ATO Interpretative Decision

ATO ID 2006/75 (Withdrawn)

Excise

• This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.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.

Issue

Does the crushing of limestone, and the washing of the crushed limestone to remove clay impurities constitute operations for the recovery of minerals for the purposes of paragraph 11(1)(b) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

No. The crushing of limestone, and the washing of the crushed limestone to remove clay impurities do not constitute operations for the recovery of minerals for the purposes of subparagraph 11(1)(b) of the EGCSA.

Facts

A mining company quarries limestone and places it in stockpiles. The mining company quarries the limestone as a means of obtaining the mineral calcium carbonate which is the primary constituent of the limestone. The mining company uses the calcium carbonate (in the form of limestone) as an input in the manufacture of quicklime.

After extraction and stockpiling, the limestone is crushed and screened to remove unwanted materials and impurities. The limestone has to be crushed to a particular particle size to enable the limestone to be calcined as part of the manufacture of lime.

The crushed limestone is then sent to the washing plant, where washing is undertaken to remove further clay impurities which are detrimental to the final quality of quicklime.

It is accepted that the recovery of the mineral calcium carbonate (in the form of limestone) constitutes mining for minerals for the purposes of the EGCSA.

Reasons for Decision

Subsection 56(1) of the EGCSA provides that if an entity is entitled to an off-road credit, it is entitled to an energy grant.

Subsection 53(1) of the EGCSA provides that an entity is entitled to an off-road credit if it purchases off-road diesel fuel for a use by the entity that qualifies. Subsection 53(2) of the EGCSA provides that use in mining operations (otherwise than for the purpose of propelling any vehicle on a public road) is a use that qualifies.

The term 'mining operations' is relevantly defined in subsection 11(1) of the EGCSA to include:

...

(b)

operations for the recovery of minerals, being:

(i)

mining for those minerals including the recovery of salts by evaporation; or

(ii)

the beneficiation of those materials, or of ores bearing those minerals

...

In Chief Executive Officer of Customs v. Adelaide Brighton Cement Ltd [2004] FCAFC 183 (Adelaide Brighton) the court ruled that the recovery of the minerals sought, being minerals contained within limestone, ceases once the limestone has been extracted and stockpiled.

Given this, the crushing and washing of limestone does not constitute 'mining for those minerals' for the purposes of subparagraph 11(1)(b)(i) of the EGCSA.

The remaining issue to be determined is whether the crushing and washing of the limestone constitutes the beneficiation of the minerals contained within the limestone for the purposes of subparagraph 11(1)(b)(ii) of the EGCSA.

Beneficiation is a technical term applicable to a range of processes undertaken in the mining or metallurgical industries. It is used to describe a treatment to improve, upgrade or concentrate the quality of mineral bearing ore up to, but not including, the refining or final pyrometallurgical or hydrometallurgical process whereby metal is produced.

The meaning of the term 'beneficiation' was discussed in Abbott Point Bulk Coal Pty Ltd & Anor v. Collector of Customs (1992) 35 FCR 371 in the context of the former Diesel Fuel Rebate Scheme. It was determined that a point is reached where recovery of the mineral is complete and what is done thereafter is the use or processing of it for its better use as a mineral.

In this instance, the limestone has to be reduced to a particular particle size in order to prepare it for subsequent calcination in the manufacture of lime. Therefore the crushing represents the first stage in the manufacture of lime. It follows that operations for the recovery of minerals have ceased when the limestone is first stockpiled, and activities that occur after this point (including crushing and washing) are more properly considered manufacturing activities.

Although it is accepted that the washing of the crushed limestone is undertaken in order to remove clay impurities that would otherwise affect the limestone's suitability for lime manufacture, it is considered that this activity occurs after the commencement of manufacturing operations. Therefore the washing of the limestone is considered to be a manufacturing process rather than part of the mining and beneficiation of the desired minerals.

This principle is supported by subsection 11(5) of the EGCSA which states:

(5)

In determining whether a particular process to which a mineral, or ores bearing a mineral, are subjected constitutes beneficiation of that mineral or those ores, regard is to be had to the nature of the technical process involved but no regard is to be had to any market considerations that might affect the decision to subject that mineral or those ores to that process.

In this case the crushing and washing of the limestone are undertaken to facilitate the use of the limestone in lime manufacture and thus improve its marketability.

As the crushing and washing of the limestone occur in the course of manufacturing lime, they do not constitute operations for the recovery of minerals for the purposes of paragraph 11(1)(b) of the EGCSA.

Legislative References:
The Customs Act 1901
   Customs Act 1901

Case References:
Abbott Point Bulk Coal Pty Ltd & Anor v. Collector of Customs
   (1992) 35 FCR 371

Related Public Rulings (including Determinations)
Product Grants and Benefits Ruling PGBR 2005/2

Keywords
Diesel fuel rebate scheme
DFRS mining

Business Line:  Indirect Tax

Date of publication:  24 March 2006

ISSN: 1445-2782