HIGH COURT OF AUSTRALIA

                                   Deputy Federal Commissioner of Taxation

                                                           Vs.

                                        W. R. Moran Proprietary Limited

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

                                                    25th July 1939

Latham C.J.

The court, by a majority, holds that the defence to the action fails and that judgment should be
entered for the plaintiff for the amount claimed. The reasons for judgment will be delivered later.

The following written reasons for judgment were delivered:--

July 25

Latham C.J.

In this action the defendant is sued for a sum of £85 12s. tax and additional tax, alleged to be due
under the Federal Flour Tax (Wheat Industry Assistance) Assessment Act 1938 and the Flour Tax
(Stocks) Act 1938. The case has been removed to the High Court under sec. 40 of the Judiciary Act
1903-1937 and has been referred by Evatt J. to the Full Court. The plaintiff is entitled to judgment
for the amount claimed unless the defendant establishes the only defence which is raised, namely,
that the said Acts are, or one of them is, invalid as being ultra vires of the Commonwealth
Parliament.

In August 1938 at a conference attended by representatives of the Commonwealth Government and
of all the State Governments of Australia it was agreed that it was necessary to take action to ensure
to wheat growers a payable price for wheat. The approved scheme involved the imposition of an
excise duty upon flour by the Commonwealth Parliament. By this means the Commonwealth
Government would obtain funds out of which moneys could be paid to assist wheat growers in
general, and also to give relief to distressed wheat growers. It was part of the plan that special
treatment should be given to Tasmania on account of the special circumstances of that State. Those
special circumstances consisted in the fact that Tasmania alone, among the States of the
Commonwealth, imports wheat from other States. Apparently all the wheat required for flour
milling in Tasmania has to be brought from other States. The quantity of wheat produced in
Tasmania is relatively very small and accordingly the Tasmanian community, though it would bear
the excise duty on flour by paying increased prices for bread, &c., would receive very little money
by way of moneys paid or other assistance given to the small number of Tasmanian wheat farmers.

Another element in the scheme involved the fixing by or under State legislation of prices for flour
and/or bread. The object was to prevent undue exploitation of consumers.

All the Parliaments of Australia combined in order to give effect to the plan. It was thought that by
the co-operative action of all the Parliaments (and only by such co-operative action) the desired
result could be achieved.

The Commonwealth Parliament passed three Acts imposing taxes on flour and one imposing a tax
upon wheat. The first was the Flour Tax Act 1938, which imposed a tax upon flour manufactured in
Australia and sold or used in the manufacture of other goods. The second, the Flour Tax (Stocks)
Act 1938, imposed a tax upon flour held in stock upon a specified date. The third, the Flour Tax
(Imports and Exports) Act 1938, imposed a tax upon flour and biscuits &c. imported into Australia
and upon wheat exported from Australia after a date to be fixed by proclamation. Taxes under these
Acts would, as a general rule, be paid by millers. The Acts were designed to raise money by taxing
flour and flour products so as to form a fund which would provide the Commonwealth with means
of paying moneys to wheat farmers, so as to provide a payable price for wheat. The tax was fixed
upon the basis that 5s. 2d. a bushel on rails at Williamstown was a payable price, and the Acts
mentioned were designed to produce a sum representing the difference between any lower price and
that price, so that the farmer would receive payment upon the basis of 5s. 2d. If, however, the price
of wheat went above 5s. 2d. at Williamstown, it was part of the scheme that a tax should be imposed
upon wheat so as to form a fund from which moneys could be paid, not to farmers, but to millers.
This tax was imposed by the fourth Act, the Wheat Tax Act 1938. The Flour Tax (Wheat Industry
Assistance) Assessment Act 1938 provided the necessary machinery for the collection of these taxes.

The Commonwealth Parliament enacted the Wheat Industry Assistance Act 1938 as another
necessary part of the scheme. This Act recites the substance of the plan which I have outlined. The
preamble of the Act refers to the conference and declares that the Commonwealth and the States
have agreed to co-operate in order to give effect to the scheme and that the State Parliaments have
passed legislation providing for the fixing of prices for flour sold for home consumption in
Australia. All the State Parliaments had in fact either passed special Acts enabling them to fix prices
of flour and bread or already had an applicable statute in operation.

Upon the argument in this case it was objected that the court should not look outside the four
corners of the statutes in question and that the proceedings of the conference were irrelevant. The
Wheat Industry Assistance Act, however, expressly refers in the preamble to the conference, and I
am, therefore, of opinion that there can be no objection to looking at the record of what was done at
the conference. An examination of that record does not add anything to what is apparent upon the
face of the Federal and State statutes. These statutes show that the Commonwealth and the State
Governments agreed to ask their Parliaments to pool their constitutional powers for the purpose of
bringing about a result which admittedly neither the Commonwealth Parliament alone nor the State
Parliaments alone could achieve. The question which arises is whether the Commonwealth
Parliament, in providing its contribution to this scheme, has infringed the Constitution.

The principal objection is that the scheme involves an imposition of a tax (namely, an excise duty)
which infringes sec. 51 (ii.) of the Constitution. Sec. 51 (ii.) provides that the Commonwealth
Parliament shall have power to make laws with respect to "taxation; but so as not to discriminate
between States or parts of States." As I have already stated, it was part of the scheme that special
treatment should be provided for the special circumstances of Tasmania. It was obvious that the
Commonwealth Parliament could not impose an excise duty and exclude Tasmania from the Act
imposing the duty. The course adopted was to impose a tax on flour in general terms, without any
discrimination between States, and then to distribute the amount of the proceeds among the States
for allocation to wheat farmers, but with a special Federal grant to meet the special case of
Tasmania.
The taxing and assessment Acts dealt with the raising of money by taxation. The appropriation of
money towards the desired objects was made by the Wheat Industry Assistance Act 1938. This Act
provided for the payment of the proceeds of the flour taxes (which go into the consolidated revenue
fund under sec. 81 of the Constitution) out of that fund into a wheat industry stabilization fund. The
money in this fund is to be applied (sec. 6 (6)) in making payments to the States of amounts
proportionate to the production of wheat in each State. Sec. 6 (7) provides that these grants to the
States shall be paid upon condition that the amount so paid to a State shall be distributed to the
wheat growers in the State in proportion to the quantity of wheat sold or delivered for sale by each
wheat grower during the relevant year. Sec. 7 of the Act provides that specified other amounts shall
be paid, in the first year, to only four States, namely, New South Wales, Victoria, South Australia
and Western Australia. It is a condition of these latter special payments that these amounts shall be
applied in the relief of distressed wheat growers, or in subsequent years, in meeting the cost of
transferring wheat growers from unsuitable land. After the first year of operation of the scheme and
during the following four years, the amounts to be paid to the States under sec. 7 are to be
determined by the Minister administering the Act (sec. 7 (3)).

The special provision for Tasmania is contained in sec. 14 of the Wheat Industry Assistance Act. It
provides that, in addition to any amount granted to Tasmania under sec. 6 or sec. 7, a further sum, of
such amount as the Minister should determine, shall be paid to the State of Tasmania (not to the
millers of Tasmania) in each year by way of financial assistance. This section is subject to a proviso
that the amount paid to Tasmania in any year shall not be greater than the sum (if any) by which the
amount collected in that year under the assessment Act in respect of flour consumed in Tasmania
exceeds the total amount paid to Tasmania in respect of the year by way of grants under sec. 6 and
sec. 7 of the Act. This proviso imposes a maximum limit upon the amount to be paid to Tasmania--
the difference between what the community of Tasmania receives under the other provisions of the
assistance Act and the amount which it pays under the taxation Acts. The assistance to wheat
growers was regarded as benefiting Tasmania to a very small degree, because (as already stated)
there are very few wheat growers in Tasmania, but the people of Tasmania consume as much bread
per head as the people in any other part of the Commonwealth. Thus, sec. 14 was devised as a
means, not mathematically precise, but roughly accurate enough, of putting all parts of Australia,
including Tasmania, upon substantially the same footing. It is contended that the payment to the
State of Tasmania of an amount which bears a relation (namely, by way of maximum limit) to the
amount of excise duty paid on flour, really amounts to a prohibited discrimination in favour of
Tasmania.

The Tasmanian Parliament passed an Act entitled the Flour Tax Relief Act 1938. This Act and all the
Federal Acts mentioned were assented to on the same day, 2nd December 1938. This Act (like the
other Acts) did not disguise its object in any way. The preamble recited that the Federal Wheat
Industry Assistance Act provided for the payment to the State of moneys by way of financial
assistance during any period in respect of which a tax was imposed upon flour. The next recital was:
"Whereas it is desirable that the moneys so granted to this State should be applied to the relief of
persons paying flour tax upon flour for consumption in this State." The Act provided that persons
who paid flour tax to the Commonwealth might apply to a State official for relief, and might
thereupon obtain a payment by way of relief in respect of the flour tax which they had paid. The
evidence shows that, in fact, ninety per cent of the flour tax paid was repaid under this Act by the
State to the Tasmanian taxpayers, and to persons in other parts of Australia who, having paid tax
upon flour in those other States, subsequently exported the flour to Tasmania, where it was used.

The result of this whole scheme of Federal and State legislation is that a Federal excise duty is
imposed upon flour which is paid upon the same basis by persons in all States. The proceeds of the
duty go into the Federal consolidated revenue. An equivalent sum is then taken from the
consolidated revenue and is paid by the Commonwealth by way of financial assistance to the States
of the Commonwealth, upon condition that the States apply the moneys in the assistance and relief
of wheat growers. In the case of Tasmania, however, a special grant is made by the Commonwealth
which is not subject to any Federal statutory conditions, but which, in fact, is applied, and which it
was known would be applied, by the Government of Tasmania in paying back to Tasmanian millers
and others nearly the whole of the flour tax paid by them in respect of flour consumed in Tasmania.

It is now possible to deal with the principal contention of the defendant; based upon sec. 51 (ii.) of
the Constitution. Under sec. 51 (ii.) the Commonwealth Parliament can undoubtedly tax flour as it
has done in the various taxation Acts to which I have referred. But the power to legislate with
respect to taxation is subject to the condition expressed in the words "but so as not to discriminate
between States or parts of States." It is contended that, if the taxation Acts and the Wheat Industry
Assistance Act (with its preamble) are read together, it is evident that the amount paid in taxation by
persons in Tasmania is to be refunded to the Government of Tasmania for repayment to them, so
that there is a discrimination in favour of Tasmania and against the other States. The argument is
that if Tasmania had been excluded from the taxation Acts, those Acts would clearly have been bad,
but that the same result is produced by collecting the tax from Tasmania, and then paying it, or most
of it, back to Tasmania. But sec. 51 of the Constitution relates only to the powers of the
Commonwealth Parliament, and the provision prohibiting discrimination affects and can affect that
Parliament only. Unless the Federal taxation legislation itself discriminates between States or parts
of States, it is not rendered invalid by the condition attached to sec. 51 (ii.). The Federal taxation
Acts themselves plainly do not discriminate between States. They are therefore not affected by the
condition contained in sec. 51 (ii.). The special treatment which is given to Tasmania does not arise
from any discrimination in any law passed by the Federal Parliament "with respect to taxation." The
Wheat Industry Assistance Act is not an Act with respect to taxation. It is an Act appropriating
money. It provides, not for the collection, but for the expenditure of money. There is no provision in
the Constitution to the effect that appropriation Acts must not discriminate between States or that
Federal expenditure in the several States must be equal in any sense. Such a provision would
obviously encounter very grave practical difficulties.

What is said to be the discrimination in favour of Tasmanian taxpayers really arises from Tasmanian
legislation. No Commonwealth legislation provides for the repayment of any money to any
Tasmanian taxpayer. It provides only for the payment of a sum to the Government of Tasmania. The
Government of Tasmania has, with the authority of the Parliament of Tasmania, devoted this money
to giving relief to Tasmanian taxpayers. But such action cannot be an infringement of sec. 51 (ii.),
because that section does not apply to the Parliament of Tasmania. In my opinion, there would be
nothing unlawful or invalid in any State enacting legislation providing for the repayment to its
citizens of moneys which they had paid to the Commonwealth by way of taxation. Such a law might
be open to political objection, but no remedy could be obtained by any objection in the courts. The
enactment of such a law could not affect the validity of any Act passed by the Parliament of the
Commonwealth. It may be added that a State Parliament could achieve much the same practical
result in some cases by reducing its own taxes. The validity of such a reduction would not be open
to doubt.

A somewhat similar question to that which arises under the first objection was answered in Colonial
Sugar Refining Co. Ltd. v. Irving[1]. The Commonwealth Parliament imposed uniform duties of
excise upon sugar but subject to exemptions so far as goods had borne customs or excise duties
under State legislation. In Queensland there had been no State excise duty on sugar and accordingly
the amounts payable by way of excise duty to the Commonwealth varied in the case of different
States. But this result was brought about not by the Federal legislation, but by the State legislation.
Their Lordships of the Privy Council say: "The rule laid down by the Act is a general one,
applicable to all States alike, and the fact that it operates unequally in the several States arises not
from anything done by the Parliament, but from the inequality of the duties imposed by the States
themselves"[2]. In that case the resulting inequality was an effect of past legislation, and the
inequality in result was, therefore, obvious ab initio. The case is, therefore, a stronger one than the
present case, where it is open to the Tasmanian Parliament, as a matter of law, to repeal the Flour
Tax Relief Act and to alter the manner of expending the money received from the Commonwealth
under the Wheat Industry Assistance Act.

The defendant relied very strongly upon the case of Attorney-General for Alberta v. Attorney-
General for Canada[3]. The principle which it was sought to derive from that case was that a
statute, apparently valid when considered by itself, might nevertheless be held to be invalid if it
were part of a "scheme" for achieving a prohibited purpose. The case cited provides one of many
illustrations of the difficulties arising from the distribution of Dominion and Provincial legislative
powers under the British North America Act 1867. Sec. 91 of that Act places certain matters within
the exclusive legislative power of the Dominion Parliament. Sec. 92 places certain matters within
the exclusive legislative power of the Provincial Parliaments. But reality does not satisfactorily
respond to the statutory fiat. The matters mentioned in the two sections overlap. Accordingly very
difficult problems arise in the case of Canada with respect to the category to which legislation
should be assigned. This precise problem does not arise in Australia, where the Constitution does
not assign exclusive powers to the Commonwealth and also exclusive powers to the States. In the
present case no question of judicial selection as between mutually exclusive categories arises.

