The Alcohol Industry - Excise Technical Guidelines (current to 30 June 2006)

Chapter 7 - Spirits - Distilleries

This document has been archived. It is current only to 30 June 2006.

Section 1 Introduction

1.1 Acronyms used in this chapter

AIG Alcohol Industry Group

CMP Continuing movement permission

EDN Export declaration number

ETI Excise tariff item

N.E.I Not elsewhere included

SMP Single movement permission

SVR Rectified grape spirit ( spiritus vini rectificatus )

1.2 Appendices at the end of this chapter

Appendix: 7.1 The distillation process

Appendix: 7.2 Distillation flow chart

Appendix: 7.3 Pot brandy still

Appendix: 7.4 Pot rectifying still

Appendix: 7.5 Rectifying columns

Appendix: 7.6 Cross-section of rectifier column

Appendix: 7.7 Continuous still

Appendix: 7.8 Continuous still (double column)

Appendix: 7.9 Continuous still (single column)

Appendix: 7.10 Marc still

Appendix: 7.11 Spinning cone

Appendix: 7.12 Vacuum still

Appendix: 7.13 Reverse osmosis (osmotic distillation)

Appendix: 7.14 Controls and licensing requirements for the use of stills

Appendix: 7.15 Age certificates - imported spirit - approved authorities

Appendix: 7.16 Brandy certificates - imported brandy - approved authorities

Appendix: 7.17 Distillation efficiency guide

Appendix: 7.18 Glossary of distillation terms

Appendix: 7.19 Record keeping requirements for distilleries.

1.3 Foreword

If you want to know more about Excise go to our website at www.ato.gov.au .

Section 2 The Distillation Process

2.1 Overview

In the alcohol industry distillation is the separation or purification of mixtures of alcohol and water (for example in wine or fermented grain mash) by using the different evaporation rates or boiling points of the water and the alcohol. As alcohol evaporates at a lower temperature, it vaporises first and therefore its separation will start before the water evaporates. Distillation does not produce alcohol, it is merely a separating or refining process. Alcohol is created through fermentation. Therefore prior to distillation you must have a base product which already contains alcohol.

Alcohol is produced by the fermentation of sugars, for example grape juice, apple juice, or the starch in malt. This is brought about by the anaerobic change of the sugars by yeast to ethyl alcohol with the release of carbon dioxide.

The commercial distillation process covers three phases comprising raw materials preparation, fermentation and distillation. All of these are not always necessarily carried out at a distillery. For example brandy may be distilled from wine sourced from elsewhere and the first two stages will already have been completed.

When alcoholic base products are distilled to produce spirit, the spirit may contain a number of other components such as essential oils, esters, sulphur dioxide and other alcohols such as methyl, propyl, butyl and amyl. Some of these components are undesirable or undrinkable and must be cut from the mixture. This process involves dividing spirit into a number of parts depending on when that part is produced during the distillation process. These parts may be separated during the initial distillation process or during a redistillation of low wines (spirits from the first distillation run).

The first components that are produced during distillation are known as the heads . Heads are the highly volatile components with a lower boiling point than ethanol. The heads vaporise first and therefore condense first.

Heads consist mainly of low molecular weight material or highly volatile compounds. Heads may contain a number of poisonous components, including high levels of methanol which can be hazardous to health.

Usually the heads are not desired in the finished product and are run to a different receiver from the rest of the spirit. Once the heads have been produced they are followed by the heart .

The heart consists mainly of ethyl alcohol, some water, small amounts of heads, volatile components, acetate esters of fusel oils, and ethyl esters of fatty acids. This part of the spirit run is the most desirable part and is generally directed to a spirit receiver .

The final part of the spirit to come from the condenser is known as the tails .

The tails form the last part of the spirit run and comprise the least volatile compounds of higher molecular weight with a higher boiling point than ethanol. These compounds are undesirable in the finished spirit and are generally directed to a different receiver from the heart. The tails are made up of what are called fusel oils .

Fusel oils are heavier molecular weight compounds, a proportion of which are required to give spirit much of its flavour but are undesirable in excessive amounts. They generally comprise a mixture of isoamyl, butyl, propyl and heptyl alcohols that are produced as a by-product of fermentation.

The combination of the more undesirable parts of the heads and the tails is referred to as feints . Feints are collected in a feints receiver and may be re-distilled as they still contain some ethyl alcohol.

See Appendix: 7.1 for a brief explanation of the various stages of distillation.

The flow chart at Appendix: 7.2 summarises a typical distillation process.

Section 3 Legislation and Licences

3.1 Overview

The Excise Act and the Excise Regulations provide administrative provisions relating to excisable goods generally.

The Distillation Act and the Distillation Regulations provide administrative provisions relating to the production and control of excisable spirits:

• sections 12 to 24 of the Distillation Act deal with the licensing of distillers (the general licensing provisions of the Excise Act do not apply to distillation), and
• section 6 of the Distillation Act defines distiller, distillery and spirits.

Section 8 of the Distillation Act provides for parts of the Excise Act to be incorporated and read as one with the Distillation Act.

The Spirits Act and the Spirits Regulations deal with specific aspects of local and imported spirits, including maturation and methylation.

The Excise Tariff Act imposes duties of excise (section 5) and contains the Schedule of excisable goods and the rates of duty which apply.

The diagram at Appendix: 7.14 summarises registration and licensing requirements for the use of stills.

3.2 Requirements of the Acts and Regulations

(1) (a) Distillation Act
	s.8	provides for parts of the Excise Act to be incorporated and read as one with the Distillation Act
	s.12	person not to distil unless licensed
	s.13	descriptions of types of licences to distil
	s.17	applications for licences to be in prescribed form
	s.18	security to be given
	s.21	period of licence (calendar year)
	Part IV	regulation of distilleries (applies only to spirit makers)
	Part V	strength of spirits for duty purposes, call up of duty for deficiencies in quantity of spirit produced (spirit makers only)
	s.60	officers to have access to premises and records
	s.63	officer may take sample of wort and spirits
	s.83	enables the Governor-General to make regulations which are necessary or convenient for giving effect to this Act
(b) Distillation Regulations
	Regs 63-65	blending, clarification and reduction of spirits
	Reg 127	procedure for dealing with samples.
(2) Excise Act
	s.50	manufacturers to keep, retain and produce records as directed
(3) Spirits Act
	s.10	requirements for brandy delivered for human consumption
	s.11	imported brandy, whisky or rum to be matured
	s.12	Australian brandy, whisky or rum to be matured

3.3 Legal definitions

Feints means spirits received into the feints receiver (section 6 of the Distillation Act). They are the heads and tails, or the first and last parts of spirits distilled, and include methanol and fusel oils. It is normal practice for feints to be returned to the still for redistillation. They are dutiable because they are spirits, although they are of low quality.

Distiller means a person who holds a spirit makers licence issued pursuant to this Act (section 6 of the Distillation Act).

Distillery means the licensed premises of a distiller (section 6 of the Distillation Act).

Illicit spirits means spirits distilled, moved, altered or interfered with in contravention of this Act (section 6 of the Distillation Act).

Illicit still means a still made, removed, set up, erected, sold or otherwise disposed of, purchased or otherwise acquired, imported, or in the possession or custody, or under the control, of a person, in contravention of this Act (section 6 of the Distillation Act).

Low wines means spirits of the first extraction received into the low wines receiver (section 6 of the Distillation Act).

Spent wash means the liquor which remains after the spirits have been extracted by distillation' (section 6 of the Distillation Act).

Spirit means goods described in item 2 (other than sub-item 2H) of the Schedule to the Excise Tariff Act 1921 (section 4 of the Excise Act).

Spirits includes any liquor on which, under the name of spirits, any duty of excise is imposed by the Parliament, whether the liquor is distilled or made or in any stage of distillation or making (section 6 of the Distillation Act). When produced the spirits are placed in a vat or vessel known as a spirits receiver.

Standard temperature and pressure means a temperature of 20 ° centigrade and a pressure of one standard atmosphere (section 4 of the Excise Act).

Still means any apparatus for or capable of distilling spirits and any part thereof, and any apparatus connected or used in connexion therewith (section 6 of the Distillation Act).

Wash means the liquor from mashed material after it has commenced to ferment and before it has been distilled (section 6 of the Distillation Act).

A Glossary of Distillation Terms is at Appendix: 7.18.

3.4 Permissions regarding stills

The Distillation Act 1 prohibits the manufacture, removal, setting up, sale, disposal, purchase and importation of stills without permission.

The Distillation Act 2 prohibits the use of a still for a purpose other than the distillation of spirits unless appropriate notice has been given to the Tax Office.

The Distillation Act 3 prohibits the distillation of spirits without a licence.

The Distillation Act 4 specifies that the provisions of sections 10 and 11 do not apply to stills having a capacity not exceeding 5 litres. Such stills may be used for production of distilled water and essential oils but they may not be used under any circumstances by unlicensed persons to distil alcohol (section 12).

Stills forming an integral part of dry cleaning equipment are not regarded as stills requiring permission under sections 10 and 11.

Under section 11 of the Distillation Act, should a person wish to use a still (other than a still to which the provisions of section 10 do not apply) for a purpose other than the distillation of spirits, for example for the distillation of eucalyptus oil or other essential oils, that person is required to give appropriate notice to the Tax Office.

Details of all stills with a capacity exceeding 5 litres are recorded in a stills register maintained by the AIG.

3.5 Classes of licences

The Distillation Act ⁵ divides the types of licences to distil as follows:

1. pirit makers licence:
   1. general licence authorising the licensee to distil spirits from any material
   2. wine distiller licence authorising the licensee to distil spirits from wine or lees of wine
2. vigneron licence authorising the licensee to distil spirits from wine or lees wine for the purpose of fortifying wine
3. experimenter licence authorising the licensee to distil spirits from any material for the purpose of research into the production or use of fuel ethanol, including
4. research relating to the development of technology for such production or use.

