FEDERAL COURT OF AUSTRALIA Chief Executive Officer of Customs v Goliath Portland Cement Co Ltd [1999] FCA 666 TAXES AND DUTIES - diesel fuel rebate - appeal from Administrative Appeals Tribunal - rebate available for fuel used in "mining operations" - cement manufacturing plant - operations including recovery of calcite and processing thereof – whether limestone excluded from definition of "minerals" WORDS AND PHRASES – "minerals", "mining operations" Customs Act 1901 (Cth) s164 Excise Act 1901 (Cth) s78A Customs and Excise Amendment Act 1995 (Cth) Customs and Excise Legislation Amendment Act (No 1) 1996 (Cth) Thompson v Goold & Co [1910] AC 409 at 420 applied Re Bolton; ex parte Beane (1987) 162 CLR 514 applied Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 applied CSR Limited v Chief Executive Officer of Customs (1997) 26 AAR 84 at 91 applied North Australian Cement Ltd v Commissioner of Taxation (Cth) (1969) 119 CLR 353 at 362 cited Neumann Dredging Co Ltd v Collector of Customs (1987) 79 ALR 588 applied Collector of Customs v Bell Basic Industries Ltd (1988) 20 FCR 146 applied CHIEF EXECUTIVE OFFICER OF CUSTOMS V GOLIATH PORTLAND CEMENT CO LTD No TG 21 OF 1998 HEEREY J 20 MAY 1999 MELBOURNE (HEARD IN HOBART) IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY TG 21 OF 1998 BETWEEN: CHIEF EXECUTIVE OFFICER OF CUSTOMS Applicant AND: GOLIATH PORTLAND CEMENT CO LIMITED First Respondent SHAW CONTRACTING PTY LIMITED Second Respondent JUDGE: HEEREY J DATE OF ORDER: 20 MAY 1999 WHERE MADE: MELBOURNE (HEARD IN HOBART) THE COURT ORDERS THAT: 1. The appeal is allowed. 2. The applications the subject of the appeal are remitted to the Administrative Appeals Tribunal for reconsideration according to law. 3. The respondents pay 50 per cent of the applicant's costs of the appeal, including reserved costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY TG 21 OF 1998 BETWEEN: CHIEF EXECUTIVE OFFICER OF CUSTOMS Applicant AND: GOLIATH PORTLAND CEMENT CO LIMITED First Respondent SHAW CONTRACTING PTY LIMITED Second Respondent JUDGE: HEEREY J DATE: 20 MAY 1999 PLACE: MELBOURNE (HEARD IN HOBART) REASONS FOR JUDGMENT 1 The first respondent Goliath Portland Cement Co Limited ("Goliath") manufactures cement at Railton in Tasmania. For this purpose Goliath uses limestone and also clay containing alumina, silica and ferric oxide. Both the limestone and the clay are extracted at the site. 2 The applicant ("Customs") appeals from a decision of the Administrative Appeals Tribunal which upheld three claims for diesel fuel rebate under s 164 of the Customs Act 1901 (Cth) and s 78A of the Excise Act 1901 (Cth) in respect of diesel fuel used in operations at Railton. The application concerned claims for the following periods: (i) T96/67 – 6 December 1995 to 18 December 1995 (operations by Goliath's subcontractor the second respondent Shaw Contracting Pty Limited); (ii) T96/69 – 17 July 1995 to 25 September 1995 (Goliath's operations); and (iii) T98/5 – 4 July 1993 to 24 June 1995 (the kiln claim). The legislation 3 Prior to 1 July 1995, s 164(1) and (7) of the Customs Act relevantly provided: "164 (1) A rebate is … payable to a person who purchases fuel for use by him: (a) in mining operations(otherwise than for the purpose of propelling a road vehicle on a public road); … (7) In this section: … 'minerals' means: minerals in any form whether solid, liquid or gaseous and whether organic or inorganic; 'mining operations' means: (a) exploration, prospecting, or mining for minerals, or (b) the dressing or beneficiation (at the mining site or elsewhere) of minerals, or ores bearing minerals, as an integral part of operations for their recovery. … but does not include quarrying operations carried on for the sole purpose of obtaining stone for building, road making or similar purposes." 4 The foregoing legislation applies to application T98/5 ((iii) above), which relates entirely to diesel fuel purchased before 1 July 1995. The definitions were amended by the Customs and Excise Amendment Act 1995 (Cth) (Act No. 87 of 1995) and by the Customs and Excise Legislation Amendment Act (No 1) 1996 (Cth) (Act No. 21 of 1996). Both the 1995 Act and the 1996 Act apply as from 1 July 1995. 