In the next place it may be noted that the Alberta Case[4] dealt with a legislative power which was
defined by reference to purpose. The power was conferred upon the Provincial Parliament by sec.
92 (2): "Direct taxation within the province in order to the raising of a revenue for provincial
purposes." The words in italics are so printed in the report[5]. It was reasonably plain that the
purpose of the challenged legislation was not the raising of any revenue by taxing banks. The
purpose was plainly a purpose of putting the banks out of business. But "banking" was one of the
subjects as to which the Dominion Parliament had exclusive legislative power under sec. 91. The
Provincial Act was therefore invalid. In the present case no consideration of the purpose of the
Commonwealth Parliament is relevant. This, indeed, is the general rule. If a power is not defined by
reference to purpose, the element of purpose is irrelevant. In Barger's Case[6] all the justices took
this view: See per Griffith C.J., Barton and O'Connor JJ.[7], per Isaacs J.[8], and per Higgins
J.[9]--See also James v. Cowan[10]. Sec. 51 (ii.) of the Commonwealth Constitution makes no
reference to any purpose of the Commonwealth Parliament. It confers a power to make laws with
respect to taxation, but so as not to discriminate between States or parts of States. The condition
relates only to laws with respect to taxation. If such a law does in fact discriminate between States,
it is not within the power granted. The absence of a purpose to discriminate would be nothing to the
point. If such a law does not in fact so discriminate, the presence of a purpose to discriminate would
equally be nothing to the point. The laws with respect to taxation, that is, the taxing Acts and the
assessment Act, do not discriminate between States. Thus the condition of sec. 51 (ii.) is not
infringed. In my opinion the Alberta Case[11] does not assist the plaintiff.

In my opinion, for the reasons given, neither the Flour Tax (Stocks) Act 1938 nor any other of the
Acts mentioned is open to the objection that it is legislation with respect to taxation which
discriminates between States.

It is further objected that the payments made under the Wheat Industry Assistance Act are bounties
on the production or export of goods, and that they are not uniform. Sec. 51 (iii.) of the
Commonwealth Constitution provides that the Parliament shall have power to make laws with
respect to bounties on the production or export of goods "but so that such bounties shall be uniform
throughout the Commonwealth." In support of this objection reference is made to the fact that the
grants made to the States under secs. 6 and 7 vary in amount, and that, under sec. 10, the Governor-
General may suspend payments if he is satisfied that State legislation is amended, or that action is
taken under State legislation, so as to affect prejudicially the position of wheat growers in the State
in respect of wheat sold for home consumption in Australia. The same section gives power to the
Governor-General to suspend payments to a State if the State has not taken steps to adequately
protect consumers of flour &c. against excessive prices. In my opinion this objection fails for
several reasons.

In the first place, the payments made by virtue of the Wheat Industry Assistance Act are payments
made to States upon condition that the States shall pay moneys to wheat growers. The payments
made by the Commonwealth are not bounties upon either the production or the export of goods.
They are payments by way of financial assistance to States, subject to terms and conditions fixed by
the Commonwealth Parliament. The Federal Acts do not authorize any payment by any Federal
authority to any wheat grower in any State. In the second place, although the amount paid to each
State is determined by the amount of wheat produced in the State (Wheat Industry Assistance Act,
sec. 6 (6)), the moneys are to be paid by the State to wheat growers "in proportion to the quantity of
wheat sold or delivered for sale." Thus a wheat grower who receives a payment from a State does
not receive it in respect of wheat produced or exported, but only in respect of wheat which he sells
or delivers for sale. For example, he would receive no payment in respect of seed wheat retained out
of his harvest. Finally, every wheat grower in all the States is treated in the same way. He is to
receive moneys "in proportion to the quantity of wheat sold or delivered for sale by" him (Wheat
Industry Assistance Act, sec. 6 (7)). Thus, if it were necessary that these payments should be
uniform, that condition would be satisfied. The payments for the relief of distressed wheat growers
and for taking them off unsuitable land are plainly not bounties on the production or export of
goods. Thus the objection based upon sec. 51 (iii.) of the Constitution fails at all points.

The defendant further objects that the provisions for grants to States are invalid because the
Minister, and not the Commonwealth Parliament, determines the amount and the conditions of the
grants. Thus, under sec. 7 of the Wheat Industry Assistance Act, the Minister, after the first year,
determines the amount to be received by the States, and the Minister must approve the method of
distribution of moneys for transferring distressed wheat farmers from unsuitable land (sec. 7 (5)).
Further, under sec. 10, the Governor-General may suspend payment altogether in certain events, and
under sec. 14 the Minister, subject to a maximum limit, determines the amount to be paid to
Tasmania.

In my opinion, none of these objections, even if well founded as objections to the validity of these
sections, could affect the validity of the taxation Acts. Even if the provisions as to the distribution of
the funds established under the Wheat Industry Assistance Act were invalid, that invalidity would
affect only the expenditure of moneys under that Act, and not the collection of moneys under the
various flour taxation Acts. Although the Acts are all directed towards the assistance of wheat
farmers, and in a readily intelligible sense form part of one scheme, there is nothing to show that
Parliament intended that the tax should not be collected if any of the provisions for expenditure of
money out of the consolidated revenue fund, augmented by the proceeds of the tax, should prove to
be invalid. An analogous case may be suggested. Parliament might provide by an appropriation Act
for the expenditure of, let it be supposed, a certain proportion of the moneys collected by way of
income tax. If those provisions for appropriation were invalid, I do not think that it could be
contended that therefore the whole or any part of the income taxation legislation of the
Commonwealth was invalid.

But, in the second place, the objections are, in my opinion, not well founded. The grants made by
the Wheat Industry Assistance Act are made by virtue of the power conferred on the Commonwealth
Parliament by sec. 96 of the Constitution, which is as follows: "During a period of ten years after
the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, the
Parliament may grant financial assistance to any State on such terms and conditions as the
Parliament thinks fit." The words of this section show that Parliament may grant financial assistance
to a single State under this power and may therefore discriminate between States in making grants.
They also show that the Parliament has the fullest power of fixing the terms and conditions of any
grant made under the section. Parliament does fix the terms and conditions of the grant if, by
legislation, it authorizes a Minister to determine such terms and conditions. It is too late now to
argue that terms and conditions determined by a Minister under such legislation are not determined
by the Parliament (Powell v. Apollo Candle Co.[12]; Baxter v. Ah Way[13]; Roche v.
Kronheimer[14]; Victorian Stevedoring and General Contracting Co. Pty. Ltd. and Meakes v.
Dignan[15]; Radio Corporation Pty. Ltd. v. The Commonwealth[16]). Further, the case of Victoria v.
The Commonwealth[17] (the Roads Case) is conclusive against the defendant upon this point. It was
there held, by a court of seven justices, that the Federal Aid Roads Act 1926 was a valid enactment,
"being plainly warranted by the provisions of sec. 96 of the Constitution, and not affected by those
of sec. 99 or any other provisions of the Constitution"[18]. The Federal Aid Roads Act approved
agreements between the Commonwealth and the States for making roads under which payments
were made to the States "in such amounts at such times and subject to such conditions as the
Minister may from time to time determine." Other provisions of the agreements required the
Minister to be satisfied as to various matters before he was bound to make payments. It was argued
that "the terms and conditions referred to in sec. 96 must be terms and conditions imposed by the
Parliament itself and not terms and conditions fixed by executive authority"[19]. This argument was
rejected, and it must again be rejected in the present case.

Sec. 96 is a means provided by the Constitution which enables the Commonwealth Parliament,
when it thinks proper, to adjust inequalities between States which may arise from the application of
uniform non-discriminating Federal laws to States which vary in development and wealth.
Discrimination is prohibited in laws with respect to taxation (sec. 51 (ii.). Bounties must be uniform
(sec. 51 (iii.)). Laws or regulations of trade, commerce or revenue must not give preference to one
State or part thereof over another State or part thereof (sec. 99). But these "equal" laws may produce
very unequal results in different parts of Australia. A uniform law may confer benefits upon some
States, but it may so operate as to amount to what is called "a Federal disability" in other States.
Sec. 96 provides means for adjusting such inequalities in accordance with the judgment of
Parliament. That section is not limited by any prohibition of discrimination. There is no general
prohibition in the Constitution of some vague thing called "discrimination." There are the specific
prohibitions or restrictions to which I have referred. The word "discrimination" is sometimes so
used as to imply an element of injustice. But discrimination may be just or unjust. A wise
differentiation based upon relevant circumstances is a necessary element in national policy. The
remedy for any abuse of the power conferred by sec. 96 is political and not legal in character.
It was also objected that as the object of the provision in sec. 14 of the Wheat Industry Assistance
Act enabling the minister to grant special financial assistance to Tasmania was to make it possible
for Tasmania to refund the tax to Tasmanian taxpayers, the "real purpose" of that Act was to make
possible a discrimination between the States in breach of sec. 51 (ii.) of the Constitution.

This objection is, in my opinion, met by what I have already said, namely, that the taxation
legislation of the Commonwealth does not discriminate between States, that appropriation Acts of
the Commonwealth are not subject to sec. 51 (ii.) of the Constitution, and that legislation by the
State of Tasmania is not subject to any limitation arising from that section.

The regulations under which Tasmania distributed the money received from the Commonwealth
provided that taxpayers should enter into a bond to repay the amount received by way of relief if
they exported from Tasmania to other States flour upon which tax had been paid in Tasmania in
respect of which payment they had received relief. This, it was said, imposed a burden upon inter-
State trade contrary to sec. 92 of the Constitution. But even if the regulations which Tasmania has
chosen to make are inconsistent with sec. 92, their invalidity cannot have the effect of making any
Commonwealth legislation invalid. It would, I think, be impossible to hold that, because a State
government elected to make certain regulations under a valid State Act, Commonwealth legislation,
not referring to or dependent upon such regulations in any way, could be rendered invalid.
Commonwealth statutes are not at the mercy of State legislatures or governments in the manner
suggested.

The only remaining objection of the defendant is based upon provisions under the flour taxation
Acts which enable the Minister, in accordance with a recommendation from the Wheat Stabilization
Committee established under the Wheat Industry Assistance Act, to fix the amount of tax. The
amount of tax, within a limit, is to be determined by the difference between the actual price of
wheat and 5s. 2d. per bushel on rail at Williamstown, the difference in wheat prices being translated
into difference in flour prices: See, for example, Flour Tax (Stocks) Act, sec. 5. The objection is that
the Minister, and not Parliament, fixes the tax. The same objection was taken in Powell v. Apollo
Candle Co.[20]. In that case an Order in Council issued under the Customs Regulation Act 1879, of
New South Wales authorized the Governor, acting upon the opinion of the Collector of Customs, to
fix the rate of duty upon imported articles. It was objected that the power of taxation was vested by
the Constitution in Parliament and not in the Governor. Their Lordships of the Privy Council said:--
"It is argued that the tax in question has been imposed by the Governor, and not by the legislature,
who alone had power to impose it. But the duties levied under the Order in Council are really levied
by the authority of the Act under which the order is issued. The legislature has not parted with its
perfect control over the Governor, and has the power, of course, at any moment, of withdrawing or
altering the power which they have entrusted to him. Under these circumstances their Lordships are
of opinion that the judgment of the Supreme Court was wrong in declaring sec. 133 of the Customs
Regulation Act 1879 to be beyond the power of the legislature"[21]. This case was followed and
applied in this court in Nott Bros. & Co. Ltd. v. Barkley[22], where Isaacs J.[23] described the same
objection as "a cardinal error," saying that the Privy Council "had for ever settled that question in
Powell v. Apollo Candle Co."[24]. Accordingly, in my opinion, this objection fails.

I have not referred to some arguments which were addressed to the court with respect to the
admissibility of certain evidence. I have said that the reference in the preamble of the Wheat
Industry Assistance Act to the conference of Premiers made the report of the proceedings at that
conference admissible. But I do not think that this fact is important in the present case. Federal and
State legislation passed after the conference very plainly carries out the general scheme which the
conference desired. But this circumstance appears to me to be irrelevant. If the statutes carry out the
scheme, their validity is determined by what they in fact do and the prearranged scheme is
irrelevant. If the statutes do not carry out the scheme, their validity is still determined by what the
statutes in fact do and again the scheme is irrelevant. Evidence was tendered of statements by the
Treasurer of the Commonwealth contained in minutes approved by him as to the basis of the grants
to Tasmania. These minutes show that the Treasurer was carrying out the scheme according to its
intention, but the validity of the statute under which he acted could not be affected by what the
Treasurer purported to do under the statute, if what he did was not authorized by the statute. If what
he did was authorized by the statute, then the question is whether a statute conferring such authority
is valid. Thus this evidence also does not appear to me to be important. I do, however, agree that,
where the question of the validity of a statute is raised, a declaration by parliament as to the
character of the statute cannot be accepted by a court as conclusive in relation to the question of
validity. There is ample authority for this statement in decisions of the Privy Council. See Shannon
v. Lower Mainland Dairy Products Board[25], citing Gallagher v. Lynn[26]: In the case of a
parliament of limited powers "the legislation must not under the guise of dealing with one matter in
fact encroach upon the forbidden field." See also Attorney-General for Ontario v. Reciprocal
Insurers[27]: "Where the law-making authority is of a limited or qualified character, obviously it
may be necessary to examine with some strictness the substance of the legislation for the purpose of
determining what it is that the legislature is really doing." Reference may also be made to In re
Insurance Act of Canada[28], where their Lordships inquired whether an amendment was or was
not "a genuine amendment" of the law or really an attempt by a soi-disant amendment to deal with a
matter which was not within the power of the legislature; and reference is made to a "false
definition" intended to give a colour of validity to a statute which was, in truth, invalid[29]. It is
also well settled in the United States of America that the mere declaration by a legislature that the
subject matter of the legislation falls within a particular category cannot be accepted as conclusive
when a question of the validity of the statute arises: See, for example, Tyson & Brother v.
Banton[30].

For the reasons given, I am of opinion that the defences to the action fail, and that there should be
judgment for the plaintiff for the amount claimed.

Rich J.

I have had the opportunity of reading the judgment of the Chief Justice and concur in it.

Starke J.

