Commissioner of Taxation v Pantral Pty Ltd [2001] FCA 1513

FEDERAL COURT OF AUSTRALIA

Commissioner of Taxation v Pantral Pty Ltd [2001] FCA 1513

SALES TAX – taxpayer a wholesaler of new motor vehicles including accessories – "accessories" included instruction manuals associated with all sales – instruction manuals exempt from sales tax by reason of being "books" within exemption Item 100 in Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 (Cth) – vehicles sold for single composite price which includes the manuals – agreement between Commissioner of Taxation and representatives of, relevantly, taxpayer, under s 43 of Sales Tax Assessment Act 1992 (Cth) about calculating taxable value of, purportedly, "taxable dealings" – in so far as taxpayer's sales by wholesale included the instruction manuals, they were not taxable dealings – proper construction of agreement – whether agreement, properly construed, was authorised by s 43 and therefore prevailed over Act Sales Tax Assessment Act 1992 (Cth), ss 16, 34, 43, 44, 51, 95 Sales Tax (Exemptions and Classifications) Act 1992 (Cth), Schedule 1, Item 100

THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA v PANTRAL PTY LIMITED (ACN 002 793 348) N 13 OF 2001 LINDGREN J 26 OCTOBER 2001 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 13 OF 2001

ON APPEAL FROM THE TAXATION DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL CONSTITUTED BY THE HONOURABLE

MR R N J PURVIS QC, DEPUTY PRESIDENT

BETWEEN: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

APPLICANT

AND: PANTRAL PTY LIMITED (ACN 002 793 348)

RESPONDENT

JUDGE: LINDGREN J

DATE OF ORDER: 26 OCTOBER 2001

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. The proceeding be stood over to 5 November 2001 at 9.30 am for the making of orders. 2. The parties supply to the Associate to Lindgren J by 2 November 2001 an agreed form of orders and, failing agreement, the forms of orders for which they respectively contend. 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 N 13 OF 2001

ON APPEAL FROM THE TAXATION DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL CONSTITUTED BY THE HONOURABLE

MR R N J PURVIS QC, DEPUTY PRESIDENT

BETWEEN: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

APPLICANT

AND: PANTRAL PTY LIMITED (ACN 002 793 348)

RESPONDENT

JUDGE: LINDGREN J

DATE: 26 OCTOBER 2001

PLACE: SYDNEY

REASONS FOR JUDGMENT

INTRODUCTION 1 Instruction manuals frequently accompany new motor vehicles. They are exempt from sales tax because they fall within exemption Item 100 in Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 (Cth) ("the Exemptions and Classifications Act"), which covers "Books, pamphlets, leaflets, periodicals, magazines or printed music". But the respondent ("Pantral") claimed to have paid sales tax amounting to $31,530.70 in respect of owners' manuals supplied with new passenger motor vehicles sold by it during the period 1 October 1994 to 30 September 1997. It claimed to be entitled to recover this amount as tax paid that was not legally payable. On the sale of the vehicles, a price was not in fact allocated to the manuals. Pantral therefore sought to invoke subs 95(1) of the Sales Tax Assessment Act 1992 (Cth) ("the STA Act") which provides: "If there is a need to know the price for which particular goods were sold, but the parties have not allocated a particular amount to those goods, the price for which those goods were sold is (for the purposes of the sales tax law) the price for which the goods could reasonably be expected to have been sold if they had been sold separately." (Section 5 of the STA Act defines the "sales tax law" to mean, relevantly, that Act and the Exemptions and Classifications Act.) 2 The applicant ("the Commissioner") contends that Pantral is not entitled to the refund claimed by reason of arrangements between the Commissioner and Pantral which, according to the Commissioner's contention, foreclosed dispute over the taxable values of the relevant dealings on which sales tax was to be assessed.

PROCEDURAL HISTORY 3 Pantral's Application for Refund of Sales Tax was dated 29 September 1997 (the covering letter from Pantral's sales tax advisers, "Australian Sales Tax Consultants", was dated 14 October 1997). Pantral's claim was based on subs 51(1) of the STA Act and Credit Ground CR1 in Table 3 of Schedule 1 to that Act. Subsection 51(1) provides simply that "Table 3 sets out the situations in which a claimant is entitled to a credit" and Credit Ground CR1 provides for a credit where a claimant "has paid an amount as tax that was not legally payable". 4 On 11 August 1988 the Commissioner wrote to Pantral advising that its claim had been disallowed. 5 On 9 October 1998 Pantral gave notice to the Commissioner of its objection to his decision and on 17 June 1999 the Commissioner advised Pantral that he had disallowed the objection. 6 On 20 August 1999 Pantral lodged with the Administrative Appeals Tribunal ("the Tribunal") an application for review of the Commissioner's objection decision. On 8 December 2000, the Tribunal set aside that decision, allowed Pantral's objection and remitted the matter to the Commissioner in order that the amount of the credit to which Pantral was entitled might be calculated. 7 On 5 January 2001 the Commissioner filed in this Court a notice of appeal from the Tribunal's decision. Section 44 of the Administrative Appeals Tribunal Act 1975 (Cth) ("the AAT Act") provides that a party to a proceeding before the Tribunal may appeal to this Court "on a question of law" from any decision of the Tribunal in that proceeding.

background Facts 8 The following account of background facts is based on the reasons for decision of the Tribunal and on other matters that are not controversial. 9 Pantral was a subsidiary of Mapala Pty Limited ("Mapala") which traded as "Brad Garlick Automotive Group". On 12 January 1993 Pantral and Mapala entered into a "Bailment Plan Agreement" with Ford Credit Australia Limited ("Ford Credit"). According to the evidence of Myer Leibman, the Financial Controller of Pantral, the finance and bailment arrangement, for which the Bailment Plan Agreement provided, was of a kind commonly used in the motor vehicle industry. Under the Bailment Plan Agreement, Pantral or Mapala would order or purchase new motor vehicles from their manufacturers or importers. Pantral or Mapala would do so as agents for Ford Credit, which would pay for the vehicles. Pantral or Mapala would hold the vehicles as bailee for Ford Credit as bailor, but would be entitled to sell them on their own account to retail customers. The property in the vehicles would pass from Ford Credit to Mapala or Pantral at the time of the retail sale. 10 During the period 1 October 1994 to 30 September 1997, the following practice was followed. According to the Tribunal, on behalf of Ford Credit, Mapala "would order motor vehicles with instruction manuals" from distributors. The motor vehicles were delivered to Pantral with an invoice from the distributor or manufacturer for the wholesale price of the motor vehicle and "selling expenses". The invoice would also indicate the amount of sales tax payable on the vehicle. When Mapala, the retail seller, found a buyer, it would, upon receipt of monies from the customer or execution of a finance agreement by him or her, notify Ford Credit and transfer funds on behalf of Pantral in a sum equal to "the wholesale price of the motor vehicle and the selling expenses". Once the transfer of funds had occurred, the motor vehicle was treated as having been sold by Ford Credit to Pantral and then by Pantral to its retailer-holding company, Mapala. Mapala would issue an invoice for the sale to the customer. Each month Pantral remitted to the Commissioner an amount equal to the sum of the sales tax amounts recorded for all motor vehicles sold during the previous month. 11 An instruction manual was always delivered with the vehicle, either by being in the vehicle when it was delivered or by being dispatched separately. It was Mr Leibman's understanding, although he could not say so from his own knowledge, that "the price of the instruction manual was included in the invoice [price, that is to say, in the price fixed by the manufacturer or distributor]". On occasions it was necessary to purchase manuals separately, from a publisher or from a manufacturer or distributor. 12 Accordingly, so stated the Tribunal, the sales from the manufacturer or distributor to Ford Credit, from Ford Credit to Pantral and from Pantral to Mapala, were all for the same wholesale price, but the sale from Pantral to Mapala also included sales tax, and "[t]he wholesale price was the price invoiced by the distributor". The amount of sales tax payable was shown on the invoice and was calculated by multiplying the invoice price by the rate applicable to the wholesale sale of motor vehicles under the Exemptions and Classifications Act. 13 Mr Leibman could not say how the recommended retail list price ("RRLP") was calculated by the manufacturer or distributor. However, the RRLP less a certain fixed percentage plus amounts for "selling expenses" and "dealer advertising fund", together made up the amount that was paid to Ford Credit to discharge Pantral's liability. 14 The period to which I referred earlier, 1 October 1994 to 30 September 1997, was in fact divided into two periods for present purposes. During the first period, from 1 October 1994 to 30 June 1997, the wholesale price was an amount equal to the RRLP excluding sales tax, less 22.5 per cent. The wholesale price was arrived at in that way in accordance with an administrative arrangement between the Commissioner and participants in the motor vehicle industry, known as the "Uniform Taxable Value" arrangement ("the UTV Arrangement"). But during the second period, from 1 July 1997 to 30 September 1997, the wholesale price was an amount equal to the RRLP, excluding sales tax, less 22.25 per cent, and was arrived at in this way in accordance with a written agreement between the Commissioner and such representatives under s 43 of the Act ("the s 43 Agreement"). Pantral was a party to the s 43 Agreement by reason of it having executed an "authority to sign form" authorising the Motor Trades Association of Australia to sign the s 43 Agreement on its behalf. 15 An invoice in respect of a new vehicle which was in evidence before the Tribunal exemplified the above account of matters. Daewoo Automotive Australia Pty Ltd ("Daewoo") issued the invoice which was dated 31 August 1997 and related to a new "NUBIRA 4DR SX 4-SPEED AUTO" ("the Nubira"). It was addressed to Ford Credit; it was for $17,101.84; it referred to the "Account" involved as that of "Brad Garlick Daewoo" (that is to say, Mapala); and it bore the following figures: Total Wholesale Price/RRLP $14,606.55 Selling Expenses 2,395.29 Dealer Advertising Fund 100.00 Invoice Total ------------- $17,101.84 ========

