JUDGMENT No. oct Samal <2 bie CATCHWORDS SALES TAX - exemptions - whether booklets or inserts sold with compact disks exempt from sales tax - whether sold as part of composite product or as separate goods - whether part of the container containing compact disks - whether published to advertise the products or business of applicant. Sales Tax (Exemptions and Classifications) Act 1935 (Cth): Sch.1 Item 51, 51(1)(b), (e) & (f). " goods iD "container" "advertising matter" John Fairfax & Sons Ltd v Deputy Commissioner of Taxation (1988) 15 NSWLR 620; distinguished. Federal Commissioner of Taxation v Nimrod Theatre Company Ltd (1985) 5 FCR 269; doubted. Federal Commissioner of Taxation v Totalisator Administration Board of Queensland (1990) 170 CLR 508; discussed. Deputy Commissioner of Taxation v Rotary Offset Press Pty Ltd (1971) 45 ALJR 518; applied. EMI AUSTRALIA PTY LIMITED v COMMISSIONER OF TAXATION No NG 189 of 1994 SYDNEY oF 14 DECEMBER 1994 CHING REGISTRY COURT 0 ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No NG 189 of 1994 ) GENERAL DIVISION ) BETWEEN: EMI AUSTRALIA PTY LIMITED Applicant AND: COMMISSIONER OF TAXATION Respondent CORAM: HILL J PLACE: SYDNEY DATED: 14 DECEMBER 1994 MINUTES OF ORDER THE COURT DIRECTS THAT: (1) The parties file and serve submissions as to what Note: (2) orders are appropriate in the case, including, if desired, submissions as to costs, within seven days from the date of this order. The matter be stood over until a date to be fixed. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. No NG 189 of 1994 dd GENERAL DIVISION BETWEEN: EMI AUSTRALIA PTY LIMITED Applicant AND: COMMISSIONER OF TAXATION Respondent CORAM: HILL J PLACE: SYDNEY DATED: 14 DECEMBER 1994 REASONS FOR JUDGMENT On 15 March 1994 EMI Music Australia Pty Ltd ("EMI") commenced proceedings in the High Court of Australia seeking declarations that sales tax was not payable upon what the writ of summons and statement of claim referred to as "booklet(s)" inserted into the plastic container housing compact disks or which are otherwise packaged with compact disks which EMI sells to retailers for resale to the _ public. These proceedings were, in due course, remitted to this Court by the High Court. In the meantime, EMI sought from the Commissioner of Taxation ("the Commissioner") a refund of sales tax which it claimed to be due to it for the period 1 May 1990 to 31 December 1992 in respect of sales tax claimed to have been overpaid in respect of the same booklets. That claim for refund was denied and EMI objected to the Commissioner's refusal to refund the sale tax. When that objection was itself disallowed, EMI referred the objection decision to the Administrative Appeals Tribunal ("the Tribunal"). The Tribunal has not yet heard the application to it which has been adjourned pending the outcome of the present proceedings. The compact disks which are the subject of sale by EMI to retailers were manufactured either in Australia or were imported by EMI into Australia. Where the compact disks were imported the booklets were imported with the disk to which the booklet related. Where the compact disk was manufactured in Australia, the relevant booklet was printed in Australia by a company unassociated with EMI. To enable the booklet to be printed EMI supplied the printer with art work in the form of negatives. The printer, in the relevant period, obtained plastic containers for the compact disks from independent suppliers, received the compact disks from the contract manufacturer who produced them for EMI, placed each compact disk into a plastic containers, placed the booklet in the appropriate position in that container and forwarded the disks to EMI for sale to retailers. The issues between the parties arise for decision under the sales tax legislation which was repealed by the Sales Tax Assessment Act 1992 (Cth) and related Acts which came into effect as and from 1 January 1993. By force of the definition of "manufacturer" in s.3 of the Sales Tax Assessment Act (No.1) 1930 (Cth) ("the No.1 Assessment Act") and having regard to the manner in which the applicant carried on its business, EMI was deemed to be the "manufacturer" of the compact disks and booklets produced in Australia, notwithstanding that the actual manufacturing or printing processes were carried out by others. It became liable to sales tax under the No.1 Assessment Act accordingly upon sales being made by wholesale to retailers of compact disks: ss.17(1) and 18(1)(a) of the No.1 Assessment Act and ss.3 and 4 of the Sales Tax Act (No.1) 1930 (Cth). Where compact disks were imported into Australia in containers holding the booklets, EMI's liability to sales tax arose under 8.3 of the Sales Tax Assessment Act (No.6) 1930 (Cth) (imposed by ss.3 and 4 of the Sales Tax Act (No.6) 1930). In each case, however, the liability for sales tax on the booklets would not arise if they were exempted from sales tax by force of s.5(1) of the Sales Tax (Exemptions and Classifications) Act 1935 (Cth) ("the Exemptions and Classifications Act"), because they were covered by an item or sub-item in the First Schedule to that Act. EMI claims that the booklets are exempt because they fall within Item 51 of the First Schedule to the Exemptions and Classifications Act which provides as follows: "Item 51(1) Books, pamphlets, leaflets, periodicals, magazines and printed music, but not including ... (a) (b) (ba) (c) (d) (e) (f£) books of account; books of receipts, cheques, deposit slips, bank withdrawal forms, tickets, dockets, labels or order forms; books of blotting paper, books of blank sheets, or of sheets ruled or printed, for writing notes, letters, exercises, accounts or for record purposes, or for sketching, drawing, colouring or painting (not being children's books containing printed illustrations for copying or colouring or for copying and colouring); albums, books of samples, menus or calendars; booklets of printed matter conveying greetings or sympathy; diaries; other stationery in book form; programmes, schedules, syllabuses, guides or souvenirs of entertainments, amusements, exhibitions, competitions or sporting events; books covered by sub-item (3) of item 3 in the Third Schedule; catalogues or price-lists; memoranda of association, articles of association, balance-sheets, statements of accounts or prospectuses of trading or other concerns carried on for the profit of individuals or associated reports; advertising matter; or books, pamphlets, leaflets, periodicals, magazines or _ printed music published or to be published for the purpose or as a means of advertising the business or _ the products of the publisher or of the person or persons for whom they are or are to be published". Before outlining more precisely the issues between the parties, it is necessary to describe in some detail the nature of the booklets with which the present case is concerned. The parties, by agreement, tendered a number of samples of compact disks containing within them the relevant booklets agreed to be representative of the compact disks sold by EMI to retailers in the period in question. Compact disks, using that expression to refer only to physical disks from which digital information may be read by a laser in a compact disk player and thereby produce music, are most usually sold packaged in one of two ways. Occasionally, as was the case with the three compact disk set of "Aida" in evidence before me, the disks are packaged in a cardboard package on the front of which appears the title of the set, the name of the lead artists together with some artwork and on the back of which is contained some information about the recording. Inside the cardboard package there is contained a plastic container holding the three disks. Separate from the plastic container holding the disks, is a booklet containing 128 pages cut to the same size as the plastic container so that it can fit with the disks into the cardboard container. The booklet contains information about the opera itself, a summary of the story of the opera and the libretto. The booklet is printed in English, Italian, German and French. Typically, however, compact disks are presented for sale in a plastic container which might house one or more disks. The plastic container, as originally manufactured, is made from see-through plastic. On the back face of the container and on two spines there is a piece of paper, folded to fit the shape of the plastic container and wedged between the plastic forming the spines and back face of the container and a plastic moulding which holds the compact disk in place when in the container. The back usually contains some information about the disk in question, its name, contents and those associated with its production and the spine contains generally the name of the artist, the title of the disk and a catalogue reference number. The front cover of the plastic container contains, on its internal face, a number of plastic lugs into which are intended to be inserted the booklets with which the case is concerned. Those booklets serve two functions. The first is to provide an attractive image for the front of the compact disk and show the title of the work. The second purpose which the booklet serves is to provide some information about the contents of the disk. Sometimes this information consists merely of details of a songwriter or performer, sometimes it consists of comments about the disk and sometimes it consists as well of the words of the various songs on the disk. There is often some advertising matter, referring to other recordings of the performers on the disk. The booklets take a variety of forms as illustrated by the examples in evidence. They range from the simple to the complex. Perhaps the simplest booklet is that which appears in the disk "Greatest Hits" by Queen. That booklet, which would more accurately be described as an "insert", is a single sheet folded in half to a size designed to fit between the lugs on the front of the plastic container. On the front page is artwork showing a photo of the group and containing the name of the group and title of the disk. The next page lists the titles of the songs on the disk together with the name of the songwriter and the date the original recording was made. The third page has artwork depicting 12 compact disks forming the "Queen Digital Master Series". The back page of the booklet is in identical form to the material visible through the back face of the compact disk. Another simple booklet is that which slides into the plastic cover for the album "Kiss This" by the Sex Pistols. It would more accurately be described as a "poster" rather than a booklet. Both in length and width it is four times the size necessary to fit into the front cover. One side of the poster is a collage