ATO Interpretative Decision
ATO ID 2006/300 (Withdrawn)
Excise
Tobacco Producer Licence: conditions that relate to the level of co-operation the Collector requiresFOI status: may be released
-
While the view expressed within the ATO ID is technically correct there are no licenced tobacco producers in Australia.This document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Can the Collector impose a condition on a tobacco producer licence under sections 39D and 39DA of the Excise Act 1901 that requires the producer to be available at their licensed premises at all reasonable times during the growing season to provide assistance to taxation officers on the basis that the condition is necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts?
Decision
Yes. The Collector can impose a condition on a tobacco producer licence under sections 39D and 39DA of the Excise Act that requires the producer to be available at their licensed premises at all reasonable times during the growing season to provide assistance to taxation officers on the basis that the condition is necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts.
Facts
The Collector is considering whether he can impose a condition on a tobacco producer licence that requires the producer to be available at their licensed premises at all reasonable times during the growing season to provide assistance to taxation officers.
There are several stages in the production of tobacco leaf, including the production of seedlings, transplanting of the seedlings to a field and harvesting of the tobacco leaf. Typically tobacco is picked six times from each plant in a growing season. The tobacco leaf is generally cured and baled on the licensed premises by the tobacco producer.
The baled tobacco leaf is then transported to the tobacco co-operative's premises for sale to licensed manufacturers.
Officers from the Tax Office routinely visit the licensed premises to ensure the tobacco producer is complying with their obligations under the Excise Act, and the tobacco leaf grown on the premises can be accounted for.
Reasons for Decision
Subsection 39D(3) of the Excise Act provides that a licence is subject to such conditions that are considered by the Collector to be necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Act.
Under section 39DA of the Excise Act the Collector may, on his or her own initiative, vary or revoke a condition of a licence that was specified under subsection 39D(3) of the Excise Act. The Collector may also impose an additional condition.
Section 4 of the Excise Act provides that 'Collector' means the Commissioner of Taxation or an authorised person. Section 4 states that 'Excise Acts' means the Excise Act and any instruments (including rules, regulations or by-laws) made under the Excise Act, or any other Act and any instruments (including rules, regulations or by-laws) made under that Act relating to excise in force within the Commonwealth or any part of the Commonwealth.
The term 'necessary for the protection of the revenue' was considered in Re Francesco Martino Applicant v. Australian Taxation Office Respondent (2002) AATA 1242.
At paragraphs 51 and 52 of the judgement in that case Deputy President Forgie stated:
51...the ordinary meanings of the word 'protect' include 'keep safe, take care of', (The New Shorter Oxford English Dictionary, 3rd edition, 1993) and they would seem to be in the senses in which the word is used in the expression 'protect the revenue'. Mr Martino's licence may only be cancelled if it is necessary to take care of the money belonging to the Crown in right of the Commonwealth. That has the aspect of ensuring that the Commonwealth receives all that it should in the form of any excise that is ultimately payable in respect of tobacco originally grown on Mr Martino's farm and keeps all that it receives. It also has the aspect of not spending more of the Commonwealth's money than need be spent in carrying out its supervisory duties and responsibilities under the Act and in ensuring that the tobacco is not marketed illegally in Australia, and so avoid the payment of excise duty, if it cannot be marketed legally.
52 What is meant by the word 'necessary'? I have taken the view that the meaning adopted by Allen J in State Drug Crime Commission of NSW v Chapman (1987) 12 NSWLR 447:
'As to the word "necessary" it does not have, in my judgment, the meaning of 'essential'. The word is to be subjected to the touchstone of reasonableness. The concept is one as to what reasonable is necessary in a commonsense way. As Pollock CB said in Attorney General v Walker (1849) 3 Ex 242; 154 ER 833:
"It may be stated as a general rule that those things are necessary for the doing of a thing which are reasonably required or which are legally ancillary to its accomplishment."' (page 452)
The following two elements for the protection of the revenue may be drawn from Deputy President Forgie's judgement.
- •
- firstly, the need to ensure that the Commonwealth receives all that it should in the form of any excise that is ultimately payable, and
- •
- secondly, that the Commonwealth does not have to incur excessive expenditure in ensuring clients' compliance with their excise responsibilities.
Given the need to ensure that all excise duty properly payable on tobacco products made from the tobacco leaf grown by tobacco producers is duly paid, it is imperative for the Collector to be able to monitor the producers' activities. If tobacco leaf finds its way into the illicit market, excise duty is evaded on the resultant tobacco products. Although the Collector has statutory rights of access to producers' premises (under section 86 of the Excise Act), the Collector's task is made easier if producers are available to provide assistance to the Collector during these visits.
During these visits, taxation officers are able to observe the growing, harvesting and storage of tobacco leaf. By being available at the licensed premises, tobacco producers enable taxation officers to examine the producer's activities and records in real time. By being available at their licensed premises to provide assistance, producers also facilitate the Collector's ability to ensure compliance with the Excise Act.
The Excise Act imposes numerous obligations on producers and imposes a range of penalties for various offences. For example, if tobacco leaf goes missing, and cannot be accounted for to the Collector's satisfaction, a tobacco producer can be held liable, on demand from the Collector, to pay an amount equal to the excise duty that would have been payable if the tobacco leaf had been used to manufacture excisable tobacco products. By being available to provide assistance, a producer enables the Collector to speedily ensure all obligations have been complied with, and no offences have been committed.
It follows that a condition may be imposed on a tobacco producer's licence requiring the producer to be available at licensed premises at all reasonable times during the growing season to provide assistance to taxation officers, on the basis that the condition is necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts.
Date of decision: 27 October 2006
Legislative References:
Excise Act 1901
section 4
section 28
section 39A
subsection 39D(1)
subsection 39D(2)
subsection 39D(3)
section 39DA
section 86
Case References:
Re Francesco Martino Applicant and Australian Taxation Office Respondent
[2002] AATA 1242
ATO ID 2006/299
Keywords
Collector
Licensed tobacco producer
Tobacco leaf
Tobacco producer
Tobacco producer licence
ISSN: 1445-2782
| Date: | Version: | |
| 27 October 2006 | Original statement | |
| You are here | 17 January 2019 | Archived |