Re A Taxpayer v Commissioner of Taxation

[2007] AATA 1759
(2007) 97 ALD 501
(2007) 67 ATR 959

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(Decision by: Deputy President P E Hack SC)

Re A Taxpayer
v.Commissioner of Taxation

Tribunal:

Member: Deputy President P E Hack SC

Subject References:
TAXATION
energy grants
off-road credit for use of diesel fuel in constructing rail line or access road
use in mining operations is a use that qualifies for credit
whether activities of applicant were mining operations
construction of rail line and access road are mining operations
remit matter to respondent
applicant entitled to off-road credits for diesel fuel for construction of rail line and road

Legislative References:
Energy Grants (Credits) Scheme Act 2003 (Cth) - 11; 15; 52; 53
Taxation Administration Act 1953 (Cth) - 359-60; 359-65
Customs Act 1901 (Cth) - 164
Excise Act 1901 (Cth) - 78A
Customs and Excise Amendment Act 1995 (Cth) - The Act

Case References:
Commissioner of Taxation v McMahon - (1997) 79 FCR 127
Re Hall and Federal Commissioner of Taxation - (2006) 64 ATR 1001
Jeffrey James Prebble Pty Ltd v Commissioner of Taxation - (2003) 131 FCR 130
Cameron Brae Pty Ltd v Commissioner of Taxation - [2007] FCAFC 135
Abbott Point Bulk Coal Pty Ltd v Collector of Customs - (1992) 35 FCR 371
WMC Resources Ltd v Chief Executive Officer of Customs - [1997] FCA 1451
Chief Executive Officer of Customs v WMC Resources Limited - (1998) 87 FCR 482
McDermott Industries (Aust) Pty Ltd v Chief Executive Officer of Customs; WMC Resources Limited (as agent for East Spar Alliance) v Chief Executive Officer of Customs - [1997] AAT 12014
Chief Executive Officer of Customs v Dyno Wesfarmers Ltd - (1997) 73 FCR 1
Dawson Rockwater Joint Venture v Chief Executive Officer of Customs - [1998] 1010 FCA (21 August 1998)
Re Wandoo Alliance Pty Ltd and Chief Executive Officer of Customs - (2001) 34 AAR 98
Hampton Transport Services Pty Ltd and Chief Executive Officer of Customs - (2001) 49 ATR 1005

Other References:
Pearce, D.C. & Geddes, R.S. (2006) Statutory Interpretation in Australia, 6th. ed., Butterworths, New South Wales.

Hearing date: 13 August 2007
Decision date: 13 September 2007

Brisbane

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Decision by:
Deputy President P E Hack SC

Decision

The Tribunal:

1. sets aside the objection decision;

2. remits the matter to the respondent with a direction that:

(a)

the applicant is entitled to an off-road credit for the use of diesel fuel in earthworks for the construction of a rail line to carry minerals from a mine site to a port;

(b)

the applicant is entitled to an off-road credit for the use of diesel fuel in earthworks for the construction of a maintenance road alongside the rail line;

3. Certifies that the proceedings have terminated in a manner favourable to the applicant.

..............................................

Deputy President

REASONS FOR DECISION

13 September 2007

Deputy President P E Hack SC

INTRODUCTION

1. Between July 2004 and July 2005 the applicant undertook earthworks in connection with the construction of a railway line and associated access road from the Rolleston coal mine to Blackwater. The issue I have to decide is whether, in doing so, the applicant used diesel fuel in mining operations as that expression is used in the Energy Grants (Credits) Scheme Act 2003 ("the Act").

BACKGROUND

2. There is no dispute between the parties regarding the facts. What follows is, as I understand it, common ground.

3. The Rolleston mine is some 16 kilometres west of Rolleston in Central Queensland. The mine is operated by Xstrata Coal Australia Pty Ltd ("Xstrata"). It is an open cut thermal mine that produces power grade coal that is not subjected to any processing after it leaves the mine site. The mine commenced operations, in the sense of first extracting coal, shortly prior to October 2005.

4. The rail line in issue in this case is described as the Bauhinia Regional Rail Project. It was built to take coal from the Rolleston mine to the Port of Gladstone via the Kinrola Spur at Blackwater. The length of the new line is not entirely clear but seems to be in excess of 100 kilometres in length.

5. Construction of the rail line involved as well the construction of an 8 metre wide access road adjacent to the rail line for maintenance of, and access to, the rail line. Queensland Rail contracted the task of constructing the rail line and access road to Abigroup Contractors Pty Ltd ("Abigroup"). Abigroup, in turn, subcontracted to the applicant:

"The supply of all materials, labour, operators, plant and equipment to complete the Earthworks Mass Haul between chainage km 72.100 to chainage km 100.900."

