BHP Petroleum Pty Ltd and Collector of Customs, Re

11 ALD 413
AAT No. 3194

---

Between: BHP Petroleum Pty Ltd
And: Collector of Customs

Tribunal:

Deputy President R D Nicholson
C G Woodard (Member)

Subject References:
Customs and excise
Rebate of diesel fuel duty
Movement of drilling ship between exploration permits
Whether included within meaning of exploration
Whether an operation connected with exploration
Whether carried out in a place adjacent to exploration area
'Exploration'
'Operations connected with exploration, prospecting or mining'
'Place adjacent to'

Legislative References:
(CTH) Customs Act 1901 - s 164 (1); s 164 (7)
(CTH) Excise Act 1901 - s 78A(1); s 78A(7)

Hearing date: 26, 27 August 1986 - Melbourne
Decision date: 21 January 1987

Perth

---

The applicant held two exploration permits situated some 1400 km apart off the Western Australian coast. The applicant's drilling ship, after completing exploratory drilling in one of these areas, sailed to the other where it undertook further exploratory drilling. The Collector rejected the applicant's claim for a rebate of the duty paid on the diesel fuel expended by the ship on this voyage under s 164 of the Customs Act. That section provides:

164(1)

A rebate is, subject to sub-sections (2) and (3) and to such conditions and restrictions as are prescribed (being conditions and restrictions that relate to goods generally, to goods included in a class of goods that includes diesel fuel or to diesel fuel only), payable to a person who purchases diesel fuel, being diesel fuel upon which duty has been paid, for use by him-

(a)

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

...

Mining operations means -

(a)

exploration, prospecting or mining for minerals; or

(b)

the dressing or beneficiation (at the mining site or elsewhere) of minerals, or ores bearing minerals, as an integral part of operations for their recovery,

and includes -

(c)

other operations connected with exploration, prospecting or mining for minerals that are carried out in, or at a place adjacent to, the area in which the exploration, prospecting or mining occurs.

During the course of the voyage, some of the drilling crew left the ship while others were engaged in necessary maintenance and other work preparatory to the exploration in the second area. Evidence was given that the voyage formed part of a single exploration programme which was organised to ensure the most cost-effective use of the drilling ship over the largest number of sites. It was also common practice in the industry to include within the costs of the exploration the costs of transporting the drilling aparatus to the site.

Held:

(i)

"Exploration" is not a word with a technical or special meaning within the off-shore drilling industry and it is to be interpreted according to its ordinary meaning.

(ii)

Exploration is limited to the actual process of searching and does not involve transporting the exploration equipment to the site and work preparatory to the exploration carried out on the way.

(iii)

The phrase "in connection with exploration" should not be narrowly construed to cover only operations which are directly associated with exploration but more widely to include operations which are bound up with or involved in it.

Re Cliffs Robe River Iron Associates and Collector of Customs (1984) 6 ALN N255, followed.

(iv)

A place is adjacent to an area of exploration where it is close or near to that area, but it need not be continguous with the area.

FCT v BHP Minerals Ltd (1983) 51 ALR 166 , followed.

(v)

The whole of the other operations connected with exploration must occur in a place adjacent to that exploration to attract any rebate of the duty paid in respect of those operations.

(vi)

The voyage of the applicant's drilling ship was an operation connected with exploration but the distance between the two exploration sites meant that they could not be considered as a single area of exploration or that the voyage was adjacent to both areas. Accordingly, the decision under review should be affirmed.