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Re: MAGNA STIC MAGNETIC SIGNS PTY LIMITED and MAGNA STIC PRODUCTS LIMITED
And: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
Nos. G301-303 of 1990
FED No. 68
Sales Tax
91 ATC 4216/21 ATR 1367/98 ALR 604
28 FCR 39
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Davies(2), Beaumont(1) and O'Loughlin(1) JJ.
CWDS
Sales Tax - exemption - adhesive vinyl letters - whether letters exempt from
sales tax as "builders' hardware" - relevance of evidence as to understanding
of "builders' hardware" in building and hardware trades.
Sales Tax - remission of tax - notice of assessment issued under wrong Act -
whether Commissioner "required payment of the tax" - whether notice of
assessment referred to the particular tax - whether substantial compliance
with remission requirements.
Sales Tax (Exemptions and Classifications) Act 1935 (Cth) Schedule 1
Division XII Item 84(2)
Sales Tax Procedure Act 1934 (Cth) - s.12B(1)
Feltex Commercial Interiors Pty Ltd v Federal Commissioner of Taxation
(1990) 90 ATC 4925
Pioneer Plastic Containers Ltd v Commissioners of Customs and Excise (No. 2)
(1968) 1 WLR 236
Deputy Commissioner of Taxation v Academy Plastics Pty Ltd (Kitto J., 22
March 1956)
HRNG
SYDNEY
#DATE 12:3:1991
Counsel and Solicitors for appellants: A.H. Slater instructed by
J.W. Walker and D.K.L. Raphael
Counsel and Solicitors for respondent: A.R. Emmett QC with N.R. Burns
instructed by Australian
Government Solicitor
ORDER
Within 14 days the parties bring in draft short minutes of orders to reflect
the reasons for judgment.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal
Court Rules.
JUDGE1
In order to understand the issues in these three appeals from orders made by
a judge of the Court (now reported at (1989) 89 ATC 5,000 and (1990) 90 ATC
4,424) it is necessary to explain the history of the matter, which arises
under the Commonwealth sales tax legislation, as follows.
The background facts
2. Magna Stic Magnetic Signs Pty. Limited ("Signs"), the first appellant,
manufactures adhesive vinyl letters and numbers suitable for fixing to solid
surfaces ("the goods"). The goods are suitable for fixing to solid surfaces
such as buildings, notice boards or vehicles. They are capable of being
formed into words, such as names, warnings or instructions. The goods adhere
strongly to any surface to which they are applied, so that they cannot be
removed without damage to that surface. Signs wholesales the goods to a
related corporation, Magna Stic Products Pty. Limited ("Products"), the second
appellant. Products makes the goods up into "legends" in the form of a single
word or a group of words. The legends are then sold by Products to the
public, either directly or through agents.
3. On 18 February 1987, the Deputy Commissioner of Taxation purported to
issue a notice of assessment to Signs under s.25(2A) of the Sales Tax
Assessment Act (No. 1) 1930 ("(No. 1) Act") in these terms:
"You are hereby notified that you are liable to pay sales
tax as shown hereunder in accordance with an assessment that
has been made under the provisions of sub-section 25(2A) of
Sales Tax Assessment Act (No 1) 1930, as amended.
