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1. The Appeal Commissioners found in favour of Tara Mines Limited (the Company) on issue (a) and against the company on issue (b).

2. The Inspector of Taxes appeals by way of case stated against the decision on issue (a) The company reserves its position in relation to the decision on issue (b) pending the outcome of this appeal.

3. The question arose during the hearing before the Appeal Commissioners, which extended from January 1995 to July 1996, as to whether the concentrates produced by the company constitute “goods” within the meaning of part four of the Corporation Tax Act, 1976. The Inspector accepted that the concentrates are “goods” within the meaning of that part.

4. In relation to export tax relief Section 58 (3) of the 1976 Act provides that:-

5. A capital allowance is available for development expenditure in relation to a qualifying mine under the 1974 Act referred to above. Development expenditure is defined in Section 1 of that Act as :-

6. The Commissioners made extensive findings - 22 in all - including many sub- findings under the heading of steps carried out in extracting the ore (7 sub-findings) and the status of processing (12 sub-findings).

7. This Court is, of course, bound by such findings.

8. These findings may be reduced to the following relevant findings on which submissions were made by the parties.

9. The company extracts lead and zinc ores from the earth... which are then processed to produce the finished product of lead and zinc concentrates. A major constituent (approximately 90%) of the concentrates are sphalerite and galena. Sphalerite is a naturally occurring substance containing zinc in the form of zinc sulphide. Galena is a naturally occurring substance containing lead in the form of lead sulphide. (Finding (b))

10. The ore contains an average of 8% zinc and 2.5% lead. All the concentrates sold by the company during the accounting periods were exported out of the State. (Finding (d))

11. The company’s whole operation at Tara is divided into two major divisions under the management of the Production Manager and the divisions are entitled the Mining Division and the Processing Division respectively. (Each division has a separate manager who gave evidence before the Appeal Commissioners). (Finding (f))

12. In summary (the Manager of the Mining Division) is responsible for the exploration and development of the mine, together with the extraction of ore from the mine and its transportation to the storage tepee located on the surface. His responsibilities end at that point. The Manager of the Processing Division is responsible for all activities after the ore arrives in the tepee, including the manufacture of lead and zinc concentrates. (Finding (j))

13. This type of specialisation exists throughout the industry. Exploration is generally managed by Geologists, mining managed by Mineral Engineers and processing managed by Mineral or Chemical Engineers. There is some overlap, with the core professional capabilities of these specialities differing (Finding (k))

14. The personnel working in the Mining Division, with the exception of the Mobile Equipment Department personnel, work exclusively in that division. Likewise, Processing Division personnel do not work in the Mining Division. (Finding (m))

15. The steps carried out by the company in extracting the ore appear, from the further findings of the Appeal Commissioners, to extend from surface drilling, access tunnelling, blasting, excavating blasting of broken ore, crushing, back filling transferring to coarse or bin and from that to surface storage bin or tepee.

16. The main stages of processing appear from the three pages of findings of the Appeal Commissioners to be more complex. The first of these is as follows:-

17. It would appear that this finding encompasses some or all of the eleven findings which follow, in relation to the detail of processing which would seem to involve further discreet activities: -

18. The findings also refer to the high degree of computer control and monitoring of reagent dosing rates and other control variables.

19. Two further findings are relevant.

20. In relation to the second issue before the Appeal Commissioners, that of the claim for certain capital allowances, the Appeal Commissioners decided as follows:-

21. A determination followed with regard to the assessment to taxation which does not concern this appeal.

22. Immediately after the determination the Inspector of Taxes expressed dissatisfaction in relation to the determination regarding the export sales relief as being erroneous in law. The company and the Inspector of Taxes both expressed dissatisfaction in relation to the second issue, that is the claim for certain capital allowances, as also being erroneous in law. The company and the Inspector both asked for a case stated for the opinion of the High Court as to whether, on the foregoing facts and evidence, the Appeal Commissioners’ decisions are correct in law.

23. The Court is not debarred from exercising its supervisory function where a decision of the Commissioners is unreasonable in the sense in which the term is used in Judicial Review applications. However, the Courts will not intervene unless there is no way in which a reasonable decision maker could have reached the same conclusion.

