H.C. or A, Sales Tax—Goods manufactured in Australia—Treated by manufacturer as eo. Sypyey, Aug. 20; Sept. 3. Gavan Duffy C.J., Starke, 'Evatt and 'MeTiernan JJ. THE FEDERAL COMMISSIONER OF TAXATION BEARD, WATSON AND COMPANY LIMITED _ Derenp: : HIGH COURT [HIGH COURT OF AUSTRALIA.] AND stock prior to 1st August 1930—Sold on or after that date to unregistered or persons who had failed to quote certificate number—Liability to taz—S Tax Acts (No. 1) 1930 (Nos. 26 and 63 of 1930)—Sales Tax Assessment Act( 1930 (No. 25 of 1930), secs. 17*, 18 (1), (2), (3)*—Sales Tax Assessment 4c (No. 14) 1930 (No. 62 of 1930), seca. 4, 5. Certain goods of Australian manufacture were, prior to Ist August 1930, treated by the manufacturing company (which was duly registered under: Sales Tax Assessment Acts) as stock for sale in its retail business. The goodsin question were, on or after Ist August 1930, sold to persons who were not registered under the Acts or had failed to quote the number of respective certificates, Held, that such sales came within sec. 18 (1) of the Sales Tax A. Acts (No. 1) 1930, and the sale value of the goods as so found was accordingly. * The Sales Tax Assessment Act (No. 1) 1930, as amended by the Sales Tax Assessment Act (No. 14) 1930, provides (so far as is material) as follows :— Sec. 17. " Subject to, and in accordance with, the provisions of this Act, the sales tax imposed by the Sales Tax Act (No. 1) 1930 shall be levied and paid upon the sale value of goods manufac- tured in Australia, either before or after the commencement of this Act, by a taxpayer and on or after the first day of August one thousand nine hundred and thirty sold by him or treated by him as stock for sale by retail or applied to his own use." Seo. 18. "(1) For the purposes of this Act, the sale value of goods, not being goods to which the next succeeding sub-section applies, which are sold on or after the first day of August one thousand nine hundred and thirty, shall be the amount for which those goods are sold to an unregi tered person, or to a registered per who has not quoted his certificate i respect of that sale. . . . (2) For the purposes of this Act the sale val of goods treated by the manuf of the goods on or after the first day of August one thousand nine ht and thirty as stock for sale by him by retail, shall be the amount which be the fair market value of those g if sold by him by wholesale. (3) For the purposes of this Act, the sale va of goods manufactured by any person and, on or after the first day of one thousand nine hundred and th applied to his own use shall be such amount as, in the opinion of the missioner, would be the fair m value of the goods if sold by that perso in the ordinary course of trade." 45 C.L.R.] OF AUSTRALIA. Case StaTeD. For the purpose of determining the liability to sales tax of the sale value of certain goods manufactured by Beard, Watson & Co. Ltd., Sydney, and, prior to Ist August 1930, treated by that Company as stock for sale in its retail business, a special case, which was substantially as follows, was, under Order XXXII, tule 1, of the High Cowt Rules 1928, stated by the Commissioner of Taxation and the Company for the opinion of the High Court :— 1. The defendant in this case is, and at all relevant times was, a limited company duly incorporated under the Companies Acts of the State of New South Wales, and carrying on business in that State as a manufacturer with its registered office in George Street, Sydney. The defendant is, and at all times relevant was, also carrying on business in the said State as a wholesale merchant in respect of the sale of cabinets for wireless sets but, save as aforesaid, is and was carrying on business in the said State as a retailer. 2. The defendant is registered under the Sales Tax Assessment Adts (Nos. 1 to 9) 1930, being Acts Nos. 25, 27, 29, 31, 33, 35, 37, 39, 41, 62 and 64 to 71 of 1930 of the Commonwealth, as a manufac- turer and wholesaler, the certificate of registration having been issued to it on 15th September 1930. 3. The plaintiff is claiming from the defendant the sum of £412 5s. 8d. for sales tax and additional tax under the Sales Tax Acts (No. 1) 1930, being Acts Nos. 26 and 63 of 1930 and the Sales Tax Assessment Acts (No. 1) 1930, being Acts Nos. 25 and 62 of 1930, and the sum of £4 14s. 6d. for costs. 