Matthews v. Chicory Marketing Board (Victoria)
60 CLR 263(Judgment by: LATHAM CJ)
Between: MATTHEWS
And: CHICORY MARKETING BOARD (VICTORIA)
Judges:
Latham CJRich J
Starke J
Dixon J
McTiernan J
Subject References:
Constitutional Law
Duties of excise
Freedom of inter-State trade
State marketing legislation
Legislative References:
Constitution (Cth) - s 90; s 92
Marketing of Primary Products Act 1935 (Vic) No 4337 - s 4; s 6; s 7; s 16; s 19; s 26; s 32
Judgment date: 9 August 1938
SYDNEY
Judgment by:
LATHAM CJ
This is an appeal by way of order to review from an order of a police magistrate ordering the defendant, Horace Matthews, to pay PD11 to the complainant, the Chicory Marketing Board. This amount was claimed as the amount of a levy made by the board under s. 32 (1) (a) of the Marketing of Primary Products Act 1935 (Vict.). The levy was at the rate of PD1 for each half acre of an area of five and a half acres which had been planted with chicory by the defendant at Cowes in Victoria during the year ending 30th June 1937. The chicory to be grown upon the five and a half acres had been sold to a New South Wales purchaser before the complainant board had been constituted, and it was duly delivered to the purchaser in pursuance of the contract of sale. It was contended that the order was wrong and should be set aside upon the grounds (1) that the Act did not apply to "inter-State transactions"; (2) that so far as it did apply it was invalid, and on a further ground, introduced by amendment permitted upon the hearing of the appeal, (3) that s. 32 of the Act was invalid because it infringed s. 90 of the Constitution of the Commonwealth.
The Marketing of Primary Products Act is an Act which provides for the control of the marketing of products to which the Act is applied. The Act authorizes the establishment of marketing boards and enables the boards to acquire products which have been declared to be commodities under the Act. There is, however, an exception in the case of commodities which are the subject of inter-State trade or commerce, or required or intended for such trade or commerce. The boards appointed under the Act sell the commodities and pay a share of the total proceeds of the sale of the commodity to the producer after making certain deductions for expenditure. Provision is made for ascertaining the standard quality or grade of the commodities and for making dockages in the manner which is ordinary in the case of pools. Section 32 authorizes the board, with the approval of the Governor in Council, to make levies on producers of commodities and to apply the moneys raised by the levies in payment of expenses, in repayment of advances to the board, in effecting insurances, and in work directed to the improvement of the quality of a commodity. The outline of the Act shows that the Act follows the general lines of pooling legislation such, for example, as was considered by this court in Peanut Board v Rockhampton Harbour Board. [F1] The outline of the Act must be supplemented by reference to the particular provisions upon which the determination of the appeal depends.
Section 4 defines "product" so as to include any product of agriculture, and, therefore, so as to include chicory, if chicory is declared to be a product for the purposes of the Act. Chicory was so declared under s. 4 (2). The Act provides in s. 6 (1) that the Governor in Council, when requested to do so by a petition signed by the required number of producers, may proclaim a product to be a commodity. This was done in the case of chicory. After the Act has been applied to a commodity, the Governor in Council may, under s. 7, appoint a marketing board in relation to the commodity. This was done in the case of chicory. Sec 16 provides that, when a product has been declared a commodity and a board has been appointed in relation to the commodity, the Governor in Council may by proclamation provide that the commodity shall, from a specified date, be divested from the producers of the commodity and become vested in and become the absolute property of the board as the owner thereof and that upon any of the commodity coming into existence within a time specified it shall become vested in and become the absolute property of the board as the owner thereof. The section also provides that the board may by further proclamation "obtain possession of the commodity as such owner, and ... deal with the same as is deemed necessary or expedient in order to give full effect to the objects and purposes for which the board is constituted." Sub-s. 3 of s. 16 is particularly important in the present case. It is as follows:
"Nothing in this section and no proclamation under this section shall affect such portion of any commodity as is the subject of trade commerce or intercourse between the States or as is required by the producers thereof for the purposes of such trade commerce or intercourse or as is intended by the producers thereof to be used for such trade commerce or intercourse."
