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Asciano Services Pty Ltd v Commissioner of Taxation [2009] FCAFC 28 (13 March 2009)

Last Updated: 13 March 2009

FEDERAL COURT OF AUSTRALIA

Asciano Services Pty Ltd v Commissioner of Taxation [2009] FCAFC 28

TAXATION LAW – disallowance of energy grants claimed for purchase of off-road diesel fuel used in connection with rail transport – whether fuel must be used in equipment which is in or on a rail vehicle – whether off-rail use for a purpose incidental to rail transport is sufficient

WORDS AND PHRASES – "use in rail transport"

Acts Interpretation Act 1901 (Cth)
Customs Act 1901 (Cth)
Customs and Excise Amendment (Diesel Fuel Rebate Scheme) Act 1999 (Cth)
Customs and Excise Legislation Amendment Act 1995 (Cth)
Customs and Excise Legislation Amendment Act 1997 (No 1) (Cth)
Diesel and Alternative Fuel Grants Scheme Act 1999 (Cth)
Energy Grants (Credits) Scheme Act 2003 (Cth)
Excise Act 1901 (Cth)

Australian Taxation Office, Excise Bulletin EB 2000/3
Explanatory memorandum to the Energy Grants (Credits) Scheme Bill 2003
Second reading speech of the Customs and Excise Amendment (Diesel Fuel Rebate Scheme) Bill 1999
Second reading speech of the Customs and Excise Legislation Amendment Bill (No 2) 1996

Australian Native Landscapes Pty Ltd v Collector of Customs (1997) 44 ALD 531
Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 456; (1993) 43 FCR 280
Federal Commissioner of Taxation v Ostwald Bros Civil Pty Ltd [2008] FCAFC 99; (2008) 167 FCR 588
Kowalski v Domestic Violence Crisis Service Inc [2001] FCA 1082; (2001) 113 FCR 67
Queensland Rail v Commissioner of Taxation [2006] FCA 816; (2006) 153 FCR 524
Re Alcan Australia Ltd; ex parte Federation of Industrial, Manufacturing and Engineering Employees [1994] HCA 34; (1994) 181 CLR 96
Re Serco Australia Pty Ltd and Chief Executive Officer of Customs (2003) 76 ALD 223
Riviera Nautic Pty Ltd v Federal Commissioner of Taxation [2002] AATA 657; (2002) 68 ALD 581
Saraswati v Queen [1991] HCA 21; (1991) 172 CLR 1

ASCIANO SERVICES PTY LTD v COMMISSIONER OF TAXATION
VID 841 of 2008

RYAN, STONE & EDMONDS JJ
13 March 2009
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 841 of 2008

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	ASCIANO SERVICES PTY LTD Appellant
AND:	COMMISSIONER OF TAXATION Respondent

JUDGES:	RYAN, STONE & EDMONDS JJ
DATE OF ORDER:	13 MARCH 2009
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The appeal be dismissed with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 841 of 2008

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	ASCIANO SERVICES PTY LTDAppellant
AND:	COMMISSIONER OF TAXATIONRespondent

JUDGES:	RYAN, STONE & EDMONDS JJ
DATE:	13 March 2009
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1 The issue in this appeal is the appellant’s entitlement to off-road credits for diesel fuel purchased for use in equipment deployed in connection with its rail transport enterprise. Some of the equipment was used to load and unload bulk freight containers onto the rolling stock used to transport the containers between the various terminals which the appellant operated throughout Australia. Other equipment was used for safety testing including testing the brakes of the rolling stock using compressors. None of the equipment the subject of these proceedings was "in or on a rail vehicle"; all of it was operated adjacent to the rail tracks. These facts are not in dispute. Nor is there any dispute that the equipment was used for a purpose incidental to the use of a rail vehicle.
2 The Commissioner issued the appellant with an amended assessment dated 12 March 2007 for the period 1 July 2003 to 30 June 2006 in which the appellant's claim for diesel fuel credits was denied. On 18 October 2007 the Commissioner disallowed in full the appellant's objection dated 11 May 2007. On appeal to this Court the primary judge accepted the Commission’s contention that the use of diesel fuel in equipment used for a purpose incidental to the use of a rail vehicle is a qualifying use that gives rise to a credit entitlement only if the incidental use takes place "in or on a rail vehicle". Accordingly, her Honour dismissed the appeal against the Commissioner’s objection decision.
3 As the primary judge recognised, the question is one of statutory construction. Section 53 of the Energy Grants (Credits) Scheme Act 2003 (Cth) specifies the uses of off-road diesel fuel that will attract off-road credits. Relevantly it provides:

(1) Subject to such conditions and restrictions as are specified in the regulations, you are entitled to an off-road credit if you purchase or import into Australia off-road diesel fuel for a use by you that qualifies (see the following subsections).

...

(3) Use in rail transport (otherwise than for the purpose of propelling a road vehicle on a public road), or in marine transport, in the course of carrying on an enterprise is a use that qualifies.

