FEDERAL COURT OF AUSTRALIA CUSTOMS AND EXCISE – excise duty – diesel fuel rebate – whether rebate payable with respect to fuel used in transporting construction materials – onshore processing of natural gas – general approach to construction – whether activity "..in the preparation of a site to enable mining for minerals to commence". Customs Act 1901 (Cth) Excise Act 1901 (Cth) Abbott Point Bulk Coal Pty Ltd v Collector of Customs (1992) 35 FCR 371, cited Regional Director of Customs (WA) v Dampier Salt (Operations) Pty Ltd (1996) 67 FCR 108, cited Commissioner of Taxation v North West Iron Co Ltd (1986) 9 FCR 463, cited Commissioner of Taxation v Reynolds Australia Alumina Ltd (1987) 18 FCR 29, cited Collector of Customs v The Western Australian Government Railways Commission (Westrail) (1995) 39 ALD 21, referred to Re Dyno Wesfarmers Ltd v Chief Executive Officer of Customs (unrep AAT decision number 11257, 23 September 1996), referred to Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280, applied Parker v Federal Commissioner of Taxation (1953) 90 CLR 489, cited Collector of Customs v Cliffs Robe River Iron Associates (1985) 7 FCR 271, cited Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622, cited Chief Executive Officer of Customs v Dyno Wesfarmers Ltd (1997) 73 FCR 1, discussed Politis v Commissioner of Taxation (1988) 69 ALD 707, cited Dawson, Rockwater Joint Venture v Chief Executive Officer of Customs (Judgment No. 1010/98, unrep, Merkel J, 21/8/98), referred to Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259, referred to Collector of Customs v Agfa-Gevaert Ltd (1996) 141 ALR 59, cited Powley v Crimes Compensation Tribunal (1996) 11 VAR 146, cited Telstra Corporation Ltd v Federal Commissioner of Taxation (1996) 68 FCR 566, cited State Rail Authority of New South Wales v Collector of Customs (1991) 33 FCR 211, referred to Robe River Mining Co Pty Ltd v Commissioner of Taxation (Cth) (1989) 21 FCR 1, cited Australian Native Landscapes Pty Ltd v Collector of Customs (1997) 24 AAR 353, cited CHIEF EXECUTIVE OFFICER OF CUSTOMS v WMC RESOURCES LIMITED (AS AGENT FOR EAST SPAR ALLIANCE) WAG 10 OF 1998 FRENCH, CARR & R D NICHOLSON JJ PERTH 9 OCTOBER 1998 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAG 10 of 1998 oN APPEAL FROM A JUDGE OF THE FEDERAL COURT BETWEEN: CHIEF EXECUTIVE OFFICER OF CUSTOMS Appellant AND: WMC RESOURCES LIMITED (aS AGENT FOR EAST SPAR ALLIANCE) Respondent JUDGES: FRENCH, CARR & R D NICHOLSON JJ DATE OF ORDER: 9 OCTOBER 1998 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The appeal is allowed. 2. The order made by Lee J allowing the appeal against the decision of the Administrative Appeals Tribunal made on 7 July 1997 be set aside. 3. The application by WMC Resources Ltd for review by the Tribunal of the decision of the delegate of the Chief Executive Officer of Customs made on 4 October 1996, disallowing diesel fuel rebate in respect of the transportation of construction materials from Onslow to Varanus Island, be dismissed. 4. WMC Resources Ltd pay the Chief Executive Officer's costs of the appeal and of the proceedings before Lee J. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAG 10 of 1998 ON APPEAL FROM A JUDGE OF THE FEDERAL COURT BETWEEN: CHIEF EXECUTIVE OFFICER OF CUSTOMS Appellant AND: WMC RESOURCES LIMITED (AS AGENT FOR EAST SPAR ALLIANCE) Respondent JUDGES: FRENCH, CARR & R D NICHOLSON JJ DATE: 9 OCTOBER 1998 PLACE: PERTH REASONS FOR JUDGMENT FRENCH J Introduction A rebate of customs and excise duties on diesel fuel used in mining operations has been a feature of the law since 1985. Prior to that time there was a general exemption for diesel fuel used off public roads. The introduction of the rebate involved statutory classification of activities to which it applied. The plasticity of language is such that limits upon the range of exempted activities are not defined with precision. The Court is required, in disputed cases which come before it, to undertake situation specific and evaluative application of the law. In so doing it identifies limits upon its application. This is such a case. The question for decision is whether the Administrative Appeals Tribunal erred in law in finding that the use of diesel fuel on ships for transporting construction materials for facilities for onshore processing of natural gas recovered from an offshore well, was not an activity in mining operations. If this use is within that activity then the rebate applies. Factual Background The East Spar gas field lies some forty kilometres to the west of Barrow Island on the North West Shelf, offshore Western Australia. It extends to the western side of Varanus Island. Development of the field for gas production was undertaken by a consortium calling itself the East Spar Alliance, the members of which are WMC Resources Limited, Kvarner RJ Brown Pty Ltd and Clough Engineering Limited. Gas extracted from the field is transported by a production pipeline from the wellheads to Varanus Island for further processing. The processing begins with the introduction of a hydrate inhibiting agent and a corrosion inhibitor into the gas as it emerges from the well and the passage of the gas through a heat exchanger adjacent to the wellhead to cool it so that its corrosive effects on the pipeline on the way to Varanus Island are reduced. The mixture of gas and fluids piped to Varanus Island comprises raw natural gas, natural gas condensate, consisting of hydrocarbon liquids and water, the hydrate inhibiting agent and the corrosion inhibitor. At Varanus Island the gas and liquids are separated out. The liquids are themselves separated into condensate and water, the latter being passed to a water treatment plant for removal of oil. Dissolved light gas is removed from the condensate using a distillation column. The gas is compressed and processed. It is further compressed to high pressure and delivered through an existing pipeline to the Alinta Gas Dampier/Bunbury pipeline or the Goldfields Gas Transmission Pipeline. The deep water section of the production pipeline supplied and installed by McDermott Industries (Aust) Pty Ltd measured approximately fifty five kilometres. The balance of the pipeline, which is the 7.6 kilometre shallow water section, was installed by WMC Resources on behalf of the East Spar Alliance. From 22 March 1996 to 6 May 1996, McDermott Industries used a number of vessels in carrying out work under the contract each of which consumed quantities of diesel fuel. The total amount used was 1,422,137 litres. From 11 March 1996 to 1 July 1997 WMC Resources used 1,187,057 litres of diesel fuel for vessels and cargo barges involved in carrying out the work required to install the shallow water section of the pipeline. Between 21 July 1995 and 10 June 1996 WMC Resources also purchased 339,535 litres of diesel fuel used in the transport of construction materials from Onslow to Varanus Island for use in the construction of the facilities required for the mining and beneficiation operations described earlier. McDermott Industries claimed a diesel fuel rebate in respect of the fuel used by it in operations relating to the pipeline construction. WMC Resources Ltd as agent for the East Spar Alliance did likewise in respect of diesel fuel used for the installation of the shallow water pipeline and in the transportation of construction materials. The rebates claimed were all disallowed by decisions of a delegate of the Chief Executive Officer of Customs on 21 June 1996 in respect of the McDermott Industries' claim and on 4 October 1996 in respect of the two WMC Resources' claims. Both McDermott Industries and WMC Resources appealed to the Administrative Appeals Tribunal against the disallowances. The appeals were heard together on 1 May 1997. On 7 July 1997 the Tribunal made orders: 1. setting aside the decision of the delegate of 21 June 1996 and in substitution therefore decided that a rebate of duty was payable to McDermott Industries (Aust) Pty Limited in respect of 1,422,137 litres of diesel fuel purchased by it for use by it during the period from 22 March 1996 to 6 May 1996 in the installation of 55 kilometres of deep water pipeline in the East Spar gas field. 2. setting aside the decision of the delegate dated 4 October 1996 and in substitution therefore, decided that a rebate of duty was payable to WMC Resources Limited (as agents for the East Spar Alliance) in respect of 1,187,057 litres of diesel fuel purchased by it for use by it during the period from 11 March 1996 to 1 July 1996 in the installation of 7.6 kilometres of shallow-water pipeline in the East Spar gas field. 3. affirming the decision of the delegate dated 4 October 1996. In summary the McDermott rebate claim was allowed by the Tribunal, as was that of WMC Resources in respect of the construction of the shallow water pipeline. The rebate claimed by WMC Resources for the transportation of materials in connection with the construction of onshore processing facilities was not allowed. The Chief Executive Officer appealed to a single judge of the Federal Court against the decisions of the Tribunal setting aside his delegate's decisions in respect of the principal rebates claimed by McDermott Industries and WMC Resources. WMC Resources also appealed against the Tribunal's decision that it was not entitled to a rebate in respect of the diesel fuel used for the transportation of construction materials. Lee J dismissed the Chief Executive Officer's appeal and allowed that of WMC Resources in relation to the transportation of construction materials to Varanus Island. The matter was remitted to the Tribunal for redetermination in that respect. The Chief Executive Officer of Customs appeals to this Court against the latter decision. Statutory History and Framework The diesel fuel rebate provisions of the Customs Act 1901 (Cth) and the Excise Act 1901 (Cth) were introduced as a budgetary measure in 1982. They replaced a scheme under which diesel fuel used off public roads was exempt from excise duty. The stated rationale was that the global exemption arrangements had proven difficult to administer so as to prevent abuse. The new scheme was described in the then Treasurer's Budget Speech and in the Second Reading Speech for the Diesel Fuel Taxes Legislation Amendment Bill 1982 as a system to "allow users to claim rebates of this excise in respect of certain categories of off road end use - broadly domestic use, hospitals, nursing and convalescent homes and in the agricultural, mining, fishing and forestry industries" - Parl Deb, H of R 17/8/82 p 71 and pp 433-434. The 1982 legislation introduced a new s 164 into the Customs Act and a new s 78A into the Excise Act. The latter section provided for a rebate of duty on diesel fuel purchased for use "in mining operations... (otherwise than for the purpose of propelling a road vehicle on a public road)". The relevant wording remains unamended today although the arrangement of the paragraphs was changed in 1985. The term "mining operations" was defined for the purposes of this provision by s 164 of the Customs Act. That definition appeared in s 164(7). It covered exploration, prospecting, mining, dressing and beneficiation of minerals or mineral bearing ores and, in so called "sweeper clauses" (paras (c) and (ca)), operations "connected