewer's licences. At the same time the Compensation Fund was abolished, and the entire proceeds of the licence fees went into a fund, the Licensing Fund, from which certain moneys were paid annually to municipalities and to the Police Superannuation Fund, and the balance applied to carrying out the provisions of the Licensing Act including the payment of compensation (Licensing Act 1916 ss. 19, 44). In fact the proceeds of the new licence fees soon exceeded the sum necessary to meet these charges on the Licensing Fund; and in 1922 provision was made for transferring the surplus from time to time to the consolidated revenue of the State (Licensing Act 1922, s. 39 ; and see s. 291 of the present Act). In the result the tax with which this case is concerned yields a large annual revenue to the State of Victoria. The statement of claim alleges that in each of the three years before the action was commenced more than two million pounds was transferred to consolidated revenue. But it was contended for the State of Victoria that, as I understood the argument, whatever the manner of computing the fee for a liquor licence, it could never be an excise duty. This view hardly seemed to accord with the State's attitude which appeared to be based on concern lest the State lose a source of revenue rather than on any fear that it would be frustrated in the control of the liquor trade. However, the way in which the argument that the fee for the licence was merely incidental to the system of liquor trade licensing was urged makes it necessary to go even further into the background of the present legislation than Mr. Gowans took us. For it becomes necessary to see whether there is any special quality in a liquor licence that so colours payments for it that, however computed, they cannot be duties of excise in the constitutional sense. (at p604)
13. The Australian system of taxing and licensing the liquor trade is derived from England. In its essentials, as it still operates in England, it is described in Halsbury's Laws of England, 3rd ed., vol. 22, par. 1010, p. 514 as follows: "The sale of intoxicating liquors although perfectly lawful at common law is subject to certain statutory restrictions. These restrictions are primarily of two kinds: those designed for the orderly conduct of the retail trade and those designed to obtain revenue from the trade whether wholesale or retail. The machinery for achieving these ends consists of two systems of licensing, one controlled by licensing justices, the other controlled by the Commissioners of Customs and Excise". Taking first the fiscal provisions : Historically these consisted of two levies. One a true excise duty levied upon brewers and distillers according to their production. The second a fee for brewer's and distiller's licences. Such licences, commonly called "excise licences", have for long been common concomitants of excise duties on commodities. They are required to facilitate the collection of the duties and to prevent evasion of them. They are part of the machinery for the collection of the excise revenue, not part of the social regulation of the liquor trade. They had their beginning in 1784 (24 Geo. III c. 41) when makers of and dealers in various exciseable commodities were required to be licensed. For these licences fees were charged, so that excise licences became themselves a source of revenue as well as an administrative convenience. Such licences to make exciseable goods are still an ordinary part of the machinery for the collection of excise duties. Examples of those required to-day may be found in the Beer Excise Act 1901-1957 (Cth) and the Distillation Act 1901-1956 (Cth). Since the fees payable for these licences do not themselves bear any direct relation to the quantity or value of the exciseable liquor which the brewer or distiller makes they are not themselves duties of excise in the constitutional sense. The brewer's fee in question in Peterswald v. Bartley [1904] HCA 21; (1904) 1 CLR 497 , is a good illustration. Even further removed from duties of excise in the constitional sense are the miscellaneous taxes payable in England for licences required for a variety of purposes. Many of these have no relation at all to duties on commodities. They are called excises in England simply because the issue of such licences had, as a matter of convenience, been made the responsibility of the Excise Commissioners. (at p605)
14. Turning now to the other system of licensing mentioned in the above quotation from Halsbury, that concerned with the orderly conduct of the retail trade in intoxicating liquor : It has a quite separate early history going back to 1552, when the Act 5 & 6 Edw. VI c. 25 was passed : "Forasmuch as intolerable hurts and troubles to the Commonwealth of this Realm doth daily grow and increase through such abuses and disorders as are had and used in common alehouses and other houses called tippling houses", Parliament required keepers of such houses to be licensed by the justices and to enter into recognizances for the proper conduct of them. The only other enactment in the long series of licensing Acts which then began to which I need refer is 9 Geo. IV c. 61. It is the Act that my brother Kitto mentions as under consideration in Reg. v. Lancashire (1857) 7 El & Bl 839 (119 ER 1458) ; but I, with respect, apply that decision in this case somewhat differently from his Honour. When 9 Geo. IV c. 61 was passed in 1828 duties of excise on beer and spirits were in force, and the Act related justices' licences to them. It provided for a special session of justices, the General Annual Licensing Meeting, for granting licences to persons keeping or being about to keep inns, alehouses and victualling houses. The fee for a licence was fixed - the petty constable got a shilling ; the justices' clerk five shillings, and one shilling and sixpence was payable for the preparation of precepts etc. - seven and sixpence in all. To carry on his business the publican had still to obtain from the Commissioners of Excise a licence to sell exciseable liquor - meaning liquor "charged with duty either by Customs or Excise". For this excise licence the publican had to pay the usual excise licence fee. The Excise Commissioners were, however, prohibited