4 The meaning of the expression, "use in rail transport" is critical to the appellant's claim. It is defined in s 38 of the Act which states:

(1) This section sets out the meaning of the expression use in rail transport.
Use in a rail vehicle in rail transport or light rail transport
(2) Use in a rail vehicle in rail transport or light rail transport is use in rail transport.
Use in a rail vehicle for various purposes
(3) Use in a rail vehicle, or in equipment in or on a rail vehicle, for any of the following purposes is use in rail transport:

(a) loading anything onto the rail vehicle, or enabling persons to board the rail vehicle, for the purpose of being transported by the vehicle;
(b) unloading anything from the rail vehicle, or enabling persons to alight from the rail vehicle, after being transported by the vehicle;
(c) repairing or maintaining rails;
(d) observing the condition of rails;
(e) reducing fire hazards on or adjacent to rails;
(f) rescuing or recovering derailed rail vehicles or carriages or other parts of rail vehicles;

(g) any purpose in connection with using the rail vehicle:

(i) in rail transport; or

(ii) for any of the purposes mentioned in the preceding paragraphs; or

(iii) as mentioned in subsection (4).

Use in a rail vehicle on certain journeys

(4) Use in a rail vehicle:

(a) on its forward journey for the purpose of using it in rail transport or using it for any of the purposes mentioned in paragraphs (3)(a) to (f); or

(b) on its return journey after any such use;
is use in rail transport.
Use in equipment for certain purposes
(5) Use in equipment in or on a rail vehicle for air-conditioning, heating, lighting or for any purpose incidental to using the rail vehicle:
(a) in rail transport; or
(b) for any of the purposes mentioned in paragraphs (3)(a) to (f); or
(c) as mentioned in subsection (4);
is use in rail transport.
(6) To avoid doubt, the fact that a rail vehicle is not operating a scheduled service does not mean that the use of the rail vehicle does not constitute use in rail transport.

5 It is the interpretation of s 38(5) that is in issue in this appeal. The question is whether the requirement in the opening words of the subsection that equipment using diesel fuel in respect of which energy credits are claimed, must in all cases be "in or on a rail vehicle" or whether that requirement applies only to equipment used for air-conditioning, heating or lighting. In other words, for equipment to be used "in rail transport" is it sufficient for it to be used for "any purpose incidental to using the rail vehicle in rail transport" or is it also necessary for the equipment to be "in or on a rail vehicle"? If the latter interpretation is correct, it would not be sufficient for such equipment to be placed adjacent to the rail vehicle.
6 The trial judge held that the use of diesel fuel in equipment used for a purpose incidental to rail transport (as well as its use for air-conditioning, heating and lighting) must be "in or on a rail vehicle" if it is to be "use in rail transport". Her Honour held: (a) that the repetition of "for" in the opening words of subsection (5) was a matter of style and emphasis that did not affect the meaning; and (b) that the presence of a comma, rather than "or", between "heating" and "lighting" indicated that "lighting" is the penultimate item in a list of four in which "any purpose" is the ultimate item. In summary her Honour held that the language of s 38(5) was to be read as:

"Use in equipment in or on a rail vehicle for [(1)] air-conditioning, [(2)] heating, [(3)] lighting or for [(4)] any purpose incidental to using the rail vehicle[.]"

Her Honour rejected the alternative reading advanced by the appellant which was:

"Use in equipment [A] in or on a rail vehicle for [(1)] air-conditioning, [(2)] heating, [(3)] lighting or [B] for any purpose incidental to using the rail vehicle[.]"

7 The appellant submitted, correctly in our view, that the exercise of statutory construction must commence with s 53, the function of s 38 being merely to aid construction of the later section. We do not, however, accept the appellant's submission that the parenthetical exclusion in s 53, "(otherwise than for the purpose of propelling a road vehicle on a public road)", would be redundant if no off-rail activities could potentially be classed as "use in rail transport". The exclusion deals with the use of diesel fuel to propel road vehicles on a public road. It is doubtful that the concept of use of equipment would extend to such use. As the Commissioner noted the language originated at a time where "in rail transport" was not defined and when it played a role in excluding claims for on-road use in respect of, for example, hi-rail vehicles which are dual purpose vehicles that can travel on both road and rail. In any event, whether or not the definition of "in use in rail transport" obviates the need for the exclusion in 53(3), we agree with the primary judge that there was no inconsistency. As her Honour said, at [19]:

Section 53(3) says only that fuel purchases for use in propelling a road vehicle along a public road are not eligible for credits. As to whether any other purchases for off-rail use are or are not eligible, s 53 is simply silent.