Section 4 Distillery Products

4.1 Definitions

Brandy, whisky and rum are defined in section 3 of the Spirits Act and in the preamble to The Schedule to the Excise Tariff Act. The definitions are the same in both Acts (see definitions in section 4.2 to section 4.8).

Other excisable beverage is defined in the Schedule to the Excise Tariff Act and means any beverage containing more than 1.15% alcohol by volume but does not include beer, brandy, fruit brandy, whisky, rum, liqueurs or wine subject to wine equalisation tax (WET). It includes what were formerly known as spirituous beverages, vodka, ouzo and gin and, following Tax Reform in July 2000, also includes any other alcoholic beverage, whether fermented or distilled or both. Other excisable beverages are classified either under Excise Tariff Item (ETI) 1D (alcoholic strength not exceeding 10% a/v) or ETI 2H (alcoholic strength exceeding 10% a/v).

4.2 Brandy

(1) ETI 2A

1. brandy is defined in the preamble to the Schedule to the Excise Tariff Act and means a spirit distilled from wine in such a manner that the spirit possesses the taste, aroma and other characteristics generally attributed to brandy, being a spirit that contains not less than 25% of spirit distilled at a strength of not more than 83% by volume of alcohol.
2. section 12 of the Spirits Act requires that brandy must be matured in wood for not less than 2 years.

4.3 Whisky

(2) ETI 2D

1. whisky is defined in the preamble to the Schedule to the Excise Tariff Act and means a spirit obtained by the distillation of a fermented liquor of a mash of cereal grain in such a manner that the spirit possesses the taste, aroma and other characteristics generally attributed to whisky.
2. section 12 of the Spirits Act requires that whisky must be matured in wood for not less than 2 years.

4.4 Rum

(3) ETI 2F

1. rum is defined in the preamble to the Schedule to the Excise Tariff Act and means a spirit obtained by the distillation of fermented liquor derived from the products of sugar cane, being distillation carried out in such a manner that the spirit possesses the taste, aroma and characteristics generally attributed to rum.
2. section 12 of the Spirits Act requires that rum must be matured in wood for not less than 2 years.

4.5 Gin, vodka and ouzo

Although these products can be, and often are manufactured in a distillery, they are classified within item 2H of the Schedule to the Excise Tariff Act as other excisable beverages. There is no requirement for these products to be aged in wood. They are dealt with in this manual in chapter 8, which deals with liqueurs and other excisable beverages.

4.6 Other spirits (excise tariff item 2 (O))

ETI 2 (O) is 'Spirits, n.e.i' (that is spirits not elsewhere included).

ETI 2 (O) may be applied when spirits approved for use under ETI 2M or 2N are used otherwise than in accordance with the regulations or when the permit holder cannot account to the satisfaction of the Tax Office for any shortages of such spirits.

4.7 Volumes for duty purposes

Volumes for duty purposes of spirit and other excisable beverages are dealt with in chapter 3 section 3.2.3 in this manual.

4.8 Spirits packaged in bulk containers

Spirits must not be entered for home consumption packaged in a bulk container without the written approval of the Tax Office (subsection 58(4) of the Excise Act).

A bulk container means a container that has the capacity to have packaged in it more than 2 litres of liquid (section 4 of the Excise Act).

4.9 Treatment of feints

Feints are low quality spirits, and may be subject to excise duty if a licensee does not adequately account for them. A licensee should also include feints in their distillation efficiency calculations (see guide at Appendix: 7.17) to obtain an accurate efficiency figure.

If a licensee does not redistil feints but runs them to waste, they would normally collect them over a period of time until they need to be disposed of. Regulation 51 of the Excise Regulations requires that the licensee must lodge an application with the Alcohol Industry Group (AIG) at the Tax Office for remission of duty and permission to destroy the feints. They must record details in their distillation records.

Where destruction of feints is an ongoing issue, a licensee may apply to the AIG for continuing approval for their disposal. The AIG is examining the possibility of conditioning relevant licences to include ongoing approval for the destruction of feints.

4.10 Imported spirits used in the manufacture of excisable goods

As stated in chapter 1, imported spirits may be brought within the ambit of the excise regime by being blended with excisable spirits in the manufacture of other excisable spirits or used in the manufacture of other excisable beverages ⁶ .

Imported spirits intended for blending with excisable spirits, or for use in the manufacture of other excisable beverages, are dealt with in the first instance under the Customs Act 1901 (Customs Act). Under the Customs Act imported bulk spirits are required to be warehoused in a licensed Customs warehouse. At the time of being used to manufacture excisable goods the imported spirits must be entered on a Customs Nature 30 Entry and any ad valorem duty differential (typically 5%) paid.

The imported spirits remain subject to Customs control until such time as they are blended with excisable spirits or used in the manufacture of other excisable beverages. Such blending or manufacture can only be carried out by a licensed excise manufacturer. Therefore the premises where the excise manufacture takes place, using excise equivalent goods (that is imported spirits in this case), must be licensed under both the Customs Act (as a Customs warehouse) and the Excise Act (for excise manufacture).

Prior to being used in excise manufacture, any losses of imported spirit are a Customs matter and remission can be sought from Customs for the ad valorem duty and the duty based on the volume of spirit losses.

Any losses occurring after excise manufacture are an excise matter and remission of the duty based on the volume of spirit losses can be sought from the Tax Office. The ad valorem duty will not be refunded.

Section 5 Flavouring, Colouring and Blending

5.1 Flavouring and colouring

The regulations relating to the addition of colouring materials and flavourings to spirits are regulated by Departments of Health in each State under the Food Standards Code (Standards 1.3.1 and 2.7.5).

5.2 Blending of spirits

(1) Blending of spirits is covered by section 24 of the Excise Act and regulation 2A of the Excise Regulations . Schedule 2 of the Excise Regulations sets out the cases and conditions as follows:

• item 7 imported spirits containing not less than 84% a/v used in the manufacture of other spirits
• item 9 imported brandy, fruit brandy, whisky or rum are used in the manufacture of other spirits.

Blending involves the mixing together of two or more different types of the same spirit and may only be carried out by a licensed distiller or excise manufacturer.

(2) The age of blended spirits is deemed to be the age in wood of the youngest spirit in the blend. Section 12 of the Spirits Act stipulates a period of not less than 2 years for the maturation of brandy, whisky or rum. Therefore, if any part of a blend is less than two years old, the blend as a whole could not be said to be of an age not less than 2 years.

Section 6 Certificates and Samples

6.1 Certificates - excisable spirit

• The Spirits Act 7 authorises the Tax Office, at the request of a distiller or blender, to issue a certificate to the effect that excisable spirits are brandy, whisky or rum.
• To obtain such certification, a licensee is required to complete a Form 1 in accordance with the Schedule to the Spirits Regulations and forward it to the AIG for endorsement.
• The AIG will not endorse certificates for excisable spirits which have left Tax Office control.

6.2 Age certificates - imported spirit

The Spirits Act ⁸ prohibits the delivery of imported brandy, whisky or rum from the control of Customs unless the Tax Office is satisfied that the spirit has been matured by storage in wood for not less than 2 years. Primary responsibility therefore rests with the Tax Office, although appropriate delegations have been given to certain Customs Officers.

This requirement may be satisfied by production of a certificate for brandy, whisky or rum, issued by an approved authority in the country of exportation or manufacture, to the effect that the spirit (or the youngest spirit in a blend) has been matured in wood for not less than two years (see section 6.3 for brandy certificates). Age certificates are to be produced to the Tax Office when imported spirits are to be blended with excisable spirits in accordance with Item 9 of Schedule 2 of the Excise Regulations.

Appendix: 7.15 lists the overseas authorities approved for the issue of age certificates.

6.3 Brandy certificates - imported brandy

The Spirits Act ⁹ prohibits the delivery of imported brandy for human consumption until the Tax Office is satisfied by the production of an official certificate given in the country of origin that the spirit is distilled wholly from:

• grapes
• products derived solely from grapes, or
• both grapes and such products.

The word Collector has the same meaning in the Spirits Act as is given to it in the Excise Act ¹⁰ . Primary responsibility therefore rests with the Tax Office, although appropriate delegations have been given to certain Customs Officers.

This requirement may be satisfied by production of a certificate for brandy, issued by an approved authority in the country of exportation or manufacture, to the effect that the spirit (or the youngest spirit in a blend) has been matured in wood for not less than two years. When imported brandy is to be blended with excisable brandy in accordance with Item 9 of Schedule 2 of the Excise Regulations, age certificates are to be produced to the Tax Office.

Appendix: 7.16 lists the overseas authorities approved for the issue of brandy certificates.

6.4 Samples

6.4.1 Delivery of samples free of duty.

The Excise Act ¹¹ states that small samples of goods which are subject to Tax Office control may, with Tax Office approval, be delivered for home consumption without entry for home consumption and without payment of duty.

Requests in writing for the delivery of samples into home consumption without payment of duty should be forwarded to the AIG for written approval. As section 64 applies to samples across the spectrum of excisable goods it is not practical to specify the size of samples which may be approved in all cases. Consequently the quantity of samples allowed will depend on an assessment by the AIG of the particulars of each request. The AIG will forward written approval to the licensee detailing the samples that may be delivered without entry. A licensee is required to retain the written approval as evidence of acquittal of the goods from Tax Office control.

Samples of imported spirit taken at the wharf by another government agency (for example the Australian Quarantine Inspection Service) fall within the authority of the Australian Customs Service.

6.4.2 Samples for strength testing

A tax officer conducting compliance activity may take samples for verification purposes ¹² .

Regulation 127 of the Distillation Regulations, regulation 83 of the Excise Regulations and regulation 54 of the Spirits Regulations deal with the handling of samples by tax officers.