24. Lord Radcliffe stated, in relation to the law:

25. The Inspector, in his appeal, relies on the findings that the company is engaged in the extraction of lead and zinc ores from the earth which are then processed to produce the finished products of lead and zinc concentrates. (Finding (b))

26. While the ore contains on average 8% zinc and 2.5% lead (finding (c)) the major constituent of the concentrates are sphalarite and galena (90% approximately) which is sold to smelters in other European countries.

27. It is disputed by the Inspector that the mining operations end before the processing operation begins as is the submission of the company.

28. Mr. Fitzsimmons S.C., for the inspector outlined the legislative history of the Finance (Profits of certain Mines) (Temporary Relief from Taxation) Act, 1956 as amended by Section 9 of the Finance Act, 1967 whereby profits from mining activities were exempt for the first four years and a 50% exemption for the subsequent four years which was (subsequently extended to the first twenty years by the 1967 Act).

29. In the same year the Finance (Miscellaneous Provisions) Act, 1956 introduced exports sales reliefs in respect of profits from the export of manufactured goods. Section 15 (1) (b) of the 1956 Act provided that reduction shall not be made -

30. The 1956 Act was repealed and replaced with the Finance (Taxation of Profits of Certain Mines) Act, 1974 which eliminated the tax exemption from mining of scheduled minerals and reimposed the normal rate of tax on mining profits. It did introduce a generous capital allowance regime for mining companies.

31. Section 15 (1) (b) of the 1956 Act, which excluded reductions in respect of income tax or corporation profits tax payable on profits from any mining operations, was carried through in Section 58 (9) of the Corporation Tax Act 1976 which is the subject of interpretation in this case stated.

32. The term “mining operation” is not defined in any of the legislative provisions cited above. This is the issue before the Court. What is also before the Court is whether the company is entitled to allowances under the 1974 Act and, if so, whether it is entitled to claim mining development allowances on foreign exchange borrowings.

33. The correct approach to the interpretation of taxing statutes is, in the Appellant’s submission, three basic rules enunciated by Henchy J. in de Brun (Inspector of Taxes) -v- Kiernan (3 ITR 19):

34. Indeed the first decision of the Appeal Commissioners is in relation to the principle of construction laid down by that case given that the expert witnesses differed to some extent on the meaning of “mining operations”. This was so because of finding (v) in relation to the term as used within the mining industry.

35. Mr. Fitzsimons urges that where the company is seeking to bring itself within a relieving section it must fall within the section without any doubt or ambiguity. He referred to the decision of Keane CJ. in O’Connell -v- Fyffes Banana Processing Limited (Supreme Court, unreported, 24th of July, 2000) at page 6:

36. Where there is ambiguity the Court can consider the purpose and intention of the legislator to be inferred from other provisions of the statute involved, or even of other statutes expressed to be constructed with it (see Finlay CJ. in McGrath -v- McDermott 3 ITR 683 at 703).

37. The Inspector’s submission is that this finding excludes the company not only (a) from claiming capital allowances on its exchange losses but also from

38. However, the inspector agrees that the Appeal Commissioners in deciding that the Company is entitled to export sales relief under the 1976 Act and not capital allowances under the 1974 Act are consistent in their approach. But this very consistency highlights the fallacy of their findings in respect of the export sales relief claimed. The 1974 Act was intended to remove the exemption from tax for income derived from mining of scheduled materials and replacing it with a system of generous capital allowances. The Commissioners decision renders ineffective the entire legislation. The inspector submits that the company does indeed carry on the trade of a working qualifying mine and is therefore entitled to mining development and other capital allowances under the 1974 Act but is not entitled to export sales relief under the 1976 Act.

39. However the inspector has accepted that the produce of the process are goods for the purpose of the legislation.

40. The inspector contends that the highly integrated trade, from rock face to mine gate makes it impossible to draw an artificial line, as the Appeal Commissioners have done, between operating a mine and carrying out a separate processing activity. The company’s income derives from the trade of working a qualifying mine. This is consistent with the coherence of the 1974/1976 Acts.

