Case: Sidebottom v Giuliano [2000] FCA 607 ; (2000) 98 FCR 579
Outcome: followed
Caltex has sought to have the demand set aside for invalidity, on the following grounds: (a) The residual oils are not "excisable goods" and s 60 has no application to them. (b) Section 60 applies only to excisable goods that are "subject to the [Commissioner's] control". If as the Commissioner contended the residual oils were delivered for home consumption, then they were thereupon no longer subject to the Commissioner's control and s 60 does not apply. (c) Caltex did not "fail to keep [the residual oils] safely". The safety with which s 60(1)(a) is concerned is that the goods do not find their way into home consumption without the payment of duty. It is not directed at the protection of goods from damage or destruction (relying on Southern Shipping 107 CLR at 296 (Taylor J) and 299 (Menzies J)). As the residual oils were "destroyed" by Caltex and did not and were never intended to find their way into home consumption, there was no failure to keep them safely for the purposes of s 60(1)(a). (d) The Commissioner was not entitled to make a request pursuant to s 60(1)(b) nor to rely on that paragraph in the demand as a basis for liability. Section 60(1)(b) may only be invoked when there is doubt about the whereabouts of goods or doubt as to whether they have been kept safely (relying on Sidebottom v Giuliano [2000] FCA 607 ; (2000) 98 FCR 579 ( Sidebottom )). There was no doubt as to whether Caltex had failed to keep the residual oils safely. The Commissioner was aware that the residual oils had been burnt at Caltex's refineries. In particular, he acknowledged that the residual oils had been "used to generate energy within Caltex's refineries" in the purported request he made under s 60(1)(b). (e) Even if the Commissioner was entitled to make the s 60(1)(b) request, Caltex properly accounted for the residual oils by explaining that they had been used to generate heat, which thereby demonstrated they had not gone into home consumption. (f) The demand is invalid because it claimed payment of a "debt". Liability under s 60(1) only arises upon the due making of a valid demand. Accordingly Caltex could not have owed the amount demanded prior to the making of the demand and its description as a debt renders the demand invalid. 154 In relation to (b), Caltex's submission has the effect that s 60 could only operate where excisable goods have not in fact been delivered for home consumption. The Commissioner submitted that s 60 applies whether or not goods have been delivered for home consumption. He emphasised that the purpose of the Commissioner's control over excisable goods is to ensure that duty is properly paid (relying on Lyon [1906] HCA 17 ; 3 CLR 770 and Southern Shipping [1962] HCA 20 ; 107 CLR 279) and the obligations imposed by s 60 are designed to ensure that the goods do not find their way into home consumption without proper payment (relying on Sidebottom [2000] FCA 607 ; 98 FCR 579). More particularly the Commissioner said that s 60 is aimed directly at the unauthorised relinquishment of possession, which would include delivering goods for home consumption in a manner that was not authorised, principally where there is no payment of duty. 157 In relation to the failure to keep safely point at (c), the Commissioner relied on the decision of Finkelstein J in Sidebottom [2000] FCA 607 ; 98 FCR 579 and his Honour's discussion of the purposes of s 60 as explained by the High Court in Southern Shipping [1962] HCA 20 ; 107 CLR 279. What is clear from each of those cases is that s 60 imposes an essentially absolute duty to keep goods safely and to ensure they do not find their way into home consumption without the payment of duty. Where that does occur, the goods will have found their way into home consumption "irregularly", that is, in a manner not authorised by the Excise Act , and s 60 will apply in order that the revenue might be protected. The Commissioner said that the residual oils found their way into home consumption irregularly when Caltex consumed them without duty having been paid. I agree. As I said earlier, Caltex's consumption of the residual oils at its refineries amounted to "home consumption". It follows that Caltex's dedication of the residual oils as refinery fuel oil, without paying excise duty, and subsequent consumption of them by burning them, means that they found their way into home consumption irregularly. Caltex's consumption of the residual oils in this manner (by burning and thus using them up or "destroying" them) was therefore a failure to keep them safely within s 60(1)(a). As Dixon CJ said in Southern Shipping 107 CLR at 287, the safe keeping comprehended by s 60(1)(a) is the keeping safe from loss or destruction, because "the provision is pointed at the loss of goods involving the loss of excise duty". Caltex relied on the judgments of Taylor J (at 296) and Menzies J (at 299) in Southern Shipping [1962] HCA 20 ; 107 CLR 279 and their Honours' references to damage or destruction. However, their observations were directed not to a case such as the present (where the "destruction" is the consumption of the residual oils as a fuel) but to a rejection of the proposition that the section imposes a duty of care not to permit goods to be damaged or destroyed. 158 I now turn to Caltex's submission at (d). The Commissioner acknowledged that it was entitled to request an account only where the safety of the relevant goods is something less than an "undoubted" fact: see Southern Shipping 107 CLR at 305 (Owen J); Sidebottom [2000] FCA 607 ; 98 FCR 579 at [14] (Finkelstein J). It said that the section was directed to an account that shows either: &#8226; an unauthorised relinquishment of possession; &#8226; despite an unauthorised loss of possession, that the goods have not gone into home consumption without payment of duty; or &#8226; despite a failure to keep them safely, the Commissioner's control over the goods is still effective (see Southern Shipping 107 CLR at 299 (Menzies J)) 159 If it were an undoubted fact that Caltex had failed to keep the residual oils safely because it burnt them, then s 60(1)(b) would not be available to the Commissioner: Sidebottom [2000] FCA 607 ; 98 FCR 579. Conversely, if the position with respect to the residual oils was something less than an undoubted fact, it was open to the Commissioner to invoke s 60(1)(b). 160 It seems to me that it was common ground from the outset that Caltex had consumed all of the residual oils and that no duty had been paid in respect of them. The premise of the Commissioner's conclusion in the Advice that the residual oils had been delivered for home consumption and had not been accounted for (the latter of which, curiously, was not based on any request to account at that stage), was that the residual oils had been burnt by Caltex as a fuel oil. Moreover, in the Commissioner's request under s 60(1)(b) itself, he acknowledged that the residual oils had already been burnt. The only thing that could possibly have remained in any doubt was whether Caltex had paid duty, but that was not the case. The Commissioner had already stated in the Advice that "the [residual oil] that you are manufacturing is no longer present within the licensed premises and duty has not been paid". 161 In my view there was no doubt about the whereabouts of the residual oils or whether they had been, at least on the Commissioner's construction of s 60(1)(a) , kept safely. This is not a case where the location of the goods (and therefore whether they had gone into home consumption) was unknown (cf. Moama [2001] FCA 1287 ; 115 FCR 205) , or a case where the Commissioner only had "evidence which might lead him to form the opinion that excisable goods were not kept safely" (see Sidebottom [2000] FCA 607 ; 98 FCR 579 at [16] ). The facts here were clear the residual oils had been consumed by Caltex at its premises without the payment of any duty. 162 Accordingly I do not consider that the Commissioner was entitled to make the request pursuant to s 60(1)(b): see Sidebottom [2000] FCA 607 ; 98 FCR 579 at [14] .