Universal Press Pty. Limited v. Federal Commissioner of Taxation

Judges:
Gummow J

Court:
Federal Court

Judgment date: Judgment handed down 8 November 1989.

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Gummow J.

These proceedings were heard together and evidence in each was treated as evidence in the other.

The applicant (``the taxpayer'') carries on business as a wholesale merchant and as publisher of a range of publications which includes the UBD and Gregory's street directories. The taxpayer sells these street directories principally by wholesale. Some of the street directories are printed in Australia and others are printed in Singapore.

Section 3 of the Sales Tax Assessment Act (No.2) 1930 provides that the sales tax imposed by the Sales Tax Act (No.2) 1930 shall be levied and paid upon the sale value of goods manufactured in Australia and sold by a taxpayer who purchased them from the manufacturer. The Sales Tax Act (No. 2) 1930, sec. 4, imposes a rate of sales tax of 10% in respect of goods covered by the Third Schedule to the Sales Tax (Exemptions and Classifications) Act 1935. Section 5 of the Sales Tax Act (No. 2) 1930 relevantly provides that where a ``registered person'' who has purchased goods manufactured in Australia from the manufacturer of the goods sells the goods to an unregistered person or to a registered person who has not quoted his certificate in respect of that purchase, sales tax shall be paid by the first-mentioned person. The taxpayer is such a ``registered person''. Section 6 states that notwithstanding anything in sec. 5, sales tax shall not be payable under that Act upon the sale value of goods, the sale value of which is exempt from sales tax under that Act by virtue of the Sales Tax (Exemptions and Classifications) Act 1935.

The Sales Tax Assessment Act (No. 6) 1930and Sales Tax Act (No. 6) 1930 contain provisions which are essentially to the same effect, save that these statutes are concerned with the levy and payment of tax upon the sale value of goods imported into Australia by a taxpayer and sold by him or applied by him to his own use.

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Sub-item 3(3) of the Third Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 is in the following terms:

``Books consisting wholly or principally of maps (including road and tourist maps and navigators' charts), but not including books marketed exclusively or principally for use in schools, colleges or universities.''

Section 5 of the Sales Tax (Exemptions and Classifications) Act 1935 provides that notwithstanding anything contained in any Sales Tax Assessment Act, sales tax shall not be payable upon the sale value of any goods covered in any item in the first column of the First Schedule. Item 51 of the First Schedule is in the following terms:

``ITEM 51

(1) Books, pamphlets, leaflets, periodicals, magazines and printed music, but not including (unless covered by any other item or sub-item in this Schedule) -

• (a) books of account; books of receipts, cheques, deposit slips, bank withdrawal forms, tickets, dockets, labels or order forms; books of blotting paper, books of blank sheets, or of sheets ruled or printed, for writing notes, letters, exercises, accounts or for record purposes, or for sketching, drawing, colouring or painting (not being children's books containing printed illustrations for copying or colouring or for copying and colouring); albums, books of samples, menus or calendars; booklets of printed matter conveying greetings or sympathy; diaries; other stationery book form;
• (b) programmes, schedules, syllabuses, guides or souvenirs of entertainments, amusements, exhibitions, competitions or sporting events;
• (ba) books covered by sub-item (3) of item 3 in the Third Schedule;
• (c) catalogues or price-lists;
• (d) memoranda of association, articles of association, balance-sheets, statements of accounts or prospectuses of trading or other concerns carried on for the profit of individuals or associated reports;
• (e) advertising matter; or
• (f) books, pamphlets, leaflets, periodicals, magazines or printed music published or to be published for the purpose or as a means of advertising the business or the products of the publisher or of the person or persons for whom they are or are to be published

(2) Books, pamphlets, leaflets, periodicals or magazines issued or to be issued by or on behalf of an organization which is not carried on for the profit of individuals, for the purpose of advertising tourist resorts or disseminating information concerning tourist traffic

For the purposes of this item, `periodicals' means any publications issued at regular intervals not exceeding three months.''