from granting him their licence except on production of his justices' licence. The form of the justices' licence was to authorize and empower the licensee to sell by retail on the specified premises all such exciseable liquors as he should be licensed to sell under his excise licence. It was an offence to sell exciseable liquor without a licence. But it was no offence to sell without a justices' licence liquor which at the relevant time was not exciseable; for a justices' licence was not necessary for the sale of liquor - only for the sale of exciseable liquor (Reg. v. Lancashire (1857) 7 El & Bl 839 [1857] EngR 600; (119 ER 1458) ; sub. nom. Lancashire v. Staffordshire Justices (1857) 26 LJMC 171 ; Jones v. Whittaker (1870) LR 5 QB 541 ). There have, of course, been many changes in licensing law in England since the Act of 1828 ; but the system continues generally the same. For the sale of intoxicating liquor by retail, excise licences and justices' licences are still required ; and intoxicating liquor as defined by the Licensing Act 1953 is liquor which cannot for the time being be sold without an excise licence (s. 165 (1)). The fee for an excise licence is either a fixed sum or a percentage of the annual value of the licensed premises (Customs & Excise Act 1952, s. 149 (2), schedule 4). Such a fee is, according to English practice, described in the Act as a "duty of excise". But it is not a duty of excise within the meaning of that phrase in the Constitution. Justices' licences are granted or renewed at the annual licensing meeting of the licensing justices. The fee for a justices' licence is eight shillings and six-pence (Licensing Act 1953, s. 51). (at p606)
15. Passing from England to Australia, the system of liquor licensing has from its first institution had a pattern similar to, but different from, that of England. The first statutory licensing of public houses in New South Wales was effected by an Act of the Legislative Council in 1825 (6 Geo. IV No. 4). Duties on spirits locally manufactured were levied by the Governor at about the same time, under the authority of the Imperial Act 59 Geo. III c. 114 s. 3. The duties on commodities imported and locally manufactured existing in 1828 are set out in an Act of the Legislative Council II Geo. IV No. 9 (1830). Distiller's licences were provided for in 1838 (2 Vic. No. 24). For a distiller's licence an annual fee of 50 pounds had to be paid. Brewer's licences came much later. In the Colony publican's licences were not as directly related to customs and excise duties as in England. They were licences to sell, not exciseable liquor, but fermented and spirituous liquor. They were authorized by justices but issued and signed by the Colonial Treasurer and Commissary of Civil Accounts. From the first, one of the professed objects was to raise revenue. The preamble to the Act of Council of 1825 ran: "whereas it is necessary to the orderly conduct of public houses where strong liquors are sold by retail, that the characters of the occupiers thereof should be subject to strict examination; and whereas it is expedient, in consideration of the licences to be granted to such public houses, to raise certain sums of money in aid of the funds expended in the Colony". For beer licences a fee of twenty dollars was payable to the Colonial Treasurer, for beer and spirit licences a hundred dollars - the Spanish dollar was then the currency of the Colony. The licences were renewable annually. (at p607)
16. Of the local enactments which followed, the earliest which is clearly shown to have been applied in the Port Phillip District is 3 Wm. IV No. 8 (1833). Its application there is referred to in 8 Wm. IV No. 8 s. 3. It may therefore be said to be the beginning of licensing law in Victoria. Various new forms of licences were from time to time authorized in addition to the publican's licence - for example, packet licences in 1833 (3 Wm. IV No. 8 s. 8), and temporary extensions of a publican's licence to fairs held in the neighbourhood of his premises in 1838 (2 Vic. No. 18 s. 8); there was originally no fee for these temporary licences. A confectioner's licence was required for the sale of ginger beer, and for it the annual fee was 1 pound. The Act in force in the Port Phillip District when Victoria became a separate colony was a consolidation, 13 Vic. No. 29 (1849). By that time the provisions for the control of licensed premises had become much more elaborate than they had been. But licence fees were still imposed as a source of revenue. The annual fee for a publican's general licence was 30 pounds, for a packet licence 2 pounds. These fees were payable to the Colonial Treasurer, and the licence was issued by him on payment of the fee and production of a certificate by two justices after the annual licensing meeting. From the beginning of Victoria as a separate colony in 1851 until 1885, the amount of the annual fee for a victualler's licence continued to be a fixed sum. By the Licensing Act of 1885 this was changed, and the graduated scale depending on the annual value of the premises was adopted. This, of course, was still not a duty of excise. But, as has been shown earlier, a vital alteration occurred when the annual fee was computed as a percentage of the publican's purchases for the licensed premises. (at p607)
17. I find nothing in the provisions of the present Licensing Act of Victoria, or in the historical background of licensing law in England or Australia, that prevents a fee for a liquor licence being a duty of excise. In Australia one victualler's licence is used to effect the dual purpose which in England was, and is, effected by the separate justices' and excise licences which a publican must have. In England, however, the fee for the excise licence is not a duty of excise in the sense in which that phrase is used in the Commonwealth Constitution, for it is not computed by reference to the quantity of liquor bought or sold. And neither, of course, is the eight shillings and sixpence there paid for the justices' licence. But in Victoria the licence fees in question have what I consider to be the essential characteristics of duties of excise in the constitutional sense. I think therefore that the demurrer should be overruled. (at p608)