ATO Interpretative Decision

ATO ID 2004/792 (Withdrawn)

Excise

Energy Grants (Credits) Scheme: off-road - fuel oil used in furnaces
FOI status: may be released

This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.
Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of the period the Act was in force, 1 July 2003 up to and including 30 June 2012.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Status of this decision: Decision Withdrawn 1 July 2012

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the heating of fuel oil to enable it to be piped from a port to a beneficiation plant an operation for the recovery of minerals under subparagraph 11(1)(b)(ii) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

No. The heating of fuel oil to enable it to be piped from a port to a beneficiation plant is not an operation for the recovery of minerals under subparagraph 11(1)(b)(ii) of the EGCSA.

Facts

An entity beneficiates ore at a plant.

The same entity imports fuel oil which is ultimately used in the mineral beneficiation processes at the beneficiation plant.

The imported fuel oil meets the definition of 'diesel fuel' for the purposes of the Energy Grants (Credits) Scheme.

The fuel oil is imported via ship and transferred to bulk storage tanks located on land at a port.

An underground pipeline links the tanks at the port with bulk storage tanks located at the beneficiation plant. To enable the fuel oil to be effectively pumped via the pipeline from the port to the beneficiation plant, it is heated to increase its viscosity.

This heating process is facilitated by oil fired furnaces. The entity uses fuel oil in these furnaces.

Reasons for Decision

In the context of the EGCSA, use of diesel fuel 'in mining operations' is a use that qualifies for an off-road credit under subsection 53(2) of the EGCSA. Mining operations are defined in subsection 11(1) of the EGCSA, with the relevant subparagraph for the purposes of this activity being subparagraph 11(1)(b)(ii) which states:

(b)

operations for the recovery of minerals, being:

(i): ...; or
(ii): the beneficiation of those minerals, or of ores bearing those minerals

To determine whether an activity is 'in' mining operations one must consider the preposition 'in' which means 'in the course of' or 'in the process or act of.' Therefore, if an activity takes place 'in the course of mining operations, it takes place 'in' mining operations' (see Chief Executive Officer of Customs v. WMC Resources Ltd (as agent for East Spar Alliance) (1998) 87 FCR 482.

In Federal Commissioner of Taxation v. Payne (2001) 202 CLR 93; (2001) 46 ATR 228; 2001 ATC 4027; Chief Executive Officer of Customs v. WMC Resources Ltd (as agent for East Spar Alliance) (1998) 87 FCR 482; Wandoo Alliance Pty Ltd v. Chief Executive Officer of Customs [2001] AATA 801, it was deemed pertinent to consider whether there was a causal, spatial or temporal link present in determining if an activity takes place 'in the course of' something.

A causal link exists if a certain activity is 'functionally integrated' with a mining operation, thereby forming an essential part of it. Whilst the use of fuel oil is essential in the beneficiation process at the beneficiation plant, the movement of the fuel oil from the port to the beneficiation plant is not essential to the beneficiation process. That is, any fuel oil used to facilitate the movement of the fuel oil from the port to the beneficiation plant is not considered to be functionally integrated with the mining operation at the beneficiation plant. Therefore, this link does not exist.

For a spatial link to exist, an activity must take place in an area set aside or utilised for a mining operation. In this case a spatial link is not present as the entity uses fuel oil in furnaces at a place that is not an area set aside or utilised for a mining operation. The fuel oil is used in furnaces at a port rather than the beneficiation plant. Therefore, the activity is not undertaken in an area where mining takes place. This link does not exist.

Finally, a temporal link exists if the activity takes place in a timely fashion, not prior to, or after the completion of the relevant activity. The heating of the fuel oil is undertaken prior to the 'mining operation' of beneficiation because it occurs at the port before the beneficiation process takes place at the beneficiation plant. Therefore, a temporal link does not exist because the activity of using fuel oil to heat the furnaces is antecedent to the beneficiation process.

Conclusion

The heating of the fuel oil does not have the requisite causal, spatial, and temporal links with the beneficiation process. Therefore, the heating of fuel oil to enable it to be piped from a port to a beneficiation plant is not an operation for the recovery of minerals under subparagraph 11(1)(b)(ii) of the EGCSA.

Date of decision: 16 September 2004

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   subsection 11(1)
   subparagraph 11(1)(b)(ii)
   subsection 53(2)

Case References:
Chief Executive Officer of Customs v. WMC Resources Ltd (as agent for East Spar Alliance)
(1998) 87 FCR 482

Federal Commissioner of Taxation v. Payne
   (2001) 202 CLR 93
   (2001) 46 ATR 228
   2001 ATC 4027

Wandoo Alliance Pty Ltd v. Chief Executive Officer of Customs
[2001] AATA 801

Related Public Rulings (including Determinations)
Product Grants and Benefits Ruling PGBR 2003/3

Keywords
EGCS beneficiation
EGCS mining operation
EGCS off-road
EGCS off-road diesel
Excise
Excise payments

Business Line: Indirect Tax

Date of publication: 1 October 2004

ISSN: 1445-2782

history

	Date:	Version:
	16 September 2004	Original statement
You are here →	1 July 2012	Archived

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