5 The 1995 Act amended the definition of "minerals" by inserting after the word "inorganic" the words ", except sand, sandstone, soil, slate, clay (other than bentonite or kaolin), basalt, granite, gravel, limestone or water". (Emphasis added) 6 Also by the 1995 amendment, the following definition of "mining operations" (relevantly for present purposes) was inserted: "'mining operations' means: (a) exploration, prospecting, the removal of overburden and other activities undertaken in the preparation of a site to enable mining to commence or mining for minerals; or (b) the dressing or beneficiation of minerals, or ores bearing minerals, as an integral part of operations for their recovery; … but does not include quarrying operation carried on solely for the purpose of obtaining stone for building, roadmaking or similar purposes." 7 The 1996 amendment inserted the following definition of "minerals" in s 164(7) : "'minerals' means minerals in any form, whether solid, liquid or gaseous and whether organic or inorganic, except; (a) sand, sandstone, soil, slate, clay (other than bentonite or kaolin), basalt, granite, gravel or water; or (b) limestone (other than agricultural use limestone). "Agricultural use limestone" was defined to mean "limestone for use in the de-acidification of soil in any agricultural activity other than the activity referred to in paragraph (t) of the definition of agriculture". (Paragraph (t) relates to soil or water conservation.) Also a new par (a) in the definition of "mining operations" was inserted as follows : "(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." 8 Applications T96/67 and T96/69, (i) and (ii) above, are governed by the legislation in its post 1 July 1995 form. The excise legislation is not in relevantly different form. Goliath's operations at Railton 9 Limestone is rock which contains more than 50 per cent calcite (calcium carbonate, CaCO3). The deposits at Railton contain in excess of 90 per cent calcite. An essential part of the cement-making process is the application of heat to calcite so as to dissociate it into lime (calcium oxide, CaO) and carbon dioxide, the latter going to waste. 10 Goliath extracts limestone in order to obtain calcite. The clay which largely makes up the overburden at Railton contains about 60 per cent silica, 20 per cent alumina and ferric oxide. Where necessary, Goliath adds bought in silica and iron to those extracted on site. Goliath extracts limestone and clay and crushes them together in a blender/crusher in a proportion to result in a calcium carbonate content in the blend of about 78 per cent along with the desired proportion of silica, alumina and ferric oxide. Limestone is also crushed without clay to achieve that composition. 11 After a process of proportioning, raw meal is finely ground in an atmosphere of hot gases to drive off moisture, and further blended. In a pre-heater, further moisture is removed and the main "calcining" occurs. In this process, 95 per cent of the calcium carbonate dissociates to calcium oxide, which is the essential ingredient for "clinkering", and carbon dioxide, which is waste. The process stream then discharges into the kiln where clinkering occurs. Clinkering involves reactions between calcium oxide, the silicates, silica, alumina and ferric oxide to make cement. The Tribunal's decision 12 The Tribunal found that Goliath's extraction of limestone and clay amounted to "mining for minerals" and thus fell within "mining operations". The Tribunal believed it should have a regard to the wide definition of "mineral" in s 164(7). The amendments which took effect on 1 July 1995, in the Tribunal's view, did not make any difference to the meaning of "mining operations". 13 In reference to the exclusion of quarrying from the definition of "mining operations", the Tribunal said: "38. A plain reading of the Act indicates that the intention is to exclude 'quarrying operations carried on solely for the purpose of obtaining stone for building, road making or similar purposes'. The Act does not exclude quarrying operations which are not carried on solely for such purpose. This suggests that quarrying falls under the heading of mining and it is only excluded as an eligible activity if it is carried on exclusively for the purposes described. This interpretation is supported by the decision of the Full Court of the Federal Court in CSR Limited v Chief Executive Officer of Customs (1997) 26 AAR 84 at 91." 14 The Tribunal considered that the end use of materials mined, or their derivatives, was irrelevant (par 42). 