These proceedings commenced in the District Court at Sydney in New South Wales. The claim was
for £85 12s., being the first instalment and additional tax for late payment payable to the Crown
under the Flour Tax (Stocks) Act 1938, No. 50, and Flour Tax (Wheat Industry Assistance)
Assessment Act 1938, No. 48. The only defence raised was that the Acts were beyond the power of
the Commonwealth Parliament. The proceedings were then removed into this court under sec. 40 of
the Judiciary Act. Evidence was taken before this court, both documentary and oral, but all subject
to objection and pursuant to the power contained in the Judiciary Act, sec. 18, and a direction was
given that the case be argued before the Full Court.

The preamble to the Wheat Industry Assistance Act 1938, No. 53, sets forth the circumstances
surrounding the imposition of the tax. It is as follows:--"Whereas at a conference between the
Prime Minister of the Commonwealth and the Premiers of the States held in Canberra, at the request
of the Premiers, on the twenty-ninth day of August, One thousand nine hundred and thirty-eight, the
co-operation of the Government of the Commonwealth was sought in putting into operation a
scheme to ensure to wheat growers a payable price for wheat: And whereas the Premiers on behalf
of their respective States undertook that, if the Commonwealth agreed to co-operate in the said
scheme, legislation would be passed by the said States providing for the fixing of such prices for
flour sold for home consumption in Australia as would provide for wheat growers a payable average
price on all the wheat produced by them: And whereas, in order to ensure a payable price in respect
of the wheat sold for home consumption in Australia, it was represented at the said conference that
it would be necessary that a tax be imposed upon flour sold for home consumption in Australia and
that the proceeds of the tax be distributed among wheat growers in proportion to the quantities of
wheat respectively produced by them: And whereas the Prime Minister on behalf of the
Commonwealth agreed that the Commonwealth would co-operate in the said scheme and that any
legislation necessary on the part of the Commonwealth would be submitted to the Parliament of the
Commonwealth: And whereas legislation has been passed by the Parliaments of the States providing
for the fixing of prices for flour sold for home consumption in Australia."

This scheme, as it was called, was implemented both by the Commonwealth and the States. The
Commonwealth enacted the Flour Tax Act 1938, No. 49, the Flour Tax (Stocks) Act 1938, No. 50,
the Flour Tax (Imports and Exports) Act 1938, No. 51, a Wheat Tax Act 1938, No. 58, an assessment
Act, the Flour Tax (Wheat Industry Assistance) Assessment Act 1938, No. 48, and the Wheat
Industry Assistance Act 1938, No. 53. The States, other than Tasmania, passed various Acts, all to
the same effect, providing for the regulation of flour and other products of wheat and for the
application of moneys paid to the State by the Commonwealth for assistance to the wheat growers.
The Acts of the State of Tasmania were the Wheat Products Prices Act 1938 (2 Geo. VI. No. 39)
which provided for the regulation of the prices of flour and other products of wheat and the Flour
Tax Relief Act 1938 (2 Geo. VI. No. 40) which provided for the relief of persons paying flour tax on
flour for consumption in or imported into Tasmania.

The Flour Tax (Stocks) Act 1938 imposed a tax upon all flour in excess of one thousand pounds in
weight held in stock on 5th December 1938 by any person not the manufacturer of that flour. The
rate of tax, not in any case exceeding £7 10s. per ton of flour, was such rate per ton of flour as the
Minister in accordance with a recommendation by the committee (the Wheat Stabilization Advisory
Committee constituted under the Wheat Industry Assistance Act 1938, No. 53), declares to be the
amount by which the price per ton of flour based upon the price of wheat per bushel free on rails at
Williamstown in the State of Victoria at the time of the recommendation of the committee was less
than what in the opinion of the committee the price of flour would be if the price of wheat per
bushel free on rails at Williamstown were five shillings and two pence.

This form of imposing taxation was bad, so it was contended, because the Parliament could not
confer upon or delegate to any executive authority the function of determining the rate of tax. But
this contention has many times been considered in this court and always rejected for reasons that are
stated in the cases of Victorian Stevedoring and General Contracting Co. Ltd. and Meakes v.
Dignan[31]: See also Roche v. Kronheimer[32] and Crowe v. The Commonwealth[33].

The preamble, already mentioned, was referred to in support of an argument to the effect that the
flour taxes were imposed to provide financial assistance to the States and to ensure wheat growers a
payable price for wheat, but that the Parliament had not granted such financial assistance. The
argument was based upon the Constitution, sec. 96, which enacts that Parliament may grant
financial assistance to any State on such terms and conditions as the Parliament thinks fit. The
Wheat Industry Assistance Act 1938, No. 53, sec. 7 (2), provides for payments to each State by way
of financial assistance out of a fund into which had been paid from consolidated revenue the
amounts collected by way of flour taxes of such amount, if any, as the Minister administering the
Act (Acts Interpretation Act 1901-1937, sec. 17) after advice from the State Minister determined.
Substantially this contention again asserts the proposition that Parliament cannot delegate its
authority or confer upon an executive authority the function of determining the amount of assistance
that a State requires. It is contrary to the decisions already mentioned, and also to the actual
decision, Victoria v. The Commonwealth[34]: See clause 2 (3) of the agreement scheduled to the
Federal Aid Roads Act 1926, No. 46. I would add that I am far from convinced that the validity of
the taxing Acts depends, in any way, upon the validity or effectiveness of the grant of financial
assistance to the States.

Much broader ground, however, was relied upon in support of the defence. It is said that the scheme
of the Acts already mentioned involves taxation which discriminates between the States
(Constitution, sec. 51 (ii.)), bounties on the production or export of goods which are not uniform
throughout the Commonwealth (Constitution, sec. 51 (iii.)) and preference to the State of Tasmania
over the other States contrary to sec. 99 of the Constitution: "The Commonwealth shall not, by any
law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof
over another State or any part thereof."

The provisions of the various Acts may be summarized. The tax Acts impose the taxation and the
assessment Act provides for its assessment, collection and recovery. The Wheat Industry Assistance
Act 1938, No. 53, provides for the grant of financial assistance to the States. A wheat industry
stabilization fund is created into which is paid, out of the consolidated revenue fund, all moneys
collected under the assessment Act, sec. 5. Moneys to the credit of the fund are applied in making
grants of financial assistance to the States (sec. 6). The whole amount paid into the fund, subject to
the deduction of certain payments, expenses and credits, is applied in making payments to the States
of such amounts respectively that there shall be paid to each State in respect of that year the amount
which bears to that total amount after the deduction has been made, the same proportion as the
quantity of wheat produced in that State during the year bears to the total quantity of wheat
produced in Australia during that year. Any amount so granted and paid to a State shall be paid to
the State upon condition that it is distributed to the wheat growers in that State in proportion to the
quantity of wheat sold or delivered for sale by each wheat grower during the year in respect of
which payment is made (sec. 6). Special accounts are kept in the fund, called "Wheat Industry
Special Account" and "Wheat Tax Account," and the amounts at credit of those special accounts
applied for purposes mentioned in accordance with the determination of the Minister administering
the Act: See secs. 6 (3), (4), (5), (7) and (8); Acts Interpretation Act 1901-1937, sec. 17--the
Minister.

This court has decided that grants of financial assistance to the States may be made on such terms
and conditions as the Parliament thinks fit and are therefore unaffected by sec. 99 or any other
provision of the Constitution (Victoria v. The Commonwealth[35]).

So far, admittedly, the provisions of the Wheat Industry Assistance Act 1938, No. 53, do not
contravene any provision in the Constitution. But the argument concentrated upon sec. 14 of that
Act coupled with the Tasmanian legislation. The provisions of sec. 14 are:--"(1) In addition to any
amount granted by way of financial assistance to the State of Tasmania in pursuance of section six
or section seven of this Act, there shall, subject to this section, be granted out of the fund to that
State, in each year by way of financial assistance, such amount as the Minister determines: Provided
that the amount paid to that State in any year shall not be greater than the sum (if any) by which the
amount collected in that year under the Flour Tax (Wheat Industry Assistance) Assessment Act 1938
in respect of flour consumed in that State (whether as flour or as goods manufactured from flour)
exceeds the total amount paid to that State in respect of that year under section six and section seven
of this Act: Provided further that no amount shall be payable under this section in respect of any
year during which no moneys (other than moneys collected as tax upon wheat exported from
Australia or upon wheat produced and sold in Australia) were collected under the Flour Tax (Wheat
Industry Assistance) Assessment Act 1938. (2) Payments under this section shall be made at such
times and in such instalments as the Minister determines. (3) For the purposes of this section year
means a period of twelve months commencing on the date of coming into operation of the Flour Tax
(Wheat Industry Assistance) Assessment Act 1938 or any period of twelve months commencing on
any anniversary of that date."

The Tasmanian Flour Tax Relief Act 1938 (2 Geo. VI. No. 40) provided for the opening in the books
of the State Treasury of an account called the "Flour Tax Relief Suspense Account" which was
credited with all moneys received by the State from the Commonwealth as a grant by way of
financial assistance under the Wheat Industry Assistance Act 1938, No. 53, of the Commonwealth
(sec. 4). Any person who in Tasmania paid flour tax on flour for consumption in the State or who
imported into the State from any other State flour for consumption in the State upon which flour tax
had been paid elsewhere than in the State might apply for payment to him of an amount by way of
relief in respect of the flour tax so paid and payments might be made accordingly (secs. 5, 6 and 7).
According to the evidence an amount was paid to persons claiming relief under the Act equal to the
amount of flour tax paid less ten shillings per ton.

It is this scheme or method of relief from flour taxation that operates, so it is argued, in a manner
prohibited by the Constitution and avoids the whole of the flour taxes imposed by the
Commonwealth. But the invalidity of sec. 14 does not destroy and bring down the flour tax Acts of
the Commonwealth. The provision in sec. 14 is perfectly distinct and separable. It is not so
interwoven and intermixed with the other provisions of the Act that a radically or substantially
different law is enacted if the provisions of sec. 14 be inoperative. The grant to Tasmania under sec.
14 is not dealt with as part of an indivisible scheme but as a separate and independent subject
matter. The legislation, if sec. 14 were inoperative, leaves intact a body of provisions "consistent,
workable and effective," dealing with a subject matter within the power of the Commonwealth
(Whybrow's Case[36]; Olsen v. City of Camberwell[37]). Further still, the provisions of the Acts
Interpretation Act 1901-1937, sec. 15A, operate as a legislative declaration that the flour tax Acts
shall not fail even though the provision in sec. 14 be invalid: "Every Act ... shall be read and
construed subject to the Constitution, and so as not to exceed the legislative power of the
Commonwealth, to the intent that where any enactment thereof would, but for this section, have
been construed as 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" (Newcastle and Hunter River Steamship Co. Ltd. v. Attorney-
General for the Commonwealth[38]; Australian Railways Union v. Victorian Railways
Commissioners[39])--Cf. Carter v. Carter Coal Co.[40]. The same answer may be given to an
argument based on secs. 6 (7) and 10 that bounties have been granted by the Parliament that are not
uniform throughout the Commonwealth.

Consequently the defence in this case fails. In this view it is not actually necessary to decide
whether the provisions of sec. 14, coupled with the Tasmanian Act, operate in contravention of the
Constitution. One cannot but be impressed, as Higgins J. said in Attorney-General for New South
Wales v. Brewery Employees Union of New South Wales[41], "with the wisdom of the practice, so
well established in the Supreme Court of the United States, never to decide against an Act as
unconstitutional except in the last resort and as a necessity in the determination of real, earnest and
vital controversy between individuals: Chicago and Grand Trunk Railway Co. v. Wellmann7(1892)
[1892] USSC 52; 143 U.S. 339, at p. 345 [1892] USSC 52; ; 36 Law. Ed. 176, at p. 179.. Nothing
would tend to detract from the influence and the usefulness of this court more than the appearance
of an eagerness to sit in judgment on Acts of parliament, and to stamp the Constitution with the
impress which we wish it to bear. It is only when we cannot do justice, in an action properly
brought, without deciding as to the validity of the Act, that we are entitled to take out this last
weapon from our armoury": Cf. Carter v. Carter Coal Co.[43].

I shall, however, do no harm in this particular case in expressing my opinion that the
Commonwealth Acts do not contravene any provision of the Constitution. The court cannot concern
itself with the motives of the Parliaments. All it can rightly do is to inquire whether the means
devised by the Parliaments in the execution of their powers are prohibited by the Constitution. It is
plain on the face of the various Acts already mentioned and is explicitly recited in the preamble to
the Wheat Industry Assistance Act 1938, No. 53, that the Commonwealth and the States were co-
operating in a scheme to ensure wheat growers a payable price for wheat. The legislative bodies of
the Commonwealth and the States were each entitled to use to the full the powers vested in them for
the purpose of carrying out the scheme. Co-operation on the part of the Commonwealth and the
States may well achieve objects that neither alone could achieve; that is often the end and the
advantage of co-operation. The court can and ought to do no more than inquire whether anything
has been done that is beyond power or is forbidden by the Constitution.

The main feature of the scheme to ensure wheat growers a payable price for their wheat has not
been attacked. It is contended, however, that the provisions of secs. 6 and 10 of the Wheat Industry
Assistance Act 1938, No. 53, involve a bounty on the production or export of goods that is not
uniform throughout the Commonwealth. The argument, if sound, would not, in my opinion, destroy
the taxing Acts for reasons already given. But sec. 6 grants no bounties: it grants financial assistance
to the States upon condition that the amount granted is distributed to wheat growers in manner
provided by the section. Even if the same result might have been achieved by the grant of bounties,
still the Parliament did not resort to that method but to another authorized and not forbidden by the
Constitution. The lack of substance in the contention is accentuated when it was suggested that
uniformity is lacking in the grant of the so-called bounties because the Parliament might under sec.
10 suspend financial assistance to any State in certain events. But such a provision is not wanting in
uniformity: it applies a uniform rule to the cases stated in the section though the cases may not
occur in each State at the same time: Cf. Colonial Sugar Refining Co. Ltd. v. Irving[44].