6. The works undertaken by the applicant comprised^[1]:

•

the clearing of virgin land and the removal and stockpiling of topsoil;

•

the earthworks to construct an 8 metre wide construction haul road for safe access to the site during the Works and remaining upon completion of the Works for the purpose of private access to and maintenance of the railway;

•

the performance of necessary bulk earthworks to construct the rail formation and achieve the required vertical and horizontal alignment;

•

the extraction and haulage of materials from within the wider easement and from adjoining properties due to a major shortfall in cut-to-fill balance;

•

the earthworks for bridge abutments and approaches;

•

the earthworks for the construction of the Dawson Highway Overpass across the rail formation;

•

the earthworks in the formation and wider easement for the installation of all major drainage structures including corrugated metal pipes and precast concrete culvert sections;

•

the backfilling of installed drainage structures using cement stabilised soil;

•

the performance of necessary 'cuts and fills'; and

•

the preparation of the sub-base for the alignment of the railway.

7. The construction of the rail line and the access road was, I accept, a critically important part of the overall viability of the Rolleston coal mine. Dr Eugene Gallagher has both professional qualifications and experience that enable him to comment on the role of the rail line in the overall operation of the Rolleston mine. He said this:

"1. The rail line is an essential part of the infrastructure for the mine development and, in this case, as in the case of other mines in my experience, the practical completion of such being agreed by Queensland Rail, signalled the commencement of operations at the mine. ...

2. The Rail Line is an essential part of the infrastructure for the mine development because it is the means by which the product coal is moved from the mine to the port.

...

4. The Rail Line is an integral part of the 'coal chain', and as such can be considered to be core infrastructure to the operation ...

5. The 'coal chain' commences at the mine face where the coal is extracted and finishes when the coal reaches the customer. ... By 'coal chain' I mean the steps in the operation of the coal being mined, crushed, beneficiated (if required), and transported to the port.

Access Road

6. The Access Road is essential to the maintenance of the Rail Line ... Just as the Rail Line is an essential part of the mine infrastructure, the access road is part of the infrastructure required to enable access to the line in order to carry out routine and breakdown maintenance.

7. Interruption to the 'coal chain' through breakdowns is to be avoided, by providing ready means of access to the rail infrastructure. Access to the rail line is an essential part of the requirements for the rail line."

8. Dr Gallagher also commented upon the stages of a typical mine development. He concluded by observing:

"16. The construction phase is timed to enable the expenditure to be made in such a way as to minimise the costs prior to the project generating a cash flow. To do this, the individual items of infrastructure are built in parallel so that, as near as possible, all essential infrastructure is completed by the time estimated for the commencement of coal extraction. Then the project becomes operational when the coal can be mined, crushed, beneficiated (if required), and transported to the port for export or to domestic customers such as power stations. As most mines, apart from those which supply adjacent (Mine Mouth) Power Stations use rail transport, the rail line and access road are built as part of the infrastructure."

THE RESPONDENT'S PROCESSES

9. The matter comes to this Tribunal as a consequence of a request made by the applicant on 16 January 2006 for a private ruling. The request was made a short time after the repeal of former Part IVAA of the Taxation Administration Act 1953 (Cth.) ("the TAA") and its replacement by Division 359 of Schedule 1 to that Act. The questions posed in the request for ruling were these:

"Under the Energy Grants (Credits) Scheme Act 2003 ... is [the applicant] ... entitled to an off-road credit for the following:

•

The use of diesel fuel in earthworks for the construction of a rail line to carry minerals from a mine site to a port?

•

The use of diesel fuel in constructing an access road along the side of the rail line?"

10. On 10 April 2006 the Commissioner answered both questions "no".

11. By letter dated 9 June 2006 the solicitors for the applicant objected to the ruling. The right to object is conferred by s 359-60 of the TAA. The manner of objection is set out in Part IVC of the TAA. In contradistinction to the procedure under former Part IVAA of the TAA, s 359-65(1) of the TAA now permits the Commissioner, in deciding an objection, to consider additional information. Thus the difficulties with Part IVAA of the Tribunal being bound by the facts identified in the Commissioner's ruling, highlighted in Commissioner of Taxation v McMahon^[2], have been overcome.

12. It is accepted by Mr Boddice SC, who led Mr Redmond of counsel for the Commissioner, that I am not bound by the evidence before the Commissioner and that I may have regard to the evidence before me even though it was not before the Commissioner when the ruling was made. Mr Marks of counsel, who appeared for the applicant, properly drew my attention to the decision of Senior Member Hunt in Re Hall and Federal Commissioner of Taxation^[3] where at [43] the Senior Member seemed to suggest that under the new regime in Division 359 the Commissioner (and thus, I infer, the Tribunal) "still does not have a fact finding role".