The procedure is as follows:

• the licensee or their agent will be advised by the tax officer that samples are required
• samples should be drawn by the licensee or their agent under the supervision of the tax officer, but samples may be drawn by the tax officer
• the tax officer will divide each sample into three (3) equal parts and label or mark each part so as to be readily identifiable
• the tax officer will ensure that the samples are properly sealed
• one sample will be given to the licensee or their agent, and the other two parts retained by the tax officer
• the tax officer will record details of samples in a samples register
• when analysis is required, one sample is to be delivered to AGAL or another suitably qualified analyst, personally by a tax officer, by registered post or by another method approved by the Tax Office, and
• tax officers will observe proper procedures for maintaining security and accountability of samples.

Section 7 Spirit and Concentrated Flavourings Obtained from the Treatment of Wine

7.1 Overview

Concentrated wine flavours (or aromas) are flavourings obtained from the treatment of wine by an enhanced distillation process such as a spinning cone. Aromas are chemically similar to the highest alcohols and are distilled in the first 1-2% by volume of the spinning cone distillation process. Using grape wine as the feedstock the process results in two liquid streams:

• a low volume but high strength flavour stream, comprising concentrated wine flavourings, typically 50-60% a/v, and
• a high volume but lower strength stream comprising the remainder of the wine after the flavour, and with it a small amount of alcohol at high strength, has been removed. This stream is typically around 1% lower in alcohol content than the original wine.

Flavour is usually removed as a part of a process to produce low alcohol, de-alcoholised or reduced alcohol wine. Flavour removal is the first stage of the process. It is followed by the concentrated flavourings at 50-60% a/v being put back through the spinning cone to remove the alcohol which it contains. This produces two further liquid streams:

• a high strength spirit stream (typically 40-50% a/v), and
• the remainder which consists essentially of water.

The three wine components which are produced (flavour, spirit, remainder) can then be blended in the appropriate ratio to produce de-alcoholised, low alcohol or reduced alcohol wine.

7.2 Concentrated wine flavourings

7.2.1 General

These concentrated wine flavours are obtained from the treatment of wine by an enhanced distillation process (see section 7.1).

They normally represent only a very small portion of the overall quantity of treated wine.

The essential purpose of extracting the concentrate from the wine is to obtain its flavouring characteristics. It typically has an alcoholic strength of around 50% alcohol by volume as alcohol is the necessary carrying medium for the volatile flavours.

Concentrated wine flavourings produced from such enhanced distillation processes are distilled spirit and are subject to excise licensing, control, accounting and audit procedures.

7.2.2 Approved uses

For export

Where it is intended to export the concentrated wine flavours, the flavours may be moved under the authority of an export movement authority (Single Movement Permission (SMP) or Continuing Movement Permission (CMP)) issued by the Tax Office. An Export Declaration Number (EDN) issued by Customs will authorise export of the goods. Normal excise procedures apply relating to the storage, accounting and export of under bond goods.

For use in wine making

The use of concentrated wine flavouring within the Australian wine industry as part of the wine making process is permitted by the Australian Food Standards. The addition of the flavours to wine is for the purpose of enhancing existing wine flavours rather than for having any material effect on increasing the strength of the wine. As the strength of concentrated wine flavouring is below the strength of fortifying spirit specified in section 57B of the Distillation Act, its addition does not constitute fortification of the wine and as such, is not subject to the provisions of Part VIA of the Distillation Act. Flavours may also be used as described in the overview to this section in the production of de-alcoholised, low alcohol and reduced alcohol wines.

7.2.3 Excise control and accountability

The concentrated wine flavours are produced by distillation and are classified under ETI 2(O) as spirits n.e.i. until exported or used for concessional purposes.

Storage, movement, export and non-excisable end use of the concentrated wine flavourings are subject to normal excise control, accounting and audit procedures.

Where the concentrated wine flavours are used for blending with local wine (see section 7.1), the spirit is entered as concessional spirit under ETI 2M. This complies with Excise Regulation 142 (that is being for manufacturing purposes approved by the Tax Office) and regulation 153 (that is being at a strength approved by the Tax Office). A licensee is required to apply to the AIG for a permit for the addition of concentrated wine flavours to local wine.

Where the concentrated wine flavourings cannot be satisfactorily accounted for the amount of duty liability will be recovered using the rates in force under ETI 2(O) ¹³ .

7.3 Low strength spirit residue

7.3.1 General

Spirit residue is the low strength spirit obtained as a by-product of the treatment of wine by spinning cone flavour removal (de-aromatisation) process.

The essential characteristic of the low strength residue is that it is produced at strength less than the original strength of the wine used in the distillation.

7.3.2 Approved uses

For use in wine making

Low strength spirit residues may be reintroduced into the wine making process as an integral part of the process and are not designed to have any material effect on increasing the strength of the wine concerned. Used in this manner the addition of the spirit to the wine is not deemed to be fortification of the wine and is not subject to the provisions of Part VIA of the Distillation Act. Low strength spirit residue used in this manner is to be acquitted as concessional spirit under ETI 2M. This complies with Excise regulation 142 (that is being for manufacturing purposes approved by the Tax Office) and regulation 153 (that is being at a strength approved by the Tax Office).

7.3.3 Excise control and accountability

The low strength spirit residue is produced by distillation and is classified to ETI 2(O) as distilled spirit until dealt with in an approved manner.

Storage, movement and use of the low strength spirit residue is subject to normal excise control, accounting and audit procedures.

Where the low strength spirit residue cannot be satisfactorily accounted for, the amount of the duty liability will be recovered using the rates in force under ETI 2(O) ¹⁴ .

7.4 De-alcoholisation

7.4.1 General

Where a de-alcoholised, low alcohol or reduced alcohol wine is required, the low strength spirit residue produced from the de-aromatisation process is put back through the spinning cone as described in the overview at section 7.1. The result is a high strength spirit stream (de-alc spirit) and a de-alcoholised remainder.

7.4.2 Approved uses

For use in the fortification of grape wine

The spirit stream produced from the de-alcoholisation process is normally around 40-50% a/v. It is treated as a distilled spirit for excise purposes. Where the spirit has been produced from grape wine, it may be blended with high strength grape spirit (SVR - see glossary of distillation terms at Appendix: 7.18) and used for fortification subject to the provisions of section 57B of the Distillation Act, that is once blended it is spirit distilled from wine or other products of wine making containing not less than 74% by volume of alcohol. Anyone using such spirit for fortification is required to hold an appropriate concessional spirit permit.

7.4.3 Excise control and accountability

The spirit obtained from the de-alcoholisation process is produced by distillation and is classified to ETI 2(O) as distilled spirit until dealt with in an approved manner.

Storage, movement and use of high strength de-alcoholised spirit is subject to normal excise control, accounting and audit procedures.

Where high strength de-alcoholised spirit cannot be satisfactorily accounted for, the amount of duty liability will be recovered using the rates in force under ETI 2(O) ¹⁵ .

Section 8 Officer Role, Distillery Access and Records

8.1 Officer role, distillery access and records

The Distillation Act ¹⁶ allows tax officers access to all distilleries or premises on which a still is kept, to carry out tests and examinations as necessary and to take copies of, or extracts from, all books and accounts required to be kept by the distiller in relation to the distillery or the making or sale of spirits.

The Distillation Act ¹⁷ allows tax officers to require any charger or receiver to be emptied and cleaned and any quantity of the wash to be distilled and the produce to be conveyed into the charger or receiver.

The Distillation Act ¹⁸ allows tax officers to take a sample of wort, wash, low wines, feints or spirits from any vessel. The strength of any sample so taken shall be deemed the strength of the whole of the contents of the vessel from which it is taken.

Before any such sample is taken a licensee may stir up and mix together all the liquor contained in the vessel from which the sample is to be taken.

The Excise Act ¹⁹ requires a licensee to keep such records as the Tax Office directs. Part V of the Excise Act, including section 50, is incorporated with provisions of section 8 of the Distillation Act, and therefore applies to distillers.

Under the provisions of section 50 of the Excise Act, a distiller is required to maintain sufficient records to show that they are complying with their obligations under excise legislation as follows:

• keep excisable goods secure
• account for all excisable goods produced, and
• pay the correct amount of excise duty as and when it is due.

Comprehensive records also assist the licensee to track and account for stock for commercial purposes.

In most cases it is unnecessary for tax officers to use regulatory powers to gain access to premises or to inspect records. An informal request to the licensee usually results in the production of the desired information. Officers will inform the licensee that they are relying on their cooperation rather than use the access powers to enter premises, examine documents or take samples. However the formal powers can be used if necessary.

Field services officers intending to audit a licensee's business will firstly advise them in writing of the intended audit and arrange an entrance interview at which they will discuss access to premises and documents.

In the event that the licensee refuses to allow officers access to premises and records, the situation would be escalated to their manager or the National Director level for review.

8.2 Distillery records

Under the provisions of section 50 of the Excise Act a licensee is required to keep, retain and produce to an officer such records as the Tax Office directs. While the Tax Office does not normally give specific directions about which records must be maintained, most records which are required by tax officers to verify compliance are those that would normally be required to efficiently maintain the licensee's operation. If the records are found to be inappropriate or insufficient, the Tax Office may use the provisions of section 50 of the Excise Act to direct the licensee to maintain specific records.

A licensee must keep records to account for:

• still house production
• treatment of feints
• stock takes
• distillation efficiency
• spirit store movements
• receipt and delivery of bulk spirit
• bottling operations
• production and movement of packaged stock, and
• spirit warehouse movements.

A comprehensive list of distillery records is at Appendix: 7.19.

Section 9 Stills

9.1 Stills used in the distillation of spirits

9.1.1 What is a still for excise purposes?

A still is an apparatus for distilling spirits. Distillation is based on alcohol boiling at a lower temperature than water, with the result that when an alcoholic liquid is heated to a temperature between the two boiling points, the vapours that rise can be caught and condensed back to form a liquid with a higher alcoholic content. When heated to a temperature between the two boiling points, the vapour given off contains a portion of both alcohol and water, even though the temperature is below the boiling point of water. This is because liquids vaporise at lower temperatures than their actual boiling points (for example water vaporises from puddles without ever reaching 100 ° C).

