ADMINISTRATIVE APPEALS TRIBUNAL - GENERAL ADMINISTRATIVE DIVISION

Re Parks Holdings PTY LTD t/as Gladstone Chemicals and Chief Executive Officer of Customs

[2001] AATA 562

J Block, Deputy President

20 June 2001 - Melbourne

J Block, Deputy President.

Preliminary and General

In April 1999, the applicant, Parks Holdings Pty Ltd trading as Gladstone Chemicals (referred to in these Reasons as the "applicant") paid customs duty under protest pursuant to s 167 of the Customs Act 1901 (Cth). Payment was made in response to a letter of demand dated 19 May 1997 by a delegate of the respondent for duty short paid. The duty, amounting to $435,372.20 which was paid under protest as aforesaid, related to the importation by the applicant of a petrochemical product (gas oil) from the Philippines on board a ship named the "Stolt Lily" in August 1996. On 26 April 1999 the applicant applied under s 273GA of the Customs Act 1901 (Cth)for a review of the decision by the respondent to classify the product under sub-heading 2710.00.20 (20) and to make demand for duty in consequence thereof, the applicant having entered the product under sub-heading 2710.00.90 (90).

(a) The T Documents in this matter referred in the main to a contest, so far as classification is concerned, between 20 and 90. At a late stage of the proceedings the applicant contended that there was another classification which might be applicable, and being sub-heading 2710.00.30 (30). There is no dispute between the parties as to the fact that the product in question falls within heading 2700; the question before the tribunal so far as classification is concerned, is simply as to whether the correct classification is 20, 30 or 90. Tariff references contained in these Reasons refer to Sch 3 of the Customs Tariff Act 1995 (Cth).

(b) The applicant was originally represented by Mr J Slonim and Mr S Hamlyn-Harris of Counsel, instructed by Louis Gross & Associates, solicitors, while the respondent was represented (throughout) by Mr K Bell QC and Mr J Lenczner of Counsel, instructed by the Australian Government Solicitor. Messrs Slonim and Hamlyn-Harris were on 26 February 2001 (only) led by Mr J Burnside QC, and thereafter by Mr N Moshinsky QC.

(c) The tribunal had before it the T Documents lodged pursuant to s 37 of the Administrative Appeals tribunal Act 1975 (Cth) (the AAT Act) and which were formally accepted in by the tribunal on 19 February 2001. The tribunal also admitted into evidence a large number of exhibits, which are listed as follows:

A1	Illustration outlining the refinery (distillation) process;
A2	Document outlining 3 distillation processes; Rotherdam refinery, Bavarian refinery and Dunkirk refinery;
A3	Chart comparing volume percentages on Kuwait Crude Oil & Iraq Export Crude Oil;
A4	Document outlining initial stage of production;
A5	Document titled Diesel outlining Cetane and Octane;
A6	Document titled Diesel "It's Not As Good As It Used To Be" by Mr Gunn;
A7	Document titled Diesel: low temperature properties;
A8	Document titled "Storage Life of Diesel";
A9	Minutes of Committee of Standards Association of Australia committee meeting - 25 February 1998;
A10	Ampol Product Sales Specification : Diesel unmarked;
A11	Substitute Copy with numbered paragraphs of Statement of Sergio Tribuzio dated 30 September 1999;
A12	Document outlining components of crude oil;
A13	Document outlining crude oil products and their applications;
A14	Pro forma agreement between Mobil and purchaser;
A15	Statutory Declaration of Sergio Tribuzio dated 20 December 1994;
A16	Documents signed by the Directors regarding conditions of sale;
A17	Fax from Mobil Oil regarding Centrex 70/72 Allocations, May - June 1996;
A18	Pro forma Invoice of Jayta Petrochemical Private Ltd to Gladstone Chemicals P/L dated 19 July 1996;
A19	Original document of copy pro forma invoice found at T25 - p79;
A20	Original document of Certificate of Quality at T5 - p16 and T25 - p93, dated August 1996;
A21	Original document of Certificate of Quality at T25 - p94, dated 4 August 1996;
A22	Original document of Jayta Petrochemical Private Ltd Invoice at T6 - p17 and T25 - p95, dated 4 August 1996;
A23	Chentech Services P/L Ship Out-Turn Report dated 27 August 1996;
A24	Chemtech Services P/L Quantity Certificate dated 27 August 1996;
A25	Chemtech Services P/L Survey Report dated 27 August 1996;
A26	Caltex Product Guide Fuels Lubicants Specialies, February 2000;
A27	Dangerous Goods (Prescribed List) Regulations 1985 (Vic);
A28	Second Statement of Sergio Tribuzio dated 19 June 2000;
A29	Market Distribution Diagram;
A30	Internatio Muller Chemicals P/L, Solvent 98 Specification;
A31	Gladstone Chemicals P/L Product Record - Ramset Steelform FRS;
A32	Gladstone Chemicals P/L Product Record - Wombat Fuel Additive;
A33	Gladstone Chemicals P/L Product List - update July 1992;
A34	Statement of Bruce Allan McIver dated 15 July 1999;
A35	Graph containing Product Comparisons prepared by Mr McIvor dated 29 May 2000;
A36	Shell Marine Fuel Specifications dated December 1990;
A37	Statement of Frank Russell dated 16 February 1999;
A38	Amended statement (paragraph numbers added) of Donald Gunn dated 12 October 1999;
A39	Further statement of Donald Gunn (undated);
A40	Product Sales Specification - Bitumen Flux Unmarked;
A41	Mould Release Oils (Caltex);
A42	Statement of Dr Richard William Michell dated 17 June 2000;
A43	Further Statement of Dr Richard William Michell dated 7 May 2001;
A44	Statement of Joseph Brothers dated 2 March 2001;
A45	Further Statement of Joseph Brothers dated 3 May 2001;
A46	Statement of Bruce Biddington dated 19 October 1999;
A47	Further Statement of Bruce Biddington dated 6 June 2000;
A48	Definition of "gas oil" from "Hawley's Condensed Chemical Dictionary (11^th ed)";
A49	Statement of Peter Horne dated 17 December 2000;
A50	Receipt for payment of customs duty for "returned gasoil" by Shell Co of Australia Ltd;
A51	Caltex/Ampol Product Sales Specification - Bitumen Flux Obsolete;
A52	Ingredients of "Amine plus";
A53	Extract from "1996 Book of ADSM Standards";
A54	Product Sales Specification - Low Emission Diesel;
A55	Shell Material Safety Data Sheet for Mexflux/Bitumen Flux/Heating Oil dated March 1999 (relevant pages only);
A56	Product Data Sheet for "Shell Mexflux";
A57	"869131-85 Solvent AC" Material Safety Data Bulletin;
A58	List of customers for the Shell products "Mexflux", "Mexcut-H", and "Mexcut-L"; it should be noted that this exhibit was and remains the subject of a confidentiality order;
A59	Chromatogram in relation to sample "1139ppm diesel";
A60	Chromatogram in relation to sample "96/36229 0.25/50";
A61	External Standard Reports in relation to samples "1139ppm diesel" and "96/36229 0.25/50";
R1	Australian Customs Service - Minute Paper - September 1993;
R2	Statement of John Michael Drury dated 19 June 2000;
R3	Diagram showing crude oil distillation;
R4	Statement of Trevor Eric Walker dated 18 April 2000;
R5	Statement from Robert Samuel Johnson dated 3 December 1999 appointing Mr Walker in his place whilst on leave;
R6	Fax from Gladstone Chemicals to Ray Sidebottom of APS dated 22 October 1996;
R7	Letter from Freehill Hollingdale & Page to Gladstone Chemicals dated 20 August 1996;
R8	Letter from Freehill Hollingdale & Page dated 22 August 1996 with memorandum of costs;
R9	Bundle of documents in answer to respondents summons dated 26 February 2001;
R10	Paramins Worldwide Diesel Fuel Quality Survey 1986;
R11	Shell Products data sheet;
R12	Statement of Francis Ivor Kelly dated 22 June 2000;
R13	Statement of John Jeffrey dated 22 September 2000;
R14	Statement of Helena Romaniuk dated 19 June 2000;
R15	Statement of Daniel John Finn dated 7 August 2000;
R16	Statement of Dawn Webb dated 16 May 2000;
R17	Statement of Carmel Mary Weaver undated;
R18	Statement of Noel Hamilton dated 26 February 2001;
R19	Statement of Thomas Gerard Fahy dated 9 November 2000;
R20	Statement of Peter Muzeens dated 5 December 2000;
R21	Specification D 396 - Heating Oil;
R22	Specification for Heating Oil - Shellheat;
R23	Extract from Customs Tariff;
R24	Bundle of file documents in answer to summons produced on 30 March 2001 and relating to advice obtained from Peter Butler, Partner, Freehills (formerly Freehill Hollingdale & Page), Melbourne;
R25	Certificate of Quality - CERTREX 70 (Mobil Oil);
R26	Description of 3 Shell products: Diesoline (Automotive Diesel Fuel), Household Kerosene (Industrial and Domestic Heating Fuel), Shellheat (Heating Oil); BP Product Specification - BP Heating Oil;
R27	Ampol Product Sales Specification - Bituflux;
R28	Professional Opinion in respect of Three X370 Imports by Gregory Richard Shuptrine dated 4 December 1998;
R29	Further Statement of Gregory Richard Shuptrine dated 20 April 2000;
R30	Statement of Richard John Bryant dated 19 April 2000;
R31	Statement of Barrie Seymour Magor dated 16 April 2000;
R32	Statement of Andrew Troupis dated 1 May 2000;
R33	respondent's Particulars of Lack of Intention of the applicant to Import the Goods for Sale or Use as Solvent dated 15 May 2001.

It may be noted that some of the exhibits tendered by the applicant were objected to by the respondent, at an early stage of the hearing, on the grounds of relevance. At that early stage, the tribunal decided to admit the evidence tendered, on the basis that it could consider questions of relevance and weight at a later stage. In the result, some at least of the exhibits tendered on behalf of the applicant proved to be of distinctly dubious relevance.

(d) Oral evidence was given by Mr Gunn, Mr Tribuzio, Mr McIver, Mr Russell, Mr Brothers, Mr Biddington, Mr Horne, and Mr Butler (a partner of Freehills, formerly known as Freehill Hollingdale & Page) on behalf of the applicant and by Mr Drury, Mr Walker, Mr Johnson, Mr Kelly, Mr Shuptrine, Mr Bryant and Mr Magor on behalf of the respondent.

(e) The hearings in this matter were very lengthy. The matter was originally listed to be heard during 2 weeks in February and early March 2001; that period proved insufficient and further hearings took place in May and June 2001.

(a) It was clear from the outset that it was anticipated that this decision might be appealed to the Federal Court. Indeed Mr Gross, when he asked in a letter to the tribunal that the tribunal be constituted by a presidential member and 2 other members, said that this was likely. After the hearings in May 2001, the parties furnished lengthy and written submissions prior to the final hearing day (for oral submissions only) on 8 June 2001.

(b) The applicant was good enough to furnish both extensive written submissions and also a helpful summary, styled "executive summary". The respondent's submissions were equally helpful. To include the written submissions in the body of these Reasons would make them quite extraordinarily lengthy and unwieldy. At the same time, they proved to be so helpful that they could, by way of annexures be attached to these Reasons, in part for the benefit of the Federal Court in case of an appeal, and in part because the tribunal can then, and in such event, conveniently refer to them; accordingly we annex to these Reasons:

Annexure P - the applicant's written submissions (referred to in brief as "the applicant's submissions") (at 109ff);

Annexure Q - the applicant's executive summary (at 220ff);

Annexure R - the respondent's written submissions (referred to in brief as "the respondent's submissions") (at 230ff);

Annexure S - the applicant's reply to the respondent's submissions (at 283ff);

Annexure T - the respondent's submissions in reply (at 323ff);

Annexure U - an additional brief submission by the respondent as to the solvent market (at 342ff); and

Annexure V - an additional brief submission by the respondent as to "General Industry Usage" (at 346ff).

(c) We propose to commence in the first instance with a review of the issues and evidence and will then proceed to consider the law in respect of the 2 substantive issues referred to in para 4 below.

(d) Prior to the commencement of the hearings, the tribunal issued a confidentiality order in respect of a large number of documents. On 8 June 2001, that order was, by consent, amended in such manner that it relates only to the Shell Customer List, which is exhibit A58.

The issues

4 There are basically 2 substantive matters to be decided by the tribunal:

(A) The delegation of authority matter

5 On 19 May 1997 and 19 August 1997 Mr Trevor Eric Walker, who during that time held the positions of the relieving head of the Customs Investigation Branch and Chief Inspector in Customs Investigation Branch, issued demands to the applicant for short payment of duty. The issue to be determined by the tribunal is whether Mr Walker had authority, properly delegated to him pursuant to s 14 of the Customs Administration Act 1985 (Cth), to issue the demands in each or either capacity pursuant to s 165 of the Customs Act 1901 (Cth). The demand dated 19 May 1997 was delivered at a time when Mr Walker was temporarily relieving Mr Robert Samuel Johnston, from 19 May 1997 to 23 May 1997 as Customs Director in the Melbourne office in charge of the Broader Compliance Branch of the Australian Customs Service. A second demand was issued by Mr Walker on 19 August 1997 in his own capacity as Chief Inspector. The term "own capacity" refers to Mr Walker in his own capacity as Chief Inspector; the term "acting capacity" refers to Mr Walker in his acting capacity as Customs Director.

(B) The tariff classification matter

6 The applicant imported into Australia 3 shipments of gas oil from the Philippines in 1996. The first, which is the subject of this hearing, arrived in Australia on board the "Stolt Lily" in August 1996, the second arrived on board the "Stolt Sunrise" in October 1996 and the third arrived on board the "Sampet Hope" in November 1996.

7 The applicant ordered the gas oil in question from a petrochemical broker named Jayta Petrochemical Private Ltd (Jayta), situated in Singapore. Jayta arranged for the 3 shipments of gas oil from the Philippines to Australia and also for Certificates of Quality to be issued by SGS (Subic Bay) Inc (SGS) of the Philippines, following their laboratory analysis in respect of each of the shipments. No scientific analysis was conducted in Australia by the respondent in respect of the "Stolt Lily" shipment which is the subject of this hearing. The respondent forwarded a 4 litre sample taken from the third "Sampet Hope" shipment for testing and identification at the Australian Government Analytical Laboratories (AGAL) and the results of that analysis on 26 November 1996 indicated that the gas oil imported on the "Sampet Hope" was consistent with it being diesel fuel. The parties have agreed that the tribunal's decision regarding the "Stolt Lily" shipment will be applicable to the other 2 (subsequent) shipments of gas oil to the applicant by Jayta.

8 T25 consists of a bundle of documents; it includes important and relevant documents such as orders for supply of the gas oil by the applicant to Jayta and the resulting invoices from Jayta, plus other associated documentary evidence including the SGS Certificate of Quality for the "Stolt Lily" gas oil; documents which comprise T25 were seized by the respondent from the applicant under a warrant on 5 December 1996.

9 On the fourth day of the hearing (22 February 2001), the applicant objected "in the strongest manner" to the tribunal's admission of the T25 documents as evidence. It was contended by the applicant that, pursuant to s 203R of the Customs Act 1901 (Cth), material seized under a search warrant, may be retained by the respondent only in the circumstances set out in s 203R(1) of the Customs Act 1901 (Cth), which reads as follows:

Subdivision F-Dealing with things seized as evidential material under a search warrant or under subsection 203B(3) or 203C(3)

203R Retention of things seized under a search warrant or under subsection 203B(3) or 203C(3)
(1) Subject to any law of the Commonwealth, a State or a Territory permitting the retention, destruction or disposal of a thing seized as evidential material by an officer of Customs under a search warrant or by an authorised person under subsection 203B(3) or 203C(3), the officer or authorised person must return it if:
(a) the reason for its seizure no longer exists or it is decided that it is not to be used in evidence; or

(b) 60 days after its seizure:
(i) proceedings in respect of which the thing may afford evidence have not been started; and

(ii) an order permitting the thing to be retained has not been made under section 203S; and

(iii) an order of a court of the Commonwealth or of a State or Territory permitting the retention, destruction or disposal of the thing has not been made;

whichever first occurs.

(2) For the purposes of this section, the return of a thing requires its return to the person reasonably believed to be the owner of the thing in a condition as near as practicable to the condition in which it was seized.

10 Mr Hamlyn-Harris contended to the tribunal that although the respondent had returned the original documents approximately 11 months after seizure, there was no entitlement for the respondent to retain copies of the seized originals which comprise T25 of the T documents. He contended that it was contrary to public policy to allow the documents which have been "illegally retained" and were thus not properly and lawfully in the possession of the respondent to be used for the purpose these proceedings.

11 The tribunal considered both the submissions of the applicant and also those of the respondent in respect of the retention of the T25 copies and the weight, as evidence, that we should give to these documents. The tribunal noted that s 203R(1) of the Customs Act 1901 (Cth) is prefaced by the words "Subject to any law of the Commonwealth". Under s 33(1)(c) of the AAT Act the tribunal is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate. While there is ample authority to the effect that the rules of evidence should not be disregarded, the tribunal is of the view that the evidence in this case, which may or may not be the best evidence, can be weighed by the tribunal appropriately. Accordingly, the tribunal ruled in favour of the admissibility of documents in question. Arising from that ruling by the tribunal, the applicant requested an adjournment to allow it to brief counsel and for arrangements to be made for an application to be made by the applicant to the Federal Court to restrain the tribunal from considering the T25 documents. The tribunal agreed to the applicant's request on the basis of an undertaking that an application would be made to the Federal Court for an injunction to restrain the proceedings during the adjournment. The respondent objected to the grant of an adjournment, and the respondent's counsel gave notice of his intention to issue a summons on the applicant to produce the original T25 documents at the resumption of the proceedings. The tribunal granted an adjournment for the purpose of an application to the Federal Court until 2.15 pm on Monday, 26 February 2001.

12 At the resumption of the hearing on 26 February 2001, Mr Burnside QC informed the tribunal that he had advised the applicant that he considered that its proposed application to the Federal Court was doomed to fail and should not be made. Accordingly, no application was made to the Federal Court by the applicant during the period of adjournment. Having resolved the objection raised by the applicant, in respect of the tribunal's decision to consider the important and relevant evidence provided by the T25 documents, the tribunal is better placed to consider and determine the appropriate tariff classification for the gas oil imported by the applicant on board the "Stolt Lily" in August 1996. (Some of the originals of the T25 documents have since been provided to the tribunal by the applicant.)

13 The applicant and the respondent are in agreement that Sch 2 of the General Rules for the Interpretation of Sch 3 of the Customs Tariff No 147, 1995 apply to the imported "Stolt Lily" gas oil. The parties also agree that Chapter 27 of Sch 3 entitled "Mineral fuels, mineral oils and products of their distillation" plus the following Note 2 also applies to the August 1996 "Stolt Lily" gas oil import by the applicant.

Notes.

…
2- References in 2710 to "petroleum oils and oils obtained from bituminous minerals" include not only petroleum oils and oils obtained from bituminous minerals but also similar oils, as well as those consisting mainly of mixed unsaturated hydrocarbons, obtained by any process, provided that the weight of the non-aromatic constituents exceeds that of the aromatic constituents.

Accordingly, the tariff classification issue to be determined by the tribunal is whether the gas oil imported by the applicant on board the "Stolt Lily" in August 1996 should be classified as 20 as assessed by the respondent or as 90 as declared by the applicant, or as some other alternative 2710 reference tariff classification (and in particular 30) provided in the following Table prescribed by Sch 3:

Reference Number	Statistical Code/Unit	Goods	Rate#
2710		PETROLEUM OILS AND OILS OBTAINED FROM BITUMINOUS MINERALS, OTHER THAN CRUDE; PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED, CONTAINING BY WEIGHT 70% OR MORE OF PETROLEUMOILS OR OF OILS OBTAINED FROM BITUMINOUS MINERALS, THESE OILS BEING THE BASIC CONSTITUENTS OF THE PREPARATIONS:
2710.00.1		--- Crudes, topped or enriched:
2710.00.11	31 L	---- Goods, as follows: (a) enriched crudes; (b) topped crudes for use as a petroleum refinery feedstock at a factory specified in a licence granted pursuant to section 34 of the Excise Act 1901 (Cth)	Free
2710.00.12	41 L	---- Having the characteristics of fuel oil as defined in Additional Note 1 to this Chapter	$0.07171/L NZ:$0.07171/L PNG:$0.07171/L FI:$0.07171/L DC:$0.07171/L
2710.00.19	32 L	---- Other	$0.34559/L NZ:$0.34559/L PNG:$0.34559/L FI:$0.34559/L DC:$0.34559/L
2710.00.20		--- Goods, as follows: (a) automotive diesel oil; (b) industrial diesel fuel; (c) marine diesel fuel	$0.34559/L NZ:$0.34559/L PNG:$0.34559/L FI:$0.34559/L DC:$0.34559/L
	34 L
	35 L	Automotive diesel oil
		Industrial or marine diesel fuel
2710.00.30		--- Goods, as follows: (a) fuel oil; (b) heating oil; (c) lighting kerosene; (d) power kerosene	$0.07171/L NZ:$0.07171/L PNG:$0.07171/L FI:$0.07171/L DC:$0.07171/L
	36 L
	27 L	Fuel oil
	28 L
	29 L
		Heating oil
		Lighting kerosene Power kerosene
2710.00.40	30 L	--- Kerosene for use in aircraft	$0.02528/L NZ:$0.02528/L PNG:$0.02528/L FI:$0.02528/L DC:$0.02528/L
2710.00.5		--- Gasoline and other oils having a flash point of less than 23°C when tested in an Abel (closed test) apparatus:
2710.00.51		---- For use in aircraft	$0.18681/L NZ:$0.18681/L PNG:$0.18681/L FI:$0.18681/L DC:$0.18681/L
	01 L
		Aviation spirit (ie, avgas)
	02 L
		Spirit type jet fuel (wide-cut jet fuel)
2710.00.52	32 L	---- For use in internal combustion engines and having a lead content exceeding 13 mg/L, NSA	$0.36725/L NZ:$0.36725/L PNG:$0.36725/L FI:$0.36725/L DC:$0.36725/L
2710.00.53	33 L	---- For use in internal combustion engines and having a lead content not exceeding 13 mg/L, NSA	$0.34559/L NZ:$0.34559/L PNG:$0.34559/L FI:$0.34559/L DC:$0.34559/L
2710.00.59	04 L	---- For other uses	Free
2710.00.90		--- Other	Free
	05 L	Light oils and preparations containing light oils
	06 L	Medium oils and preparations containing medium oils Other: .In packs not exceeding 5 L:
	07 L	..Mineral turpentine
	08 L	..Other .In bulk or in packs exceeding 5L:
	09 L	..Liquid paraffin of pharmaceutical quality
	10 L	..Lubricating oils containing 2% or less by weight of additives
	11 L	..Mineral turpentine
	12 L	..Other

14 The tribunal notes that the tariff classification number 2710 denotes that the goods are properly described in the Note 2 reference to 2710. The seventh number in either the 7 or 8 digit tariff code number indicates a change in sub-headings. For example, 2710.00.1 is a sub-heading as are 2710.00.20, 2710.00.30, 2710.00.40, 2710.00.5 and 2710.00.90. The tribunal considers that should it determine that the imported "Stolt Lily" gas oil is specifically described in any one of the sub-headings from 2710.00.1 to 2710.00.59 inclusive, then it is not necessary for the tribunal to consider the tariff classification prescribed for sub-heading 2710.00.90 - other. (We note that the applicant contended that 2710.00.90 is also a specific classification; the rejection of that contention is dealt with later in these Reasons.)

Evidence concerning the tariff classification matter

15 Mr Donald Gunn, a consultant engineer specialising in petroleum products, was called to give sworn specialised evidence by the applicant in support of his statements dated 12 October 1999 and 8 June 2000 (exhibits A38 and A39). Mr Gunn is a graduate of the Royal Naval Engineering College (UK) in aeronautical engineering, mechanical engineering and marine engineering and is a fellow member of certain engineering professional bodies in Australia, the USA and the UK. Following his employment from 1951 to 1960 as an engineer in the Royal Australian Navy, Mr Gunn was employed from 1960 to 1996 for Shell, AMCO, BP and Ampol, in the petroleum industry, specialising in the composition, formulation and application of petroleum products.

16 Mr Gunn was the Chairman of the Petroleum Products Technical Committee (PPTC) of the Australian Institute of Petroleum and also convened the working party of PPTC during the development of the Australian Standard 3570-1988, Automotive Diesel Fuel (AS3570 or the Standard) which came into effect in 1988.

17 AS3570 was developed by petroleum diesel fuel experts who wanted to make sure that their equipment would function without fault or damage, and also by farming and consumer groups concerned about automotive diesel fuel performance in all climates, and in addition by state and federal authorities concerned with environmental and legislative needs. The publication of AS3570 provided the petroleum industry with an authoritative document without ambiguity for the automotive diesel fuel manufactured and sold by oil companies.

18 Mr Gunn conceded, that other non AS3570 standard fuels can be used to power a diesel engine, although he believes that the more the properties of the diesel fuel deviate from those specified in AS3570, the greater the likelihood that there will be undesirable consequences arising from its use, and including possible engine damage. Other fuels may consist of a number of mixtures including petroleum fractions such as heating oil, gas oil and some unrefined crude oil.

19 Mr Gunn provided the tribunal with a valuable explanation of the petroleum refining process of separating the many compounds present in crude oil. The principle which is used is that the longer the carbon chain, the higher the temperature at which the compounds will boil. During the refinery process the crude oil is heated and transformed into a gas. These gases are then passed through a distillation column which becomes cooler as the height increases. When a compound which is in a gaseous state is cooled below its boiling point, it condenses into a liquid and the cooled liquids are then drawn out of the distilling column at various heights (cuts), as per the following basic example:

20 Mr Gunn said that crude oil is predominantly made up of hydrocarbons and varies depending upon where it is extracted. For example, Bass Strait crude oil has hydrocarbon molecules which differ from the crude oil extracted in the Middle East and therefore, the end products (eg percentage of kerosene to diesel fuel) may vary in the distillation process dependent upon the origin of the crude oil. Every refinery processes crude oil differently depending upon the oil used and the percentage of end product which the refinery requires to meet consumer demand.

21 An illustrated drawing of a distillation tower provided by Mr Gunn indicates that heavy gas oil is extracted at a temperature of between 200°C to 365°C with kerosene between 175°C to 200°C and naptha between 120°C and 175°C and benzine and gasoline between 40°C to 120°C. Mr Gunn said that a change of temperature within the tower will change the various "cut points", where the type of product is extracted. A change in temperature within the distillation tower will vary the temperature at which the various products condense at each cut off point and this process is used by the refinery to vary the quantity of a particular product refined to meet marketing requirements. In order to meet consumer demands for gasoline and other high demand products, some gas oil fractions must be converted by a secondary process such as "cracking" - breaking down large molecules of heavy heating oil; "reforming" - changing molecular structures of low quality gasoline molecules; or "polymerisation" - forming longer molecules from smaller ones. Mr Gunn advised that most crude oils provide too many heavy cuts of gas oil to meet market needs, and that a secondary process is used to crack big molecules into smaller ones and bring output into the merchantable fuel ranges required by the refinery.

