French Island Barge Pty Ltd and: Collector of Customs, Re:

AAT No. 8625

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(Decision by: B.M. Forrest (Deputy President), D. Elsum (Member), W. McLean (Member))

Between: French Island Barge Pty Ltd
And: Collector of Customs

Tribunal:

B.M. Forrest (Deputy President)
D. Elsum (Member)
W. McLean (Member)

Subject References:
Customs

Decision date: 17 February 1993

Melbourne

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Decision by:
B.M. Forrest (Deputy President)
D. Elsum (Member)
W. McLean (Member)

This is an application for review of a decision of a delegate of the respondent refusing to pay a claim for diesel fuel rebate in respect of diesel fuel used by the applicant in the operation of the French Island barge. In refusing the claim, the decision maker considered the barge was carrying out activities which were not connected with agriculture and therefore ineligible for rebate.

2. The claim is made under s.78A of the Excise Act 1901, which is in similar terms to s.164 of the Customs Act 1901. Section 164 relevantly reads:

"Section 164

(1)

A rebate is...payable to a person who purchases diesel fuel for use by him;

(a)

...

(aa)

in primary production (otherwise than for the purpose of propelling a road vehicle on a public road);

...

Both "agriculture" and "primary production" are defined in sub-section s.(7)

(7)

In this section "agriculture" means:

(a)

the cultivation of the soil;

(b)

the cultivation or gathering in of crops; or

(c)

the rearing of live-stock

and includes

(d)

viticulture, horticulture, pasturage or apiculture;

(e)

hunting or trapping carried on for the purpose of a business; or

(f)

other operations (including operations by way of pest or disease control or by way of soil or water conservation) connected with any operations referred to in paragraph ...(c)...

"primary production" means

(a)

agriculture

(b)

fishing operations; or

(c)

forestry;"

3. The facts are not in dispute. The applicant, which is the corporate entity of a consortium of French Island farmers, owns the barge operating between French Island in Western Port Bay and Corinella on the mainland. The barge has a certificate issued by the Marine Board of Victoria permitting it to carry general cargo, livestock and motor vehicles with a maximum of six passengers and two crew. Livestock are transported, enclosed in livestock trucks on the barge, to and from French Island. The barge is also used to carry farming equipment and supplies and general cargo for the farmers and residents of French Island. Visitors vehicles are also carried from time to time. French Island is also served by a passenger ferry which operates from Stony Point on the mainland.

4. During the course of the hearing, the Tribunal was informed that the parties had reached agreement on the matters in dispute, save for when diesel fuel is used for the transportation of livestock from French Island to the mainland for sale. The only question remaining for determination is whether the transportation of livestock in these circumstances is on the proper construction of s.164(7) connected with the rearing of livestock. If so, then the applicant is entitled to a diesel fuel rebate.

5. It was contended on behalf of the applicant that the transportation of livestock from French Island to the mainland was an operation sufficiently connected with the rearing of livestock for it to fall within the meaning of primary production. The respondent made the contrary contention that the rearing of livestock had then ceased.

6. Mr Molloy, a farmer on French Island and a member of the consortium owning the barge, represented the applicant, Mr Williams, a departmental officer, represented the respondent. Mr Molloy stressed the essentiality of a barge for livestock production on French Island. Without it, it was submitted, it would be impossible to raise livestock on French Island, as the barge is the only means of stock transportation. Mr Molloy was in fact saying that primary production should be considered in the broad sense of the term, to include all activities involved in primary production.

7. Both the applicant and respondent relied on Australian National Railways Commission v Collector of Customs (SA) (1985) 8 FCR 264 . In that case a rebate was claimed for the carriage of livestock in the following circumstances:

"1.

Carriage away from an area the subject of a programme for the eradication of tuberculosis or brucellosis.

2.

Carriage for re-stocking purposes after the carrying out of such a programme.

3.

Carriage from an area in which the livestock are bought in store condition to another area for the purpose of enabling them to gain body weight preparatory to sale for slaughter.

4.

Carriage from an area subject to drought for agistment in another area which is presumably not subject to drought."

8. The Federal Court, Sheppard and Burchett JJ and in a separate judgment, Davies J, found each of these circumstances connected with the rearing of livestock. Significantly in that case, no claim for rebate was made in respect of the transportation of livestock to an abattoir or a slaughtering point or in respect of transportation to a port for export.

9. The applicant sought to rely on a passage in the judgment of Davies J in National Railways, when His Honour said at 269:

"The fact that transportation is specifically included in the definitions of "forestry" and "mining operations" does not lead to the conclusion that transportation is not within the definition of agriculture. Transportation which occurs as part of the processes undertaken in the course of the rearing of livestock or in the course of other operations connected therewith falls within the ambit of "agriculture" as defined."

10. It was quite properly conceded by the respondent during the hearing that fuel used in the transportation of livestock from French Island to the mainland for the purpose of agistment on better pasture whether in times of drought or otherwise, is for a purpose connected with the rearing of livestock. However, it seems to us on the authority of National Railways that transportation from the farm for sale or slaughter would not qualify for rebate.

11. In Pozzolanic Enterprises Pty Ltd v Collector of Customs (unreported Federal Court judgment 30 November 1992) Drummond J allowed an appeal from a decision of the Tribunal affirming the decision of the Collector of Customs. In that case, no claim for rebate was made in respect of fuel used by the applicant's trucks in carting the feed from the feed mill to the unloading point adjacent to the receiving bin on the farm - the claim was confined to that part of the diesel fuel which is used in unloading the stock feed into receiving bins on the farm. As Drummond J pointed out, in determining whether a particular activity falls within the definition of primary production:

"... "a common-sense and commercial approach has to be taken to the question having regard to the evident purpose of the legislation" to make rebates available to encourage and assist primary production in Australia: cf. Abbott Point Bulk Coal Pty Ltd v Collector of Customs (1992) 15 AAR 365 at 372. Given that this is the legislative policy, the relevant provision "should not be given a narrow application": Collector of Customs v Cliffs Robe River Iron Associates (1985) 7 FCR 271 at 275. The expression "connected with" in s.164(7) is "... both wide and imprecise."

12. In Impast Pty Ltd and Collector of Customs (unreported decision) No. 8355, the Tribunal had to consider whether the applicant's operations in fellmongering sheep skins were connected with the rearing of livestock.

13. In deciding against the applicant, the Tribunal found that the fellmongering is not a part of, or connected with, the rearing of the sheep. Although not having to decide the precise point in issue in the present case, the Tribunal in Impast commented:

"...the process of transporting the live sheep to the abattoirs is no longer part of the process of, or connected with, the rearing of the livestock."

14. In the instant case, we are satisfied the diesel fuel used to power the barge when livestock are being transported from French Island to the mainland to be sold, is not connected with the rearing of livestock. The rearing of the livestock has finished when they leave the farm for sale. Transportation for that purpose is an 'off farm' cost associated with selling livestock, not rearing of livestock.

15. The Tribunal is mindful of the requirement to apply a common sense and commercial approach to the legislation. If it had been the intent of the legislature that diesel fuel used in the transport of livestock to markets was to attract a rebate, it would have been a straightforward matter to broaden the definition of "agriculture" in s.164(7) to be included within the definition of primary production. In our opinion, the plain meaning of the language used precludes acceptance of the contention advanced by the applicant.