ADMINISTRATIVE APPEALS TRIBUNAL - TAXATION APPEALS DIVISION
[2005] AATA 7
Re Allseas Marine Contractors SA and Federal Commissioner of Taxation
P J Lindsay, Senior Member
6 January 2005 - Sydney
P J Lindsay, Senior Member. This matter concerns the applicant's claim for the diesel fuel rebate. The applicant, Allseas Marine Contractors SA, maintains that it purchased diesel fuel for use in marine transport, thus entitling it to the rebate. The claim was partly allowed by the Commissioner of Taxation (the respondent).
2 The applicant seeks review of the respondent's objection decision dated 14 July 2003. That decision was to allow only in part, the objection of 7 May 2003 regarding the respondent's refusal to pay diesel fuel rebate.
3 At the hearing, Mr A Robertson SC, with Mr D Leeming, appeared for the applicant. Mr S Lloyd of counsel appeared for the respondent. The tribunal had before it the documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (Cth) (the T-documents) and a witness statement by Willem Van Benten dated 9 June 2004 including the exhibits thereto was accepted in evidence (exhibit A1). Mr Van Benten gave oral evidence by telephone.
Background
4 The following material was not disputed by the parties.
5 The applicant was incorporated under the laws of Switzerland. In 2001, the applicant was commissioned by Duke Energy International to lay 301 kilometres of offshore gas pipeline from Georgetown in Tasmania across the Bass Strait to Seaspray in Victoria. The project commenced in April 2001 and concluded in August 2002.
6 On 23 September 2002, the applicant completed a claim for diesel fuel rebate in respect of its purchase of 1,828,174 litres of diesel fuel (T4). The claim form referred to a number of different categories of eligible activity for which the diesel fuel rebate was available. The applicant completed the form by noting that it had purchased and used the fuel in marine transport, an eligible activity. In providing a detailed description of the eligible activity, the applicant stated that: "Allseas Marine contractors have brought a specialised gas pipelaying vessel into Australia to lay gas pipe in the Bass Strait. The diesel fuel will be consumed in operating the vessel in its day-to-day activities" (T4-22).
7 At the respondent's request, further information was provided. On 21 January 2003, the applicant's solicitors forwarded an e-mail (T7) to advise that the claim was in respect of a pipelaying vessel, the MV Lorelay, pipe carriers (CEC Pride and Arktis Ace) transporting pipes from the beach to the MV Lorelay, tugboats (the Woona and Tarpan) used for mooring the pipe carriers alongside the MV Lorelay, and a survey boat (the Searanger) used to survey the pipeline.
8 By letter dated 26 March 2003 (T8) the respondent advised that the operation of a specialised pipelaying vessel was not "marine transport" as defined in s 164(7) of the Customs Act 1901 (Cth). The reason given was that although the pipelaying vessel may have crew on board and machinery, the fundamental purpose of moving the vessel while engaged in pipelaying activities, is to lay pipe, not to transport passengers and goods. The pipelaying vessel was considered not to transport anything but itself. The delegate stated that such movement of the vessel constituted transport of the vessel rather than transport by the vessel and therefore the diesel fuel was not used in marine transport. Further, the movement of the pipelaying vessel to a position where pipelaying can take place was seen as incidental to the pipelaying operation but not incidental to transport of goods or passengers by the vessel.
9 The applicant's objection dated 7 May 2003 (T9) claimed the diesel fuel rebate under s 164(1)(ac) of the Customs Act 1901 (Cth) and s 78A(1)(ac) of the Excise Act 1901 (Cth) for fuel used in the operation of specialised pipelaying vessels, namely:
- - a specialised pipelaying vessel (the MV Lorelay);
- - other vessels to transport the pipe to the MV Lorelay;
- - tug boats to help moor the pipe carrying vessels alongside the MV Lorelay;
- - survey boats to survey the pipeline.
10 The respondent allowed the objection in part only, for use of diesel fuel by the vessels carrying pipe from port (Bell Bay in Tasmania) to the MV Lorelay and by the tug boats used in mooring those vessels. The applicant subsequently applied to the tribunal for review of the objection decision.