It is not disputed that the applicant's street directories to which I have referred are ``books'' within the meaning of sub-item 51(1). The debate in the present litigation has been whether that exemption does not apply because the street directories are books covered by sub-item 3(3) of the Third Schedule. If that is the case, then by dint of para. (ba) of sub-item 51(1), the exemption will not apply and what will apply is the rate of tax imposed in respect of goods covered by the Third Schedule.

The question thus comes down to one of whether the street directories are ``Books, consisting wholly or principally of maps (including road and tourist maps...)''.

On 11 February 1988, the Deputy Commissioner of Taxation notified the taxpayer that it was liable to pay sales tax upon certain street directories printed in Australia, in accordance with an assessment made under sec. 10A of the Sales Tax Assessment Act (No. 2) 1930. On 23 March 1988, the taxpayer gave notice of objection against that assessment. That objection was disallowed on 1 September 1988. Pursuant to sec. 41 of the Sales Tax Assessment Act (No. 1) 1930 (which applied by force of sec. 12 of the Sales Tax Assessment Act (No. 2) 1930), the taxpayer requested that this decision disallowing the objections be referred to this Court. The referral to this Court of that decision on the objection constituted the institution by the taxpayer of what subsec. 42C(3) of the Sales Tax Assessment Act (No. 1) 1930 describes as an ``appeal''. It is nevertheless a matter in the original jurisdiction

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of the Court. Matter No. G104 of 1989 is that matter so arising.

Matter No. G105 of 1989 arose from an assessment under sec. 10A of the Sales Tax Assessment Act (No. 6) 1930 in respect of street directories printed in Singapore. It comes to this Court by a similar path following the disallowance on 1 September 1988 of the taxpayer's objections to the assessment.

There are seven relevant street directories printed in Australia. On the front page of each of them appears prominently displayed the words ``UBD STREET DIRECTORY''. In each case, there is also prominently displayed on the cover the name of the geographic area with which the directory is concerned. The areas are Albany, Geraldton, Kalgoorlie-Boulder, New South Wales, South-West Western Australia, Victoria and Western Australia.

There are four directories printed in Singapore. One is the 24th edition of the UBD Street Directory for Sydney which, on the cover, is described as ``Featuring Improved Motor Services Section''. Each of the others is identified on the front cover as a ``Gregory's Street Directory''. The geographic areas concerned are stated as Canberra, Newcastle and Wollongong.

The directories vary in size. The UBD street directory for New South Wales comprises 280 pages, that for Kalgoorlie-Boulder comprises 17 pages. Each street directory contains an index, the length of the index reflecting the number of the maps contained in the volume. In some volumes, for example the UBD street directory for New South Wales, the index is compiled on a town by town basis and the relevant portion of the index is placed near the maps of the town concerned. On the other hand, the index to the UBD street directory for Sydney occupies more than 100 consecutive pages of that volume.

The evidence indicates that as regards all but three of the directories (those for Albany, Geraldton and South-West Western Australia), if the maps and indices are taken together, that total represents more than half) of the complete contents; in the case of the directories for Albany, Geraldton and South-West Western Australia, if the maps, indices and editorial content dealing with points of interest, scenic and historical, of the areas in question are taken together, the total represents more than half of the complete contents. On the other hand, if regard is had only to the maps themselves, the result with each directory is that more than half of the contents is concerned with other matters.

The taxpayer fixes upon this last characteristic and submits that none of the street directories consists wholly or principally of maps, including road and tourist maps, within the meaning of sub-item 3(3) in the Third Schedule, with the result that the taxpayer makes out its case for exemption under sub-item 51(1) of the First Schedule.

In addition to the maps and indices, the street directories contain advertising material, some of which would be of particular interest to tourists using the directory concerned. As I have indicated, there is also, in varying quantities, general editorial content dealing with points of interest in, and the history of, the local areas covered by the maps. Information also is given in a number of the directories as to the location of local utilities such as fire stations, golf courses, hospitals, libraries, bowling clubs, parks and places of worship.

I also should add that some of the street directories contain (often as front and end sheets) ``grid-maps'' which would be of particular use to persons already familiar in a general way with the area concerned; the ``grid-maps'' direct the reader by identification number to the larger scale maps which are found further inside the directory. This characteristic of some of the directories was emphasised in the submissions for the taxpayer as diminishing the importance to the user of those directories of the general indices of the streets. But as a matter of practical reality, the indices are an essential adjunct to the maps and these volumes are aptly described as ``street directories'' because the reader is directed to the street he or she seeks by going to the index and then to the relevant map.

