Federal Court of Australia Philip Morris Ltd v Comptroller-General of Customs [2022] FCAFC 185 Appeal from: Philip Morris v Comptroller-General of Customs [2022] AATA 548 File number(s): VID 209 of 2022 Judgment of: LOGAN, THAWLEY AND HESPE JJ Date of judgment: 24 November 2022 Catchwords: TAXATION – where applicant made applications for drawbacks pursuant to the Customs Act 1901 (Cth) and Customs (International Obligations) Regulation 2015 (Cth) – whether applicant gave notice in writing of intention to claim drawbacks as required by items 7(a) of s 37 of the Regulation – where applicant had made export declaration notices – whether notice of intention to claim drawbacks could be inferred from export declaration notices and surrounding circumstances – applicant did not comply with item 7(a) of s 37, substantially or at all – whether respondent had discretion to pay drawback notwithstanding non-compliance with items 7(a) of s 37 – no discretion to pay drawbacks – application dismissed Legislation: Administrative Appeals Tribunal Act 1975 (Cth) s 44 Customs Act 1901 (Cth) ss 8, 113, 113AA, 114, 114A, 114B, 168 Customs (International Obligations) Regulation 2015 (Cth) ss 34, 37, 38 Legislation Act 2003 (Cth) s 13 Cases cited: Emanuele v Australian Securities Commission [1997] HCA 20; 188 CLR 114 Philip Morris v Comptroller-General of Customs [2022] AATA 548 Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 Sun v Minister for Immigration and Border Protection [2016] FCAFC 52; 243 FCR 220 Williams v Nicoski [2003] WASC 131 Woods v Bate (1986) 7 NSWLR 560 Division: General Division Registry: Victoria National Practice Area: Taxation Number of paragraphs: 38 Date of hearing: 14 November 2022 Counsel for the Applicant: Mr C Horan KC with Mr B Jellis Solicitor for the Applicant: Cooper Grace Ward Counsel for the Respondent: Mr P R D Gray with Ms Z Maud Solicitor for the Respondent: Australian Government Solicitor Table of Corrections 29 November 2022 In paragraph 33, "[d]rawback of" has been inserted after the words "It follows, in the language of the chapeau in s 37, that". ORDERS VID 209 of 2022 BETWEEN: PHILIP MORRIS LTD Applicant AND: COMPTROLLER-GENERAL OF CUSTOMS Respondent order made by: LOGAN, THAWLEY AND HESPE JJ DATE OF ORDER: 24 NOVEMBER 2022 THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay the respondent's costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT THE COURT: INTRODUCTION 1 The applicant imports tobacco products into Australia. Some of the tobacco products imported by the applicant are exported to third countries. Before 1 July 2019, those tobacco products were held in bonded warehouses until their export. No import duty was payable on such products in such circumstances. However, from 1 July 2019, all tobacco products were required to be entered into home consumption at the time of importation and import duty was payable. When tobacco products were then exported to third countries without entering the domestic market, a drawback of import duty could be claimed and paid under the Customs Act 1901 (Cth). The payment of drawback is dealt with by the Customs Act and the Customs (International Obligations) Regulation 2015 (Cth). 2 The applicant claimed ten drawbacks of import duty paid on tobacco products exported from Australia from July to September 2019. These claims were rejected by the respondent, the Comptroller-General of Customs, in a decision dated 29 September 2020. The claims were rejected because the applicant had failed to comply with item 7(a) of s 37 of the Regulation which required that the applicant give notice in writing of its intention to claim drawback a reasonable time before export. The applicant sought review of the decision in the Administrative Appeals Tribunal. It was unsuccessful: Philip Morris v Comptroller-General of Customs [2022] AATA 548. 3 The issues as identified by the Tribunal at [8] of its reasons were: (1) whether the applicant gave the Australian Border Force (ABF) notice in writing a reasonable time before the relevant exports of its intention to claim drawback on those exports in accordance with the requirements of item 7(a) of s 37 of the Regulation; (2) if the answer to (1) was "no", whether the respondent had a discretion to pay drawback notwithstanding non-compliance item 7(a) of s 37, and whether the discretion should be exercised. 4 The Tribunal found that: (1) the applicant had not satisfied the condition imposed by item 7(a) of s 37: at [39], [42]; (2) the "plain language of the text of the Regulation means that drawback of duty is not payable in the event of non-compliance" with the condition imposed by item 7(a) of s 37 and there "is no discretion to pay drawback in the circumstances": at [50]. 