Rebmik Contractors Pty Ltd and Commissioner of Taxation

[2008] AATA 335

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 335

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/1553

TAXATION       APPEALS         DIVISION		)
Re		REBMIK CONTRACTORS PTY LTD

Applicant

And COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Mr Egon Fice, Member

Date24 April 2008  

PlaceMelbourne

Decision The Tribunal affirms the reviewable decisions.

(sgd) Egon Fice

Member

CATCHWORDS – Energy Grants Scheme – off-road diesel fuel – location test – purpose test – reliance on ATOID - penalty

Acts Interpretation Act 1901 s 13

Customs Act 1901 s 164

Diesel Fuel Taxes Legislation Amendment Bill 1982

Energy Grants (Credits) Scheme Act 2003 s 53

Energy Grants (Credits) Scheme Bill 2003

Excise Act 1901 s 78A

Tax Administration Act 1953 ss 284-75

Collector of Customs, Tasmania v Flinders Island Community Association (1985) 7 FCR 205

Collector of Customs v Rottnest Island Authority (1994) 48 FCR 177

Ergon Energy Corp Limited v Commissioner of Taxation (Cth) (2006) 153 FCR 551

K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 60 ALR 509

Metropolitan Gas Co v Federated Gas Employees’ Industrial Union (1924) 35 CLR 449

Port of Brisbane Corporation v Deputy Commissioner of Taxation (2004) 81 ALD 549

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355

Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

REASONS FOR DECISION

24 April 2008   Mr Egon Fice, Member      

1.      On 2 March 2005 Rebmik Contractors Pty Ltd (Rebmik) lodged an Energy Grants Credits Scheme claim form with the Commissioner of Taxation (the Commissioner).  Rebmik claimed an entitlement to an off-road credit for diesel fuel used in excavation work for the construction of an aged-care facility and a medical school.  It also claimed for the use of diesel fuel in road transport but that part of the claim is not the subject of this proceeding. 

2.      By Notice of Assessment dated 10 March 2005, the Commissioner assessed Rebmik for a rebate of $10,403.88.

3.      The Commissioner conducted an audit of Rebmik’s Energy Grants Scheme claim and on 24 October 2006, issued an amended claim assessment disallowing Rebmik’s claim for $10,403.88.  On 30 December 2006, Anthony Richard’s Consulting Pty Ltd, on behalf of Rebmik, lodged an objection to the Commissioner’s amended assessment.  On 27 February 2007 the Commissioner notified Rebmik that it had disallowed its objection (the objection decision).  Rebmik disagrees with the Commissioner’s objection decision and seeks a review of that decision.

4. There was no dispute between the parties about the volume of diesel fuel Rebmik claimed to have used. The only issue before the Tribunal is whether the diesel fuel purchased by Rebmik and used in its excavation activities in the course of constructing the aged-care facility and the medical school created an entitlement to off-road credits in accordance with s 53(4)(c) of the Energy Grants (Credits) Scheme Act 2003 (Energy Grants Act).

RELEVANT BACKGROUND

5.      The aged-care facility excavation work was carried out on vacant land which was part of the Redland Hospital site.  When constructed, the aged-care facility provided occupants with nursing care, minor medical care and occupational therapy etc.  It was envisaged that residents requiring major medical care would be transferred to the hospital.  The aged-care facility was not physically connected to the hospital; although a covered service link/walkway was constructed between the two. 

6.      The second project involved excavation work for the construction of the Griffith Centre for Medicine and Oral Health.  It was designed to accommodate Griffith University’s Medical School and School of Oral Health, providing students and staff with world class clinical, laboratory and associated teaching and research facilities.  It was constructed on land owned by Queensland Health (a State Government statutory authority) and leased to Griffith University for a term of 30 years.  The Griffith Centre was constructed across the highway from the Gold Coast Hospital, and the two structures were connected via a bridge.