ASSESSMENT UNDER SUB-SECTION 25(2A)
OF SALES TAX ASSESSMENT ACT (No. 1) 1930, AS AMENDED
In respect of self adhesive vinyl letters and numerals
manufactured by you and sold or applied to your own use
during the period 1 March 1982 to 31 October 1986 (both
dates inclusive):-
RATES OF TAX TOTAL SALE AMOUNTS OF TAX
VALUE THEREON
$ $
17-1/2% 266,479.25 46,633.87
20% 844,720.20 168,944.04
Total 215,577.91
Less Tax Previously Paid 25,741.31
Amount of Tax Now Payable 189,836.60
Additional Tax under sub-section
45(2) and 25(2B) of Sales Tax
Assessment Act (No 1) 1930 203,690.66
Total amount 393,527.26"
4. Signs objected against the assessment on the grounds, inter alia, that the
goods were exempt from sales tax by virtue of the provisions of Item 84(2) in
the First Schedule of the Sales Tax (Exemptions and Classifications) Act 1935
("the Exemption Act"). Item 84(2), which is in Division XII - headed
"Building Materials" - in Schedule 1 to the Exemption Act, is as follows:
"(2) Builders' hardware (not including electrical fittings,
accessories or equipment, duct work or channelling of a kind
used in forced draught ventilating or air conditioning
systems, or fittings, accessories or attachments for,
components of, or goods designed to form part of, such duct
work or channelling, or goods covered by item 12, 14 or 14A
in the Third Schedule), being goods of a kind used in the
construction or repair of, and wrought into or attached to
so as to form part of, buildings or other fixtures,
including -
Bolts, brackets, brads
Catches, ceiling ties, clips, clouts, corrugated
fasteners
Decking spikes, door bells, door handles, door knockers,
door sheaves and tracks, door stops and stoppers, door and
cupboard catches, door and gate springs, drawer pulls,
dryvins
Flush rings
Gate loops
Hasps, hinges, hooks, hooks and eyes, house numbers
Knobs
Latches, letter boxes, letter plates, locks, locksets and
keys therefor, loxins
Metal frames for the support of wash basins
Nails, name plates, nuts
Padbolts, panel pins
Rivets
Staples, screws, scruins
Washers."
(During the period now in question, the provisions of Item 84(2) were amended
with respect to duct work used in ventilating or air conditioning systems. It
is common ground that these amendments are not material for present purposes.)
5. The Commissioner decided to disallow the objection. By letter dated 25
June 1987, the solicitors for Signs requested that the decision be referred to
the Court. In this matter (No. G159 of 1988), the primary judge ordered that
the appeal be allowed and that the notice of assessment be set aside but that
an amended assessment be issued as follows:
Sales tax $107,788.95
Additional tax $101,845.33
Less by payment $25,741.37
Sales tax due and payable $183,892.97
6. Signs now appeals (No. G301 of 1990) from so much of the judgment and
orders as ordered that an amended assessment be issued.
7. On 18 February 1987, the Deputy Commissioner also purported to issue to
Products a notice of assessment under s.25(2A) of the (No. 1) Act in these
terms:
"You are hereby notified that you are liable to pay sales
tax as shown hereunder in accordance with an assessment that
has been made under the provisions of sub-section 25(2A) of
Sales Tax Assessment Act (No 1) 1930, as amended.
ASSESSMENT UNDER SUB-SECTION 25 (2A)
OF SALES TAX ASSESSMENT ACT (No 1) 1930, AS AMENDED
In respect of self adhesive vinyl letters and numerals
manufactured by you and sold or applied to your own use
during the period 1 March 1982 to 31 October 1986 (both
dates inclusive):-
RATES OF TAX TOTAL SALE AMOUNTS OF TAX
VALUE THEREON
$ $
17-1/2% 424,642.91 74,312.51
20% 1,430,628.70 286,125.75
Total 360,438.26
Less Tax assessed to Magna Stic
Magnetic Signs Pty Ltd 215,577.91
Amount of Tax Now Payable 144,860.35
Additional Tax under sub-section 45(2)
and 25(2B) of Sales Tax Assessment Act
(No. 1) 1930 154,754.71
Total Amount 299,615.06"
8. Products objected against the assessment; the Commissioner decided to
disallow the objection, and the decision was also referred to the Court (No.
G160 of 1988). The primary judge was of the view that the appeal should be
allowed and the assessment set aside. No appeal is brought in this matter.
9. On 3 December 1987, Signs commenced proceedings in the High Court of
Australia against the Commissioner seeking a declaration that it was not
obliged to furnish a sales tax return in respect of the sale of the goods; a
declaration that it was not liable to pay sales tax upon the sale value of the
goods; an order that the Commissioner withdraw the assessment dated 18
February 1987; an injunction restraining the Commissioner from collecting the
sales tax assessed; alternatively, an order that the Commissioner remit so
much of the tax as related to the period prior to 21 February 1986. These
proceedings having been remitted to this Court (No. G1408 of 1988), the
primary judge made a declaratory order that Signs was indebted to the
Commissioner in the sum of $183,892.97 in respect of sales tax and additional
tax. Signs now appeals from this order (No. G303 of 1990).
