ADMINISTRATIVE APPEALS TRIBUNAL - GENERAL ADMINISTRATIVE DIVISION

[2004] AATA 222

Re Port of Brisbane Corporation and Deputy Commissioner of Taxation

R P Handley, Deputy President

3 March 2004 - Sydney

R P Handley, Deputy President The applicant, the Port of Brisbane Corporation (the Corporation), carries out dredging operations from its base at Fisherman Islands in the Port of Brisbane and in other ports and waterways using a trailer suction hopper dredge, a cutter suction dredge and a grab dredge. The Corporation claimed a diesel fuel rebate in relation to the use, application and operations of the dredges for the financial years ending 30 June 2001, 2002 and 2003.

2 The respondent, the Deputy Commissioner of Taxation, states that the Corporation's dredging operations do not constitute "marine transport" as defined in the Customs Act 1901 (Cth) and the Excise Act 1901 (Cth). The respondent therefore refused the Corporation's claims under the Diesel Fuel Rebate Scheme for the 2001, 2002 and 2003 financial years.

3 This matter involves 4 applications relating to the respondent's refusal to accept the Corporation's claims:

(a) File No N2002/1245 - a decision made on 27 June 2002 affirming a decision of 1 March 2002 disallowing the Corporation's claim for diesel fuel rebate for diesel fuel used to power the hull of the dredges and day-to-day activities of the dredges under the Excise Act 1901 (Cth) or Customs Act 1901 (Cth) for the financial year ending 30 June 2001.

(b) File No N2002/1247 - a decision made on 27 June 2002 affirming a decision of 1 March 2002 disallowing the Corporation's claim for diesel fuel rebate for diesel fuel used to power the hull of the dredges and day-to-day activities of the dredges under the Excise Act 1901 (Cth) or Customs Act 1901 (Cth) for the financial year ending 30 June 2002.

(c) File No N2002/358 - a decision made on 3 February 2003 affirming a decision of 8 November 2002 disallowing the Corporation's claim for diesel fuel rebate for diesel fuel used in the cutter suction dredge the "Amity" and the grab dredge the "Ken Harvey" under the Excise Act 1901 (Cth) or Customs Act 1901 (Cth) for the financial year ending 30 June 2003.

(d) File No N2003/359 - a decision made on 27 February 2003 affirming a decision of 13 December 2002 disallowing the Corporation's claim for diesel fuel rebate for diesel fuel used in the trailer suction hopper dredges the "SD Brisbane" and "Sir Thomas Hiley" under the Excise Act 1901 (Cth) or Customs Act 1901 (Cth) for the financial year ending 30 June 2002.

The facts

4 The facts giving rise to the matter are not in dispute. The Corporation, a State Government owned corporation established in 1994, is responsible for the operation and management of the Port of Brisbane. The Corporation's activities include the dredging of the navigation channels in the Port of Brisbane and other ports and waterways to remove sand, silt and other "spoil" to ensure the efficient movement of ships and cargo. The spoil is either carried away by the dredging vehicle or pumped ashore through pipes. The Corporation maintains a fleet of dredges of varying configurations to carry out this dredging.

5 In carrying out its operations, the Corporation employed the use of the following diesel fuel powered dredges:

(a) The "SD Brisbane", a trailer suction hopper dredge, which is a self-propelled, crewed vessel 84 metres long and 16 metres wide which travels to the dredging site, and then deploys 2 drag arms that trail behind the vessel along the seabed. A vacuum pump sucks the spoil from the seabed into a hopper in the hold of the vessel. The water is then drained from the spoil. When the hopper is full, the vessel transports the spoil to a disposal site where it is either dumped through hydraulically operated valves in the bottom of the hopper or pumped ashore through long floating hoses. Diesel fuel powers the propulsion, pumping and other mechanical activities of the vessel. The "Brisbane" is best suited to dredging long straight channels.

(b) The "Sir Thomas Hiley", a trailer suction hopper dredge of the kind described in (a) above. This vessel was used by the Corporation until approximately November 2000, when it was replaced by the "SD Brisbane".

(c) The "Amity", a cutter suction dredge, which is a non-propelled barge 72 metres long and 14 metres wide with a cutter arm extending to the seabed. The arm rotates, cutting the seabed, and the displaced spoil is sucked up by a vacuum pump and pumped ashore using a floating hose and pipes. The hose or pipe is directed to a dumping area on nearby land under reclamation. The barge moves through the area being dredged using a system of anchors and winches together with hydraulic "spuds", steel pylons that rest on the seabed. Diesel fuel powers the cutter arm, pumps and other mechanical equipment. Because of its heavy duty metal cutter, the "Amity" is used for dredging large areas of more compacted material such as berth pockets or the areas in front of wharfs.

