Storage licence and conditions that relate to the excisable goods stored

Can the Commissioner specify conditions, under subsection 39D(3) of the Excise Act 1901 , in a storage licence that relate to the goods and /or the ownership of the goods that may be stored at the premises specified in the licence?

Yes, the Commissioner can specify conditions in a storage licence that relate to the goods and /or the ownership of the goods that may be stored at the premises specified in the licence.

An entity has applied for a storage licence to store excisable goods.

A licensed manufacturer of excisable goods has contracted with the entity to store excisable goods of a particular kind.

The licensed manufacturer will deliver the goods into home consumption and therefore be liable for the excise duty payable on the goods.

The licensed manufacturer has secure stock control and record keeping systems.

Subsection 4(1) of the Excise Act gives the meaning of 'storage licence' as: storage licence means a licence granted under Part IV, the holding of which authorises the licence holder: (a) to keep and store goods that are: (i) excisable goods on which duty has not been paid; and (ii) of the kind specified in the licence; and at the premises specified in the licence; and (b) carry out at the premises activities of a kind specified in the licence in relation to those goods.

Under subsection 39A(1) of the Excise Act, which is in Part IV of the Act, the Commissioner may grant or refuse to grant a licence. One of the factors that the Commissioner can take into account in deciding whether to refuse to grant a licence is whether the applicant would be able to keep proper books of account or records to enable the Commissioner to adequately audit those books of account or records (paragraph 39A(2)(j) of the Excise Act).

Subsection 39D(3) of the Excise Act provides that the licence is subject to such conditions that the Commissioner considers 'to be necessary or desirable 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, ( Martino ) in the context of the suspension and cancellation of a tobacco producer's licence (also issued under Part IV of the Excise Act).

In considering the word 'necessary' DP Forgie referred to Allen J in State Drug Crime Commissioner of NSW v. Chapman (1987) 12 NSWLR 447 who stated: 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:

DP Forgie, in Martino also considered the word 'protect' and stated at paragraph 51, in part: 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 ".

In Pemberton Brewing Company Pty Ltd as Trustee for the Pbc Unit Trust Applicant v. Commissioner of Taxation [2011] AATA 11, CM Walsh also considered the phrase 'necessary for the protection of the revenue' for the purposes of the Excise Act. In referring to Martino , CM Walsh, at paragraph 45, summarised DP Forgie's conclusions as follows: DP Forgie concluded by finding the phrase 'necessary for the protection or the revenue' meant ensuring that the Commonwealth receives all that it should in the form of any excise that is ultimately payable in respect of excisable goods.

It can be drawn from the discussions in the abovementioned cases that the Commissioner may impose such conditions of a storage licence that are reasonably necessary to ensure that Commonwealth receives the duty payable on excisable goods.

In accordance with the definition of storage licence in subsection 4(1) of the Excise Act, a storage licence must specify the kind of excisable goods that may be stored in the premises specified. The kind of goods specified in the licence could be very general, such as 'any excisable goods' or quite specific, such as 'beer'.

In this case, the records of the manufacturer are an important aspect of the assurance that the Commissioner will have that the correct amount of duty will ultimately be paid. It follows that a condition in a storage licence that limits the excisable goods which may be stored to those which are owned by the specific manufacturer is a condition reasonably necessary to ensure that Commonwealth receives the duty payable on excisable goods.

Similarly, a condition to a storage licence that states that only those excisable goods of a type, which may be more specific than the kind of goods specified as per the definition of storage licence, manufactured by the licensed manufacture is a condition reasonably necessary to ensure that Commonwealth receives the duty payable on excisable goods.

Hence, conditions to a storage licence which limit: • the goods to those owned by a specified entity; or • the type of excisable goods that may be stored

are conditions necessary and desirable for the protection of the revenue and to ensure compliance with the Excise Acts and therefore the licence can be subject to those conditions on a storage licence under subsection 39D(3) of the Excise Act.