10. On the same date, 3 December 1987, Products commenced proceedings against
the Commissioner in the High Court seeking similar relief. These proceedings
having been remitted to this Court (No. G1407 of 1988), the primary judge made
a declaratory order that Products was indebted to the Commissioner in the sum
of $175,549.04. Products now appeals from this order (No. G302 of 1990).
11. The primary judge, with the consent of the parties, dealt with all
matters, that is, both statutory appeals and both actions remitted from the
High Court, together. As has been said, appeals have now been brought in
three of the matters. The appeals have been argued together since they
involve some common questions.
12. Several arguments were advanced by the appellants in support of the
appeals. It is convenient to consider them separately.
Did the goods fall within exempting Item 84(2)?
13. In rejecting the claim for exemption, the primary judge said:
"I do not agree that the term 'builders' hardware' is to be
treated as no more than a compendious description of what
follows, so that it is irrelevant whether particular goods
are builders' hardware in ordinary parlance. If that had
been the intention, there would have been no need to use the
term at all. The description could have commenced with the
words 'goods of a kind...'. It is not as if item 84(2) was
a definition provision, the draftsman wanting a simple term
to avoid lengthy repetition. It is noteworthy that item
84(2) not only appears in a Division of the Schedule headed
'Building Materials' but is surrounded by other items used
in the construction of buildings. In my opinion the
intention of the draftsman was to exempt only items which
fulfill three criteria: firstly, that they answer the
description 'builders' hardware' in ordinary parlance,
secondly, that they are 'goods of a kind used in the
construction or repair of...buildings or other fixtures'
and, thirdly, that they are goods wrought into or attached
to buildings or other fixtures so as to form part thereof."
14. The judge referred to an unreported decision of Kitto J. dealing with the
meaning of Item 84(2) (Deputy Commissioner of Taxation v Academy Plastics
Proprietary Limited, 22 March 1956) (see below) and said:
"The Macquarie Dictionary relevantly defines 'hardware' as
'building materials, tools, etc; ironmongery'.
'Ironmongery' is defined as 'the goods, shop, or business of
an ironmonger' and an 'ironmonger' is 'a dealer in metal
ware, tools, cutlery, locks, etc'. The Australian Concise
Oxford Dictionary relevantly defines 'hardware' more
narrowly, simply as 'ironmongers' goods'. 'Ironmonger' is
circularly defined as 'dealer in hardware, etc'.
I take the wider definition, which includes building
materials and tools. This accords with my understanding of
the word 'hardware' in ordinary parlance. What is
significant about that definition is its emphasis upon use
in building. Of course, in the present case, this emphasis
is re-inforced by the circumstance that the item is
described, not as 'hardware' simpliciter, but as 'builders'
hardware'. I think that the draftsman had in mind materials
designed for use by builders, being materials, tools, etc.
While I accept that the subject letters are capable of being
affixed to buildings or other structures, it is another
matter to describe them as materials designed for use by
builders. The evidence suggests that the letters have a
multitude of applications, mostly in advertising. It cannot
be said that the product is one designed for use by
builders, as distinct from others. Nor does it appear that
builders are the main users of the product."
15. The judge thus concluded that the goods were not "builders' hardware".
He further expressed a difficulty in accepting, within the meaning of Item
84(2), that the goods were "of a kind used in the construction...of, buildings
or other fixtures". He said:
"To the extent that they are used in buildings at all, they
are things affixed to completed buildings for convenience in
use; for example, indicating an exit from the building, or
that a particular room is used for a particular purpose."
16. In the Academy Plastics Case, Kitto J., in holding that a plastic article
marketed as the "Tidy Towel Rack" was not exempt under Item 84(2), stated:
"Turning to the general words themselves, even if the words
'Builders' Hardware' were the only words to be considered, I
should be of the opinion on the evidence that the Tidy Towel
Rack was not within the class of goods so described. Seven
witnesses of long experience in the hardware and building
trades concurred in rejecting the notion that the article
was builders' hardware as they understood the term and as it
is understood in those trades...