8 At the hearing of the appeal both parties drew on the history of schemes dealing with energy credits or rebates. An understanding of this history is necessary to understand the parties’ submissions.
9 The early history of these schemes was described by a Full Court of this Court in Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 456; (1993) 43 FCR 280 at 289. The Court found that the rebate provisions were intended to encourage the activities to which they apply and held "[t]hey should not be construed narrowly". Over time this beneficial construction produced results that the government did not favour and eventually led to the repeal by the Customs and Excise Legislation Amendment Act 1995 (Cth) of "sweeper clauses" which had extended the rebate to uses "in connection with" defined purposes; see Australian Native Landscapes Pty Ltd v Collector of Customs (1997) 44 ALD 531 at 533. This narrowing of the scheme continued in 1997 with the enactment of the Customs and Excise Legislation Amendment Act 1997 (No 1) (Cth). In the second reading speech for the Bill containing the relevant 1997 amendments (Customs and Excise Legislation Amendment Bill (No 2) 1996), the Minister for Small Business and Consumer Affairs, Mr Prosser, stated:

There have been several decisions in recent times which have had the effect of expanding eligibility under the scheme beyond what the government believes was intended, with consequent effects on outlays. In some areas, the potential financial impact of decisions is very significant. The particular amendments will ensure the continuation of rebate for diesel fuel used in carrying out mining activities but will preclude from eligibility certain activities, best described as undertaken for economic-marketing reasons, rather than the physical extraction of minerals, and activities which essentially involve the transport of inputs-materials for mining or beneficiation. The government's clear intention is that rebate paid under the legislation should be confined to the narrow definition of eligible activities in the legislation - that is, the intention is not that the legislation be defined broadly and beneficially. The amendments proposed in this bill are designed to tighten and narrow eligibility. It is the government's intention to continue to adopt such an approach in the face of any future broadening.

10 The second reading speech also referred to transport operations and, in the context of that discussion, said:

The government considers that it is wrong to apply the concept that an activity is eligible for rebate because it is integral to another eligible activity. It is the intent of the diesel fuel rebate scheme to pay rebate only on those activities that are explicitly mentioned in the legislation and not to activities that are said to be integral to, associated with or connected with these activities. The amendments are necessary to put the intent of the scheme beyond doubt.

11 The Diesel and Alternative Fuel Grants Scheme Act 1999 (Cth) made limited provision for grants to be made in respect of diesel or similar fuels used in a range of road vehicles. Prior to this Act rebates had not been provided in respect of diesel fuel used in road transport. At about the same time a 100% rebate was provided for all diesel used by registered businesses in rail transport and in the marine industry; Customs and Excise Amendment (Diesel Fuel Rebate Scheme) Act 1999.
12 In Re Serco Australia Pty Ltd and Chief Executive Officer of Customs (2003) 76 ALD 223, the Administrative Appeals Tribunal (Deputy President S Forgie and Member C Ermert) described in some detail the changes that were made by the various amendments described above and commented, at 233-4:

Having regard to the second reading speeches, it is apparent that the object of the diesel fuel rebate scheme is rather more complex than might first appear. Until 1999 when rail transport and marine transport were introduced, it could be said that the object of the scheme was to maintain the competitiveness of certain export industries and to achieve one or two social objects that are not relevant in this case. Once rail transport and marine transport were introduced in 1999, the focus of the scheme moved from export industries to incorporate a wider range of activities. In doing so its object underwent a subtle change. Its object was now to minimise the cost of diesel fuel to business and to implement certain environment policies. ... In view of our conclusions regarding the object, we have concluded that parliament did not intend to encourage rail transport anymore than it intended to encourage marine transport.. ...we have also concluded that neither of those forms of "off public road" transport were favoured above "on public road" transport conducted outside the metropolitan area as part of an enterprise. It follows that each type of transport, and "rail transport" in particular, should be given their ordinary meanings and there should not be an attempt to broaden the compass of each or any of them.

13 The decision in Serco concerned diesel fuel used by buses that had been modified to enable them to operate on a guided busway system as well as on public roads. The guided busway system (the O-Bahn) operated by means of protruding guide wheels on the vehicle (connected to the vehicle’s steering system) making contact with concrete beams along the busway. The Tribunal held that the vehicles were not controlled by the direct influence of the rails on the wheels and the bogies or wheel sets located under the vehicle and concluded that the vehicles did not have the essential features of rail transport.
14 On 30 June 2000, the Australian Taxation Office issued the Excise Bulletin EB 2000/3 in which it was stated that the rebate did not apply to the use, amongst others, of diesel fuel for "the movement, handling, storage, loading or unloading of goods before or after rail transportation" and for "activities not conducted on railways, tramways or light rail systems". The Bulletin also stated that to be entitled to a rebate "the claimant must be the purchaser as well as the user of the fuel". The Bulletin was withdrawn on 27 July 2005 following the decision of the Administrative Appeals Tribunal in Riviera Nautic Pty Ltd v Federal Commissioner of Taxation [2002] AATA 657; (2002) 68 ALD 581.
15 In Riviera Nautic the Tribunal considered the requirement in s 164 of the Customs Act 1901 (Cth), that to be eligible for a rebate, diesel fuel had to be used by the purchaser. It held that the requirement was satisfied by the taxpayer providing the fuel (without sale or separate charge) in boats that it hired to its clients for use as required in marine transport. The notice of withdrawal referred to Riviera Nautic and stated that the Commissioner accepted the decision "and hence the interpretation in [the Bulletin] is incorrect". It also stated that, as the Diesel Fuel Rebate Scheme had expired in July 2003 and the time for making claims had expired, the bulletin would not be replaced.
16 In Queensland Rail v Commissioner of Taxation [2006] FCA 816; (2006) 153 FCR 524 Dowsett J considered whether Queensland Rail was entitled to a rebate in respect of diesel fuel purchased for use in its off-rail and hi-rail operations. Hi-rail operations involve vehicles which can be used on or off rails. Pursuant to s 164(1)(ab) of the Customs Act 1901 (Cth) a rebate was available to a person who purchased diesel fuel for use by that person "in rail transport". His Honour held, at [44], that "in rail transport" meant "in a system or means of transportation or conveyance of people or goods by rail". His Honour rejected the argument that the rebate only extended to on-rail operations observing, at [38], that if Parliament intended that only on-rail activities should attract a rebate, "it would have been easy to say so". Dowsett J postulated that if the purpose of the legislation was to subsidise transport costs and to benefit the environment then there was "no apparent reason for such a narrow construction". His Honour further observed that in the context of the taxpayer carrying on an enterprise it was unlikely that Parliament "intended to draw an artificial distinction between activities on-rail and off-rail, all of which were necessary to the transport of people or goods by rail".
17 During the period under consideration in Queensland Rail there were two rebate schemes, the Diesel Fuel Rebate Scheme (administered under the Customs Act and the Excise Act 1901 (Cth)) and the Diesel and Alternative Fuels Grants Scheme (administered under the Diesel and Alternative Fuels Grants Scheme Act 1999 (Cth)). The case was concerned with amendments to the legislation governing those schemes. In 2003 the government introduced the Energy Grants (Credits) Scheme Bill 2003 which was designed to replace the two schemes with a single entitlement called the Energy Grants (Credits) Scheme. The explanatory memorandum for this Bill stated that it would replicate existing entitlement provisions to create an on-road credit and an off-road credit. Paragraph 2.14 of the explanatory memorandum stated that "Except for the changes discussed below, the Government's intention is that the scope of the off-road credit will be the same as that of the [Diesel Fuel Rebate Scheme]." The particular changes referred to are not presently relevant.
18 In the second reading speech on 13 February 2003, the Parliamentary Secretary to the Minister for Finance and Administration stated:

Under the provisions of the bill, a person will be entitled to an off-road credit when purchasing diesel fuel for use in eligible activities that are the same as those activities currently eligible for a rebate under the Diesel Fuel Rebate Scheme. Similarly, a person will be entitled to an on-road credit when purchasing fuel for use in activities that are the same as those activities that were eligible for a grant under the Diesel and Alternative Fuels Grants Scheme. In this way the Energy Grants Credits Scheme will maintain benefits equivalent to those available under the existing schemes.

19 The Energy Grants (Credits) Scheme Act 2003 (Cth) commenced on 1 July 2003. Sections 38 and 53, which are at the heart of the present appeal, are set out above at [3]-[4]. In considering these provisions, the primary judge rejected the submission that they should be given a broad construction as beneficial legislation and relied on the decision of the Full Court of this Court in Federal Commissioner of Taxation v Ostwald Bros Civil Pty Ltd [2008] FCAFC 99; (2008) 167 FCR 588.
20 Ostwald was an appeal from a decision of the Administrative Appeals Tribunal and concerned a claim for off-road credits arising from the use of diesel fuel in the course of construction of earthworks for a rail line and associated maintenance road. The applicants claimed to be entitled to the off-road credits as the diesel fuel was used in mining operations; s 53(2). The Full Court held that in asking itself whether the rail line and the road were integral or essential to the commercial operation of the coal mine, the Tribunal had asked the wrong question and had thus made an error of law. The Court held that the issue under the Energy Grants (Credits) Scheme Act was not whether such activity was undertaken in preparation of the coal mine but whether it was undertaken in preparation of the mine site.
21 The Full Court declined to adopt a broad construction that would include the construction of the rail line and maintenance road. In considering the relevant legislative history the Court quoted extensively from the second reading speech for the Bill containing the 1997 amendments (see [9]-[10] above) and observed:

The restricted definition of "mining transport activity" is consistent with a legislative policy to confine the benefits of the Act to mining regarded as a physical act of extracting minerals and only in specific cases ... to allow for activities outside the mine site itself.

22 Although Ostwald was specifically concerned with mining activity, the Court’s rejection of a broad construction is equally applicable to the present circumstances. Whilst we would not go as far as the trial judge and say that Ostwald’s adoption of a narrow approach to construction creates a presumption in favour of the Commissioner, we do accept that indications of Parliament’s intention gleaned from the second reading speech and the explanatory memorandum are useful in the context of a purposive approach to construction; see generally Acts Interpretation Act 1901 (Cth) s 15AA, Saraswati v Queen [1991] HCA 21; (1991) 172 CLR 1 at 22; Kowalski v Domestic Violence Crisis Service Inc [2001] FCA 1082; (2001) 113 FCR 67 at [22]- [25]. Ultimately, however, the legislation must be construed according to its terms.
23 The appellant criticises her Honour’s reliance on Ostwald on the basis that the Full Court was concerned with "mining operations" not "rail transport" and it was in that context that the Court referred to the second reading speech. In the appellant's submission:

It is one thing to say that the eligibility criteria in respect of mining operations were narrowed by new legislation in 1997. It is quite another to say that the specified activities should be construed narrowly. ... The reason why the Court in Ostwald allowed the appeal is set out at [37] of its decision. It was not based on a requirement to construe the provisions narrowly. It was based on the provisions which in terms restricted the relevant activities to "on-site" activities. It is submitted that her Honour's mistaken view of the decision in Ostwald caused her to adopt a narrow construction and a presumption in favour of the Commissioner of what was intended to be a beneficial provision.