Distillation can be done in a single-shot pot still or in a continuous feed unit.

A still consists essentially of the following components:

• the heat source - electricity, gas, wood, charcoal, heat beads or other heat source
• the still or retort - container such as a closed boiler for heating the liquid charge
• the condenser - unit for cooling the vapour from the heated liquid, and
• the receiver - unit for collecting the condensed vapour.

There are various types of stills including:

• pot stills
• pot rectifying stills
• continuous stills
• marc stills
• spinning cone column stills, and
• vacuum stills.

There are other methods of concentrating the percentage of alcohol within a liquid which are not distillation. For example reverse osmosis (osmotic distillation) and other more experimental methods. Reverse osmosis is discussed in section 10 of this chapter.

9.1.2 Pot still

(Appendix: 7.3)

The pot still, sometimes referred to as the brandy pot still, consists of a boiling pot and condenser which are connected by a hollow tube called a head. At the top of the head is the brandy ball, a water cooled section which provides some intermediate condensation and a limited amount of reflux (that is the vapour reverts to liquid and the liquid retreats back down the distillation column).

The size of pot stills in Australia varies between 1,500 and 23,000 litres. Current practice is to heat the charge (wash) using steam giving improved temperature control.

The strength of the spirit/water mix produced as a result of the first distillation run through a pot still is usually between 30% and 45% a/v. This contains most of the volatile products from fermentation (that is sulphur dioxide, esters, and many higher alcohols) and is known as low wine.

Often when a series of low wines have been produced through distillation, these will then be combined to form a charge to put through the pot still again. This is the stage where a greater amount of skill is required by the distiller as this is when a number of undesirable elements in the product need to be separated. This is also usually when cool water is passed through the intermediate cooler to provide a greater amount of reflux to make the process slower and allow greater control of the separation of the spirit components.

Low wines are a step in the process of producing spirit in saleable form. Some spirits must be double or triple distilled to achieve the final result.

When the spirit produced in a pot still is condensed and directed to the spirit receiver or to the low wines receiver, it passes through a glass chamber called a brandy safe through which condensed spirit flows. The brandy safe contains a hydrometer to measure the specific gravity of the spirit and allow the calculation of the alcoholic strength.

At the conclusion of a distillation run when the alcohol has been removed, there will be a mixture of water and other material (such as grape juice colourings, sugars, preservatives, or the remnants of starchy materials which were converted to sugars then fermented if a grain based wash was used) remaining in the pot section of the still. The leftover mixture is known as spent wash .

9.1.3 Pot rectifying still

(Appendix: 7.4)

A pot rectifying still is similar to a pot still but has a rectifying column rising from the pot and leading to a condenser, instead of a head tube connecting the pot to the condenser.

A rectifying column is divided into sections by a number of plates with numerous holes, promoting greater heat exchange between rising vapour and liquid which has already condensed, retreated, and lies on the plates.

There are three types of rectifying column:

• perforated plate column
• packed column, and
• bubble cap column.

Examples of the different types of rectifying columns are shown at Appendix: 7.5 and a cross-section of a rectifying column is at Appendix: 7.6.

Although the construction of the three types of rectifying column may vary in design, the operating principle remains the same for all three, that is, the promotion of the exchange of heat between rising vapours and descending condensate.

9.1.4 Continuous still

(Appendix: 7.7)

A continuous still is a more economical system which has a higher throughput and uses less energy. The continuous still employs the same operating principle as the pot rectifying still except that the continuous still uses a continual input of wash (or distillation wine), instead of a single charge in a single pot. A balance in the system must be maintained. This means that the input wash and steam (used for heating the wash) must equal output spirit, feints and spent wash.

The continuous still normally has two columns (Appendix: 7.8), although it can be arranged as a single column (Appendix: 7.9) or even broken down into three columns. The first column is known as an analyser (or stripping) column and removes most of the alcohol from the wash to produce a low wine of around 40% a/v. The second column is known as a rectifying column and is designed to separate the components and increase the purity of the spirit. If a third column is used it is known as a purifier column and is used to remove further impurities.

The higher the vapour rises up the column, the stronger it will be in alcoholic purity due to the interaction which has occurred between the rising vapour and the descending condensate. Therefore, the higher up the column the vapour condenses, the higher the strength of the condensate (spirit). Spirit is removed at different heights up the column depending on the required strength.

9.1.5 Marc still

(Appendix: 7.10)

The marc still is a unique style of still designed to recover alcohol from marc (the residue of grapes, that is seeds, skins, stalks and pulp, after the juice has been extracted). It has horizontally mounted revolving heaters into which marc is fed via an Archimedean screw. The screw acts as a self seal against steam and alcohol vapour loss. Steam is introduced into one end of the still and strips all volatile materials through a vapour pipe to a condenser. This produces a low wine of about 40% a/v. After removing some undesirable characteristics through an ionisation cleansing process, the low wine is then fed through a continuous still for rectification to produce a high strength spirit.

The low wine produced from a marc still is relatively impure and is commonly known as grappa . The final spirit produced from the marc still has a unique character (said to be peppery) and is used in fortifications with other spirits to give a special characteristic and flavour.

9.1.6 Spinning cone column still

(Appendix: 7.11)

The spinning cone column still process is used to evaporate volatile esters from a liquid stream. The apparatus comprises a series of inverted cones attached to a central shaft which is rotated between another series of inverted cones fixed to the wall of the vessel. On the bottom of the rotating cones are four tapered fins which induce a high gas flow across the liquid flowing down the underlying cone. The profile of these fins is such that they are parallel to the liquid profile beneath them ensuring maximum gas pumping efficiency. The effect of these fins is further enhanced by the ability to raise or lower the rotating plates such that the fins are in close proximity to the liquid surface. This causes volatile esters to evaporate and be subsequently carried out of the chamber through an inert gas stream. These gases then travel to a condenser where the alcohol is retrieved.

The spinning cone can also be used to strip aroma from a broad section of unfermented fruits and vegetables where no alcohol extraction is involved.

9.1.7 Vacuum still

(Appendix: 7.12)

Vacuum distillation is a process of distillation under reduced pressure. The distillation system operates at approximately half atmospheric pressure. This results in the boiling points of all components being reduced. It is a type of continuous still operation where the spirit is condensed at various stages, hence various strengths.

The vacuum still comprises an analyser column, a series of vacuum pots, a steam supply and condensers. Between each vacuum pot is a condenser which acts as a dephlegmator or reflux system. The processes of the vacuum still and continuous still are alike in that heads travel furthest up the column, followed by high strength SVR (grape spirit), lower strength brandy spirit, and fusel oil travelling the least distance up the column. That is the heads travel through the system to the final vacuum pot, high strength SVR is accumulated in the second pot, lower strength brandy spirit is accumulated in the first pot and fusel oil is taken off in the analyser column.

The process is said to give better quality brandy on initial distillation and the spent wash is ideal as a non-alcoholic wine base. The vacuum still can be used for redistillation, handling charge strengths of up to 45% a/v.

Vacuum stills do not include brandy safes as these are not feasible in the vacuum system. The distiller monitors strengths by adjusting pressures/temperatures at the analyser column by controlling the wine flow rate and testing the spirit from the vacuum pots.

Section 10 Alternative Technologies

10.1 Mobile still - description

A mobile still is a spinning cone column still (see section 9.1.6) which can be mounted on a truck for transport around wine producing areas. It is designed primarily to:

• collect aromas and flavours, and
• de-alcoholise wine.

A still is subject to the Distillation Act when used to de-aromatise, de-alcoholise or reduce the strength of wine or other alcoholic beverages as spirit is produced. Mobile stills are subject to the Distillation Act . The processes are described in section 7 of this chapter.

The mobile still is a transportable unit and can be assembled and made operational

in twelve hours.

The mobile still should have two flow meters as permanent attachments as follows:

• one meter to accurately measure throughput of wine taken into the mobile spinning cone, and
• one meter to accurately register take-off of spirit flavouring from the wine charge.

10.2 Mobile still - conditions for operation

If a person operates a mobile still, they must be licensed in accordance with section 12 of the Distillation Act (see section 9.1.1). The mobile still owner is required to:

• register the still with the AIG 20 , and
• obtain approval from the AIG to remove, set up or erect the still 21 .

The premises where excisable spirit is to be extracted must be covered by an excise

• storage licence or other appropriate licence (for example manufacturer licence) to
• enable the storage of the spirit at that premises. The owner of the premises where
• the distillation is to take place:
• must be a licensed distiller 22 (at least for the duration of the distillation as distillation can only take place at a licensed premises 23 ), and
• may revert to an excise storage licence if spirit remains at the premises when the mobile still has been removed.

As the owner of the mobile still the licensee is subject to subsection 10(b) of the

Distillation Act at each premises where they intend to operate, that is they require permission from the Tax Office to remove, set up, or erect the still. Either the mobile still owner or the owner of the premises will require a movement permission to move the spirit.

The owner of premises who de-alcoholises wine and retains the spirit for their own use must have a permit for the fortification of Australian wine (normal arrangements relating to fortifiers apply) or have an appropriate excise manufacturer licence to use the spirit for other purposes.

Fortifying spirit means ²⁴ :

• a spirit distilled from wine or other products of wine making, being a spirit that contains not less than 74% by volume of alcohol, or
• Australian brandy that has been matured by storage in wood for a period of 2 years or more, being brandy that contains not less than 57% by volume of alcohol plus flavouring and colouring matter (if any) approved by the Tax Office and which does not cause obscuration of the strength of the brandy exceeding 1.7%.

