JUDGMENT No. 638/97. CATCHWORDS Sales Tax - Sales Tax (Exemptions and Classifications) Act 1935, Schedule 1, Items 14 and 113C - Sales Tax Regulations, Reg.4(1) - bauxite mining - overland conveyor facility - whether facility constitutes - "use in the mining industry"; - "mining operations"; — "in the treatment of the products of those operations" - aids to manufacture - what constitutes - "in the transportation within premises of goods" Statutory Construction - exemption from sales tax - liberally construed. THE COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA v. REYNOLDS AUSTRALIA ALUMINA LTD. & ORS. No. WAG 44 of 1987 Beaumont, Wilcox and Burchett JJ. Sydney 26 November 1987 IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. WAG 44 of 1987 ) GENERAL DIVISION ) BETWEEN: THE COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA Appellant AND: REYNOLDS AUSTRALIA ALUMINA LTD., THE SHELL COMPANY OF AUSTRALIA LIMITED, ? BHP MINERALS LTD., KOBE ALUMINA ASSOCIATES (AUSTRALIA) PTY. LIMITED and WORSLEY ALUMINA PTY. LTD. Respondents MINUTES OF ORDER Court: Beaumont, Wilcox and Burchett Jd. Date order made: 26 November 1987 Where made: Sydney THE COURT ORDERS: Note: The appeal is dismissed with costs. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. "2 oer IN THE FEDERAL COURT OF AUSTRALIA ) ) WESTERN AUSTRALIA DISTRICT REGISTRY) No. of WAG 44 of 1987 ) ) GENERAL DIVISION BETWEEN : THE COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA Appellant AND: REYNOLDS AUSTRALIA ALUMINA LTD., THE SHELL COMPANY OF AUSTRALIA LIMITED, BHP MINERALS LTD., KOBE ALUMINA ASSOCIATES (AUSTRALIA) PTY. LIMITED and WORSLEY ALUMINA PTY. LTD. Respondents CORAM: Beaumont, Wilcox and Burchett Jd. DATED: 26 November 1987 REASONS FOR JUDGMENT BEAUMONT J. Reynolds Australia Alumina Ltd., The Shell Company of Australia Limited, BHP Minerals Ltd. and Kobe Alumina Associates (Australia) Pty. Limited ("the joint venturers"), four of the respondents in this appeal, are members of a joint venture ("the joint venture") carrying on the business of mining bauxite and refining it into alumina in the Darling Ranges in Western Australia. Worsley Alumina Pty. Ltd., the fifth respondent, a company controlled by the joint venturers, is the manager of the joint venture. The respondents have constructed near Worsley, moe ee eee ee --— - mr eer oe ' we ea wee = oe ae TI erg oe wee me eee ee 2. W.A., mine facilities and an alumina refinery and the present dispute concerns sales tax claimed by the Commissioner of Taxation in respect of an overland conveyor facility ("the conveyor") operating between the mine facilities and _ the refinery. The Commissioner claimed that the respondents were liable to pay sales tax in respect of the constituent parts of the conveyor applied to their own use. The respondents disputed this, contending that the constituent parts of the conveyor were exempt from sales tax for several reasons. In the first place, they said that the conveyor fell within Item 14(1) in the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 as follows: "14. (1) Machinery, implements and apparatus (other than road vehicles of the kinds ordinarily used for the transport of persons or the transport or delivery of goods, or parts for those road vehicles), for use in the mining industry in carrying out mining operations or in the treatment of the products of those Operations. (Emphasis added) Alternatively, the respondents claimed exemption by virtue of Item 113C of the First Schedule as "Goods...applied by a registered person to his own use as aids to manufacture (as defined by [the Regulations])..." Reg.4(1) of the Sales Tax Regulations defines "aids to manufacture" to mean - "goods for use by a registered person in the course of carrying on a business (where that use is exclusively, or primarily and principally, for the purposes of that business), being - (a) machinery, implements and apparatus for use exclusively, or primarily and principally - De ee mee ee ite pore ee ne + ms (i) in the actual processing or treatment of goods to be used in, wrought into or attached to goods to be manufactured; (viii) in the transportation, within premises in which any activity is carried out by him as specified in this paragraph (not being an activity carried out by the use of machinery, implements or apparatus expressly excluded from this definition) of goods in relation to which that activity has been, is, or is to be, carried out by him; (Emphasis added) A Judge of this Court upheld the respondent's claim for exemption from tax, making a declaration that none of the respondents was liable to pay sales tax in respect of any constituent part of the conveyor. The Commissioner now appeals from this order. Bauxite is a rock like substance; it consists of alumina trihydrate together with other substances which for present purposes can be described as "mud". Geologists refer to alumina trihydrate or hydrated aluminium oxide as gibbsite. Aluminium oxide is commonly known as alumina and alumina is the basic material used in a smelting process to produce aluminium. The amount of gibbsite in bauxite varies so that the greater the proportion of gibbsite in bauxite, the richer the bauxite; the mud content of bauxite is a waste product for which there is no commercial use. It is feasible to transport bauxite rich in gibbsite (high grade bauxite) long distances to refine alumina Te vee 4. elsewhere; but, because of transport costs, this is not a viable proposition if the bauxite is poor in gibbsite (low grade bauxite). There are large deposits of low grade bauxite in the Darling Ranges. Since the deposits contain some 30% gibbsite only, it is not practicable to transport the bauxite from these deposits to overseas refineries. In 1957, 1t was realised that the commercial exploitation of these deposits was possible. In the 1960's, with the support of the State of Western Australia, a number of proposals for the mining of this bauxite and its refining into alumina locally were brought forward. In 1970, the State entered into an agreement with Alwest Pty. Ltd. ("the Bunbury agreement"). Under the Bunbury agreement, which was ratified by the Alumina Refinery (Bunbury) Agreement Act 1970 (W.A.), Alwest covenanted to commence the construction of a refinery near Bunbury and to produce specified amounts of alumina; to transport to the refinery bauxite mined from mining premises 1n respect of which mineral leases would be granted and, for that purpose to construct an appropriate conveyor or pipeline between the mineral lease area and the refinery or effect alternative means of transportation; and to pay to the State a royalty on ail alumina produced at the refinery. After the making of the Bunbury agreement, further feasibility studies were carried out and other parties became involved. The site of the refinery was changed to a site near ae poe ee peer oe roe nents wee ere 5. Worsley, inland from Bunbury in the Darling Ranges. The refinery site was not far from Collie, near which coal is produced: coal is needed to fuel the furnaces necessary to provide energy used in the mining and refining operations including the transport of the bauxite on the conveyor. The Worsley site offered a supply of the water required for the refining process itself; also, water is needed for the disposal of the mud, known as red mud, which 1s removed from the bauxite at the refinery. The mine site is near Boddington, approximately 50 kilometres from Worsley. In 1971, a subsidiary of Broken Hill Proprietary Limited, Dampier Mining Company Ltd. ("DAMCO"), acquired a 50 per cent interest in Alwest's rights under the Bunbury agreement. Reynolds Metals Company, a North American corporation, was invited to participate in the development proposed. Further feasibility studies conducted during 1973 led to the execution in 1974 of another development agreement between Alwest, DAMCO, and the State ("the Worsley agreement") which was authorised by the Alumina Refinery (Worsley) Agreement Act 1973 (W.A.). Thereafter, by various agreements, the joint venturers acquired in proportionate shares the Worsley agreement rights and various other assets and rights necessary for the implementation of the Worsley joint venture agreement. The joint venturers undertook to construct a refinery; to transport the bauxite mined within the mineral lease to the refinery, and to transport the alumina produced at the refinery to the port of Bunbury for shipping. They further agreed to facilitate such transport and the -<- meee reg Saye ee ope: ee 6. transport of coal and other materials required by them for use at the refinery. To that end they were to construct an appropriate conveyor or pipeline between the mineral lease and the refinery and a pipeline from the refinery to Bunbury. Except with the consent of the Minister, all bauxite (other than special grade bauxite) mined by the joint venturers was to be used in the manufacture of alumina and associated chemicals and by-products at the refinery. The State agreed to take all steps required on its part to permit performance of the Worsley agreement. After 1973, a number of amendments were made to the Worsley agreement, which were ratified by the Alumina Refinery (Worsley) Agreement Act 1978 and the Alumina Refinery (Worsley) Agreement Act 1982. These amendments are not presently relevant. The Worsley Joint Venture Agreement was entered into by the joint venturers on 7 February 1980. Under that agreement, the parties agreed that they associated themselves in the joint venture with the objective, inter alia, of developing the project "so that it will be sufficiently completed to allow production of Sandy Alumina in substantial quantities on a regular basis." The joint venturers also entered into a management agreement with Worsley Alumina. Worsley Alumina has exclusive possession of the joint venture assets for the purpose of managing the business of mining bauxite and refining it into alumina. ac a ee rte 7. Construction of the project facilities comprising the facilities at the mining compound, the overland conveyor and the refinery facilities, began in 1980. fThe| first alumina was \ produced in April 1984. The mine is on a lane area Of land held . . 