ATO ID 2005/45: Excise: excisable goods delivered in error and returned to stock
Date of decision: 11 February 2005
Business line: Indirect Tax

Issue
Have excisable goods left the CEO's control for the purposes of section 61 of the Excise Act 1901 if they have been removed from licensed premises and delivered to a customer without being entered for home consumption and without duty having been paid and the goods are subsequently returned to the licensed premises?

Decision
No. Excisable goods have not left the CEO's control for the purposes of section 61 of the Excise Act if they have been removed from licensed premises and delivered to a customer without being entered for home consumption and without duty having been paid and the goods are subsequently returned to the licensed premises.

Facts
An excise licensee accepts an order for excisable goods. The licensee raises an invoice/picking slip for the goods, enters the goods for home consumption and pays the excise duty. When picking the goods from stock, the licensee makes an error (either by choosing the wrong goods or taking a quantity in excess of the ordered goods). The goods are then delivered to the customer who realises the error and reports it to the licensee. The goods that were delivered in error are subsequently returned to the licensed premises.

Reasons for decision
Summary: Subsection 61(1) of the Excise Act provides that all excisable goods are subject to the CEO's control until delivered for home consumption or for exportation to a place outside Australia, whichever comes first. Exportation is not a consideration in this instance. There are two ways in which the manufacturer or owner of excisable goods may lawfully deliver excisable goods from licensed premises and pay the requisite duty. Under section 58 of the Excise Act, the licensed manufacturer or owner may make an entry and pay the requisite duty in respect of excisable goods. The goods may then be removed from the licensed premises. Under subsection 61C(1) of the Excise Act, a Collector may give written permission to a person to deliver excisable goods for home consumption, notwithstanding that an entry of the goods for home consumption has not been made and passed. Subsection 61C(2) of the Excise Act provides that goods that are delivered for home consumption by authority of subsection 61C(1) of the Excise Act are deemed to be entered for home consumption on the day on which they are delivered. Where a periodic settlement permission is in place, subsection 61C(3) of the Excise Act empowers the CEO to stipulate requirements that the owner/manufacturer must satisfy. The CEO normally requires a return to be lodged on a weekly basis detailing all the movements that have taken place under the permission. Duty is normally payable at the time of lodgement of the return. The Excise Act also ensures the Government's revenue is protected if a licensee delivers goods without the authority bestowed by section 58 or section 61C of the Excise Act. Section 60 of the Excise Act requires persons who have been entrusted with the possession, custody or control of excisable goods to keep those excisable goods safely or, when requested by the CEO, to account for those goods. The term 'CEO' is defined in section 4 of the Excise Act to mean the Commissioner of Taxation. The purpose of section 60 of the Excise Act was examined in Collector of Customs v. Southern Shipping Co Ltd (1962) 107 CLR 279. The case was decided prior to the CEO of Taxation taking responsibility for Excise matters. The principles outlined in the decision remain valid but references to Customs control should be read as being references to the CEO's control. In discussing sub section 60(1) of the Excise Act, Menzies J stated: ... the safety with which the section is concerned is that the goods - subject as they are to the control of Customs - do not get out of Customs control into home consumption without the payment of duty; similarly, the account of the goods that is required is an account that shows an authorized relinquishment of possession, custody and control or, despite an unauthorized loss of possession, custody and control, that the goods have not gone into home consumption without the payment of duty or that, notwithstanding the failure to keep the goods safely, Customs control over them is still effective. In this instance, the excisable goods have been removed from the licensed premises without being entered under section 58 of the Excise Act, and without being recorded in accordance with the client's periodic settlement permission. Therefore, in the words of Menzies J., there has been 'an unauthorized loss of possession, custody and control'. However, the fact that the goods are present in the licensed premises is evidence that, in the words of Menzies J., 'notwithstanding the failure to keep the goods safely, Customs control over them is still effective'. Therefore, it can be concluded that the CEO's control over the goods is still effective, notwithstanding the temporary absence of the goods from the licensed premises.

Legislative references: Excise Act 1901 section 58 section 60 section 61 subsection 61(1) section 61C subsection 61C(1) subsection 61C(2) subsection 61C(3)
Case references: Collector of Customs v. Southern Shipping Co Ltd (1962) 107 CLR 279
Subject references: Alcohol excise Excise Excise payments other