The main objection, however, is based upon the provisions of sec. 14 of the Wheat Industry
Assistance Act 1938, No. 53. These provisions, at all events, it is said, involve a plain discrimination
in taxation between the States or a manipulation of the revenue of the Commonwealth so as to give
a preference to Tasmania over the other States. But the taxation Acts do not discriminate in any way
between the States. The tax is imposed upon every person within the categories mentioned in the
Acts in whatever State he may be: tax Acts (supra); assessment Act (supra), secs. 10 to 14 both
inclusive. Further, sec. 14 is, on its face, a grant by way of financial assistance to Tasmania. It is
true that the amount of the grant depends upon the tax collected upon flour consumed in Tasmania
and is not greater than the sum, if any, by which the amount of tax collected exceeds the total
amount of grants by way of financial assistance paid to the State under other sections of the Act. But
the State is free to deal with the grant free from any control of the Commonwealth. The
Commonwealth does not by any law or regulations of revenue give any preference to the State of
Tasmania that is forbidden by the Constitution for, as already observed, grants of financial
assistance to a State are unaffected by sec. 99 or any other provision of the Constitution. A grant of
financial assistance of a State necessarily depends upon the financial position of the State at the time
of the grant. The Constitution in sec. 96 explicitly enacts that financial assistance may be granted to
any State, which makes plain that a grant under this section to one or more States and not to others
is no infringement of the provisions of sec. 99 of the Constitution.

A grant of financial assistance to a State under sec. 96 is not, therefore, a law or regulation of trade,
commerce or revenue which gives preference to one State over another State. Such a grant is
authorized and not forbidden by the Constitution.

It is clear enough though that an end contemplated by the Wheat Industry Assistance Act 1938, No.
53, sec. 14, and the Flour Tax Relief Act of Tasmania was relief from flour tax in respect of flour
consumed in or imported into Tasmania by payments of amounts determined in the manner required
by the Act. The Commonwealth legislation on its face purports to levy flour taxes and by sec. 14 to
grant financial assistance to Tasmania, but it is said that the real object or purpose of the legislation
is the giving of a preference to Tasmania. The history of the legislation, its operation, and the
resolutions of a conference recited in the preamble already mentioned were legitimately referred to
in support of this contention, but a good deal of inadmissible evidence was also relied upon such as
communications between Ministers of State and other executive officers and speeches made at
conferences by the Prime Minister of the Commonwealth and ministers of the States. I do not find it
necessary to discuss the evidence in detail, for I think all the material relevant to the contention
appears upon the face of the legislation itself, particularly in the preamble to the Wheat Industry
Assistance Act 1938, No. 53. Everything is plainly and fairly stated: nothing is cloaked and hidden.
But, as already stated, the end was achieved lawfully by methods within the constitutional powers of
the legislative bodies and by means that are not anywhere forbidden by the Constitution.

Several cases, however, were referred to in support of the contention, but I shall confine myself to
three: Attorney-General for Alberta v. Attorney-General for Canada[45], United States v. Butler[46]
and R. v. Barger[47].

The Alberta Case[48] was a decision under a reference to the Supreme Court of Canada pursuant to
the Supreme Court Act. The Legislative Assembly of the Province of Alberta had passed a Bill
imposing on every corporation (other than the Bank of Canada) incorporated for the purpose of
doing banking business in the Province an annual tax, in addition to any tax payable under any other
Act, on capital and on reserve fund and undivided profits. It was sought to justify the Bill under sec.
92 (2) of the British North America Act as being "direct taxation within the province in order to the
raising of a revenue for provincial purposes." The Judicial Committee examined the provisions of
the Bill, the legislative history of Alberta leading up to the Bill in question, its operation and effect
and its object or purpose, and the conclusion was reached that instead of being in any true sense
taxation in order to the raising of revenue for Provincial purposes the Bill was merely part of a
legislative plan to prevent the operation within the Province of banking institutions which had been
incorporated and given the necessary power to conduct their business by the Dominion Parliament
pursuant to sec. 91 (15) and (16) of the British North America Act. But the constitutional power of
the Commonwealth in respect of taxation is general in its terms: "Taxation: but so as not to
discriminate between States or parts of States" (sec. 51 (ii.)). And the aim and purpose of the
Australian legislation is to raise money for the purpose of assisting wheat growers and not to
trespass upon any authority of the States.
United States v. Butler[49] dealt with an Act of Congress which enacted a processing tax upon the
first domestic processing of commodities. The Act on its face was passed to increase the price of
certain farm products for the farmer by decreasing the quantities produced: the decrease was to be
attained by making payments of money to farmers who under agreements with the government
reduced their acreage and crops. It was decided, three justices dissenting, that the Act was part of a
plan to invade the reserved rights of the State[50] and to trespass upon their authority. But the
Commonwealth legislation invades no rights reserved by the Constitution to the States and in no
wise trespasses upon their authority: See Engineers' Case[51].

The case of R. v. Barger[52] in this court held, against the dissent of two justices, that an Act
purporting to impose duties of excise was in truth an Act to regulate the conditions of manufacture
of agricultural implements and therefore not an exercise of the power of taxation conferred by the
Constitution. The terms of the Act itself led to this conclusion, but are not relevant to the legislation
now in question. All the members of the court, however, concurred in the view that the question was
one of power, that the motives which actuated the legislature, the end desired, and the indirect effect
of the Act were all equally irrelevant. And, in my opinion, the legislation, in this case, is within
power for the reasons already given.

Evatt J.

This action raises a question of the greatest constitutional importance. Before any decision was
given the action was removed to this court from a New South Wales District Court, where the
defendant's sole defence to actions brought for the recovery of flour tax under Commonwealth Acts
Nos. 48 and 50 of 1938 was that such Acts were ultra vires the Commonwealth Parliament. Before
this court, several minor grounds were relied upon to establish the invalidity of the Commonwealth
Acts. But the outstanding point is whether Commonwealth Acts Nos. 48 to 53 of 1938 inclusive,
which include a scheme of taxing flour, infringe the prohibition contained in sec. 51 (ii.) of the
Commonwealth Constitution to the effect that the Commonwealth power of taxation must be
exercised "so as not to discriminate between States or parts of States."

This point does not raise any question as to the limits inter se of the constitutional powers of the
Commonwealth and any of the States: See James v. Cowan[53]. The issue is simply whether the
Commonwealth Parliament's undisputed power of taxation has been used inconsistently with an
overriding constitutional mandate.

In my opinion there has been a very thinly disguised, almost a patent, breach of the provision
against discrimination; and the especial significance of the present case lies in its result, which
practically nullifies a great constitutional safeguard inserted to prevent differential treatment of
Commonwealth taxpayers solely by reference to their connection or relationship with a particular
State.

In the present case, moreover, the discrimination exercised by the Commonwealth in favour of the
State of Tasmania bears little resemblance to the comparatively minor type of differentiation
illustrated by Cameron's Case[54], where the Commonwealth statutory rule was seeking to lay
down a fair average value of stock but offended because that value was varied in accordance with
the State in which the stock were found. But here, taxpayers associated with the favoured State
obtain the tremendous advantage of a remission or exemption of more than ninety per cent of a very
heavy levy which is exacted without any remission or exemption in the case of taxpayers similarly
associated with the other five States of the Australian Commonwealth.
Under the Commonwealth Constitution, taxing schemes are often spread over a number of Acts. For
one thing, except in the case of duties of customs or of excise, laws imposing taxation must deal
with one subject of taxation only (The Constitution, sec. 55). The draftsman is very apt to separate
different aspects of what is or may be regarded as one subject of taxation. Again, sec. 53 of the
Constitution takes away from the Senate the power of originating or amending bills imposing
taxation; but sec. 55 intervenes to prevent the device of "tacking" by the House of Representatives
by requiring that laws imposing taxation shall deal only with the imposition of taxation. For very
many years this requirement has been observed by the draftsman with a literalness which at times
seems to have been almost pedantic. The established practice is to pass one Act which imposes a
rate of taxation and another tax Act, called the "assessment" Act, which defines the subject matter of
the tax, provides for its collection and recovery, for exemptions, for refunds in appropriate cases and
for other necessary incidents in any taxation scheme. The practice has been followed in the
Commonwealth's present taxing scheme.

In the light of the established practice, the Commonwealth legislature, if it was minded to establish
a taxation system which discriminated between States, and to do so by the most direct method,
would include in the assessment Act a provision exempting either wholly or partially from the
operation of the tax imposed by the rates Act either taxpayers or goods solely because of their
association with the States which were to be favoured. Thus, in a system of income taxation, the
assessment Act would provide (a) that those entitled to exemption should include, e.g., all persons
who were resident in the State of New South Wales, or (b) that the "income" subject to tax should
not include income earned in such State, or (c) that from the "income" of every taxpayer there
should be deducted expenditure incurred in earning it, provided it was incurred in such State.

Similarly, in a system of taxing the production of a commodity, the assessment Act might provide
that taxpayers should be entitled to exemption from payment of a stated percentage of the tax on
condition that the commodity should be manufactured in Victoria, or on condition that the
commodity should be consumed in Victoria, or on condition that the raw materials used in its
manufacture should be purchased from Victoria.

In all such cases of discrimination contrary to sec. 51 (ii.), the rates Act would not, of itself,
evidence the fact of discrimination. It would, presumably, merely declare that taxation at the rate it
fixes shall be imposed in accordance with the provisions and conditions specified in the assessment
Act. Incidentally, the examples given above show that sec. 51 (ii.) is infringed wherever a condition
or provision or exemption or relief from taxation fails to treat all States of the Commonwealth alike.
It is no answer to say that if a stated condition of exemption from income tax was residence in
Victoria, every taxpayer in Australia was at liberty to satisfy the condition by residing in Victoria.
By establishing such a condition of exemption, the taxing scheme infringes sec. 51 (ii.) (per Isaacs
J. in Cameron's Case[55]); and, unless it was clear that in case of challenge in the courts, the
exemption was to be regarded as obliterated (and the proceeds from the tax thereby increased), the
tax, as well as the exemption from tax, would be void, for the forbidden discrimination arises from
their conjoint operation.

The leading case on sec. 51 (ii.) of the Constitution is R. v. Barger[56] There the Commonwealth
Excise Tariff 1906 was held to be invalid upon four distinct grounds, three of which were specified
by the majority of the court[57] and are irrelevant to the present question. But the fourth ground of
attack was based upon sec. 51 (ii.) and it was also sustained. All that the Excise Tariff did was to
impose duties of excise upon specified goods at specified rates, and to provide that the Act should
not apply to goods manufactured by any person in any part of the Commonwealth under conditions
as to remuneration of labour which were (by any one of four prescribed methods) deemed fair and
reasonable.

It was possible that, as a result of the so-called "exemption," goods of the same class would be
excisable in some parts of the Commonwealth but not in others. But it is very difficult to appreciate
the court's finding that because of such possibility the Act discriminated between States or parts of
States because there was differentiation in the taxing scheme by reference to the criterion of locality.
The majority so held, but, with great respect, I think erroneously. This particular ruling in R. v.
Barger[58] has never been formally overruled, but the reasoning of the judges in cases like
Cameron v. Deputy Federal Commissioner of Taxation[59] tells against it. Of course, the first
ground of the decision--that the Excise Tariff was in substance not an attempt to raise revenue, but
to penalize unfair labour conditions and was therefore outside the specified heads of Commonwealth
legislative power--was quite independent of the argument based on sec. 51 (ii.).

In Cameron's Case[60], Higgins J. said of Barger's Case[61]:--"We were in the minority in that
case as to the main decision; but I cannot find that as to our general understanding of discrimination
between States, as to our major premiss, we were in conflict with the majority of the court. Unless
and until overruled on the subject, I adhere to what I then said".

In these circumstances it is convenient, because most favourable to the Commonwealth, to accept
the judgment of Isaacs and Higgins JJ. in Barger's Case[62] as correctly stating the principle to be
applied in the interpretation of sec. 51 (ii.). Isaacs J. said:--

The pervading idea is the preference of locality merely because it is locality, and because it is a
particular part of a particular State. It does not include a differentiation based on other
considerations, which are dependent on natural or business circumstances, and may operate with
more or less force in different localities; and there is nothing, in my opinion, to prevent the
Australian Parliament, charged with the welfare of the people as a whole, from doing what every
State in the Commonwealth has power to do for its own citizens, that is to say, from basing its
taxation measures on considerations of fairness and justice, always observing the constitutional
injunction not to prefer States or parts of States[63].

Applying this principle, the learned judge held, in my opinion rightly, that in the case of the
particular enactment under discussion, "the area is marked out by the circumstances, not the
circumstances by the area"[64].

In his judgment, Higgins J. said:--"There is not one rate of excise for Queensland and another for
West Australia, nor is there one set of conditions of exemption for Tasmania and another for
Victoria. Each manufacturer is to be treated on his own merits; and all the four bases for exemption
are applicable to all manufacturers, wherever they are found in Australia"[65].

In Cameron's Case[66], Isaacs J. applied these principles. He said:--

Stock in Queensland and stock in New South Wales are, by reason solely of their State situation,
"treated differently," by the mere fact that different standards are applied to them respectively. It
does not matter whether those legal standards are arbitrary or measured, whether dictated by a desire
to benefit or to injure, the simple fact is they are "different," and those different legal standards
being applied simply because the subject of taxation finds itself in one State or the other there arises
the discrimination by law between States which is forbidden by the Constitution.

It is clear from these principles laid down in Barger's Case[67] and applied in Cameron's Case[68]
that, if the Commonwealth Parliament granted an exemption from tax to all manufacturers who sold
the excisable goods in (say) New South Wales, what Isaacs J. calls "the constitutional injunction" of
sec. 51 (ii.) would have been disobeyed. Equally in case of income taxation, if an exemption had
been granted to all Australians who were resident in New South Wales. In neither case would it have
been an answer that, in theory, every manufacturer could have obtained the exemption by restricting
his sales to New South Wales, and every income taxpayer resident elsewhere could have changed his
residence to that State. In neither case, to use the language of Isaacs J. is the "differentiation ...
dependent on natural or business circumstances"[69]; on the contrary, it is entirely dependent on the
factor of locality because it is locality. In neither case do the particular circumstances govern or
determine the scope of immunity or exemption: immunity or exemption results solely from a
consideration of State boundaries.

It is hardly likely that this court will ever be called upon to give its judgment upon instances so
plain as those illustrated; where the exemption from tax is granted upon a State basis, and where the
tax is not collected from the exempted persons or upon the exempted goods.

A second type of discrimination arises where the tax is imposed without discrimination, but
provision is made in the assessment Act for refunding the tax or a portion thereof to those taxpayers
who (to pursue similar illustrations) are resident in New South Wales, or to those taxpayers who
manufacture the excisable commodity in Victoria or to those taxpayers who sell the commodity in
South Australia. In all such cases, the taxing scheme constituted by the rates Act and the assessment
Act would just as clearly infringe the injunction of sec. 51 (ii.). True, the Commonwealth would
collect from all taxpayers alike; but it would refund the tax solely because of considerations
applicable to a single State.