7.      Following an audit of Rebmik’s Energy Grants Credits Scheme claim, the Commissioner decided that the diesel fuel used by Rebmik in the construction of the two facilities was not eligible for credits under the Energy Grants Act.  It decreased Rebmik’s entitlement by the 27,276 litres claimed and issued an amended assessment.  In addition, the Commissioner noted that the statutory administrative penalty would not be remitted and therefore Rebmik was liable for a penalty of $2,600.97.  The Commissioner also informed Rebmik that the general interest charge, calculated the rate of 13.19 per cent per annum, was imposed.  The Commissioner issued an amended assessment in accordance with its findings on the audit. 

8.      On 30 December 2006 Anthony Richards Consulting, on behalf of Rebmik, lodged an objection to the Commissioner’s amended assessment.  In its objections, Anthony Richards Consulting complained about the fact that the Commissioner had published an Australian Taxation Office Interpretive Decision ATOID 2006/280, on 13 October 2006.  It claimed that the Commissioner had relied on this ATOID in making a decision, some 19 months after the claim was lodged.  However, nothing was made of this point at the hearing of the matter.  Nor could it, because the level of protection provided by compliance with an ATOID could not possibly have applied to Rebmik as the ATOID was not in existence at the time it made the claim.  Anthony Richards Consulting also objected to the imposition of a penalty by the Commissioner.  It claimed that Rebmik had taken reasonable care when lodging its claim and that it had done so using the ATO Guidelines, there being no legal precedent available to it. 

9.      On 27 February 2007 the Commissioner issued to Rebmik a Notice of Decision on Objection in which he disallowed Rebmik’s objection.  The Commissioner decided that Rebmik was not entitled to an Energy Grant for the purchase and use of diesel fuel in respect of the earthworks activities for the construction of the aged care facility and the medical school; that Rebmik was liable for an administrative penalty for lack of reasonable care when making the claim for an Energy Grant; and that Rebmik was liable for the general interest charge imposed on its account. 

THE LEGISLATIVE SCHEME

10. The Energy Grants Credit Scheme, upon the introduction of the Energy Grants Act, replaced the Diesel Fuel Rebate Scheme (DFRS) and the Diesel and Alternative Fuels Grants Scheme. The DFRS had it legislative authority in s 78A of the Excise Act 1901 (Excise Act) and s 164 of the Customs Act 1901 (Customs Act).  As is stated in the explanatory memorandum to the Energy Grants (Credits) Scheme Bill 2003 (the Bill), Part 4 of the Bill reproduces the entitlement provisions for the DFRS from the Customs Act and the Excise Act for the purposes of the new scheme. The explanatory memorandum also states that except for some changes, the Government’s intention was that the scope of the off-road credit would be the same as that under the DFRS. The Excise Act provided for a rebate in respect of domestically produced fuel. Section 78A(1) of the Excise Act, insofar as it describes eligible entitlements for of use of diesel fuel at certain premises, is in identical terms to that set out in s 53(4) of the Energy Grants Act. Relevantly, s 53(4) provides:

4)Each of the following is a use that qualifies:

(a)…

(b)…

(c)use at a hospital or nursing home or at any other institution providing medical or nursing care;

(d)use at a home for aged persons. …

USE AT CERTAIN PREMISES

11. Rebmik contended that in order to satisfy the provisions of s 53(4)(c) of the Energy Grants Act, the diesel fuel must have been used within the grounds of a hospital or home for aged persons, that is, it must satisfy the location test.  Furthermore, Rebmik contended that s 53(4)(c) does not pose any restrictions on the purpose for which diesel fuel may be used at a hospital or at a home for aged persons. Neither of the parties referred me to s 53(4)(d), although it could equally be applicable to the aged-care facility. Although the Commissioner contended that the Griffith Centre could not be described under s 53(4)(c), because it is a teaching establishment, it is, in my view, reasonable to anticipate that although it is a teaching facility, it will provide some medical care in the course of its training activities.

