Private ruling: Excise ~~ Alcohol
Published: September 2013
Ruling period: On or after 1 July 2013

Ruling: Q1: Is the aromatic bitters product you manufacture an excisable good and subject to excise duty? | A1: No

Relevant facts and circumstances: · You manufacture aromatic bitters (bitters). · The bitters contains more than 10% alcohol by volume. · The bitters will consist of: o ethanol o water, and o various other ingredients. · You have obtained approval to receive the ethanol as a concessional spirit for use in manufacturing the bitters. · The bitters is used to flavour food and beverages. · Only minimal amounts of the bitters can be dispensed at one time. · The bitters is not a palatable condiment and that it is highly unlikely that it would be consumed as an alcoholic beverage on its own.

Relevant legislative provisions: Excise Act 1901 section 4 | Excise Act 1901 section 54 | Excise Tariff Act 1921 section 5 | Excise Tariff Act 1921 Schedule

Reasons for decision: Summary: Under section 54 of the Excise Act 1901 (the Excise Act), the licensed manufacturer of excisable goods, or where the owner of excisable goods enters them for home consumption, the owner of the goods, is liable to pay excise duty on those goods. Under section 4 of the Excise Act, excisable goods are goods in respect of which excise duty has been imposed. Section 5 of the Excise Tariff Act 1921 (the Excise Tariff Act) provides that duties of excise are imposed on goods that are specified in the Schedule to that Act. Therefore, for the bitters to be an excisable good and subject to excise duty, the bitters must be able to be classified to an Item in the Schedule to the Excise Tariff Act. The most relevant sub-item in the Schedule to the Excise Tariff Act to which the bitters may be classified is sub-item 3.2, other excisable beverages exceeding 10% by volume of alcohol. The term other excisable beverage is defined in the Schedule to the Excise Tariff Act as: Any beverage containing more than 1.15% alcohol by volume, but does not include: (a) beer; or (b) brandy; or (c) wine. The term 'beverage' is not defined in the Excise Tariff Act or the Excise Act. As such, guidance can be taken from the common law interpretation of the meaning of the term. In the case of Bristol-Myers Company Pty Ltd v Commissioner of Taxation (1990) 23 FCR 126 (Bristol-Myers), Lockhart J considered the meaning of the term 'beverage' in the context of Sales Tax legislation. However, the judicial commentary in this case is also relevant for the purposes of the Excise Act as it has broad application and has been cited with approval in contexts outside of Sales Tax. In Bristol-Myers, Lockhart J discussed the distinguishing features of a beverage. He stated: A beverage is consumed either hot or cold and is normally taken to quench the person's thirst or for stimulation or as an accompaniment to solid foods either at mealtimes or between meals. Beverages may contain stimulants such as caffeine and they may be used for refreshment or to overcome thirst. Beverages are not generally formulated to provide nor do they invariably provide essential nutrients to the meals with which they are consumed. An important part of a beverage is to replenish fluids. It is an important element in the concept of a beverage that it is something one drinks not eats. This is quite a usual means of distinguishing beverage from other types of liquid foods which are not beverages such as gravy, sauce and syrup. After applying the Macquarie Dictionary definition of the word beverage, Lockhart J eventually concluded that a beverage is 'any liquid which is swallowed to quench thirst or for nourishment'. In your case, you intend to manufacture bitters containing greater than 10% alcohol by volume. The bitters is a flavour additive to be used to flavour food and beverages. Only minimal amounts of the bitters can be dispensed at one time, it is not a palatable condiment and it is highly unlikely that it would be consumed as an alcoholic beverage on its own. As such, the bitters is not swallowed to quench thirst or for nourishment. It is also not used to replenish fluids, rather it is added as an ingredient into other foods or beverages. The bitters is therefore not considered to be a beverage. As the bitters is not considered to be a beverage, it is not considered to be an other excisable beverage as specified in the Schedule to the Excise Tariff Act. In addition, none of the other Items in the Schedule to the Excise Tariff Act are relevant to your product. On the basis that the bitters is not a good that can be classified to any item in the Schedule to the Excise Tariff Act, it is not an excisable good and therefore not subject to excise duty.