CATCHWORDS

CUSTOMS - rebate under s. 164(1)(aa) of the Customs Act 1901 in respect of diesel fuel purchased for use in primary production - construction of provision - nature of purpose involved in it - purchase of diesel for power generation in country areas involving some use in primary production and some of other kinds - whether facts fully found - whether entitlement shown to an apportionment - appeal from Administrative Appeals Tribunal.

Customs Act 1901, s. 164

Collector of Customs v. Rottnest Island Authority (1994) 119 ALR 406

Collector of Customs v. Pozzolanic Enterprises Pty Limited (1993) 43 FCR 280

Australian National Railways Commission v. Collector of Customs, South Australia (1985) 8 FCR 264

Collector of Customs v. Cliffs Robe River Iron Associates (1985) 7 FCR 271

Collector of Customs v. Perkins Shipping Pty Ltd (1989) 24 FCR 520

District Council of Coober Pedy v. Collector of Customs (1993) 42 FCR 127

Commissioner of Taxation v. Cooper (1991) 29 FCR 177

COWELL ELECTRIC SUPPLY COMPANY LIMITED v. COLLECTOR OF CUSTOMS

NG 214 of 1994

Burchett, Hill and Carr JJ.

Sydney

10 January 1995

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)    NG 214 of 1994

                                  )

GENERAL DIVISION                  )

ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL

           BETWEEN:     COWELL ELECTRIC SUPPLY COMPANY LIMITED

                             Applicant

               AND:     COLLECTOR OF CUSTOMS

                             Respondent

CORAM: Burchett, Hill and Carr JJ.

PLACE: Sydney

DATE : 10 January 1995

                     ORDERS OF THE COURT

THE COURT ORDERS THAT:

1.   The appeal be allowed.

2.   The decision of the Administrative Appeals Tribunal be set aside, and in lieu thereof it be determined that the applicant is entitled to a rebate in respect of an apportioned part of the diesel fuel the subject of the application to the Administrative Appeals Tribunal.

3.   The matter be remitted to the Administrative Appeals Tribunal to determine the appropriate apportionment, unless the parties are able to reach agreement thereon.

4.   The respondent pay the applicant's costs of and incidental to the appeal.

NOTE:     Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)    NG 214 of 1994

                                  )

GENERAL DIVISION                  )

ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL

           BETWEEN:     COWELL ELECTRIC SUPPLY COMPANY LIMITED

                             Applicant

               AND:     COLLECTOR OF CUSTOMS

                             Respondent

CORAM: Burchett, Hill and Carr JJ.

PLACE: Sydney

DATE : 10 January 1995

                    REASONS FOR JUDGMENT

BURCHETT J.:

     In this matter, the facts have been set out in some detail in the judgments of Hill J. and Carr J.  I am therefore able to come directly to the central issues in the case.

     The first thing to do is to determine how the Administrative Appeals Tribunal's decision should be understood.  Hill J., although "(n)ot without some doubt", treats it as positively finding as a fact that the applicant did not purchase diesel fuel "for use by him ... in primary production" within s. 164(1)(aa) of the Customs Act 1901.  So understanding the decision, his Honour has held that it was open to the Tribunal in respect of the applicant's purchases of diesel fuel for use in generating electricity for Marla and Kingoonya, but not in relation to Penong and Nundroo-Coorabie.  Carr J. thinks it was not open at all.  Thus they are at one as regards part of the applicant's claim, but in difference as to part. 

     For myself, before I come to the question whether the decision was open to the Tribunal in respect of these places or any of them, I think I should consider whether the Tribunal did actually take up the suggested issue of fact.  It seems to me that it did not.  On the contrary, it stopped short at the point where it decided that -

    "(t)he purpose of [the applicant] in purchasing diesel fuel is to enable it to generate electricity for distribution through the grid.  ...  The electricity so generated is sold to `all and sundry'.  Anybody within the area having suitable facilities that are receptive to the technical requirements of the company can apply to be connected to the grid.  The fact that some of those customers use electricity in connection with one of the statutory purposes cannot, without more, change or govern the purpose of the initial purchase of fuel."

After referring to the dictum in the joint judgment of Beaumont, French and Foster JJ. in Collector of Customs v. Rottnest Island Authority (1994) 119 ALR 406 at 419 which is cited by Carr J., the Tribunal commented that the applicant's activity of power generation -

    "must clearly be viewed as a commercial undertaking.  The evidence is that the fuel is purchased for the purpose of producing electricity in connection with this undertaking.  In those circumstances, as their
Honours pointed out, the relevant purposive use is not established."

     The last statement, in my opinion, misapplies the dictum to which the Tribunal was referring.  That dictum went no further than to concede that it "may well be" that a finding could in some circumstances be made precluding the establishment of the appropriate purpose.  The Tribunal converted this into an absolute rule applying wherever there was "a commercial undertaking" producing electricity for the generation of which fuel was purchased, being an undertaking that sold to "all and sundry".

     Whether the Tribunal's view involves an error of law seems to me to depend fundamentally on the proper construction of s. 164(1), and on the proper place of the concept of purpose in the criterion for entitlement to a rebate that it expresses.  The subsection provides:

    "A rebate is ... payable to a person who purchases diesel fuel for use by him:

                            . . .

     (aa)in primary production (otherwise than for the purpose of propelling a road vehicle on a public road);

                           . . ."

The application of this provision requires resort to be had to the definition of "primary production" in s. 164(7) which includes, via the definition of "agriculture", also in s. 164(7), a number of rural activities, such as "the cultivation of the soil" and "the rearing of live-stock", listed in paras. (a) to (e) of the latter definition, and "(f) other operations (including operations by way of pest or disease control or by way of soil or water conservation) connected with any operations referred to in paragraph (a), (b), (c), (d) or (e)", but not including fishing operations or forestry.

     It has been said that the criterion so expressed is "purposive": Collector of Customs v. Rottnest Island Authority (1994) 119 ALR 406 at 419; and see Collector of Customs v. Pozzolanic Enterprises Pty Limited (1993) 43 FCR 280 at 289-290.  But the aspect of it that proved crucial in cases such as Australian National Railways Commission v. Collector of Customs, South Australia (1985) 8 FCR 264 and Pozzolanic (at 291) was the sufficiency of the connection, required by the expression "in primary production", between the use of the diesel fuel and the rural operation performed, or the sufficiency of the further connection required by the expression "connected with any operations referred to" appearing in the definition, at one remove, of the expression "primary production".  And, as Mr Bennett Q.C., who appeared for the appellant, pointed out, the matter that was crucial in Collector of Customs v. Rottnest Island Authority (supra), as appears from what was said at 421-422, was the location of the use of the diesel fuel, the rebate having been claimed on the basis of para. (b) of s. 164(1), which poses the question whether the use was "at residential premises".

     The purposive element in the criterion for rebate derives from the phrase "for use by him".  The word "for" expresses a link between the purchase of the fuel and the particular use to which it is to be put.  It is purchased "for" that use.  The word frequently does express purpose, although it may also, or instead, express the intention rather than the purpose of an actor, or the suitability or destined application of a thing.  In s. 164(1), it has been understood as expressing the purpose or object of the purchaser of the fuel.  That is in accordance with the understanding of Lord Westbury L.C. in The Attorney General v. Sillem (1864) 33 LJ Ex (NS) 209 at 213, where his Lordship construed a power to frame rules of court "for making the process, practice, and mode of pleading ... uniform" as conferring the power "for the purpose of" achieving that end, and said: "Uniformity of process, practice and pleading ... is the object of the power, and defines its extent."  So, as s. 164(1) is framed, fuel is purchased with an object in view, and the rebate is attracted by that object.