with" those activities. It also extended to a number of incidental or related activities. These included the transport of minerals or ore from the mining site to another place for dressing or beneficiation and the transport of natural gas from the mining site to a place where it was to be liquefied. The definition also picked up the construction, maintenance and repair of various forms of infrastructure associated with mining activities. The definition was amended by the Customs and Excise Legislation Amendment Act (No. 3) 1989 (No. 78 of 1989) by the inclusion of a new par (ca) relating to operations connected with the dressing or beneficiation of minerals and ores. In 1992 another subparagraph (da) was added. It included in the definition of "mining operation" the undertaking of voyages to or from Australian ports by ships used in carrying out "northern mining activities for the purposes of their refit or repair and of associated trials". Northern mining activities were defined as activities associated with or incidental to exploration for or exploitation of oil or natural gas in northern waters which were defined by reference to lines of longitude and latitude in the definition. Those waters include the area in which the East Spar gasfield is located. In 1995 the Customs and Excise Legislation Amendment Act 1995 (No 87 of 1995) replaced the entire definition of "mining operations" in s 164(7) with a new definition which begins as follows: ""mining operations" means: (a) exploration, prospecting or mining for minerals; or the removal of overburden and other activities undertaken in the preparation of a site to enable mining for minerals to commence; or (b) the dressing or beneficiation of minerals, or ores bearing minerals, as an integral part of operations for their recovery; and includes: (c) if minerals, or ores bearing minerals, are dressed or beneficiated at a place other than the mining site as an integral part of operations for their recovery: (i) the transporting of the minerals or ores from the mining site to that place; and (ii) the return journey from that place to the mining site of the vehicles or equipment used in transporting the minerals or ores, if that journey is for the purpose of later carrying out the mining operation referred to in subparagraph (i) or for the backloading of raw materials or consumables for use in a mining operation referred to in paragraph (a) or (b); or (d) the undertaking: (i) of voyages to or from an Australian port by a ship that is proposed to be, or that is, used wholly or primarily in carrying out northern mining activities for the purposes of refitting or repairing the ship or its equipment for, or as a result of, carrying out those activities; or (ii) of trials in connection with such a refit or repair of the ship or its equipment; or The definition goes on in subsequent paras (e) to (w) inclusive to pick up natural gas liquefaction, common salt production, coal stockpiling, electricity generation, mine site rehabilitation, the search for and pumping of water for use in mining operations and other activities associated with the provision of specified elements of mining infrastructure. In the Second Reading Speech for the Customs and Excise Legislation Amendment Bill 1995 it was said by the then Minister for Industry, Science and Technology that: "The amendments are principally designed to tighten the eligibility criteria for rebates of customs or excise duty which have been paid on purchases of diesel fuel so that the integrity of the Scheme as it was introduced in 1982 to assist those engaged in main stream primary production and those engaged in main stream mining operations, can be maintained." (Parl Deb Senate 8/6/1995 p 1062) Among the principal changes to the Scheme proposed by the Bill the Second Reading Speech identified: "The amendment of the definitions of "agriculture" and "mining operations" in the Customs Act 1901 to specify a clear list of activities in which the use of diesel fuel is to be eligible for the payment of rebate, from 1 August 1986." (Ibid at p 1063) In relation to the amendment to the definition of "mining operations" the Second Reading Speech elaborated upon the changes in the following way: "In the existing legislation, both the definition of "agriculture" and the definition of "mining operations" employ what are known as "sweeper clauses", which have the effect of making other operations connected with agriculture or mining eligible for the payment of rebate. The interpretation of these "sweeper clauses" has been a main source of contention over the years, and has generated most of the litigation in the life time of the Scheme. The amendments proposed in items 4 and 8 of Schedule 1 to the Bill are to remove the subjectivity associated with the "sweeper clauses", and replace those clauses with an objective list of activities that are eligible for rebate. This has been done with a view to giving claimants certainty as to the actual activities that are eligible for rebate, and thereby avoiding the costly litigation concerning eligibility circumstances which has plagued the Scheme in recent years. It should be noted that although the proposed amendments will necessarily narrow the range of activities for which rebate is payable, farmers and miners will generally be unaffected. The intention of these amendments is to put beyond doubt that the Scheme is not meant to provide rebate eligibility for activities which are not sufficiently connected with mining or agriculture; for instance, the provision of a service or utility to a farmer or miner, such as electricity through a grid, or the building of a dam which is intended to supply water to, amongst others, farmers, or the operation of a garbage tip on a former mine site by someone other than the miner, where the resultant filling of the mine site is said to be the rehabilitation of a mine site, and thus connected with a mining operation." (Parl Deb Senate 8/6/1995 p 1064) In the Explanatory Memorandum which accompanied the Bill the commentary on cl 3 of the Bill, which include the amendment to the definition of "mining operations" under s 164(7), characterised the relevant clause of the Bill as proposing to: "remove the so-called "sweeper clause", which confer rebate on activities characterised as being "connected with" mining operations and primary production and insert a clear list of activities, under the definitions of "agriculture" and "mining operations" in section 164 of the Customs Act, in which the use of diesel fuel is to be eligible for the payment of rebate of customs and excise duty." The purpose of the amendment to the definition of "mining operations" was said in the Explanatory Memorandum to be: "...to clarify that the ambit of the DFRS is to pay rebate on diesel fuel for use in the activities of the exploring or prospecting for, and subsequent dressing and beneficiation of minerals and also for use in particular activities that are sufficiently connected with mining, and for use in the liquefaction of natural gas and the production of common salt by means of evaporation." The memorandum said that the payment of rebate was originally intended to be made to those persons "who are involved in the main stream of mining as understood by the common person". That intention was said to be implicit in the terms of par 164(1)(a). The memorandum went on: "The amendments proposed by this item removes any doubt that the DFRS is a targeted scheme providing rebate of customs and excise duty in respect of diesel fuel used in those activities that fall fully within the activities specified in the new definition of "mining operations", rather than in respect of activities that may, in a loose sense, go towards "encouraging" mining operations." Paragraphs (a) to (g) of the new definition reinserted pars (a), (b), (d), (da), (e), (f) and (g) of the previous definition. Paragraphs (h), (i), (j), (k) and (l) specify activities in respect of which rebate is payable and according to the Explanatory Memorandum "replace the so called "sweeper clauses" in existing paragraphs (c) and (ca) of the definition of "mining operations" under which activities said to be "connected with" mining operations are eligible for payment of rebate". The eligible activities were said to be those "ordinarily conducted either by, or on behalf of, miners as part of the operation of their mining business". There was a significant number of government amendments moved to the definition which were the subject of a Supplementary Explanatory Memorandum. These amendments were made following concerns expressed to the Senate's Economic Legislation Committee by representative bodies from the mining sector. According to the Supplementary Explanatory Memorandum the stated intention of the Bill was not to affect the eligibility for rebate of persons engaged in mainstream mining. Concerns had been raised however that the proposed list did not include a range of activities which are integral to mining and that the exclusion could have a significant commercial impact. The schedule of amendments to the Bill was a direct response to those representations and it was said in the Explanatory Memorandum: "It is considered that the expanded list will maintain the integrity of the Scheme in assisting persons engaged in mainstream agriculture and mining activities while excluding from eligibility activities that can only be regarded as being remotely connected with agricultural or mining." The Tribunal's Decision The facts before the Tribunal were not in dispute. There was an agreed statement of facts and three affidavits from the Project Development Manager and two engineers respectively, none of whom was cross-examined. It emerged from those affidavits, in addition to the factual background already outlined, that there was no option for the processing of the gas that did not involve its transport by pipeline to a nearby island, in this case Varanus Island. It also emerged that the control of production at the well, injection of chemicals to inhibit corrosion and the rate of production was effected through an integrated system operated from a control room on Varanus Island. That control room was linked by telemetry with satellite backup to an unmanned buoy above the wells. After reciting the contending submissions the Tribunal observed that the purpose of the diesel fuel rebate provisions in the Customs Act and the Excise Act is to provide financial encouragement for the undertaking of mining operations by effectively reducing the cost of diesel fuel purchased for use in such operations. The provisions, it said, are to be interpreted beneficially "so as to promote rather than frustrate that legislative purpose". Abbott Point Bulk Coal Pty Ltd v Collector of Customs (1992) 35 FCR 371 at 378 was cited for the proposition that a "common sense and commercial approach" has to be taken to the question whether an activity falls within the definition of "mining operations". On the other hand, the Tribunal accepted that in adopting such an approach the statutory wording must be given its ordinary meaning and not such an interpretation as would strain that ordinary meaning or not be reasonably open on the words used. In considering the meaning of the term "in mining operations" the Tribunal looked to the word "in" the Shorter Oxford English Dictionary there defined as "in the process or act of". There was no doubt, in the Tribunal's opinion, that the operations involved in extracting gas from the East Spar gas field reservoir were "mining operations" as defined in s 164(7) of the Customs Act. The gas processing operations carried out on Varanus Island were "mining operations" within the definition because they constituted "beneficiation" of the gas "as an integral part of operations for (its) recovery" within the meaning of par (b) of the statutory definition. The first question which the Tribunal posed for itself was whether the operations involved in installing or laying the pipeline by which the raw gas extracted from the reservoir was transported to the processing plant on Varanus Island also fell within the statutory definition of "mining operations". The Tribunal accepted the affidavit evidence to the effect that the decision to connect the sub sea manifold and the island based processing plant by means of a pipeline transporting the raw gas was based on economic and practical considerations. It referred to the affidavit of Mr Clough, the chemical engineer, who said of the operation: "It is an integrated operation and the control of the wells and flow rates from offshore into the pipeline are integral with the operations of the plant to satisfy the demands of changing markets on a day to day, or even an hour by hour, basis." The Tribunal cited Regional Director of Customs (WA) v Dampier Salt (Operations) Pty Ltd (1996) 67 FCR 108, requiring that it have regard to the desired end product of the person engaged in the relevant mining operations and that it eschew a narrow view of the extent of mining operations which would frustrate the legislative intent of providing a concession to the mining industry. Commissioner of Taxation v North West Iron Co Ltd (1986) 9 FCR 463, a case involving pipeline transport of an iron ore slurry from mine site to a pelletisation plant was also cited. Reference was made to Commissioner of Taxation v Reynolds Australia Alumina Ltd (1987) 18 FCR 29 which concerned the transport of mined bauxite to a refinery via an overland conveyor some fifty one kilometres in length. Arguing, inter alia, by analogy from these cases, the Tribunal found: "The various activities of the East Spar Alliance in the East Spar gas field, commencing with the extraction of the raw gas from the reservoir and culminating in the production of sales quality gas and condensate after processing at the plant on Varanus Island, comprise, in the Tribunal's opinion an overall integrated mining activity whose object is the production of sales quality gas and condensate, and the pipeline connecting the subsea manifold and the processing plant is an essential and integrated part of that integrated mining activity." On that basis the Tribunal found that the installation and laying of the pipeline were activities in "mining for minerals" within the meaning of par (a) of the definition of mining operations in s 164(7) of the Customs Act. The Tribunal also found that the installation of the pipeline could constitute "activities undertaken in the preparation of a site to enable mining for minerals to commence". The Tribunal said: "… the Tribunal finds that the construction of the pipeline occurred at the place where the relevant mining operation was being carried on, as an integral part of that operation. On the alternative basis that the applicant's activities in installing the pipeline constituted "activities undertaken in the preparation of a site to enable mining for minerals to commence", within the meaning of paragraph (a) of the statutory definition of "mining operations"… the same conclusion follows, namely, that the construction of the pipeline occurred at the place where that "mining operation" was being carried on." The second question considered by the Tribunal and raised on this appeal was whether the activities of WMC Resources Ltd in transporting the various construction materials from Onslow to Varanus Island for use in the construction of the facilities fell within the definition of "mining operations". It was accepted that Onslow was the nearest available mainland port facility to the East Spar gas field. The Tribunal said: "In the Tribunal's opinion they do not. Although the abovementioned gas mining and processing activities themselves fall within the statutory definition of "mining operations", the act of transporting the necessary construction materials for those activities does not. The transportation of the construction materials is, in the Tribunal's opinion, an activity which is antecedent to, and does not form part of, or occur in the course of, the relevant mining or processing activities." The Tribunal distinguished two cases. The first, Collector of Customs v The Western Australian Government Railways Commission (Westrail) (1995) 39 ALD 21 involved transportation of coal from coalfields at Collie to an alumina refinery at Worsley, forty eight kilometres away, for use in the refinery process. That was one of a number of integrated steps between excavating bauxite at Boddington and recovering alumina at Worsley. In the second, Re Dyno Wesfarmers Ltd v Chief Executive Officer of Customs (unrep AAT decision number 11257, 23 September 1996) it had been held by the Tribunal that transportation of explosives from depot to mine site on a mobile manufacturing unit which blended the explosives at the mine site and pumped them down drill holes was an ordinary and regular part of the process of mining in that area. The Tribunal went on: "None of the special features of Westrail and Dyno Wesfarmers, which render the transport activities in those cases as forming part of the relevant mining operations, is present in the instant case. Here the transportation of the construction materials was a discrete activity which preceded the relevant mining operations and was not a part of them. In other words the transportation of the construction materials was not an activity in mining operations as defined in s 164(7) of the Customs Act 1901." The cases distinguished were plainly distinguishable. They were both concerned with operational mines. In the end the reasoning of the Tribunal on the question of the transportation of construction materials to Varanus Island rested on the unelaborated proposition that it was "a discrete activity which preceded the relevant mining operations and was not a part of them". The Decision of the Judge at First Instance The learned trial judge on appeal from the Tribunal was of the view that a number of items included in the definition of "mining operations" show that it is intended to be read expansively. He rejected a submission that the 1995 amendments indicated an intention to narrow the definition so that it had a more restricted meaning than that used in par (a) of the old definition. He referred to the Second Reading Speech relating to the Amendment Bill and the Explanatory Memorandum which he said confirmed that the meaning of par (a) was not intended to be so restricted. The long standing purpose of the rebate provisions to stimulate or assist the development of mining and the production of minerals was to be continued under the amended definition. The use of the pipeline was an essential part of the operation of recovering natural gas. There was no requirement as a matter of logic to exclude construction of a pipeline from the meaning of "construction of plant or equipment". Further, it had been open to the Tribunal to conclude that the area on which the production wells and the pipeline which connected the production wells to the processing facility on Varanus Island and those facilities, together constituted the site on which the mining of natural gas was undertaken for the purposes of the rebate. It was therefore open to the Tribunal to conclude that the transportation of material, plant and equipment, to establish the wells, pipeline and processing facilities, was an activity undertaken in preparation of a site to enable mining for minerals to commence. His Honour observed that the findings of the Tribunal on these questions were findings of fact and that no question of law arose. He referred to the decision of the Full Court in Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287. His Honour then turned to the Tribunal's characterisation of the transportation of construction materials from Onslow to Varanus Island as "an activity which is antecedent to, and does not form part of, or occur in the course of the relevant mining or processing activities". He was of the opinion that the Tribunal's reasons indicated a view that unless the activity in which fuel was used had a temporal relationship with a "mining or processing activity" no entitlement to a rebate could arise. Referring back to his discussion of the meaning of the phrase "mining operations" and its enlargement by the paragraphs of inclusion which followed his Honour said: "That meaning makes it clear that the entitlement to rebate is not restricted to an activity in a "mining operation" that has a temporal relationship with the production of a mineral. For the purposes of s 164(7) neither exploration nor prospecting is an activity "antecedent" to a mining operation. Each is a mining operation. Similarly, activities undertaken in preparation of a site to enable mining for minerals to commence constitute a mining operation." His Honour rejected a submission that only acts which disturbed or excavated the seabed on which the production wells or pipeline were placed could be regarded as acts that were in the preparation of a site to enable the mining of natural gas to commence. He held that the context in which the words are used shows that such a restricted meaning for them is not intended. He said: "As stated earlier in these reasons, the words relating to preparation of a site for mining, and those relating to the removal of overburden, have been added to remove any doubt that may have arisen as a consequence of the deletion of par (c) of the old definition. The words "to enable mining for minerals to commence" suggest a broader scope than acts of disturbance or excavation of land. To restrict a right of rebate to such activities and to deny a rebate for fuel used in substantive works undertaken in preparation for mining would provide a strange result and one inconsistent with Parliament's intention." Having found, as he did, that it was open to the Tribunal to conclude that the transportation of construction materials was an activity undertaken in preparation of a site to enable mining for minerals to commence, his Honour allowed the appeal and remitted the matter to the Tribunal for redetermination. This contemplated that it was for the Tribunal to then decide whether the act of transportation was in fact an activity undertaken in preparation of a site to enable mining for minerals to commence. The Appeal The appeal was confined to his Honour's decision that transportation of construction material, plant, equipment and fuel from Onslow to Varanus Island could constitute mining operations for the purposes of s 78A of the Excise Act. It is not necessary for present purposes to set out the various formulations of the issue in the grounds of appeal. The critical issue, as senior