Evidence
11 Mr Van Benten, a mechanical engineer, has been employed by the Allseas Marine Group SA since April 2001. The applicant is a subsidiary in the Allseas Group. As general manager and project director for Allseas Construction Contractors SA, Mr Van Benten had overall responsibility for the Tasmanian Natural Gas Pipeline project to convey natural gas from Seapsray in Victoria to Georgetown, Tasmania. The applicant was sub-contracted by Allseas Construction Contractors SA to perform the work for the project. In his statement of 9 June 2004 (exhibit A1) Mr Van Benten described the MV Lorelay as a converted bulk carrier, being 182.5 metres in length and 25.8 metres wide. It is capable of storing 10,200 tonnes of unlaid pipe. Due to the characteristics of the pipe used in this project, the MV Lorelay's typical capacity was 8000 tonnes.
12 Mr Van Benten's oral evidence was that the MV Lorelay, which had a crew of 200, was replenished with pipe on 21 occasions during the project. Its pipelaying operations continued 24 hours a day, 7 days a week. In his statement he described the MV Lorelay's main engines and its operations in the following terms:
12. The 4 diesel powered engines on board the MV Lorelay generated electricity which amongst other things:
- (a) propelled the vessel and maintained its position;
- (b) operated the survey, computer and navigation systems;
- (c) operated the cranes referred to in para 14 below;
- (d) operated the conveyor belt system;
- (e) operated the Phoenix automated welding system; and
- (f) powered the lighting, ventilation and crew amenities.
13. The MV Lorelay was a fully self-propelled vessel, which over the course of the project, travelled from Georgetown, Tasmania to Seaspray, Victoria, laying the gas pipeline as it progressed.
14. There were 4 cranes on board the MV Lorelay which were used for the functions as follows:
- (a) the crane located towards the bow of the vessel was used to transfer the pieces of pipe from the pipe carrying vessels into the hold of the MV Lorelay;
- (b) the large crane located at the stern of the vessel was used to assemble/disconnect the "stinger" after ocean voyages;
- (c) the crane located in the middle section of the vessel was used to launch other marine craft such as lifeboats; and
- (d) the fourth crane was located inside the vessel and was used to move the pipe within the vessel from and into the conveyor system.
15. To allow the MV Lorelay to lay pipe continuously throughout the duration of the project, pipe was delivered at intervals to the MV Lorelay by the pipe carrying vessls, CEC Pride and Arktis Ace and welded on board. These pipe carrying vessels were smaller self-propelled vessels that visited the MV Lorelay at various locations in Bass Strait. These ships moored themselves alongside the MV Lorelay with the assistance of the tug boats, Woona and Tarpan, whilst the pipes were moved from the pipe carrying vessel by use of the crane referred to in para 14(a). The pipe pieces were then stored in the hold of the MV Lorelay until the vessel reached the position at which the pipe pieces were required in the construction of the pipeline.
16. The time required to transfer the pipe from the pipe carrying vessel to the MV Lorelay ranged from 3 to 11 days, depending on the weather conditions. After the pipe was discharged, the pipe carrying vessels would return to Tasmania to reload, refuel and recrew over a 5-day period.
17. As the pipeline was laid, the pipe pieces were picked up from the stacks in the hold by the internal crane and placed onto a conveyor belt system. These pipe pieces were transported via this conveyor belt from the hold of the ship to an assembly line known as the "main firing line". The main firing line was manned by a crew of 40 people.
18. Once on the main firing line, the crew prepared the pipe pieces for welding. The pipes were welded together by automatically operated welding equipment known as the Phoenix welding system. The Phoenix welding system was supervised by the crew of the MV Lorelay.
19. At the main firing line, there were 6 workstations where welding took place. Pipe would be conveyed along the firing line to each of these workstations where 6 different stages of the welding process would occur. Tensioners held the pipe in place as it travelled through to each of the workstations on the main firing line.
20. When all of the stages of welding had been completed, crew overseeing the Phoenix system at each workstation signalled by use of a green light to indicate that the pipeline was ready to be laid.