(d) The "Juno", a cutter suction dredge of the kind described in (c) above, which was used by the Corporation until around July 2001, when it was replaced by the "Amity".

(e) The "Ken Harvey", a grab dredge, which is a non-propelled barge 22 metres long and 9 metres wide that uses a grab bucket fitted to a crane to grab and lift spoil from the seabed and deposit it in a separate hopper barge moored alongside. When full, the hopper barge is towed to a disposal site and emptied by dumping the spoil through hydraulic opening doors in the bottom of the barge. The barge moves through the area being dredged using a system of anchors and winches. Diesel fuel powers the crane and grab bucket, the winches and other mechanical equipment.

6 On 26 October 2001, the Corporation lodged a Diesel Fuel Rebate Scheme registration and initial application form with the Australian Taxation Office (the ATO) in respect of the financial year ending 30 June 2001. This involved a claim relating to dredging activities carried out by the dredges "SD Brisbane" and "Sir Thomas Hiley", including the marine transportation of spoil between dredging and dumping sites in Queensland ports, for a rebate on 2,990,293 litres of diesel fuel.

7 On 1 March 2002, the ATO informed the Corporation that their claim for a rebate had been disallowed because the operations of a dredge were not characterised as "marine transport" as defined in s 164(7) of the Customs Act 1901 (Cth). Therefore the diesel fuel used by the dredges was not eligible for a rebate.

8 A further application for the financial year ending 30 June 2002 was also lodged by the Corporation, claiming the diesel fuel rebate for the same activities and fuel consumption as claimed for the 2001 financial year. This application was also subsequently refused by the ATO.

9 On 3 May 2002, the Corporation lodged an objection to the original decision of 1 March 2002. On 27 June 2002, a delegate of the ATO affirmed the decisions made in respect of the claims for both the 2001 and 2002 financial years. On 23 August 2002, the Corporation lodged 2 applications for review of these decisions by the tribunal (financial year 2001 - designated file N2002/1245 and financial year 2002 - designated file N2002/1247).

10 On 6 December 2002, a further Diesel Fuel Rebate Scheme registration and initial application form was lodged by the Corporation in respect of the financial year ending 30 June 2002. This application claimed a rebate for 1,656,827 litres of diesel fuel used in its dredging operations in respect of the dredges "SD Brisbane" and "Sir Thomas Hiley". These operations included powering the material extraction pumps (loading spoil into the vessel) and pump ashore pumps (unloading spoil from the vessel). On 13 December 2002, a delegate of the ATO refused the application on the basis that the dredging activities did not fall within the definition of "marine transport" and the diesel fuel used was not eligible for rebate. On 2 January 2003, the Corporation lodged a notice of objection to this decision, which was affirmed by a delegate of the ATO on 27 February 2003. On 3 March 2003, the Corporation lodged an application for a review of this decision by the tribunal (designated file N2003/359).

11 On 20 October 2002, the Corporation lodged a Diesel Fuel Rebate Scheme registration and initial application form in respect of the financial year ending 30 June 2003. This application claimed a rebate in respect of 6,490 litres of diesel fuel used in marine transport activities undertaken by the dredges "Amity" and "Ken Harvey". On 8 November 2002, the ATO refused this application on the basis that the activities of the dredges did not fall within the definition of "marine transport". By letter dated 6 December 2002, the Corporation lodged a notice of objection to this decision, which was affirmed by a delegate of the ATO on 3 February 2003. On 3 March 2003, the Corporation lodged an application for a review of this decision by the tribunal (designated file N2003/358).

12 At the hearing, the Corporation was represented by Alan Robertson, Senior Counsel, instructed by Ernst Young Law, and the respondent was represented by Stephen Lloyd, of Counsel, instructed by the Australian Taxation Office. The evidence before the tribunal comprised the documents produced pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Cth) (the T-documents) together with the documents tendered by the parties at the hearing. Mr Arie Geelhoed, the dredging operations manager for the Corporation, provided a statement dated 11 August 2003 (A1) and gave oral evidence for the applicant.

Relevant legislation and policy

13 The relevant legislation is the Customs Act 1901 (Cth) and the Excise Act 1901 (Cth). Section 164 of the Customs Act 1901 (Cth) allows for a rebate of duty in respect of diesel fuel if it is used for certain purposes, including in "marine transport". Section 164(1) states a rebate is payable to a person who purchases diesel fuel for use by the person in a range of activities including:

(ac) in marine transport (other than for the purpose of propelling a road vehicle on a public road) in the course of carrying on an enterprise.