22 Mr Gunn was referred to the Automotive Diesel Fuel Standard AS3570-1988 published by the Standards Association of Australia (T30, pp 210 to 227 inclusive). This document was prepared by the Association's Committee on Automotive Diesel Fuel under the direction of the Consumer Standards Advisory Board. It states that the request for the preparation of the Standard was made by the National Farmers Federation and the Shires Association of NSW as both organisations expressed concern about the declining quality of automotive diesel fuel.

23 The foreword to AS3570 (T30, at 212) refers to the concern for diesel fuel users regarding the low cetane number in the fuel and the engine problems experienced by them if the cetane number is below 48. The cetane number is a measure of the ignition quality of a fuel (T30, at 216). The important charts in AS3570 - Table 1 - "General Requirements for Automotive Diesel Fuel" and Table 2 - "Maximum Limits for Cloud Point" (CP) or "Cold Filter Plugging Point" (CFPP) are set out on page 5 of the Standard (T30, at 214). The definitions of CP and CFPP are contained on page 8 of the Standard (T30, at 217). CP is the temperature point at which waxes begin to separate and appear as a cloud or haze in the fuel. The CFPP is a lower temperature than CP when more waxes will come out of the fuel solution and will begin to agglomerate. If further cooling is continued, a point is reached where sufficient wax is present in the fuel to form a mat on the filter of a diesel engine, thick enough to impede the flow of fuel. It is to be noted that (a) of 2710.00.20 in the Tariff refers to automotive diesel oil whereas AS3570 relates to automotive diesel fuel. It was agreed between the parties (and the tribunal accepts) that for the purposes of this matter, the 2 terms are synonymous.

24 Table 1 - General requirements for diesel fuel itemises the standards for ash, carbon, cetane number, CP, CFPP, copper corrosion, density, distillation, flash point, oxidation stability, sulphur, water sediment and viscosity. Pages 7 to 9 of the Standard (T30, pp 216 to 218) provide the explanatory notes for each of the AS3570 requirement standards.

25 Table 2 - Maximum limits for CP or CFPP - indicates the winter grade and summer grade temperature limits for Australian Zones, divided into North, South, East and West Zones. A map of Australia (T30, p 215) depicts the relative zones established for this standard, It is noted that the winter grade limit for CP ranges between +7°C in the North Zone to - 4°C in the South in the winter and +15°C in the North and −4°C in the South in the summer. CFPP ranges from +4°C in the North to −7°C in the South in the winter and between +12°C in the North and −7°C in the South in summer. In effect, the table reveals that a certain diesel fuel may only meet the AS3570 Standard for a particular time of the year - winter 16 March to 15 September or summer 16 September to 15 March and for a particular Australian Zone, and yet that fuel is nevertheless acceptable for resale in accordance with AS3570 within the prescribed summer/winter dates and/or in the prescribed zones.

26 Mr Lenczner referred Mr Gunn to para 36 on page 14 of his written statement which reads as follows:

Overall, solvent X370 does not meet the requirements of AS3570 in several respects. Some are minor but four of them, distillation, oxidation stability, cloud point and carbon residue are significant.

27 Mr Gunn's statement, (paras 37 - 41), describes the minor differences of the imported gas oil on the "Stolt Lily" (ie X370) as being specific gravity rather than density, cetane index rather than cetane number, presence of a colour clause, viscosity and copper strip corrosion at 50°C rather than 100°C. Mr Gunn agreed that these minor differences have no practical effect. He said, "[i]t will still work as automotive diesel fuel but it is not automotive diesel fuel because it doesn't comply with the standards."

28 As there are no Australian Standards for industrial diesel fuel and marine diesel fuel similar to AS3570 for automotive diesel fuel, Mr Gunn was shown International Standard ISO 8217:1987 for petroleum products - fuels (Class F) - Specifications of Marine Fuels and Requirements for Marine Distillate Fuels and British Standard BSMA 100:1989 - British Standard Marine Series - Specification for Petroleum Fuels for Marine Engines and Boilers (exhibit A36). These specifications refer to certain prescribed standards for marine distillate fuels based upon characteristics closely resembling those standard characteristics specified by AS3570. These include acceptable standards for density, viscosity, flash point, pour point, cloud point, carbon residue, ash sedimentary extraction, water, cetane number, sulphur and vanadium.

29 The ISO 8217 Standard and the BSMA 100 Standard list specifications for 4 grades of marine diesel fuel, DMX which is the lightest and closest to automotive diesel fuel which has a cetane number of 45, DMA which is a grade of diesel fuel for use in the marine market which has a cetane number of 40, DMB marine diesel fuel with a cetane number of 35 and DMC which is a blended marine diesel fuel without a cetane number specification. Mr Gunn agreed that the SGS Certificates of Quality for the gas oil imported on board the "Stolt Lily" by the applicant in August 1996 (T25, pp 93 and 94) indicate that the "Stolt Lily" gas oil test results were better than the ISO 8217 and BSMA 100 specifications for DMA and DMB and DMC marine fuels and therefore, would comply with the ISO and BSMA Standards as marine diesel fuel.

30 Mr Gunn opined that the gas oil imported on the "Stolt Lily" by the applicant, which was rebranded Solvent X370 (X370), could be used as a petroleum heating fuel but could not be used in a domestic space heater. Mr Gunn confirmed that in his view X370 is appropriately specified in both the suppliers' specifications (T24) and the SCS quality analysis reports (T25, pp 93-94) as a product suitable for use as an industrial heating fuel. He defined industrial diesel fuel as a petroleum product, mostly distillate but not necessarily wholly distillate, which is intended for use as a diesel engine fuel for slow speed or larger diesel engines other than automotive diesel engines. Alternatively, industrial diesel fuel may be used as a heating fuel for continuous combustion purposes, which, he said, needs a specification either provided by the seller or agreed between the buyer and the seller. He also defined marine diesel fuel as being "essentially industrial diesel fuel intended for use in marine applications".

31 Mr Gunn agreed with Mr Moshinsky that if an importer of X370 intended to sell it as a solvent then he would call X370 a solvent. Because, he said, "that's what the specification says, that's what the label says". He contends that the simple invoicing out or branding of a diesel fuel oil by a manufacturer or the subsequent rebranding of the product determines its character, where such a diesel fuel product has a multipurpose use.

32 Mr Gunn agreed that heating oil can be used as automotive diesel fuel and that in some cases heating oil is a preferred fuel. Mr Gunn cited, as an example, a closed environment such as an underground mine where lower emissions are sought. He said that the higher cetane number of heating oil reduces the white smoke on starting the engine. White smoke is not desirable in a below ground mining environment, because it irritates the eyes and has an obnoxious odour.

33 Mr Gunn explained that heating oil has fewer heavy ends. Diesel fuel has a lower 90% recovered temperature. He said:

This is important in that there is less likelihood of smoke, but more importantly there is an almost total absence of polycyclic aromatics in heating oil which are more present in diesel fuel, and these are precursors that lead to carcinogens in exhaust and in an enclosed environment you don't want them.

34 As another example of the use of heating oil in lieu of automotive diesel fuel, Mr Gunn cited the practice in the USA, during freezing temperatures in winter, where buses use heating oil as an alternative to automotive diesel fuel. He said, "No one diesel is the preferred fuel for those applications, because it has a much lower cloud point and much better temperature properties". Mr Gunn said that the reason that heating oil is not more readily used as automotive diesel fuel is due to the lack of availability of heating oil. Heating oil provides advantages over automotive diesel fuel when starting an engine in colder climates.

35 Mr Sergio Tribuzio gave sworn oral evidence in support of his written statements dated 30 September 1999 (exhibit A11) and 19 June 2000 (exhibit A28). Mr Tribuzio is a director of the applicant company. He holds a Master of Science Degree in Inorganic and Analytical Chemistry. His prior employment positions included 2 years as National Solvents Product Manger for Petrochem, which was a division of BP Chemicals, UK, where he had responsibility for solvent heating oil and kerosene sales in Australia including all aspects of supply, marketing, pricing and strategy.

36 The applicant commenced trading in 1987; its main business was to trade in petroleum solvents and some heating fuel. Products included kerosene, heating oils and a variety of petroleum and petrochemical solvents. The applicant also blended solvents and other chemicals for can and coil coatings, marine paints and for the automotive industry. The applicant's other business was the storage and transportation of petroleum products and it owned a site at Altona which had a storage capacity for 5.5 million litres. The applicant sold its transport division; moreover and in February 1998 the applicant sold its reseller solvent and other products business to another company, which in turn sold it to Solchem, which is owned as to 50% by a Mobil company.

37 The applicant purchased all of its petroleum solvents from Australian refiners of crude oil until 1996. In August 1996 the applicant commenced the importation of gas oil from the Philippines on board the "Stolt Lily". Mr Tribuzio said that for internal administration reasons he renamed the imported gas oil X370 solvent. The name "X370" was derived from the boiling range of the imported gas oil, which had an upper limit of at least 370°C Celsius. The following extract has been copied from Mr Tribuzio's Statement dated 30 September 1999 (exhibit A11) in order to ensure that his comments and opinions expressed therein, are precisely recorded in these Reasons:

. . .
12 Petroleum products which can be used as solvents have boiling points within a wide range from approximately 30°C to 400°C Celsius. These include volatile solvents with low boiling points and flashpoints, such as toluene, white spirits and gasoline, as well as products from the so-called "middle distillate" cut/fraction, which includes kerosenes, heating fuels, diesel fuel and solvents.

13 The X370 solvent imported by Gladstone was a middle range distillate product.

14 Many, if not all, of these middle distillate products have wide boiling/distillation ranges that extensively overlap because they share many common chemical constituents . The specifications of various of these products are therefore similar and all of these products have more than one commercial use.

15 A second consequence of this specification overlap is that there is always a limit as to the quantity and type of middle distillate products that can be produced by any one refinery from the crude oil stock available to it. Therefore, the production of any one particular product from the middle distillate fraction results in less production, or none at all, of various competing/alternative products.

16 Overall then, the range of commercial products (ie different fractions and fraction combinations) produced and sold by a refinery is determined/influenced by a number of competing factors. The main ones are as follows.
(a) The type and origin of crude oil that is available for processing. Crude oil consists of thousands of different petroleum fractions and the composition of crude from different geographical areas varies enormously, as does the suitability of particular fractions for certain uses.

(b) The economics of operating a refinery both generally and in a particular location.

(c) The particular demand in the local market for various products. The principal focus of most or all refineries is on the production of engine fuels, such as gasoline, for which there is a significant continuing demand. The market for other non-engine products, such as kerosene and heating oils, is more seasonal and it is uneconomical for refineries to continually adjust their output to meet the seasonal market requirements. This often results in a shortage during the winter season of heating fuels and other products that are used as solvents.

(d) The competitive targeting of a larger market share.

17 The trade in petroleum products has always been monitored closely by the Australian Customs Service because Excise Duty must be paid when local products, such as gasoline, diesel, heating oils, or kerosene, are sold by the manufacturers to either consumers or wholesalers. If the products are instead imported into Australia, Customs Duty is paid on these products at a rate equivalent to the rate of Excise Duty. The highest rate of excise (and corresponding customs duty) has always applied to automotive engine fuels, such as gasoline and diesel. Lower rates of Excise Duty are imposed on products when sold for use as other types of fuel, such as kerosene and heating oil. Solvents and other chemicals are sold free of excise.

18 Prior to 1^st January 1998, the amount of excise that was payable for any sale of petroleum products was determined by the use to which the product was to be put by the purchaser. This was because most, if not all, of the products were used for more than one purpose. Products satisfying the requirements of, for instance, automotive diesel fuel, heating oil, kerosene and various solvents would often be more or less interchangeable but the excise would vary depending on whether the end use was as a fuel. Use as a fuel would attract excise. However, if the use of these products was other than as a fuel, for instance as a bitumen cutter, there was no requirement to pay excise. In fact, it was common for the major refineries to sell a particular product, at different rates of excise, depending on whether the end use was as a fuel or otherwise. They would then require contractual undertakings or statutory declarations from their customers as to the intended end-use of the product.

19 It was also a common practice of the oil companies to multiple-brand the same product (ie sell under different brand names according to the intended end use of the product). Product would be sold as both a solvent (whether generic or specialised, for instance as a bitumen cutter) and as a fuel such as ADF, heating oil or kerosene.

20 During the pre-1998 period, when multiple-branding particular product which complied with the Australian Standard for ADF, the refineries also often "adulterated" such product to a nominal extent, in order to sell it for use as a non-fuel/solvent. This was done by introducing a trace contaminant. The adulteration technically altered, to an insignificant extent, at least one specification or physical characteristic of the product, for the sole purpose of allowing the product to be sold free of excise. This practice of token adulteration was formally sanctioned by the Australian Customs Service.

21 Excise By-Law 109 was originally introduced to enable chemical manufacturers to purchase excisable products without paying excise for use in the formulation of non-excisable products, such as concrete release agents. However, the by-law was commonly used by the oil companies as a mechanism for selling "adulterated" ADF as a solvent without the payment of excise. The composition of each blended product had to be approved by the Collector of Customs and approval was regularly given to products containing only a token amount of contaminant.

22 Examples of such multi-branded "adulterated" products that were widely sold as solvents included Bituflux, which as distributed by Ampol, Solvent 98, which was distributed by BP Chemicals, and Solvent AC Cutter, which was distributed by Mobil.

23 As Gladstone was only a distributor and reseller of product, and not an end-user, it was unable, when purchasing from the refineries, to identify the use to which the products which it purchased would be ultimately put. Instead, as a "middle man", Gladstone was required, when purchasing heating oil or kerosene, to sign contractual agreements with its suppliers and also to provide statutory declarations which certified that the products would not be sold by Gladstone for use as a fuel.

24 In turn, Gladstone required similar undertakings from its customers, who provided statutory declarations or letters of undertaking for every significant purchase of heating oil, solvent heating oil, kerosene or solvent kerosene. All of Gladstone's invoices also included an endorsement that: "In accordance with Regulations of the Australian Customs Service, these goods are sold on condition that they are solely for use other than as fuel in internal combustion engines."

25 There was no clear set of rules or regulations that set out the obligations and responsibilities of a seller or trader of products that could potentially be subject to the payment of excise. Joe travelled to Canberra on at least one occasion and met with senior Customs officials to discuss Gladstone's administrative procedures and safeguards, which were to the satisfaction of Customs. We also retained the services of Freehill Hollingdale & Page to advise Gladstone regarding the requirements of the Excise Act and the Australian Customs Service. We chose Freehill Hollingdale & Page because we knew them to be the solicitors for BP and we therefore assumed that they would have a thorough knowledge of the industry. When we contacted them, we were put onto a partner who told us he was an expert in this area and it was he who subsequently advised us, prior to importation, as to the appropriate tariff classification for Solvent X370.

26 Gladstone kept detailed records of all purchases and sales, which were subject to periodic inspections by officers of the Australian Customs Service. Gladstone's records were inspected on at least six occasions during 1992 - 1997 and, on each occasion, the Customs officers expressed their satisfaction or confirmed that we complied with their requirements.

27 Gladstone was successful and its sales increased rapidly for several years. The only restriction on Gladstone's continued growth and profitability was the availability of products from local suppliers. The available quantities and prices of solvents and other petroleum products fluctuated because of the economics of the refinery process and the seasonal variation in demand for different products, which can, for instance, produce a shortage in availability of heating oils and solvents during winter.

28 Gladstone's supply of product was never reliable. In 1995, Ampol, which was then Gladstone's principal supplier, completely ceased its sale to Gladstone of heating oils and solvents. Gladstone then began to trade with Mobil and BP Chemicals. Gladstone was able to continue supplying its customers but Joe and I were both concerned at the uncertainty of supply. I therefore began to investigate the possibility of purchasing product from a foreign supplier for importation into Australia. I was initially unsuccessful because we were seeking relatively small parcels of product and therefore could not source a suitable product at a commercially viable price.

29 In early 1996, Gladstone was advised by Mobil, which was then our biggest supplier, that it would be unable to continue to sell us the same quantities of Certrex 70 that we had been purchasing for some time. Certrex 70 is an example of a multiple-branded product, which can also be sold under another name as a heating oil, but whose main industrial application under the Certrex 70 brand name is as a solvent. We had been purchasing an average of approximately 1 million litres per month and Mobil was going to reduce it to 500,000 litres per month. At that time, our customers' demands for our products were either stable or increasing and it was apparent that we would not be able to satisfy their requirements. I therefore resumed my enquiries regarding the possibility of purchasing product from foreign suppliers for importation and sale within Australia.

30 I telephoned a number of companies based in Singapore that traded in petroleum products to determine whether a product was available that would meet our customers' needs and could be purchased at a price that was competitive with solvents manufactured in Australia.

31 I had previously been advised that it would not be possible to purchase product that was specifically manufactured to Gladstone's preferred specifications because I was seeking to purchase shipments of approximately 1,000 tonnes of product. No refinery would produce a specifically tailored product of this quantity, unless I could guarantee that the transaction would result in future purchases of much greater volume. In any event, a product that was specifically manufactured for Gladstone's requirements would have been far too expensive.

32 As the generic product description "solvent heating oil" was not widely recognised outside Australia, I advised potential suppliers of my preferred specifications for flashpoint, visual appearance and colour, density and boiling range. These were similar to the specifications for products, such as Certrex 70, that we had previously purchased from Australian refineries. I was not interested in any other specifications or characteristics, as they were not relevant to our customers.

33 For my purposes, the most important of these specifications were the boiling or distillation range, which broadly defined the product, and the colour and clarity, which was indicative of the purity. My initial requested specifications included a distillation range with an upper boiling limit of approximately 270°C.

34 Most of the traders that I contacted either did not respond to my initial enquiry or advised that they did not have a suitable product available for purchase, either in small enough quantities or at my price point, The only company that responded positively was Jayta Petrochemical Private Limited ("Jayta").

35 Jayta was staffed entirely by female traders who were aggressively seeking to establish their own market niche and were keen to do business. Jayta advised that it did not have an available product that met Gladstone's requirements but that it was able to source a cut that was reasonably close to my specification requirements and, most importantly, Gladstone's price point. However, the boiling range of the offered product had an upper limit which was at least 370°C Celsius.

36 I expressed some interest in the product, so my contact at Jayta immediately faxed to Gladstone's office the manufacturer's specifications for the product (the "Jayta specifications"). It is the Jayta specifications that are listed on page 46 of the respondent's T documents (T24). Included in the Jayta specifications were various specifications or characteristics for the product that I had not asked for and about which I was not concerned. Although in my view the specifications were not ideal, I had to make a decision rapidly, as the price of petroleum products fluctuated constantly on the open market and currency exchange rates were also volatile. It was also expected that the price of the product would soon go up. Space would also have to be booked on a vessel as soon as possible, as the choice of shipping schedules and times was extremely limited, if we were to get any imported product to Gladstone in time to meet expected orders from its customers. I advised the specifications to some of Gladstone's customers, to determine whether this product was suitable for their needs, and I received their confirmation.

37 I did not want to commit Gladstone's funds without obtaining a comitem0 price quotation from another trader if possible. I therefore masked the heading on the Jayta specifications sheet and copied the specifications under a new, more anonymous heading, "Solvent X-370". I arrived at this name, which simply re-branded the available Jayta product, by selecting a name based on the product's boiling point and which did not reveal the origin of the specifications to Jayta's competitors. That copied document is the actual document which has been copied as the respondent's document T24. I then faxed the rebranded Jayta specifications sheet to Hin Leong Trading, which was another Singapore trader, with a request for a quotation to enable me to compare available prices.

38 Hin Leong did not reply to my fax, so, given the time pressures, I placed an initial order with Jayta for 1,000 tonnes of X-370. The order was placed with Jayta by reference to the Jayta specifications that had previously been provided and the order was also endorsed as being subject to independent testing of the parcel, both before shipment and after arrival in Australia.

39 The parcel was ordered in accordance with the full Jayta specifications and they were also included as a condition in the contract . (Amended in trans. p.143) This was not because I was concerned with each of the specifications in its own right but, rather, because Gladstone had not previously imported product from overseas. I also did not have any independent reference for or verification of Jayta's bona fides. I therefore wanted to reduce the possibility of any contractual mistakes and confusion and I was reluctant to commit approximately $US200,000 of Gladstone's funds unless I could be certain that we would receive the same product that had been offered and quoted for.

40 Because many of the specifications did not matter to me, Gladstone's order was stated to be conditional only on testing the X370 for three specifications/characteristics that I was interested in at that time. However, Jayta still arranged for an independent laboratory to test the shipment for every one of the Jayta specifications before shipment. I had no objection to this being done as it was Jayta, and not Gladstone, who paid for those tests.

41 When the first shipment arrived in Australia, it was tested at Gladstone's request by a local surveyor only for appearance and colour, density, distillation range and flashpoint. The product was then unloaded and transported to storage tanks at Gladstone's premises, where it was blended with solvent heating oil and sold to Gladstone's customers. Gladstone also continued to purchase available solvent product from local sources during that time and all of the imported parcel was sold to Gladstone's customers at the same price as locally sourced product, being the prevailing market price for solvent heating oil sold by the major oil companies. That price was approximately 20 cents per litre lower, (ie approximately one third lower), than the prevailing price for automotive diesel fuel.

42 The first importation was successful but, at this time, the price of both the local and overseas product was rising steadily. I therefore made further enquiries with Jayta about the possibility of blending the X-370 with another product, to obtain a product specification that was closer to my original requirements and which would also be more profitable.

43 I was particularly interested in obtaining a product with a lower density and lower final boiling point and, if possible, a higher flash point. This was because Gladstone purchased the imported product by weight but sold it by volume. A lower density would therefore be desirable because it would result in a greater volume of product for subsequent sale at the same price per litre as X370.

44 The flash point is the temperature at which product vapour can be ignited with a spark or flame. Each Australian State has restrictive regulations that govern the handling, transport and storage of products that are deemed to be highly flammable. If a product has a flash point below the statutory limit (which for the products we were selling at the time was 61.5°C Celsius), it will be deemed to be flammable and subject to certain restrictions.

45 A high flash point imported product would have been commercially attractive for Gladstone, provided that the other specifications were suitable, because I could then have blended the imported product with lower flash solvent kerosene, still resulting in an overall acceptable flashpoint. At that time, compared to solvent heating oil, kerosene was in more plentiful supply and it also had a lower density than solvent heating oil. Accordingly, such a blend would have yielded a greater volume of product for sale and also met the relevant HAZCHEM requirements, without affecting the suitability of the product for use as an industrial solvent.

46 Jayta made a number of attempts to produce a blend that would meet my requirements but they were unsuccessful. As a result, to meet its customers' demands, Gladstone purchased two further parcels of X-370 in accordance with the original Jayta specifications.

47 The majority of the second shipment was also transported to Gladstone's premises and blended with local product prior to sale. Most or all of the third shipment was sold as imported. None of the imported X-370 product was sold or priced by Gladstone as automotive diesel fuel.

38 Mr Tribuzio advised that Jayta is a trader in petroleum products saying:

They arrange a consignor which actually owns the product and the consignor, when they buy the product from the consignor they go to the bank, and for the consignor to sell them the product they have to show they have got an irrevocable letter of credit from another supplier so they can go to the consignor and buy the product, and they just take a margin off the differences between the two letters of credit.

The tribunal considers that if the product supplied by Jayta does have inconsistencies, those inconsistencies might arise from the fact that there could be different suppliers.

39 The precise status of the applicant at this time was not clear. As set out previously in these Reasons, the applicant has sold each of its transport division and its solvent business. The tribunal was told that the site at Altona (in Victoria) has been sold. A statement from the bar table (by Mr Slonim) indicated that the applicant still has some assets and that there are outstanding issues, and including this matter. The word "dormant" was used in relation to the applicant; on the other hand it does seem that the applicant still engages in some trading activities.

40 Mr Tribuzio said that he regards heating oil and solvent X370 as being the same thing - "it depends on the end use". He agreed that heating oil has a dual purpose, "[i]f a customer wanted to buy the X370 solvent and use it as a heating oil, the applicant would have to sell it to you as a heating oil and charge the excise". The applicant sold heating oil under the name "Gladheat". Mr Tribuzio regards solvent kerosene, jet fuel and lighting kerosene all as being dual purpose kerosene. He concurred that the applicant renamed lighting kerosene as solvent kerosene - Code SSK, used in its blending of a concrete release agent for Ramset (exhibit A31), for excise reasons. The above-mentioned cl 21 of Mr Tribuzio's statement which refers to Excise By-Law 109 reads:

Excise By-Law 109 was originally introduced to enable chemical manufacturers to purchase excisable products without paying excise for the use in the formulation of non-excisable products, such as concrete release agents. However, the by-law was commonly used by the oil companies as a mechanism for selling "adulterated" ADF as a solvent without the payment of excise. The composition of each blended product had to be approved by the Collector of Customs and approval was regularly given to products containing only a token amount of contaminant.

41 Mr Tribuzio said that most of the gas oil imported from the Philippines on board the "Stolt Lily" in August 1996 was sold to 3 companies being United, Success Freight Lines and Australian Petroleum Supplies (APS). He said that United runs a freight business and is also a reseller and distributor, Success Freight Lines is also a freight company and reseller/distributor and APS is also a freight company and a reseller/distributor. He does not know whether any of the 3 companies which purchased the gas oil are solvent users or not and Mr Tribuzio agreed that he has no idea how the companies used the gas oil. He did not conduct any inspections of the plants of the 3 purchasers of the gas oil to inform himself how it was being used. There was no evidence before the tribunal specifically referable to the "Stolt Lily" product. The extent to which the gas oil was blended (with heating oil or any other product) before resale was not clarified.

42 Mr Tribuzio agreed that he received the following facsimile dated 18 July 1996 from Jayta offering the applicant gas oil (T3) and that the note was written by him on the facsimile. This document refers to the importation of gas oil transported on the "Stolt Lily":

Re Gas Oil

Further to our tel. conversation just now and our gas oil offer to you yesterday. Please revert urgently your confirmation. Please note gas oil price fluctuates every day. As such we might not be able to hold the same price on daily basis.

The note on the facsimile by Mr Tribuzio was addressed to Parks Purchasing Manager and instructed him to place an order for 1000 MT of solvent X370 based upon the following conditions and upon certain specifications:

a) Bill of Lading and invoice must be marked solvent X370.

b) $200USD PMT FOB Stolt Lily V38 00 SUB. ETA Subic Bay 28/29 July.

c) Irrevocable L/C at sight

The specifications for the gas oil ordered by the applicant were confirmed by Jayta in an undated facsimile (T25, at 69) and read as follows:

SPECIFICATION - X370
ASH, WT PCT	MAX 0.01
CETANE INDEX, CALCULATED	MIN 45
COLOR, ASTM	MAX 2.0
SPECIFIC GRAVITY AT 60 DEG F	MIN 0.82/MAX 0.86
DISTILLATION: 90 PCT RECV, DEGCc	MAX 370
* FLASH POINT, PMCC DEG C	MIN 61.5
POUR POINT, DEG C	MAX 0
SULFUR, PCT WT	MAX 0.5
VISC AT 40 DEG C, CST	MIN 1.8/MAX 5.50
WATER AND SEDIMENT, PCT VOL	MAX 0.05
CARBON RESIDUE, PCT WT	MAX 0.05
COPPER STRIP CORR (3H/50 DEG C)	MAX NO. 1

* NOTE Mr Tribuzio admitted that he had deleted, by whiting-out, Jayta's heading above the List of Specifications and that he had typed in his alternative heading "Specification - X370". He believed that the facsimile was originally headed by Jayta as Specification for Gas Oil.

