ATO ID 2006/270: Excise implications of repackaging excise equivalent goods upon which customs duty has been paid
Date of decision: 19 September 2006
Business line: Indirect Tax

Issue
Is the process of repackaging imported tobacco products excise manufacture for the purposes of the Excise Act 1901 ?

Decision
No. The repackaging of imported tobacco products is not excise manufacture for the purposes of the Excise Act.

Facts
The entity imports tobacco goods in non-stick form which are equivalent to goods classifiable to the Schedule to the Excise Tariff Act 1921 (the Schedule). Customs duty has been paid on the imported goods. As the overseas packaging is poor, the entity would like to repackage the goods in Australia. The goods would not undergo any process in Australia other than repackaging. The tobacco will remain in non-stick form after its repackaging.

Reasons for decision
Summary: Subsection 4(1) of the Excise Act defines the term 'manufacture' as follows includes all processes in the manufacture of excisable goods... Given the inclusive nature of this definition, and the absence of any further guide in relation to what constitutes manufacture from the point of view of the Excise Act, one must also consider the ordinary meaning of the term. The Macquarie Dictionary , 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines the term manufacture as follows: manufacture ... noun 1. the making of goods or wares by manual labour or by machinery, especially on a large scale. 2. the making of anything. 3. the thing or material manufactured. Putting the dictionary definition and the Excise Act definition together, 'manufacture' from the point of view of the Excise Act includes any process undertaken in making something. The Schedule, following amendments which took effect on 1 July 2006, specifies only two rates of excise duty for tobacco products. The two rates (as at 1 July 2006) were as follow: In this instance the imported tobacco, if it had been manufactured in Australia, would have been classifiable to sub-item 5.5 of the tariff. Customs duty has been paid on this tobacco at a rate equivalent to the excise rate. Accordingly, the client is importing a fully manufactured product upon which Customs duty has been paid at the full excise equivalent rate. Following its repackaging, the tobacco will not have changed in any way. It is the same product both prior to and after its repackaging. Accordingly, the mere repackaging of imported tobacco, in the absence of any other process, does not constitute manufacture. This would not be the case however if the tobacco underwent any processes other than repackaging. For example, if the tobacco was cut and/or rolled, this would constitute a step in manufacture as the tobacco following the process(es) would be in a different form to the tobacco prior to the process(es). Accordingly, if duty paid pouch tobacco were used to make stick tobacco, this would constitute a step in excise manufacture. In this instance the entity is importing tobacco products which are a finished product. The tobacco products are not undergoing any other process in Australia other than the process of repackaging which results in no change to the product. Therefore the process of repackaging does not constitute manufacture for the purposes of the Excise Act.

Legislative references: Excise Tariff Act 1921 Schedule
Case references: McNicol and Anor v. Pinch [1906] 2 KB 352
Other references: The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW
Subject references: Excise Tobacco products Excisable goods Manufacture