HIGH COURT OF AUSTRALIA

                                                         Parton

                                                           Vs.

                                                      Milk Board

                 (Latham C.J.(1), Rich(2), Dixon(3), McTiernan(4) and Williams(2) JJ. )

                                                 21 December 1949

CATCHWORDS

Constitutional Law (Cth.) - Duties of excise - Exclusive power of Commonwealth Parliament - Milk
Board constituted under State law - Costs of administration - Levy on milk distributors - Levy
assessed on quantity of milk distributed - Statute - Regulations - Validity - The Constitution (63 &
64 Vict. c. 12), s. 90 - Milk Board Acts 1933-1939 (No. 4183 - No. 4676) (Vict.).

High Court - Original jurisdiction - Question arising under the Constitution - Action involving such
a question and also a question under State law - Judiciary Act 1903-1948 (No. 6 of 1903 - No. 65 of
1948), s. 30 (a).

HEARING

Melbourne, 1949, October 18, 19; December 21. 21:12:1949 DEMURRER.

DECISION

December 21.The following written judgments were delivered:-

LATHAM C.J.

This is a demurrer to a statement of claim in an action in which 30 of the Milk Board Acts of
Victoria and certain regulations and determinations thereunder with respect to contributions are
invalid, a declaration that, even if the Acts are valid, the regulations are invalid, and appropriate
injunctions. The principal question which arises is whether the Acts or the regulations impose a duty
of excise. The Commonwealth Constitution, s. 90, provides that the power of the Parliament to
impose duties of customs and excise is exclusive. Accordingly a State Parliament cannot validly
impose an excise duty. If s. 30 of these Victorian Acts is invalid, the provisions of the Acts with
respect to the collection of money to meet the expenditure of the Milk Board constituted under the
Acts will not operate. The actual contributions are fixed by regulations made under the statutes.
Even if the Acts are valid, it may still be the case that the regulations are invalid as themselves
imposing an excise duty. A further argument submitted for the plaintiffs is that the regulations fixing
the amount of the contributions are (independently of all constitutional considerations) ultra vires
the Acts. (at p239)
2. The Milk Board Act 1933, No. 4183, has been amended in many of its sections by subsequent
Milk Board Acts passed in 1934 (No. 4276), 1936 (No. 4463) and 1939 (No. 4676). Some of the
provisions of the Act can be interpreted and applied only by reference to the Milk and Dairy
Supervision Act 1928. These Acts embody a detailed scheme with respect to the production,
distribution and sale of milk, wholesale and retail. The Milk Board Acts consist principally of
special provisions relating to the metropolis, which is defined in s. 4 of Act No. 4183 as meaning
certain municipal districts specified in the Second Schedule to the Milk and Dairy Supervision Act
1928, and other proclaimed municipal districts. The municipal districts mentioned in the Second
Schedule are the City of Melbourne and twenty-six neighbouring suburbs. (at p239)

3. Act No. 4183 provides for the appointment of a Milk Board by the Governor in Council (s. 5).
The Milk Board has many powers. They include a power to determine minimum prices to be paid to
the owners of dairy farms or milk depots for milk for sale or distribution in the metropolis (Acts No.
4183, s. 15; No. 4463, s. 4). Under Act No. 4676, s. 3, the Board may determine the maximum
prices at which milk may be sold by retail in the metropolis. Certain purchases of milk must be
made under contracts approved by the Board - No. 4183, s. 18; No. 4276, s. 5; No. 4676, s. 5. The
Board may, and when required by the Minister shall, investigate the methods in use for the
collection, transport and distribution of milk and make reports thereon - Act No. 4183, s. 21. For the
purpose of promoting and encouraging the consumption of milk the Board may spend such amounts
as the Minister approves - Act No. 4183, s. 22. The Board also may specify the dairies from which
milk may be sold in the metropolis and may cancel licences held under Part II. of the Milk and
Dairy Supervision Act 1928 by dairies not so specified. If the Board fails to specify a licensed dairy
as a dairy from which milk may be sold in the metropolis and cancels the licence of a dairy, the
Board is required to assess compensation to the holder of the licence and other persons injured by
the failure to specify the dairy or by the cancellation of a licence: Act No. 4183, s. 23, as amended
by Act No. 4676, s. 11. The Board may cancel licences under the Milk and Dairy Supervision Act
1928 of dairymen or owners of a dairy farm or milk depot who buy or sell milk at a price less than
the minimum price and shall assess the compensation for cancellation of licences of dairies: Act No.
4463, s. 6. The Board may determine the dairies which shall be allowed to supply milk in specified
areas in the metropolis: Act No. 4183, s. 24. (at p240)

4. The Treasurer may advance 5,000 pounds to the Board: Act No. 4183, s. 28. The Minister shall
cause the Board to prepare for every year an estimate of the probable expenditure for that year to be
incurred in the administration of the Act and in carrying out the powers and duties of the Board
thereunder. Such estimate shall not exceed a limit fixed by the Minister and shall have no force or
effect unless approved by the Governor in Council: Act No. 4183, s. 29. (at p240)

5. Section 30 of Act No. 4183 as amended by s. 12 of Act No. 4463 and s. 14 of Act No. 4676 is
now in the following terms:- "(1) (a) Towards the expenditure so estimated (that is the expenditure
referred to in s. 29) there shall be contributed by - (i) every dairyman (other than the owner of a
milk shop) who sells or distributes milk in the metropolis; and (ii) every owner of a milk depot who
sells or distributes milk to any person in the metropolis - such sum as is determined by the Board in
accordance with the regulations but such sum shall not in the case of any such dairyman or owner
exceed a sum equal to one-quarter of a penny per gallon for every gallon of milk so sold or
distributed. (b) Notwithstanding anything in the last preceding paragraph no contribution shall be
payable by - (i) any dairyman in respect of milk sold or distributed to another dairyman (other than
the owner of a milk shop); (ii) any owner of a milk depot in respect of milk sold or distributed - to a
dairyman (other than the owner of a milk shop); or to any person for use in the manufacture of any
prescribed article or commodity to be sold by such person by wholesale; or (iii) any person in
respect of milk sold or distributed to such charitable institutions as are prescribed by the regulations.
(2) The contributions payable under this section shall be assessed and be paid at such times and in
such manner as may be prescribed by regulations. (3) If any such sum is not paid as and when the
same becomes payable the amount thereof may be recovered in a court of petty sessions as a civil
debt recoverable summarily or in any court of competent jurisdiction by the Board; and if such sum
is not so paid the licence of the dairyman or of the owner of the milk depot (as the case may be)
may be cancelled by the Minister and shall thereupon cease to have any further force or effect. (4)
Every such dairyman and owner shall as and when prescribed furnish such returns and supply such
information as are or is required for the purposes of this section and every such dairyman or owner
who fails or refuses to furnish such a return or to supply such information as and when prescribed or
who furnishes any false return or supplies any false or incomplete return or information shall be
guilty of an offence against this Act." (at p241)

6. It is possible to deal at once with the objection to the validity of s. 30 of the Acts, which is based
upon s. 90 of the Constitution. Section 30 does not impose any excise duty upon milk. It provides
for the payment of contributions which are not to exceed an amount equal to one-quarter of a penny
per gallon for milk sold or distributed by any dairyman or owner. This provision simply fixes a
maximum total amount of contribution. An amount of contribution might be fixed which was not
calculated by reference to milk sold or distributed and a contribution so assessed would be within
the authority conferred by the Act provided that the total amount of contribution in any year did not
exceed a sum equal to the amount of money which would be produced if one farthing per gallon
were paid by the dairyman or other person concerned. If, for example, a particular dairyman was
required under a regulation made under the Act to pay 10 pounds and if one farthing per gallon of
milk sold or distributed by him would amount to any sum larger than 10 pounds the assessment at
10 pounds would be within the power conferred by s. 30. Section 30 in itself plainly does not
impose any specific liability upon any person. That can be done only by regulations made under the
Act. As far as s. 30 is concerned, it prescribes a limit only and there is nothing in the section which
is in any way inconsistent with s. 90 of the Constitution. If a regulation made under s. 30 purported
to impose an excise duty, this fact would not invalidate s. 30. The section should not be construed as
purporting to authorize an unlawful regulation. It is to be assumed that the regulation-making
authority will act in accordance with any relevant law. Unlawful action under a statute which is not
unlawful in its own terms does not invalidate the statute. It would be quite a different case if the
statute in terms purported to require or to authorize an unlawful act. Section 30 is not open to this
objection. (at p241)

7. The contributions to which the plaintiffs object have been assessed and are required to be paid
under regulations made under Act No. 4183, s. 37, as amended. (at p242)