     But a concentration upon refining the meaning of purpose, distinguishing between primary and secondary purposes, and examining the extent of the actor's understanding of a consequence required to enable it to be described as intended, would be a distraction from the real point in cases arising under s. 164(1).  It is the nature of the activity envisaged rather than the nature of the process of envisaging it with which the legislature is concerned.  To become engrossed in the niceties of the latter would be to miss the whole point of an exemption provided to encourage the activity of primary production.  From the point of view of the policy and ends Parliament sought to serve, it is not the mental state of the purchaser that attracts the rebate.  Therefore, given that the notion of purpose intent or object implicit in the word "for" can be seen as looking to a purchase of fuel to be used in a way that in fact involves primary production, or alternatively can be seen as looking to a purchase of fuel to be used in a way that is consciously directed to such an involvement, the former interpretation, being the simpler understanding of the nature of the purpose necessary for entitlement to a rebate, is to be preferred.  It provides a more direct link to that which qualifies for a rebate.  Parliament did not provide that rebate for the mental process, but to promote or facilitate the important activity of primary production.  As Neaves, French and Cooper JJ. said in Pozzolanic (supra at 289): "The rebate provisions are intended to encourage the activities to which they apply.  They should not be construed narrowly: Collector of Customs v. Cliffs Robe River Iron Associates (1985) 7 FCR 271 at 275."

     It follows that the almost philosophical analysis of the nature of the appellant's purpose, in which the argument in this case became enmeshed - whether that purpose was to generate electricity for all the appellant's customers, constituting an inseverable purpose not in terms matching the provision for rebate, or whether that purpose was to generate electricity for each customer, involving separate purposes matching the provision for rebate in the case of customers engaged in primary production - is totally unreal.  More importantly, it is totally divorced from the aims of the legislation.  There was here, as a matter of common sense and in reality, a purchase of fuel with an object in view of use for generating electricity to be made available to customers who in fact, and to the knowledge of the purchaser, included persons who would utilize the electricity directly "in primary production" and, in addition, in "other operations ... connected with" primary production.

     To look to what is in fact involved in operations for the carrying on of which fuel is purchased, so as to accept the end result as a purpose of the acquisition of the fuel, would be consistent with the unanimous decision of the Full Court (Morling, Olney and von Doussa JJ.) in Collector of Customs v. Perkins Shipping Pty Ltd (1989) 24 FCR 520, where (at 527) the joint judgment accepted that a purchase of fuel "for the general purpose of operating [a] vessel" was a purchase for purposes that included the use of the fuel in supplying the crew quarters with power that was inevitably involved.  The Court did not treat the operation of the vessel as an exclusive purpose in the way in which the Administrative Appeals Tribunal, in the present case, treated the operation of a commercial power generation service as an exclusive purpose.  What the Court said was rather:

    "No doubt the diesel fuel was purchased by the respondent with the intention that it would be used to operate the vessel, but that operation includes use for propulsion, for navigating and hoisting equipment, for the generation of power for use in the crew's living quarters, and so on.  The proportion of the fuel to be used in providing the amenities in the crew's living quarters, for which the rebate was later sought, was purchased for that purpose."

Likewise, in Australian National Railways Commission v. Collector of Customs, South Australia (supra), the purchase of diesel for use in the operation of a railway which involved the hauling of live-stock, for agistment at a distance from their home station etc, satisfied the statutory criterion; it was not suggested that the availability of the railway to "all and sundry" who wished to use it for transporting their goods made the relevant purpose too remote to be taken into account.

     Ever since the decision of the Full Court (Bowen C.J., Morling and Neaves JJ.) in Collector of Customs v. Cliffs Robe River Iron Associates (supra) at 275, it has been accepted that the provision for a rebate with which we are concerned reflects "a legislative policy of encouragement of [the specified] operations and should not be given a narrow application."  More recently, in Pozzolanic (supra, at 290) the Court accepted a "commonsense and commercial approach to construction" and a "broad construction consonant with the beneficial purpose of the legislation".  In my opinion, to adopt the views of the Tribunal in the present case would be to deny the provision the generous construction which it is entitled to receive.  Those views are erroneous in law.

     It follows that the appeal must be allowed.  The next question is whether the matter must again be remitted to the Tribunal, and if so on what issues.  In my opinion, the facts have been fully found, so far as the issue of entitlement to a rebate is concerned, and it is a question of law whether upon those facts that entitlement is established.  I find myself in agreement with Carr J. on this point.  But the entitlement is, of course, limited to an apportioned amount, and I think the matter should be remitted to the Tribunal for the purpose only of fixing that apportionment, if the parties cannot agree upon it.  On that subject, I agree with comments made in the last paragraph of the judgment of Hill J.

     It will be apparent that, for me, there is no doubt this case is concerned with a question of law.  However, I desire to add my complete concurrence with the comments Hill J. made (with the agreement, relevantly, of O'Loughlin J.) in Commissioner of Taxation v Roberts (1992) 37 FCR 246 at 252, to which he has referred in his judgment in the present case.  It is my understanding that those comments have very wide support among experts in taxation law.  I hope the judgments in this case will be referred to the appropriate advisory or lawmaking body.  I am authorised by Carr J. to say that he joins in these remarks.

     I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett.

     Associate:

     Date: 10 January 1995

IN THE FEDERAL COURT OF AUSTRALIA  )

                                   )

NEW SOUTH WALES DISTRICT REGISTRY  )     No NG 214 of 1994

                                   )

GENERAL DIVISION                   )

     ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION

           OF THE ADMINISTRATIVE APPEALS TRIBUNAL

              BETWEEN:      COWELL ELECTRIC SUPPLY COMPANY LIMITED

                             Applicant

                  AND:      COLLECTOR OF CUSTOMS

                             Respondent

CORAM:    BURCHETT, HILL & CARR JJ

PLACE:    SYDNEY

DATED:    10 JANUARY 1995

                    REASONS FOR JUDGMENT

HILL J:

          This is the second occasion on which the parties to the present application have been before the Court following decisions by the Administrative Appeals Tribunal ("the Tribunal") adverse to the applicant, Cowell Electric Supply Company Limited ("Cowell").  In each case the decision under review by the Tribunal was the rejection by an officer of the Australian Customs Service ("ACS") of an application by Cowell for a diesel fuel rebate, in respect of diesel fuel used by Cowell in the generation of electricity.

          Initially Cowell framed its case on a number of different grounds.  When the matter was before me on the first application brought by Cowell under s.44 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act"), I set aside the
then decision of the Tribunal and remitted the matter to it for the determination in accordance with law of so much of Cowell's claims as were made under sub-paras.164(1)(aa), (b) and (c) of the Customs Act 1901 (Cth) ("the Act").  I rejected other arguments put by Cowell at the time: District Council of Coober Pedy v Collector of Customs (1993) 42 FCR 127.

          In due course the Tribunal heard the matter again and some fresh evidence was called.  Cowell was again unsuccessful on all grounds argued.  The present application, brought in the Court's original jurisdiction, but heard by a Full Court, challenged the decision of the Tribunal on only one ground, namely, that diesel fuel purchased by Cowell for use by it was, at least in part, purchased for use in primary production within s.164(1)(aa) of the Act and so was entitled to that extent to the benefit of the exemption.

          Section 164(1) of the Act provides relevantly as follows:

          "A rebate is ... payable to a person who purchases diesel fuel for use by him:

          ...

          (aa)in primary production (otherwise than for the purpose of propelling a road vehicle on a public road);".

          The expression "primary production" is defined as meaning relevantly, "agriculture": s.164(7).  "Agriculture" is also defined in s.164(7) relevantly as meaning:

          "(a)the cultivation of the soil;

          (b)  the cultivation or gathering in of crops; or

          (c)  the rearing of live-stock;

          and includes:

          (d)  viticulture, horticulture, pasturage or apiculture;

          (e)  hunting or trapping carried on for the purpose of a business; or

          (f)  other operations (including operations by way of pest or disease control or by way of soil or water conservation) connected with any operations referred to in paragraph (a), (b), (c), (d) or (e);".