Sub-item 3(3) is concerned with books which consist wholly or principally of maps, including road and tourist maps. In my view, the eleven street directories of the taxpayer consist principally of road and tourist maps in the sense with which sub-item 3(3) is concerned. They have that quality because of the interrelation between the drawings or plans which comprise the maps, the indices which direct or assist the

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reader in locating particular streets on those drawings or plans, and (in some cases) the editorial material which encourages the tourist to visit scenic, historical, or other interesting features of the country covered by the directory. I deal later in these reasons more closely with the characterisation of each of the eleven directories.

No doubt, in dictionaries (exemplified by the entry in the Shorter Oxford English Dictionary, p. 1276) the noun ``map'' is defined as a representation of the earth's surface or a part thereof, of its physical and political features or of the heavens delineated on a flat surface of paper according to a definite scale or projection. Nothing is there said as to indices or any other explanatory or accompanying material. Indeed, I have used ``map'' in this dictionary sense earlier in these very reasons.

However, one is here not simply construing the word ``map'', divorced from any particular context. The question is one of statutory construction. The issue presented under the sales tax legislation is essentially one of fact to be decided upon an inspection of the street directories, guided by common knowledge and experience; cf.
Rotary Offset Press Pty. Ltd. v. D.F.C. of T. 72 ATC 4212; (1972) 46 A.L.J.R. 609 per Stephen J. Road maps and tourist maps would ordinarily be considered as articles of practical utility which were sold in trade and commerce. To market a book consisting wholly of road maps or wholly of tourist maps, with no indices or other supporting material, would be to deal in something of a curiosity. It is true that in each directory, there is a number of advertisements, but looking at each publication overall, it is in my view a proper conclusion to say that it is a book consisting principally of road maps or principally of road maps and tourist maps. I would treat the UBD street directories for Kalgoorlie-Boulder, Albany, Geraldton, Western Australia, Victoria, South-West Western Australia and New South Wales as books consisting principally of road and tourist maps. I would treat the UBD street directory for Sydney, and the Gregory's street directories for Canberra, Wollongong and Newcastle as books consisting principally of road maps.

I should deal with some further submissions by counsel, though it is unnecessary to resolve all the issues they present.

Reference was made by counsel for the taxpayer to the proposition that whilst if the terms of a statute plainly impose a tax they should be given effect, liability should not be inferred from ambiguous words if there is revealed no clear intention to impose the tax:
Western Australian Trustee Executor & Agency Co. Ltd. v. Commissioner of State Taxation (W.A.) 80 ATC 4567 at pp. 4570-4571; (1980) 147 C.L.R. 119 at pp. 126-127, per Gibbs J. His Honour also said: ``If the words in question are words of exception or exemption the same rules of construction should be applied''. Earlier, in
Burt v. F.C. of T. (1912) 15 C.L.R. 469 at pp. 482 and 487 respectively, Barton, J. and Higgins J. had expressed agreement with Privy Council authority to the effect that there was no principle of construction that in a taxing Act provisions establishing an exception to the general rule of taxation are to be construed strictly against those who invoke their benefit; see Pearce and Geddes, Statutory Interpretation in Australia, 3rd ed., §9.32. In the present case, one is dealing with a qualification to an exception, in the sense that as ``books'' the street directories would be exempt for the purposes of sub-item 51(1), unless they were brought to tax under sub-item 3(3) and thus taken out of sub-item 51(1) by para. (ba) thereof.

Some reconsideration of the common law principles of statutory interpretation may be required if full effect is to be given to sec. 15AB of the Acts Interpretation Act 1901. This relevantly provides that consideration may be given to material which, whilst not forming part of a statute, is capable of assisting in the ascertaining of the meaning of a provision thereof, the consideration being given, inter alia, to determine the meaning of an ambiguous or obscure provision.