In all such cases, moreover, the fact that the provision for refunding would require an appropriation
of Commonwealth funds would not be material. Considered by itself, a provision authorizing the
expenditure of money would not be a provision with respect to taxation. Considered as part of the
taxing scheme, provisions authorizing refunds of tax are provisions in relation to taxation, and are
always included in the tax assessment Act.

It needs little imagination to visualize that in all these cases, the representatives elected to the
Federal Parliament from the favoured State would view with equanimity, if not with enthusiasm,
such a differentiation in the incidence and burden of Commonwealth taxation; but that is the very
possibility which sec. 51 (ii.) was designed to avert; for by various combinations of State interests,
some States could be greatly advantaged, and other States seriously disadvantaged by such taxing
schemes. In such cases at least, the aphorism of Chief Justice Marshall would apply. The power to
tax would be the power to destroy.

I shall now turn to the legislation of the Commonwealth which is said to infringe sec. 51 (ii.). The
six Commonwealth Acts here in question (Acts Nos. 48 to 53 inclusive) all became law on the same
day (2nd December, 1938). On the same day, a Tasmanian Act (No. 40 of 1938) also became law. It
will appear that in all seven Acts there was a concurrence, not only of time, but of subject matter
and purpose.
Dealing first with the Commonwealth Acts, we find that three of them (Nos. 49 to 51) impose
taxation upon flour, No. 49 upon flour manufactured in Australia, No. 50 upon flour held in stock
on December 5th 1938, and No. 51 upon flour imported into Australia. Portion of Act No. 51 and
the whole of Act No. 52 were part of the same legislative scheme, and imposed a tax upon wheat
exported from Australia and wheat grown in Australia and sold to a wheat merchant. But these taxes
upon wheat were to operate only in the event of a considerable increase in the price of wheat. That
event has not yet happened; the main object of the scheme having been to increase to a "stabilized"
level the effective price of wheat in Australia.

Further, the Tasmanian Act, No. 40 of 1938, relates only to persons who have paid the flour tax
imposed by the Commonwealth Acts Nos. 49 to 51 inclusive.

Each of the Commonwealth Acts imposing taxation upon flour incorporates most of the provisions
of the Commonwealth Act No. 48, i.e., the Flour Tax (Wheat Industry Assistance) Assessment Act,
which provides for the collection and recovery of the various taxes, for the administration of the
taxing scheme, for certain exemptions (such as flour for use in the Northern Territory) and for
refunds of tax, e.g., in relation to flour upon which tax has been paid but which subsequently
becomes exempt from tax because (say) consumed in the Northern Territory: See, e.g., Act No. 48,
secs. 14 (1) (d) and sec. 30.

The crucial point of the present case is conveniently illustrated by this exemption from flour tax and
the creation of the ancillary right to refund in the case of flour consumed in the Northern Territory.
That Territory is not a State and is therefore outside the prohibition of sec. 51 (ii.). But if such a
provision had been applied in favour of the State of Tasmania or if the Northern Territory were a
State, then it is elementary that a discrimination contrary tosec. 51 (ii.) would have been enacted by
the Commonwealth.

If such an immunity or exemption was part of the Commonwealth's scheme of legislation, it could
have been expressly provided either in the taxing Act, or in the assessment Act, that in case of flour
consumed in the State of Tasmania:--(a) the flour tax was to be levied at the rate of only (say) 8.5
per cent of the rate levied upon flour consumed in the other States of Australia (8.5 per cent is taken
because where the flour tax is levied at the rate of £5 17s. 6d. per ton, flour for consumption in
Tasmania is in substance levied at the rate of only ten shillings per ton); or (b) the taxpayer was to
be granted a formal exemption of 91.5 per cent of the tax otherwise payable; or (c) the taxpayer,
though not granted a formal exemption as in (b), was to become entitled to a refund of 91.5 per cent
of the tax already paid by him, the Commonwealth providing the necessary funds from the proceeds
of the flour tax and payment being made to the taxpayer by some person designated by the
Commonwealth of Australia.

If any one of the three courses mentioned had been adopted, the fact of unconstitutional
discrimination would have been plainly evident. But a parliamentary draftsman would naturally
shrink from so open a defiance of constitutional requirements. Therefore precisely the same result
was sought to be achieved by a slight alteration in the modus operandi. Instead of adopting any one
of the three methods above specified, the draftsman, having several convenient precedents at hand
in legislation passed in 1934 and 1935, decided upon a slight variation of method (c) above
specified.

The Commonwealth was to hand over to another authority approximately 91.5 per cent of the
proceeds of the tax collected by the Commonwealth upon flour consumed in Tasmania, and such
authority was to repay to each taxpayer affected 91.5 per cent of the tax already paid by him upon
flour consumed in Tasmania. Inasmuch as this rebate or remission or exemption would operate for
the benefit of Tasmanian consumers, it was decided to select the State of Tasmania itself as the
proper and convenient "authority" for the purpose of acting as the Commonwealth's conduit pipe for
the refund of Commonwealth tax. Of course, the Commonwealth Deputy Commissioner of Taxation
in Tasmania or a private person might have been chosen to act: but those responsible thought it
better to follow the less direct but very convenient method already devised by those who were the
Commonwealth's legal advisers in the years 1934 and 1935.

During those years, on three separate occasions, legislation was passed by the Commonwealth and
by the State of Tasmania which was intended to secure, and did secure, for Tasmania special
treatment in relation to the flour tax then imposed and collected under the authority of the
Commonwealth Parliament. Those occasions were as follows:--

(I.)

On 12th December 1933 the Commonwealth Parliament enacted No. 42 of 1933. The Act provided
for assistance to wheat-growers. But sec. 12 required a special grant to Tasmania "in each month
during which a tax is, under any law of the Commonwealth, imposed upon flour."

On 22nd December 1933 the State of Tasmania enacted No. 31 of 1933, called the Flour Tax Relief
Act. It required the payment into a special account of the moneys received by way of "special grant"
under the Commonwealth Act No. 42 of 1933, and by sec. 2 (3) directed the treasurer to pay out of
the special account the full amount of the flour tax paid in respect of flour consumed in Tasmania;
the money was payable either to the taxpayer who paid the Federal tax in Tasmania, or to the
importer who imported such flour after tax had been paid on it elsewhere in Australia.

(II.)

A year later, on 17th December 1934, the Commonwealth Parliament passed Act No. 59 of 1934,
which by sec. 9 granted to Tasmania a certain sum for each month during which the Commonwealth
tax on flour was being collected. Then, on 4th January 1935, the Tasmanian Parliament passed Act
No. 89 of 1934. Again, that Act created a special account into which the special Commonwealth
grant was to be swept. The procedure for obtaining refunds of the tax or "relief in respect of the
flour tax" was slightly altered. A certificate had to be obtained, and there was no provision that the
whole of the tax was to be refunded.

(III.)

A year later still, on 9th December 1935, the Commonwealth Parliament passed Act No. 73 of 1935.
On this occasion, the Act was called Tasmania Grant (Flour Tax) Act, a name which sufficiently
evidenced the purpose of the Commonwealth differentiation in favour of taxpayers wherever the
flour came to be consumed in Tasmania. Otherwise, the Act practically repeated the terms of the
relevant sections of the two previous Acts.

The Tasmanian Act, No. 71 of 1935, merely amended and continued the Act No. 89 of 1934.

By the end of 1935, therefore, the procedure was becoming well settled. It was desired to give
Commonwealth taxpayers exemption from flour tax if the flour was to go into use in Tasmania. The
Commonwealth would collect the tax in all the States including Tasmania. Then it would provide a
special grant to Tasmania for flour tax purposes; and a refund or a rebate would be paid by
Tasmanian officials to the Commonwealth taxpayers. The result was that Tasmania received no
subvention towards ordinary revenue purposes, the Commonwealth lost the benefit of the tax
collected in respect of flour consumed in Tasmania, and those who were called upon to pay such tax
received a rebate or refund amounting to all or a very large portion of the tax. In substance and
reality, the Commonwealth saw to it that a special section of its taxpayers were granted an
exemption, that exemption proceeding solely by reference to the benefiting of Tasmanian taxpayers
and Tasmanian consumers. The Tasmanian legal apparatus operated, as it was intended to operate,
merely as the means selected for returning to Commonwealth taxpayers moneys which
Commonwealth officers had already collected from such taxpayers.

The evidence shows that this scheme of differential treatment was operated in a very simple manner.
On every day, the Tasmanian officers received from the Commonwealth taxation department in
Tasmania returns showing the name of the taxpayer and the amount of tax paid by him. At first, the
Tasmanian officials paid to each person entitled every penny of the tax which had been paid to the
Commonwealth. Later, owing to a failure to estimate with precision, they paid at the rate of £2 4s.
6d. per ton out of the total tax of £2 12s. 6d. per ton. The Tasmanian officials notified the
Commonwealth taxpayers through the press and otherwise that the refunds were to be made: further,
upon payment over the counter, the Commonwealth tax officials advised the taxpayers as and when
they paid, that they should apply for refunds to the Tasmanian officials.

This evidence shows the general nature of the scheme. Normally, payments by taxpayers to the
Commonwealth taxation authorities cannot be revealed to other State officials without serious
infringement of the secrecy required by the Commonwealth taxation laws. On this occasion, there
was no occasion for secrecy. The Commonwealth officials still collected the moneys, but they knew
and intimated that refunds would be made on application to another office round the corner. The
Commonwealth's device was, to turn the phrase, that of sauter pour mieux reculer.

In order to see how closely the methods of 1934-1935 were followed in the present scheme, I now
turn to the enactment of the Commonwealth, which provided for Tasmania the fund out of which
refunds of tax were to be payable.

The Commonwealth Act is No. 53 of 1938, called the Wheat Industry Assistance Act. Its recitals are
of great importance, but I postpone consideration of them for the moment. It establishes a fund into
which all moneys collected under the assessment Act are to be paid. In the contingency (which at
the commencement of the scheme was deemed very unlikely) of the price of wheat exceeding the
"stabilized price," so that moneys would be received from the tax upon wheat grown in Australia, a
wheat tax account was to become a reality, sec. 6 (4). There is also a "wheat industry special
account," established for a purpose which is not here material.

Omitting these two separable accounts, the principal fund, called the wheat industry stabilization
fund, is devoted to the making of payments to the States for distribution to the wheat growers
thereof in proportion to the production and sale of wheat in the respective States. Of course, an
essential feature of the stabilization scheme is to tax flour at the point of manufacture so that the
burden of the tax will be passed forward to the ultimate consumer in the shape of increased prices of
bread; the proceeds of the tax being devoted to the wheat producer who is producing on an
unprofitable basis. There is no constitutional objection to the Commonwealth's taxing one class (the
consumer) for the benefit of another (the producer); indeed, uniform bounties on production or
export are placed within the Commonwealth's exclusive jurisdiction by sec. 51 (iii.) and sec. 90. But
the Commonwealth's taxing power must not be exercised in conflict with sec. 51 (ii.).

Before the wheat producers (through the States) become entitled to any payment under secs. 6 (6)
and (7) of the Act, the fund is first charged with (a) refunds of tax under the assessment Act and the
administrative expenses of the Act, and (b) the payments to Tasmania provided for under sec. 14 of
this Act. It is curious, and perhaps significant, that in this way the Commonwealth grouped with
refunds of tax (payable, e.g., in relation to flour consumed in the Northern Territory which is
exempt from tax) the special payments under sec. 14, the effect of which is to provide for refunds of
tax in relation to flour consumed in Tasmania.

Sec. 14 provides that in addition to the amounts payable to Tasmania for the benefit of its wheat
growers (on the same footing as all other States and all Australian wheat growers) a special yearly
grant is to be paid to Tasmania, the amount to be determined by the Commonwealth Minister. It is
also provided that:--(1) This annual amount is not to be greater than the amount by which the tax
collected in respect of flour consumed in Tasmania exceeds the payments Tasmania may receive
either as bounty for her wheat growers under sec. 6 (7) or for distressed growers under sec. 7; (2) If
no flour tax is collected by the Commonwealth, the special grant under sec. 14 ceases to be payable.

It is to be noticed that (1) no State other than Tasmania receives money under sec. 14; (2) the
moneys receivable by Tasmania under secs. 6 and 7 of the Wheat Industry Assistance Act would be
very small compared with the amount of flour tax collected in respect of Tasmanian consumption of
flour which is subject to tax. On 19th January 1939 the Federal treasurer estimated that the two
annual sums amounting to £6,205 and £124,400 respectively. It follows that the sec. 14 grant to
Tasmania is, and probably will remain, about nineteen times the moneys payable to Tasmania under
secs. 6 and 7.

It has been suggested that, in respect of wheat production, Tasmania stands apart from the other five
States, and that the remission of flour tax is to be explained on the theory that if one adds the large
benefit to Tasmania of the flour tax grant (sec. 14) to the very small benefit of the bounties to
Tasmanian wheat growers (secs. 6 and 7), one will find that, speaking very broadly, Tasmania may
be said to receive a corresponding benefit to the other States. I think that the comments to be made
are:--(1) Sec. 51 (ii.) cannot be infringed because the State in favour of which taxation
discrimination is shown gets little or no benefit from the funds provided by the taxation scheme; (2)
while Tasmania is not a great wheat-producing State, neither is Queensland. The area of Queensland
is approximately twenty-five times as great as that of Tasmania, and its population is less than five
times as great. The area sown for wheat in Queensland is nineteen times as great as that in
Tasmania, and the actual production is only seven times as great. Therefore a case for differential
treatment could be made as much in favour of Queensland as of Tasmania. In truth, there is nothing
in the Commonwealth scheme of distributing moneys derived from the flour tax which ensures any
equality of the States even in economic result; to say nothing of the extraordinary theory that
because (say) New South Wales is a great wheat-producing State, the large consuming population of
that State should pay more for their flour and their bread than the small wheat-producing States.

On 2nd December 1938 the Tasmanian Flour Tax Relief Act was passed. It recited that the State was
to receive grants during any period in respect of which a tax is imposed upon flour. It provided that
the Secretary for Agriculture "may" certify to payment of flour tax, and that the Secretary was to
determine the amount of "relief" payable to any Commonwealth taxpayer in respect of flour
consumed in Tasmania.

