FEDERAL COURT OF AUSTRALIA Qantas Airways Ltd v Commissioner of Taxation [2001] FCA 1720 SALES TAX – overpayment – where applicant made payments under protest – where first respondent subsequently refunded overpayment – where applicant claimed interest on refund – whether first respondent made "decision to which this Act applies" pursuant to Taxation (Interest on Overpayments and Early Payments) Act 1983 s 3 – whether applicant entitled to restitution under general law – whether sales tax legislation denies right of recovery under general law Taxation (Interest on Overpayments and Early Payments) Act 1983 (Cth) ss 3, 9, 10, 10A Sales Tax (Exemptions and Classifications) Act 1935 (Cth) Item 63A Sales Tax Assessment Act (No. 1) 1930 (Cth) ss 26, 29, 40 Sales Tax Assessment Act (No. 5) 1930 (Cth) ss 10AA, 25AA Sales Tax Procedure Act 1934 (Cth) s 12D(1) Sales Tax Assessment Act 1992 (Cth) s 16, 55 Taxation Administration Act 1953 (Cth) ss 14ZY, 14ZZ, 14ZZL, 14ZZQ Mason v New South Wales (1959) 102 CLR 108 discussed Chippendale Printing Co Pty Ltd v Commissioner of Taxation (1996) 62 FCR 347 followed QANTAS AIRWAYS LTD v COMMISSIONER OF TAXATION & ANOR N 125 OF 2000 EMMETT J 7 DECEMBER 2001 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 125 OF 2000 BETWEEN: QANTAS AIRWAYS LIMITED ACN 009 661 901 APPLICANT AND: COMMISSIONER OF TAXATION FIRST RESPONDENT COMMONWEALTH OF AUSTRALIA SECOND RESPONDENT JUDGE: EMMETT J DATE OF ORDER: 7 DECEMBER 2001 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay the respondents' costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 125 OF 2000 BETWEEN: QANTAS AIRWAYS LIMITED ACN 009 661 901 APPLICANT AND: COMMISSIONER OF TAXATION FIRST RESPONDENT COMMONWEALTH OF AUSTRALIA SECOND RESPONDENT JUDGE: EMMETT J DATE: 7 DECEMBER 2001 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The applicant, Qantas Airways Limited ("Qantas"), seeks to recover interest from the respondents, the Commissioner of Taxation ("the Commissioner") and the Commonwealth of Australia ("the Commonwealth"), in respect of overpayments of sales tax made by Qantas to the Commissioner from January 1988 to May 1994. While the amounts of the overpayments have been refunded, the Commissioner and the Commonwealth deny that they have any liability to make any payment of interest to Qantas in respect of the overpayments. Qantas makes its claim under the Taxation (Interest on Overpayments and Early Payments) Act 1983 ("the Interest Act") and under the general law. BACKGROUNd 2 From before 1970, Qantas has operated a number of training centres at various locations in Australia, including a flight operations training centre at premises located within the Qantas Jet Base at Mascot, New South Wales ("the Training Centre"). The purpose of the Training Centre has been to instruct and train individuals in relation to the skills required to become a commercial airline pilot and also to train flight and cabin crew. 3 By letter of 7 September 1970, Qantas sought exemption from sales tax under item 63A in the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 ("the 1935 Exemptions Act") in respect of equipment for use by Qantas at the Training Centre. Item 63A applied to goods for use, and not for sale, "by a school conducted by an organisation not carried on for the profit of an individual". 4 On 13 October 1970, the Commissioner wrote to Qantas saying that it had been decided that Item 63A applies in respect of goods for use by the various training establishments operated by Qantas, including the Training Centre. In order to obtain the benefit of the exemption, the Commissioner required that a certificate be furnished to the vendor of any goods concerned. The letter also indicated that, in the case of imported goods, such a certificate, suitably amended, could be endorsed on the customs entry form. By letter of 20 April 1971, the Commissioner confirmed that certain Qantas in-house training establishments were governed by Item 63A. Until July 1987, quantities of goods were imported by Qantas for use at the Training Centre. No sales tax was paid in respect of the importation for home consumption of those goods on the basis that Item 63A applied to them. 5 On 4 June 1987, the Commissioner made Taxation Ruling ST2342. In that ruling, the Commissioner concluded that the exemption under the 1935 Exemptions Act was not available for goods for use by commercial enterprises for in-house staff development and training programs, whether the programs were undertaken by divisions or sections of an enterprise or by separate entities established by an enterprise for that purpose. On 3 July 1987, Qantas received an undated letter from the Commissioner ("the July Letter"). By the July Letter, after referring to the letters of 13 October 1970 and 20 April 1971, the Commissioner purported "to withdraw these exempt rulings". The decision was to take effect "as from the date of this letter", notwithstanding the lack of a date. 6 The reasoning in the July Letter included the following: "Each Qantas training centre is a part of a larger commercial undertaking. The centres do not participate in the general education system nor do they impart knowledge as an object of end in itself. The raison d'etre of each and every centre is the training of airline staff. It follows that these departments are not 'schools'…." 7 From 1979 to June 1988, Mr Stephen Morris was employed by Qantas in the position of "Manager, Customs". In that position, he had the responsibility for determining the liability of Qantas for sales tax in connection with the importation of goods into Australia. A copy of the July Letter was provided to Mr Morris shortly after its receipt by Qantas. After reading the letter, Mr Morris concluded that: · the Australian Taxation Office ("ATO") had withdrawn the ruling of 13 October 1970, and · as the ATO no longer accepted that Qantas was exempt from sales tax on goods imported and entered for home consumption for use in the Training Centre, the ATO required that sales tax should in the future be paid on such goods. 8 Mr Morris also had an understanding that, if the Collector of Customs had been advised of the withdrawal of the ruling of 13 October 1970, the Collector would not have released from customs imported goods entered for home consumption by Qantas until both customs duty and sales tax had been paid. The source of that understanding was not explained. Because of the understanding, Mr Morris instructed the customs clearance manager of Qantas to commence paying sales tax in respect of all equipment imported and entered for home consumption by Qantas for use in the Training Centre. 