counsel for the Chief Executive Officer put it, is "whether the activity of transporting fuel and construction materials to a mining site, in this case the gas field, is an activity in the preparation of a site to enable mining for minerals, in this case gas, to commence". The facts of the case were not in dispute and as senior counsel for the Chief Executive Officer conceded, if the appeal is to be dismissed, the Court should make an order substituting a decision that the purchase price of the relevant diesel fuel is rebateable and that the claim should be allowed. The Question of Construction The taxonomy of mining operations in revenue law is more art than science. The boundaries which mark off activities attracting exemptions from those which do not are defined by reference to broadly framed phrases expressing statutory policies of some generality. So, in ordinary parlance "mining operations" means operations pertaining to mining and the word "operations" "is a very large expression" – Parker v Federal Commissioner of Taxation (1953) 90 CLR 489 at 494. The inclusion in the former definition of "mining operations" of activities "connected with" those specified in the definition gave it a meaning "both wide and imprecise" – Collector of Customs v Cliffs Robe River Iron Associates (1985) 7 FCR 271 at 275. That was consistent with a "legislative policy of encouragement of mining operations" which required that the provisions of the Excise Act "should not be given a narrow application". Beneficial as the intent of the legislation is, its application must be constrained by its language – Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 at 638. But that establishes at best a theoretical outer limit. The application of the definition is narrowed by limiting principles which do not admit within its scope any activity however tenuously "connected" with a specified mining activity. The limiting principles may be analogous to concepts such as that of "remoteness" in damages assessment. They are evaluative in character. The 1995 amendments to the definition of "mining operations" in s 164(7) of the Customs Act disposed of the term "connected with". They set out a list of specified activities and in so doing undoubtedly narrowed the scope of the definition. They did not however change the policy of the legislation which is still one of encouragement of mining operations. The purpose of the amendments, as explained in the Second Reading Speech quoted earlier, was to "tighten eligibility criteria…so that the integrity of the Scheme as it was introduced in 1982 to assist those engaged in…mainstream mining operations can be maintained". Although the proposed amendments would narrow the range of activities for which the rebate was payable "farmers and miners will generally be unaffected". As the learned trial judge said "the purpose of the rebate provisions namely to stimulate or assist the development of mining and the production of minerals was to be continued under the amended definition of "mining operations"". The Full Court observed in Chief Executive Officer of Customs v Dyno Wesfarmers Ltd (1997) 73 FCR 1 at 6: "The expression "mining operation" is a broad concept. The concept is not narrowed by the legislation save to the extent that the operations must be "in mining"." The amendments contracted the range of eligible activities theoretically falling within the widest construction of the definition. For present purposes, in relation to preparation for mining, that range is defined by the phrase "…other activities undertaken in the preparation of a site to enable mining for minerals to commence". Within the theoretical possibilities that the literal use of the words allow there is still the need for an evaluative or selective process. While the words, on a literal reading may catch a very wide range of activities some of the activities will be too remote from the core meaning of the words to attract their application as a matter of law. His Honour's reference to an "expansive reading" of the term "mining operations" disclosed an approach to this evaluative application of the definition which was informed by the legislative policy of encouraging mining operations. While words such as "expansive" or "generous" in the construction of statutes do not identify clear lines of distinction they indicate a judicial response to perceived statutory purpose which will not limit the application of the words of the Act to their narrowest meaning. His Honour took, as he was entitled to do, cues from other elements of the definition of "mining operations". They indicate that the activities to which the rebate is applicable are not necessarily contemporaneous with the recovery of minerals. Dressing and beneficiation of minerals is required to be "an integral part of operations for their recovery". But these aspects of minerals recovery come after their extraction from the ground. And, as appears from par (c) of the definition, they need not be carried out at the mine site. The same applies to the liquefaction of natural gas which might be thought of as a special case of beneficiation. Transport to a place other than the mine site for that purpose attracts the rebate under par (f). There is however an express limitation in respect of other activities ancillary to the recovery of minerals, which requires that they occur at or adjacent to the place at which the mining operation is carried on. That limitation applies to coal stockpile management (par (i)), rehabilitation (pars (k) and (ka)), ground water exploration (para (f)), pumping and supply of water for use in a mining operation (par (m)), construction or maintenance of private access roads (par (o)), storage dams (par (p)), private airstrips, buildings, plant or equipment (par (q)), power stations or power lines (par (r)), the maintenance and repair of vehicles, plant or equipment (pars (u) and (v)) and the use of diesel fuel at residential premises (par (w)). But the condition of proximity to the mine site in those cases is in a sense self-evident. The activities there referred to fall generally into categories that if truly part of a mining operation would be located close to it. The emphasis on the location of those ancillary activities does not mandate a construction that all eligible ancillary or preparatory activities must be located at or close to the place at which the mining operation takes place. There is however a more general consideration which limits the constructional choices available and that is that the activity must be functionally integrated with the physical activity of mining. Thus, any eligible activity undertaken "in the preparation of a site to enable mining for minerals to occur" will be functionally integrated with that preparation. To put it another way, it will be part of that preparation. In Dyno Wesfarmers Ltd (supra) at 6-7 the Full Court referred to the use of the term "integral" by the Tribunal to describe the relationship between the activities there in question and the relevant mining operations. The use of that word did not involve the Tribunal substituting a different test for that used in the legislation and in context was "consistent with the statutory requirement". The reference in par (a) of the definition to the removal of overburden as an eligible preparatory activity does not limit the class of "other activities" there referred to to physical interventions at the mine site. The mention of overburden no doubt covers particular classes of mining operation. It plainly does not refer to all. It cannot refer to subsea extraction of natural gas. If eligible preparatory activities are to be identified by their functional relationship to preparation for and conduct of the mining operation there is a variety of factors which can be taken into account in making that identification. These factors will include temporal and geographical proximity. As the Full Court said in Dyno Wesfarmers Ltd: "When the issue is whether a particular operation is "in" a specified activity, matters respecting locality and place can be, and often are, relevant." If consideration of the application of the Act is limited to those factors however, there is the possibility of artificial and commercially unrealistic distinctions being drawn which would defeat the purpose of the rebate provisions. The Tribunal based its decision upon its characterisation of the transportation of construction materials as: (a) An activity which is antecedent to and does not form part of or occur in the course of, the relevant mining or processing activities. (b) A discrete activity which preceded the relevant mining operations and was not part of them. (c) Not an activity in mining operations as defined in s 164(7) of the Customs Act. The Tribunal did not address in terms the question whether the transportation of the material was an activity "undertaken in the preparation of a site to enable mining for minerals to commence" within the meaning of par 164(7)(a) of the Act. The focus of its reasoning was upon the question whether the transportation was antecedent to and part of the mining operations. It did consider that element of the definition of mining operations in its reasons for decision relating to the installation of the pipeline. That was expressly undertaken as "an alternative basis" upon which the installation might fall within par 164(7)(a). It noted (at par 34) that although the gas mining and processing activities fell within the definition of mining operations in s 164(7), the act of transporting the necessary construction materials did not. The opposition thus identified by the Tribunal lay between a mining operation which was underway and the transportation process in connection with its construction. In a sense it was comparing two different categories of activity. Having expressly considered, in connection with the construction of the pipeline, the limb of that definition of mining operations relating to mine site preparation, the Tribunal's failure to do so in relation to transportation of construction materials is significant. I do not consider that this view of its reasons criticises mere looseness of language nor unhappy phrasing. Nor do I consider that it amounts to a minute construction of the reasons with an eye keenly attuned to the perception of error - Politis v Commissioner of Taxation (1988) 69 ALD 707 at 708. The statutory test required to be applied appears not to have been applied. A narrow limb of the relevant definition has been invoked. As a result an unduly restrictive construction of the section has been applied to the activity in question. If the evaluation of a factual situation applies an unduly restrictive or unduly expansive approach then the decision made will be affected by an error of law. In Collector of Customs v Pozzolanic Enterprises Pty Ltd (supra), the Full Court in considering the question whether an activity was "connected with the rearing of livestock" for the purposes of eligibility for diesel fuel rebate, said at p 289: "The range of relationships to which the words apply for the purpose of the Act depends upon a judgment about that purpose. The selection process involved is analogous to that used in determining what causal relationships between conduct and loss attribute liability for the purpose