New Style Furniture Sales Pty Ltd v Deputy Commissioner of Taxation [1998] FCA 993

FEDERAL COURT OF AUSTRALIA SALES TAX – whether the taxpayer is entitled to a credit for the sales tax which it claims to have borne in respect of offcuts remaining after the manufacture of furniture and sold to an exporter – examination of the criteria necessary for a claim under CR8 and CR10 Sales Tax Assessment Act 1992 (Cth)

WORDS AND PHRASES – "application to own use" Sales Tax Assessment Act 1992 (Cth) – ss 11, 22, Deputy Federal Commissioner of Taxation v Taubmans (NSW) Pty Ltd (1966) 115 CLR 570 – cited Max Factor & Co Inc v Federal Commissioner of Taxation (1971) 124 CLR 353 – cited Deputy Commissioner of Taxation v Stewart (1984) 154 CLR 385 – cited Genex Corporation Pty Ltd v Commonwealth of Australia (1991) 30 FCR 193 – cited Commonwealth of Australia v Genex Corporation Pty Ltd (1992) 176 CLR277 – cited Federal Commissioner of Taxation v Jack Zinader Pty Ltd (1949) 78 CLR 336 – cited

NEW STYLE FURNITURE SALES PTY LIMITED

v DEPUTY COMMISSIONER OF TAXATION NG 107 of 1998 HILL J SYDNEY 20 AUGUST 1998

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 107 of 1998

BETWEEN: new style furniture sales pty limited

Applicant

AND: deputy commissioner of taxation

Respondent

JUDGE: HILL J

DATE OF ORDER: 20 AUGUST 1998

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The application be dismissed. 2. The Applicant pay the Respondent's costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 107 of 1998

BETWEEN: new style furniture sales pty limited

Applicant

AND: deputy commissioner of taxation

Respondent

JUDGE: HILL J

DATE: 20 AUGUST 1998

PLACE: SYDNEY

REASONS FOR JUDGMENT The Applicant, New Style Furniture Sales Pty Ltd ("the Applicant") is a contract furniture manufacturer. It manufactures furniture ordered by retail customers (i.e. retail stores) using, in the course of upholstering the furniture, fabric or leather which it purchases from outside suppliers. However, in some cases, it uses material, leather or fabric, supplied by the retail customer. It receives payment from these customers for the furniture it sells or makes up and pays sales tax on the sale of the furniture or its delivery, as the case may be. The basis upon which this sales tax is charged, which is later explained in the course of these reasons, is not the subject of controversy. However, it is perhaps an almost inevitable consequence of its business that the Applicant is left with offcuts of fabric or leather not used or discarded in the manufacturing process. It sells these offcuts on a weight basis to an exporter for export. That transaction is not subject to sales tax, if otherwise an assessable dealing, for at least two reasons. First, the exporter quotes a certificate in respect of the non taxable export sale to it (see, eg. ss 30 and 32F of the Sales Tax Assessment Act 1992) ("the Assessment Act"); second, the material in any case would be exempt from sales tax under either Item 150 or Item 152 of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1992. The present case raises the question whether the Applicant is entitled to a credit for the sales tax which it claims to have borne in respect of the offcuts after the sale to the exporter is effected. It claims that it is entitled to a refund of $101,890.18 covering sales of the offcuts for export in the period 1 November 1993 to 31 October 1995. The Commissioner refused the credit and on the Applicant's objection to this decision the present proceedings were instituted in the Court by way of an appeal, in the original jurisdiction, against the objection decision of the Commissioner. The primary facts are not in dispute, although there is some dispute as to the conclusions which flow from these facts. As will be shortly noted the facts divide, generally speaking into two separate categories. The parties are in agreement that the Court deal with the matters of principle at issue between the parties leaving, if the Applicant is wholly or partly successful, to the Commissioner in consultation, if necessary, with the Applicant the working out of the mathematical consequence of the decision.