          The question for decision before the Tribunal relevant to the present appeal was whether some part of Cowell's expenditure on diesel fuel was expenditure on the purchase of diesel fuel for use by Cowell in operations connected with the cultivation of soil, crops or the rearing of live-stock.

          Upon the Tribunal, constituted by a Deputy President, affirming the decision under review, Cowell applied once more to this Court by way of an appeal on a question of law under s.44(1) of the AAT Act.  The Collector of Customs ("the Collector") challenged the jurisdiction of the Court to hear the application on the basis that there was no question of law raised in the appeal.  The Collector also submitted that the Tribunal was correct in affirming the decision under review.

The Facts

          Most of the facts were agreed.  Oral evidence tendered was accepted by the Deputy President.  The following summary of the facts is taken largely from the agreed facts, supplemented by the judgment, but with some reference to the oral evidence.

          Cowell is an unlisted public company.  Among other activities it contracts to generate electricity.  Relevantly it has contracted with the Outback Areas Community Development Trust of South Australia ("the Trust") for the generation of electricity in the four towns and districts of Marla, Kingoonya, Penong and Nundroo-Coorabie.

          The Trust is a body corporate established under the Outback Areas Community Development Trust Act 1978 (SA).  Its members are appointed by the Governor of South Australia and it is subject to the general control and direction of a Minister of the South Australian Government.  The Trust's functions, as defined by s.15(1) the Act constituting it, are:

          "(a)to carry out development projects and to provide services for local communities within the area;

          (b)  to make grants and loans to community organizations within the area and otherwise to foster the development and work of such organizations;

          (c)  to exercise such powers, and carry out such functions of a local governing body in relation to its area or any part thereof as may be conferred upon, or assigned to, the Trust, under this Act;

          and

          (d)  to carry out works to improve, or otherwise to promote or facilitate the improvement of, communications to country districts (whether within or outside the area)."

          Under the generation agreements with the Trust, Cowell was required to operate and maintain relevant power stations the ownership of which, together with the electricity reticulation system, remained in the Trust.  For this purpose it was obliged to buy all fuel needed in the generation of electricity.  There are local operators who act as subcontractors to Cowell and attend to day to day operations and read meters.

          Cowell's tariff for electricity supply is set by the State Treasury.  There is no separate tariff for electricity supplied for agricultural purposes.  The difference between the cost of production and reticulation, on the one hand, and revenue derived from its sale on the other, is subsidised by the South Australian Government in a way which provides a profit to Cowell.

          There are differences in the factual situation at each of the four towns with which the Tribunal was concerned.  I shall briefly summarise the relevant facts.

Marla

          Marla has a population of between 140 and 150 persons.  It is situated 450 kilometres south of Alice Springs on the Stuart Highway and was established to provide rest and service facilities for motorists using the Stuart Highway.  It provides township facilities for miners at the Mintabie opal fields and for surrounding aboriginal communities.  Coober Pedy is the nearest town to the south, 237 kilometres away on the same highway.  Marla serves as a service centre for the north-west of South Australia and most of the activity in the town is related to this purpose.  There are several government activities located at the town concerned with planning and servicing the north-west, a police station, a local school and a medical clinic, as well as other government offices.

          The township of Marla is surrounded by Welbourne Hill pastoral lease property, to which electricity is connected, and there are other cattle stations further away to the east and south (not connected to Cowell's grid).  There is also a hotel-motel, camping ground, a general store, a supermarket, and a service station business.  Additionally
there are private contractors working in the town.  There is a golf course and some sporting activities.

Penong

          Penong is on the Eyre Highway, the main road link between Adelaide and Perth.  It is 80 kilometres east of Nundroo-Coorabie.  An interstate bus service passes through Penong and there is a rail connection.  Nundroo-Coorabie is the service centre for the region.

          The population of Penong is around 250 persons, 150 of whom are resident in the town.  The main population consists of farming families with the main farming activity being wheat farming with some sheep in addition.  Most farms and private residences have bore pumps connected to windmills.  Additionally there are gypsum and salt mines which use diesel fuel to generate power, south east of Penong.  Some employees engaged in these industries live in Penong.  In Penong itself there is a hotel, truck stop and service centre, general store, fuel distributor, police station, grain handling silos and other facilities.  People living in the town are made up of those who work in businesses, the mines, work for government organisations, farmers who live in town and a few retired persons.  There is also a primary school in Penong.

          Diesel fuel is used in generating the electricity which is supplied to residential premises, as well as the pumping of water, and electricity is supplied to businesses and government organisations as well as being used on farms for shearing purposes.  As at 30 June 1990 electricity was supplied to 71 metered premises and of these there were 34 residential premises and 23 agricultural properties.  Electricity was also supplied to 14 general purpose commercial and government consumers.

          In a typical farm in the area electricity is supplied to shearing sheds used for a total of about three weeks per year, to the farm workshop shed where a range of power equipment and tools is installed for general repairs and maintenance, to operate a welder and various hand tools and for the supply of lighting.  Electricity is also used for domestic purposes by those living on the farm.

Kingoonya

          Kingoonya is located on the transcontinental railway line approximately 650 kilometres north west of Adelaide and approximately 43 kilometres west of Glendambo, which is on the Stuart Highway.  It was initially established as a service town for the railway and later provided facilities for motorists using the Stuart Highway.  It was reduced in
importance in 1982 when the Stuart Highway was redirected east of the town.

          It has a population of between 6 and 13 persons.  As at 30 June 1990 electricity was supplied and connected to 20 metered premises, 8 of which were residential and three connections were to an agricultural property.  The remaining 9 connections were commercial or governmental.

          Electricity was also supplied to pump water for the town water supply and used for the operation of bore water pumps to water live-stock at North Well station.  Among the commercial users is a caravan park.  A former hotel is leased by a gold field company.

Nundroo-Coorabie

          Nundroo is located on the Eyre Highway some 329 kilometres from the South Australian - West Australian border.  It is 78 kilometres west of Penong.  Coorabie is approximately 15 kilometres off the highway to the south east.

          As at 30 June 1990 electricity was supplied to 30 metered premises, 5 of which were residential.  Electricity was supplied also to 16 agricultural properties and to 9 general purpose commercial and government consumers.

          The population of Nundroo, Coorabie and nearby areas in 1981 was 444 persons of whom 43 recorded their occupation as farmers.  Although the population has since declined (it seems now to be 60 persons) there are no statistics available as to the percentage of persons who are farmers.

          There were in 1990 some 15 different ownerships of farms connected to the electricity grid.  There is no industrial activity in the towns.  Electricity is connected to a hotel-motel and caravan park, general store, service station, school and Telecom.  There are, according to the agreed statement of facts, no notable tourist attractions, the town serving as a limited service stop for travellers on the Eyre Highway.

The Tribunal's Reasons

          The Tribunal found that Cowell's purpose in purchasing diesel fuel was to enable it to generate electricity for distribution through the grid.  The Tribunal seized upon what it saw as an admission by Mrs Chase, the General Manager of Cowell, that Cowell was like a mini Electricity Trust of South Australia.  It sold electricity to all and sundry.  In the Tribunal's view the fact that some of Cowell's customers used electricity in connection with agricultural pursuits could not be determinative of Cowell's purpose.

          The Tribunal found, taking what it called a "commonsense and commercial" approach, that Cowell's only purpose was the generation of electricity and the reticulation of it to a wide variety of customers.  It found Cowell's purpose to be an undifferentiated one so that the mere fact that some of its consumers were engaged in agricultural pursuits did not convert the whole operation into one of partial eligibility.

Was there a question of law?

          I do not wish to add to the confusion surrounding the issue whether, in a particular case, there is or is not a question of law.

          In Commissioner of Taxation v Roberts (1992) 37 FCR 246 at 252 I expressed agreement with the criticism of French J in Nizich v Federal Commissioner of Taxation (1991) 91 ATC 4747 at 4752 to the effect that the categories of fact and law could well be included in the class of "categories of meaningless reference" described by Professor Stone in Legal System and Lawyer's Reasonings 1964 at 340.  I urged that consideration should be given to amending the law to avoid sterile controversies of this kind.  That injunction fell, it would seem, on deaf ears.

