Opinion Number. 52

Subject

IMPOSITION OF UNIFORM DUTIES OF CUSTOMS
DISPOSITION OF REVENUES BEFORE IMPOSITION AND DURING FIRST FIVE YEARS THEREAFTER

Author
Key Legislation

CONSTITUTION, ss. 89, 92, 93

Date
Client
The Minister for Trade and Customs

In reference to my opinions of 26 September(1) and 6 February(2) last, the Minister for Trade and Customs asks:

  1. Do not sections 89 and 93 relate to distinctly different periods, and each exhaustively dispose of all revenues collected during such periods?
  2. Is it not more reasonable to hold this than that a State, after receipt and expenditure of money under paragraph (iii) of section 89, should be come upon for a refund under section 93?

The Minister also forwards a minute by the Comptroller-General drawing attention to the practical effect of the opinion if duties paid 'many years ago' have to be 'refunded' by the States, and adds the following minute:
I have not had time to thoroughly go into the question yet, and, before doing so, should like to be advised if the Honourable the Attorney-General adheres entirely to the opinions referred to. I cannot avoid doubting if such a state of things as that pointed out by Dr Wollaston(3) was really intended by the framers of the Constitution.

What the framers of the Constitution undoubtedly did intend was to establish the union at the earliest possible moment, and it was particularly provided that the Customs Departments should be federalized from the instant the Commonwealth came into existence. Provisions were made to enable this to be done as far as possible without injustice to any State, but the aim was subject to some necessary restrictions to encourage interstate commerce from the very outset.

It may be observed, to begin with, that the opinions referred to have no such wide application as Dr Wollaston supposes. They only apply to goods originally imported into a State, or manufactured in a State, i.e. goods imported or manufactured after the establishment of the Commonwealth. Section 93 does not apply to importations or manufactures before the establishment of the Commonwealth, as appears from the difference of phraseology between that section and section 92.

Section 92 refers to goods imported before the imposition of uniform duties 'into any State, or into any Colony which, whilst the goods remain therein, becomes a State'; whilst section 93 refers to goods imported into or manufactured in 'a State'. This distinction agrees with the general intention of section 93 (i), which is only meant to apply to revenue'collected . . . by the Commonwealth'(see section 89 (i)). This explanation removes the most serious difficulty raised by Mr Kingston(4)-that it would be necessary to re-open the question of duties paid 'many years before'.

The whole issue, therefore, is whether goods imported into or manufactured in a State after the establishment of the Commonwealth, but before the imposition of uniform duties, and passing into another State after the imposition of uniform duties, are to be deemed 'to have been collected not in the former but in the latter State'. This question is one on which a difference of opinion may reasonably obtain, since neither answer to it is free from difficulty. It turns upon the reading of section 93, which provides that during the first five years after the imposition of uniform duties, and thereafter until the Parliament otherwise provides:
the duties of customs chargeable on goods imported into a State
the duties of excise paid on goods produced or manufactured [in a State] (5) (Note: and afterwards passing into another State for consumption)
shall be deemed to have been collected not in the former but in the latter State.

Section 93 marks the beginning of a new period, dating from the imposition of uniform duties; and the question is whether the adjustment applicable to the new period applies-(1) to goods on which duty was 'chargeable' or 'paid' within that period, or (2) to goods which 'passed into another State' within that period-whether duty was paid before or after the imposition of uniform duties. In other words, do the words 'During the first five years' etc. relate both to 'chargeable' (or 'paid') and 'passing', or only to 'passing'? If they relate to both, then the duty on all goods imported before the imposition will remain credited to the State of importation, notwithstanding that they subsequently pass for consumption into another State. If they relate only to 'passing', then (assuming that imposition will relate back to 8 October 1901) there is a period of nine months (from 1 January to 8 October 1901) as to which the debits and credits under section 89 may have to be re-adjusted in consequence of transfers after 8 October.

The solution of the question depends on the reading together of sections 89 and 93. The distinction between the two periods dealt with in these sections is Very marked, and for this reason: that before the imposition of uniform duties the border duties protected the States from inequity, affording a strong presumption that the goods would be consumed in the State in which the duty was paid. After the imposition there is no such presumption. The moment the border barriers are down, goods previously or afterwards imported into one State, that State being credited with the duties paid upon them, are at once free to pass into another State for consumption.