8. On 27th March 1947 the following regulation was made by the Governor in Council:- "Any
determination by the Board under or pursuant to Section 30 of the Milk Board Acts shall be made at
a meeting of the Board called for that purpose. In arriving at a determination the Board shall have
regard to the probable revenue for the year based on the estimated quantity of milk to be sold or
distributed in the metropolis. The contributions payable under and pursuant to section 30 of the
Milk Board Act 1933 as amended by the Milk Board Act 1936 and any determination made
thereunder shall be assessed on the quantity of milk sold or distributed in the metropolis during each
month by every dairyman and owner of a milk depot liable to pay such contributions and every such
dairyman or owner of a milk depot shall pay to the Milk Board by the twenty-first day of each
month the contributions payable by him in respect of the milk so sold or distributed during the
preceding month." (at p242)
9. On 9th June 1948 the Board, purporting to act under that regulation, determined that the sum to
be contributed by dairymen who sold or distributed milk in the metropolis until 30th June 1949
should be one-eighth of a penny per gallon for every gallon of milk sold or distributed in the
metropolis. Another regulation was made on 15th June 1948 for the purpose of giving effect to this
determination, and this is the regulation which actually imposed the contribution - "Every dairyman
who sells or distributes milk in the metropolis and every owner of a milk depot who sells or
distributes milk to any person in the metropolis, shall under and pursuant to section 30 of the Milk
Board Act 1933, as amended by the Milk Board Act 1936 and the Milk Board Act 1939, and to a
Determination made thereunder by the Milk Board on the 9th day of June 1948, contribute in
accordance with the Regulations made under the Milk Board Acts the sum of one eighth of a penny
per gallon for every gallon of milk sold or distributed by him during the period ending June 30th,
1949." In the year 1949, a similar regulation, determination, and further regulation were made -
except that the contribution was fixed at one-tenth of a penny per gallon. (at p242)

10. Regulation 6 of the regulations made under the Act on 27th March 1947 provides that the
contributions payable under the Milk Board Act 1933 as amended and any determination made
thereunder "shall be assessed on the quantity of milk sold or distributed in the metropolis during
each month by every dairyman and owner of a milk depot liable to pay such contributions and every
such dairyman or owner of a milk depot shall pay to the Milk Board by the twenty-first day of each
month the contributions payable by him in respect of the milk so sold or distributed during the
preceding month." (at p243)

11. These regulations require payments by dairymen and owners of milk depots. "Dairyman" means
the owner of a dairy within the metropolis - Act No. 4183, s. 4. "Dairy" means any dairy within the
meaning of s. 39 of the Milk and Dairy Supervision Act 1928 (Act No. 3736) and includes certain
adjacent premises, and "dairy farm" has the like meaning as in s. 39 of that Act - Act No. 4676, s. 2.
"Dairy" means (Act No. 3736, s. 39) any premises (not being solely a dairy farm or factory) where
milk is kept for sale or where any dairy produce is prepared for sale and every milk depot under Part
III. of the Milk and Dairy Supervision Act 1928. "Dairy farm" means (Act No. 3736, s. 39) - "any
premises where cows are milked or kept for the purpose of producing milk either for sale or for
preparing any dairy produce for sale and includes the animals thereon." "Milk depot" in the Milk
Board Acts means any premises at which milk is received direct from the owner of a dairy farm for
the purpose of mixing or treatment and which are prescribed as a milk depot by the regulations - Act
No. 4183, s. 4; Act No. 4276, s. 2. "Milk shop" means any premises in the metropolis registered as a
shop under the Factories and Shops Acts and in respect of which a licence as a dairy is held and is in
force under Part II. of the Milk and Dairy Supervision Act 1928 and from which milk is sold for
delivery only at such premises - Act No. 4276, s. 2. (at p243)

12. The duty to pay the contribution is imposed by s. 30 upon every dairyman (other than the owner
of a milk shop) and every owner of a milk depot who sells or distributes milk in the metropolis, but
subject to the exceptions set out in s. 30 (1) (b). The amount of contribution payable depends upon
the number of gallons of milk so sold or distributed during a specified period. (at p243)

13. The milk is not produced by dairymen or owners of milk depots. It is produced on dairy farms
by dairy farmers who sell the milk to such persons as dairymen and owners of milk depots. The
dairymen and owners of the depots then sell or distribute the milk again. If they sell or distribute
milk within the metropolis they must pay the contributions. (at p243)

14. The question which arises in the present case is whether a duty imposed in relation to the sale or
distribution, as distinct from the production or manufacture, of goods is a duty of excise. In what
follows I refer only to sale, because identical considerations apply to distribution. (at p243)

15. The plaintiff contends that the contributions exacted in pursuance of the statute, though they
provide what are regarded by the legislature as benefits to those engaged in the milk industry,
should not be regarded as payments for services rendered. They are, it is argued, really a tax because
they are compulsory contributions levied under statutory authority payable to a body which should
be regarded as a Crown agency. I am prepared to deal with the case upon the basis that the
contributions are a tax. The amount of the tax depends upon the quantity of milk sold. It is a tax
imposed upon commodities in relation to quantity, and is therefore, it is argued, a duty of excise.
The fact that it is imposed upon the occasion of sale does not, it is said, prevent it being an excise
duty, because cases decided in this Court show that a tax upon sales is a duty of excise - especially
the case of Commonwealth & Commonwealth Oil Refineries Ltd. v. South Australia [1926] HCA
47; (1926) 38 CLR 408 . Reference is also made to statements in other cases which are relied upon
to support the proposition that a tax upon the sale of goods is an excise duty: John Fairfax Ltd. v.
New South Wales [1927] HCA 3; (1927) 39 CLR 139 ; Attorney-General (N.S.W.) v. Homebush
Flour Mills Ltd. (1937) 56 CLR 390 . (at p244)

16. It is not necessary again to outline the history of excise duties. The substance of this history is
summarized in Atlantic Smoke Shops Ltd. v. Conlon (1943) AC 550, at pp 564, 565 :- "'Excise' is a
word of vague and somewhat ambiguous meaning. Dr. Johnson's famous definition in his dictionary
is distinguished by acerbity rather than precision. The word is usually (though by no means always)
employed to indicate a duty imposed on home-manufactured articles in the course of manufacture
before they reach the consumer. So regarded, an excise duty is plainly indirect. A further difficulty
in the way of the precise application of the word is that many miscellaneous taxes, at any rate in this
country, are classed as 'excise' merely because they are for convenience collected through the
machinery of the Board of Excise - the tax on owning a dog, for example." (at p244)

17. An account of the origin and development of duties of excise may be found in Encyclopedia of
the Laws of England, 3rd ed., vol. 4, pp. 384 et seq. The term "excise" has been applied in Great
Britain to a number of miscellaneous taxes which had nothing in common except the fact that they
were taxes and were administered by a department known now as the Board of Excise. Patton v.
Brady [1902] USSC 77; (1901) 184 US 608 (46 Law Ed 713) supplies instances of a similar wide
and vague use of the term in the United States of America. (at p244)

18. But the references in the Commonwealth Constitution to duties of excise (in ss. 55, 86, 87, 90
and 93) are all closely associated with the subject of customs duties. I refer to what I have said as to
the relation between customs duties and excise duties in Matthews v. Chicory Marketing Board
(Vict.) [1938] HCA 38; (1938) 60 CLR 263, at pp 277, 278 . See per Higgins J. in Commonwealth
& Commonwealth Oil Refineries Ltd. v. South Australia (1926) 38 CLR , at p 435 . It is, I think,
plain that the word "excise" in the Commonwealth Constitution was not intended to comprehend all
the taxes of various kinds, some of them not even being taxes in respect of goods, e.g. duties on
manservants and armorial bearings, which from time to time have been included within the term. (at
p245)

19. The whole subject was examined in detail in Peterswald v. Bartley [1904] HCA 21; (1904) 1
CLR 497 . It was there held by a unanimous court that the word "excise" in Australia had a distinct
meaning in the popular mind, that the references in the Constitution to duties of excise showed that
the word was used in the Constitution with this meaning, and that "the conclusion is almost
inevitable that, whenever it is used, it is intended to mean a duty analogous to a customs duty
imposed upon goods either in relation to quantity or value when produced or manufactured, and not
in the sense of a direct tax or personal tax." (at p245)

20. This decision has been followed and applied ever since: see R. v. Barger [1908] HCA 43; (1908)
6 CLR 41 ; Commonwealth & Commonwealth Oil Refineries Ltd. v. South Australia [1926] HCA
47; (1926) 38 CLR 408 ; Vacuum Oil Co. Pty. Ltd. v. Queensland [1934] HCA 5; (1934) 51 CLR
108 ; Hartley v. Walsh (1937) 57 CLR 372 : see also Matthews v. Chicory Marketing Board (Vict.)
[1938] HCA 38; (1938) 60 CLR 263 . I am of opinion that the Court should, as a matter of course,
still follow and apply the decision in Peterswald v. Bartley [1904] HCA 21; (1904) 1 CLR 497 . (at
p245)

21. But in certain cases it has been held that a tax payable on the sale of goods was a duty of excise.
The contributions payable under the Milk Board Acts are payable on the sale of milk and it is said
that therefore they are duties of excise. (at p245)

22. In my opinion an examination of the cases upon which the plaintiff relies shows that in each of
them a tax payable upon the occasion of the sale of a commodity was held to be a duty of excise
because the tax was a tax payable by the producer of the commodity and therefore was truly a tax
upon the production of goods. If a tax is imposed upon the producer of goods when he sells the
goods the tax is a tax upon production. If, however, the tax is imposed at a later stage after the
producer has disposed of the goods, it is a tax merely upon sale and not upon production. There may
be a first sale of raw material. That raw material may then be partly manufactured and sold again.
That sale would be a first sale of the partly manufactured material. That material may then be
completely manufactured by additional treatment or addition of other material and sold for the first
time in a completed state. That sale would be the first sale of the completely manufactured article. A
simple example of such a process is to be found in successive sales of hides, of leather manufactured
from the hides, and of boots manufactured from the leather. There could be an excise duty at each
stage upon the production or manufacture of the goods, just as there could be an excise upon both
locally manufactured malt and upon locally manufactured whisky. If the duty were made payable
upon the sale by the producer or manufacturer, in each case the duty would be an excise duty,
because it would be imposed upon the production or manufacture of the relevant article. In the
present case, however, the contribution is exacted, not at the point of production of the material or
of disposition by the producer, but when milk which has been produced has already been disposed
of to a dairyman other than the owner of a milk shop or to the owner of a milk depot who then sells
it to some other person. The contribution is exacted upon the second and not upon the first sale. It is
payable only after all processes of production are complete and the milk has passed out of the hands
of the producer and has entered the market. It is true, as pointed out in argument, that milk may be
chilled and mixed after production and before sale to a consumer. But milk sold by the persons who
are liable to pay the contribution is not a new article simply because it has been preserved from
spoiling by refrigeration, or because in a particular gallon or quart or pint of milk there may be milk
from several dairy farms. It is still the same commodity, namely milk. (at p246)

23. I now proceed to consider more in detail the cases upon which the plaintiff relies. In
Commonwealth & Commonwealth Oil Refineries v. South Australia [1926] HCA 47; (1926) 38
CLR 408 the Court held that a tax imposed on the first sale of petrol refined in South Australia was
an excise duty. It was so held because it was regarded by the Court as a tax upon production: see per
Knox C.J. (1926) 38 CLR, at pp 419, 420 ; per Isaacs J. (1926) 38 CLR, at pp 425, 426 ; per
Higgins J. (1926) 38 CLR, at p 435 and per Starke J. (1926) 38 CLR, at p 439 . (at p246)
24. In Attorney-General (N.S.W.) v. Homebush Flour Mills [1937] HCA 3; (1937) 56 CLR 390 the
tax was payable upon a sale of flour by the miller who manufactured the flour. It was a tax upon
production or manufacture, although made payable on the occasion of sale. As Rich J. expressed it
(1937) 56 CLR, at p 403 , "it is a tax upon the production of flour in New South Wales and therefore
an excise". Dixon J. (1937) 56 CLR, at p 413 pointed out that the tax was imposed upon the
producer of the flour in respect of such production: see also per Evatt J. (1937) 56 CLR, at p 419 -
"The tax was in truth a charge or levy or tax on New South Wales flour producers," and was
therefore a duty of excise. In John Fairfax Ltd. v. New South Wales [1927] HCA 3; (1927) 39 CLR
139 a tax upon newspapers issued for sale and sold was held to be a duty of excise. The Court
applied the decision in Commonwealth & Commonwealth Oil Refineries Ltd. v. South Australia
[1926] HCA 47; (1926) 38 CLR 408 which, as already stated, depends upon the tax being a tax
upon the first sale after production. (at p247)

25. In Matthews v. Chicory Marketing Board [1938] HCA 38; (1938) 60 CLR 263 a tax was
imposed on the producers of chicory, the amount of the tax being determined by the number of half-
acres planted with chicory. The tax was not a tax on sales, but the reasons given for the decision of
the court show that it was held to be an excise duty because it was a tax upon production. A crop
might fail, but it was held by the court that, in view of the ordinary course of affairs, namely, that
planting a crop generally produced a crop, the tax should be regarded as a tax upon production of
chicory and it was therefore a duty of excise: see per Rich J. (1938) 60 CLR, at p 280 - "The levy is
imposed upon the producer as a producer and not a trader"; per Starke J. (1938) 60 CLR, at p 286 -
"It remains a tax in respect of the commodity produced for sale"; per Dixon J. (1938) 60 CLR, at p
303 - The fact that a crop might fail "does not seem to make the levy any less a tax upon
production." (at p247)

26. Thus, in the cases in which a tax upon the sale of an article has been held to be an excise, it has
been so held because the tax was imposed upon the producer of the article and was a tax upon the
production of goods. In the present case the tax is not imposed upon the producer of milk, but is
imposed upon a sale made after the producer of milk has disposed of the milk to a dairyman other
than the owner of a milk shop or to the owner of a milk depot. It is therefore in my opinion not a
duty of excise. (at p247)

27. The Court has considered legislation similar to that contained in the Milk Board Acts in the
cases of Crothers v. Sheil [1933] HCA 42; (1933) 49 CLR 399 , Hartley v. Walsh [1937] HCA 34;
(1937) 57 CLR 372 and Hopper v. Egg & Egg Pulp Marketing Board (Vict.) [1939] HCA 24;
(1939) 61 CLR 665 . In each of these cases contributions were exacted for the expenses of a board
which had powers of control in relation to an industry and the contributions were designed, as in the
case of the Milk Board Acts, to meet the costs of administration of the scheme set up under the
relevant statute. In each case it was held that the requirement that the contribution should be paid for
the purpose mentioned did not amount to the imposition of a duty of excise. It may be pointed out
that, if any tax imposed upon or in relation to the sale of a commodity is a duty of excise, the system
common in the States whereby the sellers of intoxicating liquor make contributions to a fund to be
employed in (inter alia) providing compensation for licensed houses which are closed would almost
certainly have to be held invalid. (at p248)

28. The plaintiff has a further objection to the validity of the regulations which fixed the amount of
the contribution first at one-eighth and then at one-tenth of a penny per gallon of milk sold or
distributed in the metropolis. The Act as amended makes the contribution payable by dairymen
other than owners of milk shops and owners of milk depots - Act No. 4183, s. 30; Act No. 4363, s.
12; Act No. 4676, s. 13. The relevant power to make regulations (No. 4183, s. 37 (d), as amended
by No. 4463, s. 12 (3), and No. 4676, s. 14 (2)) is a power to make regulations for or with respect to
contributions payable under the Act by dairymen other than owners of milk shops and by owners of
milk depots. It is contended for the plaintiffs that the regulations do not recognize the exception
from liability created by the words "other than the owner of a milk shop" or the exceptions made by
s. 30 (1) (b), because they purport to impose a liability for contributions upon "every dairyman and
owner of a milk depot" with no exception. (at p248)

29. But the regulation of 27th March 1947 provides that the contribution shall be assessed on the
quantity of milk sold or distributed in the metropolis during each month "by every dairyman or
owner of a milk depot liable to pay such contributions." It is therefore clear that the only persons
upon whom the contributions are assessed are persons who are liable under the Act. (The same
observation applies to reg. 6, which, it was argued, was invalid because it also failed to make the
exceptions for which the Acts provide.) The further regulation of 23rd June 1948, made in
pursuance of a determination of the Board of 9th June 1948, does, it is true, in terms apply to "every
dairyman who sells or distributes milk in the metropolis and every owner of a milk depot who sells
or distributes milk in the metropolis" and there is no express exception in the case of dairymen who
are owners of milk shops or any other express exception. But the regulation proceeds to provide that
the contribution is to be paid "under and pursuant to s. 30 of the Milk Board Act 1933 as amended
by the Milk Board Act 1936 and the Milk Board Act 1939, and to a determination made thereunder
by the Milk Board on 9th June 1948." In my opinion, although the regulations are awkwardly
expressed, it is sufficiently clear that they purport to impose liability only upon the persons who are
actually liable under the Acts, and in the Acts there is a clear exemption of dairymen who are the
owners of milk shops. I am of opinion, therefore, that the regulations are not ultra vires the Acts. (at
p249)

30. It was contended that the claim that the regulations were not within the regulation-making
power conferred by the Victorian statute, not being a question arising under and involving the
interpretation of the Commonwealth Constitution, was not a claim in respect of which the High
Court had original jurisdiction: Judiciary Act 1903-1948, s. 30 (a): see Carter v. The Egg & Egg
Pulp Marketing Board [1942] HCA 30; (1947) 66 CLR 557 . In that case, however, the claim upon
which it was sought to obtain a decision of the High Court was a claim for an account which was
completely separate in all its characteristics from the claim made for a declaration that certain
legislation was invalid - as to which latter claim the High Court did have original jurisdiction. A
distinction was drawn (1947) 66 CLR, at p 580 between such a case and cases where a single claim
"was supported upon several grounds, one or more of which involve the interpretation of the
Constitution." The present is a case of the latter description, and in my opinion the Court has
jurisdiction to deal with it. (at p249)

