PRECISION MEASURES LIMITED v FC of T
Judges:Jenkinson J
Court:
Federal Court
Jenkinson J
Appeals from decisions of the Administrative Appeals Tribunal on review of decisions by the respondent disallowing the applicant's objections against sales tax assessments.
The goods in question are structures to support simultaneously several inverted bottles of different beverages, usually spirits, as well as a device below each bottle for dispensing from the bottle a specific quantity of the contents of the bottle. The evidence before the Administrative Appeals Tribunal established that the use of such devices, and of structures to support them and the bottles to which they are connected, is common in places where spirits are sold by the glass, and is also known in private homes. The applicant sells such devices by wholesale and makes in Australia and sells by wholesale several kinds and sizes of the supporting structures, which are so designed as to be apt for use with the dispensing devices which the applicant sells. The applicant contends, and the respondent denies, that the supporting structures fall within sub-item 84(2) and sub-item 90(c) in the first column of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935, s. 5(1) of which provides that sales tax shall not be payable upon the sale value of any goods covered by any such sub-item under any Act specified in the second column of that Schedule opposite that sub-item. The Sales Tax Assessment Acts numbered 1 to 9 are specified in the second column of that Schedule opposite each of sub-items 84(2) and 90(c).
The First Schedule is divided into Divisions. Division XII has the heading ``Building Materials''. Sub-item 84(2) reads:
``Builders' hardware (not including electrical fittings, accessories or equipment, duct work or channelling of a kind used in forced draught ventilating or air conditioning systems, or fittings, accessories or attachments for, components of, or goods designed to form part of, such duct work or channelling, or goods covered by item 12, 14 or 14A in the Third Schedule), being goods of a kind used in the construction or repair of, and wrought into or attached to so as to form part of, buildings or other fixtures, including-
Bolts, brackets, brads Catches, ceiling ties, clips, clouts, corrugated fasteners Decking spikes, door bells, door handles, door knockers, door sheaves and tracks, door stops and stoppers, door and cupboard catches, door and gate springs, drawer pulls, dryvins Flush rings Gate loops Hasps, hinges, hooks, hooks and eyes, house numbers Knobs Latches, letter boxes, letter plates, locks, locksets and keys therefor, loxins Metal frames for the support of wash basins Nails, name plates, nuts Padbolts, panel pins Rivets Staples, screws, scruins Washers''
Item 90 reads:
ATC 4101
``Timber, including-
- (a) timber (not being joinery or turnery) which has been mortised, tenoned, bevelled, chamfered, checked, bored, trimmed or shaped at an end or ends, or cut into lengths;
- (b) floorings, linings, mouldings, weatherboards, parquet blocks, plywood, veneers and sawdust; and
- (c) joinery and turnery of a kind used in the construction or repair of, and wrought into or attached to, so as to form part of, buildings or other fixtures''
One of the two assessments in question was issued in respect of both kinds of supporting structure sold by the applicant. The other assessment was made under s. 25AA of the Sales Tax Assessment Act (No. 1) 1930 in respect of a single example of the structure which is called a cabinet. The other structure is called a rack. The cabinet is made of timber. Cabinets are available which support four bottles, others are made which support six, and the largest support eight. The back of the largest cabinet consists of a piece of timber less than 2 centimetres thick, about 1.15 metres long and about 45 centimetres high, together with things attached to it. That piece of timber will be fixed in a vertical position when the cabinet is installed. In that piece of timber there are small holes through which means of attaching it to a wall or another structure may be horizontally passed. Spaced along the front of that piece of timber near the lower edge are eight plastic lugs screwed to the timber, each to provide support for a dispensing device, which will in turn support a bottle of a capacity of 2 litres or less, down to 750 millilitres. To either end of the piece of timber is affixed vertically a timber side