12. Rebmik also contended that, unlike the other sections of the Energy Grants Act, s 53(4)(c) (and (d) for that matter) does not impose any restrictions on the purpose for which diesel fuel may be used at the facilities in question.

13.     The Commissioner, on the other hand, directed my attention to the Diesel Fuel Taxes Legislation Amendment Bill 1982, and in particular, the second reading speech.  It explained that:

… The users of diesel fuel in the categories defined in clause 5 of the Bill who use the fuel for ‘off-road’ purposes are eligible for a rebate of the duty paid on the diesel fuel used in their operations … The categories I have just referred to relate to the use of diesel fuel in agriculture, mining, forestry and fishing industries, in domestic premises, hospitals, aged persons homes and nursing homes …

14. As the Commissioner correctly contended, the relevant subsections of s 53(4) of the Energy Grants Act mirror the related provisions of the DFRS, and in particular, s 78A(1) of the Excise Act. According to the Commissioner, that second reading speech, and in particular reference to in domestic premises, hospitals, aged persons homes and nursing homes, makes it clear that eligible diesel fuel should be used in the operations of those relevant premises. The Commissioner recognised the distinction in the language used between s 53(4)(a) and (b) on the one hand, and (c) and (d) on the other. However, he contended that use of the preposition at when used in the corresponding provisions in the Excise Act and the Customs Act has been judicially held to impose the requirements for a close connection to be made good as between the use to which the diesel fuel is put by the purchaser and, for example, the premises referred to in s 53(4) of the Energy Grants Act.

15. The Commissioner contended that the diesel Fuel Rebate Scheme Eligibility Guidelines published by the Commissioner may have some relevance in assisting in the interpretation of s 53(4). However, in my view, to use the guidelines in aid of interpreting a statutory provision is impermissible. Moore J made that clear in Port of Brisbane Corporation v Deputy Commissioner of Taxation (2004) 81 ALD 549. In that case, the Tribunal assumed that an Excise Bulletin constituted departmental policy and the Tribunal, in accordance with the decision in Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 noted that, in the absence of a statutory obligation to do so, it would ordinarily apply that policy unless it is unlawful or its application would cause injustice, or there are other reasons for not applying it in the circumstances of the particular case. Moore J said, at 550:

The decision of Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 concerned a deportation order under the Migration Act 1958 (Cth). The then president of the tribunal, Brennan J, discussed the role of ministerial policy in the exercise of the discretionary power to deport. His Honour concluded that while the tribunal was not bound to apply that policy, it should only depart from it cautiously and sparingly, particularly if parliament had in fact scrutinised and approved the policy. That case does not suggest (nor does any other case of which I am aware) that guidelines or policy documents which express a view about the scope or meaning of legislation provide a tool or aid in construing the legislation.

Moore J indicated that the Bulletin in question was no more than an expression of opinion of what the relevant legislation meant after the legislation was enacted.  In relying on the material to assist it in determining the scope or the meaning of the legislation, the Tribunal erred in law.

16.     It is clear to me that in order to properly understand what Parliament intended by the words used in s 54 of the Energy Grants Act, I must apply the statutory and common law rules of statutory interpretation.  I must strive to give meaning to every word in that section (see High Court of Australia decision in ProjectBlue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355) and in examining the words and phrases used in that section, I must necessarily adopt a contextual approach. As Mason J said in K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 60 ALR 509 at 514:

… to read the section in isolation from the enactment of which it forms a part is to offend against the cardinal rule of statutory interpretation that requires the words of a statute to be read in their context …

I need to examine Part 4 of the Energy Grants Act in the context in which it appears in the Act.  As Isaacs and Rich JJ said in Metropolitan Gas Co v Federated Gas Employees’ Industrial Union (1924) 35 CLR 449, at 445:

… every passage in a document must be read, not as if it were entirely divorced from its context, but as part of the whole instrument. …

17. As I have set out above, in interpreting Part 4 of the Energy Grants Act, which deals with entitlements to off-road credits, I need to look at the words used in s 53(4)(c) and (d) in the context of Part 4 generally, and more specifically, in the context of all of the subsections set out under s 53. The heading to s 53, while it may seem to be instructive, cannot be taken to be part of the Energy Grants Act (see s 13 of the ActsInterpretation Act1901).  

