Tobacco Producer Licence: conditions that relate to the control and security over the tobacco produced

Can the Collector impose conditions on a tobacco producer licence under sections 39D and 39DA of the Excise Act 1901 that relate to the control exercised over the licensed premises by the licensee or a person participating in the management or control of the licensed premises on the basis that they are necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts?

Yes, the Collector can impose conditions on a tobacco producer licence under sections 39D and 39DA of the Excise Act that relate to the control exercised over the licensed premises by the licensee or a person participating in the management or control of the licensed premises on the basis that they are necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts.

The Collector is considering imposing conditions on a tobacco producer licence that relate to the requirement that the producer maintain control, or ensure a person participating in the management or control of the licensed premises maintains control over the licensed premises at all reasonable times during the tobacco producing season.

A tobacco producer is required to complete an application for a licence to produce tobacco. As part of the application process an applicant is required to provide details of their business and the associates that will have a role in the proposed tobacco producing business, and details of all individuals that will participate in the management or control of the business.

All of the following legislative references are made to the Excise Act.

Section 28 provides that a person cannot produce material that is tobacco seed, tobacco plant or tobacco leaf unless they hold a producer licence.

Producer licences are issued under section 39A.

Subsection 39D(3) allows the Collector to impose conditions on a licence that he or she considers are necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts. Under section 39DA the Collector may, on his or her own initiative, vary or revoke a condition of a licence that was specified under subsection 39D(3). The Collector may also impose an additional condition.

Section 4 provides that 'Collector' means the Commissioner of Taxation or an authorised person. Section 4 states that 'Excise Acts' means the Excise Act and any instruments (including rules, regulations or by-laws) made under the Excise Act, or any other Act and any instruments (including rules, regulations or by-laws) made under that Act relating to excise in force within the Commonwealth or any part of the Commonwealth.

The term 'necessary for the protection of the revenue' was considered in Re Francesco Martino Applicant v. Australian Taxation Office Respondent (2002) AATA 1242.

At paragraphs 51 and 52 of the judgement in that case Deputy President Forgie stated: 51...the ordinary meanings of the word 'protect' include 'keep safe, take care of', (The New Shorter Oxford English Dictionary, 3rd edition, 1993) and they would seem to be in the senses in which the word is used in the expression 'protect the revenue'. Mr Martino's licence may only be cancelled if it is necessary to take care of the money belonging to the Crown in right of the Commonwealth. That has the aspect of ensuring that the Commonwealth receives all that it should in the form of any excise that is ultimately payable in respect of tobacco originally grown on Mr Martino's farm and keeps all that it receives. It also has the aspect of not spending more of the Commonwealth's money than need be spent in carrying out its supervisory duties and responsibilities under the Act and in ensuring that the tobacco is not marketed illegally in Australia, and so avoid the payment of excise duty, if it cannot be marketed legally. 52 What is meant by the word 'necessary'? I have taken the view that the meaning adopted by Allen J in State Drug Crime Commission of NSW v. Chapman (1987) 12 NSWLR 447: 'As to the word "necessary" it does not have, in my judgment, the meaning of 'essential'. The word is to be subjected to the touchstone of reasonableness. The concept is one as to what reasonably is necessary in a commonsense way. As Pollock CB said in Attorney General v. Walker (1849) 3 Ex 242; 154 ER 833: "It may be stated as a general rule that those things are necessary for the doing of a thing which are reasonably required or which are legally ancillary to its accomplishment."' (page 452)

The following two elements for the protection of the revenue may be drawn from Deputy President Forgie's judgement: • firstly, the need to ensure that the Commonwealth receives all that it should in the form of any excise that is ultimately payable, and • secondly, that the Commonwealth does not have to incur excessive expenditure in ensuring clients' compliance with their excise responsibilities.

Subsection 39A(2) provides that the Collector may refuse to grant a licence if, amongst other things, the Collector is of the opinion that the applicant: • if a natural person, is not a fit and proper person • if a person who would participate in the management or control of the premises in relation to which the licence is sought is not a fit and proper person • is an associate of a person who is not a fit and proper person, or a fit and proper company • is a natural person, and does not have, nor has available to them, the skills and experience to carry out the activity that would be authorised by the licence, or • would not be able to keep proper books of account or records to enable the CEO adequately to audit those books or records.

In applying for a producer licence, the applicant must provide details of their business and the associates that will have a role in the proposed tobacco producing business, and details of all individuals that will participate in the management or control of the business.

In granting a producer licence the Collector has considered the abovementioned factors in connection with the applicant, their associates, and any other persons that will be involved in the tobacco producing business. The Collector has considered it appropriate to grant the licence based, in part, on the knowledge that people who are fit and proper and possess relevant skills will exercise control over the activities that take place on the licensed premises. If in fact there is a lack of control by these persons over the premises, the Collector will have less confidence that the revenue will be protected, and that the Excise Acts will be complied with.

Therefore, the licensee, and the individuals identified in the application for the tobacco producer licence as having management or control of the business, must exercise effective control over the tobacco producing business at all reasonable times. This is particularly important during the tobacco production season.

It follows that the Collector can impose conditions on a tobacco producer licence under sections 39D and 39DA of the Excise Act that relate to the control exercised over the licensed premises by the licensee or a person participating in the management or control of the licensed premises on the basis that they are necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts.