HIGH COURT OF AUSTRALIA

                                                       Matthews

                                                           Vs.

                                             Chicory Marketing Board

                            (Latham C.J., Rich, Starke, Dixon and McTiernan JJ.)

                                                    9 August 1938

Latham C.J.

This is an appeal by way of order to review from an order of a police magistrate ordering the
defendant, Horace Matthews, to pay £11 to the complainant, the Chicory Marketing Board. This
amount was claimed as the amount of a levy made by the board under sec. 32 (1) (a) of the
Marketing of Primary Products Act 1935 Vict.. The levy was at the rate of £1 for each half acre of
an area of five and a half acres which had been planted with chicory by the defendant at Cowes in
Victoria during the year ending 30th June 1937. The chicory to be grown upon the five and a half
acres had been sold to a New South Wales purchaser before the complainant board had been
constituted, and it was duly delivered to the purchaser in pursuance of the contract of sale. It was
contended that the order was wrong and should be set aside upon the grounds (1) that the Act did
not apply to "inter-State transactions"; (2) that so far as it did apply it was invalid, and on a further
ground, introduced by amendment permitted upon the hearing of the appeal, (3) that sec. 32 of the
Act was invalid because it infringed sec. 90 of the Constitution of the Commonwealth.

The Marketing of Primary Products Act is an Act which provides for the control of the marketing of
products to which the Act is applied. The Act authorizes the establishment of marketing boards and
enables the boards to acquire products which have been declared to be commodities under the Act.
There is, however, an exception in the case of commodities which are the subject of inter-State trade
or commerce, or required or intended for such trade or commerce. The boards appointed under the
Act sell the commodities and pay a share of the total proceeds of the sale of the commodity to the
producer after making certain deductions for expenditure. Provision is made for ascertaining the
standard quality or grade of the commodities and for making dockages in the manner which is
ordinary in the case of pools. Sec. 32 authorizes the board, with the approval of the Governor in
Council, to make levies on producers of commodities and to apply the moneys raised by the levies
in payment of expenses, in repayment of advances to the board, in effecting insurances, and in work
directed to the improvement of the quality of a commodity. The outline of the Act shows that the
Act follows the general lines of pooling legislation such, for example, as was considered by this
court in Peanut Board v. Rockhampton Harbour Board[1]. The outline of the Act must be
supplemented by reference to the particular provisions upon which the determination of the appeal
depends.

Sec. 4 defines "product" so as to include any product of agriculture, and, therefore, so as to include
chicory, if chicory is declared to be a product for the purposes of the Act. Chicory was so declared
under sec. 4 (2). The Act provides in sec. 6 (1) that the Governor in Council, when requested to do
so by a petition signed by the required number of producers, may proclaim a product to be a
commodity. This was done in the case of chicory. After the Act has been applied to a commodity,
the Governor in Council may, under sec. 7, appoint a marketing board in relation to the commodity.
This was done in the case of chicory. Sec 16 provides that, when a product has been declared a
commodity and a board has been appointed in relation to the commodity, the Governor in Council
may by proclamation provide that the commodity shall, from a specified date, be divested from the
producers of the commodity and become vested in and become the absolute property of the board as
the owner thereof and that upon any of the commodity coming into existence within a time specified
it shall become vested in and become the absolute property of the board as the owner thereof. The
section also provides that the board may by further proclamation "obtain possession of the
commodity as such owner, and ... deal with the same as is deemed necessary or expedient in order to
give full effect to the objects and purposes for which the board is constituted." Sub-sec. 3 of sec. 16
is particularly important in the present case. It is as follows: "Nothing in this section and no
proclamation under this section shall affect such portion of any commodity as is the subject of trade
commerce or intercourse between the States or as is required by the producers thereof for the
purposes of such trade commerce or intercourse or as is intended by the producers thereof to be used
for such trade commerce or intercourse." Sec. 18 provides that, subject to the Act, the board, after
ensuring the supply and distribution of any commodity at reasonable prices to consumers thereof in
Victoria, may sell or arrange for the sale of the commodity. Sec. 19 (a) requires that commodities
vested in a board shall be delivered by the producers to the board. Sec. 19 (c) provides that "every
producer who, except in the course of trade commerce or intercourse between the States and save as
prescribed, sells or delivers any of the commodity to any person other than the board and every
person (other than the board) who, save as prescribed, buys or receives any of the commodity from
a producer shall be liable to a penalty of not more than one hundred pounds." Sec. 26 enables a
board to prevent the carriage of any commodity by the Victorian Railways Commissioners, any
common carrier, or the owner &c. of any ship. But this section applies only to commodities "not
being the subject of inter-State trade or commerce."

By a proclamation made on 15th July 1937 the Chicory Marketing Board made a levy to be paid by
all producers of chicory in manner following: "at the rate of £1 for every ½ acre, or part thereof, of
the area planted by such producer with chicory during the year ending 30th June, 1937." The term
"producer" is defined in sec. 4 in such a way as to include a person who grows a product declared
under the Act. The defendant planted five and a half acres with chicory during the year ending 30th
June 1937. The amount payable by him in respect of that area was therefore, if sec. 32 is valid,
£11--the amount for which the court made the order.

The first contention for the defendant is that sec. 32 of the Act is invalid by reason of sec. 92 of the
Constitution. The relevant part of sec. 92 is as follows: "On the imposition of uniform duties of
customs, trade, commerce, and intercourse among the States, whether by means of internal carriage
or ocean navigation, shall be absolutely free." It is contended that a tax upon land to be used for the
purpose of growing chicory is necessarily an interference with inter-State dealing in chicory because
it places a burden upon the producer and therefore renders less profitable to the producer any sale of
chicory, including inter-State sales.

In my opinion the contention cannot be supported. The proclamation made under sec. 32 in this case
imposes a levy upon land used for a particular purpose. The effect of the levy doubtless is to
increase the expenditure necessarily incurred in growing chicory, including chicory which may be
intended or actually disposed of for purposes of inter-State trade. The increase of costs of
production or the diminution of disposable profit is a common and often an inevitable result of
taxation. But this fact does not show that there is any interference with "freedom at the frontier," to
use the phrase adopted by the Privy Council in James v. The Commonwealth[2]. The imposition of a
levy upon land used for growing chicory has no more relation to inter-State trade than any
legislation which has the effect of increasing costs of production--and a great deal of legislation has
such an effect.

A levy imposed under sec. 32 certainly increases the cost of producing any product to which the Act
is applied. But there is no inter-State element in growing an article in primary industry or
manufacturing an article in secondary industry, and legislation which deals only with producing or
manufacturing is not in itself legislation of a character which restricts or limits the freedom of inter-
State trade. I refer to what I said upon this matter in Hartley v. Walsh[3].

If a contrary view were adopted it would be necessary to hold that any taxation legislation was
invalid if it increased the cost of producing, or raised the prices of, any goods which could be sold
or transported to another State. As James v. The Commonwealth[4] has determined that sec. 92
applies equally and in the same sense to Commonwealth and State Parliaments, all legislation,
whether Federal or State, which increased the cost of producing, or raised the prices of, such goods
would be, at least in part, invalid. Customs and excise duties which produce revenue may have such
an effect and would fall within such a suggested prohibition, though the operation of sec. 92 itself is
dependent upon the imposition of uniform duties of customs and excise. Economists have debated
the question whether land tax or income tax forms part of the cost of production of goods. But,
whatever may be the true economic doctrine developed upon a basis of precise technical definition,
it will hardly be disputed that the existence of such taxes, payable by persons who are producers or
manufacturers of goods or traders in goods, may have an effect upon price levels. Sales tax
obviously has such an effect. But it could hardly be contended that all these taxes are for this reason
necessarily invalid in relation to goods which enter into inter-State trade. A contention which would
produce such results should not be accepted unless supported by overwhelming argument. In my
opinion, for the reasons which I have stated, the contention should be rejected.

I therefore reach the conclusion that sec. 32 and the proclamation made under it in relation to
chicory do not in themselves infringe the provisions of sec. 92 of the Constitution.

It was further contended that even if sec. 32 by itself might be held to be valid, the section was part
only of a single scheme for the control of the sale of primary products under a pooling system and
that that scheme is inconsistent with sec. 92 of the Constitution. A marketing Act such as this deals
directly, and not indirectly, with the subject of trade and commerce. It was argued that sec. 32, as an
integral part of the scheme, must fail if the provisions of the Act relating to the vesting of products
in the board and the sale of products by the board were held to be invalid. The effect of the pooling
system of the Act is that, when his product becomes vested in the board, the owner of the product is
prevented from engaging in inter-State trade. He loses the right to dispose of the product in an inter-
State transaction. Such a provision, being expressed in general terms, prevents intra-State as well as
inter-State trade. But the fact that the provision is general in its terms does not exclude the operation
of sec. 92 (James v. The Commonwealth[5]).

