ZENDEL AUSTRALIA LIMITED & ANOR v FC of T & ANOR
Judges:Hill J
Court:
Federal Court
Hill J
By proceedings commenced in the High Court of Australia and remitted to this Court pursuant to the provisions of s. 44(2A) of the Judiciary Act 1903, the applicants, Zendel Australia Limited and Integrated Packing Pty Limited, seek declarations that certain products sold by each of them are either exempt from sales tax or taxable at the rate of 10 percent as a result of the provisions of the Sales Tax (Exemptions and Classifications) Act 1935 (``the Act'').
The products, ``GLAD Wrap - 30 Metres'' and ``GLAD Go-Between - 15 Metres'' are sold by wholesale by the first applicant. The product ``Teno Spin Stretch Film'' is sold by wholesale by the second applicant. The
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applicants claim that all of these products are exempt from sales tax because they fall within the provisions of Item 120(5) of the First Schedule to the Act. That Item reads relevantly as follows:``Item 120 Clothing, footwear, piece goods and yarns (other than goods covered by any item in the Second or Third Schedule) viz.:-
- ...
- (5) Piece goods, being cloth (whether woven, felted, knitted, netted or crocheted), including plastic and rubber sheeting, table baize and cloth made wholly or partly of glass fibre, rubber, synthetic or plastic material, but not including tracing cloth or floor coverings.''
The first applicant also sells by wholesale the products ``GLAD Foil - 10 Metres'' and ``GLAD Freezer 'n' Storage Bags - 120 Small''. It Is claimed that these items attract the rate of sales tax of 10 percent because they fall within Item 2 of the Third Schedule to the Act. That Item provides as follows:
``Item 2 Parts, fittings and accessories for goods covered by item 1, but not including -
- (a) duct work or channelling of a kind used in forced draught ventilating or air conditioning systems; or
- (b) fittings, accessories or attachments for, components of, or goods designed to form part of, duct work or channelling of a kind used in forced draught ventilating or air conditioning systems''
The relevant paragraphs of Item 1 said to be applicable are paras. (e) and (h) of that Item which read as follows:
- ``(e) refrigerators, ice chests and other appliances used for the cooling or freezing of food;
- ...
- (h) grillers, stoves, ranges, ovens, cookers... and other appliances for use for culinary purposes;''
Each of the products in question, with the exception of the ``Teno Spin Stretch Film'' is well-known to any regular shopper in a supermarket. The product ``GLAD Wrap - 30 Metres'' is a plastic food wrap of 30 metres in length and 33 centimetres in width, put up for sale on a roll in a cardboard package with a serrated edge which can be used to cut the plastic after a length of it is pulled off the roll. The product is made from polyethylene by a process of extrusion which produces the plastic wrap in large continuous lengths which are then cut to size for the purposes of marketing.
The product ``GLAD Go-Between - 15 Metres'' is likewise a roll of plastic film of 15 metres in length and 33 centimetres in width which is packaged in a cardboard container. Its primary use is apparently to separate food in a freezer, or to cover food. Its attraction to the consumer is said to be that it separates easily from any product which comes in contact with it. It too is extruded in large continuous lengths which are cut to size for the purposes of marketing.
The product ``Teno Spin Stretch Film'' is sold as a roll of plastic film. A full roll is 500 millimetres wide and it contains approximately 1800 metres of plastic stretch film. The product is used by wholesalers, retailers, transporters and other persons or companies to wrap goods or pallets of goods for transport or storage. Like the other products I have mentioned, it is produced by an extrusion process as a continuous roll of plastic film which is cut to size for the purposes of marketing as a roll of plastic film.
``GLAD Foil'' is a roll of aluminiun foil marketed in a cardboard package with a serrated edge for cutting. It is not disputed that the product is principally used by consumers in connection with cooking. Indeed it is sold for this purpose, and the package proclaims that it makes every stage of food preparation in cooking easier and the food served in the result, fresh, moist and full of flavour. The package says:
``GLAD Foil is a super-strength quality aluminium foil which ensures perfectly baked or barbecued meats and vegetables, delicious garlic bread and easy-to-prepare meals-in-a-parcel. When you use GLAD Foil you will love the moist, succulent results.''
