Issue
Is a licence holder required to continue to keep their records in accordance with a direction issued under section 50 of the Excise Act 1901 even after their licence expires or is cancelled?
Decision
Yes. A licence holder is required to continue to keep their records in accordance with a direction issued under section 50 of the Excise Act even after their licence expires or is cancelled.
Facts
A person is issued a manufacturer's licence under Division 2 of the Excise Act.
The Commissioner issues a direction under section 50 of the Excise Act (section 50 direction) requiring the licensed manufacturer to keep particular records for five years.
The person's licence expires or is cancelled.
Reasons for Decision
Subsection 50(1) of the Excise Act empowers the Commissioner to direct a licensed manufacturer (or proprietor of an approved place) to keep particular records for a specified time and produce the records to an officer on demand. 50(1) A licensed manufacturer, and a proprietor of an approved place, shall: (a) keep such records, and furnish to the CEO such returns, as the CEO directs; (b) retain any records so kept for such period as the CEO directs; and (c) on demand by an officer, produce the records to the officer. ...
In this instance, the taxpayer received a section 50 direction when their licence was granted. The direction set out the records that the taxpayer was required to keep records, and specified that the records were to be retained for five years.
The taxpayer's licence subsequently expired, or was cancelled under section 39L of the Excise Act.
Although section 50 requires a 'licensed manufacturer' to comply with a direction issued by the Commissioner, and a person whose licence expires or is cancelled is no longer a licensed person, the direction continues to apply to the former licensed manufacturer insofar as he/she continues to hold records specified in their section 50 direction that relate to their former activities as a licensed manufacturer.
The importance of licensed manufacturers keeping records is illustrated in a number of provisions throughout the Excise Act. For example, paragraph 39G(j) states that a licence may be suspended if the licence holder is not keeping proper books of account or records to enable the Chief Executive Officer of Customs (CEO) adequately to audit those books or records. (Certain other requirements must be satisfied where the licence is a producer licence or dealer licence). Further, section 39A enables the Commissioner to refuse to grant a licence where the applicant would not be able to keep proper books of account or records to enable the CEO adequately to audit those books or records (once again, subject to certain additional requirements in the case of producer or dealer licences).
By setting a time limit of 5 years for the retention of records, the Commissioner ensures his ability to audit the client's affairs at a time convenient to him so as to ensure the client has paid all excise duty properly payable.
If, in fact, the direction issued under section 50 ceased to have effect once a client's licence expired or was cancelled, the Commissioner would be unable to subsequently review the client's records with a view to determining whether the correct amount of duty had been paid, as the client would no longer be required to retain their records. This would defeat the purpose of the section 50 direction.
It follows that a client is required to continue to hold records specified in a section 50 direction for the duration of the time period specified in the direction, even though their licence has expired or been cancelled.