Sogo Duty Free Pty Ltd v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (VT2003/211-213; VT2004/47; VT2009/1459 (AAT); VID 161 of 2010 (FC); VID 827 of 2010 (FFC))
Judgment date: 16 March 2011
Date published: 22 June 2011

Summary of decision:
Outlines the Tax Office's response to these decisions which concerned whether the Applicant had sold cigarettes to relevant travellers for export or whether the cigarettes had been sold domestically or, alternatively, were deemed to have been entered for home consumption.

Overview of facts:
During the period 11 April 1999 - 24 May 2001 (" the relevant period "), the Applicant was licensed to operate an "outwards duty free shop". In effect, the Applicant was licensed to sell duty free goods to persons travelling overseas. | During the relevant period, the Applicant sold 46,017,670 sticks of cigarettes. The invoices evidencing the cigarette sales recorded the sales as having been made to members of the crew of various ships. | The Commissioner had assessed the Applicant to understatements of Income Tax, understatements of Goods and Services Tax and duty imposed under section 60 of the Excise Act (1901) ("the Excise Act ") on the basis that the cigarette sales had not been made to the crew members of ships travelling overseas but had been sold domestically and in breach of the requirements of the GST Regulations and the Applicant's relevant licences. | Issues decided by the court and Tribunal | The AAT found that the cigarette sales were not made to relevant travellers and that the goods had been delivered into home consumption. It also found that the sales invoices recorded a price less than the actual price received by the Applicant. | The AAT concluded that the Applicant had not discharged its burden of proof in either of the three proceedings. | The Applicant appealed from the AAT's decision to the Federal Court in respect of those parts of the decision that dealt with the Applicant's liability as to Income Tax and duty payable pursuant to section 60 of the Excise Act. | On appeal, Gordon J upheld the AAT's decision on the basis that it was reasonably open to the AAT to conclude on the evidence before it that the goods had been sold domestically rather than as stated on the invoices. Gordon J also rejected the Applicant's submissions that an 'outwards duty free shop' could not be subject to duty under section 60 of the Excise Act and was subject to liability only under an exclusive code outlined in section 61D of the Excise Act . | The Applicant appealed Gordon J's decision to the Full Federal Court in respect of that part of the decision that dealt with the Applicant's liability to duty payable pursuant to section 60 of the Excise Act. | The Full Federal Court found that although the enquiry as to whether goods have been kept safely for the purposes of section 60 may overlap with, and is logically anterior to, the enquiry as to whether the requirements of section 61D have been met, it did not follow that section 60 was incapable of extending to the same circumstances which enliven the provisions of section 61D of the Excise Act.

Issues decided:
The AAT found that the cigarette sales were not made to relevant travellers and that the goods had been delivered into home consumption. It also found that the sales invoices recorded a price less than the actual price received by the Applicant. The AAT concluded that the Applicant had not discharged its burden of proof in either of the three proceedings. The Applicant appealed from the AAT's decision to the Federal Court in respect of those parts of the decision that dealt with the Applicant's liability as to Income Tax and duty payable pursuant to section 60 of the Excise Act. On appeal, Gordon J upheld the AAT's decision on the basis that it was reasonably open to the AAT to conclude on the evidence before it that the goods had been sold domestically rather than as stated on the invoices. Gordon J also rejected the Applicant's submissions that an 'outwards duty free shop' could not be subject to duty under section 60 of the Excise Act and was subject to liability only under an exclusive code outlined in section 61D of the Excise Act . The Applicant appealed Gordon J's decision to the Full Federal Court in respect of that part of the decision that dealt with the Applicant's liability to duty payable pursuant to section 60 of the Excise Act. The Full Federal Court found that although the enquiry as to whether goods have been kept safely for the purposes of section 60 may overlap with, and is logically anterior to, the enquiry as to whether the requirements of section 61D have been met, it did not follow that section 60 was incapable of extending to the same circumstances which enliven the provisions of section 61D of the Excise Act.

ATO view of decision:
The Full Federal Court has reinforced the principles previously articulated in Sidebottom v Giuliano (2000) 98 FCR 579 and Collector of Customs (NSW) v Southern Shipping Co Ltd (1962) 107 CLR 279. The decision is consistent with the Commissioner's submission that section 60 of the Excise Act operates independent of any other provision of that Act for the collateral protection of the revenue and is a separate and collateral liability to Excise duty. | Implications for ATO precedential documents (Public Rulings & Determinations etc) | None

Administrative treatment:
None

Legislative references: Income Tax Assessment Act (1997) 6-5 A New Tax System (Goods and Services Tax) Act (1999) Excise Act (1901) 54 59 60 61D
Case references: Sidebottom v Giuliano (2000) 98 FCR 579 [2000] FCA 607 Collector of Customs (NSW) v Southern Shipping Co Ltd (1962) 107 CLR 279 [1962] HCA 20 Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 [1996] HCA 6
Subject references: Income Tax False Pricing Undeclared Income Outward Duty Free Sales Failure to comply with GST Regulations Sealed Bag rules Failure to comply with Warehouse License Failure to ensure goods received onboard Relationship between s 60 and 61D of the Excise Act Whether s61D of the Excise Act precludes operation s60 from attaching liability to proprietor of outwards duty free shop Nature of collateral liability imposed under s60 of the Excise Act Interpretation of Tribunal's reasons