10.3 Mobile still - operational requirements

The licensee of the premises at which a mobile still (or spinning cone) operates must:

• record the type, quantity (in litres) and alcoholic strength of wine or other distillation material used in the process
• record details of tank numbers for the wine or other distillation material used in the process
• record the opening and closing readings of the two flow meters for all operations
• record the quantity (in litres and Lals) and alcoholic strength of spirit extracted from the wine or other distillation material
• record the quantity (in litres and Lals) of flavours and reduced alcohol wine extracted during the distillation process
• record the quantity (in litres and Lals) and strength of spirit retained at the premises where the distillation took place
• record details of tank numbers to which the treated product is returned, and
• ensure that a movement permission is in place for the removal of any spirit extracted during the distillation process.

10.4 Reverse osmosis filtration (Appendix: 7.13)

Reverse osmosis filtration is based on the use of semi-permeable membranes to separate the components of the feedstock at the molecular level (that is only small molecules pass through the membrane). It is used in water treatment, desalination, the pharmaceutical industry, as well as food, beverage and flavour technology.

Reverse osmosis is most commonly used in the wine industry to adjust alcohol and/or volatile acidity levels. For example where a wine may be excessively alcoholic at 15%, reverse osmosis is used to adjust alcohol content to a more palatable level such as 14%.

The purpose of reverse osmosis is to remove a stream of alcohol, water and some other chemical compounds from the wine without removing any of the flavour elements. The process operates by passing wine of strength of approximately 10% a/v under pressure against a membrane which allows only small molecules to pass through. The process results in two liquid streams:

• the permeate - the stream that passes through the membrane, comprising water, ethanol (typically 75% of the alcoholic strength of the original wine), acetic acid, and some other components, and
• the retentate - the portion that does not pass through the membrane, comprising the remainder of the wine (including the flavour components), typically at a slightly higher alcoholic strength than the original wine.

The process of reverse osmosis does not involve separation by means of vaporisation and subsequent condensation and is, therefore not regarded as distillation under the definition in section 5 of the Distillation Act.

Distillation involves a process of evaporation and condensation. Section 5 of the Distillation Act describes the 'present ordinary course of' distillation:

(iii) The wash is distilled in a still by heating to evaporation and condensing the vapour...

Consequently, the use of reverse osmosis equipment to process wine to this initial stage does not require the operator to be licensed under the Distillation Act. This is conditional upon the process not being repeated to concentrate alcohol in either stream. This latter process may be considered to be excise manufacture to be carried out only by a licensed manufacturer.

section 11 Goods Returned to Under Bond Stock After Removal or Delivery for Home Consumption

Goods falling within the following categories may be returned to under bond stock:

• incorrect stock selections, and
• over delivery.

Returns are subject to the following conditions:

• they must be accompanied by the original documentation, and
• they must be returned within 48 hours of delivery, or such further time as the Tax Office may allow if satisfied that the goods have been returned without delay.

Goods covered by a PSP may be returned to under bond stock within the week before the goods are to be entered on an Excise return and duty paid.

Breakages that occur after goods have left the Tax Office's control may not be returned to under bond stock.

Interpretative Decisions (ATO IDs) which provide examples of circumstances when goods may or may not be returned to under bond stock after removal or delivery may be found at ATO IDs .

APPENDIX: 7.1 The distillation process

(section 2.1 in this chapter)

Raw materials preparation

Raw materials that constitute the basic ingredients in the distillation process may be divided into two categories; sugars, and starches which can be easily converted to fermentable sugars. Sugars may come from grapes, sugar cane and fruits such as plums, peaches and apples. Starches may come from grains such as wheat, barley, rye, maize and rice or tubers such as potatoes.

All of these materials are initially processed to more fully expose their sugars or starches to facilitate subsequent treatment. Fruits are crushed while cereals and tubers are milled and mashed.

Milling breaks the outer protective cellulose wall around the kernel and exposes the starch to cooking and the conversion process. The resulting ground product is called grist.

Mashing is done in a mash tun and involves a cooking and conversion process where grist is steam cooked. Water and malted grain are added, and the combination is agitated, converting starches to fermentable sugars sufficiently concentrated to produce a fermented liquor of between 7% to 10% alcohol by volume. This sugary substance is called wort (pronounced wert).

Malting is the softening by steeping (soaking) of grain and allowing the grain to germinate. It is then heated sufficiently to kill any further growth. Malt can be produced from any cereal grain but the most commonly used grain is barley. Malting also assists in adding flavour characteristics.

Fermentation

Fermentation is a natural process by which living yeasts convert sugars into alcohol and carbon dioxide. The wort produced is fermented in a back. Fermentation ceases when all the sugars are converted or when the concentration of alcohol becomes too great and kills the yeast, whichever occurs first. This fermented alcohol base product is called wash.

Distillation

The wash, which contains alcohol and water, is distilled in a still by heating to evaporation and condensing the vapour. Distillation operates on the principle that alcohol vaporises at a lower temperature than water. It may be carried out by boiling or by reducing the atmospheric pressure in the vessel containing the liquids (vacuum or low pressure distillation). The liquor product is spirits and the residue of the wash is spent wash.

The liquor product passes into one of three receivers:

• low wines receiver for the receipt of low wines. These are spirits of the first extraction requiring further distillation
• feints receiver for the receipt of feints. These may include low wines and are spirits requiring further distillation, and
• spirits receiver for the receipt of spirits not requiring further distillation.

APPENDIX: 7.2 Distillation flow chart

(section 2.1 in this chapter)

APPENDIX: 7.3 Pot brandy still

(subsection 9.1.2 in this chapter)

APPENDIX: 7.4 Pot rectifying still

(subsection 9.1.3 in this chapter)

APPENDIX: 7.5 Rectifying columns

(subsection 9.1.3 this chapter)

APPENDIX: 7.6 Cross-section of rectifier column

(subsection 9.1.3 in this chapter)

APPENDIX: 7.7 Continuous still

(subsection 9.1.4 in this chapter)

APPENDIX: 7.8 Continuous still (double column)

(subsection 9.1.4 in this chapter)

APPENDIX: 7.9 Continuous still (single column)

(subsection 9.1.4 in this chapter)

APPENDIX: 7.10 Marc still

(subsection 9.1.5 in this chapter)

APPENDIX: 7.11 Spinning cone

(subsection 9.1.6 in this chapter)

APPENDIX: 7.12 Vacuum still

(subsection 9.1.7 in this chapter)

APPENDIX: 7.13 Reverse osmosis (osmotic distillation)

(subsection 9.1.1 and section 10.4 in this chapter)

APPENDIX: 7.14 Controls and licensing requirements for the use of stills

(section 3.1 in this chapter)

APPENDIX: 7.15 Age certificates - imported spirit - approved authorities

(section 6.2(3) in this chapter)

• The following are approved authorities:
• Austria (Brandy): Chambers of Commerce
• Antigua/Barbados (Rum): Comptroller of Customs and Excise
• Belize (Rum): Belize Customs and Excise Department
• Brazil (Whisky, Rum): Ministry for Agriculture, Supply and Agrarian Reform (Ministerio de Agricultura do Abastecimento e Reforma Agraria)
• Bulgaria (all spirits): any laboratory accredited by the Bulgarian Accreditation Service, Ministry of the Economy, Sofia
• Canada (Spirit): Revenue Canada (section of Customs, Excise & Taxation)
• Chile (Spirit): Agricultural and Livestock Service (Servico Agricola Y Gandero)
• China (Brandy): Chinese State Administration on Quality Supervision, Entry-Exit Inspection and Quarantine
• Colombia: INVIMA
• Croatia (Spirit): the exporting company (endorsed by Croatian Chamber of Commerce)
• Cuba (Whisky, Rum): Centro Nacional de Inspeccion de la Calidad (CENICA - National Centre for Quality Inspection)
• Cyprus (Spirit):
  • Ministry of Commerce and Industry; or
  • Ministry of Agriculture, Natural Resources and Environment; or
  • Department of Customs and Excise
• Czech Republic (Spirit): Economic Chamber of the Czech Republic
• Fiji (Spirit): Fiji Islands Customs Service (FICS)
• France (Brandy): Ministeres de L'Economie Nationale Finances et de L'Agriculture
• France (Calvados): Bureau National Interprofessionel du Calvados, du Pommeau et des Eaux-de-Vie de Cidre et de Poire (BNICPE)
• France (Rum): Conseil Interprofessionel du Rhum Traditionnel (CIRT-DOM)
• Germany (Brandy):
  • Chambers of Industry and Commerce (for certificates of origin)
  • Federal Ministry of Finance (for age certificates)
• Greece (Brandy): Ministry of Economy and of Finances, Directorate of Alcohol, Wines-Beers-Spirits
• Guyana (Spirit): Customs and Excise Department
• Haiti (Rum): Ministere du Commerce et de l'Industrie (Directeur de la Division Controle de la Qualite et Protection du Consommateur)
• India (Spirit): Customs and Excise Authority
• Ireland (Whiskey): Customs and Excise
• Italy (Brandy): (not including Trieste spirits): Officio Tecnico delle Imposte di Fabbricazione (Technical Office of Excise Duty) of the region of manufacture
  • Trieste (Brandy/Grappa):
    • Ente Autonomo del Porto di Trieste; or
    • Direzione della Circoscrizione Dogonale di Trieste
• Japan (Whisky): Local Tax Offices with jurisdiction over distilleries
• Macedonia (Spirit): University " Kiril i Metodij " W.O. Institute of Agriculture - Skopje
• Mexico (Spirit): Secretaria de Economia
• New Zealand (Spirit): New Zealand Customs
• Philippines (Spirit): Bureau of Internal Revenue - Excise Tax Division
• Poland (Spirit): Issued on demand by producer (Customs endorsed)
• Portugal:
  • (Brandy): Instituto do Vinho E da Vinha
  • (Whisky, Rum): Instituto de Proteccao da Producao Agro-Alimentar
• Puerto Rico (USA) (Spirit): Bureau of Alcoholic Beverages, Treasury Department (Departmento de Hacienda)
• Russia (Spirit): Russian Chamber of Commerce
• Slovak Republic (Spirit): Slovak Agriculture and Food Inspection
• South Africa: South African Revenue Service (SARS) - certificate of age and origin of spirits endorsed by Customs and Excise
• Spain (Spirit):
  • Consejo Regulador de la Denominacion de Origen Jerez-Sherry - for this particular spirit only.
  • There is not a Spanish authority for certifying the age of other spirits, such as rum and brandies different from Jerez-Sherry, as Spanish regulations don't control ageing time.
• St Kitts and Nevis (Spirit): Comptroller of Customs
• Sweden: Livsmedelverket, National Food Administration
• Trinidad & Tobago (Rum): Customs and Excise Division
• Thailand: Bureau of Tax Administration I, Excise Department (for verification of producers and raw materials used)
• Turkey: TEKEL Genel Murdulugulu
• UK (Spirit): H.M. Customs and Excise
• USA (Spirit): Bureau of Alcohol, Tobacco and Firearms
• Yugoslavia (Spirit): Jugoinspekt Beograd

Other countries (Spirit): Inquiries to the Customs and Excise Authority for that country.