Counsel for the respondent (``the Commissioner'') sought to rely upon the explanatory memorandum circulated by the Treasurer in respect of certain Bills, one of which became the Sales Tax (Exemptions and Classifications) Amendment Act 1985. Clause 15 of Sch. 2 to that Act inserted into sub-item 51(1) the words:

``(ba) books covered by sub-item (3) of item 3 in the Third Schedule;''

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Clause 43 added sub-item 3(3) to the Third Schedule. In the Bill, what became cl. 43 was then numbered cl. 44.

The passages in the explanatory memorandum upon which counsel for the Commissioner relied, were principally the following:

``Schedule clause 15: Item 51

Item 51 in the First Schedule to the Principal Act exempts books, as well as pamphlets, leaflets, periodicals, magazines and other printed material. There are, however, several exceptions to the exemption provided by this item, examples of which include books of account, receipt books and cheque books.

Clause 44 proposes to include books of maps - atlases and street and road directories - in the sales tax base (see notes on that clause). To ensure that books of maps are, in fact, subject to tax as proposed by that clause, it has been necessary to specifically exclude such books from the general exemption afforded to books by item 51. To this end, clause 15 will add a new paragraph - paragraph (ba) - to the exclusions contained in existing item 51.

...

Schedule clause 44: Item 3

Sub-item 3(1) in the Third Schedule to the Principal Act presently covers maps, including road and tourist maps and navigators' charts, but does not include maps used as advertising matter. However, maps in book form, e.g., atlases and street and road directories, are exempt from tax under the item in the First Schedule - item 51 - that exempts books, magazines and most printed material.

Clause 44 proposes the insertion of a new sub-item - sub-item (3) - in item 3 of the Third Schedule to cover books consisting wholly or principally of maps including road and tourist maps and navigators' charts. This clause, together with clause 15 of this Schedule (see notes on that clause), will ensure that books consisting exclusively or principally of maps are taxable at the proposed 10% rate.''

In support of his tender of these materials, counsel for the Commissioner relied upon
Gardner Smith Pty. Ltd. v. Collector of Customs, Victoria (1986) 66 A.L.R. 377 at pp. 383-384. I received these materials into evidence, subject to consideration of their relevance.

However, I have reached the conclusion which I have earlier expressed as to the outcome of these proceedings, without recourse either to the principle of interpretation described by Gibbs J., or to sec. 15AB and, therefore, without attempting to resolve any competition that might arise between the common law principle and the new statutory provision. In my view, the legislation is to be construed in the manner I have suggested and there is no ambiguity in the relevant sense.

I should refer also to the decision in
F.C. of T. v. F.H. Faulding & Co. Ltd. (1950) 83 C.L.R. 594, as having some relevant bearing upon the meaning of the words ``consisting wholly or principally of...''. The word ``principally'' may well take particular colour from the statutory context in which it appears. Examples were discussed by Lockhart J. in
Parker Pen (Aust.) Pty. Ltd. v. Export Development Grants Board (1983) 46 A.L.R. 612 at pp. 619-621. To bring dealings in certain goods to tax on the footing that the goods ``principally'' have a certain characteristic may require one to ask whether it is that characteristic which provides the goods with their essential properties or gives them their distinctive quality. That was the way in which Rich J. approached the construction of item 36(3) of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 as it stood at the time of F.C. of T. v. F.H. Faulding & Co. Ltd. (supra).

Sub-item 36(3) rendered exempt from sales tax ``essences, concentrates and cordials, consisting wholly or principally of juices of Australian fruits, for the making of non-alcoholic beverages; non-alcoholic beverages consisting wholly of juices of Australian fruits''. It was not disputed the taxpayer's lemon squash cordial and its raspberry balm cordial were cordials for the making of non-alcoholic beverages; nor was it contended that they were non-alcoholic beverages consisting wholly of juices of Australian fruits. The evidence showed that the lemon squash cordial contained 29% of juices of Australian fruits by volume, and 26.4% by

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weight; the raspberry balm cordial contained 13.4% of juices of Australian fruits by volume, and 11.44% by weight. The other main ingredients of each cordial were sugar and water.

