ATO Interpretative Decision

ATO ID 2002/253 (Withdrawn)

Excise

• This ATO ID is withdrawn from the database because it contains a view in respect of the diesel fuel rebate provisions of the Excise Act 1901 and or the Customs Act 1901 that were repealed with effect from 1 July 2003. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions for fuel purchased before 1 July 2003.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

For the purposes of subsections 164(1) and (7) of the Customs Act 1901 (Customs Act) and section 78 of the Excise Act 1901 (Excise Act), is fuel used to power ancillary equipment to transfer stock feed from a delivery vehicle into a storage silo on an agriculture property, eligible for rebate under the Diesel Fuel Rebate Scheme (DFRS)?

Decision

For the purposes of subsections 164(1) and (7) of the Customs Act and section 78 of the Excise Act, the diesel fuel used for pumping stock feed from a transport vehicle into a farm storage silo is not an activity which falls within the definition of 'primary production', and therefore the applicant is not entitled to the rebate for that activity.

Facts

The applicant carries on a cartage business. One of the activities undertaken by the business is the transportation of mill-produced stock feed from the mill to farms.

The delivery of stock feed is effected by pumping the feed from the transport vehicle into storage silos on the farms. The pumping operation is fuelled by diesel.

The applicant has made a claim for the diesel fuel rebate for the diesel used in the process of loading the feed into the farm silos. The claim is made on the basis that the diesel fuel so consumed is being used in the rearing of livestock and therefore is used 'in primary production'.

Reasons for Decision

Diesel fuel in respect of which the rebate may be claimed is diesel fuel used in eligible activities otherwise than for the purpose of propelling a road vehicle on a public road. The rebate activities are intended to encourage the activities to which they apply. They should not be construed too narrowly: Collector of Customs v. Cliffs Robe River Iron Associates (1985) 7 FCR 271 at 275.

The rebates are not payable only to persons who are themselves directly engaged in activities supported by the legislation. The benefit of the diesel fuel rebate is not restricted to a person who carries on mining operations or primary production using those terms in their ordinary parlance. The rebate is given not to persons who carry on occupations as defined but to persons who purchase diesel fuel for use in operations as defined: Australian National Railways Commission v. Collector of Customs ( 1985) 8 FCR 264 at 377.

In the case of primary production, the rebate is payable to a person who purchases diesel fuel for use by him in primary production. The condition that the use be by that person in primary production is satisfied if it is for use by that person in agriculture. More specifically the condition is satisfied if the fuel is purchased for use by him in operations connected with the rearing of livestock (paragraphs 164(7)(c) and (f) of the Customs Act). The rebate is payable where a primary producer engages a contractor to carry out work connected with primary production and the contractor uses diesel fuel in operating the plant necessary for the task: Australian National Railways Commission case (supra).

In Collector of Customs v. Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 the Full Federal Court considered whether the diesel used for the delivery of stock feed by an entity operating a cartage business was eligible for the rebate.

The Full Court stated that the requirement that the fuel be purchased by a person claiming rebate 'for use by him .... in primary production', is a requirement that must be satisfied at the point of purchase. It is a requirement, which can only be met if the fuel for which the rebate is claimed is purchased with the purpose of applying it to one of the eligible uses. The Full Court considered that the use of the fuel by a cartage enterprise for delivering stock feed was to some extent connected with the rearing of livestock, but not to the extent contemplated by the Customs Act. It expressly approved the words of the Administrative Appeals Tribunal:

'We believe that, having regard to the evident purpose of the legislation, and taking a commonsense and commercial approach, the unloading of the feed from the trucks to the silos is part of the process of manufacture, distribution, haulage and delivery of stock feed .... The payment of a rebate of duty in the circumstances of this case may help in some small degree to promote the manufacture and distribution of the applicant's stock feed but it is stretching commonsense to say that it would promote primary production. We have taken the view that the applicant is not an entity, which has purchased diesel fuel for use by it in primary production. The fuel was purchased for use in the manufacture, distribution and delivery of stock feed. The operation the subject of this review is part of that distribution and delivery process. It is not sufficiently connected to the rearing of livestock to bring it within our definition of primary production'.

Year of income:  Year ending 30 June 2002

Legislative References:
Customs Act 1901
   subsection 164(1)
   subsection 164(7)

Case References:
Collector of Customs v. Cliffs Robe River Iron Associates
   (1985) 7 FCR 271.

Keywords
diesel fuel rebate
primary production

Business Line:  Excise

Date of publication:  22 March 2002

ISSN: 1445-2782