Section 18 provides that, subject to the Act, the board, after ensuring the supply and distribution of any commodity at reasonable prices to consumers thereof in Victoria, may sell or arrange for the sale of the commodity. Section 19 (a) requires that commodities vested in a board shall be delivered by the producers to the board. Section 19 (c) provides that "every producer who, except in the course of trade commerce or intercourse between the States and save as prescribed, sells or delivers any of the commodity to any person other than the board and every person (other than the board) who, save as prescribed, buys or receives any of the commodity from a producer shall be liable to a penalty of not more than one hundred pounds." Section 26 enables a board to prevent the carriage of any commodity by the Victorian Railways Commissioners, any common carrier, or the owner etc of any ship. But this section applies only to commodities "not being the subject of inter-State trade or commerce."
By a proclamation made on 15th July 1937 the Chicory Marketing Board made a levy to be paid by all producers of chicory in manner following:
"at the rate of PD1 for every acre, or part thereof, of the area planted by such producer with chicory during the year ending 30th June. 1937."
The term "producer" is defined in s. 4 in such a way as to include a person who grows a product declared under the Act. The defendant planted five and a half acres with chicory during the year ending 30th June 1937. The amount payable by him in respect of that area was therefore, if s. 32 is valid, PD11-the amount for which the court made the order.
The first contention for the defendant is that s. 32 of the Act is invalid by reason of s. 92 of the Constitution. The relevant part of s. 92 is as follows:
"On the imposition of uniform duties of customs, trade, commerce, and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free."
It is contended that a tax upon land to be used for the purpose of growing chicory is necessarily an interference with inter-State dealing in chicory because it places a burden upon the producer and therefore renders less profitable to the producer any sale of chicory, including inter-State sales.
In my opinion the contention cannot be supported. The proclamation made under s. 32 in this case imposes a levy upon land used for a particular purpose. The effect of the levy doubtless is to increase the expenditure necessarily incurred in growing chicory, including chicory which may be intended or actually disposed of for purposes of inter-State trade. The increase of costs of production or the diminution of disposable profit is a common and often an inevitable result of taxation. But this fact does not show that there is any interference with "freedom at the frontier," to use the phrase adopted by the Privy Council in James v The Commonwealth, [F2] at p. 58. The imposition of a levy upon land used for growing chicory has no more relation to inter-State trade than any legislation which has the effect of increasing costs of production-and a great deal of legislation has such an effect.
A levy imposed under s. 32 certainly increases the cost of producing any product to which the Act is applied. But there is no inter-State element in growing an article in primary industry or manufacturing an article in secondary industry, and legislation which deals only with producing or manufacturing is not in itself legislation of a character which restricts or limits the freedom of inter-State trade. I refer to what I said upon this matter in Hartley v Walsh, [F3] at p. 375.
If a contrary view were adopted it would be necessary to hold that any taxation legislation was invalid if it increased the cost of producing, or raised the prices of, any goods which could be sold or transported to another State. As James v The Commonwealth [F4] has determined that s. 92 applies equally and in the same sense to Commonwealth and State Parliaments, all legislation, whether Federal or State, which increased the cost of producing, or raised the prices of, such goods would be, at least in part, invalid. Customs and excise duties which produce revenue may have such an effect and would fall within such a suggested prohibition, though the operation of s. 92 itself is dependent upon the imposition of uniform duties of customs and excise. Economists have debated the question whether land tax or income tax forms part of the cost of production of goods. But, whatever may be the true economic doctrine developed upon a basis of precise technical definition, it will hardly be disputed that the existence of such taxes, payable by persons who are producers or manufacturers of goods or traders in goods, may have an effect upon price levels. Sales tax obviously has such an effect. But it could hardly be contended that all these taxes are for this reason necessarily invalid in relation to goods which enter into inter-State trade. A contention which would produce such results should not be accepted unless supported by overwhelming argument. In my opinion, for the reasons which I have stated, the contention should be rejected.
I therefore reach the conclusion that s. 32 and the proclamation made under it in relation to chicory do not in themselves infringe the provisions of s. 92 of the Constitution.
