ATO Interpretative Decision

ATO ID 2006/56

Excise

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

Issue

Is the sawing of logs into flitches prior to slicing the flitches to produce veneer the milling of timber at a sawmill for the purposes of paragraph 35(d) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes, the sawing of logs into flitches prior to slicing the flitches to produce veneer is the milling of timber at a sawmill for the purposes of paragraph 35(d) of the EGCSA.

Facts

An entity transports logs from a forest or plantation to its veneer slicing plant.

In a dedicated area of the plant, the logs are sawn with circular saws into flitches suitable for mounting on the veneer slicing lathe. The flitches are then soaked in vats prior to the veneer slicing process.

Reasons for Decision

In Product Grant and Benefit Ruling PGBR 2005/1, a 'sawmill' is described at paragraph 163 as a mill 'in which the sawing of timber is the main or predominant process'. The expression 'main or predominant process' was used by the Administrative Appeals Tribunal in Brymay Forests Pty Ltd and Collector of Customs (Vic), Re (1985) 9 ALN N177 (Brymay).

In Brymay, the Tribunal considered a claim for the diesel fuel rebate at a plant that manufactured blank 'splints' (shafts) for safety matches. The Tribunal stated:

If all the processes carried out at the Yarrawonga mill are properly seen as conducted within a single integrated factory unit, we do not think there can be any doubt that the mill, as a whole, is most aptly described as a splint plant or mill. The predominant function of the mill is to produce splints. Except in the production of billets, that function is not performed by means of saws. The sawing of timber is merely an ancillary process, preparatory to the main splint manufacturing processes that follow. On that finding, the applicant's claim would have to fail.

However, the evidence in this case establishes that the debarking and sawing operations are conducted in an area external to the main factory, albeit under an extension of the factory roof line. These processes, as earlier noted, constitute the milling of timber. They are processes which, if conducted in a completely separate building on the same site, would be such as, in our view, to characterise that building as a sawmill.

Taking into account the beneficial nature of the diesel fuel rebate legislation and statements that it should be read in a practical, commonsense manner (Re Central Norseman Gold Corporation Limited and Collector of Customs (WA) (1985) ALN N288) and construed beneficially rather than restrictively (Collector of Customs v. Cliffs Robe River Iron Associates (1985) 7 ALN N269a; (1985) 7 FCR 271), the Tribunal found that the term 'sawmill' included the annex to the splint making plant.

We consider that the same principles apply in interpreting the definition of 'forestry' in section 35 of the EGCSA, which replicates the definition in subsection 164(7) of the Customs Act 1901 for the diesel fuel rebate scheme. See also PGBR 2005/1, paragraph 81.

The facts in the present case are similar to those in Brymay. Logs are sawn into flitches in a separate area of the veneer production plant. That dedicated part of the plant carries out the same operations as a typical sawmill. It is appropriate therefore to characterise that part of the plant as a sawmill on the same basis as in Brymay.

The sawing of logs into flitches in preparation for veneer slicing is therefore the milling of timber at a sawmill, for the purposes of paragraph 35(d) of the EGCSA.

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 35
   paragraph 35(d)

Case References:
Brymay Forests Pty Ltd and Collector of Customs, Victoria, Re
   (1985) ALN N177
   [1985] AATA 2496

Related Public Rulings (including Determinations)
Product Grants and Benefits Ruling PGBR 2005/1

Related ATO Interpretative Decisions
ATO ID 2006/54
ATO ID 2006/55

Keywords
EGCS forestry
EGCS milling
EGCS off-road
Energy grants (credits) scheme

Business Line:  Excise

Date of publication:  24 February 2006

ISSN: 1445-2782