Case: Cascade Brewery Co Pty Ltd v Federal Commissioner of Taxation [2006] FCA 821 ; (2006) 153 FCR 11
Outcome: considered
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' Reference was made to Cascade Brewery Company Pty Ltd v Commissioner of Taxation [2006] FCA 821 ; 153 FCR 11 where Sundberg J said at [40]: The reason for the qualified exemption of food from GST is well-known, and was common ground. It was the political compromise reached in order that the GST scheme might become law. The distinction drawn in Totalizator between an exemption directed at a particular person or body and one that encourages a particular activity is applicable here. It is true, as Cascade says, that item 13 is not directed at a particular person or body. But nor is it concerned to encourage any particular activity. It is not intended to encourage the production of beverages or ingredients of any kind. It was the result of a political deal that gave partial exemption to food. In the case of the beverage component of food, the result was that the beverage or an ingredient therefore would be exempt if it was of a kind marketed principally as food for infants or invalids. In accordance with Totalizator , there is no occasion to approach the meaning of 'infant' or 'invalids' in any manner other than by according the words their ordinary meaning. According to the Commissioner, the applicant is not correct in submitting that the expressions 'juices of fruits' is an anachronism resulting from the history of the sales tax legislation and that the meaning intended to be conveyed by the draftsman by the use of that expression was the same as 'fruit juice'. It follows, the Commissioner argued, that 'juices of fruits' and 'fruit juice' are not synonymous and any purported trade meaning as to 'fruit juice' in the beverage industry (being the definition in the Foods Standard Code ) has no relevance to the interpretation of the expression 'juices of fruits'. In any event, the Commissioner submitted, the definition of 'fruit juice' in the Food Standards Code could not have had significance in construing the expression 'juices of fruits' in circumstances where that expression was used in taxing legislation many years before the Food Standards Code was introduced. The expression 'juices of Australian fruits' had been a term used in the wholesale sales tax since the 1930s and 1940s. I have come to the conclusion, not without some hesitation, that the Commissioner's approach is to be preferred because it better promotes the legislative purpose of the GST Act in relation to food , namely, that the exemption or GST-free status is a qualified one where, as Sundberg J pointed out in Cascade Brewery , 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. The fact that one can readily point to some specific exclusions to this line in the GST Act does not reduce or mitigate against its force as an overall observation or conclusion. For these reasons, I am of the view that the Edenvale products are not non-alcoholic beverages. While their respective alcohol content by volume is low, it owes its existence to an infused process of fermentation rather than a naturally occurring one. The application must be dismissed.