Case: Davies Coop and Company Limited v Federal Commissioner of Taxation [1947] HCA 64 ; (1948) 77 CLR 299
Outcome: considered
Lindsay drew attention furthermore to what was described as the leading authority on the meaning of the combined expression process or treatment, as appears in the context of sub-paragraph (a)(iii) of the definition of 'aids to manufacture' contained in the legislative precursor to the STEC Act, being the Sales Tax (Exemptions and Classifications) Act 1935 (Cth), the words process or treatment appearing of course in each of pars (a), (b) and (c) of the Item 18(5) definition of manufacture-related activity. That authority is Federal Commissioner of Taxation v Hamersley Iron Pty Ltd (1981) 33 ALR 251, which was decided by the Supreme Court of Victoria (Gobbo J) at first instance, and which decision was upheld on appeal to a Full Court (Lush, Kaye and Brooking JJ) (1981) 37 ALR 595. At first instance, Gobbo J reviewed (at 268) dictionary meanings of processing and treatment , as follows: 'Turning first to the meaning of "processing or treatment", there is nothing in the context of Item 113C to suggest that the ordinary meaning of treatment found for Item 14 should not be adopted. Treatment was there taken to mean the act of subjecting to chemical or physical action so as to bring about a change in form nature or condition. I further found that in its context such treatment had to be directed to a relevant result, namely to use or marketability. As to processing this in my view should in its context in Item 113C and Reg 4 be taken to have a different and probably wider meaning than treatment.... These meanings all suggest that a change in nature form or condition is effected. I am disposed to the view that even in processing some change must result if this procedure is to be regarded as a process.' Lindsay drew attention in particular to 'subjecting to... physical action... [and] condition' , and also to 'use or marketability', appearing above, being expressions reflected explicitly or implicitly in Item 18(5)(a) to (c) within the definition of manufacture-related activity . After referring to Davies Coop and Company Limited v Federal Commissioner of Taxation [1947] HCA 64 ; (1948) 77 CLR 299, Gobbo J observed at 269 in Hamersley Iron that authority 'supports a meaning of processing that does not require that there be a change producing a commercially distinct article...', and his Honour referred to recent English authority which had 'adopted the view... that alteration of the material was not necessary to involve subjecting it to a process'. That submission was soundly conceived. 57 The Commissioner submitted however that the reasons for decision in Hamersley Iron at first instance and on appeal did not support Lindsay's case, upon the basis that '[r]efrigeration is not a chemical change, and it is doubtful whether it would be regarded as a physical action on the goods of the sort contemplated by the definition of a manufacture-related activity within subItem 5(5)'. The difficulty for the Commissioner is that even if a chemical change is not effected by refrigeration, refrigeration must at least involve physical action. Lindsay pointed out that in Hamersley Iron, '[t]he stacker and reclaimer were machines which physically stacked, and then physically blended the iron ore to ensure homogeneity', which the Commissioner appeared to accept was sufficient to enable the Court to conclude that a process or treatment was involved. However the Commissioner contended further that 'the mere cooling of goods during transport is qualitatively different from the process under consideration in Davies ', because there the winding of the yarn onto the cones and tubes was described as 'part of the process of bringing the ultimate product, namely the piece goods, into a form or condition in which they could be marketed' . The difficulty for the Commissioner flowing from any comparison of the factual circumstances in Hamersley Iron , and also in Davies , is that whilst the physical outcome of the process or treatment might be described in each case as more significant in terms of process and extent of change, the STEC notion of applying a process or treatment of goods appearing in the Item 18(5) definition of manufacture-related activity would clearly enough accommodate situations of varying degree, depending upon the nature and extent of the process or treatment the subject of application. I have not found the Commissioner's endeavours to distinguish the circumstances in Hamersley Iron (or Davies for that matter) from the present to be persuasive.