31. For the reasons which I have stated I am of opinion that the allegations in the statement of
claim, if taken to be true, (as is proper upon demurrer), do not constitute a cause of action, and that
therefore the demurrer should be allowed. (at p249)

RICH AND WILLIAMS JJ. This is a demurrer to an action, the purpose of which is to obtain a
declaration that s. 30 of the Milk Board Act 1933 as amended and certain regulations and
determinations made thereunder and set out in the statement of claim with respect to the payment of
contributions under this section and each of them are and is and have and has at all material times
been invalid. Section 29 of the Act provides that the Minister shall cause the Board to prepare for
every year an estimate of the probable expenditure for that year to be incurred in the administration
of the Act and in carrying out the powers and duties of the Board thereunder. Section 30 (1) (a) of
the Act provides that towards the expenditure so estimated there shall be contributed by (i) every
dairyman (other than the owner of a milk shop) who sells or distributes milk in the metropolis; and
(ii) every owner of a milk depot who sells or distributes milk to any person in the metropolis such
sum as is determined by the Board in accordance with the regulations, but such sum shall not in the
case of any such dairyman or owner exceed a sum equal to one-fourth of a penny per gallon for
every gallon of milk so sold or distributed. The section provides that no contribution shall be made
by these persons in respect of certain sales and distributions, that the contributions payable under the
section shall be assessed and paid at such times and in such manner as may be prescribed by
regulations, and that if any such sum is not paid as and when the sum becomes payable the amount
thereof may be recovered in a Court of Petty Sessions as a civil debt recoverable summarily or in
any court of competent jurisdiction by the Board. The regulations made under the Act and
determinations of the Board complained of are set out in the statement of claim and in the judgment
of the Chief Justice and we shall not repeat them. Their effect is to levy a contribution upon
dairymen and owners of milk depots in one case of one-eighth of a penny and in the other of one-
tenth of a penny per gallon for every gallon of milk sold or distributed by them in the metropolis
during the period ending in the one case 30th June 1949 and in the other 30th June 1950. It is
claimed that s. 30 and these regulations and determinations impose a duty of excise contrary to the
provisions of s. 90 of the Constitution and that for this reason they are invalid. (at p250)

2. The purpose of the levy is to contribute to the expenditure incurred in the administration of the
Act and in carrying out the powers and duties of the Board thereunder. Mr. Sholl submitted in the
first instance, and we agree, that the present legislation is indistinguishable in substance from the
legislation passed on by this Court in Hartley v. Walsh [1937] HCA 34; (1937) 57 CLR 372 . In that
case it was held by three members of the Court that the legislation did not impose such a duty. But
we are unable to reconcile this decision with the later case of Matthews v. Chicory Marketing Board
(Vict.) (1938) 60 CLR 263 . In that case the majority of the Court held that the legislation did
impose such a duty. In this conflict of opinion we prefer to follow Matthews v. Chicory Marketing
Board (Vict.) [1938] HCA 38; (1938) 60 CLR 263 . We do so because the charge in Hartley's Case
[1937] HCA 34; (1937) 57 CLR 372 was considered by the Justices concerned to be of a similar
nature to that in Crothers v. Sheil [1933] HCA 42 [1933] HCA 42; ; (1933) 49 CLR 399 . But the
two charges were not, in our opinion, of the same nature because in Crothers v. Sheil [1933] HCA
42; (1933) 49 CLR 399 the Board acquired the property in the milk and then deducted certain
charges from the proceeds of sale which were its property before distributing them amongst the
dairy farmers in accordance with the Act. The fact that such proceeds are subject to deductions
would not convert the scheme into one for taxation. This is made clear in the passage from the
judgment of Rich J. in Crothers v. Sheil [1933] HCA 42; (1933) 49 CLR 399 cited by Dixon J. in
Matthews v. Chicory Marketing Board (Vict.) (1938) 60 CLR, at p 289 and from the judgment of
Starke J. in Hopper v. Egg & Egg Pulp Marketing Board (Vict.) [1939] HCA 24; (1939) 61 CLR
665, at pp 676, 677 , a similar case to Crothers v. Sheil [1933] HCA 42; (1933) 49 CLR 399 . The
present levy is in the words of Latham C.J. in Matthews v. Chicory Marketing Board (Vict.) (1938)
60 CLR, at p 276 "plainly a tax. It is a compulsory exaction of money by a public authority for
public purposes, enforceable by law, and is not a payment for services rendered." In the same case
(1938) 60 CLR, at p 281 , Rich J. said: "As to the fact that it (the tax) is to be applied to meet the
expenses of a marketing scheme and for purposes connected with chicory growing, the statute treats
these as public purposes to be undertaken by a public body in the public interest. If the State
authorizes a levy upon a commodity which in other respects is an excise, I think it is difficult to see
how the purpose for which the money is obtained can affect the question whether it comes within an
excise." (at p251)

3. In our opinion the present levy must, like the levy there discussed, be an excise unless Mr. Sholl's
alternative submission is correct that the contributions are not imposed in respect of or in relation to
the production or manufacture of milk, or even in respect of or in relation to the first sale after
production, and no imposition is a duty of excise within s. 90 of the Constitution unless it is so
imposed. In connection with this submission Mr. Sholl supplied the Court with a valuable list of
extracts from the judgments of this Court on the meaning of such duties of excise in Peterswald v.
Bartley [1904] HCA 21; (1904) 1 CLR 497 ; R. v. Barger [1908] HCA 43; (1908) 6 CLR 41 ;
Commonwealth & Commonwealth Oil Refineries Ltd. v. South Australia [1926] HCA 47; (1926) 38
CLR 408 ; John Fairfax & Sons Ltd. v. New South Wales [1927] HCA 3[1927] HCA 3; ; (1927) 39
CLR 139 and the cases which we have already mentioned. The lack of unanimity in these judgments
indicates the difficulty of the problem. The views there expressed must, of course, be read in the
light of the facts of each particular case, and there is not, in our opinion, any decision of this Court
that a levy is only a duty of excise within the meaning of s. 90 of the Constitution if it is imposed in
respect of the production or manufacture of goods or in respect of the first sale of such goods by the
producer or manufacturer. In Peterswald v. Bartley (1904) 1 CLR, at p 509 Griffith C.J. for the
Court said that excise in s. 90 is intended to mean a duty analogous to a customs duty imposed upon
goods either in relation to quantity or value when produced or manufactured and not in the sense of
a direct tax or personal tax. At (1904) 1 CLR, at p 512 he said that the term "duties of excise" as
used in the Constitution is limited to taxes on goods in process of manufacture. If the latter
statement is accepted literally, a levy on the first sale of goods produced or manufactured in
Australia is not an excise duty. But it has been decided that such a levy is an excise: Commonwealth
& Commonwealth Oil Refineries Ltd. v. South Australia [1926] HCA 47; (1926) 38 CLR 408 ; John
Fairfax & Sons Ltd. v. New South Wales [1927] HCA 3; (1927) 39 CLR 139 . It is submitted this is
because the first sale of the goods is usually a sale by the producer or manufacturer, so that such a
tax is in effect a tax on their production or manufacture. But we can see no reason why a levy
should not be a duty of excise within the meaning of s. 90 of the Constitution although it is imposed
at some subsequent stage. It must be imposed so as to be a method of taxing the production or
manufacture of goods, but the production or manufacture of an article will be taxed whenever a tax
is imposed in respect of some dealing with the article by way of sale or distribution at any stage of
its existence, provided that it is expected and intended that the taxpayer will not bear the ultimate
incidence of the tax himself but will indemnify himself by passing it on to the purchaser or
consumer. As Higgins J. said in Commonwealth & Commonwealth Oil Refineries Ltd. v. South
Australia [1926] HCA 47[1926] HCA 47; ; (1926) 38 CLR 408 , "it matters not whether the duty is
imposed at the moment of the actual sale or not, or sale and delivery, or consumption." Then there is
the definition of excise duties cited by Rich J. in John Fairfax & Sons Ltd. v. New South Wales
(1927) 39 CLR, at p 146 , "an inland imposition, and one imposed sometimes on the manufacturer
or dealer, sometimes on the commodity itself or the retail sale." (at p252)