43 Mr Bell referred Mr Tribuzio to a pro forma invoice from Jayta to the applicant dated 19 July 1996 (T25, at 79), upon which Mr Tribuzio whited-out a reference to gas oil or some other generic description of the product prior to sending it back to Jayta for their preparation of their final invoice (T25, p 104). Because of the whiting-out deletion, the only description of the goods remaining on the pro forma invoice was X370, and X370 accordingly became the only description of the imported gas oil shipped via the "Stolt Lily" on Jayta's final invoice to the applicant dated 4 August 1996. Mr Tribuzio denied that he whited-out any generic description used by Jayta in their facsimile and pro forma invoice on the advice of Freehill Hollingdale & Page, a legal firm retained by the applicant to advise it regarding the requirements of the Excise Act 1901 (Cth) and the Australian Customs Service (see para 25 of his statement extracted above). He contended that the whiting-out by him was for internal brand classification administration purposes. He also said that the whiting-out and name substitution was done in order to ensure that there would be no difficulty with the banking documents; we deal with that statement in relation to the banking documents more fully later in these Reasons. Mr Tribuzio was asked by the tribunal if he was saying that X370 is gas oil and he replied as follows (see transcript, at 477):

Well obviously it is" … "Yes, it is gas oil. That's what they said it is. I am not disputing that was rebranded from gas oil.

44 Mr Tribuzio said that there was no clear division of functions between him and his division co-director, Mr Brothers, in their employment by the applicant. He was involved in the main in marketing the more technical products and Mr Brothers was involved in administration functions and also the marketing of heating oil type products. He said that the arrangement of finance and credit to purchase products, including the "Stolt Lily" purchase of gas oil from Jayta, was a combined function. A letter of credit expressed in US dollars for the "Stolt Lily" purchase was arranged in Melbourne and provided to Jayta's Singapore Bank by the applicant's bank.

45 Mr Tribuzio was asked whether it was usual or unusual for product invoices provided by suppliers to the applicant to have the product description whited-out and another product description inserted. Mr Tribuzio replied by saying:

There would be one or two occasions where we had product descriptions for a local product. I don't - I am not - I don't recall it where I would have said define it as something else as a re-brand. We might have whited it out or crossed it out and sent it back to the supplier and say, yes, give us another system. But I don't think that - I must admit it wouldn't be something that has been done normally - per se, No.

He agreed that the respondent was never informed that Jayta, the supplier of the "Stolt Lily" import, described the product as gas oil in the Philippines and that he had never sought a ruling from the respondent regarding the imported product. He said that his lawyer, Mr Butler of Freehills, had never indicated to them that they should obtain such a ruling from the respondent.

46 An application was made by Mr Bell on 10 May 2001 to recall Mr Tribuzio to give further evidence following the prior evidence given to the tribunal by Mr Brothers. Mr Bell said that he desired to enquire further into the nature of information given to Mr Butler of Freehills, and in particular, the adequacy of the applicant's assertion to Mr Bell that the gas oil, which was intended to be imported from Jayta was a product of a kind that had previously been marked as solvent - Certrex 70.

47 Mr Moshinsky objected to the recall of Mr Tribuzio, on the basis that it could relate only to an allegation of fraud by the respondent.

48 Mr Bell contended that there was a sufficient basis in this matter for the allegation of fraud, and that there were relevant issues as to the legal advice obtained coupled with the question of whether the information provided was adequate; in addition there was an issue as to whether the legal advice was obtained in order to hide an intention to misinform the respondent.

49 The tribunal made the following decision in relation to the respondent's application to recall Mr Tribuzio:

THE D.PRESIDENT: This case is, as Mr Moshinsky contended a matter of classification, leaving aside for the moment, but without doubting its importance and relevance, the delegation issue. Mr Moshinsky contends that intent as to use is both important and relevant in relation to the tariff classification for which the respondent contends. However, that tariff classification is not qualified by a reference to use and so that it is possible that Mr Moshinsky's contentions in this regard are not correct. There is evidence still to be lead and lengthy argument to follow and so that it is unnecessary and undesirable for us to say any more on the subject at this stage.

That the credit of the applicant is important in this case cannot be doubted nor can it be said that Mr Bell's contentions as to fraud are without foundation or groundless or that he is fishing for evidence. The factual matrix which arises from what might loosely be referred to as the whiting out of relevant documents, coupled with the uncertainty surrounding the legal advice, ensures that this must be so.

It was not originally intended that Mr Brothers would be a witness. The applicant decided to call him at a comparatively late stage of these proceedings. Similarly, and at a late stage, the applicant expanded the ambit of its case.

In the light of Mr Brothers' evidence it does not seem to us to be unreasonable that Mr Tribuzio be recalled on the basis requested by Mr Bell. It is certainly not usual that a witness be recalled a second time but this is not a case which is aptly characterised as usual.

We believe that credit is so important an issue in this case that further evidence along the lines suggested by Mr Bell may well assist us in performing our duty which is to come to the correct and preferable decision. In the circumstances, Mr Bell's application will be granted on the basis that he will be allowed to cross-examine but only on the issues to which he referred.

Before adjourning to consider Mr Bell's application for the recall of Mr Tribuzio we noted that we had not heard evidence from Mr Butler and invited the parties to consider whether his evidence might not assist, although we indicated that we did not intend having regard to the counsel involved in this matter, to call him ourselves. We note also that it does not appear to us that there will be evidence by either Jayta, who supplied the product, or SGS, who tested it, although that evidence might also well be of assistance and value to the tribunal.

We do not wish to be thought to be instructing the applicant as to how to run its case; we note merely, that if Jayta or SGS or Butler is likely to be called, then it might well be prudent and appropriate to delay the recall of Mr Tribuzio until that relevant evidence has been given. But if the applicant or the respondent in the case of Mr Butler decides not to call any of that evidence, for whatever reason, then Mr Tribuzio should be recalled on the basis set out previously.

Mr Tribuzio said that he could not remember the "fine details" of the information provided to Mr Butler of Freehills. He was shown exhibit R25, which is a certificate of quality published by Mobil Oil Australia Ltd which sets out the characteristics and specifications of the product Certrex 70. Mr Tribuzio agreed that Certrex 70 is a heating oil product. Mr Tribuzio was referred to T24 which sets out the Jayta specifications of the gas oil imported on board the "Stolt Lily", and which he altered by whiting-out the heading and retyping it to read "Specification - X370". Mr Tribuzio agreed that he had not provided Mr Butler with the specifications for X370 and said:

Well, I mean, we discussed them generally, middle distillate products that we could be importing for us in the same sort of market as Certrex 70 and he accepted the fact that anything of a like nature, his decision would be based on that basis. He didn't ask for any specifications. He didn't require us to submit any specifications at all. And he didn't say, tell me what you are importing. He said, is the middle distillate, is it similar to Certrex 70. Certrex 70 was known as a - for heating oil. He said it didn't matter. He read the Customs tariff exactly like he thought the excise tariff was. We asked him on the excise tariff that products were transposable in terms of excise and use. And any of these products, whether it is similar to X370, Certrex 70, kerosene or what not, in the excise tariff - we went with him in detail regarding the transposibility and exciseability of it. We said to him, if we import a light product solvent under the Customs tariff similar to products that use as a solvent under the excise tariff, is it suitable to be imported under that classification. And he replied, Yes, it wasn't relevant for him to know the technical issues of it. It wouldn't matter what they were.

Mr Tribuzio said that he did not tell Mr Butler that the product he intended to import was suitable as an automotive diesel fuel.

50 Mr Joseph Brothers gave sworn oral evidence in support of his written statements dated 2 March 2001 and 3 May 2001 (exhibits A44 and A45). Mr Brothers has no formal technical qualifications. However, he studied engineering for a couple of years in the Australian Navy as an apprentice shipwright engineer. The following extracts have been copied from Mr Brothers' written statements in order to ensure that his comments and opinions expressed therein are precisely recorded in these reasons for decision:

I, JOSEPH BROTHERS, of 145 Green Street, Bulla, Victoria, state as follows -
1 I have been a shareholder and director of Parks Holdings Pty Ltd t/a Gladstone Chemicals ("Gladstone") since its inception in 1987. I have been actively involved in the marketing, purchasing and administrative functions within the company since that time. I have also taken a general responsibility for statutory compliance in areas such as Health and Safety, Taxation, Excise and Customs. I have no particular expertise in any of these areas and I rely heavily on the advice given to Gladstone by experts in each of these fields. That advice, when received, would sometimes then be discussed with my partner Sergio and decisions and actions taken and made on the merits or otherwise of that advice.

2 From the period 1987 to 2000 Gladstone was involved in the sale of Heating Oil, Kerosene and many other solvents and solvent blends and petrochemicals. We became recognised over time as one of the largest independent solvent distributors and re-sellers in Australia. Our main suppliers during this period were Mobil, BP and Ampol. In the period leading up to our decision to import solvent X370 our supplies of Mobil solvent Certrex 70 and BP solvent 99 and 99L became increasingly limited. We relied heavily on the sales of these products and naturally it was important to us that we secured a reliable supply.

3 During the period July 96 through October 1996 the sales we made of Solvent 1H were supplemented by our imports of Solvent X370. During that 3 to 4 month period Solvent X370 constituted about 30 per cent of our supply of Solvent Heating Oil. Following the discontinuation of our importations we continued to supply these solvents wholly from local supply with no major change until the business ceased trading in July 2000.

4 During the nine years in which we had been selling solvents, prior to the importations of Solvent X370, we were contacted on at least five occasions by the ACS. Regular requests were made for details of Gladstone's customers and the product types and volumes that were sold to them. Most of our suppliers, which included major oil companies and customers, were regularly contacted.

5 As we often sold both products that attracted excise and products that were excise free, the ACS would visit from time to time and check that our sales and procedures complied with the requirements of the Excise Act. As our sales of excise free solvents were increasing and we were also blending products for customers I felt it necessary to seek clarification and to make sure we were not exposed to excise duty or penalties for some error or omission. I initially made inquiries of representatives of the ACS who visited our offices and they informed us that our procedures were satisfactory. However, as the requirements became more complex I decided that we needed legal assistance.

6 I was aware that BP Chemicals used Freehill Hollingdale & Page for legal advice so in mid-1994 I contacted the firm. I asked to speak with someone who was expert in customs matters and I was put through to Mr Peter Butler. He was identified on his business card as a partner and a specialist in customs matters. I explained to Mr Butler that we were concerned to ensure our procedures and treatment of Gladstone's products was in accordance with the law. After I provided a detailed explanation of our business, both in conference and in correspondence Mr Butler and one of his more junior solicitors confirmed that Gladstone's procedures complied with the ACS requirements. Mr Butler also assisted us in negotiating the terms of an agreement with Mobil regarding the purchase of excise free solvents.

7 When we began to consider the importation of Solvent X370 I consulted with Mr Butler to ensure that we would classify the imported product correctly. Sergio informed me that he had been advised by both BP Chemicals and Exxon that it was usual for solvents to be imported under the classification No. 2710.00.90. I put this to Mr Butler and we discussed the differences between the excise tariff and the customs tariff. Peter told me that he believed the excise tariff and the customs tariff were closely aligned with regard to these products. He said that there was some possibility of confusion within the customs tariff, but he advised that if the product was clearly defined, then if there was any query the relationship between the customs tariff, the excise tariff and by-law 109 would serve to clarify the entry or query. He quoted a number of cases and I recall one being the Savage River Mines case.

8 All of this information was given to me verbally, and at times was complicated. At no time in my discussions with Mr Butler did he suggest that we ask for a customs ruling prior to the first importation. After the meeting I rang Mr Butler and asked him to confirm his advice in writing. After some chasing on my part he did so. His letter confirmed the advice he had given earlier, although it was not quite as clear. Given the difficulties I had getting the letter out of him in the first place I relied on my general recollection and understanding of his advice in conference. I advised Sergio to proceed with that classification, and told him that the product should be clearly described so as not to cause any confusion or misinterpretation on entry. Naturally, since we were selling an excise free locally produced product we did not wish to pay duty on any imported product of the same nature.

9 On arrival of the first shipment on the Stolt Lily, the first part of the shipment was immediately transported to our site at Altona and unloaded into the Solvent 1H tank. The main reason for this was that the tank capacity at our rented tanks at the wharf could not accommodate the entire shipment. Our original intention was to mix all of the incoming Solvent X370 with locally produced product. The purpose was to keep the dilution rates as low as possible and remain fairly close to the product specification for the local product. It later became apparent that this was unnecessary as the main customers that purchased the product were happy to take it in its imported state. This did not surprise or concern me because our major buyers were resellers and may have been blending the product themselves or selling it to companies who used the product in manufacture. We had been dealing with all of these companies for a number of years and had a solid relationship with them. We also had no reason to suspect that the eventual end use was other than a solvent application as assured to us by our customers. To this day no evidence to the contrary has been produced to us.

10 The blended product and the Solvent X370 were sold locally under the name Solvent 1H. This was a name our customers readily identified with and our stock system was set up to deal with this product. As we would often blend Mobil product with BP product or Ampol product of or the same or a similar specification the addition of Solvent X370 to the final product mix of Solvent 1H was simply an extension of our normal practice.

11 I deny that either Sergio or myself has ever knowingly misdescribed product or committed or attempted to commit any fraud whatsoever, whether in relation to the importations of X370 or any other excisable product.

Further statement of Joseph brothers

1 I refer to my previous statement filed in this proceeding and further state as follows.

2 From 1989 to 1992 I was on the State Executive of the Australian Petroleum Distributors Association ("APADA"). As an Executive Member and Treasurer I was also involved in ongoing industry liaison with, and representations to, Customs regarding proposals for and the implementation of regulations and compliance procedures for the sale and distribution of excisable products.

3 I had general responsibility within Gladstone for maintaining the integrity and accuracy of Gladstone's compliance and record keeping procedures. I supervised staff in relation to these issues. Sergio Tribuzio's principal roles within the company related to the supervision of all manufacturing and blending of Gladstone's own products, the testing of products and the sale of the more specialised products. Business decisions were made by the two of us jointly.

4 In paragraph 2 of my previous statements, I referred to Gladstone's long trading history as one of the largest independent solvent distributors and re-sellers in Australia. Many of the products Gladstone purchased could be subject to more than one rate of excise duty, depending on the intended use for which Gladstone purchased the products and/or the intended use of the products by Gladstone's customers. It is a usual industry practice adopted by all refineries, manufacturers and resellers to re-brand product to identify the seller and its use. For example, heating oil type product is branded differently by the oil companies, and also by Gladstone when selling it to its customers, depending on the intended use. Different manufacturers and distributors adopt their own individual brand names to differentiate their product from that of their competitors. When sold for heating purposes, Mobil Oil Co calls the product Mobil Heat and Mobil Chemicals Co calls it Certrex 72, while Gladstone's own brand name for the product was Gladheat. When sold excise free for use as a solvent, Mobil Chemicals Co calls it Certrex 70 and Gladstone's branding from about 1994 to 2000 was solvent 1H.

5 It is a common industry practice that, when selling non-excisable product, oil companies and manufacturers will require statutory declarations or agreements from their customers confirming that the product will not be sold or used by the purchaser for excisable purposes. Resellers like Gladstone then in turn require similar declarations or agreements from their customers. In fact, at Gladstone there was a standing instruction to all staff that they were not to sell Solvent 1H without first obtaining a statutory declaration or agreement from the customer. This resulted from the need to ensure that the declared end use of multi-functional products was the actual end use. Customs were at all times aware of this practice and to my knowledge endorsed it.

6 Because of the different applications and duty rates that can apply to the same product, some companies store the product in the same tanks but then keep records of the quantities that relate to different duty rates. However, at Gladstone, where possible, we actually stored the product in different tanks according to use and applicable duty rate, as well as maintaining detailed records enabling the tracing of all product, via both the tank and stock control records.

7 I refer to paragraph 8 of my previous statement and say that the letter to which I referred was the letter from Freehill Hollingdale & Page to Gladstone dated 20 August 1996, being the respondent's exhibit R7.

8 I also say that the actual advice given in conference was that Mr Butler had researched several cases that were relevant to what would happen if the classification was challenged. He asked us what the product was and what its characteristics were. We explained that the characteristics were similar to the product that we were selling locally, which he was familiar with from previous discussions. He said that because of the similarities between the different product descriptions in that part of the Tariff, it was important that we clearly describe the product when importing it. He said that if its solvent nature was made clear and it was clearly described as a solvent, then entry under heading 2710.00.90 was appropriate.

9 I refer to paragraph 3 of my previous statement wherein I discussed Gladstone's importation of Solvent X370. The Solvent X370 was imported for the sole purpose of supplementing our local supplies of solvent heating oil, which at that time were mainly purchased from Mobil (Certrex 70) and BP (Solvent 99L). During the five months period from August to December 1996, the Solvent X370 was usually blended with solvent heating oil purchased from Mobil and BP Chemicals. Over that period, approximately 11.13 million litres of Solvent 1H was sold to our customers. This included a total of 3.77 million litres of rebranded Solvent X370 in the months of August, October and November. For the 12 month period from July 1996 to June 1997, purchases of Solvent X370 represented only about 15% of our total supply of Solvent 1H.

10 All of Solvent X370 was sold to Gladstone's customers under the "Solvent 1H" brand, not as Solvent X370. However, the imported product had to be given its own individual branding for internal stock and quality control reasons to cover the period up until it was blended and or rebranded as Solvent 1H for sale to customers. The Solvent X370 name served this purpose. It was necessary for Gladstone to be able to identify the source of each product or component and the quantity that was available and the margin that it was making on each batch of product. Gladstone was also accredited for quality assurance purposes under International Standard ISO 9002, which required the maintenance of internal specifications for each product that was either used or sold by Gladstone, so that quality control problems could be traced to their source and identified. This is also usual industry practice.

11 Gladstone had an ongoing customer base for Solvent 1H and also used it in the production of various Gladstone's own formulated solvent products. I was usually responsible for sales of this particular product. Pages 174-177 of T25 of the T documents contain a list many of Gladstone's customers for Solvent 1H. The two largest customers for Solvent 1H during the time it included the Solvent X370 were Success Freight Lines Pty Ltd ("Success") and Australian Petroleum Supplies ("APS").

12 Success operates a truck fleet that transports petroleum products and is also a major distributor and reseller of both fuel and non-fuel products Australia wide. Before Esso was taken over by Mobil, Success was also an authorised distributor of Esso fuel and non-fuel products. Success was required by Gladstone to provide a statutory declaration acknowledging that Solvent 1H was to be used only for non-fuel uses and that, if onsold by Success, a similar statutory declaration would be obtained by Success from its own customers. The statutory declaration also included an indemnity to Gladstone against liability. Attachment A is a copy of the statutory declaration.

13 APS ran both a transport company and a distributorship of both fuel and non-fuel products in northern Victoria, as well as operating an independent refinery in Moama. It executed an agreement with Gladstone in which it undertook not to use the Solvent 1H, and several other products, as an engine fuel, and also indemnified Gladstone. Attachment B is a copy of the agreement.

14 In terms of the origin of the Solvent X370, I note that it was sold to Gladstone by Singapore commodity traders, it was shipped to Australia from the Philippines and payment by Gladstone was required to be made both to the commodity trader and to the Petroleum Authority of Thailand. Gladstone was never informed what the country of origin of the crude oil was, what refinery(ies) or country had produced it or whether it constituted a blend of more than one product. Jayta's source might have been an oil company refinery or just another trader.

15 In about 1997, after the importation of the Solvent X370, I was visiting Singapore and actually met with a number of potential suppliers of product, including Jayta. Jayta consists of about 4 women who run their company largely by telephone and fax machine. They are general commodity traders operating out of Singapore and have a wide network of contacts throughout the whole of Asia. They deal in parcels of any type of product which comes their way. They have no particular expertise in petroleum products and they had nothing to do with the manufacture or refining of the Solvent X370. The product specification for the "gasoil" that Jayta sold to Gladstone would have been written by someone else and given to them with the product. In fact, during our meeting in Singapore, they offered me a wide variety of different products including uniforms and bicycles. I asked them about the Solvent X370, where it had come from and whether it had been blended, but they would not tell me anything about the product. Rather, they told me that that was their "business" and that they would not reveal the source of the product in case I tried to cut them out as middlemen and went directly to their source for future product.

It is noted that Mr Brothers' written statement dated 3 May 2001 (exhibit A45) has 2 attachments marked "A" and "B". Attachment A is a copy of a statutory declaration and indemnity given to the applicant by Success Freighters Pty Ltd dated 20 March 1995 and attachment B is a copy of an agreement entered into between the applicant and Australian Petroleum Supplies dated 1 August 1996. Both of these documents refer to certain undertakings given to the applicant by Success Freighters Pty Ltd and Australian Petroleum concerning the restricted use by them of the Solvent 1H product supplied to them by the applicant. They undertook inter alia, that solvent supplied to them by the applicant would be for use by them in a non-fuel application.

51 Mr Brothers gave evidence that he and Mr Tribuzio were essentially business partners with equal shares in the applicant, and that he was more actively involved in the administrative functions of the company. He said that it was not unusual for them to white-out and/or re-type a product name on documents and rebrand products. He said:

We very, very often - in fact on nearly on every occasion we bought product we would re-name it. It was for a number of reasons we would - it would identify the origin of the product. It would identify the supplier of the product. It would also create an audit trail within our company.

He could not satisfactorily explain why Mr Tribuzio was only able to name one other occasion when a product specification had been whited-out on a supplier's document. He said that he had "no first hand knowledge" that Mr Tribuzio was actually altering the "Stolt Lily" imported gas oil product specification and pro forma invoice documentation from Jayta, to read Solvent X370 in lieu of gas oil and had only discovered this fact during the hearing of this matter by the tribunal.

52 Mr Brothers said that the applicant consulted Mr Butler of Freehills when it was decided that the applicant would import gas oil from Jayta as this method of acquisition was a departure from their past practice of buying product from oil companies located in Australia. He said that they were concerned that as the imported product was of a multi-functional nature, it might be misconstrued or incorrectly considered under the Excise Act 1901 (Cth). He explained that the product that they were importing from Jayta was a multi-functional middle distillate which was suitable for many different uses, and that one of those uses could have possibly been as an automotive diesel fuel. Mr Brothers said:

We had taken legal advice from our advisors, Freehills. They said that we should clearly describe the product, clearly indicate the nature of the product and the intended use of the product; which we did. We renamed the product X370.

Mr Brothers said that the imported product was not sold by the applicant as Solvent X370 but as Solvent 1H. The name "Solvent X370" has never been used in the marketplace.

53 Mr Brothers and Mr Tribuzio told Mr Butler that the product to be imported was the same or essentially the same as the solvent product that they were buying and selling locally. He said that Mr Butler was familiar with the products the applicant was selling because they had briefed him previously on other aspects when they had to explain to him the products and what they were. Mr Butler was not provided with the specifications of the gas oil to be supplied by Jayta.

54 Mr Brothers indicated that at the time of entry of the "Stolt Lily" shipment, the applicant intended to market the imported gas oil as solvent to existing customers, most of whom are re-sellers. He said that they had no knowledge of to whom their customers were re-selling the product to, because if they had known, the applicant "would have cut them out of the deal". He said that on no occasion did they ever find out that their products had been put to an end use other than that which they had been told by their re-seller customers, although they had reason to suspect that something like that might have happened. He also said that at the time of the "Stolt Lily" importation, he did not have any belief that the applicant could blend the gas oil with another product to make it fully compliant with the automotive diesel fuel industry standard AS3570 and, at that time, he did not intend to sell any of the imported gas oil as off-specification diesel fuel.

55 Mr Brothers indicated that the applicant company has sold its operating storage business in Altona and that the applicant company continues to trade in some products under the name of "Gladstone Chemicals."

56 Mr Peter Mark Butler gave sworn oral evidence on behalf of the applicant. A written statement by him was not provided. Mr Butler is a barrister and solicitor and is a partner of the law firm Freehills (previously known as Freehills Hollingdale & Page). He is currently the head of Freehills' national litigation group and from 1994 to 1996 he was working and living in Melbourne. He commenced a professional relationship with Mr Tribuzio and Mr Brothers in 1994, in their capacity as the directors of the applicant company.

57 Mr Butler received a telephone call from Mr Brothers in 1994 concerning the applicant's need for advice upon a matter not associated to these proceedings but relevant to some minor degree. He said that at that time Mr Tribuzio and Mr Brothers were wholesale suppliers of fuel and other liquid petroleum products. They had a depot in the outer suburbs of Melbourne and they were in the process of purchasing a product from Mobil which they described as solvent or solvent heating oil. Mobil was asking the applicant to execute an agreement which provided for 2 important matters; one was a statement of intent as to use of the product, and the second matter required the applicant to provide an indemnity to Mobil in respect of any difficulties encountered by Mobil. Mr Butler recalled that there was a by-law exemption, (by-law 109), which indicated that it was appropriate and proper to look for intention in end use of a product of the Mobil kind, in order to determine whether or not it was subject to duty. If the product was not to be used in an internal combustion engine, then no duty was payable. Mr Butler also considered the fact that the Mobil product had a number of potential uses. He advised Mr Brothers that they needed to be scrupulously careful as to the end use and their intention. Mr Brothers and Mr Tribuzio told him that they were certain that this product would only be sold or used as a non-internal combustion fuel or product. Mr Butler suggested that they should consider having each purchaser of this product execute a statutory declaration saying in effect that the product would not be used for any purpose, other than non-internal combustion engine usage.

58 Mr Butler said that he did not hear from Mr Tribuzio and Mr Brothers again for nearly 2 years. He considered, in 1994, that they had impressed him as people who knew their industry in the sense that Mr Tribuzio particularly understood and knew a great deal about the technical aspects of the products and specification issues. He said:

I reached the view that they wanted to take advantage of [by-law] 109 for perfectly understandable reasons and they were prepared to do what it took to comply with any legal requirement to do so.

During mid-1996 Mr Butler was contacted again by Mr Brothers concerning the applicant's possible importation of solvent from the Philippines. Mr Butler was provided with exhibit R24, which is the file of Freehills documents provided by Freehills in connection with this matter and tendered as evidence to the tribunal by the respondent. Mr Moshinsky confirmed that there is no issue of privilege claimed by the applicant in respect of Mr Butler's evidence or the documents contained in exhibit R24. Mr Butler was referred to his file note dated 23 July 1996, which reads as follows:

Telephone call from Joe Brothers.

He said he wished to import approximately one million litres of "solvent" from the Philippines.

He will be doing this instead of buying it from Mobil.

The question was whether any additional excise duty problems arose.

I said I would have to give careful consideration to the Act and would ring him tomorrow.

PMB

Mr Butler said that he would have recorded "solvent" in inverted commas because the word solvent was a direct quote, and that it was obviously an issue Freehills were going to have to research and the research was going to turn substantially on that word. He said:

So I wanted to make it clear to myself if I ever looked at that memo again, or any other reader such as a younger lawyer who had researched the issue for us, that it was solvent and it wasn't just my supposition as to what the product actually was.

Mr Butler subsequently made arrangements to have a meeting with Mr Brothers and Mr Tribuzio to discuss the importation of the product; that meeting occurred on 12 August 1996 as set out in the following file memo of the same date:

Attending Joe and Serge Brothers, who want to talk about the importation of solvent.

Warning them that there could be some difficulties if they were challenged, and pointing out some of the objective factors that the Customs and the AAT would look for.

Their big problem is that if they are challenged and the goods are placed in bond not to be released without security and/or payment of duty, then they could not afford to take the goods out (a sum of $400,000 might be involved).

However, I suggested they spoke to their Customs agent and got him to ensure that the matter went through without any difficulty administrative if they were possible.