piece, less than 2 centimetres thick, of the same height as the back piece, about 19 centimetres wide at the top and for about 9 centimetres below the top and curving to a width of about 7 centimetres at its base. A fourth piece of timber less than 2 centimetres thick and about 9.5 centimetres wide lies vertically between the tops of the inner surfaces of the side pieces. The enclosure formed by those four pieces of timber is roofed by a fifth piece of timber fixed in a horizontal plane above them. The enclosure is completed by a sixth piece of timber about half a centimetre thick which lies horizontally less than 8 centimetres below the roof. Out of that sixth piece of timber are cut six circular holes, each above one of the plastic lugs, so that the base of an inverted bottle supported by a dispensing device attached to a lug will project through the circular aperture and will be retained in an approximately vertical position by the timber from which the aperture has been cut. Because the dispensing device is operated by hand while the glass into which the beverage is to be dispensed is held by hand the cabinet is ordinarily installed at a height of about 5 feet or more above the ground. The cabinet is well made and surfaces visible when it is installed are well finished and stained. The cabinets and racks are designed to accommodate the dispensing devices which the applicant manufactures and sells. One of those devices uses electricity, the others are merely mechanical. The backs of the cabinets are channelled to accommodate electrical wiring. (The base of the channel appears to consist of compressed particulate fragments. Counsel for the parties admitted in writing, however, that ``the veneered material used in each of the bottle rack and bottle cabinet tendered in evidence is timber'', and counsel for neither party sought to make any submission about the appearance to which I have referred.) The weight of eight bottles of spirits each of a capacity of 2 litres is such that the cabinets are of strong construction and must be supported by attachment to a strong structure. Sometimes attachment to a wall is by nails fired by a ramset gun, sometimes by toggle bolts to wall studs. The racks are also made to accommodate either four, six or eight bottles. The largest rack consists of a piece of timber and plastic and metal attachments. The piece of timber is less than two centimetres thick, with holes for its attachment to a supporting structure. Its length is about 1.15 metres. Its height is about 11.5 centimetres. Spaced along its length are the eight lugs which support the dispensing devices. Fixed into grooves in the back of the timber opposite each lug are vertical aluminium channels in which run vertically moving aluminium arms. Vertical movement of the arm is restrained by a spring. About 25 centimetres above the top of the timber the arm curves into a horizontal plane. To the under side of the horizontal part of the arm, which is only a few centimetres in length, is attached a black rubber hemisphere, which in use is pressed by the action of the spring against the base of the inverted bottle, retaining the bottle in a vertical
ATC 4102
position. There is provision for electrical wiring in the back of the timber, which is well finished and stained. The weight of the bottles to be mounted on the rack requires strength in construction and attachment and strength in the structure by which the rack is supported.Precedent authority has provided assistance in the construction of sub-items 84(2) and 90(c). Speaking of the former sub-item Wilcox J. said, in
Magna Stic Magnetic Signs Pty. Ltd. & Anor v. FC of T 89 ATC 5000 at 5003:
``In my opinion the intention of the draftsman was to exempt only items which fulfil three criteria: firstly, that they answer the description `builders' hardware' in ordinary parlance, secondly, that they are `goods of a kind used in the construction or repair of... buildings or other fixtures' and, thirdly, that they are goods wrought into or attached to buildings or other fixtures so as to form part thereof.''
That passage was expressly accepted by Lockhart J. in
Feltex Commercial Interiors Pty. Ltd. v. FC of T 90 ATC 4925 at 4933-4934. And it is not contradicted by anything in the reasons for judgment of the members of the Full Court who in
Magna Stic Magnetic Signs Pty. Ltd. & Anor v. FC of T 91 ATC 4216; (1991) 28 F.C.R. 39 decided the appeal from the judgment of Wilcox J.
