ATO Interpretative Decision
ATO ID 2006/302 (Withdrawn)
Excise
Tobacco Producer Licence - conditions that apply until 1 July 2006 on matters relating to record keepingFOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 conditions on a tobacco producer licence under sections 39D and 39DA of the Excise Act 1901 that relate to record keeping in connection with the production of tobacco seed, tobacco plant or tobacco leaf on the basis that the conditions are 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 conditions on a tobacco producer licence under sections 39D and 39DA of the Excise Act that relate to record keeping in connection with the production of tobacco seed, tobacco plant or tobacco leaf on the basis that the conditions are 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 imposing record keeping conditions on a tobacco producer licence.
The tobacco producer produces leaf which they sell to tobacco manufacturers via a tobacco co-operative.
Tobacco manufacturers manufacture excisable goods from the tobacco leaf.
Reasons for Decision
All of the following legislative references are made to the Excise Act unless otherwise indicated.
Section 28 provides that a person cannot produce material that is tobacco seed, tobacco plant or tobacco leaf unless they hold a producer licence.
Producer licences are issued under section 39A.
Subsection 39D(3) allows the Collector to impose conditions on a licence that he or she considers are necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts. Under section 39DA the Collector may, on his or her own initiative, vary or revoke a condition of a licence that was specified under subsection 39D(3). The Collector may also impose an additional condition.
Section 4 provides that 'Collector' means the Commissioner of Taxation or an authorised officer. 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 (Martino).
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:
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- firstly, the need to ensure that the Commonwealth receives all that it should in the form of any excise that is ultimately payable; and
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- secondly, that the Commonwealth does not have to incur excessive expenditure in ensuring clients' compliance with their excise responsibilities.
Section 28 states that only a person that holds a producer licence may produce tobacco seed, tobacco plant or tobacco leaf.
Hence, only persons that are licensed can produce tobacco product, and, they must ensure that they meet their obligations under the Excise Act. In Martino, Deputy President Forgie stated that certain privileges, obligations and responsibilities are given to a person when they are granted a tobacco producer licence, explaining at paragraph 44 that:
What are those privileges, obligations and responsibilities? If, as in this case, the licence is a producer licence, the licence holder has the privilege of growing tobacco. A person who does not hold such a licence may not knowingly or recklessly grow tobacco (Act, s. 28). Unlike a wheat farmer or a market gardener, who produces his or her crop for his or her own profit, a tobacco farmer grows each crop for his or her own profit and also for the benefit of Australia's revenue for it is subject to the payment of excise under the Excise Tariff Act 1921.
Revenue is derived through tobacco production when excise duty is paid on the excisable goods manufactured from the tobacco leaf. Therefore, for the purposes of verifying that all the tobacco leaf which is produced is sold through the legitimate market, we consider it is necessary that the tobacco producer keep records which verify that all the tobacco leaf suitable for sale is sold through the legitimate market. Further, records should be made in such a manner that allows the Tax Office to readily ascertain the tobacco producer's level of compliance with the Excise Acts.
Therefore, the Collector can impose conditions on a tobacco producer licence under sections 39D and 39DA that relate to record keeping in connection with the production of tobacco seed, tobacco plant or tobacco leaf on the basis that the conditions are necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts.
Note: under the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Act 2006, the scope of section 50, which deals with record keeping requirements, was extended so that , with effect from 1 July 2006, licensed producers (and licensed dealers) must keep and produce such records as the Commissioner directs.
Date of decision: 2 November 2006
Legislative References:
Excise Act 1901
section 4
section 28
section 39A
subsection 39D(3)
section 39DA
Case References:
Re Francesco Martino Applicant and Australian Taxation Office Respondent
[2002] AATA 1242
ATO ID 2006/299
ATO ID 2006/300
ATO ID 2006/301
ATO ID 2006/310
ATO ID 2006/311
Keywords
Accounting & record keeping
Licensed tobacco producer
Tobacco
Tobacco producer
ISSN: 1445-2782
| Date: | Version: | |
| 2 November 2006 | Original statement | |
| You are here | 17 January 2019 | Archived |