Issue
Is the transportation of ore concentrate between two beneficiation plants a 'mining operation' for the purposes of paragraph 164(7)(b) of the Customs Act 1901 (or subsection 78A(7) of the Excise Act 1901 )?
Decision
No. The transportation of ore concentrate between two beneficiation plants is not a 'mining operation' for the purposes of paragraph 164(7)(b) of the Customs Act (or subsection 78A(7) of the Excise Act).
Facts
Ore is extracted from a pit at a mine and transported to a beneficiation plant located away from the mine site. At this beneficiation plant the ore undergoes various beneficiation processes.
When these processes have been completed, the ore is then transported to another beneficiation plant which is also located away from the original mine site. At this second plant, the ore undergoes further beneficiation processes.
Reasons for Decision
Under subsection 164(1) of the Customs Act, a diesel fuel rebate is: ... payable to a person who purchases diesel fuel for use by the person: (a) in mining operations (otherwise than for the purpose of propelling any vehicle on a public road)
'Mining operations' is relevantly defined in paragraph 164(7)(b) of the Customs Act as: ... (b) operations for the recovery of minerals, being: ... (ii) the beneficiation of those minerals, or of ores bearing those minerals ...
In the phrase 'in mining operations', the preposition 'in' means 'in the course of' or 'in the process or act of' see Chief Executive Officer of Customs v. WMC Resources Ltd (as agent for East Spar Alliance) (1998) 87 FCR 482 per Nicholson J.
Therefore, if an activity can be said to have taken place 'in the course of' mining operations, it can be concluded that it also takes place 'in' mining operations.
When considering whether an activity takes place 'in the course of' a mining operation, the courts have applied the following three tests see Federal Commissioner of Taxation v. Payne (2001) 202 CLR 93, (2001) 46 ATR 228, 2001 ATC 4027; Chief Executive Officer of Customs v. WMC Resources Ltd (as agent for East Spar Alliance) (1998) 87 FCR 482; Wandoo Alliance Pty Ltd v. CEO of Customs [2001] AATA 801: • Does a causal link exist? - in other words, is the activity functionally integrated with a mining operation, thereby forming an essential part of it. • Does a spatial link exist? - meaning that an activity takes place in an area set aside or occupied for a mining operation. • Does a temporal link exist? - whereby the activity takes place in a timely fashion, not prior to, or after the completion of, the mining operation.
The relevance or weighting afforded to these criteria will vary depending on the facts of each case.
The transportation of the ore concentrate is not considered to be causally linked to the mining operations. To be functionally integrated, an activity must be so closely related to the mining operation that it is impossible to distinguish between the activity undertaken and the mining operation. In this case, the transportation of the ore concentrate is more properly regarded as being related to the transport function rather than being part of a 'mining operation'.
The conveying of the ore concentrate is not considered to be spatially linked because the transportation activity does not occur in an area set aside or occupied for a mining operation.
A temporal link does not exist because the transportation does not occur during the 'mining operations'. That is, it does not occur during the beneficiation process, it is merely the movement of the ore concentrate from one beneficiation site to another.
Given that the above links cannot be established, the transportation of the ore concentrate between two beneficiation plants is not a 'mining operation' for the purposes of paragraph 164(7)(b) of the Customs Act or subsection 78A(7) of the Excise Act.