          The judgment of Carr J, which I have had the advantage to read, indicates the subtlety of distinction which can arise.  However, I repeat the view which I expressed in Roberts with the agreement of Jenkinson J and in Commissioner of Taxation v Cooper (1991) 29 FCR 177 at 193-4 that a question of law will arise in any case where, the facts not being in dispute, the only question is whether the case necessarily falls within or outside the statute.  The authorities for this proposition are set out in my judgment in Cooper and in the other cases referred to in Roberts.  In essence this is the fifth proposition referred to by the full court in its judgment in Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287.  To the extent that there is a qualification to that principle, the present is not a case within that qualification.

          The question that arises here is not whether the Tribunal has reached the correct conclusion, there being different conclusions reasonably open, but whether it was open at all to the Tribunal to decide as it did.  The rationale for this, as I have explained before, is that if the Tribunal reaches a conclusion not open to it at all, then in so doing the Tribunal can be inferred to have erred in some way in law, albeit that its error is not express.  Cases which concern themselves with whether the meaning of an ordinary English word is a question of fact and whether a particular factual
situation comes within ordinary English words are not, in my view, presently to the point.

          I am accordingly of the view that the present application is competent.

Section 164

          Section 164 has now been the subject of a number of cases.  So far as are relevant these establish the following propositions:

(1)  The section reflects a legislative policy of encouraging certain forms of operations and should not be given a narrow application: Collector of Customs v Cliffs Robe River Iron Associates (1985) 7 FCR 271 at 275.

(2)  There need be no identity between the person actually engaged in agriculture in the ordinary sense of the word and the person undertaking a connected operation: Australian National Railways Commission v Collector of Customs, South Australia (1985) 8 FCR 264.

(3)  When s.164(1) refers to operations "connected with" agriculture, the connection need not be direct or immediate, although a question of degree will be involved: Collector of Customs v Cliffs Robe River Iron
Associates (supra).  The degree of connection is not stated in the legislation itself.  It must, however, be real and substantial rather than remote: District Council of Coober Pedy v Collection of Customs (1993) 42 FCR 127 at 140-1; and cf Australian National Railways (supra).

(4)  Section 164(1)(aa) posits a purposive test.  This is so because to obtain the rebate it must be shown that the diesel fuel purchased is "for use" by the purchase.  That purpose must be shown at the point of purchase: Collector of Customs v Pozzolanic Enterprises Pty Limited (1993) 43 FCR 280 at 289-90

(5)  The actual use to which the diesel fuel is put subsequently can be evidence of the purpose at the time of acquisition: Pozzolanic (supra); Collector of Customs v Rottnest Island Authority (1994) 48 FCR 177 at 189-91.

(6)  Where diesel oil is purchased for multiple uses, the section permits apportionment.  However, where apportionment is sought, the case must be an appropriate one for such apportionment.  The section permits of apportionment in an appropriate case: Rottnest (supra at 420); Australian National Railways (supra at 270 per Davies J).

          Because the question for the Tribunal will be whether a sufficient connection exists, it is obvious that in the Tribunal a question of degree will arise.  Minds may well differ as to whether a connection, if it exists, is sufficient or whether it is too remote.  This must, however, be a matter for the Tribunal, not the Court.  It is useful to recall the facts of some of the cases to which reference has already been made.

          In the Australian National Railways case the claim for rebate payable, under the then s.78A of the Excise Act 1901 (Cth), was a claim made by the Commission for fuel purchased by it in respect of certain operations of its railways.  One of those operations involved the carriage of live-stock.  There were special carriages designed for the carriage of live-stock, some suitable for the carriage of cattle and others for the carriage of sheep and goats.  Live-stock was relevantly carried to other areas for restocking or as part of a programme for the eradication for tuberculosis or brucellosis or for purposes of fattening or agistment in another area.  In some cases the entire train would consist of wagons transporting live-stock.  In other cases live-stock would be only part of the goods carried.

          On this aspect of the case, the full court of this Court set aside the finding of the Tribunal denying the rebate.  However, the full court was critical of the way the
matter had been conducted, both in the Tribunal and in the Court as a hypothetical exercise.  Sheppard and Burchett JJ (at 277) pointed out that:

          "... there may be circumstances, for instance, the use of the fuel in a locomotive pulling a mixed train, which would make it very difficult to justify the payment of the rebate even if the facts relating to certain stock were as postulated in the Tribunal's reasons."

          In another part of the decision the full court held that it was not open to the Tribunal to find that fuel intended for the carriage of superphosphate from the point of manufacture to sidings where it would be picked up and used for the improvement of land was an operation connected with the gathering in of a crop.  The carriage of fertiliser was too remote.

          In Pozzolanic the applicant for rebate delivered stock feed to farms and claimed the rebate on fuel used in the unloading of the feed into farm silos.  The full court held that it was not open for the Tribunal to find that the purchase of the fuel was for use in manufacture, distribution, delivery of stock feed, as there did not exist a sufficient connection with the rearing of live-stock.  In so doing the Court emphasises the necessity of a commonsense and commercial approach to the question.

          Where diesel fuel is purchased for use in the generation of electricity, in my view the mere fact that one or more users of that electricity use it for a relevant purpose, will not require the conclusion that the diesel oil was purchased in part for use in connection with the relevant activity.  Likewise the mere fact that persons use electricity other than for a relevant purpose will not disqualify the diesel purchase from the rebate where apportionment is possible as, for example, by reference to meter readings.

          These propositions can be illustrated by two examples.  A city electricity authority, such as the Prospect Council in Sydney, supplies electricity to all within an area.  Some within that area might purchase electricity for farming purposes.  It would always be possible to calculate the ratio of electricity consumed for agricultural purposes and that consumed for ordinary domestic purposes, having regard to the fact that electricity is metered.  But it is hard to suppose, consistent with the legislative purpose, that a proportionate rebate would be available in such a case assuming diesel oil was used in the generation of electricity.  This is because the purpose of that Council in purchasing diesel oil would be totally unrelated to the use by such persons of electricity in farming operations.  Such an electricity supplier must supply electricity irrespective of the use to which that electricity is put.  It does not have the necessary purpose at the time of acquisition.  Put in another way, each use by consumers of
electricity will not necessarily supply evidence of the authority's purpose.

          On the other side of the line are cases such as Collector of Customs v Cliffs Robe River Iron Associates where electricity was generated by a joint venturer engaged in mining iron ore in the Pilbara region of Western Australia and supplied to the town which formed part of the infrastructure of the mine.  It was held that the oil was purchased in connection with the mining operations.

          The distinction sharply made between these two classes of case caused me, in Coober Pedy, to say (at 140), in a passage relied upon by the Tribunal:

          "Generally speaking, an entity which generates electricity and supplies it to all and sundry would not, in any ordinary usage of language, be said to be engaged in an operation connected with mining merely because the persons to whom the electricity to be supplied happened themselves to be engaged in mining operations.  Something more would ordinarily be required.  In the Western Mining Corporation cases the extra factors consisted in the facts that the suppliers of electricity were also miners and that they were required, as part of their obligations in the development of the mine, to provide electricity.  Those two factors assisted the Tribunal in reaching the conclusion that the generation of electricity was so bound up with and involved in the mining as to make the generation of electricity itself an operation connected in the relevant sense with the mining for minerals."