But whatever meaning might be given to the expression
'Builders' Hardware' standing by itself, in item 84(2) it is
confined to 'goods of a kind used in the construction or
repair of, and wrought into or attached to so as to form
part of, buildings or other fixtures'. Obviously these
words cannot properly be applied to every article which is
intended to be affixed to the fabric of a building so as to
be held in a position which is suitable for its convenient
use. The Tidy Towel Rack, it may be remarked, is not even
of that wide description, for the support it requires may be
as well provided by the end of a detached piece of
furniture, such as a kitchen cabinet, as by a wall. Even if
I had no assistance from evidence, I should think it
sufficiently clear from an inspection of the article itself
that it is not of a kind used in the construction or repair
of a building. No one would ever think of such a thing, I
am sure, except after the building was completed, and as a
matter rather of furnishing and equipping the household than
of adding to the building as a building."
17. More recently, in Feltex Commercial Interiors Pty. Limited v Federal
Commissioner of Taxation (1990) 90 ATC 4,925, Lockhart J. held that certain
fixing brackets were "Builders' hardware" within the meaning of Item 84(2).
There was evidence from the building industry as to the meaning of the term
"Builders' hardware" in the industry. One expert said that it had the meaning
of stock items, i.e., items available for use by builders and able to be
purchased from recognised builders' hardware stores, and did not include items
made specially to suit the needs of a particular builder or client. Another
expert was of the contrary view, namely that "Builders' hardware" was
understood in the industry to embrace both stock and custom-built items.
Lockhart J. said (at p 4,936):
"I regard the expression 'builders' hardware' where
appearing in item 84(2) as one which is to be defined
according to its natural and ordinary meaning and not by the
evidence of people in the building industry. But I regard
that evidence as relevant not to determine the meaning of
the expression which seems to me to be a simple expression;
but to identify whether certain objects fit within it as
understood in the building trade. Perhaps in the end it
does not matter and may come down to semantics, but the
distinction is nevertheless there. In this respect I take a
different view from Wilcox J. in Magna Stic at pp 5004-5005
about the use of evidence as to the meaning of the term in
the building trade, but I agree with him that the expression
'builders' hardware' means materials, tools etc. which are
designed for use by builders. I do not think one needs to
resort to evidence within the trade for that proposition. I
therefore think that the meaning which should be ascribed to
the terms accords with the definition given to it by the
witness for the applicant."
18. No expert opinion evidence as to the meaning of "Builders' hardware" was
called in the present case so that there was no attempt to prove that there
was a common commercial or trade usage in relation to the goods (see the
discussion in Pearce, Statutory Interpretation in Australia, 3rd ed. at pp
72-3).
19. On behalf of the appellants, it is now contended that: (1) The phrase
"Builders' hardware", in the present context, means "materials, tools etc.
which are designed for use by builders" (see per Lockhart J. in the Feltex
Case, cited above). Its meaning is a matter of statutory interpretation, not
evidence. (2) The term is not confined to goods designed exclusively for use
by builders. For instance, catches, door bells, hooks, letter plates or name
plates have many possible applications by householders or by advertisers. It
is sufficient to qualify for exemption that the goods are apt for use by
builders in the prescribed manner. (3) The evidence shows that the goods
were purchased by builders and by shopfitters; and that the goods could be
purchased in the hardware department of a department store. (4) The goods
appear, on inspection, to be apt for use by builders. (5) Once the goods are
attached to a building, they cannot be removed without causing damage and thus
they should be regarded as part of the building. (6) The character of the
goods is such that they are apt and available for use in the construction and
repair of buildings. This might not be their exclusive or principal use, but
Item 84(2) does not require this. (7) Moreover, the goods fall within the
specific descriptions "house numbers", "letter plates" or "name plates".
20. In considering these contentions, it is necessary to take the matter in
stages. It is first necessary to decide, as a matter of law, whether the
exempting item uses the expression "Builders' hardware" in any other sense
than that which it has in ordinary speech. For this purpose, it is relevant
to inquire whether the expression is defined in the Act, whether it has a
technical legal signification, and whether there is any other indication in
the legislation that the Parliament intended any other meaning than that which
the words ordinarily have in this country and at this time. The common
understanding of the words has therefore to be determined and that is a
question of fact. The next question must be whether the material before the
Court reasonably admits of different conclusions as to whether the goods fall
within the ordinary meaning of the words as so determined. That is a question
of law. If different conclusions are reasonably possible, it is necessary to
decide which is the correct conclusion. This is a question of fact. See,
generally, N.S.W. Associated Blue-Metal Quarries Limited v Federal
Commissioner of Taxation (1955) 94 CLR 509 per Kitto J. at pp 511-2; Hope v
The Council of the City of Bathurst (1980) 144 CLR 1 per Mason J. at pp 7-8.