18. Section 53(1) provides that a person registered under s 9 of the Product Grants and Benefits Administration Act 2000 is entitled to an off-road credit if that person purchases or imports into Australia off-road diesel fuel for use by the registered person that qualifies (in accordance with the following subsections). Sections 53(2) and (3) provide that use in mining operations and in rail transport are qualifying uses. Neither of those subsections contains a locational limit.  In other words, qualifying activities can take place at any location in Australia. 

19. Sections 53(4)(a) and (b) contain two tests. The diesel fuel purchased to satisfy those subsections must be used at particular premises to generate electricity for purposes limited by each subsection. Section 53(4)(c) and (d) specify the locations at which the diesel fuel must be used but do not limit the purposes for which that fuel is used. Section 53(5)(a) and (b) specifies the type of place at which the use must take place and also specifies purposes at that place. Section 53(5)(c) does not specify the place at which the diesel fuel is to be used but merely specifies the purpose for which it is to be used. Similarly, s 53(6) simply requires the use to be for specific purposes. The final subsection s 53(7), refers to off-road diesel fuel of a specific kind as set out in the regulations and for a use which is not an internal combustion engine. No location is specified.

20. The problem with Rebmik’s claim is that it has merely looked at s 53(4)(c), without referring to the other subsections of s 53, and come to the conclusion that the only test that it is required to meet to satisfy that subsection is to satisfy the location test. In other words, as long as the diesel fuel used by Rebmik could be said to be used at a hospital, nursing home or any other institution providing medical or nursing care, it satisfied the requirements of s 53(4). For that reason, it directed my attention to the decisions in Collector of Customs, Tasmania v Flinders Island Community Association (1985) 7 FCR 205 and Collector of Customs v Rottnest Island Authority (1994) 48 FCR 177. The Federal Court in both of those cases was primarily concerned with the location question, given that the generator used to provide electricity to the residential premises in question was not located in or on those premises. Nevertheless, that did not preclude the generators in question from being described as being used at the residential premises in question. Although the Full Court of the Federal Court in Rottnest Island came to a different decision on the facts of that case to that held by the Full Court in Flinders Island, it nevertheless agreed with what the Full Court said in Flinders Island regarding location.  What the Full Court in Flinders Island said, at 213, was that:

…  Upon this approach the word [at] should be taken to require a close connection between the use and the residential premises but not use within the residential premises. What is a sufficiently close connection must depend upon the circumstances of the particular case (cf Dampier Mining Co Ltd v Federal Commissioner of Taxation (1982) 63 FLR 158) applied to the policy evinced by the legislation. … It is consistent with that policy, and the use of the word “at”, that the generation takes place in physical proximity to the supplied houses and that the resultant electricity be used only at premises falling within the definition of “residential premises”.

21. Therefore, the argument put by Rebmik regarding location, carries some weight. However, as the Commissioner submitted, that is not the only test to establish entitlement to off-road credits. One needs to return to s 53(1) of the Energy Grants Act which provides that, subject to conditions and restrictions specified in the regulations, a person is entitled to an off-road credit if off-road diesel fuel is purchased or imported into Australia for a use by you that qualifies (see the following sections). In other words, diesel fuel in this case must be purchased for use at the locations set out in s 53(4)(c). While there is no restriction regarding the purpose for which the diesel fuel is used, such as the restrictions set out in s 53(4)(a) and (b), the diesel fuel nevertheless must be used at the premises identified in subsection (c). Just as in Flinders Island the diesel fuel was used for generating electricity for use at premises falling within the definition of residential premises, so must the diesel fuel in this case be used at a hospital, nursing home or any other institution providing medical or nursing care.  Although the purpose to which those institutions may use the diesel fuel is not limited in the way residential premises are limited, nevertheless, to be a qualifying use, it must be for activities conducted by those institutions.  In other words it must be for the purposes of those existing institutions.  It is not sufficient merely to meet the location test. 