``GLAD Freezer 'n' Storage Bags'' are, as the product name suggests, plastic bags which may be used for freezing or refrigerating food, or defrosting food in a microwave so long as a browning unit or a browning dish is not used. The evidence demonstrates, and it is not in dispute, that the principal use to which this
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product is put by consumers is for storage in refrigerators and freezers.Item 120(5)
For the applicants it was submitted that Item 120(5), so far as it concerned plastic sheeting, should be construed on the basis that the Item would be satisfied if the goods in question had the characteristics of ``piece goods'' save that they were plastic rather than cloth. It was said that the application of the Item was not concerned directly with whether the goods in question were, in the ordinary accepted meaning of the term, ``piece goods'' as such, for the concept of ``piece goods'' was necessarily extended by the language of the Item so as to include plastic and rubber sheeting, neither of which would be included in the ordinary connotation of ``piece goods''. Once this was accepted, it was submitted that the products ``GLAD Wrap - 30 Metres'', ``GLAD Go-Between - 15 Metres'' and ``Teno Spin Stretch Film'' could properly be characterised as ``piece goods'' because they were put up for sale in defined lengths.
The expression ``piece goods'' is defined in the Oxford English Dictionary (2nd ed) as follows:
``Textile fabrics, such as calico, shirtings, mull, etc, woven in recognised lengths (see PIECE sb 4a) for sale; a term formerly applied to Indian and other Oriental fabrics exported to Europe, but subsequently chiefly applied to Lancashire cotton goods exported to the East.''
The reference to PIECE sb 4a in the same volume of the dictionary is in the following terms:
``A length (varying according to the material) in which cloth or other textile fabric is woven; also, a length of wall paper as made (in England, generally 12 yards)...''
The Macquarie Dictionary (2nd Revision) defines the expression ``piece goods'' as:
``goods or fabrics woven in lengths suitable for retail sale by the usual linear measure.''
The publication ``Textile Terms and Definitions'' (8th revised ed), compiled by the Textile Institute, defines ``piece goods'' as: ``fabric sold by or from the piece''. The same publication defines ``piece'' as: ``a length of fabric of customarily accepted unit length''.
The applicants point to the evidence that ``GLAD Wrap'' and ``GLAD Go-Between'' are sold in specific lengths and that competitive products are sold in the same lengths.
With respect to the submissions of the applicants, I do not think that any of the three products in question fall within Item 120(5). I agree with the applicants that goods will fall within Item 120(5) which are plastic sheeting, if those goods would be capable of being described as ``piece goods'' in the event that they were otherwise woven cloth rather than plastic sheeting. In other words, it is clear that for goods to fall within Item 120(5) relevantly, they must have the characteristics of ``piece goods'' save that they need not be made of cloth but could be made of plastic or rubber sheeting. However, the difficulty with the applicants' case is that the goods in question must, but for the material of which they are composed, still satisfy the essential characteristic of ``piece goods''.
In my view the essential characteristic of ``piece goods'' is, as the publication ``Textile Terms & Definitions'' makes clear, the sale of the goods by retail ``by or from the piece'', that is to say by or from a linear measure. It is to facilitate such a sale that ``piece goods'' are initially produced in defined lengths. Once, however, exposed to retail sale, they may then be sold either by the metre, yard etc or the total length. That is to say, that they must be goods put up for sale in lengths and sold by or from the piece. A familiar example of an item which is within the category of ``piece goods'' would be curtain material. Such material is put up for sale as a roll or ``bolt'' of material of standard length. However, it is generally sold by retail by the metre. This would not preclude, of course, a customer buying the whole bolt, but the material is not put up for sale by the bolt.