21. There is no indication in the legislation that the expression "Builders'
hardware" is used in the Item in any special or technical sense. We may then
take it that the term was intended to have its ordinary meaning.
22. The Macquarie Dictionary defines "builder" as: "1. a person who builds.
2. a person who contracts for the construction of buildings and supervises the
workmen who build them." The Dictionary relevantly defines "build" and
"building" as: "1. to construct (something relatively complex) by assembling
and combining parts: build a house....8. to engage in the art or business of
building." The Macquarie relevantly defines "hardware" as: "1. building
materials, tools, etc.; ironmongery. 2. the mechanical equipment necessary
for conducting an activity, usu. distinguished from the theory and design
which may make the activity possible..." The Macquarie definition of
"ironmongery" includes the goods of an "ironmonger". An "ironmonger" is
defined as "a dealer in metal ware, tools, cutlery, locks etc." Thus, in
ordinary speech, "Builders' hardware" denotes the building materials, metal
ware, tools and locks used by persons who contract for the construction of
buildings and who supervise the workmen who build them.
23. As Kitto J. pointed out in the Academy Plastics Case, whatever meaning
might be given to the expression "Builders' hardware", standing by itself in
Item 84(2), it is confined to "goods of a kind used in the construction or
repair of, and wrought into or attached to so as to form part of, buildings or
other fixtures". Kitto J. observed that, obviously, these words cannot
properly be applied to every article which is intended to be affixed to the
fabric of a building so as to be held in a position which is suitable for its
convenient use.
24. The next question is whether the material before the Court reasonably
admits of different conclusions as to whether the goods fall within the
ordinary meaning of the words as understood in ordinary speech. In our
opinion, only one conclusion is reasonably open. It is, as the primary judge
held, that the goods do not fall within the statutory description. For this
purpose, it is relevant to consider the nature of the goods, the uses for
which they were designed and the uses to which they could be put (see Pioneer
Plastic Containers Ltd. v Commissioner of Customs and Excise (1967) 1 Ch 597
per Buckley J. at p 601; see also Federal Commissioner of Taxation v Thomson
Australian Holdings Pty. Ltd. (1989) 87 ALR 682 at pp 683-4, pp 687-8; p 690).
In our view, it is not possible to characterise the goods as the building
materials, metal ware, tools and locks used by builders and of a kind used in
the construction or repair of, and wrought into or attached to, so as to form
part of, buildings or other fixtures. For one thing, the goods are not
"hardware", even if, as Davies J. has pointed out, it may be arguable that
some plastic articles, e.g. a door knob, may now fall within that description
(cf. Pioneer Plastic Containers Ltd. v Commissioner of Customs and Excise (No.
2) (1968) 1 WLR 236 per Pennycuick J. at p 240 where a plastic lid was held
not to be "hardware"). For another, the goods are used for many purposes,
some of which have no connection with builders or buildings (cf. Customs and
Excise Commissioners v Westbury Developments (Worthing) Ltd. (1981) STC 72 per
Ackner L.J. at p 76, where it was held that carpets were not exempt from value
added tax as "materials" because carpets were not normally used for building
purposes). The goods are not normally used as building materials and that is
the present statutory context.
25. In our opinion, the judge correctly held that the goods were not exempt.
It follows, in our view, that the appeals in matter No. G301 of 1990 and
matter No. G303 of 1990 should be dismissed.
Did s.12B(1) of the Sales Tax Procedure Act 1934 apply so as to require the
remission of tax unpaid by Products?
26. By s.12B(1) of the Sales Tax Procedure Act 1934, it is provided,
relevantly, that where tax in respect of any transaction, act or operation,
effected or done in relation to any goods has not been paid at the expiration
of a period of three years from the close of the month in which the
transaction, act or operation was effected or done, the Commissioner may remit
that tax unless he has required payment of the tax. A question arose for
decision by the primary judge whether the purported notice of assessment
issued to Products under the (No. 1.) Act dated 18 February 1987 set out
above, amounted to a requirement of payment of unpaid tax within the meaning
of s.12B(1). The judge held that it did and Products now appeals from this
order.
