Excise - Collections - Petroleum - Liability to pay excise duty on refinery residue

Is refinery residue, being an output from the process of refining crude oil at an oil refinery, subject to excise duty at a rate set out in Item 11 of the Schedule to the Excise Tariff Act 1921 (the Schedule)?

Yes. Refinery residue is a product described in Item 11 of the Schedule and is therefore subject to excise duty under section 5 of the Excise Tariff Act.

A refinery uses crude oil as a feedstock and this is processed in a simple distillation column.

There are three basic products resulting from the refining process, being diesel, naphtha and residue.

Refinery residue is not liquid at ambient temperatures and is not suitable for use as a grease or lubricating oil. Residue is not used for blending with any other product.

Residue is not an excisable blended petroleum product, a petroleum based oil or grease, nor is the residue an unrefined stabilised crude petroleum oil or condensate. Therefore residue is not classified to Items 12, 15 or 17 of the Schedule.

Subsection 4(1) of the Excise Act 1901 defines 'excisable goods' as goods in respect of which excise duty is imposed by Parliament, and includes goods the subject of an excise tariff or excise tariff alteration proposed in the Parliament.

Section 5 of the Excise Tariff Act imposes excise duty on goods specified in the Schedule. The Schedule describes those goods which are excisable, and sets down the rate of excise duty levied on these goods.

The Schedule has 3 columns, being an item number in column 1, a description of the goods or article in column 2 and a rate of duty in column 3.

For refinery residue to be classified as an excisable good under Item 11 of the Schedule, it must come within one of the descriptions of goods specified in paragraphs (a) to (e) of Item 11 and also must fall within one of the specific categories of the goods specified in subitems 11(A) to (K) of the Schedule.

Thus Item 11 of the Schedule contemplates a 2 stage classification of goods. If a good comes within one of the categories in paragraphs (a) to (e) of Item 11 it will not be an excisable good unless it also comes within one of the categories in subitems 11(A) to 11(K).

Paragraph (a) of Item 11 of the Schedule refers to refined or semi-refined liquid petroleum products and shale oil products other than those specifically excluded. The term liquid in this paragraph qualifies the input to the refining process and not the output.

The relevant issue for the purposes of paragraph (a) of Item 11 of the Schedule is whether the product is derived from refined or semi-refined liquid petroleum or shale oil.

Even if residue were not derived from refined or semi-refined liquid petroleum falling within paragraph (a) of Item 11 of the Schedule, it would be a product within the category 'other petroleum products other than products classified to Item 15 of the Schedule'. Thus, if the product does not come within paragraph (a) it would fall within paragraph (d) of Item 11 of the Schedule.

Refinery residue meets the description in subitem 11(I) of the Schedule where it is described as an 'other refined or partly refined petroleum' product (refinery residue does not meet a description in any of the other subitems in Item 11 of the Schedule).

As refinery residue meets the description in column 1 of subitem 11(I) of the Schedule, excise duty is payable on residue at the rate specified in column 3 of subitem 11(I) of the Schedule.