15 After reviewing the evidence of a number of witnesses the Tribunal concluded: "47. The Tribunal prefers the evidence of Professor Galvin, Professor Brown, Dr. Bush and Dr. Moore and Dr. O'Connell to that of Mr. Weedon and Mr. Loomes and finds that the extraction operations conducted by the applicants at Railton constitute mining for minerals. We reject the submission that the extraction operations relate to limestone, which has been excluded from the definition of 'minerals' since 1 July 1995, on the basis that Goliath mines for calcite, a mineral that is found in the limestone. We reject the submission that the extraction operations must be regarded as 'quarrying' as distinct from 'mining'." 16 After discussing some chemical evidence, and the earlier decision of the Tribunal (differently constituted) in Re David Mitchell Limited and Chief Executive of Customs (9 February 1998), the Tribunal concluded that calcium carbonate as a mineral can be regarded as containing the minerals calcium oxide and carbon dioxide, and that calcium oxide (lime) is present in the material mined "in an association with carbon dioxide in the form of calcite" (par 62). 17 The Tribunal found that silica, alumina and iron oxide found in the clay extracted by Goliath were minerals and that the clay was an ore. 18 The Tribunal, after referring to evidence, found that limestone is an ore and "can also be regarded as a mineral" (par 73). 19 The Tribunal then turned to the statutory exclusion of limestone. It referred to some extrinsic materials, including the following passage from the Second Reading Speech on the 1995 amendment as follows (Hansard, 7 June 1995 p 1478): "Accordingly, in item 7 of Schedule 1 to the Bill, the Government has proposed to amend the definition of 'minerals' to exclude sand, sandstone, soils, slate, clay (other than bentonite or kaolin), basalt, granite, gravel, limestone and water. The exclusion is consistent with the principal mining legislation of the States and would bring about a transparent distinction between mining for minerals and operations that cannot, in the ordinary sense, be regarded as mining. Where these materials are extracted for the purpose of recovering a mineral, the extraction will remain eligible for rebate.'" 20 The Tribunal concluded that it was not the intention of the Government or Parliament "to exclude the extraction of limestone where it is being extracted for its mineral content as it is in the present case" (par 72). 21 The Tribunal found that the extraction and all subsequent blending, crushing, screening and water removal prior to the pre-heating stage constituted beneficiation and thus "mining for minerals" (pars 80-87). 22 Likewise the calcining process in the pre-heater was beneficiation; lime was "recovered (i.e. obtained) by separation" and therefore "the calcining of calcite contained in limestone constituted beneficiation of minerals as an integral part of operations for their recovery" (par 101, see also par 51). 23 However, the beneficiation ended with the recovery of lime as the product of the calcining process. The clinkering, the process by which the lime reacted with silica, alumina and ferric oxide to form cement compounds, was in the nature of a manufacturing process and thus not "mining operations" (par 102). 24 As to the kiln claim, the Tribunal found that the diesel fuel used in the kiln was used partly for the purpose of mining operations (calcining) and partly for other operations (clinkering). The Tribunal thought that the Act did not require an apportionment. It held that all the fuel used in the kiln was eligible for rebate, although it may be used partly in non-mining clinkering operations. Conclusion on the Appeal (i) "Minerals" 25 If "limestone" has been expressly excluded from the statutory definition of "minerals" it seems to me to follow inexorably that the essential and defining component of limestone, namely calcite, must also be excluded. One cannot mine for calcite without mining for limestone, and vice versa. Goliath's argument requires treating the exclusion as if it read "(other than agricultural use limestone or limestone where what is sought is not the limestone as such, but a mineral that is found in the limestone)". 26 To quote the well known passage from the speech of Lord Mersey in Thompson v Goold & Co [1910] AC 409 at 420 : "It is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do." 27 This conclusion is confirmed by the restoration of the rebate for limestone, but limited to agricultural use limestone. Likewise, by expressly excluding bentonite and kaolin from the exclusion of clay, Parliament has indicated that there is no room for any further exception for clay by reference to its components. 