21. Whilst the welding process took place, the MV Lorelay used a combination of survey systems to ensure that the vessel maintained the same position while the pipe pieces were welded together. These systems operated a set of propellers, which through a series of adjustable blades and transfer thrusters, pumped water between starboard and port to correct any movement of the ship against the current. The effect of this was that the MV Lorelay was able to maintain a steady position throughout the pipe laying process.
22. This process was repeated so that the pipe pieces were welded together formed one continuous pipeline which was slowly expelled from the stern of the MV Lorelay via the stinger. The stinger provided support for the pipe as it moved towards the seabed. As the pipes were being welded together, the pipeline was pushed towards the stern of the ship.
23. The stinger was a structure located on the stern of the MV Lorelay which carried the welded pipe to the seabed and gave the processed pipe its initial bending. As the length of the welded pipe increased, the processed pipe was pushed though the stinger making the pipe curve as it entered the water. The tensioners in the main firing line, the external support forces on the stinger structure and the friction on the seabed caused the curvature of the pipe to change from overbend as it rested on the stinger, to sagbend as it rested on the seabed.
24. Once each of the 6 workstations indicated that the welding of each section of pipe was completed, the MV Lorelay moved the length of one pipe piece in a continuous motion so as to lay a section of the pipeline along the seabed. This was achieved by the tensioners moving the pipe relative to the position of the vessel as well as the transfer thrusters moving the vessel relative to the seabed. This equated to a speed of approximately 12.2 metres every 4 minutes. This meant that the speed at which the MV Lorelay travelled was based on the time required to weld the pipe pieces together and the length of each pipe.
13 Mr Van Benten's oral evidence referred to each pipe being numbered. Pipes were laid according to their qualities of thickness of the pipe wall and of the coating. After loading onto the MV Lorelay, the pipe was cleaned and then moved to the firing line. At the initial station of the firing line each new pipe was subjected to welding processes and inspection and lined up with already assembled pipe within the firing line. It was then coated to prevent corrosion and by then it was at the end of the firing line and would pass into the stinger which provided the curvature to the pipes before going down onto the seabed. The stinger was supported by vertical wires. The entire process of moving a piece of pipe from the forward section of the firing line to moving overboard via the stinger would take 3 to 4 minutes. Although moving continuously due to wave action and despite the action of its thrusters, the MV Lorelay would have its station co-ordinates changed with the completion of every pipe. The move forward would involve its thrusters and the tensioners playing out the pipe through the firing line in a co-ordinated movement.
14 An exhibit to his statement (WVB3) included a description of the MV Lorelay, its technical features including data about its dimensions and propulsion including propeller and thrusters, the deck and gantry cranes, for handling pipe and its dynamic positioning system.
15 Mr Van Benten's statement described the Searanger and its operations as follows:
25. Over the course of the project, Allseas operated a survey boat known as the Searanger. The Searanger is a 78 metre long and 18 metre wide vessel, which amongst other things, was used to perform survey, observation and testing work in conjunction with the laying of the pipeline.
…
27. To ensure that the MV Lorelay did not lose production time in the pipe laying process as a result of refueling in Melbourne, a role of the Searanger was to transport to the MV Lorelay all the diesel fuel used on board once at sea. To perform this function, the Searanger had large specially designed fuel storage tanks on board to enable it to carry large volumes of fuel to be used in the MV Lorelay. These tanks were located throughout the hull of the vessel and had a capacity of 79.6 cubic metres.
28. The Searanger propelled itself to the Melbourne fuel depot, where the fuel was deposited in the tanks located in the hold of the vessel. On some occasions the opportunity was taken to change the crew manning the Searanger.
29. Once the tanks on board the Searanger were full, it propelled itself to the MV Lorelay where the 2 vessels were connected by way of a bunker hose. The fuel in the tanks of the Searanger was then pumped on board the MV Lorelay. This refueling process occurred every 30 to 40 days.
30. As the fuel was being pumped on board, the Searanger maintained its position through a system of propellers and transfer thrusters, similar to that of the MV Lorelay.
31. Whilst the MV Lorelay was engaged in the project, the Searanger surveyed the sea floor by use of sonar equipment to, amongst other things, ensure that the pipe was lying flat against the bottom of the seabed.
