ATO Interpretative Decision

ATO ID 2007/155 (Withdrawn)

Excise

• This ATO ID is withdrawn from 1 July 2015, the date the Energy Grants (Cleaner Fuels) Scheme Act 2004 was repealed. Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of the period the Act was in force 18 September 2003 up to and including 30 June 2015. Further guidance on the Energy Grants (Cleaner Fuels) Scheme can be found at Cleaner fuels grants scheme.
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Issue

Is the reduction of a cleaner fuels grant (grant) entitlement on a quantity of fuel limited to the amount of grant entitlement on that quantity of fuel for the purposes of subsection 8(2) of the Energy Grants (Cleaner Fuels) Scheme 2004 (EGCFSA)?

Decision

Yes. The reduction of a grant entitlement on a quantity of fuel is limited to the amount of grant entitlement on that quantity of fuel for the purposes of subsection 8(2) of the EGCFSA.

Facts

An entity manufactured 1,000 litres of a cleaner fuel (ultra low sulphur diesel). The entity claimed a grant of 1c per litre on the fuel.

The entity paid excise duty on the fuel at a rate of 38.143c per litre. The entity subsequently received a refund of duty in respect of 100 litres of the fuel. The refund equated to 38.143c per litre.

Reasons for Decision

Subsection 8(2) of the EGCFSA provides that where a drawback, refund, rebate or remission is payable in respect of the cleaner fuel that gave rise to an entitlement to a grant, the amount of the grant 'is reduced by the amount of the drawback, refund, rebate or remission'.

The issue is the meaning of the word 'reduced'.

The Macquarie Dictionary, 2001 rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'reduce' to mean:

1. to bring down to a smaller extent, size, amount, number, etc.

However subsection 8(2) of the EGCFSA includes the following words after 'reduced':

...by the amount of the drawback, refund, rebate or remission.

While the word 'reduce' by definition means to bring down to a 'smaller extent, size, amount, number etc.', the phrase, 'by the amount of the' in subsection 8(2) of the EGCFSA suggests that the amount of the reduction may exceed the amount of the grant itself so that a negative amount will result.

Consequently, the wording in subsection 8(2) of the EGCFSA may lead to the following outcomes depending on how the provision is interpreted:

1.

the entity's grant of 1c per litre for the 100 litres to which the refund relates may be reduced by the drawback, refund, rebate or remission of excise or customs duty but only to the extent of the grant on the 100 litres, or

2.

the entity's grant of 1c per litre for the 100 litres to which the refund relates may be reduced by the drawback, refund, rebate or remission of excise or customs duty beyond the amount of the grant resulting in a liability for the client, or

3.

the total grant payable to the entity for the particular entitlement would be reduced by the amount of the drawback, refund, rebate or remission of duty.

This would result in the entitlement of 1c per litre on 1,000 litres being reduced by the amount of the refund payable in respect of the 100 litres. Hence there would be no grant remaining in respect of any of the 1,000 litres.

The Commissioner considers that the second and third outcomes are contrary to the legislative objects of the EGCFSA which includes encouraging the manufacture and importation of low sulphur fuels. This is because these outcomes would result either in a liability to the entity, or the entity would forgo any entitlement in respect of the entire 1,000 litres merely because they received a refund of duty in respect of a small proportion of the fuel.

In determining the correct interpretation of subsection 8(2) a purposive approach is required. This approach is summarised in section 15AA of the Acts Interpretation Act 1901 where it is stated that:

In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.

The first of the above outcomes is considered to deliver on the objectives of the EGCFSA. The reduction in the entity's entitlements should only apply to the 100 litres to which the refund relates, and only serve to reduce their entitlement in respect of the 100 litres to zero. This interpretation is also consistent with the ordinary meaning of the term 'reduce'.

Accordingly, the reduction of a grant entitlement on a quantity of fuel is limited to the amount of grant entitlement on that quantity of fuel for the purposes of subsection 8(2) of the EGCFSA.

Amendment History

Legislative References:
Energy Grants (Cleaner Fuels) Scheme Act 2004
   subsection 8(2)

Keywords
Refunds
Rebates and offsets
Excise
Customs

Business Line:  Indirect Tax

Date of publication:  13 July 2007

ISSN: 1445-2782