Linfox Australia Pty Ltd and Commissioner of Taxation
[2012] AATA 517
•7 August 2012
[2012] AATA 517
Division TAXATION APPEALS DIVISION File Number(s)
2011/1053
Re
Linfox Australia Pty Ltd
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Mr S E Frost, Deputy President
Professor R Deutsch, Deputy PresidentDate 7 August 2012 Place Sydney The Tribunal sets aside the objection decision and remits the matter to the Commissioner for reconsideration on the basis that the fuel used to power and operate the Applicant’s refrigeration units is not fuel acquired “to use, in a vehicle, for travelling on a public road”.
....................[sgd]....................................................
Mr S E Frost, Deputy President
Catchwords
TAXATION – fuel tax credits – whether use of diesel fuel in refrigerated transport trailers answers description of fuel “to use, in a vehicle, for travelling on a public road” – decision under review set aside and remitted.
Legislation
Energy Grants (Credits) Scheme Act 2003
Fuel Tax Act 2006 ss 41-5, 41-20, 43-10Cases
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27
CIC Insurance Limited v Bankstown Football Club Ltd (1997) 187 CLR 384
IRG Technical Services Pty Ltd v Deputy Commissioner of Taxation [2007] FCA 1867; (2007) 165 FCR 57
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355REASONS FOR DECISION
Mr S E Frost, Deputy President
Professor R Deutsch, Deputy President7 August 2012
INTRODUCTION AND OUTLINE OF THE ISSUE
The Applicant, referred to in these reasons as “Linfox”, is the representative member of the Linfox GST group. On behalf of the group it claims fuel tax credits (FTC) under the Fuel Tax Act 2006 (FTA).
A dispute has arisen between Linfox and the Commissioner of Taxation in relation to Linfox’s FTC entitlements. The question for the Tribunal is whether Linfox’s FTC amount should be reduced by the amount of the road user charge (RUC) to take account of its use of diesel fuel in its refrigerated transport trailers. That depends on the narrow question whether fuel to be used for those purposes answers the description of diesel fuel “to use, in a vehicle, for travelling on a public road”. If it does answer the description then the FTC amount will be reduced, as the Commissioner submits. If not, then no reduction to the FTC amount is required.
We have concluded that the fuel used in the refrigerated trailers does not answer the relevant description. It is not for use “for travelling on a public road” but for refrigeration purposes. The Commissioner will need to re-assess Linfox so as to increase the net FTC allowed. We will explain why.
THE LEGISLATION
Excise duty is payable on diesel fuel manufactured or produced in Australia. The rate of duty is currently 38.143 cents per litre.
However, and subject to some exceptions, the FTA provides a “fuel tax credit” for entities that acquire diesel fuel for use in carrying on their enterprise: s 41-5(1) of the FTA. The amount of the credit is, generally, the full amount of duty payable on the fuel.
The amount of the credit is reduced if s 43-10(3) of the FTA applies. That subsection provides:
To the extent that you acquire, manufacture or import taxable fuel to use, in a vehicle, for travelling on a public road, the amount of your fuel tax credit for the fuel is reduced by the amount of the road user charge for the fuel.
Subsection (3) is itself subject to the following proviso, in subsection (4):
However, the amount is not reduced under subsection (3) if the vehicle’s travel on a public road is incidental to the vehicle’s main use.
The only question in the current case is whether, in acquiring fuel for use in its refrigerated trailers, Linfox “acquire[s] … taxable fuel to use, in a vehicle, for travelling on public road” within s 43-10(3).
FACTUAL BACKGROUND
Linfox provides what it describes as “supply chain management solutions” in Australia and throughout South East Asia.
One of its major activities is the transportation of goods on behalf of its clients. For that purpose it owns and operates a large fleet of prime movers and trailers.
All the prime movers run on diesel fuel, and each of them has a gross vehicle mass (GVM) in excess of 4.5 tonnes. The goods to be transported by Linfox are carried in trailers, which are attached to the prime movers. The trailers are wheeled carriages, specifically designed to be towed by a prime mover, and cannot propel themselves.
Some of the goods Linfox transports are perishable, and must therefore be maintained at specified temperatures. Linfox uses refrigerated trailers for this purpose.
A refrigerated trailer is an insulated trailer to which a refrigeration unit is affixed. It is to be distinguished from a “reefer”, which is a refrigerated container. A reefer, unlike a refrigerated trailer, is not a “vehicle”, since it does not have wheels. A reefer needs to be placed onto a (flat) trailer if it is to be transported from one site to another.
The refrigeration units used by Linfox are specifically designed for use with an insulated trailer. The refrigeration units weigh between about 700 and 950 kg. The installation of a refrigeration unit involves cutting an aperture into an insulated trailer, and mounting the refrigeration unit at the aperture, by way of studs drilled into the trailer, so that the aperture is fully covered by the refrigeration unit. The installation process takes two people about five hours to complete.
The refrigeration units function either by an internal diesel powered mechanically driven compressor, or by an internal diesel engine generator that provides power to the compressor.