24 In support of its submission the appellant pointed to extrinsic materials which, in its view, demonstrate "that there was to be no narrowing of eligibility in respect of rail transport, nor was there to be introduced some general requirement to construe entitlement narrowly". The extrinsic material referred to by the appellant included the second reading speech for the Customs and Excise Amendment (Diesel Fuel Rebate Scheme) Bill 1999 which stated:

The Diesel Fuel Rebate Scheme will sunset on 30 June 2002, and benefits equivalent to those available under it will be grandfathered into the new Energy Grants (Credits) Scheme that will come into effect on 1 July 2002. Those off-road businesses that receive rebates under this scheme can be assured that the government will ensure these benefits are not diminished under the new Energy Grants Scheme.

25 Extrinsic material relating to the Energy Grants (Credits) Scheme Bill 2003 was also referred to, being the report of the Senate Economics Legislation Committee into the Bill, the second reading speech and the explanatory memorandum. All these materials referred to the Bill maintaining existing entitlements; see [17]-[18] above. In the appellant's submission if it had been intended to remove "the substantial benefits" this would have been clearly identified. This may be so, but accepting that the intention was not to detract from the benefits provided under previous legislation still leaves open the question, "What benefits were the subject of this intention?"
26 The appellant submitted that Dowsett J's decision in Queensland Rail and the entitlements that would flow from applying his Honour’s approach to interpretation should be the appropriate starting point for determining Parliament's intention in passing the Energy Grants (Credits) Scheme Act. This submission was bolstered by reference to the withdrawal of the Excise Bulletin EB 2000/3 (see [14] above) and the acceptance that the position taken in that Bulletin was incorrect. In our view, the withdrawal of the Bulletin does not assist the appellant. The issue in Riviera Nautic concerned whether the purchaser of the fuel was also the user. It was on this point that the position taken in the Bulletin was shown to be incorrect and, as the time for making claims under the Diesel Fuel Rebate Scheme had expired, there was no occasion for replacing the Bulletin. Riviera Nautic was not concerned with the issues raised in this appeal and therefore the withdrawal of the Bulletin because it was inconsistent with the decision in that case does not provide any support for the appellant's submission.
27 In so far as assistance might be gained from the Bulletin it would be more likely to assist the Commissioner than the appellant. If the question is what can the Bulletin tell us about Parliament's intention in enacting the Energy Grants (Credits) Scheme Act, the fact that it was issued soon after the commencement of the Act might suggest that it reflected the prevailing view when the Act was debated and enacted. That was in 2003, well before the decision in Queensland Rail. On that basis, statements in the extrinsic material to the effect that the new Act was intended to allow the same sort of rebates as under the previous legislation cannot be understood as referring to the approach of the Court in Queensland Rail. As the respondent submitted, "it is not a situation where Parliament has adopted an approved language that had at that time been construed by a court"; cf Re Alcan Australia Ltd; ex parte Federation of Industrial, Manufacturing and Engineering Employees [1994] HCA 34; (1994) 181 CLR 96 at 106.
28 In any event, arguments such as the above are of limited assistance. Ultimately the question is one of interpretation of the present provisions. In regard to that question it is more to the point that the provisions considered in Queensland Rail did not define the phrase "in rail transport". As the primary judge commented, this led Dowsett J to consult the dictionary and a variety of the other sources before concluding that the phrase referred to a system of rail transportation which inevitably involved loading and unloading activities and maintenance activities. In the Energy Grants (Credits) Scheme Act, however, s 38 makes it quite clear that, whatever might have been said in the extrinsic materials, the legislature has defined the term, "use in rail transport" more narrowly. Putting aside s 38(5) for the moment, every other instance of "use in rail transport" given in s 38 refers to on-rail use. Even without the assistance of the textual analysis it would be strange if Parliament having defined the phrase as referring to on-rail activities were to slip in a significant exception as an adjunct to uses that are clearly required to be on-rail, such as air-conditioning, heating and lighting.
29 It is noteworthy, as Mr Williams SC, who appeared for the respondent, pointed out, that in the opening words of s 38(5) the indefinite article, "a", is used to refer to rail vehicle in the first line and the definite article, "the" is used in the second line. This is a clear indication that the rail vehicle referred to in the second line is the same as that referred to in the first line, namely it is the rail vehicle with the equipment on it. The subject of the subsection is the use of diesel fuel in equipment that is "in or on a rail vehicle". This subsection then lists a number of purposes for which that equipment could be used: "air-conditioning, heating, lighting or for any purpose incidental to using the rail vehicle". Which rail vehicle? The one with the equipment on it.
30 As Mr Williams submitted:

[T]hat reading does not require that the word "for" be deleted, although her Honour noted that setting the section out in that way would make its meaning plain. But the word "for" second appearing, the word "for any purpose" appearing in the second line, is no more than a nicety of expression but when one reads the section as a whole, "use in equipment in or on a rail vehicle" is clearly a qualifying phrase that governs the entirety of the subsection.