In the Full Court Beaumont and O'Loughlin JJ. determined in the negative the question of law as to whether the expression ``Builders' hardware'' in sub-item 84(2) is used in any other sense than it has in ordinary speech: 28 F.C.R. at 49. Accordingly they determined the question of fact as to what the common understanding of the meaning of the expression in this country at this time was, by reference to dictionaries and their own knowledge. I am bound to accept their determination of the question of law. I would be required to make for myself a finding on the question of fact if I were hearing an appeal pursuant to ss. 41(b) and 42C(3) of the Sales Tax Assessment Act (No. 1) 1930. I have no reason to suspect that my conclusion on that question of fact would be different from theirs. It was for the Tribunal, on the review it undertook pursuant to ss. 41(2) and 42C(2), to make for itself its finding on that question of fact. In its reasons for decision the Tribunal did not refer to the judgment of the Full Court, which was published after the hearing by the Tribunal had concluded. The Tribunal did refer to statements by Wilcox J. (89 ATC at 5004) and by Lockhart J. (90 ATC at 4936) of their findings that in ordinary parlance ``builders' hardware'' means ``building materials... designed for use by builders, being materials, tools etc.'' and ``materials, tools etc. which are designed for use by builders''. The Tribunal's reasons for decision do not include an express statement of its own finding, but it can confidently be inferred from those reasons, read as a whole, that the finding the Tribunal made as to the meaning of the expression in ordinary parlance was that which those two learned judges had made. Beaumont and O'Loughlin JJ. stated their finding in similar terms:
``in ordinary speech, `Builders' hardware' denotes the building materials, metal ware, tools and locks used by persons who contract for the construction of buildings and who supervise the workmen who build them.''
The relevance of evidence, by persons familiar with the building trade and with the conversation of those in the trade, as to whether a thing is regarded in the trade as builders' hardware has been affirmed by Lockhart J. in the Feltex Case (90 ATC at 4936), by Davies J. in the Full Court in the Magna Stic Case (ATC at 4217-4218; F.C.R. at 42) and by Kitto J. in DFC of T v. Academy Plastics Pty. Ltd. (unreported; judgment 26 March 1956). I defer consideration of the evidence before the Tribunal which might be regarded as of that kind.
Beaumont and O'Loughlin JJ. observed (ATC at 4223; F.C.R. at 49):
``As Kitto J. pointed out in the Academy Plastics case, whatever meaning might be given to the expression `Builders' hardware', standing by itself in Item 84(2), it is confined to `goods of a kind used in the construction or repair of, and wrought into or attached to so as to form part of, buildings or other fixtures'. Kitto J. observed that, obviously, these words cannot properly be applied to every article which is intended to be affixed to the fabric of a building so as to be held in a position which is suitable for its convenient use.''
Perhaps in response to that observation, Mr. Rosenbaum of counsel for the applicant pointed to evidence which established that the structures now under consideration were attached
ATC 4103
sometimes to a wall of the building and sometimes to what he called ``the bar''. In relation to hotels and other licensed premises the expression ``the bar'' may be understood as a collective noun identifying the structures surrounding those who dispense beverages to consumers. The evidence established that similar structures are constructed in private residences and business premises, in a room dedicated to recreational and social activities. When the cabinet or the rack was attached to a part of the bar it could aptly be said that it had been attached to a fixture so as to form part of that fixture, according to Mr. Rosenbaum's submission. There might be difficulty in conceiving the cabinet or the rack, when attached to a wall of a building, as attached so as to form part of the building. Rather would it be conceived as attached to the fabric of the building so as to be held in a position which was suitable for its convenient use. Its function and the function of the building to which it was attached are quite different. But the bar, and each separate component of the bar, was in Mr. Rosenbaum's submission a fixture, in the legal sense, if it was attached to the building in which it was installed. When cabinet or rack was attached to some part of the bar, as it sometimes was, it was attached so as to form part of that fixture, it was said. The function of the cabinet or rack was an essential component of the function of the bar: provision of structures to facilitate the comfortable and efficient dispensing and storage and consumption of a variety of beverages. The submission that the attachment of a cabinet or rack to a fixture was ``so as to form part'' of that fixture was said to be strengthened by the circumstance, of which there was evidence, that sometimes the cabinet or rack was so connected to the bar that it provided support for a part of the bar. One example given was of a cabinet supported by its attachment to a wall of a room providing in turn support of what was described as a pelmet, being a structure situated above the counter of a bar at a height above the floor greater than the height of a man.One possible obstacle to acceptance of Mr. Rosenbaum's submission was removed by reasoning of Lockhart J. in the Feltex Case. In that case his Honour was considering whether sub-item 83(2)(b) - ``Goods being... goods having structural uses similar to those of... plaster products... that are of a kind used exclusively or principally in the construction and repair of, and wrought into or attached to so as to form part of, buildings or other fixtures...''- comprehended fabric covered aluminium framed panels installed as partitions in an office building and held in position by attachment to structures called ``wall-starters'', which were themselves attached to a wall of the building and were ``fixtures'' in the sense of that word in the sub-item. Lockhart J. said (90 ATC at 4934):
``It was submitted by counsel for the Commissioner that in order to satisfy the test of goods being `attached to... buildings or other fixtures' it is necessary that the goods be attached either to a building or to some other fixture which was itself affixed directly to the soil. The examples that were given of such fixtures that were said to be like buildings included swimming pools, fences, railway lines and television transmission towers. It was submitted that goods which were attached to a fixture which was only indirectly affixed to the soil by being attached to a building would not satisfy the test. In my opinion there is no foundation for this submission. Fixtures should not be read down by reference to the word `building'; rather, it should be given its traditional meaning.''