In my opinion, if it were not for two matters to which I shall refer later, this argument should be
accepted. The provisions of the Marketing of Primary Products Act cannot be distinguished in
substance from the provisions of the Primary Producers Organization and Marketing Act 1926-
1930 of Queensland which was held to be invalid by this court in Peanut Board v. Rockhampton
Harbour Board[6]. That case was decided after James v. Cowan[7], and in James v. The
Commonwealth[8] the Privy Council refers to the Peanut Board Case[9] as being a case in which
James v. Cowan[10] was followed and applied by the High Court. The words of the Privy Council
referring to that case are as follows:--"The producers of the peanuts, it was held, were prevented by
the Act from engaging in inter-State and other trade in the commodity. The Act embodied, so the
majority of the court held, a compulsory marketing scheme, entirely restrictive of any freedom of
action on the part of the producers; it involved a compulsory regulation and control of all trade,
domestic, inter-State and foreign; on the basis of that view, the principles laid down by this board
were applied by the court"[11].

The Act now under consideration is an Act which (subject to the two considerations to which I am
about to refer) falls within the description of the Queensland Act which, if accepted as accurate,
justified, in the opinion of their Lordships, the conclusion that that Act was invalid. There are,
however, two matters which lead me to a different conclusion in the present case.

In the first place, the Act contains a specific provision in sec. 16 (3) which is plainly intended to
prevent any interference with any actual or possible inter-State trade. I repeat the words of sec. 16
(3): "Nothing in this section and no proclamation under this section shall affect such portion of any
commodity as is the subject of trade commerce or intercourse between the States or as is required by
the producers thereof for the purposes of such trade commerce or intercourse or as is intended by
the producers thereof to be used for such trade commerce or intercourse." It is difficult to suggest
any provision which could more clearly show the intention of the Act not to interfere with inter-
State trade in any commodities which become subject to the Act. The effect of sec. 16 (3) is that
actual and intended inter-State trade is removed from the operation of the Act. Sec. 16 (3) excepts
from the operation of the vesting provisions of sec. 16 (1) and (2), and, therefore, from the whole
marketing scheme of the Act, not only commodities which are actually the subject of inter-State
trade and commerce, but also commodities which are required for that purpose and even
commodities which are intended by the producers thereof to be used for such trade and commerce.
There could hardly be a more complete exclusion of inter-State trade and commerce from the scope
of the Act. Possibly the provision goes further than is necessary for the purpose of allowing full
freedom of inter-State trade and commerce, but it is not necessary to consider this possibility. In my
opinion this provision distinguishes the present case from that dealt with in the Peanut Board
Case[12] and makes it impossible to contend that the Act interferes in any respect with "freedom at
the frontier," or with "the passage of goods out of the State" (See James v. The Commonwealth[13]).
It was said of the Queensland Act in James v. The Commonwealth[14] that "it involved a
compulsory regulation and control of all trade, domestic inter-State and foreign." The effect of sec.
16 (3) is that this statement can be truly applied to the Victorian Act if, but only if, the word "inter-
State" is struck out.

Sec. 16 (3) also provides a reply to the contention that sec. 18, in providing that the board should
ensure "reasonable prices" to consumers in Victoria, imposes a burden or disadvantage upon persons
in other States who may wish to purchase chicory produced in Victoria. Inter-State sales are free
from the vesting provisions of the Act and accordingly are not controlled by the board. Further, I do
not think that it should be assumed that "reasonable" prices for persons in Victoria necessarily and
as of course involve unreasonable prices for other persons. It is unnecessary to examine in detail the
provisions of secs. 19 and 26. It is sufficient to say that these sections carry out the principle
embodied in sec. 16 (3), namely, the exemption of inter-State trade from the provisions of the Act.

In the second place, the Acts Interpretation Act 1930 Vict., sec. 2, provides as follows: "Every Act,
whether passed before or after the commencement of this Act, shall be read and construed subject to
the Commonwealth of Australia Constitution Act, and so as not to exceed the legislative power of
the Parliament of Victoria, to the intent that where any enactment thereof would, but for this Act,
have been construed as being in excess of that power, it shall nevertheless be a valid enactment to
the extent to which it is not in excess of that power." I have already expressed my opinion that the
Act as a whole is valid, and, therefore, in my opinion, it is not necessary to consider the application
of the provision quoted from the Acts Interpretation Act. But, if my opinion (based upon sec. 16 (3))
as to the validity of the whole Act should be ill-founded, the result would then be that the provisions
of the Act which relate to the vesting of commodities and the sale of them under the control of the
board would be invalid. Sec. 32, however, is capable of independent operation. Even if the portions
of the Act mentioned were invalid, the levy could still be imposed and the proceeds applied towards
the objects mentioned in sec. 32, namely, the payment of administrative expenses of the board,
repayment of advances to the board, creating a fund for insurance against disease, fire, hail, flood or
other catastrophes, and work towards the improvement of the quality of commodities. Sec. 32 is, in
my opinion, severable from the provisions of the Act which would be invalid by reason of sec. 92 of
the Constitution. Polls can be taken, boards can be constituted, and levies can be made and applied
in accordance with the Act, even if the marketing provisions were held to be invalid. Difficulties
sometimes arise in the application of such provisions as sec. 2 of the Acts Interpretation Act (See,
for example, the Harvard Law Review, vol. 51, p. 76) but there is no difficulty in the present case.

I am, therefore, of opinion, for the reasons stated, that sec. 92 of the Constitution does not invalidate
either sec. 32 or the proclamation made under it.

It is now necessary to consider the argument founded on sec. 90 of the Constitution, which provides
that "on the imposition of uniform duties of customs the power of the Parliament to impose duties of
customs and of excise, and to grant bounties on the production or export of goods, shall become
exclusive." It is contended that sec. 32 purports to authorize, and that the proclamation purports to
impose, a duty of excise upon chicory, and that, as it is contained in a State Act, the section is,
therefore, invalid.

The levy is, in my opinion, plainly a tax. It is a compulsory exaction of money by a public authority
for public purposes, enforceable by law, and is not a payment for services rendered (Lower
Mainland Dairy Products Sales Adjustment Committee v. Crystal Dairy Ltd.[15]). The question
which it is necessary to consider is whether it is a duty of excise.

If the resolution of the board had imposed a levy upon producers in respect of the quantity or value
of chicory produced or treated or sold, the levy would have been an excise duty according to all
definitions or explanations of that term. The question is whether the fact that the levy is imposed in
respect of areas planted with chicory is sufficient to constitute a real distinction so as to remove the
levy from the category of excise duties.

In England the term "excise" has been used in such a manner as to be equivalent, in any
classification of taxes, to a heading "Miscellaneous." It is difficult to discover any common
characteristic (except that they are all taxes) between inland taxes on intoxicating liquor and
tobacco, and taxes on auctioneers, armorial bearings, owners of carriages and keepers of
refreshment houses. These examples are taken from a much longer list of English excise duties set
out in Quick and Garran, Annotated Constitution of the Commonwealth (1901), p. 837, and quoted
in Peterswald v. Bartley[16]; see also Bell and Dwelly, The Laws of Excise (1873), pp. 1-4; Laws of
England, 1st ed., vol. 24, pp. 532, 533 (list of excise duties and excise licences). Thus, the term as
used in England covered, not only the well-recognized excise duties upon liquor and tobacco, but
also a most heterogeneous collection of what may be called taxation oddments. Accordingly, in
Peterswald v. Bartley[17] this court, in order to discover the meaning of the term "excise," directed
its attention to the use of the term in the laws of the colonies at the time of Federation. The
conclusion reached was expressed in the following words:--"Bearing in mind that the Constitution
was framed in Australia by Australians, and for the use of the Australian people, and that the word
excise had a distinct meaning in the popular mind, and that there were in the States many laws in
force dealing with the subject, and that when used in the Constitution it is used in connection with
the words on goods produced or manufactured in the States, the conclusion is almost inevitable that,
whenever it is used, it is intended to mean a duty analogous to a customs duty imposed upon goods
either in relation to quantity or value when produced or manufactured, and not in the sense of a
direct tax or personal tax. Reading the Constitution alone, that seems to be the proper construction
to be put upon the term"[18]. See also Attorney-General (N.S.W.) v. Homebush Flour Mills Ltd.[19].

But the reasoning which led to the conclusion in Peterswald v. Bartley[20] does not necessarily limit
the application of the term "excise" to taxes imposed upon goods at the very moment when they are
"produced or manufactured." A tax possessing the other attributes mentioned in the passage which I
have quoted may be an excise duty if it is imposed upon the sale or consumption of goods. It has
been so held, in relation to sale, in The Commonwealth and Commonwealth Oil Refineries Ltd. v.
South Australia[21]. If, however, a tax has no relation to the quantity or value (however measured)
of goods, it cannot be said to be an excise duty within any of the definitions or explanations of that
term which are to be found in the decisions of this court.