APPENDIX: 7.16 Brandy certificates - imported brandy approved authorities

(subsection 6.3(4) in this chapter)

The following authorities have been approved:

• Austrian brandy: Austrian Chambers of Commerce
• Bulgarian brandy: any laboratory accredited by the Bulgarian Accreditation Service, Ministry of the Economy, Sofia
• Chinese brandy: China National Cereals, Oils and Foodstuffs Import and Export Corporation
• Chilean brandy: Agricultural and Livestock Service of Chile
• French cognac: Certificate of origin incorporates materials (yellow) Bureau National Interprofessionel du Cognac (BNIC)
• French Armagnac: Bureau National Interprofessionel de l'Armagnac
• French brandy: Age certificates are issued by French Customs
• Greek brandy: Ministry of Economy and of Finances, Directorate of Alcohol, Wines-Beers-Drinks
• Italian brandy (not including Trieste brandy): Officio Tecnico delle Imposte di Fabbricazione of the region of manufacture
• Portuguese brandy: Portuguese Ministry of Economy
• Spain (Jerez Brandy only): Consejo Regulador de la Denominacion Especifica Brandy de Jerez
• Trieste brandy: Ente Autonomo del Porto di Trieste Direzione della Circoscrizione Dogonale di Trieste

Other Countries: the Customs and Excise Authority for that country.

APPENDIX: 7.17 Distillation efficiency guide

(section 4.9 in this chapter)

Check on distillery's efficiency of production

To calculate the production efficiency of the distillery, a licensee should select the figures (in Lals) for the pumping of one week's production to vat storage and divide that figure by what should have been produced. That is the total volume of all fermenters distilled for that week multiplied by the strength of the distilled product.

Example :

A total of 120,000 litres of wash at a strength of 8.5% is transferred to the still. The still produces 10,000 Lals.

10,000	= 98.04% efficiency
120,000 x 8.5%

Production efficiency as calculated by the distiller = 98.5%.

Production efficiency as calculated by ATO = 98.04%.

Should production efficiency fall below historical performance it would be necessary to look for:

1. leaking still or leaking pipes
2. inaccurate recordings
3. bad security and pilfering, and
4. alcohol in the waste material.

APPENDIX: 7.18 General Excise glossary and industry glossary of distillation terms

(section 3.3 in this chapter)

Alcohol

For excise purposes alcohol means ethyl alcohol ²⁵ . Ethyl alcohol is a colourless, flammable liquid (C ₂ H ₅ OH), the intoxicating principal of fermented liquors, formed from certain sugars (especially glucose) by fermentation, usually prepared by treating grain with malt and adding yeast ²⁶ .

Anhydrous ethanol (absolute alcohol)

Defined as having less than 1 per cent water.

Azeotropes

The term used to describe a constant boiling mixture. It is a mixture of two (or more) components with a lower boiling point than either component alone. The vapour of the mixture has the same composition as the liquid and therefore no further concentration can be achieved by normal distillation.

An alcohol and water mixture is an azeotropic solution.

Azeotropic distillation

A distillation process in which a liquid compound ( entrainer ) is added to the mixture to be separated to form an azeotrope with one or more of the compounds. Normally the entrainer is easily separated from the component to be removed. Benzene and cyclohexane are examples of entrainers used in the dehydration of ethanol by azeotropic distillation. The term molecular sieve is frequently used to refer to the entire ethanol dehydration apparatus.

Back

A shallow vat in which wort is deposited for fermentation.

Boiling point

The temperature at which the transition from the liquid to the gaseous phase occurs in a pure substance at fixed pressure (liquids vaporise at lower temperatures than their actual boiling points. For example water evaporates from puddles after rain without ever reaching 100 ° C).

Bubble cap

A contacting device used on some distillation plates. It consists of a cylindrical chimney set in a hole in the plate and covered by a dome-shaped cap which deflects the vapours rising up the chimney to cause them to pass through the liquid layer on the plate.

Charge

Wash. The fermented material (for example distillation wine) used in a still and from which spirit is distilled.

Condenser

A heat exchange device connected to the vapour discharge pipe of a column to permit the vapour to be cooled and condensed to a liquid. Condensers are commonly cylindrical vessels containing tubes through which cooling water is passed.

Dephlegmator

Name commonly used for the first of two or more condensers attached to the overhead vapour line of a distillation column. It literally means an entrained liquid separator.

Distillation is:

• the separation or purification of mixtures by using different evaporation rates or boiling points of their components
• the separation by heating of ethyl alcohol from wine or other spirituous liquids
• involves the processes of vaporisation and condensation
• operates on the principle that alcohol vaporises at a lower temperature than water, and
• does not produce alcohol (alcohol is produced by fermentation); it is merely a refining process. Therefore it is necessary prior to distillation to have a base product which already contains alcohol.

Dunder

Sugar cane lees used to promote fermentation of rum. Dunder is the residue left in the still after distillation and is generally used in the processes of slow fermentation.

Ester

The product derived from the reaction of an acid with an alcohol or other organic compound having hydroxyl groups. For example ethyl acetate is an ester produced by reacting acetic acid with ethanol. Esters tend to accumulate in distillation in the heads at the top of the column.

Ethanol

A common term for ethyl alcohol. See Alcohol.

Feedstock

The raw material used in a process.

Feints

Feints are low quality spirits received into the feints receiver. They are the combination of the more undesirable parts of the heads and tails and may be re-distilled as they still contain some ethyl alcohol.

Fractional distillation

Fractional distillation is a method used to separate a mixture of volatile components of different boiling points. The mixture is distilled at the lowest boiling point and the distillate is collected as one fraction until the temperature of the vapour rises showing that the next highest boiling component of the mixture is beginning to distil. This component is then collected as a separate fraction.

Fusel Oils

Term used to describe the higher alcohols, generally the various forms of propanol, butanol and amyl alcohol. Fusel oils are heavier molecular weight compounds, a proportion of which are required to give spirit much of its flavour. However they are undesirable in excessive amounts. They are generally composed of a mixture of isoamyl, butyl, propyl and heptyl alcohols which are produced as a by-product of fermentation.

Hydrometer

A hydrometer is a direct reading instrument for indicating the density, specific gravity or other similar characteristics of liquids.

• a proof hydrometer measures the content of ethanol in a mixture with water.
• a Brix or balling hydrometer measures on a scale equivalent to the percentage of sugar by weight of an aqueous solution.

Low wines

Low wines are spirits of the first extraction (distillation run) received into the low wines receiver. Low wines are merely a step in the process of producing spirit in saleable form. For example Cognac must be double distilled, Irish whisky triple distilled and malt Scotch double distilled.

Methanol

Also known as methyl alcohol (CH ₃ OH). A colourless, poisonous liquid with essentially no odour and very little taste. It is the simplest alcohol. Having a lower boiling point than ethanol, it tends to be a major component of the heads stream on distillation. It was formerly derived from the destructive distillation of wood which caused it to be known as wood alcohol.

Miscible substances

These are substances which are capable of being mixed (for example water and alcohol). Distillation is a means of separating miscible substances.

Packed distillation column

A column filled with a packing of ceramic, metal or other material designed to increase the surface area for contact between liquids and vapours.

Pot still procedure

This example uses distillation wine as a charge for the eventual production of brandy:

• the pot is charged with distillation wine usually of 10-12% a/v with a low sulphur content
• steam is injected via an open coil to heat the distillation wine in the pot
• the distillation wine starts to boil
• volatiles vaporise and start to rise
• the brandy ball at the top of the column provides some intermediate reflux but generally, for the first run, no water is passed through the brandy ball. Therefore volatiles are distilled over with the lowest possible reflux
• the vapour which passes the brandy ball then goes through a condenser for cooling
• the vapour condenses into a spirit/water mix and is collected in a receiver
• distillation is continued with the steam coil closed until the hydrometer indicates that only pure water is being distilled over, and
• the spent charge in the pot (now with zero alcohol content) is discarded and a fresh charge introduced into the pot.

The strength of the spirit/water mix produced as a result of the first distillation run through a pot still is usually between 30 and 45% a/v, generally contains most of the volatile products from fermentation (that is sulphur dioxide, esters, many higher alcohols) and is referred to as low wine.

Receiver

A tank into which new distillates flow from the still.

Rectification

• rectification is distillation carried out in such a way that the vapour rising from a still comes in contact with a condensed portion of vapour previously evolved from the same still
• a transfer of material and an interchange of heat result from this contact thereby securing a greater enrichment of the vapour in the more volatile components than could be secured with a single distillation operation using the same amount of heat
• The condensed vapours which are returned to accomplish this object are reflux.