1 by the joint venturers under a mining lease|granted pursuant to the Mining Act 1978 (W.A.) and the Alumina Refinery (Worsley) Agreement Act 1973 for the purpose of mining for bauxite. Part | of the conveyor is constructed on this lami. The conveyor is | constructed along a corridor of land connecting the mine site and \ . the refinery. The joint venturers hold freelold title to some of this land; the balance is held by them under a Crown lease \ granted pursuant to the Land Act 1933 (W.A.) and the Alumina I Refinery (Worsley) Agreement Act 1973 fer the purpose of constructing and operating a conveyor for\ the transport of bauxite from the mining lease area to the refinery site and for ancillary purposes. The joint venturers have no authority to mine in the corridor. Because of environmental considerations, the corridor is not in a straight line from the mim site to the refinery. It consists of two lines - flight 1, which is 30 N kilometres long; and flight 2, which is 21 kilometres long. The refinery 1s situated on land held by the joint venturers under Crown leases granted pursuant to the Land Act and the Alumina Refinery (Worsley) Agreement Act 1973 for the furpose of \ constructing and operating an alumina refinery and for' ancillary purposes. Part of the conveyor is constructed on this land. The refinery site comprises the refinery and all associited works including a reservoir, a dam, the red mud disposal\area and railway tracks. The floor of the bauxite to be mined comprises clay containing reactive silica. The floor is uneven and clay pinnacles often protrude into the bauxite. The quality of the bauxite varies. The percentage of gibbsite in the bauxite ranges from 21.7% to 32.8% while the percentage of reactive silica varies from .7% to 2.6%. In the refining process it is important that, as far as possible, the bauxite being fed in contains the same percentage of gibbsite, optimally 30.7% and, as far as possible, a constant percentage of silica. Any variation from these standards causes problems in the refining process. These standards are maintained by a biending procedure; this process takes place partly at the mine site and partly at the refinery site. As part of the mining procedure, the overburden is removed; where necessary, the hardcap bauxite is blasted. The bauxite is then loaded into dump trucks. The loader operator has a "picture" of the pod on which he is operating derived from an examination of the test bore records. The bauxite is taken to a primary crusher and tipped into a surge hopper; the crushed bauxite is then carried by a conveyor belt to a secondary crusher and fed into a surge bin; it 1s then fed by a conveyor to a surge pile and recovered from the surge pile by means of feeders placed under its base. The bauxite is next fed onto an accelerator belt and then transported by the overland conveyor belt (flight 1 of the conveyor). The speed of the accelerator 3m rosary re wie tres, serra ope = ere 9. belt and the conveyor belt are controlled from the control room at the refinery. The withdrawal rate is about 2,040 tonnes per hour. The bauxite takes some two and a quarter hours to travel from the mine site to the refinery, moving at about 22 k.p.h. The weight of bauxite on the conveyor belts when fully operational is about 5,000 tonnes. The point at which the bauxite is fed onto flight 1 is on the mine site. The conveyor then enters upon the conveyor corridor, traversing hilly country and crossing rivers and roads. A private roadway is built alongside the conveyor. The corridor 1s not fenced but when it crosses roads, fences have been built along the road boundaries. The roadway 1s used for the purpose of maintenance of the conveyor and for access between the mine site and the refinery. Although the total distance traversed is 51 kilometres, most of the corridor 1s State forest with very little development of any kind en route. The conveyor consists of a cable belt system. The belt carrying the bauxite rests on steel cables and power is applied to the cables to move the belt; the cables are supported by pulley wheels. The belt is covered by a roof. Nothing is done to the bauxite while 1t is travelling on the conveyor belts: the conveyor is used solely for the purpose of transporting bauxite from the mine site to the refinery. age ro ne re ree 10. As the bauxite arrives at the refinery, samples are taken to determine the quality of the bauxite. From the analysis made of the bauxite arriving at the refinery, instructions are sent to the mine site as to the quality of bauxite to be used in further deliveries of bauxite to ensure the correct blend of bauxite in the stockpiles. The bauxite is stockpiled at the refinery site. The method of stacking the stockpiles and the recovery of bauxite from the stockpiles complete the blending process of the bauxite prior to its being fed into the refinery procedures. At the refinery, alumina is refined from the bauxite by the "Bayer" process. This involves a number of procedures; digestion, separation, precipitation and calcination. It is not necessary for present purposes to examine the detail of these procedures. A. Item 14(1) The primary Judge dealt first with the claim for exemption under Item 14(1). It will be recalled that this item exempts "{mjJachinery, implements and apparatus (other than road vehicles of the kinds ordinarily used for the transport of persons or the transport or delivery of goods...) for use in the mining industry in carrying out mining operations or in the treatment of the products of those operations." It 1s convenient to consider separately the meaning and application of the three limbs of the provision as follows: (1) "for use in the mining aS er eee a a a aa oer sow rere ll. industry"; (2) "in carrying out mining operations"; (3) "in the treatment of the products of those operations". "Por use in the mining industry" It is common ground that the respondents carry on the business of mining bauxite and refining it into alumina. It is also common ground that the conveyor is machinery, implements and apparatus "for use in the mining industry". The primary Judge was of the view that, in the light of the decisions and reasoning in R. v. Hickman; Ex parte Fox and Clinton (1945) 70 C.L.R. 598 at pp.608-9; R. v. Central Reference Board; Ex parte Thiess (Repairs) Pty. Ltd. (1948) 77 C.L.R. 123 at pp.140-2; Federal Commissioner of Taxation v. Hamersley Iron Pty. Ltd. (1981) 37 A.L-R. 595 at p.604; and R. v. Coldham; Ex parte The Australian Workers' Union (1983) 153 C.L.R. 415 at p.425, this concession by the Commissioner was correctly made. In this connection, his Honour placed particular reliance upon the circumstances that, with respect to the activities at the mine site and the refinery, there was "the one employer, Worsley Alumina, the one operation identified as the Worsley Project and the one integrated overall activity". I respectfully agree with the primary Judge's conclusion that the conveyor facility was for use in the mining industry. "In carrying out mining operations" Before the primary Judge and before us the Commissioner disputed that this limb was satisfied here. It was said that 12. "mining operations" were conducted only at the mine site; that such operations were concluded when the bauxite was recovered in manageable dimensions fit for use, transport or delivery; and that this stage was reached when the bauxite emerged from the secondary crusher and was deposited on the surge pile. Thus, it was submitted, the transport of the bauxite from the mine site to the refinery was not part of a mining operation. Because his Honour was of the view that other provisions of the legislation provided an exemption from tax, he did not need to decide this question. In my opinion, the conveyor facility is part of the mining operations conducted by the respondents within the meaning of this limb of Item 14(1). It 1S possible to deduce from the settled course of authority in this area a number of general propositions: (i) Because the object of a provision such as Item 14(1) 1s to encourage the production of minerals in Australia, the exemption should be construed and applied Jliberally (see Federal Commissioner of Taxation v. I.C.I. (Australia) Ltd. (1972) 127 C.L.R. 529 at pp.563; 581); (ii) The notion of "mining" is a flexible rather than fixed one so that, conceptually, it is capable of accommodating technological change (see the I.C.I. Case at p.579). (iii) "Mining operations" means operations pertaining to mining and "operations" is a very wide expression. aecrecs ny 13. For instance, "mining operations" is wider than "the working of a Mining property" (see Parker v. Federal