9 Mr Morris considered that the Commissioner's change in approach to the exemption under the 1935 Exemptions Act was likely to be of great significance to Qantas because Qantas proposed to incur considerable expenditure on the purchase of new equipment, such as flight simulators, which would be imported by Qantas for use in the Training Centre. Mr Morris believed that a result of withdrawal of the ruling would be that considerable sales tax would be payable in respect of the importation of those goods. 10 Accordingly, pursuant to instructions given by Mr Morris, Coopers & Lybrand wrote to the Commissioner on behalf of Qantas on 2 September 1987. Coopers & Lyrand made a submission intended to refute some of the conclusions contained in Ruling ST2342, with particular reference to the Training Centre. The letter requested that the Commissioner's decision be reviewed and that a ruling be issued that goods for use by the Training Centre are exempt under Item 63A. The Commissioner replied by letter of 2 December 1987 ("the December Letter") saying that it was the view of the ATO that the Training Centre is not a school in the context in which that word appears in Item 63A and that the Training Centre did not qualify for exemption under the 1935 Exemption Act. 11 On 21 and 27 January 1988, Qantas wrote letters to the Commissioner aimed at establishing that the payment by Qantas of amounts of sales tax in respect of the importation of goods for use in the Flight Centre was being made "under protest". By the letters, Qantas applied for a refund of the amounts of sales tax paid under protest and requested an assessment in respect of all goods for use in the Training Centre that had been imported and entered by Qantas for home consumption. The letters claimed refunds of $7,185.17 and $39,564.67 respectively. The letters were otherwise identically worded. 12 On 9 March 1988, Mr David Vos of Coopers & Lybrand attended a meeting with Messrs Frank Merrick and Mark Smith of the ATO. Shortly after commencement of the meeting an exchange occurred between Messrs Merrick and Vos to the following effect: Merrick: "Qantas has lodged three separate refund claims. I would like to work out a more efficient way of dealing with the refund claims. I suggest that instead of lodging single individual refund applications, Qantas should provide the Australian Taxation Office with monthly schedules listing the amounts of sales tax paid on goods for which the Item 63A exemption is claimed." Vos: "The Australian Customs Service is not presently accepting payments of customs duty and sales tax at the time of entry accompanied by a statement that it is a 'payment under protest'. The Australian Customs Service refuses to process such payments." 13 Mr Vos raised the possibility of resolving the question as to the applicability of Item 63A by Qantas bringing proceedings in the Federal Court for a declaration that Item 63A applied to particular goods purchased by Qantas for use in the Training Centre. Mr Vos said that he would arrange for the preparation of a statement of facts that would be an enlargement of the details already given to the ATO. He indicated that he would then make arrangements for officers of the ATO to visit the Training Centre and inspect relevant financial records. Mr Vos said that he hoped that there would be agreement between Qantas and the Commissioner on the factual situation by the end of March 1988. 14 Mr Merrick indicated that the ATO may not accept Qantas as having standing for the purposes of declaratory proceedings in the Federal Court. Mr Vos understood from the discussion that the preference of the ATO was for the issue to be resolved by way of a test case based on a special assessment issued under s 10AA of the Sales Tax Assessment Act (No. 5) 1930 ("the 1930 Assessment Act No. 5") for particular goods imported by Qantas for use in the Training Centre. A further exchange occurred to the following effect: Merrick: "I suggest that Qantas should provide to the ATO on a monthly basis details of the sales tax paid on goods imported for use by Qantas in the [Training Centre] for which the Item 63A exemption is claimed." Vos: "This should be acceptable to Qantas. Once we have settled a statement of facts, the ATO would issue a section 10AA special assessment to Qantas as previously requested which will provide a test case for the determination of Qantas's entitlement to a refund for all sales tax paid on goods for use in the [Training Centre]." 15 On 23 March 1988, the Commissioner wrote to Coopers & Lybrand referring to the meeting with Mr Vos and relevantly saying: "This office will accept that payments of sales tax under Sales Tax Assessment Act No. 5 in respect of training school equipment are being made under protest provided that each month Qantas sends a statement showing the following details: · a brief description of the goods; · the sale value of the goods; · the tax paid; · the customs entry number; · the date of entry. Each monthly statement must include a declaration that the goods are for use in the Qantas Flight Training Centre. In addition to the declaration, the statement should also say that sales tax has been paid under protest. As agreed in the discussion, as soon as this office has received the draft statement of facts, and has had the opportunity to review it, (and, if necessary, carried out an inspection of the training school's facilities) an assessment will be issued in accordance with section 10AA of Sales Tax Assessment Act No. 5. It will not be necessary for Qantas to lodge individual refund applications in respect of each entry. If Qantas is successful in its proposed Federal Court action, it should lodge a refund application within 60 days of that Court's decision. This extension of time for lodgement of the refund application is given under the discretionary power vested in the Commissioner of Taxation by virtue of subsections 40(3) in Sales Tax Assessment Act No. 1." [Emphasis added] 16 In due course, the Commissioner issued assessments under s 10AA of the 1930 Assessment Act No. 5 in respect of the amounts of $7,185.17 and $39,564.67 referred to in the letters of 21 and 27 January 1988. Qantas objected to those assessments on the ground that the goods in question were exempt under Item 63A. 17 By letter of 13 October 1989 the Commissioner disallowed the objection lodged by Qantas in respect of the assessment in the sum of $7,185.17. It is common ground that at about the same time the Commissioner also disallowed the objection in respect of the sum of $39,564.67. On 8 November 1989, Coopers & Lybrand wrote to the Commissioner saying that Qantas was dissatisfied with the Commissioner's decisions on the objections and requesting that he refer the decisions to the Federal Court. 