          In Rottnest, my judgment in Coober Pedy was cited with approval in various respects.  The Court there held the use of fuel by the Authority to provide generation of electricity for employees stationed on the island was evidence of a qualifying purposive use.  Their Honours said (at 191):

          "We agree, with respect, with Hill J that the authority as purchaser must also engage in `the purposive use'.  However, the use of the fuel in providing electricity to the relevant residences so that it is then available as a source of power to the residents for the provision of the amenities contemplated by the section constitutes, in our view, a sufficient `purposive use' of the diesel fuel purchased for the generation of that electricity.  It may well be, however, that where a generating authority provides electrical power to `all and sundry' in circumstances where it sells it at a commercial rate to a variety of consumers including those who buy it at such a rate for purely domestic purposes, that authority would be found to be purchasing fuel merely for the purpose of producing electricity for commercial sale.  In those circumstances the relevant purposive use would not be established.  That, however, is not this case."

          These passages should not be taken to mean that, as the Tribunal appears to have thought in the present case, there was a dichotomy between a case where diesel fuel was purchased for a relevant purpose and that where diesel fuel was purchased for the purpose of generating electricity for distribution through the grid.  In one sense that will always be the purpose of any purchaser of diesel fuel for the generation of electricity.  The question that must be asked is whether accepting that the oil is to be used in the production of electricity, the purchase can nevertheless be said to be for use in connection with the relevant activity (here agriculture).

          There is an analogy between the present case and the case of diesel oil purchased by a train authority.  The mere fact that some carriages of a train are used for a relevant agricultural purpose will not mean that the train company will obtain the rebate.  As Davies J pointed out in the Australian National Railways case (at 269-270) the rebate is not expressed to be payable in respect of fuel used in primary production or in connection with primary production.  Rather it is payable with respect to diesel fuel which has been purchased for use in connection with primary production.  His Honour said (at 270):

          "There was no evidence before the Tribunal that diesel fuel was purchased by the applicant for any particular use.  Certainly, diesel fuel was purchased for the general operation of the railway, but the general operation of a railway is not primary production as defined.

          I do not suggest that, if an appropriate case for apportionment is put forward, there should not be an apportionment of diesel fuel purchased in bulk with several uses in mind.  Although the diesel fuel rebate provisions use simple language, they are intended to be applied in a practical, commonsense manner to commercial operations.  I would not accept that a person is excluded from rebate merely because diesel fuel was purchased in bulk and no separate purchase was made
of diesel fuel for use in primary production.  In an appropriate case, there may be apportionment.

          But to say that there may be apportionment does not mean that a rebate is payable to the applicant simply because diesel fuel was used by the applicant in an operation of primary production as defined.  It is only payable on diesel fuel purchased for use in that operation."

          His Honour was of the view that the matter should be reconsidered by the Tribunal to determine the question of purpose.

          Sheppard and Burchett JJ, in the same case (at 277), accepted that there could be circumstances where fuel was used to power a train with mixed carriages which would make it difficult to justify the payment of the rebate.  In so saying they were, I believe, expressing more briefly the same problem which Davies J had expressed in the passage quoted above, notwithstanding their Honours' views that in abstract the rebate was available for so much of the fuel as was purchased for use in the transportation of cattle.

          In the present case I have some doubt whether the Tribunal really addressed itself to the right question.  If the Tribunal intended to hold that simply because Cowell's purpose was to generate electricity for sale it followed that it did not have the necessary purpose, that finding would be erroneous in law.  It would follow that the matter would need again to be remitted to the Tribunal.  Not without some doubt, I am prepared to read the judgment as involving a positive finding by the Tribunal of the absence of the necessary purpose so that the only issue before us is whether it was open to the Tribunal so to find.

          In my view it was open to the Tribunal so to find in the cases of Marla and Kingoonya.  Both these towns were established and continue to exist as service towns, servicing travellers by road or train.  While there is no evidence illuminating why electricity was originally brought to these towns, it could be inferred that this was to service the towns and their residents.  Although some users of electricity connected to the grid do so for agricultural purposes, I do not think it can be said that the evidence of agricultural use is so strong that the Tribunal was obliged to find that the present was an appropriate case for apportionment of a total purchase so as to identify that some of the oil was clearly purchased for the requisite use in connection with agriculture.

          The cases of Penong and Nundroo-Coorabie are stronger for Cowell.  These towns were each established to service agricultural pursuits.  The agricultural use of electricity is considerably more extensive and in taking a commonsense and commercial approach it is easier to infer from that use that part of Cowell's purpose in operating the
generator and therefore in purchasing diesel oil was connected in a way not too remote with agricultural activities of the necessary kind.  In my view the diesel use in these towns was such as to be appropriate for apportionment and in those circumstances I do not think it was open to the Tribunal to find "an undifferentiated purpose" which I understand to mean a case where apportionment would be inappropriate.

          I would therefore allow the appeal in part and remit the matter to the Tribunal to find the extent of apportionment of diesel use of the relevant kind for generating electricity at Penong and Nundroo-Coorabie, unless the parties can otherwise agree on the figures.  It goes without saying that use of electricity on farms for domestic use would qualify as agricultural use.  However, in my view use of electricity in the townships by persons who choose to live there, albeit employed on rural pursuits, would not qualify for a rebate.

I certify that this and the

preceding twenty-two (22) pages

are a true copy of the Reasons

for Judgment herein of his Honour

Mr Justice Hill.

Associate:

Date:  10 January 1995

IN THE FEDERAL COURT     )

OF AUSTRALIA                    )

NEW SOUTH WALES            )

DISTRICT REGISTRY            )

GENERAL DIVISION            )                      No. NG 214 of 1994

             ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL

B E T W E E N:                                            COWELL ELECTRIC SUPPLY CO LTD

                                                                                                Applicant

                                                                   and

                                                                   COLLECTOR OF CUSTOMS

                                                                                                Respondent

CORAM:        BURCHETT, HILL & CARR JJ

PLACE:          SYDNEY

DATE:            10 JANUARY 1995

                                      REASONS FOR JUDGMENT

CARR J.

                                                   Introduction

             This is an appeal under s.44 of the Administrative Appeals Tribunal Act 1975 (Cth) from the decision of the General Administrative Division of the Administrative Appeals Tribunal constituted by Deputy President Mr P J McMahon, on 17 March 1994, to affirm the respondent's decision refusing certain rebates of excise claimed by the applicant Cowell Electric Supply Co. Ltd ("Cowell") under s.164(1)(aa) of the Customs Act 1901 (Cth) ("the Act") in respect of purchases of diesel fuel.  Cowell purchased the diesel fuel for the generation of electricity during the period between 1 August 1986 and 30 June 1990.

             Cowell's claim is for rebates of excise paid in respect of 431,733 litres of diesel fuel used for generating electricity in the four towns and districts of Marla, Kingoonya, Penong and Nundroo-Coorabie in South Australia.  That fuel was purchased separately by each of its four agents at those places.  The total volume of diesel fuel purchased by Cowell during the above period was 10,490,954 litres.  The basis of the claim is that the diesel fuel is said to have been used in operations "... connected with ..." "... the cultivation of the soil; the cultivation or gathering in of crops; or the rearing of live-stock;" and was thus indirectly used by the applicant "in primary production" within the meaning of those expressions in s.164 of the Act.  Alternatively, it was submitted that even without recourse to some of the extended definitions in that section, the applicant had purchased the diesel fuel for use by it in primary production.

             This claim, together with related claims by Cowell and another applicant has already been the subject of an earlier decision of the Administrative Appeals Tribunal and an appeal from that decision to a single judge of this Court: District Council of Coober Pedy v. Collector of Customs (1993) 42 FCR 127 (Hill J.).  In the first of those proceedings, the Tribunal disallowed all the claims for rebates.  Hill J. allowed that appeal in part and remitted this (and other claims not here in issue) to the Tribunal for determination. 

                                             Factual Background

             Cowell is a public unlisted company which operates eight power stations at or near various outback towns in South Australia including the towns and districts
referred to above.  Customers for electricity at each township and in each district include the occupiers of residential premises and agricultural properties and some general purpose commercial and government consumers.  Cowell supplies this electricity pursuant to contracts which it has with the Outback Areas Community Development Trust, an agency of the South Australian Government.  Electricity rates are set by the South Australian Treasury and the difference between the cost of production and reticulation of the electricity on the one hand and revenue derived from its sale on the other is subsidised by the South Australian Government.  In practical terms, although privately owned, Cowell operates in the same manner as a government electrical utility supplying to all and sundry within its area of electrical reticulation.

