Diesel Fuel Rebate Scheme - Marine Transport - Dredging

Can the use of diesel fuel while a dredge is performing dredging processes be properly characterised as use in 'marine transport' for the purposes of subsection 164(7) of the Customs Act 1901?

No. The use of diesel fuel in a dredge during dredging processes is not 'marine transport' for the purposes of subsection 164(7) of the Customs Act.

Diesel fuel is used in a trailer suction hopper dredge (TSHD), which is a self-propelled, crewed vessel which travels to the dredging site, and then deploys an on-board drag arm that trails behind the vessel along the seabed. A vacuum pump sucks the spoil from the seabed into a hopper in the hold of the vessel. When the hopper is full, the vessel transports the spoil to a disposal site where it is dumped. Diesel fuel powers the propulsion, pumping and other mechanical activities of the vessel.

Paragraph 78A(1)(ac) of the Excise Act 1901 and paragraph 164(1)(ac) of the Customs Act provide that a diesel fuel rebate is payable to a person who purchases diesel fuel for use in 'marine transport'.

'Marine transport' is defined for the purposes of both Acts 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.

In Re Port of Brisbane Corporation and Deputy Commissioner of Taxation [2004] AATA 222 (Port of Brisbane) the applicant submitted that the overall objective of the dredging operation is to maintain navigable channels in the Port of Brisbane and elsewhere. Alternatively, the focus can be placed on the spoil extracted by dredging being transported from the seabed to the disposal site. The pumping and winching operations of the dredges effect the transport of the spoil from the seabed to the vessel and from the vessel to the disposal site. The definition of marine transport is not an exhaustive definition as it states that the term 'includes transport by vessels in or on fresh water'. Thus fuel used in those operations is used in conveying materials on a vessel in sea water.

The Tribunal considered that the ordinary meaning of 'marine transport' does not include the conveying of things via a pipe that is in, that is, passes through, water or floats on water.

The Tribunal reasoned at paragraph 31 that: ... the phrase "use in ... marine transport" should be accorded its ordinary and natural meaning. In this context, the normal association of 'marine' with the sea is extended by the definition of 'marine transport' in s 164(7) to include freshwater. That same definition, which 'includes transport by vessels in or on freshwater', while not an exhaustive definition because it is extending the ordinary meaning of 'marine' to include an association not only with sea water but also with fresh water, nevertheless refers to transport by vessels.

And further at paragraph 32 that: In the Tribunal's opinion, the key to the meaning of "marine transport" lies in the meaning of the word "transport". The Concise Macquarie Dictionary (3rd edition 1988) lists as the sixth meaning of transport: 6. a means of transporting, as a ship, truck or plane used for transporting soldiers or military stores, or convicts. The first meaning of transport in the Oxford English Dictionary is: 1. the action of carrying or conveying a thing or person from one place to another, conveyance. The use of the word "transport" in the phrase "marine transport" suggests a conveyance - something which does the conveying - a vehicle or vessel or aircraft which moves through its particular medium (land, water, air) carrying a thing or person. The medium in this case is, of course, water. Thus, ... "marine transport" should in this instance be interpreted as meaning the act of conveying a thing...

In Port of Brisbane Corporation v, Deputy Commissioner of Taxation (2004) FCA 1232; (2004) 57 ATR 545, the Federal Court considered that the construction of the legislation adopted by the Tribunal in Port of Brisbane in paragraph 32 of its decision was correct. That paragraph states (in part): ...Thus, in the Tribunal's opinion, "marine transport' should in this instance be interpreted as meaning the act of conveying a thing or a person from one place to another through or over water using some kind of vessel or vehicle.

Justice Moore considered that the Tribunal did not misconstrue paragraph 164(1)(ac) of the Customs Act and that it was open to the Tribunal in applying this construction to the facts of the case to find that diesel fuel used in dredging operations is not a use in marine transport.

His Honour stated: ... it was open to the Tribunal to conclude that the use of diesel for the immediate purpose of retrieving spoil from the bed of the river was not a use 'in marine transport' while accepting that the movement of the self propelled dredges to and from locations where dredging was undertaken (and from port to port) and from those locations to points where spoil was discharged did involve such a use.

In this case there is no conveyance by the trailer suction hopper dredges while they are involved in dredging activities. The movement of the dredges, together with the operations of the material extraction and pump ashore equipment, form a fundamental part of the dredging activities and cannot be said to involve the transportation of the dredged material.

Accordingly, the operations of the trailer suction hopper dredges while dredging material from the bottom of the river are not 'marine transport' as defined in subsection 164(7) of the Customs Act for the purposes of the diesel fuel rebate scheme.