The "Total Wholesale Price" was calculated as RRLP ($22,000.00) less sales tax of $3,213.44 ($18,786.55) x 77.75% (100%–22.25%). The invoice did not show the calculation, although it showed the "RRLP" of $22,000, "Indicated Sales Tax @ 22.0%" as giving an amount of $3,213.44, and a "Total Wholesale Price/RRLP" of $14,606.55. The sales tax of $3,213.44 was calculated as 22.0% of $14,606.55, that is to say, as 22.0% of the amount shown on the invoice as the wholesale price. A "footnote" on the invoice stated that the "selling expenses" were "incurred by Daewoo ... on behalf of the retail dealer [Mapala] and [were] the responsibility of the retail dealer". The footnote continued: "Receipt of payment therefore, by another dealer entity, is as agent for the retail dealer". 16 Invoices from Ford Credit to Pantral and from Pantral to Mapala were not in evidence: apparently they were rendered electronically. Mapala would render an invoice to the retail customer or to his or her financier. Such an invoice dated 23 September 1997 relating to the Nubira was in evidence and showed the "Vehicle Price" as $22,000.00. 17 So far as relevant, the s 43 Agreement provided as follows: "This is an agreement under section 43 of the [STA Act, referred to in the s 43 Agreement as the "STAA"] entered into on 5 September 1997 BETWEEN ... RECITALS (A) The parties desire to enter into an agreement in order to continue a longstanding arrangement that has existed between the Commissioner and Motor Vehicle Industry bodies regarding the taxable value of new motor vehicles for the purpose of calculating the sales tax payable on new motor vehicles [clearly, a reference to the UTV Arrangement]. (B) This agreement will result in reduced compliance costs and administrative simplicity by eliminating the necessity for wholesale finance companies, dealer wholesale companies, manufacturers and importers to individually calculate the sale tax on each assessable dealing. (C) The non-taxable component contained in this agreement has been arrived at after negotiations with industry bodies. The practice of applying a non-taxable component has been accepted and adopted for some years by members of the industry in calculating sales tax on taxable dealings. INTERPRETATION In this agreement, unless the contrary intention appears, the singular means the plural and vice versa and the following words have these meanings: ... 'Non-taxable component' represents a standard deduction from the list price or amended list price of a new motor vehicle. ... 'Taxable value' has the meaning given in the STAA. ... THE TERMS OF THE AGREEMENT ARE AS FOLLOWS: 1. This agreement is entered into under section 43 of the STAA and applies to the calculation of the taxable value of new motor vehicles.

2. The duration of this agreement is to be 1 July 1997 to 30 June 2002.

3. The terms of this agreement replace the taxable value provisions of the STAA in so far as they relate to the calculation of the taxable value of new motor vehicles.

4. (a) all parties to this agreement shall calculate the taxable value of new motor vehicles in all assessable dealings in accordance with the terms of this agreement and, in particular, in accordance with clause 7.

… 7. Subject to the exceptions (a), (b), (c) and (d) to this clause [(a), (b), (c) and (d) are not presently relevant], the taxable value of new motor vehicles which are sold by a manufacturer/importer, wholesale finance company or dealer wholesale company will, in all assessable dealings, be the list price less a non-taxable component of 22.25%. This is referred to as the clause 7 value. … 8. Where a new motor vehicle is sold with goods that are not parts of or accessories to the vehicle, (golf clubs, TVs or watches etc), sales tax on those goods must be borne at the time of purchase or importation of the goods and no further liability for sales tax will arise in relation to such goods. …" (my emphasis) 18 Pantral contends that clause 8 of the s 43 Agreement makes clear that the reference to "new motor vehicles" was intended to include a reference to cover goods sold with a new motor vehicle which were "parts of or accessories to" the vehicle, and that the instruction manuals were "accessories".

