ATO Interpretative Decision

ATO ID 2005/329 (Withdrawn)

Excise

• This ATO Interpretative Decision is withdrawn from the database because it contains a view in respect of regulation 2A of the Excise Regulations 1925 that doesn't apply on or after 1 July 2006 as a result of changes contained in Excise Amendment Regulations 2006 (No. 3) (repeal of regulation 2A). Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions up to and including 30 June 2006.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Does regulation 2A of the Excise Regulations 1925 (the Regulations) permit beer spirit that is subject to the Commissioner's control to be used in the manufacture of beer if the spirit is distilled in a different location from where the beer is made, but the companies that operate each site are wholly owned by the same holding company?

Decision

Yes. Regulation 2A of the Excise Regulations permits beer spirit that is subject to the Commissioner's control to be used in the manufacture of beer, when the spirit is distilled in a different location from where the beer is made, but the companies that operate each site are wholly owned by the same holding company.

Facts

An entity (the beer manufacturer) holds an excise manufacturer's licence that authorises the entity to manufacture beer.

The beer manufacturer uses beer spirit that is subject to the Commissioner's control in the manufacture of beer. Both the beer and beer spirit are excisable goods.

The beer spirit is supplied by a second entity (the beer spirit manufacturer) that distils the spirit from beer manufactured at its brewery. The beer spirit manufacturer also holds an excise manufacturer's licence that allows it to manufacture beer. Both the beer manufacturer and the beer spirit manufacturer are wholly owned by the same holding company.

Reason for Decision

Section 24 of the Excise Act 1901 allows excisable goods (or goods liable to Customs duty), while subject to the control of Customs or the Commissioner, to be used in the manufacture of other excisable goods:

•

in certain prescribed cases; and

•

where any prescribed conditions are met.

Regulation 2A of the Excise Regulations prescribes that:

(a)

the cases in which an excisable good is allowed to be used in the manufacture of another excisable good are specified in column 2 of Schedule 2 to the Excise Regulations, and

(b)

the conditions that apply in each case are set out in column 3 of Schedule 2 to the Excise Regulations.

Item 4 of Schedule 2 allows for spirit distilled from beer at a brewery to be used in the manufacture of beer, provided the conditions prescribed in Column 3 are met, namely:

•

the spirit is used in the manufacture of beer at the brewery at which the spirit was distilled, or

•

if the manufacturer of the spirit holds a brewery licence in respect of another brewery, the spirit is used in the manufacture of beer at that other brewery.

The first condition is not satisfied as the beer spirit is not distilled at the brewery where the beer is manufactured. Therefore, the beer spirit may only be added to the beer if the second condition is satisfied.

In determining whether the second condition is satisfied, the term 'brewery licence' is not defined in the regulations. However, within the Excise Act and Excise regulations, a reference to a licence is a reference to a licence issued under Part IV of the Excise Act allowing a person to undertake certain activities, including allowing a person to manufacture excisable goods.

Therefore, in the context of Schedule 2 to the Excise Regulations, a reference to a brewery licence is a reference to a licence to manufacture beer.

In this case, the beer spirit manufacturer holds an excise licence that permits it to manufacture beer at the premises where the beer spirit is made. Therefore, the beer spirit manufacturer holds a 'brewery licence'.

The beer manufacturer also holds a licence permitting them to manufacture beer at the beer manufacturer's premises. Therefore the beer manufacturer also holds a 'brewery licence'.

A strict interpretation of the second condition in item 4 of Schedule 2 of the Regulations requires the beer spirit manufacturer to hold the brewery licence in respect of the premises where the beer is manufactured. In this case, the brewery licence in relation to the premises where the beer is manufactured is held by a separate entity from the entity that manufactures the beer spirit.

However, in interpreting this provision, we are cognisant of the fact that Australia now has a number of large (and small) brewers which commonly have subsidiary companies. Rather than every licence being in the name of the ultimate holding company, each subsidiary company may have its own excise manufacturer's licence in respect of its particular premises. We also recognise that there may be efficiencies in producing different products at different locations and then blending them.

Given these factors, we consider that in determining whether the beer spirit manufacturer holds a brewery licence in regard to the premises where the beer is manufactured, we should apply a beneficial ownership and common control test. In this instance, the beer spirit manufacturer and the beer manufacturer have common ownership as they are both wholly owned by the same holding company. This in turn means that there is no doubt that the ultimate control of each entity rests with the parent company. Therefore, in effect, the beer spirit manufacturer is the holder of the brewery licence in relation to the premises where the beer is made.

As the second condition is satisfied, the beer manufacturer is permitted to use beer spirit that is subject to the Commissioner's control, in the manufacture of beer if the spirit is distilled in a different location from where the beer is made, but the companies that operate each site are wholly owned by the same holding company.

Legislative References:
Excise Act 1901
   section 24

Related ATO Interpretative Decisions
ATO ID 2005/328

Keywords
Beer
Beer excise
Excisable goods
Excise

Business Line:  Excise

Date of publication:  25 November 2005

ISSN: 1445-2782