Section 164(7) of the Customs Act 1901 (Cth) defines "marine transport" as follows:

marine transport includes transport by vessels in or on fresh water, but does not include any transport relating to forestry.

14 Section 78A(1) of the Excise Act 1901 (Cth) also provides for the payment of a rebate to a person who purchases diesel fuel for certain purposes including:

(ac) in marine transport (otherwise than for the purpose of propelling a road vehicle on a public road) in the course of carrying on an enterprise.

Section 78A(7) states that in this section "marine transport" has the same meaning as in s 164(7) of the Customs Act 1901 (Cth). Section 78A(1AB) states that rebates are not payable for fuel purchased after 1 July 2003. From that date, relevant provisions of the Energy Grants (Credits) Scheme Act 2003 (Cth) applied.

15 The Diesel Fuel Rebate Scheme established by relevant sections of the Customs Act 1901 (Cth) and the Excise Act 1901 (Cth) provides that a rebate is payable in respect of diesel fuel purchased for certain uses, subject to certain conditions and restrictions. On 30 June 2000, the ATO issued an Excise Bulletin EB2000/3 "Diesel Fuel Rebate Scheme" which explained an extension of the scheme to include diesel fuel used in marine transport and in rail transport. The bulletin states:

The Excise Act 1901 (Cth) and the Customs Act 1901 (Cth) allow for a rebate of excise or customs duty that has been paid on diesel fuel purchased for use in certain eligible activities.

Traditionally these eligible activities have been confined to:
• agriculture;

• fishing;

• forestry;

• mining;

• residential premises;

• hospitals;

• nursing and aged persons homes; and

• other medical institutions.

The scheme has been extended so that from 1 July 2000, diesel purchased for use in:
(a) marine transport (otherwise than for the purpose of propelling a road vehicle on a public road) in the course of carrying on an enterprise; and

…
(b) in rail transport (otherwise than for the purpose of propelling a road vehicle on a public road) in the course of carrying on an enterprise;

will also be eligible.

This bulletin explains the scope and coverage of "marine transport" and "rail transport" and some common eligibility requirements that relate to these two new rebate categories.

What is meant by marine transport?

The expression "marine transport" includes transport by vessels in or on fresh water, but does not include any transport relating to forestry.

The following uses of diesel fuel are eligible for rebate:
(a) in vessels for the transport of goods or passengers, whether or not on scheduled services;

(b) in vessels carrying out activities connected with marine transport (including the forward journey of a vessel with a view to undertaking transport activities or the return journey after the transport activities have been carried out);

(c) in vessels providing towing, mooring and piloting services;

(d) in vessels carrying out sea or surf rescue operations, firefighting and other emergency services;

(e) in vessels engaged in the exploration or mining of oil or natural gas or other minerals;

(f) in hire or charter vessels, operated by a tourism business, for fishing or other recreational activities;

(g) in sea trials or delivery of marine transport vessels;

(h) in vessels engaged in marine or other scientific research; or

(i) in vessels for their day-to-day operations (including air conditioning, heating or lighting).

The following uses of diesel fuel are not eligible for rebate:
(a) the production or manufacture of goods (including vessels);

(b) the movement, handling, storage, loading or unloading of goods before or after marine transportation;

(c) the transport of passengers before or after travel by vessels;

(d) planning, development or construction of waterways, ports, docks, freight terminals, marinas or similar facilities or infrastructure;

(e) the supply of goods or services (including fuels) to vessels by means other than marine transport;

(f) operations of a dredge; or

(g) recreational activities not in the course of carrying on an enterprise.

Common Eligibility Requirements
1. Diesel fuel purchased on or after 1 July 2000 for use in "marine transport" or "rail transport" is eligible for rebate.

2. Rebate is payable at the same rate that applies in the category of "primary production".

3. A claimant who is entitled to rebate in more than one category is entitled to the highest applicable rate of rebate.

4. To be entitled to rebate the claimant must be the purchaser as well as the user of the fuel.

16 The tribunal assumes the Excise Bulletin constitutes departmental policy. The tribunal notes that in the case of relevant policy of a government department or agency, in the absence of a statutory obligation to do so, the tribunal will ordinarily apply that policy unless it is unlawful or its application would cause injustice, or there are other cogent reasons for not applying it in the circumstances of the particular case: Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 645.