Legislation 19 The following are the relevant provisions of the STA Act (including, for convenience, various Part, Division and Subdivision headings). " PART 2 – GENERAL DEFINITIONS 5 In this Act, unless the contrary intention appears: … 'assessable dealing' means any dealing covered by Table 1 [in Schedule 1 to the STA Act]; ... 'exemption item' means an Item or subitem in Schedule 1 to the Exemptions and Classifications Act; ... 'taxable dealing' means an assessable dealing ... for which no exemption is available under Division 2 of Part 3; 'taxable value' means the taxable value that applies under Division 3 of Part 3 [Division 3, which is headed "Taxable value", comprises ss 34-43, and Pt 3 is headed "LIABILITY TO TAX" and comprises ss 16-50A]; ... PART 3 – LIABILITY TO TAX Division 1 – General rules for taxability Subdivision A – Taxing assessable dealings 16(1) Table 1 sets out all the assessable dealings that can be subject to sales tax. (2) If the time of an assessable dealing (as specified in column 4 of the Table) is on or after the first taxing day, and no exemption applies under Division 2 of this Part, then: (a) the dealing is a taxable dealing; (b) the person specified in column 3 [of Table 1 in Schedule 1] is the person liable to the tax; (c) the tax becomes payable at the time of the dealing, as specified in column 4; (d) the tax is due for payment at the time that applies under Division 2 of Part 5. (3) To calculate the amount of the tax: (a) determine the taxable value of the dealing under Division 3 of this Part; (b) deduct any exempt part of the taxable value that applies under Division 4 of this Part; (c) multiply the result by the rate that applies under the Exemptions and Classifications Act. … Division 2 – Exemptions Subdivision A - Exemptions based on exemption Items 24 An assessable dealing is not taxable if: (a) the goods are covered by an exemption Item that is in force at the time of the dealing; and (b) all the requirements of that Item have been met at or before the time of the dealing. … Division 3 – Taxable value Subdivision A - General rules for working out taxable value 34(1) The general rules for calculating the taxable value are set out in Table 1. (2) … (3) In some cases, a special taxable value applies instead of the amount that would normally apply under Table 1 and Subdivision B of this Division. These substitute taxable values are set out in Subdivision C of this Division [Subdivision C contains s 43 next to be noted]." ... Subdivision C – Substitute taxable value in special cases … 43(1) The Commissioner may enter into an agreement with a taxpayer about calculating the taxable values of particular taxable dealings. (2) So far as the agreement is inconsistent with this Act, the agreement prevails. Division 4 – Exempt parts of taxable value 44 This Division sets out the exempt parts of the taxable value. Exempt parts are deducted from the taxable value before applying the appropriate rate of tax. ... PART 4 – CREDITS 51(1) Tables 3 and 3A [in Schedule 1 to the STA Act] set out the situations in which a claimant is entitled to a credit. …" (Subsection 95(1) of the STA Act was set out in [1] above.) 20 Table 1 in Schedule 1 to the STA Act lists "Assessable dealings" and these include Assessable dealings AD1b and AD11b. Assessable dealing AD1b is concerned with Australian goods and Assessable dealing 11b is concerned with imported goods. The former is a "wholesale sale by a person who is not the manufacturer of the goods", while the latter is a "wholesale sale by any person". In each case "the seller" is identified as the person liable to pay the sales tax and the "normal taxable value" of the goods is "the price (excluding sales tax) for which the goods were sold". Some of the relevant motor vehicles were Australian goods and some were imported. 21 Table 3 in Schedule 1 to the Act identifies credit ground CR1 as "Tax overpaid" and gives details of it as "Claimant has paid an amount as tax that was not legally payable". The item identifies the amount of the credit as "the amount overpaid, to the extent that the claimant has not passed it on". 22 The expression "exemption Item" is defined in s 5 of the STA Act as "an Item or subitem in Schedule 1 to the Exemptions and Classifications Act". Subsection 4(2) of the Exemptions and Classifications Act provides, relevantly, and in substance, that if all the requirements of an exemption item in Schedule 1 to that Act are satisfied at or before the time of an assessable dealing, the dealing is not taxable. As par [1] above shows, exemption Item 100 refers to, inter alia, "Books". It is common ground that the instruction manuals fell within that expression.