It was further contended that even if s. 32 by itself might be held to be valid, the section was part only of a single scheme for the control of the sale of primary products under a pooling system and that that scheme is inconsistent with s. 92 of the Constitution. A marketing Act such as this deals directly, and not indirectly, with the subject of trade and commerce. It was argued that s. 32, as an integral part of the scheme, must fail if the provisions of the Act relating to the vesting of products in the board and the sale of products by the board were held to be invalid. The effect of the pooling system of the Act is that, when his product becomes vested in the board, the owner of the product is prevented from engaging in inter-State trade. He loses the right to dispose of the product in an inter-State transaction. Such a provision, being expressed in general terms, prevents intra-State as well as inter-State trade. But the fact that the provision is general in its terms does not exclude the operation of s. 92 (James v The Commonwealth [F5] ).
In my opinion, if it were not for two matters to which I shall refer later, this argument should be accepted. The provisions of the Marketing of Primary Products Act cannot be distinguished in substance from the provisions of the Primary Producers Organization and Marketing Act 1926-1930 of Queensland which was held to be invalid by this court in Peanut Board v Rockhampton Harbour Board. [F6] That case was decided after James v Cowan, [F7] and in James v The Commonwealth [F8] the Privy Council refers to the Peanut Board Case [F9] as being a case in which James v Cowan [F10] was followed and applied by the High Court. The words of the Privy Council referring to that case are as follows:
"The producers of the peanuts, it was held, were prevented by the Act from engaging in inter-State and other trade in the commodity. The Act embodied, so the majority of the court held, a compulsory marketing scheme, entirely restrictive of any freedom of action on the part of the producers; it involved a compulsory regulation and control of all trade, domestic, inter-State and foreign; on the basis of that view, the principles laid down by this board were applied by the court". [F11]
The Act now under consideration is an Act which (subject to the two considerations to which I am about to refer) falls within the description of the Queensland Act which, if accepted as accurate, justified, in the opinion of their Lordships, the conclusion that that Act was invalid. There are, however, two matters which lead me to a different conclusion in the present case.
In the first place, the Act contains a specific provision in s. 16 (3) which is plainly intended to prevent any interference with any actual or possible inter-State trade. I repeat the words of s. 16 (3):
"Nothing in this section and no proclamation under this section shall affect such portion of any commodity as is the subject of trade commerce or intercourse between the States or as is required by the producers thereof for the purposes of such trade commerce or intercourse or as is intended by the producers thereof to be used for such trade commerce or intercourse."
It is difficult to suggest any provision which could more clearly show the intention of the Act not to interfere with inter-State trade in any commodities which become subject to the Act. The effect of s. 16 (3) is that actual and intended inter-State trade is removed from the operation of the Act. Section 16 (3) excepts from the operation of the vesting provisions of s. 16 (1) and (2), and, therefore, from the whole marketing scheme of the Act, not only commodities which are actually the subject of inter-State trade and commerce, but also commodities which are required for that purpose and even commodities which are intended by the producers thereof to be used for such trade and commerce. There could hardly be a more complete exclusion of inter-State trade and commerce from the scope of the Act. Possibly the provision goes further than is necessary for the purpose of allowing full freedom of inter-State trade and commerce, but it is not necessary to consider this possibility. In my opinion this provision distinguishes the present case from that dealt with in the Peanut Board Case [F12] and makes it impossible to contend that the Act interferes in any respect with "freedom at the frontier," or with "the passage of goods out of the State" (See James v The Commonwealth [F13] ). It was said of the Queensland Act in James v The Commonwealth [F14] that "it involved a compulsory regulation and control of all trade, domestic inter-State and foreign." The effect of s. 16(3) is that this statement can be truly applied to the Victorian Act if, but only if, the word "inter-State" is struck out.
Section 16(3) also provides a reply to the contention that s. 18, in providing that the board should ensure "reasonable prices" to consumers in Victoria, imposes a burden or disadvantage upon persons in other States who may wish to purchase chicory produced in Victoria. Inter-State sales are free from the vesting provisions of the Act and accordingly are not controlled by the board. Further, I do not think that it should be assumed that "reasonable" prices for persons in Victoria necessarily and as of course involve unreasonable prices for other persons. It is unnecessary to examine in detail the provisions of ss. 19 and 26. It is sufficient to say that these sections carry out the principle embodied in s. 16 (3), namely, the exemption of inter-State trade from the provisions of the Act.
