Issue
Is the fuel used to conduct on-site manufacture in a vehicle and to unload the manufactured goods, integral to the operation of the vehicle under paragraphs 42(2)(b) and 42(2)(c) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?
Decision
No. The fuel used to conduct on-site manufacture in a vehicle and to unload the manufactured goods is not integral to the operation of the vehicle under paragraphs 42(2)(b) and 42(2)(c) of the EGCSA.
Facts
An entity operates a vehicle which has a gross vehicle mass (GVM) of more than 20 tonnes.
The vehicle is fitted with auxiliary equipment to manufacture explosives and to unload the explosives by pumping.
The vehicle is also fitted with several tanks and bins to transport the ingredients/goods which are used in the manufacture. For safety reasons the manufacture is conducted at the site where the explosives are to be used.
The vehicle's engine provides power to mix the ingredients/goods in the final step of manufacture and to pump the explosive where directed.
Reasons for Decision
Section 42 of the EGCSA details the circumstances when an entity will be entitled to an on-road credit for the use of diesel or alternative fuel in a registered vehicle that has a GVM of 20 tonnes or more.
Subsection 42(1) of the EGCSA provides that a claimant is entitled to an on-road credit if they purchase on-road diesel fuel or on-road alternative fuel for: (a) use in a registered vehicle that has a gross vehicle mass of 20 tonnes or more, or (b) incidental use in relation to such a vehicle.
However, the extent of entitlement is limited by subsection 42(2) of the EGCSA which requires that the fuel is for use in the carrying on of the entity's enterprise.
In this case, the vehicle is effectively a mobile manufacturing unit which operates (carries out the manufacture of explosives) at the place where the explosives are to be used. It is therefore not a vehicle for transporting passengers or goods under paragraph 42(2)(a) of the EGCSA.
Thus the entitlement to an on-road fuel grant is limited under paragraph 42(2)(b) of the EGCSA to the extent to which the relevant fuel is used in operating the vehicle on a road in Australia for the purpose of moving it: (i) to a place (whether or not on a road) where it is to operate; or (ii) from a place (whether or not on a road) where it has operated.
Paragraph 42(2)(c) of the EGCSA relevantly provides that entitlement includes the incidental use, or any other use, of the vehicle that is integral to operating the vehicle as mentioned in paragraphs 42(2)(b) of the EGCSA.
The use of fuel to manufacture explosives, and pump them from the vehicle, is not a use that is integral to moving the vehicle to or from the place where the manufacture of explosives is or was undertaken.
Consequently the use of the fuel is not integral to operating the vehicle as mentioned in paragraph 42(2)(b) of the EGCSA. There is no entitlement to the on-road grant for the use of the fuel.