ATO Interpretative Decision

ATO ID 2003/806 (Withdrawn)

Excise

Diesel Fuel Rebate Scheme: Agriculture - distillation of essential oils
FOI status: may be released

This ATO ID is withdrawn from the database because it contains a view in respect of the diesel fuel rebate provisions of the Excise Act 1901 and or the Customs Act 1901 that were repealed with effect from 1 July 2003.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

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Does the distillation of essential oils constitute 'agriculture' as defined in subsection 164(7) of the Customs Act 1901 for the purposes of the diesel fuel rebate scheme?

Decision

No. The distillation of essential oils does not constitute 'agriculture' as defined in subsection 164(7) of the Customs Act for the purposes of the diesel fuel rebate scheme.

Facts

The claimant uses diesel fuel in a boiler to generate steam for distilling essential oils from various herbs.

Reasons for Decision

Subsection 78A(1) of the Excise Act 1901 and subsection 164(1) of the Customs Act provide that, subject to various conditions, a diesel fuel rebate is payable to a person who purchases diesel fuel for various uses. One eligible use of diesel fuel is use in primary production (other than for the purpose of propelling a road vehicle on a public road).

The term 'primary production' is defined in subsection 164(7) of the Customs Act as meaning:

(a): agriculture
(b): fishing operations; or
(c): forestry.'

The term 'agriculture' is in turn defined as meaning:

(a): the cultivation of the soil; or
(b): the cultivation or gathering in of crops; or
(c): the rearing of live-stock; or
(d): viticulture, horticulture, pasturage or apiculture

Subsection 164(7) of the Customs Act also includes a number of specific activities under the umbrella of agriculture.

The issue of whether distillation of essential oils falls within the general meaning of 'agriculture' in subsection 164(7) of the Customs Act was considered by the AAT in Vicmint Partners Pty Ltd v. Chief Executive Officer of Customs (1997) 48 ALD 475 (the Vicmint Case). The AAT considered that the gathering in of the herbs finished when the mobile tubs containing the picked leaves were brought to the site of the distillation plant. As a result the AAT concluded that steam distillation itself is not included within the general definition of agriculture under the Act.

The AAT went on to consider whether the distillation of essential oils is eligible under any of the specific inclusions within the definition of agriculture. The AAT focused its discussion on two types of activity.

The first of these specific activities was the packing, or the prevention of deterioration, of the produce of a core agricultural activity. Paragraph 164(7)(x) of the Customs Act provides that this activity will constitute agriculture if the activity satisfies the following three tests:

(i): the packing, or prevention of deterioration, of the produce is carried out on an agricultural property where a core agricultural activity is carried on; and
(ii): there is no physical change to the produce; and
(iii): the packing, or the prevention of deterioration, of the produce does not constitute a processing of the produce

The AAT determined that the distillation process results in a physical change to the product. Therefore the second proviso of paragraph 164(7)(x) of the Customs Act was not satisfied.

The second specific activity considered by the AAT was the removal of waste products of an agricultural property on the agricultural property where the activity is carried on. The AAT determined that this paragraph was not relevant because the distillation was not carried on for the purpose of disposing of the herbage as waste, but for the purpose of extracting the oil from the leaves and stalk.

Therefore, the distillation of essential oils does not fall within the general meaning of 'agriculture', and nor does it meet any of the specific inclusions within the meaning of agriculture.

Date of decision: 24 July 2003

Legislative References:
Excise Act 1901
subsection 78A(1)
subsection 78A(7)

Customs Act 1901
subsection 164(7)

Case References:
Vicmint Partners Pty Ltd v. Chief Executive Officer of Customs
(1997) 48 ALD 475

Keywords
DFRS agriculture
Diesel fuel rebate scheme
Excise
Excise payments

Business Line: Excise

Date of publication: 5 September 2003

ISSN: 1445-2782

history

	Date:	Version:
	24 July 2003	Original statement
You are here	8 January 2010	Archived

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