32. The Searanger had 2 diesel powered engines on board. Both engines were direct drive which amongst other things, operated the propellers and transfer thrusters of the vessel.
33. These engines also generated electricity to power the following functions:
- (a) the pumps used to transfer the fuel from the tanks of the Searanger onto the MV Lorelay;
- (b) the navigation and survey systems; and
- (c) the lighting and air conditioning.
16 In his oral evidence he said the Searanger was also a dynamically positioned vessel, holding a stationary position through use of its propellers and thrusters. The Searanger would survey the state of the proposed path for the pipe along the seabed, avoiding obstacles such as containers, and record the precise position of the pipe as laid. A remote operated vehicle would be put overboard from the Searanger to track the pipe laying route, ensure the correct curvature of the constructed pipe and assess the support installations for the pipe. In addition to the sonar equipment and the remote operated vehicle, the Searanger carried satellite guided equipment.
Applicable legislation
17 The following provisions from the Customs Act 1901 (Cth) are relevant:
164. Rebate of duty in respect of diesel fuel used for certain purposes
(1AA) This section makes provision for a rebate to be payable in respect of diesel fuel purchased for certain usages. In particular (but without limiting the effect of the provisions), it sets out:
- (a) the particular usages of diesel fuel that would entitle a person to apply for rebate (subsection (1)); and
- …
- …
…
(1) A rebate is, subject to subsections (2) and (4A) and to such conditions and restrictions as are prescribed (being conditions and restrictions that relate to goods generally, goods included in a class of goods that includes diesel fuel or to diesel fuel only), payable to a person who purchases diesel fuel for use by the person:
- …
- (ac) in marine transport (otherwise than for the purpose of propelling a road vehicle on a public road) in the course of carrying on an enterprise;
- …
(2) A person is not entitled to be paid diesel fuel rebate, or to retain diesel fuel rebate paid to the person, in respect of diesel fuel purchased by the person for use by the person in a manner referred to in subsection (1) that is specified in the application for that rebate if, in fact, the person:
- (a) uses the fuel otherwise than in that manner; or
- (b) sells or otherwise disposes of the fuel; or
- (c) loses the fuel (whether because of accident, theft or any other reason).
Note: If rebate has been paid on diesel fuel that is subsequently used in a manner other than the manner indicated, or sold or otherwise disposed of, or lost, the rebate on the fuel is repayable. (See sections 164AA and 164AD.)
…
(7) In this section:
carrying on an enterprise has the same meaning as in the Diesel and Alternative Fuels Grants Scheme Act 1999 (Cth). …
marine transport includes transport by vessels in or on fresh water, but does not include any transport relating to forestry. …
use, in relation to diesel fuel in relation to a person, does not include the sale or other disposal of the diesel fuel by the person to another person or the loss of the diesel fuel by the person.
Consideration and findings
18 It was not disputed that the applicant's use of the diesel fuel purchased, being the diesel fuel that is the subject of the claim for rebate, was used in the course of carrying on an enterprise.
19 Early on in the hearing there was some uncertainty as to the particular uses of diesel fuel by the applicant that the respondent contended in its statement of facts, issues and contentions dated 14 May 2004, was not eligible to a rebate under s 164(1)(ac) of the Customs Act 1901 (Cth). It was agreed that the respondent would clarify its position and did so by letter to the tribunal (and the applicant) dated 23 November 2004. The respondent accepted that in relation to the MV Lorelay the following uses of diesel fuel were in marine transport:
- - propelling the MV Lorelay from Bell Bay (in Tasmania) to the point it commenced its construction operation;
- - operating a crane on board the MV Lorelay to load it for the passage referred to above.
- - operating the on board crane to unload the pipe carrier vessels when restocking the MV Lorelay because at that time the MV Lorelay was not used in marine transport;
- - any other use of diesel fuel aboard the MV Lorelay.
20 In relation to the Searanger, the respondent accepted that the following were uses of diesel fuel in marine transport:
- - propelling the Searanger while carrying fuel to the MV Lorelay (and back);
- - propelling the Searanger while carrying the remote controlled survey vessel to the point of survey (and back).