18 In the meantime proceedings that directly raised the application of Item 63A had been brought by Australian Airlines Limited against the Commissioner in the Federal Court. Australian Airlines Limited was in a similar position to Qantas in relation to the importation of goods for its own training centre. On 24 August 1992, the Australian Government Solicitor, acting on behalf of the Commissioner, wrote to Qantas saying: "I am now instructed to advise that my client consents to delay reference of the above matter to the Federal Court until the conclusion of the proceedings in the matter of Australian Airlines. I am further instructed to advise that my client cannot be bound by the decision in the Australian Airlines proceedings." 19 The solicitors then acting for Qantas replied on 9 September 1992 relevantly saying: "Our client has provided to us a copy of your letter to it dated 24 August 1992 in which you indicated that your client is not prepared to be bound in this matter by the decision in the current Federal Court proceedings involving Australian Airlines. Our client is surprised at this attitude and we are instructed to request that your client reconsider its position…" 20 The Australian Government Solicitor replied on 11 September 1992 saying: "I am instructed to advise that while my client accepts and recognises what your client is saying, my client cannot be bound by a decision in the Australian Airlines proceedings currently before the Federal Court, unless and until he satisfied himself that all material facts are identical with the facts of your client's matter." 21 Following the enactment of the 1992 sales tax legislation, the Commissioner wrote to Qantas on 24 January 1995 saying that the sales tax legislation effective from 1 January 1993 no longer required the submission of the details described in the letter of 23 March 1988. In the intervening period, Qantas had written a number of letters to the ATO furnishing details of goods imported and containing the statements required by the letter of 23 March 1988. 22 On 21 March 1995, Qantas wrote again to the Commissioner referring to discussions that had taken place on 28 February 1995 and relevantly saying: "Following those discussions, it was agreed that Qantas Airways Ltd … should provide detail of the amount of sales tax to be paid under protest on the purchase or importation of goods used in Qantas' Flight Operations Training Centre … for the period of 1 July 1991 to 30 June 1994." Details were attached to the letter. During the period to March 1995, Qantas paid to the Commissioner, in addition to the amounts of $7,185.17 and $39,564.67, a total amount of $12,285,266.26 as sales tax on goods imported for use in the Training Centre. 23 In 1996 Australian Airlines Limited was successful in its proceedings against the Commissioner in relation to the application of Item 63A – see (1996) 65 FCR 341 and (1996) 71 FCR 446. On 1 April 1997, the Commissioner wrote to Qantas referring to an objection "dated 15 September 1988 for the year ended 30 June 1988"and saying that the Commissioner had allowed the objection in full. The letter went on to say: "We will refund to you or credit to your account with any amount that you have overpaid on the original assessment. We will also pay or credit interest on any tax and penalty you have overpaid." Reasons for the decision were attached. Those documents were sent under cover of a letter of 1 April 1997 from the Commissioner. That letter said: "As discussed, it is now expected that as a result of this decision that Qantas Airways Limited will now lodge with this Office a refund claim for other amounts in dispute." 24 On 22 April 1997, KPMG, acting on behalf of Qantas, wrote to the Commissioner claiming entitlement to a refund of the sales tax paid in respect of goods purchased for the Training Centre. The letter claimed entitlement to refunds in the following amounts totalling $12,324,830.93: · $5,737,524.01; · $4,206,705.34; and · $2,380,601.58. On 7 August 1997, the Commissioner sent cheques for refunds totalling $12,324,830.93. On 10 September 1997, the Commissioner sent a further cheque in the sum of $7,185.17. 25 Thus, the Commissioner made good the statement in his letter of 23 March 1988 (see para [15] above) that the time for lodging a refund application would be extended. The extension was to be 60 days after the Federal Court had made a decision in relation to the objections by Qantas. In the events that happened, of course, there was no decision of the Federal Court in relation to the objections by Qantas. Rather, the Commissioner changed his decision on the objections and allowed them in full. It was therefore not necessary for the objections to be referred to the Federal Court. The Commissioner clearly accepted that the decision in the Australian Airlines case was sufficient for him to change his decision in relation to the objections by Qantas. 26 By letter to the Commissioner of 12 September 1997, Qantas referred to indications that had apparently been given by officers of the ATO that Qantas was not entitled to interest in respect of the refunds. After referring also to the Commissioner's letter of 23 March 1988 (see paragraph [15] above), Qantas said: "The letter advised that Qantas would not need to lodge individual refund applications in respect of each entry, so formal refund applications were not lodged. We do not understand why Qantas does not have an interest entitlement, now that the objection has been allowed and refunds paid. We would appreciate confirmation of your decision and an explanation of the reasons for your decision." 27 The Commissioner replied on 18 December 1997, saying that the amount of refund eligible for interest was $46,749.84, being the amounts that had been the subject of the special assessments under s 10AA. Interest on that amount was $48,047.23. A calculation of that sum was set out in the letter and in due course a cheque for that amount was received by Qantas. However, the Commissioner declined to pay any further amount for interest. Qantas now seeks interest in respect of overpayments that totalled $12,285,266.26. The Court has been asked to determine the questions of principle concerning the entitlement of Qantas to any interest. If Qantas is entitled to interest, the parties will calculate the amount payable by the Commissioner or the Commonwealth. STATUTORY FRAMEWORK 28 There are two sales tax regimes in the context of which the questions raised in this proceeding must be considered. First there is the regime enacted initially in 1930. Secondly, there is the regime enacted in 1992. The two regimes are broadly similar, although there are variations in detail. 