Commissioner of Taxation (1953) 90 C.L.R. 489 at p.494); (1v) The present question is one of fact and degree (see the I.C.1. Case; Federal Commissioner of Taxation v. Northwest Iron Co. Ltd. (1986) 64 A.L.R. 436 at p-.445); (v) In determining whether the exemption 1s applicable, it is appropriate to have regard to practical and businesslike considerations and, for this purpose, to look at the matter in the context of the taxpayer's activities as a whole (see the Northwest Iron Case at pp.446-7). It follows, in my view, that the ultimate question of characterisation in the present case, one of degree and thus of judgment, is whether the conveyor facility may fairly be seen to be part of the activities carried on at the mine site in the sense of being ancillary to those activities or whether, on the other hand, the conveyor facility should be perceived as something which stands apart from, and is independent of, the activities at the mine site (see Federal Commissioner of Taxation v. Henderson (1943) 68 C.L.R. 29 at pp.39, 45, 50; Federal Commissioner of Taxation v. Broken H11ll Proprietary Company Limited (1969) 120 C.L.R. 240 at pp.244-5; 272-3; 275). The conveyor facility should, I think, be seen as something ancillary to the activities at the mine site and therefore part of the mining operations conducted by the respondents (cf. Lopinot Limestone Ltd. v. A-G. of Trinidad & ae See ee ee ee pe <oscee re a " 14. Tobago [1987] 3 W.L.R. 797 at pp.801-802). As has been said, to determine when mining operations begin and end is one of fact and degree. The considerations which, in my view, indicate a sufficient connection for present purposes between the conveyor operations and the actual process of winning the product at the mine site are as follows: Pirst, the circumstance that the conveyor belt activity commences within the mine site area is, I think, significant. It emphasises the physical proximity between the various activities at the mine site, especially the recovery, withdrawal and movement of the mineral product. The conveyor is anchored, so to speak, in the mine site. Secondly, the conveying of the product is part of a single, integrated operation which commences at the surge pile and continues until the product is dumped and then blended at the stockpiles at the refinery. Given this proximity and this integration, any attempt to fragment the respondents' activities into a number of distinct compartments must run the risk of producing an artificial and unrealistic result. I will return to this later. On behalf of the Commissioner, it was strongly submitted that the reasoning of the Full High Court in the BHP Case was decisive for present purposes. It will be necessary to refer to the facts and legislation in that case in some detail. The taxpayer worked ironstone deposits in the Middleback Ranges in South Australia and transported the ore thirty miles by rail to Whyalla which was the nearest seaport. It improved the harbour facilities at Whyalla by installing an ore-loading jetty, and Ge et ee eee eae gp < paso ere 15. constructed a pelleting plant for the conversion of powdered ore into pellets for convenience of loading, shipment and subsequent use in blast furnaces. The taxpayer claimed that the expenditure on the pelleting plant and on the _ harbour improvements were allowable deductions under s.122(1) of the Income Tax Assessment Act 1936 as follows: "When a person, in connexion with the carrying on by him of mining operations upon a mining property...for the purpose of gaining or producing assessable income, has incurred expenditure of a capital nature on necessary plant, development of the mining property...an amount ascertained in accordance with this section shall be an allowable deduction in respect of that expenditure." It will have been noted that s.122(1) differed from Item 14(1) in significant respects. Section 122 required that the expenditure be incurred in connection with the carrying on of mining operations upon a mining property; further, the expenditure had to be incurred in respect of necessary plant or in the development of the mining property. Kitto J., sitting at first instance, held that the cost of the harbour improvements was deductible but that the expenditure on the pelleting plant was not. In construing s.122, Kitto J. explained the meaning of the phrase "mining operations" (at pp.244-5): "This expression is wider than 'the working of a mining property'. It embraces not only the extraction of mineral from the soil, but also all operations pertaining to mining...Thus it comprehends more than mining in the narrow sense which imports the detaching of lumps of material from the position in which in a state of nature they form part of the soil. It extends to any work done on a mineral-bearing property -=~ A sore caper Oe rt me re 16. in preparation for or as ancillary to the actual winning of the mineral (as distinguished from work for the purpose of ascertaining whether it is worthwhile to undertake mining at all)...Likewise it extends to any work done on the property subsequently to the winning of the mineral (e.g., transporting, crushing, sluicing and screening) for the purpose of completing the recovery of the desired end product of the whole activity... In each case it is the close association of the work with the mining proper that gives it the character of operations pertaining to mining. Accordingly, such subsequent procedures as above mentioned, if carried out at a distance from the mining property, may be in particular cases so dissociated from the mining that they are properly to be considered as standing on their own feet (so to speak) and to be characterized not by reference to the Mining but by reference only to the result which they themselves achieve." (Emphasis added) On appeal, it was held by the Full Court (Barwick C.J., McTiernan, Menzies and Owen JJ.) that Kitto J. correctly disallowed the claim to deduct the cost of the pelleting plant. On the question of the deductibility of the expenditure on the harbour improvements, the majority (Barwick C.J., McT1rernan and Menzies JJ., Owen J. dissenting), reversing Kitto J. on the point, held that no deduction should be allowed. Barwick C.J., McTiernan, Menzies JJ., in a passage now heavily relied on by the Commissioner, said (at pp.272-4): "We agree entirely with his Honour's view that 'mining operations' covers 'work done on a _mineral-bearing property in preparation for, or as ancillary to, the actual winning of the mineral', but, with regard to the statement, that ' 1t extends to any work done on the property subsequently to the winning of the Mineral (e.g., transporting, crushing, sluicing and screening) for the purpose of completing the recover of the desired end product of the whole activity', we have a reservation. We do not doubt that to separate what 1t 1S sought to obtain by mining from that which 1s mined with it, e.g., the separation of gold from Ce rep em et ee pats Satie aeiaieal 17. quartz by crushing etc., or the separation of tin from dirt by sluicing, is part of a 'mining operation' but we would not extend the conception to what is merely the treatment of the mineral recovered for the purpose of the better utilization of that mineral. Thus to crush bluestone in a stone crushing plant so that it can be used for road making, or to fashion sandstone so that it becomes suitable for building a wall or a town hall is not, as we see it, a mining operation. Nor would the cutting of diamonds or opals which have been recovered by mining operations fall within the description of mining operations...once the iron ore is obtained in manageable lumps then its further treatment, either to reduce or increase 1ts size so that it can be conveniently transported from the mine and better utilized in industry, forms no part of the mining operation. In the same way we would not regard the converting of brown coal into briquettes as part of a mining operation; nor would we regard the treatment in a refinery of naturally occurring hydro-carbons in a free state as part of the operation of mining for petroleum...because we think 'the end product' of the mining activity in this case is iron ore to be taken away from the mining property, we_ consider that 'mining operations' ends when the iron ore 1S 1n a state suitable for this. The taking away from the mining property of ore which has been mined, whether that be done by the mining company or by someone else, is a step subsequent to the conclusion of the mining operations." (Emphasis added) In the I.C.I. Case, where the meaning and application of s.122(1) were also considered, Barwick C.J., McTiernan and Menzies JJ. elaborated upon the significance of the recovery process in defining the activities comprehended by the expression "mining operations". Their Honours also spoke further of the distinction, in this context, between mining activities and the process of treatment of minerals. The taxpayer was lessee under mining leases under the surfaces of which were substantial quantities of brine at up to three times the normal salt concentration of sea water. The taxpayer sank bores and pumped brine to the surface in a series of pools where 1t was ore coe) wom pone ir errr er er soe eyeo Se ie ee ee ee 18. concentrated by natural evaporation. After crystallization, the salt was removed and washed. Walsh J. held that the taxpayer was carrying out mining operations on a mining property. On appeal, his