4. We accept with respect the definition reached by Dixon J. in Matthews v. Chicory Marketing
Board (Vict.) (1938) 60 CLR, at p 304 , where his Honour, after a very full discussion of the
subject, said: "to be an excise the tax must be levied 'upon goods,' but those apparently simple words
permit of much flexibility in application. The tax must bear a close resemblance to the production or
manufacture, the sale or the consumption of goods and must be of such a nature as to affect them as
the subjects of manufacture or production or as articles of commerce." Each of the present levies
fulfils these requirements. It is a contribution of a fraction of a penny for every gallon of milk sold
or distributed by the taxpayer during a certain period. This affects the goods, that is the milk sold or
distributed by these taxpayers as articles of commerce, the basis of assessment is the quantity of the
goods sold or distributed, and it is a levy against which it is expected and intended that the taxpayer
should indemnify himself at the expense of the persons to whom the milk is sold or distributed. It is
the very form of levy which s. 30 of the Milk Board Act contemplates and intends, for the section
provides for a contribution not exceeding a fraction of a penny per gallon for every gallon of milk
sold or distributed from time to time (the italics are ours). The regulations and determinations under
challenge carry this intention into effect. We are of opinion that the section, the regulations and
determinations are all invalidated by s. 90 of the Constitution. (at p253)

5. For these reasons we would overrule the demurrer. (at p253)

DIXON J. The question for decision upon this demurrer is whether the levy under the Milk Board
Acts of Victoria of contributions to a fund kept in the Treasury called the Milk Board Fund is valid.
Its validity is attacked on two grounds. One is that the levy of the contributions amounts to the
imposition of a duty of excise within the meaning of s. 90 of the Commonwealth Constitution,
which makes the power of the Federal Parliament to impose duties of excise exclusive. The other is
that the levy has not been properly made under the authority of the Milk Board Acts because it
covers a class of persons whom the statutes except. The jurisdiction of this Court to entertain the
suit comes from the first ground, in virtue of which it is a matter arising under the Constitution or
involving its interpretation. (at p253)

2. The Milk Board Acts are four statutes of the State of Victoria, the principal Act (No. 4183)
passed in 1933 and three amending Acts (Nos. 4276, 4463 and 4676) passed in 1934, 1936 and
1939 respectively. I shall state the result of this somewhat troublesome agglutination of statutes so
far as it is material to the two points to be decided. (at p253)

3. It begins by establishing as a body corporate a Milk Board consisting of a chairman and two
members. The Board is entrusted with wide powers for the control of the trade by which Melbourne
and its suburbs are supplied with milk. But the Acts also contain provisions directly regulating the
trade. The legislation provides for the distinct parts played by the dairy farmers who produce milk,
the milk depots which obtain it and mix or treat it and the dairy where milk is kept for sale or dairy
produce is prepared for sale and whence milk is distributed in the metropolis. There is one particular
kind of dairy, the milk shop, which is registered as a shop, licensed as a dairy and sells milk only for
delivery at the premises. For some purposes it is dealt with specially. "Dairyman" and "metropolitan
milk distributor" are equivalent terms. Milk for sale or distribution in the metropolis must be
purchased by the dairyman either from a dairy farm, a milk depot or another dairyman. Milk depots
must keep records of the milk purchased from a dairy farm and must not mix it with milk received
for purposes of manufacture. Milk purchased for sale or distributed in the metropolis whether from
dairy farms, milk depots or by one dairyman from another can be purchased only under and in
accordance with contracts the Board has approved. Both the dairyman and the owner of the dairy
farm must make returns to the Board of what they buy and sell and their records may be examined
by officers of the Board. The minimum price to be paid for milk to owners of dairy farms and to
milk depots is fixed by the Board and also the maximum price at which milk may be sold by retail.
The Board may specify the dairies from which milk may be distributed by retail in the metropolis. It
may specify dairies which are to be restricted to selling milk for delivery at the dairy premises.
When a dairy is not specified as one from which milk may be so sold by retail and when a dairy is
restricted to sale "over the counter" it may be compensated. The Board assesses the compensation. A
licensed dairy may not be transferred without the approval of the Board and without that approval
no new licence may be granted. Annually the maximum quantity of milk to be forwarded by a milk
depot to the metropolis in the ensuing year may be fixed by the Board. Another duty of the Board is
to license carriers who transport milk by road to the metropolis or to railheads for consignment to
the metropolis. It has wide powers, and indeed duties, of inquiry. The extensive field covered by its
functions necessarily means a great deal of administration. To the ordinary expenses of
administration are added the liability to pay compensation and an authority to expend money on
promoting and encouraging by advertisement or otherwise the consumption of milk. The Milk
Board Fund is established by the statutes as the fund from which the Board will meet its
expenditure. Out of the fund there is to be paid what it expends in promoting the consumption of
milk, the compensation and the costs of assessing it, and all costs and expenses of administration.
Any advance the Treasurer makes to the Fund is to be repaid thereout. Lastly the Governor in
Council may fix annual contributions from the Fund towards recouping expenditure incurred (sc. by
the Treasury) under the Milk and Dairy Supervision Acts in improving the quality of milk for
consumption in the metropolis. (at p255)

4. The fund is fed by contributions exacted under s. 30 of the Milk Board Act as amended. Section
29 directs the Board to prepare for every year an estimate of the probable expenditure of the year in
administering the Acts and carrying out the duties of the Board. It must not exceed a limit fixed by
the Minister and it must obtain the approval of the Governor in Council. The method of raising the
money is then dealt with by s. 30, the material sub-sections of which are as follows:- "30. (1) (a)
Towards the expenditure so estimated there shall be contributed by - (i) every dairyman (other than
the owner of a milk shop) who sells or distributes milk in the metropolis; and (ii) every owner of a
milk depot who sells or distributes milk to any person in the metropolis - such sum as is determined
by the Board in accordance with the regulations but such sum shall not . . . exceed a sum equal to
one-quarter of a penny per gallon for every gallon of milk so sold or distributed. (b)
Notwithstanding anything in the last preceding paragraph no contribution shall be payable by - (i)
any dairyman (other than the owner of a milk shop) in respect of milk sold or distributed to another
dairyman; (ii) any owner of a milk depot in respect of milk sold or distributed to a dairyman (other
than the owner of a milk shop); or to any person for use in the manufacture of any prescribed article
or commodity to be sold by such person by wholesale; (iii) any person in respect of milk sold or
distributed to such charitable institutions as are prescribed by the regulations. (2) The contributions
payable under this section shall be assessed and be paid at such times and in such manner as may be
prescribed by regulations. (3) If any such sum is not paid as and when the same becomes payable
the amount thereof may be recovered in a court of petty sessions as a civil debt recoverable
summarily or in any court of competent jurisdiction by the Board; and if such sum is not so paid the
licence of the dairyman or of the owner of the milk depot (as the case may be) may be cancelled by
the Minister and shall thereupon cease to have any further force or effect." It should be noticed that
the owner of a milk shop is specifically excluded from liability to make a contribution. Why it is
important that this should be noticed is that it forms the foundation of the contention that the
contribution has been levied on too wide a class. The regulation by which it is levied is said to be
bad because it ignores the exception. It will be seen that it is left to the Board in accordance with
regulations to determine the sum to be contributed. The Governor in Council is given a regulation-
making power. It is expressed to extend to making regulations for or with respect to contributions
payable under the Act by dairymen other than the owners of milk shops and by owners of milk
depots. It will further be seen that a limitation is placed upon the sum to be exacted of a farthing a
gallon. The limitation suggests that the contribution is to be at a rate per gallon or is to be measured
by the quantity sold. All three exclusions made by par. (b) of sub-s. (1) are based on this assumption
and they would not be workable unless the levy was calculated upon the amount of milk sold or
distributed. For the exclusions are "in respect of milk sold or distributed" to the particular class of
customer specified by the sub-paragraphs. But the actual words "such sum as is determined by the
Board" occurring in par. (a) of sub-s. (1) do not expressly relate the sum to the quantity sold or
restrict it to a rate per gallon. It is significant however that neither these words nor the limitation
which follows limiting the levy to a farthing per gallon refer to a period of time. It is true that the
budget under s. 29 is of course for a year and the rate of contribution must be determined every
year. But the provision reads as if it contemplated only a contribution according to quantity, such as
a rate per gallon, so that there was no need to calculate the amount per month or per annum. It
would be impossible to discover whether a contribution of a sum fixed in any other manner
exceeded the farthing a gallon unless the contribution was fixed according to an interval of time and
over the same time the quantity of milk sold was taken and the amount at a farthing per gallon was
reckoned in order to ascertain whether the limit had been exceeded. I do not think that the section
authorizes the levying of a contribution otherwise than according to the quantity of milk sold or
distributed. (at p256)