1930 REGIME 29 Under s 3 of the 1930 Assessment Act No. 5, sales tax was to be levied and paid on the sale value of imported goods entered for home consumption by a taxpayer. Under s 9 of the 1930 Assessment Act No. 5, where a person was liable to pay an amount of sales tax on the sale value of imported goods, the amount was due and payable at the time when the goods were imported for home consumption. 30 Section 5 of the 1935 Exemptions Act relevantly provided: "… sales tax shall not … be payable upon the sale value of any goods covered by any item … in the first column of the First Schedule, under any [Sales Tax Assessment] Act specified in the second column of that Schedule opposite that item." 31 Item 63A in column 1 of the First Schedule to the 1935 Exemptions Act was in the following terms: "Goods for use (whether as goods or in some other form), and not for sale, by a university or school conducted by an organisation not carried on for the profit of an individual". The Acts specified in the second column included the 1930 Assessment Act No. 5. 32 Sections 11(1) and 11(2) of the 1930 Assessment Act No. 5 provided as follows: "(1) Subject to subsection (1A), where the Commissioner finds in any case that tax has been overpaid by a person, the Commissioner shall – (a) refund the amount of any tax overpaid; or (b) apply the amount of any tax overpaid against any liability of the person to the Commonwealth, being a liability arising under, or by virtue of, an Act of which the Commissioner has the general administration, and refund any part of the amount that is not so applied. (1A) Subsection (1) does not apply in relation to any tax paid by a person unless the Commissioner is satisfied that the tax has not been passed on by the person to another person, or, if passed on by the person to another person, has been refunded to the other person. (2) Where a taxpayer has sold goods in respect of the sale value of which he has paid tax under this Act, and the whole or any part of the amount for which the goods were sold has actually been written off by the taxpayer as a bad debt, the Commissioner may, to the extent to which it is proved to his satisfaction that the debt is a bad debt, refund so much of the tax that bears to the tax the same proportion as the amount so proved to be a bad debt bears to the total amount for which the goods were sold: Provided that, if the whole or any part of the amount in respect of which tax has been so refunded is at any time recovered by the taxpayer, he shall within seven days notify the Commissioner in writing accordingly and repay the whole or a proportionate part of the tax so refunded. 33 Section 10AA of the 1930 Assessment Act No. 5 provided as follows: "10AA. (1) A taxpayer may request the Commissioner, in accordance with this section, to make an assessment in respect of specified imported goods that are entered by the taxpayer for home consumption. (2) A request under subsection (1) shall be in writing and shall be lodged with the Commissioner not later than 21 days after the close of the month within which the goods were so entered or within such further period as the Commissioner allows. (3) The Commissioner shall comply with each request made under subsection (1). (4) As soon as practicable after the assessment is made, the Commissioner shall cause notice in writing of the assessment to be served on the taxpayer who made the request under subsection (1)." 34 Section 40 of the Sales Tax Assessment Act (No. 1) 1930 (Cth) ("the 1930 Assessment Act No. 1") provided as follows: "40(1)A taxpayer who is dissatisfied with an assessment may, within 60 days after service on the taxpayer of the notice of assessment, lodge with the Commissioner an objection in writing against the assessment. 40(2) An applicant for a refund decision who is dissatisfied with a decision made on the application may, within 60 days after service on the applicant of notice of the decision, lodge with the Commissioner an objection in writing against the decision. 40(3) Sub-section (2) does not apply in relation to a refund decision unless the application for the refund or payment to which the decision relates was lodged with the Commissioner within 60 days after the transaction, act or operation (not being the payment of tax) that is claimed to entitle the applicant to the refund or payment or within such further time as the Commissioner allows." Section 12 of the 1930 Assessment Act No. 5 relevantly provided that s 40 of the 1930 Assessment Act No. 1 applied mutatis mutandis in relation to the imposition, assessment and collection of tax chargeable under the 1930 Assessment Act No. 5. 1992 REGIME 35 Under s 16 of the Sales Tax Assessment Act 1992 ("the 1992 Assessment Act") the assessable dealings that could be subject to sales tax were set out in Table 1 to that Act. Under s 16(2), if the time of an assessable dealing was on or after the first taxing day, and no exemption applied under Division 2 of Part 3 of the 1992 Assessment Act, then: · the dealing was a taxable dealing; · the person specified in column 3 of the Schedule was the person liable to the tax; · the tax became payable at the time of the dealing; · the tax was due for payment at the time that applies under Division 2 Part 5. 36 The importation of goods by Qantas was a customs dealing for the purposes of the 1992 Assessment Act. Under s 64 of the 1992 Assessment Act, tax payable on a customs dealing was due for payment at the time of the dealing. Under s 64(2), a customs officer could refuse to deliver the goods concerned unless the tax had been paid. Under s 24 of the 1992 Assessment Act, an assessable dealing was not taxable if the goods were covered by an exemption Item that was in force at the time of the dealing and all of the requirements of the Item had been met. Section 5 of the 1992 Assessment Act defined "exemption Item" as an Item or subitem in Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 ("the 1992 Exemptions Act"). It was common ground that if the goods in question fell within Item 63A, they also fell within the corresponding item in Schedule 1 to the 1992 Exemptions Act. 37 Under s 51 of the 1992 Assessment Act, the situations in which a claimant was entitled to a credit were set out in Table 3 of Schedule 1. Under Item "CR1" in Table 3, where a claimant had paid an amount as tax that was not legally payable, the amount overpaid, to the extent that the claimant had not passed it on, was the amount of the credit. The credit arose when the amount became overpaid. Under s 51(3), a claimant was not entitled to a credit unless the claim for the credit was lodged within three years after the time when the credit arose. 