ATO Interpretative Decision
ATO ID 2006/270
Excise
Excise implications of repackaging excise equivalent goods upon which customs duty has been paidFOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 process of repackaging imported tobacco products excise manufacture for the purposes of the Excise Act 1901?
Decision
No. The repackaging of imported tobacco products is not excise manufacture for the purposes of the Excise Act.
Facts
The entity imports tobacco goods in non-stick form which are equivalent to goods classifiable to the Schedule to the Excise Tariff Act 1921 (the Schedule).
Customs duty has been paid on the imported goods.
As the overseas packaging is poor, the entity would like to repackage the goods in Australia. The goods would not undergo any process in Australia other than repackaging. The tobacco will remain in non-stick form after its repackaging.
Reasons for Decision
Subsection 4(1) of the Excise Act defines the term 'manufacture' as follows
includes all processes in the manufacture of excisable goods...
Given the inclusive nature of this definition, and the absence of any further guide in relation to what constitutes manufacture from the point of view of the Excise Act, one must also consider the ordinary meaning of the term.
The Macquarie Dictionary , 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines the term manufacture as follows:
manufacture
...
noun
1. the making of goods or wares by manual labour or by machinery, especially on a large scale.
2. the making of anything.
3. the thing or material manufactured.
Putting the dictionary definition and the Excise Act definition together, 'manufacture' from the point of view of the Excise Act includes any process undertaken in making something.
The Schedule, following amendments which took effect on 1 July 2006, specifies only two rates of excise duty for tobacco products. The two rates (as at 1 July 2006) were as follow:
| 5 | Tobacco, cigars, cigarettes and snuff | |
| 5.1 | In stick form not exceeding in weight 0.8 grams per stick actual tobacco content | $0.23259 per stick |
| 5.5 | Other | $290.74 per kilogram of tobacco content |
In this instance the imported tobacco, if it had been manufactured in Australia, would have been classifiable to sub-item 5.5 of the tariff. Customs duty has been paid on this tobacco at a rate equivalent to the excise rate.
Accordingly, the client is importing a fully manufactured product upon which Customs duty has been paid at the full excise equivalent rate. Following its repackaging, the tobacco will not have changed in any way. It is the same product both prior to and after its repackaging.
Accordingly, the mere repackaging of imported tobacco, in the absence of any other process, does not constitute manufacture. This would not be the case however if the tobacco underwent any processes other than repackaging. For example, if the tobacco was cut and/or rolled, this would constitute a step in manufacture as the tobacco following the process(es) would be in a different form to the tobacco prior to the process(es). Accordingly, if duty paid pouch tobacco were used to make stick tobacco, this would constitute a step in excise manufacture.
In this instance the entity is importing tobacco products which are a finished product. The tobacco products are not undergoing any other process in Australia other than the process of repackaging which results in no change to the product. Therefore the process of repackaging does not constitute manufacture for the purposes of the Excise Act.
Date of decision: 19 September 2006
Legislative References:
Excise Tariff Act 1921
Schedule
subsection 4(1)
Case References:
McNicol and Anor v. Pinch
[1906] 2 KB 352
Other References:
The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW
Keywords
Excise
Tobacco products
Excisable goods
Manufacture
ISSN: 1445-2782
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