Reasoning of the Tribunal 23 The Tribunal noted that Pantral claimed a credit on the basis that the sales by Pantral to its holding company, Mapala, involved two assessable dealings: a taxable dealing in respect of the motor vehicle strictly so called and a non-taxable dealing in respect of the instruction manual. The Commissioner submitted that there was only one assessable dealing, the taxable dealing in respect of the vehicle strictly so called, and that Pantral had failed to show that the instruction manual was a component of any dealing on which sales tax had been paid. The Commissioner submitted that the s 43 Agreement was referable only to the taxable dealing in respect of the vehicle, and that its terms prevented Pantral from relying on subs 95(1) of the STA Act. 24 The Tribunal stated as follows at [30]-[36]: "30. ... The agreement affects the taxable value of a motor vehicle and does not purport to refer to an assessable dealing that is exempt. 31. The latter, surely however, is a matter of fact. If the Tribunal is satisfied that the item sold under the rubric of motor vehicle falls within the purport and intent of section 95 then the submissions made in this regard on behalf of the Applicant are apposite. That is, if there be two assessable dealings, the one to the motor vehicle and the other to the manual, then section 43 could not relate to the manual assessable dealing as it is exempt. 32. The section 43 agreement is said to be more than an agreement 'about calculating the taxable values of particular taxable dealings' and is an agreement about calculating the taxable values of particular assessable dealings. Clause 7 of the agreement, as earlier indicated, provides that the taxable value of the motor vehicles sold 'in all assessable dealings' is to be the list price less the non-taxable component of 22.25 per cent. The clause does not make mention of the assessable dealing represented by the sale of a vehicle alone. Consequently, apportionment of the global taxable value of the list price less the percentage, so as to exclude so much of the global amount as relates to the taxable value (being exempt) attributed to the assessable dealing constituted by the sale of the instruction manual is to be allowed. Clause 7 of the section 43 agreement provides for a combined taxable value of list price less the percentage for the two assessable dealings constituted by the sale of the motor vehicle and the other sale of the instruction manual. 33. On the basis of the whole of the material placed before it, the Tribunal is satisfied that there were two assessable dealings in which the Applicant and its holding company were involved, one the sale of the motor vehicle, the other the sale of the manual. The Tribunal finds that manuals were sold with vehicles and not given away with vehicles, this being implicit in the manual being regarded as an accessory within the meaning of the agreement. 34. The Tribunal is further satisfied that the Applicant was required to deduct from the one inclusive invoiced price, the price for which the manuals could reasonably have been expected to have been sold if they had been sold separately within the meaning of section 95 of the Act so as to arrive at the price for the sale of the motor vehicle only, the price on which the sales tax was payable. The Applicant is entitled to a credit consequent on an apportionment under section 95. 35. The Tribunal is not able to ascertain the price for which the relevant manuals could have been sold, if sold separate from the motor vehicles. The evidence before the Tribunal is that of replacement value and not the price for which the items could have been sold by a manufacturer. The matter is to be referred back to the Respondent and the Applicant in order that the price for which the manuals could have been sold may be ascertained. 36. Accordingly the objection decision under review is set aside, the objection allowed and the matter remitted to the Respondent in order that the credit to which the Applicant is entitled may be calculated. Liberty to apply is reserved."

my reasoning on the present appeal 25 The notice of appeal purports to identify twelve errors of law made by the Tribunal and it specifies sixteen grounds of appeal. But the Commissioner's submissions did not address them all. The submissions of the respective parties were structured differently and in some respects did not engage with each other. I find it best to follow my own course rather than the structure of the notice of appeal or of either party's submissions. 26 Senior counsel for Pantral correctly observes that the UTV Arrangement relates to nearly the whole of the period in respect of which a refund is claimed, while the s 43 Agreement relates to a short period only. It will be recalled that the former relates to the period from 1 October 1994 to 30 June 1997 (two years and nine months) while the latter relates only to the period from 1 July 1997 to 30 September 1997 (three months). Nonetheless, I find it convenient to commence by referring to the s 43 Agreement. 27 Section 43 of the STA Act was set out at [19] above. It authorises the Commissioner to enter into "an agreement with a taxpayer about calculating the taxable values of particular taxable dealings" (my emphasis) and provides that so far as the agreement is inconsistent with the STA Act, the agreement prevails. The section does not authorise the Commissioner to enter into any other kind of agreement. If the Commissioner does enter into a different kind of agreement, it does not prevail over the STA Act. In such a case, the taxable value of any relevant taxable dealing is to be calculated in accordance with the STA Act as if the agreement had not been entered into. 28 Section 43 does not require that the kind of agreement for which it provides be in any particular form. Accordingly, the UTV Arrangement is not prevented by its relative informality (see below) from satisfying the terms of s 43, although a written agreement may more easily be seen to do so or not to do so. 29 The definitions of "taxable value" and "taxable dealing" were also set out in [19] above. The expression "taxable value" is defined in s 5 to mean "the taxable value that applies under Division 3 of Part 3". Division 3 of Pt 3 does not "define" taxable value but provides for how the amount of it is to be arrived at. The Division is subdivided: Subdivision A contains "General rules for working out taxable value", Subdivision B provides for "Additions to taxable value", and Subdivision C provides for a "Substitute taxable value in certain cases". Division 4 of Pt 3 deals with "Exempt parts of taxable value". 30 Aspects of these provisions of present relevance are as follows: · assessable dealings, not only taxable dealings, have a taxable value; · a taxable value may have an exempt part or exempt parts; and · any exempt part or parts must be deducted before the appropriate rate of tax is applied to calculate the amount of sales tax payable. 31 Section 34, also set out in [19] above, is the first and main provision of Division 3 and itself constitutes Subdivision A of that Division. The column headings of Table 1 in Schedule 1 to the Act and the entries in that Table for assessable dealings AD1b (in Part A headed "Australian goods") and AD11b (in Part B headed "Imported goods") are as follows: [1] No. [2] Assessable dealing [3] Person liable [4] Time [5] Normal taxable value of dealing AD1b wholesale sale by a person who is not the manufacturer of the goods Seller time of sale the price (excluding sales tax) for which the goods were sold AD11b wholesale sale by any person Seller time of sale the price (excluding sales tax) for which the goods were sold