Honour's decision was affirmed by a majority (Barwick C.J., McTiernan and Gibbs JJ., Menzies J. dissenting). Barwick C.J., McTiernan J. concurring, said (at p.565): "The next question arising 1n the appeal is whether the process of evaporating the brine in the controlled fashion described forms part of the mining operation. of course, if the evaporation was of sea water or of salt water obtained otherwise than from below the surface of the earth, the evaporative process would not itself be a mining operation any more than the pumping of the water from the sea or from a lake would be a mining operation. But though the evaporative process is similar in each case the facts that the brine 1s the immediate product, as I think, of a mining operation and that the recovery of the mineral raised by the mining operation is not complete until the evaporative process has taken place lead me to conclude that that evaporative process is itself so - associated with the raising of the brine and the recovery of the metal, sodium chloride, as to be part of the mining operation." Menzies J. was of the view that there was no "mine" at the site in question. But his Honour added (at p.573): "I should, however, add that if I were wrong in this and that ICI is at Port Alma carrying on mining operations upon a mining property, I would consider that the pumping of brine from the aquifer to the surface is the only mining operation there carried on. ICI is, within the relevant provisions of the Act, mining brine; the evaporation of sufficient water from the brine to enable salt crystals to form is not, in my opinion, part of its mining operation. At Osborne the evaporation of sea water is not a mining operation; at Port Alma the evaporation of sea water is not a mining operation; nor, I think, is the evaporation of water from the brine which has been obtained by a mining operation. Once the brine is pumped from the aquifer into the evaporation tanks, the mining operation comes to an end...the bringing of we ae ant pene ee my nye eres varnr e 19. the brine to the surface is, having regard to the Act as a whole, a mining operation to obtain brine, the treatment of that brine and sea water to obtain salt 1s not. In Federal Commissioner of Taxation v. Broken Hill Proprietary Co. Ltd., it was pointed out that what was being mined at Middleback Range was iron ore, not iron, and the treatment of that iron ore was not a part of the taxpayer's mining operation. So here the treatment of the brine mined is, as I see 1t, no part of the operation to mine brine." In considering whether the mining operation ceased when the brine had reached the surface, Gibbs J. said (at p.583): "In my opinion, the treatment of the brine after it had been pumped to the surface and before it was harvested in the crystallizers was for the purpose of separating that which it was sought to obtain by mining, namely, salt, from that which was mined with it, namely water and the calcium and magnesium salts. The object of ICI's operation was, I consider, to obtain salt, not to obtain brine. I agree, therefore, with the view taken by my brother Walsh that all the operations up to crystallization formed part of the mining operations."~ This division of judicial opinion in the B.H.P Case and in the I.C.I. Case indicates the often difficult task involved in determining when mining begins and ends in a given case. At the conceptual level, it 1s legitimate to draw a distinction between the process of recovery on the one hand and the treatment of the product on the other. The practical application of such a test is another matter. Being a question of fact and degree, it is not easy to articulate a test for the drawing of the correct dividing line which can be applied in every case. The difficulty is pointed up in the present case. Starting from the initial recovery procedures at the mine site, the respondents embark upon a series of steps leading to the feeding of the bauxite into the — 20. refining process. These steps are not isolated, independent events. Each step is part of a single complex of activities (cf. the B.H.P. Case per Kitto J. at pp.254; affirmed on appeal at p. 275). Given the obvious conclusion that mining operations have begun at some stage, the question remains: when do the operations end? It is, I think, convenient to consider the question in stages: (1) The actual recovery of mater1ral from the pods and the loading of the bauxite onto dump trucks. These are clearly part of the mining operations. (2) The primary and secondary erushing activities. It is conceded by the Commissioner, correctly I think, that these are comprehended within the mining operations. (3) The conveyance of the crushed bauxite to the surge pile. Again, it is properly acknowledged by the Commissioner that this forms part of the mining operations. (4) The feeding of the product onto an accelerator belt and thereafter its transportation by the overland conveyor facility. This is the point of departure between the parties and raises the present question. As has been noted, the Commissioner correctly recognises that stages (1), (2) and (3) above form part of the respondents' mining operations. Yet it is said that at the surge pile, the respondents' activities assume a different character, that is to say, the transport of the product. This statement may be accurate in a narrow sense but the present question, one of areal foe ato 21. characterisation, calls for a broad view (cf. per Kitto J. in the B.H.P. Case at p.254). A similar type of argument was put on behalf of the Commissioner in the I.C.I. Case. He contended that what the taxpayer had been engaging in was brine-pumping, not mining (at p.557). The argument was rejected. Barwick C.J. said (at p.565): "To speak of brine pumping is, in my opinion, but to describe the particular method of recovery employed, that is to say, conducting the mining operation." In the present case, it is not in contention that there are mining operations being conducted at the mine site. The only question is where those operations end. In the I.C.I. Case, a more fundamental issue arose because the Commissioner argued that the taxpayer's activities were entirely different from _ the traditional concepts of mining. Here, the issue is one of degree only, that 1s to say, the extent of those operations. In my opinion, the location of the conveyor facility on the mine site at its commencement point together with its role as part of a single complex of operations occurring between the surge pile at the mine site and the blended stock piles at the refinery site suggest that there 1s only one relevant activity being carried on; and that this activity should be viewed as Operations pertaining to mining rather than the independent activity of the transportation of minerals. Put differently, to fragment the respondents' activities in the way suggested by the Commissioner, leads to arbitrary and therefore artificial cae vette teeen tw Cle H oar - 22. distinctions being drawn within what is acknowledged to be an integrated activity. The preferable view is that the conveyor facility is so closely associated with and ancillary to the respondents' mining activities as to be part of those activities. It is an operation which pertains to mining. "In the treatment of the products of [mining] operations" The primary Judge found that this limb of Item 14(1) was satisfied. In essence, his Honour's reasons for deciding that the transportation of the bauxite on the conveyor formed part of its treatment were as follows: the statutory concept is not limited to machinery etc. used directly in the treatment of the products, e.g., (a) the primary crusher at the mine site or (b) the conveyor used at the refinery site to move the bauxite from the point at which it is received to the stockpile machinery; the end product of these mining operations 18 alumina; part of the bauxite blending process is carried out at the refinery site; that process constitutes, in the mining industry, the treatment of the products of mining operations, viz., bauxite; and, although no blending process occurred on the conveyor, this was immaterial because, by analogy with the reasoning in the Northwest Iron Case, the transportation of the bauxite on the conveyor should be considered to be part of the integrated activity or operation of treating the bauxite. The Commissioner now challenges this approach. He contends that all that is involved in the function of the : j Dr gee 23. conveyor is the transport of minerals after the mining operation has concluded. The Commissioner accepts, correctly I think, that the blending of the bauxite which occurs at both the mine stockpile and the refinery site by virtue of the combined effects of the stacking and reclamation procedures, constitutes the treatment of the products of mining operations (see the Hammersley Iron Case). But he fastens upon the circumstances that no blending occurs by the use of the conveyor; and that no processing or treatment oof any description, mining' or manufacturing, occurs on or with the use of the conveyor. If I be wrong in my conclusion that the second limb of Item 14(1) was satisfied there, then, in my view, the third limb of that item was satisfied. It may be accepted, as the Commissioner contends, that nothing except its movement happens to the bauxite during the course of its transit upon the conveyor. But to characterise this aspect of the respondents' activities merely as transportation is, I think, to take an unduly restricted view of the function of the conveyor. As has been said, it is part of a single complex of activities commencing at the surge pile at the Mine site and ending at the stockpile in the refinery area. It is only in an artificial and unreal sense that it is possible to fragment the respondents' activities into a number of discrete parts. The preferable approach is to look at those activities as they really are, that 1s to say, as an integrated operation. So -~ -- --- - - we eee SH we _— ce ee ae ee woe " eres eae a eee i 2a & wea te a ee ee 24. regarded, the conveyor facility should be seen as something ancillary to, and therefore part of, the actual treatment process rather than something independent of that process. Again, the question 1s one of fact and degree which, in the ultimate analysis, calls for an exercise of judgment as to what 1s the real function or place of the conveyor in the scheme of the respondents' activities. In my opinion, to see the conveyor facility as something incidental to the treatment of the bauxite accords better with the practical and businesslike considerations which should influence the proper approach to be taken in the present context. And, as has been said, it is appropriate that Item 14(1), in all its aspects, should be construed and applied liberally. Again, the Commissioner's argument, if accepted, leads to difficulties, in the present type of case, in the drawing of a satisfactory dividing line to establish where the process of treatment begins and where it ends. It is conceded by the Commissioner that the blending procedures, which are commenced at the mine site and are completed in the refinery area, amount to "treatment" for present purposes. The conveyor operates between these points. There is sufficient proximity, physically and functionally, in all of these activities to justify the classification of the facility as something incidental to the treatment process. yee mee 25. It may be accurate, in a limited sense, to speak of the conveyor's function as that of transportation; but the question remains of attributing to the facility its real or true character for present purposes. This calls for a broad view, judged in the context of the respondents' activities taken as a whole. Merely to describe the facility's mechanical functions is not enough (see per Barwick C.J. in the I.C.I. Case at p.565 in the passage cited above). Viewed more broadly, the conveyor may be seen in its real role, that 1s to say, as something ancillary to the mining operations or to the treatment of the minerals or to both of these things. On any view, the respondents qualified for exemption under Item 14(1). B. Item 113C "Aids to manufacture - machinery, implements and apparatus for use...(i) in the actual processing or treatment of goods to be used in goods to be manufactured...(viii) in the transporation within premises...of goods..." The primary Judge held that the respondents qualified for exemption on this ground also. Shortly stated, his Honour's reasons for this conclusion were that the blending process commences at the mine site; the bauxite, partially blended, is then transported to the refinery area where the blending process is completed; thereafter, a number of different processes are undertaken, resulting in the production of alumina; each of these processes, viz., blending, digestion, separation, precipitation and calcination constitute "the actual processing or treatment of goods" for the purposes of sub-para.(i) of a ae saatcensnten detained anal aadainieiedantiie - aa ee 26. para.(a) of Item 113c; the transportation of the bauxite from the mine to the refinery is transportation "within premises" in which that actual processing or treatment is carried out for the purposes of sub-para.(viii); and the interests of the respondents in the lands the subject of the Crown leases and of the mining leases and in the freehold titles constitute one set of "premises" within the meaning of sub-para.(viii). The Commissioner now disputes this reasoning. He says that the conveyor itself cannot be regarded as "premises" in any relevant sense: the site of the facility is not fenced off; and there is no activity involved other than mere transportation. Alternatively, the Commissioner argues that even if the conveyor facility can be regarded as "premises" or as erected upon "premises", these are not premises within which any relevant activity is conducted; and such premises cannot properly be regarded as part of the premises occupied by either or both of, the mine or the refinery. He says that to come within sub-para.(viii), a relevant manufacturing activity must be conducted within the premises where the transportation occurs. But, he submits, the manufacturing activity occurs only within the refinery area, the mine site 1s held under a different tenure and no relevant "processing or treatment" occurs there; and no processing or treatment takes place upon any part of the conveyor. The Commissioner denies that the three different leases, with differing rights and tenures, can be treated as one continuous set of premises. "rons in one " ater os ste 27. Tf I be wrong in thinking that the conveyor fell within Item 14(1), then, in my respectful opinion, the primary Judge was correct, for the reasons he gave, in concluding that Item 113c applied here. The real point of departure between the parties on this branch of the argument is whether it is appropriate to describe the whole of the lands used by the respondents for the purposes of the Worsley project as a single set of premises. In my opinion, what areas constitute a single premises, as distinct from separate premises, for present purposes, is not a question of law. Rather, it is a question of fact to be determined in the light of all the circumstances (cf. Phonographic Performance Ltd. v. Pontin's Ltd. [1968] Ch. 290 at pp.296-7). Where, as here, the taxpayers carry on a single complex of activities at a number of different, but adjacent, locations, it is appropriate to classify those locations together as a single set of premises (cf. the B.H.P. Case at pp.245-6; the Northwest Iron Case at pp.447,448). The Commissioner relies heavily, in this connection, upon the decision and reasons of Kitto J. in Moreton Central Sugar Mill Company Limited v. Federal Commissioner of Taxation (1964) 116 C.L.R. 151 but the case can be distinguished here on its facts, in terms of its legislation and in point of its reasoning. A sugar mill proprietor claimed as a deduction under en en ne wee mere ore oper: a4 > Sen cneeer adaneenp-ac aienmenemmemeieeteae omer ae ~ eee SOTO er oe 28. S.62AA of the Income Tax and Social Services Contribution Assessment Act 1936 its investment in the purchase of a locomotive and trucks used for the carriage of sugar cane from points at or near fields where cane was delivered by growers. To qualify under s.62AA(2) plant had to be owned for use "(e) in the transportation, within premises within which any property in relation to which [the] section applies is used, of goods in relation to which that property is to be or has been used." The locomotives and trucks were used on tramlines constructed and operated by the taxpayer, but the major portion of those lines traversed land of other persons over which the taxpayer had certain rights of passage for its rolling stock. It was held that the locomotive and trucks were not used "in the transportation within premises" within the meaning of s.62AA(3)(e). Kitto J. said (at p.155): "The words 'within' and 'in' seem clearly to indicate that both the transportation and the use of the property in relation to which the section applies must take place inside the boundaries or walls of that to which the word 'premises' is applied. It is not an apt use of language to speak of transportation as being 'within' an incorporeal right, whether it be a right under the grant of a licence or of an easement or under a statutory provision; nor is it apt to speak of property as being used '1n' an incorporeal right. Nearly all the transportation of sugar cane from the pick-up points to the mill site takes place within premises of which the appellant has for the most part ne1ther ownership nor possession, and which therefore, in my opinion, cannot be regarded as part of the premises in which the appellant uses its milling plant." In the present case, the respondents have either ownership or exclusive possession of the whole area in which we ee eee er me ee rere - Wee ee ee 29. their integrated activities take place. The respondents' rights are thus markedly different from the bare rights of the taxpayer in the Moreton Case to pass over the premises of others. Given the occupation by the respondents of the whole site stretching continuously from the mine area to the refinery for the purposes of their project, and given the close association between the several procedures undertaken on that site, it is more accurate to describe that site as a single premises rather than a number of separate premises. It is true that considerable distances are involved but this circumstance cannot, of itself, divide what is in truth a single area into a number of different premises. It is immaterial to this conclusion that not all of the conveyor's corridor has been fenced off. It is equally immaterial that parts of the area may only be used for special purposes and that a number of