Issue
Is a brewery (Brewery Y) 'legally and economically independent', for the purposes of paragraph 2AB(a) of the Excise Regulations 1925 (Excise Regulations), of another brewery (Brewery X) when the entity (the brewer) that owns Brewery Y previously owned Brewery X but the ownership was not concurrent?
Decision
Yes. Brewery Y is 'legally and economically independent' of Brewery X, for the purposes of paragraph 2AB(a) of the Excise Regulations, because the brewer did not hold Brewery X and Y at the same time.
Facts
The brewer is a company. The company is not a subsidiary of another company and does not have any subsidiary companies.
The brewer sold Brewery X to an unrelated party.
The brewer surrendered its excise manufacturer's licence in respect of Brewery X.
After the sale of Brewery X, and in the same financial year as the sale of Brewery X, the brewer established Brewery Y at a different site and commenced brewing.
Reasons for Decision
Regulation 2AB of the Excise Regulations (Regulation 2AB) defines a 'microbrewery' as a brewery that includes the following characteristic: (a) it is legally and economically independent of any other brewery;...
Subregulation 2(1) of the Excise Regulations defines the term 'brewery', unless the contrary intention appears, as having the meaning given by section 77A of the Excise Act 1901 (Excise Act).
Section 77A of the Excise Act defines 'brewery' as: brewery means a factory in respect of which a person is licensed to manufacture beer.
'Factory' is defined in section 4 of the Excise Act as 'the premises on which any person is licensed to manufacture excisable goods'.
Regulation 2AB was inserted by Excise Amendment Regulations 2000 (No. 7) and the explanatory statement to those regulations (Explanatory Statement) explains 'legally and economically independent' as follows: ... a brewery that is a subsidiary (within the meaning of Corporations Law) of another brewery, is not legally independent and therefore cannot be a microbrewery. Additionally a brewery cannot be an economically independent microbrewery if its operations are subsidised by another brewery.
The use of the word 'brewery' in this context in the Explanatory Statement is not consistent with the meaning of 'brewery' in the Excise Act. A brewery, which is a place, cannot be a subsidiary of another place. The explanation in the Explanatory Statement only makes sense if it is read as '... a brewery that is operated by an entity that is a subsidiary (within the meaning of Corporations Law) of another entity that operates a brewery...'.
As such, a brewery would not be considered to be legally independent of another brewery for the purposes of Regulation 2AB in the following circumstances: • a brewery is owned by an entity, which is not a body corporate, that holds another/other breweries, or • a brewery is owned by an entity, which is a body corporate, and is related to another/other breweries through a holding company.
Whether a brewery is economically independent is a question of fact, to be determined according to the circumstances of each case.
In this case, the brewer did not hold Brewery X and Y at the same time as they established Brewery Y after the sale of Brewery X. As such, Brewery Y cannot be legally or economically related to a brewery that the brewer did not hold at the time they established and commenced operations at Brewery Y.
Accordingly, Brewery Y is 'legally and economically independent' of Brewery X for the purposes of paragraph 2AB(a) of the Excise Regulations.