ATO ID 2014/30: Refund of excise duty - goods destroyed after delivery for home consumption
Date of decision: 14 October 2014
Business line: Indirect Tax

Issue
Is the owner of tobacco products entitled to a refund of excise duty under section 78 of the Excise Act 1901 (Excise Act) if the products are destroyed after they have left the owner's licensed premises?

Decision
The owner of tobacco products is not entitled to a refund of excise duty under section 78 of the Excise Act if the products are destroyed after they have left the owner's licensed premises.

Facts
The owner of tobacco products had paid excise duty in respect of the products. The tobacco products had left the owner's licensed premises and were in transit to the owner's customers' retail premises. The vehicle transporting the tobacco products was involved in an accident and all of the tobacco products were destroyed.

Reasons for decision
Summary: Section 78 of the Excise Act provides that a refund of excise duty may be paid. Subsection 78(1) of the Excise Act states: Refunds of excise duty may be allowed: (a) in respect of excisable goods generally or in respect of the goods included in a class of excisable goods; and (b) in such circumstances, and subject to such conditions and restrictions (if any), as are prescribed, being circumstances, and conditions and restrictions, that relate to excisable goods generally or to the goods included in a class of excisable goods. Schedule 1 of the Excise Regulation 2015 specifies the circumstances under which refunds of excise duty may be made and the two most relevant circumstances are: Item 1 of clause 1 Excise duty has been paid or is payable on goods that have, while subject to the CEO's control: (a) deteriorated; or (b) been damaged, pillaged, lost or destroyed; or (c) become unfit for human consumption. Item 7 of clause 1 Excise duty has been paid on goods that: (a) have not been used; and (b) are returned to: (i) premises for which a licence has been granted under section 39A of the Act; or (ii) a person authorised by the manufacturer of the goods to receive goods on behalf of the manufacturer; and Each of these circumstances will be examined in turn. Item 1 of clause 1 To be entitled to a refund under this provision, the goods must have been under the CEO's control at the time of their destruction. Therefore we must determine at what point goods leave the CEO's control. Section 61 of the Excise Act defines when excisable goods cease to be subject to the CEO's control. Subsection 61(1) of the Excise Act states 'All excisable goods are subject to the CEO's control until delivered for home consumption or for exportation to a place outside Australia, whichever occurs first.' Section 58 of the Excise Act allows for authority to be given for the removal of goods for home consumption. Alternatively excisable goods may be delivered for home consumption without entry under the authority of permission granted under section 61C of the Excise Act. In accordance with subsection 61C(2) of the Excise Act excisable goods delivered under the authority of section 61C are deemed to be entered for home consumption on the day they are delivered. The term 'delivered for home consumption' is not defined in the Excise Act. However, this issue was considered in detail in Caltex Australia Petroleum Pty Ltd v. Commissioner of Taxation [2008] FCA 1951 (Caltex case), where Sundberg J, in considering whether fuel manufactured and consumed in a licensed premises had been delivered for home consumption, stated: [140] I agree with the Commissioner that Caltex delivered the residual oils for home consumption for the purposes of the Excise Act. The Excise Act does not refer to delivery to a person but adopts the more ample language of delivery for or into home consumption. While I accept that the typical case of delivery will involve the movement of excisable goods from one person or place to another, the language of the Excise Act is sufficiently broad to apply to the less typical case of consumption by a manufacturer at its own premises. The contention that the Excise Act necessarily requires the physical removal of goods from one place to another seems to me to give the concept of delivery for home consumption a restricted meaning not warranted either by the breadth of the language used or the evident purpose of the legislation, namely to tax manufactured goods consumed in Australia... Permission under section 61C of the Excise Act allows for goods to be delivered for home consumption without entry. However, section 61 of the Excise Act maintains the CEO's control until goods are delivered. Based on the reasoning in the Caltex case, excisable goods are generally delivered into home consumption when they are physically delivered from the licensed premises (although excisable goods that are consumed on the licensed premises are also considered to have been delivered for home consumption). Excisable goods are therefore subject to the CEO's control until dispatched into circulation. This means the goods must physically leave the licensed area and once they do so they are no longer subject to the CEO's control. As the tobacco products were in transit to the owner's customers at the time of the accident, and the tobacco had been delivered for home consumption, the tobacco is no longer subject to the CEO's control. Since the tobacco was no longer subject to the CEO's control at the time of the tobacco products destruction, the circumstance at item 1, clause 1 of Schedule 1 of the Excise Regulation 2015 has not been satisfied. Item 7 of clause 1 As the tobacco products were destroyed in the accident, they have not been returned to the premises or a person authorised by the manufacturer to receive those goods on behalf of the manufacturer. Hence the key circumstance at item 7, clause 1 of Schedule 1 of the Excise Regulation 2015 is unsatisfied. As no circumstance at Schedule 1 of the Excise Regulation 2015 has been satisfied, a refund of excise duty is not payable under section 78 of the Excise Act.

Legislative references: Excise Act 1901 section 58 section 61 section 61C section 78
Case references: Caltex Australia Petroleum Pty Ltd v. Commissioner of Taxation [2008] FCA 1951 (2008) 173 FCR 359 74 ATR 676
Related ATO interpretative decisions: ATO ID 2004/100 (Withdrawn)
Subject references: Delivered for home consumption Excisable goods Excise Excise collections Tobacco Periodic Settlement Permission Tobacco manufacturer