Case: P &amp; N Beverages Australia Pty Ltd v Commissioner of Taxation [2007] NSWSC 338 ; (2007) 210 FLR 202 
Outcome: applied
11, but not Item 12, of the Table came up for judicial consideration in P &amp; N Beverages Australia Pty Ltd v Commissioner of Taxation [2007] NSWSC 338 ; (2007) 210 FLR 202. The plaintiff taxpayer (P &amp; N) manufactured carbonated fruit drinks by reconstituting a fruit concentrate with water and non-fruit based additives. It sought declarations that supplies of the fruit drinks were exempt from GST in reliance on Item 11 of the Table. The Supreme Court of New South Wales (Gzell J) dismissed the claim for relief and in doing so rejected a number of submissions concerning the phrase 'juices of fruits', at least three of which were repeated by the applicant in the present case. Such a legislative purpose is also discernable both from the circumstances in which the amendments arose, and the context in which Items 11 and 12 appear in the Table. This was recognised by Gzell J in P &amp; N at [32]: There is a lot to be said for the submission of the Commissioner that when the compromise was made for a qualified exemption for food to ensure the passage of legislation, as Sundberg J points out Cascade Brewery Co Pty Ltd v Commissioner of Taxation [2006] FCA 821 ; (2006) 153 FCR 11 at [40] , the legislature seems to have drawn the line between exempt and non-exempt food supplies in favour of food that is fresh, natural or unprocessed. For example, the beverages that are not included in the table to cl 1 of Sch 2 of the GST Act and are therefore not GST-free, include soft drinks and cordials, flavoured milk (Item 2) and flavoured soy milk and rice milk (Item 4). The only carbonated beverages that are GST-free are those satisfying Item 11, and water (Item 14), is GST-free only if it is non-carbonated and without any other additives. First Issue: Whether the Edenvale products consist wholly (Item 11) or at least 90% by volume (Item 12) of the juices of fruits? The phrase 'juices of fruits' It is common ground that the phrase 'juices of fruits' does not have a trade meaning. The applicant submitted, through the line of reasoning rejected in P &amp; N (see [55] and [58] above), that 'juices of fruits' is 'fruit juice' as defined in the Food Standards Code , which defines 'fruit juice' to include products that have been concentrated and later reconstituted with water to a concentration consistent with that of the undiluted juice from which it was made. The Commissioner did not accept that 'juices of fruits' is synonymous with 'fruit juice', the first step in the applicant's line of reasoning. Insofar as the applicant called in aid the second column of the Table, the Commissioner submitted that this was not permissible: s 182-15 of the GST Act. According to the Commissioner, there is no ambiguity, obscurity or manifestly absurd or unreasonable result flowing from the ordinary meaning of the text, taking into account its context and the purpose or object underlying it, which would mandate such recourse: see subs 182-10(2). The Commissioner submitted that the phrase 'juices of fruits', not having a trade meaning, is to be interpreted according to its ordinary English meaning. In this regard 'juice' is relevantly defined to mean: The Oxford English Dictionary : 1.a. The watery or liquid part of vegetables or fruits, which can be expressed or extracted; commonly containing the characteristic flavour and other properties. Macquarie Dictionary : 1. the liquid part of plant or animal substance ... 2. any extracted liquid, especially from a fruit According to the Commissioner, the ordinary meaning of 'juices', in the context of the GST Act, suggests that 'juices of fruits' is the liquid extracted from those fruits. The extraction process entails that the juice originally formed 'part' of the fruit and, therefore, the juice is extracted from the fruit through some mechanical process such as pressing or crushing. Similarly in the current proceedings the Food Standards Code could have no relevance for the same reason. As Gzell J said in P &amp; N at [33]: ... The phrase had its origin in 'juices of Australian fruits' in 1935 well before the gazettal of the Foods Standards Code in 1987. It was unreal to say that the code preceded the GST Act when the origin of Item 11 in the table in cl 1 of Sch 2 preceded the code. I agree with the Commissioner's submissions. In my view, they compel the conclusion that the phrase 'juices of fruits' in Items 11 and 12 of the Table is to have its ordinary English meaning of being confined to juices extracted from fruits and does not extend to 'fruit juice' in the wider embrace of that term in trade parlance, assisted or unassisted by the definition in the Food Standards Code. The phrase 'consist of' The carbonated Edenvale product will only qualify for GST-free status under Item 11 of the Table if it ' consist[s] wholly of juices of fruits' at the supply point and the non-carbonated Edenvale products will only qualify for GST-free status under Item 12 of the Table 'if they consist of at least 90% by volume of juices of fruits' at the supply point (emphasis added). Subject to the de minimis rule applying, which was not argued in P &amp; N , Gzell J stated that 'wholly' meant 100%: At [36] [37]: [I]n my view ... Item 11 must be construed according to its ordinary meaning. ... The concession by P &amp; N that the word 'wholly' meant 100% was a proper one. Items 10 and 12 in the table to cl 1 in Sch 2 of the GST Act are, respectively, concentrates for making non-alcoholic beverages if the concentrates consist of at least 90% by volume of juices of fruit, and non-alcoholic non-carbonated beverages if they consist of at least 90% by volume of juices of fruit or vegetables. In that context, 'wholly' must, in my view, mean 100%. And later at [41]: It follows from my finding that any trade meaning derived from the Foods Standards Code is not attracted by the legislation and my rejection of the argument that the ordinary meaning of the phrase 'wholly of juices of fruits' encompasses fruit drinks with non-fruit based additives, that P &amp; N must fail. Having accepted that to qualify for exemption, the fruit drinks of P &amp; N must consist of 100% of juices of fruits, the introduction of even 1 % of non-fruit based additives means that the exemption is not attracted. No de minimis argument was raised on behalf of P &amp; N. The de minimis rule does not arise for consideration in the current context unless the rainwater that is added to the beverage is regarded as being part of the 'juices of fruit'. Dr Brooke-Taylor in his further report (annexed to his affidavit sworn on 2 April 2009) describes the product to which the 'reconstitution' (by way of the addition of rainwater) is made as follows (at para (3)): [W]here a fruit juice product which contained ethanol was concentrated by a process of evaporation that removed the ethanol and the concentrate was later reconstituted with water to a concentration consistent with that of undiluted juice product, the resulting product would be fruit juice within the scope of the definition in Standard 2.6.1. (Emphasis added.) The reference to 'fruit juice product' in the above extract is not a reference to either the fruit juice concentrate or low sugar juice, but to the de-alcoholised base wine. The adding of rainwater to the de-alcoholised base wine would not constitute the reconstitution of juices of fruit as the de-alcoholised base wine at that point in the process (even if it was 'concentrated') does not constitute juices of fruit. In any event, the de minimis rule has no scope to operate in circumstances where the clear intent of the legislature was that the product consist of 100% of the juices of fruit. This is made clear by the fact that in the case of Items 10 and 12 of the Table the requirement imposed by the legislature for the volume of juices of fruit was 'at least 90%' which had the effect of allowing the beverage to include non fruit based additives without the loss of the exemption.