5 By this proceeding in the Court's original jurisdiction brought under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth), the applicant brings an "appeal" from the Tribunal's decision. The applicant identified four contended questions of law, supported by five grounds. 6 It is unnecessary to set out the facts in detail. They are clearly set out in the Tribunal's reasons. The critical facts for disposition of this appeal have been referred to above. It is sufficient to set out the relevant legislative provisions and turn directly to the grounds upon which the applicant relies. LEGISLATIVE FRAMEWORK Export declarations 7 Part VI of the Customs Act is entitled "The exportation of goods". Division 2 of Part VI is entitled "Entry and clearance of goods for export". In Subdivision A of Div 2, s 113(1) requires an owner of goods intended for export to ensure that the goods are "entered for export". Section 113AA provides: 113AA How an entry of goods for export is made An entry of goods for export is made by making in respect of the goods an export declaration other than a declaration that a Collector refuses under subsection 114(8) to accept. 8 Subdivision B of Div 2, comprising ss 114, 114A and 114B, is entitled "Export declarations". Sections 114(1) to (4) provide: 114 Making an export declaration (1) An export declaration is a communication to the Department in accordance with this section of information about goods that are intended for export. (2) An export declaration can be communicated by document or electronically. (3) A documentary export declaration: (a) can be made only by the owner of the goods concerned; and (b) must be communicated to the Department by giving or sending it to an officer doing duty in relation to export declarations; and (c) must be in an approved form; and (d) must contain such information as is required by the form; and (e) must be signed by the person making it. (4) An electronic export declaration must communicate such information as is set out in an approved statement. Drawbacks 9 Part IX of the Customs Act is entitled "Drawbacks". It comprises only one section, namely s 168. Subsection 168(1) provides: Part IX—Drawbacks 168 Drawbacks of import duty (1) The regulations may make provision for and in relation to allowing drawbacks of duty paid on goods imported into Australia. 10 Part 7 of the Regulation is entitled "Drawback of import duty". Within Pt 7, s 34(1) of the Regulation provides: Division 2—Goods for which drawback may be paid 34 Drawback of import duty on goods—general (1) For section 168 of the Act, drawback of import duty may be paid, in accordance with this Part, on the exportation of imported goods for which import duty has been paid. Note: For manufactured goods and processed or treated goods, see section 35. 11 It is item 7(a) of s 37 of the Regulation which is the central provision relevant to this appeal. Notwithstanding that it is this item which is central, the construction of item 7(a) is informed by the whole of s 37 and by s 38. Section 37 provides: Division 4—Conditions relating to drawback 37 Conditions relating to drawback of import duty Drawback of import duty is not payable on the exportation of goods unless the conditions set out in the following table are met. Conditions relating to drawback of import duty Item Condition 1 Before exportation, the goods are available at all reasonable times for examination by an officer. 2 The following records are available at all reasonable times for examination by an officer: (a) records that show that import duty has been paid on the goods; (b) records that show relevant details of the receipt and disposal of the goods by the owner. 3 A claim by document for drawback of import duty paid on the goods: (a) is in an approved form; and (b) sets out the amount of the claim (see section 40) and the other information that the form requires. 4 A claim made electronically for drawback of import duty paid on the goods: (a) includes the information required by an approved statement; and (b) sets out the amount of the claim (see section 40) and the other information that the statement requires; and (c) is transmitted, and signed, in a manner that meets the information technology requirements determined under section 126DA of the Act. 5 A claim for drawback of import duty includes a statement that to the best of the knowledge, information and belief of the person making the claim, the goods have not been used in Australia other than for the purpose of being inspected or exhibited. 6 The person who is the legal owner of goods at the time the goods are exported gives the claim for drawback to a Collector in the period: (a) starting on the day on which the goods are exported; and (b) ending: (i) for goods that are tobacco or tobacco products—12 months after the day on which the goods are exported; and (ii) for goods that are not tobacco or tobacco products—4 years after the day on which the goods are exported. 