Asciano Services Pty Ltd v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (VID 841 of 2008)
Judgment date: 13 March 2009
Date published: 21 May 2009

Summary of decision:
Whether the applicant was entitled to an off-road credit under the Energy Grants (Credits) Scheme Act 2003 for diesel fuel purchased for off-rail uses incidental to use in rail transport.

Overview of facts:
The case arose from the taxpayer's objection to an assessment issued by the Commissioner of Taxation reducing the taxpayer's claim for an off-road credit under the Energy Grants Credits Scheme (EGCS) for diesel fuel purchased for use in equipment that operated off-rail in carrying out activities ancillary to its rail transport enterprise for the period 1 July 2003 to 30 June 2006. | The taxpayer objected on the grounds that it was entitled to an off-road credit under s.53 of the Energy Grants Credit Scheme Act 2003 (EG(C)S Act) and, therefore, an energy grant under s.56 as the diesel fuel was purchased for use in equipment for a purpose incidental to using a rail vehicle in rail transport as defined by s.38, in particular s.38(5). | In this case, some of the equipment was used to load and unload bulk freight containers onto the rolling stock to transport the containers between various terminals throughout Australia. Other equipment was used for safety testing, including the testing of brakes of the rolling stock using compressors. All of this equipment operated adjacent to the rail tracks; none of it operated in or on a rail vehicle. | On 14 December 2007, the taxpayer commenced proceedings in the Federal Court under Part IVC of the Taxation Administration Act 1953 in respect of the Commissioner's assessment. | Legislative History | Prior to the period under review in this case there were two fuel rebate schemes, namely, the Diesel Fuel Rebate Scheme (DFRS) (commonly known as the off-road scheme) administered under the Customs Act and the Excise Act 1901 (Cth) and the Diesel and Alternative Fuels Grant Scheme (DAFGS) (commonly known as the on-road scheme) administered under the Diesel and Alternative Fuels Grant Scheme Act 1999 (Cth) (DAFGS Act). The DFRS (effective as at 1 July 2000) included a rebate for diesel and like fuels used in, among other things, rail and marine transport (otherwise than for the purpose of propelling a road vehicle on a public road) in the course of carrying on an enterprise. | The EG(C)S Act replaced the DFRS and DAFGS entitlement provisions with a single entitlement with effect 1 July 2003. The EG(C)S Act established the EGCS which, among other things, replicated the existing entitlement provisions in the DAFGS Act, the Customs Act and the Excise Act to create an on-road credit and off-road credit. The new expressions 'use in rail transport' (section 38) and 'use in marine transport' (section 36) were also introduced into the EG(C)S Act to set out clearly in the legislation which activities in these categories qualified for the off-road credit (refer to clause 1.41 of the Explanatory Memorandum to the Energy Grants (Credits) Scheme Bill 2003 (the EM). Paragraphs 1.47 to 1.51 of the EM also provide an overview of the general and specific definitions of 'use in rail transport' and 'rail vehicle' for the purposes of the EG(C)S Act. The Product Grants Benefits Administration Act 2000 provides the administrative and compliance framework for the EGCS. | Issues decided by the court | The precise issue that required determination by the Full Federal Court was the statutory interpretation of s.38(5) of the EG(C)S Act and whether the taxpayer was eligible for an off-road credit under the EGCS for diesel fuel purchased for off-rail uses incidental to use in rail transport. | The Full Federal Court adopted a natural construction of s.38(5), which was also preferred by the primary judge and who found in favour of the Commissioner (refer to [2008] FCA 1401). The Full Court held that s.38(5) of the EG(C)S Act does not include off-rail uses incidental to use in rail transport. Rather, all subsections of s.38 are expressly limited to circumstances in which diesel fuel is used in or on a rail vehicle or in equipment in or on a rail vehicle, including loading and unloading anything onto or from a rail vehicle: s.38(3)(a) and (b)). | The Full Court held that a broad construction of the legislation under review should not be adopted to include off-rail activities because the term "use in rail transport" was expressly and narrowly defined under s.38 and, therefore, must be construed according to its terms.

Issues decided:
The precise issue that required determination by the Full Federal Court was the statutory interpretation of s.38(5) of the EG(C)S Act and whether the taxpayer was eligible for an off-road credit under the EGCS for diesel fuel purchased for off-rail uses incidental to use in rail transport. The Full Federal Court adopted a natural construction of s.38(5), which was also preferred by the primary judge and who found in favour of the Commissioner (refer to [2008] FCA 1401). The Full Court held that s.38(5) of the EG(C)S Act does not include off-rail uses incidental to use in rail transport. Rather, all subsections of s.38 are expressly limited to circumstances in which diesel fuel is used in or on a rail vehicle or in equipment in or on a rail vehicle, including loading and unloading anything onto or from a rail vehicle: s.38(3)(a) and (b)). The Full Court held that a broad construction of the legislation under review should not be adopted to include off-rail activities because the term "use in rail transport" was expressly and narrowly defined under s.38 and, therefore, must be construed according to its terms.

ATO view of decision:
The decision confirms the Commissioner's view that off-rail activities do not qualify as eligible activities under s.38 of the EG(C)S Act and therefore there is no entitlement to an off-road credit under the EGCS. Note : The off-road credit entitlements under the ECGS have been replaced by fuel tax credit entitlements under the Fuel Tax Act 2006 (Cth) with effect from 1 July 2006.

Administrative treatment:
Implications on current Public Rulings & Determinations | None

Legislative references: Energy Grants (Credits) Scheme Act 2003 38 39 53 56
Case references: Australian Native Landscapes Pty Ltd v Collector of Customs (1997) 44 ALD 531 (1997) 24 AAR 353 Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 (1993) 18 AAR 9 (1993) 115 ALR 1 Federal Commissioner of Taxation v Ostwald Bros Civil Pty Ltd (2008) 167 FCR 588 [2008] FCAFC 99 (2008) 70 ATR 893 Kowalski v Domestic Violence Crisis Service Inc (2001) 113 FCR 67 [2001] FCA 1082 Queensland Rail v Commissioner of Taxation (2006) 153 FCR 524 [2006] FCA 816 [2007] ALMD 1421 Re Alcan Australia Ltd; ex parte Federation of Industrial, Manufacturing and Engineering Employees (1994) 181 CLR 96 (1994) 68 ALJR 626 (1994) 123 ALR 193 [1994] HCA 34 Re Serco Australia Pty Ltd and Chief Executive Officer of Customs (2003) 76 ALD 223 [2003] AATA 737 Riviera Nautic Pty Ltd v Federal Commissioner of Taxation (2002) 68 ALD 581 [2002] AATA 657 (2002) 50 ATR 1106 Saraswati v Queen (1991) 172 CLR 1 (1991) 65 ALJR 402 [1991] HCA 21
Subject references: entitlement to energy grant off-road credit off-road diesel fuel use in rail transport rail vehicle use in equipment in or on a rail vehicle off-rail use for a purpose incidental to rail transport