Bills Digest No. 60 1999-2000 Customs (Tariff Concession System Validations) Bill 1999


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WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details

Passage History

Customs (Tariff Concession System Validations) Bill 1999

Date Introduced: 23 June 1999

House: Senate

Portfolio: Justice and Customs

Commencement: Royal Assent

Purpose

To validate certain Australian Customs Service delegations in consequence of which concessionary customs duty was collected from various importers.

Background

The Customs Tariff Act 1995 (CTA) imposes customs duty on goods imported into Australia. In addition, the CTA sets out the rules to work out the duty payable on particular goods by reference to a principal tariff specified in Schedule 3. This tariff classifies goods in accordance with Australia's obligations under the World Trade Agreement. The rate of duty applicable to particular goods is determined by this classification unless a lesser rate of duty is payable under Schedule 4.

Part XVA of the Customs Act 1901 (CA) enables people to apply for tariff concession orders (TCO). Basically, a TCO allows goods to be imported at a concessional rate of duty in circumstances where there are no local manufacturers or substitute goods.

The Chief Executive Officer (CEO) of the Australian Customs Service (ACS) is able to delegate his/her powers and functions under section 14 of the Customs Administration Act 1985. Section 8 of the CTA specifies the circumstances when Schedule 4 applies. Subsection 8(3) provides that for the purposes of Schedule 4 a reference to a Tariff Concession Order includes a reference to a commercial tariff concession order made under Part XVA of the CA. The consequence of a TCO not being valid is that a higher duty under Schedule 3 would generally be payable on those goods.

The Bill seeks to validate certain delegations in consequence of which concessionary customs duty was collected from various importers. If this validation does not occur the Government believes that the importers will have a right to claim a refund of the duty collected by the ACS. The rationale given by the Government in the Second Reading Speech to the Bill for the measures proposed is:

In July 1996, the Government made changes to the Tariff Concession System. Those changes resulted in amendments to the Customs Act, including the introduction of additional powers and functions. New delegations were not sought for powers that were added to sections of the Act which were already the subject of the November 1995 instrument. It was thought that that instrument was sufficient. The sufficiency of the delegations for the tariff concession system was questioned in a recent hearing of the Administrative Appeals Tribunal. In light of this, the Chief Executive Officer signed two instruments on 31 May 1999. The first revoked all existing delegations for the Tariff Concession System. The second issued new delegations covering all the powers and functions in relation to the Tariff Concession System. Both instruments took effect on 1 June 1999. Notwithstanding, it is possible that certain decisions and actions taken in relation to the Tariff Concession System subsequent to the 1996 changes to the Act may not have been the subject of adequate delegations.(1)

Main Provisions

Definitions

The term 'affected delegation' is defined by clause 3 to mean any delegation, or purported delegation, by the CEO to an ACS officer of ACS powers or functions conferred on the CEO under Part XVA of the CA if:

  • that delegation was made on 27 November 1995 or any later day before 31 May 1999, and

  • a revocation of that delegation was not made, or purportedly made, before 31 May 1999.

Validation of affected delegations

Subject to the exceptions specified in clause 6, the effect of clause 4 is to deem affected delegations to have been revoked and remade and provide that affected delegations are taken to be of no effect from 1 June 1999.

Subject to the exceptions specified in clause 6, the effect of clause 5 is to validate decisions and actions taken by ACS officers under Part XVA of the CA after 15 July 1996 in relation to affected delegations.

Exceptions to validations of affected delegations

Clause 6 provides that clauses 4 and 5 will not apply:

  • Where a person has, before 1 June 1999, sought a review by the Administrative Appeals Tribunal (AAT), of:

-    a decision of an ACS officer not to pay a refund of customs duty, or

-    a decision of a delegate of the CEO of the ACS to revoke a TCO under subsection
     269SD(1AB) of the CA, and

the AAT has not made a decision on the review before 1 June 1999.

  • To any application for a refund of customs duty that:

-    is lodged with an ACS officer before 1 June 1999 and

-    gives as a reason for entitlement to a refund that a decision to revoke a TCO was
     illegal, or the TCO should never have been revoked, and

in respect of which, before 1 June 1999, no decision has been made whether to pay a refund or reject the application.

Concluding Comments

A question has arisen in relation to the Bill whether it is a law for the acquisition of property on unjust terms contrary to section 51(xxxi) of the Constitution.

Section 51(xxxi) provides:

The Parliament, shall subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:-

The acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws.