different titles and different types of titles are held by the respondents. I would propose that the appeal be dismissed with costs. I certify that this and the preceding TWENTY EIGaHr (23) pages are a true copy of the Reasons for Judgment herein of Associate 4.2. FRAWSIoW Dated: 26 MoveBER (9 P7 ——— ep ee nee a ree ee te an ww ie re are + een penny ra raed IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY No. WA G.44 of 1987 GENERAL DIVISION BETWEEN: THE COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA Appellant AND: REYNOLDS AUSTRALIA ALUMINA LTD., THE SHELL COMPANY OF AUSTRALIA LIMITED, B.H.P. MINERALS LTD., KOBE ALUMINA ASSOCIATES (AUSTRALIA) PTY. LIMITED and WORSLEY ALUMINA PTY. LTD. Respondents CORAM: BEAUMONT, WILCOX and BURCHETT JJ PLACE: SYDNEY DATE: 26 NOVEMBER 1987 REASONS FOR JUDGMENT WILCOX J: I share the view of Beaumont J that this appeal should be dismissed. I would not myself be prepared to uphold the claim for exemption by reference to Item 14(1) in the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935. It seems to me that the conveyance of the bauxite from the mine site to the refinery site 1s neither a mining operation nor the treatment of the product of a mining operation. It is simply a transport operation. =oate- =~t om a ae rape _ With respect to Beaumont J, I do not find persuasive the factors which influenced him in coming to the conclusion that the operation of the conveyor is part of the mining operations. Any transportation of mine product has to commence from within the mine site. The real question is whether, at the stage when transportation begins, there is in existence a usable product: see Federal Commissioner of Taxation v Broken Hill Proprietary Company Limited (1969) 120 CLR 240 and Federal Commissioner of Taxation v I.C.I. (Australia) Ltd (1972) 127 CLR 529 each of which are discussed by Beaumont J. There is such a product by the time that the crushed bauxite is stacked at the surge pile to await transport from the mine site. It is true that, in this case, the transport of the bauxite to the refinery is part of a continuous process controlled by a single consortium. The same may be said of the transport of the alumina from the refinery to the wharf at Bunbury; but nobody would describe that as a "mining operation". The position is that, for good economic reasons, the respondents have established a single project which integrates the first two of the three major stages needed to produce aluminium: the mining of the bauxite, the refining of the bauxite into alumina and the smelting of the alumina so as to produce aluminium. But they remain separate stages, each with their own separate characteristics. The fact that the first stage, which is a mining operation, is part of the total project does not mean that other stages are part of the mining wee ee — --- - - — « oe aan _— a oy oa — Fir tet Sessa al s eieieicmcienaailiniieenrag seat tenanietan taheciemmenadior ee oie operation. And the facts that the transportation of product from one stage to the next is carried out by the respondents themselves, rather than through contractors, and by fixed Plant, rather than by road or rail, does not make the transportation part of either stage. As to the second leg of Item 14(1), the treatment of the products of mining operations, I respect the contrary view but cannot myself regard the mere transportation over a distance of 51 kilometres of partially blended bauxite as "treatment"; notwithstanding the fact that, upon arrival at the refinery site, further blending occurs. This is not a conveyance in the course, and for the purpose, of blending operations. The purpose of the conveyor is to take the bauxite from the place where it is won from the ground to a place which is suitable for the production of alumina. It happens to be convenient to carry out some blending at each end of the conveyor. Stacking at each end of the conveyor being necessary in any event, the designers of the process used the opportunity to achieve some blending in the course of loading and unloading the stacks. If it were enough that treatment take place on either side of a conveyance for other purposes, it is difficult to see why transportation could not always be characterised as treatment. Counsel for the respondents placed primary reliance upon Item 113C of the First Schedule. I think that they were correct to do so. Item 113C grants exemption to "aids to manufacture" and this term is defined by reg.4(1) of the Sales Aes a mrs wv obarwe Tax Regulations in such a manner as to include machinery for use in transportation. The transportation must be carried on by the registered person in the course of business "within premises" in which one of the activities specified in the paragraph is carried out. The specified activities include "the actual processing or treatment of goods to be used in, wrought into or attached to goods to be manufactured". The phrase "goods to be used in, wrought into or attached to goods to be manufactured" is defined by the regulations as meaning "goods to be so used or dealt with that those goods, or some essential element thereof, will form an integral part of the goods to be manufactured". The blending of the bauxite -- both at the mine site and again at the refinery site -- answers the description of an actual processing or treatment of goods to be used in goods to be manufactured. Moreover, the activities specified in the paragraph include the actual processing or treatment by which the goods to which that processing or treatment is applied are used in, wrought into or attached to goods to be manufactured. The refining process falls within this description. It follows that, if the conveyor is within the same "premises" as either or both of the mine or the refinery, the exemption 1s available. As Beaumont J has said, the critical question is "whether it is appropriate to describe the whole of the lands used by the respondents for the purposes of the Worsley project as a single set of premises". nee et epee ae tee re ee aN we, sommes me L A ne wy ape = > ote er ee At first sight it may appear incongruous to regard as a single set of premises two substantial areas of land, upon which different industrial activities are carried on, and their linking corridor 51 kilometres in length. But I see no reason why the term "premises" in the relevant definition should be read so as to exclude such a result. The term "premises" is capable of application to vacant land. There is no implication in the definition that all parts of the premises be held subject to the same instrument of title, or even the same tenure, and there is no limitation as to size. Where a particular person holds a parcel of contiguous land, regardless of title or tenure, for the purpose of conducting a single integrated activity, it is not inappropriate to describe the whole of that land as a single set of premises. As was submitted on behalf of the respondents, even if the conveyor itself is used neither for mining operations nor for the treatment of mining products, the whole area actually occupied by the respondents constitutes the premises within which they conduct an integrated business activity consisting of those disparate parts. I think that the decision of Kitto J in Moreton Central Sugar Mill Company Limited v Federal Commissioner of Taxation (1964) 116 CLR 151, also discussed by Beaumont J, supports this conclusion. That case turned upon different legislation, relating to investment deductions, but the language of the relevant provision was not dissimilar to that under present consideration. A question arose whether the tramline system, 61 miles in length, for which the taxpayer A acer peo terse te peer rp aa had acquired the relevant rolling stock, was within the "premises" within which the taxpayer manufactured goods. The actual manufacturing activity consisted of the crushing and milling of sugar cane. The total area of land served by the tramlines is not disclosed in the report of the case, but it must have been considerable. This did not cause any difficulty, so far as Kitto J was concerned. The claim failed because the appellant held only an incorporeal right over the land over which the tramline was constructed. It appears to be clear that, if the appellant had owned or leased the land traversed by the tramline, the tramline would have been regarded as being within the same "premises" as the mill. For these reasons, which accord with those of both the learned primary judge and Beaumont J, I am of the opinion that the claim for exemption under Item 113C should succeed. I agree with the order proposed by Beaumont J. I certify this and the five (5) preceding pages to be a true copy of the Reasons for Judgment of his Honour Justice Wilcox. Associate Cm ~ Date: 26 November 1987 o pice cre yo mers rere IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY No. G.44 of 1987 we ww wv GENERAL DIVISION BETWEEN: THE COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA Appellant AND: REYNOLDS AUSTRALIA ALUMINA LTD, THE SHELL COMPANY OF AUSTRALIA LIMITED, BHP MINERALS LTD, KOBE ALUMINA ASSOCIATES (AUSTRALIA) PTY LIMITED & WORSLEY ALUMINA PTY LTD Respondents CORAM: Beaumont, Wilcox & Burchett JJ. DATE: 26 November 1987 REASONS FOR JUDGMENT BURCHETT J. I agree with the conclusions of Beaumont J. and, subject to what follows, with his reasons. A central question in the appeal is the meaning and application of the expression, appearing in s.14(1) of the Sales Tax (Exemptions and Classifications) Act 1935, "for use in the mining industry in carrying out mining operations". In The Commissioner of Taxation of the Commonwealth of Australia v. ICI eres joem- we A eeian won men ae me wre > rencep ry 2. Australia Limited (1972) 127 C.L.R. 529 the High Court was concerned with the meaning of "mining operations upon a mining property", as that expression was used in s.122 (1) of the Income Tax Assessment Act 1936. Gibbs J. (as he then was) said at 579: "It 1s true that the expression 'mining operations' is a popular, rather than a technical, expression (Federal Commissioner of Taxation v. Broken Hill South Ltd. (1941) 65 C.LeR.