27. It was, and is, common ground that between 1 March 1982 and 31 October
1986, Products sold goods not manufactured by it such that it incurred a
liability for sales tax pursuant to s.3 of the Sales Tax Assessment Act (No.
2) 1930 "(No. 2) Act") and that apart from the said purported notice of
assessment, the Commissioner did not, within the statutory three year period
require Products to pay the tax for which Products was liable.
28. Before going to the point which now arises for decision, it is necessary
to refer to the general scheme of the (No. 2) Act. By s.3 of that Act, 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 sale value of goods is
determined in accordance with the provisions of ss. 4, 4A or 4B. By s.5,
where a person (being a registered person or a person required to be
registered) 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 firstmentioned person. By s.7, every
person who during any month makes any of the sales specified in ss.4, 4A or 4B
shall, within 21 days after the close of that month, furnish to the
Commissioner a return of those sales. By s.9, every person liable to pay tax
under s.5 upon the sale value of any goods sold by him during any month shall,
within 21 days after the close of that month, pay sales tax upon that sale
value. Where (a) a person makes default in furnishing a return; (b) the
Commissioner is not satisfied with a return; or (c) the Commissioner has
reason to believe or suspect that a person (although not having furnished a
return) is liable to pay sales tax, the Commissioner may determine an amount
to be the amount upon which, in the opinion of the Commissioner, sales tax
should be paid and may make an assessment in relation to that person
(s.10(2A)). As soon as conveniently may be after an assessment has been made,
the Commissioner shall cause notice in writing of the assessment to be served
on the person liable to pay the tax (s.10(3)).
29. As has been said, s.12B(1)(c) provides that the Commissioner may remit
unpaid tax unless he "has required payment of the tax prior to the expiration
of (the statutory three year) period." By s.12B(3), it is provided that, for
the purposes of that section, the Commissioner shall be deemed to have
required payment of tax if he, or an officer acting on his behalf, has served
upon any person a notice in writing specifying that an amount of tax is
payable by that person in respect of the relevant transaction, act or
operation. By s.12B(4), for the purposes of that section, "tax" includes any
further tax payable under any Sales Tax Assessment Act and any additional tax
for which the person is liable under the Sales Tax Procedure Act or under any
Sales Tax Assessment Act. It should also be noted that by s.3 of the Sales
Tax Procedure Act, "sales tax" or "tax" is defined to mean any tax imposed
under the name of sales tax by an Act.
30. The primary judge said:
"...it is true that the 'tax' referred to in para (c) is the
tax described in the opening words of the subsection. But,
significantly in my view, that tax is not described in terms
of its exigibility under a particular Act but rather its
connection with 'any transaction' etc. The subsection
relates to any 'tax' payable in connection with a
transaction etc, without any further express limitation.
Even in the absence of a definition of 'tax', it would, no
doubt, be implied that the subject tax must be a sales tax;
but in fact the Act contains a definition which makes this
clear.
The definition section, s.3, provides that, unless the
contrary intention appears: 'Sales tax or tax means any tax
imposed under the name of sales tax by any Act'. There is
no indication that this definition is inapplicable to s.12B.
Accordingly, the opening words of subs. (1) should be read
as if they said: 'Where any tax imposed under the name of
sales tax by any Act in respect of any transaction' etc 'has
not been paid'. The subject tax was imposed under the name
of sales tax by an Act, namely the No. 2 Act, and all of it
remained unpaid at the expiration of three years from the
close of each of the months in which the relevant
transactions were effected. Consequently, the subject tax
is described by the opening words of the subsection. The
question, then, is whether the Commissioner required payment
of that tax - that is, the tax payable in respect of the
relevant transactions - before the expiration of the three
years. There can be only one answer to that question. The
Commissioner did so require, albeit that he mistakenly
claimed that the tax was payable under the No. 1 Act rather
than the No. 2 Act."
With respect, we have difficulty in accepting this analysis.
31. In our opinion, when s.12B(1)(c) is read in the light of the
interpretation provision, s.3, it is clear that s.12B is intended to have a
distributive operation. That is to say, whilst s.12B(1) is potentially
capable of applying to the tax imposed under any of the Sales Tax Acts,
s12B(1)(c) contemplates remission of the particular tax of which payment has
been required. That is to say, s.12B(1)(c) does not apply to any tax, for
instance, tax imposed under a different Sales Tax Act.