The significance of the column headings appears in the definition of "assessable dealing" in s 5 and in ss 16 and 34 of the STA Act. The Table confirms that each assessable dealing has a taxable value, whether the assessable dealing is a taxable dealing or not. 32 Section 43's "particular taxable dealings" refers to a subclass of "assessable dealings". By reason of the definition of "taxable dealing" in s 5, s 43 empowers the making of an agreement only about calculating the taxable values of particular "assessable dealing[s] ... for which no exemption is available under Division 2 of Part 3". It follows that on the facts of the present case, in order to be within s 43, an agreement would have to be about calculating the taxable value of a sale of goods shorn of the instruction manual, such as the motor vehicle strictly so called, or the motor vehicle and accessories which did not fall within exemption Items, such as a spare wheel, tool kit or wheel brace. 33 On the Tribunal's findings set out earlier, the s 43 Agreement was about calculating a composite taxable value of vehicle and book. As will appear later, I agree with the Tribunal in this respect. In my opinion, however, it follows that s 43 did not cause the s 43 Agreement to prevail over the Act to the extent of any inconsistency between them, and that the Act's régime, not the s 43 Agreement, applied. Under the Act's régime, s 95 enabled the price for which the instruction manual was sold to be ascertained. 34 The Tribunal found it impossible on the evidence before it to determine, for the purpose of s 95 in a different context, the price for which the manuals could reasonably be expected to have been sold if they had been sold separately. It follows, relevantly for present purposes, that the Tribunal could not perform the calculation required by subs 16(3) and s 44 of the STA Act, an essential step in which was the deduction of the amount of the exempt part of the taxable value. In the result, consistently with its findings, the Tribunal should have remitted the matter to the Commissioner for assessment according to law, that is, according to the régime laid down in the Act. 35 If, contrary to my view, the s 43 Agreement on its true construction provided for calculation of the taxable values of particular taxable dealings, namely, sales of the vehicles, whether with or without accessories not falling, like the manual, within any exemption Item, the s 43 Agreement would be authorised by s 43 and would, to the extent of inconsistency, prevail over the Act's régime for the determination of the taxable values of those particular taxable dealings. 36 While, in my opinion, the Tribunal was correct in concluding that the s 43 Agreement did not fit this description, it is important to understand the reasoning according to which the Commissioner contends that it did fit it. The Commissioner does not challenge the Tribunal's finding that the instruction manuals were not "given away with vehicles". There was, in fact, evidence on which the Tribunal was entitled to infer that they were sold with the vehicles for a price which was embedded in the price for the vehicle generally (the manuals had a value for a retail buyer of the vehicle and were sometimes bought and sold independently). Nor does the Commissioner dispute that the manuals fell within the notion of "accessories". The Commissioner contends, however, that it was open to the parties under s 43 to agree that the taxable value of the vehicle alone be an amount calculated by reference to the composite price of the vehicle and manual. I agree that it was. Accordingly, it was open to the parties to agree that the taxable value of the vehicle alone be 77.25% of [the composite price of vehicle and manual (RRLP)–sales tax]. But, like the Tribunal, I do not think that the parties did so agree. 37 The following are my reasons for thinking that the s 43 Agreement did not do that which I have just described. 38 First, before the Tribunal three propositions were common ground. I was told that they were reduced to writing and read out to the presiding Member but that the writing could not be found to be placed before me. The transcript of the hearing before the Tribunal records the three propositions as follows: PROPOSITION 1 "Under the uniform sale value arrangement, the sale value of recommended retail price excluding sales tax less a percentage was intended to set a standard deduction from list price to calculate a taxable value for the sale of motor vehicles including all parts and accessories, it being common ground that instruction manuals – [sic]." PROPOSITION 2 "At the time of negotiating the uniform sale value arrangement in 1974 nobody turned their minds to the particular position of instruction manuals." PROPOSITION 3 "Between 1974 and 1981 when section 6AB of the Sales Tax Exemptions and Classifications Act 1935 was repealed, a further deduction from the taxable value set by the uniform sale value arrangement was made for the value of seat-belts." 39 Perhaps the first proposition continued "are accessories". Be this as it may, the Commissioner did not contend before me that the instruction manuals, which, after all, were designed for no other purpose than to facilitate the use of the vehicle, were not accessories. Proposition 1 relates to the UTV Arrangement. Recital A in the s 43 Agreement (set out in [17] above) records that the s 43 Agreement was intended to "continue" the UTV Arrangement. It follows that the s 43 Agreement is to be understood to do so if that construction of it is reasonably open. 40 It may be difficult to understand why the Commissioner agreed to Proposition 1, in view of the contention he was making before the Tribunal that the agreed formula was intended to give a taxable value for the vehicle alone, but senior counsel for the Commissioner does not suggest that the transcript has failed to record accurately, so far as it goes, Proposition 1 as agreed before the Tribunal. 