The issue

18 The facts sets out above are not in dispute. At issue is whether the activities of the trailer section hopper dredge, the cutter suction dredge and the grab dredge constitute "marine transport" as defined in s 164(7) of the Customs Act 1901 (Cth), thereby entitling the Corporation to a rebate for the excise or customs duty paid in respect of the diesel fuel used in those activities. The parties agreed that if the tribunal found any of the relevant activities to constitute "use in … marine transport", then it should remit the matter to the respondent to calculate the diesel fuel rebate payable.

19 Essentially, therefore, the question to be determined by the tribunal is one of statutory interpretation. How is the expression "use in … marine transport" to be interpreted? Does it include the relevant activities of the Corporation's dredges?

20 During the course of the pre-hearing exchange of documents, the respondent conceded that:

Diesel fuel used in the propulsion of the trailer suction hopper dredge from the site of dredging to the designated disposal site for the removal of the dredged materials would be characterised as use in marine transport, as defined in the Excise Act 1901 (Cth) and the Customs Act 1901 (Cth).

21 In written submissions provided at the hearing, the respondent also conceded that the Corporation is entitled to a rebate in respect of diesel used to power a self-propelled dredge from the dock to the point of dredging and back to the dock once the dredging and removal of the spoil has been completed, and also diesel used to power a self-propelled dredge from one port to another. In both cases, this includes diesel used to run non-dredging equipment while the dredge is in transit.

22 Thus, the issue to be determined was narrowed to whether the use of diesel while a dredge is engaged in dredging processes can properly be characterised as use in marine transport. If the answer to this question is "No", then diesel fuel powering the pumps, winches and other on-board equipment used to extract spoil from the seabed, transfer spoil to the vessel and dispose of spoil from the vessel would be excluded. Thus, the entirety of the operations of the cutter suction dredges and the grab dredges would be excluded, and the operations of the trailer suction hopper dredges involving the actual dredging process.

Discussion

23 The Corporation submits that the legislation should be construed beneficially rather than restrictively. As Senior Member Dwyer recognised in Re Riviera Nautic Pty Ltd and Commissioner of Taxation (2002) 50 ATR 1106 at 1118; 68 ALD 581 at 593:

In this matter, the legislation is concerned with a diesel fuel rebate which is similar to an exemption or beneficial rate of sales tax. The purpose is accepted as being to encourage the use of diesel fuel for off road activities. There is nothing which requires a narrow construction of the provisions entitling a person to a diesel fuel rebate.

24 With regard to the use of the word "in" in the phrase "use in … marine transport", the Corporation referred the tribunal to the decision in Chief Executive Officer of Customs v Dyno Wesfarmers Ltd (1997) 73 FCR 1. There, the Full Federal Court considered that a similar use of the word "in" in the phrase "in mining operations" did not limit the allowable operations to a particular site. Thus, fuel used by mobile manufacturing units in travelling to and from the mining site was eligible for payment of a rebate. The court said (at 5) that the preposition "in" was used to connect the person using the fuel with the term "mining operations":

The Shorter Oxford English Dictionary used the expression "in the process or act of" to express the meaning of the word "in" in such a context.

The Corporation urged the tribunal to adopt a similar approach here.

25 The Corporation submitted that the overall objective of the dredging operations is to maintain navigable channels in the Port of Brisbane and elsewhere. The Corporation drew an analogy with the use of diesel in the repair and maintenance of railway tracks which the same Excise Bulletin accepts is eligible for the diesel fuel rebate because the diesel is used in rail transport. The new legislation, the Energy Grants (Credits) Scheme Act 2003 (Cth), which took effect on 1 July 2003, expressly excludes from the meaning of "use in … marine transport" "any use in a dredge or in equipment in or on a dredge" (s 36(7)). The Corporation suggested one could draw an inference from the inclusion of this provision in the new legislation that there was no such exclusion for dredging in the relevant provisions of the Customs Act 1901 (Cth) and the Excise Act 1901 (Cth).

26 Alternatively, the Corporation submitted that one could focus on the spoil extracted by dredging being transported from the seabed to the disposal site. The pumping and winching operations of the dredges effect the transport of the spoil from the seabed to the vessel and from the vessel to the disposal site. The purpose of the dredging operations is to move the spoil elsewhere. Moreover, the definition of "marine transport" in s 164(7) states that the term "includes transport by vessels in or on fresh water" indicating that marine transport does not necessarily involve a vessel: it is not an exclusive definition. Thus, fuel used in those operations is used in conveying materials by water. The Corporation also noted that the definition of "use in … marine transport" in the Energy Grants (Credits) Scheme Act 2003 (Cth) includes loading anything onto a vessel for the purpose of its being transported by the vessel and, similarly, unloading after being transported (s 36(4)).