of photographs of the artists forming the group with one of the segments producing what becomes the artwork for the cover of the album. On the other side of the poster there are comments made by the artists about each of the songs. Further up the scale is the booklet for the compilation album "Best of Red Hot Chili Peppers - What Hitsi?". This is a single sheet three times the size of the cover aperture folded so that there appears on one side the artwork which is the cover of the disk and photographs of the members of the group and a list of the songs and on the inside further photographs of members of the band together with technical detail about each of the songs on the disk, including publisher and the album from which the song originally came. The booklet for Diesel's "hepfidelity" might more readily be described as a booklet. It contains four cut pages, double the size of the plastic cover, stapled and folded so as to produce a total of 16 pages including the page which doubles as the cover page for the album. Inside are photos of the artist and the words of each of the songs. There is also technical information contained on the second last page. More substantial still are the booklets for the disks "Maria Callas Rarities" and "US" by Peter Gabriel . The booklet for the Peter Gabriel disk is stapled and contains 24 pages with photographs of paintings forming a number of pages, the complete words of the songs and technical information. The Maria Callas booklet contains 36 pages including translations in English, French and German of the songs recorded on the disk. Reference should be made to other evidence given during the course of the proceedings but which 'evidence played little part in the submissions. An officer of the Australian Taxation Office, in an affidavit filed in the proceedings, described how he had visited the Grace Bros store in the Pitt Street Mall, Sydney, the David Jones store in Market Street, Sydney and the Brashs store in Bankstown Square, Bankstown. In each of these stores the plastic cover containing the inserts were displayed but the disks had been removed. It was agreed by all parties that the purpose of the removal of the disk was for security purposes, presumably to obviate theft. In cross-examination the officer conceded that he had also gone to other stores not referred to in his affidavit where the position was different from that described in his affidavit. Presumably that meant that the disks were still contained inside their plastic containers. Mr Harris, the Finance Director of EMI, also swore an affidavit in the proceedings. He supplemented his evidence in chief orally, making the point that a retailer would order a quantity of a particular title during the period and that EMI would fulfil that order by packing the compact disks in their plastic containers with the inserts in position in a carton. None of the compact disks manufactured in Australia was sealed individually, although imported disks came into Australia shrink-wrapped. EMI would then invoice the retailer for the number of copies of the title ordered at the - 10 - prevailing price. In cross-examination he agreed that what was sold to retailers was a package which included the compact disks and the inserts. He said that occasionally, if a retailer had lost an insert, a sales representative, if he had a spare copy of that insert, would give it to the retailer. He said that such a request was fairly rare. The Commissioner's primary submission was that the inserts or booklets should be treated, for the purposes of the applicable sales tax legislation, as not being separate from the compact disks, with the result that exemption item 51(1) of the Exemptions and Classifications Act should be applied to the package as a whole, properly then characterised as a compact disk or set of compact disks rather than each component of the package being characterised as container, compact disk and booklet. The Commissioner's alternate submission, which arose only if the inserts were to be treated separately for the purposes of the sales tax legislation as goods in their own right, was that the inserts fell outside item 51(1) by virtue of being "guides ... of entertainments, amusements" (item 51(1)(b)), "advertising matter" (item 51(1)(e)) or "books, pamphlets, leaflets ... published ... for the purpose or as a means of advertising the business or the products of the publisher or of the person or persons for whom they are or are to be published" (item 51(1)(f)). Finally, it was submitted that because the inserts serve as a label or front sheet for the compact disk or disks, they should be treated as part of the container and, as such, outside the exemption in item 51(1). Assistance was to be obtained, it was submitted, from the decision of the New South Wales Court of Appeal in John Fairfax & Sons Ltd v t ommissi 9 ati (1988) 15 NSWLR 620 and of the High Court in Commissioner of Taxation v Totalisator Administration Board of Queensland (1990) 170 CLR 508 in the resolution of the principal issue, namely, the identification of "goods" for the purposes of the sales tax legislation in cases where there are several components each of which may fall to be considered as a "good" although not separately sold or individually having real worth. Before turning to the cases some reference might usefully be made to the legislative history of the