The supply of diesel to the refrigeration unit is always kept separate from the supply of diesel to the prime mover. Consequently, if the diesel supply to the refrigeration unit is exhausted, the unit will cease to function since it cannot draw diesel fuel from the fuel tanks located in the prime mover.
Refrigeration units can be removed from an insulated trailer, but this generally does not occur unless:
·there is a need to replace the refrigeration unit; or
·there is a need to replace the trailer, and the refrigeration unit is otherwise functioning.
A refrigerated transport trailer may be permanently converted to transport non-refrigerated goods by removing the refrigeration unit and covering the aperture on the insulated trailer by mounting a steel or fibre glass plate over it.
Typically, when preparing to transport perishable goods, Linfox will “pull down” the temperature of the empty trailer from the ambient air temperature to the temperature stipulated by the customer to maintain the quality of the goods to be transported. This “pulling down” is done either during the time the trailer is being towed by the prime mover to the loading site, or at the loading site. If it is done at the loading site, the trailer may or may not be attached to a prime mover.
While the trailer is waiting to be loaded, being loaded or waiting to be transported, the refrigeration unit will almost always be operating. While being loaded – which usually takes place at a site which is not on a public road – the trailer is commonly not connected to a prime mover.
Upon arrival at the designated destination, the refrigeration unit continues to operate and therefore continues to consume diesel fuel both while it is waiting to be unloaded and while it is being unloaded.
Significantly, the time during which loading and unloading takes place and the time during which the trailer is waiting to be loaded and unloaded can cover several hours, during which time the refrigeration unit will continue to operate using diesel fuel. Most commonly during these times the trailer is at a loading or unloading site which is not on a public road. Further, during those times the trailer is commonly not connected to a prime mover.
In some cases, the refrigeration unit can be operating for a day or longer while the trailer is parked, at a site which is not on a public road, and unattached to a prime mover, waiting for transportation to commence.
Refrigeration units are also subject to regular maintenance. During this process, the refrigeration unit will operate for about 30 minutes on diesel fuel while not on a public road and not attached to a prime mover.
THE CONTENTIONS OF THE PARTIES
Linfox contends that the fuel used to operate or power the refrigeration units is not fuel acquired “to use, in a vehicle, for travelling on a public road”. The Commissioner contends the opposite.
CONSTRUING THE STATUTE
It is well established that in construing the words of a statute one is to look to the words themselves and interpret them as the words appear but, in doing so, one should have regard to the overall context in which those words appear (see, in particular, Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 and Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355).
“Context” here is used in its widest sense to include, for example, the history of the legislative scheme, the existing state of the law and the mischief which the statute was intended to remedy (see, in particular, CIC Insurance Limited v Bankstown Football Club Ltd (1997) 187 CLR 384 and IRG Technical Services Pty Limited v Deputy Commissioner of Taxation [2007] FCA 1867; (2007) 165 FCR 57 at [21]).
However, whilst context remains important it must not be allowed to obscure the fact that primacy must at all times be given to the text of the statute. As was said in Alcan at [47], “historical considerations and extrinsic materials cannot be relied upon to displace the clear meaning of the text”.
THE MEANING BASED ON THE WORDS USED
The starting point therefore is the words used in the relevant statutory provisions. The relevant statutory provision here is s 43-10(3), which operates to reduce the fuel tax credit otherwise available under s 41-5(1) by an amount equal to the RUC where “you acquire … taxable fuel to use, in a vehicle, for travelling on a public road”.
The punctuation, in our view, is critical: the commas are plainly parenthetical, resulting in a meaning that is quite different from the same words without punctuation (“to use in a vehicle for travelling on a public road”). Under that alternative, the words “for travelling on a public road” modify the word “vehicle” rather than the expression “to use”.
But as the provision is expressed, it is clear that two conditions must be satisfied before s 43-10(3) is triggered: first, the fuel must be acquired to use in a vehicle; and second, the fuel must be acquired to use for travelling on a public road.
Linfox accepts that the refrigerated trailers are “vehicles”, and so the first condition is met. The critical issue is the second condition, and in particular the meaning of the word “for”.
The Oxford English Dictionary lists a number of meanings of the word “for” but of most relevance here is “with a view to; with the object or purpose of”. Similarly, the Macquarie Dictionary, which is perhaps more directly relevant today in an Australian context, gives as one of the meanings of the word “for”, the expression “with the object or purpose of”.
Based on those definitions, we consider that the only circumstance in which the second condition in s 43-10(3) is met, is the circumstance where fuel is acquired to use for the purpose of travelling on a public road.
That is plainly not the purpose for which the fuel under consideration here is acquired and used. It is acquired and used for an entirely different purpose: the purpose of refrigerating the cargo inside the refrigerated trailer.
It is not to the point that the fuel may – and, for most of the time, will – be consumed while the trailer is travelling on a public road. That is not the test. The question is not whether the fuel is for use “in travelling”, “while travelling” or “in the course of travelling”; it is whether the fuel is for use “for travelling on a public road”, and in our view it is clearly not.
Diesel fuel which is acquired for use in a Linfox refrigerated trailer, and which is stored in and extracted from a separate fuel tank dedicated specifically to that purpose, does not satisfy the second condition in s 43-10(3), and so does not lead to any reduction in the fuel tax credit.