In contrast, each of the three products is put up for sale as an entirety. None is sold by or from the piece at all. None is offered for sale at the retail level at a price per metre, or other linear measure. It is no doubt true that the length of each product is material to the price for which it is sold, but the mere fact that a product is put up for sale as having a particular length does not make that product ``piece goods''. No doubt plastic material, if offered for sale at the retail level, either rolled on a bolt or by the metre, would fall within the Item, but that is a far cry from the plastic wrap products
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of fixed length which are the subject of the present case.In my view, none of the three products fall within Item 120(5) of the First Schedule of the Act.
Counsel for the Commissioner sought to rely upon the legislative history of Item 120 to support the Commissioner's submissions that Item 120(5) had no application. With respect I do not find the legislative history particularly illuminating.
The original Item 120 was concerned with ``sole leather''. In 1946 it was amended to read:
``1(a) clothing, footwear, drapery, soft furnishings and yarns (other than goods covered by any item in the Third Schedule of this Act) which come within the meaning which the expression `coupon goods' had, on the 13th day of September, 1945, in the Rationing Order No. 27, made under the National Security (Rationing) Regulations, as amended to that date.''
``Coupon goods'' relevantly included ``piece goods'' defined in the same Rationing Order as meaning ``cloth, whether woven, felted, knitted, netted or crocheted, but does not include household drapery or soft furnishings''.
It was suggested that ``piece goods'' were excluded from the Rationing Order because such goods were the material from which various items of clothing could be made. Be that as it may, Item 120 was replaced by the present Item in 1948. In the Second Reading Speech the then Prime Minister and Treasurer, Mr Chifley, referred to the amendment being made as a ``re-expression of the existing exemption of clothing and household drapery, which has the effect of substantially enlarging its scope''. He said:
``The termination of rationing of clothing and household drapery has rendered it desirable to re-express the relevant sales tax provision in terms independent of the rationing schedules. The opportunity is being taken to extend the scope of the item to include a number of classes of goods which have hitherto been taxable. These goods include blankets and travelling rugs, sewing thread of the kind used for domestic purposes, heavy textile fabrics and table cloths, curtains, quilts and certain other articles made of materials which were not coupon goods. Full details will be found in the statement circulated among honourable members.''
Apparently, the statement referred to in Hansard can no longer be located.
Subsequently, in 1954 a new Item 96 was inserted in the Act in the following terms:
``Paper bags (including bags made from cellulose transparent film), wrapping paper (including cellulose transparent film), twine and lashing, being goods of a kind used to wrap up and secure goods for marketing or delivery.''
Subsequent amendments to Item 96 were made and in 1963 that Item read, after further amendment:
``(1) Goods of a kind used to wrap up or secure goods for marketing or delivery, namely:-
- (a) wrapping material... consisting of paper, flexible film or metallic foil...''
It was suggested that the wording of Item 96 made it clear that Item 120 did not cover items that would have been covered by Item 96, such as flexible film used to wrap up or secure goods.
The argument assumes that each Item in the First Schedule to the Act is mutually exclusive of any other Item. Such an assumption cannot necessarily be made but in any event I find it difficult to see how one can properly construe the provisions of Item 120, as inserted in 1944, by reference to legislative amendments made in 1954, 1963 or indeed later in 1985: cf
The Secretary of the Department of Foreign Affairs and Trade v Susie Boswell (full court of this Court, unreported 3 July 1992, per Sheppard J at 8). Even more so, what was said by the then Treasurer, Mr Holt, in the Second Reading Speech introducing Act Number 44 of 1963, cannot aid in construing the terms of Item 120(5) as inserted in 1948: see
Hunter Resources Limited v Melville & Anor (1987-1988) 164 CLR 234 at 240-241.
Item 2 of the Third Schedule
For the applicant it was submitted that the products ``GLAD Foil'' and ``GLAD Freezer 'n' Storage Bags - 120 Small'' were ``accessories'' for goods covered by Item 1, viz. stoves or refrigerators as the case may be, and accordingly each product fell within Item 2 of the Third Schedule to be taxed at the concessional rate of 10 percent.