4. The particulars indorsed on the plaintiff's writ of summons, which was issued out of this Honourable Court on 13th April 1931, show that the said sum of £412 5s. 8d. is claimed by the plaintiff to be due and payable to him by the defendant as the sales tax and additional tax under the said Acts on the sale value of goods manufactured by the defendant in Australia before Ist August 1930 which were still on hand and unsold at the commencement of business on that day, and which on or after that day and up to and including 31st July 1931 either were sold to persons not registered under the said Sales Tax Assessment Acts (Nos. 1 to 9) 1930 or to persons so registered but who had not under those Acts quoted their H.C. oF A. 1931. Cee. FEDERAL Conis- SIONER OF Taxation Bearp, Warson & Co. Li H. CG. or A. ww Freperau Comis- SIONER OF TAXATION v Brarp, Warson & Co. Lrp. HIGH COURT certificate of registration, or were applied by the defendant to j own use, 5. The goods in respect of which tax is claimed had been ma tured in Australia by the defendant prior to Ist August 1930, had been treated by the defendant as stock for sale by retail prior to Ist August 1930, and were on or after Ist August 1930 sold by defendant to persons not registered under the Sales Tax A: Acts (Nos. 1 to 9) 1930 or to persons so registered who had not under those Acts or any of them quoted their certificate of registration. 6. The parties have concurred in stating as a special case for the opinion of the Court the following question of law arising in cause :— 5 Are sales tax and additional tax chargeable under the Sales Ta Acts (No. 1) 1930 and the Sales Tax Assessment Act (No. 1) 1930 upon the sale value of goods manu by the defendant in Australia prior to Ist August which goods were still on hand and unsold at the e mencement of business on that date, and had prior to said Ist August been treated by the defendant as s for sale by it by retail and were on or after that date sold to persons not registered under the Sales Tax Assess ment Acts (Nos. 1 to 9) 1930 or under any of those A or to persons so registered but who had not under tho Acts or under any of them quoted their certificates registration ? £.M. Mitchell K.C. (with him Gallagher), for the plaintiff. Theint fe tion of the Sales Tax Assessment Act (No. 1) 1930, as shown by see. 18 tured goods in his possession on Ist August 1930, and the which this is affected is shown in sees. 17 and 18 as amended. tax is assessed on the sale value of all goods in the manufacti rer hands on or after Ist August 1930, but on a basis differing in aceord ance with the way in which such goods have been treated on or af that date. The test for ascertaining liability is by reference to s treatment. The Act is not concerned with what was done pri Ist August 1930. Goods, the sale value of which is assessable f ail 45 C.L.R.] OF AUSTRALIA. taxation, are, under sec. 18, classified into three categories, namely, (a) all manufactured goods sold on or after 1st August 1930 by the manufacturer, not being goods treated by him on or after that date as stock for sale by retail, (6) all manufactured goods treated by the manufacturer on or after Ist August 1930 as stock for sale by retail, and (c) all manufactured goods applied by the manufacturer on or after Ist August 1930 to his own use. Sales of the subject goods are not covered by sec. 18 (2)—category (b); and, therefore, on the clear language of the Act, they come within sec. 18 (1)— category (a). No provision is made in sec. 20 for any exemption for goods treated as stock for sale by retail prior to Ist August 1930. If the defendant Company were to be exempt from taxation on these sales because it had, prior to Ist August 1930, carried the goods into stock for sale by retail, it would be placed in a position of advan- tage over other manufacturers who had common stock and did not carry over into stock for sale by retail. Sec. 18 (2) does not have the effect of making certain goods non-taxable, but merely accelerates the date of payment and fixes a different basis of tax. Flannery K.C. (with him Jelbart), for the defendant. It is agreed that for the purposes of sales tax the Legislature intended that a manufacturer's goods should be divided into three categories— goods sold by him, goods treated by him as stock for sale by retail and goods applied to his own use (see secs. 17, 18, 21 and 24). The division is secured by a decisive act of the manufacturer, and the category into which the goods are so placed remains the category for all time. Sales tax payable in connection with such goods is found, under sec. 18, on the basis of what category they are placed in