Reflux

The condensation that recedes back down a distillation column as a result of the condensation of alcohol vapours:

• the condensate at the bottom of the column will be stripped of all of its original volatiles.
• the vapours at the top of the column will be highly volatile vapours with very little water content.
• due to the range of boiling points of components within a wash, the components will condense at varying temperatures and, by tapping into the still at varying points, products of different strengths can be extracted.

Reverse osmosis

A technique used in water purification and waste water and stillage treatment in which pressure is applied to the liquid in a suitable apparatus to force pure water through a membrane that does not allow the passage of dissolved ions. Reverse osmosis is used to produce low alcohol wine.

Specific gravity (SG)

The ratio of the density of a material to the density of a standard reference material (water) at a specific temperature.

Stillage

The mixture of non-fermentable (or non-fermented) solids and water, which is the residue after removal of ethanol from a fermented beer by distillation.

SVR (spiritus vini rectificatus)

Grape spirit.

Vinasse

The term sometimes applied to the stillage of molasses, grape juice or other liquid ethanol feedstock.

Volatile

Readily converting to the vapour state.

Wash

The liquor from mashed material after it has commenced to ferment and before it has been distilled.

APPENDIX: 7.19 Record keeping requirements

(section 8.2 in this chapter)

Under the provisions of section 50 of the Excise Act a licensee is required to keep, retain and produce to a tax officer such records as the Tax Office directs. While the Tax Office does not normally give specific directions about which records must be maintained, most records which are required by tax officers to verify compliance are those that would normally be required to efficiently maintain the licensee's operation. If the records are found to be inappropriate or insufficient, the Tax Office may use the provisions of section 50 of the Excise Act to direct the licensee to maintain specific records.

Still house records

The still house is the production centre where fermented base distillation materials are input to the still and where distilled alcohol or spirit is produced.

Spirit may require further work within the still house before it is suitable for transfer to the spirit store. Losses incurred during still house operations are treated as production losses and a licensee is required to keep adequate records to account for them.

The main records which a licensee must keep in the still house are:

• notice book
• comparison account, and
• still house stock register.

Notice book

This is a record of all materials charged to the still. A licensee should:

• list consecutive numbers for each charge
• record the date each charge was made
• identify the type of charge material (for example, distillation wine)
• identify the charge vessel used (for example, WC #3)
• record results for each dip of the charge vessel (in centimetres) immediately prior to charging
• record corresponding volumes (in litres) of charge material in each charge vessel
• record the alcoholic strength of the charge material, as tested by laboratory analysis (for example,   12.5% alcohol by volume)
• record the total amount of alcohol in the charge in Lals (volume in litres multiplied by alcohol strength), and
• identify the still to which each charge was made (for example, pot #2).

Comparison account

This is a record of all spirits distilled from the still. A licensee should:

• record the relevant charge numbers from the notice book (in the case of a continuous still, this information may not be available)
• record the date the spirit was produced
• record the type of spirit produced (for example, cane spirit or rectified grape spirit)
• identify the still from which the spirit was produced
• identify each receiving vessel (for example, feints to FR4, SVR to SR1)
• record results for each dip of all receiving vessels (in centimetres)
• record the temperature of the spirit at time of dipping
• record corresponding volumes (in litres) of all spirits received into the receiving vessels, and
• record the alcoholic strength of all spirit produced at 20 ° C, including feints, as tested by laboratory analysis.
• A comparison account can be maintained as a separate record or the above details can be incorporated into a combined notice book/comparison account record.

Still house stock register

This is a record of all still house spirit vessels (including feints receivers) and their alcohol contents. A licensee should:

• identify the vessel number
• record stock survey details before and after each operation including
  • the date
  • dip result (in centimetres)
  • volume (in litres)
  • the strength at a temperature of 20 ° C, and
  • the volume in Lals, and
• record the operational loss or gain in Lals for each operation, calculated as the difference between the pre and post operation Lals
• record all spirit movements into and out of each still house vessel in the still house stock register.

Other Still House Records

In addition to the notice book, comparison account and still house stock register, a licensee needs to keep records of operations within the still house such as recycling and cleaning up of spirit (for example, ion exchange).

Some losses will normally occur during these operations. While still house production losses are not normally subject to call up of duty, a licensee must keep adequate records to account for these losses.

Alcohol strength analysis

A licensee should maintain a separate record of analysis for spirit store and warehouse stock where charge material, spirit or waste from the still is tested for alcoholic strength. This record must include:

• the date of the test
• vessel identification number
• dip result (in centimetres)
• details of material tested, and
• alcoholic strength of the sample at 20 ° C.

This record may be in the form of a still house test book or laboratory analysis record.

Spirit runnings

When the spirit has been re-worked and no further cleaning up is required, it is run from the still house stock into the bonded stock. All losses and gains must be calculated.

A licensee must keep a record of all stock run from the still house into bonded stock.

For the originating still house vessel, distillery records should include:

• the date of the spirit run
• details of the vessel from which the spirit was run
• the type of spirit
• the pre-operation dip result (in centimetres) and the post-operation dip result (in centimetres)
• the volume transferred (in litres)
• the temperature of the spirit
• the alcoholic strength of the spirit at 20 ° C, and
• the volume transferred in Lals.

For the receiving bond vessel distillery records should include:

• details of the vessel to which spirit was run
• the type of spirit
• the pre-operation dip result (in centimetres) and the post-operation dip result (in centimetres)
• the volume received in litres
• the temperature of the spirit
• the alcoholic strength of the spirit at 20 ° C
• the volume received in Lals, and
• the operational loss or gain in Lals.

For the purpose of accounting for stock, there should be no physical movement from the still house into bonded stocks unless it is recorded as a spirit running.

The spirit may remain in the same multipurpose vessel - when holding still house stock the vessel is shown as a still house vessel and when holding bonded spirit store stock it is shown as a spirit store vessel.

Stocktakes and distillation efficiency

Normally every month, or every three months at the most, a licensee should conduct a stocktake of all stock including Still House stock and feints.

A licensee should measure bulk stock in tanks and vats by dipping, testing strength (if not tested within the previous month) and recording stock details, noting losses

and gains in the relevant stock records. They should record still house stock in the still house stock register .

They should calculate still efficiency on a regular basis to ensure that all available alcohol in charge material is being recovered at an acceptable rate. Efficiency is expressed as a percentage of the total Lals available. The formula is:

closing stock + total spirit run to bond + feints destroyed x 100

opening stock + total Lals charged to still.

Spirit store records

The spirit store is that part of the distillery where spirit is held that has been worked in the still house to the point where no further distillation or cleaning up is required. Any bulk spirit received from an external supplier is also received into the spirit store. Bulk spirit store storage vessels include wooden vats, stainless steel tanks and either plastic or steel drums.

Spirit is normally held in the spirit store for the following reasons:

• for further production during which the following operations are permitted:
  • blending
  • reducing
  • clarifying
  • bottling
  • casking (warehousing)
  • methylating
  • colouring, and
  • flavouring.
• for spirits required to be matured in wood (brandy, whisky and rum):
  • prior to movement into the spirit warehouse (cask storage)
  • after maturation in casks in the spirit warehouse has been completed and the cask stock has been revatted back into the spirit store, and
• for storage before delivery for home consumption.

Vat register

This is the record of all spirit store vessels and the volume of spirit in those vessels. A licensee should maintain a separate record similar to the still house stock register for each storage vessel. Each vessel should be surveyed before and after each operation to determine contents in Lals and to measure temperatures. In certain spirit store operations volumes must be corrected to 20 ° C.

A licensee should record the following details in the vat register:

• identification number of the vessel
• stock survey details before and after each operation, including the date, dip result (in centimetres), volume (in litres), strength at 20 ° C, temperature and volume in Lals, and
• details of operational loss or gain in Lals for each operation, calculated as the difference between the Lals before and after each operation .

A licensee should record losses and gains against the receiving vessel.

The vat register is a record of:

• all spirit movements into and out of each vat in the spirit store
• all spirit operations in the store, and
• all stocks held in the store.

A licensee should verify the details in the vat register periodically (normally monthly, but at least quarterly) by stock take.

For bulk stock in the spirit store, the same principles apply as for a still house stock take (for example, dipping and strength testing).

Operations notices

Operations notices provide distillery staff with written directions of the work that is to be done.

A licensee may use operations notices to direct how much spirit is required for a particular operation and from which vat it is to be drawn, which vessels are to be used and the nature of the operation. Distillery staff should use operations notices to record details such as dips and temperatures for transfer into the vat register or cask account.

Receipts and deliveries of bulk spirit

Receipts

Before accepting a delivery of bulk spirit and updating the distillery stock records (for example the vat register) a licensee should check the goods received.

When receiving spirit by road tanker, a licensee should:

• check that seals are intact
• check the dip compartments and record the measurement (converted to litres) by referring to the relevant dip charts
• record temperature readings for each compartment
• correct litre volumes to 20 ° C
• draw samples from each compartment, measure and record alcohol strengths
• correct strengths to 20 ° C and calculate and record the actual Lals received
• record any difference between the surveyed quantity (in Lals) and the supplier's details on the delivery document. The licensee should advise the Tax Office of any abnormal losses at this point.
• record details of the actual Lals received
• re-measure the quantity received after the spirit has been transferred into distillery receiving vessels, and
• record the transfer loss or gain in the stock records against the receiving vessel. This figure is the difference between the quantity signed for as received and the quantity measured in the receiving vat.

When receiving spirit in drums a licensee should:

• check that seals are intact
• record the weight of the drums and establish gross weights
• deduct tare weights to establish net weights of spirit contents
• draw samples and test strength, corrected to 20 ° C
• calculate and record contents (in litres) by referring to density tables (using apparent strength as tested)
• calculate and record contents in Lals (add obscuration if required)
• record transit loss or gain on the delivery document (the Tax Office should be advised of any abnormal loss at this point), and
• record the actual quantity received in stock records.