They will let me know if there is any difficulty and ask me to write to them a letter of advice.

We will advise them of various other issues including advising them to co-operate to a limited degree with Customs (light but firm) but if there was any difficulty to be in contact with me.

Peter Butler

59 Mr Butler said that at their meeting on 12 August 1996 Mr Tribuzio and Mr Brothers reminded him of the issues that he advised them about regarding the Mobile product purchase matter; "and they said that they were still in the business of wholesaling fuel and solvent. [They] talked about what solvent was and [they] talked about why it was that they decided to import themselves, rather than purchase product in the solvent category from Mobil or other local suppliers".

They talked about their understanding of the classifications (tariff) …that is there were two categories or classifications which cd be possibly relevant to importation of this type of product. What they said to me, as I recall, was that solvents not defined in the classification, in the Tariff Classification Act - and that was consistent with my own research - and the concept of the other classification which was, if I remember rightly, automotive diesel oil, was a concept which was not fully particularised in the subject of specifications in the Act.

60 Mr Butler said that he was not supplied with a list of product specifications for the proposed import. He said that Mr Tribuzio and Mr Brothers had satisfied themselves that what they proposed to import would satisfy their clients' needs for solvent. In Mr Butler's opinion the case law supported a view that it was possible, even though the tariff classification for solvent was "other", to have 2 classifications in this instance; "and where they had that situation, and where specificity was not a major issue, one was entitled to look at intent …". Mr Butler advised that intention (and end use might bear on intention) would be relevant. Mr Butler said that he got Mr Tribuzio and Mr Brothers to confirm again

…that they were certain - absolutely certain that the people who were purchasing product were using it for solvent related purposes, and that there was no turning a blind eye to a factual reality here, that they - I had warned them I (to) think about a danger of - I used the word recklessness, and I put this in various ways, because this was the first of - the matters I wanted to raise with them.

Mr Butler also told Mr Tribuzio and Mr Brothers that their entry documents must be accurate and that they must be clear having regard to the obligations imposed by a self-assessment system.

61 Mr Butler wrote the following letter to Mr Brothers on 20 August 1996:

Customs Duty

We refer to our recent discussions and the meeting at our office on 12 August and write to confirm our comments.

We understand that it is your intention to enter a load of solvent under item 2710.00.90 of Schedule 3 of the Customs Tariff Act. This item incurs no customs duty.

Tariff classification is very often controversial, and, as we pointed out during the conference, there is at least a possibility that Customs may challenge the entry of solvent under this item, and require a substitution of another item such as 2710.00.52. That item of course incurs Customs Duty, being a classification relating to gasoline and other oils.

There has been much litigation over the years in respect of the classification of imported products. The cases indicate that in determining such disputes it is necessary to look to all the circumstances pertaining to the product in deciding its appropriate classification. In the Federal Court case of Chinese Food & Wine v Collector of Customs 72 AL 591, the Court said:

Whether the goods in suit properly fall within (the item) of the Customs Tariff is determined by an objective test not by the intentions of the manufacturer … or of the import or export … The characteristics of the goods, being get up, colour, decoration, labelling and packaging are all relevant considerations.

We discussed with you in the conference some of the facts our Customs would look at if they are minded to challenge the entry (such as the size of the market for solvent, whether there was any real issue as to the ultimate use of the chemical and the like). On the basis of what you have told us, we do not anticipate that you ought incur any difficulty with Customs. However, if you are challenged you would have to consider appealing to the Administrative Appeals tribunal. That would take a considerable time to resolve and the goods would not be released to you without payment of the duty and/or security.

If, at the time of entry, you have any difficulty in respect of this shipment, please do not hesitate to let us know.

Yours sincerely,

Signed Peter Butler

Partner

62 Under cross-examination by Mr Bell, Mr Butler agreed that he was told that the proposed product to be imported by the applicant from the Philippines was suitable as automotive diesel fuel and as a solvent, which was consistent with the advice he had been asked to give in 1994 concerning the purchase of product by the applicant from Mobil. He said also that if the proposed imported product had not been suitable for use as an automotive diesel fuel, or as marine or industrial diesel, there would not have been an issue.

63 Mr Butler said that he did not advise Mr Tribuzio and Mr Brothers to white-out the product description of gas oil on the supplier's specifications and pro forma invoices. He said that he had

stressed to them the need to ensure the entry documentation was accurate and the penalty brought of inaccurate documentation, again contextualised by self-assessment and I undoubtedly would have stressed to them the need to ensure that the product description was clear, unambiguous and accurate.

Mr Butler agreed that he did not advise them to change the product description provided by the vendor in the specification and pro forma invoice documents. He said:

No. I think that would be unwise, not so much because of the classification issue because ultimately that is a matter of fact and intention; more because it raises - well for two reasons. One is it would raise in Customs mind an issue about the veracity and integrity of the entire transaction and, secondly, because it raises an issue - it would raise an issue in my mind or Customs as to the accuracy of the entry documentation itself which is another set of problems.

64 Mr Butler agreed that he has no technical expertise in relation to diesel fuel and the use of diesel fuel and was therefore wholly reliant upon the information provided to him by Mr Tribuzio and Mr Brothers in relation to the advice that he gave. When asked why he did not ask the applicant for the specifications of the imported product Mr Butler said:

Well it had to do with the fact that they had already made the concession to me as to the issue that I would have in other circumstances asked for specifications to be provided. They had said that this product that is automotive diesel oil, is capable of a big variety of specification. That I knew to be the case from my own knowledge as a by and by. But they said that the overlap between that product and solvent was, if not total, it was considerable. On that basis seeing a specification document for diesel wouldn't have told me anything because they had already made the concession I was worrying about. The overlap was considerable. It was multi-functional, and that brought in the question under the interpretive laws, not of specificity but of intention.

The precise relevance (and importance) of Mr Butler's evidence became difficult to assess in the light of a statement by Mr Moshinsky on 8 June 2001. Mr Moshinsky said that cl 44 of the applicant's submissions was not correct and that the applicant sought to amend it. Mr Butler's letter dated 26 August 1996 refers to a conference on 12 August 1996 (the date of his file note). However, Mr Moshinisky contended that the "Stolt Lily" came into port on 13 August 1996. The evidence for the applicant was that Mr Butler was consulted some considerable period of time prior to the arrival of the "Stolt Lily", and at all events not one day prior to that date. In the result the evidence of Mr Butler must be of doubtful relevance and assistance to the applicant.

65 Mr Bruce Allan McIver gave sworn evidence on behalf of the applicant in support of his written statement dated 15 December 1999 (exhibit A34). Mr McIver is a consultant chemist specialising in petroleum products. He holds a Chemistry Certificate from Sydney Technical College and a Bachelor of Science Degree in Pure and Applied Chemistry from the University of New South Wales.

66 Mr McIver has been a member of the Australian Institute of Petroleum since its inception and has served on various branch committees, at times as Chairman. From 1963-1998 he was employed as a Laboratory Assistant and then as a Chemist in a wide variety of technical and management roles with the Shell group in Australia and overseas. He retired from Shell in 1998. In the early 1990s he identified an automotive diesel fuel operability problem at various times of the year in certain Australian states and co-drafted the second edition of AS3570.

67 Mr McIver believed that petroleum products from the middle cuts from the crude distillate unit can be blended in different proportions, in order to generate products which are suitable for more than one application, both as a fuel and a non-fuel. For example, one such product could be used as a diesel fuel, a diesel fuel blending component, a parafinnic hydrocarbon solvent, a bitumen cutter or a major component of a mould release agent.

68 Mr McIver contended that the gas oil imported by the applicant on board the "Stolt Lily" could not have been released as automotive diesel fuel in full compliance with AS3570, because 2 tests were missing from the Certificate of Quality analysis conducted by SGS in the Philippines. They were the cloud point test and the oxidation test. He agreed with Mr Lenczner that the imported gas oil would be certified as being in compliance with AS3570; if subsequent tests had indicated that a cloud point test and oxidation test met the standards prescribed for AS3570, which might have been achieved with or without blending the imported product with another petrochemical product.

69 Mr McIver had no knowledge of any market in Australia for the sale with a waiver of automotive diesel fuel which did not comply with AS3570 nor had he reviewed the imported "Stolt Lily" gas oil for compliance with industrial and/or marine diesel fuel industry specifications.

70 Mr McIver was shown International Standard ISO 8217:1987 for petroleum products - Specifications of Marine Diesel Fuels and Requirements for Marine Distillate Fuels and British Standard BSMA 100:189 - British Standard Marine Series - Specification for Petroleum Fuels for Marine Diesel Fuels and Boilers (exhibit A36). These standards are described more fully earlier in these reasons for decision in respect of the evidence given by Mr Gunn. As in the case of Mr Gunn, Mr McIver agreed that the SGS Certificates of Quality for the gas oil imported by the applicant on board the "Stolt Lily" (T25, pp 93 and 94) indicate that the imported product would satisfy the ISO 8217 and BSMA 100 specifications for DMA and DMB and DMC marine diesel fuels. Mr McIver confirmed that there are no Australian Standards for marine diesel fuel, similar to AS3570, as it applies to automotive diesel fuel.

71 Mr Frank Beresford Clyde Russell was called by the applicant to give evidence in support of his written statement dated 16 December 1999 (exhibit A37). He is the Manager, Marketing Technical Services of BP Oil which is a division of BP Australia Ltd and has been employed by BP for 23 years. He holds a degree of a Bachelor of Applied Science. He is responsible for monitoring and maintaining the quality of all fuel products that are marketed by BP.

72 BP produces 4 different product specifications for each of its fuel products. Three of the specifications relate to the manufacture or acquisition of fuels and the fourth specification relates to marketing of products. BP manufactures most fuel but it also purchases some fuels from offshore refineries and exchanges products with other Australian refineries. Each of BP's 4 types of product specification for automotive diesel fuel complies with AS3570. Other grades of non standard diesel fuel, such as low sulphur fuel use in mines, are manufactured by BP, but these are not called automotive diesel fuel.

73 BP occasionally releases diesel fuel from the refinery, which does not meet every AS3570 specification. However, an assessment is made of all of the circumstances at that time and a product waiver is required from the customer. The most commonly varied specification is the cloud point and factors such as the season, region, weather forecast and intended customer usage are taken into account by BP when deciding whether or not to sell the product with a customer waiver. BP regards AS3570 as a voluntary industry code standard as it is not a legal requisite for fuel to be compliant with AS3570 when sold on the Australian market as automotive diesel fuel. He said other major refineries also follow a similar waiver practice.

74 Mr Russell said that the customer for non-compliance automotive diesel fuel may be another refinery for blending or to an industrial customer. He cited the following example of BP selling a non-compliance product to BHP:

The product is off specification and BHP want this product straight away. We tell BHP it is off specification for this parameter and it is up to BHP to accept that on the basis that they know it is off spec for that parameter. … "They will agree acceptance and a waiver will be issued by my team only with the approval of that customer" … "If its off spec, a waiver has to be given by my team because (sic) (otherwise) the refinery can't release the product".

75 Mr Russell made the following comment regarding his knowledge of the retail distribution of non-compliant AS3570 automotive diesel fuel ie. off spec. product:

I would think that most people would go to one of these major suppliers for their product (sic) (AS3570 standard compliance product), but if its cheaper elsewhere they may consider going there. So if it's off spec. and its cheap maybe people will use it, and we find they do.

76 Mr Richard William Michell gave sworn oral evidence on behalf of the applicant in support of his written statements dated 17 June 2000 and 7 May 2001 (exhibits A42 and A43). Mr Michell is a chemical engineer with extensive experience in the petroleum industry from 1980 to 1988 with Ampol Petroleum. He was subsequently employed by a company engaged in the supply of additives to the oil refinery industry. From 1981 to 1986, he represented Ampol on the Petroleum Products Technical Committee of the Australian Institute of Petroleum, and as a result was involved in the development of the Australian Automotive Diesel Fuel Standard AS3570.

77 Dr Michell stated that if he had been consulted by an Ampol trader, who proposed to buy the "Stolt Lily" gas oil product, he would have advised that it could not be presumed that it could be sold in Australia as automotive diesel fuel because, the SCS Certificate of Quality does not set out all of the properties that are required by AS3570.

78 Dr Michell explained how most petroleum products are suitable for more than one use and therefore, the identification of the product will depend upon its intended use at the time of sale and its suitability for that use. He stated that in the petroleum industry, automotive diesel fuel, marine diesel fuel, heating oil and solvent are all terms which are used by members of the petroleum industry to apply to middle distillate products that have more than one potential use. Accordingly, they can all be described as middle distillate hydrocarbon products until an intended use to describe them is assigned to them. He said that the intended use determines which name or term will be used to describe the product. If the ultimate end user of the product uses it for a purpose other than that indicated by its name, then that does not change the identity of the product as marketed. He was personally aware for example, that Ampol rebranded a product otherwise sold as automotive diesel fuel, under the "Protea" brand name and sold it for various solvent and non-fuel uses. In fact Ampol sold a range of Protea products that were all direct rebrands of various products which were otherwise sold as fuels or lubricant base oils.

79 Dr Michell stated that when one looks at the imported "Stolt Lily" product specifications and Certificates of Quality, it would be suitable for use as a solvent in a variety of applications. He believed that the imported product would be capable of a number of different uses and he would call it a solvent if the owner of the product intended it for use as a solvent. He also considered that the imported product would be suitable for various heating oil or fuel purposes.

80 Mr Bruce Robert Biddington gave sworn oral evidence on behalf of the applicant in support of his written statements dated 19 October 1999 and 6 June 2000 (exhibits A46 and A47). Mr Biddington is an industrial chemist who from 1993 until 1999 was employed as a laboratory chemist with Houghton Australia Pty Ltd where he was involved in quality assurance of raw materials and also short-term research and development projects. Prior to Houghton, he was employed for 15 years by Mobil in a variety of technical and marketing functions and as special products manager for Victoria. During his last 5 years with Mobil, he worked closely with refineries to meet customer requirements, with an emphasis on solvents and process oils. The following extracts are taken from Mr Biddington's statements: Exhibit A46:

…
7 Solvents that were marketed by my team included: mineral turpentine, white spirit, methyl ethyl ketone, solvent B1, and solvents that were sold by other divisions of Mobil for use as fuels such as kerosene, heating oil and distillate. Many petroleum products have multiple uses as both fuels and non-fuels and were sold to a number of customers for different uses. For example, kerosene is often sold as jet fuel but is also commonly used as a solvent and my team used to sell large quantities of kerosene into the paint industry. Kerosene is also a common solvent or cutter for bitumen as well as being used widely as a degreasing agent.

8 Another major product marketed by the Special Products Division was, and still is, a solvent called Certrex 70. This product is also sold by the fuels division of Mobil for use as a heating oil. Certrex 70 suited some of our customers that were looking for a relatively low cost solvent with a flashpoint above 62 degrees Celsius. The high flashpoint was important for safety reasons.

9 Distillate is also a good low cost solvent or cutter for certain applications and is sometimes preferred because it has an even higher flashpoint of approximately 74 degrees Celsius. At Houghton, we used both distillate and Certrex 70 as carrier solvents. Both are particularly useful for reducing the viscosity of very thick products such as some metal working fluids, and some rust preventatives where a degree of evaporation is required to produce a rust preventative film or coating. Houghton buys Certrex 70 in bulk and when it requires a distillate for use as a solvent, it draws some from its supply of excise paid diesel fuel.

10 Each of these multipurpose products would have a detailed manufacturer's specification. However, the product data sheet would only list the typical values of the parameters that characterise its suitability for a particular use. For a solvent such as Certrex 70 these would typically include parameters such as density, colour, appearance, flashpoint and final boiling point, and might also include the evaporation rate. However, it would not be possible to determine from this set of parameters whether it was suitable for use as a fuel.

11 An example of this practice is the marketing of a range of heavy petroleum fractions which are commonly used as rubber process oils, but can also be used by companies such as Houghton as the base for metal working fluids. When Houghton purchased a load of this product from the Mobil terminal at Yarraville, we would get limited information such as the water content, viscosity, density and colour of the product. However, if the same product was purchased from the lubricating oil refinery in South Australia, we would be given the specification for lubricating oil base stock, which included a large number of other parameters such as the sulphur content, the percentage of unsaturated compounds and the viscosity at two different temperatures.

12 At Mobil, the complete manufacturer's specification was important for the refinery, but the only issue that was important to myself and my team was whether the product met the customer's buying specification or requirement.

13 Products that were manufactured by Mobil for sale in Australia were usually produced for particular end uses and the specifications were developed around those requirements. However, when sourcing product from the overseas market, it is not always possible to obtain specific formulations or products made to a particular specification unless the customer or trader is prepared to purchase extremely large quantities of the particular product on a regular basis.

14 While I was employed with Mobil, solvent was purchased from time to time from various Asian refineries. These refineries have a huge capacity and it is extremely inefficient to halt their operations or slow them down in order to adjust their output to various products. It is more efficient to sell surplus product at a discount in foreign markets when domestic demand is exceeded, rather than slowing down the operation of the refinery. As a consequence, there is usually a lot of fairly generic petroleum products available on the international market at any time.

Exhibit A47:

…
2 Even if two of the three X370 shipments did meet the requirements of AS 3570 I would consider this fact irrelevant from the point of view of a prospective purchaser or for identifying what has actually been purchased. It is the product specification which fulfils that task.

3 To do otherwise would mean that any onshore purchaser, whether an oil company or a distributor, would have to select its cargo on an individual shipment by shipment or tank by tank basis, following testing at a port to ensure compliance with its requirements. The product specification would become irrelevant. This would be impractical and makes no commercial sense. Nor would this conform to the actual standard accepted practices of purchasers of product from overseas.

4 Product specifications are provided and relied on by the parties in such purchases as forming the basis, criteria and identity of the order. The real question in relation to each shipment is therefore whether it complies with the requirements of the relevant product specification.

81 Mr Biddington considered T24, p 46, which lists the specification of the gas oil imported by the applicant from Jayta on board the "Stolt Lily" and which was renamed specification X370 by the applicant. He said that a product produced in accordance with these specifications could be used as a solvent, a degreasing agent, a mould release agent and a bitumen cutter. He estimated that the Australian market for this type of solvent would exceed 2 million litres minimum per annum. He was of the view that X370 had use with Certrex 70 despite the significant difference in boiling point between the two products (of approximately 80 degrees). He believed that applications of X370 in his above use descriptors would probably be enhanced because the evaporation rate would be somewhat lower than Certrex 70, and X370 would be more residual which helps particularly in mould release applications.

82 Mr Biddington was asked the following question by the tribunal: "If you were provided with the list of gas oil specifications X370 (T24, p 46) without the heading X370, what would you expect the usage of that product to be?" He replied, "If I saw something with that, I would have to say that appears on first sight to be more than fuel specification". He also said, "I would say when you start including things like sulphur, water and sediment carbon residue, it does indicate more a fuel type requirement than a chemical requirement". He said that while X370 does not comply with the Australian Automotive Diesel Fuel Standard AS3570 he would use it in his diesel-powered tractor, (and without concern), but he would not put it in his turbo diesel.

83 Mr Peter Horne gave sworn oral evidence on behalf of the applicant in support of his written statement dated 17 December 2000 (exhibit A49). Mr Horne is a general sales manager employed by CHT Australia Pty Ltd. He holds a Bachelor of Applied Science degree and an MBA degree. In 1988 he commenced work with a company that manufactures chemicals for various industry usages and the range of chemicals produced included some solvent products. In 1996 he changed employment to a position of general manager of Solchem Victoria Pty Ltd (Solchem) which at that time was a subsidiary of Mobil. He was employed by Solchem until late 2000. Solchem is a supplier and distributor of solvents and in 1998 Solchem purchased the applicant's solvent business in order to expand its market penetration from between 40% to 50% of the Victorian distributor solvent market to over 60% after the acquisition.

84 Mr Horne clarified his statement that Solchem purchased the applicant's solvent business in 1998. Solchem did not purchase the part of the applicant's business of selling bulk quantities of product direct to the applicant's customers, as Solchem was not competing with the applicant in that area. Solchem in fact purchased the applicant's retail customer list subject to an agreement that the applicant would discontinue selling to them in small volumes such as drums or packages. In other words Solchem acquired from the applicant only its smaller packages retail business.

85 Mr Horne stated that Solchem sells a broad range of chemicals and solvents which include Mobil and other oil company products. A number of Mobil solvents are also branded and sold by Mobil as fuels for example, one of Solchem's largest selling products is marketed and sold under 2 different brandings, as Certrex 70 and Certrex 72. When sold free of excise as Certrex 70 it is widely used as a solvent and when sold as Certrex 72 it is a heating oil and excise is charged on that product at the rate applicable to heating fuels. Certrex 70 can also be blended to produce more specialised solvents such as AC cutter and sovacide PY, which is sold to oil refineries. Solchem sells millions of litres of Certrex 70 each year to hundreds of regular customers. Mr Horne's statement includes the following extract:

…
25 I have been shown a specification for a product called X370. I have been advised that Gladstone sold X370 to other resellers in the second half of 1996 within a price range of $0.36-$0.44. To my knowledge, this price was competitive with Solchem's buying price, at that time, for Certrex and other heating oil type solvent products. If Solchem had been able to obtain such a product from Gladstone within that price range, Solchem would have had no difficulty in selling large quantities of X370 to its customers.

86 Mr Horne was shown exhibit R25, which is Mobil's Certificate of Quality which details specifications for Certrex 70, and T document T24, p 46, which details the specifications of the Jayta - "Stolt Lily" imported product which the applicant renamed "Specification - X370". He was asked to compare the 2 products. He said that X370 could probably be used in areas where the applicant was selling general cleaning type solvents such as degreasing and bitumen cutting.

87 Mr Gregory Richard Shuptrine gave sworn oral evidence on behalf of the respondent in support of his written statements dated 4 December 1998 and an undated statement (exhibits R28 and R29). Mr Shuptrine is a chemical engineer with 28 years practical experience particularly in the Australian oil refining and marketing industry. This employment has been followed by 3 years to date as an independent consultant to oil refining and marketing companies. The following extracts have been taken from his statements:

…
2 I have been approached by the Australian Customs Service to utilise my experience and expertise to advise them on the nature of certain cargoes of hydrocarbon material imported into Australian [sic] in 1996. I have accepted this brief on the basis that I have relevant experience to be able to give an expert opinion on the matter put before me. I base my claim to expertise in this matter on the following relevant experience:
• Performance for in excess of 15 years of various technical and managerial roles in an Australian oil refinery where I was from time to time responsible for the laboratory and all compliance testing for finished product manufactured at the refinery, for the operation of the refinery to produce products for the market, and to work with customers on perceived quality problems. I am aware of the blendstocks generally available within refineries to generate the finished products demanded in the Australian marketplace. In this context I have served on a Standards Australia committee to review and advise on changes required to an Australian Standard covering products required in the marketplace.

• Performance for in excess of 7 years as the General Manager of supply and shipping for a major Australian oil refiner and marketer. In this role I was responsible for the acquisition of feedstocks, blendstocks and finished products from both the international and domestic markets of appropriate quality to meet the timely demands of the company's Australian market, for arranging supply to seaboard terminals while keeping coastal shipping requirements at an economic minimum, and for the protection of product from cross contamination during the transport operations. I was also responsible for the operation of the national terminal network (bonded stores).

• At various times in my career I have served on Federal and State Government committees to investigate various aspects of the use of petroleum based fuels with particular reference to how variations in certain quality parameters may affect the cost of manufacture in an oil refinery, the efficiency of energy use within the ultimate vehicle and the pollution potential for the total environment. Such committees also had members from the automotive industry so I became well aware of the end user requirements of the fuels I was responsible for either manufacturing or importing at the time.

The task and material provided

3 Representatives of the Australian Customs Service have briefed me on the nature of the question on which they have sought my advice. It is my understanding that they seek to find whether any or all of three imports in 1996 of a material designated X370 are properly described as "automotive diesel oil". They have sought my advice on whether the Australian Standard for Automotive Diesel Fuel is definitive on what can be considered automotive diesel oil to the extent that deviations would make such description impossible. They have also sought my advice on whether the imports could be considered industrial diesel fuel or marine diesel fuel based on my knowledge of the commercial use of these fuels. Finally, they have sought my advice on whether certain aspects of the X370 specification are relevant if the product was to be used as a commercial solvent.

4 To assist me to understand the procedure Customs must follow in deciding the appropriate classification of the cargoes in question, the Australian Customs Service provided me with the full text of "General Rules for the Interpretation of the Harmonized System". Classification '2710.00.20' consists of the descriptive designations: (a) automotive diesel oil; (b) industrial diesel fuel; (c) marine diesel fuel. In essence my task is to advise if any or all of the three cargoes of import can be designated by the descriptive titles of this Classification reference.

5 Australian Customs Service has also provided me with the following information in addition to the above which forms the basis of the opinion presented:
• A single sheet of paper bearing the title "Specification - X370" which Customs has advised me is the specification set by the importer for the product in question;

• 3 laboratory Certificates of Quality from SGS (Subic Bay), Inc. relating apparently to loading quality reports for three cargoes of a product entitled on the laboratory reports as "Solvent X-370", these reports are dated 03 August, 19 September, and 29 October all of 1996;

• 2 laboratory Analysis Certificates from Chemtech Services Pty Ltd of Footscray and 1 Analytical Report from SGS Australia Pty Ltd relating apparently to receiving characterisation tests for the three cargoes of "Solvent X-370" identified above;

• 1 laboratory Report of Analysis from Australian Government Analytical Laboratories relating to a sample entitled "Oil". The report bears the date of 20 November 1996 and appears to match the quality of the third of the above cargoes from which the sample was apparently drawn;

• 4 prior opinions - 2 by B.D. Batts of Macquarie University dated 12 and 27 August 1997 and 2 by Professor D.L. Trimm of University of New South Wales dated 3 February and 9 October 1997. Generally, these reports have not been relied upon in developing the opinion below. It however is noted that the 12 August opinion of B.D. Batts contains another analysis from SGS (Subic Bay) relating to the first cargo which is dated 04 August 1996. This analysis is also used in the opinion presented below.

Issues

The Australian Standard for Automotive Diesel Fuel (AS 3570)

6 In considering the appropriate descriptive designation, the Australian Standard for Automotive Diesel Fuel which was current at the time of the imports (AS 3570-1988) has also been consulted. It is however essential to recognise that this Standard does not in fact rigorously define what can be used as automotive diesel fuel in this country even though that is its intention. The Standard is not given the force of law in any Australian statute that would restrict the entry or sale of materials not in compliance with this Standard.

7 Australian Standards have been developed cooperatively by the local manufacturers of petroleum products (the oil refiners) and the automotive industry in conjunction with various interested government representative bodies and testing authorities. The Standard is meant to define quality to the extent that manufacturers of automotive engines can rely that the product quality generally available to the motoring public will consistently meet these requirements. Australian petroleum product manufacturers have translated the Australian Standard into their own finished product guarantee Specifications (see Attachment A for an example) which are in full compliance with the Standard.

8 Not all product consumed in the country is produced by the domestic refining industry. Product that enters the market outside of the established domestic oil refineries and their terminal system (bonded stores) does not have to meet the Australian Standard or the local refiners Product Specifications providing only that there are customers who are willing to buy the material for their own use or sell it through their own retail outlets. The independent chains of retail outlets are one set of potential buyers of imported material that may or may not be totally in compliance with all tests within the Australian Standard. The concern of any such buyer of material not in compliance with the Standard would be the more basic requirement that the product is "suitable for its intended use". The use of this term in this opinion means that deviations outside the Standard would be acceptable providing only that the customer is not likely to become aware of any fuel related problems during use.