of s 82 of the Trade Practices Act 1974 (Cth): see Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No. 2) (1987) 16 FCR 410 at 418-419; Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700 at 712-713. In the end this is not a process of fact finding. The facts are found. What is left is a value judgment about the range of the Act and that is a question of law." In that case the Tribunal decision was based upon a proper construction of the Act and a finding of fact that the purchase of the fuel in question was for use in the manufacture, distribution and delivery of stock feed rather than the rearing of livestock. In my opinion, upon a proper and less restrictive approach to construction than that adopted by the Tribunal in this case, the transportation of construction materials for the purpose of establishing those land based facilities is part of the preparation of the site. The "site" in this case is extended in space because of the offshore location of the wells. As his Honour said, the reference in the definition to a "site" does not involve a term of restricted meaning. In context it refers to the area or location utilised for the mining of minerals. And acts of preparation of a site are not to be restricted to acts on the site. The references to "exploration" and "prospecting" are inconsistent with the limitation of operations to a place such as a mining site. There is no principle of law or fact that mining operations are limited to the space of a mining site or the dimensions of a mining tenement – Dyno Wesfarmers Ltd (supra) at 7. In a recent unreported decision delivered on 21 August 1998, Dawson, Rockwater Joint Venture v Chief Executive Officer of Customs (Judgment No. 1010/98, unrep, Merkel J, 21/8/98), Merkel J drew a distinction between movement of a tug to and from a place at which it carried out the towing and installation of offshore production platforms and the activities considered by Lee J at first instance in this case and by the Full Court in Dyno Wesfarmers. His Honour observed (at p 8): "The activities in those cases were part of an integrated process by which "mining operations" as defined were carried out…" His Honour's reasons do not disclose any error. They represent a proper application of the law recognising, as must be recognised, that the process of construction of the statute in its application to particular fact situations does involve processes of evaluation rather than the drawing of bright line distinctions. On the basis of the Collector's concession as to the appropriate order if the appeal should be unsuccessful, the appeal should be allowed to the extent that his Honour's order remitting the matter to the Tribunal for redetermination should be set aside and replaced with an order by way of a declaration that diesel fuel rebate is payable in respect of fuel used in transporting construction materials, plant, equipment and fuel to Varanus Island. Otherwise the appeal against his Honour's decision should be dismissed with costs. I certify that this and the preceding twenty (20) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice French Associate: Dated: 9 October 1998 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY wag 10 of 1998 BETWEEN: CHIEF EXECUTIVE OFFICER OF CUSTOMS Appellant AND: WMC RESOURCES LIMITED Respondent JUDGES: FRENCH, CARR & R D NICHOLSON JJ DATE: 9 October 1998 PLACE: PERTH REASONS FOR JUDGMENT CARR J: French J has stated the facts and issues and described the statutory provisions and the proceedings before the Administrative Appeals Tribunal and the learned primary judge in terms which I adopt gratefully. As I see it, the question is whether the Administrative Appeals Tribunal erred in law (as the primary judge so held) in reaching its decision. The critical portions of the Tribunal's decision were contained in two paragraphs which I set out below in a slightly edited form: "34. The final issue is whether the activities of WMC Resources Ltd (as agent for the East Spar Alliance) in transporting the various construction materials from Onslow … to Varanus Island, for use in the construction of the facilities (including the pipeline) required for the gas mining and processing activities … fall within the definition of "mining operations" in s 164(7) of the Customs Act 1901. In the Tribunal's opinion they do not. Although the abovementioned gas mining and processing activities themselves fall within the statutory definition of "mining operations", the act of transporting the necessary construction materials for those activities does not. The transportation of the construction materials is, in the Tribunal's opinion, an activity which is antecedent to, and does not form part of, or occur in the course of, the relevant mining or processing activities. 35. The cases of Westrail and Dyno Wesfarmers (above) are distinguishable from the present case. In Westrail the transportation of coal from coalfields at Collie to an alumina refinery at Worsley approximately 48 kms away, for use in the refinery process, "was one of a number of integrated steps between excavating the bauxite at Boddington and recovering alumina at Worsley": (1995) 39 ALD at p 28. The Federal Court (Lee J) concluded (at p 29): "… therefore, diesel fuel purchased for use in transporting the coal … is purchased for use in an integral part in the recovery of alumina and the entitlement to a rebate on the purchase price under the Excise Act is thereby established". In Dyno Wesfarmers it was held that travel by a "mobile manufacturing unit" ("MMU") along public roads from a depot in Kalgoorlie to a mine site, and return – a distance of 150 kms each way – was an activity in mining for minerals and, accordingly, fell within paragraph (a) of the definition of "mining operations" in s 164(7) of the Customs Act 1901. The MMU was loaded with ingredients for explosives at the depot and then driven to the mine site where the ingredients were blended on the MMU and then pumped down drill holes at the mine site by means of a mounted pump and hose on the MMU for the purpose of creating an explosion in the process of mining for minerals. Significant aspects of that case were that the MMU was a "purpose built vehicle" and not a "road vehicle" (statutorily defined as "a vehicle of a kind ordinarily used on roads for the transport of persons or goods") and that the use of MMUs was regarded in the Kalgoorlie area as good mining practice and was an ordinary and regular part of the process of mining in that area … None of the special features of Westrail and Dyno Wesfarmers, which rendered the transport activities in those cases as forming part of the relevant mining operations, is present in the instant case. Here, the transportation of the construction materials was a discrete activity which preceded the relevant mining operations and was not a part of them. In other words the transportation of the construction materials was not an activity in "mining operations" as defined in s 164(7) of the Customs Act 1901." His Honour held that the Tribunal misunderstood the proper construction of s 164(7). First, his Honour said that the Tribunal's reasons: "… suggest that the Tribunal understood that unless the activity in which fuel was used had a temporal relationship with a "mining or processing activity", no entitlement to a rebate could arise. With great respect to the primary judge, I do not regard the Tribunal's references to the activity being "antecedent to" or "precede[ing] the relevant mining operations" as indicating that the Tribunal was of the view that unless the activity in which the fuel was used had a temporal relationship with a "mining or processing activity", no entitlement to a rebate could arise. In each case the reference was accompanied by a conclusion that the activity was not part of the relevant mining operations and (in paragraph 34) did not occur in the course of the relevant mining or processing activities. The Tribunal had earlier in its reasons held that the installation of the pipeline was an activity which fell within s 164(7)(a) although it occurred before the relevant mining activity (extraction of raw gas) – see paragraphs 26 and 31 of its reasons. Taking the Tribunal's reasons as a whole, the Tribunal is to be understood, not as working on the basis that there had to be a temporal relationship between the activity and the preparation of the site, but simply as making a characterisation of the nature of the transportation activity. That characterisation was that it fell on the other side of the line at which it might be said that activities were undertaken in the preparation of a site to enable mining for minerals to commence. There has to be a point at which "activities undertaken in the preparation of a site to enable mining for minerals to commence" start. The Tribunal was simply finding that, on the facts, transportation did not form part of those activities. It might have been helpful if the Tribunal had expressly made it clear in the above paragraphs that it was considering whether the diesel fuel used in the transportation was used in an activity "undertaken in the preparation of a site to enable mining for minerals to commence". However, the Tribunal had already considered that phrase when it ruled (as an alternative ruling), in paragraph 28 of its reasons, that installing or laying the pipeline fell within that description. A perfect set of reasons might have re-stated that part of the definition when deciding the question whether transportation of these various materials fell within it. However, it is clear from paragraph 28 that the Tribunal was well aware of the wider alternative expressed in paragraph (a) of the statutory definition of "mining operations". Even the use by the Tribunal, within the two paragraphs set out above, of the word "activity" is an indicator of that. The plural of that word appears only in the more widely expressed alternative. The citation of the two cases assumes, in my view, particular significance when one reads paragraph 10 of the Tribunal's reasons. In part of that paragraph the Tribunal said: "As regards the activity of transporting the construction materials from Onslow to Varanus Island, he [Mr Sweidan] submitted that that activity was "an incidental part of the … activities undertaken in the site preparation". In support of these submissions he relied chiefly on [Dyno]." I regard the Tribunal's reference to "the relevant mining operations" as amounting to a convenient shorthand for "other activities undertaken in the preparation of a site to enable mining for minerals to commence", being the relevant item in the definition of "mining operations" in paragraph (a). The references to Westrail and Dyno Wesfarmers are, in my view, quite understandable. At the time they were the only decisions (obiter in Westrail), since the 1995 amendments, on how "in" something has to be, to be "in". The differences between the views of French J and my views on this particular point boil down, as I see it, to how beneficial a construction should be put on the Tribunal's reasons. I happen to think that the Tribunal was aware of the test which it had to apply and applied that test. The same applies, so it seems to me, to the extent to which the primary judge's findings imply (if they do) that the Tribunal erred