22. That this is the correct interpretation of s 53(4)(c) is supported by the Full Court of the Federal Court decision is Ergon Energy Corp Limited v Commissioner of Taxation (Cth) (2006) 153 FCR 551. In that case Ergon Energy claimed it was entitled to rebates of duty under s 78A(1) of the Excise Act and s 164(1) of the Customs Act on the basis that it purchased the diesel fuel for use to generate electricity for domestic purposes and at hospitals, nursing homes and aged persons homes. After examining the relevant cases in question, including Flinders Island and Rottnest Island, the Full Court set out the propositions which those authorities established and, relevantly for this case, that part of the rebate provision with which the Ergon appeal was concerned, provide for purpose and location tests (at 569). The Court concluded, at 570;

The locational and purposive tests, as they have been called, are clearly to be read cumulatively and considered by reference to all the circumstances of the case. As TRottnest IslandT (at 183) shows, it is wrong to consider separately whether the fuel was used “at” the relevant premises from the question of the purpose(s) contemplated by the rebate provision.  …

23.     In this case, Rebmik used the diesel fuel for which credits were claimed in excavation works adjacent to the Redland Hospital.  While I accept that the use of the diesel fuel in this manner may meet the location test, it clearly cannot meet the purposive element, which must also be met.  It cannot be said that the diesel fuel was used for the purpose of the Redlands Hospital.  As the Commissioner submitted, the aged-care facility was distinct from the purposes and activities of the hospital.  The construction of a covered walkway between the two facilities does not assist Rebmik.  While it may be said to assist the location test, it certainly has no bearing on the purposive test.

24.     The use of diesel fuel in excavation work prior to the construction of the Griffith Centre adjacent to the Gold Coast Hospital has a similar problem.  It cannot be said that diesel fuel so used was used for the purposes of the Gold Coast Hospital.  The Commissioner also submitted there was no evidence that the Medical School and The School of Oral Health can be properly described as an institution providing medical or nursing care.  There was no evidence before me about the nature of its operations but, as I have already indicated, it would nevertheless fail to meet the purposive test. 

USE OF ATO INTERPRETIVE DECISIONS

25.     Although Rebmik referred to ATOID 2003/243 and ATOID2003/936 in its submissions, there is no mention of any reliance on those interpretive decisions in the objection to assessment lodged by Anthony Richards Consulting on 30 December 2006.  Those two ATOIDs were issued after the Federal Court decisions in Flinders Island and Rottnest Island.  In particular, they dealt with the meaning of the word at when dealing with residential premises.  The purpose of issuing those ATOIDs seems to me to have been to alert taxpayers to the fact that the word at did not mean in or within, but rather that the generating plant providing electricity in those cases needed to be in sufficient proximity to premises as to enable it to be reasonably identified with the premises.  ATOID 2003/936 dealt with the diesel fuel generator which was physically located on a wharf next to a vessel which was held to be, in that case, residential premises.  Neither of those ATOIDs dealt with the purposive test. 

26.     ATOID 2006/2080 was issued after Rebmik’s claim was lodged for off-road diesel credits.  It could not be said to have relied on that interpretive decision when making its claim. 

27.     In any event, interpretive decisions are not binding on the Commissioner nor do they necessarily accurately state the law.  The purpose of the ATOID service is that where a taxpayer relies on an interpretive decision in good faith and applies it to its own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect, the taxpayer is not liable to pay any penalty or interest.  However, there was no evidence before me that any of the ATOIDs were applied by Rebmik for the purpose of making its off-road diesel fuel credit claim.