If I follow Lockhart J. in rejecting the construction of the word ``fixtures'', in sub- item 84(2), which was advanced before him in relation to that word in sub-item 83(2)(b), and if I accept Mr. Rosenbaum's submission that by attachment to a fixture the cabinet or rack is ``attached so as to form part of'' that fixture, yet it cannot in my opinion be said that the cabinet or the rack is ``goods of a kind used in the construction of'' that fixture. The observation of Kitto J. to which Beaumont and O'Loughlin JJ. referred in the passage I have quoted from their judgment had reference to plastic towel racks intended to be used in pairs for the purpose of suspending towels in an extended position. After concluding that the goods were not ``Builders' hardware'' Kitto J. continued:
``But whatever meaning might be given to the expression `Builders' hardware' standing by itself, in item 84(2) it is confined to `goods of a kind used in the construction or repair of, and wrought into or attached to so as to form part of, buildings or other
ATC 4104
fixtures'. Obviously these words cannot properly be applied to every article which is intended to be affixed to the fabric of a building so as to be held in a position which is suitable for its convenient use. The Tidy Towel Rack, it may be remarked, is not even of that wide description, for the support it requires may be as well provided by the end of a detached piece of furniture, such as a kitchen cabinet, as by a wall. Even if I had no assistance from evidence, I should think it sufficiently clear from an inspection of the article itself that it is not of a kind used in the construction or repair of a building. No one would ever think of such a thing, I am sure, except after the building was completed, and as a matter rather of furnishing and equipping the household than of adding to the building as a building. It is almost unnecessary to say that even where the Tidy Towel Rack is screwed to a wall (and, as I have said, it need not be), it is certainly not `wrought into' the building. Finally, there is no justification for saying that when the Tidy Towel Rack is screwed to a wall of a building it forms part of the building. The degree, manner and object of the attachment are not such that there can properly be said to be an integration of the Rack with the building. The building supports the Rack, it is true, but the attachment is slight, easily terminated, and irrelevant to any function of the fabric.''
