Deputy Commissioner of Taxation v Fowler Rex (NSW) Pty Ltd

(1967) 118 CLR 160
40 ALJR 510

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(Judgment by: Owen J.)

DEPUTY COMMISSIONER OF TAXATION
v FOWLER REX (N.S.W.) PTY. LTD.

Court:

Judge:
Owen J.

Judgment date: 12 April 1967

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Judgment by:
Owen J.

April 12.

OWEN J. delivered the following written judgment:-

The plaintiff, the Deputy Commissioner of Taxation, issued a writ against the defendant claiming to recover 22,231 pounds 9s. 1d. ($44,462.90) made up of 20,561 pounds 16s. 10d. ($41,123.68) alleged to be due by way of sales tax together with 1,669 pounds 12s. 3d. ($3,339.22) additional tax upon such sum. By its statement of defence the defendant denied liability for any part of the amount claimed. (at p161)

At a later stage of the proceedings the parties agreed upon a statement of facts and in it the defendant admitted its liability for 914 pounds 3s. 6d. ($1,828.35), portion of the moneys claimed. (at p161)

The agreed facts are set out in detail in a document signed by counsel and I need not repeat them. In short the defendant was at all relevant times a manufacturer in Australia of what are called transit mixer units, machines which are constructed for the purpose of mixing the ingredients of and making concrete and maintaining it in a usable state until it is delivered to the person requiring it. Sometimes such a unit is operated while standing on a stationary platform but ordinarily it is mounted on a motor-truck chassis so that the process of mixing the ingredients, making the concrete and keeping it in usable condition may be carried on while the truck is being driven to the place where the concrete is to be delivered to its purchaser. In such case the design of the unit enables it to be bolted to the truck chassis and it is the practice of the defendant when it sells a unit to do the work of mounting it on and bolting it to a truck chassis supplied for that purpose by the purchaser of the unit. The truck, however, plays no part in the mixing of the ingredients or the manufacture of the concrete. Its function is merely to carry the unit and its contents to the site at which the concrete is to be delivered. (at p161)

By s. 17 of the Sales Tax Assessment Act (No. 1) 1930-1962 (Cth), sales tax is imposed upon the sale value of goods manufactured in Australia by a taxpayer and sold by him and, by s. 24 of that Act, every person liable to pay tax upon the sale value of goods sold by him during any month must pay the tax within twenty-one days after the close of that month. (at p161)

Each of the units with which this case is concerned was mounted by the defendant on a truck chassis supplied for that purpose by the purchaser of the unit. Some of those purchasers were unregistered and the remainder registered manufacturers of concrete and it is convenient to deal first with the sales made to unregistered manufacturers. (at p162)

Section 5 (1) of the Sales Tax (Exemptions and Classifications) Act 1935-1962 (Cth) exempts from tax the sale value of any goods "covered by any item or sub-item in the first column of the First Schedule to this Act". Item 113A (1) in the first column of the First Schedule includes

"goods, being aids to manufacture (as defined in this Schedule), sold . . . to an unregistered manufacturer for use by him in, or in connexion with, the manufacture of goods covered by any item or sub-item in this Schedule"

other than certain specified items which are not here material. It is common ground that transit mixer units and concrete are "goods" and that "concrete" is covered by Item 89 (1) in the Schedule. The result of all this is, therefore, that sales tax is not payable on the sale value of a transit mixer unit if it be an "aid to manufacture" sold to an unregistered manufacturer of concrete for use by him in or connexion with the manufacture of concrete. (at p162)

The relevant parts of the definition in the Schedule of "aids to manufacture" are as follows:

"'aids to manufacture' means goods for use by a manufacturer in the course of carrying on a business, being -

(a)

machinery, implements and apparatus for use exclusively, or primarily and principally -

(i)

. . .

(ii)

. . .

(iii)

in any processing or treatment for the purpose of bringing goods manufactured by him into, or maintaining those goods in, the form or condition in which he markets or uses those goods;

(iv)

. . .

(v)

. . .

(vi)

. . .

(vii)

. . .

(b)

. . .

(c)

. . .

(d)

. . .

but does not include -

(e)

road vehicles of the kinds ordinarily used for the transport of persons or the delivery of goods;

(f)

. . .

(g)

. . .

(h)

. . .

(i)

. . .

(j)

. . .

(k)

parts for any of the goods specified in paragraphs (e), (f), (g), (h), (i) or (j) of this definition."

It was conceded by counsel for the Commissioner that the transit mixer units sold by the defendant to unregistered manufacturers of concrete would have fallen within the terms of sub-par. (a) (iii) of this definition had it not been for the excepting provisions to be found in sub-pars. (e) to (k). He submitted, however, that the units were "parts for road vehicles of the kinds ordinarily used for the delivery of goods" but I cannot agree that this is so. The words "parts for" do no more, in my opinion, than bring into the excepting provisions contained in the definition those things which in ordinary parlance would be described as "spare parts" for the various classes of goods mentioned in the preceding subpars. (e) to (j). To say that a manufacturer of concrete who buys a transit mixer unit and mounts it upon a truck has purchased a "part for" his road vehicle would be to give the words "parts for" a meaning which, in my opinion, they are incapable of bearing in the context in which they are found. And this view is, I think, confirmed to some extent by the fact that in other items in the Schedule mention is made of "attachments for" (see Item 13 (1) and (3)), and "parts, accessories and attachments for" (see Item 78B (2)). (at p163)

I turn then to consider the case of the units sold by the defendant to registered manufacturers of concrete. Here the same question arises. Item 113C in the first column of the Schedule provides (inter alia) for the exemption from tax of "goods applied by a registered person to his own use as aids to manufacture" and for the purposes of this item "aids to manufacture" means "aids to manufacture as defined by Regulations made under the Sales Tax Assessment Acts". The definition in the Regulations is, for all relevant purposes, in terms similar to those of the definition in the First Schedule to the Sales Tax (Exemptions and Classifications) Act and, for the reasons I have stated, transit mixer units are not, in my opinion, properly to be described as "parts for" road vehicles ordinarily used for the delivery of concrete notwithstanding the fact that the manufacturer of concrete who buys the unit places it upon such a vehicle. (at p163)

In these circumstances it is agreed that the Commissioner is entitled to judgment for $1,926.50, made up of $1,828.35 together with $98.15 additional tax on that sum, and there remains the question of the order which I should make as to the costs of the proceedings. As I have said earlier, the statement of defence which was dated 2nd December 1963 denied liability for any of the moneys claimed. In the agreed statement of facts which was signed by counsel on 15th March 1967 the defendant admitted liability for the amount which I have held that the Commissioner is entitled to recover. Whether an admission of liability was made known to the Commissioner before March 1967 does not appear. Certainly since 15th March 1967 the only amount in issue between the parties has been the difference between the total amount claimed and the amount admitted to be due, and on that issue the defendant has succeeded. In these circumstances I think I should order that the defendant pay the plaintiff's costs incurred up to 15th March 1967 and that the plaintiff should pay the defendant's costs incurred after that date and I so order. (at p164)

There will be judgment for the plaintiff for $1,926.50 and the order for costs will be as I have indicated. (at p164)