FEDERAL COURT OF AUSTRALIA

Baxter v Commissioner of Taxation (No 2) [2002] FCA 1351

SALES TAX – excessive assessment

Taxation Administration Act 1953 (Cth) s 14ZZO

MATTHEW ALEXANDER BAXTER v COMMISSIONER OF TAXATION

Q 103 OF 2001

GYLES J

SYDNEY

23 OCTOBER 2002

THE COURT ORDERS THAT:

1.         The appeal be allowed in part. 

2.         The deemed objection decision be set aside. 

3.         The matter be remitted to the Commissioner for reassessment of sales tax and additional tax properly payable in relation to the sails in question. 

4.         The respondent is to pay 50% of the costs of the applicant.

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

REVISED EX TEMPORE REASONS FOR JUDGMENT

1                     In the reasons which I delivered on 11 October 2002, I explained why I stood the proceeding over to enable submissions to be made as to the proper order which should follow from those reasons. 

2                     Counsel for the respondent has submitted that on the facts before the Court there is an analysis of dealings with the goods which could be arrived at so as to give rise to a proper assessment under AD13c, although this analysis was not pointed to previously in terms.  He refered to the Customs Act 1903 (Cth), in particular ss 30, 68 and 71B, to indicate that the owner of the goods, Mr Baxter, effectively had dominion over the goods by reason of the operation of those sections, particularly s 71B, and that his making those goods available to the lessee amounted to an application to own use within the principles laid down in Max Factor & Co Inc v Commissioner of Taxation (Cth) (1971) 124 CLR 353.

3                     Furthermore, he pointed to evidence which showed that the goods in their imported state were actually in two parts, what was called the yacht and the mast, and he further pointed to the fact that sails were then added so that what might be called “the package” was assembled.  He submitted that the assembling of the package in that way would amount to an application to own use sufficient to satisfy the section.

4                     Assuming for the moment that these arguments are open, in my opinion they would not lead to any different result from the one to which I have come.  As  to the first argument, once it is granted that the lease was operative as between the two relevant parties, then any dominion which was held by the applicant was in reality held on behalf of the lessee at all material times, and the operation of the Customs Act cannot cut across the application of the relevant sales tax legislation so far as these parties are concerned.  As to the second argument, the reasoning which I applied in my previous reasons for judgment is applicable to the new circumstances as mooted on behalf of the respondent.  I see no difference in principle between the assembling of the goods on the one hand and the motoring away on the other, which was the particular matter which had been pointed to on the last occasion.  No assessable dealing has been established.

5                     An issue has arisen as to the effect of 14ZZO of the Taxation Administration Act 1953 (Cth) and the application of Vale Press Pty Ltd v Commissioner of Taxation (Cth) (1994) 53 FCR 92 (referred to in the previous judgment) in the light of a line of authority to which each counsel has referred me today including McAndrew v Commissioner of Taxation (Cth) (1956) 98 CLR 263, FJ Bloeman Pty Ltd v Commissioner of Taxation  (Cth) (1981) 147 CLR 360,  Commissioner of Taxation (Cth) v Dalco (1990) 168 CLR 614 and Commissioner of Taxation (Cth) v Australia & New Zealand Savings Bank Ltd (1994) 181 CLR 466.  It is not necessary for me to come to a final view as to the effect of that line of authority.  My tentative view is, firstly, that it is appropriate in showing that an assessment is excessive that the Court rule on the applicability of the stated statutory basis for the assessment, and secondly, that if, on the facts of the case, the stated basis is inapplicable but the assessment can be supported in some other way, then (subject to natural justice) the onus may lie upon the taxpayer to rebut that basis.  In the present case, I have held the stated basis for assessment to be inapplicable and no other basis has substance.  The assessment cannot stand.

6                     I will not, in these reasons, trouble to go through what has taken place today in relation to the separate issue arising in relation to sales tax on the sails in question.  The transcript will sufficiently record what has taken place.  At the end of the day, it is accepted by the taxpayer that the assessment should be remitted to the Commissioner in order that such taxes as appropriate be assessed in relation to those sails.

7                     As to costs, the applicant has substantially prevailed.  On the other hand, I am conscious of the fact that he really prevailed on an argument which was not identified until a very late stage.  In turn it might be said that there were reasons for that because of the way the Commissioner has approached the matter, but I think recognition must be given to the fact that the success of the applicant is the result of a forensic change, or certainly the addition of an extra spoke to the wheel, at a late stage.  I think that the proper order, although somewhat arbitrary, is that the respondent should pay 50% of the costs of the applicant, and that is the order I make.  The orders of the Court are therefore:

1.         The appeal be allowed in part. 

2.         The deemed objection decision be set aside. 

3.         The matter be remitted to the Commissioner for reassessment of sales tax and additional tax properly payable in relation to the sails in question. 

4.         The respondent is to pay 50% of the costs of the applicant. 

Associate:

Dated:              1 November 2002