7 For goods that are tobacco or tobacco products: (a) the owner of the goods gives a Collector notice in writing, a reasonable time before the exportation, of the owner's intention to claim drawback on the exportation; and (b) the claim for drawback mentions that, to the best of the knowledge, information and belief of the person making the claim, the goods have not been, and are not intended to be, re‑landed in Australia. 8 The amount of the drawback: (a) is at least $100; or (b) meets the following requirements: (i) the amount is claimed at the same time, and in the same approved form, as another claim or claims made by the owner of the goods for drawback on the exportation of other goods; (ii) together the claims result in an aggregate amount of drawback of at least $100. 12 Section 38 provides: 38 Additional conditions for tobacco and tobacco products (1) This section applies in relation to goods that are tobacco or tobacco products. (2) If the owner of the goods gives to a Collector a notice of intention to claim for drawback on the exportation of the goods under paragraph (a) of item 7 of the table in section 37, the Collector may, by notice in writing to the owner of the goods, require the owner to do any of the following: (a) produce the goods to an officer for examination before the exportation of the goods; (b) cause the goods to be packed, in the presence of an officer, into the packages in which they are intended to be exported; (c) cause the goods to be secured to the satisfaction of an officer after they have been packed into the packages in which they are intended to be exported; (d) mark each of the packages, into which any of the goods are packed for the purpose of being exported, with a distinctive mark or label; (e) cause a distinctive label to be affixed to any goods that are to be exported without having been packed into a package. (3) Paragraph (2)(b) does not apply in relation to goods that: (a) are intended to be exported in the packages in which they were packed when entered for home consumption; or (b) are intended to be exported without being packed into packages. (4) If a Collector gives a notice under subsection (2) to the owner of the goods, drawback of import duty is not payable on the exportation of the goods unless the owner complies with the notice. 13 It should be emphasised that: item 7 of s 37 and s 38 are specifically directed to "goods that are tobacco or tobacco products"; under the statutory scheme a "notice in writing" required by item 7 to be given by an owner to the Collector operates to engage the Collector's consideration of whether to give a "notice in writing" to the owner under s 38(2). 14 "Collector" is not defined in the Regulation. It has the same meaning as it has in the Customs Act – see: s 13(1)(b) of the Legislation Act 2003 (Cth). Section 8 of the Customs Act provides: (1) In this Act, a reference to the Collector, or to a Collector, is a reference to: (a) the Comptroller‑General of Customs; or (b) any officer doing duty in the matter in relation to which the expression is used. THE APPEAL Grounds 1 to 3 15 Grounds 1 to 3 were directed to the Tribunal's conclusion that the applicant did not give notice in writing of its intention to claim drawbacks in relation to the exports the subject of its ten claims relating to the period July to September 2019 for the purpose of item 7(a). 16 Ground 1 asserted that the Tribunal erred in concluding that the applicant had not given notice. Ground 2 asserted that, in concluding that the applicant did not give notice under item 7(a) of s 37, the Tribunal erred in law by: a. Failing to conclude that the export declaration notices (EDNs) given by the Applicant would reasonably have been understood by the Respondent in the circumstances as communicating the Applicant's intention to claim drawback of import duty on the exportations; b. Imposing a requirement that the notice must "expressly" state that the Applicant was seeking drawback of import duty or must "expressly" refer to the intention to claim drawbacks, rather than communicating an intention to claim drawback by implication from the notice in writing as it would reasonably be understood in all of the circumstances (including the history of dealings between the parties and the purposes of the legislative scheme); c. Imposing a requirement that, even if officers of the Respondent were given notice in writing of all of the information required in relation to the exportations and surmised that the Applicant would make a claim for drawbacks in respect of the exportations, the Applicant's intention to claim drawbacks must be "clearly signalled" and "brought squarely to the attention" of the Respondent (or the particular officers executing the functions of the Collector); d. Asking what was communicated to the particular "ABF officers responsible for drawbacks", rather