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Reference was made to the dictionary meaning of ``accessory'' and to court decisions in which the meaning of the word had been discussed.
The Macquarie Dictionary (2nd Revision) relevantly defines ``accessory'' as:
``a subordinate part or object; something added or attached for convenience, attractiveness, etc, such as a spotlight, heater, driving mirror, etc, for a vehicle.''
The Oxford English Dictionary (2nd ed) defines ``accessory'', inter alia, as meaning:
``An accessory thing; something contributing in a subordinate degree to a general result or effect; an adjunct, or accompaniment.''
The meaning of the word will clearly depend upon the context in which it is used. Indeed, it was the context which distinguished the different meanings given to the word by Gibbs J in
DFC of T v Polaroid Australia Pty Ltd 71 ATC 4249; (1971) 46 ALJR 32 and by Hope JA in
FC of T v Kentucky Fried Chicken Pty Limited & Anor 88 ATC 4363; (1988) 12 NSWLR 643.
In the former case, Item 38 of the Second Schedule to the Act (which operated to ensure that a rate of sales tax of 25 percent was payable) specified:
``38. Accessories and parts for goods covered by item 36 or 37 in this Schedule.''
Item 36 relevantly specified cameras and machines for taking photographs. The issue for decision, relevant to the present problem, was whether films or film packs for Polaroid cameras fell within Item 38. In holding that they did not, Gibbs J said (at ATC 4253; ALJR 35):
``The ordinary dictionary meaning of accessory is an adjunct, which itself is defined as something joined to another, but subordinate, as auxiliary, or dependent upon it... In my opinion, however, the goods in question cannot be regarded as accessories for a Polaroid camera. An accessory for a camera is an extra and additional part of the equipment of the camera itself, such as a light meter, a filter or a wide angle lens, and in the ordinary course of language a film would not be referred to as an accessory for a conventional camera, nor a film pack or a picture roll as an accessory for a Polaroid camera.''
By way of contrast, however, in the Kentucky Fried Chicken case, the question was whether paper serviettes, refresher towels and plastic spoons included in serviette packs packed in cartons with food products sold to customers of Kentucky Fried were ``accessories'' of the food products marketed in those cartons for the purpose of Item 91(1) of the First Schedule to the Act. That Item exempted containers used, or for use, in marketing exempt goods. The term ``containers'' was defined in cl. 1(1) of the First Schedule to the Act in the following terms:
"(a) the inner or outer coverings in which goods are packed or secured, or are to be packed or secured, in the ordinary course of business (including inside linings and inside packing materials); or
(b) goods ordinarily used to secure or seal, or to describe the contents of, coverings to which paragraph (a) applies, being goods forming part of the completed coverings,
and includes can keys, glass droppers and other goods that -
(c) are accessories of coverings or goods to which paragraph (a) or (b) applies or of goods marketed in such coverings;
(d) are attached to or form part of the inner coverings, or are contained in the outer coverings, of the goods so marketed; and
(e) are sold with those goods for one inclusive price."
In this context the paper serviettes, refresher towels and plastic spoons were held to be ``accessories''. Hope JA, with whose judgment Samuels and McHugh JJA agreed, after referring to Polaroid and to the passage from the judgment of Gibbs J quoted above, said (at ATC 4369; NSWLR 649):
``With respect to his Honour, although `adjunct' is one of the meanings sometimes given by dictionaries for the word `accessory', it is not the only meaning given in the dictionaries to which the Court was referred in this appeal, and indeed in some of those dictionaries the word `adjunct' is not used.''
