Case: Federal Commissioner of Taxation v F.H. Faulding &amp; Co Ltd [1950] HCA 42 ; (1950) 83 CLR 594
Outcome: considered
Federal Commissioner of Taxation v F H Faulding &amp; Co Limited [1950] HCA 42 ; (1950) 83 CLR 594 , the High Court of Australia had occasion to consider Item 36(3) of, what was then, the First Schedule to the E &amp; C Act, when it was in the following terms: 'Essences, concentrates and cordials, consisting wholly or principally of juices of Australian fruits, for the making of non-alcoholic beverages; non-alcoholic beverages consisting wholly of Australian fruits'. It is important to an appreciation of what was said in the Full High Court and its relevance to this case, that the framework of the issues which came up to the Full Court be understood. It was not disputed that the liquids sold were cordials nor that they were cordials for the making of non-alcoholic beverages or that they contained substantial quantities of juices of Australian fruits. They did not consist wholly of such juices. The only controversy was as to whether they consisted principally of juices of Australian fruits. In the present case, there is a real issue as to whether the beverage supplied consists of 'juices of fruits'. At first instance, Rich J held that the words 'consisting ... principally of juices of Australian fruits' referred to the characteristic feature of the cordial to what his Honour described as the element giving it its name and nature, its essential properties. On appeal to the Full Court, Latham CJ said (at 596 597): The difficulty which this view meets is found in the words "consisting of". The reference is not to the principal characteristic of the cordial considered as a cordial, but to the content of the cordial. In the phrase "consisting wholly or principally of juice of Australian fruits" the word "wholly" necessarily requires the application of a quantitative standard. The word "principally" must, in my opinion, be similarly construed. Words might have been used which would have given the exemption to any fruit juice cordial in which the whole or larger part of the fruit juice used was juice of Australian fruits. So also an exemption might have been given to all cordials in which any flavouring of Australian fruit juice was contained. Possibly some such provision would represent the result which Parliament intended to achieve. But the court cannot speculate upon such a matter. It must construe the words actually used. The word "consisting" refers to the physical components of the cordial, and the questions to be asked in determining whether the exemption is applicable are (1) Does this cordial consist wholly of juices of Australian fruits? In the present case the answer to this question must be--No: (2) Does it consist principally of juices of Australian fruits? The answer to this question must also, in my opinion, be--No, because the words "consisting principally of" must be read as referring to quantity expressed in terms of either volume or weight of the substance of the cordial and cannot be read as referring to that constituent of the cordial, whatever its proportionate quantity, which gives to the cordial its distinctive flavour as a cordial. Paragraph (d) was added to Item 36(3) by Act No. 71 of 1957. Significantly, it uses the word 'containing', not the words 'consisting' or 'consist of' as in paras (a), (b) and (c). After referring to what was said by Latham CJ in Faulding in the extract reproduced at [49] above, Macfarlan J said (at 106): If, indeed, as the High Court in Faulding's case appears to have thought, the use of the word "consisting" means "constituents actually existing at the time of tax and physically identifiable by reference to the qualities prescribed for exemption" the word "containing" might be thought to have been intended to have a different meaning. Were it not so, then one might reasonably have expected that the word "consisting" would have been used again. This, indeed, was an argument submitted on behalf of the defendant, while learned counsel for the plaintiff distinctly accepted that his argument on this point meant that there existed an identity of meaning for the words "contain" and "consist". After referring to various dictionary definitions of the word 'containing' to which he was taken by counsel for both parties, his Honour said (at 107 109): The word "containing" qualifies the words "non-alcoholic carbonated beverage". In other words, the mixture which is afterwards described in par. (ii) must be contained in the non-alcoholic carbonated beverage and in the present case, the beverage being carbonated when it is in the bottle for sale by retail, the contents of that bottle must then contain the "mixture". It is therefore necessary to inquire what is contained in the bottle at that time. ... In my opinion all the circumstances lead to the conclusion that, subject to certain matters I will mention in a moment, Parliament is only concerned to insure that an Australian fruit juice in the prescribed quantity shall have been used in the carbonated beverage. In my opinion, the meaning of the word "contain" must be understood in this way. The applicant relies on the decisions in Faulding and Pepsi-Cola in support of its position. The decision in Faulding is entirely consistent with the Commissioner's position. In Faulding , the majority (which included Latham CJ) concluded, in the context of Item 36(3), that the word 'consisting' refers to a quantitative test in terms of the constituents actually existing at the time of supply and physically identifiable by reference to the qualities prescribed for exemption. Latham CJ said (at 597): [T]he words 'consisting principally of' must be read as referring to quantity expressed in terms of either volume or weight of the substance of the cordial and cannot be read as referring to that constituent of its cordial, whatever its proportionate quantity, which gives to the cordial its distinctive flavour as a cordial. So too must the de-alcoholised wine under consideration consist of at least 90% (or wholly, for the carbonated Edenvale product) of 'juices of fruits' and not merely be derived from those products while retaining some of their character.