Excise: manufacturer's licence - refuse an application to renew a licence

Can the Commissioner of Taxation (CEO) refuse an application to renew a licence to distil spirits under subsection 22(1) of the Distillation Act 1901 on the basis that refusal is necessary to protect the revenue?

Yes. The CEO can refuse an application to renew a licence to distil spirits under subsection 22(1) of the Distillation Act on the basis that refusal is necessary to protect the revenue.

An excise client is the holder of a licence to distil spirits under subsection 22(1) of the Distillation Act.

The licensee has been charged with offences under the Excise Act 1901 .

The offences include non-payment of duty on excisable goods which the licensee delivered for home consumption.

The client has applied for renewal of the licence.

After due consideration of all relevant factors, the Commissioner is of the view that refusal of the client's licence application is necessary in order to protect the revenue.

Licences granted under the Distillation Act remain in force until 31 December following the date on which the licence is granted.

Subsection 22(1) of the Distillation Act states: Licences may be renewed by the CEO upon an application for renewal before the expiry of the licence sought to be renewed and on payment of the annual licence fee.

Subsection 33(2A) of the Acts Interpretation Act 1901 states: Where an Act assented to after the commencement of this subsection provides that a person, court or body may do a particular act or thing and the word "may" is used, the act or thing may be done at the discretion of the person, court or body.

In Gribbles Pathology (Victoria) Pty Ltd v. The Minister for Health and Aged Care [2000] FCA 1596 ( Gribbles Pathology ), the use of the word "may" in the context of the Minister's power to grant a licence under section 23DND of the Health Insurance Act 1923 (Cth) was considered.

In that case, Finn J states at page 10 of the judgement that, in accordance with section 2 of the Acts Interpretation Act, the rule of construction in section 33(2A) of the Acts Interpretation Act applies to all Commonwealth Acts, except insofar as the contrary intention appears. Further, at page 12 of the judgement, Finn J (citing Ward v. Williams [1955] 92 CLR 496 at 505) states that there is a prima facie presumption that, '...permissive or facultative expressions [such as "may"] operate according to their ordinary natural meaning'.

The presumption that the use of the word 'may' in subsection 22(1) of the Distillation Act is permissive as opposed to mandatory is supported by subsection 20(1) and section 23 of the Distillation Act, both of which imply that the CEO has the discretion to refuse an application to renew a licence. Subsection 20(1) and section 23 of the Distillation Act respectively state (emphasis added): The Collector (CEO) if satisfied that the application ought to be granted may grant a licence to the applicant, but if the application is refused the licence fee shall be returned to the applicant. ... The Collector may require the applicant for the renewal of a licence to give fresh security, and if fresh security is not given accordingly may refuse to renew the licence .

Considering the use of the word 'may' in the context of subsection 22(1) of the Distillation Act, in the broader context of the Distillation Act and in the absence of any intention to the contrary, it follows that the use of the word 'may' in subsection 22(1) is permissive and, therefore, the CEO may choose not to renew a licence.

Section 23 of the Distillation Act, set out above, provides an express ground for refusing an application to renew a distiller's licence. However, in line with the decision in Gribbles Pathology , the existence of an express refusal provision in the Distillation Act does not mean that no other ground for refusal exists. Finn J, in considering a specific refusal provision in the Health Insurance Act, states at page 13 of the judgement: ...I am not satisfied that the express refusal provision contained in s23DND(6) carries with it the implication that no other ground of refusal exists...The subsection can, I consider, properly be said to identify a specific instance where refusal can occur and for which Parliament has considered it appropriate to make express provisions because of its obvious significance to the policies being pursued in the legislative scheme. Subsection (6) exemplifies a reason for refusal. It does not exhaust those reasons.

In terms of the factors to which the CEO can have regard in deciding whether to refuse an application to renew a distiller's licence, the principle formulated by Mason J in Minister for Aboriginal Affairs v. Peko-Wallsend Ltd (1986) 162 CLR 24 at 39-40 applies: What factors a decision-maker is bound to consider in making the decision is determined by construction of the statute conferring the discretion...If the relevant factors - and in this context I use this expression to refer to the factors which the decision-maker is bound to consider - are not expressly stated, they must be determined by implication from the subject matter, scope and purpose of the Act.

Further, subsection 15AA(1) of the Acts Interpretation Act states: In the interpretation of the provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.

The object or purpose of the Distillation Act is not expressly stated in the Act itself. However, it can be implied from the provisions of the Act and the regulatory regime within which it operates.

The High Court case of Maher v. Musson 52 CLR 100 dealt specifically with the Distillation Act. In accordance with the joint judgement of Evatt and McTiernan JJ in that case, it is clear that the object or purpose of the Distillation Act is, '...to prevent any evasion of duty'.

The meaning of 'necessary to protect the revenue' was considered by Deputy President Forgie in Martino v. Australian Taxation Office [2002] AATA 1242. Commencing at paragraph 51 of the judgement in that case she said: 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 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)

Liability to duty in respect of distilled spirits is imposed by the interaction of a number of parts of the Excise Act with the Distillation Act.

Section 6 of the Distillation Act defines spirits as including "any liquor on which, under the name of spirits, any duty of Excise is imposed by the Parliament, whether the liquor is distilled or made or in any stage of distillation or making".

Under subsection 54(1) of the Excise Act, the licensed manufacturer of excisable goods is liable to pay to the CEO excise duty in respect to of those goods.

Paragraphs 8(2)(a) and 8(2)(c) of the Distillation Act expressly provide that a reference to a manufacturer in the Excise Act shall be read as a reference to a distiller, and that a reference to excisable goods in the Excise Act shall be read as a reference to spirits.

Upon consideration of this, the object of the Distillation Act, '...being to prevent any evasion of duty' can also be said to be protecting the revenue.

Therefore, the CEO is able to refuse an application to renew a licence to distil spirits under subsection 22(1) of the Distillation Act on the basis that refusal is necessary to protect the revenue.