Case: Collector of Customs (New South Wales) v Southern Shipping Co Ltd [1962] HCA 20 ; (1962) 107 CLR 279
Outcome: applied
Another way of considering this is by reference to s 61. Section 61 renders all excisable goods "subject to [the Commissioner's] control until delivered for home consumption or for exportation to a place outside Australia, whichever occurs first". The control residing with the Commissioner is of broad scope and is critical for the protection of the Commonwealth's excise revenue: see Lyon [1906] HCA 17 ; 3 CLR 770 and Collector of Customs (New South Wales) v Southern Shipping Co Ltd [1962] HCA 20 ; (1962) 107 CLR 279 ( Southern Shipping ). The section contemplates that excisable goods will be delivered for either home consumption or exportation. In my view the section evinces a legislative intention to cover the field in respect of all forms of internal (home) consumption and all exports. Historically, excise duties have been understood as running together with and supplementary to the customs duties traditionally imposed on certain goods. In Philip Morris Ltd v Commissioner of Business Franchises (Victoria) [1989] HCA 38 ; (1989) 167 CLR 399 at 427, Mason CJ and Deane J approved the following passage from Quick and Garran's Annotated Constitution of the Australian Commonwealth (1901): The fundamental conception of the term [excise] is that of a tax on articles produced or manufactured in a country. In the taxation of such articles of luxury, as spirits, beer, tobacco, and cigars, it has been the practice to place a certain duty on the importation of these articles and a corresponding or reduced duty on similar articles produced or manufactured in the country; and this is the sense in which excise duties have been understood in the Australian colonies, and in which the expression was intended to be used in the Constitution of the Commonwealth. 147 This however is to misconstrue the section and its intended operation. Liability under s 60 is "collateral and not substitutional" for the liability to pay excise duty that may be incurred under other provisions of the Excise Act : see Southern Shipping 107 CLR at 288 (Dixon CJ); see also s 60(4) of the Excise Act . Section 60 is an alternative recovery mechanism open to the Commissioner in appropriate cases where the circumstances set out therein are met. Subject to what I say below (at [158]-[162]), it was open to the Commissioner to rely on s 60 in making the request, regardless of whether he also maintained an alternative position that Caltex was liable for excise duty having delivered the residual oils for home consumption. 148 While I was not taken to the parties' correspondence on this point in detail, I note that the Commissioner both prior to (in its Advice) and after making the request (in its objection decision) maintained a claim that Caltex had delivered the residual oils for home consumption for the purposes of s 61C. In those circumstances, I do not consider that the request amounted to any form of concession that the Commissioner accepted that the residual oils had not been delivered. In any event, a proper construction of s 60 in my view would permit the Commissioner to rely on s 60 even where the relevant excisable goods have been "delivered for home consumption", where such delivery is not accompanied by the payment of duty. For reasons I shall explain below in dealing with the s 60 point, I consider that s 60 is capable of application to excisable goods that (1) have been subject to the Commissioner's control but (2) have not been kept safely by virtue of their delivery into home consumption without the payment of duty. 149 I now turn to the Commissioner's alternative basis for Caltex's liability under the s 60 demand. The Commissioner relied on both ss 60(1)(a) and (b) in the demand. The demand stated: [Caltex] owes the Excise Collector of the Australian Taxation Office ... the amount of $48,676,126.13, being the amount of the debt described in the Schedule. 152 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)) 163 If I am wrong in that conclusion, I would reject Caltex's submission at (e) above that it had accounted for the residual oils. Its statement that residual oils were used as fuel in generating the required heat for the refineries was an accounting for their consumption, not an accounting "for the goods". It did not demonstrate that the residual oils had been dealt with in a manner authorised by the Excise Act or that, despite an unauthorised relinquishment of possession, the goods had not got into home consumption without duty being paid, or that despite a failure to keep them safely, the Commissioner's control was still effective over the residual oils: see Southern Shipping 107 CLR at 299 (Menzies J). The purported account simply recited the facts, which showed that the residual oils had not been kept safely within the meaning of s 60(1)(a). It was therefore reasonable for the Commissioner not to be satisfied that the goods had been accounted for. 164 As I have found the Commissioner was not entitled to make a request under s 60(1)(b) , a question is raised as to the effect of this on the Commissioner's demand. In the demand, the Commissioner relied on Caltex's failure to keep the goods safely "and/or" its failure to account upon request. For the reasons I have given, it was not open to the Commissioner to rely on a failure to account under s 60(1)(b) to support the demand. Neither party made any submissions as to where this left the demand.