ATO ID 2006/88: Wine Equalisation Tax: quoting ground
Date of decision: 20 March 2006
Business line: Indirect Tax

Issue
Is wine purchased for laboratory analysis as part of a research project used as a material in manufacture or other treatment or processing for the purposes of paragraph 13-5(1)(c) of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?

Decision
No. Wine purchased for laboratory analysis as part of a research project is not used as a material in manufacture or other treatment or processing for the purposes of paragraph 13-5(1)(c) of the WET Act.

Facts
Samples of bottled and cask wine are purchased for the purpose of conducting research analysis to assess the presence and level of a particular chemical in the wine.

Reasons for decision
Summary: Paragraph 13-5(1)(c) of the WET Act provides that an entity is entitled to quote its ABN for a dealing with wine if, at the time of quoting, the entity has the intention of: ... (c) using the wine as a material in *manufacture or other treatment or processing, whether or not it relates to or results in other wine... The term 'manufacture' is defined in section 33-1 of the WET Act to include: (a) production (b) combining parts or ingredients so as to form an article or substance that is commercially distinct from the parts or ingredients (c) applying foodstuffs as a process in preparing them for human consumption but does not include any prescribed combination of parts or ingredients. On the above definition, using the wine for laboratory analysis as part of a research project is not use as a material in manufacture. The question then, is whether wine purchased for laboratory analysis as part of a research project is used as, '...a material in...other treatment or processing'. The terms 'treatment' or 'processing' are not defined in the legislation and therefore take on their ordinary meaning. The Macquarie Dictionary , 2001,rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'treatment' to mean, '...subjection to some agent or action', and 'process' is defined as: 1. a systemic series of actions directed to some end... 2. a continuous action, operation, or series of changes taking place in a definite manner... ... In the Sales Tax case FC of T v. Hamersley Iron Pty Ltd 80 ATC 4509; (1980) 11 ATR 302; 81 ATC 4582; (1981) 12 ATR 429 in the Supreme Court of Victoria, it was held that 'treatment' should be given its ordinary meaning and, as to 'process' Gobbo J stated at first instance that: Process as a noun is defined as follows: 'A continuous and regular action or succession of actions taking place or carried on in a definite manner, and leading to the accomplishment of some result; a continuous operation or series of operations.' As a verb it is defined as follows: 'To subject or treat by a special process.' The Shorter Oxford Dictionary defines process as follows: 'A continuous action or succession of actions taking place or carried on in a definite manner; a continuous operation or series of operations; a particular method of operation in any manufacture.' The relevant meaning in the section edition of Webster's New International Dictionary is: 'To subject (esp. raw material) to a process of manufacture, development, preparation for the market; to convert into marketable form.' The normal use of the verb process is exemplified as follows - to process milk by pasteurising, to process grain by milling and to process cotton by spinning. These meanings all suggest that a change in nature form or condition is effected. I am disposed to the view that even in processing some change must result if this procedure is to be regarded as a process. It could be argued that where laboratory analysis of the wine involves treating it in a way such that the wine is separated into its constituent elements, this constitutes treating or processing the wine in accordance with the ordinary meaning of the words 'treatment' or 'process'. However, in the context of paragraph 13-5(1)(c) of the WET Act, the wine must be used as, '...a material in...other treatment or processing...' Since the legislation provides that the wine must be used as a material 'in' other treatment or processing, this implies that the wine must be used in the treatment or processing of another distinct thing, as opposed to the wine itself being treated or processed. Therefore, research analysis of wine does not constitute use as a material in manufacture or other treatment or processing for the purposes of paragraph 13-5(1)(c) of the WET Act.

Legislative references: A New Tax System (Wine Equalisation Tax) Act 1999 section 13-5 subsection 13-5(1) section 33-1 paragraph 13-5(1)(c)
Case references: FC of T v. Hamersley Iron Pty Ltd 80 ATC 4509 (1980) 11 ATR 302
Related public rulings and determinations: Wine Equalisation Tax Ruling 2004/1
Subject references: Treatment EGCS processing Wine equalisation tax