38 Under s 55 of the 1992 Assessment Act, if the claimant had claimed a credit to which the claimant was entitled, the Commissioner was required to apply the credit as follows: (a) the Commissioner may apply the credit against any liability that the claimant had under any Act of which the Commissioner has the general administration; (b) the Commissioner must refund any excess to the claimant. 39 Under s 60 of the 1992 Assessment Act, if the Commissioner decided to disallow the whole or a part of a claim for a credit, the Commissioner was required to notify the claimant of the decision. If the claimant was dissatisfied with the Commissioner's decision, the claimant could object against the decision in accordance with Part IV of the Taxation Administration Act 1953 ("the Administration Act"). 40 Under s 14ZY of the Administration Act, which is within Part IVC, the Commissioner must decide whether to allow an objection, either wholly or in part, or to disallow it. Such a decision is an "objection decision". Under s 14ZZ, if the person is satisfied with the Commissioner's objection decision, the person may either apply to the Administrative Appeals Tribunal ("the Tribunal") for review of the decision or appeal to the Federal Court against the decision. In some circumstances, the person may only either apply to the Tribunal for review or appeal to the Federal Court. 41 Under s 14ZZL of the Administration Act, when a decision of the Tribunal becomes final, the Commissioner must take such action, including amending any assessment or determination concerned, as is necessary to give effect to the decision. Under s 14ZZQ, when an order of the Federal Court in relation to a decision becomes final, the Commissioner must take such action, including amending any assessment or determination concerned, as is necessary to give effect to the decision. the interest act 42 When the Interest Act was first enacted, it did not extend to sales tax. It applied only to tax under the Income Tax Assessment Act 1936, the Taxation (Unpaid Company Tax) Assessment Act 1982 and the Bank Account Debits Tax Administration Act 1982. 43 The Interest Act was extended to sales tax in 1984. At that time there was no appellate procedure to contest the right to refunds. Section 41(1) of the 1930 Assessment Act No. 1 only allowed objections to assessments or decisions of the Commissioner as to the sale value of goods, and there was no provision for the making of special assessments. In particular, there was no provision concerning objections to "refund decisions", that provision being introduced in 1986 by the Taxation Boards of Review (Transfer of Jurisdiction) Act 1986 ("Transfer of Jurisdiction Act"). 44 The Transfer of Jurisdiction Act inserted the provisions concerning the making of an objection to a refund decision (s 40(2), of the 1930 Assessment Act No. 1) and the making of special assessments (relevantly, s 10AA of the 1930 Assessment Act No. 5). The Transfer of Jurisdiction Act also amended the Interest Act to restrict the definition of "decision to which this Act applies" to decisions relating to an objection and to replace the reference to former s 41(1) in the definition of "objection" with a reference to s 40(1), but did not add a reference to s 40(2). The Explanatory Memorandum merely noted that the amendment to the definition of "objection" in the Interest Act was "consequential" upon the replacement of s 41(1) by s 40(1). 45 Thus, at that stage, the only decisions that generated an entitlement to interest under the Interest Act were decisions (of the Commissioner, the Tribunal, or the Court) on defined objections, and the only defined objections relating to sales tax were objections against assessments levying tax. Some of the defined objections relating to other taxes concerned matters other than assessments. They were analogous to sales tax refund decisions. There was no provision for interest where the Commissioner voluntarily (of his own accord, or because he had been requested to do so without an objection, for example, because the 60 day time limit had expired) reduced an assessment, or repaid an amount mistakenly paid, or made a refund of an amount of sales tax paid under protest. 46 In 1991, the objection provisions for all tax acts were consolidated in Part IVC of the Administration Act and this led, as the Explanatory Memorandum puts it, to the "necessary" amendment of the definition of "objection" in the Interest Act to cover objections under the new provisions. That picked up objections to refund decisions for Interest Act purposes. That consequence may have been adventitious, since there is no reference to such a consequence in the Explanatory Memorandum. 47 The scheme of the 1992 regime differed from the 1930 regime in that refunds were replaced by credits. There was no change in the Interest Act. 48 The pivotal provision of the Interest Act is s 9, which relevantly provides as follows: "(1) …where: (a) an amount of relevant tax is paid by a person to the Commissioner (in this subsection referred to as the "amount paid"); and (b) as a result of a decision to which this Act applies, the whole or a part of the amount paid is overpaid by the person and is refunded to the person… interest calculated in accordance with subsections (2) and (3) and sections 10 and 10A is payable by the Commissioner to the person in respect of… the amount paid…". 