It is not necessary to resort to s 43-10(4) to reach the conclusion that Linfox’s FTC amount does not need to be reduced in respect of the fuel used for powering and operating the refrigeration units.
THE MEANING BASED ON THE CONTEXT
A number of matters arise in terms of the statutory context in which the phrase “for travelling on a public road” is to be found.
First, it is instructive to compare the words of s 43-10(3) of the FTA with the words used in s 41-20 of the same Act.
Section 43-10(3) provides:
To the extent that you acquire, manufacture or import taxable fuel to use, in a vehicle, for travelling on a public road, the amount of your fuel tax credit for the fuel is reduced by the amount of the road user charge for the fuel.
In contrast, s 41-20 provides:
You are not entitled to a fuel tax credit for taxable fuel to the extent that you acquire, manufacture or import the fuel for use in a vehicle with a gross vehicle mass of 4.5 tonnes or less travelling on a public road.
It is significant, in our view, that the word “for” does not precede the phrase “travelling on a public road” in s 41-20 but it does in s 43-10(3). In other words, there is a clear intention emerging from s 41-20 to ensure that in the case of a light vehicle, the fuel tax credit is to be denied for all on-road applications of taxable fuel in the vehicle. That is not the case in s 43-10(3), where the use of the word “for” before the phrase “travelling on a public road” is evidently intended to narrow the reach of the provision, such that the RUC on taxable fuel is only imposed where the purpose is to propel the vehicle on a public road.
If indeed the legislature had intended to impose the RUC on all on-road applications of taxable fuel in heavy vehicles, then it would likely have used the same criterion for the operation of s 43-10(3) as it did for the operation of s 41-20. Instead, it inserted the word “for”, intentionally creating a different test and a different outcome.
Second, it is clear that the legislature intended that taxable fuel used to generate electricity would be entitled to a full fuel tax credit. Indeed, this represented a change from the previous regime which applied under the Energy Grants (Credits) Scheme Act 2003 which the FTA replaced.
In the case of fuel acquired for use in generating electricity for domestic use, including a caravan (which is a vehicle capable of travelling on public road), the entitlement would arise under s 42-5 of the FTA. In the case of fuel used to generate electricity for use in an enterprise, the entitlement would arise under s 41-5.
The recognition that a taxpayer carrying on an enterprise is to be entitled to a fuel tax credit for fuel used in generating electricity provides another explanation as to why s 43-10(3) is not expressed to apply to all applications of taxable fuel related to a vehicle, and in particular, fuel which is used to generate electricity for refrigeration purposes. In this context it is worth noting that the diesel fuel used by Linfox for the refrigeration units that are powered by electricity is, in fact, fuel used for the purpose of generating electricity to power the refrigeration unit.
Third, the conclusion that s 43-10(3) is directed only at fuel used to propel a heavy vehicle on a public road is supported by the purpose and method of calculation of the RUC.
The purpose of the RUC is to recover part of the cost of road construction and maintenance costs attributable to heavy vehicles (i.e. those with a GVM of more than 4.5 tonnes), with the remainder of the costs attributed to heavy vehicles being recovered through registration charges. Consistently with this, the RUC has always been calculated by reference to classes of vehicles which exclude refrigerated trailers. In other words, the charge has been calculated by reference only to the fuel used to propel heavy vehicles travelling on a public road. This was explained in the witness statement and the oral evidence of Anthony Paul Ockwell, an economist called as an expert by Linfox. We have not found it necessary to refer to his evidence in any detail, but we note that it is consistent with the conclusion we have reached, which is based on the language of the statute.
If the interpretation placed on s 43-10(3) by the Commissioner were accepted, it would have the result that the RUC would be collected once through the recovery of registration charges, and again through the reduction in the fuel tax credit necessitated by the inclusion, in the calculation of the RUC, of the diesel fuel used for the purposes of refrigeration.
CONCLUSION
The use of diesel fuel for powering and operating the refrigeration units is not a use “for travelling on a public road” – even while the trailer is in fact travelling on a public road. It follows that the “extent” to which s 43-10(3) of the FTA requires a reduction in Linfox’s FTC amount does not include the extent to which fuel is either for use, or actually used, by Linfox in powering and operating its trailer refrigeration units.
DECISION
The Tribunal sets aside the Commissioner’s objection decision, and remits the matter to the Commissioner for reconsideration on the basis that the fuel used to power and operate the refrigeration units is not fuel acquired “to use, in a vehicle, for travelling on a public road”.
I certify that the preceding 52 (fifty-two) paragraphs are a true copy of the reasons for the decision herein of Mr S E Frost, Deputy President, and Professor R Deutsch, Deputy President. ................[sgd]........................................................
Associate
Dated 7 August 2012
Date(s) of hearing 12 June 2012 Solicitors for the Applicant
Counsel for the Applicant
Deloitte Touche Tohmatsu Ltd
Mr M Richmond SC, Mr G Ng
Counsel for the Respondent Mr S Lloyd SC, Ms A Mitchelmore Solicitors for the Respondent ATO Legal Services
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