The cabinets and racks are not goods of a kind used in the construction of any of the structures proposed in the submission as ``fixtures''. Neither the bench which in one sense of the word is called ``the bar'', nor the structure above the height of a man which is not uncommonly placed above that bench, nor any one of the sinks, draining boards, beverage drawing and dispensing equipment, cupboards, cabinets, shelves, panelling or wall mirrors which the evidence, as well as common knowledge, identifies as ``fixtures'' or as a part of a fixture owes anything in its construction to the cabinet or the rack. If by attachment to one or to several of the structures comprehended by the collective noun ``bar'' a cabinet or a rack could be said to form part of that structure or of those several structures, yet it could not be said that the cabinet or the rack had by reason of that circumstance been used in the construction of that structure or of any of those structures, much less that it was goods of a kind so used. If by reason of their combination in one structure an aggregation of those named structures is conceived as the fixture, yet the attachment to, or even the incorporation into, the suggested fixture of a cabinet or a rack would not in my opinion justify the conclusion that the cabinet or the rack was ``goods of a kind used in the construction of'' that fixture. If the bench which is called ``the bar'' in one of its meanings were proposed as the relevant fixture, and if in fact some goods (for example, a sink and draining board) were always incorporated into such benches, it might be possible to say that the sink and draining board were goods of a kind used in the construction of that fixture. But the evidence in this case showed that the cabinet and the rack were placed in various positions in relation to the other structures, according to the whim or the sober judgment of him who designed the facility of which all the structures were part. Even if it were assumed, contrary to fact, that every such facility - every bar, in the sense in which that word is used as a collective noun - includes a structure to support inverted bottles and the measuring devices attached to them, it is in my opinion an error to conceive of the facility as a single ``fixture''. Some such facilities may each consist of a single fixture. But ordinarily the facility consists of several parts which are not contiguous or, if contiguous, are not attached one to the other. In those circumstances it is in relation to each part which is a fixture that the question must be asked whether the cabinet and the rack are goods of a kind used in the construction of such a fixture. The answer to that question must be in the negative if in fact the cabinet and the rack may be found attached to any of several, or to none, of such fixtures. My understanding of the evidence before the Tribunal is that those are the facts. Cabinets and racks have the same function as many of the structures to which they are ordinarily found in close proximity: facilitating the comfortable and efficient dispensing and storage and consumption of beverages. But to show that the cabinets and the racks are often attached to some of those structures at the time when those structures are being installed as fixtures is not to show that they are goods of a kind used in the construction of those other structures. Each of the other structures is no different and no less itself when it is not attached to a cabinet or a rack. It is in my opinion equally true that the
ATC 4105
cabinets and racks are not goods of a kind used in the construction of buildings, notwithstanding that they are sometimes attached to a wall of a building at the time when the building is constructed. If it be the case, as was alleged in correspondence from the applicant's representative to a Deputy Commissioner of Taxation before assessment, that built-in kitchen cabinets are accepted - and if it be the case that they are rightly accepted - as goods used in the construction of buildings, the distinction between the kitchen cabinet and the structures here in question may be thought to be fine. It may be that the distinction is between something almost invariably incorporated as a fixture in the most numerous kind of buildings - residential premises - and something which is still found only in a quite small proportion of buildings. Or it may be that a cabinet built into the kitchen of a dwelling comes to ``form part of'' that building in a sense in which the cabinet or rack does not and that that circumstance assists to the conclusion that the kitchen cabinet is goods of a kind used in the construction of buildings that are dwellings.Sub-item 90(c) imposes the same condition as sub-item 84(2): that the goods be ``of a kind used in the construction or repair of... buildings or other fixtures''. The reasons for the conclusion that neither the cabinets nor the racks are goods of that kind are as applicable in relation to sub-item 90(c) as they are in relation to sub-item 84(2).
The Tribunal did not express in its reasons for decision a conclusion as to whether the goods were of a kind used in the construction of buildings or fixtures. It found ``that the prime purpose of the goods is to facilitate the accurate dispensation of spirits in a bar and they are not `builders' hardware' within the natural and ordinary meaning of the term as used in Item 84(2), (see Magna Stic and Feltex Commercial Interiors Proprietary Limited (supra))''. The Tribunal did not say anything else in those reasons to indicate that it did not find that the goods were building materials designed for use by builders or that the goods were building materials used by persons who contract for the construction of buildings and who supervise the workmen who build them. There was a good deal of evidence that they were. Rather the Tribunal seems to have discerned what it conceived to be ``the essential character of the goods'' and to have concluded that a finding that the goods were ``building materials'' was precluded by what it had discerned to be that essential character. The passage from the Tribunal's reasons which I have quoted is immediately preceded by this passage:
``43. Dr. Kenny submitted that is in accord with what His Honour Justice Lockhart said in the Feltex case. That is it is a question of whether these articles are designed for use by builders being materials or tools used in buildings. Dr. Kenny referred to the decision in the first instance of Mr. Justice Davies in
Thomson Australian Holdings Pty. Ltd. and Ors. v. FC of T 88 ATC 4916 at 4917 where he said:`I agree with Mr. Hill's view that the task of the court is to determine the essential character of the goods. What essentially the goods are, not some characteristic that the goods might have. Essential character derives from the basic nature of the goods, from what they are, though composition, function and other factors necessarily play a part.'