The operation of sec. 14 of the Wheat Industry Assistance Act 1938 (Commonwealth) and the
Tasmanian Flour Tax Relief Act 1938 is substantially the same as under the previous legislation. It is
to be noted, however:--(1) While sec. 14 in terms does no more than fix a maximum grant, the
Minister has in fact granted up to the maximum, though the actual figure has to be estimated and
adjusted from time to time and it varies in accordance with the rate of flour tax, which is also
adjusted from time to time in accordance with the prevailing price of wheat; (2) under sec. 10 (b) of
the Commonwealth Act, the Commonwealth has reserved power to suspend payments where the
consumers are not adequately protected. Therefore, if Tasmania failed to use the sec. 14 grant for
the benefit of taxpayers and indirectly of Tasmanian consumers, the Commonwealth could suspend
the grant altogether.

Under the Tasmanian Flour Tax Relief Act 1938, the Secretary for Agriculture has determined that
for the present the amount of the refund to be made to taxpayers will be the full amount of the flour
tax paid to the Commonwealth less ten shillings per ton on the taxable amount of flour. This
determination was made "mentally," but it is to endure for nine months. There have been
fluctuations in the rate of the flour tax, but the refund has in all cases been the amount of the tax
paid, less ten shillings per ton. The ten shillings per ton was taken off because Tasmanian officials
estimated that the sec. 14 grant would fall short of the total tax collected in respect of Tasmanian
consumption by an amount corresponding to such deduction. However, when the flour tax was £5
17s. 6d. per ton, the taxpayer received back £5 7s. 6d., i.e., approximately ninety-one per cent of the
flour tax paid. The ninety-one per cent is subject to review, and may increase: in substance, the
Tasmanian officials consider themselves, and correctly so, chosen instruments for repaying so much
of the tax on flour consumed in Tasmania as can be repaid from the moneys granted by the
Commonwealth under sec. 14.

The main contention of the Commonwealth is that Tasmania's decision to use the sec. 14 grant for
flour tax relief had nothing whatever to do with the Commonwealth's scheme of taxation. But this is
contradicted by the fact that not only was the Tasmanian legislation put into force simultaneously
with that of the Commonwealth, the passing of each being in fact, if not in form, contingent upon
the passing of the other; but every executive determination of the Commonwealth Minister under
sec. 14 has been come to with the knowledge and upon the footing that the Commonwealth
taxpayers described in the Tasmanian Act will obtain a refund from the moneys granted to
Tasmania. It is plain that the Minister acted within the scope of the statutory power conferred upon
him; and it is impossible for the Commonwealth legislature to evade overriding constitutional
guarantees like that contained in sec. 51 (ii.) by authorizing and requiring the Commonwealth
executive to play a vital part in the Commonwealth's plan of taxation discrimination: Compare, for
instance, what Lord Atkin said in James v. Cowan[70].

Here I would like to quote from a decision of the Judicial Committee delivered by Lord Macmillan
in Attorney-General for British Columbia v. McDonald Murphy Lumber Co. Ltd.:--

Now, in the present case, the real nature of the tax in question is transparently obvious. While the
statute sets out to impose a tax on all timber cut within the Province it proceeds in the relative
schedules to reduce the tax by rebate to an illusory amount in the case of timber used in the
Province, leaving it to operate to its full effect only on timber exported. The best evidence that the
tax was intended to be to all intents and purposes an export tax is afforded by the fact that since
1914 the minute rebated tax on timber and used within the Province has not been collected. Indeed,
the tax has come to be known as "the timber tax on export," and is so described in the final report of
the Royal Commission of inquiry on Timber and Forestry, 1909-1910, extracts from which are
among the exhibits in the case[71].

The above passage illustrates the principle that it is necessary to consider the existence and extent of
a rebate of a tax in order to determine the real nature of the tax and whether it operates without
discrimination.

But the Commonwealth's intention to discriminate in favour of Tasmania is even more clearly
revealed by the history of the legislative scheme.

The defendant maintains that, from the first, the legislative scheme to which the Commonwealth
adhered included as an essential feature thereof a condition that, in relation to flour to be consumed
in Tasmania, an exemption which would enormously lighten both the incidence and burden of flour
tax would be provided in accordance with the modus operandi adopted in 1934 and 1935. The
defendant produced documents which support this contention: no question as to their accuracy is
raised: but the plaintiff contends that in such cases as the present no extrinsic evidence is admissible.
The objection resembles that of the Province of Alberta in the recent case of Attorney-General for
Alberta v. Attorney-General for Canada[72] to the effect that "the scope and effect of a legislative
measure is to be ascertained by an examination of its actual provisions, and it is only when
expressions used in it are ambiguous or imprecise that reference may be made to extraneous
material. A statute expressed in unambiguous and precise terms cannot properly be held invalid on
the grounds that another statute of the same legislature is invalid and that a common intention
underlies both"[73].

In considering the question of admissibility of evidence, a fundamental distinction has to be drawn
between cases where the court has no function committed to it except that of interpreting a statute,
and cases where, in accordance with a constitutional charter, the court has to determine whether
there has been an infringement by the legislature of some overriding constitutional provision. In the
former case, the court's function is to interpret the language which the legislature has employed,
though, even there, the court is not bound to shut its eyes to public general knowledge of the
circumstances in which the legislation was passed.

In the latter case, the court may entirely fail to fulfil its duty if it restricts itself to the language
employed in the Acts which are challenged as unconstitutional. As the Privy Council has said:
"Where the law-making authority is of a limited or qualified character, obviously it may be
necessary to examine with some strictness the substance of the legislation for the purpose of
determining what it is that the legislature is really doing" (per Duff J., Attorney-General for Ontario
v. Reciprocal Insurers[74]).

In such cases the court is not to be over persuaded by the appearance of the challenged legislation.
As a rule there is little need to travel beyond the words used by the legislature. Thus, under the
guise of an expropriation by a State of a commodity within its borders and a provision enabling the
person expropriated to repurchase the commodity at a higher price, the legislation may itself reveal
that a forbidden method of taxation is being resorted to (Attorney-General (N.S.W.) v. Homebush
Flour Mills Ltd.[75]). In that case, this court applied the well-known principle that in relation to
constitutional prohibitions binding a legislature, that legislature cannot disobey the prohibition
merely by employing an indirect method of achieving exactly the same result.

But it is often necessary to produce evidence in order to determine whether the executive has
employed for one purpose a power which can only be lawfully exercised for another (James v.
Cowan[76]). On such occasions, the field of admissible evidence is widened.

A similar rule applies although no executive action is involved or questioned. The issue may be
whether legislation which at first sight appears to conform to constitutional requirements is
colourable or disguised. In such cases the court may have to look behind names, forms and
appearances to determine whether or not the legislation is colourable or disguised. This is a
fundamental principle applicable to the Constitutions of the United States and Canada as well as to
that of the Commonwealth. As Lord Maugham said recently: "It is not competent either for the
Dominion or a Province under the guise, or the pretence, or in the form of an exercise of its own
powers, to carry out an object which is beyond its powers and a trespass on the exclusive powers of
the other" (Attorney-General for Alberta v. Attorney-General for Canada[77]).

The same principle is also applicable to constitutional guarantees or prohibitions such as those
contained in sec. 51 (ii.) and sec. 92 (to take two examples only) of the Commonwealth
Constitution. Sec. 51 (ii.) proclaims that the great power of taxation, if exercised, must be exercised
"so as not to" create a described condition of affairs. If that condition may be produced in various
ways and by devious methods, it may become the duty of the court to examine closely whether the
legislature has deliberately set out to produce the forbidden result although by a somewhat indirect
method. In principle there is no reason whatever why public announcements of governmental
policy, official governmental records and communications, and even the records of the proceedings
in parliament, including records of debates, must necessarily be excluded from the field of relevant
evidence. In special circumstances, some of this material may afford strong, even conclusive,
evidence as to the scheme, object or purpose of the statute, although, as has been said: "Generally
speaking," however, "the speeches of individuals" (in the legislature) "would have little evidential
weight"[78]. A valuable discussion on the topic of the admissibility of extrinsic evidence in relation
to constitutional interpretation is contained in an article by Dean MacDonald (Canadian Bar
Review, February 1939): See also Columbia Law Review, vol. 36, p. 283, and Harvard Law Review,
vol. 38, p. 6.

From the Alberta and other cases it is established that:--

(i)

The court may have to examine the operation and effect of the impugned legislation. For that
purpose evidence may be admissible (Attorney-General for Alberta v. Attorney-General for
Canada[79]).

(ii)

For the same purpose, the court "must take into account any public general knowledge of which the
court would take judicial notice" (Attorney-General for Alberta v. Attorney-General for Canada[80]).

(iii)

The court may consider other Acts passed by the legislature whose enactment is being
questioned[81].

(iv)

In determining "the object or purpose of the Act in question" the court must consider "matters of
which the court would take judicial notice ... and other evidence in a case which calls for it"
(Attorney-General for Alberta v. Attorney-General for Canada[82]).

(v)

It is legitimate to look at legislative history "as leading up to the measure in question"[83] in order
to determine whether the measure "instead of being in any true sense" in furtherance of a permitted
purpose is "part of a legislative plan" to carry out a purpose which is not permitted (Attorney-
General for Alberta v. Attorney-General for Canada[84]).

(vi)

In order to ascertain "the object and effect" of the Acts which are "part of a general scheme of
legislation" it is proper to "look at the history of the legislation passed in furtherance of the general
design" (Re Alberta Legislation[85], per Duff C.J.).

(vii)

In applying the doctrine of general knowledge, the court's "duty as judges" may be "to take judicial
notice of facts which are known to intelligent persons generally," and to reject suggested arguments
if they "would be incontinently rejected by anybody possessing the most rudimentary acquaintance
with affairs" (Re Alberta Legislation[86]).

(viii)

In relation to taxation Acts, the court may, in order to ascertain "the real nature of the tax" look at its
system of rebates, the reports of public investigations, even the name by which the tax "has come to
be known" (Attorney-General for British Columbia v. McDonald Murphy Lumber Co. Ltd.[87]), and
as to report of a royal commission see Attorney-General for British Columbia v. Attorney-General for
Canada[88], per Lord Atkin.

In attempting an analysis of the present scheme of taxation of the Commonwealth, I have examined
it with relation to the actual operation and effect of the legislation. This course is warranted by
proposition i (supra).

It will next be shown that the Commonwealth Acts are part of a general scheme or plan of
legislation. To prove this fact, extensive recourse to the so-called "extrinsic" evidence is not
required, for in the preamble to the Wheat Industry Assistance Act, the validity of which (as part of
a scheme of discriminatory taxation) is challenged, the Commonwealth Parliament has itself
declared (a) that at a conference between the Commonwealth and the States held on 29th August
1938 "the co-operation of the Government of the Commonwealth was sought in putting into
operation a scheme to ensure to wheat growers a payable price for wheat," (b) that it was
represented at the said conference that the scheme would require "that a tax be imposed on flour
sold for home consumption in Australia" and that the proceeds thereof should be distributed among
wheat growers, and (c) that the Commonwealth agreed to "co-operate in the said scheme."

In view of these recitals, a reference to the conference of 29th August 1938 between the Prime
Minister and the Premiers of the States is not only permissible but necessary in order to identify "the
scheme" to which the Commonwealth was adhering by giving it legislative effect. At the
conference, the Premier of New South Wales stated to the Prime Minister that, on 26th August, the
Premiers had "unanimously arrived at certain definite conclusions" as follows:--

(1)

That this conference affirms the necessity of action being taken to ensure to wheat growers a
payable price for their product.

(2)

That, as a first step of urgent national importance the Governments of the Commonwealth and the
States should take such immediate joint action in their respective jurisdictions as is necessary to
implement a home-consumption-price plan in the season 1938-1939 and following seasons: such
plan to be based on an equalization levy on wheat or flour (used for home consumption) collected
under the excise power of the Commonwealth.

(3)

That such a proposal should also ensure a stable home-consumption price of flour and bread in the
various States at a level fair to both producer and consumer based on a home-consumption price of
4s. 8d. a bushel at country sidings for wheat, or its equivalent, special arrangements to be made (as
on former occasions) to meet the special circumstances of Tasmania.

(4)

That it is of vital importance that such proposal be of a long-range character, and placed on a sound
legal, financial and commercial basis from the outset, and not left vulnerable to legal challenge or
dependent on voluntary co-operation.

(5)

That conference is unanimously of opinion that it is impossible to devise any practicable plan based
on voluntary co-operation of growers, millers and merchants.

(6)

This conference has received several proposals from farmers' organizations for the institution of a
permanent price equalization fund built up by contributions from the Commonwealth and wheat
growers. The conference is of opinion that they are worthy of detailed examination, and as they
involve Federal finance, this conference submits them to the Federal Government for consideration.

For present purposes, the crucial part of the scheme was the agreement, stated in head 3 above, viz.,
"special arrangements to be made (as on former occasions) to meet the special circumstances of
Tasmania." The Premier of New South Wales, as spokesman for all the Premiers, explained this vital
provision as follows:--

I repeat that State action would involve the fixing of a home-consumption price for wheat. We
exempt from the influence of that fixation wheat used for the poultry industry, and give a special
exemption in respect of Tasmania, which does not produce wheat extensively. Similar special
arrangements have been made heretofore, and we feel that in order to make the proposals operate
fairly in their incidence throughout the Commonwealth, an exemption should be made in respect of
that one State.

At a later stage in the conference, the Premier of Tasmania, also addressing the Prime Minister of
Australia, who (as is well known) was a representative of Tasmania in the Federal Parliament,
said:--

Tasmania is in entire agreement with the views expressed by Mr. Stevens, and supplemented by his
colleagues. As I concur in these views I do not think that any useful purpose would be served by
reiterating them. You, sir, know the position of Tasmania just as I know it myself. This position was
recognized in 1934-1935, and Mr. Stevens has this morning again acknowledged the State's special
circumstances. Tasmania is the only State which has to import the whole of its wheat for flour-
milling purposes.

