ATO Interpretative Decision
ATO ID 2004/667
Excise
Excise: accounting for excisable goods when a continuing permission is in placeFOI status: may be released
Status of this decision: Decision Current
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Has a licensed manufacturer accounted for excisable goods to the satisfaction of a Collector for the purposes of section 60 of the Excise Act 1901 (Excise Act), where they hold a continuing permission to move excisable goods to another premise, but in moving them, deal with them as if they were not excisable?
Decision
No. A licensed manufacturer has not accounted for excisable goods to the satisfaction of a Collector for the purposes of section 60 of the Excise Act where they hold a continuing permission to move excisable goods to another premise, but in moving them, deal with them as if they were not excisable.
Facts
An entity manufactures goods subject to wine equalisation tax (WET) and goods subject to excise duty. The entity has an excise manufacturer's licence.
The entity sold a quantity of goods to a second entity and identified the goods as subject to WET. It was subsequently shown that these goods were in fact excisable goods and subject to excise duty.
The entity holds a continuing permission granted under subsection 61A(1) of the Excise Act that permits the entity to move underbond excisable goods between their premises and those of the second entity. The permission is issued subject to the provisions of the Excise Act and includes, amongst others, the following standard conditions:
... the permission holder shall provide a company document to the proprietor of the place of removal and to the proprietor of the specified destination place, along with the goods. This 'movement' document should form part of a consecutively numbered system of documents and must outline:
Reasons for Decision
Subsection 60 (1) of the Excise Act states:
- (1)
- Where a person (including a licensed manufacturer) who has, or has been entrusted with, the possession, custody or control of excisable goods which are subject to the CEO's control:
- (a)
- fails to keep those goods safely; or
- (b)
- when so requested by a Collector, does not account for those goods to the satisfaction of a Collector
- the person shall, on demand in writing made by a Collector, pay to the Commonwealth an amount equal to the amount of the Excise duty which would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand.
The purpose of section 60 of the Excise Act was examined in Collector of Customs (NSW) v. Southern Shipping Co Ltd (1962) 107 CLR 279 (Southern Shipping). The case was decided prior to the Commissioner of Taxation taking over responsibility for Excise matters. The principles outlined in the case remain valid but references to Customs control should be read as being references to 'the CEO's control'. Menzies J, in discussing subsection 60(1) stated:
... the safety with which the section is concerned is that the goods - subject as they are to the control of Customs - do not get out of Customs control into home consumption without the payment of duty; similarly, the account of the goods that is required is an account which shows an authorized relinquishment of possession, custody and control or, despite an unauthorized loss of possession, custody and control, that the goods have not got into home consumption without the payment of duty or that, notwithstanding the failure to keep the goods safely, Customs control over them is still effective.
Finkelstein J in Sidebottom v. Giuliano (2000) 98 FCR 579 summarised the views of the High Court in Southern Shipping as follows:
The High Court held that s60 was a provision for the protection of the revenue. The obligation that it imposes upon a person who is or has been entrusted with the possession, custody or control of excisable goods is to ensure that the goods do not irregularly find their way into home consumption. Accordingly, goods will be accounted for if the person parted with possession of them in a manner authorised by the Excise Act ...
One method authorised by the Excise Act by which a person can part with excisable goods that are under the CEO's control is by way of a permission granted under section 61A. Subsection 61A(1) of the Excise Act states:
A Collector may give permission in writing to a person specified in the permission to remove goods of a kind specified in the permission that are subject to the CEO's control from a place so specified to another place so specified and, until the permission is revoked, the permission is authority for the person to remove goods of that kind that are subject to the CEO's control accordingly.
Subsection 61A(3) of the Excise Act states:
- (3)
- Permission under subsection (1) or (2) may be given subject to the condition that the person to whom the permission is given complies with such requirements as are specified in the permission, being requirements that, in the opinion of the Collector, are necessary for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts.
Note that subsection 61A(3) conditions the permission. Permission is only given if the person complies with the requirements specified in the permission.
One of the conditions specified in the continuing permission was that the holder must prepare documentation and provide it to the proprietor of the place of removal and to the proprietor of the specified destination place. This documentation must contain details including a statement that the goods are underbond.
By failing to identify the goods on the movement documentation as excisable goods being moved underbond, the manufacturer did not meet the conditions attached to the permission and therefore moved the goods without permission. Further, by failing to identify the goods as excisable goods when moving them, and in fact identifying them as goods subject to WET and therefore not subject to excise duty, the manufacturer allowed the goods to leave the CEO's control (and thereby enter home consumption) without proper authorisation and without payment of the requisite duty.
It follows that the entity has not accounted for excisable goods to the satisfaction of a Collector for the purposes of section 60 of the Excise Act where they hold a continuing permission to move excisable goods to another premise, but in moving them, deal with them as if they were not excisable.
Date of decision: 22 July 2004
Legislative References:
Excise Act 1901
section 60
section 61A
subsection 61A(1)
subsection 61A(3)
Case References:
Sidebottom v. Giuliano
(2000) 98 FCR 579
(1962) 107 CLR 279
Keywords
Continuing permission
Excisable goods
Excisable goods manufacturer
Excise
Excise collections
Wine equalisation tax
ISSN: 1445-2782