EXPLANATORY STATEMENT
STATUTORY RULES 1987 NO 103
CUSTOMS REGULATIONS (AMENDMENT)
ISSUED BY AUTHORITY OF THE MINISTER
OF STATE FOR INDUSTRY, TECHNOLOGY
AND COMMERCE
Statutory Rules 1987 No. 28 amended Schedule 2 to the Excise Regulations to introduce into that Schedule new cases and conditions to permit certain goods liable to duties of customs to be used in the manufacture of excisable goods whilst subject to the control of the Customs as per Section 24 of the Excise Act 1901. One of the new items was item 6, which permits imported manufactured tobacco upon which Customs duty has not been paid to be used with Australian tobacco in the manufacture of excisable tobacco, cigars, cigarettes or snuff.
These Statutory Rules were Gazetted on 27 February 1987. On the same day a notice of intention to propose an alteration to the Excise Tariff Act 1921 was also published in the Gazette to provide for the collection of an additional excise duty on goods mixed pursuant to section 24 of the Excise Act 1901 of an amount equal to the difference (if any) between the amount of Customs duty that would have been payable on the imported product in a mix, if that product had been entered for home consumption under the Customs Act 1901, and the amount of excise duty that would have been payable on that product if it were an excisable product and entered for home consumption under the Excise Act 1901 at the rate applicable to the mixture. As the normal excise duty payable on the mixture would continue to be levied, the purpose of the amendment was to ensure that in the prescribed situations where imported customable goods were permitted to be used in the manufacture of excisable goods, customs duty on the imported component in the mix was not completely foregone.
However, in relation to the new item 6 in Schedule 2, at least one tobacco manufacturer in Australia has been using imported duty paid tobacco in a mixture with Australian tobacco to manufacture cigarettes. The effect has therefore been that a double duty has been paid on the imported component in the mix, as excise duty has been levied in the usual way on the cigarettes upon their entry for home consumption under the Excise Act 1901. The double duty payments have been made since 1 January 1986.
The attached Statutory Rules will provide a mechanism to rebate an amount of duty paid on the imported component in a mix in these situations. The rebate will be equal to the amount that would have been payable on that component had that component been entered for home consumption only under the Excise Act 1901 at the rate applicable to the mixed goods.
The Regulations provide as follows:
Regulation 1 deems the amendments to have commenced on 1 January 1986 (the day that known payments of double duty in prescribed mixing cases commenced)
Regulation 2 inserts a new circumstance in Regulation 126 of the Customs Regulations to provide for a rebate of duty on goods which have been entered under section 68 of “the Act” and wholly used in the manufacture of goods upon which excise duty levied under the Excise Act 1901 has been paid
Regulation 3 repeals Regulation 128C of the Customs Regulations and inserts a new Regulation which provides that the amount of rebate in respect of the new circumstance is to be an amount equivalent to the amount of excise duty that would have been payable on the imported goods if they had been entered for home consumption under the Excise Act 1901 and duty paid at the rate applicable to the manufactured goods when the imported goods were entered for home consumption and duty paid under section 68 of the Customs Act 1901.
As these Regulations confer retrospective benefits, subsection 48(2) of the Acts Interpretation Act 1901 is not offended.
Overview
The Customs Regulations (Amendment) Statutory Rules 1987 No. 103 were enacted to address a problem within the taxation system concerning the use of imported goods in the manufacture of excisable goods, ensuring that appropriate duties were collected without resulting in double taxation. These regulations were issued by authority of the Minister of State for Industry, Technology, and Commerce and were intended to align the excise and customs duties on mixed goods, thereby ensuring that customs duty on imported components in mixtures was not entirely foregone. This was particularly pertinent to the tobacco industry where imported tobacco mixed with Australian tobacco led to double duty payments on the imported component since 1 January 1986. The policy objective was to provide a rebate mechanism to correct these instances of double taxation by refunding an amount of duty paid on the imported component in a mix, ensuring that the duty paid was equivalent to what would have been levied if the imported goods had been entered for home consumption under the Excise Act 1901 at the applicable rate.
Scope and Application
The Customs Regulations (Amendment) Statutory Rules 1987 No. 103, issued under the authority of the Minister of State for Industry, Technology and Commerce, apply to the circumstances where imported goods liable to customs duty are used in the manufacture of excisable goods while under the control of Customs, as stipulated by Section 24 of the Excise Act 1901. These rules particularly address item 6 of Schedule 2, which allows for the use of imported manufactured tobacco, upon which customs duty has not been paid, in conjunction with Australian tobacco for manufacturing excisable tobacco products such as cigarettes, cigars, and snuff. The regulations aim to ensure that the manufacturer does not entirely forego customs duty on the imported component when an additional excise duty is levied on the mixed goods. The rules also provide a rebate mechanism for instances where double duty has been paid on imported components used in the mix. These provisions apply on a Commonwealth level and are designed to provide retrospective benefits, thereby not contravening subsection 48(2) of the Acts Interpretation Act 1901.
Key Provisions
The main operative sections of the Statutory Rules 1987 No. 103, as referenced in the explanatory statement, pertain to the Customs Regulations Amendment. Specifically, Regulation 1 (paragraph 1) sets the commencement date of the amendments to 1 January 1986. Regulation 2 (paragraph 2) introduces a new condition under Regulation 126 of the Customs Regulations to allow for a rebate of duty on goods that have been used in the manufacture of excisable goods, as per Section 68 of the Act. Regulation 3 (paragraph 3) repeals Regulation 128C and introduces a new regulation that specifies the amount of rebate for the new circumstance, equivalent to the excise duty that would have been payable on the imported goods if they had been entered for home consumption under the Excise Act 1901.
The obligations imposed by these Regulations on parties or entities governed by them primarily concern the use of imported goods in the manufacture of excisable goods and the payment of duties. Manufacturers utilising imported goods in the production of excisable goods must comply with the new conditions set out in Regulation 126. This includes ensuring that any rebates of duties are calculated and applied as per the new regulation in Regulation 3. The Regulations also require that the duty paid on imported components in a mix of goods is accurately assessed and that appropriate rebates are claimed in accordance with the new provisions.
The Statutory Rules provide a mechanism to rebate an amount of duty paid on the imported component in a mix in specific situations where double duty has been paid. This rebate is intended to correct the overpayment of duties by ensuring that the amount of duty paid on the imported component is not duplicated. Under these Regulations, if a manufacturer has been paying double duty on imported components in a mix, they are entitled to claim a rebate for the excess amount. The amount of the rebate is calculated as the difference between the amount of Customs duty that would have been payable on the imported product if it had been entered for home consumption and the amount of excise duty that would have been payable on that product if it were an excisable product.
The consequences of non-compliance with the Regulations, while not explicitly stated in the explanatory statement, would likely include financial penalties and potential legal action. Given the nature of the amendments, any failure to correctly apply the rebate provisions or to adhere to the new conditions for duty rebates could result in significant financial liabilities for the manufacturers. While specific penalties are not mentioned, breaches of customs and excise regulations in Australia can lead to substantial fines and other legal repercussions, as stipulated under the respective Acts governing these areas.