9 As the material to be described in this instance relates to material imported by a non-refiner through independent terminal operators, compliance with the Australian Standard is not the only requirement to determine the proper designation of the material. Where a cargo complies totally with the Australian Standard the material can be properly considered as automotive diesel. However, when it is not in total compliance, then whether it can still be considered as a diesel fuel (automotive diesel, industrial diesel or marine diesel) will depend on the material's suitability for use in the relevant diesel engine given the specific non-compliance and other quality aspects of the specific fuel.

The Specification for Product 'X370'

10 In Attachment B the Specification for X370 is tabled against the Australian Standard for Automotive Diesel Fuel AS3570-1988 and those aspects of the Specification referenced in Attachment A required by the Australian Standard or the X370 specification. The X370 specification has 12 quality tests. Of these 12, only Colour and Pour Point are not referenced in the Australian Standard but Colour is part of the Attachment A specification. Colour is a quick test that can readily show contamination with heavier products that may arise during transportation of the fuel (Flash Point is used in the same way for detecting lighter material contamination). As such contamination can adversely affect the quality of the finished fuel, Colour is frequently included as a test on production, loading and discharge as a quick test to determine if there is a need to check further for possible quality degradation through contamination somewhere within the transportation chain. Colour has no bearing itself on the quality of the product within a diesel engine and is therefore not part of the Australian Standard. Pour Point will be discussed in depth below.

11 Of the remaining 10 specifications of X370, the specification limits are in complete accord with that of the Australian Standard except for Viscosity and the Distillation, 90% recovery temperature. In the case of Viscosity, the Australian Standard calls for an acceptable range of 1.9 to 5.5 centistokes whereas the X370 sets the range at 1.8 to 5.5 centistokes. In theory X370 could then include hydrocarbons lighter (and therefore of lower viscosity) than would be allowed in the Australian Standard if nothing else restricted this freedom.

12 The requirement that viscosity should reliably fall within a defined range is of importance to the proper working of the fuel injection system in a diesel engine and is therefore an important test in the Australian Standard. However, given that the Australian Standard allows a 3.6 cSt viscosity range and the X370 a 3.7 cSt range, the degree of variation between the two specifications is not seen to be significant and would not affect the ability to use X370 satisfactorily in a diesel engine even if the material supplied was at the low end of the specified range providing all other aspects of quality are consistent for this use.

13 In the case of Distillation, 90% recovered the Standard sets that this temperature should not exceed 357 degrees Centigrade (675 degrees Fahrenheit) while X370 calls for it not to exceed 370 degrees Centigrade (698 degrees Fahrenheit). This 13 degree Centigrade difference would allow the X370 material to include hydrocarbons heavier (and therefore higher Viscosity) than the Australian Standard would allow. Note that this variation has the opposite effect of the allowed change in Viscosity and would tend to bring the Viscosity toward the heavier end of the allowed range if nothing else in the Specification where to restrict this freedom. Therefore, while these two Specification limits are not in total agreement with the Australian Standard, it is not physically possible that both of these tests can fall outside of the Australian Standard in the same product.

14 Upper limits on boiling point of fuel materials can have importance in smoke generation and cylinder deposits within diesel engines used under varying loads and temperatures (an automotive diesel as opposed to the other classes of diesel engine) and are therefore important for inclusion within the Australian Standard. It is thought that above this temperature, hydrocarbons of complex ring structures can be present in the fuel and that these are the materials which lead to the smoke and deposits. However, the 675 degree Fahrenheit, limit which has been translated to metric for the Standard, has been in place for a number of decades and has not been challenged as it usually does not present a limitation to the manufacturing process (more often the Cloud Point requirements restrict inclusion of high boiling point materials).

15 Inclusion of higher boiling material will only have an adverse effect on an engine if it is consistently sustained. It is not likely that a single tank full in the average diesel vehicle will generate a problem recognised by the user especially considering the likely impact of dilution before use both in the retail merchants tanks and the fuel tank of the vehicle itself. Thus, a fuel differing from the Australian Standard may still be suitable for use as an automotive diesel fuel depending on the quality of the other aspects of the fuel in each instance.

16 The Australian Standard calls for three tests not referenced at all within the X370 specification. These tests are Cloud Point, Cold Filter Plugging Point and Oxidation Stability. Oxidation Stability is a test to determine potential for changes in the fuel over prolonged storage. Some fuels will generate gums and sediment on prolonged storage that can plug diesel fuel filters (in the extreme interrupting normal engine operation) or can cause engine deposits. This requirement is of most concerned in rural use of diesel where product can in some cases remain in storage for many months. Most retail outlets turnover their diesel stock on about a weekly basis so this is not of concern generally to that market.

17 Pour Point, Cloud Point and Cold Filter Plugging Point are all various measures of the same thing. Each is a measure of the tendency of a fuel to produce wax crystals which can impede fuel flow under cold ambient conditions of use, particularly in an engine that has to start from cold during cold weather. Pour Point was used for a long time as the measure of this tendency for diesel quality. It measures the temperature at which there is sufficient wax formed in a test dish that is gradually being cooled such that the surface of the liquid no longer "pours" as the dish is tilted. Cloud Point has replaced Pour Point for diesel specification in recent years. It measures the ability of a sample of fuel to transmit a beam of light without loss of light intensity. As the fuel is lowered in temperature, wax crystals begin to form in the liquid and these crystals can scatter light causing less to be received on the far side of the sample. When this occurs such a sample will show a visible "clouding" or haze leading to the name of the test. A sample will reach its Cloud Point before it has reached its Pour Point. Pour Points are typically about 4 to 6 degrees Centigrade lower than the Cloud Point. The Cold Filter Plugging Point lies between these two limits and seeks to measure the temperature at which the formation of waxes under progressively cooler conditions will generate wax crystals large enough to plug a fuel filter. X370 sets a limit for Pour Point of 0 degree Centigrade maximum which would allow it to meet the Cloud Point requirements of the Australian Standard during certain seasons.

18 Of all the tests in the Australian Standard, the Cetane Number (or its altemate test of Cetane Index) is of paramount importance and will frequently be the key specification that will establish the amount of fuel that can be obtained from a given feedstock within a refinery. The Cetane Number test involves that actual running of a constant speed diesel test engine on a fuel sample and matching the engine performance achieved against a blend of two standard fuels, the reference fuel. The higher the content of cetane, also known as n-hexadecane (a C16 straight chain hydrocarbon), in the reference fuel generating the same performance, the higher the Cetane Number for the fuel being tested. The Cetane Number is a difficult and time consuming test procedure. The Cetane Index is a correlation of easier tests (Distillation and Density) that has proved to provide a satisfactory estimate of the Cetane Number for normal boiling range fuels.

19 Diesel engines operate cleaner and with fewer problems as the Cetane Number is increased and thus a Minimum Cetane Number is included in the Australian Standard. However, if the Cetane Number in the fuel specification is increased, less material meeting this quality can be extracted from available crude oils. Therefore, in the setting of Standards this specification usually represents a compromise between desirable quality and potential availability (and also cost) of the fuel.

20 If the material known as X370 were imported to be used as a Solvent, then tests relating to solvent power and evaporative characteristics only would be relevant in the Specification of the material. Solvent power effectively is a measure of the ability of one material to dissolve another. High solvent power materials can dissolve more of a given material per unit volume of solvent than low solvent power materials can. Solvent power relates to the types of hydrocarbons within the Solvent with materials of high aromatic hydrocarbon content displaying high solvent power and materials of high straight chain hydrocarbon content displaying low solvent power.

21 In theory Cetane Number could be used as a rough guide to hydrocarbon types within a sample and that in turn could in theory be related as an approximation to solvent power. However, when a high solvent power is required then the Cetane Number should be as low as possible (consistent with maximising aromatic hydrocarbons in the product) so the setting of a Minimum limit on Cetane Number would be inappropriate. In my experience I have never seen Cetane Number or Cetane Index as part of any specification for a material intended for use as a solvent.

22 The Copper Strip Corrosion and Ash tests included in the X370 specification also have no relevance to a use as a Solvent but are once again essential if the material is intended for use as diesel fuel. Diesel engines frequently have copper or brass parts in the fuel injection system. The Copper Strip Corrosion test is meant to identify the tendency of the fuel to corrode such metals to the detriment of the engine life if the corrosion is high. The Ash test relates to the amount of deposit left after the sample has been combusted under test conditions.

23 Material that is consistent with automotive diesel fuel specifications is sold into the Solvent market within Australia particularly as a dilution material for bitumen. Such material however has a number of things done to it which would make the fuel unsatisfactory for use in a diesel engine. These materials are usually dyed a bright colour so as to be easily detected if blended into diesel. They will have diesel boiling range materials of high aromatic content added to otherwise acceptable diesel to boost solvent power (which would also lower the Cetane Number if it were tested). They also have other materials blended into them to make their quality for use in the diesel engine poor. Because of these aspects, such material has been allowed into the solvent market without attracting the automotive diesel excise duty. Such products have their own separate specifications that do not include tests for Cetane Number or usually for Corrosion. The imported material in question has not be (sic) dyed or altered to denote a non-diesel use is intended according to the test reports.

24 Thus, it is my conclusion that the X370 Specification requires tests that relate so closely to a material that will be burned in a diesel engine that it seems improbable that the material has any other intended use. The specific test results required are also consistent with its use in a diesel engine in most circumstances. Finally, the Specification is not consistent with specifications normally published when the material is intended for use as a solvent.

Specific Analysis of Materials Imported on "Stolt Lily" and "Stolt Sunrise"

25 Attachments C, D and E table all the SGS (Subic Bay) loading sample test reports by their respective transporting vessel which have been presented or found in the Batts opinion (see paragraph 5 above) and also the limited test results available from Australian laboratories on arrival of these cargoes. These various cargoes are displayed in these Attachments against the Australian Standard requirements for Automotive Diesel Fuel with the reported Pour Point converted to Cloud Point based on a very conservative 6 degree Centigrade difference. The Cloud Point limit for Victorian use (designated "VIC") from the specification in Attachment A for the period of time around the arrival of the vessel (according to the date of the Australian laboratory test results) has been used as the appropriate limit as the Australian Standard is less specific.

26 Attachment C for the "Stolt Lily" cargo shows that the import was made up of material from two tanks of differing quality - SGS (Subic Bay) test reports dated 3 and 4 August. The arrival sample tested by Chemtech on 26 August shows minor impurities but is otherwise consist with the materials loaded. Attachment C shows every aspect of the material is consistent with the Australian Standard for Automotive Diesel Fuel for use within the Victorian supply area under the weather conditions typically prevailing at the time of the vessel's arrival.

27 Attachment D for the "Stolt Sunrise" cargo shows the loading report by SGS (Subic Bay) dated 19 September and the tests of two arrival samples from two separate tanks on the ship both dated 17 October. The results show that the cargo may have suffered slight weathering but no contamination during transit. "Weathering" is the loss of some lighter boiling components due to "tank breathing" and tank turbulence during transit and is indicated by the increase in both Density and Flash Point on arrival. Attachment D shows every aspect of the material is consistent with the Australian Standard for Automotive Diesel Fuel for use within the Victorian supply area under the weather conditions typically prevailing at the time of the vessel's arrival.

28 From this it can be seen that there is complete compliance for the cargoes identified in Attachment C (M/T "Stolt Lily") and Attachment D (M/T "Stolt Sunrise") and therefore both cargoes are properly designated by the descriptive title as Automotive Diesel Fuel.

Specific Analysis of Material Imported on Sampet Hope

29 Attachment E for the "Sampet Hope" cargo shows the loading report by SGS (Subic Bay) dated 29 October and the arrival tests performed by SBS Australia dated 20 September (note that these dates are not consistent in that the arrival in Australia is apparently before the vessel was loaded in the Philippines). This Attachment also includes relevant results from the Australian Government Analytical Laboratories test report dated 20 November. The results once again show good transport with no detectable contamination.

30 Attachment E shows the tests are largely in compliance with the Australian Standard with only the Distillation, 90% recovered temperature falling outside of the limits set by the Standard. However, the most important quality factor for the fuel if it is to be used in a diesel engine is the Cetane Number and in this case the quality is well in excess of the minimum required by the Australian Standard. In this circumstance of high Cetane Number, the use of a fuel with a 90% recovered distillation temperature 10 degrees Centigrade above the Australian Standard limit is not seen as significant and therefore the fuel would be suitable for use as an Automotive Diesel Fuel.

31 I base the conclusion in paragraph 30 above on the fact that a high Cetane Number is known to have a beneficial effect in reducing smoke emissions from a vehicle due at least in part to earlier onset of burning within the cylinder and therefore more complete combustion. A high Cetane Number is also consistent with a low content of complex ring structures in the fuel which are the cause of engine deposits. This fuel is also of very high quality on Ash and Carbon Residue tests that also imply that there will be no problem with deposits in the cylinder despite its higher boiling range. The increased burning time in the cylinder (from the high Cetane Number) and the lower content of deposit related hydrocarbons both will combine to make the higher 90% recovered distillation temperature present no perceptible problem in automotive diesel service. It is therefore my opinion that this fuel also is properly designated by the descriptive title as Automotive Diesel Fuel.

Industrial and marine diesel fuels

32 Automotive Diesel Fuel (also "automotive diesel oil", the names being interchangeable) is only one of the products within the Chapter 27 Tariff Schedule classification designated as '2710.00.20', the others being "industrial diesel fuel" and "marine diesel fuel". Attachment F presents in tabular form two Australian specifications for fuels falling into the latter two descriptions comparing these to the Australian Standard for Automotive Diesel Fuel. There is no Australian Standard for these products. This table shows that hydrocarbons substantially heavier than acceptable for Automotive Diesel Fuel can meet these specifications (refer to the Specific Gravity, Kinematic Viscosity, Ash and Carbon Residue tests). Note also that there are no Distillation range limits on these products.

33 Industrial and Marine diesel applications differ from the Automotive diesel in that such engines tend to be run for long periods at relatively constant speed. As such, they can burn heavier fuels efficiently (due to constant hot operation), fuels that would not be satisfactory for use in automotive service where variable load and start-stop operating conditions are normal. Marine Diesel engines as an example do operate satisfactorily on Fuels based on the heaviest materials in crude oil. Such heavy fuels contain a higher energy content than Automotive Diesel Fuels but engines burning these fuels will require more maintenance due to increased engine deposits. However, the very low cost and higher energy content of these fuels compared to Automotive Diesel Fuels makes their use economic in this case.

34 Only the third cargo is in question as to its proper designation as Automotive Diesel Fuel due only to the Distillation, 90% recovered temperature falling 10 degrees Centigrade outside of the limit set within the Australian Standard. The Australian Standard itself cannot be taken as the definitive specification when imported product is being considered which is the case for the referenced cargoes. However, from the above there cannot be any question that the material supplied in this cargo is properly designated by the descriptive titles as either an industrial diesel or marine diesel fuel if it fails to be seen to be described as automotive diesel fuel.

Conclusion

35 In conclusion, it is my considered opinion that all three cargoes of import designated as X370, are properly described under the descriptive titles in Customs Tariff Schedule 3 Chapter 27, reference number 2710.00.20 being automotive diesel oil, or industrial diesel fuel, or marine diesel fuel. It is further my opinion that all three cargoes are properly designated by the descriptive title of automotive diesel oil as all three cargoes were completely suitable for use in that market. If for any legal reason it is found that any of the three cargoes cannot be properly described as automotive diesel fuel, there is no question in my mind that all are properly described under the less restrictive designations as either industrial diesel fuel or marine diesel fuel.

88 Mr Shuptrine indicated that Australian oil companies will, on occasion, release material with a waiver, where that material does not fully comply with their specifications for that product, using their judgment as to whether or not the market will be disadvantaged by the release of that product. Such "off-spec" product could be material that would be totally useable by a purchaser.

89 Mr Shuptrine expressed the view that the specification for the gas oil exported by Jayta via the "Stolt Lily" and which was re-named specification X370 by the applicant, was most probably from a normal production run of material produced by a Philippines refinery without modification. He said that he would have no hesitation in saying that the gas oil would immediately qualify as a marine or industrial fuel. He also opined that the fuel which was imported on the "Stolt Lily", even though 2 tests required by AS3570 (the Australian automotive diesel fuel standard) were not performed on it by SCS in the Philippines, would be in compliance with AS3570. He said that it was only the gas oil imported by the applicant on board the "Sampet Hope" (the third shipment), where the compliance issue was in question, because it had a higher distillation end point than the Australian Standard would allow. Therefore Mr Shuptrine's expressed view was "that fuel imported on the Stolt Lily could be used as automotive diesel fuel … and I believe it would be in full compliance with the Australian Specification". He was referred to the SGS certificates of quality (T25, pp 93 and 94) for the "Stolt Lily" imported gas oil and said, "Those certificates of quality relate to what I would call a diesel fuel, and in my mind an automotive diesel fuel". Mr Shuptrine said that in his view, X370 is not a heating oil.

90 Mr Shuptrine concurred with Mr Gunn's evidence that heating oil is preferable to automotive diesel fuel in subterranean mining engine use, due to the lower emissions of heating oil. Mr Shuptrine said that the cost for a refinery of manufacturing heating oil was "substantially greater" than the cost of manufacturing diesel oil, which would add to the user's cost and act as a deterrent for use of heating oil instead of automotive diesel fuel. Mr Shuptrine contended that heating oil is not efficient for sustained use in a diesel engine and that the viscosity difference between the fuels requires a need to add a lubricity improver to heating oil in order to avoid premature engine wear.

91 Mr Richard Bryant gave sworn oral evidence on behalf of the respondent in support of his written statement dated 19 April 2000 (exhibit R30). Mr Bryant is currently employed as solvents logistics and supply manager for a division of the Shell Company of Australia Ltd (Shell) called "Chemicals". His position involves responsibilities in areas of acquisition by Shell chemicals of all solvents purchased for resale from various suppliers and for the movement of products. He stated that he has extensive familiarity with the solvent market in Australia and New Zealand. Prior to his present position, Mr Bryant was the solvents marketing manager for Shell.

92 The following extracts have been taken from his written statement (exhibit A30):

…
4 I have been informed that the applicant in this case imported three shipments of a product named "Solvent X-370" in the last half of 1996 and that the quantity of product in each shipment was approximately 1.2 million litres.

5 I have also been provided with a sheet setting out the purchase specification for this product (a copy of which is annexed marked "A") and asked if I could identify it. While Shell is the only company which, to my knowledge, uses X in a product code to denote a solvent, "Solvent X-370" is not a Shell product. The product does not appear to be a solvent in normal industry terms. Shell would not market it as such. The product appears to be a kind of diesel fuel or close to diesel fuel. I say this because in my experience, Cetane Index is only ever used for diesel fuel and the inclusion of Carbon Residue in the specification is inconsistent. Tests for Ash, Cetane Index, pour Point and Carbon Residue are not normally undertaken in the tests of solvents, and it is doubtful whether water and sediment would be specified for a solvent either.

6 Of the solvents marketed by Shell, most are locally produced and derived from fuel products close in composition to kerosene or falling within the kerosene range. The rest are imported solvents which are oxygenated rather than petroleum based. None of these are close in the carbon distribution to diesel fuel. By way of example, alcohol.

7 Solvents marketed by Shell are widely used in a number of industries, most notably -
• the paint industry

• adhesives manufacturing;

• agricultural manufacturing; and

• mining.

One major difference from diesel fuel is the lower boiling point, highest about 250°C in Shell products. The importance of low boiling point in solvents as compared with diesel fuel in the market place, is that generally solvents are designed to evaporate quickly. The higher the boiling point the more difficult it is for that to occur. In addition, the higher the boiling point the greater potential for there being left residues after use.

8 In addition, the high content of sulphur in diesel fuel and like products renders them less acceptable to the market as solvents. It is necessary to remove the sulphur by application of hydrogen treatment processes. I note that "Solvent X-370" provides for maximum sulphur content of .05. I am also advised that the product imported when tested, contained sulphur; 0.426 "Stolt Lily"; 0.436 "Stolt Sunrise"; 0.45 "Sampet Hope". In my opinion, solvents containing that content of sulphur, would not be marketable for direct use in most applications. It would be necessary to remove the sulphur, as otherwise, a pungent acidic irritating smell could be perceived on application. Thus, if Gladstone Chemicals intended to market a solvent with that level of sulphur content, the purchaser would have to remove the sulphur content or somehow overcome the sulphur effects.

9 From my knowledge, there is no significant demand for diesel fuel-like solvents in any of the above industries and none of the major oil companies produce or market such solvents. The demand in those industries is for quality solvents tailored to the needs of particular applications, as all customers buy solvents on their specifications rather than price.

10 Diesel fuel-based products may be capable of being used as solvents in low-grade applications where the quality of the product is not as important. For example, such a product could be used as a degreasing agent or as a bitumen cutter. However, over the relevant period from 1996 onwards, there has not been a sufficiently large market for solvents in Australia to accommodate the quantities of the product imported by the applicant.

93 Mr Bryant agreed that Shell sells a product known as mexflux or bitumen flux or heating oil, which is up to 100% diesel fuel. He said that bitumen cutting and bitumen flux were outside his area of expertise and according, his above written comments concerning bitumen followed enquires and discussions with Shell's bitumen marketing manager. In response to cross-examination, he conceded that he had no expert knowledge of the solvents market.

94 Mr Barry Seymour Magor gave sworn oral evidence on behalf of the respondent in support of his written statement dated 16 April 2000 (exhibit R31). Mr Magor was employed as a chemist with the Australian Government Analytical Laboratories (AGAL) from 1968 to 1998. He currently works as a consultant and holds a Bachelor of Science Degree and a Diploma of Applied Science.

95 In order to assess the relevance of Mr Magor's evidence the tribunal must take into consideration the following background, bearing in mind that the matter before the tribunal concerns the applicant's importation of gas oil supplied by Jayta and transported to Australia from the Philippines on board the "Stolt Lily" in August 1996. Alternatively, the product analysis conducted by Mr Magor at the request of the respondent was in respect of another shipment of gas oil transported by Jayta to Australia from the Philippines on board the Sampet Hope in November 1996. Both the "Stolt Lily" shipment and the "Sampet Hope" shipment were supplied to the applicant in accordance with one specification (T24, at 46). This is the specification , which was altered by the applicant by whiting-out the supplier's heading "Gas Oil" and typing in the replacement heading Specification - X370.

Background

1 As a result of a profile being inserted in the ACS COMPILE system against importations of tariff item 2710.00.90, on 15 November 1996 Query Memorandum (Q/M) No. 44157 ( T 16 ) was issued by the Petroleum & Minerals Audit Group of the ACS Commercial Compliance Section. The purpose of the query was for the drawing of a sample of a product entered under this item for testing/identification at the Australian Government Analytical Laboratories (AGAL). A 4 litre sample was drawn on Q/M 44157 on 19 November 1996 and forwarded to the laboratory together with a Material Safety Data Sheet ( T 20 ) and copies of Australian Standard AS 3570-1988 for Automotive Diesel Fuel ( T 30 ) and ASTM Designation D 3699-90 Standard Specification for Kerosene ( T 31 ).

2 The goods were described as "Solvent X-370" of Philippines origin and were entered on Entry for Home Consumption Nature 10 No. 2M 6318 0252H ( T 8 ) under tariff item 2710.00.90.

3 The AGAL Report of Analysis registration number V96/36229 was received on 26 November 1996 ( T 17 ). It read in part - "The results of Analysis have been compared against Australian Standard AS 3570-1988 (Automotive Diesel Fuel) and ASTM Designation D 3699-90 (Standard Specification for Kerosene). The results are consistent with it being diesel fuel". A profile matching procedure was also carried out, with the sample being compared against that of diesel fuel, heating oil and kerosene. These results indicated that the sample was diesel fuel only.

96 The following extracts from Mr Magor's statement are included in these Reasons, subject to the above-mentioned relevance considerations:

…
4 On or about 19 November 1996, I received the sample V96/36229 from John Charleston of Customs, who requested that we ascertain whether the product was kerosene, heating oil or diesel fuel.

5 In addition to the sample, Mr Charleston also gave me -
• a completed Sample for Laboratory Examination form signed by Mr Charleston ("BM 1");

• a copy of SGS Certificate of Quality no. 09681/10/96 ("BM 2");

• a copy of an extract from the Customs Tariff, being in respect of tariff heading 2710 ("BM 3"); and

• a handwritten note from John Charleston, undated, asking "IS IT Kerosene OR Diesel?" ("BM 4").

6 I reviewed copies of AS 3570 - 1988 (diesel fuel) and ASTM 3699-90 (kerosene) ("BM 5") and Material Safety Data Sheets for the product ("BM 6") also provided by Customs.

7 I sent some of the sample to Inchcape Testing Services in Footscray, experts in the testing of fuels, and asked Mike Richards of Inchape to undertake tests of the sample. Inchcape subsequently tested Flash Point, Viscosity and Distillation Range and provided a report to AGAL based upon the results of those tests ("BM 7").

8 AGAL also tested the sample by Gladstone's chromatography in order to obtain a TPH (Total Petroleum Hydrocarbon) profile, which was then matched with other profiles. Gladstone's chromatography involves dissolving a small quantity of the product in a solvent (which does not interfere with the analysis) and, using helium, pumping it through a very long, narrow coil which is heated up to 300°C. The heating of the sample and bonding of some of the chemical compounds in the sample with the interior coating of the coil causes a breakdown of the sample into its many compounds. These compounds travel through the coil at different rates and pass into a detector at different points in time, which detector registers electronically the amount of each compound. A graph is then produced recording a series of "spikes" along a horizontal line calibrated in seconds, with each spike representing a separate compound. The vertical line on the graph represents the degree of electronic response, so the greater the quantity of a given compound, the taller the spike. The process involves the use of a hot oven to heat up the sample commencing at about 40°C in a controlled manner.

9 Annexed to this statement are TPH graphs for the following products:-
• sample of ordinary diesel fuel purchased from a service station ("BM 8");

• sample of heating oil ("BM 9");

• sample of kerosene ("BM 10");

• sample V96/36229 ("BM 11").

10 There was a very close match between the diesel fuel profile ("BM 8") and the profile of sample V96/36229 ("BM 11"). There were variations between these two profiles but I did not regard these as significant, especially as some variations in the profiles of different diesel fuels are to be expected. There was no close match between the sample profile and the profiles for either heating oil or kerosene.

11 After receiving the test results from Inchcape Testing Services in Footscray ("BM 7"), I noted that ninety percent of the sample was recovered on distillation (365.6°C). That was higher than permitted under AS 3570/1998 (maximum 357°C). I did not regard that difference as significant because -
(a) there was a very close match between the profile for sample V96/36229 and the diesel fuel profile;

(b) the test result for kinematic viscosity @ 40° (4.28) fell within the range for automotive diesel fuel provided by AS 3570 - 1988 (1.9 - 5.5); and

(c) the test result for flashpoint (79°C.) was well above the minimum allowed under that standard.

12 For the above reasons, I was and am of the view that the sample V96/36229 was diesel fuel . [Emphasis added.]

97 Mr Magor gave the tribunal a very professional explanation of the scientific analysis methods referred to in his above-mentioned statement, and in particular AGAL's Gladstone's chromatography test graphs. Despite lengthy cross-examination, Mr Magor did not resile from his scientifically-based opinion that AGAL's analysis of the sample of gas oil supplied by Jayta and shipped to the applicant on board the "Sampet Hope" in 1996, showed that the gas oil was diesel fuel.