relevant provisions. The overall legislative sales tax scheme is summarised in my judgment in Genex Corporation Pty Ltd v The Commonwealth of Australia (1991) 30 FCR 193 at 196-201, ina judgment with which the other members of the full court of this Court (Beaumont and Burchett JJ) agreed. That judgment was ultimately affirmed by the full High Court: Commonwealth of Australia v Genex Corporation Pty Limited (1992) 178 CLR 277. -12- As originally enacted, the No.1 Assessment Act and related Rate Acts imposed sales tax (subject to applicable exemptions then contained in the No.1 Assessment Act and subsequently contained in the Exemptions and Classifications Act) whenever there was a "sale value" determined under one of the Assessment Acts. Where goods were manufactured in Australia a sale value arose which operated to create a liability for sales tax in a manufacturer whenever that manufacturer sold goods by wholesale or retail, treated those goods as stock for sale by retail or applied the goods to its own use. A sale value arose with a correlative liability upon a wholesale merchant who sold goods by wholesale or retail or applied them to its own use. In each case, no sale value arose if the transaction, being one of sale, involved a sale to a registered person who quoted his or her certificate in respect of the sale. The only assistance to be obtained in determining the meaning of the word "goods" in the original legislation was a rather unhelpful definition in s.3(1) of the No.l Assessment Act that "goods" includes commodities. Where a sale value arose because there was a sale by retail, an application to own use or a treating of goods as stock for sale by retail, that sale value was to be determined by reference to what would have been the fair market value of the goods if sold by wholesale. This was in contrast to the sale - 13 - value which arose on the sale of goods by wholesale, namely, the amount for which the goods were sold. Undefined, the word "goods" would have a meaning of "chattels personal": cf North Shore Gas Company Limited v issi Duties (NSW) (1939-40) 63 CLR 52 where the High Court fell to consider the meaning of the expression "goods, wares and merchandise" in the Stamp Duties Act 1920- 1933 (NSW). Given the mode of calculation of sale value, the context of the word "goods" in the 1930 legislation would easily lead to the conclusion that the word was used in the sense of chattels personal capable of being sold, that is to say, capable of being the subject of bargain and sale at a price resulting in a transfer of title. Amendments were made as early as 1932 to change the way in which the sale value was to be calculated in cases other than where there was a sale of goods by wholesale. Thereafter, for a time, sale value was determined as being, in a case where the taxpayer sold the goods by retail the amount for which the goods would have been sold if sold by wholesale in the case where the goods were of a class which the manufacturer did sell by wholesale, and in any other case of sale by retail the amount for which the goods could have been purchased from another manufacturer. The amendment was said, by the then Prime Minister and Treasurer, Mr Lyons, in moving the Second Reading Speech on 8 September 1932, inter alia, to: -14- ",.. remove the undesirable implication in the present form of the law, that the tax applies only to goods of a class which the taxpayer manufactures for sale." That implication, if indeed it arose, was presumably related to the decision of the High Court in Adams v Rau (1931) 46 CLR 572. The legislation was further relevantly amended in 1934, inter alia, by the Sales Tax Assessment Act (No.1) 1934 (Cth) by inserting, as s.3(5) of the Assessment Act No.1,: "Where a sale and purchase, for one inclusive price, is made of goods upon the Sale value of which sales tax 1s payable, together with goods upon the sale value of which sales tax is not payable, the amount for which the goods upon the sale value of which sales tax is payable are sold and purchased, shall be deemed to be the amount which, in the opinion of the Commissioner, would have been the sale price of those goods if sold separately." By 1939 the High Court, in MR Hornibrook (Pty) Ltd v Federal Commissioner of Taxation (1939) 62 CLR 272, considering the legislation as it stood in 1936, was faced with a submission by the taxpayer, which made concrete piles for use in the construction of bridges, that the then Assessment Act (No.1) dealt only with saleable goods. Upholding an assessment of sales tax by the Commissioner, Latham CJ (at 279) said: "Such piles are plainly manufactured articles. They are chattels. They were intended to incorporated in a structure and were so incorporated. They lost their identity as goods in that structure. But this fact does not prevent the piles from being goods any more than it prevents bricks or stones or nuts and bolts from being goods. The fact that the goods were specially manufactured and designed for a particular purpose cannot be held to deprive them of the character of goods." McTiernan J dissented in that case holding that the piles were not goods because they were not merchantable articles or brought into existence for sale or use as a commodity but as an essential component of a = specific structure (see at 285-6). His Honour referred in support of this view to Adams v Ray (at 