Customs and excise duties are essentially indirect taxes. They are regarded as additions of definite
amounts to the prices at which the goods upon which they are imposed are, in the ordinary course of
business, sold by persons who have paid the duties. The distinction between such taxes and other
taxes may be illustrated in the following way: a customs duty or an excise duty is paid in respect of
a particular article: the amount of the tax necessarily bears a relation to the quantity or value of the
article in question: it is either a specific duty (per article or per quantity of commodity) or an ad
valorem duty: to each article in respect of which such a duty has been paid it would be possible to
attach a label stating "Duty paid, 5s."--or whatever the amount might be. It is true that commercial
competition or other factors may prevent the actual addition of the whole amount of the duty to the
price of goods in particular cases, but, even in such cases, a specific amount which has been paid as
tax can be assigned to each and every article taxed. If there were an excise duty of 3d. per pound
upon chicory, then each and every pound of chicory would have been subjected to that precise
amount of tax. But the effect of direct taxes is quite different. A land tax may affect the cost of
growing chicory in the case of some or all growers. An income tax may lead dealers in chicory who
pay income tax to endeavour to raise their prices. A tax on wholesale or retail businesses may
increase the outgoings of a business of dealing in chicory and may, therefore, affect the prices of
chicory. But in such cases it is not possible to attribute to each pound of chicory sold a specific
amount of money, the same in the case of all producers who are landowners, or income tax payers,
or owners of businesses, as a tax paid in respect of that pound of chicory. This reasoning shows, I
think, the real difference between an indirect tax and a direct tax. An indirect tax is necessarily a tax
which can normally be "passed on" to a purchaser or consumer of the goods taxed, and it must bear,
therefore, a definite relation to the quantity or value of the goods. As at present advised, I am unable
to discern any basis of taxation of goods other than quantity or value which could constitute a basis
for indirect taxation of goods. It is difficult to conceive a tax which is an indirect tax in the sense
stated and which is imposed upon goods, unless the amount of the tax is related to quantity or value.
If such a tax is ever devised, the questions which would arise can then receive consideration. If it is
held that a tax may be an excise duty though it has no direct relation in amount to the quantity or
value of the goods upon which it is imposed, it will be difficult, in my opinion, to deny the
description to any tax imposed upon persons, land or things which may, in the normal course of
business, affect the prices of goods. I can see no justification for the adoption of such a conception.

I proceed now to apply this reasoning to the present case. The levy is imposed, not upon chicory
planted, treated, sold or consumed, but upon land planted with chicory, and the amount of the levy
is determined by the area of the land planted. That land may produce a small quantity of chicory or
a large quantity or no quantity at all. In the present case the defendant in April 1937 estimated the
yield of the five and a half acres at ten tons. In fact the yield was more than fourteen tons. The tax is
payable by reason of the planting of the land, irrespective of the actual production of the product. It
is not a tax upon goods or upon the production or sale of goods.

All producers pay £1 per half acre. Equal levies are imposed upon equal areas. But the yield of
equal areas may obviously vary very greatly indeed. It is impossible, therefore, to establish any
relation between the levy and the quantity or value of the article produced. A customs or excise duty
(as already stated) is imposed in relation to the quantity or value of goods. It is contemplated that
the same amount of taxation will be payable in respect of equal quantities or values of goods. It is,
therefore, also contemplated that the amount of this duty will normally and as of course enter into
the price of the goods so as to be passed on to the purchaser or consumer. Such a tax is an indirect
tax. These assumptions are quite inapplicable to a levy imposed in respect of areas of land used for
agricultural purposes. Such a levy possesses none of the characteristics mentioned. I am, therefore,
of opinion that the levy imposed under sec. 32 of the Act is not an excise duty within the meaning
of sec. 90 of the Constitution.

In my opinion the appeal should be dismissed and the order nisi should be discharged.

The opinion of the majority of the court is that the appeal should be allowed. The appellant has
succeeded upon a ground not taken in the order nisi, namely, that the relevant legislation is invalid
by reason of the provisions of sec. 90 of the Constitution of the Commonwealth. The appellant has
failed upon the grounds taken in the order nisi, which related exclusively to sec. 92 of the
Constitution. The appellant should, therefore, not have the costs of the argument in the High Court
which are exclusively attributable to the argument upon sec. 92.

Rich J.

In the argument of this case many matters were touched on which did not appear to me to be
entirely relevant to the question whether the appellant was liable to the levy imposed upon him. He
is a defendant to a complaint for a civil debt, and his liability is the matter in issue. The marketing
board says he is liable because he is the producer of chicory and under their levy every producer of
chicory is liable to pay them one pound for every half acre planted by him with chicory during the
year. The ground the appellant stood upon to attack this levy was that he could not be liable except
at the cost of an infringement of sec. 92 of the Constitution by the State legislation. My mind failed
to grasp the intrinsic connection between the payment of a levy on the plantation and production of
chicory and trade, commerce and intercourse between the States. No doubt you cannot trade in
chicory unless it has been grown, but I imagine you may readily grow it without engaging in inter-
State trade. I could understand the contention if it were based on the view that the main purpose of
the statute involves an interference with inter-State trade and the levy was only an incident to the
main purpose so that the statute collapsed as a whole. But so far from attempting to interfere with
inter-State trade the statute on its face exhibits an earnest desire of the draftsman to walk warily
along paths which never lead to inter-State trade. The levy is imposed upon the producer as a
producer and not a trader and is computed upon acreage planted and not upon chicory sold. My
failure to grasp the bearing of sec. 92 upon the appellant's case continues. However, under
encouragement from the Bench the appellant was induced to take further ground from the vantage
of which he has, in my opinion, succeeded in relieving himself of the liability of which he
complained. He turned back from sec. 92 to sec. 90 of the Constitution and contended that the levy
was a duty of excise and, therefore, within the exclusive power of the Federal Parliament. The
question what is a duty of excise has engaged the attention of this court in Peterswald v. Bartley[22],
to some extent in R. v. Barger[23], in The Commonwealth and Commonwealth Oil Refineries Ltd. v.
South Australia[24], in John Fairfax & Sons Ltd. and Smith's Newspapers Ltd. v. New South
Wales[25], Vacuum Oil Co. Pty. Ltd. v. Queensland[26], Crothers v. Sheil[27], and Attorney-General
(N.S.W.) v. Homebush Flour Mills Ltd.[28]. In none of these cases, however, has the class of
question arisen upon which this case depends. In the present case the levy is clearly a tax (See
Lower Mainland Dairy Products Sales Adjustment Committee v. Crystal Dairy Ltd.[29]). The reason
for saying that the tax is not an excise is found in the peculiar circumstances by which it is
governed. These circumstances are that it is imposed by a board which does not represent the Crown
in order to raise a fund for the administration of a compulsory pool for marketing the commodity
and for other connected purposes, and the tax is levied on the basis of the acreage planted and not
the quantity of chicory produced. I do not think that any of these circumstances deprives the tax of
the character of an excise. To take the last first, planting chicory is an essential step in its
production. If you tax according to planting you affect or influence an operation upon which the
extent of attempted production depends. The fact that some producers may have to pay the tax
although their attempt fails is merely one of the chances and accidents which attend all the pursuits
of man and makes it no less true that the tax is aimed at production. As to the circumstance that the
revenue obtained is for the purposes of the board and not for the Treasury, the board is carrying on
an operation under statute on the public behalf and the tax is levied in connection with all chicory
throughout the State. As to the fact that it is to be applied to meet the expenses of a marketing
scheme and for purposes connected with chicory growing, the statute treats these as public purposes
to be undertaken by a public body in the public interest. If the State authorizes a levy upon a
commodity which in other respects is an excise, I think it is difficult to see how the purpose for
which the money is obtained can affect the question whether it comes within an excise.

The appeal should be allowed and the order of the magistrate set aside.

Starke J.

The respondent, the Chicory Marketing Board, sued Matthews, the appellant, in the Court of Petty
Sessions for a sum of £11, being the amount of a levy made by it under sec. 32 of the Marketing of
Primary Products Act 1935 (No. 4337 of the State of Victoria). Judgment was entered against the
appellant for the amount claimed, and an appeal is brought to this court by means of an order to
review. The grounds of appeal are that the Act contravenes the provisions of sec. 92 of the
Constitution and is, therefore, invalid.

The Marketing of Primary Products Act is of the type now familiar. Amongst other provisions it
enables the Governor in Council to proclaim various primary products to be a product for the
purposes of the Act (sec. 4 (2)); to declare that such product shall be a commodity under the Act
(sec. 6 (1)); to appoint marketing boards (sec. 7); to declare that a commodity shall be divested from
the producers and be vested in and be the absolute property of the board, whereupon the commodity
becomes the absolute property of the board freed from all contracts and encumbrances affecting the
same and the rights and interests of every person in the commodity are converted into a claim for
payment in accordance with the Act (sec. 16). The Act also empowers a board so appointed, after
ensuring the supply of any commodity at reasonable prices to consumers thereof in Victoria, to sell
or arrange for the sale of any commodity vested in or delivered to it and do all such matters and
things necessary in that behalf accordingly (sec. 18); and it also provides that a board shall out of
the proceeds of any commodity disposed of by it and out of any other moneys (except a levy)
received by it make payments to each producer of the commodity delivered to the board on the basis
of the net proceeds of the sale of all the commodity of the same quality or standard delivered to the
board, subject to certain deductions (sec. 23). Then sec. 32 provides that, a board (a) with the
approval of the Governor in Council, may from time to time make a levy on and to be paid by the
producers of any commodity in relation to which the board is constituted in such amount or at such
rate on and to be paid by such persons and on such basis and for such period or otherwise as the
board, with the approval of the Governor in Council and by notification in the Government Gazette,
specifies, and (b) may in any case where it thinks fit retain the amount of such levy out of the funds
in its hands arising from the sale or pledge of the commodity.

