Suntory (Aust) Pty Ltd v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (NSD319/2009)
Judgment date: 30 June 2009
Date published: 22 October 2009
Decision outcome: Favourable

Summary of decision:
Whether the Commissioner is precluded from collecting, and required to refund moneys collected under an Excise Tariff alteration proposal where legislation giving effect to the proposal was rejected by parliament within the 12 month expiration period.

Overview of facts:
As part of the implementation of what became known as the 'alcopops' measure, on 26 April 2008 the Commissioner published a notice of intention to propose an Excise Tariff alteration increasing the rate of duty payable on "other excisable beverages" (Excise Tariff Proposal (No 1) 2008) from $39.36 to $66.67 per litre of alcohol. The notice said that "the alterations operate on and from 27 April 2008". On and from that date the Commissioner collected monies at the higher rate specified in Excise Tariff Proposal (No 1) 2008. | On 13 May 2008 the proposed Excise Tariff alteration was moved by motion in the House of Representatives. On 11 February 2009 the Federal Government introduced into the House of Representatives the Excise Tariff Amendment (2009 Measures No 1) Bill 2009 containing the Excise Tariff alteration. On 25 February 2009 the House of Representatives passed the Bill. On 18 March 2009 the Senate rejected the Bill. | The Applicant had permission under section 61C of the Excise Act 1901 (Cth) to deliver goods for home consumption without entry, including "other excisable beverages". The permission dated 24 December 2004 was subject to conditions, including condition 3(c) which provided that, when any Excise Tariff alteration is proposed in the Parliament or by the Commissioner, from that day the rate of duty the Applicant is required to pay is the rate specified in the tariff proposal. | On 3 April 2009, following the Senate's rejection of the Bill, the Applicant sought declaratory and injunctive relief from the Federal Court pursuant to section 39B of the Judiciary Act 1903 , to the following effect: • a declaration that that the applicant is not liable to pay the amounts of excise duty at the increased rate set out in Excise Tariff Proposal (No 1) 2008 to the extent that it exceeds the previous rate set out in item 2 of the Schedule to the Excise Tariff Act 1921 ; ("the excess amounts") • a declaration that the collection of the excess amounts by the Commissioner is unlawful; • an order restraining the Commissioner from collecting the excess amounts or imposing any requirement upon the Applicant to comply with any obligation to pay the excess amounts; • an order that the Commissioner refund the excess amounts collected since 27 April 2008; and • an injunction restraining the Commissioner from collecting or imposing any requirement upon the Applicant to pay the excess amounts. | • a declaration that that the applicant is not liable to pay the amounts of excise duty at the increased rate set out in Excise Tariff Proposal (No 1) 2008 to the extent that it exceeds the previous rate set out in item 2 of the Schedule to the Excise Tariff Act 1921 ; ("the excess amounts") • a declaration that the collection of the excess amounts by the Commissioner is unlawful; • an order restraining the Commissioner from collecting the excess amounts or imposing any requirement upon the Applicant to comply with any obligation to pay the excess amounts; • an order that the Commissioner refund the excess amounts collected since 27 April 2008; and • an injunction restraining the Commissioner from collecting or imposing any requirement upon the Applicant to pay the excess amounts. | On 6 April 2009 the Commissioner filed a Notice of Motion seeking that the proceedings be stayed until 13 May 2009 (the expiry of the 12 month period under s 114). | On 15 April 2009 Justice Jagot handed down judgment at first instance ordering that the proceedings be stayed until 13 May 2009. On 17 April 2009 the Applicant filed a notice of motion seeking leave to appeal against that interlocutory decision to the Full Federal Court. | On 4 May 2009 the Full Court granted leave to appeal and dismissed the Applicant's appeal. | On 30 June 2009 the Full Court provided written reasons for its decision. | Issues decided by the court | The Full Court noted that "the primary judge held that s114 does not cease to operate when the Senate rejects a Bill that, if passed, would have given retrospective effect to the Excise Tariff alteration that has been proposed. Accordingly her Honour held that the present proceeding was required to be stayed during the period specified in s114" and agreed with Jagot J's's conclusion for the reasons given by her Honour. | On appeal to the Full Court, the Applicant argued that condition 3(c) of the permission granted to it under s61C purported to impose a tax without authorisation by Parliament. | In rejecting that submission their Honours held that "s61C(3) expressly permits the Commissioner to attach conditions to the permission subject to them being necessary for the purposes set out in the subsection. It is an exercise of statutory power that is enlivened by the decision to rely on entry of goods under s61C." | The Court considered that the validity of the collection of anticipated duty lay not in whether condition 3(c) imposed a tax but in whether it fell within the incidental scope of the taxation power. | The Court agreed with the Commissioner's submission that both s61C and s114 have the evident purpose of being for the "protection of the revenue" and therefore fall within the incidental scope of the taxation power in s51(ii) of the Constitution. | Their Honours stated that "In our view both s61C and s114 are directed to the protection of the revenue. As such they have a 'relevant and sufficient connexion' with the taxation power and are 'appropriate to effectuate the exercise of [that] power' " | The Court agreed with the Commissioner's submission that the relationship between s114 of the Excise Act and s75(v) of the Constitution did not need to be determined in this case as the proceedings were brought in the Federal Court and there is no doubt that Parliament has the power to limit jurisdiction in that Court. | As the Court concluded that the relevant provisions were properly characterised as being with respect to taxation they considered that the Applicant's further argument, that there was an acquisition of property on unjust terms under s51(xxxi) of the Constitution, did not arise.

