ATO Interpretative Decision

ATO ID 2003/437 (Withdrawn)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• This ATO ID is withdrawn from the database because it contains a view in respect of the diesel fuel rebate provisions of the Excise Act 1901 and or the Customs Act 1901 that were repealed with effect from 1 July 2003.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

Is the use of diesel fuel in a salvage vessel to:

(a)

undertake vessel salvage activities;

(b)

power the general running of the vessel while the salvage crew is on board;

(c)

conduct sea trials of the vessel after it has been repaired; and

(d)

transport the vessel to be repaired and to return the vessel after repairs

'marine transport' under paragraph 78A(1)(ac) of the Excise Act 1901 or paragraph 164(1)(ac) of the Customs Act 1901?

Decision

Yes. The use of diesel fuel in a salvage vessel to:

(a)

undertake vessel salvage activities;

(b)

power the general running of the vessel while the salvage crew is on board;

(c)

conduct sea trials of the vessel after it has been repaired; and

(d)

transport the vessel to be repaired and to return the vessel after repairs

is 'marine transport' under paragraph 78A(1)(ac) of the Excise Act or paragraph 164(1)(ac) of the Customs Act.

Facts

The claimant operates a commercial marine salvage business.

The claimant purchases and uses fuel in:

(a)

undertaking vessel salvage activities;

(b)

powering the general running of the vessel while the salvage crew is on board;

(c)

conducting sea trials of the vessel after it has been repaired; and

(d)

transporting the vessel to be repaired and to return the vessel after repairs.

The claimant is contracted by a number of companies to recover wrecks (eg. insurance companies; owners of the wreck; etc). Their vessel salvage activities involve transporting divers employed by the claimant to a wreck using the claimant's vessel. The divers then conduct their salvage activities. They bring up either parts of the wreck, or in some instances, a whole vessel. The parts of the wreck are then transported back in the claimant's vessel and, where the whole wreck has been recovered, the wreck is towed back to port by the claimant's vessel.

The general running of vessel for the diving crew refers to the normal running of the vessel (while in dock and while at sea while the vessel is being used as a base by the salvage crew) to power everyday day on-board facilities (eg. air conditioning, lighting, etc).

The 'sea trials' involve the claimant taking their vessel for a run after any maintenance or repairs have been carried out on the vessel, to check that the vessel operates properly.

The 'delivery of vessels' refers to the transport of the vessel to and from the place where it is serviced and maintained.

No tourist, recreation or charter activities are carried on.

Reasons for Decision

Paragraph 78A(1)(ac) of the Excise Act and paragraph 164(1)(ac) of the Customs Act provide that a rebate is payable to a person who purchases diesel fuel for use by the person 'in marine transport ...'. 'Marine transport' is defined in subsection 164(7) of the Customs Act as:

marine transport includes transport by vessels in or on fresh water, but does not include any transport relating to forestry.

As the term 'marine transport' is not exhaustively defined under the legislation, the term should be given its ordinary and literal meaning as modified by the definition in subsection 164(7) of the Customs Act.

The Macquarie Dictionary, 2001, 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'marine' as 'of or relating to the sea' and 'transport' as 'to carry or convey from one place to another'. Therefore, the common meaning of marine transport is to carry and convey passengers or goods by sea.

However, although an inclusive approach has been taken to defining 'marine transport', the approach does not extend the meaning of 'marine transport' beyond the actual transport of passengers or goods by vessels. The phrase is a means of ensuring that transport by vessels in or on fresh water is eligible for rebate.

Hence the definition of marine transport in the Customs Act is limited to the transport of passengers or goods by vessels. Use of a vessel that is:

(a)

a necessary part of transport by that vessel; and

(b)

incidental to transport by that vessel

forms part of 'marine transport' by that vessel.

Given this, it is necessary to determine whether the movement of a salvage vessel constitutes:

(a)

transport of passengers or goods by vessels; or

(b)

is a necessary part of transport by that vessel; and is incidental to transport by that vessel.

Vessel salvage

The claimant uses diesel fuel in a vessel to take divers (and their equipment) out to a wreck, salvage it and tow it back. Taking the divers (and their equipment) out to the wreck, and their return, is clearly 'the transport of goods and passengers' by vessels, and is therefore 'marine transport'.

In towing the wreck back, the claimant's vessel is transporting the wreck, and is therefore still engaged in 'marine transport'. The vessel is 'providing towing, mooring' services, as the wreck is transported by a vessel.

Therefore, fuel used in the vessel salvage operations is eligible for rebate as 'marine transport'.

General use

The general running of the vessel to power everyday on board facilities for the diving crew is both a necessary part of, and integral to, the vessel's marine transport (i.e. salvage) activities. Accordingly, the general running of the vessel is, in this instance, 'marine transport'.

Sea trials

The claimant also uses diesel fuel in sea trials after their vessel is repaired or maintenance carried out on it. Since the vessel is used in marine transport, the use of fuel in sea trials is incidental to the use of the vessel in marine transport. The sea trials are, in this instance, 'marine transport'.

Delivery of vessel

The claimant also uses diesel fuel in taking the vessel for repairs or maintenance and in returning it after repairs or maintenance. Since the vessel is used in marine transport, the use of fuel in delivering the vessel is incidental to the use of the vessel in marine transport. Therefore, the delivery, in this instance, is 'marine transport'.

Legislative References:
Excise Act 1901
   paragraph 78A(1)(ac)

Other References:
The Macquarie Dictionary, 2001, 3rd edn, The Macquarie Library Pty Ltd, NSW

Keywords
DFRS marine
Diesel
Diesel fuel rebate scheme
Excise

Business Line:  Excise

Date of publication:  6 June 2003

ISSN: 1445-2782