It is settled, I think, by authority that these provisions, standing alone, involve a contravention of
sec. 92 of the Constitution. It would be a compulsory marketing scheme entirely restrictive of any
freedom of action on the part of producers in trade, domestic, inter-State or foreign (James v.
Cowan[30]; Peanut Board v. Rock-hampton Harbour Board[31]). But these provisions do not stand
alone. In sec. 16 (3) it is expressly enacted: "Nothing in this section and no proclamation under this
section" (the vesting section) "shall affect such portion of any commodity as is the subject of trade
commerce and intercourse between the States or as is required by the producers thereof for the
purpose of such trade commerce or intercourse or as is intended by the producers thereof to be used
for such trade commerce or intercourse." The effect of the section is to remove from the operation
of the Act any portion of a proclaimed commodity that a producer desires to engage in inter-State
trade. The object of the section is to avoid any contravention of sec. 92 of the Constitution. And it
should be construed so as to give effect to that intention. Consequently, the provision is coextensive
with the requirement of the Constitution and enacts in effect that trade, commerce and intercourse
among the States in respect of the proclaimed commodity shall be absolutely free. It thus leaves the
producers and the commodity free to pass the frontiers of the States and to engage and be engaged
in inter-State trade without any hindrance or restriction so far as the Act is concerned (James v. The
Commonwealth[32]). The Act does not, therefore, contravene sec. 92 of the Constitution.

A more difficult question is raised under sec. 90 of the Constitution. The power of the
Commonwealth Parliament to impose duties of customs and of excise and to grant bounties on the
production or export of goods is now exclusive. The question is whether the levy sued for is a duty
of excise which the State of Victoria can neither impose nor authorize. The Chicory Board made a
levy with the approval of the Governor in Council in the following form:--"Every producer of
chicory shall in and for the year ending on the 31st of August, 1937, pay to the Chicory Marketing
Board, a levy at the rate of £1 for every half acre, or part thereof, of the area planted by such
producer with chicory during the year ending the 30th June, 1937. For the purposes of determining
the amount of such levy the area planted by a producer shall be deemed to be the area registered by
him with the Chicory Marketing Board, pursuant to and in accordance with a regulation made"
under the Act. The levy so made is a tax (Lower Mainland Dairy Products Sales Adjustment
Committee v. Crystal Dairy Ltd.[33]). "Excise," however, is not a technical term of the law, and the
popular meaning is not rigid (John Fairfax & Sons Ltd. and Smith's Newspapers Ltd. v. New South
Wales[34], per Higgins J.). But the meaning of the words "duties of excise" in the Constitution has
been the subject of several decisions in this court (Peterswald v. Bartley[35]; The Commonwealth
and Commonwealth Oil Refineries Ltd. v. South Australia[36]; John Fairfax & Sons Ltd. and
Smith's Newspapers Ltd. v. New South Wales[37]; Attorney-General (N.S.W.) v. Homebush Flour
Mills Ltd.[38]). An excise duty within the meaning of the Constitution is "a duty analogous to a
customs duty imposed upon goods either in relation to quantity or value when produced or
manufactured and not ... a direct tax or a personal tax" (Peterswald v. Bartley[39]). In Attorney-
General for British Columbia v. Kingcome Navigation Co.[40] Lord Thankerton, delivering the
opinion of the Judicial Committee, observed: "In their Lordships' opinion the customs or excise
duties on commodities ordinarily regarded as indirect taxation ... are duties which are imposed in
respect of commercial dealings"[41], such as, he explains, "their import or sale or production for
sale"[42]. These observations are dealing with the question of the test that should be applied in
determining what is "direct" or "indirect" taxation for the purposes of the Canadian Constitution
(British North America Act 1867). The leading characteristic of an indirect tax is that it is
susceptible of being passed on, and customs and excise duties ordinarily exhibit this characteristic
(Attorney-General (British Columbia) v. McDonald Murphy Lumber Co. Ltd.[43]). The cases under
the Canadian Constitution are descriptive rather than definitive of a customs and an excise duty, and
they are no authority for the proposition that a tax cannot be an excise duty unless it has the
characteristics of an indirect tax. Substantially, the interpretation given to the words "duties of
excise" in the decisions of this court accord with the views expressed by the Judicial Committee. It
would follow, as Griffith C.J. observed in Peterswald v. Bartley[44], that personal taxes, such as fees
for brewers' licences, &c., are not excise duties (Cf. Bank of Toronto v. Lambe[45]; Brewers and
Malsters' Association of Ontario v. Attorney-General for Ontario[46]). But "in every case the first
requisite is to ascertain the real nature of the tax" (Cf. R. v. Caledonian Collieries[47]; Attorney-
General for British Columbia v. McDonald Murphy Lumber Co.[48]). It does not depend upon the
name given to the tax or levy in the taxing Act, but upon its operation and effect, as gathered from
the language of the Act itself (The Commonwealth and Commonwealth Oil Refineries Ltd. v. South
Australia[49]; Attorney-General (N.S.W.) v. Homebush Flour Mills Ltd.[50]).

The levy is imposed by sec. 32 on the producers of any commodity. A producer, under the Act, sec.
4, means "a person by whom or on whose behalf a product is actually grown produced obtained or
prepared (otherwise than by any process of manufacture) for sale; and, where the product is so
grown produced obtained or prepared pursuant to any share-farming or partnership agreement
(whether express or implied), includes any party or parties to such agreement; but does not include a
person engaged as an employee on wages or salary or piece-work rates." A product means (a) "any
product (other than wool fresh fruit not being pears or apples or citrus fruit and hay) of agriculture
horticulture viticulture grazing poultry-farming bee-keeping or fishing operations and any dairy
produce (including bacon and pork); and (b) any other article of commerce prepared (otherwise than
by process of manufacture) from the produce of agriculture horticulture viticulture grazing poultry-
farming bee-keeping or fishing operations" (sec. 4). The levy itself prescribes that every producer of
chicory shall pay the levy to the board. So far I should think that the Act imposes an excise duty, for
the levy is imposed upon producers in respect of proclaimed commodities produced by them for sale
within Australia: namely, in the State of Victoria. It is true that the levy is not imposed "in relation
to the quantity or value" of the commodity produced but at the rate of £1 for every half acre or part
thereof planted by such producer with chicory. Still, that merely prescribes the basis of the levy, to
use the language of sec. 32, and does not alter the nature of the tax. It remains a tax in respect of the
commodity produced for sale. It is not a land tax nor a tax upon the producer irrespective of the
production of the commodity. Unless a product is actually grown, produced, obtained or prepared
for sale within the terms of the Act no levy can be made on or be payable by the producer. But,
further, it is argued that the tax or levy "is not susceptible of being passed on" and cannot, therefore,
be an excise duty. The Act no doubt vests the commodity in the board (sec. 16), gives it power of
sale (sec. 18), and prescribes in sec. 23 the compensation that producers shall receive. It may be that
the board does not consider the tax or levy in disposing of the commodity. But that is because of the
terms of the Act, just in the same way as in the case of an ordinary sale the "question whether it is to
be borne by the purchaser or the seller is determined by the bargain made" (See Attorney-General
for British Columbia v. Kingcome Navigation Co.[51]). The nature or effect of the tax or levy is not,
however, altered. It still remains a tax or levy upon production for sale. Such a tax or levy is usually
and normally susceptible of being passed on, which assists the conclusion that it is an excise duty. In
my opinion the provisions of sec. 32 of the Marketing of Primary Products Act are not within the
competence of the Victorian Parliament and are, therefore, void.

The grounds of the order nisi do not attack the levy on the ground that it is beyond the powers
contained in the Act. I do not suggest any doubt on the matter but merely point out that the
objection is not taken and therefore cannot be considered in the present proceeding.

The order nisi should be made absolute.

Dixon J.

The question of liability raised by this appeal is whether a sum of £11 is recoverable from the
appellant, a grower of chicory, by the respondent, a marketing board constituted in respect of
chicory under the Marketing of Primary Products Act 1935 of Victoria. The Chicory Marketing
Board, acting under sec. 32 of that Act, assumed to make a levy upon every producer of chicory in
Victoria of £1 for every half acre of the area planted by the producer with chicory during the year
ending 30th June 1937. The matter for decision is whether the attempt to impose such a levy is
valid.

I am of opinion that it is invalid upon the ground that it would amount to the imposition of a duty of
excise.

The Marketing of Primary Products Act 1935 provides means for establishing a system of collective
marketing for any of the products of certain of the primary industries, including agriculture. A poll
may be taken of the producers of a commodity, and, if the required number vote and a sufficient
majority favour the constituting of a marketing board in respect of the commodity, it may be
established by proclamation by the Governor in Council. The commodity may be a primary product
or an article of commerce prepared otherwise than by a process of manufacture from the produce of
the primary industries concerned. Of the members of a marketing board one is appointed by the
Governor in Council and the others are elected by the producers of the commodity. The duties of the
marketing board are to acquire the commodity, to sell it and, after making deductions on account of
expenses and for other purposes, to distribute among those who supplied the commodity during the
period concerned the balance of the proceeds in such a manner as to give each an appropriate
proportion (secs. 16, 18, 19 and 23). Subject to the exigencies of inter-State trade, there may be a
compulsory acquisition of the commodity by proclamation. In that case, as and when it comes into
existence, the commodity becomes the property of the marketing board. Such a proclamation was
made in respect of chicory.