Issues decided:
The Full Court noted that "the primary judge held that s114 does not cease to operate when the Senate rejects a Bill that, if passed, would have given retrospective effect to the Excise Tariff alteration that has been proposed. Accordingly her Honour held that the present proceeding was required to be stayed during the period specified in s114" and agreed with Jagot J's's conclusion for the reasons given by her Honour. On appeal to the Full Court, the Applicant argued that condition 3(c) of the permission granted to it under s61C purported to impose a tax without authorisation by Parliament. In rejecting that submission their Honours held that "s61C(3) expressly permits the Commissioner to attach conditions to the permission subject to them being necessary for the purposes set out in the subsection. It is an exercise of statutory power that is enlivened by the decision to rely on entry of goods under s61C." The Court considered that the validity of the collection of anticipated duty lay not in whether condition 3(c) imposed a tax but in whether it fell within the incidental scope of the taxation power. The Court agreed with the Commissioner's submission that both s61C and s114 have the evident purpose of being for the "protection of the revenue" and therefore fall within the incidental scope of the taxation power in s51(ii) of the Constitution. Their Honours stated that "In our view both s61C and s114 are directed to the protection of the revenue. As such they have a 'relevant and sufficient connexion' with the taxation power and are 'appropriate to effectuate the exercise of [that] power' " The Court agreed with the Commissioner's submission that the relationship between s114 of the Excise Act and s75(v) of the Constitution did not need to be determined in this case as the proceedings were brought in the Federal Court and there is no doubt that Parliament has the power to limit jurisdiction in that Court. As the Court concluded that the relevant provisions were properly characterised as being with respect to taxation they considered that the Applicant's further argument, that there was an acquisition of property on unjust terms under s51(xxxi) of the Constitution, did not arise.

ATO view of decision:
The decision is in accordance with the Commissioner's view of the operation of section 114 of the Excise Act 1901.

Administrative treatment:
Implications on current Public Rulings & Determinations | None

Legislative references: Customs Act 1901 (Cth) 262 Commonwealth Constitution 51(ii) 51(xxxi) 75(v) Excise Act 1901 (Cth) 4 54 58 59 61C 160B 109 114 115 Excise Tariff Act 1921 (Cth) 2 Excise Tariff Amendment (2009 Measures No. 1) Bill 2009 (Cth) Federal Court of Australia Act 1976 (Cth) 24(1A) Judiciary Act 1903 (Cth) 39B War Precautions Act 1914-1916 (Cth)
Case references: Bowles v Bank of England [1913] 1 Ch 57 Commonwealth v Colonial Combing, Spinning and Weaving Company Limited (Wool Tops) [1922] HCA 62 31 CLR 421 29 ALR 138 Ex parte Wallace and Co (1892) 13 NSWLR 1 Fairfax v The Commissioner of Taxation of the Commonwealth of Australia [1965] HCA 64 114 CLR 1 [1966] ALR 1073 Grannall v Marrickville Margarine Proprietary Limited [1955] HCA 6 [1955] ALR 331 93 CLR 55 Matthews v The Chicory Marketing Board (Victoria) [1938] HCA 38 [1938] ALR 370 60 CLR 263 Nationwide News Pty Limited v Wills [1992] HCA 46 177 CLR 1 Sargood Brothers v The Commonwealth [1910] HCA 45 16 ALR 483 11 CLR 258 Suntory (Aust) Pty Ltd v Commissioner of Taxation [2009] FCA 348 Szajb v Minister for Immigration and Citizenship [2008] FCAFC 75 168 FCR 410 101 ALD 499 Victoria v The Commonwealth [1996] HCA 56 187 CLR 416 70 ALJR 680 138 ALR 129 66 IR 392
Subject references: Excise Tariff Proposals Excise licence conditions Exercise of powers incidental to taxation power 'Alcopops'