41. The inspector submits that the Commissioners were heavily influenced by certain Australian case law. The context, scheme and purpose of Australian legislation cannot be substituted for that of the Irish provisions.

42. Subject to that proviso the inspector submits that when these cases are considered fully in the context of other Australian cases a number of general principles can be distilled which leads to the conclusion that the company’s operation is a mining operation.

43. One of the reasons for the finding that the process of pelletisation in Broken Hill was not a mining operation was that it was not carried out for the purpose of separating out or liberating the minerals. The same principle applied in deciding the Utah case. In the former case the ore before that process was a saleable product.

44. In the light of the above arguments the inspector submits that the Court should determine the questions of law in the case stated by finding that the trade carried on by the company consisted of mining operations and that the income from that trade was “income from any mining operations” within the meaning of Section 58(9) and that the company is thereby excluded from the reliefs provided for under the export sales relief legislation.

45. In relation to the second issue the inspector submits that the Court should answer that the company is entitled to the allowances under the 1974 Act on the basis that it is carrying on the trade of working a qualifying mine and that, accordingly, the case be submitted to the Commissioners to finalise that claim.

46. The first two matters have been referred to in the inspector’s submissions. With regard to the determination of the Appeal Commissioners the company highlights the basic finding that the company operates a mine and that it also carries out a separate activity. The company further highlights the consequential finding that the company’s income is derived from the sale of the concentrates which derive from that separate activity and it follows that the company cannot be said to have “income from mining operations” within the meaning of Section 58(9). Furthermore the company relies on the acceptance that the ultimate output are regarded as “goods”.

47. This Section was referred to in Hummingbird (supra) and in Bosnan -v- Mutual Enterprise Limited (1997) 3IR 257. In the latter case the section was considered, in relation to whether a loss arising from adverse currency movements in respect of a sterling loan were revenue or capital in nature, Murphy J, then a Judge of the High Court, stated:-

48. The Supreme Court (Hamilton CJ with whom Barrington and Lynch JJ agreed), stated:-

49. It is clear that there is no issue taken by either party as to the nature of the Courts jurisdiction.

50. Findings of primary fact made by the Appeal Commissioners cannot be set aside by the Court unless there was no evidence whatsoever to support those findings.

51. Conclusions or inferences drawn from findings of primary fact can only be disturbed if there was no evidence to support such conclusions or inferences were ones which no decision maker could reasonably have made on the basis of approved or admitted facts.

52. Where there is a mistake of law or misconstruction of documents, the Court can intervene. In that case the company contends that Section 58(9) of the 1976 Act must be construed strictly.

53. The Commissioners established that the company had no income from mining operations. Before Section 58(9) can have any application, the taxpayer must be in receipt of income from mining operations. It is not sufficient that the taxpayer be engaged in mining operations: those mining operations must be the source of the relevant income if the exclusion is to apply.

54. If the concentrates are “goods” it necessarily follows that the production of the ore into the concentrates is a process of “manufacture”. This is not disputed by the inspector. (Indeed the decision of the Commissioners at 9(a) at the end of page 23 is as follows:-

55. To say that the end products of the company’s operations were concentrates and that therefore all of the antecedent operations ought to be characterised as mining operations is flawed by circular reasoning.

56. The distinction between mining and manufacturing operations is reflected in the wording of Section 50(2) of the 1980 Act which, so far as it relates to corporation tax, is to be construed as one with the Corporation Tax Act, 1996 (see Section 96(2) of that Act). That subsection expressly provides for a situation where a company obtains a scheduled mineral etc. which is not sold as such but instead forms whole or part of the materials used in the manufacture of goods or is, to any extent, incorporated in the goods in the course of the manufacture then:-

57. This subsection acknowledges that income from the sale of goods manufactured in whole or in part from minerals obtained from mining operations will not constitute income from mining operations. This section has to deem a portion of that income to be income from mining operations.

58. As Section 58 of the 1976 Act does not contain any analogous deeming provision there is no grounds for treating any part of the company’s relevant income from the sale of concentrates as though it were income from mining operations. Income from the sale of goods under Section 58(4) of the 1976 Act must be construed narrowly that is income deriving directly or immediately from the sale of goods (see JG Kerrane -v- O’Hanlon Limited (1987) 3 ITR 633).