Sec. 32 authorizes the making of levies. It provides that a marketing board with the approval of the
Governor in Council may from time to time make a levy on and to be paid by the producers of any
commodity in relation to which the board is constituted in such amount or at such rate on and to be
paid by such persons and on such basis and for such period or otherwise as the board with the
approval of the Governor in Council specifies. Where the board thinks fit the amount of the levy
may be retained out of the funds in the board's hands. The purposes to which the moneys raised by a
levy may be applied are limited to the payment of administrative expenses, the repayment of
advances made to the board, the establishment and maintenance of a fund for insurance against
pests, hail, flood or other casualty and the purpose of instruction and experiment for the
improvement of the commodity or some other special object considered to be in the common
interest of the producers of the commodity.

In exercising the power thus given by sec. 32 a board must necessarily make the levy upon
producers in that character. It is true that, in specifying the persons upon whom a levy may be made,
the language of the section is not free from confusion. It says that a board "may make a levy on and
to be paid by the producers" but it goes on, "in such amount or at such rate on and to be paid by
such persons ... as the board ... specifies." The explanation of the words "on and to be paid by such
persons," which appear incongruous with the words "on and to be paid by the producers," must lie
in the consideration that for purposes of collection or retention of the levy it may be necessary to
specify persons, as, for instance, crop lienees, who shall actually discharge the amount levied on the
producer. But it is plain that the producer is to be the person primarily liable.

Apart from special cases, such as share-farming or partnership, the word "producer" is defined to
mean a person by whom or on whose behalf a product is actually grown, produced or prepared
(otherwise than by any process of manufacture) for sale. The resolution or determination of the
Chicory Marketing Board imposing the levy is expressed as making the levy on and to be paid by
producers of chicory. Under the words "in manner following" it then proceeds to prescribe that
every producer of chicory shall pay the board a levy at the specified rate for every half acre "of the
area planted by such producer with chicory." It thus appears that every person who during the
relevant period actually grows or produces chicory is to be liable to pay to the board a sum
calculated in respect of the area he has planted. The attempted imposition of the liability is quite
independent of the manner in which the grower disposes of his chicory. It does not matter whether it
is delivered to the board, or, as in this case, it is sold by the grower in the course of inter-State trade,
or it is used by the grower for his own manufacturing or trade purposes. It is thus quite unlike the
charge for administration expenses, advances, sinking fund and interest to be provided out of the
proceeds of the milk which in Crothers v. Sheil[52] we held to involve no excise. Rich J. said:--
"The provisions of the Milk Act do not exact any pecuniary payment from the dairy farmer. They do
not impose any liability in respect of the ownership, transfer, sale or production of goods. They
merely contain a scheme for the compulsory acquisition of milk and the payment of the price or
compensation to be borne by the proceeds arising from the resale by the board. The fact that these
proceeds are subject to deductions would not convert the scheme into one for taxation"[53].

The Chicory Marketing Board is a public authority constituted under the statute by the Executive
Government of the State. It is true that sec. 8 (4) provides that a board shall not be deemed to
represent the Crown for any purpose whatsoever. But this simply means that it is not a corporate
servant or agent of the Crown, so that nothing it does can impose any liability upon the Crown nor,
on the other hand, can it claim any of the immunities of the Crown.

The levy is clearly taxation. In Lawson v. Interior Tree Fruit and Vegetable Committee of
Direction[54] Duff J. dealt with a levy indistinguishable from the present, except possibly in the
basis of calculation and in the fact that the body, though directing and controlling marketing, did not
itself acquire and resell the commodity, and he held that it was a tax and an indirect tax. He said:--
"I think ... that such levies so imposed have a tendency to enter into and to affect the price of the
product. I think, moreover, that levies of that character, assuming for the moment that they come
under the head of taxation, are of the nature of those taxes on commodities, or trade in commodities,
which have always been regarded as indirect taxes. If they are taxes, they cannot be justified as
direct taxation within the Province. That they are taxes, I have no doubt." His decision was
mentioned with approval by the Privy Council in Lower Mainland Dairy Products Sales Adjustment
Committee v. Crystal Dairy Ltd.[55] in the course of a judgment delivered by Lord Thankerton
deciding that two levies made under a statute of British Columbia relating to the dairy industry
amounted to indirect taxes. The statute set up a committee for the purpose of insuring that producers
of milk received the same return whether the milk was sold for retailing as a fluid or used for the
purpose of manufacturing. A levy was made upon those selling milk for fluid consumption, for
which the higher prices were paid, in order to equalize the return to those whose milk was used for
manufacturing purposes. A second levy was made upon all producers in order to meet the expenses
of administration. As indirect taxes outside the provincial power both taxes were held bad by the
courts of British Columbia[56] and by the Privy Council[57]. They were held to be taxes because
they were imposed by a statutory body, a public authority, and for a public purpose or purposes, and
the levies were enforceable by law. The application of the levies, the one in payment of a bonus to
those supplying milk for the manufacture of products, and the other in providing the expenses of a
scheme, did not affect their character as taxation. "While not saying that these elements are
exhaustive of the elements which might be found in other cases to point to the same conclusion,
their Lordships are of opinion that they are sufficient to characterize the adjustment levies in the
present case as taxes. ... It seems to follow that the expenses levies in the present case, which are
ancillary to the adjustment levies, must also be characterized as taxes"[58]. As taxes they were held
to be indirect because they were imposed in proportion to milk or milk and manufactured products
sold. "In effect, both levies are imposed on the sale of commodities by the persons taxed, and, in
their Lordships' opinion, there can be little doubt that such taxes have a tendency to enter into and
affect the price which the taxpayer will seek to obtain for his commodities, as is the case with excise
and customs"[59].

The reasons given by the Privy Council in the Crystal Dairy Co.'s Case[60] and by Duff J. in
Lawson's Case[61] appear to me to apply to the Victorian levy upon chicory growers and to
establish that it constitutes a tax or duty. They do not show that the chicory levy is a duty of excise,
nor even that it is necessarily an indirect tax, but they go some way towards doing at least the latter.
The only distinctions upon which the character of indirect taxation could be denied to it consist in
the adoption of an acreage basis for calculating the amount and possibly in the intention that the
marketing board should, except for chicory sold in inter-State trade, acquire and sell all the chicory
grown in Victoria. These considerations, together with the purpose to which the levy is applied and
the nature and functions of the board making it, form the foundation for the contention that it does
not answer the description "duty of excise" within sec. 90 of the Commonwealth Constitution.

The expression "duties of excise," as used in the Commonwealth Constitution, has caused some
difficulty because of the very wide denotation of which it was capable. The tendency of the
decisions of this court has been to restrict the meaning of the word, but I do not think that any
connotation has been fixed upon it which the levy in the present case would not satisfy. The
expression "duties of excise" occurs in secs. 55, 86, 90 and 93 of the Constitution. In sec. 55 laws
imposing duties of customs or of excise are excepted from the requirement that laws imposing
taxation shall deal with one subject of taxation only, and it is provided that laws imposing duties of
customs or of excise may not deal with anything but duties of customs or of excise respectively. Sec.
86 transferred the collection and control of duties of customs and of excise and the control of
bounties to the Executive Government of the Commonwealth. Sec. 90 provided that on the
imposition of uniform duties of customs the power of the Parliament to impose duties of customs
and of excise and to grant bounties on the production and export of goods should become exclusive.
It also provided that at the same time all laws of the several States imposing duties of customs or of
excise or offering bounties on the production or export of goods should cease to have effect. Sec.
93, by reference to the provisions of sec. 89, prescribed how, for the first five years after the
imposition of uniform duties of customs, the balance of the revenue collected by the
Commonwealth within a State over the expenditure debited to that State was to be computed and
paid over to the State. For the purpose of the calculation, the first paragraph of sec. 93 directed,
among other things, that "the duties of excise paid on goods produced or manufactured in a State
and afterwards passing into another State for consumption, shall be taken to have been collected not
in the former but in the latter State."

Upon the face of these provisions, it is evident that customs, excise and bounties on production and
export are treated as complementary one to another, or, at least, closely associated, and that the
payment of excise on the production and manufacture of goods is contemplated. But these
considerations scarcely supply a foundation for a logical inference that no duty is an excise unless it
is levied immediately on the manufacture or production within Australia of a commodity.