in law in thinking that the acts of preparation of a site, referred to in the statutory definition, are restricted to acts on the site. It is quite clear from the following passage, contained in paragraph 28, and the two cases cited in paragraph 35 of its reasons that the Tribunal correctly understood the position. The relevant passage in paragraph 28 read as follows: "The Tribunal accepts Mr Sweidan's submission that the words of paragraph (a) of the statutory definition of "mining operations" do not require that the relevant preparatory activities take place at the mining site…" Then there is implicit in his Honour's reasons (see the first paragraph at p 197 of the Appeal Book) that the Tribunal misunderstood s 164(7) by restricting the meaning of the words "… preparation of a site to enable mining to commence …" to acts of disturbance or excavation of land. Again, it is quite clear from the Tribunal's rejection (in paragraph 28) of a similar submission, that it held no such restrictive view. In my view, the Tribunal's reasons should be read as a whole, including its reasoning in relation to the installation or laying of the pipeline. When that is done, it can be seen that the Tribunal had a very clear understanding of the proper construction of s 164(7). This sort of approach to the Tribunal's reasons is, in my view, required so as to comply with the guidelines laid down by four members of the High Court of Australia in Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 271-272. In my opinion it was open to the Tribunal, as the primary judge held, to find that the transport services were "… other activities undertaken in the preparation of a site". It was also open to the Tribunal to find that they were not. The words are used with their natural and ordinary meaning. Accordingly, in my view, when the Tribunal made that choice it did not err in law: see the fifth proposition in Collector of Customs v Pozzolamic Enterprises Ltd (1993) 43 FCR 280 at 287and the qualification to that proposition (at 288), to which the High Court of Australia referred, without apparent disapproval, in Collector of Customs v Agfa-Gevaert Ltd (1996) 141 ALR 59 at 63. See also J.D. Phillips J.A. in Powley v Crimes Compensation Tribunal (1996) 11 VAR 146 at 153-155. French J describes the process of construction of the statute and its application as involving evaluation. I would respectfully agree with that description. Parliament has given to the Tribunal the task of deciding on the facts where the line is to be drawn in any particular matter. I happen to agree with its conclusion, in this case, that the transport services did not have sufficient nexus to preparation of the site to be characterised as "other activities in the preparation of a site …". However, I have some reservations about whether it is something upon which I should reach any such conclusion. That factual assessment involves weighing up various factors including the place (whether on site or otherwise) at which the activities were rendered, the temporal relationship between the activities and site preparation and any other circumstances relevant to that nexus. I readily acknowledge that, in this case, the opposite conclusion to mine is equally tenable. However, when one reads the Tribunal's reasons fairly, and as a whole, my view is that it can be seen to have understood the relevant legal principles, to have applied those principles and to have asked itself the right questions. I have read R D Nicholson J's careful and comprehensive analysis of other provisions of s 164 of the Customs Act which form the basis for his Honour's conclusion that the statutory context requires s 164(7)(a) to be interpreted in its narrowest sense. I need not express any firm view on that conclusion, but I have some slight reservations on the point. It appears from the Supplementary Explanatory Memorandum that further amendments were made to the 1995 amendment bill, as a direct response to concerns expressed (by bodies representing the agricultural and mining sectors) to the Senate Economics Legislation Committee. I am inclined to suspect that this is an area where the various inclusions and exclusions may well have been "… particular responses to exigencies of political pressure" – to borrow a phrase used by Lindgren J in another context [in Telstra Corporation Ltd v Federal Commissioner of Taxation (1996) 68 FCR 566 at 581]. If so, there may not have been any coherent unifying concept underlying the list of inclusions and exclusions. If there is such a coherent unifying concept, perhaps it is to be found in the following paragraph from the Supplementary Explanatory Memorandum: "It is considered that the expanded list will maintain the integrity of the Scheme [the Diesel Fuel Rebate Scheme] in assisting persons engaged in mainstream agriculture and mining operations while excluding from eligibility activities that can only be regarded as remotely connected with agriculture or mining." My provisional view is that the 1995 amendments do not require any change to the approach to be brought to the construction of s 164(1)(a). Before the amendments there was the narrow concept of requiring the relevant activity to be "in" the various operations described in that paragraph, for there to be an eligibility for rebate. If the activity failed the "in" test then it still had a chance of passing the "connected with" test expressed in paragraphs (c) and (ca). That is a wider expression – see Dyno Wesfarmers at 5. The 1995 amendments can be seen to have inserted some further operations into paragraph (a) in respect of which the "in" test is to be applied and to remove the scope for rebate eligibility formerly extended by the "connected with" test, coupled with some more specific inclusions some of which were in response to political lobbying. The question whether the diesel fuel in the present matter was purchased for use in "… other activities undertaken in the preparation of a site …" was one of fact for the Tribunal [Dyno Wesfarmers at 6]. As I have said, I think that its conclusion was more than reasonably open. Conclusion For the foregoing reasons I would allow the appeal. I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment of Justice Carr Associate: Dated: 8 October 1998 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAG 10 of 1998 BETWEEN: CHIEF EXECUTIVE OFFICER OF CUSTOMS APPELLANT AND: WMC RESOURCES LIMITED Respondent JUDGE(S): FRENCH, CARR AND R D NICHOLSON JJ DATE: 9 OCTOBER 1998 PLACE: PERTH REASONS FOR JUDGMENT R D NICHOLSON J: The background and circumstances in which the appeal arises are set out in the reasons of French J upon which I rely in that respect. However, I reach a different conclusion from him because I consider there are strong indications in the relevant statutes that the claim for rebate is not allowable. The critical issue in this appeal is whether the primary judge erred in law in holding the Administrative Appeals Tribunal ("the Tribunal") had misunderstood the proper construction of subs 164(7) of the Customs Act 1901 (Cth) and s 78A of the Excise Act 1901 (Cth) ("the Acts") when it determined the respondent was not entitled to a rebate for fuel used in transporting by vessel construction materials, plant and equipment and fuel from Onslow to Varanus Island. Relevantly the issue is whether the primary judge was correct to hold that it was open to the Tribunal to conclude the act of transportation fell within the words "other activities undertaken in the preparation of a site to enable mining for minerals to commence as they appear in those." Words in relevant paragraph The immediately relevant part of s 164 of the Customs Act (s 78A of the Excise Act being identical in its terms) are as follows: "164.(1) A rebate is…payable to a person who purchases diesel fuel for use… (a) in mining operations (otherwise than for the purpose of propelling a road vehicle on a public road); … (7) In this section: … "mining operations" means: (a) exploration, prospecting or mining for minerals; or the removal of overburden and other activities undertaken in the preparation of a site to enable mining for minerals to commence; or (b) the dressing or beneficiation of minerals, or ores bearing minerals, as an integral part of operations for their recovery; In the circumstances of the appeal, the relevant subject for the purposes of construction are "other activities". The word "activity" is a word of the widest scope. It refers to "the state of action; doing": Macquarie Dictionary p.16. The subject may therefore be taken as unlimited in itself provided it is an act of doing. The verb relevant to the construction of the paragraph is the word "undertaken" which, somewhat tautologously, emphasises the requirement for something to be done. The object to which the subject and verb relate are "in the preparation of a site to enable mining for minerals to commence". The word "in" as it appears in par (a) of the definition of "mining operations" is to be understood in this context as "inclusion within, or occurrence during the course of …": Macquarie Dictionary, p.887. In Chief Executive Officer of Customs v Dyno Wesfarmers Limited (1997) 73 FCR 1 at 5 the Full Court (Davies, Wilcox and Tamberlin JJ) said: "In s 164(1)(a), the preposition 'in' is used to connect the words "for use by him" with the term "mining operations" so as to require the prospective use of the diesel to be use within the ambit of "mining operations". The Shorter Oxford English Dictionary uses the expression 'In the process or act of' to express the meaning of the word "in" in such a context. It follows that the issue for consideration is not that which was considered in Collector of Customs v WA Government Railways Commission (1995) 39 ALD 21 (Westrail), in which Lee J considered an earlier definition of the term 'mining operations' which included 'operations connected with … mining for minerals that are carried out in, or at a place adjacent to, the area in which the exploration, prospecting or mining occurs'. That was a wider extension, because of the use of the words "connected with" though limited by the words "in, or at a place adjacent to, the area in which … mining occurs". In State Rail Authority of New South Wales v Collector of Customs (1991) 33 FCR 211 at 214 the Full Court said: "it appears that the object of s 78A of the Act is to allow a rebate in respect of fuel purchased for use 'in mining operations'. Usually the use of the term "in" in this context is intended to be restrictive: see, for example, Robe River Mining Co Pty Ltd v Commissioner of Taxation (Cth) (1989) 21 FCR 1 at 12." The use by Parliament of the word "in" rather than "in connection with" is therefore significant for the issue of construction which arises here. The word "preparation" means in this context "a measure, or provision by which one prepares for something" and so an "act of preparing": Macquarie Dictionary, p.1394. Here it is not in issue the relevant site was one intended to be used "to enable mining for minerals to commence". It is equally clear the transportation in issue falls without controversy within the words "other activities undertaken". The only issue is whether that relevant activity in relation to that site was undertaken "in the preparation of a site". The use of the word "in" rather than "in connection with" is, in the context, a firm indication of Parliament's intention to avoid a wide interpretation. The view is supported by consideration of par (a) in its context. Restrictions in respect of road vehicles The operation of s 164 depends substantially on the provisions of subs 164(1) which provide for the rebate to apply in respect of a person who purchases diesel fuel for use by that person in the specified categories. Two of those categories are mining operations and primary production. Importantly each is qualified by the words "otherwise than for the purpose of propelling a road vehicle on a public road". Subsection 164(7) defines "road vehicle" to mean a vehicle ordinarily used on roads for the transport of persons or goods. It would appear that these words preclude any claim in respect of the use of diesel fuel to bring plant and equipment to a site, so far as the transport is on public roads and is undertaken by a road vehicle. Had it been the case the diesel fuel here in issue related to transportation by public road to bring the plant, equipment and fuel to the site, these words would have precluded any claim for rebate. However, the claim is for the ferrying by sea of the materials onto the construction site so that the exclusion is not applicable. Inclusionary provisions The inclusions specifically legislated as part of "mining operations" are listed in pars (c) – (w) of the definition of "mining operations" as it appears in subs 164(7). In the Second Reading Speech the Minister said the amendments introducing the inclusionary provisions were made to remove the subjectivity associated with the previous "sweeper clauses" and replace them with an objective list of activities. In Australian Native Landscapes Pty Ltd v Collector of Customs (1997) 24 AAR 353 at 362 Sackville J recognised one purpose of the amendments was to restrict the circumstances in which the diesel fuel rebate was payable. An expansive interpretation of par (a) would defeat this evident intention. In my opinion there are significant indications in this inclusive list of a Parliamentary intention to qualify for a rebate only that activity as it is described and not as it may include preparatory acts. I first reach this view by reference to the subparagraphs in subs 164(7) which specifically deal with construction or maintenance. These are as follows: (o) The construction or maintenance of private access roads for use in a mining operation. (p) The construction or maintenance of storage dams or tailings dams for use in a mining operation. (q) The construction or maintenance of private airstrips, buildings, plant or equipment for use in a mining operation. (r) The construction or maintenance of power stations or power lines solely for such use in a mining operation. In each of these cases the rebate of the activity will only qualify for inclusion where it occurs at the place where the mining operation is carried on. As each of the activities involves construction or maintenance it is reasonable to posit that it may require the provision of plant or equipment to enable such construction or maintenance to be carried out. On a plain reading of each paragraph that activity would not qualify. Furthermore, it would be precluded in any event by the qualifying words to the definition of mining operations if the plant or equipment necessary for construction or maintenance was transported by a road vehicle on a public road. Reading those provisions of par 164(1)(a) together with the specific requirements in the subparagraphs referred to, I consider Parliament has evidenced an intention not to include as a rebatable use the transport of plant or equipment to enable those activities to be undertaken. Other sub-paragraphs relate to the carrying out of a mining process: (e) the liquefying of natural gas; (g) the production of common salt by evaporation; (h) the reactivation of carbon for use in the beneficiation of ores bearing gold. They do not assist in relation to the issue presently before the Court. Further paragraphs relate to activities carried on in connection with mining operations, namely: (i) Coal stockpile management. (j) The generation of electricity to a mining town in certain circumstances. (k) and (ka) The rehabilitation of the place of a mining operation. (m) The pumping of water solely for use in a mining operation. (n) The supply of water solely for use in a mining operation. (s) The removal of waste products. (t) The disposal of waste products. These all relate expressly to "the place where the mining operation is carried on", which is consistent with the section being directed to a particular activity as it occurs on the relevant site. Again, so far as the preparatory work may involve the transport of plant or equipment by a vehicle on a public road, it would be precluded from inclusion by the qualifying words in par 164(1)(a). Where transport is a relevant factor, some paragraphs expressly address it. Such paragraphs are as follows: (c) The transportation of mineral or ores from the mining site to the place of dressing or beneficiation and the return journey to the mining site. (d) The transporting of natural gas from the mining site to the place of liquefication. Importantly, for the present case, the following is included. "(d)(2) the undertaking: (i) of voyages to or from an Australian port by a ship that is proposed to be, or that is, used wholly or primarily in carrying out northern mining activities for the purposes of refitting or repairing the ship or its equipment for, or as a result of, carrying out those activities; or (ii) of trials in connection with such a refit or repair of the ship or its equipment; or …" There is no provision covering transport to or from the relevant sites of plant, equipment or fuel needed for the qualifying activity on the identified site. In short there is nothing in the specific inclusions to encourage a broad interpretation of the words "other activities undertaken in the preparation of a site to enable mining for minerals to commence" in par (a) of "mining operations". Both the context of the limiting words in par 164(1)(a) and the provisions of the specific inclusions, in my view, are expressive of a legislative intention that the words in question should be construed to refer to actual activities undertaken in the preparation of the site as distinguished from preparatory acts in bringing plant and equipment to the site to enable those acts to be undertaken. Specific exclusion The definition of "mining operations" in subs 164(7) has specifically excluded from it "quarrying operations carried on for the purpose of obtaining stone for building, road making or similar purposes." This may be read in particular in conjunction with the following pars : (o) The construction or maintenance of private access roads for use in a mining operation. (p) The construction or maintenance of storage dams or tailings dams. (q) The construction or maintenance of private airstrips. (r) The construction or maintenance of power stations or power lines. By the specific exclusion Parliament has ruled out acts which are in a general sense preparatory to the undertaking of those specific acts of construction or maintenance all of which, as has been said, are to occur at the place where the mining operation is carried on. Other qualifying purposes The other uses referred to in par 164(7) (b), (c) and (d) qualify only when occurring "at" particular places, namely residential premises, a hospital or nursing home or a home for aged persons. The other qualifying use expressed in similar terms to that of mining operations is the use qualifying in par 164(1) (aa), namely, "primary production". The words "primary production" are defined to mean agriculture; fishing operations; or forestry. In the definition of "agriculture" as it appears in subs 164(7) there are a number of specifically inclusionary provisions relating to construction and maintenance. These are: (m) The construction or maintenance of fences. (n) The construction or maintenance of fire breaks. (p) The construction or maintenance of sheds, pens, silos or silage pits. (q) The construction or maintenance of dams, water tanks, water channels, irrigations systems. (r) The carrying out of earthworks. All of these are required to be carried out on an agricultural property where a core agricultural activity is carried on. No provision is made in the specific inclusionary paragraphs for a rebatable use in respect of fuel incurred in bringing plant, equipment and fuel to the site of the agricultural activity as may be necessary to carry out the particular construction or maintenance. Furthermore, so far as that plant or equipment was transported by a road vehicle on a public road it would be precluded by the qualifying words in par 164(1)(aa). The same reasoning applies in respect of the definition of "mining operations". "Fishing operations" is a definition which does not assist here apart from the fact that it includes a specific provision including within it voyages by vessels involved in fishing operations, in the same way that the definition of mining operations makes a specifically inclusionary provision for such voyages of other vessels. In the case of "forestry" this is defined specifically to include "the transport or milling or processing, in a forest or plantation, of timber felled in the forest or plantation": par (c). Also specifically included is the transporting of timber from the forest or plantation in which it was felled to a saw mill or chip mill situated elsewhere: par (e). Again where transport is to be a rebatable use there is a specific provision. Again the words in par 164(1)(aa) apply to preclude a rebatable use in respect of transport by a road vehicle on a public road. Effect of statutory context Reading the definition of "mining operations" and in particular par (a) in the context, firstly, of the other provisions of that definition and, secondly, in the context of s 164 as a whole, I find nothing to encourage or support a view that the words in it are to be given an interpretation of a broad and general nature beyond the meaning of the words used themselves. It is, in my view, a paragraph in which the words require it must be interpreted in the narrower of the two senses contended – that is, as relating to the other activities which are acts of preparation of a site to enable mining for minerals and not acts preparatory to enabling such acts to occur. It would not therefore extend to the transport by vessel of plant, equipment or fuel to enable the acts of preparation themselves to be executed. If this is a literalist interpretation, it is one which in my opinion is dictated by the context of the section and the mode in which Parliament has sought to address the issue of rebatable uses. Reasons of primary judge I agree with the primary judge the proper understanding of the effect of s 164(7) and the provision of the inclusionary paragraphs in the definition of "mining operations" is that entitlement to a rebate is not restricted to an activity in a "mining operation" that has a temporal relationship with the production of a mineral. The absence of a temporal relationship would not therefore be a ground for excluding the acts of transport by vessel of the plant, equipment