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Decision impact statement

Colby Corporation Pty Ltd v Commissioner of Taxation



Venue: Federal Court of Australia
Venue Reference No: WAD 359 of 2006
Judge Name: Justices Branson, Stone & Jessup
Judgment date: 20 February 2008
Appeals on foot:
Appellant's application for special leave to appeal to the High Court was dismissed on 8 August 2008.

Impacted Advice

Relevant Rulings/Determinations:

Subject References:
Energy Grants
Off-road credits
Off-road diesel fuel
Product Grants and Benefits
Purchase of fuel
Mining operations

Précis

Whether a contractor "purchased" fuel for use in a qualifying use under subsection 53(2) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA).

Decision Outcome:

Appellant's appeal against the decision of the Administrative Appeals Tribunal dismissed.

Brief summary of facts

A drilling contractor consumed diesel fuel using its own machines in carrying out drilling operations for a mining company in the course of mining operations. The mining company supplied the fuel to the drilling contractor under a contract and for the purpose of carrying out the contracted activities. No separate charge was made by the mining company for the fuel. However, some contracts provided for alternative payment rates for the work done by the contractor depending on whether the mining company supplied the fuel or the contractor supplied its own fuel - although the mining company supplied the fuel in this instance. There was evidence that the contractor did not have to account for any residual fuel left in the fuel tanks of its drilling rigs at the end of a contract but that the amounts in question were insignificant.

The drilling contractor argued that it had "purchased" the fuel for the purposes s.53 of the EGCSA thus entitling it to off-road credits (and, therefore, energy credits) under the EGCSA. It argued that it acquired property in the fuel because it was allowed to retain residual fuel at the end of a contract. It argued also that it had provided consideration for the fuel by agreeing to accept a lower contract rate for its work than it would have accepted had it supplied its own fuel.

The Administrative Appeals Tribunal (AAT) found that the drilling contractor had not "purchased" the fuel and in particular that no mutual intention that property in the fuel was to pass from the mining company to the drilling contractor could be discerned from the contracts.

Issues decided by the court

For there to be a "purchase" of fuel there must be both consideration provided to the supplier and an intention that property in the fuel will pass from the supplier.

While a majority of the court was of the view that consideration for the fuel was provided, it was unanimous in holding that the proper construction of the relevant contracts was that there was no intention that property in the fuel would pass.

Tax Office view of Decision

The decision supports the ATO view of the meaning of the word "purchase" in s.53 of the EGCSA. The ATO view is that for there to be a relevant "purchase" of fuel consideration is required and there must be an intention that property in the fuel pass to the party seeking to claim the relevant credits. In the above situation where a contractor is supplied fuel for the purposes of performing the contract, ownership of the fuel will not pass unless there is mutual intention of the parties that property in the fuel is to pass.

Administrative Treatment

Current practice affirmed.

Implications on current Public Rulings & Determinations

As above

Implications on Law Administration Practice Statements

None

Implications on Law Administration Practice Statements

None


Court citation:
[2008] FCAFC 10
(2008) 165 FCR 133
(2008) 71 ATR 62
(2008) 244 ALR 71

Legislative References:
Energy Grants (Credits) Scheme Act 2003 (EGCSA)
53(1)
53(2)

Case References:
Comptroller-General of Customs v Woodlands Enterprises Pty Ltd
[1996] 1 QdR 589
(1995) 128 FLR 113

Re Riviera Nautic Pty Ltd v FCT
[2002] AATA 657
(2002) 50 ATR 1106
(2002) 68 ALD 581


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