44. She asserted that in this case the Tribunal must determine the essential character of the goods and not necessarily the manner in which the goods are used in the trade. On that basis the racks and cabinets (which were not of the `built in' variety) do not conform to the characterisation of `builders' hardware'. Further she said that their purpose is to hold the spirit dispensers manufactured by the applicant and the fact they are purchased by builders does not alter their essential character.''
It is perhaps desirable to point out, parenthetically, that the cabinet and rack do not have a dispenser mounted on them when they are sold. The dispensers are subjects of separate sales. The electrically operated dispenser can be mounted only on a lug of the design to which the lugs on the applicant's cabinets and racks conform, but the mechanically operated dispensers can be - and overseas are sometimes - mounted on lugs which are of different configuration and which are not manufactured by the applicant. As the Tribunal observed in the statement of its findings which I have quoted, the goods ``facilitate the accurate dispensation of spirits in a bar'', but they do not
ATC 4106
effect such a dispensation. That is the function of the separately sold dispenser.The observation by Davies J. which Dr. Kenny cited, and from which it might be inferred that the Tribunal took guidance in determining whether or not the goods were ``builders' hardware'' within the natural and ordinary meaning of the term, was part of a statement of his Honour's reasons for his ruling on the admissibility of evidence about publications proposed as ``catalogues or price- lists'' within sub-item 51(1)(c) of the First Schedule. The evidence was described by his Honour as ``describing circumstances of the trade in which the publications circulate and the use made of the publications by persons who operate in the trade''. Davies J. admitted the evidence over objection by counsel for the Commissioner, stating that the evidence ``does not go to subjective intention or to idiosyncratic use but serves to identify characteristics of the publications and the purpose or purposes they serve''. In this case the Tribunal received, and summarised in carefully prepared and lengthy passages in its reasons for decision, much evidence as to whether the cabinets and the racks were in the building trade called ``builders' hardware'' and even more evidence as to the witnesses' conceptions of the class of goods of which they thought the expression ``builders' hardware'' was the apt description. It was a ground of appeal, added by amendment during the hearing, that the Tribunal had failed to comply with the requirements of s. 43(2B) of the Administrative Appeals Tribunal Act 1973 in that it had failed to include in its written reasons for its decision ``a reference to the evidence or other material on which'' its finding that the goods were not within the ordinary meaning of the expression ``builders' hardware'' was based. That failure, it was submitted, had in the circumstances of this case constituted an error of law.
It may be arguable - I need express no concluded opinion - that to say that the purpose of the goods is to hold spirit dispensers or ``to facilitate the accurate dispensation of spirits in a bar'' is not to say anything inconsistent with the conclusion that the goods are within the ordinary meaning of the expression ``builders' hardware''. If the goods are designed for use by builders and are on occasions used by builders when they are constructing buildings and are commonly called builders' hardware, that may be enough to bring them within that ordinary meaning of the expression. If it is enough, there may be thought to have been evidence which, if accepted, would have required the findings that these goods are designed for use, and are on occasions used, by builders when they are constructing buildings. The reasons of the Tribunal do not enable the parties or the court to determine whether some of the necessary evidence was not accepted or whether, accepting the evidence, the Tribunal made some error of law which brought it to the conclusion that the goods, having the ``purpose'' or ``the prime purpose'' stated, could not be ``builders' hardware''.
If there was error of law consisting of defective statement of reasons, yet I am of opinion that the appeals should be dismissed. For the reasons I have stated I consider that in law the evidence before the Tribunal did not admit of a conclusion that any of the goods in question were ``of a kind used in the construction or repair of... buildings'' or ``of a kind used in the construction or repair of... other fixtures'', within the meaning of either of those phrases in sub-item 84(2) or in sub-item 90(c).
THE COURT ORDERS THAT:
1. Each appeal be dismissed.
2. The Respondent's costs of each appeal be paid by the applicant.
This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.