- - using diesel fuel while the Searanger or the remote controlled survey vessel was undertaking surveys;
- - using diesel fuel by the Searanger while doing unspecified "other things".
21 There was some common ground between the parties as to the tribunal's task in deciding whether the applicant's purchases of diesel fuel were for use in marine transport:
- • though the
legislation applying to the instant application differs to that discussed
by the full Federal Court in Collector of Customs v Pozzolanic Enterprises
Pty Ltd (1993) 43 FCR 280; 18 AAR 9; 115 ALR
1, both the applicant and respondent referred to the following
passage in relation to the policy underlying the diesel fuel rebate (at
FCR 289; AAR 19; ALR 11):
The rebate provisions are intended to encourage the activities to which they apply. They should not be construed narrowly: Collector of Customs v Cliffs Robe River Iron Associates (at 275). The rebates are not payable only to persons who are themselves directly engaged in activities supported by the legislation: Australian National Railways Commission case (at 377);
- • the
meaning of "in", appearing in the expression "for use
by the person … in marine transport" (s 164(1)(ac) of
the Customs Act 1901 (Cth)) is to be found in the full court's judgment
in Chief Executive Officer of Customs v Dyno Wesfarmers Ltd (1997) 73 FCR 1 at 5:
In s 164(1)(a), the preposition "in" is used to connect the words "for use by him" with the term "mining operations" so as to require the prospective use of the diesel to be use within the ambit of "mining operations". The Shorter Oxford English Dictionary uses the expression "In the process or act of" to express the meaning of the word "in" in such a context. It follows that the issue for consideration is not that which was considered in Collector of Customs v Western Australian Government Railways Commission (1995) 39 ALD 21 (Westrail), in which Lee J considered an earlier definition of the term "mining operations" which included "operations connected with … mining for minerals that are carried out in, or at a place adjacent to, the area in which the exploration, prospecting or mining occurs". That was a wider extension, because of the use of the words "connected with" though limited by the words "in, or at a place adjacent to, the area in which … mining occurs".
22 Recently the Federal Court has had to consider the meaning of "for use by the person … in marine transport" in s 164(1)(ac) of the Customs Act 1901 (Cth), which is the subject of this application. In Port of Brisbane Corporation v DCT (2004) 57 ATR 545, Moore J expressly approved (at ATR 551 [15]) the approach to the interpretation of those words that Handley DP had adopted at [32] (Re Port of Brisbane Corporation and DCT (2004) 55 ATR 1029 at 1037) in the following passages from his decision:
[31] The tribunal agrees with the parties that the phrase "use in … marine transport" should be accorded its ordinary and natural meaning. In this context, the normal association of "marine" with the sea is extended by the definition of "marine transport" in s 164(7) to include fresh water. That same definition, which "includes transport by vessels in or on fresh water", while not an exhaustive definition because it is extending the ordinary meaning of "marine" to include an association not only with sea water but also with fresh water, nevertheless refers to transport by vessels.
[32] In the tribunal's opinion, the ordinary meaning of "marine transport" does not include the conveying of things via a pipe that is in, that is, passes through, water or floats on water. Otherwise, one can foresee it might be argued that the pumping of natural gas or oil from an off-shore drilling rig to shore via a pipeline could constitute "marine transport". In the tribunal's opinion, the key to the meaning of "marine transport" lies in the meaning of the word "transport". The Concise Macquarie Dictionary, 3rd ed (1988) lists as the sixth meaning of transport:
6. a means of transporting, as a ship, truck or plane used for transporting soldiers or miliary stores, or convicts.
The first meaning of transport in the Oxford English Dictionary is:
1. the action of carrying or conveying a thing or person from one place to another, conveyance.
The use of the word "transport" in the phrase "marine transport" suggests a conveyance - something which does the conveying - a vehicle or vessel or aircraft which moves through its particular medium (land, water, air) carrying a thing or person. The medium in this case is, of course, water. Thus, in the tribunal's opinion, "marine transport" should in this instance be interpreted as meaning the act of conveying a thing or a person from one place to another through or over water using some kind of vessel or vehicle.