on or after Ist August 1930. The effect of that section is that if such decisive act is performed by the manufacturer prior to that date the goods concerned escape taxation, there being no sales value. All possibility of double taxation is avoided. All goods accumulated in stock for sale by retail at Ist August 1930 must escape taxation because they have no sales value, such value being found by an act which is decisively done only on or after Ist August 1930. H. C. or A. 1931. Ww FrpEraL Comis- SIONER OF TAXATION Brarp, Watson & Co. Lr. H. CG. oF A. 1931. Ww HIGH COURT E. M. Mitchell K.C., in reply. Sec. 18 (1) does not permit of a double taxation. The Act allows the division of the goods - categories according to what takes place in respect of those go on or after Ist August 1930; operations prior to that date be ignored. Cur. adv. v The following written judgments were delivered :— p Gavan Durry C.J. I agree with the judgment to be deliver by my brother Evatt. SrarkE J. The following question is stated for the opini the Court: " Are sales tax and additional sales tax chargeable un the Sales Tax Acts (No. 1) 1930 and the Sales Tax Assessment A (No. 1) 1930 upon the sale value of goods manufactured by t defendant in Australia prior to Ist August 1930, which goods still on hand and unsold at the commencement of business on date, and had prior to the said 1st August been treated by defendant as stock for sale by it by retail and were on or after th date either sold to persons not registered under the Sales Tax Ass ment Acts (Nos. 1 to 9) 1930 or under any of those Acts or to persor so registered but who had not under those Acts or under any of the quoted their certificate of registration ? " The answer depends upon the construction of secs. 17 and the Sales Tax Assessment Act (No. 1) 1930, as amended by 1 Act No. 62 of 1930. By the Acts No. 26 of 1930 and No. 63 ¢ 1930 a sales tax is imposed at the rate of two and one-half centum (increased after 11th July 1931 by Act No. 26 of upon the sale value of goods manufactured in Australia by a taxpayt and sold by him or treated by him as stock for sale by retail applied to his own use. But the Sales Tax Assessment Act (No.1 1930 and the Sales Tax Assessment Act (No. 1a) 1930 (Act No. 62) the limits of that tax, and provide for its assessment and the chargeable therewith. Thus, in sec. 17 itis enacted that th there mentioned shall be levied and paid upon the sale value of manufactured in Australia by a taxpayer before or after the mencement of the Act, and on or after Ist August 1930 sold | 45 C.L.R.] OF AUSTRALIA, him or treated by him as stock for sale by retail or applied to his H- ©. or A. own use. The sale value of goods in Australia is also fixed. Thus sec. 18 provides :—(1) The sale value of goods not being goods to which the next clause (2) applies which are sold on or after 1st August 1930, shall be the amount for which those goods are sold, to certain persons. (2) The sale value of goods treated by the manufacturer of the goods on or after 1st August 1930 as stock for sale by him by retail shall be the fair wholesale market price. (3) The sale value of goods manufactured by any person, and, on and after Ist August: 1930, applied to his own use, shall be such amount as in the opinion of the Commissioner is the fair market value in the ordinary course of trade. Both the Tax Acts and the Assessment Acts divide the goods the subject of the tax into three classes, but the determination of the class into which the goods fall depends upon the manufacturer's acts on or after Ist August 1930. This view is borne out by sec. 21, which requires every manufacturer who during any month makes any of the sales specified in sec. 18, or treats any goods as stock for sale by him by retail, or applies to his own use any goods manufactured by him, to furnish a return thereof. It is admitted that the manufacturer had in the present case treated the goods as stock for sale by retail prior to 1st August 1930, and the argument is that the goods were thereby excluded from the second of the classes above mentioned. But if they be excluded from that class, why do they not then fall within the class of goods manufactured in Australia and sold by the taxpayer on and after Ist August 1930? Because, as I understand the argument, they had become irrevocably stamped, before Ist August 1930, With the character of goods treated by the taxpayer as stock for sale by retail. I cannot agree. The Acts give no character to the goods except in respect of acts done on and after 1st August 1930. Here we have a sale within the terms of sec. 18 (1), on and after Ist August 1930; and the taxpayer does not contend that he treated the goods on and after that date as stock for sale by retail, for that would only bring him within the provisions of sec. 18 (2). The question stated must be answered in the affirmative. 