In Peterswald v. Bartley[62] the court directed a conviction under sec. 75 of the New South Wales
Liquor Act 1898 for carrying on the trade or business of a brewer without holding a licence,
notwithstanding that under sec. 71 of that Act a licence fee of £30 a year was imposed. The court
regarded it as passed for the purpose of regulating or controlling the manufacture of beer. It required
the manufacturer to give his name and the place of manufacture as well as to pay the fee and to
submit to the entry of inspectors in order to prevent adulteration. The amount of the licence fee did
not depend on the quantity of beer manufactured. The Supreme Court had interpreted the expression
"duties of excise" as including all kinds of inland revenue imposts and, accordingly, had held that
under sec. 90 of the Constitution the brewer could no longer be compelled to pay such a licence fee.
The decision of this court was summarized in a sentence by Griffith C.J.: "Rejecting, then, the larger
view as to the meaning of the term duties of excise, which found favour with the majority of the
Supreme Court, and regarding the term as it is used in the Constitution, where it is limited to taxes
imposed upon goods in process of manufacture, we find nothing in the State Act to show that this
licence fee was other than a direct tax upon the manufacturer"[63]. But in an earlier part of the
judgment[64] Griffith C.J. had formulated a definition of the expression as "a duty analogous to a
customs duty imposed upon goods either in relation to quantity or value when produced or
manufactured, and not in the sense of a direct tax or personal tax." This definition, particularly the
words "in relation to quantity or value when produced or manufactured" may well be found to be
too narrow.

Unfortunately the word "excise" has never possessed, whether in popular, political or economic
usage, any certain connotation and has never received any exact application. The word came into
English apparently as a description of a tax, strange to England, but in operation in the Low
Countries and elsewhere upon the Continent, a tax upon articles of consumption. Even its derivation
was misunderstood, and the misunderstanding seems to have coloured its meaning. For it was
supposed that the duties were called "excises" because they meant the excision of a part of the goods
taxed (See Skeat's Etymological Dictionary and the Oxford English Dictionary, s.v. "Excise," and
compare Dowell, History of Taxation, 2nd ed. (1888), vol. ii., at pp. 8, 9). When, in Elizabeth's
reign, a proposal was mooted of appointing a surveyor of brewers in London, the Queen was
advised against it because, among other reasons, "it was certain that, should she grant never so small
a fee, the people would say their drink was excised as it was in Flanders, and would repine at it"
(Dowell, op. cit., ibid.). Under James I. an attempt to introduce duties on commodities was
relinquished in face of a fear that the "impositions might be extended to commodities which
growing in the kingdom, are not transported, but uttered (that is, put out, retailed) to the subjects of
the same" (Dowell, op. cit., vol. i., p. 188). But in the Long Parliament in 1643 a resolution was
passed and an ordinance made imposing an excise and new impost on a list of articles of
consumption. During the period of the Commonwealth this form of taxation was much relied upon,
and, in 1656, by an ordinance a long list of commodities was made subject to duty. It is worth notice
that the list was divided into two parts, one relating to foreign and imported goods, and the other to
native or inland goods (Dowell, op. cit., vol. ii., p. 12). The expression "excise" was thus used to
cover inland taxes on commodities, whether imported or produced or manufactured in England.
This was so, too, when the Restoration Parliament granted the "hereditary excise" and the
"temporary excise" (12 Car. II. c. 23 and c. 24) (ibid., p. 25).

Perhaps the occasion when the use of the word "excise" proved of the greatest consequence was in
Walpole's plan for avoiding all the evils of smuggling arising out of customs duties by taxing
commodities, not at the ports, but as they went from a merchant's warehouse into consumption. His
"Excise Bill," introduced in 1733 as the first step in the plan, related to tobacco and in its second
part was to have included wine. "Walpole proposed in his Bill to do away" with "the customs duty
on tobacco and to substitute for it an excise duty at a slightly lower rate. When tobacco was
imported it would be stored in bonded warehouses, and no duty would be demanded until the owner
wished to remove it for purposes of sale within the United Kingdom. It would then be weighed on
government scales and the duty would be assessed and exacted before its removal. Or if, on the
other hand, the owner wished to re-export it, he would be allowed to do so without hindrance. In
this case there would be no need to weigh the bales at all, because, as no duty had been paid, no
drawback could be claimed. By this means fraudulent practices of nearly every kind would be dried
up at their sources" (F. S. Oliver, The Endless Adventure (1931), vol. ii., p. 241). The associations of
the word "excise" formed a very powerful element in arousing against the proposal one of "the
strange and feverish agitations which sometimes suddenly gripped the English people during this
century," before which Walpole abandoned the plan (Cambridge Modern History (1909), vol. vi., c.
II., p. 47). "The mass of the people did not object to the principle of excise, for they did not
understand what the principle was. ... They merely hated a word, as people so often do" (F. S.
Oliver, op. cit., p. 251). Where so much depended on the use of an unpopular term, it is not easy to
suppose that Walpole gratuitously wrested the word "excise" from what he understood to be its true
meaning and applied it to a tax which ought not to have been so called. Yet the "Excise Bill" dealt
with imported commodities. Thirty-four years later, when there was again talk of such a tax, Lord
Chesterfield wrote: "As for a general excise, it must change its name by Act of parliament before it
will go down with the people who know names better than things" (Miscellaneous Works, vol. iv., p.
214, quoted by Dowell, op. cit., vol. ii., p. 105). Blackstone's account of the excise, which was
published about that time and is the source of many dictionary definitions, begins by drawing a
contrast with customs duty:--"Directly opposite in its nature to this is the excise duty; which is an
inland imposition, paid sometimes upon the consumption of the commodity, or frequently upon the
retail sale, which is the last stage before the consumption. This is doubtless, impartially speaking,
the most economical way of taxing the subject: the charges of levying, collecting and managing the
excise duties being considerably less in proportion, than in other branches of the revenue. It also
renders the commodity cheaper to the consumer, than charging it with customs to the same amount
would do; for the reason just now given, because generally paid in a much later stage of it." After
tracing the history of the tax, he concludes his account with a description of the taxes then in force
under the name of excise which shows that already the tendency had set in of bringing under that
head inland taxes of another description, namely, licence fees exacted from those using such things
as carriages, a tendency which has led to still wider applications of the word "excise." "From its first
original to the present time, its very name has been odious to the people of England. It has
nevertheless been imposed on abundance of other commodities in the reigns of King William III.,
and every succeeding prince, to support the enormous expenses occasioned by our wars on the
continent. Thus brandies and other spirits are now excised at the distillery; printed silks and linens,
at the printer's; starch and hair powder, at the maker's; gold and silver wire, at the wire-drawer's; all
plate whatsoever, first in the hands of the vendor, who pays yearly for a licence to sell it, and
afterwards in the hands of the occupier, who also pays an annual duty for having it in his custody;
and coaches and other wheel carriages, for which the occupier is excised; though not with the same
circumstances of arbitrary strictness with regard to plate and coaches, as in the other instances. To
these we may add coffee and tea, chocolate and cocoa paste, for which duty is paid by the retailer;
all artificial wines, commonly called sweets; paper and pasteboard, first when made, and again if
stained or printed; malt as before mentioned; vinegars; and the manufacture of glass; for all which
the duty is paid by the manufacturer; hops, for which the person that gathers them is answerable;
candles and soap, which are paid for at the maker's; malt liquors brewed for sale, which are excised
at the brewery; cyder and perry, at the vendor's; and leather and skins, at the tanner's. A list, which
no friend to his country would wish to see farther increased" (Blackstone, Commentaries, vol. i., pp.
318, 320). During the War of Independence the system of taxing by means of licences was extended.
There existed already annual taxes on hawkers, hackney-coachmen, publicans and dealers in gold
and silver plate which dated from the Marlborough Wars, or shortly after. Toward the end of the
War of Independence, Burke was able to say of Lord North's taxation that "the blessed fruits of the
noble lord's administration were an additional load of ten new taxes," including impositions in
respect of beer, wine, houses, coaches, post-chaises, post-horses and servants. "He did not wonder
that the noble lord was at a loss about new taxes. We were already taxed if we rode or if we walked;
if we kept at home or went abroad; if we were masters or if we were servants; if we drank wine or if
we drank beer; and, in short, we were taxed in every way possible" (Dowell, op. cit., vol. ii., pp. 82,
172, 174; cf. vol. iii., pp. 223 et seq., 240, 243). The extension of the system of taxation by means
of licences was an important part of Pitt's budget of 1784, and the extension continued during his
administration. It was natural to seek to place the collection of inland taxes under one authority, and
this was done, but only by steps. In deciding a case depending on referential provisions in the
confused excise laws, Ashhurst J. expressed as early as 1788 the difficulty of distinguishing between
the original excises and taxes placed under the authority of the Commissioners of Excise. In R. v.
Justices of Surrey[65] he says that he was led "to apply to a person who has long been concerned in
the business of the Excise, to know what was the distinction generally understood between excise
laws, and inland duties under the management of the Commissioners of the Excise. He said the
difference they understood is this, that the law of excise is understood to relate only to liquors; and
that inland duties under the management of the Commissioners of Excise are understood to relate to
malt, dry goods, and other articles, which have of late been put under their management." The
distinction thus taken did not depend upon the true meaning of the word "excise"; it depended on the
use of it in the course of legislation. But, in the case of licences to carry on pursuits of business or
pleasure, the course of legislation ignored the meaning of the term and so caused its misapplication.
In 1824 one set of commissioners was established, but in the subsequent consolidation of the laws
relating to the management and regulation of the excise the expression "revenue of excise" could
only be defined as "the whole revenue under the collection and management of the Commissioners
of Excise" (7 & 8 Geo. IV. c. 53, sec. 3).