Delivery notes

A licensee must maintain a record of the following details about deliveries of spirit from the spirit store:

• name and address of the supplier
• name and address of the consignee
• date of delivery from the distillery
• type of delivery vessel (for example, drums, bulk tanker, bottles)
• volume in litres (corrected to 20 ° C for bulk tankers), alcohol strength, quantity in Lals, and
• type of spirit.

Bottling operations records

Under bond excisable spirit may only be packaged at licensed premises.

Bulk stock (that is, stock in a container or vessel greater than two litres) can not be entered for home consumption before packaging ²⁷ .

After maturation (following blending, clarifying, colouring or flavouring), the volume of spirit in the bottling tank must be corrected to 20 ° C before commencing the bottling process ²⁸ .

Alcoholic strength of the spirit should be determined and recorded either at the header tank before bottling or by sampling the packages from the bottling line.

A licensee should include the following details in bottling operations records:

• quantity in litres (at 20 ° C) and Lals of spirit delivered from the header tank
• strength of the spirit in the header tank
• number and size of bottles or cans
• total litres, strength and Lals of packaged product
• total litres, strength and Lals of catchings, and
• reconciliation between Lals delivered from the header tank and Lals packaged, showing any losses.

Packaged stock records

Packaged stock records commonly referred to as the case account, are records of all packaged stock held. Quantities are normally recorded to show the number of cartons.

A licensee should record the following details:

• product line identification, total quantity, package size and number per carton for each packaged goods line
• receipts of packaged stock from bottling or of under bond stock from other licensees into the case account
• under bond deliveries from the case account to other licensees for duty payment or for export
• dates when stock is received or delivered, and
• stocktake details.

Spirit warehouse records

Certain spirits (brandy, whisky and rum) are required to be matured in wood for a minimum period of two years ²⁹ . The maturation area of a distillery is referred to as the spirit warehouse.

Storage in wood can be either in large wooden vats or in wooden casks and barrels. A licensee must record the date the spirit is put into wood, taking into account any period when the spirit is temporarily held in non-wooden vessels. Failure to maintain accurate records may mean that the date when the spirit has reached the required maturation age cannot be properly calculated.

Usually maturing spirit is held in wooden casks to impart greater wood character. The transfer of the spirit from vats to casks storage for an extended period and its subsequent return back into vats (called revattal) all incur losses. A licensee is therefore required to maintain detailed records of quantities delivered from vats, plus quantities received into casks within the warehousing operations, and vice-versa for revattal.

The principal records for the spirit warehouse are the warehousing book which records details of all transfers from vats to cask storage and the revattal book, which records details of all spirit transferred from casks back to vat storage.

Cask storage methods and recording

There are three acceptable methods by which spirit may be held in casks. They are the conventional method, the in situ method and the batching method. In each case a measured quantity is withdrawn from the full cask measure to allow for possible expansion. Once the spirit has been sent to cask storage it should remain untouched until revattal.

Contrary to other distillery operations, a licensee should record losses or gains, incurred in warehousing operations when spirit is transferred from vat to cask storage, against the delivery vessel, unless a separate cask account (the cask equivalent of the vat register) is maintained.

Regardless of which method is used, the date of the warehousing operation and the date of the revattal operation should be recorded. The acceptability of cask storage losses is determined from these dates.

Procedures for the conventional method

Warehousing

A licensee should:

• measure the quantity in litres and Lals from the delivering vat and record it in the vat register
• number each cask consecutively
• if the casks' contents are to be measured by weight, a licensee should
  • weigh the casks empty
  • fill and weigh the casks and mark tare and gross weights on each cask, and
  • measure and record fill contents in litres and Lals for each cask.
• if the casks' contents are not measured by weight, a licensee should measure the cask contents by flowmeter, and
• record the details of each casks' contents and the date in the warehousing book. Reconcile the total quantity (in Lals) warehoused in casks against the total quantity delivered from vats and calculate the operational gain or loss then record this against the delivery vat.

Revattal

A licensee should:

• draw a sample of the casks' contents and test for strength, noting variations
• survey the receiving vat prior to operation to establish litre and Lals contents
• pump the contents of casks which are to be revatted into a receiving vat
• survey receiving vat again to establish total Lals quantity received from casks, noting also dip, temperature and litre volume
• reconcile revatted Lals quantity against the warehoused Lals quantity
• record details of casks revatted and note the date in the revattal book and the vat register, and
• calculate the loss resulting from the revattal and record details in the revattal book and the vat register against the receiving vat.

The advantage of this method is that each cask can be treated as a separate entity for storage purposes, however it is labour intensive and not commonly used.

Procedures for the in situ method

Warehousing

A licensee should:

• measure the quantity in litres and Lals from the delivering vat and record details in the vat register
• measure the capacity of individual casks (normally by flowmeter)
• number the casks consecutively, mark the capacity on each cask and fill the casks
• record the details of each cask, contents and date in the warehousing book, and
• reconcile the total quantity (in Lals) warehoused in casks, against the total quantity delivered from vats and calculate the operational gain or loss.
• Each stack is filled as a complete entity. A licensee should survey the delivery vat for each stack. The advantage of this method is that once cask capacities have been established the licensee can use this information for all subsequent warehousing operations for which those casks are used. The casks can be left stacked up without the need to take down the stack each time the casks are filled. As individual cask contents are known, the licensee may treat each cask as a separate entity for storage purposes if required.

Revattal

The revattal procedure is the same as that outlined for the conventional method.

Procedures for the batching method

Warehousing

A licensee should:

• measure the quantity in litres and Lals from the delivering vat and record details in the vat register
• accept this quantity as the total quantity delivered into the casks
• divide the total quantity by the number of casks to calculate an average fill
• record the average fill in warehousing records as the contents of each cask in the batch and note the date, and
• identify batches and casks by sequential numbering systems.

Revattal

The revattal procedure is the same as outlined under the conventional method. However each batch must be revatted as a whole.

This is the simplest and least labour intensive cask storage methods. However the use of this method is subject to written approval from the Tax Office. As with the

in situ method, casks can be left stacked between fills. Each batch is treated as a separate entity for storage purposes and as such must be revatted as a whole.

Operational losses and gains

A licensee should record losses and gains incurred in still house and spirit store operations. When product is moved from one bulk storage vessel to another, it must be recorded against the receiving vessel. The only exception is when spirit is transferred to a vessel that is outside the spirit store, such as:

• warehousing into casks
• deliveries to other licensees or premises, or
• transfers to packaging.

In each of the above cases, a licensee should record operational losses or gains against the delivery vessel.

Abnormal Losses

A licensee is required to advise the Tax Office as soon as practicable when they incur operational losses that are outside normal parameters for any operation. They should collect evidence such as broken bottle necks or caps, photographs, or police/insurance reports that may substantiate the losses and present such evidence to the Tax Office if requested.

Stock takes

A licensee should carry out stock takes on a regular basis to establish the accuracy of their stock records, to detect omissions or errors in stock records, and to identify security issues such as theft, plant and equipment problems.

Bulk storage vessels should be dipped, temperatures noted and volumes in litres and Lals established. When alcohol strength has not been checked within the preceding three months, they should re-test and record alcohol strength. They should then update stock records such as the still house and vat registers.

A licensee is required to advise the Tax Office as soon as practicable of any discrepancies in bulk spirit stocks beyond normal loss parameters. The Tax Office will advise if any further action is to be taken. Cumulative loss or gain figures for each bulk storage vessel in stock records need to be reset to zero after the stock take.

A licensee should carry out stock takes on packaged product on a floor-to-book basis. They should check packaged stock and reconcile against the case account. A licensee will be required to pay duty on packaged stock that cannot be accounted for.

In some circumstances stock take gains may be offset against unaccounted shortages when calculating duty payable on packaged stock losses. In these

circumstances, the licensee should refer the matter to the Tax Office for advice or further action.

A licensee is responsible for the safe-keeping of under bond excisable goods in their possession, custody or control. A licensee is accountable for any duty which would have been payable on stock that has been stolen. Any theft should be reported to the Tax Office who will advise what action is required.

1 Section 10 of the Distillation Act

2 Section 11 of the Distillation Act

3 Section 12 of the Distillation Act

4 Section 11A of the Distillation Act

5 Section 13 of the Distillation Act

6 Section 24 of the Excise Act and regulation 2A of the Excise Regulations.

7 Section 7 of the Spirits Act

8 Section 11 of the Spirits Act

9 Section 10 of the Spirits Act

10 Section 3 of the Spirits Act

11 Section 64 of the Excise Act

12 Sections 106 and 107 of the Excise Act, sections 63 and 71 of the Distillation Act and section 22 of the Spirit Act.

13 Regulation 149 of the Excise Regulations and Section 60 of the Excise Act.

14 Regulation 149 of the Excise Regulations and Section 60 of the Excise Act.

15 Regulation 149 of the Excise Regulations and Section 60 of the Excise Act.

16 Section 60 of the Distillation Act

17 Section 62 of the Distillation Act

18 Section 63 of the Distillation Act

19 Section 50 of the Excise Act

20 Section 10 of the Distillation Act.

21 Subsection 10(b) of the Distillation Act.

22 Section 12 of the Distillation Act.

23 Section 34 of the Distillation Act.

24 Section 57B of the Distillation Act.

25 See the definition of `Alcohol' in Section 6 of the Distillation Act. See also the preamble to the Schedule to the Excise Tariff Act which states in part, `A reference to alcohol is taken to be a reference to ethyl alcohol.'

26 The Macquarie Dictionary , 2001, rev. 3 ^rd edn, The Macquarie Library Pty Ltd, NSW.

27 Section 4 and subsection 58(5) of the Excise Act.

28 Subsection 6(2) of the Distillation Act and the preamble to the Schedule of the Excise Tariff Act.

29 Section 12 of the Spirits Act.

ATO references:
NO NAT 14790-04.2006