than what was reasonably communicated to the Respondent by reason of the EDNs in all the circumstances; e. Asking whether or not the Applicant was "entitled to 'take it as read' that ABF officers would automatically make the connection between its exports and the need for drawbacks under the new law", rather than what was reasonably communicated to the respondent by the EDNs in all the circumstances; f. Having found that the Applicant had given clear notice of its intention to export the relevant goods, failing to have regard to the circumstances known to the Respondent including that: i. The goods were destined for export to international markets, and had never entered domestic consumption; ii. The history of dealings between the Applicant and the Respondent, including regular exports of goods held in bonded warehouses that had been imported by the Applicant and that were destined for sale in foreign markets; iii. The Applicant had paid import duty on the goods and would be entitled to claim a drawback on the goods once they were exported; iv. There was no rational reason why the Applicant would not claim drawback of import duty on the exportation of the goods; g. Failing to have regard to the absence of any evidence from the Respondent that, having received the EDNs from the Applicant prior to the export of the goods, the Respondent did not know or did not expect that PML would claim drawback of import duty on the goods, or that the Respondent lost any opportunity to inspect or verify the goods prior to their exportation. 17 Ground 3 contended that the Tribunal's decision was irrational or legally unreasonable for the reasons given in relation to Ground 2. 18 The applicant's primary contention, as advanced in submissions, was that the Tribunal misconstrued item 7(a) of s 37 as requiring an express statement in writing "of the owner's intention to claim drawback". The applicant contended that the real question raised by item 7(a) of s 37 was whether the export declaration notices submitted by the applicant, "understood against all of the circumstances including the history of dealings between the parties and the purposes of the legislative scheme, would reasonably be understood by Customs as giving notice in writing of an intention to claim drawback on the exportation" of the relevant tobacco products. Consideration of Grounds 1 to 3 19 The export declaration notices relied on by the applicant were notices given to the respondent in compliance with s 114 in Part VI of the Customs Act. Such declarations must be made by way of an "approved form" (documentary declaration) or "approved statement" (electronic declaration): s 114(3)(c) and (4). The purpose of the export declaration notices was to "enter the goods for export". Goods may be entered for export regardless of whether the goods were produced in Australia or imported into Australia and regardless of whether import duty was required to be and has been paid on their importation. The export declaration notices submitted by the applicant did not expressly state that the applicant intended to claim drawback on the exportation. The applicant did not lodge a separate notice for the purposes of item 7(a) of s 37 of the Regulation made pursuant to s 168(1) in Part IX of the Customs Act. 20 One of the principal purposes of item 7(a) of s 37 is to alert the Collector of the existence of an intention to claim drawback, so that before the goods are exported, any verification measures or inquiries of the kind provided for in s 38 of the Regulation, may be undertaken. The statutory context, subject matter and language indicates that there must exist a "written notice" and that it must be written notice "of the intention to claim drawback on the exportation". Item 7(a) of s 37 prescribes the content of the written notice that must be given to a Collector: it must be notice "of the intention to claim drawback on the exportation". It is not sufficient if the intention to claim drawback must be gleaned from documents or circumstances which are not contained in the notice given in purported compliance with the condition identified in item 7(a). It is the written notice which must convey the intention to claim the drawback. The terms of the item 7(a) are clear. They are easily complied with. It cannot sensibly be presumed that, in enacting items 7(a), it was intended that the Collector receiving what is said to constitute the item 7(a) written notice should look outside of the written notice in order to infer that the requisite intention existed or is likely to exist. Less still could it be presumed that it was intended that a Collector look back over the course of dealings with the particular claimant in order to determine the likely existence of such an intention. Those dealings may have involved a number of different officers of the ABF, some of whom may not have been undertaking duty in relation to "the matter of" drawbacks. 