Issue
Is a vegetable oil emulsion consisting of vegetable oil blended with diesel fuel and ethanol 'off-road diesel fuel' as defined in regulation 9 of the Energy Grants (Credits) Scheme Regulations (the Regulations) for the purposes of the Energy Grants Credits Scheme (EGCS)?
Decision
Yes. A vegetable oil emulsion consisting of vegetable oil blended with diesel fuel and ethanol is 'off-road diesel fuel' as defined in regulation 9 of the Regulations for the purposes of the EGCS.
Facts
An entity manufactures two fuels. Each fuel consists of a blend of vegetable oil, diesel fuel and ethanol.
The proportions of each part of the blend vary, but include a maximum of 41% diesel and a minimum of 50% vegetable oil.
The blend has a sulphur content not exceeding 50 parts per million.
The fuels are capable of being used as fuel in a diesel engine.
Each blend is an excisable blended petroleum product and excise duty has been paid on the fuels.
Reasons for Decision
For the purposes of the EGCS, 'off-road diesel fuel' is defined at sub regulation 9(1) of the Regulations as: a product on which: ... (ii) excise duty has been paid at a rate that is applicable to diesel fuel, under the Schedule to the Excise Tariff Act 1921, at the time of payment; that is capable of being used as fuel in a diesel engine;...
Under Item 11 of the Schedule to the Excise Tariff Act, two rates are given for diesel fuel, depending on the level of sulphur in the fuel. As the product is suitable for use in a diesel engine, it will be considered to be 'off-road diesel fuel' if excise duty has been paid on the product at a rate that corresponds with either of the rates specified for diesel fuel.
Section 5 of the Excise Tariff Act imposes excise duty on those goods which are described in the Schedule to the Excise Tariff Act (the Schedule). The Schedule specifies those goods which are excisable, and the rate of duty levied on those goods.
Item 12 of the Schedule deals with blended petroleum products. The rate of duty that applies to items classified to Item 12 of the Schedule is calculated in accordance with section 6G of the Excise Tariff Act.
Subsection 6G(2B) of the Excise Tariff Act gives the formula for calculating the rate of duty of a product that is a blend of diesel, ethanol and any other substances. Under this formula a product will attract excise duty at one of the rates that applies to diesel fuel where sulphur content does not exceed 50 parts per million.
As the sulphur content of both vegetable oil emulsions does not exceed 50 parts per million, they are products on which excise duty is payable at the diesel rate and which are capable of being used as a fuel in a diesel engine. Accordingly, they are 'off-road diesel fuel' for the purposes of the EGCS.