- 150 at 155) and should, in accordance with established principles of construction, be understood in its ordinary and natural meaning unless the provisions of the Act itndicate that some departure from that meaning is intended. However, the expression is one whose ordinary and natural meaning is flexible rather than fixed." He went on to cite authority and to conclude at 580 that the expression was "capable of including the recovery of salt by the pumping of brine from a natural deposit in the crust of the earth." This was the view of the majority of the High Court. The ICI case contains specific statements that the provision by s.122 of a deduction in respect of mining operations exemplified a policy which was relevant to questions of construction of the section. Barwick C.J., with whom McTiernan J. agreed, referred at 568 to "the policy of encouragement of mining which the Act otherwise exemplifies". Gibbs J., at 581, said: "In my opinion, the subject matter of s.122 and the context in which it is found provide indications that ait should be liberally construed. The section is one of the provisions of the Act whose evident purpose is to encourage the production of minerals in Australia and in the Territory of Papua and New Guinea; it gives effect to a legislative policy which, as was said in NSW Associated ne a a po en Blue-Metal Quarries Ltd Vv. Federal Commissioner of Taxation (1956) 94 C.L.R. at 525, was 'to make special concessions to mining as a means of winning precious metals and valuable minerals from the soil'." In Federal Commissioner of Taxation v. BHP Minerals Ltd (1983) 51 A.L.R. 166, a Full Court of this Court was concerned with a claimed deduction under the Income Tax Assessment Act in respect of the provision of employee housing "at, or at a place adjacent to", the site of mining operations. At 171 Toohey and Lockhart JJ. said: "It has been the policy of successive Australian Governments to encourage' the prospecting for and winning of certain metals and minerals and, accordingly, special concessions have been given in the Assessment Act to persons carrying on mining operations upon mining properties in Australia, by enabling them to deduct from their assessable income capital expenditure which would not otherwise be deductible." At 173 they said: "One approaches the task of defining the word 'adjacent' with the knowledge that Div 10 in which it appears gives legislative expression to the Australian Government's policy to encourage the search for and winning of metals and minerals and thus affords special concessions to the mining industry." At 174 they commented that: "The tax incentive ... was intended by the legislature to operate realistically", and they adopted what they described as "a broad approach to the question of the definition of the expression under consideration in this case". See also Commissioner of Taxation v. Northwest Iron Co Ltd (1986) 9 F.C.R. 463 at 473. ? perpen ore ee ee tee cto oo arate rl eee 8 4. In my opinion, the beneficial purpose of the legislation with which this appeal is concerned is as apparent as was that of Div. 10 in the cases to which I have referred. But this purpose would be stultified if the Court unrealistically refused to recognize change in the mining tundustry, and confined the exemption to operations conducted in a manner, once familiar or even invariable, which the progress of the industry has now (in large measure) left behind. The extension of the site of an operation, linking activities by conveyors or pipelines, in order to make the best use of available advantages and do the least damage to the ecology of the area, are everyday features of new mining ventures; while novel or improved techniques and practices are introduced from time to time to open up to exploitation mineral deposits which were previously worthless. When the Act speaks of "mining operations", it uses an elastic expression the full meaning of which emerges from its application in a particular context; it is not frozen into an immobility that cannot accommodate changes in technology. The extent to which the technological context enables the expression to be understood, and assigned its rightful place in the characterization of a variety of activities, distinguishing between those operations which it embraces and those it does not, is illustrated by a comparison of the decision in Commissioner of Taxation of the Commonwealth of Australia v. Broken 4Hill Proprietary Company Limited (1969) 120 C.L.R. 240 with the decision in the Northwest Iron case (supra). The technology involved in the BHP case concerned a mine producing iron ore Saleable as such; but, for its better transport and utilization, an or oan le ae Sr te ey ry or oe er we ee ees cae 5. ' some of the ore was converted to pellets. The majority judgment (at 273, 275) held that the pellet making was not a mining operation. The Court distinguished between the separation of the desired product of mining from its containing rock or other material and the improvement of the product once obtained. On the other hand, in the Northwest Iron case, a new technology was employed to extract, from what until then had been a uselessly low grade material, a useable ore. That new technology also involved conversion of the ore to pellets, but it did so in the context of a continuous integrated series of operations which started with the rock containing the ore at a low grade, and ended by producing the pellets as its first saleable product. In that new context, the very same principles which were enunciated in the BHP case led the Court in the Northwest Iron case, upon an evaluation of the facts, to conclude that the activities from which the pellets emerged were all part of the mining operation. Lockhart J., with whose reasons Bowen C.J. and Toohey J. agreed, said at 474-475: "The taxpayer adopted the method of moving the concentrated ore ina slurry form through the pipeline to Port Latta for pelletisation because it regarded it as the only economically feasible method available. The object of the taxpayer's activities is the production of pellets after treatment of the ore... . .«..- (T)he mining operations extend until the completion of the pellet producing process. The process of pelletisation is integral to the whole operations of the mining venture and essential to the development of the potential of the low-grade ore of the Savage River site by means of the taxpayer's technology. The pipeline is essential to the end product. It is not different in essence from a necessary conveyor line conveying material from one section to another within a mining complex. The end product of the taxpayer's mining activities is the production of pellets." seat oer ~My The key to the application of the concept of "mining operations" in differing technological contexts, according to both cases, is to identify the desired end product of the mining activities, or, as it was called in the BHP case at 273, "what it 1s sought to obtain by mining". In doing so, the Court must not allow the beneficial purpose of the legislation to be obscured and obstructed by adhering to the implications of obsolete technological limitations rather than to the flexible legal principle which, as construed in the ICI case and the Northwest Iron case, is well able to adapt itself to the constantly changing objectives and methods of modern mining. The principle must not become stuck in the dead wood, but must be allowed to move with the sap and growth of the mining industry. The ICT case and the Northwest Iron case are striking illustrations of the capacity of the Courts to apply the principle in new circumstances. In both, the identification of what was sought by the mining operation was crucial. (Cf. Federal Commissioner of Taxation v. Hamersley Iron Pty Ltd (1981) 37 A.L.