Cohns Industries Pty. Ltd. v. Deputy Federal Commissioner of Taxation.

Judges:
Young CJ
Starke J
Gray J

Court:
Supreme Court of Victoria (Full Court)

Judgment date: Judgment handed down 30 April 1979.

---

Young C.J.; Starke and Gray JJ.: This is an appeal from a judgment of Murray J. whereby he ordered that judgment be entered for the respondent in the amount claimed in the action brought by the respondent against the appellant together with interest thereon at the rate of eight per cent per annum from 8 August 1974, to date of judgment, viz. 26 May 1978. The amount claimed in the action was $155,536.57.

---

ATC 4244

The respondent's claim against the appellant is for the amount of sales tax assessed by the respondent and alleged to be payable by the appellant pursuant to two assessments dated 20 May 1974. The respondent's case at the trial was proved by the tender of a certificate under sec. 10 of the Sales Tax Procedure Act and it appears to have been tacitly conceded by the appellant that such a certificate constitutes a prima facie case. The only defence relied upon was that the goods sold by the appellant were not manufactured goods. On a proceeding by the Commissioner to recover sales tax it is open to a defendant to take any objection to the assessment other than an objection that some required formality has not been observed: see
D.F.C. of T. v. Hankin (1959) 100 C.L.R. 566 at p. 578.

The appellant is a manufacturer of aerated waters which it sells in bottles and in cans. It operates plants at Bendigo, Swan Hill and Wangaratta. It evidently markets three principal lines: (1) its own products which it makes from basic ingredients which it purchases, (2) Schweppes' products which it makes under franchise arrangements from basic ingredients some of which it purchases and some of which are supplied by Schweppes, and (3) Coca Cola products which it also makes under franchise arrangements but from ingredients supplied to it by the Coca Cola organisation.

The relevant legislation is the Sales Tax Assessment Act (No. 1) 1930-1966 which provides in sec. 17 that sales tax shall be levied and paid upon the sale value of goods manufactured in Australia. By sec. 3(1) ``manufactured'' is to have a meaning corresponding to that of ``manufacture'' which by the same subsection is defined as follows:

``Manufacture'' includes -

• (a) production;
• (b) the combination of parts or ingredients whereby an article or substance is formed which is commercially distinct from those parts or ingredients, except such combination (not being a combination whereby concrete, cement mortar, lime mortar or any similar preparation of a kind used in the construction, repair or maintenance of buildings or other structures is formed, or whereby any other prescribed article or substance is formed) as, in the opinion of the Commissioner, it is customary or reasonably practicable for users or consumers of those articles or substances to undertake; and
• (c) any treatment applied to foodstuffs as a process in the preparation of the foodstuffs for human consumption."

At the trial the appellant presented a substantial amount of evidence designed to show that its operations fell in one way or another within the exceptions contained within para. (b) of this definition. The learned trial Judge did not find it necessary to deal with that evidence or with the elaborate argument based upon it. His Honour held that the definition was not exhaustive of the meaning of the word manufacture and that, as what the appellant does is plainly to manufacture goods within the ordinary meaning of that word, the appellant's goods were manufactured goods within the meaning of the Act.

The basal contention of the appellant was that the definition of manufacture was an exclusive or exhaustive definition. Since it was conceded that the appellant's operations were those of manufacture in the ordinary meaning which that word has come to bear (see
F.C. of T. v. Riley (1935) 53 C.L.R. 69 at p. 80 per Starke J.) this basal contention was critical to the success of the appeal. It will, therefore, be as well to examine it at once.

When the word ``includes'' is used in a definition section, it is generally used to enlarge the meaning of the word it describes, that is to say to bring within the word something that would otherwise not be within it:
Savoy Hotel Co. v. London County Council (1900) 1 Q.B. 665 at p. 669. The classic statement is of course to be found in the advice of the Privy Council in
Dilworth v. Commr. of Stamps (1899) A.C. 99 at p. 105, which was quoted by the learned trial Judge. Yet in a passage that is worth quoting, Kitto J. has warned against taking that statement so literally as to reduce the enquiry to a consideration of the meaning of

---

ATC 4245

the word ``includes''. In
Y.Z. Finance Co. Pty. Ltd. v. Cummings (1964) 109 C.L.R. 395 at pp. 401-2, Kitto J. said:

``Unlike the verb `means', `includes' has no exclusive force of its own. It indicates that the whole of its object is within its subject, but not that its object is the whole of its subject. Whether its object is the whole of its subject is a question of the true construction of the entire provision in which the word appears. The well-known statement of Lord Watson in Dilworth v. Commr. of Stamps ((1899) A.C. 99) at pp. 105, 106, should not be taken so literally as to reduce the inquiry in a case like the present to an inquiry into the meaning of the word `includes'. Strictly speaking, that word cannot be equivalent to `means and includes'. But a provision in which it appears may or may not be enacted as a complete and therefore exclusive statement of what the subject expression includes. A provision which is of that character has the same effect as if `means' had been the verb instead of `includes'. The question whether a particular provision is exclusive although `includes' is the only verb employed is therefore a question of the intention to be gathered from the provision as a whole.''