41 Proposition 3 calls for some explanation. Section 6AB of the Sales Tax (Exemptions and Classifications) Act 1935 (Cth), which was inserted into that Act by Act No 29 of 1967 and was therefore in force when the UTV Arrangement was made in 1974, provided, relevantly, that sales tax was not payable upon so much of the sale value of goods in which were incorporated "seat belt assemblies" as was equal to the amount which would have been the sale value of such assemblies if the transaction in relation to which the sale value arose had been a transaction in relation to those assemblies only. Accordingly, Proposition 3 is to the effect that, from the inception of the UTV Arrangement in 1974 down to the repeal of s 6AB in 1981, the parties treated the agreed taxable value for which the UTV Arrangement provided as encompassing, not only the vehicle strictly so called, but the "exempt" seat belt assemblies as well. 42 Proposition 3 is consistent with both the evidence and the Tribunal's implicit finding in relation to the terms of the UTV Arrangement. Although the parties did not refer me to it, I now set out subs 18(5B) of the Sales Tax Assessment Act (No. 1) 1930 (Cth), which afforded the legislative test and basis for the enforceability of the UTV Arrangement, as follows: "Notwithstanding anything contained in this Act, the Commissioner may enter into an agreement with any taxpayer as to the manner of ascertaining the sale value or sale values of goods which during the period of the agreement become the subject of any transaction, act or operation effected or done by the taxpayer in respect of which tax is payable under this Act and the sale value or sale values ascertained in the manner specified in the agreement shall, for the purposes of this Act, be the sale value or sale values of those goods in respect of those transactions, acts and operations. The agreement may be in respect of any or all of those goods and in respect of any or all of the transactions, acts or operations effected or done by the taxpayer in relation thereto." This provision was adopted by reference in the various other Assessment Acts. 43 The terms of the UTV Arrangement were not deliberately and formally spelt out, as were those of the s 43 Agreement, and are to be found in certain correspondence in 1974 between the Commissioner and motor vehicle manufacturers or distributors or their representatives. The earliest letters in evidence were eight letters in identical form dated 26 April 1974 from Senior Assistant Commissioner Whalan to eight motor vehicle manufacturers or importers as follows: "As you would be aware, at a meeting of the Federal Chamber of Automotive Industries in Canberra on 3 April 1974 I discussed some of the matters that had emerged from our examination of the marketing arrangements in the motor industry that have had the effect of reducing the amount of sales tax payable on vehicles. In the course of our discussions with individual members of the Chamber over recent months it has been put to us that under arrangements currently in operation, some manufacturers and importers of motor vehicles are at a competitive disadvantage, as compared with others, because of variations in the weight of sales tax. It has been urged on us that it is highly desirable that there be some degree of uniformity in order that all motor vehicle manufacturers and importers should be placed on the same footing as regards the weight of sales tax. As I indicated at the meeting of the Chamber, we think it should be possible to arrive at a uniform basis which would result in sales tax being paid on a value which represents a standard deduction from recommended retail list price excluding sales tax. After taking into account all relevant factors, including the present marketing arrangements in the industry, it is considered that, as the law stands, a value of recommended retail price excluding tax less 26% would be a fair and reasonable level for a uniform sale value. If this uniform basis of taxable sale value is adopted, we would not be concerned, as we have in the past, with the levels of actual expenditure on advertising, freight, warranty and such like. It would also obviate any call for annual adjustments or changes in levels of taxable sale values because of variations in actual sales or cost figures. The proposal will not necessarily do away with the need for the intervention in marketing arrangements of separate arms length companies but it may be possible in some cases for existing marketing arrangements or documentation to be simplified. If there is anything in this area that you wish to discuss, you could telephone Mr L T Flinn at the Australian Taxation Office in Melbourne (Telephone 609 2428). I would be glad if you could let me have advice on the company's attitude to the proposal." (my emphasis) This letter suggests that the purpose of the UTV Arrangement was to eliminate disputation arising from differences as between some manufacturers or importers and others, as to that part of a sale price which was properly attributable to "services" and was therefore a non-taxable component of the price. There is no suggestion in the letter that the percentage to be deducted to cover the non-taxable component was also intended to encompass "exempt goods" which were included in the sale price. That is to say, the remainder of the price (74 per cent so long as the deduction remained at 26 per cent) was in fact for the vehicles, their parts and accessories, irrespective of their sales tax status. 