49 Under s 3 the expression "relevant tax" includes: "(m) tax within the meaning of subsection 29(1) of the [1930 Assessment Act No.1] (including that subsection as applied by any other Act providing for the assessment of sales tax); (ma) tax within the meaning of section 68 of the Sales Tax Assessment Act 1992;" 50 As at 1 February 1989, s 29 of the 1930 Assessment Act No. 1 relevantly provided as follows: "(1) If any tax remains unpaid after the time when it became due and payable or would, but for section 28, have become due and payable, additional tax is due and payable by way of penalty by the person liable to pay the tax at the rate of 20% per annum on the amount unpaid, computed from that time or, where, under section 28, the Commissioner has extended the time for payment of the tax or has permitted the payment of the tax to be made by instalments, from such date as the Commissioner determines, not being a date prior to the date on which the tax was originally due and payable. ……………………… (4) In this section, unless the contrary intention appears, 'tax' includes: (a) further tax; and (b) additional tax under Part VIII." 51 Thus, s 29(1) of the 1930 Assessment Act No. 1 imposes additional tax on "tax" and, for that purpose, the term "tax" was given the extended meaning in s 29(4). The definition in s 29(4) is inclusive, so that "tax" in s 29(1) includes primary tax as well as further tax (that is, tax assessed under s 25 following enquiry by the Commissioner) and additional tax under Part VIII. That view is confirmed by other sections of the 1930 Assessment Act No. 1, where a similar extended definition of "tax" is used and the context indicates that primary tax is intended to be included (see, for example, s 25A(2), s 26(7) and s 28(2)). Accordingly, paragraph (m) of the definition of "relevant tax" in s 3 of the Interest Act extends to sales tax payable under any Act providing for the assessment of sales tax. 52 That is confirmed by the Explanatory Memorandum for the Taxation Laws Amendment Bill 1984, which introduced paragraph (m). The Explanatory Memorandum states: "Paragraph (f) will extend the definition of 'relevant tax' – the term used in the Principal Act to identify the kinds of tax which, if refunded as a result of an objection or appeal, will give rise to an entitlement to interest – to include: ……………………… · Sales tax payable under the Sales Tax Assessment Act (No. 1) 1930 (including penalty tax assessed under Part VIII of the Sales Tax Assessment Act (No. 1) (1930) including that Act as applied to the Sales Tax Assessments Acts (Nos.2 to 9) 1930…". 53 Under s 3(1) of the Interest Act, the expression "decision to which this Act applies" relevantly means a decision of the Commissioner upon an "objection". Under the same provision, objection relevantly means a "taxation objection" within the meaning of Part IVC of the Administration Act. Under s 14ZL of the Administration Act, a taxation objection is one where a provision of an Act or of regulations provides that a person who is dissatisfied with an assessment, determination, notice or decision may object against it in a manner set out in Part IVC. 54 Section 10(1)(a) of the Interest Act relevantly provides as follows: "Interest payable to a person by virtue of section 9… in respect of an amount of relevant tax… refunded to the person… as a result of a decision to which this Act applies shall be calculated… in respect of the period that commenced on whichever is the latest of the following days, namely: (i) the day on which notice of the assessment… in relation to which the decision to which this Act applies was made, was issued to the person by the Commissioner; (ii) the day on which the amount of relevant tax was paid to the Commissioner; or (iii) …20 December 1984; and ended on the day on which the amount of the relevant tax… was so refunded…." 55 However, s 10A of the Interest Act relevantly provides as follows: "10A Interest is not payable to a person by virtue of s 9 in respect of an amount of relevant tax… being relevant tax of a kind referred to in paragraph…(m) of the definition of 'relevant tax' in subsection 3(1), in respect of any period in relation to which the amount of the relevant tax… has been passed on by the person to another person and has not been refunded to that other person by the first mentioned person." 56 Thus, s 9 of the Interest Act only applies in circumstances where a decision to which the Interest Act applies has a certain result. Relevantly, a decision to which that Act applies is a decision upon an objection and an objection is relevantly a taxation objection within the meaning of Part IVC of the Administration Act. As I have indicated, an objection decision is a decision by the Commissioner to allow or disallow a taxation objection. 57 An objection pursuant to s 60 of the 1992 Assessment Act is an objection within the meaning of the Interest Act. Section 9 of the Interest Act is predicated upon an objection decision within the meaning of s 14ZL of the Administration Act. Section 9 has no application where there has been no objection pursuant to s 60 of the 1992 Assessment Act. More particularly, where the Commissioner, pursuant to s 55 of the Administration Act, makes a refund to a claimant, s 9 has no application. On the other hand, where a decision has been made in respect of an objection pursuant to s 60, s 9 could have application in respect of an amount of relevant tax. 58 Further, the scheme of s 10 of the Interest Act contemplates that interest will be payable no earlier than the day on which the objection decision was made. That is to say, if there is no objection decision, no interest will be payable. Even where interest is payable, it is only from the date of the decision by the Commissioner on an objection, for example, pursuant to s 60 of the 1992 Assessment Act. THE ISSUES 59 The primary claim by Qantas is pursuant to s 9 of the Interest Act. The Commissioner contends that, on the proper construction of the Interest Act, no interest is payable in the present circumstances. 60 Qantas contends that, if no interest is payable pursuant to the Interest Act, it is entitled to restitution under the general law by reason of the Commonwealth having been unjustly enriched at its expense. The Commissioner responds to that contention by saying that: · no general law basis for recovery of interest has been shown to exist on the part of Qantas; · in any event, the Interest Act constitutes a code governing the payment of interest on refunds of sales tax. claim under THE INTEREST ACT 61 It is common ground that the sales tax paid by Qantas is "relevant tax" within the meaning of s 9(1)(a) of the Interest Act. The obligation of the Commissioner under s 9 to pay interest is predicated upon the relevant tax having been paid "as a result of" a decision of the Commissioner upon a taxation objection within the meaning of Part IVC of the Administration Act. That requires a causal relationship between the objection decision and the conclusion that the amount of relevant tax is "overpaid". Qantas contends that, in the present case, there is such a relevant causal connection between the objection decision of 1 April 1997 and a conclusion that the sales tax totalling $12,285,266.26 was overpaid by Qantas. 