ATO Interpretative Decision

ATO ID 2011/61 (Withdrawn)

Excise

• This ATO ID is withdrawn as it is a restatement of the law and does not contain an interpretative decision.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

What is the meaning of 'tobacco content' for the purposes of Item 5 of the Schedule to the Excise Tariff Act 1921 (Excise Tariff Act)?

Decision

Tobacco content includes any thing (including moisture) added to the tobacco leaf during manufacturing or processing. Tobacco content is a reference to the total weight of the tobacco product.

Facts

An entity is a licensed manufacturer of tobacco products, namely molasses tobacco.

During the manufacturing process, the entity adds ingredients such as molasses to tobacco leaf.

Reasons for Decision

Section 5 of the Excise Tariff Act imposes excise duty on goods listed in the Schedule that are manufactured or produced in Australia.

Item 5 of the Schedule to the Excise Tariff Act makes reference to tobacco, cigars, cigarettes and snuff.

'Tobacco' is defined in the Schedule to the Excise Tariff Act to mean 'tobacco leaf subjected to any process other than curing the leaf as stripped from the plant'.

The Commissioner considers 'tobacco' to be tobacco leaf that is subjected to an action or a series of actions to produce an end product manufactured from tobacco. These actions consist of anything other than curing the leaf as stripped from the plant.

In this instance, molasses tobacco is 'tobacco' for the purposes of the Excise Tariff Act as the tobacco leaf has been subject to an action or series of actions (among other things) being the addition of molasses to produce a tobacco product called 'molasses tobacco'. The meaning of 'molasses tobacco' was considered by the Commissioner in ATO Interpretative Decision 2010/205 Excise - molasses tobacco.

'Molasses Tobacco' is classified to subitem 5.5 of the Schedule to the Excise Tariff Act. Subitem 5.5 includes tobacco, cigars, cigarettes and snuff other than that in stick form not exceeding in weight 0.8 grams per stick actual tobacco content.

The rate of duty of 'Tobacco' applicable to subitem 5.5 is expressed as '... per kilogram of tobacco content'. The term 'tobacco content' is not defined in the Excise Acts. However, guidance on its meaning can be found in the Customs Tariff Act 1995 (Customs Tariff Act).

Subsection 3(1) of the Customs Tariff Act defines 'tobacco content' as 'includes any thing (including moisture) added to the tobacco leaf during manufacturing or processing'. The Explanatory Memorandum for the Customs Tariff Amendment (Tobacco Content) Bill 2008 (the EM) which inserted the definition of 'tobacco content' into the Customs Tariff Act states at paragraph 1 of Schedule 1:

This item defines 'tobacco content' in subsection 3(1) of the Customs Tariff as including 'any thing (including moisture) added to tobacco leaf during manufacturing or processing'. This includes sugar, flavour, additives or any thing else added to the tobacco leaf during manufacturing or processing.

Paragraph 2 of Schedule 1 further explains that:

This amendment will clarify the existing reference to 'tobacco content' found within the Customs Tariff, confirming that the excise equivalent customs duty payable on tobacco and tobacco products is based on the total weight of the goods . [emphasis added]

As customs duty at an equivalent rate to excise is imposed on imported alcohol, tobacco and petroleum to ensure that imported goods are treated consistently with local goods, the Commissioner considers the definition of 'tobacco content' as defined in the Customs Tariff Act is relevant to determining the meaning of 'tobacco content' for the purposes of the Excise Tariff Act.

This approach is supported by the legal principle of 'in pari materia'. In brief, the principle means upon the same subject or matter. Where statutes are in pari materia, a definition in one Act can be applied to the same word found in a different Act. If Acts or amendments are related and enacted at the same time it is a reasonable assumption that Parliament had the same particular object in mind, and that the courts should "enforce the purpose of any legislative scheme which concurrent legislation evinces." (Gifford, DJ 1990, Statutory Interpretation, Law Book, Sydney, p. 88)

The Customs Tariff Amendment Act (No. 1) 2000 and Excise Tariff Amendment Act (No. 1) 2000 which implemented the 'per stick rate of duty' on lightweight tobacco products were introduced together into Parliament as one legislative package. The rate of the duty introduced for imported and locally manufactured tobacco products is identical. It is clear from this that the Customs Tariff Act and the Excise Tariff Act are upon the same matters, that is, the imposition of an equivalent rate of duty for imported and locally manufactured tobacco. Consequently, the Commissioner is of the opinion that the definition of 'tobacco content' in the Customs Tariff Act may be carried across to the Excise Act.

The Commissioner is of the view that 'tobacco content' for the purposes of the Excise Tariff Act includes any thing (including moisture) added to the tobacco leaf during manufacturing or processing. Therefore, the tobacco content of 'molasses tobacco' which is a tobacco product is a reference to the total weight of the product.

Legislative References:
Customs Tariff Act 1995
   subsection 3(1)
   Schedule 1

Related ATO Interpretative Decisions
ATO ID 2010/205

Other References:
Explanatory Memorandum to the Customs Tariff Amendment (Tobacco Content) Bill 2008.
Gifford, DJ 1990, Statutory Interpretation, Law Book, Sydney.

Keywords
Excise
Tobacco

Siebel/TDMS Reference Number:  1-36GJ789

Business Line:  Indirect Tax

Date of publication:  5 August 2011

ISSN: 1445-2782