[33] The parties agree and the tribunal accepts that the word "in" in this context means "in the process or act of". On the one hand, the corporation contended that diesel used to power dredging operations was being used to facilitate marine transport by maintaining navigable channels and was therefore used in the process of marine transport. On the other hand, the respondent contended that the process of marine transport does not include activities designed to facilitate marine transport.
[34] The tribunal agrees with the latter view. For diesel to be used in the process or act of marine transport, the use must be associated with the conveying of a thing or person from one place to another through or over water using some kind of vessel or vehicle. To break the link with conveying using a vessel or vehicle would, in the tribunal's view, extend the meaning of the phrase beyond its ordinary or natural meaning even when construed beneficially. (Moore J's emphasis.)
23 Moore J found that it was open for the tribunal to conclude that use of diesel for the immediate purpose of retrieving spoil from a riverbed was not a use in marine transport, while accepting that movement of self-propelled dredges to and from locations where dredging was undertaken and from those points to points where spoil was discharged, did involve such a use. However, Moore J said it was conceivably open for the tribunal to have concluded that use for the immediate purpose of retrieving spoil from the riverbed, was use in marine transport. It might have been so characterised for self-propelled dredges, as a process analogous to loading cargo using an onboard crane. It would have been viewed as an activity ancillary to, but part of, marine transport.
24 The applicant submitted that pipelaying and transportation are not mutually exclusive. Indeed laying pipe involves movement of the pipe from a place to another place, in this case moving the pipes to the seabed, which at times also required using a crane to load pipes from supply vessels to re-stock the MV Lorelay. Whether welding occurs is not to the point because in the applicant's submission, the pipelaying was happening continuously and that activity was a movement of pipes from one place to another. The use of cranes, welding and lowering the pipes into position was in the process of transporting the pipe. The process of moving the pipes was not complete until the pipes were on the seabed.
25 In relation to the Searanger the applicant submitted that its use of diesel fuel was rebateable because it was transporting crew and equipment, whether replenishing the MV Lorelay with fuel or in carrying out survey activities, which are equally part of the continuous process of overall movement or transportation of the pipes from port to the seabed.
26 Mr Robertson drew support for his submission from the Port of Brisbane case where it was accepted that diesel used to power self-propelling dredges, in travelling from the dredging site and then with the spoil to the dump site, was in marine transport because the dredges were carrying dredging machinery or the spoil from one place to another.
27 Counsel also referred to the respondent's Interpretative Determination 2004/843 "Energy Grants (Credits) Scheme: off-road credit - marine transport - setting and servicing of nets and drumlines for a shark control program". Although the interpretative decision concerns different legislation, it was submitted that since that legislation also refers to "use of a vessel in marine transport" the interpretative decision was instructive. The interpretative decision states that:
Similarly the applicant relied on the respondent's Interpretative Decision 2004/626 "Energy Grants Credits Scheme: off-road marine transport - travel by a vessel to and from bed levelling sites". Bed levelling was described as dragging a levelling bar across the seabed to level the sea floor at the designated site by moving sediment into deeper areas. The interpretative decision accepted that the use of diesel fuel in operating a vessel travelling to and from a place where it undertakes bed levelling is use in marine transport. Although the transport was incidental to another activity, shark netting or bed levelling, that did not result in the carrying of the people or equipment being found not to be in marine transport. Here, the transportation of the pipes was not complete until the pipes were placed on the seabed.In this case, the contract for the shark control program requires the entity to:
- - transport nets and drumlines when setting them;
- - transport equipment for the repair and maintenance of nets and drumlines once set; and
- - transport caught sharks out to sea for disposal or release.
Each of the above journeys involves the conveyance of things by a vessel on water.
Accordingly, an entity which sets and maintains drumlines and nets for the purpose of catching sharks is undertaking "marine transport". …
28 The respondent submitted that the MV Lorelay's use of diesel fuel for pipelaying activities was not an activity done in the process or act of marine transport. It was emphasised that "in marine transport" is a narrower concept than "in marine use". The distinction should not be overlooked and accordingly counsel submitted that any use of diesel fuel by a marine vessel would not necessarily constitute use in marine transport. In counsel's submission "transport", bears the meaning of transporting or conveying people or things. So, "marine transport" should be interpreted as Moore J did in the Port of Brisbane case, as the use of diesel in the process or act of transporting or conveying people or things in or on the sea or in or on fresh water. In this matter the use of diesel fuel by the MV Lorelay in constructing a pipeline is not transporting the pipes.
