ATO Interpretative Decision
ATO ID 2006/310 (Withdrawn)
Excise
Tobacco Producer Licence - conditions that relate to the labelling of baled tobacco leafFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 (Excise Act) that relate to the labelling of baled 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 the labelling of baled 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 conditions on a tobacco producer licence that relate to the labelling of tobacco leaf bales.
As part of the tobacco producing process, tobacco leaf is generally cured and baled in hessian bales on the licensed premises by the tobacco producer. Each bale has a bar coded tobacco bale label attached to it which has the grower's identification number and the bale number. The tobacco bale label is provided by the Tax Office to the tobacco co-operative. The co-operative issues a sufficient number of tobacco bale labels to each tobacco producer for the estimated number of bales they will deliver for sale under their quota for the selling season.
The baled tobacco leaf is then transported to the tobacco co-operative's premises. The co-operatives facilitate the sale of the producers' tobacco leaf to licensed manufacturers of excisable goods.
Reasons for Decision
All of the following legislative references are made to the Excise Act.
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) provides that a licence is subject to such conditions as are specified in the licence, being conditions 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 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 (the Commissioner) 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.
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 4 states that a tobacco bale label is a label that is in a form approved in writing by the Commissioner and uniquely identifies a bale of tobacco leaf.
Section 44 stipulates that, unless the Collector has given additional written permission that it need not have a tobacco bale label, it is a requirement of a permission to move tobacco leaf that a tobacco bale label must be affixed to the tobacco leaf at all times when the tobacco leaf is not at premises specified in the relevant licence. Further, section 117I deals with counterfeit tobacco bale labels and the intentional use of a counterfeit tobacco bale label.
The Tax Office issues tobacco bale labels to the tobacco co-operative who in turn issues the appropriate number of labels to the tobacco producer once it has recorded the details of each tobacco bale label.
The purpose of these provisions and actions is to monitor the tobacco leaf that is produced each tobacco growing season and to track the movement of each bale of tobacco leaf. This ensures the Tax Office can monitor the compliance by the tobacco producer with the Excise Acts and that the tobacco leaf is sold through the legitimate market. This in turn helps ensure that tobacco leaf is not diverted to the illegal market and excise duty is paid on the excisable tobacco products manufactured from the producers' tobacco leaf. Therefore, the labelling of tobacco leaf bales helps to protect the revenue.
Accordingly, the Collector can impose conditions on a tobacco producer licence that relate to the labelling of baled tobacco leaf on the basis that they are necessary or desirable for the protection of the revenue or for the purposes of ensuring compliance with the Excise Acts.
Date of decision: 2 November 2006
Legislative References:
Excise Act 1901
section 4
subsection 39A
subsection 39D(3)
section 39DA
section 44
section 117I
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 2006/302
ATO ID 2006/311
Keywords
Excise acts
Licensed tobacco producer
Tobacco leaf
Tobacco leaf movement permission
Tobacco producer
Tobacco producer licence
ISSN: 1445-2782
| Date: | Version: | |
| 2 November 2006 | Original statement | |
| You are here | 17 January 2019 | Archived |