Evidence concerning the delegation of authority matter

98 Mr John Michael Drury gave evidence on behalf of the respondent. He is presently employed as Deputy Chief Executive Officer (Border) of the Australian Customs Service and from 6 September 1993 to 8 October 1993 he acted in the position of Comptroller-General of Customs.

99 On 30 September 1993, Mr Drury signed an Instrument of Delegation of Authority (Instrument) in relation to certain powers of his position under various Acts. A copy of the Instrument is attached to his written statement dated 19 June 2000 (exhibit R2). The Instrument nominates his delegation of authority to numerous officers of Customs identified by the number of the position that each officer respectively occupies. The Instrument groups positions by seniority from position 30001 up to the most senior position on the list of 31640 for a Regional Manager, and delegates his power for the recipient delegatee to act pursuant to a nominated section of a particular Act (eg s 165 of the Customs Act 1901 (Cth), s 80 of the Excise Act 1901 (Cth), s 103 of the Trade Marks Act 1995 (Cth), etc). The Instrument also indicates the limit of authority restriction, if any, applicable for each recipient delegatee.

100 The Instrument is prepared by the Customs Legal Branch for the Comptroller-General's signature, and reissued intermittently every 3 to 6 months. A repository of delegations databank is computerised and updated or amended by the legal branch in accordance with approved recommendations from various state branches of Customs.

101 Mr Drury said that it was not his intention to delegate his powers under s 165 of the Excise Act 1901 (Cth) in respect of positions numbers 31551, 31552, 31586, 31587, 31588, 31589, 31590, 31591, 31592, 31593, 31594, 31395 and 31639 at the time that he executed the Instrument on 30 September 1993. It was his intention to delegate his authority to the above-mentioned numbered positions in respect of s 165 of the Customs Act 1901 (Cth). He contends that the Delegation of Authority to s 165 of the Excise Act 1901 (Cth) to the above-mentioned numbered positions was the result of a clerical error in the preparation of Sch 1 to the Instrument.

102 Mr Drury said that he would not have signed the Instrument if he had thought that it delegated his powers to the above-mentioned numbered positions under s 165 of the Excise Act 1901 (Cth) rather than s 165 of the Customs Act 1901 (Cth); he would have requested that the references to the Excise Act 1901 (Cth) be altered to Customs Act 1901 (Cth) if he had been aware of this clerical error.

103 The following relevant extracts are from the Excise Act 1901 (Cth) and the Customs Act 1901 (Cth):

Excise Act 1901

CEO may make by-laws

165. (1) Where:
(a) an item of an Excise Tariff, or a proposed item of an Excise Tariff, is expressed to apply to goods, or to a class or kind of goods, as prescribed by by-law; or

(b) under an item of an Excise Tariff, or a proposed item of an Excise Tariff, any matter or thing is expressed to be as prescribed or defined by by-law;

the CEO may, subject to this Part, make by-laws for the purposes of that item or proposed item.

(2) Where in a section of an Excise Tariff, or a proposed section of an Excise Tariff, any matter or thing is expressed to be as prescribed, defined or declared by by-law, the CEO may, subject to this Part, make by-laws for the purposes of that section or proposed section.

Excise Act 1901

Recovery of overpayments of refunds, rebates and drawbacks

80. (1) Where an amount has, in whole or in part, been incorrectly paid to a person as a refund or drawback of Excise duty, the person to whom the amount was paid shall, on demand in writing being made by the CEO, pay to the Commonwealth an amount equal to the amount, or the part of the amount, incorrectly paid and, if the person fails to pay to the Commonwealth the amount demanded within such period as is specified in the demand, the amount may be recovered in a court of competent jurisdiction as a debt due to the Commonwealth.

(2) Where a rebate of duty (other than diesel fuel rebate) has been paid to a person and the whole or a part of the rebate was not payable to him or her, the person shall, on demand in writing made by the CEO, pay to the Commonwealth an amount equal to the whole or that part, as the case may be, of the amount of rebate paid to him or her and, if the person fails to pay to the Commonwealth the amount demanded within such period as is specified in the demand, the amount may be recovered in a court of competent jurisdiction as a debt due to the Commonwealth.

Customs Act 1901

Short paid duty etc may be recovered

165. (1) When any duty has been short levied or erroneously refunded the person who should have paid the amount short levied or to whom the refund has erroneously been made shall pay the amount short levied or repay the amount erroneously refunded on demand being made by the CEO within twelve months from the date of the short levy or refund.

(2) For the purposes of subsection (1), a drawback of duty shall be deemed to be a refund of duty.

(3) Where a rebate of duty (other than diesel fuel rebate) has been paid to a person and the whole or a part of the rebate was not payable to him, he shall repay the whole or that part, as the case may be, of the amount of rebate paid to him on demand being made by the CEO within 12 months from the date on which the rebate was paid.

104 Mr Drury pointed out that s 165 of the Excise Act 1901 (Cth) is the power to make by-laws and this power was only intended to be delegated to officers in senior management positions. It was never intended that this power would be delegated to less senior personnel, such as those referred to in the above-mentioned numbered positions.

105 The Instrument executed by Mr Drury on 30 September 1993 involved 68 pages with his authority provided to thousands of positions (in Victoria) in relation to several statutes; a similar Instrument was required to be executed by him for the other Australian states. This was the first occasion that he had issued an Instrument following his appointment to the position of acting Comptroller-General on 6 September 1993.

106 Mr Trevor Eric Walker gave evidence for the respondent in support of his written statement dated 18 April 2000 (exhibit R4). He is presently employed as the National Director, Investigation Excise by the Australian Taxation Office. Prior to February 1999 he held the position of Chief Inspector with Customs in its Investigation Branch from April 1991 until March 1998. During this period, as Chief Inspector, he exercised a number of powers delegated to him, and one of these powers was to make demands for duty under s 165 of the Customs Act 1901 (Cth).

107 On 19 May 1997 and 19 August 1997, Mr Walker issued notices of demand to the applicant for duty short paid. He has since been informed that as the result of a mistake in the preparation of an Instrument dated 6 December 1989, made by the Comptroller-General of Customs Mr Francis Ivor Kelly, his delegated power pursuant to s 165 of the Customs Act 1901 (Cth) was incorrectly expressed as being pursuant to s 165 of the Excise Act 1901 (Cth).

108 Some time prior to 16 May 1997, Mr Walker was informed by his superior that he was to act in his position as the head of Customs Investigation Branch while his superior was on leave for one week. He commenced to act in Mr Johnson's position on 19 May 1997.

109 Mr Walker's next demand for the payment of duty was made in August 1997; he had consulted an officer in the administration area of Customs Investigation Division to confirm that he had the authority delegated to him to make the demand under s 165 of the Customs Act 1901 (Cth), "and the reply was everybody does". He was not given a copy of the Instrument signed by the Comptroller-General of Customs and he has never checked the Instrument; however, he said that he may have been shown the Instrument in the last 12 months. He agreed that he occupied position 31551 in his position of Chief Inspector with Customs and that he signed the notices of demand on the applicant issued in May and August of 1997 as delegate of the respondent. He believed that he had the authority to issue the notices of demand on the applicant when they were issued in May and August 1997, as he had previously issued similar notices of demand under s 165 of the Customs Act 1901 (Cth).

110 Mr Robert Samuel Johnson gave evidence for the respondent in support of his written statement dated 3 December 1999 (exhibit R5). He is at present employed by Customs in the position of Customs Director in charge of the Border Compliance Branch. From 1991 to 1994 he was in charge of the Fraud Investigation Area and from 1994 to 1999 he was the head of the Customs Investigation Branch. In May 1997 he was Mr Walker's direct supervisor and Mr Walker acted in his position while he was away on leave during the week commencing Monday 19 May 1997 until 23 May 1997 inclusive.

111 Mr Johnson said that he believed that he had the power to make demand for payment of duty under s 165 of the Customs Act 1901 (Cth), and he thought that it was proper for Mr Walker to have issued demand notices on the applicant because he was more familiar with the case than any one else was.

112 Mr Johnson gave evidence that he did not have the power to appoint Mr Walker to relieve him from 19 May 1997 until 23 May 1997 because that power was vested only in the Regional Director of Customs. He said that he received oral approval from the Regional Director, Ms Virginia Stretton, to appoint Mr Walker to relieve him prior to making his appointment. He says that "The normal practice of the department (is) to seek approval for higher duties before the event, preferably well before the event, and get the approval of the Regional Director, or the appropriate person, and do the paper work later". He also said that he had never actually seen a copy of the Regional Director's written approval of Mr Walker's appointment to relieve him in May 1997, and presumed that written approval had been given - "because Mr Walker would have complained if he had not got paid. If the appropriate paper work had not gone through". Mr Johnson was informed by Mr Hamlyn-Harris of Mr Walker's earlier evidence that he did not receive written approval of his appointment.

113 Mr Johnson considered that the question of whether or not Mr Walker was appointed to act in his position from 19 May 1997 to 23 May 1997 was irrelevant, as far as his notices of demand issued to the applicant on 19 May 1997 and 19 August 1997 were concerned, because Mr Walker could have issued those notices on his own delegated authority as Chief Inspector in the Investigation Branch.

114 Mr Francis Ivor Kelly was called to give evidence by the respondent in support of his statement dated 6 July 2000 (exhibit R12). Mr Kelly was employed as the Comptroller-General of Customs from 1988 to 1994.

115 On 6 December 1994 he signed an Instrument which is annexed to his statement. This Instrument refers to s 165 of the Excise Act 1901 (Cth) in respect of position 31551, 31552, 31586, 31587, 31588, 31589, 31590, 31591, 31592, 31593, 31594, 31395 and 31639. He contended that it was not his intention at the time of executing the Instrument to delegate the power under s 165 of the Excise Act 1901 (Cth) to these positions and it was intended by him to delegate powers pursuant to s 165 of the Customs Act 1901 (Cth) to these positions. He stated that the mistake appears to have been the result of a clerical error.

116 Mr Kelly considered also that the fact that the mistake was a clerical error is confirmed by the fact that positions numbered 31586 and 31639 have a restriction of $1000 in authority expressed in column 4 of Sch 1 in respect of their Delegation of Authority Schedules. He says that the restrictions of $1000 for each of these positions are nonsensical, in the context of a by-laws power, but are appropriate to the s 165 of the Customs Act 1901 (Cth) power. He also said that section of the Excise Act 1901 (Cth) powers would normally only be delegated to officers in the Inland Revenue Sub-Program. He says that he would not have executed the Instrument in December 1989 if he had thought that it delegated powers to the above-mentioned positions under s 165 of the Excise Act 1901 (Cth) rather than s 165 of the Customs Act 1901 (Cth) and that he would have requested that references to the Excise Act 1901 (Cth) be altered to Customs Act 1901 (Cth).

117 Mr Kelly confirmed that Instruments were prepared by the Parliamentary Services Division of the Customs Legal Services Branch using a computer database. Consolidations of Instruments were prepared for each state every 3 months. Revised Consolidated Instruments were automatically generated by the database in a standard format and they included all approved amendments. Each Consolidation Instrument took effect from a specific date and revoked previous Consolidation Instrument. Following signature by the Comptroller-General of Customs, the revised Consolidation Instrument would be distributed by Legal Services to National Managers with a copy to the various Regional Managers. Mr Kelly said that as part of his inspectoral tasks he would often ask an officer - "Where is your duty statement and list of delegations?" - and only some officers were able to produce them while others said that they were with the Administration Clerk. He felt that it was more of a breach than a practice for customs officers to apprise themselves of their delegated powers.

118 Mr Kelly said that the clerical error in the Instrument first occurred when he signed the Instrument on 6 December 1989. There was some change about that time in the computer software packages or computer print out which caused all of the errors to occur at the same time. The errors were perpetuated in updated Instruments signed by Mr Drury in 1994, which was the last Instrument signed before the "nomad" computer system subsumed the delegation task. Mr Kelly was unaware of whether or not the errors were perpetuated into the nomad system.

119 Mr Kelly said that he expected that an officer who was moved to a position that had delegated power under s 165 of the Customs Act 1901 (Cth), particularly in the Investigation Area, would have checked to see that there was a proper delegation of authority conferred upon him before exercising assumed powers. He felt that it would be a dereliction of duty for an officer to demand payment of duty without checking whether he or she held the power to do so. If an officer did not have the power it should have been dealt with by simply asking another officer with the delegated power, to make the demand.

120 Mr Kelly recalled that, at least until he left Customs in 1994, the reg 116A of the Public Service Regulations 1935 (Cth) required that directions appointing an officer to assume another officer's position on an acting basis, must be made in writing and such a direction would have taken effect on the day it was given.

121 The following statement of agreed facts was provided to the tribunal jointly by the applicant and the respondent, in respect of both the tariff classification matter and the delegation matter:

1 The applicant ("Gladstone") was a reseller and manufacturer, inter alia, of petroleum, solvents and non-automotive fuels.

2 In 1996 Gladstone purchased three parcels of product that it called "Solvent X 370" ("X 370"), being a middle distillate petroleum product, which were shipped to Australia on the Stolt Lily ("the first shipment"), the Stolt Sunrise ("the second shipment") and the Sarnpet Hope ("the third shipment") ("the shipments").

3 The shipments were loaded at Subic Bay in the Philippines.

4 The first shipment was entered for home consumption on 13 August 1996, the entry no being 2M62261045E. Upon its arrival in Australia the applicant arranged for the X 370 to be tested for the following properties:
(a) appearance,

(b) colour;

(c) density;

(d) distillation range;

(e) flash point.

The tests were performed by Chemtech Services Pty Ltd and the results were recorded in an Analysis Certificate dated 27 August 1996.

5 Samples from different parts of the first shipment were tested between 28 July 1996 and 3 August 1996 and 4 August 1996 respectively for the properties, and with the results, as identified in Certificates of Quality given by SGS (Subic Bay) Inc on 3 and 4 August 1996. The applicant contends that Jayta Petrochemical Private Ltd ("Jayta") arranged for these tests.

6 The second shipment was entered for home consumption on 9 October 1996, the entry no being 2NM62830883K. Upon its arrival in Australia the applicant arranged for the X370 to be tested for the following properties:
(a) appearance;

(b) colour;

(c) density;

(d) distillation range;

(e) flash point.

The tests were performed by Chemtech Services Pty Ltd and the results were recorded in an Analysis Certificate dated 22 October 1996.

7 The second shipment was tested between 18 and 19 September 1996 for the properties, and with the results, as identified in the Certificate of Quality given by SGS (Subic Bay) Inc on 19 September 1996. The applicant contends that Jayta arranged for these tests.

8 The third shipment was entered for home consumption on 13 November 1996, the entry no being 2M63180252H. Upon its arrival in Australia the applicant arranged for the X 370 to be tested for the following properties:
(a) density;

(b) colour;

(c) flash point;

(d) water;

(e) distillation 90% recovery.

The tests were performed by SGS Australia Pty Ltd and the results were recorded in an Analytical Report erroneously dated 21 September 1996.

9 The third shipment was tested on 29 October 1996 by SGS (Subic Bay) Inc. for the properties, and with the results, as identified in the Certificate of Quality given on 29 October 1996. The applicant contends that Jayta arranged for these tests.

10 Each shipment was entered on behalf of the applicant under subheading 2710.00.90 of Schedule 3 of the Customs Tariff Act 1995 (Cth) (the "Customs Tariff") at a free rate of duty and described as "Solvent X 370".

11 The shipments fall to be classified within heading 2710 of the Customs Tariff.

12 The respondent contends that the shipments were incorrectly entered under sub-heading 2710.00.90 and should have been entered under sub-heading 2710.00.20. The applicant disputes this contention and alleges that each entry was correct.

13 Trevor Walker, in his purported capacity as the Delegate of the respondent, by a letter dated 19 May 1997, demanded from the applicant payment of $1,305,110. 20, being duty allegedly short levied on the shipments.

14 A penalty notice was issued in respect of each shipment on 13 August 1997, the total amount of the penalties being in excess of $2.5 million.

15 On 7 October 1997 two of the penalty notices relative to the second and third shipments were cancelled and reissued.

16 The applicant disputes that any liability to pay duty arises under the Customs Act 1901 (Cth) in respect of any of the shipments.

17 The applicant has paid under protest the sum demanded by the Collector as duty in respect of the Stolt Lily shipment, being an amount of $435,372.20 ("the said sum").

18 By an Application for review dated 26 April 1999, the applicant sought review of the decision to make the demand for payment of the said sum.

19 In 1997, Trevor Walker usually occupied position 31551.

20 None of:
(a) the instrument of delegation signed by Francis Kelly on 6 December 1989;

(b) the instrument of delegation signed by John Drury on 30 September 1993; or

(c) any consolidated instrument of delegation executed by the Comptroller General of Customs during the intervening period;

on its face conferred on position 31551 a power to make a demand under section 165 of the Customs Act 1901 (Cth).

20A Robert Johnson purported to authorise Trevor Walker orally, prior to 19 May 1997, to act in Johnson's position (numbered 30508) in the week commencing 19 May 1997.

21 Between December 1989 and September 1993, new consolidated instruments of delegation were produced by the respondent.

22 On Friday, 16 May 1997, Trevor Walker occupied position 31551 and not position 30508.

23 Trevor Walker signed the demand on Friday, 16 May 1997 and left instructions that the demand be served on, and this was effected on, 19 May 1997.

24 Trevor Walker did not purport to commence acting in position 30508 until Monday, 19 May 1997.

122 On 6 April 2001 the applicant provided the tribunal with the following schedule of amended contentions:

CONTENTIONS

Classification
1 It is common ground that the goods fall to be classified under heading 2710.

2 The classifier must ascertain each of the subheadings at the same level that may apply to the goods.

3 It is not permitted to classify the goods within the first available subheading under heading 2710.

4 There are three subheadings of equivalent level under heading 2710 into which the goods could fall, being:
a) 2710.00.20;

b) 2710.00.30;

c) 2710.00.90.

5 The competing sub-headings in this proceeding must be construed and each given a meaning before the goods can be classified.

6 The competing sub-headings must be construed as a whole and in the context of all of the sub-headings of Chapter 2710.

7 Each of the sub-headings of Chapter 2710 is descriptive of a potential function or application of petroleum products.

8 Each of the terms "automotive diesel fuel", "marine diesel fuel" and "industrial diesel fuel" is merely one of several equally valid use based descriptors which could in certain circumstances be applied to certain middle distillate products.

9 A descriptor which relates to a fuel use is no more valid than one which refers to a non-fuel use.

10 If suitability for use is the sole means of identification, the goods fall within all of the three subheadings referred to in paragraph 4 of these Contentions.

11 The terms automotive diesel oil, marine diesel fuel and industrial diesel fuel in 2710.00.20 ("the .20 subheading") are trade or technical terms and should be interpreted as they are understood in the petroleum industry.

12 In that industry, each term contained in the .20 sub-heading is understood to mean a middle: distillate product which is intended by the owner to be supplied or used for a purpose which complies with any of the purposes enumerated in that sub-heading, and which is suitable for such use. By way of example, a middle distillate product which is capable of use as marine diesel fuel will not be understood in that industry as bearing that meaning if the owner intends to supply or use it, for instance, as heating fuel or as a mould release agent. In such a case this product will be identified according to the intended use.

13 In this dispute, the applicant contends that at the time when the Stolt Lily shipment was entered for home consumption it intended to blend some or all of the goods with locally purchased solvent heating oil for sale to persons who would use the product as solvent.

15 Further, in Australia, in the petroleum industry, the term "automotive diesel fuel" is synonymous with "automotive diesel oil" and refers to product:
a) whose proposed use is as ADF; and

b) which is suitable for use as automotive diesel fuel (as determined either by strict compliance with AS 3570 or by the granting of a waiver);

16 The product specification for the X 370 does not comply with the requirements of AS 3570. The respondent cannot rely on Certificates of Quality to rebut this proposition because the sole purpose of the Certificates was to verify that the product received complied with the order.

17 A waiver would also not have been granted for the importation and marketing as ADF in Australia of that product.

17 Accordingly, the goods are correctly classified as "Other".

Delegation
18 Power to make a demand for an amount "short levied" is given by s 165(1) to the Comptroller of Customs.

19 This power may be lawfully delegated by the Comptroller to an officer of Customs by a signed instrument. (Customs Administration Act 1985 (Cth), s 14(1)).

20 The Comptroller of Customs did not sign an instrument delegating to Mr. Walker power to make the demand.

21 Further, the applicant contends that, at the time of making the demand, Mr Walker was not authorised by law to make demands under section 165 of the Customs Act 1901 (Cth), as:
c) he was not acting in position number 30508;

d) he did not hold a delegation by virtue of his usual position, number 31551;

e) he did not hold a delegation otherwise by operation of law.

22 By reason of the foregoing, the applicant contends that the tribunal should, further to s 43(1)(c)(ii) of the Administrative Appeals tribunal Act 1975 (Cth), set aside the decisions under review and remit them for reconsideration in accordance with directions that
(a) the decision to make the demand was not authorised by law;

(b) the decision to make the demand was not justified in fact because the applicant entered the goods under the correct tariff classification.

Witnesses
23 The applicant relies on the witness statements of Sergio Tribuzio, Joseph Brothers, Donald Gunn, Richard Michell, Bruce McIver, Frank Russell and Peter Horne.

123 On 12 April 2001 the respondent provided the following written response to the applicant's amended contentions; furthermore, on 15 May 2001 the respondent tendered the following written statement of particulars of lack of intention of the applicant to import solvent for sale or use as solvent; in respect of these 2 documents, we set out part of the first, and all of the second, as follows:

…

CONTENTIONS

Classification

12 Customs agrees with pars 1-3 of Gladstone's contentions.

13 Customs agrees with par 4, except that heading 2710.30 [sic] is not applicable. The heading that applies is either 2710.00.20 or 2710.00.90.

14 Customs agrees with pars 5-6.

15 The central thrust of pars 7-9 appears to be that the headings of Chapter 2710 contain use based descriptors. Customs does not agree with that contention. The headings, particularly heading 2710.00,20. are not use based. They are descriptive of products suitable for use in automotive diesel engines, marine diesel engines and industrial diesel engines respectively. A use based heading is one of the kind expressed in heading 2710.00.2 in the l995 amendment to the Customs Tariff provided to the tribunal. Heading 2710.00.20 as in force at the relevant time is plainly not a heading of that kind.

16 The proper function of the tribunal is to determine on an objective basis and without reference to the intention of the importer where the product falls to be classified under the Customs Tariff.

17 In discharging that function the tribunal can, and should, consider the suitability of the product for use as a diesel fuel. In that sense, and in that sense alone, use is relevant. This involves consideration of the characteristics and attributes of the product, not the intention of the importer.

18 The product is suitable for use as automotive diesel oil, industrial diesel fuel or marine diesel fuel and therefore falls to be classified under heading 2710.00.20.

19 The contention of Gladstone that the product was imported for use as a solvent, even if correct (which is denied), does not change the suitability of the product for use as a diesel fuel and hence its proper classification to heading 2710 00.20.

20 The proper application of the Customs Tariff would be subverted if the approach by Gladstone were to be accepted. It would convert the practical and objective task of classifying goods according to their character and suitability for use into a search for the subjective intention of the importer. Without express words in the Customs Tariff, this is not warranted or permissible.

21 Heading 2710.00.90 is the "Other" category. It applies only where the relevant goods cannot otherwise be classified to a heading of Chapter 2710. If the goods can be so classified, it does not apply. This is so in the present case.

22 The present case turns entirely on whether the product falls to be classified to heading 2710.00.20. In determining that question heading 2710.00.90 is irrelevant. If the product is diesel fuel, heading 2710.00,20 applies. If it is not, heading 2710.00.90 applies.

23 If the product is suitable for use as a diesel fuel it falls to be classified to heading 2710.00.20 (see above). The fact that it might also be suitable for use as a solvent (a non-fuel) does not mean that it cannot be classified to heading 2710.00.20. Although it might be suitable for non-fuel uses, its suitability for use as diesel fuel means that it falls to be classified to 2710.00 20.

24 There is no contest in the present case between two equally applicable headings. (In such a case the more specific heading would apply: General Interpretation Rule 3(a).) Heading 2710.00.90 is not a "Non-fuel" category. It is an "Other" category and cannot apply because the product can and should be classified to heading 2710.00.20.

25 If, contrary to Customs submissions, classification under heading 2710.00,30 is available and the product may equally be classified to headings 2710.00 20 and 2710.00.30, the most specific heading will apply (see above). That is heading 2710.00.20. (The outcome of the case is not affected by this matter as the duties payable under both headings were the same at the material times).

26 Customs does not agree with pars 11-14 of Gladstone's contentions and states as follows:
(a) Construction of the terms of heading 2710.00.20 is informed by evidence of a trade or a technical nature but is not governed by that evidence.

(b) Gladstone's reliance on the industry evidence is misconceived. As a matter of law, the terms of heading 2710.00.20 do not involve consideration of subjective use and therefore industry evidence based on that approach is irrelevant. Properly construed, heading 2710.00.20 requires consideration of the question whether the product is suitable for use as diesel fuel. The industry evidence establishes that it is.

(c) The industry's understanding of what a middle distillate product is suitable for is not dependent on subjective use. It is dependent on the characteristics of the product. Industry evidence is not that, because the product may be suitable for use as a non-fuel, the product is not suitable for use as a diesel fuel and is therefore not a diesel fuel.

(d) The intentions of Gladstone were not as alleged in par 13 (see par 3 above).

27 Customs does not agree with pars 15-17 and states as follows:
(a) As to the relevance of suitability for use and the irrelevance of intended use, see above.

(b) The understanding of industry of the terms automotive diesel oil, industrial diesel fuel and marine diesel fuel is influenced by:
• Chemical composition of the goods

• Suitability of the goods for use as the specified fuel

• Degree of compliance with AS3570

• Industry views generally

(c) Industry recognised the existence of "off-spec diesel", being product suitable for use as diesel fuel and sold and used as such although not fully compliant withAS3570.

(d) The Customs Tariff does not make AS3570 the test of whether a product is diesel fuel under heading 2710.00.20. That heading, the introduction of which preceded the commencement of AS3570, applies according to its own terms.

(e) AS3570 is a voluntary industry code that is adhered to by the major oil companies in respect of product released from the refinery. Compliance with the code is not legally required and it does not purport to define the meaning of diesel fuel for any purpose. It does not prevent release of off-spec diesel.

(f) In any event, the product complies or nearly complies with AS3570 and therefore qualifies as diesel fuel even under that standard. Any non-compliance is minor.

(g) The certificates of quality given in respect of the product supply reliable evidence of its chemical composition. It is not to the point that the sole purpose for the supply of the certificates may have been to verify that the product received complied with the order, as alleged in par 16. This fact does not detract from the reliability of the evidence of the chemical composition of the product supplied by the certificates.

(h) If, contrary to Customs submissions, the product is not suitable for use as automotive diesel oil, it is suitable for use as industrial diesel fuel or marine diesel fuel. Gladstone has not contended to the contrary.

Delegation

28 By reason of Malika Holdings Pty Ltd v Virginia Stretton [2001] HCA 14 at [77] it is not necessary for Customs to make a demand under section 165 of the Customs Act 1901 (Cth) where Customs has been misinformed by the importer and Customs has made no mistake itself. In the present case Gladstone misinformed Customs as to the proper classification of the product and therefore section 165(1) has no application.

29 Alternatively, by reason of the matters set forth in pars 5-9 above, a proper demand under section 165 of the Customs Act 1901 (Cth) was made by a delegate possessing the power to make the demand.