In the second place, the Acts Interpretation Act 1930 (Vict.), s. 2, provides as follows:
"Every Act, whether passed before or after the commencement of this Act, shall be read and construed subject to the Commonwealth of Australia Constitution Act, and so as not to exceed the legislative power of the Parliament of Victoria, to the intent that where any enactment thereof would, but for this Act, have been construed as being in excess of that power, it shall nevertheless be a valid enactment to the extent to which it is not in excess of that power."
I have already expressed my opinion that the Act as a whole is valid, and, therefore, in my opinion, it is not necessary to consider the application of the provision quoted from the Acts Interpretation Act. But, if my opinion (based upon s. 16 (3)) as to the validity of the whole Act should be ill-founded, the result would then be that the provisions of the Act which relate to the vesting of commodities and the sale of them under the control of the board would be invalid. Section 32, however, is capable of independent operation. Even if the portions of the Act mentioned were invalid, the levy could still be imposed and the proceeds applied towards the objects mentioned in s. 32, namely, the payment of administrative expenses of the board, repayment of advances to the board, creating a fund for insurance against disease, fire, hail, flood or other catastrophes, and work towards the improvement of the quality of commodities. Section 32 is, in my opinion, severable from the provisions of the Act which would be invalid by reason of s. 92 of the Constitution. Polls can be taken, boards can be constituted, and levies can be made and applied in accordance with the Act, even if the marketing provisions were held to be invalid. Difficulties sometimes arise in the application of such provisions as s. 2 of the Acts Interpretation Act (See, for example, the Harvard Law Review, vol. 51, p. 76) but there is no difficulty in the present case.
I am, therefore, of opinion, for the reasons stated, that s. 92 of the Constitution does not invalidate either s. 32 or the proclamation made under it.
It is now necessary to consider the argument founded on s. 90 of the Constitution, which 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 is contended that s. 32 purports to authorize, and that the proclamation purports to impose, a duty of excise upon chicory, and that, as it is contained in a State Act, the section is, therefore, invalid.
The levy is, in my opinion, plainly a tax. It is a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered (Lower Mainland Dairy Products Sales Adjustment Committee v Crystal Dairy Ltd, [F15] at p. 175). The question which it is necessary to consider is whether it is a duty of excise.
If the resolution of the board had imposed a levy upon producers in respect of the quantity or value of chicory produced or treated or sold, the levy would have been an excise duty according to all definitions or explanations of that term. The question is whether the fact that the levy is imposed in respect of areas planted with chicory is sufficient to constitute a real distinction so as to remove the levy from the category of excise duties.
In England the term "excise" has been used in such a manner as to be equivalent, in any classification of taxes, to a heading "Miscellaneous." It is difficult to discover any common characteristic (except that they are all taxes) between inland taxes on intoxicating liquor and tobacco, and taxes on auctioneers, armorial bearings, owners of carriages and keepers of refreshment houses. These examples are taken from a much longer list of English excise duties set out in Quick and Garran, Annotated Constitution of the Commonwealth (1901), p. 837, and quoted in Peterswald v Bartley; [F16] see also Bell and Dwelly, The Laws of Excise (1873), pp. 1-4; Laws of England, 1st ed., vol. 24, pp. 532, 533 (list of excise duties and excise licences). Thus, the term as used in England covered, not only the well-recognized excise duties upon liquor and tobacco, but also a most heterogeneous collection of what may be called taxation oddments. Accordingly, in Peterswald v Bartley [F17] this court, in order to discover the meaning of the term "excise," directed its attention to the use of the term in the laws of the colonies at the time of Federation. The conclusion reached was expressed in the following words:
"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. Reading the Constitution alone, that seems to be the proper construction to be put upon the term". [F18]
See also Attorney-General (N.S.W.) v Home-bush Flour Mills Ltd. [F19]
But the reasoning which led to the conclusion in Peterswald v Bartley [F20] does not necessarily limit the application of the term "excise" to taxes imposed upon goods at the very moment when they are "produced or manufactured." A tax possessing the other attributes mentioned in the passage which I have quoted may be an excise duty if it is imposed upon the sale or consumption of goods. It has been so held, in relation to sale, in The Commonwealth and Commonwealth Oil Refineries Ltd v South Australia. [F21] If, however, a tax has no relation to the quantity or value (however measured) of goods, it cannot be said to be an excise duty within any of the definitions or explanations of that term which are to be found in the decisions of this court.