62 The Commissioner's reasons for the decision to allow the objection in respect of the assessment relating to the payment of sales tax in the sum of $7,185.17 were as follows: "The goods to which the objection relates were flight simulator parts ('the goods') which were imported into Australia by the taxpayer during February 1983. The amount involved is $7,135.17. The goods were solely for use in connection with the flight stimulator equipment at the Taxpayer's Flight Operations Training Centre and for no other purpose. The issues have been dealt with at the Federal Court and then subsequently by the Full Federal Court…. … It is noted that the activities and administration of the centre equates to that of the Australian Airlines Limited Flight Training Centre involved in the relevant case law. ……………………… It is considered that the facts in this case are similar to those in the Australian Airlines Case. The Flight Operations Training Centre operates similar to that of the Flight Training Centre in the Australian Airlines matter… [a]s decided by the Full Federal Court…." 63 It is clear from the language of the Commissioner's notice of decision, and the reasons for that decision, that the decision related only to the objection to the assessment in respect of the sum of $7,185.17. Indeed, the covering letter expressed the expectation that, as a result of that decision, Qantas would lodge a refund claim for the "other amounts in dispute". The Commissioner also accepts that a decision was made relating to the objection in respect of the sum of $39,564.67. 64 In one sense, it can be said that the decision of 1 April 1987 was a result of the decision of the Federal Court in relation to the Australian Airlines Limited case. It might also be said that the decision of 1 April 1997 was a result of the conclusion ("the Critical Conclusion") reached by the Commissioner that: · the Training Centre was a school for the purposes of Item 63A; and · Qantas was an "organisation not carried on for the profit of an individual". It can also be said that, by reason of the correctness of the Critical Conclusion, the Commissioner concluded that sales tax in the sum of $12,285,266.26 was overpaid by Qantas. 65 Thus, two events may be said to have been a result of the Critical Conclusion, namely: (i) the objection decision of 1 April 1997; (ii) the willingness of the Commissioner: · to refund pursuant to s 11 of the 1930 Assessment Act No. 5 the amount of any tax overpaid; · to refund pursuant to s 55 of the 1992 Assessment Act any excess of any credit to which Qantas is entitled. 66 However, any entitlement of Qantas to a refund either under s 11 or under s 55 was not a result of the objection decision of 1 April 1997. Rather, any entitlement to a refund arose by the operation of the sections according to their respective terms. If Qantas was entitled to any refund, it was because the Commissioner extended the time for requesting a refund, as he had indicated he would in his letter of 23 March 1988, and decided to make the refunds in accordance with the request. Qantas had no entitlement to a refund until KPMG made the request contained in their letter of 22 April 1997. That being so, it follows that s 9 has no application in the present circumstances. 67 The position might have been different if, instead of the procedure that was adopted following the meeting of 9 March 1988, Qantas had continued to make payments under protest and request assessments, in respect of each payment, under s 10AA of the 1930 Assessment Act No. 5. If Qantas had continued to request assessments, it would have been a fair inference that the Commissioner would have made decisions disallowing the claims under s 14ZY of the Administration Act. If Qantas had objected to each such decision, it would have been incumbent upon the Commissioner to make an objection decision in respect of each overpayment of sales tax made by Qantas. Interest would then have been payable under the Interest Act. However, that course was not adopted. 68 No argument was advanced that the circumstances described above should lead to a conclusion that the Commissioner should be treated as having made an assessment in respect of any amounts other than the sums of $7,185.17 and $39,564.67 referred to in the letters of 21 and 27 January 1988. The communications at the meeting on 9 March 1988 and the Commissioner's letter of 23 March 1988 might arguably have given rise to an agreement between Qantas and the Commissioner that Qantas would not make a series of refund claims but the dealings shown in its monthly statements would form part of the s 10AA assessment to be made by the Commissioner. However, it was not asserted by Qantas that any agreement came into existence. Nor was there any assertion that Qantas would have acted any differently but for some conduct on the part of the Commissioner, so as to rise to an estoppel. 69 In my opinion, Qantas is not entitled to any interest pursuant to the Interest Act. CLAIM UNDER THE GENERAL LAW 70 In the alternative, Qantas contends that it is entitled to interest by way of restitution by reason of the unjust enrichment of the Commonwealth at its expense. The claim to interest under the general law, as framed by Qantas, must be dependent upon there being an underlying right to restitution of the overpayment. If there were no general law right to restitution in respect of the money overpaid as sales tax, there could be no right of restitution in respect of the loss of the use of that money. 71 Money paid under compulsion may be recoverable. Thus, where a public officer demands, colore officii, and is given, an amount that is not due, for the performance of a public duty or the proper exercise of a public discretion, any amount paid pursuant to such a demand will be recoverable – Mason v New South Wales (1959) 102 CLR 108 at 140. For example, if the Commonwealth, through the Collector of Customs, refused to deliver goods entered by Qantas for home consumption unless Qantas paid an amount by way of sales tax that was not in fact payable, such a principle may well have be attracted. However, it is far from certain that the colore officii principle survives in relation to overpayment of sales tax. The sales tax legislation, both under the 1930 regime and under the 1992 regime, constituted a code for the recovery of overpaid sales tax, which excluded any common law right to recover overpaid sales tax – Chippendale Printing Co Pty Ltd v Commissioner of Taxation (1996) 62 FCR 347 at 348-9 and 358. 72 Qantas asserts that its entitlement to restitution arises by reason of the following: (a) the Commonwealth has been enriched by reason of having had the use of the overpaid sales tax for varying periods from 1987 to 1994; (b) that enrichment occurred at the expense of Qantas, which has not had the use of that money during those periods; (c) there exists a vitiating factor that makes the enrichment unjust; (d) there is no applicable defence or other reason to deny restitution to Qantas. 