21 The applicant's argument is not assisted by cases addressing the sufficiency of a notice given under contract – see, for example: Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 at 677 (Kirby P) and 681 (Samuels JA). The present context is not analogous. Nor is the applicant's case assisted by what might be required to satisfy a notice requirement in a different statutory context – see, for example: Williams v Nicoski [2003] WASC 131 at [294]-[297] (Barker J). A principal object underlying item 7(a) is to communicate an unambiguous written notification to the respondent that there is an intention to claim drawback in relation to tobacco products so that the respondent or a "Collector" as defined (ie: in the circumstances, an officer doing duty in the matter of drawbacks) may then take whatever steps it considers are appropriate having regard to the powers furnished by s 38 of the Regulation. 22 The Tribunal is not shown to have erred in reaching its conclusion that the export declaration notices did not convey an intention to claim drawback on the exportation as required by item 7(a) of s 37 and that no such notice was given. Grounds 1 and 2 have not been made out. 23 The applicant complained that the respondent "did not lead any evidence to the effect that it did not understand and expect that [the applicant] would claim drawback of import duty … when notice was given of their intended exportation". The respondent did not need to adduce evidence about this. Although the applicant was not subject to any formal onus of proof before the Tribunal, it was in its interest to place such material as it could before the Tribunal to engender satisfaction that it had complied with item 7(a): Sun v Minister for Immigration and Border Protection [2016] FCAFC 52; 243 FCR 220 at [61] and following per Flick and Rangiah JJ (with whom Logan J agreed generally). Compliance with item 7(a) did not turn on the understanding or expectation of the Collector. 24 In relation to the notice triggering s 38 powers to inspect or verify the goods before their exportation, the applicant submitted that "all of the evidence was to the effect that Customs had not on any other occasions sought to inspect tobacco products exported by [the applicant]". This is not to the point. The correct construction of item 7(a) does not turn on whether s 38 powers have in fact been exercised in a particular case. The significance of s 38 lies in what it indicates about the purpose and correct construction of item 7(a). 25 The applicant has not demonstrated any irrational or legally unreasonable finding of fact or conclusion in the Tribunal's reasons. It follows that Ground 3 has not been made out. 26 One further matter should be mentioned. The respondent submitted that, in any event, an item 7(a) "notice" must be given to an officer "doing duty in the matter in relation to" drawbacks. The respondent submitted that item 7(a) requires "notice in writing" to "a Collector", namely "any officer doing duty in the matter in relation to which the expression is used": s 8(1) of the Customs Act. 27 The Tribunal found that "the particular office within the ABF which deals with drawbacks has dedicated staff and a dedicated email address" which the applicant knew: at [40]. The Tribunal found that the export declaration notices were submitted through the Integrated Cargo System (ICS) and were not sent to the dedicated email address for drawbacks and that submission of the export declarations via the ICS did not constitute giving notice in writing to "a Collector" for the purpose of item 7(a) – see: [12], [22]-[23], [40] and [42]. 28 It is not strictly necessary to decide this question given that there was no item 7(a) notice at all. Notwithstanding, it is as well to observe that the Tribunal's conclusion is supported by the language and context of the statutory provisions. In particular, the language and context indicate a presumed intention on the part of the legislature to require a "written notice" containing the required content (notification of an intention to claim drawback) to be made to the "officer doing [drawback] duty" so that the officer might consider exercising the powers under s 38 of the Regulation. Grounds 4 and 5 29 Grounds 4 and 5 were: 4. The Tribunal erred in law by holding that there is no power or discretion to pay drawback of import duty under s 168 of the Customs Act 1901 and/or the Regulations notwithstanding any failure by the owner to comply with item 7(a) of s 37 of the Regulations. 5. The Tribunal should have held that compliance, or strict compliance, with item 7(a) of s 37 of the Regulations is not a mandatory condition or condition precedent to the existence of power to pay drawback of import duty under s 168 of the Customs Act 1901 and/or in accordance with Part 7 of the Regulations. 