13. I am, with respect, unable to agree with this view. It is, I think, expressed too broadly. If the additional information is such that the scheme is materially different to that originally considered, the Commissioner must request the applicant to make an application for another ruling and, in that circumstance, must necessarily decline to find additional facts. But short of that it seems to me that no purpose would be served by permitting the Commissioner to consider additional information if he were not permitted to find facts from that additional information.

14. In any event, in the present case the Commissioner considered the objection by the applicant and on 6 July 2006 disallowed it, hence the present proceedings.

THE STATUTORY SCHEME

15. The scheme of the Act is to provide "energy grants"; in effect rebates on diesel fuel or alternative fuel purchases to those entitled to "on-road" or "off-road" credits. The requirements for an on-road credit are twofold. First, the applicant must be registered^[4]. That is not in issue here.

16. The other requirement, and that in issue in the present case, arises from s 53 of the Act. By virtue of s 53(1) an applicant is entitled to an off-road credit for purchases or imports of off-road diesel fuel for a use "that qualifies". Use in mining operations is such a use and is provided for by s 53(2) in these terms:

"(2) Use in mining operations (otherwise than for the purpose of propelling any vehicle on a public road), ... is a use that qualifies."

17. What is meant by "mining operations" is defined in s 11 of the Act as follows:

"(1) Subject to subsection (2), the expression mining operations means:

(a)

exploration or prospecting for minerals, or the removal of overburden and other activities undertaken in the preparation of a site to enable mining for minerals to commence; or

(b)

operations for the recovery of minerals, being:

(i)

mining for those minerals including the recovery of salts by evaporation; or

(ii)

the beneficiation of those minerals, or of ores bearing those minerals;

and includes:

(c)

a mining transport activity; or

(d)

a mining rehabilitation activity; or

(e)

a mining water activity; or

(f)

a mining construction activity; or

(g)

a mining waste activity; or

(h)

a mining vehicle activity; or

(i)

a sundry mining activity."

18. It is unnecessary to have regard to the exceptions in s 11(2); it is not suggested that any of them are relevant in this case. Of the particular matters included in paragraphs (c) to (i) of s 11(1), it is only that in paragraph (f), a 'mining construction activity', which is relevant. The nature of such an activity is set out in s 15 of the Act which, so far as is presently relevant, provides:

"The expression mining construction activity means:

(a) the construction or maintenance of private access roads for use in a mining operation referred to in paragraph (a) or (b) of the definition of that expression in subsection 11(1) if the construction or maintenance:

(i)

occurs at the place where the mining operation is carried on; and

(ii)

is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the construction or maintenance; or

...

(d) the construction or maintenance of private airstrips, buildings, plant or equipment for use in a mining operation referred to in paragraph (a) or (b) of the definition of that expression in subsection 11(1) if the construction or maintenance:

(i)

occurs at the place where the mining operation is carried on; and

(ii)

is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the construction or maintenance; or

..."

THE PARTIES' CONTENTIONS

19. The case for the applicant is that its activities satisfy the test for mining operations in either or both of two ways:

•

the primary contention was that earthworks for the construction of a rail line (and associated access road) to carry coal from a mine site to a port was "other activity undertaken in preparation of a site to enable mining for minerals to commence"; that is, it came within the primary definition of 'mining operations' in s 11(1)(a) of the Act;

•

the secondary contention was that the earthworks for the rail line and access road constituted "mining construction activity",

•

in the case of the rail line, because it was construction of plant or equipment for use in a mining operation referred to in s 11(1)(a) or (b);

•

in the case of the access road, because it was construction of a private access road for use in a mining operation referred to in s 11(1)(a) or (b).

20. For his part, the Commissioner contended that the activities undertaken by the applicant did not satisfy the test for mining operations in either of the ways contended. The diesel fuel purchased by the applicant was for use (and used) in the carrying out of earthworks to enable the construction of the rail line.

THE APPROACH TO CONSTRUCTION

21. The task of construing the provisions in issue requires scrutiny of the language used by the Parliament and the context of that language. The context is construed in its broadest sense; that is, including matters such as the object of the legislation, its history^[5], and the statutory history of any other statute that can be viewed as part of that context^[6].

22. In the latter context, the Act replaced the scheme for rebate of customs or excise duty that was created by the now repealed s 164 of the Customs Act 1901 (Cth.) and s 78A of the Excise Act 1901 (Cth.). Each section provided for the payment of a rebate to a person who purchased diesel fuel for use in mining operations, otherwise than for the purpose of propelling any vehicle on a public road. The expression "mining operations" was defined for the purpose of both Acts by s 164(7) of the Customs Act, so far as is presently relevant, in these terms:

" mining operations means:

(a)

exploration or prospecting for minerals, or the removal of overburden and other activities undertaken in the preparation of a site to enable mining for minerals to commence; or

(b)

...