29 Counsel for the respondent referred to the process on board the MV Lorelay of coating the pipes, inserting valves and welding them together as a construction process. The pipes were transformed by these procedures. Use of the vessel's cranes and conveyor belts was no more transport than their use within a factory. It was submitted further that the natural meaning of transport does not involve altering or constructing the thing transported. The mere fact of the MV Lorelay's movement was not sufficient for its use of diesel fuel to be in marine transport, as that term should properly be understood, as opposed to use being in processes such as construction. Power was used to stabilise the vessel while these construction activities happened.
30 In respect of the Searanger the respondent accepted that its transportation of fuel to the MV Lorelay was a rebateable use as was its transportation of the remote controlled survey vessel. However, the Searanger's survey activities do not involve transport of people or things within the meaning of marine transport. Some measure of apportionment would be required. Counsel submitted that during that period of time when diesel fuel is used while the Searanger is stable and carrying out survey activities, that use would not be in marine transport. In making the submission about apportionment, counsel stressed that the correct approach is not a generic or global appraisal of a claimant's activities. Rather, the activities of each of the vessels must be separately addressed, followed by a consideration of the use of fuel by each vessel. It was submitted in relation to the MV Lorelay, that the use of diesel fuel to power the welding equipment, the thrusters, the cranes in moving the pipes into position and the power spent on the firing line, are uses in construction processes. Indeed the respondent went further and submitted that the only rebateable use of diesel fuel was in propelling the MV Lorelay to the position where it started the construction process.
31 I make the following findings:
- • the pipe loaded onto the MV Lorelay at Bell Bay and while at sea, was conveyed or transported in the MV Lorelay to another place, being the Bass Strait seabed, and such conveyance is an activity covered by the ordinary meaning of "marine transport": Port of Brisbane case (at ATR 551 [15]). The vessel's 4 main engines, propeller and thrusters are electrically driven through diesel power and the use of the diesel fuel was in marine transport as these articles of plant provided the vessel's propulsion (item 2.2 to exhibit WVB3 to Mr Van Benten's statement);
- • diesel fuel used to power the MV Lorelay's onboard cranes and other equipment such as the elevator and conveyor used to load, move and store the pipe in the cargo hold during passage was a use of diesel fuel in marine transport. Similarly, diesel fuel used to power the MV Lorelay's internal gantry cranes, elevator and the longitudinal conveyor to move pipe from the hold to the main firing line, was use in marine transport. The pipe was being moved in the course of being transported to its destination point, unlike goods shifted around inside a warehouse or factory;
- • subject to what is said below, the power used in the processes that occurred at each of the stations on the main firing line, including the lining up of pipe with the pipe already assembled on the firing line, is a use of diesel fuel in marine transport. I will comment further on this stage of the transportation of the pipe as it is more problematic than the other uses of diesel on the MV Lorelay. However, the diesel used to power the winches, tensioners and roller supports as it moves along the stinger and in lowering the pipe to the seabed is also a use in marine transport. The pipe is in the course of being conveyed to its destination;
- • my reason for finding that the use of diesel for powering the stations through which the pipe moved along the main firing line was in marine transport, requires an assessment of how the conveyance of pipe is carried out on the MV Lorelay and the place of particular activities that occur on the vessel: Dyno Wesfarmers (at FCR 6). The conveying of pipe aboard the MV Lorelay takes place continuously for, as Mr Van Benten said, the vessel is in constant motion, although its thrusters are employed to correct its movement and to move it forward to new co-ordinates as a pipe moves through to the stinger and a new pipe is loaded at the front of the firing line. I accept the applicant's submission that the MV Lorelay's conveyance of pipe did not cease and was not complete until the pipe was on the seabed. In contrast with the use of fuel by dredges for retrieving spoil from the riverbed, on the evidence before me the immediate purpose of the firing line processes is to make the pipe ready for its placement on the seabed and they take place during the conveyance of the pipe: cf Port of Brisbane case (at ATR 552 [23]). Apart from the welding and application of the anticorrosive coating, the processes along the firing line are effected to enable the pipe to be transported securely to its particular place on the seabed. But I do not include the diesel fuel used in operating the Phoenix automated welding system. The welding process, as opposed to say the fuel used to power the conveyor belt system, was not "ancillary to"(Port of Brisbane case (at ATR 552 [23])) or "an integral part of" (Dyno Wesfarmers (at FCR 5 and 6)) the activity of conveying the pipe;