59. It is not the function of the Court to add or delete from expressed statutory provisions so as to achieve objectives which to the inspector or to the Court appears desirable in interpreting Section 58(9).

60. In relation to the wider statutory scheme, the 1974 and 1976 Acts recognise a distinction between mining on the one hand, in respect of which mining development allowances are available in respect of certain capital expenditure, and processing on the other, in respect of which such development allowances are excluded because references to capital expenditure in both Sections is expressly defined to exclude “expenditure and works constructed wholly or mainly for subjecting the raw material of the mine to any process except a process designed for preparing the raw product for use as such.”

61. The products are, in the findings of the Appeal Commissioners, quite distinct from the ore (Finding (5)(s) of the case stated).

62. In relation to decisions from other jurisdictions, the company submits that the Appeal Commissioners decision was not founded on those decisions.

63. Paragraph 9(a) of Case Stated is emphatic that the Commissioners believed that they would have reached the same decision without the assistance of such cases.

64. While the company acknowledges that decisions from other jurisdictions inevitably pose difficulties with regard to the scheme and context in which the statutory provisions operate, these decisions do indeed support the company’s claim in the instant case.

65. Newton J. held that the operations carried out in the plants were indeed “operations by means of which manufactured goods are derived from other goods” referred to the “highly technical process, the use of which involves human labour and also numerous items of plant, equipment and machinery, some of which are very large, many of which are complicated and sophisticated, and all of which are housed in or situated near large factory like building”. ( Utah Development Company -v- Federal Commissioner of Taxation ) (1995) 75 ATC 4103 at 4108.

66. On appeal from the Supreme Court to the High Court of Victoria (Federal Commissioners of Taxation -v- Utah Development Company (1996) 76 ATC 4119 the full High Court dismissed the appeal of the Commissioner Barwick CJ (with whom Gibbs and Steven JJ agreed) referring to the decision of the lower court stated:

67. In the company’s submission the concentrates suitable for export, as the metallurgical coking coal in Utah simply did not exist in the mine. They are, as is correctly accepted by the Inspector, manufactured products.

68. The company also referred to Marbridge Mines Limited- v- Minister for National Revenue (1971) 71 DTC 5231 where the Exchequer Court of Canada accepted the distinction between “mining operations” and subsequent processing activities where Gibson J at 5233 states that mining ends with the bringing of the mineral ore to the ground surface and that before that terminal point three stages of physical operations have been gone through namely: exploration, development and extradition.

69. Following the bringing of the materials to the surface. The physical operations that take place is “treatment” of the ore. Treatment consist of three stages of physical operation, namely: milling smelting and refining.

70. In the Company’s submission the Appeal Commissioners followed the same distinction between mining and non mining.

71. Findings on primary fact should not be set aside by the Court unless there was no evidence whatsoever to support them. Kenny J, in (Inspector of Taxes) Mara -v- Hummingbird (1982) ILRM 421 at 426; and Blayney J in Revenue Commissioners -v- O’Loinsigh (1994) Vol 5 ITR 98 at 106 and Hamilton CJ (with whom Barrington and Lynch JJ agreed) in Brosnan -v- Mutual Enterprises Limited (1997) 3 IR 257 at 284.

72. This appeal is by of case stated which is necessarily restricted to points of Law only (see Tax Consolidation Act, 1997, Section 941). This Court cannot entertain an appeal insofar as it seeks to address issues of fact. The Court has, of course, an inherent jurisdiction to exercise a supervisory function by way of Judicial Review. It may, therefore, be open to impugn a decision of the Appeal Commissioners if that decision is unreasonable in the sense in which that term is used in administrative law (see O’Keeffe -v- An Bord Pleanala (1992) ILRM 69 and Hogan and Morgan, administrative law in Ireland (3rd edition, 617 - 690).

73. I accept the cogent arguments submitted by Mr. Fitzsimons SC for the Inspector that the Court should relate the overall scheme of the legislation, to the ambiguous finding of the Commissioners in relation (a) to the definition of mining and (b) to the output of concentrates from ore.