5. The existing general regulations under the Milk Board Acts were made on 25th March 1947.
Clause 6 is as follows:- "Contributions - Any determination by the Board under or pursuant to s. 30
of the Milk Board Acts shall be made at a meeting of the Board called for that purpose. In arriving
at a determination the Board shall have regard to the probable revenue for the year based on the
estimated quantity of milk to be sold or distributed in the metropolis. The contributions payable
under and pursuant to s. 30 of the Milk Board Act 1933 as amended by the Milk Board Act 1936
and any determination made thereunder shall be assessed on the quantity of milk sold or distributed
in the metropolis during each month by every dairyman and owner of a milk depot liable to pay
such contributions and every such dairyman or owner of a milk depot shall pay to the Milk Board
by the twenty-first day of each month the contributions payable by him in respect of the milk so
sold or distributed during the preceding month." Two determinations of the Board in purported
pursuance of this clause are involved in the demurrer, one adopting a rate of an eighth of a penny a
gallon the other of one-tenth of a peny. These determinations, as they are alleged in the pleading,
determined that the sum to be contributed by every dairyman who sold or distributed milk in the
metropolis until the end of the year for which the determination was made should be in the one case
one-eighth and the other one-tenth of a penny per gallon. No mention was made of a dairyman who
was an owner of a milk shop. The pleading does not state that owners of milk depots were included
in the determination as I think that s. 30 (1) (a) requires. The validity of the imposition was not
attacked on this ground and I imagine the pleader omitted the words as immaterial. The Governor in
Council made a regulation in each case to give effect to the determination. Again the owner of a
milk shop was not expressly excepted. But owners of milk depots are included. Each of the two
regulations required that the dairyman and owner of a milk depot should "under and pursuant to s.
30 of the Milk Board Act 1933 as amended by the Milk Board Act 1936 and the Milk Board Act
1939 and (pursuant) to a determination made thereunder by the Milk Board . . . contribute in
accordance with the Regulations made under the Milk Board Acts the sum of" &c. (at p257)

6. The validity of the imposition is, as I have said, attacked upon the ground that owing to the
failure in the Board's determinations and in the regulations lastly mentioned to except owners of
milk shops, the levy includes too wide a class. (at p257)

7. This of course is a matter of State law. But upon it depends the question whether there is a State
imposition which would be effectual but for the Constitution. If it is authorized so far as State law is
concerned then its validity depends on s. 90 of the Constitution. If it has not the authority of State
law the State law cannot be treated as assuming to impose an excise. (at p257)

8. In these circumstances I am of opinion that we have jurisdiction to decide the question. The case
in respect of this matter is like O'Neill v. O'Connell [1946] HCA 59; (1946) 72 CLR 101, at pp 115,
116, 124, 125, 126 and Hopper v. Egg and Egg Pulp Marketing Board (1939) 61 CLR at pp 673,
674, 680, 681 . In Carter v. Egg & Egg Pulp Marketing Board [1942] HCA 30; (1942) 66 CLR 557
the claim under State law was collateral to and severable from that involving the Federal questions
(1942) 66 CLR, at pp 580, 587, 588, 593, 594, 601, 602 . (at p258)

9. The substance of the question depends upon the interpretation of the three steps in combination
by which the statutory power was exercised; viz. (1) clause 6 of the regulations of 25th March 1947;
(2) the two respective determinations of the Board; (3) the two respective regulations imposing the
levy so determined on by the Board. The first clearly limits the determinations which its provisions
govern to the class of persons liable. It speaks of "every dairyman and owner of a milk depot liable
to pay such contributions." The second, the determinations, professed on their face to be in
accordance with the Acts and regulations; and the third, the regulations imposing the levy, recite the
Acts that affect the imposition, leaving out No. 4276 which does not, and they recite the
determination. On the whole I think that there is enough to show that it was not intended to impose
either levy on the owners of milk shops and the regulations imposing the levies should be so
interpreted. This point therefore fails. The result is that the question whether the levy amounts to the
imposition of an excise must be decided. (at p258)

10. In my opinion the levy of the contribution does amount to the imposition of a duty of excise. In
stating as briefly as I can my reasons for this conclusion I shall begin by mentioning the
characteristics of the contribution in virtue of which I think it is a duty of excise. In the first place I
think that it is clearly a tax. It is a compulsory exaction. It is an exaction for the purposes of
expenditure out of a Treasury fund. The expenditure is by a government agency and the objects are
governmental. It is not a charge for services. No doubt the administration of the Board is regarded
as beneficial to what may loosely be described as the milk industry. But the Board performs no
particular service for the dairyman or the owner of a milk depot for which his contribution may be
considered as a fee or recompense. There is nothing comparable with the facilities for which the
wharfage rates were imposed in Melbourne Harbour Trust Commissioners v. Colonial Sugar
Refining Co. Ltd. (1926) VLR 140 . The purposes for which the money is expended are extensive
and cover not only all the activities in which the Board may engage, including the compensation of
dairies whose licences are cancelled and promotion of milk consumption, but also subventions
contributed towards the cost of the measures taken under the Milk and Dairy Supervision Acts to
improve the quality of milk in Melbourne. In Matthews v. Chicory Marketing Board (Vict.) (1938)
60 CLR 263 in conditions that are very similar all the judges regarded the levy there in question as a
tax. The contribution is a compulsory levy by a public authority for public purposes and that is
enough to show that it is a tax: Lower Mainland Dairy Products Sales Adjustment Committee v.
Crystal Dairy, Ltd. (1933) AC 168, at p 175 ; City of Halifax v. Nova Scotia Car Works Ltd. (1914)
AC 992, at p 998 . (at p259)

11. In the next place the tax is a tax upon goods. It is a levy of an eighth or a tenth of a penny upon
every gallon of milk sold or distributed in the metropolis by a dairyman or a milk depot. That means
a tax upon the milk sold or distributed for consumption in Melbourne. It is not a licence fee payable
as a condition of a right to carry on a business. On the other hand it is a trading tax. "Customs and
excise duties are, in their essence, trading taxes, and may be said to be more concerned with the
commodity in respect of which the taxation is imposed than with the particular person from whom
the tax is exacted": Attorney-General for British Columbia v. Kingcome Navigation Co. (1934) AC
45, at p 59 . Again the exaction is not a tax imposed upon the dairyman and owner of a milk depot
because they are selected as the parties to the trading who should bear a particular contribution but
on the contrary it is imposed on them as the persons to pay, it being a matter of indifference which
of the parties ultimately bears the burden and the tax having from its nature a tendency to enter into
the price obtained for the milk. The tax is therefore indirect: Attorney-General for British Columbia
v. Kingcome Navigation Co. (1934) AC 45, at p 57 . "The leading characteristic of an indirect tax is
that it is susceptible of being passed on and customs and excise duties ordinarily exhibit this
characteristic" (Matthews v. Chicory Marketing Board (1938) 60 CLR at p 285 , per Starke J.). It is
a sales tax and as I understand it that is generally regarded as an excise. (at p259)

12. Finally it falls within the definition of "excise" given by the Encyclopaedia Britannica, 11th ed.,
vol. 10, and adopted by the Oxford English Dictionary s.v. viz.: "a term now well known in public
finance, signifying a duty charged on home goods, either in the process of their manufacture or
before their sale to the home consumers." (at p259)

13. Only if the conception of what is an excise is limited by the condition that the tax must be levied
on the manufacturer, that is to say upon the goods while they are still in his hands, can I see any
escape from the conclusion that the levy of the contribution is an excise. (at p260)

14. I cannot adopt the view that this is an essential feature of the conception. What probably is
essential is that it should be a tax upon goods before they reach the consumer. Though in
Commonwealth & Commonwealth Oil Refineries v. South Australia (1926) 38 CLR at p 435
Higgins J. said: "Excise means a duty on the manufacture, production &c. in the country itself; and
it matters not whether the duty is a duty imposed at the moment of actual sale or not or sale and
delivery or consumption." In making the power of the Parliament of the Commonwealth to impose
duties of customs and of excise exclusive it may be assumed that it was intended to give the
Parliament a real control of the taxation of commodities and to ensure that the execution of
whatever policy it adopted should not be hampered or defeated by State action. A tax upon a
commodity at any point in the course of distribution before it reaches the consumer produces the
same effect as a tax upon its manufacture or production. If the exclusive power of the
Commonwealth with respect to excise did not go past manufacture and production it would with
respect to many commodities have only a formal significance. (at p260)

15. I am aware that Isaacs J. in Commonwealth & Commonwealth Oil Refineries v. South Australia
(1926) 38 CLR at p 426 expressed the view that a tax with respect to the sale of goods as existing
articles of commerce independently of the fact of their local production is not an excise duty. But
upon this there are two observations to be made. One is that in Attorney-General (N.S.W.) v.
Homebush Flour Mills Ltd. (1937) 56 CLR at pp 401, 408 Starke J. explicitly said on the authority
of Peterswald v. Bartley [1904] HCA 21; (1904) 1 CLR 497 that the Constitution limited the words
to duties charged upon goods produced or manufactured in Australia itself or upon a sale of such
commodities; and Latham C.J. pointed out that the negative proposition was not essential to the
judgment of Isaacs J. (at p260)

16. The other observation is that the Milk Board Acts ensure that, excepting milk shops, the sale and
distribution of milk in the metropolitan area of Melbourne will be through dairies and milk depots.
They will obtain the milk from the dairy farms. Thus the case is, I imagine, one which Isaacs J.
would regard as coming within the qualification he made to his proposition. In his language, the tax
is "so connected with the production of the article sold or is otherwise so imposed as in effect to be
a method of taxing the production of the article." (at p261)