32. A purported requirement of the payment of the tax which is substantially
accurate, where the mistake was evident and could be safely ignored and
corrected by the recipient may yet be a valid requirement for the purposes of
s.12B(1)(c) (see, e.g. Wingadee Shire Council v Willis (1910) 11 CLR 123 per
Isaacs J. at p 144). Errors of this kind are not fatal to the rights of the
Commissioner (see the Wingadee Case per Higgins J. at p 148). In such cases,
it is proper to apply the maxim "falsa demonstratio non nocet". But can it be
said that the demand now relied upon substantially complies with the
requirements of s.12B(1)(c)? Was the mistake evident so that it could be
safely ignored and corrected by the recipient?
33. In our opinion, it is not possible, as a matter of form or substance, to
characterise the assessment issued to Products on 18 February 1987 as a
requirement for the payment of the tax for which it was liable under the (No.
2) Act. The notice referred to the (No. 1) Act and asserted that Products had
manufactured the goods. The notice purported to allow Products a credit for
tax assessed to Signs under the (No. 1 Act). These were significant
departures in form from the true position and substantial errors in substance,
since Products did not manufacture the goods and could only be liable under
the (No. 2) Act. In the circumstances, in our view, the provisions of
s.12B(1)(c) were not complied with. It follows, in our opinion, that the
appeal in matter G302 of 1990 should be allowed.
Orders and costs
34. Since the parties have agreed on certain other matters, we think that it
is appropriate that a direction be given that the parties submit draft short
minutes of orders to reflect these reasons in the light of their agreement.
We further propose that the parties may, if any of them wish, make a
submission in writing in respect of costs.
JUDGE2
The first issue in these appeals is whether certain goods were exempt from
sales tax as being goods within Item 84(2) in Division XII of the First
Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 (Cth).
Magna Stic Magnetic Signs Pty Limited ("Signs") manufactures adhesive vinyl
letters and numerals suitable for fixing to solid surfaces such as buildings,
notice boards or vehicles and capable of being formed into words such as
names, addresses, warnings or instructions. The letters adhere strongly to
any surface to which they are applied. Signs wholesales these letters to
Magna Stic Products Pty Limited ("Products"), which in the years in question
was not a registered person, and Products sells the letters and numbers to the
public on individual orders. Thus a customer wishing to make a sign will
specify to Products the style, height, colour and other details of the letters
and numbers required and Products will make up the order from the stock which
it holds.
2. Item 84(2) specifies:-
"Builders' hardware ... being goods of a kind used in the
construction or repair of, and wrought into or attached to so as
to form part of, buildings or other fixtures."
The item goes on to specify particular goods such as:-
"Bolts, brackets, brads" and "Catches, ceiling ties, clips,
clouts,
corrugated fasteners."
Item 84(2) appears in a group of items, all of which appear to be used in or
associated with the building or repair of buildings and fixtures. It specifies
goods which have the character of builders' hardware and are goods of a kind
used in the construction and/or repair of, and wrought into or attached to so
as to form part of, buildings or fixtures.
3. The trial Judge, in a passage which was subsequently cited with approval
by Lockhart J. in Feltex Commercial Interiors Pty Ltd v Federal Commissioner
of Taxation (1990) 90 ATC 4925 at p 4936, expressed the view that the Item
applied to goods such as "building materials, tools etc. which are designed
for use by builders." But building materials generally are dealt with in
other items and tools are not wrought into or attached to buildings or
fixtures. Item 84(2) applies to a more limited class of goods, many examples
of which are specified in the item.
4. As the item does not use the words "primarily and principally" or
"exclusively", the words "of a kind used in" would themselves require no more
than that the goods have a sufficient use in the construction and repair of
buildings and fixtures to confer upon them the character of being so used.
See Deputy Commissioner of Taxation v Stewart (1984) 154 CLR 385 at 390, 397,
401-2.