73 Although there was no evidence directed to the question as such, it is probably fair to conclude that the Commonwealth has been enriched to the extent that it had the use of the overpaid sales tax. Similarly, to the extent that Qantas lost the use of that money during the relevant period, that enrichment of the Commonwealth has been at the expense of Qantas. The question, however, is whether there is a vitiating factor that makes any such enrichment of the Commonwealth at the expense of Qantas "unjust". Qantas contends that the vitiating factor is that Qantas made the payments of sales tax to the Commissioner "following an ultra vires demand by the Commissioner". The demand was said to be contained in the July Letter and the December Letter. 74 It is clear that, by the July Letter, the Commissioner made clear his opinion that goods for use in the Training Centre entered for home consumption by Qantas would not be exempt under Item 63A. That position was confirmed by the December Letter. However, neither of those letters contains any demand for payment of any sum of money. The letters are no more than a statement of the Commissioner's opinion on the applicability of Item 63A. There is no evidence that, at the time of receipt of those letters, there were any specific goods that were being entered for home consumption by Qantas. There is no suggestion in the letters that the Collector of Customs would not release any goods to Qantas unless sales tax was paid in respect of the goods. I do not consider that either of the letters can properly be characterised as a demand. 75 There was no evidence that the Collector of Customs ever refused to deliver goods to Qantas because sales tax was paid under protest. Nor was there any evidence that the Collector would have refused to deliver goods if sales tax were only paid under protest. It appears that Mr Vos had some understanding to that effect. However, there was no claim that any payment was made by Qantas as a consequence of any mistaken belief to that effect. 76 As I have said, there was no suggestion by Qantas that the arrangements put in place pursuant to the discussion that took place on 9 March 1988 constituted an agreement between Qantas and the Commissioner or between Qantas and the Commonwealth that all moneys paid by Qantas by way of sales tax would be treated as though they were the subject of a special assessment under s 10AA of the 1930 Assessment Act No. 5. Nor was there any suggestion by Qantas that the Commissioner and the Commonwealth were estopped from denying that all the payments were to be treated as though they were the subject of such a special assessment. 77 The most that can be said is that Qantas made the payment of sales tax believing that the Commissioner was of the opinion that Qantas was liable to pay such sales tax. It has not been suggested, and could not be, that Qantas made the payments believing, mistakenly, that it had a liability to pay sales tax. Qantas has always maintained the position that it was not liable to pay sales tax. In my opinion, Qantas has failed to establish that it overpaid sales tax by reason of an ultra vires demand by the Commissioner. That is the only ground relied on for its contention that the overpayment of sales tax was made in circumstances that would justify the recoverability of interest on that overpayment under the general law as to unjust enrichment. LEGISLATIVE EXCLUSION OF GENERAL LAW RIGHT OF RECOVERY 78 In any event, I consider that the Interest Act constitutes a code for the recovery of interest on overpaid sales tax. It would be curious if the legislature, in circumstances such as those presently under consideration, intended to restrict the right to recover interest under the Interest Act, as it has in Part III of the Interest Act, yet intended to allow an unrestricted right, derived from the general law, to remain available at the same time. 79 Section 9 of the Interest Act is predicated upon there being an overpayment as a result of a decision to which the Interest Act applies. Even then, interest is only payable for a limited period, as contemplated by s 10, commencing no earlier than the day on which notice of the relevant assessment was issued to the taxpayer. Further, under s 10A, interest is not payable where the tax has been passed on. It would be anomalous if those limitations on recovery contained in Part III of the Interest Act applied where the Commissioner wrongly disallowed an objection but did not apply where the Commissioner allowed an objection. That would be the consequence of the contentions advanced by Qantas. 80 That is to say, if Qantas is correct in its contention, where: · there was an overpayment; · a refund application was made; · a favourable decision was made by the Commissioner; · a refund was made; there would be no limitation on recovery of interest under the general law. 81 However, where: · there was an overpayment; · a refund application was made; · the Commissioner decided to disallow the claim; · the claimant objected; · the objection was allowed; · a refund was made; the limitation on recovery, both as to time of recovery, interest rate, and disqualification under s 10A, would be applicable. 82 That would be a very curious result. The Commonwealth would be entitled to the benefit of the limitation of recovery under Part III of the Interest Act where the Commissioner wrongly disallowed a claim, whereas, where he correctly allowed a claim, there would be no limitation. There would be a reward to the Commonwealth for the incorrect decision of the Commissioner. I consider that that anomaly leads to the conclusion that the Interest Act was intended to lay down a code for the recovery of interest in respect of, inter alia, overpaid sales tax that is refunded by the Commissioner. Since it does not permit recovery of interest in the present circumstances, no such recovery is available to Qantas. CONCLUSION 83 It follows, in my opinion, that the application should be dismissed with costs. I certify that the preceding eighty-three (83) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 5 December 2001 Counsel for the Applicant: A H Slater with M Richmond Solicitor for the Applicant: KPMG Legal Counsel for the Respondent: S Gageler with M Wigney Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 31 October 2001, 2 November 2001 Date of Judgment: 7 December 2001