- • each
of the uses of diesel fuel aboard the MV Lorelay referred
to in the points above, occurred in the process or act of conveying the
pipe to its destination and I find therefore that the fuel used by the MV
Lorelay in those activities was "in marine transport" according
the test in Dyno Wesfarmers, apart from powering the Phoenix welding equipment (see
para 12(e) of Mr Van Benten's statement at [12] above) and in applying
the anti-corrosive (as to the latter, there was little evidence
regarding the use of diesel fuel). I am satisfied that it is appropriate
for there to be an apportionment of the diesel fuel purchased by the applicant
for use in the MV Lorelay. I am mindful of the following
comments of Davies J in Australian National Railways Commission v Collector
of Customs (SA) (1985) 8 FCR 264 at
270; 69 ALR 367 at 372, albeit discussing
an earlier legislative version of the diesel fuel rebate scheme and in
the context of use of diesel in primary production:
I do not suggest that, if an appropriate case for apportionment is put forward, there should not be an apportionment of diesel fuel purchased in bulk with several uses in mind. Although the diesel fuel rebate provisions use simple language, they are intended to be applied in a practical, commonsense manner to commercial operations. I would not accept that a person is excluded from rebate merely because diesel fuel was purchased in bulk and no separate purchase was made of diesel fuel for use in primary production. In an appropriate case, there may be apportionment.
But to say that there may be apportionment does not mean that a rebate is payable to the applicant simply because diesel fuel was used by the applicant in an operation of primary production as defined. It is only payable on diesel fuel purchased for use in that operation.
32 As for the Searanger, I note the respondent's concession that the use of diesel fuel in propelling the vessel while carrying fuel for re-supply of the MV Lorelay (and return) and transporting the remote controlled vehicle to the point of survey (and return) is a use of diesel fuel in marine transport.
33 It was not disputed and I find that the Searanger did not transport pipe. The applicant submitted that while the Searanger conducted survey work to ensure the pipe was laid flat on the seabed, it necessarily carried crew and equipment for that purpose and such conveyance was in marine transport. In addition, it was submitted that this activity was part of the process of the transporting of the pipe by the MV Lorelay. I do not accept this submission. Taking the surveying activity to include, as Mr Van Benten represented, the Searanger's use of the remote operated vehicle to assess the pipe lay route in advance and the pipe's supports, and observation to ensure the pipe's curvature was correct, this activity does not involve transporting people or things. Of course, crew and equipment were on board the vessel while the surveying was performed. But the vessel was not then carrying them as part of an activity of marine transport or ancillary to marine transport. The immediate purpose in carrying them was to perform the survey work, which I find is not marine transport.
34 The decision under review should be varied by determining that diesel fuel rebate is payable to the applicant pursuant to s 164(1)(ac) of the Customs Act 1901 (Cth) and s 78A(1)(ac) of the Excise Act 1901 (Cth) in respect of the diesel fuel purchased by the applicant for use:
- (a) by the MV Lorelay in all its activities in laying pipe across the Bass Strait, such use was in marine transport in the course of the applicant's carrying on an enterprise, except use: (i) in powering the Phoenix welding equipment; and (ii) in applying the anti-corrosive coating;
- (b) by the Searanger in propelling the vessel while carrying fuel to the MV Lorelay (and back) and while carrying the remote controlled vessel to the point of survey (and back), such use was in marine transport in the course of the applicant's carrying on an enterprise, but the rebate is not otherwise payable.
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