578). From time to time the legislation as initially enacted was amended to deal with particular circumstances. The definition of "goods" was amended to ensure that certain second-hand goods would fall within it following the decision of the full High Court in Deputy Federal Commissioner of Taxation (SA) v Ellis & Clark Limited (1934) 52 CLR 85. The mode of computation of the sale value applicable where there was not a sale of goods by wholesale, was also amended from time to time. Another amendment significant perhaps to the present case related to containers. The original 1930 Act made no reference at all to containers. That omission was rectified in two respects. First, the definition of "goods" was amended to refer specifically to containers so as to ensure that a container did not go into use or consumption until: "the goods for the marketing or delivery of which the container has been so used have been removed therefrom for use, sale or other disposition separately from the container;", Further, the Exemptions and Classifications Act and the Sales Tax Regulations dealt specifically with containers ensuring that a container for the marketing or delivery of goods themselves exempt would itself be exempt from sales tax. In general terms, containers for the marketing or delivery of taxable goods were themselves to be taxed, but at the rate applicable to the goods contained in them. A registered person purchasing containers for the marketing or delivery of goods was, in the circumstances set out in reg.12 of the Sales Tax Regulations, to quote a certificate where the property in the containers would pass, inter alia, to the purchaser of the goods, ensuring that a liability for sales tax on the container was to be deferred until liability arose with respect to the goods contained. Although not conclusive of the present argument, the legislative scheme became clearly that, where a registered person sold goods in a container in circumstances where the price included both the goods and the container, the container was treated as separate "goods" to which the same sales tax rate attached as attached to the "goods" contained by the container. The idea that for an item to be "goods" it had to be "saleable", at least in the sense of "capable of sale", was expressed by Fox J in the full court of this Court in Federal Commissioner of Taxation v Nimrod Theatre Company Ltd (1985) 5 FCR 269 where his Honour, speaking of a stage set which the Commissioner claimed attracted liability for sales tax by virtue of the theatre company being the manufacturer of it and applying it to its own use, said (at 272-3): "In Adams v Rau what was produced was saleable. In the present case the stage setting was not intended for sale nor could it readily have been sold; it was prepared only for the Nimrod Theatre, and the particular play. To be removed from the theatre it would have had to be broken up. The case related to the part of s.17 which referred to goods sold, whereas the present assessment involves the alternative of 'applied to his own use'. It seems to me at least arguable that that which is to be regarded as satisfying this latter phrase is something which, before application, is itself a saleable commodity. This construction would I think be more in keeping with the purpose of the [Assessment Act No.1] , which is in general to impose tax on sales, or saleable goods. The making of something which is non-saleable for oneself would not seem to fall within its intended purpose. In the present case, too, the entity came into existence for the first time where, and as, it was to be used." The judgment of the full High Court in Federal Commissioner of Taxation v Totalisator Administration Board of Queensland (supra) cast doubt upon the correctness of the ultimate decision in Nimrod, at least to the extent that that case held the theatre company not a manufacturer. However, in the course of the judgment their Honours (Brennan, Deane, Dawson, Gaudron and McHugh JJ) said (at 511): "By parity of reasoning, the test whether objects are 'goods' is whether they would ordinarily be described by the words 'goods' or 'commodities'. Although unsaleable items are not necessarily outside the conception in 'goods' in s.17(1) of the [Assessment Act No.1], it may be useful, in determining whether they are properly described as 'goods' or 'commodities', to consider whether they are saleable. Many objects which are unsaleable are not properly described as 'goods' or 'commodities'. However, some objects are properly so described notwithstanding that, for one reason or another they are unsaleable. References in cases such as Federal Commissioner of Taxation v Riley (1935) 53 CLR 69 at 78-79 and Federal Commissioner of Taxation v Nimrod Theatre Co Ltd (1985) 5 FCR 269 at 272-273, to the question whether particular objects are or are not saleable are properly to be understood as referring to a feature which in many cases (but not invariably) will indicate whether' the objects are properly described as 'goods' or 'commodities'." Curiously no reference was made to the comments of Latham CJ in Hornibrook to which I have earlier referred. The law would now appear to be settled that the mere fact that items said to be goods are special purpose items, and in that sense not saleable, would of its own not require the conclusion that those items were taken outside the concept of "goods". The totalisator betting slips printed by the agency in the Totalisator case are a good example. It is hard to imagine anyone other than the Totalisator Agency Board itself purchasing the slips. But that did not take the slips outside the category of "goods". I turn now to the case upon which the Commissioner placed considerable reliance. In John Fairfax & Sons Ltd v Deputy Commissioner of Taxation (supra) the Commissioner had imposed sales tax upon glossy newspaper advertising supplements inserted with newspapers. The taxpayers in that case had paid for the printing of the advertising supplements and inserted them in their ordinary newspaper publications. Sales tax became payable when the newspaper publishers sold the newspaper including the advertising supplement. There were two substantial issues in the case upon which the newspaper proprietors sought to rely. The first was whether supplements were exempt from sales tax under item 51(1) or item 54 which merely exempted "newspapers". The second, was whether, if supplements were not within the exemption, there had been a composite sale of the newspaper, on the one hand, and the - 20 - supplement, on the other, so that the liability for sales tax had to be determined by the Commissioner applying s.3(5). There was little doubt that supplements had no separate value. The Court of Appeal decided that the supplements should be seen as part of the newspaper and accordingly exempt under item 54. The conclusion that the supplements were to be regarded as part of the newspaper was said by Kirby P to be a matter of commonsense. Relevant to that conclusion would appear to be the fact that the supplement was not sold separately on any occasion for, to use the language of Kirby P (with whose judgment Samuels JA agreed) "It was the 'newspaper'". His Honour said (at 631): "Never was the supplement sold as a Separate item, valuable in itself. It just joined the sporting section, the comics, possibly the television supplement and the news section as one of those 'delights' which entertain the readers, doubtless often appealing to different members of the household unit settling down for hours of leisurely reading on a Sunday." Mahoney JA stated the essential question for decision in that case in the following terms (at 633): "The essential question is whether the material in question was published as part of the newspaper or merely with it. This turns upon, or at least is affected by, the way in which the material was related to the parts of the publication which admittedly constituted a newspaper." Further (at 634) his Honour said: "In my opinion, the advertising material was published by the companies together with the other material constituting the newspaper. It was issued together with it. It comprised the kind of material apt to be found as an integral part of a newspaper. It was material of a kind which newspaper readers were, as I think the Court is entitled to know, apt to expect to find in their newspaper. In my opinion it is proper to characterise it part of the newspaper." It seems that it was not suggested to the Court of Appeal that the advertising supplements were not capable of being "goods". They had been printed by an independent printer who had charged for them and but for the fact that the newspaper proprietors had quoted a certificate when ordering the inserts there is no doubt that a liability for sales tax would have arisen at the time the inserts were sold to the newspapers. What the case is authority for, so far as is relevant to the present context, is that the question whether at the time the taxing point is reached a particular item is to be treated as "goods" for the purposes of determining whether the item satisfies a particular exemption item will be a question of fact determined in a commonsense way. - 22 - Where an item is used in, wrought into or attached to goods manufactured, the legislative scheme clearly implies that the goods cease to have an independent existence (cf reg.12 of the Sales Tax Regulations which form an integral part of the legislative scheme imposing sales tax). In other cases, however, a particular item may be capable of being seen either as a separate item of goods, on the one hand, or, as in the case of the newspaper supplements, being so integrated into another item of goods that commonsense requires that it be treated as part of those goods. A simple example is the case of a kit for self- assembly. Each individual part of such a kit might be capable of being a separate item of goods but in the context of a kit would be seen as an integral part of the kit seen as a whole. The present is not a case where the inserts have necessarily lost their identity as booklets. It could not be said that the inserts had become part of the compact disk itself. That disk clearly 1s a separate item of property from the inserted booklet. Likewise, the container in which the compact disk is housed must be treated as a separate entity from the compact disk itself. The concession made at the outset of the case by senior counsel for the Commissioner that it was not suggested that the relevant goods were to be treated for sales tax purposes as a plastic container, a - 23- booklet and a disk as one composite item was clearly correct. But that is not necessarily the end of the matter. There would, I think, be no doubt that if there were a single