Thus we see that an important part of the scheme which the States were proposing to the
Commonwealth and which the Commonwealth subsequently accepted was that special arrangements
were to be made (as on former occasions) to meet the special circumstances of Tasmania. The
"former occasions" referred to the schemes of 1934 and 1935 by which flour tax, although collected
by the Commonwealth on all flour consumed in Australia, was refunded to Tasmania and handed
back to taxpayers and others in all cases where the flour was consumed in Tasmania. In 1938, the
spokesman of the State Premiers described what was done in 1934-1935 as a "special exemption in
respect of Tasmania" and as "an exemption ... in respect of that one State." What was to be done in
1938 was to be a "special arrangement ... as on former occasions." In other words, the
Commonwealth was being asked to agree to a scheme of taxation from which the State of Tasmania
would obtain a special exemption.

We have already observed that, in the present year, the scheme of exempting Tasmanian consumed
flour corresponds in all essentials to the scheme of 1934-1935. Although it may not be strictly
necessary, I now furnish several additional references in order to make clear the nature of the
"arrangements" made by the Commonwealth in 1934-1935 which the Commonwealth agreed to
reproduce in 1938.

(1)

In 1934-1935, the Federal Commissioner of Taxation was authorized by the Commonwealth to
disclose to Tasmanian officials information to assist them in making refunds in respect of
Tasmanian consumed flour only and to prevent millers from retaining the refund if the flour went
into consumption in any of the other States.
(2)

The practice in 1934-1935 was then stated on behalf of Tasmania as follows:--

In order to ensure that the flour in respect of which the refunds of tax are made is consumed in
Tasmania and not exported, the Department takes a bond from the taxpayers conditioned on the
flour being consumed in Tasmania. So long as the flour in respect of which the refund of tax is
made is consumed in Tasmania, the Department takes the view that it is not concerned as to the
manner in which the flour is ultimately consumed, whether in the form of bread or biscuits; but it
takes precautions to see that none of the flour which is in effect free of tax is exported from the
State.

(3)

On 12th June 1934 the Tasmanian Premier in a letter to the Prime Minister said, inter alia: "So far
as the State Government is concerned, the flour tax can be refunded only from amounts received
from the Commonwealth for that implied purpose." (Italics are mine.)

(4)

On 11th December 1934, in connection with the legislation then being prepared to impose a flour
tax, the Tasmanian Premier telegraphed to the Commonwealth Prime Minister: "Would appreciate
urgent advice as to precise terms of amendment proposed by Commonwealth providing for payment
of grant to this State to be applied towards refund of flour tax."

(5)

In December 1935, the Prime Minister and the Premier of Tasmania exchanged the following
telegrams in relation to the legislation enacted in that month and previously referred to in this
opinion:--

From Prime Minister to Premier:--"Legislation now before Parliament provides for continuance of
present flour tax. It is proposed to submit a Bill to Parliament before it rises on Friday providing for
payment to your State of £4,300 per month during period of continuance of tax commencing from
January 7th to enable rebates at present rate of £2 1s. per ton to be continued by your Government. I
shall be glad of your assurance that in the event of this legislation being passed rebates will be
continued by your Government at present rate during currency of tax. Would appreciate reply by
noon Thursday 5th. I may add that Act was passed by Parliament to-day authorizing payment not
exceeding £4,500 for period up to January 6th."

From Premier of Tasmania to the Prime Minister:--"Reference your letter-gram of to-day's date
flour tax legislation. My Government undertakes that in event of Bill being passed flour tax rebates
will be continued at present rates during currency of tax provided that payment to this State of
£4,300 per month is made during period of continuance of tax."

This evidence is admissible to show the clear understanding by the Commonwealth in 1934-1935
that the purpose of the special grants made and to be made to Tasmania was to furnish Tasmania
with the money to enable rebates to be made where the flour had been consumed in Tasmania. The
evidence as a whole clearly establishes that the "special arrangements" made "on former occasions"
were arrangements by which the Commonwealth, without making a direct and specific exemption,
paid to Tasmania moneys to enable refunds of tax to be paid to Commonwealth taxpayers in respect
of flour consumed in Tasmania. The Acts, the executive action taken, the modus operandi and the
correspondence all show that the Commonwealth's purpose in making special payments to the
Tasmanian Government was to enable flour consumed in Tasmania to be exempt from tax, in whole
or in part, while flour consumed elsewhere in the Commonwealth was to bear the full burden of the
tax.

Even in relation to the present legislative scheme, there is evidence which strengthens the inference
that the object and purpose of the Commonwealth's special grant to Tasmania under sec. 14 was to
refund tax wherever the taxed commodity was consumed in Tasmania. On 30th November 1938,
two days before both the Commonwealth and Tasmania passed their respective Acts, a telegram
from the Premier of Tasmania to the Prime Minister of the Commonwealth referred to clause 14
(which became sec. 14) of the Wheat Industry Assistance Bill. At that time, the clause fixed the
grant to Tasmania by reference to the amount of flour tax "collected" in Tasmania. The Premier of
Tasmania demanded that the Commonwealth legislation should conform to the precedents of 1934
and 1935 and that the amount of the special grant should be determined by reference to the amount
of flour tax collected "in respect of flour consumed in Tasmania." The telegram said:--

If amount of rebate of flour tax is to be based on collections in Tasmania difficult questions will
arise as to inclusion of imported flour for purposes of flour tax remission. Commonwealth
Government has insisted on inclusion of imported flour and we agree that this is desirable. If rebate
is to be made in respect of imported flour under present proposal the amount of rebate will fall short
of the amount of tax by considerable sum. It will be remembered that my concurrence in plan
agreed on at Premiers' Conference and Conference of Commonwealth and State Ministers was
conditional on same treatment being given to this State as in 1934 and 1935 when amount of special
grant for flour tax remission was based on consumption of flour in this State. I therefore urge
Commonwealth Government to alter clause 14 of Bill so as to reproduce same results as achieved
by the Wheatgrowers Relief Act 1934-1935, sec. 9. Wheat Products Bill is now in Legislative
Council and can be disposed of this week if satisfactory arrangements are made with respect to
remission of flour tax. If, however, provisions of Wheat Industry Assistance Bill are not altered I
can give no assurance that price-fixing Bill will be passed.

It is to be observed that every word and phrase of this telegram is consistent with, and consistent
only with, the conclusion that both the Commonwealth and Tasmania recognized the real purpose of
the "special grants" made and to be made by the former to the latter. The demand made by Tasmania
was acceded to by the Commonwealth, and clause 14 was altered so as to conform to the precedents
of 1934 and 1935.

From whatever angle the matter is approached, the inference is irresistible that sec. 14 of the Wheat
Industry Assistance Act 1938 was passed by the Commonwealth with the object of enabling flour
consumed in Tasmania to obtain a practical exemption from flour tax by means of (a) a "grant" to
Tasmania out of the fund provided by the receipts from the flour tax, (b) employment by Tasmania
of the "grant" for the purpose of refunding the tax to those who had been or would be called upon to
pay it.
Here it is convenient to deal with several contentions made on behalf of the plaintiff that sec. 14 of
the Wheat Industry Assistance Act is not a law with respect to taxation because it deals with the
disbursement of Commonwealth moneys. No doubt it does authorize the disbursement of moneys.
But the question whether sec. 14 is a law with respect to taxation depends upon the prior question
whether the real purpose of sec. 14 is to effect a refund of part or all of the tax. If so, sec. 14 is a law
with respect to taxation just as much as are provisions with respect to refunds of tax which in
themselves merely authorize disbursement of moneys and which are usually contained in tax
assessment Acts. In short, it is impossible to dissociate sec. 14 from the purpose which has been
stamped upon it by the Commonwealth's adherence to the scheme.

The same finding as to the true purpose of sec. 14 also disposes of the argument that, inasmuch as
sec. 96 enables the Commonwealth to make a grant of financial assistance and to make it to one
State only, sec. 14 is authorized by the Constitution itself. The broad answer to the argument is that
sec. 96 cannot be employed for the very purpose of nullifying constitutional guarantees contained
elsewhere in the Constitution. For instance, it was not and could not be contended that, in defiance
of sec. 92 which provides for inter-State freedom of trade and which binds Commonwealth and
State alike, the Commonwealth could make a grant (under sec. 96) of money to one or all of the
States for the express purpose of enabling the States to discriminate against inter-State trade, e.g., by
subsidising traders on condition that they did not engage in inter-State trade: or that, in face of sec.
99, which precludes the Commonwealth from enacting commercial laws which give a preference to
one State over another, the Commonwealth could grant moneys to one State for the express purpose
of enabling that State to subsidise traders engaged in inter-State trade on condition that they resided
in such State or employed a certain proportion of employees who belonged to trade-unions
registered in that State.

In these instances, the Commonwealth, while purporting to grant money to a State under sec. 96,
would in reality be authorizing the employment of its funds for the sole purpose of infringing
constitutional prohibitions; and it is clear that sec. 96 cannot be used as an instrument for such a
purpose.

Sec. 96 was referred to in the case of Victoria v. The Commonwealth[89], where the validity of the
Federal Aid Roads Act 1926, was affirmed by this court. The only substantial ground upon which its
validity was attacked was that inasmuch as road making was not a function committed to the
Commonwealth under sec. 51 of the Constitution, the Commonwealth could not impose a term or
condition upon its grant of money to a State that the money must be expended upon road making.
This argument was rejected.

The court held that the particular Act was not affected by sec. 99 of the Constitution which deals
only with laws of "trade, commerce or revenue." The Act did not relate to trade or commerce; and it
dealt with Commonwealth expenditure, not with its revenue. The decision does not even suggest
that the power under sec. 96 can be invoked for the very purpose of nullifying the prohibition of
discrimination in Commonwealth taxation laws which is enacted by sec. 51 (ii.).

Sec. 96 has been regarded as raising several difficulties. One of them is whether the power of the
Parliament to grant financial assistance was not terminated when the Braddon clause (sec. 87)
terminated. The words in sec. 96 are verbatim the same as those in sec. 87, and perhaps the court
should take judicial notice of the fact that the two sections were closely associated with each other
and may well have been intended to stand together and terminate together. The difficulty is
accentuated by the fact that if sec. 96 is read otherwise, and its operation ceases only when
parliament otherwise provides, this would seem to contemplate the possibility that one Parliament is
authorized to bind itself and its successors in a way which can hardly have been intended. However
that may be, it seems clear that sec. 96 cannot be relied upon in the present case.

It was also contended for the plaintiff that "the discrimination ... is the result of State action and
does not affect Federal legislation" and that even if the Tasmanian Flour Tax Relief Act is invalid,
sec. 14 is not invalidated. Again the answer depends upon whether sec. 14 is to be stripped of its
disguise. If its purpose is to establish taxation discrimination in favour of Tasmania, it is clearly
invalid. But the Tasmanian Flour Tax Relief Act is not thereby invalidated. The State of Tasmania is
not bound by sec. 51 (ii.) of the Constitution. All that happens is that the special grant under sec. 14
is unauthorized by law, so that there is nothing upon which the Tasmanian Act can operate. It is
erroneous to assume that the taxation discrimination is the result of the Tasmanian Act. It is the
result of the combined operation of the Commonwealth's imposition of flour taxes and the
Commonwealth's special grant to one State for the purpose of refunding the tax to Commonwealth
taxpayers who are associated with that one State.

The further contention that the taxing scheme is not legally binding on the Commonwealth or any of
the States is quite misconceived. The injunction of sec. 51 (ii.) regards such a question as irrelevant.
The injunction concerns itself solely with the operation of Commonwealth taxing laws. Do they, or
do they not, at the moment of their operation discriminate as laws between States? If yes, they
infringe sec. 51 (ii), whether or not the Commonwealth has made an arrangement or bargain to
enact them. The existence of the bargain or scheme is of importance, not as establishing a binding
legal bargain, but as evidencing the real nature of the legislation enacted in pursuance of the
scheme.

It has also been suggested that the decision of the Privy Council in Colonial Sugar Refining Co. Ltd.
v. Irving[90] is applicable to the present case. There it was contended that the Commonwealth
Excise Tariff 1902 was ultra vires of the Commonwealth Parliament upon the ground that sec. 51
(ii.) was infringed. Under that Act, an exemption from the duties imposed was granted in respect of
goods on which customs or excise duties had already been paid under State legislation passed before
the States powers on those topics was excluded. The scale of duties was not uniform throughout the
several States, and in the State of Queensland no excise duty at all had been imposed upon sugar. As
a result of such lack of uniformity "the exemption operated unequally on the traders and
manufacturers of the several States"[91]. It was argued that this inequality of consequence infringed
sec. 51 (ii.).

It is difficult to understand how, as a law, the enactment of the exemption (which applied equally to
all the States) could be regarded as affecting any discrimination between States. Similar legislation
has always been recognized as permissible. For instance, in estimating the Commonwealth estate
duty, deductions from the value of the estate of the amount of probate or succession duties payable
in any State have always been allowed and authorized by Commonwealth law. The fact that the
quantum of such duties may vary in the several States and that in one or more States they may not
be imposed at all would not make the Commonwealth law discriminate as a law. As the Privy
Council said, "the rule laid down by the Act is a general one, applicable to all the States alike, and
the fact that it operates unequally in the several States arises not from anything done by the
Parliament, but from the inequality of the duties imposed by the States themselves"[92].

Similarly, if the Commonwealth levied an excise on a commodity which in fact was being produced
in one State only, there would be no infringement of sec. 51 (ii.) so long as the Commonwealth tax
extended to the commodity wherever in Australia it was produced. As in the case of a constitutional
requirement of uniformity "what the Constitution commands is the imposition of a tax by the rule of
geographical uniformity, not that in order to levy such a tax objects must be selected which exist
uniformly in the several States" (Knowlton v. Moore[93]).

But the present taxing enactments of the Commonwealth stand on a very different footing, unless of
course the action of Tasmania in refunding tax to Commonwealth taxpayers was quite unrelated to
the enactment of the Commonwealth in making available to Tasmania portion of the moneys
collected from the imposition of the same tax. Upon the assumption that the object of sec. 14 of the
assistance Act is as has already been described, the discrimination established is not constituted by
mere unequal operation in the States through casual or accidental features of the laws of those
States; the case is one where discrimination is aimed at and achieved by the Commonwealth Act,
with the favoured State playing the subordinate role of executant of the Commonwealth's scheme
for refunding the tax. If this is the correct view of the legislation of the Commonwealth, the case of
the Colonial Sugar Refining Co. Ltd. v. Irving[94] is valuable by way of contrast only.

