ATO Interpretative Decision

ATO ID 2002/636 (Withdrawn)

Excise

Excise - Collections - Tobacco - Liability of a licensed tobacco producer to pay excise
FOI status: may be released

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Status of this decision: Decision withdrawn 17 January 2019.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Is a licensed tobacco producer liable to pay excise duty under the Schedule to the Excise Tariff Act 1921 (Tariff Act) on the tobacco leaf that he or she produces?

Decision

Providing that a tobacco producer does not subject tobacco leaf to any manufacturing process following curing he or she will not be liable to pay excise duty under the Schedule to the Tariff Act, on the tobacco which he produces.

Facts

The taxpayer is a licensed producer of tobacco under section 39A of the Excise Act 1901 (EA).

An excise producer licence permits the licensee (the producer) to grow and store tobacco seed, tobacco plant and tobacco leaf at the premises specified in the licence.

When the crop of tobacco plants is mature, the producer strips the leaves from the plants and cures them. The cured leaf is then sorted and packed in bales for transportation to a licensed dealer in accordance with a permission granted under section 44 of the EA to move tobacco.

Ultimately the cured tobacco is sold to a licensed tobacco manufacturer for processing into consumable tobacco products.

The producer requested advice as to whether, and in what circumstances, he would become liable to pay excise duty on the tobacco leaf that he produced.

Reasons for Decision

The EA and the Tariff Act must be read together and as one (see section 6 of the EA and section 2 of the Tariff Act). .

It is necessarily implicit in the excise legislation that excisable tobacco, like other excisable goods, is a product that is manufactured.

The term 'manufacture' is relevantly defined in subsection 4(1) of the EA as including 'all processes in the manufacture of excisable goods'. This definition is merely inclusive and, in relation to tobacco, does not alter the fact that a process must result in some change in a product before it can be said that it has been manufactured (see, for example, McNicol v. Pinch [1906] 2 KB 352).

Ordinarily, the curing of tobacco leaf would probably result in the manufacture of something - a process is applied to produce cured tobacco leaf. However, because of section 68 of the EA, it is clear that the simple curing of tobacco leaf does not involve the manufacture of anything for the purposes of the EA and the Tariff Act.

Duties of excise are payable on excisable goods and the relevant duties are imposed by the Tariff Act (see section 54, and the definition of 'excisable goods' in subsection 4(1) of the EA).

For the purpose of imposing duty on tobacco, the Schedule to the Tariff Act defines 'tobacco' as meaning 'tobacco leaf subjected to any process other than curing the leaf as stripped from the plant'.

It is clear from both section 68 of the EA and the definition of 'tobacco' in the Schedule to the Tariff Act that the process of curing leaf as stripped from the plant is deemed not to be a manufacturing process which brings tobacco into an excisable state. It is any manufacturing process that follows curing which brings tobacco to an excisable state.

Providing that a tobacco producer does not subject tobacco leaf to any manufacturing process following curing he will not be liable to pay excise duty on the tobacco which he produces.

Note: It should be noted that in the event that the producer is unable to account for a deficiency in his or her tobacco leaf stock, he or she will be liable to pay an amount equal to the duty which would have been payable if the missing tobacco had been manufactured into excisable goods by the producer (section 105 of the EA).

Note: Even though section 105 of the Excise Act has been repealed, from 1 July 2006 section 77AA of the Excise Act provides a similar outcome for tobacco leaf that cannot be accounted for.

Date of decision: 7 May 2002

Legislative References:
Excise Act 1901
   subsection 4(1)
   section 6
   section 39A
   section 44
   section 54
   section 68
   section 105
   Section 77AA

Excise Tariff Act
section 2
The Schedule

Case References:
McNicol v. Pinch
[1906] 2 KB 352

Keywords
Tobacco growing
Tobacco producer
Licensed tobacco producer
Excisable goods
Manufacture

Siebel/TDMS Reference Number: CRS75612

Business Line: Indirect Tax

Date of publication: 6 June 2002

ISSN: 1445-2782

history

	Date:	Version:
	7 May 2002	Original statement
You are here →	17 January 2019	Archived

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