ATO ID 2014/13: Excise: Blended fuel - used, contaminated fuel and diesel
Date of decision: 8 April 2014
Business line: Interpretative Assistance, Indirect Tax

Issue
Are there any amounts of duty to be subtracted from the total duty to be paid for the purposes of section 6G of the Excise Tariff Act 1921, in relation to a constituent element of a blend where the constituent element has had duty paid, is used and becomes contaminated through use and is then blended with diesel?

Decision
No. There are no amounts of duty to be subtracted from the total duty to be paid for the purposes of section 6G of the Excise Tariff Act. In this case, any duty that was paid on the fuel before it was used and contaminated is not relevant for the purposes of section 6G.

Facts
An entity acquires duty paid fuel classified to sub-item 10.28 of the Schedule to the Excise Tariff Act for use as a solvent. The solvent is used for the cleaning of engine parts. As a result of its use as a solvent, the fuel is contaminated with dirt and particulates. The used solvent is collected and stored in a small tank. The entity subjects the contaminated solvent to a process to remove all dirt and particulates. The process requires the contaminated solvent to pass through a filtration system in a continuous cycle. The resultant product is not for use as a solvent. Duty is not paid on the used solvent product. The used solvent is then blended with diesel fuel, on which duty has not been paid, to produce a fuel which is suitable for use in diesel powered vehicles and which is classified to sub-item 10.30 of the Schedule to the Excise Tariff Act.

Reasons for decision
Summary: Section 6G of the Excise Tariff Act provides the method for working out the duty payable on certain fuel blends specified in item 10 of the Schedule to the Excise Tariff Act as follows: Method statement Note: The rate set out in this step is indexed under section 6A of the Excise Tariff Act. The effect of section 6G of the Excise Tariff Act is that the entire volume of the blend is subject to a rate of duty of $0.38143 per litre, however, subtracted from the amount of duty payable is any duty that has been previously paid on any of the constituents of the blend. In this case the constituent elements of the blend are diesel and used solvent. To be determined is whether any of the duty previously paid on the solvent when it was originally delivered, is an amount of duty to be subtracted from the total duty to be paid on the blended goods. The Commissioner's view is that the solvent which was originally delivered is not the constituent element of the blend. The constituent element is the used solvent product. As the used solvent has not had any duty paid on it there is no amount of duty to be subtracted from the total duty to be paid on the blended product for the purposes of section 6G of the Excise Tariff Act.

Legislative references: Excise Tariff Act 1921 section 6G item 10 of the Schedule subitem 10.28 of the Schedule
Related ATO interpretative decisions: ATO ID 2008/165 (withdrawn)
Subject references: Excise Fuel