17. In Matthews v. Chicory Marketing Board (Vict.) (1938) 60 CLR, at pp 287 et seq I examined the
history of the word "excise" and its meaning and I shall not go over the same ground again. It is
probably a safe inference from Atlantic Smoke Shops, Ltd. v. Conlon (1943) AC 550 , which has
since been decided, that a tax on consumers or upon consumption cannot be an excise. This decision
perhaps makes it necessary to that extent now to modify the statement: "that so far there is no direct
decision inconsistent with the view that a tax on commodities may be an excise although it is levied
not upon or in connection with production, manufacture or treatment of goods or the preparation of
goods for sale or for consumption, but upon sale, use or consumption and is imposed independently
of the place of production" (1938) 60 CLR, at p 300 . The modification is with respect to
consumption. (at p261)

18. I do not regard Hartley v. Walsh [1937] HCA 34; (1937) 57 CLR 372 as governing the decision
of the present case. The liability to contribute to which reference was there made was imposed upon
persons in whose name packing sheds were registered under the Dried Fruits Act 1928. The
contribution was to be determined by the Dried Fruits Board and was not to exceed a thirty-second
of a penny a pound of the quantity of fruit sold from the packing shed and also the quantity of dried
fruits forwarded therefrom for the purposes of trade or sale in the preceding year. A packing shed
performs a service in processing or packing the fruit. It may do so for the grower or it may purchase
the unprocessed fruit. The contribution was therefore levied upon the person responsible for the
performance of the service and, at all events as to the limitation on the charge, was calculated on the
goods passing through his hands in the preceding twelve months. It was therefore not a levy directly
imposed upon a commodity. (at p261)

19. Further I do not think that the question of the validity of the levy could have been material to the
decision in Hartley v. Walsh (4). It was an appeal from a conviction upon an information for selling
dried fruits which had not been packed in a registered packing shed contrary to a regulation made
under the Dried Fruits Acts. The levy was made under s. 18 of the Act. The validity of the
regulation could not have been affected even if s. 18 were void and of course the liability of the
packing shed to pay a contribution had no relevance to the charge. Evatt J. said so much expressly
(1937) 57 CLR, at p 396 . The opinions that were expressed were, I think, obiter dicta. Three judges
dealt with the liability of the packing shed to pay contributions. Latham C.J. said: "This contribution
is specifically provided as a contribution towards carrying out the Act and as a payment for services
rendered and cannot, in my opinion, be regarded as a tax forbidden by s. 90 of the Constitution. A
similar charge was dealt with by this Court in Crothers v. Sheil [1933] HCA 42; (1933) 49 CLR 399
. In that case an Act dealing with the marketing of milk provided that the price of the milk should be
paid to the suppliers with a deduction for charges incurred in the treatment, carriage, distribution
and sale of the milk and for the costs, charges and expenses of the administration of the Act by the
Milk Board. It was held that this provision for deductions did not 'convert the scheme into one for
taxation.' In view of this decision I do not see how it can be held that the charge made under the
Dried Fruits Act is a contravention of s. 90 of the Constitution" (1937) 57 CLR, at p 376 . (at p262)

20. If the contribution in that case was for services rendered, nevertheless I am quite certain that the
contribution levied upon dairymen and owners of milk depots in the present case was not of that
description. As to the decision in Crothers v. Sheil [1933] HCA 42; (1933) 49 CLR 399 , I should
respectfully doubt whether it was in point in Hartley v. Walsh [1937] HCA 34; (1937) 57 CLR 372 .
But I am clearly of opinion that it is quite irrelevant to the present case. Like Hopper v. Egg & Egg
Pulp Marketing Board (1939) 61 CLR 665 , Crothers v. Sheil [1933] HCA 42; (1933) 49 CLR 399
was a case in which there was no tax (cf. (1939) 61 CLR, at pp 676, 677 ). (at p262)

21. The New South Wales Milk Act 1931 vested the milk in a Milk Board. Section 28 (2) then
provided:- "The Board shall, out of the proceeds of milk disposed of by the Board under this Act,
make provision for expenditure incurred in the treatment, carriage, distribution, and sale of milk, the
costs, charges, and expenses of the administration by the Board of this Act, and any amounts
necessary to repay advances made to, and to provide a sinking fund in respect of any loan raised by
the Board, and interest on any such advance or loan; and subject to this Act shall make payments to
each dairyman in respect of the milk delivered by him on the basis of the minimum price or prices
notified in relation thereto." (at p262)

22. The point was put by Rich J.:- "The provisions of the Milk Act do not exact any pecuniary
payment from the dairy farmer. They do not impose any liability in respect of the ownership,
transfer, sale or production of goods. They merely contain a scheme for the compulsory acquisition
of milk and the payment of the price of compensation to be borne by the proceeds arising from the
resale by the Board. The fact that these proceeds are subject to deductions would not convert the
scheme into one for taxation . . . . In the Lower Mainland Dairy Products Sales Adjustment
Committee v. Crystal Dairy, Ltd. Case (1933) AC 168 there was an actual levy of a money sum
upon the producers of milk who sold it in a liquid form; here there is no tax and no duty of excise"
(1933) 49 CLR, at p 408 . In Hartley v. Walsh (1937) 57 CLR at p 396 Evatt J. also referred to
Crothers v. Sheil [1933] HCA 42; (1933) 49 CLR 399 . But he does not appear to have expressed
himself definitively. Evatt J. said: "Having regard to the decision in Crothers v. Sheil [1933] HCA
42; (1933) 49 CLR 399 , it is very difficult to regard the charge as a duty of excise, more especially
as the charge is not intended to be passed on to the consumer, but back to the grower. Even if the
charge was a duty of excise, its invalidity would not affect the validity of the rest of the Act (see s. 2
of the Acts Interpretation Act 1930 of the State of Victoria)." McTiernan J. simply said: "I agree that
there is no substance in the submission (see Crothers v. Sheil [1933] HCA 42; (1933) 49 CLR 399 )"
(1937) 57 CLR, at p 400 . (at p263)

23. Before leaving Hartley v. Walsh [1937] HCA 34; (1937) 57 CLR 372 it is perhaps desirable to
refer again to the character of the levy in that case. Not only was the imposition upon the proprietor
of the packing shed and one measured, at least as to the maximum, by the fruit handled, but the fruit
was the fruit of the previous year. This appears to me to place the imposition more in the category
of a licence fee in respect of a business calculated on past business done; something like the licence
fee of a licensed victualler calculated on the amount expended by him in the previous year in
purchasing liquor, which I should not regard as an excise. (at p263)

24. But for the reasons I have given I think that the contribution which the two regulations in the
present case purport to impose under s. 30 of the Milk Act 1933 (Vict.) as amended amounts to an
excise and the purported imposition is void. (at p263)

25. In my opinion the demurrer should be overruled. (at p263)

McTIERNAN J. The principal question is whether s. 30 of the Milk Board Acts 1933-1939 of
Victoria invades the field reserved by s. 90 of the Constitution to the Parliament of the
Commonwealth, because the payment which s. 30 requires to be made to the Government is a duty
of excise within the meaning of s. 90. This section does not give the Commonwealth Parliament the
power to impose duties of customs and of excise. This power is derived from s. 51 (ii.) of the
Constitution. There is no definition of the classes of duties, whether customs or excise, which the
Commonwealth Parliament has power to impose. The Parliament is given power to legislate with
respect to taxation. Customs and excise are of course included in the term "taxation." The extent to
which the taxing powers of the States are curtailed by s. 90 depends upon the interpretation of the
words "duties of customs and of excise." It is necessary to consider the meaning of the words, their
connection with other parts of the Constitution and the object of providing that after the imposition
of uniform duties of customs only the Parliament of the Commonwealth shall have power to impose
"duties of customs and of excise." (at p264)

2. It is obviously necessary to imply after the words "customs" and "excise" some subject matter to
which these duties are appropriate. (at p264)

3. The term "duty of customs" means a duty upon the importation or exportation of goods or any
duty which, irrespective of its form, burdens the importation or exportation of goods: for example a
tax upon the importer in respect of the sale of the goods. It may be inferred from the term "duties of
customs" that Parliament is intended to have exclusive power to impose duties upon the importation
of goods into or the exportation of goods from the Commonwealth. (at p264)

4. But by the term "excise," s. 90 does not so plainly indicate the subject matter upon which only the
Parliament of the Commonwealth can impose duties of excise. (at p264)

5. The term "excise" includes exactions for licences to carry on certain trades or occupations and it
is used to cover miscellaneous taxes on various articles and sometimes as a synonym for inland
revenues. Excise also means a duty on the manufacture, production, sale or consumption of goods.
A duty of excise of this kind and a duty of customs are classified as indirect taxes. (at p264)