             At the re-hearing, the Tribunal accepted the applicant's evidence that there were customers of the grid who used its electricity for agricultural purposes.  The Tribunal also accepted that one example of such use (that by Mr G Shippard, or more correctly, Mr J J Shipard) was typical of farms in the various rural districts supplied by the applicant.  Mr Shipard's evidence was that he used electricity in his shearing shed, which was fully electric, for about three weeks each year, and in his workshop shed where a range of power equipment and tools was installed to undertake general repairs and maintenance of farm machinery and equipment.  He also used electricity supplied by the applicant to operate his welder, various hand tools and for lighting. 

             In Marla (population of approximately 150 persons) the applicant generated electricity for use only at that township except for a connection to the bore on the adjoining cattle station.  In the township itself the electricity was used by certain businesses and government agencies and at residential premises.  The bore on the cattle station was used for agricultural purposes.

             At Kingoonya (population of approximately 13 persons) there are four pastoral stations surrounding the boundary of the township.  The applicant supplied electricity to the residents of the township for domestic purposes and to such business and government agencies as were located in the township.  Electricity generated by the applicant at Kingoonya was also supplied to power pumps which are used to reticulate water from a bore at North Well Station for the watering of livestock on that property and also for use in its homestead.

             At Penong (population approximately 173 persons) and in the surrounding areas, the applicant supplied electricity to 71 metered premises during the year ended 30 June 1990.  Of these 34 were residential premises, 23 agricultural properties and 14 were occupied by general purpose, commercial or government electricity consumers.

             At Nundroo-Coorabie (population approximately 379 persons) the applicant's electricity was supplied to businesses carried on in the town, to residences and to all except two of the farms within an area stretching from 55 kms to the east of Nundroo to 10 kms west.  Sixteen agricultural properties were thus connected to
the applicant's grid.

             Consumption of electricity by each of the applicant's customers was measured regularly by conventional electricity meters and the applicant's claim for the above rebate is in respect of an apportionment of the total diesel fuel purchased by the applicant for use in its power stations in the abovementioned towns and districts.  The proportion has been calculated by estimating the usage of electricity consumed for agricultural purposes as a proportion of the total consumption of electricity supplied by the applicant.

                                          The Tribunal's Reasons

             The Tribunal took into consideration the fact that there were some agricultural uses to which the applicant's electricity was put, but expressed the view that this consideration was not determinative.  It said that Cowell's purpose in purchasing diesel fuel was to enable it to generate electricity for distribution through the grid, such electricity being sold to "all and sundry".  Anybody within the area having suitable facilities that were receptive to the technical requirements of the applicant could apply to be connected to the grid.  In the words of the Tribunal:

                 "The fact that some of those customers use electricity in connection with one of the statutory purposes cannot, without more, change or govern the purpose of the initial purchase of fuel.  At best, a consideration of end use is secondary in determining the purpose of the applicant."

The Tribunal noted that although the applicant sold electricity at below direct cost, it was reimbursed for its cost of production and in addition given a margin for profit. 
The applicant's undertaking, so the Tribunal held, "... must clearly be viewed as a commercial undertaking."  The Tribunal then turned to a passage in the reasons for judgment of the Full Court of this Court in Collector of Customs v. Rottnest Island Authority (1994) 48 FCR 177 at p.191 which reads:

                 "In our opinion, there is nothing in the section which precludes an electricity generating authority, private or governmental, from having in mind that a proportion of the fuel purchased by it will be used in the generation of electricity to be supplied to domestic residences for the provision of the amenities contemplated in s.78(1)(b)(i), (ii) and (iii).  In such circumstances there would be no impediment to a finding that the Authority purchased that amount of fuel to be used by it for those purposes.  We agree, with respect, with Hill J. [a reference to his Honour's decision on the appeal which formed part of the history of this matter] that the Authority as purchaser must also engage in "the purposive use".  However, the use of the fuel in providing electricity to the relevant residences so that it is then available as a source of power to the residents for the provision of the amenities contemplated by the section constitutes, in our view, a sufficient "purposive use" of the diesel fuel purchased for the generation of that electricity.  It may well be, however, that where a generating authority provides electrical power to "all and sundry" in circumstances where it sells it at a commercial rate to a variety of consumers including those who buy it at such a rate for purely domestic purposes, that authority would be found to be purchasing fuel merely for the purpose of producing electricity for commercial sale.  In those circumstances the relevant purposive use would not be established.  That, however, is not this case."

             The Tribunal held that the evidence showed that the fuel was purchased by the applicant for the purpose of producing electricity in connection with its commercial undertaking which was one of its many business enterprises.  In those circumstances, the Tribunal applied the above passage from Rottnest Island Authority and found that the relevant purposive use was not established.  Reliance was also placed on portion of Hill J's reasons for judgment in the Coober Pedy decision (supra) at p.140:

                 "Generally speaking, an entity which generates electricity and supplies it to all and sundry would not, in any ordinary usage of language, be said to be engaged in an operation connected with mining merely because the persons to whom the electricity [was] to be supplied happen themselves to be engaged in mining operations.  Something more would ordinarily be required."

             The Tribunal further relied on another decision of the Full Court of this Court, Collector of Customs v. Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 as authority for the proposition that what the Tribunal described as part of the purposive test, the phrase "connected with", presented a simple evaluative process which should be approached "taking a commonsense and commercial approach" (p.290).  The Tribunal concluded as follows:

                 "Adopting that approach in the present circumstances, it seems to me that the commonsense and commercial reason for the purchase of fuel by Cowell was for the purpose of generating electricity and reticulating it to a wide variety of consumers.  The question of apportionment does not arise as the sale of electricity to particular classes of consumers does not alter the purpose of the applicant Cowell at the time the fuel was purchased.  The mere fact that some of the consumers engaged in an eligible activity does not convert the whole operation into one of partial eligibility.  The purpose of the applicant was undifferentiated."

                                       The Applicant's Submissions

             The applicant contended that it qualified for the rebate in two ways.  First, because the use in its generators of the diesel fuel was use by the applicant in the primary production carried on by its customers and thus s.164(1)(aa) applied directly.  Secondly, the generation of electricity was itself an operation "connected with" the primary production carried on by the applicant's customers - a reliance upon the extended definition of the word "agriculture" which in turn extends the definition of "primary production" both of which definitions are contained in s.164(7) of the Act.

             It was submitted that it was necessary to distinguish those cases in which the issue was the use of diesel fuel "at", for example, residential premises [Collector of Customs v. Flinders Island Community Association (1985) 7 FCR 205; Collector of
Customs v. Perkins Shipping Pty Ltd (1989) 24 FCR 520; Collector of Customs v. Rottnest Island Authority (1994) 48 FCR 177].  I would agree that those cases can to a large extent be put to one side for present purposes save to the extent that they involve consideration of what might be described as the second requirement for rebate entitlement contained in s.164(1)(b) that the use be "in" providing the goods and services there described.

             It was put on the applicant's behalf that in recent decisions involving s.164 of the Act the Courts have taken a broad view of the width of the word "in" in s.164(a) and (aa).  Reference was made to Collector of Customs v. Cliffs Robe River Iron Ore Associates (1985) 7 FCR 271 where the use of diesel fuel to generate electricity for the use of a township established by a mining company to house its mine employees was held to be use "in mining operations".  Again, in Australian National Railways Commission v. Collector of Customs (1985) 8 FCR 264 it was pointed out that the Full Court of this Court had held that the use of diesel fuel to power trains which transported livestock "amongst other things" was use in primary production.  The applicant submitted that the more recent decision of the Full Court of this Court in Collector of Customs v. Pozzolanic Enterprises Pty Ltd (supra) in which the Court took a different view in relation to cartage contractors who unloaded stock feed at farms, was of little value as a precedent.  This was because the reason for the Full Court's decision was that the issue was one of factual judgment in relation to which the Court at first instance should not have interfered with the Tribunal's decision.

