Issue
Is the transport of vessels from a factory to a dealership for sale 'marine transport' as defined in subsection 164(7) of the Customs Act 1901?
Decision
No. The transport of vessels from a factory to a dealership for sale is not 'marine transport' as defined in subsection 164(7) of the Customs Act.
Facts
A client carries on an enterprise operating a dealership selling new pleasure craft, which are built interstate and second-hand vessels.
Under the dealership agreement, the client buys vessels from the factory interstate and freights the vessels to their dealership for sale. The vessels are freighted by sea under their own power, and are sailed by a qualified skipper who is accompanied by one other person for safety reasons.
Reasons for Decision
Paragraph 78A(1)(ac) of the Excise Act 1901 and paragraph 164(1)(ac) of the Customs Act provide that a rebate is payable to a person who purchases diesel fuel for use by the person 'in marine transport ... in the course of carrying on an enterprise'.
'Marine transport' is defined in subsection 164(7) of the Customs Act as: marine transport includes transport by vessels in or on fresh water, but does not include any transport relating to forestry.
As the term 'marine transport' is not exhaustively defined under the legislation, the term should be given its ordinary and literal meaning as modified by the definition in subsection 164(7) of the Customs Act.
The Macquarie Dictionary , 2001, 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'marine' is defined as 'of or relating to the sea' and 'transport' as 'to carry or convey from one place to another'. Therefore, the common meaning of marine transport is to carry and convey passengers or goods by sea.
However, although an inclusive approach has been taken to defining 'marine transport', the approach does not extend the meaning of the 'marine transport' beyond the actual transport of passengers or goods by vessels. The phrase is a means of ensuring that transport by vessels in or on fresh water is eligible for rebate.
Hence the definition of marine transport in the Customs Act is limited to the transport of passengers or goods by vessels. Use of a vessel that is: (a) a necessary part of transport by that vessel; and (b) incidental to transport by that vessel
forms part of 'marine transport' by that vessel.
Given this, it is necessary to determine whether the transport of a vessel from a factory to a dealership constitutes: (a) transport of passengers or goods by vessels; or (b) is a necessary part of transport by that vessel; and is incidental to transport by that vessel.
When the vessel is being freighted by sea from the factory to the dealership, it is not transporting any goods. As the qualified skipper and person accompanying them for safety reasons are considered to be the 'crew' of the vessel, neither is it transporting any passengers. Accordingly, this travel is not the transport of passengers or goods by vessels.
Neither is this activity a necessary part of transport by that vessel and incidental to transport by that vessel. Although, on arrival at the dealership, a particular vessel may be used in demonstrations to clients, the primary purpose of the movement of the vessel from the factory to the dealership is to enable the sale of the vessel, rather than to enable the demonstrations to occur. Accordingly, the freighting of the vessel is, in this instance, incidental to the ultimate sale of the vessel by the retailer, and not a necessary part of and incidental to 'marine transport' by that vessel.