5. However, the item commences with the generic description "Builders'
hardware". The apostrophe shows that the hardware must have the character of
hardware pertaining to builders. The item is looking at hardware of a kind
"designed for use by builders", to use the expression adopted by the trial
Judge and by Lockhart J., or "ordinarily installed by builders as fixtures" to
use one of the expressions which was considered in Pioneer Plastic Containers
Ltd v Commissioners of Customs and Excise (No. 2) (1968) 1 WLR 236. In that
case, Pennycuick J., applying the definition in the Oxford Dictionary of
"hardware", held that the term was limited to ironmongery and such like metal
objects and did not include plastic articles. In this country, at the present
time, the term has a wider denotation and would include wooden and plastic
knobs, handles etc. Nevertheless, the traditional meaning of the term is not
to be overlooked when new products are under consideration.
6. Very little evidence was given to the trial Judge to assist him in
determining whether the goods fell within the classification. I would
therefore pause to observe that, in a classification case, it is better to
have too much rather than too little information. Evidence as to the relevant
industry and as to the use therein of language provides a judge with a
background against which and with relevant information on which he may make a
decision. Lockhart J. in Feltex at p.4936 and the trial Judge held that the
term "Builders' hardware" carries the meaning which it has in ordinary
language. The contrary has not been contended in the appeal. But that is not
to say that evidence as to what goods are understood in the building and
hardware trades to be builders' hardware would not be relevant and helpful.
The term "Builders' hardware" is not one of general application but refers to
goods dealt with in the trades. Evidence by persons experienced in the
building or hardware trades that certain goods were or were not understood to
be builders' hardware and were or were not sold as such by merchants of
builders' hardware would be evidence tending to demonstrate the character of
those goods. Thus, in Deputy Commissioner of Taxation v Academy Plastics Pty
Ltd (unreported 22 March 1956) Kitto J said:-
"Turning to the general words themselves, even if the words
`Builders' Hardware' were the only words to be considered, I
should be of the opinion on the evidence that the Tidy Towel Rack
was not within the class of goods so described. Seven witnesses
of long experience in the hardware and building trades concurred
in rejecting the hardware as they understood the term and as it is
understood in those trades ..."
Likewise in the Feltex case, at p 4936, Lockhart J. said:-
"I regard the expression `builders' hardware' where appearing in
item 84(2) as one which is to be defined according to its natural
and ordinary meaning and not by the evidence of people in the
building industry. But I regard that evidence as relevant not to
determine the meaning of the expression which seems to me to be a
simple expression; but to identify whether certain objects fit
within it as understood in the building trade".
A judge would be hesitant to hold that goods were not builders' hardware if
they were so regarded in the building and hardware trades. And a judge would
be reluctant to hold that goods were builders' hardware if they were not
understood to be so in those trades. No evidence of that type was given in
this present case.
7. Examples of the goods themselves were in evidence. They were letters or
numbers with an adhesive backing. Evidence was given that similar goods were
sold in hardware shops in Sydney and were found on shelves located amongst
building items. But that evidence was of little use having regard to the vast
range of goods now sold by hardware stores. Two photographs were in evidence
showing examples of the use of the letters and numbers. All examples were of
signs on the frontage of a building. Many of the examples showed the number
or address of the building and the name of the building or of its occupant,
but many advertised the wares or services of the occupant.
8. Most of the customers were signwriters or shopfitters. There was in
evidence a bundle of 20 purchase orders and this bundle contained only one
invoice directed to a building contractor. As the trial Judge held, the
evidence suggested that the letters had a multitude of applications, mostly in
advertising. They were not limited to use on buildings and fixtures for they
were suitable for use on signboards, motor vehicles and other personalty. The
goods were as suitable for use for advertising purposes as they were in the
construction and repair of buildings and fixtures.
9. Counsel for the appellants submitted that it was sufficient for
characterisation under Item 84(2) that the goods be appropriate for use by
builders. But that is not the meaning of the term. To fall within the
description, goods must have a sufficient association with builders and with
the construction and repair of buildings and fixtures to gain the character of
builders' hardware used in that activity. The uses to which the letters and
numerals could be and were put appear to be too wide to confer upon the goods
the limited character which Item 84(2) specifies.
10. I agree with the trial Judge that the goods were not exempt from sales
tax.
11. On the second issue in the appeals, that arising under s.12B of the Sales
Tax Procedures Act 1934 (Cth), I agree with the views expressed by Beaumont
and O'Loughlin JJ. and have nothing to add thereto.
12. I agree with the order proposed by Beaumont and O'Loughlin JJ.