and fuel here in issue. I also agree with him that the reference in the definition of "mining operations" to a "site" does not involve a term of restricted meaning. The primary judge then said "that acts of preparation of a site referred to in the definition are not restricted to acts on the site". In support of this he referred to Chief Executive Officer of Customs v Dyno Wesfarmers Ltd (1997) 25 AAR 43. In that decision the Full Court (Davies, Wilcox and Tamberlin JJ) held it was open to a Tribunal to conclude that the operations of certain mobile manufacturing units were operations "in mining" because par 164(1)(a) and the definition of "mining operations" did not limit the allowable operations to a particular site. With respect, that is not supportive of the proposition as stated by the primary judge. What it means is that the site for "mining for minerals" is not confined to a particular site. That is a question of fact against which the requirements of par (a) are to be applied. If there is more than one "site" then it will be necessary to apply the words "other activities undertaken in the preparation of a site" to those other sites. In the case of any qualifying site it must still be necessary for the other activity to be undertaken "in the preparation of" that site. That is not determinative of the issue as to whether "the other activities" here in issue – namely the transport by vessel of the plant, equipment and fuel – was an activity "undertaken in the preparation of a site". It has not been contended that the vessel was a mining site. It should be added that in that portion of his reasons not under appeal to this Court the primary judge dealt with a submission on behalf of the present appellant to the effect that the addition of words relating to the removal of over-burden and the preparation of a site for mining in par (a) by the Customs and Excise Amendment Act 1995 (Cth) reflected the intention of Parliament that the phrase "mining for minerals" should have a more restricted meaning than previously when those words were not included. He said at 12 of his reasons: "I am unable to agree with that submission. There is nothing in the added words to support that conclusion. In the context of s 164(7) as a whole it could be concluded that the phrase "mining for minerals"embraces the activities described in the words added to par (a) of the amending Act. Whether that is so is unnecessary to determine. The apparent purpose of adding the words to par (a) was to remove any doubt that may have arisen by the deletion of the former par (c) that an entitlement to a rebate continued where diesel fuelled was used in such preparatory activities." Former par (c) read: "(c) other operations connected with exploration, prospecting or mining for minerals that are carried out in, or at a place adjacent to, the area in which the exploration, prospecting or mining occurs;" Reference to that former paragraph does not assist, in my opinion, with the interpretation of the scope of the words here in issue, namely the words "other activities undertaken in the preparation of a site to enable for mining for minerals to commence." In that portion of his reasons not under appeal the primary judge also referred to the Second Reading Speech in the Senate by the Minister for Industry, Science and Technology responsible for the Custom and Excise Legislation Amendment Bill 1995 and of the explanatory memorandum. He said these confirmed that the meaning of par (a) was not intended to be altered by introducing a restricted meaning for the phrase "mining for minerals". The primary judge noted that in the Second Reading Speech the Minister had said "it should be noted that although the proposed amendments will necessarily narrow the range of activities for which rebate is payable, farmers and miners will generally be unaffected." The supplementary explanatory memorandum had also reaffirmed the intention for the Bill was "not to affect the eligibility for rebate of persons engaged in mainstream … mining". As has been said, these reasons are not on appeal; they support the continued interpretation of the phrase "mining for minerals" in the manner determined by the Full Court in Dyno but, in my view, do not assist in resolution of the issue in the present appeal. Returning to the reasons of the primary judge on the point under the appeal, he continued: "The context in which the words are used shows that such a restricted meaning for the words is not intended. As stated earlier in these reasons, the words relating to preparation of a site for mining, and those relating to the removal of overburden, have been added to remove any doubt that may have arisen as a consequence of the deletion of par (c) of the old definition. The words "to enable mining for minerals to commence" suggest a broader scope than acts of disturbance or excavation of land. To restrict a right of rebate to such activities and to deny a rebate for fuel used in substantive works undertaken in preparation for mining would provide a strange result and one inconsistent with Parliament's intention." There is no difficulty with his Honour's view that the words "to enable mining for minerals to commence" suggest a broader scope than acts of disturbance or excavation of land. Accepting, as I consider the law requires, that "mining for minerals" is to be given a broad construction, that must necessarily be the case. However, his Honour was not correct in stating that there would be a denial of a rebate for fuel "used in substantive works undertaken in preparation for mining". The issue before the Tribunal and the issue of law raised on the appeal is whether the relevant acts of transport by vessel were "undertaken in preparation of a site to enable mining for minerals to commence". "Substantiality" was not an issue. Nor was it necessary for the works to be "undertaken in preparation for mining". What was required was that "the other activities" be undertaken "in the preparation of a site". In the final paragraph of his reasons the primary judge concluded: "On the material before the Tribunal it was open to the Tribunal to conclude that the area on which the production wells and the pipeline which connected the production wells with the processing facilities on Varanus Island and the facilities on Varanus Island together were the site on which the mining of natural gas was undertaken by the East Spar Alliance. Therefore, it was open to the Tribunal to conclude that if construction materials, plant and equipment, and fuel transported from Onslow to Varanus Island were used in establishing the wells, the pipeline and the processing facilities on Varanus Island, the act of transportation was an activity undertaken in preparation of a site to enable mining for minerals to commence. Whether those findings are to be made is a matter for the Tribunal. Accordingly the "appeal" should be allowed and the matter returned to the Tribunal for redetermination." I agree it was open to the Tribunal to conclude that the relevant site was that described by the primary judge. It does not follow, however, that it was then open to the Tribunal to conclude the act of transportation would be an activity undertaken in preparation of the site if the construction, materials, plant and equipment were used to establish the wells, pipeline and processing facilities. The act of transportation was not itself an act in preparation of the relevant site as I understand those words. It was an act preparatory thereto. In common with all such acts of construction or maintenance and otherwise in s 164, it is not an act brought within the rebatable activities. Tribunal's reasons In its reasons on the point under appeal the Tribunal concluded the transportation of the construction materials was an activity "which is antecedent to, and does not form part of, or occur in the course of, the relevant mining or processing activities". So far as this formulation acknowledges the relevant acts of transport were preparatory to commencement of acts in preparation of the relevant site, it accords with what I consider to be the proper understanding of the relevant provisions. The Tribunal distinguished Dyno Wesfarmers on the ground that none of the special features of it which resulted in the transport activities in that case forming part of the relevant mining operations was present in the instant case. For the same reason it distinguished the decision of the trial judge in Collector of Customs v The Western Australian Government Railways Commission (Westrail) (1995) 39 ALD 21 at 28-29. That was a case in which the question was whether the transportation of coal was "connected with" a mining operation and it was held that diesel fuel purchased for use and transporting the coal was purchased for use as an integral part in the recovery of alumina so that the entitlement to a rebate on the purchase price under the Excise Act was established. In my opinion, each of these decisions was rightly distinguished by the Tribunal. In its conclusion the Tribunal was not led to an erroneous outcome. Conclusion Since reaching the above view I have considered the decision in Dawson, Rockwater Joint Venture v Chief Executor Officer of Customs (Merkel J, Federal Court of Australia, 21 August 1998, unreported). While it accepts the reasoning of the primary judge presently under appeal I consider the reasoning in Dawson and the ratio decidendi there applied are supportive of the views I have reached on the issue of statutory construction. Since writing the above I have also had the advantage of reading the draft reasons of Carr J including his reference to what was said by Lindgren J in Telstra Corporation Ltd v Federal Commissioner of Taxation (1996) 68 FCR 566 at 581. I remain of the view that there is a sufficient degree of underlying concept in the provisions here in issue to enable this appeal to be resolved as a matter of statutory construction. In particular the provisions of the opening general paragraphs of s 164(1) and s 78A(1) where they refer to "otherwise than for the purpose of propelling a road vehicle on a public road", appearing as they do in provisions not of the character referred to by Lindgren J, set the tenor of legislative approach which is, in my view, picked up and carried forward by the limitations in the subsequent provisions. For these reasons I consider his Honour was in error in construing par (a) so as to include the use of fuel in transportation by vessel of plant, equipment and fuel to the site. Without prejudice to the authorities according a broad scope to the understanding of "mining operations" and "mining for minerals", I consider par (a) does not intend the act of such transportation to be a relevant use for the purpose of a rebatable claim. Accordingly, I consider that the primary judge was in error and the decision of the Tribunal on the point under appeal should be restored. I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice R D Nicholson Associate: Dated: 8 October 1998 Counsel for the Appellant: Mr G J Gibson QC with Mr R J Maguire Solicitor for the Appellant: Australian Government Solicitor Counsel for the Respondent: Mr M L Barker QC with Mr A Sweidan Solicitor for the Respondent: KPMG Legal Date of Hearing: 22 July 1998 Date of Judgment: 9 October 1998