In the meantime, in writings concerned with economic theory and fiscal principles the word "excise"
was employed as the natural and convenient name for inland taxes directly levied upon goods, as
opposed to customs duties upon imported goods. The distinction of importance for such writers is
that between burdens upon domestic production and upon importation, and, accordingly, they used
the word "excise" as the name for inland taxes upon home manufactures and products. Mill, in his
Political Economy (1848), Book. V., c. IV., sec. 1, says: "Taxes on commodities are either on
production within the country, or on importation into it, or on conveyance or sale within it; and are
classed respectively as excise, customs, or tolls and transit duties." Sir Robert Giffen in his article
upon Taxation in the Encyclopoedia Britannica, 11th ed. (1911), vol. 26, at p. 460, says:--"Excise
duties are charges upon commodities produced at home on their way to the consumer, and customs
duties in the United Kingdom are charges upon commodities brought into the country from abroad;
and they are of essentially the same nature. Not only so, but excise duties and customs duties are in
some cases supplementary to each other, like articles being produced at home and imported from
abroad, so that for the sake of the revenue they have both to be taxed alike." Again, McCulloch's
Commercial Dictionary defines excise as "the name given to the duties or taxes laid on certain
articles produced and consumed at home," although it proceeds to show how the term was extended
to include duties upon certain licences. The Concise Oxford Dictionary adopts this view, its leading
definition being: "Duty charged on home goods during manufacture or before sale to home
consumers." In the note to sec. 90 in Quick and Garran's Constitution, which supplied the
foundation of the decision in Peterswald v. Bartley[66], the concern of the learned authors appears
to be to show that the extension of the application of the word to licences upon the exercise of
trades, the ownership or possession of articles of luxury, the employment of servants and the pursuit
of game was not within the ambit of the word "excise" in the Commonwealth Constitution. But the
note goes further because it limits the word to taxes on articles of home production:--"The
fundamental conception of the term is that of a tax on articles produced or manufactured in a
country. In the taxation of such articles of luxury, as spirits, beer, tobacco and cigars, it has been the
practice to place a certain duty on the importation of these articles and a corresponding or reduced
duty on similar articles produced or manufactured in the country; and this is the sense in which
excise duties have been understood in the Australian colonies, and in which the expression was
intended to be used in the Constitution of the Commonwealth. It was never intended to take from
the States those miscellaneous sources of revenue, improperly designated as excise licences in
British legislation. It was considered essential that the two correlative powers over customs and
excise, properly so called, should run together and be exclusively vested in the Federal Parliament."
The statement as to the Australian use of the term is founded upon the circumstances that in
Australia taxes called excise duties were in fact confined to goods produced in the colony, or at least
the subject of some process within the colony. An account is given of the excise duties of the
various colonies by Mr. Stephen Mills in his book, Taxation in Australia (1925), pp. 54, 81, 108,
138, 156 and 173). But it appears that in Tasmania the duties imposed in 1829 under the name of
"excise" covered spirits distilled in Van Dieman's Land or in New South Wales and imported
directly therefrom (op. cit., p. 173).

The history of the word "excise" does not disclose any very solid ground for saying that, according
to any established English meaning, an essential part of its connotation is, or at any time was, that
the duty called by that name should be confined to goods of domestic manufacture or production.
The application of the word by economists and others to duties so confined is scarcely logical proof
that the word is inapplicable to inland duties levied on commodities independently of the place of
manufacture. But, of course, it is a factor to be weighed, and context and other considerations may
show that the word is so restricted. Whether the limitation of the word "excise" in the Constitution
to duties upon commodities produced or manufactured within Australia is justified is a question
which I think should be regarded as open for future decision. In all the cases so far dealt with by the
court, except The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia[67],
home production or manufacture alone has been in question. In that case the duty included petrol
produced, refined, manufactured or compounded in Australia, and it was considered enough that it
fell on goods thus treated at home although the duty did not discriminate between petrol produced,
refined or the like before, and petrol so dealt with after, importation. No doubt there are strong dicta
in the judgments of Isaacs J. and Higgins J. to the effect that the tax must be connected with
production. But I think that it should not be overlooked that so far there is no direct decision
inconsistent with the view that a tax on commodities may be an excise although it is levied not upon
or in connection with production, manufacture or treatment of goods or the preparation of goods for
sale or for consumption, but upon sale, use or consumption and is imposed independently of the
place of production (Cf. the judgments of Rich J. in The Commonwealth and Commonwealth Oil
Refineries Ltd. v. South Australia[68]; John Fairfax & Sons Ltd. and Smith's Newspapers Ltd. v.
New South Wales[69]). What is decided is that to be an excise the tax must be imposed in respect of
commodities. A tax imposed upon a person filling a particular description or engaged in a given
pursuit does not amount to an excise. In this way a distinction arises which resembles that required
by sec. 92 (2) of the British North America Act 1867, which confers upon a provincial legislature
exclusive power to make laws in relation to direct taxation within the Province in order to the
raising of revenue for provincial purposes. "The principle is that a direct tax is one that is demanded
from the very person who it is intended or desired should pay it. An indirect tax is that which is
demanded from one person in the expectation and with the intention that he shall indemnify himself
at the expense of another. Of such taxes excise and customs are given as examples" (per Lord
Haldane, Attorney-General for Manitoba v. Attorney-General for Canada[70]). But "it is the nature
and general tendency of the tax and not its incidence in particular or special cases which must
determine its classification and validity" (per Lord Cave, City of Halifax v. Fairbanks' Estate[71]).
In that case and in Attorney-General for British Columbia v. McDonald Murphy Lumber Co.[72]
duties of customs and excise are referred to as types of indirect taxes. In Attorney-General for
British Columbia v. Kingcome Navigation Co.[73] Lord Thankerton, speaking for the Privy Council,
says that the customs or excise duties on commodities ordinarily regarded as indirect taxation,
referred to in those cases, are duties which are imposed in respect of commercial dealings in
commodities. "They do not extend, for instance, to a dog tax, which is clearly direct taxation,
though the machinery of the excise law might be applied to its collection, or to a licence duty...
Customs and excise duties are, in their essence, trading taxes, and may be said to be more concerned
with the commodity in respect of which the taxation is imposed than with the particular person from
whom the tax is exacted." It is evident that, in the application of this distinction to manufacturing or
trading businesses or productive enterprises, it may be difficult to say where a licence fee or duty
ceases to be a tax imposed upon the person expected to bear the burden so that it is a direct tax and
when it is so closely connected with the manufacture, production, or distribution of commercial
goods that it forms an element naturally incorporated in the price of every article and constitutes an
indirect tax. In Bank of Toronto v. Lambe[74] a Quebec Act to impose certain direct taxes on certain
commercial corporations was upheld. It enacted that every bank carrying on the business of banking
in that Province, every insurance company accepting risks and transacting insurance business there,
every incorporated company carrying on any labour, trade or business in the Province, and some
other companies, should pay annual taxes severally imposed upon them. The decision related to the
tax upon banking. Lord Hobhouse, for the Privy Council, said:--"It is not a tax on any commodity
which the bank deals in and can sell at an enhanced price to its customers. It is not a tax on its
profits, nor on its several transactions. It is a direct lump sum, to be assessed by simple reference to
its paid-up capital and its places of business. It may possibly happen that in the intricacies of
mercantile dealings the bank may find a way to recoup itself out of the pockets of its Quebec
customers. But the way must be an obscure and circuitous one, the amount of recoupment cannot
bear any direct relation to the amount of tax paid, and if the bank does manage it, the result will not
improbably disappoint the intention and desire of the Quebec Government"[75]. In Brewers and
Malsters' Association of Ontario v. Attorney-General for Ontario[76] the provincial legislation
under attack imposed upon brewers an obligation to obtain a licence and pay a small fee without any
relation to the quantity of goods sold. It was decided that the fee was demanded from the very
person intended to bear the duty. The Privy Council held that it was a direct tax, but Lord Herschell,
who delivered the judgment, said:--"It was argued that the provincial legislature might, if the
judgment of the court below were upheld, impose a tax of such an amount and so graduated that it
must necessarily fall upon the consumer or customer, and that they might thus seek to raise a
revenue by indirect taxation in spite of the restriction of their powers to the imposition of direct
taxation. Such a case is conceivable. But if the legislature were thus, under the guise of direct
taxation, to seek to impose indirect taxation, nothing that their Lordships have decided or said in the
present case would fetter any tribunal that might have to deal with such a case if it should ever
arise"[77]. In accordance with this view, in R. v. Caledonian Collieries Ltd.[78] a provincial Mine
Owners Tax Act was held invalid as imposing indirect taxation, because, although the tax was on the
mine owner, it was calculated on the gross revenue from the mine. "First it is necessary to ascertain
the real nature of the tax. It is not disputed that, though the tax is called a tax on gross revenue, such
gross revenue is in reality the aggregate of the sums received from sales of coal, and is
indistinguishable from a tax upon every sum received from the sale of coal. The respondents are
producers of coal, a commodity the subject of commercial transactions. Their Lordships can have no
doubt that the general tendency of a tax upon the sums received from the sale of the commodity
which they produce and in which they deal is that they would seek to recover it in the price charged
to a purchaser. Under particular circumstances the recovery of the tax may, it is true, be
economically undesirable or practically impossible, but the general tendency of the tax remains"
(per Lord Warrington[79]). In the same way for the purpose of judging whether an imposition is an
excise it is necessary to see what is the real nature of the tax.