-R. 595 at 606, 609.) In the ICI case at 549 Walsh J. said: "Having decided that ICI is carrying on mining operations, the further question whether all the processes up to the crystallization of the salt fall within that description depends in my opinion upon a decision whether the object of the mining activities should be regarded as the obtaining of brine or as the obtaining of salt in crystallized form." Barwick C.J. at 565 said: i atieauee . "7 7. "The recovery of the mineral raised by the Mining operation is not complete until the evaporative process has taken place... ." Gibbs J., at 582-3, referred to the BHP case and said: "In my opinion, the treatment of the brine after it had been pumped to the surface and before it was harvested in the crystallizers was for the purpose of separating that which it was sought to obtain by mining, namely, salt, from that which was mined with it, namely water and the calcium and magnesium salts. The object of ICI's operation was, I consider, to obtain salt, not to obtain brine." As was true in the Northwest Iron case, this case concerns a new industry which utilizes a product previously useless. The bauxite mined at Mt. Saddleback is of a grade too low to be worth carrying away to the markets where bauxite is a valuable commodity. In that respect, it is like the iron ore of the Savage River. But if the gibbsite which it contains is separated from the red mud (and as part of a continuous process converted to alumina) a valuable product emerges. Low grade bauxite is no more the product sought by the mining operation than was the low grade iron ore that was removed from the ground in the Northwest Iron case. It 1s irrelevant that richer bauxite is in itself an end product of other (and particularly older) mines, just as it was irrelevant to the conclusion, that pellets were the end product, in the Northwest Iron case, to consider the factual finding in the BHP case which saw pellet production as an improvement to an already existing end product, the richer ore which issued from the BHP mine. It 1s equally irrelevant that, in the abstract, if from the low grade material a valuable substance can be extracted wos ae 8. by the respondent companies, the same operation could be performed by some other company provided it set up a large enough enterprise in the immediate vicinity of the mine. No one has done so, and the statutory background to the respondents' undertaking suggests the prospect is remote in the extreme. To argue that the purely theoretical possibility of selling it to such a company makes the bauxite a viable product of the mine is unrealistic. The very same argument appears to have been advanced in the Northwest Iron case, and was rejected by the Court at 471. When a new technology unlocks low grade deposits, previously worthless, it would generally accord with the normal use of language, and with the principles discussed in the BHP case and the ICI case, to regard the processes by which, in the vicinity of the mine itself, the containing material and impurities are removed in order to produce a useful commodity as part of the mining operation. In modern conditions, the distance between the mine site and the refinery site (dictated by considerations related to the environment, the availability of fresh water, and the housing and social needs of the work force) does not take the present case outside the scope of this principle. The site of the activities is an extended one. The conveyor may be compared with the pipeline in the Northwest Iron case, as indeed, by way of example, such a conveyor was compared with the pipeline by Lockhart J. in that case at 475. The trial Judge, Northrop J., identified the end product of this particular mining operation as alumina. He said: fare a oe ee are Se pe re icice "Tt is not appropriale to treat bauxite as the intermediate product of mining operations and the alumina as the end product of a manufacturing process separate and distinct from the mining operations. ... It 1s clear that the Worsley bauxite, of itself, has no commercial value. It must be processed to obtain alumina before a commercial product is obtained." Later, he added that the bauxite's "only value is in its use in the production of alumina at the Worsley Refinery." These findings were well justified by the evidence, which showed that nowhere in the world is bauxite of such low grade exported in the state in which it leaves the mine. But it is unnecessary to go quite so far. The process, by which, using caustic soda, the 30 per cent of gibbsite is extracted from the 70 per cent of red mud, is conceptually indistinguishable from other processes, such as the cyanide technique for the extraction of gold, which have long been accepted as part of mining operations (see, for example The Federal Commissioner of Taxation v. Henderson (1943) 68 C.L.R. 29). The red mud is unwanted waste. There 1s no reason to deny this operation the true character of a separation of a desired product from the material unavoidably dug out with it (cf. BHP case at 273), simply because it is convenient, in a continuous Process, to go one step further, and produce alumina (chemical formula, Al2 03) from the gibbsite (chemically, alumina tri-hydrate, Al2 03 3H20), by breaking its molecular bond and liberating water (Al2 03 3H20 yields Al2 03 + 3H20). And it would be contrary to reality to see the low grade bauxite as what 1s sought by this mining undertaking. It is sufficient to hold Doe perme we oe 10. that the separation of the gibbsite from the red mud is part of the mining operations, in order to reach the conclusion that the conveyor is ancillary to those operations. The conveyor takes the low grade bauxite from the site where it has been removed from the ground to the nearest convenient place where a preliminary process could be performed without which the bauxite would not have been mined at all. A fortiori, the conveyor 1s also used in the mining industry in the treatment of a product of mining operations. [It is of interest to note, though the context was different, that Deane and Dawson JJ. in The Queen v. Coldham; Bx parte The Australian Workers' Union (1983) 153 C.L.R. 415 at 425 found it natural to describe the process involved as "treatment of bauxite". The remaining problem relates to Item 113C. The crucial question here is whether the mine site, conveyor corridor, and refinery site, should together be regarded as "premises" in which a relevant processing or treatment activity is carried out. The word "premises" has a long history of use as a wide and general word referring to land or land and buildings. This is a secondary meaning derived from the fact that the lands referred to in a deed of grant were set forth in that part of the deed technically called the premises. In Blackstone's Laws of England Vol. 2, page 298 the premises of a deed are said to contain, in addition to the names of the parties, recitals of such matters "as are necessary to explain the reasons upon which the present transaction is founded", and the consideration, "the certainty of me eR Re a — mee ee me rn or ee eee een ee or a erbaad a li. the grantor, grantee and the thing granted." In a conveyance, "the thing granted" was, of course, the land conveyed, which might or might not have buildings erected on it. The development in language which followed is explained by Lord Goddard C.J. in Gardiner v. Sevenoaks Rural District Council [1950] 2 All E.R. 84 at 85, where he said: "'Premises'' is, no doubt, a word which is capable of many meanings. How ut originally became applied to property is, I think, generally known. It was from the habit of conveyancers when they were drawing deeds of conveyance referring to property and speaking of 'parcels'. They set out the parcels in the early part of the deed, and later they would refer to 'the said premises,' meaning strictly that which had gone before, and gradually by common acceptance 'premises' became applied, as it generally is now, to houses, land, shops, or whatever it may be, so that the word has come to mean generally real property of one sort or another. There is no doubt that from time to time the word 'premises' has been given different meanings, either extended or more restricted." Lord Goddard went on to hold that, in an Act restricting the use of premises for the storage of film, "Parliament intended to use the widest possible word." He held that a cave, to the entrance of which a door had been attached, constituted premises within the meaning of the Act. - In Phonographic Performance Ltd v. Pontin's Ltd [1967] 3 All E.R. 736 Cross J. held that a considerable area of land, containing chalets capable of accommodating over 1,000 people, a cafe, a shop, a bar, a swimming pool, tennis courts, and other structures, could not be regarded as a number of separate and distinct premises, but should be regarded, as a whole, as one we ere ee ee - sytem ee rr ae = vy nae 12. "premises". He took into account the common purpose, of a sort of seaside hotel, to which all these things were devoted. It seems to me that the integrated activity carried on over the whole of a continuous area of land does, in the present case, assist in the correct characterization of the whole area as relevantly "premises". In the Northwest Iron case (supra, at 477) a similar view was taken. Lockhart J. said: "The pipeline, notwithstanding its length of some 85 kilometres, 1s within the 'premises' on which the taxpayer conducts its mining operations." In the present case, Northrop J. concluded: "The whole of the Mine Site land, the Refinery land and the Conveyor corridor land constitute premises and the one premises to enable the applicants to carry on the one business of mining bauxite and refining it into alumina." In my opinion, his Honour was right when he reached that conclusion. For these reasons, I agree that the appeal should be dismissed with costs. I certify that this and the preceding eleven (11) pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Burchett. En 5 yi Associate Dated: 26 November, 1987. — ae Counsel for the Appellant: Solicitors for the Appellant: Counsel for the Respondent: Solicitors for the Respondents: Dates of hearing: 13. Mr. E.M. Heenan, OC with Mr. M.D.F. O'Sullivan Australian Solicitor Government Mr. N.H-H. Forsyth, OQC with R.K. O'Connor Mallesons Stephen Jacques 8, 9 & 10 September 1987.