28 The extrinsic materials relied on cannot alter the meaning of the unambiguous words of the statute: Re Bolton; ex parte Beane (1987) 162 CLR 514 at 518. Cement manufacture is a well known use of limestone. It would be an odd reading of the statute to treat limestone as excluded from the exclusion not only where it is sought for the use explicitly mentioned (agriculture) but also for other, and necessarily unspecified, uses. Such other uses would include not only cement manufacture but glass manufacture and medicinal purposes, amongst others. 29 A reading which treats limestone as excluded from "minerals" if, but only if, it is for agricultural use, is not irrational, absurd, extraordinary, capricious, irrational or obscure: Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 304-5 per Gibbs CJ, 319-321 per Mason and Wilson JJ. Nor is there good reason for thinking that this literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from these provisions: Cooper Brookes at 321. The present context is a revenue statute which implements policies that some forms of commercial and industrial activity should be treated more favourably than others. Of necessity, fine lines have to be drawn. For example, the definition of the one word "agriculture" extends over more than four pages of the statute, and the definition of "mining operations" over three. Historical, political and economic factors are at work. The provisions of the statute (as distinct from extrinsic materials which at the most can only be an aid to the construction of those provisions) do not indicate any policy, other than the obvious one that limestone is only to be treated as a "mineral" when it is for agricultural use. (ii) "Mining" v "Quarrying" 30 The exclusion of quarrying for the purposes specified in the definition leaves open the possibility that there might also be other quarrying which would fall within the definition of mining. However, it does not follow that all quarrying other than that for the specified purposes will constitute "mining": CSR Ltd v Chief Executive Officer of Customs (1997) 26 AAR 84 at 91. The Tribunal's reference to CSR in par 38 of its reasons misunderstands the effect of that decision. However, that error does not seem to have had operative effect. The Tribunal did not simply say that there was a quarry at Railton, it was not for the sole purpose of obtaining stone for building, road making or similar purposes, ergo it must be a mine. 31 The meaning of the expression "mining for minerals" is one of fact: CSR at 89. 32 In North Australian Cement Ltd v Commissioner of Taxation (Cth) (1969) 119 CLR 353 at 362-3 Menzies J said: "'… whether an open cut extraction of material is mining or not is something to be determined by an informed general usage which takes into account both the way in which the deposits of the material occur, the character of the material to be recovered and the use to which it may reasonably be put.'" 33 Menzies J was discussing the expression 'mining operations' in a different statutory context. However, his Honour's statement is equally applicable to the present legislation: Neumann Dredging Co Ltd v Collector of Customs (1987) 79 ALR 588, Collector of Customs v Bell Basic Industries Ltd (1988) 20 FCR 146 at 149. 34 In reaching its conclusion that Goliath's activities were mining rather than quarrying, the Tribunal had regard to the wide definition of "minerals" in s 164(7), a "very large volume" of exhibits, and the evidence of a number of witnesses, including Customs' witness Dr Moore. The Tribunal rejected the evidence of another Customs witness, Mr Weedon, as "idiosyncratic". 35 The only substantive attack on the Tribunal's finding was that it failed to take into account the evidence of Mr Cusack that "extraction operations at Railton are regarded and referred to as quarrying". Plainly this does not make out a case of legal error. To bring itself within the statute, Goliath did not have to establish that nobody ever referred to its operation as a quarry. (iii) "Beneficiation" 36 Whether lime (calcium oxide) is a mineral is a question of fact. Notwithstanding the submissions of Customs, there was ample evidence to support the Tribunal's conclusion that lime was a mineral both according to strict scientific definition and informed general usage. Moreover, it is not disputed that calcite is a mineral. 37 As noted, the Tribunal found (par 104): "The purpose of the mining operations is to recover lime, the elements of which are present in the calcite as mined. The lime is recovered by separating it from the elements of carbon dioxide with which it is associated in calcite and which, as a waste product, is discarded in the same way that other minerals are freed from extraneous matter." 