             In my view, that submission should be rejected because it overlooks this passage of the Full Court's reasons for judgment at p.13:

                 "We would go further and say, having regard to the purpose of the legislation, that the characterisation of the unloading operation adopted by the learned primary judge was not reasonably open."

             The applicant submitted that there need be no identity between the persons undertaking agriculture on the one hand and the person undertaking connected operations on the other. 

             The applicant took issue with the Tribunal's reliance on the passage from the Rottnest Island Authority case set out above.  First, it was pointed out that the passage expresses an obiter dictum.  Secondly, it was said that the passage involved "the common logical fallacy of comparing purposes at different levels of generality".  When a generating authority purchases diesel it could be described as having at least three purposes (which were in no way inconsistent) at three quite different levels of generality:

       .     to burn it in a generator for the purpose of making electricity;

       .     to make money;

       .     to enable specific uses to be made of it by individual consumers.

             The applicant summarised the existence of the nexus required by s.164(1)(aa) in the present matter as follows:

             (a)    the applicant generated electricity in the relevant townships and districts;

             (b)    nearly half the users in those areas were agricultural;

             (c)    this use was clearly known to the applicant when it purchased the fuel; and

             (d)    the applicant also knew (because it was obvious) that but for the primary production, those consumers would not acquire electricity.

             It was said that the above facts established the relevant purpose and that it was irrelevant to the significance of this purpose whether that fuel was obviously intended to be used by the applicant, at other levels of analysis of its intentions, to generate electricity and to make money.  The "all and sundry" test was ambiguous and unsatisfactory.  If the bulk of users were known to be agricultural but the supplier supplied to all who asked in a rural area this was no reason for excluding the relevant purpose.  If the test meant that it was to be applied where there was "a wide and indeterminate group of customers" the test did not have relevance to the present facts.  Even that version of the test was inappropriate where the authorities support apportionment of uses for purposes.  It should not matter, even in those circumstances, that the relevant usage was small.

                                        Respondent's Contentions

             The respondent contended that:

      .      the relevant question before the Tribunal was whether the applicant had purchased diesel fuel for use by it in operations connected with agriculture;

      .      that was a question of fact unless (a) the facts found admitted of only one answer or (b) unless the correct approach (which would be far too sophisticated an approach to a question based essentially on everyday concepts) was that on every occasion when
fuel is purchased by an electricity supplier to generate electricity to supply to persons some of whom may use some of it for a purpose contemplated by s.164 of the Act, there must be a pro tanto and ex post facto apportionment; and

      .      the "commonsense" approach adopted by the Tribunal was consistent with the cases of Coober Pedy, Pozzolanic and Rottnest Island Authority.

                                        Is there a question of law?

             S.44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) which confers appellate jurisdiction on this Court, provides:

                 "A party to a proceeding before the Tribunal may appeal to the Federal Court of Australia, on a question of law, from a decision of the Tribunal in that proceeding."

In its grounds of appeal, the applicant claimed that the Tribunal erred in law:

                 "(a)    ... in concluding that the purchase of diesel fuel by the applicant was not for use by it in primary production by substituting for the statutory test the question of what was the commonsense and commercial reason for the purchase of diesel fuel by the applicant;

                  (b)    ... in concluding that the purchase of diesel fuel by the applicant was not for use by it in primary production by misapplying the decisions of the Federal Court to which it referred in relation to whether or not the applicant provided power to all and sundry and by asking the question whether the applicant was a commercial undertaking rather than asking whether the power was supplied at a commercial rate;

                  (c)     ... in holding that there was any purposive element involved in the application of paragraph (f) of the definition of `agriculture' in section 164(7) of the Customs Act 1901; and

                  (d)    ... in regarding a commercial purpose in production of electricity as being inconsistent with a purposive use in primary production."

             In Collector of Customs v. Pozzolanic Enterprises Pty Ltd (supra) at pp.286-289 the Full Court gave detailed consideration to this limitation of the Court's jurisdiction in reviewing decisions of the Tribunal.

             Five general principles were listed as emerging from the cases and I do not propose to set them out seriatim in these reasons.

             The fifth general proposition identified by the Full Court in Pozzolanic was that the question whether facts fully found fall within the provision of an enactment properly construed is generally a question of law.  The Full Court observed that this principle was qualified when a statute uses words according to their ordinary meaning and the question is whether the facts as found fall within those words.  As Burchett J. pointed out in Collector of Customs v. Sharp Corporation of Australia Pty Ltd (unreported, Sydney 9 August 1994 NG8 of 1993), the qualification was applied in Liebert Corporation Australia Pty Ltd v. Collector of Customs (Wilcox, O'Connor and Drummond JJ., unreported 1 November 1993) and by the majority in The Jedco Game Co Pty Ltd v. Collector of Customs NSW (unreported, 10 March 1987) which Burchett J. described as "cases where the facts were clear-cut, and no modification by way of construction of the provision (was) involved or value judgment about its scope had emerged".

             In the Sharp Corporation case Burchett J. was faced with the difficulty of reconciling the obiter dictum in Times Consultants Pty Ltd v. Collector of Customs (1987) 16 FCR 449 at p.462 that "it was a question of fact whether one material or component gave to the goods their essential character" and the following statement from Pozzolanic itself:

                                   "Although the words of the statute are construed according to their ordinary English meaning, that does not mean that their application to a set of facts is simply described as the matching of
that set of facts with a factual description.  There is necessarily a selection process involved.  The range of relationships to which the words apply for the purpose of the Act depends upon a judgment about that purpose.  The selection process involved is analogous to that used in determining what causal relationships between conduct and loss attract liability for the purpose of s.82 of the Trade Practices Act ... In the end this is not a process of fact finding.  The facts are found.  What is left is a value judgment about the range of the Act and that is a question of law."

             For my part, I would respectfully make the same choice as Burchett J. did in Sharp Corporation and apply what amounts to a qualification to the qualification of the fifth general principle referred to above.  In Pozzolanic the Full Court referred, with apparent approval, to a passage from the reasons for judgment of Beaumont J. in Collector of Customs v. Davis (1989) 23 FCR 378 at p.382 who in turn was referring to and adopting the words of Kitto J. in NSW Associated Blue-Metal Quarries Ltd v. Commissioner of Taxation (1955) 94 CLR 509 at p.512:

                           "The next question must be whether the material before the Court reasonably admits of different conclusions as to whether the appellant's operations fall within the ordinary meaning of the words as so determined; and that is a question of law ..."

As Beaumont J. observed (at the same page referred to above):

                           "For present purposes, it is not, of course, necessary to decide which of the two possible, but reasonable contentions is correct.  It is enough to say, on this question of jurisdiction, that the competing points of view are both reasonably taken.  It must follow that there is a question of law in the "appeal" (see also Australian National Railways at 277).  Put differently, neither party, before the Tribunal, or in this Court, sought to dispute the facts.  The facts were common ground.  Thus the only question, for the Tribunal, and for the Court was whether the circumstances of the case necessarily fell within the statutory definition of "agriculture", as the respondent contends, or, necessarily outside the definition, as the Collector argues.  This was also the situation which arose in Cliffs Robe River.  It was held that a question of law was involved."

             In my opinion, the passage cited immediately above and the fifth principle as qualified and explained in Pozzolanic results in the conclusion that there is a question of law involved in this appeal and accordingly this Court has jurisdiction to decide the matter.

                                                   Conclusions

         It is not necessary for the person engaged in agriculture (and thus in primary production) to be one and the same as the person carrying out other operations "connected with" agriculture: Australian National Railways Commission v. Collector of Customs (1985) 8 FCR 264 at p.275:

                  "... the rebate ... will also be payable to persons if their use of it [the diesel fuel] is for those purposes even though they themselves are not miners or primary producers.  Thus, it is payable where a primary producer, for example, a grazier, engages a contractor to carry out work connected with primary production and the contractor uses diesel fuel in operating the plant necessary for the task.  The contractor providing the equipment is in that case entitled to the rebate."