Rich J. held that each of the cordials fell within the exemption because it consisted principally of juices of Australian fruits, those juices supplying the element which gave the cordial its distinctive quality. In the present case, there would be little doubt but that it was the road maps and tourist maps, even treating those terms in their strictest sense as no more than the plans or drawings appearing on certain pages of the street directories, which gave to those books their distinctive qualities.

However, on appeal from Rich J., the Full High Court (Faulding (supra)) came to the view that in sub-item 36(3) the words ``consisting... principally of'' referred to quantity, expressed in terms of either volume or weight; accordingly, cordials which contained less than 50% by volume or by weight of the juices of Australian fruits did not fall within the exemption. Latham C.J. pointed out that the word ``consisting'' in sub-item 36(3) referred to the physical components of the cordial. Of the conclusion reached by Rich J., the Chief Justice said (at pp. 596-597):

``The difficulty which this view meets is found in the words `consisting of'. The reference is not to the principal characteristic of the cordial considered as a cordial, but to the content of the cordial. In the phrase `consisting wholly or principally of juice of Australian fruits' the word `wholly' necessarily requires the application of a quantitative standard. The word `principally' must, in my opinion, be similarly construed.''

Webb J. said (at p. 598):

``If `essence' and `concentrate' appeared alone in the provision and not with `cordial', `principally' might be taken to refer to `the chief thing concerned'; but the phrase `consisting wholly or principally of the juice of Australian fruit' is also predicated of `cordial', and inconsistency must not readily be imputed to the legislature in dealing with cordials of the kind in question here, on the one hand, and beverages on the other. As `principally' in that phrase cannot have two different meanings, a choice must be made. As its primary meanings include `chiefly' and `mainly', and, as quantity is twice indicated by the use of the word `wholly' and, further, as inconsistency should not, as already stated, be imputed to the legislature unless that is unavoidable, I think quantity - weight or volume - should be taken to be the only test provided by item 36(3). There might be greater difficulty in coming to this conclusion if the exemption were of things which `wholly or as to a principal part thereof' consisted of Australian fruit juices.''

Fullagar J. said (at p. 601):

``[T]he word `principally' must be used either as a quantitative expression or as some other kind of expression. It cannot be used partly as a quantitative expression and partly as some other kind of expression. It does not seem to me, in any case, to be possible to say on the evidence that sugar is not the dominant element in the respondent's products. But, in my opinion, the word in question refers to quantity or proportion, not to `dominance' or `relative importance'.''

In the present case, counsel for the taxpayer relied upon what was said in the Full Court of the High Court as to the quantitative denotation of ``principally''. He submitted that this required one to have decisive regard to the circumstance that in none of the street directories did the maps in the dictionary sense of the term occupy more than half the contents. Therefore, it was submitted, the exemption under sub-item 51(1) was not lost, because the street directories were not covered by sub-item (3) of item 3 of the Third Schedule.

On the other hand, counsel for the Commissioner said that the High Court decision had to be understood in the setting in which there appeared the words ``consisting wholly or principally of...'' The question was the identification of that of which the cordial consisted. That directed attention to identification of ingredients. Here, one was concerned with the characterisation of the finished product, namely a book, and of the contents of the book. The task might be a simple one because one readily might be able to say that the book contained nothing but maps and so consisted wholly of maps. If that were

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so, the exemption would be lost. But, counsel submitted, the exemption would be lost also if the book comprised varied contents, but one could characterise it in a qualitative sense as consisting principally of maps; it would be the maps which provided the essential character of any street directory.

In my view, there is much to be said for the submissions by counsel for the Commissioner. If it had been necessary for me to do so, I would have accepted those submissions. However, as I have indicated, given the meaning I have attached earlier in these reasons to the expression ``books consisting wholly or principally of maps (including road and tourist maps...)'', as applicable to the street directories with which I am concerned here, my conclusion is that even on the simply quantitative basis urged by the taxpayer the exemption does not apply. That conclusion follows from the rejection of the taxpayer's submission as to the limited meaning to be given in the present context to the word ``map''.

For these reasons, in each matter there should be an order confirming the decision of the Commissioner dated 1 September 1988 to disallow the objection by the taxpayer to the assessment, notice of which was issued on 11 February 1988. The taxpayer should pay the costs of the Commissioner.