38 According to witnesses for both parties, "beneficiation" means making something fit for purpose. Customs accepted that chemical transformation can constitute beneficiation. However, it argued that the phrase "for their recovery" meant recovery of these materials which are present in the material as extracted from the ground. Moreover, it argued that "recovery" did not extend to an operation which involved the destruction of the limestone and the calcite which it enclosed. 39 As already noted, the Tribunal found that lime is a mineral. It also found, after reviewing conflicting chemical evidence, that lime is present in limestone in that it is in chemical association with carbon dioxide within the calcite. 40 The Tribunal found the phrase "to recover" meant "to obtain". There was evidence to support that, for example Dr Ketteridge who said that "recovery" was a term "… used very broadly in the mining industry … the term is used very widely and separation is not necessarily involved … when you're using the word 'recovery', in the wider sense." 41 Given these findings of fact, I see no error in the conclusion of the Tribunal. Goliath's purpose was to obtain lime, an essential material for the manufacture of cement. It obtained, or recovered, that lime from the limestone at Railton. The beneficiation which occurred was an integral part of that recovery. That the lime was immediately applied in a manufacturing operation to produce cement does not mean that, as a matter of law, there were not beneficiation operations to recover the lime. (iv) Procedural fairness 42 Customs complained of the use of the David Mitchell decision. It was said that in referring to evidence in David Mitchell the Tribunal acted on specific factual material which was not before the Tribunal and without giving Customs an opportunity to be heard. 43 Both parties were of course aware of David Mitchell; counsel for Customs told the Tribunal, as was the fact, that the decision was under appeal. 44 I agree with counsel for Goliath that the Tribunal referred to the David Mitchell decision as a touchstone rather than as a source of evidence. To anyone familiar with common law discourse, it is hardly surprising that a court or tribunal might pay attention to the decision of the same body applying the same statute in a similar fact situation. In Collector of Customs v BHP Australia Ltd (1994) 53 FCR 499 at 509 both the Tribunal and the Full Court discussed the facts in the earlier case of Abbott Point Bulk Coal Pty Ltd v Collector of Customs (1992) 35 FCR 371. Both Tribunal and Full Court considered the two cases to be "vastly different". In the present case, the Tribunal obviously thought there was considerable similarity. As a matter of factual analysis, it was entitled to do this. (v) Informed general usage 45 Customs also complained that the Tribunal ignored evidence of "informed general usage" as to the meaning of various expressions. However, a fair reading of pars 22 to 33 of the Tribunal's reasons does not sustain that complaint. In essence all the Tribunal did was to reject (correctly in my view) a submission on behalf of Customs that informed general usage was conclusive, so that if a substance is not referred to as a "mineral" in informed general usage then it was not a "mineral", whether or not it has scientifically the characteristics of a mineral: see especially pars 23 to 25. Plainly the Tribunal did take into account evidence of informed general usage along with scientific evidence, text books and technical and other publications and other cases (par 33). Orders 46 I have concluded that the Tribunal erred only in its treatment of the statutory exclusion of limestone. The matter will be sent back for reconsideration accordingly. Moreover the Tribunal, in the view it took, did not find it necessary to resolve Goliath's contention that the material extracted at Railton was partly marble, which had ceased to be limestone as a result of metamorphic process, and the marble did not fall within the statutory exclusion of limestone. Customs has been only partly successful. There will be an order that Goliath pay 50 per cent of the costs of the appeal, including reserved costs. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate: Dated: 20 May 1999 Counsel for the Applicant: Mr A Robertson SC and Dr Alex Gelbart Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondents Dr G Flick SC Solicitor for the Respondents: Freehill Hollingdale & Page Date of Hearing: 22 – 23 April 1999 Date of Judgment: 20 May 1999