1931. Ww FEDERAL Comanis- SIONER OF Taxation v. Bear, Warsow' & Co. Lap. Starke J. H. C. or A. 1931. Ww Feperat Commis- SIONER OF TAXATION rs Bearp, Warson & Co. Lap. Evatt J. HIGH COURT Evarr J. The question which arises for decision is whether Commonwealth Sales Tax Acts (No. 1) and the Sales Tax As Acts (No. 1) 1930 operate in such a way as to make the defend: Company chargeable with sales tax and additional tax upon { "sale value" of certain goods. These goods were manufactured Australia by the defendant Company prior to Ist August I! and were treated by it as stock for sale in its retail b before that date. At the commencement of business on Ist A the goods were still on hand and unsold, but they were all s or after that date either to persons not registered under the Comm their certificate in respect of their purchases. Such sales by t manufacturer of goods ordinarily create a liability on his p pay sales tax upon their sale price, but the defendant seeks toa that result because, prior to 1st August 1930, the goods had he treated as stock for sale by it by retail. The Sales Tax Act (No. 1) 1930 imposes what is called a tax" at the rate of 2} per centum upon the sale value of gc which a taxpayer has manufactured in Australia, and aftery has (1) sold or (2) treated as stock for sale by retail or (3) a to his own use (No. 26 of 1930, sec. 3; No. 63 of 1930, sec. 4 Sec. 19 of the Sales Tax Assessment Acts provides that tax is payal by the manufacturer of the goods, the sale value of which is specifi in sec. 18. The part of sec. 18, which is important for prese purposes, is as follows :— a 18. (1) For the purposes of this Act, the sale value of goods, not being g0 to which the next succeeding sub-section applies, which are sold on or afte first day of August one thousand nine hundred and thirty, shall be the am for which those goods are sold to an unregistered person, or to a registered per who has not quoted his certificate in respect of that sale. 7 (2) For the purposes of this Act, the sale value of goods treated by the turer of the goods on or after the first day of August one thousand nine and thirty as stock for sale by him by retail, shall be the amount which the fair market value of those goods if sold by him by wholesale. Sec. 17 of the Sales Tax Assessment Acts defines the subj matter of sales tax as the sale value of goods manufactured bj taxpayer (whether before or after the commencement of the 4 where the goods are (a) sold on or after Ist August 1930, treated by him as stock for sale on or after Ist August 1930, itil 45 C.L.R.] OF AUSTRALIA. applied to his own use on or after Ist: August 1930. These three H. ©: or A. descriptions clearly identify the three classes of manufactured goods struck at by the Act. Sec. 18 then enacts that a sale value will attach to the goods in the manufacturer's hands upon his performing —on or after Ist August 1930—any one of three acts—selling, a treating as retail stock, or applying to his own use. The performance of one of these acts at once creates and measures the manufacturer's liability. The argument for the taxpayer is that there is no liability to taxation if the goods have been sold or applied to the taxpayer's use prior to 1st August 1930, and that, by parity of reasoning, a treatment of goods as retail stock prior to that date should have a similar result. It is not disputed that if (as he might) the manu- facturer sold the goods by retail on or after 1st August 1930, without any prior treatment of such goods as stock for sale by retail, he would be liable. The taxpayer's contention necessarily involves the assertion that the words " not being goods to which the next succeeding sub-section applies," which occur in sec. 18 (1), indicate an exclusion or exception from sec. 18 (1) of all goods which are sold after treatment as stock for retail sale, whether such treatment occurred before or after Ast August 1930. But this is opposed to the language used. The goods to which sec. 18 (2) applies are not all goods which are or have been treated by the manufacturer as stock for sale retail, but only those goods which are so