74. In interpreting Section 58(9) of the 1976 Act, in relation to income from any mining operations, this Court should have regard to the findings of the Commissioners at (v) that, in general usage, terms such as “mining”, “mining activity” , “mining operations”, etc could, depending on the context in which they are used, encompass the type of activities carried on by the company. The Commissioners did not find it necessary to make a finding of fact as to whether the term “mining operations” as used within the mining industry did include all of the activities carried on by the company or just the underground activities.

75. Moreover, finding (b) that the company extracts lead and zinc ores from the earth which are then processed to produce the finished product of zinc and lead concentrates is a finding that there are no new elements produced and, by definition, each of the concentrates is a naturally occurring substance and also a finding that there is a process of manufacturing. It goes someway to establishing that production and manufacturing are not mining activities.

76. The two major divisions of the company under the management of the Production Manager are the mining division and the processing division does not necessarily delimit mining output. The steps carried out by the company in extracting the ore - see finding (n) - as distinct from the main stages of processing (finding (o)) could both be mining operations.

77. The finding (e) that the company commenced commercial production of zinc and lead concentrates in or around 1978 pursuant to a state mining lease granted to the company in 1975 is a finding which leads to an inference that the object of the operation of mining is the commercial production of concentrates all of which were exported out of the State (see finding (d)).

78. The company’s reliance on findings that distinguish between extracting of ores and processing of concentrates (finding (b)) depend on a finding that the production of concentrates is a manufacturing process which is distinct from the exploration, development and extraction of ore and its transportation to the storage tepee located on the surface (see finding (j)), further depends on a definition of what mining is.

79. The steps taken by the company in extracting the ore (detailed in finding (n)) are distinct from the main stages in processing, detailed in finding (o), depends on a finding that the latter is a highly sophisticated process which is carried out at the milling plant which produces precisely calibrated concentrates suitable for saled smelters and also that the concentrates produced as the end product of the company are quite distinct from the ore.

80. The decision of the Commissioners was that while the company did carry out “mining operations” on its land not all of its activities could be said to come within the meaning of that phrase. The company contends that this follows from the findings of the

81. Commissioners, in particular finding (j) - the manufacture of concentrates as distinct from the extraction of ore from the mine - and (s): the concentrates produced as the end product of the company are quite distinct from the ore.

82. The Commissioners also decided that the company operates a mine and that it also carries out a separate activity subsequent to its activity; namely, the processing of ore, the result of its mining operations, to manufacture concentrates of lead and zinc. The company contends that that decision is based on findings (b) - extracts and then processes - (j) and (s) as above.

83. The decision of the Commissioners concluded that the company does not sell its mining output. Its subjects that output to a separate manufacturing process to produce concentrates which it sells. Therefore the company’s income is derived from the sale of the said concentrates. It follows that the company cannot be said to have “income from any mining operations” within the meaning of Section 58(9) of the 1976 Act. Consequently the company is entitled to export sales relief.

84. The conclusion that not all of the company’s activities could be said to come within the meaning of “mining operations” can however, have no basis given the finding that the term “mining”, depending on the context in which it and cognate terms are used, could encompass the type of activities carried out by the company. The conclusion is not a finding of paragraph (v) as the Commissioners did not deem it necessary to make a finding of fact specifically in regard to whether the term “mining operations” as used within the mining industry would include all of the activities carried on by the company or just the underground activities.

85. The general observation implying that the activities carried on by the company were encompassed by the term was not a finding. The question arises whether a finding is necessary to support the decision.

86. The company has urged that other findings, in particular (j) and (s) support the contention that not all of the company’s activities are mining.

87. As a preliminary to their decision, the Commissioners decided that, applying the principles of construction laid down by the Supreme Court in the Kiernan case, they should give the words there ordinary meanings and should not adopt a technical approach to construing them. They observed that, in an event, the evidence of the experts clearly established that there was no specific widely accepted technical meaning of the term “mining operations.” It was in that context that they decided that the company did carry on “mining operations” but that not all of its activities could be said to come within the meaning of that phrase. This is, of course, to beg the question of what the meaning is which is pivotal to the further decisions that, for example, the company did not sell its mining output.