30 The Tribunal found that, on the proper construction of the Regulation, there was no discretion to pay drawbacks, if there was a failure to comply with item 7(a). On appeal, the applicant submitted that the power to pay a drawback is not so strictly confined, contending that the correct approach was that identified by the High Court of Australia in Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355, where the Court said at [91] (footnotes omitted): An act done in breach of a condition regulating the exercise of a statutory power is not necessarily invalid and of no effect. Whether it is depends upon whether there can be discerned a legislative purpose to invalidate any act that fails to comply with the condition. The existence of the purpose is ascertained by reference to the language of the statute, its subject matter and objects, and the consequences for the parties of holding void every act done in breach of the condition. 31 The applicant contended that it does not necessarily follow that compliance with all of the relevant items in s 37 of the Regulation are "mandatory pre-conditions" and that the central question was whether it was "a purpose of the legislature to deny any power to pay a drawback" if there was a failure to comply with the conditions in s 37, in particular item 7(a). Consideration of Grounds 4 and 5 32 Subsection 168(1) of the Act authorises provision by regulation for and in relation to allowing drawbacks of duty paid on goods imported into Australia. In turn, by s 34 of the Regulation, drawbacks may be paid if the conditions for payment of drawback are satisfied. Although s 34 states that a drawback of import duty "may" be paid if the conditions are satisfied, it is difficult to see that there is any residual discretion to refuse to pay a drawback where the conditions are met. 33 Section 37 provides that "[d]rawback of import duty is not payable on the exportation of goods unless the conditions set out in the following table are met". Item 7(a) is in the relevant table. Item 7(a) was not complied with, either substantially or at all. The item 7(a) "condition" was not met because the applicant did not give the respondent written notice of an intention to claim drawback. It follows, in the language of the chapeau in s 37, that "[d]rawback of import duty is not payable". The Regulation does not provide a residual discretion to pay drawback where the condition, being item 7(a) of s 37, is not met. 34 The applicant sought comfort in what McHugh J said in Woods v Bate (1986) 7 NSWLR 560 at 567 (citations omitted): In recent times the courts have shown great reluctance to invalidate an act done pursuant to a statutory provision because of the failure to comply with an antecedent condition. Speaking generally, I think that, at the present time, the proper approach is to regard a statutory requirement, expressed in positive language, as directory unless the purpose of the provision can only be achieved by invalidating the result of any departure from it, irrespective of the circumstances or resulting injustice. 35 The applicant noted that this passage was referred to with approval by Kirby J in Emanuele v Australian Securities Commission [1997] HCA 20; 188 CLR 114 at 152. Both of these cases pre-date Project Blue Sky. The question which McHugh J was addressing was whether it was a "mandatory" condition of an appeal to the Full Bench of the Licensing Court that a copy of the notice of appeal be served on the other parties not more than seven days after the lodging of the appeal. The Court of Appeal concluded that the requirement for service was "directory" and a failure to serve the notice of appeal within seven days did not invalidate the appeal. No real assistance is provided by the general statement relied upon, less still by the decision on a different question in a different statutory context. 36 Grounds 4 and 5 are not made out. CONCLUSION 37 There was some discussion in the appeal, particularly by the applicant, concerning the confusion which evidently attended the transition to the new regime referred to in [1] above. The Tribunal referred, in places, to the applicant being provided assistance from the ABF which was perhaps less than ideal. The point of the applicant's discussion, no doubt, was to attribute blame or fault for the omission on the part of the applicant to comply with item 7(a). On any view, the fault is not all one way. The applicant had read the Regulation and was well advised. In any event, none of these matters raise any questions of law and an inquiry into them cannot lead to any different answer in relation to the grounds raised. 38 The application must be dismissed with costs. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Logan, Thawley and Hespe Associate: Dated: 24 November 2022