...

(o)

the construction or maintenance of private access roads for use in a mining operation referred to in paragraph (a) or (b) if the construction or maintenance:

(i)

occurs at the place where the mining operation is carried on; and

(ii)

is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the construction or maintenance; or

...

(q)

the construction or maintenance of private airstrips, buildings, plant or equipment for use in a mining operation referred to in paragraph (a) or (b) if the construction or maintenance:

(i)

occurs at the place where the mining operation is carried on; and

(ii)

is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the construction or maintenance; or

..."

23. As can be seen, the words used are, for all practical purposes, identical to those used in the sections of the Act relied upon by the applicant. There is no reason to presume other than that the Parliament intended that the expressions in the Act be given an interpretation consistent^[7] with those determined in the considerable jurisprudence in the Federal Court on the expressions used in the Customs Act.

24. Part of that jurisprudence is the decision of the Full Court of the Federal Court in Abbott Point Bulk Coal Pty Ltd v Collector of Customs^[8]. This passage from the joint judgement of Ryan and Cooper JJ. is on point^[9]:

"Whether an activity falls within the definition of 'mining operations' as defined in s 164(7) of the Customs Act is a question of fact. So too is the question of when recovery is complete. In each case a commonsense and commercial approach has to be taken to the question having regard to the evident purpose of the legislation, to make rebates available to promote the exploitation of mineral deposits in Australia."

25. It was not argued in the present case that any different approach was required under the Act or that the purpose of the Act was other than that recognized under the earlier legislation.

THE APPLICANT'S PRIMARY CONTENTION

26. As it seems to me, the general structure of the Act, so far as it concerns mining operations, is to identify four distinct operations or classes of operation that will satisfy the definition:

•

operations to ascertain the existence of minerals i.e. "exploration or prospecting for minerals";

•

operations in preparation for mining to enable mining to commence i.e. the balance of s 11(1)(a) of the Act;

•

operations for the recovery of minerals i.e. s 11(1)(b) of the Act; and,

•

operations related to mining by reference to the activities listed in paragraphs (c) to (i) of s 11(1) of the Act.

27. The applicant's primary contention is that its activities in undertaking the earthworks for the rail line and access road answer the description of operations in preparation of a site for mining. It relies, for that proposition, upon decisions under the earlier scheme in the Customs Act. Examination of those decisions is warranted.

28. The first decision relied upon is that of Lee J in WMC Resources Ltd v Chief Executive Officer of Customs^[10] and that case on appeal, reported as Chief Executive Officer of Customs v WMC Resources Limited^[11]. The case concerned claims for rebate on diesel fuel purchased in connection with the production of natural gas from the East Spar gas field of the North West Shelf off the coast of Western Australia. The Tribunal dealt with two claims - one by McDermott Industries (Aust) Pty Ltd ("McDermott") and the other by WMC Resources ("WMC").

29. McDermott had been engaged to supply and install, in deep water, a section of the gas pipe line that connected the wellheads at the gas fields with the treatment and processing facility at Varanus Island. That island lay between the gas fields and the mainland. Both McDermott and WMC claimed rebate for diesel fuel purchased for use in vessels and barges operated by them to carry out the work of supplying and installing sections of the pipeline. These claims were allowed by the Tribunal^[12]. WMC also claimed for diesel fuel purchased by it for use in vessels which transported materials, plant and equipment, and fuel from Onslow, on the mainland, to Varanus Island for use in the construction of the facilities, including the pipeline, required to extract and process natural gas from the gas fields. That claim was rejected by the Tribunal.

30. Customs appealed the decisions in favour of McDermott and WMC and WMC appealed the decision against it. At the time the expression "mining operations" was defined in s 164(7) of the Customs Act in these terms:

"(7) In this section:

...

'mining operations' means:

(a)

exploration, prospecting or mining for minerals; or the removal of overburden and other activities undertaken in the preparation of a site to enable mining for minerals to commence; or

(b)

the dressing or beneficiation of minerals, or ores bearing minerals, as an integral part of operations for their recovery;

and includes:

(c)

...

...

(q)

the construction or maintenance of private airstrips, buildings, plant or equipment for use in a mining operation referred to in paragraph (a) or (b) if the construction or maintenance:

(i)

occurs at the place where the mining operation is carried on; and

(ii)

is carried out by the person who carries on the mining operation or by a person contracted by that person to carry out the construction or maintenance; or

but does not include quarrying operations carried on solely for the purpose of obtaining stone for building, road making or similar purposes."