When one turns to the remainder of sec. 3(1) one is immediately struck by the fact that throughout it the draftsman carefully distinguished between ``means'' and ``includes''. It is unnecessary to set out the whole of the subsection which is long, but an examination of it justifies the conclusion in our opinion that leaving aside for the moment the definition of ``manufacture'' and allied words, the draftsman uses the word ``means'' to introduce an exhaustive definition and ``includes'' to introduce an enlarging but not exhaustive definition. There is perhaps one definition which does not fit this pattern. That is the definition of ``company'' which ``includes all bodies or associations corporate or unincorporate, but does not include partnerships''. It is difficult to think of any body or group which would fit the description ``company'' and which would be outside the defined meaning. Thus the definition given to the word ``company'' may be said not only to enlarge the meaning of the word, but also to provide an exhaustive definition of it. But even if this be the case, the definition has been made exhaustive by chance, so to speak, that is by choosing a very wide definition, rather than by exhibiting any intention that the definition is to be exhaustive. Thus it does not in the end militate against the conclusion that the draftsman has not in sec. 3(1) used the word ``includes'' for the purpose of introducing exhaustive definitions. This conclusion would, of course, yield to a contrary conclusion in the case of the definition of ``manufacture'' if there were any indications that the draftsman intended to enact an exhaustive definition of that word.

No submission was made to us to the effect that there were any indications of such an intention to be found anywhere in the statute save in the definition itself. Nor was any such submission made to the learned Judge. Indeed Dr. Pannam's argument would lead to the strange result that although the definition was to be treated as exhaustive it left out of the exhaustive definition certain operations which would be within the ordinary meaning of the word ``manufacture''. For these reasons we would conclude from an examination of sec. 3(1) that the definition of ``manufacture'' is not to be treated as exhaustive.

Dr. Pannam attempted to construct an argument based upon para. (b) of the definition of ``manufacture'' to show from the proper construction of that paragraph that the definition was intended to be exhaustive of the meaning to be attributed to the word. The argument depended to a large extent upon that part of para. (b) which is enclosed in brackets. It was said that the exclusion from the exception of such combination as in the opinion of the Commissioner it is customary or reasonably practicable for certain users to undertake showed that some operations which were indubitably manufacturing operations were to be excluded. It is not necessary to express a concluded view upon the question whether some operations within the ordinary meaning of the term ``manufacture'' fall within the exceptions contained in brackets: it is sufficient to say that even if they are, it does not follow that the definition of ``manufacture'' is intended to be exhaustive, for the operations thus excluded are excluded

---

ATC 4246

not from the inclusive or enlarging part of the definition but from an exception from that part. Moreover, para. (b) is only one of the paragraphs of the definition and there is no reason to treat it as controlling, so to speak, the whole of the definition. These considerations are sufficient to dispose of the argument.

Accordingly, it is our opinion that the appellant's contention that the definition of ``manufacture'' is exhaustive cannot succeed. As it was conceded that the goods produced by the appellant are manufactured goods within the ordinary meaning of that expression it must follow that the appeal should fail. Indeed the reasons we have given which are substantially the same as those upon which the learned Judge based his conclusion are sufficient to dispose of the appeal. If, however, it were necessary to do so, further reasons can, in our opinion, be given for rejecting the appellant's contentions.

Evidence was called by the appellant to describe its manufacturing processes. It is unnecessary to refer to that evidence in detail. It described the ingredients used in the production of the appellant's own line of products and how those ingredients were combined. But the evidence showed that the operation went beyond mere combination and that at one stage heat was applied to the ingredients or some of them. At another stage the mixture was cooled by artificial means. These processes are sufficient, in our opinion, to take the operation out of the opening words of para. (b) which speaks only of a combination. Thus the appellant's operations do not fall within para. (b) at all and it is unnecessary to consider the evidence and arguments directed to showing that the combination of the ingredients used by the appellant is reasonably practicable for users or consumers of the appellant's products to undertake.

Mr. Charles who appeared for the respondent contended that the construction of the definition of ``manufacture'' which we think is correct is supported by a consideration of the history of the provision. The definition was said to have been amended to overcome the result of the decision in
Irving v. Munro & Sons Ltd. (1931) 46 C.L.R. 279. It is, however, unnecessary to consider this contention.

For these reasons the appeal will be dismissed.