There is no necessity, except for considerations of departmental convenience, to press the distinction between the two periods further than this. From the establishment of the Commonwealth-1911 January 1901-the Customs Department came under Commonwealth control, and the Commonwealth became, for customs purposes, one federation-the State tariffs being temporarily taken over as local tariffs of the Commonwealth. From that moment the Constitution makes provision for rough justice being done in the allotment of the revenue. During the first period, the revenue is credited to the State in which it is collected-which is presumed to be the consuming State. During the second period, the same mode of crediting is continued by section 93, with an extra adjustment which has been rendered necessary by the fact of border duties being abolished. That adjustment is that duties which have been credited to one State must subsequently, if the dutiable goods afterwards pass to another State for consumption, be struck out from the credit of that State, and credited to the consuming State.

If that adjustment did not apply to duties paid to the Commonwealth before the imposition of uniform duties, it would follow that goods which had paid duty in one State before 8 October, and were afterwards transferred, would escape from the adjustment, notwithstanding that the event had meanwhile occurred (i.e. the abolition of border duties) to meet which the adjustment was provided. Whilst, therefore, as a matter of mere grammar, section 93 seems to be equally capable of either interpretation, yet the intention of the section, and considerations of equity, favour the view that the period mentioned therein has relation to the time of transfer, not to the time of payment of duty. On the whole, therefore, it is not necessary to vary my previous opinions.

They are confirmed by looking forward to the end of the five-year period. On the view suggested by Mr Kingston, no adjustment could take place till some time after the commencement of that period-i.e. until goods, which have paid duty after the commencement of the period, afterwards pass into another State. But, on any interpretation, adjustment under the section would cease immediately at the end of the period; i.e. goods which paid duty during the five-year period, but were transferred after its termination, would not come within the provisions of the section. Mr Kingston's view therefore involves the consequence that the principle of adjustment would not be fully operative during the whole period.

I do not quite see the force of the objection that where the duties on an article differ in different States, the amounts credited on transfer from the States will differ. In each case the amount credited will be the amount received. It must, however, be admitted that there is a certain anomaly in crediting, say, New South Wales, with duty on a buggy transferred from Victoria, which might at the time of importation into Victoria, have been imported into New South Wales free. But on the alternative interpretation there would be an equal anomaly in the case of articles dutiable in both States, imported before the imposition of uniform duties into one State, and afterwards transferred to another. The effect of the imposition of uniform duties, and the simultaneous establishment of interstate free trade, enables goods previously imported and duty-paid, in one State, to be transferred to another free of duty; and the adjustment of section 93 seems to have been designed to meet this difficulty-whether importation into the Commonwealth was before or after the imposition of uniform duties. From the very nature of the case, no interpretation can be free from anomaly.

The difficulty raised by Dr Wollaston with regard to the transfer of goods, e.g. buggies, which have been in use in the State of importation, is a real one; but it arises equally on either interpretation of the section. An article which has been in use is already partially consumed, and can hardly be said to pass into another State 'for consumption' in the complete sense of the word. The section contemplates goods which had not been used in the State of importation or manufacture, and I think that the section does not require the duty on goods which have been bona fide used before the transfer to be credited to the State of transfer.

Mr Kingston's two questions quoted at the beginning of this opinion may therefore be answered as follows:

  1. Sections 89 and 93 do relate to distinctly different periods in the life of the Commonwealth, which includes both periods. Section 89 disposes exhaustively (subject to subsequent adjustment) of revenues collected during the first period. Section 93 disposes exhaustively of revenues collected by the Commonwealth during the second (or transition) period, and further provides for an adjustment, during that period, of revenues collected by the Commonwealth during either period.
  2. Under any interpretation of section 93 (i), a State may be called upon, after receipt and expenditure of money under paragraph (ii) of section 93, for a refund under paragraph (i) of that section; and I do not see that it is unreasonable to hold that it may be similarly called upon for a refund of moneys received and expended under section 89.(6)

[Vol. 1, p. 378]

(1) Opinion No. 19.
(2) Opinion No. 42.
(3) Harry Newton Phillips Wollaston, Comptroller-General of Customs.
(4) Charles Cameron Kingston, Minister for Trade and Customs.
(5) These words, not in the Parliamentary Paper (see endnote (6)), appear in the Opinion Book, pencilled in, seemingly, by Mr Garran, Secretary, Attorney-General's Department.
(6) This opinion was published in Commonwealth of Australia, Pari. Papers 1903, Vol. II, p. 934.