31 In addition to the comments referred to in [17] above, the explanatory memorandum for the Energy Grants (Credits) Scheme Bill, also indicated, in Subdivision D, that the new Act was designed to remove some uncertainty about the ambit of marine transport and rail transport:

1.39 Marine transport in the DFRS [Diesel Fuel Rebate Scheme] is defined in the Customs Act 1901 to include transport by vessels in or on fresh water, but does not include any transport relating to forestry. The ATO has released the administrative guidelines on which activities are eligible for a rebate under the marine transport category, but as there is no further clarification of the meaning in the Customs Act 1901, there has continued to be uncertainty surrounding which activities are actually eligible. 1.40 The situation for rail transport in the DFRS is largely the same as that described in paragraph 1.39 for marine transport. 1.41 In order to remove this uncertainty and align the current administration of the marine transport and rail transport categories with the legislation, the new expressions ‘use in marine transport’ and ‘use in rail transport’ have been introduced into the EG(C)S, so as to set out clearly in the legislation which activities in these categories will qualify for the off-road credit. ... 1.45 Finally, use for air-conditioning, heating, lighting, or for any purpose incidental to use of the vessel in marine transport or the purposes discussed in 1.43 and 1.44 is also use in marine transport. However, use in a dredge, or in equipment used in or on a dredge is not included. ... 1.47 The definition of use in rail transport is set out in the Energy Grants (Credits) Scheme Bill 2003 in much the same format as that of use in marine transport. It is defined generally to mean that use in a rail vehicle in rail transport or light rail transport is use in rail transport. ... 1.50 Finally, use for air-conditioning, heating, lighting, or for any purpose incidental to the use of the rail vehicle in rail transport or the purposes discussed in paragraphs 1.48 (except the final purpose) and 1.49 is also use in rail transport.

32 Despite the expressed intention to align marine transport and rail transport the appellant focused on the drafting differences between s 36(6) of the Act and s 38(5) of the Act. Section 38(5) is set out at [4] above, s 36(6) is as follows:

(6) Use:

(a) In equipment in or on a vessel; and (b) while the vessel is in or on the sea or fresh water; and (c) for air-conditioning, heating, lighting or for any purpose incidental to use of the vessel: (i) in marine transport; or (ii) for any of the purposes mentioned in subsection (4); or (iii) as mentioned in paragraph (5)(c);

is use in marine transport.

33 Comparison of the sections shows that the drafting differences are slight. They are more easily explained as resulting from the need to accommodate not only the requirement that the equipment be "in or on a vessel" but also that the vessel be "in or on the sea or fresh water" than from an intention to differentiate between marine and rail transport. Too much can be made of these minor differences.
34 In our view the more natural construction of s 38(5) is that preferred by her Honour. It is also consistent with the very specific focus on on-rail activities that is evident in the other subsections of s 38. In particular ss 38(3)(a) and (b) specifically deal with loading and unloading as well as enabling persons to board or alight from a rail vehicle. The subsections are clearly limited to circumstances in which the fuel is used in the rail vehicle or in equipment in or on the rail vehicle. In view of these quite specific provisions, it would be very strange if other forms of loading or unloading were intended to be caught up in the reference to incidental purposes in subsection (5).
35 For these reasons the appeal must be dismissed with costs.

I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Ryan, Stone & Edmonds.

Associate:

Dated: 13 March 2009

Counsel for the Appellant:	J de Wijn QC with D McInerney

Solicitor for the Appellant:	PricewaterhouseCoopers Legal

Counsel for the Respondent:	N Williams SC with S Lloyd SC

Solicitor for the Respondent:	Australian Government Solicitor

Date of Hearing:	17 February 2009

Date of Judgment:	13 March 2009

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URL: http://www.austlii.edu.au/au/cases/cth/FCAFC/2009/28.html

1	The issue in this appeal is the appellant’s entitlement to off-road credits for diesel fuel purchased for use in equipment deployed in connection with its rail transport enterprise. Some of the equipment was used to load and unload bulk freight containers onto the rolling stock used to transport the containers between the various terminals which the appellant operated throughout Australia. Other equipment was used for safety testing including testing the brakes of the rolling stock using compressors. None of the equipment the subject of these proceedings was "in or on a rail vehicle"; all of it was operated adjacent to the rail tracks. These facts are not in dispute. Nor is there any dispute that the equipment was used for a purpose incidental to the use of a rail vehicle.
2	The Commissioner issued the appellant with an amended assessment dated 12 March 2007 for the period 1 July 2003 to 30 June 2006 in which the appellant's claim for diesel fuel credits was denied. On 18 October 2007 the Commissioner disallowed in full the appellant's objection dated 11 May 2007. On appeal to this Court the primary judge accepted the Commission’s contention that the use of diesel fuel in equipment used for a purpose incidental to the use of a rail vehicle is a qualifying use that gives rise to a credit entitlement only if the incidental use takes place "in or on a rail vehicle". Accordingly, her Honour dismissed the appeal against the Commissioner’s objection decision.
3	As the primary judge recognised, the question is one of statutory construction. Section 53 of the Energy Grants (Credits) Scheme Act 2003 (Cth) specifies the uses of off-road diesel fuel that will attract off-road credits. Relevantly it provides:

13	The decision in Serco concerned diesel fuel used by buses that had been modified to enable them to operate on a guided busway system as well as on public roads. The guided busway system (the O-Bahn) operated by means of protruding guide wheels on the vehicle (connected to the vehicle’s steering system) making contact with concrete beams along the busway. The Tribunal held that the vehicles were not controlled by the direct influence of the rails on the wheels and the bogies or wheel sets located under the vehicle and concluded that the vehicles did not have the essential features of rail transport.
14	On 30 June 2000, the Australian Taxation Office issued the Excise Bulletin EB 2000/3 in which it was stated that the rebate did not apply to the use, amongst others, of diesel fuel for "the movement, handling, storage, loading or unloading of goods before or after rail transportation" and for "activities not conducted on railways, tramways or light rail systems". The Bulletin also stated that to be entitled to a rebate "the claimant must be the purchaser as well as the user of the fuel". The Bulletin was withdrawn on 27 July 2005 following the decision of the Administrative Appeals Tribunal in Riviera Nautic Pty Ltd v Federal Commissioner of Taxation [2002] AATA 657; (2002) 68 ALD 581.
15	In Riviera Nautic the Tribunal considered the requirement in s 164 of the Customs Act 1901 (Cth), that to be eligible for a rebate, diesel fuel had to be used by the purchaser. It held that the requirement was satisfied by the taxpayer providing the fuel (without sale or separate charge) in boats that it hired to its clients for use as required in marine transport. The notice of withdrawal referred to Riviera Nautic and stated that the Commissioner accepted the decision "and hence the interpretation in [the Bulletin] is incorrect". It also stated that, as the Diesel Fuel Rebate Scheme had expired in July 2003 and the time for making claims had expired, the bulletin would not be replaced.
16	In Queensland Rail v Commissioner of Taxation [2006] FCA 816; (2006) 153 FCR 524 Dowsett J considered whether Queensland Rail was entitled to a rebate in respect of diesel fuel purchased for use in its off-rail and hi-rail operations. Hi-rail operations involve vehicles which can be used on or off rails. Pursuant to s 164(1)(ab) of the Customs Act 1901 (Cth) a rebate was available to a person who purchased diesel fuel for use by that person "in rail transport". His Honour held, at [44], that "in rail transport" meant "in a system or means of transportation or conveyance of people or goods by rail". His Honour rejected the argument that the rebate only extended to on-rail operations observing, at [38], that if Parliament intended that only on-rail activities should attract a rebate, "it would have been easy to say so". Dowsett J postulated that if the purpose of the legislation was to subsidise transport costs and to benefit the environment then there was "no apparent reason for such a narrow construction". His Honour further observed that in the context of the taxpayer carrying on an enterprise it was unlikely that Parliament "intended to draw an artificial distinction between activities on-rail and off-rail, all of which were necessary to the transport of people or goods by rail".
17	During the period under consideration in Queensland Rail there were two rebate schemes, the Diesel Fuel Rebate Scheme (administered under the Customs Act and the Excise Act 1901 (Cth)) and the Diesel and Alternative Fuels Grants Scheme (administered under the Diesel and Alternative Fuels Grants Scheme Act 1999 (Cth)). The case was concerned with amendments to the legislation governing those schemes. In 2003 the government introduced the Energy Grants (Credits) Scheme Bill 2003 which was designed to replace the two schemes with a single entitlement called the Energy Grants (Credits) Scheme. The explanatory memorandum for this Bill stated that it would replicate existing entitlement provisions to create an on-road credit and an off-road credit. Paragraph 2.14 of the explanatory memorandum stated that "Except for the changes discussed below, the Government's intention is that the scope of the off-road credit will be the same as that of the [Diesel Fuel Rebate Scheme]." The particular changes referred to are not presently relevant.
18	In the second reading speech on 13 February 2003, the Parliamentary Secretary to the Minister for Finance and Administration stated:

19	The Energy Grants (Credits) Scheme Act 2003 (Cth) commenced on 1 July 2003. Sections 38 and 53, which are at the heart of the present appeal, are set out above at [3]-[4]. In considering these provisions, the primary judge rejected the submission that they should be given a broad construction as beneficial legislation and relied on the decision of the Full Court of this Court in Federal Commissioner of Taxation v Ostwald Bros Civil Pty Ltd [2008] FCAFC 99; (2008) 167 FCR 588.
20	Ostwald was an appeal from a decision of the Administrative Appeals Tribunal and concerned a claim for off-road credits arising from the use of diesel fuel in the course of construction of earthworks for a rail line and associated maintenance road. The applicants claimed to be entitled to the off-road credits as the diesel fuel was used in mining operations; s 53(2). The Full Court held that in asking itself whether the rail line and the road were integral or essential to the commercial operation of the coal mine, the Tribunal had asked the wrong question and had thus made an error of law. The Court held that the issue under the Energy Grants (Credits) Scheme Act was not whether such activity was undertaken in preparation of the coal mine but whether it was undertaken in preparation of the mine site.
21	The Full Court declined to adopt a broad construction that would include the construction of the rail line and maintenance road. In considering the relevant legislative history the Court quoted extensively from the second reading speech for the Bill containing the 1997 amendments (see [9]-[10] above) and observed:

25	Extrinsic material relating to the Energy Grants (Credits) Scheme Bill 2003 was also referred to, being the report of the Senate Economics Legislation Committee into the Bill, the second reading speech and the explanatory memorandum. All these materials referred to the Bill maintaining existing entitlements; see [17]-[18] above. In the appellant's submission if it had been intended to remove "the substantial benefits" this would have been clearly identified. This may be so, but accepting that the intention was not to detract from the benefits provided under previous legislation still leaves open the question, "What benefits were the subject of this intention?"
26	The appellant submitted that Dowsett J's decision in Queensland Rail and the entitlements that would flow from applying his Honour’s approach to interpretation should be the appropriate starting point for determining Parliament's intention in passing the Energy Grants (Credits) Scheme Act. This submission was bolstered by reference to the withdrawal of the Excise Bulletin EB 2000/3 (see [14] above) and the acceptance that the position taken in that Bulletin was incorrect. In our view, the withdrawal of the Bulletin does not assist the appellant. The issue in Riviera Nautic concerned whether the purchaser of the fuel was also the user. It was on this point that the position taken in the Bulletin was shown to be incorrect and, as the time for making claims under the Diesel Fuel Rebate Scheme had expired, there was no occasion for replacing the Bulletin. Riviera Nautic was not concerned with the issues raised in this appeal and therefore the withdrawal of the Bulletin because it was inconsistent with the decision in that case does not provide any support for the appellant's submission.
27	In so far as assistance might be gained from the Bulletin it would be more likely to assist the Commissioner than the appellant. If the question is what can the Bulletin tell us about Parliament's intention in enacting the Energy Grants (Credits) Scheme Act, the fact that it was issued soon after the commencement of the Act might suggest that it reflected the prevailing view when the Act was debated and enacted. That was in 2003, well before the decision in Queensland Rail. On that basis, statements in the extrinsic material to the effect that the new Act was intended to allow the same sort of rebates as under the previous legislation cannot be understood as referring to the approach of the Court in Queensland Rail. As the respondent submitted, "it is not a situation where Parliament has adopted an approved language that had at that time been construed by a court"; cf Re Alcan Australia Ltd; ex parte Federation of Industrial, Manufacturing and Engineering Employees [1994] HCA 34; (1994) 181 CLR 96 at 106.
28	In any event, arguments such as the above are of limited assistance. Ultimately the question is one of interpretation of the present provisions. In regard to that question it is more to the point that the provisions considered in Queensland Rail did not define the phrase "in rail transport". As the primary judge commented, this led Dowsett J to consult the dictionary and a variety of the other sources before concluding that the phrase referred to a system of rail transportation which inevitably involved loading and unloading activities and maintenance activities. In the Energy Grants (Credits) Scheme Act, however, s 38 makes it quite clear that, whatever might have been said in the extrinsic materials, the legislature has defined the term, "use in rail transport" more narrowly. Putting aside s 38(5) for the moment, every other instance of "use in rail transport" given in s 38 refers to on-rail use. Even without the assistance of the textual analysis it would be strange if Parliament having defined the phrase as referring to on-rail activities were to slip in a significant exception as an adjunct to uses that are clearly required to be on-rail, such as air-conditioning, heating and lighting.
29	It is noteworthy, as Mr Williams SC, who appeared for the respondent, pointed out, that in the opening words of s 38(5) the indefinite article, "a", is used to refer to rail vehicle in the first line and the definite article, "the" is used in the second line. This is a clear indication that the rail vehicle referred to in the second line is the same as that referred to in the first line, namely it is the rail vehicle with the equipment on it. The subject of the subsection is the use of diesel fuel in equipment that is "in or on a rail vehicle". This subsection then lists a number of purposes for which that equipment could be used: "air-conditioning, heating, lighting or for any purpose incidental to using the rail vehicle". Which rail vehicle? The one with the equipment on it.
30	As Mr Williams submitted:

33	Comparison of the sections shows that the drafting differences are slight. They are more easily explained as resulting from the need to accommodate not only the requirement that the equipment be "in or on a vessel" but also that the vessel be "in or on the sea or fresh water" than from an intention to differentiate between marine and rail transport. Too much can be made of these minor differences.
34	In our view the more natural construction of s 38(5) is that preferred by her Honour. It is also consistent with the very specific focus on on-rail activities that is evident in the other subsections of s 38. In particular ss 38(3)(a) and (b) specifically deal with loading and unloading as well as enabling persons to board or alight from a rail vehicle. The subsections are clearly limited to circumstances in which the fuel is used in the rail vehicle or in equipment in or on the rail vehicle. In view of these quite specific provisions, it would be very strange if other forms of loading or unloading were intended to be caught up in the reference to incidental purposes in subsection (5).
35	For these reasons the appeal must be dismissed with costs.