page inserted in the plastic cover giving the title to an album and details of the songs, whether or not removable, that single page would be treated as a matter of commonsense, not as a separate item of goods (although it may have been printed separately) but as part of the container itself. That is because of the function which that page would serve as providing identification for the plastic cover. The parties are agreed that there is no relevant definition of "container" which the Commissioner could apply for the present purposes. Definitions of "container" contained in the Exemptions and Classifications Act or the Sales Tax Regulations have no relevant application. However, the word is an ordinary English word and simple to understand. As defined in the Macquarie Dictionary (2nd Rev. at 401) the word is said to mean: "1. anything that contains or can contain, as a carton, box, crate, tin, etc. 2. a box-shaped unit for carrying goods; its standardised size facilitates easy transference from one form of transport to another." The question for decision is, in my view, one of characterisation, to be determined in a commonsense way. Relevant to that characterisation will be the function which the insert plays. In turn, the function of the insert will depend upon matters such as the size and contents of the insert and the relationship of the insert to the plastic container. Paraphrasing the language of Mahoney JA, the question for decision might be expressed to be whether the insert was sold as part of the cover containing the compact disk or whether it was sold merely with it. The answer to that likewise will turn upon the relationship of each insert to the cover or container. The question will be one of fact and degree and may require different answers depending upon the particular compact disk title. The booklet containing the libretto enclosed in the boxed set of disks of "Aida" could not, in any sense of the word, be treated as part of the container or box in which it is housed. It is, in every way, a separate entity from it. At the other extreme is the insert for Queen's compact disk package. Although that insert, on one view of the matter, may be said to comprise four pages, in that one page printed on both sides is folded in half, it is necessary to look at the function which it plays. In my view, that insert does no more than identify the contents of the disk contained in the plastic cover. In a commonsense way it should be treated as part of the container. - 25 - While each insert, other than the "Aida" booklet, does play, in part, a function of identification so as to be, in a real sense, a label for the container, in some cases the insert plays a more important function. This is clearly the case of the larger inserts containing the words of songs appearing on the disk. The Callas insert is a good example. It has an entity of its own greater than its function as a mere label for the container in which the compact disks are housed. Its function is informative. It can properly be characterised as a booklet or leaflet which also acts to provide a cover for the plastic container rather than as the identification label for the container, albeit containing information. In these circumstances I would conclude, in relation to the compact disks which were adduced in evidence before me, that only the inserts or booklets for the following titles are properly characterised as goods separate from the containers: Giuseppe Verdi Aida James Blundell This Road Slim Dusty That's the song we're singing Maria Callas Rarities Dorian Mode Rebirth of the Cool Lou Rawls The Legendary Lou Rawls Roxette Tourism Vince Jones Future Girl Peter Gabriel us Diesel Hepfidelity The album Paul McCartney: "Off the Ground", which was tendered in evidence before me, bears a date 1993 and the insert for this album would appear to fall outside the period with which the present proceedings are concerned. All other inserts or booklets are, in my view, properly to be characterised as part of the container for the compact disks in question. There remains therefore to be determined whether the inserts or booklets, which are properly to be characterised as separate goods and thus prima facie within item 51, fall outside the exemption item because excluded from it. The meaning of "advertising matter" in sub-item (e) of item 51 was considered by Gibbs J in Deputy Commissioner of Taxation v Rotary Offset Press Pty Ltd (1971) 45 ALJR 518 in a judgment subsequently upheld by the full court of the High Court Rotary Offset Press Pty Ltd v Deputy Federal Commissioner of Taxation (1972) 72 ATC 4212. The question there arose in the context of a publication "The Realtor" put out by Estate Agents Co-operative Limited as a means of publicising properties for sale. Gibbs J, in holding that the publication was "advertising matter" said (at 521-2): "The question remains whether 'The Realtor' is 'advertising matter' and within para.