Thiess v Collector of Customs: High Court Decides on Disputed Duty

Wednesday 2 April 2014 @ 12.46 p.m. | Taxation | Trade & Commerce

The High Court has handed down its decision in Thiess v Collector Of Customs & Ors [2014] HCA 12 (2 April 2014) holding that subsection 167(4) of the Customs Act 1901 (Cth) ("the Act") bars all actions for the recovery of duty paid to the Collector of Customs, irrespective of whether a dispute as to the amount or rate of duty payable arises at the time of payment, subject only to two statutory exceptions, as to which see  paragraphs [24] to [26] of the court's decisions:

[24] . . . Two qualifications are apparent.

[25] First, s 167(2) permits the bringing, within the times limited by s 167(4), of a statutory action for the recovery of the whole or any part of a sum paid under protest pursuant to s 167(1). It is that statutory action to which s 167(4) goes on to refer when it adds the express qualification "unless the payment is made under protest in pursuance of this section and the action is commenced within the following times".

[26] Second, s 167(5) adds the express qualification that nothing in s 167 affects any rights or powers under s 163. Section 167(4) therefore says nothing to affect any action to enforce any right to a refund, rebate or remission of duty which arises under s 163. In particular, s 167(4) does not bar an action in debt to enforce the right which arises under s 163 to recover a sum paid through manifest error of fact or patent misconception of law, where application is made within the prescribed period for a refund of that sum, and where other prescribed conditions of, and restrictions on, the making of that refund are met.

Background Facts

In 2004, Mr Alan Thiess (the appellant), imported a yacht which due to its weight (160 tonnes) should not have attracted any import duty under the the Act. However, the appellant's customs broker mistakenly believed the yacht was of a lower weight (108 tonnes) that would attract a different tariff classification and require an import duty to be paid. The effect of this error was that the Collector of Customs' COMPILE computer system automatically calculated that the customs duty payable on the yacht was $494,472, with an additional $49,447 being added payable as goods and services tax (GST). A duty which the appellant's broker later paid.

The appellant learned of the mistake two years later (in 2006) and sought an "act of grace" refund of the import duty and the GST which was not paid. The appellant then commenced proceedings in 2010, six years after the duty was paid. On 15 December 2010, the appellant brought proceedings in the trial division of the Supreme Court of Queensland seeking to recover the amount of $543,919, relying on the money having been paid under a mistake of fact, and in the alternative claiming restitution in equity or equitable compensation.

Queensland Court of Appeal Proceedings

Questions of law were reserved for the consideration of the Queensland Court of Appeal (QCA) and in Thiess v Collector of Customs & Ors [2013] QCA 54 (22 March 2013), the QCA held that the Collector of Customs had a lawful defence to the appellant’s claim relating to both the import duty and the GST charged on the yacht by virtue of subsection 167(4) of the Act which provides that:

"No action shall lie for the recovery of any sum paid to the Customs as the duty payable in respect of any goods, unless the payment is made under protest in pursuance of this section and the action is commenced within the following times:

(a) In case the sum is paid as the duty payable under any Customs Tariff, within 6 months after the date of the payment; or

(b) In case the sum is paid as the duty payable under a Customs Tariff or Customs Tariff alteration proposed in the Parliament, within 6 months after the Act, by which the Customs Tariff or Customs Tariff alteration proposed in the Parliament is made law, is assented to."

The QCA found that subsection 167(4) barred an action for recovery of duties unless the original payment was made under protest, and that any action to recover payment must be commenced within six months of the payment date. The QCA found that the appellant neither made the payment under protest nor did it commence an action within six months required.

The Court of Appeal further found that the claim for repayment of the GST failed due to a four year notice limitation.

The QCA also rejected the appellants’s argument the statutory provisions relevant to those claims contravened section 51(xxxi) of the Commonwealth Constitution, relating to the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws.

The appellant appealed to the High Court and proceedings commenced on 5 March 2014.

In the High Court

The High Court dismissed the appeal holding in a unanimous joint decision that, irrespective of whether a dispute had arisen at the time of payment within the meaning of subsection 167(1) of the Act, subsection 167(4) operated to bar all actions for the recovery of duty paid to the Collector of Customs, subject only to either a statutory action for recovery under subsection 167(2) of the Act, or any action to enforce a right or to compel the exercise of powers under section 163 of the Act which deals with refunds of duty.

Further, the High Court has held that because the appellant could not recover the amount paid as customs duty, the appellant could not recover the amount paid as GST.

In reaching its decision, at paragraph [28] the High Court said in it's judgment that the function of section 167:

". . . is to provide, by s 167(1), a mechanism for payment under protest, so as to allow goods to be entered for home consumption in circumstances where the owner and Customs are in dispute as to the amount of duty payable in respect of those goods. The comprehensive nature of that mechanism is demonstrated by the exhaustive operation of s 167(3) and (3A) to explain when, if at all, a payment is to be taken to have been made under protest. The correct amount of duty payable is then able to be determined after entry, in a statutory action under s 167(2).

While at paragraph [29] the High Court said that:

". . . [B]y barring any other recovery action, s 167(4) enhances the operation of that scheme. It creates an incentive for the owner to be vigilant in the process of entering goods for home consumption to identify what the owner considers to be the duty payable. It creates an incentive for the owner then to abide by the statutory mechanism of payment under protest and subsequent statutory action in the event of a difference emerging in that process between what the owner considers to be the correct duty payable and what Customs considers to be the duty payable".

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