Caltex Australia Petroleum Pty Ltd v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (VID 823 of 2018)
Judgment date: 14 November 2019
Date published: 13 December 2019

Summary of decision:
Outlines the ATO's response to this case concerning entitlement to benefits under the Product Stewardship (Oil) Act 2000 (PSO Act) for the recycling of diesel contaminated through use as a solvent or hydraulic medium. The key issue considered by the Federal Court was whether diesel is a petroleum based oil for the purposes of the PSO Act.

Overview of facts:
The taxpayer imports, stores and sells petroleum products and is registered for entitlement to benefits under the PSO Act. It uses diesel in connection with refinery operations as a solvent to flush crude oil and petroleum products through shipping tanks and pipelines; and as a medium to push inspection devices through pipelines. This diesel becomes contaminated and must be refined to meet fuel quality standards before it is sold as automotive diesel fuel in Australia. | The taxpayer's claim for benefits for recycling and sale of contaminated diesel under the PSO Act was disallowed by the Commissioner. | Issues decided by the Court | The issue in this case concerned whether diesel is a petroleum based oil for the purposes of the PSO Act. | The term 'oils' is defined under subsection 6(1) of the PSO Act to mean, among other things: (a) petroleum based oils (including lubricant base oils; prepared lubricant additives containing carrier oils; lubricants for engines, gear sets, pumps and bearings; greases; hydraulic fluids; brake fluids; transmission oils; and transformer and heat transfer oils); (b) synthetic equivalents of goods covered by paragraph (a); ... | The Court found that diesel is a 'petroleum based oil' within the meaning of subsection 6(1) of the PSO Act, concluding that Parliament did not intend the words in brackets to be an exhaustive list of petroleum based oils for the purposes of the PSO Act. The Court rejected the Commissioner's construction of the term 'oils' to exclude petroleum based oils that are primarily for use as fuel and held that there was no evident reason to exclude recycled diesel from the scope of the PSO Act because its primary use is as a fuel.

Issues decided:
The issue in this case concerned whether diesel is a petroleum based oil for the purposes of the PSO Act. The term 'oils' is defined under subsection 6(1) of the PSO Act to mean, among other things: (a) petroleum based oils (including lubricant base oils; prepared lubricant additives containing carrier oils; lubricants for engines, gear sets, pumps and bearings; greases; hydraulic fluids; brake fluids; transmission oils; and transformer and heat transfer oils); (b) synthetic equivalents of goods covered by paragraph (a); ... The Court found that diesel is a 'petroleum based oil' within the meaning of subsection 6(1) of the PSO Act, concluding that Parliament did not intend the words in brackets to be an exhaustive list of petroleum based oils for the purposes of the PSO Act. The Court rejected the Commissioner's construction of the term 'oils' to exclude petroleum based oils that are primarily for use as fuel and held that there was no evident reason to exclude recycled diesel from the scope of the PSO Act because its primary use is as a fuel.

ATO view of decision:
The ATO accepts that it was reasonably open to the Court to find that diesel is a 'petroleum based oil' within the meaning of subsection 6(1) of the PSO Act. | The ATO (in consultation with the Department of Environment and Energy) is assessing the impacts of the decision on the effectiveness and sustainability of the Product Stewardship for Oil program. | The ATO is also considering any implications of the decision for the classification of diesel under the Schedule to the Excise Tariff Act 1921 where that diesel is employed as a solvent or for some other non fuel use in connection with refinery operations.

Administrative treatment:

Legislative references: Product Stewardship (Oil) Act 2000 6(1) Excise Tariff Act 1921 The Schedule 5 Product Stewardship (Oil) Regulations 2000 The Regulations
Case references: BHP Billiton Iron Ore Pty Ltd v National Competition Council [2008] HCA 45 (2008) 236 CLR 145 82 ALJR 1482 249 ALR 418 Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross [2012] HCA 56 (2012) 248 CLR 378 87 ALJR 131 239 ALR 412 Commissioner of Taxation v Bargwanna [2009] FCA 620 2009 ATC 20-107 72 ATR 963 Corporate Affairs Commission (SA) v Australian Central Credit Union [1985] HCA 64 (1985) 157 CLR 201 59 ALJR 785 61 ALR 236 Gibb v Commissioner of Taxation (Cth) [1966] HCA 74 (1966) 118 CLR 628 40 ALJR 394 [1967] ALR 527 (1966) 14 ATD 363 IW v The City of Perth [1997] HCA 30 (1997) 191 CLR 1 71 ALJR 943 146 ALR 696 Re Gray; Ex parte Marsh [1985] HCA 67 (1985) 157 CLR 351 59 ALJR 804 62 ALR 17 Saeed v Minister for Immigration and Citizenship [2010] HCA 23 (2010) 241 CLR 252 84 ALJR 507 267 ALR 204 YZ Finance Co Pty Ltd v Cummings [1964] HCA 12 (1964) 109 CLR 395 37 ALJR 431 [1964] ALR 667 Zickar v MGH Plastic Industries Pty Ltd [1996] HCA 31 (1996) 187 CLR 310 71 ALJR 32 140 ALR 156