His Honour then referred, inter alia, to the definitions in the Oxford English Dictionary and the Macquarie Dictionary (set out above) and continued (at ATC 4369; NSWLR 649-650):
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``In Black's Law Dictionary an American publication, it is defined as `Adjunct or accompaniment... A thing of subordinate importance. Aiding or contributing in secondary way or assisting in or contributing to as a subordinate'. In Webster's Dictionary, also of course an American publication, as an adjective it is defined as `Contributing; aiding in producing some effect, or acting in subordination to the principal agent; contributing to a general effect; belonging to something else as principal; accompanying'. As a noun its meaning is given as: `...; that which belongs to something else, as its principal; that which contributes to the effect of something more important; an accompaniment'.
As it seems to me, even without a context which may confirm such a conclusion, the word `accessory' whether used as an adjective or a noun does not necessarily connote that the accessory must be joined to something else. An object that is joined to another may well be an accessory although it will not necessarily be so. However it may still be an accessory even though it is not joined. Adopting as a basis the meaning given in the Macquarie Dictionary, an article will be an accessory if it is a subordinate part or object, added or attached for convenience or effectiveness or other such reason.
... The word thus may apply to a subsidiary article whether joined or not joined to the principal article; it must be subordinate or subsidiary to that principal article and is added or attached for reasons such as convenience or effectiveness.''
His Honour then proceeded to examine the context in which the word was used, noting that the reference to ``can keys'' and ``glass droppers'' required that these items be taken to be accessories for the purposes of the Item. The context not only confirmed his Honour in the view that an accessory need not be joined to the principal Item, it also demonstrated that the accessory need not be of a kind which had some inherent characteristic which made it suitable only for the principal article.
The applicants relied heavily upon the judgment of Hope JA as the foundation for a broad meaning to be given to the word ``accessory''. It was submitted that each of the goods in question in the present application were to be seen as accessories to stoves or refrigerators as the case may be, because they enhanced the effect of these appliances and improved the performance of them. It was said to be relevant that the foil or bags were designed for use in the particular appliance.
The broad meaning which the Kentucky Fried Chicken case advanced depended, as the judgment in that case acknowledged, upon the context in which the word appeared. No such expansion of meaning can be inferred from the context of Item 2 of the Third Schedule and, as in Polaroid, the word must be taken to have its ordinary meaning. It is unnecessary for present purposes to determine whether that ordinary meaning requires that for an item to be an ``accessory'' to some other item, the first- mentioned item must be an adjunct to the second. It is sufficient to say that it would be a misuse of language to call aluminium foil an accessory to an oven, or plastic freezer bags an accessory to a refrigerator. Not every item which is for use in a refrigerator or oven (even if designed for the purpose of that use) will be an accessory to the refrigerator or oven. As the dictionary definitions demonstrate, for an item to be an ``accessory'' in the relevant sense that item must contribute to the working of some principal item or its general effect. Thus both a camera lens and a light meter are, as Gibbs J observed, accessories to a camera; mag wheels may be an accessory to a car, a crisper may be an accessory to a refrigerator, or perhaps even a baking dish might be an accessory to a stove, at least if custom-made for it. In each of these examples the accessory actually contributes to the functioning of the principal item.
However, to take the example of aluminium foil, that does not in any way contribute to the stove, or its functioning. The stove functions and performs in the same way irrespective of the use of aluminium foil. It is true that the foil may improve the effect of cooking on the food, or the freezer bags may modify the effect of freezing on food, but this is but to say that the product in question assists in the process of cooking or freezing. They are, as counsel for the Commissioner submitted, an adjunct to the process, rather than an adjunct to the appliance. Further, to say that the items in question are designed for use in an appliance, (which while not a necessary precondition to an item being an accessory, certainly assists in concluding that it
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is) disguises the fact that the items are designed for use in stoves or refrigerators generally, not in particular stoves, or particular refrigerators.In my view neither ``GLAD Foil - 10 Metres'' nor ``GLAD Freezer 'n' Storage Bags - 120 Small'' can properly be said to be an ``accessory'' to an appliance referred to in Item 1 of the Third Schedule to the Act. In these circumstances I would not grant to the applicants the declarations they seek, but would make declarations that the goods in question do not fall within the relevant Items.
The applicants must pay the respondents' costs of the application.
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