The legal result of all these considerations is clear. The relevant Commonwealth Acts have been
analysed in relation to (a) their necessary operation and effect, (b) the history of the scheme adopted
by the Commonwealth in 1934-1935, (c) the executive action taken by the Commonwealth Minister
under sec. 14 at a time when the Tasmanian Flour Tax Relief Act was already on the statute book,
(d) the recital in the Wheat Industry Assistance Act of the Commonwealth's co-operation with the
States in a certain scheme, (e) an analysis of the heads of the scheme so far as it was based on the
exercise by the Commonwealth of its powers of taxing flour, (f) an investigation of the meaning of
that portion of the scheme by which it was agreed that "special arrangements ... as on former
occasions" were to be made for Tasmania, and (g) a consideration of what the Commonwealth
Parliament and executive did on such "former occasions" as well as the preparation for and the
operation of its taxing laws on the present occasion. The conclusion is that the present scheme of
Commonwealth taxation was devised with the very object of exempting all flour consumed in
Tasmania from the principal burden of the tax. The co-operation of Tasmania in the general scheme
of wheat stabilization was purchased at the price of exempting Tasmanian consumers from the
burden of a tax which all other Australian consumers are called upon to bear. Up to the present time,
the effective exemption has amounted to over 90 per cent of the tax.

The truth is that every well-informed person in Australia is aware that, in pursuance of prior design,
the present flour tax applies to all flour manufactured and consumed in the Commonwealth, but that
two exemptions obtain. One exemption is in relation to flour used in the Northern Territory, which,
not being a State of the Commonwealth, is not affected by sec. 51 (ii.) of the Constitution. The other
applies in relation to flour consumed in Tasmania where the taxpayer gets a refund of at least 90 per
cent of the tax. In other words, everyone in Australia knows well that, contrary to the express
prohibition of sec. 51 (ii.), the scheme of flour taxation designedly creates an exemption in favour
of Tasmania. If the court to which the protection of the Constitution is committed is willing to shut
its eyes to facts which are so well known, then, if I may adopt Lord Atkin's phrase, used in another
connection, "the constitutional charter might as well be torn up"[95].

The final contention of the defendant was that, assuming sec. 14 of the Wheat Industry Assistance
Act to be invalid, the Commonwealth Acts imposing the flour tax are separable and valid. But the
Commonwealth's scheme of taxation is constituted by the series of Acts Nos. 48 to 53 inclusive. If,
as I have held, there has been an infringement of sec. 51 (ii.), it must follow that, in the absence of
an express statutory indication to the contrary, the Acts which make up the entire scheme, and are
sufficiently expressed as doing so, are invalid.

It is correct to say that, if sec. 14 of the Wheat Industry Assistance Act had not been included in the
scheme, the residue of the Commonwealth's taxing scheme would have been valid. The difficulty is
that the taxing scheme is one and indivisible. Moreover, but for the fact that sec. 14 worked an
exemption in Tasmania's favour, it seems certain that Tasmania would not have become a party to
the scheme; in that event the States would not have been unanimous; and the Commonwealth might
well have refrained from accepting responsibility for taxing flour with a view to increasing the price
of bread to the ultimate consumer.

Sec. 15A of the Commonwealth Acts Interpretation Act 1901-1937 lays down a general rule of
construction which is in conformity with the general principle ut magis valeat quam pereat. If
invalid and unconstitutional provisions can be discarded, the court may allow valid and
constitutional provisions to remain effective. But a series of cases has established that where the
infringing provisions can only be removed at the price of disturbing a general legislative scheme, all
the enactments which go to make up the scheme must fall (Australian Railways Union v. Victorian
Railways Commissioners[96]; Huddart Parker Ltd. v. The Commonwealth[97]; Vacuum Oil Co. Pty.
Ltd. v. Queensland [No. 2][98]; McDonald v. Victoria[99]).

As was pointed out in the case last mentioned,

in the Australian Railways Union Case[100] the court held that sec. 33 as well as sec. 34 of the
amending Commonwealth Arbitration Act of 1930 was invalid because the two sections were
regarded as essential portions of one statutory scheme which stood as a whole or, if part of it fell,
fell as a whole. In such a case sec. 15A of the Commonwealth Acts Interpretation Act was thought
to be incapable of operation. The feature of the Vacuum Oil Case [No. 2][101] was that the oil
companies were required to purchase such quantity of power alcohol as was measured by a fixed
percentage of "every one hundred gallons of motor spirit sold." In the case of legislation so framed,
it was impossible to exclude any portion of the total sales, for that would completely revise and
rewrite the required statutory formula[102].

Further, in every case where an exemption from taxation on a basis contrary to sec. 51 (ii.) is
granted by the Commonwealth Parliament, the discrimination results, not alone from the provisions
which exempt the favoured State, but from those provisions coupled with the operations of other
provisions of the scheme upon the remaining States of the Commonwealth. It would be difficult to
apply sec. 15A to such a state of affairs, because the court cannot assume that the exemption was
merely an accidental or subordinate feature of the taxing scheme. Moreover, to regard the exemption
as invalid would be to add to the net yield of the tax and so increase the total burden of the people, a
course which parliamentary practice usually places under rigid restrictions.

In this particular case, the exemption or refund provision constituted by sec. 14 is affirmatively
shown to be an essential part of the scheme. To that scheme in all its parts, the Commonwealth
adhered. The balancing of funds and accounts required by sec. 6 of the Wheat Industry Assistance
Act would be disturbed, if sec. 14 alone was treated as invalid and void. In short, to quote from a
well-known judgment of the Privy Council, "the offending provisions are ... so interwoven into the
scheme that they are not severable" (In re The Initiative and Referendum Act[103]).
In the result it becomes unnecessary to examine in detail the other contentions raised by the
defendant. They were ably presented by counsel, but I am satisfied that, subject to one exception,
they cannot be acceded to. That exception is the contention alleging an infringement by the
Commonwealth of sec. 92 of the Constitution. This stands on a different footing, but it is dependent
on the main argument that there has been a discrimination contrary to sec. 51 (ii.).

In principle it is difficult to see how, in case of an excise duty laid by the Commonwealth upon a
commodity manufactured and sold within Australia, the mandate of sec. 92 will not be disobeyed if
the Commonwealth exempts the commodity from tax in case it is consumed in a particular State; in
such circumstances every dealing in the commodity, whether intra-State or inter-State, will be taxed,
except dealings which will result in the final delivery of the commodity in the favoured State.

Thus the sale to the other States of Tasmanian manufactured flour will bear the full burden of the
tax; every local sale of the same flour will be practically exempt. This seems to be a plain
discrimination against selected inter-State dealings in flour solely because they are inter-State
dealings of the selected character. Discrimination is not expressly forbidden by sec. 92, but in
certain cases the proof of discrimination may show conclusively that the trade freedom of the border
has been unconstitutionally restricted (Riverina Transport Pty. Ltd. v. Victoria[104]).

This point need not be elaborated because my opinion is that, because the Commonwealth flour-
taxing scheme discriminates in favour of Tasmania contrary to sec. 51 (ii.)</leg.ptr>, the Acts
imposing the tax are invalid.

McTiernan J.

I agree with the judgment of the Chief Justice.

Judgment for the plaintiff for the amount claimed.

Solicitor for the plaintiff, H. F. E. Whitlam, Commonwealth Crown Solicitor.

Solicitors for the defendant, H. O. Marshall, Lupton & Scott.

Solicitor for the States of New South Wales, Victoria and South Australia (intervening), J. E. Clark,
Crown Solicitor for New South Wales.

Solicitors for the State of Tasmania (intervening), Allen, Allen & Hemsley.

[1] (1906) A.C. 360.

[2] (1906) A.C., at p. 367.

[3] (1939) A.C. 117.

[4] (1939) A.C. 117.

[5] (1939) A.C., at p. 130.

[6] [1908] HCA 43; (1908) 6 C.L.R. 41.

[7] (1908) 6 C.L.R., at p. 67.
[8] (1908) 6 C.L.R., at pp. 89, 92, 93.
[9] (1908) 6 C.L.R., at pp. 119, 129.
[10] [1930] HCA 48; (1930) 43 C.L.R. 386, at p. 421.
[11] (1939) A.C. 117.
[12] (1885) 10 App. Cas. 282.
[13] [1909] HCA 30; (1909) 8 C.L.R. 626.
[14] [1921] HCA 25; (1921) 29 C.L.R. 329.
[15] [1931] HCA 34; (1931) 46 C.L.R. 73.
[16] [1938] HCA 9; (1938) 59 C.L.R. 170.
[17] [1926] HCA 48; (1926) 38 C.L.R. 399.
[18] (1926) 38 C.L.R., at p. 406.
[19] (1926) 38 C.L.R., at p. 405.
[20] (1885) 10 App. Cas. 282.
[21] (1885) 10 App. Cas., at p. 291.
[22] [1925] HCA 11; (1925) 36 C.L.R. 20.
[23] (1925) 36 C.L.R., at p. 29.
[24] (1885) 10 App. Cas. 282.
[25] (1938) A.C., at p. 720.
[26] (1937) A.C. 863, at p. 869.
[27] (1924) A.C., at p. 337.
[28] (1932) A.C., at p. 49.
[29] (1932) A.C., at p. 51.
[30] [1927] USSC 65; (1927) 273 U.S. 418; 71 Law. Ed. 718.
[31] [1931] HCA 34; (1931) 46 C.L.R. 73.
[32] [1921] HCA 25; (1921) 29 C.L.R. 329.
[33] [1935] HCA 63; (1935) 54 C.L.R. 69.
[34] [1926] HCA 48; (1926) 38 C.L.R. 399.
[35] [1926] HCA 48; (1926) 38 C.L.R. 399.
[36] [1910] HCA 33; (1910) 11 C.L.R. 1, at p. 36.
[37] (1926) V.L.R. 58, at p. 68; 47 A.L.T. 116, at p. 120.
[38] [1921] HCA 31; (1921) 29 C.L.R. 357.
[39] [1930] HCA 52; (1930) 44 C.L.R. 319, at p. 386.
[40] [1936] USSC 93; (1936) 298 U.S. 238, at pp. 312, 313, 321, 322, 334, 335 [1936] USSC 93; ;
80 Law. Ed. 1160, at pp. 1189, 1190, 1194, 1195, 1201.
[41] [1908] HCA 94; (1908) 6 C.L.R. 469, at p. 590.
[42] [1892] USSC 52; (1892) 143 U.S. 339, at p. 345 [1892] USSC 52; ; 36 Law. Ed. 176, at p.
179.
[43] (1936) 298 U.S., at p. 325; 80 Law. Ed., at p. 1196.
[44] (1906) A.C. 360.
[45] (1939) A.C. 117.
[46] [1936] USSC 11; (1935) 297 U.S. 1; 80 Law. Ed. 477.
[47] [1908] HCA 43; (1908) 6 C.L.R. 41.
[48] (1939) A.C. 117.
[49] [1936] USSC 11; (1935) 297 U.S. 1; 80 Law. Ed. 477.
[50] (1935) 297 U.S., at p. 68; 80 Law. Ed., at p. 489.
[51] [1920] HCA 18; (1920) 28 C.L.R. 1.
[52] [1908] HCA 43; (1908) 6 C.L.R. 41.
[53] (1932) A.C., at p. 560; 47 C.L.R., at pp. 397, 398.
[54] [1923] HCA 4; (1923) 32 C.L.R. 68.
[55] (1923) 32 C.L.R., at p. 76.
[56] [1908] HCA 43; (1908) 6 C.L.R. 41.
[57] (1908) 6 C.L.R., at p. 78.
[58] [1908] HCA 43; (1908) 6 C.L.R. 41.
[59] [1923] HCA 4; (1923) 32 C.L.R. 68.
[60] (1923) 32 C.L.R., at pp. 78, 79.
[61] [1908] HCA 43; (1908) 6 C.L.R. 41.
[62] [1908] HCA 43; (1908) 6 C.L.R. 41.
[63] (1908) 6 C.L.R., at p. 108.
[64] (1908) 6 C.L.R., at p. 110.
[65] (1908) 6 C.L.R., at p. 131.
[66] (1923) 32 C.L.R., at pp. 76, 77.
[67] [1908] HCA 43; (1908) 6 C.L.R. 41.
[68] [1923] HCA 4; (1923) 32 C.L.R. 68.
[69] (1908) 6 C.L.R., at p. 108.
[70] (1932) A.C., at p. 555; 47 C.L.R., at pp. 393, 394.
[71] (1930) A.C., at p. 363.
[72] (1939) A.C. 117.
[73] (1939) A.C., at p. 122.
[74] (1924) A.C., at p. 337.
[75] [1937] HCA 3; (1937) 56 C.L.R. 390.
[76] (1932) A.C. 542; 47 C.L.R. 386.
[77] (1939) A.C., at p. 130.
[78] (1939) A.C., at p. 131.
[79] (1939) A.C., at p. 130.
[80] (1939) A.C., at p. 130.
[81] (1939) A.C., at p. 130.
[82] (1939) A.C., at pp. 130, 131.
[83] (1939) A.C., at p. 132.
[84] (1939) A.C., at pp. 132, 133.
[85] (1938) 2 D.L.R. 81, at p. 83.
[86] (1938) 2 D.L.R., at p. 103.
[87] (1930) A.C. 357, at p. 363.
[88] (1937) A.C., at p. 376.
[89] [1926] HCA 48; (1926) 38 C.L.R. 399.
[90] (1906) A.C. 360.
[91] (1906) A.C., at p. 367.
[92] (1906) A.C., at p. 367.
[93] [1900] USSC 127; (1900) 178 U.S. 41, at p. 108 [1900] USSC 127; ; 44 Law. Ed. 969, at p.
996.
[94] (1906) A.C. 360.
[95] (1932) A.C., at p. 555; 47 C.L.R., at p. 394.
[96] [1930] HCA 52; (1930) 44 C.L.R. 319.
[97] [1931] HCA 1; (1931) 44 C.L.R. 492.
[98] [1935] HCA 9; (1935) 51 C.L.R. 677.
[99] [1937] HCA 60; (1937) 58 C.L.R. 146.
[100] [1930] HCA 52; (1930) 44 C.L.R. 319.

[101] [1935] HCA 9; (1935) 51 C.L.R. 677.
[102] [1937] HCA 60; (1937) 58 C.L.R. 146, at p. 153.
[103] (1919) A.C. 935, at p. 944.
[104] (1937) 57 C.L.R., at p. 367.
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