(e). The word 'advertise' means to make generally or publicly known, or to give public notice of, but the phrase 'advertising matter' in the context of item 51 must have a somewhat' more limited meaning, and must be restricted to published announcements of a business kind, for example, calling attention to the fact that property is for sale and setting out its qualities, especially the desirable ones. In my opinion, it is clear that the greater part of the material contained in 'The Realtor' is 'advertising matter'. It seems to me that all the parts of the publication other than the articles and questions and answers and the 'fill ins', indexes, mastheads etc. are advertisements - there is no other word by which they may properly be described. On behalf of the defendant, it was conceded that some of the published material was 'advertising matter' but it was said that, in deciding what is 'advertising matter' and what is not, it is necessary to have regard to the purpose with which the matter was published and that the evidence showed that the purpose with which some of the material was published was not an advertising purpose. In particular, it was submitted that the materlal published with regard to new listings was inserted as a means of conveying to the members of the co-operative information that' the working of the multiple listing scheme required should be transmitted to them and that the 'classifieds' or notifications about properties already listed were also published as part of the arrangement between the co-operative and its members and were intended to provide the members with information that it was necessary for them to have in carrying out' their businesses. It was said that the evidence showed that the advertisement of the properties referred to in the announcements was not the sole or even the dominant purpose which actuated their publication. In my opinion, however, the subjective purpose of those responsible for the publication is not the test in deciding whether a periodical falls within par.(e). In par.(f) purpose is expressly referred to but para.(e) looks to the nature of the matter itself. The question whether a periodical is 'advertising matter' seems - 28 - to me to depend on whether the periodical, viewed objectively and without regard to the actual intentions of those publishing it, answers that description. In other words, if the periodical on its face appears to be designed to promote the sale of property by means of a public announcement that it is for sale, and by giving a description of its qualities and a statement of its price, 1t 1s 'advertising matter' notwithstanding that its publication was, in fact, promoted not only by the desire to sell the property, but for other purposes as well." The test to be applied is, therefore, whether the inserts, viewed objectively and without regard to the actual intentions of those publishing them, are advertising matter. That question is to be determined by looking at the inserts themselves. A more detailed discussion of the cases is contained in my judgment in ACP Publishing Pty Limited v Federal Commissioner of Taxation (1994) 49 FCR 191. It was submitted by the Commissioner that because the inserts were the means by which the public's attention was called to the fact that the compact disks were for sale, required the conclusion that the booklets were advertising matter. With respect I can not agree. Viewed objectively, whatever the booklet may be it is not, in the sense used in the cases, advertising matter. Largely those booklets which are separately treated as "goods" can be described as informative of the contents of the compact disk but not as being "advertising matter". Likewise, it is not correct to say that the booklets or inserts, because they serve as guides to the contents are themselves "entertainments or amusements". Finally, it was argued on behalf of the Commissioner that the fact that disks were frequently omitted from the container so that the insert was the only means by which a customer established what was for sale showed that the insert was published for the purpose or as a means of advertising the business or products of the publisher. There is no doubt that the question of whether an exemption applies must be determined at the time the taxing point is reached: Deputy Commissioner of Taxation v Stewart (1983-84) 154 CLR 385. At that time it could hardly be said that the insert was published to advertise the products of the publisher. Whatever one may draw from the evidence that some retailers display the cover without the disk, the fact is that the booklets, viewed objectively, have two functions and two functions only, that is to say, the function of information and the function of serving as well the purpose of the cover for the container. In no way can it be said that the booklets serve the purpose of advertising the business or products of EMI. It follows from what I have said that I would not make a declaration in the terms sought by EMI. It may well be - 30 - appropriate to make declarations concerning various titles. In the circumstances I would direct the parties to file and serve short submissions dealing with the question of what orders would be appropriate and also, if desired, the question of costs within 7 days of the these reasons are given. The matter should accordingly be stood over until a date to be fixed. I certify that this and the preceding twenty-nine (29) pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice Hill. Associate: Date: 14 December 1994 Counsel and Solicitors DH Bloom QC with A Robertson for Applicant: instructed by Mallesons Stephen Jaques Counsel and Solicitors JW Durack SC with SJ McMillan for Respondent: instructed by Australian Government Solicitor Dates of Hearing: 14 November 1994 Date Judgment Delivered: 14 December 1994