31. The Tribunal had concluded, in relation to the successful claims, that the fuel had been purchased for use in mining operations, either in mining for minerals, in activities undertaken to prepare a site to enable mining for minerals to commence, or in the construction of plant or equipment for use in a mining operation at the place where the mining operation was carried out. But the Tribunal had regarded WMC's other activities, subject of the rejected claim, as "a discrete activity which preceded the relevant mining operations and was not part of them"^[13].

32. The appeal by Customs advanced three errors of law said to exist in the Tribunal's approach. All were based upon the notion that installation of the pipeline could not amount to mining operations. Lee J. considered the amendments made to the definition of "mining operations" by the Customs and Excise Amendment Act 1995 (Cth). His Honour discerned in the amendments and in the Minister's Second Reading Speech confirmation that:

"the longstanding purpose of the rebate provisions, namely, to stimulate or assist the development of mining and the production of minerals, was to be continued under the amended definition of 'mining operations'".

33. His Honour said this of the scope and meaning of paragraphs (a) and (b) of s 164(7):

"The scope of meaning of pars (a) and (b) is to be found in the succeeding paragraphs which describe expansively the activities covered by these paragraphs. That is to say the words 'means:...and includes:' are used in s 164(7) to convey both the idea of exclusion and of enlargement. (See: Y.Z. Finance Company Pty Limited v Cummings (1964) 109 CLR 395 per Menzies J at 405.) Thus, for example, when it is said in par (b) that 'mining operations' means the beneficiation of minerals, by operation of par (c) it extends to the transportion [sic] of minerals for beneficiation and the return journeys of the transporting vehicles and, by par (h), to the process of reactivating carbon that has been used in the beneficiation of gold-bearing ores.

By par (q) the construction of plant or equipment for use in a mining operation referred to in par (a) or (b), is an activity in that mining operation. It would be a question of fact whether the construction was for use in a mining operation of exploration, prospecting, preparation of a mining site, or in mining. (See: Customs v Dyno Wesfarmers at p48.)

Customs submitted that the terms of par (v) which refer to the service, maintenance, or repair of 'transport networks' (defined to include pipelines) indicated Parliament's intention that par (q), and therefore par (a), did not extend to the construction of a pipeline in mining for minerals or as an activity in the preparation of a mining site.

That submission must be rejected. In respect of the mining of natural gas at the East Spar gas field, the use of the pipeline is an essential part of the operation of recovering natural gas . According to the ordinary meaning of the words used in par (q), the construction of such a pipeline would be the construction of plant and equipment for use in a mining operation defined in par (a) or (b), that is, the mining operation of mining for minerals or of an activity undertaken in preparation of a site to enable mining for minerals to commence. It would be contrary to the thrust of s 164(7) to exclude from entitlement to a rebate fuel used in the construction of such a pipeline when fuel used in the construction of other plant and equipment to be used in the same mining operation attracts a rebate. The object of par (v) is to add to the catalogue of activities that are to be taken to be within pars (a) and (b). Under par (v) fuel used in service, maintenance or repair of, inter alia, a pipeline 'solely for use in a mining operation' is included. Paragraph (q) has a broader operation than par (v) and refers to 'construction or maintenance' of plant or equipment 'for use in a mining operation'. Whatever the meaning of the word 'maintenance' as used in 'construction or maintenance' in par (q) and as used in 'service, maintenance or repair' in par (v), there is no requirement as a matter of logic to exclude construction of a pipeline from the meaning of 'construction...of plant or equipment' because par (v) has provided expressly that there is a rebate for fuel used in servicing, maintaining or repairing that pipeline." [emphasis added]

34. His Honour then dealt with the arguments by WMC in its appeal in this way:

"As stated earlier in these reasons, the meaning of the phrase 'mining operations' recited in pars (a) and (b) of the definition set out in s 164(7), is enlarged by the paragraphs of inclusion which follow. That meaning makes it clear that the entitlement to rebate is not restricted to an activity in a 'mining operation' that has a temporal relationship with the production of a mineral. For the purposes of s 164(7) neither exploration nor prospecting is an activity 'antecedent' to a mining operation. Each is a mining operation. Similarly, activities undertaken in preparation of a site to enable mining for minerals to commence constitute a mining operation.

The reference in the definition to a 'site' does not involve a term of restricted meaning. In the context in which it appears it refers to the area or a location utilized for the mining of minerals. Furthermore, acts of preparation of a site referred to in the definition are not restricted to acts on the site. (See: Customs v Dyno Wesfarmers at p49.)