6. Duties of customs on imported goods have a relationship to the price paid by the user or
consumer of the goods similar to that which duties of excise imposed upon goods produced or
manufactured in the country have to the price paid by the user or consumer of those goods. There is
an important relationship between duties of customs and duties of excise levied upon production or
manufacture. In Stephen's Commentaries on the Laws of England, 16th ed., vol. II, p. 668, there is
this statement: "The relationship of excise to customs duties is always of great importance; though
the views taken of it naturally vary with the fiscal policy followed by the country at any given time.
Thus, for example, if the desire of Parliament is to favour British manufacturers at the expense of
the nation at large, customs duties will be placed on articles coming from abroad which could be
manufactured in the United Kingdom, but no corresponding or 'countervailing' excise duties on
articles produced at home will be levied. If, on the other hand, Parliament takes the view that open
competition between British and foreign manufacturers will, in the long run, produce the best results
for the country, then, on every article which is taxed at the Custom House, it will place a
'countervailing' excise duty on the articles of the same class manufactured in the United Kingdom."
(at p265)

7. It may be inferred from the event mentioned in s. 90 and the inclusion of customs, excise and
bounties in the section that the duties of excise to which it refers have this relationship to duties of
customs and that the object of the section is a uniform fiscal policy for the Commonwealth. The
meaning of the term "excise" in s. 90 is governed by the object of the section. (at p265)

8. In Peterswald v. Bartley (1904) 1 CLR, at p 508 , Griffith C.J. cites a passage in the work written
by Quick & Garran "on the origin and use of the term 'excise'" in which the learned authors say:
"The fundamental conception of the term is that of a tax on articles produced or manufactured in a
country. In the taxation of such articles of luxury as spirits, beer, tobacco and cigars, it has been the
practice to place a certain duty on the importation of these articles and a corresponding or reduced
duty on similar articles manufactured in the country; and this is the sense in which excise duties
have been understood in the Australian colonies, and in which the expression was intended to be
used in the Constitution of the Commonwealth." (at p265)

9. Section 90 does not restrict the power of a State legislature to the utmost extent that the widest
meaning of the words "duties of excise" would allow, but to the extent only that the object of the
section requires. (at p265)

10. The words "duties of customs and excise" are used in ss. 86, 90 and 93. In s. 93 the term
"customs" is used to mean a duty chargeable "on goods imported into a State," and "excise" to mean
a duty "paid on goods produced or manufactured in a State." (at p265)

11. In Peterswald v. Bartley (1904) 1 CLR 509 it was decided that the duties of excise mentioned in
s. 90 are taxes levied on the production or manufacture of goods. In the Motor Spirit Case [1926]
HCA 47; (1926) 38 CLR 408 a State tax levied upon the "first sale" made by "a producer" was held
to be a tax on production and consequently a duty of excise within the meaning of s. 90. In John
Fairfax & Sons Ltd. & Smiths Newspapers Ltd. v. New South Wales [1927] HCA 3; (1927) 39 CLR
139 another State tax was held to be such a duty of excise for the same reason. The nature and
incidence of the tax may be ascertained by reference to s. 2. of the Finance (Taxation Management)
Act 1926 and s. 3 of the Finance (Newspaper Taxation) Act 1926. In Matthews v. Chicory Board
(Vict.) [1938] HCA 38; (1938) 60 CLR 263 a State tax was held to be a duty of excise within s. 90
because it was levied upon production. In an earlier case, Attorney-General v. Homebush Flour
Mills Ltd. [1937] HCA 3; (1937) 56 CLR 390 , a contribution levied upon a miller in respect of the
sale of flour was held to be an excise tax which s. 90 put beyond the powers of the State legislature.
(at p266)

12. In the Motor Spirit Case (1926) 38 CLR, at p 426 Isaacs J. said, after referring to the
interdependence of customs, excise and bounties in the Constitution, that he agreed with the
reasoning in Peterswald v. Bartley [1904] HCA 21; (1904) 1 CLR 497 . (at p266)

13. In that case Griffith C.J. (1904) 1 CLR, at p 509 said that, "when used in the Constitution it (the
term 'excise') is used in connection with the words 'on goods produced or manufactured in the
States,' the conclusion is almost inevitable that, whenever it is used, it is intended to mean a duty
analogous to a customs duty imposed upon goods either in relation to quantity or value when
produced or manufactured, and not in the sense of a direct tax or personal tax. Reading the
Constitution alone, that seems to be the proper construction to be put upon the term." (at p266)

14. The passage in the reasons for judgment of Isaacs J. in the Motor Spirit Case [1926] HCA 47;
(1926) 38 CLR 408, at p 426 in which he expressed agreement with the reasoning in Peterswald v.
Bartley [1904] HCA 21; (1904) 1 CLR 497 is as follows: "Licences to sell liquor or other articles
may well come within an excise duty law, if they are so connected with the production of the article
sold or are otherwise so imposed as in effect to be a method of taxing the production of the article.
But if in fact unconnected with production and imposed merely with respect to the sale of the goods
as existing articles of trade and commerce, independently of the fact of their local production, a
licence or tax on the sale appears to me to fall into a classification of governmental power outside
the true content of the words 'excise duties' as used in the Constitution. Such taxing regulations are,
in my opinion, not 'withdrawn' from the States, however they might stand in presence of relevant
Commonwealth legislation respecting foreign or inter-State trade. I agree with the reasoning in
Peterswald v. Bartley [1904] HCA 21[1904] HCA 21; ; (1904) 1 CLR 497 ." (at p266)
15. Higgins J. (1926) 38 CLR, at p 434 gives instances of excise duties within the meaning of s. 90.
One is a tax upon the distillation of spirits: another is a duty imposed upon tobacco manufactured in
any tobacco factory and entered for home consumption. There is also this statement by Higgins J.
(1926) 38 CLR, at p 435 : "for the purpose of section 90 and our Constitution as a whole, customs
duty is a duty on the importation or exportation whether by land or by sea; whereas excise duty
means a duty on the manufacture, production etc. in the country itself; and it matters not whether
the duty is imposed at the moment of actual sale or not, or sale and delivery, or consumption." This
means that it matters not if a duty "on the manufacture, production etc." is imposed "at the moment
of" any of the transactions which are mentioned. (at p267)

16. The weight of judicial authority favours the view that s. 90 withdraws from the States power to
levy a duty on the production or manufacture of goods, but not that s. 90 goes as far as to withdraw
from the States the power to levy a tax on goods which is in fact unconnected with their production
and is imposed merely with respect to the sale of the goods as existing articles of commerce. (at
p267)

17. Section 30 of the Milk Board Act 1933-1939 requires "a dairyman other than the owner of a
milk shop" and "every owner of a milk depot" to contribute towards the expenditure incurred in the
administration of the Acts. The dairyman as owner of a milk depot is made subject to liability only
if he sells or distributes milk in the metropolis. In order to ascertain what is meant by "dairyman"
and "owner of a milk depot," it is necessary to refer to definitions in the Milk Board Acts and the
Milk and Dairy Supervision Act 1928. Upon reference to those definitions, it is seen that the
authority given by s. 30 is limited to exacting contributions from distributors of milk and not from
dairy farmers or producers as such. The Act gives authority to exact a contribution in respect of sale
or distribution. The Milk Board is given power to determine the sum to be paid by any person who
is liable to contribute but subject to the condition that "such sum shall not in the case of any such
dairyman or owner exceed a sum equal to one quarter of a penny per gallon for every gallon of milk
sold or distributed." (at p267)

18. The pecuniary impost which s. 30 authorizes is a burden upon the sale or distribution of milk to
users and consumers. It is not levied upon the producers and it is in fact not connected with
production. The impost is levied with respect to the sale of milk as an existing article of commerce
independently of the production of the commodity. The impost is not a duty of excise within the
meaning of s. 90. (at p267)

19. The sellers and distributors who are required to make the payment provided by s. 30 may pass
on the amount of the liability to the users and consumers of the milk and the Parliament may have
expected that they would do so. The burden of the payment may be an indirect tax, but the
Constitution does not withdraw power from the States to impose any indirect tax unless it is a duty
of customs or of excise within the meaning of s. 90. (at p268)

20. The payment which s. 30 requires to be made is a tax because it is a forced contribution to the
government for public purposes. The objects of the Acts are directed to the general welfare rather
than to the performance of services for the sellers and distributors who may be required to
contribute. But the tax is not a duty of excise within s. 90 and is therefore within the constitutional
power of the State. (at p268)

21. As s. 30 is not in conflict with the Constitution, the question whether the regulations and
determinations are invalid arises under and involves only the interpretation of the Milk Board Acts.
Such a question is not within the original jurisdiction of this Court. No declaration should therefore
be made as to the validity of the regulations and the determination: Carter v. The Egg Board [1942]
HCA 30[1942] HCA 30; ; (1942) 66 CLR 557 . (at p268)

22. In my opinion the demurrer should be allowed. (at p268)

ORDER

Demurrer overruled.

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