The chief purpose of the foregoing discussion of the considerations governing the connotation of the
word "excise" is to show that, although, as it is used in the Commonwealth Constitution, it describes
a tax on or connected with commodities, there is no ground for restricting the application of the
word to duties calculated directly on the quantity or value of the goods. A definition which makes
quantity and value the only basis of taxation which would satisfy the notion of "excise" has no
foundation either in history, economic or fiscal principle, nor in any accepted specialization. The
basal conception of an excise in the primary sense which the framers of the Constitution are
regarded as having adopted is a tax directly affecting commodities.

The levy made by the Chicory Marketing Board is not ascertained by direct reference to the quantity
or value of the chicory produced. It is imposed upon a producer, and presumably under the
definition of that word he must actually obtain some chicory from the crop he has sown before he
satisfies that description. But the basis of his assessment is not what he garners but what he plants.
By calculating the levy upon the number of half acres which the producer plants with chicory the
board makes it at least theoretically possible that owing to a failure of his crop the levy upon him
has little or no relation to his actual production of chicory. But the basis adopted for the levy has a
natural, although not a necessary, relation to the quantity of the commodity produced. Although
many other factors go to the determination of the actual quantity of chicory produced, the area
planted is, if not the chief, at all events a controlling element. By adopting area planted as the
criterion of the amount of the levy upon each producer the board has taxed the production of the
commodity as effectually as if it had selected, for instance, the weight of the chicory gathered in its
raw state, the quantity treated or the gross returns. For it has placed upon an essential step in
production, namely, planting, an impost computed quantitatively. There is no distinction of
substance and scarcely any even of form between levying a tax upon the area planted and levying a
tax upon the act of planting the area. The levy is directed to the normal case of a man reaping even
as he sows. The fact that the tax would also fall upon a chicory farmer whose expectations are
disappointed through some of the mischances of agriculture does not seem to me to make the levy
any less a tax upon production. The natural or practical relations between manufacture or production
and activities or conditions chosen as the tests or standards of liability to taxation depend, not upon
logical definitions, but upon the actual course of industrial organization and technique and of the
productive arts.

If the word "excise" received a meaning which confined its application to taxes the relation of which
to the commodity concerned was of some narrow and strictly defined nature, as, for instance, by an
arithmetical relation to quantity, it would not only miss the principle contained in the use of the
word "excise," but it would expose the constitutional provision made by sec. 90 to evasion by easy
subterfuges and the adoption of unreal distinctions. To be an excise the tax must be levied "upon
goods," but those apparently simple words permit of much flexibility in application. The tax must
bear a close relation to the production or manufacture, the sale or the consumption of goods and
must be of such a nature as to affect them as the subjects of manufacture or production or as articles
of commerce. But if the substantial effect is to impose a levy in respect of the commodity the fact
that the basis of assessment is not strictly that of quantity or value will not prevent the tax falling
within the description, duties of excise.

I do not think that the fact that the board does not form part of or represent the central Government
of the State, or the fact that the purpose is to defray expenses in connection with the marketing and
improvement of a commodity make the levy any less an excise.

In my opinion the appeal should be allowed. The order of the court of petty sessions should be set
aside and the complaint dismissed. The appellant succeeds as a result of an amendment, but I think
that he should have the costs of the appeal other than the costs thrown away upon the ground first
taken.

McTiernan J.

In my opinion the order nisi should be discharged. I agree with the judgment of the Chief Justice.

Appeal allowed. Order absolute with costs except such costs as are exclusively attributable to the
argument in the High Court upon sec. 92 of the Constitution. Order of Court of Petty Sessions set
aside. Complaint dismissed with costs.

Solicitor for the appellant, R. John Horsfall.

Solicitor for the respondent, F. G. Menzies, Crown Solicitor for Victoria.

[1] [1933] HCA 11; (1933) 48 C.L.R. 266.

[2] [1936] UKPCHCA 4; (1936) A.C. 578, at p. 630; 55 C.L.R. 1, at p. 58.

[3] [1937] HCA 34; (1937) 57 C.L.R. 372, at p. 375.
[4] [1936] UKPCHCA 4; (1936) A.C. 578; 55 C.L.R.1.
[5] (1936) A.C., at p. 628; 55 C.L.R., at pp. 56, 57.
[6] [1933] HCA 11; (1933) 48 C.L.R. 266.
[7] (1932) A.C. 542; 47 C.L.R. 386.
[8] [1936] UKPCHCA 4; (1936) A.C. 578; 55 C.L.R. 1.
[9] [1933] HCA 11; (1933) 48 C.L.R. 266.
[10] (1932) A.C. 542; 47 C.L.R. 386.
[11] (1936) A.C., at p. 623; 55 C.L.R., at p. 52.
[12] [1933] HCA 11; (1933) 48 C.L.R. 266.
[13] (1936) A.C., at p. 630; 55 C.L.R., at p. 58.
[14] (1936) A.C., at p. 623; 55 C.L.R., at p. 52.
[15] (1933) A.C. 168, at p. 175.
[16] (1904) 1 C.L.R., at p. 508.
[17] [1904] HCA 21; (1904) 1 C.L.R. 497.
[18] (1904) 1 C.L.R., at p. 509.
[19] (1937) 56 C.L.R., at pp. 400, 401, 403, 408.
[20] [1904] HCA 21; (1904) 1 C.L.R. 497.
[21] [1926] HCA 47; (1926) 38 C.L.R. 408.
[22] [1904] HCA 21; (1904) 1 C.L.R. 497.
[23] [1908] HCA 43; (1908) 6 C.L.R. 41.
[24] [1926] HCA 47; (1926) 38 C.L.R. 408.
[25] [1927] HCA 3; (1927) 39 C.L.R. 139.
[26] [1934] HCA 5; (1934) 51 C.L.R. 108.
[27] [1933] HCA 42; (1933) 49 C.L.R. 399.
[28] [1937] HCA 3; (1937) 56 C.L.R. 390.
[29] (1933) A.C. 168.
[30] (1932) A.C. 542; 47 C.L.R. 386.
[31] [1933] HCA 11; (1933) 48 C.L.R. 266.
[32] [1936] UKPCHCA 4; (1936) A.C. 578; 55 C.L.R. 1.
[33] (1933) A.C., at pp. 175, 176.
[34] (1927) 39 C.L.R., at p. 144.
[35] [1904] HCA 21; (1904) 1 C.L.R. 497.
[36] [1926] HCA 47; (1926) 38 C.L.R. 408.
[37] [1927] HCA 3; (1927) 39 C.L.R. 139.
[38] [1937] HCA 3; (1937) 56 C.L.R. 390.
[39] (1904) 1 C.L.R., at p. 509.
[40] (1934) A.C. 45.
[41] (1934) A.C., at pp. 58, 59.
[42] (1934) A.C., at p. 57.
[43] (1930) A.C. 357.
[44] (1904) 1 C.L.R., at p. 509.
[45] (1887) 12 App. Cas. 575.
[46] (1897) A.C. 231.
[47] (1928) A.C. 358, at p. 362.
[48] (1930) A.C. 357, at p. 363.
[49] [1926] HCA 47; (1926) 38 C.L.R. 408.
[50] [1937] HCA 3; (1937) 56 C.L.R. 390.
[51] (1934) A.C. 45, at pp. 58, 59.
[52] [1933] HCA 42; (1933) 49 C.L.R. 399.
[53] (1933) 49 C.L.R., at p. 408.
[54] (1931) S.C.R. (Can.), at p. 362.
[55] (1933) A.C., at p. 176.
[56] (1932) 2 D.L.R. 277.
[57] (1933) A.C. 168.
[58] (1933) A.C., at p. 176.
[59] (1933) A.C., at p. 176.
[60] (1933) A.C. 168.
[61] (1931) S.C.R. (Can.), at p. 362.
[62] [1904] HCA 21; (1904) 1 C.L.R. 497.
[63] (1904) 1 C.L.R., at p. 512.
[64] (1904) 1 C.L.R., at p. 509.
[65] (1788) 2 T.R. 504, at p. 510; 100 E.R. 271, at p. 275.
[66] [1904] HCA 21; (1904) 1 C.L.R. 497.
[67] [1926] HCA 47; (1926) 38 C.L.R. 408.
[68] (1926) 38 C.L.R., at p. 437.
[69] (1927) 39 C.L.R., at p. 146.
[70] (1925) A.C. 561, at p. 566.
[71] (1928) A.C. 117, at p. 126.
[72] (1930) A.C. 357.
[73] (1934) A.C. 45, at p. 59.
[74] (1887) 12 App. Cas. 575.
[75] (1887) 12 App. Cas., at p. 583.
[76] (1897) A.C. 231.
[77] (1897) A.C., at p. 237.
[78] (1928) A.C. 358.
[79] (1928) A.C., at p. 362.

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