PENALTY

28.     Although Rebmik made no submissions on the penalty issue, in its objection to the Commissioners amended assessment it did object to a penalty being imposed.  Rebmik claimed that it relied on Anthony Richards Consulting which prepared the claim and the ATO Guidelines. 

29.     Section 284-75 of the Tax Administration Act 1953 provides that a taxpayer is liable to an administrative penalty if it or its agent makes a statement to the Commissioner and the statement is false or misleading in a material particular, whether because of things in it or omitted from it, and there is a tax shortfall as a result of the statement. 

30.     As the Commissioner pointed out in his reasons for the objection decision, a statement that is wrong is a false statement and there need not be intent to make a false statement.  To take reasonable care means that a reasonable person, in the same circumstances as the taxpayer in question, would be likely to exercise that degree of care when making the statement. 

31.     Rebmik claimed that the off-road diesel claim was prepared on the basis of guidelines published by the ATO.  However, as the Commissioner has contended, the purpose of the guidelines is to provide a warning to prospective claimants under the DFRS that the document contains interpretations of the provisions of the DFRS as at the time of production.  It also states that the ATO interpretation of the provisions dealing with the DFRS will not necessarily remain fixed and that from time to time, as a result of Court decisions, changes may be made.  The documents specifically state that claimants should be aware that the guidelines merely seek to provide guidance to the way the ATO proposes to administer the scheme.  The guidelines also caution that, where a claimant may have some doubt, it should submit a full statement of facts and relevant evidence with a view to seeking advice.  The evidence does not disclose the Rebmik sought any advice from the ATO prior to lodging its claim.

32.     Where the shortfall amount of tax or part of it resulted from the failure of a taxpayer or its agent to take reasonable care in complying with the taxation law, the base penalty amount is 25 per cent.  This is the figure which the Commissioner has used to assess a penalty to Rebmik. 

33.     In my view, prior to making a claim for off-road diesel fuel credits, Rebmik failed to take reasonable care as it did not seek advice from the ATO nor did it seek any legal advice regarding the interpretation of the relevant sections of the Energy Grants Act.  The letterhead of Anthony Richards Consulting indicates that its principals are not lawyers but accountants.  In those circumstances, I am satisfied that Rebmik failed to take reasonable care to comply with the Energy Grants Act when making its off-road diesel fuel claim and, accordingly, the administrative penalty of 25 per cent should be applied. 

CONCLUSION

34.     Rebmik’s claim for off-road diesel fuel credits under the Energy Grants Credit Scheme is not one which falls within Part 4 of the Energy Grants Act.  Although the use of the diesel fuel at the two sites, for which the claim was made, may meet the proximity test as established by the Federal Court in cases such as Flinders Island and Rottnest Island, it certainly does not meet the purposive test. Both tests need to be met in order for the claim to be valid. Merely using off-road diesel fuel at a location proximate to a hospital, nursing home or another institution providing medical and nursing care, without more, does not satisfy the requirements of s 53(4)(c) of the Energy Grants Act. The diesel fuel must be used for a purpose of one or other of those institutions. Excavation work conducted in the proximity of one of those institutions will not satisfy that test. As the Full Court of the Federal Court said in Ergon Energy, the locational and purposive tests are clearly to be read cumulatively and considered by reference to all the circumstances of the case. 

35.     In my view, Rebmik did not take reasonable care to comply with the Energy Grants Act at the time of lodging its claim on 2 March 2005.  It did not seek advice from the ATO nor did it seek any legal advice.  It is therefore appropriate that it should pay the base penalty of 25 per cent as accessed by the Commissioner.  It follows that the Commissioner’s objection decision was correct and must be affirmed.

I certify that the thirty-five [35] preceding paragraphs are a true copy of the reasons for the decision herein of Mr Egon Fice, Member

(sgd) Mara Putnis

Clerk

Date of Hearing  31 January 2008 
Date of Decision  24 April 2008
Advocate for Applicant                Self-Represented (Mr A. Tong)
Advocate for the Respondent       Ms J. Proimos