Customs submitted if the final words of par (a) are read with the words that precede them, namely, those which refer to the removal of overburden, the meaning to be applied to the words relating to preparation of a site to enable mining to commence cannot be as broad as contended by WMC. It was said that only acts which disturbed or excavated the seabed on which the production wells or the pipeline were placed could be regarded as acts that were in the preparation of a site to enable the mining of natural gas to commence.

The context in which the words are used shows that such a restricted meaning for the words is not intended. As stated earlier in these reasons, the words relating to preparation of a site for mining, and those relating to the removal of overburden, have been added to remove any doubt that may have arisen as a consequence of the deletion of par (c) of the old definition. The words 'to enable mining for minerals to commence' suggest a broader scope than acts of disturbance or excavation of land. To restrict a right of rebate to such activities and to deny a rebate for fuel used in substantive works undertaken in preparation for mining would provide a strange result and one inconsistent with Parliament's intention."

35. There was no appeal against that part of his Honour's judgement that affirmed the Tribunal's decision allowing rebate in connection with the laying of the pipeline however Customs appealed against that part of the decision that remitted to the Tribunal for further consideration the claim by WMC in relation to the Onslow to Varanus Island transport. A majority of the Court allowed the appeal but the reasoning of the majority does not cast doubt on the correctness of the conclusions of Lee J set out above. In particular French J (who dissented) and R.D. Nicholson J commented upon the role that "disturbance or excavation of the land" plays in construing "mining operations".

36. French J. said this^[14]:

"The reference in par (a) of the definition to the removal of overburden as an eligible preparatory activity does not limit the class of 'other activities' there referred to to physical interventions at the mine site. The mention of overburden no doubt covers particular classes of mining operation. It plainly does not refer to all. It cannot refer to sub-sea extraction of natural gas."

R.D. Nicholson J. said, to similar effect^[15]:

"There is no difficulty with his Honour's view that the words 'to enable mining for minerals to commence' suggest a broader scope than acts of disturbance or excavation of land. Accepting, as I consider the law requires, that 'mining for minerals' is to be given a broad construction, that must necessarily be the case. However, his Honour was not correct in stating that there would be a denial of a rebate for fuel 'used in substantive works undertaken in preparation for mining'. The issue before the Tribunal and the issue of law raised on the appeal is whether the relevant acts of transport by vessel were 'undertaken in preparation of a site to enable mining for minerals to commence'. 'Substantiality' was not an issue. Nor was it necessary for the works to be 'undertaken in preparation for mining'. What was required was that 'the other activities' be undertaken 'in the preparation of a site'. " [emphasis added]

37. Section 164(7) of the Customs Act was also considered in Chief Executive Officer of Customs v Dyno Wesfarmers Ltd^[16]; the next case relied upon by the applicant. That case concerned a claim for rebate for diesel fuel used by special trucks that travelled 150 kilometres from their depot at Kalgoorlie to a mine site where they mixed ingredients for explosive charges and injected those charges into drill holes. The vehicles had been purpose built and, to be used successfully at the mine site, had to be loaded with the ingredients for the charges at the depot. The Tribunal concluded that the transportation was an integral part of the mining operation and upheld the claim for rebate. Customs appealed that decision, arguing that mining operations were confined to a mine site and did not extend to activities carried on outside that property. Of present relevance is this discussion in the reasons for judgment of the Full Court^[17]:

"In s 164(1)(a), the preposition 'in' is used to connect the words 'for use by him' with the term 'mining operations' so as to require the prospective use of the diesel to be use within the ambit of 'mining operations'. The Shorter Oxford English Dictionary uses the expression 'In the process or act of' to express the meaning of the word 'in' in such a context. It follows that the issue for consideration is not that which was considered in Collector of Customs v WA Government Railways Commission (1995) 39 ALD 21 (Westrail), in which Lee J considered an earlier definition of the term 'mining operations' which included 'operations connected with ... mining for minerals that are carried out in, or at a place adjacent to, the area in which the exploration, prospecting or mining occurs'. That was a wider extension, because of the use of the words 'connected with' though limited by the words 'in, or at a place adjacent to, the area in which ... mining occurs'."

38. What might be loosely described as "transportation" issues arose again in the next case to which my attention was directed, Dawson Rockwater Joint Venture v Chief Executive Officer of Customs^[18], a decision of Merkel J. His Honour was called upon to consider claims for rebate for diesel fuel used by tugs in connection with the installation of oil production platforms in Bass Straight. The tugs journeyed from their home ports to two locations where the platforms had been constructed (Port Kembla and Barry's Beach), towed and installed the platforms in Bass Straight, and then returned to their home ports. The journeys towing the rigs were not in issue; what was in issue was the trips from the home port to Port Kembla and Barry's Beach and the return trips to those ports. The Tribunal affirmed the decision of Customs to refuse rebate.

