ATO Interpretative Decision
ATO ID 2006/311 (Withdrawn)
Excise
Tobacco Producer Licence - conditions that relate to the disposal of waste or unsaleable tobacco seed, plant or 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 incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision withdrawn 17 January 2019.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 that relate to the disposal of rejected and waste 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 disposal of rejected and waste 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 disposal of waste and rejected tobacco leaf.
There are several stages in the production of tobacco leaf, including the production of seedlings, transplanting of the seedlings to a field and harvesting of the tobacco leaf. Typically the tobacco plant is picked six times. The tobacco leaf is generally cured and baled on the licensed premises by the tobacco producer. During the picking, curing and baling processes, the producer may decide that some tobacco leaf has become diseased, mouldy or otherwise unfit for sale. This waste tobacco is not baled and is retained on the farm.
The remaining tobacco leaf is packed in hessian bales and is then transported to a tobacco co-operative's premises for sale to licensed manufacturers. During the sale process representatives of the tobacco co-operative and licensed manufacturers view each bale of tobacco leaf and agree on a final grade of the leaf. Where there are several grades of tobacco leaf in a bale, the tobacco producer will sort and re-bale the tobacco leaf. Where the tobacco leaf is of such poor quality as to render it unsuitable for sale, the bale will be classified with a 'z-code'.
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 conditions that the Collector considers 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 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.
During the picking, curing and baling processes, the producer may decide that some tobacco leaf has become diseased, mouldy or otherwise unfit for sale. This waste tobacco is not baled and is retained on the farm. During the sale process, representatives of the tobacco co-operative and licensed manufacturers view the remaining tobacco leaf and agree on a final grade of the leaf. Some tobacco leaf may be of such poor quality that the licensed manufacturers will not purchase the leaf and the tobacco leaf is rejected by the tobacco co-operative. This means that both waste tobacco leaf and rejected tobacco leaf do not have a legitimate market.
Section 117H provides that it is an offence to sell material that is tobacco leaf to another person who is not a licensed dealer or licensed manufacturer. If tobacco leaf is sold in this manner, the Commonwealth misses out on the excise duty that would otherwise have been payable on the tobacco products manufactured from the tobacco leaf.
Accordingly, the Collector may impose conditions on a tobacco producer licence under sections 39D and 39DA of the Excise Act that relate to the disposal of rejected and waste 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.
Date of decision: 2 November 2006
Legislative References:
Excise Act 1901
section 4
section 28
section 39A
subsection 39D(3)
section 39DA
section 117H
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 2006/310
Keywords
Licensed tobacco producer
Tobacco
Tobacco leaf
Tobacco producer
Tobacco producer licence
ISSN: 1445-2782
| Date: | Version: | |
| 2 November 2006 | Original statement | |
| You are here → | 17 January 2019 | Archived |