27 The respondent submitted that the term "marine transport" should be construed according its ordinary English usage. "Transport" involves the carrying or conveying of a thing or person. The adjective "marine" is used in relation to the use of the sea for navigation or shipping. Thus submissions, para 12:

"marine transport" ordinarily refers to the act of carrying or conveying persons and things by methods relating to the commercial use of the sea, such as by use of ships and other vessels.

28 The respondent said one needs to look at the purpose for which the diesel is used and, for example, the nature of the machinery whose operation it fuels. In this case, the diesel was used to power cutting and grabbing equipment to dislodge spoil from the seabed, and to power pumps and hydraulics to remove the spoil from the seabed and deposit it in the barge or pump it ashore. The respondent submitted this is not conveying persons or things by vessel.

29 Thus, the respondent contended, while the use of diesel in the propulsion of a vessel will generally fall within the notion of "marine transport", the Corporation needs to apportion the diesel used by the trailer suction hopper dredges to exclude that used in the process of dredging.

30 With regard to the meaning of the word "in", while agreeing that this means "in the process or act of", the respondent contended this does not mean that all activities designed to facilitate marine transport are included. The respondent rejected the analogy with rail transport and the repair and maintenance of railway tracks. Dredging activities facilitate not only marine transport but also the use of leisure craft. Moreover, dredging produces a useful by-product, the spoil which can be used for land reclamation.

The tribunal's reasoning

31 The tribunal agrees with the parties that the phrase "use in … marine transport" should be accorded its ordinary and natural meaning. In this context, the normal association of "marine" with the sea is extended by the definition of "marine transport" in s 164(7) to include freshwater. That same definition, which "includes transport by vessels in or on freshwater", while not an exhaustive definition because it is extending the ordinary meaning of "marine" to include an association not only with seawater but also with freshwater, nevertheless refers to transport by vessels.

32 In the tribunal's opinion, the ordinary meaning of "marine transport" does not include the conveying of things via a pipe that is in, ie passes through, water or floats on water. Otherwise, one can foresee it might be argued that the pumping of natural gas or oil from an off-shore drilling rig to shore via a pipeline could constitute "marine transport". In the tribunal's opinion, the key to the meaning of "marine transport" lies in the meaning of the word "transport". The Concise Macquarie Dictionary, 3rd ed, (1988) lists as the sixth meaning of transport:

6. a means of transporting, as a ship, truck or plane used for transporting soldiers or miliary stores, or convicts.

The first meaning of transport in the Oxford English Dictionary is:

1. the action of carrying or conveying a thing or person from one place to another, conveyance.

The use of the word "transport" in the phrase "marine transport" suggests a conveyance - something which does the conveying - a vehicle or vessel or aircraft which moves through its particular medium (land, water, air) carrying a thing or person. The medium in this case is, of course, water. Thus, in the tribunal's opinion, "marine transport" should in this instance be interpreted as meaning the act of conveying a thing or a person from one place to another through or over water using some kind of vessel or vehicle.

33 The parties agree and the tribunal accepts that the word "in" in this context means "in the process or act of". On the one hand, the Corporation contended that diesel used to power dredging operations was being used to facilitate marine transport by maintaining navigable channels and was therefore used in the process of marine transport. On the other hand, the respondent contended that the process of marine transport does not include activities designed to facilitate marine transport.

34 The tribunal agrees with the latter view. For diesel to be used in the process or act of marine transport, the use must be associated with the conveying of a thing or person from one place to another through or over water using some kind of vessel or vehicle. To break the link with conveying using a vessel or vehicle would, in the tribunal's view, extend the meaning of the phrase beyond its ordinary or natural meaning even when construed beneficially.

35 Thus the tribunal agrees, as the respondent has conceded, that diesel used by the Corporation in powering the self-propelled trailer suction dredges in travelling to and from dredging operations or dump sites or used in towing the cutter suction or grab dredges to and from the dredging operations or dump sites should be considered as being used in marine transport because the diesel is being used to power a vessel conveying dredging machinery or the spoil generated by the dredging activities from one place to another. However, diesel used in powering dredging activities where there is no conveying by a vessel involved, is not used in marine transport so as to attract a fuel rebate.

36 The tribunal therefore varies the decisions under review by determining that diesel fuel:

(a) used by the self-propelled trailer suction dredges in travelling to and from dredging operations or dump sites; and

(b) used to tow the cutter suction or grab dredges to and from dredging operations or dumpsites;

is used by the Corporation in marine transport for the purposes of s 164(1) of the Customs Act 1901 (Cth) and s 78A(1) of the Excise Act 1901 (Cth) so that a rebate of duty is payable.