39. Merkel J. considered both the decision of Lee J. in WMC Resources^[19] and that of the Full Court in Dyno Wesfarmers and said:

"In my view the transportation activities considered in WMC Resources Limited and Dyno Wesfarmers Limited can be readily distinguished from the activities the subject of the present case. The activities in those cases were part of an integrated process by which 'mining operations' as defined were carried out and as such were analogous to the activities involved in the towing and installation of the platforms from Port Kembla and Barry's Beach to and from Bass Strait. Those towing and installation activities may be said to be part of the integrated process by which the site was prepared for mincing [scil. mining] to commence. Neither case was concerned with activities of the kind claimed in the present case which were anterior or subsequent to the activities involved in towing and installing the platforms. In the present case the outward and return journey's of the particular tug boats depended upon the purely fortuitous circumstance of where they happened to be located when required to commence the outward journey, or where they were required to travel on the return journeys.

In my view the use of the preposition 'in' in s 164(1) is significant. It was intended by the legislature to define more clearly the activities which were to be entitled to the diesel fuel rebate. Whilst it may be arguable that the anterior and subsequent transportation activities to which I have referred were activities undertaken 'in connection with' the preparation of a site to enable mining to commence, in my view, those activities are not activities undertaken 'in' the preparation of a site to enable mining to commence. Using the Lunney analogy referred to in Dyno Wesfarmers, the activities involved in the tug vessels getting to and from work are qualitatively different to the activities involved in working." [emphasis added]

40. Finally I was taken to the decision of the Tribunal in Re Wandoo Alliance Pty Ltd and Chief Executive Officer of Customs^[20]. In that case a concrete gravity structure, which ultimately formed part of the production platform, had been towed 1700 kilometres from Bunbury to the Wandoo oilfield. The Tribunal concluded^[21] that the towing had been:

"undertaken as an essential part of a carefully planned and integrated operation whose sole purpose was to achieve full development of the Wandoo oilfield by preparing the Wandoo 'B' site so that, inter alia, the extraction of crude oil could be commenced at that site."

41. The argument for the Commissioner in the present case stresses that the work undertaken by the applicant was preliminary to the construction of the rail line and that it was not undertaken "to enable mining to commence". The activities of the applicant, it is said, were not functionally integrated with the commencement of any mining activities; they were functionally integrated with the transport function and thus related to the sale of the product, not the mining of it. Moreover, it is said, the evidence of Dr Gallagher goes to the viability of the Rolleston coal mine and thus addresses the wrong question.

42. It seems to me to be wrong to approach the matter, as the Commissioner submits I ought, on the basis that the work undertaken by the applicant was preliminary to the construction of the rail line. True it is that the applicant undertook only the earthworks component of the construction of part of the rail line and access road, and it is true that the earthworks undertaken by the applicant preceded other parts of the overall project, in particular, the laying of the track. But that goes only to the timing of the involvement of the applicant. That involvement was, nonetheless, an integral part of the task of constructing the rail line and the access road.

43. It is then necessary to consider the role played by the rail line in the overall operation of the mine. The evidence of Dr Gallagher refers to the rail line as being "an essential part of the infrastructure for the mine". That view, which was not challenged, accords in any event with common sense. The operations of a mine do not cease at the point where the product is brought to the surface. They must, necessarily, extend to the operations involved in transporting the product away from the mine site. Dr Gallagher describes this aptly as the "coal chain". It would be entirely unrealistic to regard a mine site without any means of economic removal of the product of mining as one where mining was able to commence, a fortiori in the case of an open cut mine. Thus, as Dr Gallagher puts it, the rail line is "core infrastructure to the operation".

44. The integral role of the rail line is emphasized by a press release issued by Xstrata in May 2004, on the occasion of execution of the contract to construct the Bauhinia Regional rail line. The press release spoke of an expectation "that Rolleston Coal will commence production towards the end of 2005, once the rail line is completed".

45. The Commissioner relied upon evidence in an Environmental Impact Assessment, prepared in August 2002, which commented upon transport of coal in these terms:

" Temporary Coal Transport Phase

Initially, coal will be transported by road to an existing rail siding (Ballast Siding) approximately 7 km south of Emerald on the Gregory Highway, and then by existing rail infrastructure to Gladstone for a period of up to 12 months (the temporary transport plan) until a high-volume Rail Corridor in constructed between the Mine Study Area and Blackwater ...

Rail Corridor

The project will require a rail line to be established between the mine itself, south of the Dawson Highway, and one of the existing spur lines ..."

