ATO Interpretative Decision

ATO ID 2004/100 (Withdrawn)

Excise

• This ATO ID is withdrawn because it contains a view in respect of provision subsection 61C(1) of the Excise Act 1901 which was repealed and replaced under the Excise Amendment (Reducing Business Compliance Burden) Act 2012. The ATO ID continues to be a precedential ATO view in respect of decisions made on and before 14 April 2012, which is the day prior to the date of effect of the amendment to subsection 61C(1). This ATO ID has been replaced by ATO ID 2014/30.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the owner of tobacco products entitled to a refund of excise duty under section 78 of the Excise Act 1901 if the products are destroyed after they have left the owner's licensed premises?

Decision

No. The owner of tobacco products is not entitled to a refund of excise duty under section 78 of the Excise Act if the products are destroyed after they have left the owner's licensed premises.

Facts

The owner had paid excise duty in respect of the tobacco products.

The tobacco products had left the owner's licensed premises and were in transit to the owner's retail customers.

The vehicle transporting the tobacco products was involved in an accident and all of the tobacco products were destroyed.

Reasons for Decision

Section 78 of the Excise Act provides that a refund of excise duty may be paid. Subsection 78(1) of the Excise Act states:

...Refunds of excise duty may be allowed:

(a)

in respect of excisable goods generally or in respect of the goods included in a class of excisable goods; and

(b)

in such circumstances, and subject to such conditions and restrictions (if any), as are prescribed, being circumstances, and conditions and restrictions, that relate to excisable goods generally or to the goods included in a class of excisable goods.

Subregulation 50(1) of the Excise Regulations 1925 (the Excise Regulations) specifies the circumstances under which refunds of excise duty may be made. The two circumstances that are most relevant in this instance are paragraphs 50(1)(a) and 50(1)(h) of the subregulation:

...

(a)

the goods on which Excise duty has been paid or is payable have, while subject to the CEO's control:

(i)

deteriorated or have been damaged, pillaged, lost or destroyed; or

(ii)

become unfit for human consumption; ...

(h)

tobacco, cigarettes, cigars or snuff on which Excise duty has been paid are returned, or are deemed to have been returned, to the manufacturer of those goods; ...

Each of these circumstances will be examined in turn

Paragraph 50(1)(a) of the Excise Regulations: destruction of goods whilst under the CEO's control

To be entitled to a refund under this paragraph, the goods must have been under the CEO's control at the time of their destruction. Therefore we must determine at what point goods leave the CEO's control.

Section 61 of the Excise Act 1901 (Excise Act) defines when excisable goods cease to be subject to the CEO's control. Subsection 61(1) of the Excise Act states, 'All excisable goods are subject to the CEO's control until delivered for home consumption or for exportation to a place outside Australia, whichever occurs first.'

Section 58 of the Excise Act allows for authority to be given for the removal of goods for home consumption. Subsection 58(1) of the Excise Act states:

Subject to subsections (2) and (4), entries may be made by the licensed manufacturer or owner and passed by an officer and may authorise the removal of excisable goods for:

(a)

Home consumption.

(b)

Removal to an approved place that is an approved place in relation to goods of all kinds or in relation to goods of the kind that are to be entered.

Excisable goods may be delivered without entry under the authority of permission granted under section 61C of the Excise Act. Subsection 61C(1) of the Excise Act states:

A Collector may give permission in writing to a person specified in the permission to deliver for home consumption from a place specified in the permission goods of a kind so specified that are subject to the CEO's control, and, until the permission is revoked, the permission is the authority for that person to deliver for home consumption from that place goods of that kind that are subject to the CEO's control (other than goods that a Collector has directed are not to be delivered for home consumption under this section) notwithstanding that an entry of the goods for home consumption has not been made and passed under this Act.

Section 61C of the Excise Act allows for goods to be delivered for home consumption without entry but the goods are deemed to be entered for home consumption. Subsection 61C(2) of the Excise Act states:

Goods delivered for home consumption by authority of subsection (1) shall, for the purposes of this Act, be deemed to be entered for home consumption on the day on which they are so delivered.

The term 'delivered for home consumption' is not defined in the Excise Act. However, this issue was considered in detail in Caltex Australia Petroleum Pty Ltd v. Commissioner of Taxation [2008] FCA 1951 (Caltex case), where Sundberg J, in considering whether fuel manufactured and consumed in a licensed premises had been delivered for home consumption, stated:

[140] I agree with the Commissioner that Caltex delivered the residual oils for home consumption for the purposes of the Excise Act. The Excise Act does not refer to delivery to a person but adopts the more ample language of delivery for or into home consumption. While I accept that the typical case of delivery will involve the movement of excisable goods from one person or place to another, the language of the Excise Act is sufficiently broad to apply to the less typical case of consumption by a manufacturer at its own premises. The contention that the Excise Act necessarily requires the physical removal of goods from one place to another seems to me to give the concept of delivery for home consumption a restricted meaning not warranted either by the breadth of the language used or the evident purpose of the legislation, namely to tax manufactured goods consumed in Australia...

Permission under section 61C of the Excise Act allows for goods to be delivered for home consumption without entry. However, section 61 of the Excise Act maintains the CEO's control until goods are delivered. Based on the reasoning in the Caltex case, excisable goods are generally delivered into home consumption when they are physically delivered from the licensed premises (although excisable goods that are consumed on the licensed premises are also considered to have been delivered for home consumption).

Excisable goods are therefore subject to the CEO's control until dispatched into circulation. This means the goods must physically leave the licensed area and once they do so they are no longer subject to the CEO's control.

As the tobacco products were in transit to the owner's customers at the time of the accident, and the tobacco had been delivered for home consumption, the tobacco is no longer subject to the CEO's control.

Since the tobacco was no longer subject to the CEO's control at the time of the tobacco product's destruction, the requirements of paragraph (a) of subregulation 50(1) of the Excise Regulations have not been satisfied.

Paragraph 50(1)(h) of the Excise Regulations: the tobacco products have been returned to the manufacturer (or deemed to have been returned)

As the tobacco products were destroyed in the accident, they have not been returned to the manufacturer. The term 'deemed to have been returned to the manufacturer' is defined in sub-regulation 50(1) of the Excise Regulations as meaning that the goods must have been returned to a person authorised by the manufacturer to receive those goods on behalf of the manufacturer. Once again, as the tobacco products were destroyed in the accident, this requirement has not been satisfied.

As the tobacco products have not been returned to the manufacturer, nor deemed to have been returned, the requirements of paragraph (h) are not satisfied.

Conclusion

As the requirements of subregulation 50(1) of the Excise Regulations have not been satisfied, a refund of excise duty is not payable under section 78 of the Excise Act.

Legislative References:
Excise Act 1901
   section 78

Case References:
Caltex Australia Petroleum Pty Ltd v Commissioner of Taxation
   [2008] FCA 1951

Keywords
Delivered for home consumption
Excisable goods
Excise
Excise collections
Tobacco
Tobacco manufacturer
Weekly settlement permission

Business Line:  Indirect Tax

Date of publication:  6 February 2004

ISSN: 1445-2782