44 On 5 July 1974 the Commissioner wrote to Nissan Motor Co (Aust) Pty Limited ("Nissan") a letter which included the following: "... the deduction of 26% to arrive at the uniform taxable values is designed to exclude from those values the cost of providing replacement parts under warranty. Consequently, it will not be open to the company to claim exemption from tax on warranty replacement parts as from the date of implementation of the proposal." This letter asserted the Commissioner's view that the 26 per cent was intended to cover the manufacturer's warranty, and that, for this purpose, the "warranty" included any spare parts which had to be supplied in the course of the honouring of it. On 5 September 1974 Nissan replied accepting that: "…exemption from tax on warranty replacement parts [would] not be claimed in respect of warranty repairs effected on and after 1/10/74." 45 On 13 August 1974 the Commissioner wrote to Renault (Australia) Pty Limited a letter which included the following: "As I explained in my letter of 26 April 1974 the figure of 26% specified as the deduction from recommended list price was arrived at after taking into account all relevant factors, including the present marketing arrangements in the industry and the general pricing arrangements adopted by the various motor vehicle manufacturers and importers. The purpose was to achieve uniformity throughout the industry and to place all manufacturers and distributors on an equal footing as regards the application of sales tax. Any departure from this standard percentage would be contrary to the basic purposes of the scheme." 46 Finally, on 10 November 1982, Arthur Andersen & Co, Chartered Accountants for General Motors-Holden's Limited and General Motors-Holden's Sales Pty Limited, wrote to the Commissioner a letter which included the following inquiry: " ... we would appreciate your ruling that the Commissioner has entered into agreements with motor vehicle dealers and (in particular) with GMH, whereby the manner for ascertaining the sale value or sales values of motor vehicles is to calculate 74% of the list price of the vehicle (excluding sales tax), and that this manner of ascertaining the sale value applies to sales by wholesale, sales by retail and/or other taxable sales by GMH." 47 On 15 November 1982 the Commissioner replied, relevantly, as follows: "In response to your question as to whether there is an agreed sale value under section 18(5B) of Sales Tax Assessment Act (No. 1) in the motor vehicle industry the answer is "yes" and the sale values are determined on the basis set out in your letter." 48 The correspondence referred to above is consistent with the Tribunal's implicit finding that the UTV Arrangement was, as the Tribunal expressly found the s 43 Agreement to be, an agreement for the calculation of a composite undifferentiated "taxable value" for what are, for sales tax purposes, two assessable dealings: one, a taxable one in respect of the vehicle, and the other in respect of "exempt goods", the manual. 49 I return now to the s 43 Agreement. If the parties had intended the s 43 Agreement to provide that the agreed taxable value for which it provided should be referable to the vehicle alone, I would have expected them to say so expressly. As noted earlier, it was possible, but I think not lightly to be expected, for the parties to assign as the taxable value of the vehicle alone, a percentage of the composite price of vehicle and book minus sales price. The Commissioner points out that the s 43 Agreement purported to be an agreement under s 43 of the STA Act and that the ordinary meaning of "new motor vehicles" does not include accompanying instruction manuals. But there are considerations pointing in the other direction. First, the s 43 Agreement was expressly intended to continue the UTV arrangement. Secondly, cl 8 of the s 43 Agreement suggests that accessories were being treated as included in the notion of "a new motor vehicle". It is true that strictly cl 8 is concerned with the question of the timing of the payment of sales tax. But the clause shows that the parties considered the question of "accessories" and, in my opinion, having done so they would have provided expressly in the s 43 Agreement in respect of them if they had intended that they be treated otherwise than as "parts of ... the vehicle" were being treated for the purposes of that agreement. Thirdly, the "strict" construction of the expression "new motor vehicles" in cl 7 of the s 43 Agreement for which the Commissioner contends, would also exclude other accessories such as a spare tyre, tool kit and wheel brace. In response, the Commissioner submits that the expression "new motor vehicles" should be construed to refer to the new motor vehicles themselves together with those accessories, the sale of which would constitute taxable dealings within s 43 of the STA Act. I can only say that I find such a construction a strained and improbable one. It is far more likely that the possibility that something falling within the expression "parts of or accessories to the vehicle" was within the "non-taxable component" by reason of falling within an exemption Item did not occur to the parties. 50 Since I have agreed above with the Tribunal's construction of the s 43 Agreement, I need not address Pantral's submission that that construction does not give rise to a question of law for the purposes of s 44 of the AAT Act.

Conclusion 51 For the above reasons the Tribunal's decision dated 8 December 2000 in proceeding NT 1999/432 should be set aside but, rather than make that order or further orders at this time, I will allow the parties an opportunity to confer with a view to their submitting an agreed form of orders. I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate: Dated: 26 October 2001

Counsel for the Applicant: Mr G Nettle QC, Mr J Davies and Mr P Sest

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the Respondent: Mr S Gageler SC and Mr M Robertson

Solicitor for the Respondent: Robert Richards & Associates

Date of Hearing: 31 July 2001

Date of Judgment: 26 October 2001