30 In the further alternative the demand was valid by reason of the application of the Carltona principle.

31 By reason of the foregoing [the respondent] contends that the tribunal should, pursuant to section 43(1)(a) of the Administrative Appeals tribunal Act 1975 (Cth) confirm the decision under review.

RESPONDENT'S PARTICULARS OF LACK OF INTENTION OF THE APPLICANT TO IMPORT THE GOODS FOR SALE OR USE AS SOLVENT

The respondent contends that the applicant did not import the goods with the intention that the goods be sold and used as a solvent by reason of the following:
(1) SPECIFICATIONS WERE FOR A DIESEL FUEL
(a) The respondent purchased the goods against specifications that rendered the goods suitable for use as a diesel fuel, particularly ADF. The specifications contained items, particularly the cetane index, that were only relevant to an ADF.

(b) The specifications described a product that was significantly different (being a diesel fuel) to the local product that it purportedly replaced (such as Certrex 70 being a heating oil with specifications for that kind of product).

(c) The applicant acted on the X-370 specifications not only in purchasing the goods but in attempting to obtain an alternative quotation for supply of like goods (Hin Leong Trading) and in providing information as to the nature of the goods to a customer (APS).

(d) The applicant was supplied by the vendor with certificates of quality that verified that the goods complied with the specifications and hence were suitable for use [sic] a diesel fuel.

(2) RE-NAMING THE GOODS "SOLVENT X-370"
(a) The goods being described by the vendor as "gas oil" (which encompassed a diesel fuel), the applicant re-named them as "solvent X-370" which did not describe the true character of the goods (ie a diesel fuel).

(b) No credible explanation was provided by the applicant as to why this was done.

(c) The goods were sold as Solvent 1H and not as Solvent X-370 so the goods were not re-named to facilitate local sale.

(d) These actions were done in order to conceal the true nature of the goods (diesel fuel, especially ADF), which the applicant well knew.

(3) SUPPLY AND ENTRY DOCUMENTATION
(a) The applicant carefully ensured that the supply and entry documentation relating to the goods did not mention "gas oil" and referred only to "Solvent X-370" and the specifications for that product. These included:
(i) the specifications;

(ii) the purchase order;

(iii) the invoice;

(iv) the bill of lading;

(v) the letter of credit;

(v) the entry.

(b) No credible explanation was provided by the applicant as to why this was done.

(c) The goods could and should have been purchased and entered as gas oil in accordance with the vendor's description.

(d) These actions were taken in order both to ensure that the goods supplied were diesel fuel, especially ADF, and to conceal the true nature of the goods, which the applicant well knew.

(4) ALTERATION OF VENDOR'S DOCUMENTATION
(a) The applicant obliterated with white-out paint any reference to the description "gas oil" on two vendor's documents, being the specifications for the product sold and the pro-forma invoice relating to the purchase of the product. It substituted instead the description "Solvent X-370" or "X-370".

(b) No credible explanation was provided by the applicant as to why this was done.

(c) These actions were inconsistent with the advice of Mr Butler that the applicant should be scrupulous with the relevant paperwork.

(e) The applicant admitted that one of the reasons for whiting out the name "gas oil" and inserting the name "Solvent X-370" in the documentation and particularly in the entry was to avoid questions that may otherwise come from Customs.

(f) These actions were done in order to conceal the true nature of the goods (diesel fuel, especially ADF), which the applicant well knew.

(5) MAKING FALSE DENIALS AND STATEMENTS
(a) Officers of the applicant falsely denied that they did not know whether the goods were suitable for use as a diesel fuel. In fact they informed Mr Butler that the goods were so suitable and only needed to obtain legal advice because this was so.

(b) Mr Tribuzio told the tribunal that he lacked the technical expertise necessary to know the relevance of certain items in the X-370 specifications and the certificates of quality for the goods, especially the cetane index. In fact he possessed ample expertise for this purpose and was regarded by Mr Butler as highly proficient on technical matters.

(c) The two officers of the applicant falsely denied that they did not know the meaning of the cetane index in the specifications X-370 and the certificates of quality for the goods and in particular that it related only to the use of the product as a diesel fuel. The applicant's own records contained documentation that referred to the cetane index. The applicant would not have purchased and imported so much valuable product unless it knew what each specification meant, especially the cetane index. Likewise it would not have contemplated purchasing 5000 MT of ADO from a New Zealand supplier in July 1996 unless it understood the technical specifications for ADO, especially the cetane index. Neither would it have forwarded specifications containing this information to a prospective customer without knowing what it meant.

(d) Mr Tribuzio falsely stated that it was neither common nor uncommon - not one way or the other - for supply documentation to be whited out in the manner done in the purchase of the goods. In fact this was common: Mr Brothers spoke of this as being done on most occasions when the company purchased product and as a usual course.

(e) Mr Tribuzio stated that one reason why the supply documentation was altered to specify "Solvent X-370" and the specifications for that product because of the bank's requirements. In fact this was not so.

(f) The applicant has attempted to justify its description of the goods in the supply and entry documents as being in accordance with Mr Butler's legal advice when in fact that advice was in highly qualified terms and not given on the basis of all of the relevant information as to the circumstances of the purchase and entry.

(6) FAILING TO TAKE REASONABLE STEPS TO ENSURE THAT THE GOODS WERE RE-SOLD OR USED AS SOLVENT AND NOT AS A FUEL
(a) The applicant relied entirely on agreements with its customers that the goods would not be re-sold or used as a fuel but stated that it had no knowledge as to the purpose of any re-sale or ultimate actual use of the goods. It took no steps to look into those matters and was wilfully blind in that respect. This was not in accordance with Mr Butler's advice that the applicant had to be absolutely scrupulous as to end use and absolutely satisfied that any sale to a diesel fuel re-seller was not for an improper purpose.

(b) There was a limited market for the goods as a solvent and the quantity of the shipments was considerable in the context of that market. The two main purchasers of the goods (APS and Success) were not known to Mr Horne as purchasers or re-sellers of solvent.

(c) There was a market for the goods as a diesel fuel, particularly as ADF.

124 (a) We cannot accept the evidence of Mr Tribuzio as credible. His demeanour as a witness was unsatisfactory. He was at times evasive and bellicose. He plainly resented the cross-examination by Mr Bell and displayed his resentment in no uncertain manner. Mr Moshinsky, in his final address, referred to the judgment of the High Court in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In liq) (1999) 73 ALJR 306 (per Kirby J at 328) as to the dangers inherent in making decisions based on perceptions as to demeanour. Mr Tribuzio's evidence was in our view unacceptable and not worthy of credibility, in particular, in the light of 3 important aspects. In the first place, his denial of knowledge of and expertise in the relevant industry was belied by his post-graduate qualifications and experience in this area. In the second place the alleged reliance on Mr Butler's advice fails in the light of Mr Moshinsky's statement as to cl 44 of the applicant's submissions, even apart from the fact that Mr Butler gave guarded advice based on information which was not complete. But the most unsatisfactory aspect of his evidence related to the whiting-out of certain documents referred to earlier in these Reasons. Mr Tribuzio said that he selected X370 as a suitable new name by reference to the boiling point of the product. He said furthermore (and we do not believe him) that the whole whiting-out process was undertaken in order to ensure that the banking documents were in order and so that there would be no difficulty as regards payment under the letter of credit. It was for this reason, so he said, that the whiting-out process was adopted. These contentions were adhered to by Mr Tribuzio, despite their inherent impossibility. The transaction was one between Jayta as seller, and the applicant as purchaser. How precisely the product was named in the documents as between seller and purchaser was entirely immaterial, since each of them was aware of what precisely was being bought and sold. Jayta called the product "gas oil", which is a middle distillate. It was at the instance, and indeed insistence, of Mr Tribuzio that the renaming took place, and in documents referable to the same 2 parties. The contentions as regards the bank documents are ludicrous. The bank would have been satisfied with whatever description the parties gave to the product, and whether "gas oil" or any other appropriate description. How the precise product was described was of no relevance to the bank. In the original specification the whiting-out was complete; in the pro forma invoice, both terms originally appeared, but the "gas oil" reference was deleted. Mr Brothers agreed that the whiting-out was not necessary, so far as the bank was concerned and in this regard his evidence was inconsistent with the evidence of Mr Tribuzio. (b) It was not originally intended that Mr Brothers would give evidence. He did so after Mr Tribuzio had faired badly in cross-examination. (Mr Butler also gave evidence as something of an afterthought, possibly after the tribunal's ruling as to the recall for the second time of Mr Tribuzio.) Mr Brothers' evidence was certainly more fluent and controlled than that of Mr Tribuzio; at the same time it was repeatedly qualified to the effect that statements were made to the best of his recollection. (c) We consider that the whiting-out process was done for one reason and one reason only, and that was to deceive the respondent. Mr Moshinsky referred us to the decision in Briginshaw v Briginshaw (1938) 60 CLR 336, as to the test as to fraud and contended at some length that there was after all, no motive for fraud. That contention was disingenuous; there was indeed a motive and that motive was to deceive the respondent and to escape duty. The 90 category is duty free whereas each of 20 and 30 attracts duty. No other conclusion is reasonable, or even possible. The contention as to an alteration for the purpose of ensuring that banking documents were in order is altogether unacceptable. (d) The product was different in a material sense from Certrex 70; moreover the specifications required were entirely consistent with the product being diesel fuel. We therefore have no doubt at all that we should and do find in relation to s 165(1) of the Customs Act 1901 (Cth), that the applicant did indeed misinform the respondent and that the respondent was in no way at fault, and moreover, and to the extent necessary we should and do find that the applicant did indeed commit a fraud on the respondent. We agree with Mr Moshinsky that it would not be correct to categorise the acts of the applicant in this regard as "careless misdescription". There was nothing careless about it; the deception was altogether deliberate.

125 We turn next to deal with the classification question in this regard:

(a) A large part of the applicant's case was devoted to the relevance of "intent". The applicant sought to contend (put in broad terms) that it intended to import solvent and that is how the product should be classified. As a matter of convenience, and to facilitate the reading of these Reasons, and although the paragraph in question appears in Annexure R, we set out cl 35 of the respondent's submissions (with which we fully agree) as follows:

35. Customs relies upon the approach as articulated in the following authorities. In Blackwood Hodge (Australia) Pty Ltd v Collector of Customs (NSW) (1979) 47 FLR 131, Sheppard J (at 155) (Fisher J agreeing at 143) articulated the principle in the following terms:

I should add that in reaching my conclusions I have borne in mind that it is the state or condition of the goods at the time of importation that is the determining factor. The test is an objective one. The purpose of the manufacturer or exporter on the one hand or the importer or use on the other can have no relevance. Otherwise rates of duty for identical articles would vary depending upon what their proposed use was to be. It is the intrinsic nature of the article itself which has to be considered. That is not to say, however, that it will not be relevant to take into account in determining the nature of an article and the question of whether it is in an unfinished or incomplete state the ordinary use to which such an article might reasonably be expected to be put. What ought to be left out of account is the particular purpose which an exporter or importer may have had in mind for the article in question. Nothing in the reasons of the tribunal leads me to think that it misdirected itself in relation to the matter I have last mentioned.

In Chinese Food and Wine Supplies Pty Ltd v Collector of Customs (1987) 72 ALR 591 at 599 Lockhart J (with the agreement of Woodward J at 592 and Ryan J at 600) stated as follows:

It is the goods themselves in the condition in which they are imported here to which it is generally necessary to look under the Tariff Act to determine the identification of goods for purposes of Customs duty: see Chandler & Co v Collector of Customs (1907) 4 CLR 1719; Re Gissing and Collector of Customs (1977) 1 ALD 144 at 146; and Re Tridon Pty Ltd and Collector of Customs (1982) 4 ALD 615 at 620ff. Conformity with this general approach is achieved in the case of Ch 30 if, on its proper interpretation, it is the therapeutic or prophylactic use to which the goods will be put in Australia to which the chapter is directed.

Whether the goods in suit properly fall within Item 30.03 of the Customs tariff is determined by an objective test not by the intentions of the manufacturer in China or of the exporter or the importer. The test is applied at the port of entry of the goods and at the time of entry. The characteristics of the goods, their get-up, colour, decoration, labelling and packaging are all relevant considerations. In some cases, a visual inspection of the goods and their packaging will disclose characteristics of the goods and enable a judgment to be made as to whether they are for therapeutic or prophylactic use. But visual inspection will not necessarily provide the answer in each case. Tests may have to be carried out and inquiries made to ascertain the relevant characteristics of the goods. In the present case, samples were taken and sent for chemical analysis. As the tribunal noted, the paucity of the information contained in the labelling of the goods necessitated further inquiries being made in respect of them.

Lastly in Times Consultants Pty Ltd v Collector of Customs (Queensland) (1987) 76 ALR 313 at 327 Fox, Morling and Wilcox JJ restated the principle and certain criticisms of the approach of the tribunal in that case as follows:

The authorities make it clear that in determining what is the essential character of goods it is the state or condition of the goods at the time of importation that is the determining factor and that it is wrong to classify goods or to determine their essential character by reference to the purpose of the importer or of the purchaser. Regard must be had to the characteristics of the goods themselves, as they would present themselves to an informed observer: see Chandler & Co v Collector of Customs (1907) 4 CLR 1719 at 1729; Whitton v Falkiner (1915) 20 CLR 118 at 131; Blackwood Hodge (Australia) Pty Ltd v Collector of Customs (1980) 47 FLR 131 at 155.

…

That analysis demonstrates that the majority arrived at their decision that the magazine gave to the goods their essential character by having regard to such matters as the reasons the goods were put up in sets, the manufacturer's purposes in taking that course, and the likely reactions of purchasers. His Honour was correct in his view that the majority misdirected themselves by turning their attention away from the goods themselves and deciding the question posed for their consideration by reference to such matters. The statement in the majority's reasons that one of the principal factors pointing to the dominant component in goods "will be the use or function which the consumer or end user of the set will make of the combination" is an indication of the approach which they adopted…

(d) We note that Collector of Customs v Savage River Mines (1988) 79 ALR 258 was decided in the tribunal on a basis which the Federal Court subsequently found was incorrect. Where a product is classifiable in accordance with 2 specific sub-headings the tribunal is not obliged to find that it must fall into one and not the other. The rules deal with situations such as this. In this case, there is potentially a competition between 20, 30 and 90.

(e) Let us deal in the first instance with 30 which was a very late entry by the applicant and was not pursued with any enthusiasm. In respect of the 30 sub-headings, it is not necessary to consider either of the 2 Kerosene categories; the only 2 relevant categories are heating oil and fuel oil. We do not consider that the product does fall with 30. Dealing firstly with "heating oil", each of Mr Shuptrine (transcript, at 1109) and Mr Gunn (transcript, at 1224 and 1225) agreed that the imported product was not heating oil as defined in Australia; we refer in this context to T25 at 48 and the classification in column 1 of the Australian Institute of Petroleum extracts as to heating fuels. Each of Mr Gunn (transcript, at 1218) and Mr Shuptrine (transcript, at 1229) agreed that heating oil was used in a low emission environment in mines in Australia and in buses in extremely cold weather in the United States, but that the specifications of the "Stolt Lily" product would not be regarded as heating oil (transcript, pp 1218, 1230, 1231). Moreover, and in the same context it was common ground that the imported product was not fuel oil as it does not comply with the Notes to heading 2710; we refer in this context to the evidence of Mr Gunn at transcript, pages 733-734 and Mr Shuptrine at transcript, page 1107.

The mere fact that in some very cold climates and in winter heating oil is sometimes used to run diesel engines is not to the point. We are called upon to make the correct and preferable decision. Even if, but only with a stretch, it is possible to classify the product as heating oil in certain rare circumstances, (and we do not believe it is), 20 is in our view and as regards the competition between 20 and 30, by far the appropriate classification.

(f) The product was in our view within (a), (b) and (c) of 20; it was automotive diesel oil (or automotive diesel fuel) whether or not it complied strictly with AS3570 (which serves only as a reference point and has no legislative or binding effect). The specifications required by the applicant when it ordered the product are akin to those apposite to automotive diesel oil and are far more extensive than those required for a "mere" solvent. We use the word "mere" here not in any derogatory sense, but purely because most liquids are solvents and the relevant product was that.

(g) Even if the product did not comply strictly with AS3570 (and this is not clear) there was considerable evidence of "off-spec" sales with waivers. We again note that there were 2 AS3570 tests which were not carried out; as to whether the product would have complied had they been tested in this regard is not clear. The applicant specified a maximum boiling point of 370 degrees Centigrade and in fact the tests showed that the boiling point was well below the maximum specified. Even if the product had in the result upon testing proved not to comply with AS3570 in respect of the 2 tests which were not carried out, this would not have been conclusive, because they were relatively unimportant in the scheme of things. Of singular importance in relation to automotive diesel oil is the Cetane Index (of which Mr Tribuzio pretended to be uncertain). The Cetane Index is in relation to diesel what the octane index is for petrol in petrol-driven vehicles.

The tests in Australia are a persuasive assistance only because they did not relate specifically to the "Stolt Lily" shipment, notwithstanding evidence to the effect that the three consignments related to the same product.

(h) It is at this point also that we can and should reject the arguments of the applicant as to the "disjunctive" element in respect of 20. It is true that the word "or" does not appear after (b), but it is clear enough that the product will fall within 20 if it is within (a), (b) or (c) of 20. And the evidence before us was that industrial diesel fuel and marine diesel fuel does not have and need not have the same qualities (prescribed by AS3570) as automotive diesel fuel. Certainly there is no comparable Australian Industry standard. The overwhelming evidence before us was that the "Stolt Lily" product would have qualified under (b) or (c) of 20 even if it did not qualify under (a). We note here that the applicant concentrated on (a) of 20 and devoted little attention to (b) and (c), although they were deserving of equal importance. If the applicant is seeking to rely on a contention that the absence of the word "or" at the end of (b) of 20 means that to fall within 20 the product must comply with all of (a), (b) and (c) of 20, that contention is rejected. (Such a contention was raised but it was not pursued with any conviction.) In any event we find that the imported "Stolt Lily" gas oil satisfies each of (a), (b) and (c) of 20.

We accept that "suitability for use" may be relevant in the classification process. We refer in this context to the statement of Brennan J, as the first President of the tribunal (with members Skermer and Stock) in Re Gissing and Collector of Customs (1977) 1 ALD 144 (at 146), which reads as follows:

Description is relevant to the next step, the application of the Tariff to the entity. In determining the relevant entity, regard is had to the imported goods themselves in the condition in which they are imported (Chandler v Collector of Customs (1907) 4 CLR 1719 at 1730; Worthington v Robbins 139 US 337 at 341; United States v Schoverling 146 US 76 at 82). They are not identified by reference to the use to which the goods may be put in the future, though their present suitability for that use may be a relevant factor.

We refer also in the same context to the decision in Re Tridon Pty Ltd and Collector of Customs (1982) 4 ALD 615, where the tribunal said (at 621):

Identification will frequently extend to characterisation of goods by reference to their design features … or by reference to their suitability for a particular use where those characteristics emerge from informed inspection of the goods as imported … The extent to which these characteristics may be relevant to the ultimate classification of the goods and whether evidence of the use to which goods are put after importation is relevant will depend upon the language of the Tariff Nomenclature …

Lastly in this context we refer again to the decision in Blackwood Hodge (Australia) Pty Ltd v Collector of Customs (NSW) (1979) 47 FLR 131 where Shepherd J said that it might be relevant to take into account "the ordinary use to which [the goods] might reasonably be expected to be put … [but not] the particular purpose that the … importer may have had in mind …" (at 155).

(i) In the same context we refer to the judgment of the full court in Savage River Mines where it was said (at 265-266):

However, as fuel oil is oil adapted for use as fuel, ordinarily in a furnace or engine or for heating, a use based distinction may be admitted in the present case. Its importance in the process of characterisation is a matter of evidence. The tribunal was entitled and obliged to consider the evidence to ascertain whether, having regard to such factors as physical and chemical properties and suitability for particular uses, the product in question was "fuel oil" or not.

The critical feature of this analysis is that it may be necessary to consider such factors as physical and chemical properties and suitability for particular uses. This statement falls squarely within the approach set out in Blackwood Hodge, Chinese Food and Wine Supplies Pty Ltd v Collector of Customs (1987) 72 ALR 591 and Times Consultants Pty Ltd v Collector of Customs (Queensland) (1987) 16 FCR 449; 76 ALR 313.

(j) Finally, in this context we refer to the following passage from Controller General of Customs v ACI Pet Operations Pty Ltd (1994) 121 ALR 347 (at 366) as follows:

In our opinion, Foster J was correct to conclude, as his Honour did, that goods can be classified for taxing purposes in accordance with their intended or actual use. As Morling and Wilcox JJ pointed out in Times Consultants (at FCR 462), what gives goods their essential character is a question of fact. In some, but not all, cases, an inquiry as to the use to which goods are to be put may throw light upon the question of what their essential character is: see Thomson Australian Holdings Pty Ltd v FCT (1988) 20 FCR 85 at 86-7; FCT v Thomson Australian Holdings Pty Ltd (1990) 25 FCR 481 at 482; 87 ALR 682. In the present case, as for instance in Savage River, it was thought appropriate to look at how the goods were actually to be applied in order to understand their true character. We are not persuaded that Foster J fell into any error in embarking upon that exercise. Moreover, in our view, there was nothing in the description of the mischief mentioned in the legislative history of Pt XVA which made this an impermissible course in the present case. It is not suggested that in this matter any administrative difficulties would have been created: the imported product was in fact applied for the use it was always intended to have and that use was apparent from the outset. This is not a case of a change of direction on the part of the importer. In particular, there is nothing in the legislative history which would negate the possibility that, as a question of fact, actual or intended use can, in some circumstances, provide guidance as t the essential character of goods.

(k) As Mr Bell pointed out there is a somewhat guarded reference in the full court Decision in Savage River Mines to the effect that the tribunal (to whom the matter was referred back) could consider (inter alia) marketing material (at 266).

(l) The tariff in its terms makes it clear that some classifications are use based and others are not. 20 is not. Parliament has over the years, as the respondent's submissions demonstrate, changed back and forth. In 1996 20 was not a use-based classification. Evidence of use is relevant to the limited extent set out previously in these Reasons. Clearly enough the "wharfside" test does not work in all circumstances. There will be occasions when the naked eye alone can use the wharfside test to determine classification, but there will be many others where testing is necessary for this purpose. This is one of those cases. The available tests (by SGS) indicate in the clearest possible terms that 20 is the appropriate specific classification. Also, the AGL scientific analysis test conducted upon the "Sampet Hope" (third) shipment which was supplied to the applicant under the same specification as the "Stolt Lily" shipment, indicates that the imported gas oil was diesel fuel.

(m) Why then was Jayta not called? The explanation in Mr Brothers' second statement is that Jayta was not prepared to assist. We believe that we can accept this explanation; after all it is not unreasonable to be told in effect that Jayta was not prepared to be involved in a dispute in which it had no commercial interest.

(n) The applicant devoted much time and attention to an argument that 90 (other) is just as specific as 20. That argument is entirely and completely without foundation. "Other" is so plainly non-specific and so obviously a residual "bucket" category for product which does not fall into a specific category in the relevant main heading, that we do not believe that we need to elaborate on this view.

(o) We are not clear as to how in all the circumstances we should treat the evidence of Mr Butler. As we have said previously in these Reasons, he gave evidence as something of an afterthought. As we have said, his advice to the applicant was guarded and based on what he had been told by the applicant. In the light of the statement by Mr Moshinsky on 8 June 2001, it would appear though that the applicant does not now, in any event seek to contend that the applicant relied on his advice; this is so because as set out previously, the relevant meeting and file note took place and was made respectively on 12 August 1996, one day prior to the arrival of the "Stolt Lily", and the applicant's case was that it consulted Mr Butler some considerable time prior to the arrival of the "Stolt Lily". Whatever the correct position may be as to the impact of Mr Moshinsky's statement (regarding cl 44 of the applicant's submissions) on the applicant's case, we do not believe that the applicant in classifying the relevant product under 90, relied on Mr Butler's advice.

126 It is unnecessary for us to deal with the Carltona principle (enunciated in Carltona v Commissioner of Works [1943] 2 All ER 560) because it was abandoned by the respondent.

127 (a) The "de facto officers" principle is considered in this para 127. It apparently derives from company law and the internal management rule. In Morris v Kanssen [1946] AC 459, Lord Simonds said (at 475):

One of the fundamental maxims of the law is the maxim "omnia praesumuntur rite esse acta." [all acts are presumed to have been done rightly] It has many applications. In the law of agency it is illustrated by the doctrine of ostensible authority. In the law relating to corporations its application is very similar. The wheels of business will not go smoothly around unless it may be assumed that that is in order which appears to be in order. But the maxim has its proper limits. An ostensible agent cannot bind his principal to that which the principal cannot lawfully do. The directors or acting directors or other officers of a company cannot bind it to a transaction which is ultra vires. Nor is this the only limit to its application. It is a rule designed for the protection of those who are entitled to assume, just because they cannot know, that the person with whom they deal has the authority which he claims. This is clearly shown by the fact that the rule cannot be invoked if the condition is no longer satisfied, that is, if he who would invoke it is put upon his inquiry. He cannot presume in his own favour that things are rightly done if inquiry that he ought to make would tell him that they are wrongly done .

(Emphasis added.)

(b) The principle was more recently described by Southwell J of the Supreme Court of Victoria in United Transport Services v Evans [1992] 1 VR 240, at 248-249:

Doctrine of the validity of the acts de facto public officials

I was enlightened by considerable discussion of this seemingly esoteric doctrine, with which I must confess but passing acquaintance. I am, however, fortified by the knowledge that I am in good company, Bray CJ having said in R v Cawthorne; Ex parte Public Service Association of South Australia Incorporated (1977) 17 SASR 321, at 329, that the "venerable principle" was then invoked "for the first time in my experience of the law."

For present purposes the doctrine may briefly be described as one which permits a court to recognise as valid the acts of public officers performed in purported exercise of their assumed public duty, but where the officer concerned has not been properly appointed .

Most of the cases to which I was referred related to challenges to the validity of past acts of persons acting in a judicial capacity, from lords of the manor to a judge of the Supreme Court of New Zealand. Mr Graham was unable to point to any case which I regard as even remotely similar to the present case.

Where the doctrine applies, it will validate the public acts of officers who, inter alia, are not duly appointed. But it can apply (if it can apply at all in the present type of case) only where the want of power or defect is unknown to the public at the time of the exercise of that power : see Adams v Adams [1971] P 188, at 214. It cannot apply where there is, at the outset, a challenge to the validity of the appointment of the relevant officer . Mr Uren was good enough to refer me to Reference re Language Rights under the Manitoba Act, 1870 (1985) 19 DLR (4th) 1, at 28, where the Supreme Court observed that "the rationale for the doctrine (was) that the members of the public with whom the officer dealt relied upon his ostensible status… it recognises and gives effect only to the justified expectations of those who have relied upon the acts of those administering the invalid laws…"

In Cawthorne, Bray CJ said, at 333: " The answer probably is that if the validity of the appointment is challenged before the officer when the matter arises he no longer has such a reputation of lawful appointment as is referred to in the first proposition of Butler CJ and the defect has been known to the public within the meaning of the third proposition and this qualification must, in my view, impliedly apply to the second proposition as well so that the rule about the validity of the acts of de facto officers would no longer apply . "

There is nothing in the present case to show that anyone relied upon the informant's "ostensible status", nor that anyone held justified expectations about the informant's acts. The validity of his appointment was challenged at the outset. In my opinion, the doctrine can have no application here.