         In Australian National Railways there were three categories of rail carriage.  The first was the carriage of fertiliser.  In that regard, the Full Court agreed with the Tribunal in its conclusion that the carriage of superphosphate in the circumstances postulated in the Tribunal's decision was remote from any operation connected with the cultivation of the soil.  The circumstances postulated were that superphosphate was carried by rail in specially adapted bulk wagons to sidings at various locations within the applicant's railway system.  The consignee of the superphosphate would be either a farmer proposing to use it on his property, a carting and spreading contractor carrying on business in the area or the manufacturer itself maintaining a country
depot in the area.  It would almost never happen that a train would be composed solely of wagons carrying superphosphate.

         The second category was the carriage of grain.  The facts found by the Tribunal were that farmers delivered grain to receival centres for storage in silos built mainly on railway property owned by the applicant and by South Australian Co-operative Bulk Handling Ltd which also operated the silos.  There were insufficient silos to store the whole of the harvest at those points and the grain had to be moved from those silos to central points both to relieve pressure at the receival centres and to have the grain at more convenient points for distribution to buyers.  The central points were on the sea-board.  In those circumstances the Full Court agreed with the Tribunal that the carriage of that grain was not an operation connected with the gathering in of a crop but was connected rather with the distribution of the gathered-in product. 

         The third category (in respect of which the applicant was successful before the Full Court) was the carriage of livestock on certain specific occasions namely:

         (a)    carriage away from an area which was the subject of a programme for the eradication of tuberculosis or brucellosis;

         (b)   carriage for re-stocking purposes after the carrying out of such a programme;

         (c)    carriage from an area in which the livestock were bought in store condition to another area for the purpose of enabling them to gain body weight preparatory to sale for slaughter; and

         (d)   carriage from an area subject to drought for agistment in another area which was presumably not subject to drought.

         No claim was made for rebate of duty in respect of the transportation of livestock to an abattoir or a slaughtering point or in respect of transportation to a port for export.  Not infrequently a train would consist only of wagons transporting live-stock.  On other occasions live-stock would form only part of the goods carried on a particular train.  In respect of the third category the Full Court held that the rebate was payable because the operations were all clearly undertaken in connection with the rearing of live-stock.

         The applicant in this matter relied upon the fact that the trains which transported the live-stock in Australian National Railways also carried other goods.  In that regard there is a caveat in the joint judgment of Sheppard and Burchett JJ. at p.277:

                     "But we emphasise that both the court and the Tribunal, because of the approach adopted by the parties, have engaged in what must be a hypothetical exercise.  The matter has been raised generally rather than specifically and there may be circumstances, for instance, the use of the fuel in a locomotive pulling a mixed train, which would make it very difficult to justify the payment of the rebate even if the facts relating to certain stock were as postulated in the Tribunal's reasons."

Davies J. dealt with this matter at pp.269-270:

                     "The diesel fuel rebate is not payable with respect to diesel fuel used in primary production.  It is payable with respect to diesel fuel which has been purchased for use in primary production and it ceases to be so payable, or becomes refundable, if the diesel fuel is used in some other manner.  The rebate is payable if the diesel fuel is purchased for use in primary production whether or not it is so used, provided that it is not used in any other manner.

                     There was no evidence before the Tribunal that diesel fuel was purchased by the applicant for any particular use.  Certainly, diesel fuel was purchased for the general operation of the railway, but the general operation of a railway is not primary production as defined.

                     I do not suggest that, if an appropriate case for apportionment is put forward, there should not be an apportionment of diesel fuel purchased in bulk with several uses in mind.  Although the diesel fuel rebate provisions use simple language, they are intended to be applied in a practical, common sense manner to commercial operations.  I would not accept that a person is excluded from rebate merely because diesel fuel was purchased in bulk and no separate purchase was made of diesel fuel for use in primary production.  In an appropriate case, there may be an apportionment."

         In the present matter there is, in my view, a direct connection between the applicant's operations of generating electricity and the agricultural operations referred to above in outlining the factual circumstances above.  The electricity so generated passes directly from the applicant's four respective generators, along its wires and into the shearing sheds, power tools, water bores and the like of its farming customers.  Nearly half the users in the respective areas were farmers and this use was clearly known to the applicant at the time when it purchased the diesel fuel.  The applicant's counsel relied on what was said by Deane J. in Deputy Commissioner of Taxation v. Stewart (1984) 154 CLR 385 at p.401:

                     "Item 81 does not require that the goods be used "exclusively" or "primarily and principally" by a public benevolent institution.  It suffices that the goods come within the classification of goods for use by such an institution.  That does not mean that any intended or planned or possible subsequent use of the goods by a public benevolent institution, however transient or insignificant or uncertain, would justify the goods being characterised as "goods for use" by that institution.  The projected use by the institution must be such as would warrant characterization of the goods by reference to it."

         Apart from Australian National Railways Commission, there is abundant authority for an apportionment in circumstances such as those in the present matter.  In Collector of Customs v. Perkins Shipping Pty Ltd (1989) 24 FCR 520 an apportionment was considered appropriate by the Full Court in relation to so much of the diesel fuel consumed on a ship as was used in providing amenities for the crew quarters.  At p.527 the Court said this:

                     "Finally the appellant contended that as diesel fuel was purchased in Singapore for the general purpose of operating the vessel, it could not be said that it was purchased for use "at residential premises".  As we understand this argument, the complaint is that no particular part or quantity of the diesel fuel had been earmarked at the time of purchase as fuel for provision of the relevant amenities to the officers and crew.  ... Whatever the position, in our opinion the point is without substance.  No doubt the diesel fuel was purchased by the respondent with the intention that it would be used to operate the vessel, but that operation includes use for propulsion, for navigating and hoisting equipment, for the generation of power for use in the crew's living quarters, and so on.  The proportion of the fuel to be used in providing the amenities in the crew's living quarters, for which the rebate was later sought, was purchased for that purpose."

         Similarly although the absence of connection resulted in the Full Court allowing the appeals in Pozzolanic, the problem of apportionment was not regarded as decisive - see p.290:

                     "In the present case it is not in dispute that the diesel fuel purchased was purchased partly for the purpose of transporting the stock feed and partly for the purpose of unloading it into the silos.  The fact that only a proportion of the fuel so purchased was intended for that use and the fact that it might not be precisely quantified at the point of sale does not take the purchase outside the rebate provisions.  So long as there is some means of establishing that a proportion of the fuel is to be used for an exempt purpose, the precise quantification can await the actual use."

See also the passage from Rottnest Island (at p.191) set out earlier in these reasons.

         In my opinion the factual circumstances of the present matter permit only one answer.  The farming customers for whose primary production activities the applicant generated electricity formed such a significant proportion of the applicant's customers (as would be expected in remote rural communities) that when the applicant purchased electricity it did so for use by it in primary production in the extended meaning given to that term in s.164(7) of the Act.

         The appeal must be allowed.  I agree with Burchett J. that the matter should be remitted to the Tribunal for the purpose only of fixing the apportioned amount of entitlement.  The respondent should pay the costs of this appeal.

                             I certify that this and the preceding eighteen (18) pages are a true copy of the Reasons for Judgment of Justice Carr.

                             Associate:

                             Date:      10 January 1995

Counsel for the Applicant:            Mr D.M.J. Bennett Q.C. with Mr A. Robertson

Solicitors for the Applicant:          Blake Dawson Waldron

Counsel for the Respondent:         Mr D.F.Jackson Q.C. with Mr S.J. Gageler

Solicitor for the Respondent:        Australian Government Solicitor

Date of Hearing:                          21 September 1994

Date of Judgment:                       10 January 1995