Customs and excise duties are essentially indirect taxes. They are regarded as additions of definite amounts to the prices at which the goods upon which they are imposed are, in the ordinary course of business, sold by persons who have paid the duties. The distinction between such taxes and other taxes may be illustrated in the following way:
- a customs duty or an excise duty is paid in respect of a particular article:
- the amount of the tax necessary bears a relation to the quantity or value of the article in question:
- it is either a specific duty (per article or per quantity of commodity) or an ad valorem duty:
- to each article in respect of which such a duty has been paid it would be possible to attach a label stating "Duty paid, 5s."-or whatever the amount might be.
It is true that commercial competition or other factors may prevent the actual addition of the whole amount of the duty to the price of goods in particular cases, but, even in such cases, a specific amount which has been paid as tax can be assigned to each and every article taxed. If there were an excise duty of 3d. per pound upon chicory, then each and every pound of chicory would have been subjected to that precise amount of tax. But the effect of direct taxes is quite different. A land tax may affect the cost of growing chicory in the case of some or all growers. An income tax may lead dealers in chicory who pay income tax to endeavour to raise their prices. A tax on wholesale or retail businesses may increase the outgoings of a business of dealing in chicory and may, therefore, affect the prices of chicory. But in such cases it is not possible to attribute to each pound of chicory sold a specific amount of money, the same in the case of all producers who are landowners, or income tax payers, or owners of business, as a tax paid in respect of that pound of chicory. This reasoning shows, I think, the real difference between an indirect tax and a direct tax. An indirect tax is necessarily a tax which can normally be "passed on" to a purchaser or consumer of the goods taxed, and it must bear, therefore, a definite relation to the quantity or value of the goods. As at present advised, I am unable to discern any basis of taxation of goods other than quantity or value which could constitute a basis for indirect taxation of goods. It is difficult to conceive a tax which is an indirect tax in the sense stated and which is imposed upon goods, unless the amount of the tax is related to quantity or value. If such a tax is ever devised, the questions which would arise can then receive consideration. If it is held that a tax may be an excise duty though it has no direct relation in amount to the quantity or value of the goods upon which it is imposed, it will be difficult, in my opinion, to deny the description to any tax imposed upon persons, land or things which may, in the normal course of business, affect the prices of goods. I can see no justification for the adoption of such a conception.
I proceed now to apply this reasoning to the present case. The levy is imposed, not upon chicory planted, treated, sold or consumed, but upon land planted with chicory, and the amount of the levy is determined by the area of the land planted. That land may produce a small quantity of chicory or a large quantity or no quantity at all. In the present case the defendant in April 1937 estimated the yield of the five and a half acres at ten tons. In fact the yield was more than fourteen tons. The tax is payable by reason of the planting of the land, irrespective of the actual production of the product. It is not a tax upon goods or upon the production or sale of goods.
All producers pay PD1 per half acre. Equal levies are imposed upon equal areas. But the yield of equal areas may obviously vary very greatly indeed. It is impossible, therefore, to establish any relation between the levy and the quantity or value of the article produced. A customs or excise duty (as already stated) is imposed in relation to the quantity or value of goods. It is contemplated that the same amount of taxation will be payable in respect of equal quantities or values of goods. It is, therefore, also contemplated that the amount of this duty will normally and as of course enter into the price of the goods so as to be passed on to the purchaser or consumer. Such a tax is an indirect tax. These assumptions are quite inapplicable to a levy imposed in respect of areas of land used for agricultural purposes. Such a levy possesses none of the characteristics mentioned. I am, therefore, of opinion that the levy imposed under s. 32 of the Act is not an excise duty within the meaning of s. 90 of the Constitution.
In my opinion the appeal should be dismissed and the order nisi should be discharged.
The opinion of the majority of the court is that the appeal should be allowed. The appellant has succeeded upon a ground not taken in the order nisi, namely, that the relevant legislation is invalid by reason of the provisions of s. 90 of the Constitution of the Commonwealth. The appellant has failed upon the grounds taken in the order nisi, which related exclusively to s. 92 of the Constitution. The appellant should, therefore, not have the costs of the argument in the High Court which are exclusively attributable to the argument upon s. 92.