I feel oppressed by a consideration of the possible ramifications of a finding that the informant has not produced evidence sufficient to prove due appointment. Clearly enough, this may affect the validity not only of past actions of the 95 inspectors purportedly appointed under the two statutes here under consideration, but possibly, many more under other statutes. A single judge of the court must be reluctant to put in doubt the efficacy of legislation of such antiquity.

However, I feel driven to the conclusion that the minister purported to appoint the informant as an inspector, where there was no power to do so. (Emphasis added.)

(c) The principle was considered in GJ Coles v Retail Trade Industrial tribunal (1987) 7 NSWLR 503, a judgment of the NSW Court of Appeal, in the context of an invalidly constituted tribunal. McHugh JA considered the principle extensively, referring to a number of authorities, at 526-528, as follows:

The rule concerning de facto officers can be traced back to Abbot of Fountaine's Case in 1431 (YB 9 H VI 33). Many instances of its application can be found in the English reports: see eg, R v Bedford Level Corporation (1805) 6 East 356; 102 ER 1323, and Margate Pier Co v Hannam (1819) 3 B & AId 266; 106 ER 661. In the United States the rule has been frequently invoked in the State and Federal courts. A very detailed examination of the English and American authorities can be found in State v Carroll (1871) 9 Am Rep 409.

The rule appears to have been applied in Victoria. In Re Armstrong and Stewart (1878) 4 VLR (L) 101, Barry J sitting in Chambers on an application for a writ of habeas corpus by prisoners convicted of a felony refused to admit affidavits purporting to show that the chairman of general sessions had been removed from office and not been re-appointed. More importantly, in Ellis v Bourke ( 1889) 15 VLR 163, the Full Court of Victoria, when hearing a special case arising out of the conviction of a licensee and the forfeiture of his licence, refused to admit evidence that the Licensing Court was not properly constituted. Under the legislation, the constituent members of the Licensing Court were a County Court judge and two police magistrates. The defendant had proposed to call evidence that two members of the Court had not been re- appointed as police magistrates. Higinbotham CJ said (at 169):

… the argument which has been presented to us on this point is one for which no precedent has been cited, and for which I think it would be very difficult to find a precedent. It has been contended that an application may be made to the Court which the Court is bound to entertain for the purpose of hearing evidence to enable that Court to determine that it is not a Court at all. The very objection assumes the existence of the Court, and yet it is proposed to that Court that it should determine that it is not a Court.

The decision in Ellis v Bourke makes it plain that the de facto officer rule applies to the acts of a multi-membered court as well as to the acts of an individual judicial or public officer . In principle, there seems no reason why the rule should not apply to protect the acts of a public tribunal improperly constituted. In State v Carroll (at 423) Butler CJ said:

The de facto doctrine was introduced into the law as a matter of policy and necessity, to protect the interests of the public and individuals, where those interests were involved in the official acts of persons exercising the duties of an office, without being lawful officers . It was seen, as was said in Knowles v Luce, that the public could not reasonably be compelled to inquire into the title of an officer, nor be compelled to show a title, and these became settled principles in the law. But to protect those who dealt with such officers when apparent incumbents of offices under such apparent circumstances of reputation or color as would lead men to suppose they were legal officers, the law validated their acts as to the public and third persons, on the ground that, as to them, although not officers de jure, they were officers in fact, whose acts public policy required should be considered valid. It was not because of any quality or character conferred upon the officer, or attached to him by reason of any defective election or appointment, but a name or character given to his acts by the law for the purpose of validating them.

In Re Aldridge, Richmond J referred (at 370-371) to the "strong reasons of I public convenience which have compelled the recognition of the validity of the judicial acts of kings de facto" as applying to the acts of public officers de facto.

In his paper "De Facto Officers" (reprinted in Jesting Pilate (1965)) Sir Owen Dixon, however, expressed the opinion that, although public policy had fostered the growth of the rule, its origin lay in the conception of an office as an incorporeal thing in which there might be a freehold. Hence an assize would lay against the disseisor. But the disseisor, nonetheless, obtained an estate good against the world "except him who had the right of entry."

Whatever is the true account of the origin of the de facto officer rule, its rationale in modern times is the protection which it affords the public . If an award of an industrial tribunal is held void, great inconvenience will usually be occasioned to a section of the public. To hold that the award is void simply because of a defect in the composition of the tribunal is a course to be avoided if it is possible to do so. Such a case seems to call, in the public interest, for the application of the de facto officer rule.

Unfortunately, although the making of the award of the tribunal in the present case was defended on a number of grounds, no attempt was made to invoke the de facto officer rule. No doubt this was the result of the urgency concerning the matter which caused the case to be brought on at short notice. Since the Court has not heard counsel for the parties on the matter, I cannot come to any conclusion on the point. But it does appear prima facie at all events that the de facto officer rule would prevent the invalidation of the award even though the tribunal was improperly constituted. The tribunal is created and constituted by s 380(1) of the Act. It exists as a legal entity: cf St Leonards Municipality v Williams [1966] Tas SR 166 at 169-171; 15 LGRA 62 at 65-66. The award was the act of the tribunal even though made irregularly and in substantial breach of the Industrial Arbitration Act 1940 (NSW). The Act entitles the tribunal to be constituted by the chairman sitting alone. Whether or not he was entitled to do so depends upon matters internal to the tribunal. To all outward appearances the composition of the tribunal was consistent with the terms of the Act. The composition of the tribunal was unlawful; but in fact Macken J was purporting to sit as the tribunal. Both the claimants and the second and third opponents acted on the basis that the tribunal was properly constituted. No doubt so did relevant members of the public. The award purported to be the award of the tribunal.

It is not the Act which declares the award invalid but the common law doctrine that an act dependent on a mandatory condition is void if the condition is not fulfilled. However, the de facto officer doctrine, when applicable, prevents the nullification of such an act.

In the circumstances, I do not think that an order in the nature of certiorari should have been made. Since the formal orders of the Court have not been drawn up, the Court can revoke any of its order. However, the other orders of the Court were properly made and, for practical purposes, they have the same effect.

In Magrath v Goldsbrough Mort and Co Ltd (1932) 47 CLR 121, the High Court upheld the issue of a writ of prohibition to a Deputy Commissioner when the number of members of the Commission fell below those prescribed by the Industrial Arbitration (Amendment) Act 1926 (Cth), s 6.

Rich J said (at 127): "…The central hypothesis of the statute is that a properly constituted commission shall exist. It proceeds entirely upon this subsumption. But where it fails, in my opinion it must follow that all matters provided in the statute which are founded upon it fail with it."

(Emphasis added.)

(d) In their judgment, Kirby P and Hope JA said the principle should be applied warily, (at 519-520):

De facto officers "doctrine":

We have read what McHugh JA has written about the validity of the acts of de facto officers and the suggested operation of that "doctrine" to this case. For a number of reasons we are not disposed to alter the orders pronounced by the Court on 11 December 1986.

First the proceedings in the Court were conducted by the parties upon the basis dealt with in this judgment. No contention was advanced, during extensive evidence and argument, that the purported award of the tribunal could be sustained, even though invalidly made, on the basis of its being the act of a de facto public officer. Such contention might have justified the claimants' calling evidence. It would certainly have necessitated extensive argument. Steps will have already been taken upon the basis of the Court's orders to bring the matter back to the tribunal, properly constituted, in order to reopen the application for an award. The circumstances before the tribunal are urgent and industrially sensitive. It is not appropriate, therefore, in this case and at this stage, for the Court of its own motion to introduce an issue which the parties did not choose to litigate.

Secondly, we are in any case by no means convinced that the "doctrine" of de facto officers applies to these proceedings. The award here is a creature of statute . The ultimate obligation of the Court is to determine the meaning of legislation and to ensure that the legislative purpose is fulfilled. No common law doctrine can avail the parties if it flies in the face of the particular legislation under review . That is the case here. The legislature made it abundantly plain that assessors should participate in meetings of the tribunal. Their participation was intended to affect the decisions of the tribunal and awards made by it. The "doctrine" of de facto officers cannot operate to protect an award, made otherwise than in accordance with the legislation, if, in doing so, it negatives clear legislative provisions.

What was involved here was not merely a suggested irregularity in the appointment of particular members of a tribunal as in Ellis v Bourke (1889) 15 VLR 163. Nor is it a case such as Margate Pier Co v Hannam (1819) 3 B & Ald 266; 106 ER 661, where a provision of a statute requiring a duly appointed justice of the peace to take an oath before acting was held to be binding only on the justice personally and making him liable to a penalty at common law, but not to affect the validity of his acts. The present case involved the complete failure of the tribunal to meet as such and to be constituted as Parliament provides . The basis of the de facto doctrine supports its inapplicability in circumstances such as the present. "… An officer de facto is one who has the reputation of being the officer he assumes to be, and yet is not a good officer in point of law": R v Corporation of the Bedford Level (1805) 6 East 356 at 368-369; 102 ER 1323 at 1328. It is difficult to see how a judge could have a reputation of being a judge and two assessors. True the statute empowers him to act by himself if the assessors, having been duly summoned, do not turn up. But this is a question which must arise afresh in each new case. It is not capable of being the subject of reputation.

Thirdly, the de facto officers cases have developed "as a matter of policy and necessity" to protect those litigants whose interests are affected by the apparently official acts of persons who purport to exercise official powers. The doctrine should not be extended to a case, such as the present, where what is involved is an industrial award having quasi legislative force upon large numbers of persons not immediately involved in the litigation . True it is, declaring the award void and quashing it will cause industrial inconvenience. But that is not a reason to invoke the public officers "doctrine". Indeed, the widespread operation of the purported award, made invalidly, is, on the contrary, a reason to insist upon due observance of the law. Otherwise the rule of law and compliance with the requirements established by Parliament will be ignored by reference to a "doctrine" whose operation should be strictly confined .

(Emphasis added.)

(e) This approach was affirmed in the case of Balmain Association Inc v Planning Administration for the Leichhardt Council (1991) 25 NSWLR 615 at 639-640 (per Kirby P, Priestley and Handley JJA):

De facto officers doctrine is inapplicable:

Having reached these conclusions we need to consider the contention of the Minister that the acts of the planning administrator, as an officer de facto exercising the planning functions of the Council under s 68 of the Act, are valid despite the invalidity of his appointment. It was further submitted that the action taken by the Director of Planning pursuant to s 69, consequential upon the steps taken by the planning administrator pursuant to s 68, were likewise valid and that, therefore, there was no legal impediment to the Minister now exercising his powers under s 70 by making the local environmental plans in question. Indeed, it was argued that, even if the planning administrator was invalidly appointed, the Minister had a legal obligation, in the events that have happened, to make those local environmental plans.

In support of this contention the Court was referred to the well-known essay by Sir Owen Dixon "De Facto Officers" which originally appeared in (1938) 1 Res Judicatae 285 and is reproduced conveniently in S Woinarski (ed) Jesting Pilate (1965) at 229 ff. It was conceded that there was no authority binding on this Court which supports the result contended for by the Minister. Such authority as exists indicates that this Court, in upholding the rule of law, will be cautious in applying any doctrine protective of the acts of invalidly appointed public officers . The inclination of the Court to confirm any such doctrine within narrow limits sufficiently appears from what was said by the majority in G J Coles & Co Ltd v Retail Trade Industrial tribunal (1986) 7 NSWLR 503 at 519 ff.

The de facto officers doctrine affords no protection to the officer when his or her right to the office in question is challenged by quo warranto proceedings or proceedings of that nature. Moreover, in our view the doctrine is essentially one for the protection of members of the public who deal with, or who are affected by, the official acts of de facto officers: see R v Lisle (1738) Andrews 163 at 166; 95 ER 345 at 346 .

The de facto officers principle may well be the counterpart in public law of the indoor management rule in company law. Both appear to be manifestations of the fundamental principle that acts are presumed to have been done rightly and regularly unless the contrary appears: see Morris v Kanssen [1946] AC 459 at 475. While outsiders who deal in good faith with de facto directors can invoke the indoor management rule, it is well-established that de facto directors themselves cannot rely upon their own unauthorised acts on behalf of the company to hold the company bound to some transaction for their own benefit: see Morris v Kanssen (at 474-476) .

We see no reason in this case why the Minister can rely upon his own unauthorised appointment of the planning administrator to support or justify any further action under the Act . In particular , the Minister cannot rely upon the steps which the planning administrator purported to take under s 68 to support the making of these local environmental plans under s 70.

Furthermore, Sir Owen Dixon pointed out in his essay (at 286; 230) "it may be taken to be a necessary condition that the officer de facto must have a colourable authority" although at the same time he noted that "what will fulfil this condition is not clear". Later, (at 287; 231) he referred to the effect produced upon the rights of others by the public transactions of a de facto judge who had exercised "apparent authority". He also indicated (at 286; 230 n7) his acceptance of old authority that limited the operation of the principle to de facto officers who hold "without protest or disturbance". In our opinion after legal proceedings have been commenced which challenge the validity of an officer's appointment persons with knowledge of the proceedings can no longer rely upon the colourable or apparent authority of that officer. In these circumstances the validity of acts of that officer, otherwise within the de facto principle performed while the proceedings are pending, must depend on the validity of the officer's appointment. So much at least is required by the fundamental principle of the rule of law in our community . Moreover this view is supported by State v Carroll 38 Conn 449; 9 Am Rep 409 (1871) referred to by Sir Owen Dixon. In that case (9 Am Rep at 418-419) the Chief Justice discussed the case of R v Lisle. There the "de facto" Mayor of Christchurch nominated Lisle as a Burgess while a quo warranto was pending against him. After judgment of ouster against the mayor (who was held to be a mere usurper) quo warranto proceedings were brought against Lisle and his election on the nomination of the ousted mayor was held to be void. Lisle knew that the legality of the mayor's appointment was disputed but it is not altogether clear whether he knew of the pending proceedings (R v Lisle (1738) Andrews 163, 168, 170; 95 ER at 345, 347, 348, 349): see also R v Pursehouse (1732) 2 Barn KB 264 at 265; 94 ER 490 and I R v Malden (1767) 4 Burr 2135 at 2140; 98 ER 113 at 116.

We express no view on the question whether members of the public are entitled to rely upon official acts of the planning administrator in relation to sites on the Balmain Peninsula other than those with which this appeal is directly concerned.

(Emphasis added)

(f) We note in this context, also, that we were referred to a learned article by Professor Enid Campbell (the Sir Isaac Isaacs Professor of Law at Monash University), entitled 1; in the last 3 paras of that article (at 20-21) Professor Campbell said:

No-one has suggested that the de facto officer doctrine should be abandoned or should be absorbed within estoppel doctrine. It is nevertheless a doctrine which some believe should be strictly confined. The doctrine, after all, represents an important qualification of the ultra vires principle and serves to validate official action which, technically, is beyond power. It is not, however, a doctrine which has been evolved for the protection of de facto officers. Its primary purpose is rather to protect members of the public with whom officials have dealings in circumstances in which those members of the public can legitimately assume that persons have a good legal title to hold the public offices they presume to occupy. That purpose is not well served if courts allow official parties to invoke the doctrine when the validity of their acts is contested.

Strict confinement of the de facto officer doctrine can be achieved in several ways. The first is by adherence to a rule that the doctrine may not be relied on by de facto officers in proceedings to which they are a party and in which the validity of their acts is in issue. The second is by some relaxation of the general rule that the title of de facto officers may not be challenged in collateral proceedings. A third is by adoption of stringent criteria for adjudging whether a person has acquired de facto officer status. The fourth is by allowing the doctrine no room to operate where the conditions for acquisition of a good title to a public office have been prescribed by legislation and the prescriptions are for the protection of members of the public who will have dealings with the occupant of the office.

The most difficult question is whether any exceptions should be made to the general rile that the doctrine operate only if the office assumed exists de jure and, if so, what those exceptions should be.

It will be noted that Professor Campbell appears to consider that the de facto officer principle is applicable only where a member of the public seeks relief. We find (in line, in particular, with Professor Campbell's view) that the de facto officer principle does not operate in this instance in favour of the respondent. We note further that the Mr Bell did say, fairly enough, that this was not his strongest point.

128 (a) The legislative framework which is relevant for the purposes of these Reasons is set out in 4 sections of the Customs Act 1901 (Cth) as follows:

Section 8(1)(a)(iii)

8 (1) In this Act:
(a) a reference to the Collector, or to a Collector, is a reference to:
(i) …;

(ii) …; or

(iii) any officer doing duty in the matter in relation to which the expression is used; and

(b) …

Section 165(1)

165 (1) When any duty has been short levied or erroneously refunded the person who should have paid the amount short levied or to whom the refund has erroneously been made shall pay the amount short levied or repay the amount erroneously refunded on demand being made by the CEO within twelve months from the date of the short levy or refund.

Section 167

(1) If any dispute arises as to the amount or rate of duty payable in respect of any goods, or as to the liability of any goods to duty, under any Customs Tariff, or under any Customs Tariff or Customs Tariff alteration proposed in the Parliament (not being duty imposed under the Customs Tariff (Anti-Dumping) Act 1975 (Cth)), the owner of the goods may pay under protest the sum demanded by the Collector as the duty payable in respect of the goods, and thereupon the sum so paid shall, as against the owner of the goods, be deemed to be the proper duty payable in respect of the goods, unless the contrary is determined in an action brought in pursuance of this section.

(2) The owner may, within the times limited in this section, bring an action against the Collector, in any Commonwealth or State Court of competent jurisdiction, for the recovery of the whole or any part of the sum so paid.

(3) If a documentary import entry has been made in respect of goods, a protest under this section is taken to have been made if, and only if, the owner of the goods or the agent of the owner:
(a) writes on the entry Paid under protest ; and

(b) adds to the entry a description of the goods to which the protest relates (where the protest does not relate to all the goods covered by the entry) and a statement of the grounds on which the protest is made; and

(c) signs the statement.

(3A) If a computer import entry has been made by a registered COMPILE user in respect of goods, a protest under this section is taken to have been made if, and only if, the registered COMPILE user transmits to Customs at the time of making payment in respect of those goods following an import entry advice under section 71B:
(a) the entry number; and

(b) the words Paid under protest ; and

(c) a description of the goods to which the protest relates (where the protest does not relate to all the goods covered by the entry) and a statement of the grounds on which the protest is made.

(4) No action shall lie for the recovery of any sum paid to the Customs as the duty payable in respect of any goods, unless the payment is made under protest in pursuance of this section and the action is commenced within the following times:
(a) In case the sum is paid as the duty payable under any Customs Tariff, within 6 months after the date of the payment; or

(b) In case the sum is paid as the duty payable under a Customs Tariff or Customs Tariff alteration proposed in the Parliament, within 6 months after the Act, by which the Customs Tariff or Customs Tariff alteration proposed in the Parliament is made law, is assented to.

(5) Nothing in this section shall affect any rights or powers under section 163.

Section 273GA(2)

(2) Where a dispute referred to in subsection 167(1) has arisen and the owner of the goods has, in accordance with that subsection, paid under protest the sum demanded by the Collector, an application may be made to the tribunal for review of the decision to make that demand and of any other decision forming part of the process of making, or leading up to the making of, that first-mentioned decision.

(We note that having regard to s 8(1)(a)(iii) of the Customs Act 1901 (Cth), Mr Walker was unquestionably a Collector as defined.)

(b) We commence in the first instance with the judgment of the High Court in Malika Holdings Pty Ltd v Stretton (2001) 178 ALR 218. Gummow and Callinan JJ said in paragraph 77 (at 237):

77 Section 165 has no application where Customs has been misinformed by the importer; rather, the provision is concerned with the redressing of errors made by Customs, giving it 12 months to repair its own mistakes. Section 165 did not qualify the operation of s 153 in the action instituted by the Collector in the Supreme Court of Victoria against the appellant.

McHugh J adopted a somewhat different test requiring fraud or negligent description at paras 40-41 (at 227), reading as follows:

40 As in Carter Holt, the parties to this appeal agreed that "short levied" included instances when no duty at all has been charged. That being so, it is unnecessary to express a concluded opinion on the subject. But even if s 165 applies or applied to some cases where "the amount charged is nil", I am far from convinced that s 165 governs a case where no duty has been paid by reason of fraud or negligent description. In such cases, I can see no reason why the Collector cannot rely on s 153 without the time limit restriction imposed by s 165 ^[1].

41 Whether or not s 165 applies to cases where the amount charged is nil, it seems clear enough that there may be many cases where the Collector may sue for duty long after the goods have been imported. Indeed, he or she may sue for the duty long after they have ceased to exist. And the person the Collector sues need not be the original owner or the person who imported the goods. Any person who is in possession or control of goods on which duty is payable, but unpaid, can be sued under s 153 for that duty ^[2].

The decision in Malika Holdings was not, in our view, obiter; but even if we are wrong and it was obiter, a tribunal such as this should not disregard the pronouncements of 3 judges of the High Court.

(c) Section 165 of the Customs Act 1901 (Cth) has the effect that where the respondent is not misinformed or there is no fraud or negligent misdescription, the respondent cannot make a demand for duty after the expiry of 12 months. That prohibition (and it is to be remembered that the system involves self-assessment) is removed when Malika Holdings applies, as, in our view, it does in this instance.

(d) This tribunal derives its jurisdiction from s 273GA(2) of the Customs Act 1901 (Cth), which in its terms relates back to s 167 of the Customs Act 1901 (Cth). This tribunal must consider the "decision to make that demand and of any other decision forming part of the process …". The first question then is as to whether the demand must comply with s 165 of the Customs Act 1901 (Cth). Section 167 of the Customs Act 1901 (Cth) does not refer to s 165 of the Customs Act 1901 (Cth), even though it follows relatively closely after it. It is arguable that where Malika Holdings does not apply, the demand must nevertheless be one which complies with s 165. In this case, though, Malika Holdings does apply, and so that a demand under s 165 of the Customs Act 1901 (Cth) is not necessary. This being so, the demand made in May 1997, even if it was not compliant with s 165 of the Customs Act 1901 (Cth)suffices; so for that matter would the later demand by Mr Walker be sufficient. It is relevant as we have said that Mr Walker was on any basis a Collector as defined. This being so, this tribunal does have jurisdiction to consider the relevant classification and the demand made in respect thereof.

(e) There must also be a question of whether the fact that the tribunal has jurisdiction under s 273GA(2) of the Customs Act 1901 (Cth), which refers to s 167 of the Customs Act 1901 (Cth), but not s 165, has the effect that even if Malika Holdings (supra) does not apply, a demand will suffice for s 167 even where it does not suffice for s 165. It is not necessary for us to decide this point because, in our view, Malika Holdings (supra) does apply to eliminate the need for a demand which complies with s 165 of the Customs Act 1901 (Cth).

129 (a) There are further aspects which require consideration. Mr Walker signed the demand on 16 May 1997 when he was still functioning in his own position. It was delivered when he was functioning in his acting position.

(b) When one considers the Instrument as a whole it becomes clear that the reference, in relation to 13 positions, to s 165 of the Excise Act 1901 (Cth) was a clear error and probably, as Mr Bell suggested, an input error. There were numerous other delegations, all of which combined s 165 of the Customs Act 1901 (Cth) with s 80 of the Excise Act 1901 (Cth) in favour of a large number of officers and, in the case of the more junior of them, with an amount limitation. Mr Walker was a more senior officer; numerous other officers received delegated authority under s 165 of the Customs Act 1901 (Cth) and s 80 of the Excise Act 1901 (Cth); on this basis it is clear, in our view, that an error of a clerical nature was made.

We note that we much prefer, in this regard, the evidence of Mr Drury to that of Mr Kelly. The latter was apparently prepared to agree with almost any proposition put to him, and his opinions were often enough matters of law for decision by this tribunal and not by him.

(c) Mr Moshinsky characterised an error of the relevant kind as one where "of" appears instead of "or", or in other words, simple typographical errors. But why need this concept by so confined? The omission of the word "not" in a sentence which intended the use of 2 negatives alters its meaning completely. The tribunal considers that this would be an error of a clerical nature, and moreover, that the error as regards the delegated power falls within the same category. The tribunal is not seeking to exercise a jurisdiction which it does not have under the Customs Act 1901 (Cth) and the AAT Act; it seeks merely (obliged as it is to make the correct and preferable decision) to interpret the Instrument in the manner which was so plainly intended.

130 (a) What then of the acting position and where the correct legislative reference appeared? Mr Walker, on 16 May 1997, prepared a demand for dispatch and delivery on 19 May 1997, when his acting position commenced. Mr Bell contended that a demand is made when it is delivered.

(b) It is also perhaps arguable that the reference to a demand is one which requires consideration of the date on which it is prepared and signed and also the date on which it is delivered, and as part of one continuum. If this is correct, then Mr Walker signed the demand too soon.

(c) There is a further difficulty. Regulation 116A of the Public Service Regulations 1935 (Cth), suggests that Mr Walker's acting appointment would be effective only when it was authorised in writing, in this case by Ms Stretton, and it seems clear that written authorisation occurred after the event. Regulation 116A(2) of the Public Service Regulations 1935 (Cth) reads as follows:

116A. (1) …

(2) The Secretary of a Department may give a direction in writing to an officer to perform temporarily the whole, or a specified part, of the duties of an office in that Department.

…

(d) The respondent argues that the requirement for writing is directory or permissive, but not mandatory. We refer, in this regard, to clauses 176 to 181 (inclusive) of the respondent's submissions, which need not be repeated in these Reasons.

(e) On balance, and although it is not strictly necessary for us to decide the issue, we incline to the view that the respondent is correct and so that a demand is made when it is delivered, and that written confirmation is permissive in the sense that a lack of writing in this case does not result in invalidity. We note, in this context, that it is relevant to consider the nature of the process of appointment. It must be true that it is necessary, sometimes as a matter of urgency, that an officer be appointed to an acting position. (We refer to the evidence of Mr Walker at transcript, pp 396-397 and Mr Kelly at transcript, pp 609-610.) Having regard to the judgment in Sandvik Australia Pty Ltd v Commonwealth of Australia (1989) 89 ALR 213, we do not think that this is a case where the parliament intended that the fact that the writing occurred post the relevant event would have the effect that the act was thereby rendered invalid. We consider, though, that a contrary view is arguable.

131 In summary then:

(a) We find against the applicant on the classification issue, and find that the imported goods should be classified in each or any of 2710.00.20 (a), (b) or (c).

(b) We find that Malika Holdings applies to defeat the need for a demand which complies with s 165 of the Customs Act 1901 (Cth), in respect of the delegation issue, in particular because the applicant intentionally misinformed the respondent concerning the proper description of the imported product.

(d) We thus find against the applicant also in respect of the delegation issue.

132 We note in conclusion that we do not think that this case, at least so far as classification is concerned, is nearly as complex as the weight of evidence and paper before us would tend to suggest. The classification issue is, in the end, relatively simple, resolved to a considerable extent by our conclusions as to the factual circumstances surrounding the whiting-out process, and the weight of the scientific evidence as to the nature of the product. The delegation issue is, if anything, somewhat more complex, but resolved, inter alia, by our findings as to the application of Malika Holdings (supra). It is not clear to us why this matter should have taken so many hearing days and at such large cost. A consideration of the annexures alone indicates, in the clearest possible terms, that they required considerable time and expertise, and the costs would have been correspondingly high. The respondent seeks penalties in addition to the duty; however this is not a matter before us. In addition we note that the penalty notices by Mr Muzeen and Mr Fahy do not constitute demands for our purposes.

133 The decision under review is accordingly affirmed.