46. This was relied upon as showing that a rail line was not essential to the success of the mine and that, at least on a temporary basis, partial road transport was regarded as being a viable option. I am unconvinced that I ought draw such a conclusion from an environmental impact study, especially one prepared in August 2002, some years before the mine was completed. But the inference sought to be drawn does not detract from the evidence of Dr Gallagher as to the integral nature of the rail line in the mine infrastructure. The fact, if it be the fact, that there may been considered to be another way to transport coal on a temporary basis does not detract from a conclusion that the rail line is an integral part of the mine's infrastructure.

47. The same seems to be to be true of the Commissioner's reliance upon the fact that the rail line is capable of being used by other users and that use by local grain growers was envisaged prior to construction of the mine and the rail line. Construction of the rail line was an activity "to enable" the mining to commence. That conclusion is true even if it enabled, for example, local wheat growers to get their product to market sooner.

48. Given the importance of the rail line as an essential part of the core infrastructure of the mine development I am satisfied that the construction of the rail line and its access road was an activity undertaken in preparation of the Rolleston coal line and that it was an activity to enable mining to commence at the mine.

THE APPLICANT'S SECONDARY CONTENTION

49. The alternative argument for the applicant is that the work undertaken satisfied the definition of "mining construction activity". Paragraphs (a) and (d) of s 15 are relied upon. As may be seem from the extract from the legislation in paragraph [18] above, the requirement that the construction or maintenance activity occur "at the place where the mining activity is carried on" is an element to each of paragraphs (a) and (d).

50. The applicant relies upon the decision of Deputy President Estcourt QC in Hampton Transport Services Pty Ltd and Chief Executive Officer of Customs^[22] as demonstrating the proposition that the statute permits a degree of flexibility in determining the place where the mining operation is carried out. In that case, the taxpayer had constructed an 86 km private road from its gold mine to a junction of a highway in order to haul ore between the mine and a processing plant in remote Western Australia. The claim for diesel fuel rebate was put (and accepted by the learned Deputy President) on the basis that the road came within the description in s 164(7) of the Customs Act, namely, "the construction or maintenance of private access roads for use in a mining operation".

51. The Tribunal's reasoning is illustrated by this passage^[23]:

"17. In the Tribunal's view the words 'mining operation', in the phrase 'occurs at the place where the mining operation is carried on', mean all of the operations involved in mining for minerals and in the beneficiation of those minerals and thus the places at which those operations occur include the whole of the land legally occupied for the purposes of the excavation or extraction process, the whole of the land legally occupied for the purposes of the beneficiation process, and the whole of the land legally occupied for the purposes of private roads that connect that parcel or those parcels of land, either together, or to the public road system beyond.

18. It follows that, so construed, the construction or maintenance of such private roads, including in this case the Red October haul road maintenance operations, will by definition occur 'at the place where the mining operation is carried on'. Conversely, private access roads that do not so connect or interconnect that parcel or those parcels of land, for example private access roads to tailings dams, water supplies or airstrips on other parcels of land will not be constructed or maintained 'at the place where the mining operation is carried on', even though they may be 'private access roads for use in a mining operation referred to in paragraph (a) or (b)...' within the meaning of the first part of sub-paragraph (o) of the definition in s. 164(7) of the Customs Act (Cth)."

52. That case is, to my mind, readily distinguishable. The road was a means of access between the mine and the processing plant. Each location was a separate location where part of the mining operation was carried out and they were separated, in part at least, by a private access road legally occupied for that purpose. But the present case is quite different. While I have concluded that construction of the rail line comes within the definition of "mining operations", the presence of that rail line does not, of itself, amount to a mining operation such that it can be said that a mining operation is carried on where the rail line runs. In addition, the areas over which the rail line and access road are constructed are not devoted solely to the transport of coal. Whilst no other use is presently being made of the rail line, it is available to carry other goods (and presumably passengers if ever a need should arise) and the carriage of wheat was in contemplation at the planning stages of the rail line.

53. I am not then satisfied that the rail line was a "place where the mining operation is carried out" and accordingly neither definition of "mining construction activity" relied upon is made out.

CONCLUSION

54. I am then satisfied that the activities undertaken by the applicant amounted to "mining operations" as defined in the Act. I would set aside the objection and remit the matter to the respondent with a direction that:

(a)

the applicant is entitled to an off-road credit for the use of diesel fuel in earthworks for the construction of a rail line to carry minerals from a mine site to a port;

(b)

the applicant is entitled to an off-road credit for the use of diesel fuel in earthworks for the construction of a maintenance road alongside the rail line^[24].

I certify that the 54 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC

Signed: .....................................................................................
Eleanor O'Gorman, Associate

Counsel for the Applicant Mr D Marks
Solicitor for the Applicant DLA Phillips Fox
Counsel for the Respondent Mr D Boddice SC, Mr F Redmond
Solicitor for the Respondent ATO Legal Services Branch