Excise: conditions of a periodic settlement permission

Is the Collector able to impose record keeping conditions under subsection 61C(3) of the Excise Act 1901 (Excise Act) in respect of a periodic settlement permission holder who does not hold any form of excise licence?

Yes. The Collector is able to impose record keeping conditions under subsection 61C(3) of the Excise Act in respect of a periodic settlement permission holder who does not hold any form of excise licence.

A holder of a periodic settlement permission (PSP holder) purchases and on-sells excisable goods.

The PSP holder orders and purchases the excisable products from a licensed manufacturer or storage licence holder (licensed entity).

The licensed entity sells the excisable goods to the PSP holder while the goods are still in the licensed entity's premises and while the goods are still under the Collector's control.

The licensed entity delivers the excisable goods to the PSP holder's customers without the PSP holder ever having physical possession of the goods.

The PSP holder does not hold any type of licence issued under section 39A of the Excise Act.

Under section 54 of the Excise Act, if the licensed manufacturer or owner of excisable goods enters those goods for home consumption, the licensed manufacturer or owner must pay excise duty to the Collector.

Under subsection 58(1) of the Excise Act, a licensed manufacturer or owner cannot deliver excisable goods for home consumption until the entry of those goods is passed by an officer.

However, subsection 61C(1) of the Excise Act states that the Collector may give permission to a person to deliver excisable goods for home consumption without entering those goods. This is called a periodic settlement permission (PSP). A PSP allows a person to deliver excisable goods into home consumption for a specified period and defer payment of duty for those goods until the end of the period.

Under subsection 61C(3) of the Excise Act the granting of a PSP may be: subject to the condition that the person to whom the permission is given complies with such requirements as are specified in the permission, being requirements that, in the opinion of the Collector, are necessary for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts.

The term 'necessary for the protection of the revenue' was considered in Re Francesco Martino Applicant v. Australian Taxation Office Respondent [2002] AATA 1242 (unreported, Deputy President Forgie, 29 November 2002) in relation to the cancellation of a producer licence under subsection 39L(1) and paragraph 39G(1)(m) of the Excise Act.

In this case, Deputy President Forgie held that the applicant'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'. This concept has two aspects: • ensuring that the Commonwealth receives all that it should in the form of any excise that is ultimately payable; and • 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 excisable product of the licence is not marketed illegally in Australia, thereby avoiding the payment of excise duty.

Deputy President Forgie also accepted the view adopted by Allen J in State Drug Crime Commission of NSW v. Chapman (1987) 12 NSWLR 447 that the term 'necessary' does not mean 'essential' and that 'the concept is one as to what is reasonably necessary in a commonsense way'.

Thus, when imposing requirements on a person who holds a PSP, the Collector considers whether those requirements are reasonably necessary in ensuring that the Commonwealth collects all the duty to which it is entitled and in minimising its expenses in carrying out its supervisory duties under the Excise Act. Alternatively, the Collector considers whether those requirements are reasonably necessary to ensure compliance with the Excise Acts.

Under section 50 of the Excise Act, a licensed manufacturer, and a proprietor of an approved place are required to: • keep such records, and furnish to the CEO such returns, as the CEO directs • retain any records so kept for such period as the CEO directs; and • on demand by an officer, produce the records to the officer.

A notice under section 50 of the Excise Act is an important mechanism in ensuring that licensed persons are able to account for excisable goods to the Collector's satisfaction, and in enabling the Collector to determine if the licence holder has paid the appropriate amount of duty and complied with their obligations under the Excise Acts.

In the present case, the PSP holder purchases excisable goods from a licensed entity. The PSP holder is therefore the owner of those excisable goods and arranges for delivery of those goods for home consumption to the end user. The PSP holder enters and pays duty (where applicable) on those goods at the end of its PSP.

As the PSP holder does not hold a storage or manufacturer licence, they are not subject to the record keeping requirements that the Collector requires of manufacturers and storage licence holders under section 50 of the Excise Act.

Therefore, it is appropriate for record keeping requirements similar to those imposed under section 50 of the Excise Act to be imposed on the PSP holder. By imposing such conditions, the Collector is better able to determine that the PSP holder is paying the appropriate amount of excise duty and is complying with the requirements of the Excise Acts.

The Collector therefore considers that it is necessary for the protection of the revenue, and to ensure compliance with the Excise Acts, to impose record keeping requirements as a condition on the PSP. The Collector considers these requirements are reasonably necessary to ensure that the Commonwealth collects all the excise duty to which it is entitled, while minimising its expenses in carrying out its supervisory duties under the Excise Act.