88. In the absence of a finding of what constitutes “mining operations” it is at this stage that a concession made by the Inspector should be considered. The company contends that for the purpose of part IV of the Corporation Tax Act, 1976, the concentrates represent “goods”. This appears to have been conceded by the Inspector. The company argues that goods are necessarily manufactured.

89. The term “manufactured” is not defined in the Tax Acts. Accordingly, the normal meaning of the word must be applied. There is no doubt that the use of the word in finding (j) on the basis of the complexity of the process involved in the output of lead and zinc concentrates that the company is engaged in the manufacture of goods. The consideration of Cronin -v- Strand Dairies Limited (1985) 3 ITR 441, Charles McCann -v- O’Culachain (1985) IR 298 and (1986) IR 196; McCausland -v- Ministry for Commerce (1956) NI 367 and Irish Agricultural Machinery Limited -v- O’Culachain (1985) IR 458 and (1990) 1 IR 535 support a wide interpretation of the term manufactured.

90. The next subsections detail the said relief and subsection (9), which is central to the consideration of this appeal, provides that the reduction shall not be made under this section in respect of Corporation Tax payable on income from any mining operations.

91. The concession that the concentrates are “goods” does not determine whether the output of the company’s activities is manufacturing or mining, given the wide definition of each term.

92. What an analysis of the whole section does show, however, is that a reduction shall not be made in respect of income from any mining operations. Without definition of “mining operations” and in the absence of a finding by the Commissioners other than the general observation that mining operations could encompass the activities of the company, “any mining operations” must be interpreted in the broadest manner.

93. Moreover, the provisions of the Finance (Taxation of Profits of Certain Mines) Act 1974 (which, so far as it relates to income tax, is to be read and constructed together with the Income Taxes Acts and the Corporation Tax Acts) provides allowances for a company carrying on “the trade of working on a qualifying mine”. There would not seem to be any distinction possible between such trade and “mining operations”. It is clear that the definition of development expenditure in Section 1 of the 1974 Act applies to all of the capital expenditure of the company. Expenditure on works constructed wholly or mainly for subjecting the raw product of the mine to any process except a process designed for preparing the raw product for use as such is excluded. It would seem that the “manufacturing process” for preparing the raw product for use as such is applicable to the concentrates and is not restricted to the ores which, on the Commissioners findings, have no commercial value.

94. This would appear to be the effect both of the common construction but also of the policy inherent in the 1974 and 1976 Acts.

95. It seems to, accordingly, that the basis for the Commissioners decision requires an express finding that the mining operations cease after the extraction of the ore from the mine and its transportation to the storage tepee. It is not sufficient to rely on Marsden or Utah in this regard.

96. The general observation that mining operations could encompass the type of activities carried on by the company does restrain the Commissioners from making a clear finding in relation to mining operations. The finding that the concentrates produced as the end product of the company are quite distinct from the ore is not a finding that they are essentially different and do not derive from mining.

97. The decision of the Commissioners itself would appear to involve a finding which is not supported on facts as found by them. To come broadly to the same conclusion as the Australian Judges in the Utah case that, while the company did carry on “mining operations” on its land not all of its activities could be said to come within the meaning of that phrase is, in my view, not soundly based on facts found.

98. The second decision would appear to be a finding which is perhaps closer to the facts as found. The Commissioners decided that the mining activity and the manufacturing activity were of similar scale and that neither was subsidiary or incidental to the other. It is the Commissioners’ opinion that the manufacturing activity was, in the words of the Judges of the Broken Hill case, “distinct from although connected with the taxpayers mining operations” and did not come within the meaning of the phrase “mining operations.” They continue as follows:

99. The finding that the Manager of the mining division’s responsibilities end at that point and that the Manager of the processing division is responsible for all activities after the ore arrives in the teppe including the manufacture of lead and zinc concentrates does not, in my view, determine the beginning and end of mining operations, as experts would appear to be uncertain as to the extent of “mining operations” and such term could encompass all the activities the company.

100. The decisions of the Commissioners do not accordingly sit firmly on the findings. It may be that, within the decision, there are further latent findings. These further findings seem in turn to be somewhat at variance with the extensive findings found by the Commissioners as such.

101. I would allow the appeal.