Issue
Is a product, which has been entered into home consumption against item 11(C)(3) of the Schedule to the Excise Tariff Act 1921 (Item 11(C)(3)) a product on which duty has been paid at a rate that is applicable to diesel fuel as required by paragraph 9(1)(c) of the definition of off-road diesel fuel in the Energy Grants (Credits) Scheme Regulation 2003 (the Regulations), even though Item 11(C)(3) has a duty rate of 'free'?
Decision
Yes. A product, which has been entered into home consumption against Item 11(C)(3) is a product on which duty has been paid at a rate that is applicable to diesel fuel as required by paragraph 9(1)(c) of the definition of off-road diesel fuel in the Regulations, even though Item 11(C)(3) has a duty rate of free.
Facts
An entity has purchased a product for use in an activity that is eligible for an energy grant.
The product meets the technical specifications set out in subparagraph 9(1)(c)(i) of the Regulations and is capable of being used as a fuel otherwise than in an internal combustion engine as required by subparagraph 9(2)(c)(iii) of the Regulations.
The product is a recycled product and was entered into home consumption against Item 11(C)(3).
Reasons for Decision
Under the Energy Grants (Credits) Scheme, an energy grant is generally payable to an entity which purchases 'off-road diesel fuel' for use in certain defined activities.
'Off-road diesel fuel' is defined in Regulation 9 of the Regulations and includes a number of different type of products. In this case, the most relevant product is the product covered by paragraph 9(1)(c) of the definition.
Paragraph 9(1)(c) of the Regulations sets out a number of criteria that need to be met in order for the product to be considered 'off-road diesel fuel'.
Subparagraph 9(1)(c)(i) of the Regulations requires the product to meet certain technical specifications and subparagraph 9(1)(c)(iii) of the Regulations requires the product to be capable of being used as a fuel otherwise than in an internal combustion engine. It is accepted that the product meets these requirements.
Subparagraph 9(1)(c)(ii) of the Regulations further requires that the product be a product on which 'duty has been paid at a rate that is applicable to diesel fuel'.
Under the excise regime, excise duty is payable on the goods described in the Schedule of the Excise Tariff Act 1921 . Excise duty is payable when the goods are entered into home consumption.
Under Item 11 of the Schedule of the Excise Tariff Act, two rates are given for diesel fuel, depending on the level of sulphur in the fuel. A product will be considered to be a 'product on which duty has been paid at a rate that is applicable to diesel fuel' for the purposes of the Regulations if duty has been paid on the product at either of these rates.
The product was entered into home consumption against Item 11(C)(3), which covers: Diesel ... recycled product, on which Customs or Excise duty has been paid, recovered by a process not being a process of refining...
and has a 'free' rate of duty.
Recycled petroleum products were inserted into the Excise Tariff by the Excise Tariff (Fuel Rates Amendments) Act 1997 . That Act inserted a tariff item (then item 11(I)(1)(a) of the Schedule to the Excise Tariff Act) that covered recycled diesel fuel on which customs or excise duty has been paid, recovered by a recycling process, not being a process of refining, which also attracted duty at the 'free' rate.
The Explanatory Memorandum to the Excise Tariff (Fuel Rates Amendments) Bill 1997 explains that a duty rate of free applies As ... duty has already been paid on these products, no further duty will be payable on these products once that have been recycled
Consequently, a product covered by Item 11(C)(3), is diesel on which duty has already been paid. Therefore, a product which has been entered into home consumption against Item 11(C)(3), is a product on which duty has been paid at the diesel rate, even though the rate of excise duty which applies to Item 11(C)(3) is 'free'.