treated on or after Ist August 1930. The object of the exclusion in sec. 18 (1) isreasonably clear. A manufacturer who sold goods retail after August Ist would, as a rule, have also treated such goods as stock for retail sale after August Ist. By sec. 18 (2) such act of treatment exposes him to a liability measured by the fair wholesale value of the goods at the time of treatment. But by see. 18 (1), the subsequent act of selling would expose him to a second liability measured by the actual sale price, were it not for the express insertion in the sub-section of the exception mentioned. The plain terms of sec. 18 (1) of the Sales Tax Assessment Acts therefore show that a sale value attaches to manufactured goods sold by the manufacturer on or after 1st August 1930, unless such 1931. ed FEDERAL ComMis- Watson & Co. Lp. Evatt J. H. ©. or A. goods were, prior to sale, but on or after 1st August 1930, 1931. ed Feperat Commis- SIONER OF Taxarion v. Bearp, Warsow & Co. Lev. McTiernan J. HIGH COURT by him as stock for retail sale. This contention is in strict ance with the terms of sec. 17 and of the Rates Acts. There being no exemption applicable to the case, the defer is liable to pay taxation assessed by reference to sec. 18 (1) of th Assessment Act, and the question should be answered Yes. — #, McTiernan J. I am of opinion that the question should } answered in the affirmative. The Sales Tax Assessment Acts (No 1) 1930 levies the sales tax which is imposed by the Sales Tax Aa (No. 1) 1930 upon the sale value of goods manufactured in At t before or after the commencement of the Act, and establishes categories into which goods to which the Act applies may be by the act of the manufacturer, which is done in relation to then Briefly the categories are (1) goods sold by him, (2) goods tre: by him as stock for sale by retail, and (3) goods applied to his use (see sec. 17). The manufacturer of such goods is the taxpayi (sec. 19). As the tax is levied by the statute upon the sale of the goods, the statute prescribes a method for assessing the value of the goods in each category, and the method differs accor to the category into which the goods are put by the act of 1 manufacturer (see sec. 18). The goods in respect of which tax: claimed in the present case had been treated by the defendant pri to 1st August 1930 as stock for sale by it by retail. There is no category established by the statute to which goods which had thus treated prior to Ist August 1930, should be assigned, and special method is prescribed for specifying the sale value of g 0 August 1930 by the manufacturer under the conditions mention in the special case, that is to say, to unregistered persons, or f registered persons who had not quoted their certificate ; method is prescribed for determining the sale value of goods wh the manufacturer has sold during that time and under those co ditions. The goods having been sold by the manufacturer at t time and in the manner which have been stated, it appears to me the all the conditions mentioned in sec. 18 (1) were fulfilled and th sub-section operated and determined the amount at which the a 45 C.L.R.J OF AUSTRALIA. value of the goods should be assessed for the purposes of taxation and upon that sum sales tax was levied and is payable (sec. 17). The only ground of exception mentioned in sub-sec. 1 of sec. 18 to that amount becoming the sale value of any goods to which the section refers, and which are sold on or after Ist August, is that sub-sec. 2 of sec. 18 applies to the goods. That sub-section obviously does not apply to the goods in this case. Sec. 18 (1) being applicable to the goods in respect of which tax is claimed by the plaintiff, it does not appear to me relevant or material that they may be said to belong to a category, namely, goods treated by the manufacturer before 1st August 1930 as stock for sale by him by retail, and the Legislature has not provided any special method for determining the sale value of goods in that category. In my opinion, there is no expression or implication of any legislative intention in the Act that the goods, in respect of which sale tax is claimed should not be within its scope, or that an exemption has been granted in respect of them. Question answered: Yes. Solicitor for the plaintiff, W. H. Sharwood, Crown Solicitor for the Commonwealth. Solicitors for the defendant, R. N. Henderson & Co. J.B. VOL, XLV. 19 H.C. oF A. 1931. Ww Feperat Commts- SIONER OF Taxation v. Bran, Warsow & Co. Lap. 'McTiernan J.