It has been held by the High Court that if an imposition is held to be a tax it cannot at the same time be an acquisition of property. This was reiterated by the High Court in Federal Commissioner of Taxation v Barnes.(2)

The measures in the Bill will validate certain steps taken under the CA to collect customs duty albeit retrospectively. It will therefore be a law with respect to taxation under section 51(ii) of the Constitution.

Section 51(ii) provides:

The Parliament, shall subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:-

Taxation: but not so as not to discriminate between States or parts thereof.

Customs or excise duties are simply a species of taxation(3) and the measures which relate to the customs duties payable by affected importers will be laws with respect to taxation under section 51(ii) of the Constitution. The measures in the Bill together with the measures in the CTA will lead to the imposition of tax in the form of customs duty on affected importers.

The imposition of customs duty on these importers will require them to pay the duty. This duty will certainly be met by the amount paid to Customs as duty without authority and to which they have a right of refund. This right to a refund which these importers have for the duty collected without authority is in no way denied by the measures in the Bill. The practical effect of the measures in the Bill is to set off the refunds due against the duty now properly imposed on affected importers. On this view the measures in the Bill do not amount to an acquisition of property on unjust terms.

There may be scope to argue that the exaction of duty without authority denied the importers the right to the use of the property represented by the amounts paid to Customs until the measures in the Bill are enacted. The counter to this argument is that if the concessionary tariff under the TCO did not apply to these importers they would have paid the non-concessionary customs duty before their goods were permitted to enter Australia. This would generally be a higher duty and by the same token these importers have benefited by paying less than the higher duty which could have been imposed on them under the Customs Tariff Act 1995. Thus there would not appear to be even a case to consider an interest payment for the amounts paid until the measures in the Bill are enacted.

For these reasons the writers take the view that the measures in the Bill are laws with respect to taxation under section 51(ii) of the Constitution and are not laws for the acquisition of property under section 51(xxxi) of the Constitution.

However, if it is conceded that the measures in the Bill are laws for the acquisition of property the question that arises is whether the terms of acquisition are unjust.

A number of principles have emerged on the interpretation of this section, following the decisions in 5 cases handed down by the High Court in 1994: Mutual Pools(4), Peverill(5), Georgiadis(6), Lawler(7), and Nintendo.(8) The Attorney-General's Legal Practice Briefing No. 13 of 28 July 1994 examined the developments in the interpretation of section 51(xxxi) in those cases against the pronouncements of the High Court in the earlier cases. The comments from the Legal Practice Briefing on the meaning of 'just terms' is set out below.

The cases produced little discussion on 'just terms'. The Commonwealth had argued that 'just terms' did not necessarily involve full monetary compensation but involved general notions of fairness, and that a range of factors could be considered. Only Brennan J considered these arguments. He rejected them: in his view section 51(xxxi) is a guarantee that, when property is acquired in the circumstances to which the provision applies, the burden will be borne by the taxpayers (or, possibly, the person acquiring the property) and not by the individual whose property is confiscated. This appears to be a more restrictive view than had been put in statements in some earlier cases, which suggested that there might be circumstances in which compensation at less than full value of the property could be 'just'.(9)

Thus compensation to affected importers on the restricted meaning of 'just terms' may require the consideration of some interest payment from the date of payment of unauthorised duty until the measures in the Bill are enacted.

However, the overriding consideration is that the measures in the Bill are laws with respect to taxation under section 51(ii) of the Constitution and not laws for the acquisition of property under section 51(xxxi) of the Constitution. Being laws with respect to taxation, as the measures in the Bill confirm a concessionary rate of duty as against the higher duty that would have been otherwise payable, the case for considering any interest payment under the tax system may not arise.

Endnotes

  1. Customs (Tariff Concession System Validations) Bill 1999, Second Reading Speech, p. 2.

  2. (1975) 133 CLR 483 at pp. 494-495

  3. Harper v Sea Fisheries Minister (1989) 168 CLR 314 at p. 334; Elliott v Commonwealth (1936) 54 CLR 657 at p. 667.

  4. Mutual Pools and Staff Pty Ltd v Commonwealth (1994) 119 ALR 577

  5. Health Insurance Commission v Peverill (1994) 119 ALR 675

  6. Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 119 ALR 629

  7. Re DPP; Ex parte Lawler (1994) 119 ALR 655

  8. Nintendo Co Ltd v Centronics Systems Pty Ltd (1994) 121 ALR 577

  9. Legal Practice Briefing No. 13 of 28 July 1994, p. 4

Contact Officer and Copyright Details

Ian Ireland and Bernard Pulle
13 September 1999
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1999

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1999.

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