Citation: 2013 TCC 406
Date: 20131217
Docket: 2011-839(GST)I
BETWEEN:
CONSTRUCTION S.Y.L. TREMBLAY INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1]
The Minister of
National Revenue (the Minister) issued a notice of assessment pursuant to Part
IX of the Excise Tax Act (the ETA) for the period from January 1, 2000,
to June 30, 2008 (the period in question) that reflected the following
corrections:
|
|
GST
|
QST
|
Act
|
|
|
Tax collected and not remitted
|
16,332.42
|
21,151.10
|
228 ETA
|
437 QSTA
|
|
Benefits – car
|
2,591.46
|
3,241.74
|
173 ETA
|
290, 292
QSTA
|
|
Total taxes owing
|
18,913.88
|
24,392.84
|
|
|
|
Unclaimed input
(conciliation)
|
(9,650.59)
|
(12,011.92)
|
169 ETA
|
201 QSTA
|
|
Disallowed input
|
|
|
|
|
|
Non-compliant invoices
|
1,821.24
|
2,163.14
|
169 ETA
|
201 QSTA
|
|
Invoices of convenience
|
33,179.09
|
38,037.45
|
169 ETA
|
201 QSTA
|
|
Penalty
|
9,372.22
|
9,627.99
|
285 ETA
|
59.3 AMR
|
The appellant is appealing from this assessment.
[2]
I must note that the
appellant's challenge is solely on the input tax credits (ITCs) related to the supplies
of goods and services it allegedly acquired from six suppliers named at
paragraph 14 of the Reply to the Notice of Appeal (the dubious suppliers).
[3]
In making the
assessment, among other things, the Minister relied on the conclusions and assumptions
of fact listed at paragraphs 12 to 17 of the Reply to the Notice of Appeal,
which state the following:
[translation]
12.
The appellant operates a post-disaster repair
business and deals with insurance companies;
13.
The sub-contractors the appellant deals with are
suppliers of invoices of convenience;
14.
The list of accommodating sub-contractors is as
follows:
• Les entreprises Pro-Plus Inc.
ITCs
of $9,902 were disallowed. From January 2004 to December 2004, this business
participated in an invoice of convenience scheme as a mixed accommodator,
meaning transactions between the appellant and Pro-Plus do not reflect the actual
transactions between the two parties because there was no supply and some
invoices were non-compliant;
• Constructions 3 Étoiles Inc.
ITCs
of $17,894.88 were disallowed. From March 2001 to August
2002, this company also participated in a mixed invoice of convenience scheme.
There was no supply or valid invoice;
• Yvon Dubé
ITCs
of $1,470 were disallowed. Mr. Dubé does not carry out commercial
activities. He provides financial services and his income is GST exempt.
• Entrepreneur D.F. Inc.
ITCs
of $299.25 were disallowed. (Period of January 2006). This company's records do
not mention the appellant.
• Les constructions Boutin Inc.
ITCs
of $861 were disallowed. (Period of April 2004). This company's records do not
mention the appellant.
• Julie Séguin (Gestion Jacoby)
ITCs
of $2,751.96 were disallowed. (Period of April 2004 to
August 2004). This business does not conduct any commercial activity.
15.
It is clear in light of the facts available in
the file that work was not executed by the sub-contractors in question;
16.
There is no doubt that the appellant did not act
in good faith and was part of an invoices of convenience scheme;
17.
The appellant knowingly or in circumstances
amounting to gross negligence made false statements or omissions in its return
with regard to the calculation of the net tax it reported during the period in
question;
[4]
The first issue to
address in this appeal is whether the appellant was eligible for ITCs of
$33,179.09 in the calculation of its net tax for the period in question. As
underlying issues, the Court must determine:
(i)
whether the appellant
truly acquired from the six dubious suppliers the supplies for which it claimed
ITCs of $33,179.09 in the calculation of its net tax;
(ii)
whether the invoices
allegedly prepared by the appellant's dubious suppliers meet the requirements
set out in the ETA and the Input Tax Credit Information (GST/HST)
Regulations (the Regulations).
The second issue to address in this appeal is whether
the Minister was correct in imposing the penalty provided under section 285 of
the ETA.
Sylvain Tremblay's testimony
[5]
Mr. Tremblay essentially
reported the following:
(i)
during the period in
question, he was the sole officer and director of the appellant, which has always
operated a construction business;
(ii)
during the period in
question, the appellant mainly repaired single-family residences that were
damaged by fire or flood. The appellant's services were mainly retained by
various insurance companies. Mr. Tremblay described the various steps resulting
in a contract with an insurance company after a disaster: the insurance company
sends a disaster expert to the site of the disaster. The disaster expert
retains the services of an estimator who establishes the specifications, giving
a detailed quote of the work to be completed with an estimate of the cost.
Mr. Tremblay conducted his own estimation of costs. Then, Mr. Tremblay
and the disaster expert negotiated the details of the cost and the work to
perform, using the specifications established by the estimator. In my opinion,
the specifications (once an agreement was reached on the cost) constituted the
written contract between the appellant and the insurance company. Once the
agreement was entered into, the appellant could begin carrying out the work
according to the specifications.
(iii)
during the period in
question, the appellant did not have any employees. All the work it agreed to
execute was contracted out to sub‑contractors;
(iv)
during the period in
question, Mr. Tremblay regularly went to the appellant's work sites to
talk to the sub‑contractors (and sometimes with the disaster experts and
victims) about the work to be done and the progress made;
(v)
in all the contracts
granted by the insurance companies, the appellant and Mr. Tremblay never
received any commission or bribe. Mr. Tremblay added that the appellant
always paid its sub‑contractors by cheque;
(vi)
the appellant prepared
an estimate (that described in detail the work to be done and estimated the
amount to be paid to the sub‑contractor) that was initialled by the sub-contractor
whose services were retained. In my opinion, this estimate constituted the
written contract between the appellant and the sub-contractor in question (see
transcript, pp. 76-78);
(vii)
Mr. Tremblay did
not perform any verifications (with the CSST, the CCQ, the Régie du bâtiment du
Québec or with the Registraire des entreprises) of the dubious sub-contractors
before granting them contracts. He did not even verify whether the registration
number they were assigned in accordance with subsection 241(1) of the ETA was
valid;
(viii)
Mr. Tremblay never
verified where the cheques drawn on the appellant's bank account payable to the
dubious suppliers were cashed. When he received a call from a cheque cashing
business wishing to conduct a verification on a dubious supplier (he did not
clarify which dubious suppliers had been the subject of such calls) he
immediately stopped dealing with this sub-contractor. He added that he was
never notified that Les Entreprises Pro‑Plus Inc. (Pro‑Plus), Les
Constructions Boutin Inc. (Boutin Inc.) and Constructions 3 Étoiles (Trois Étoiles)
cashed cheques payable to them drawn on the appellant's bank account at cheque
cashing businesses (see transcript, p. 174).
[6]
Additionally, Mr. Tremblay
stated the following regarding Trois Étoiles:
(i)
contracts the appellant
granted to Trois Étoiles were related to the installation of ceramic, drywall, cupboards
and stairs;
(ii)
the only person he spoke
to from Trois Étoiles was Gaétan Lefebvre who had been introduced by his
brother-in-law. Mr. Tremblay explained that he thought Trois Étoiles was
owned by two people, including Mr. Lefebvre (see transcript, p. 87,
lines 27 and 28);
(iii)
all the cheques payable
to Trois Étoiles on the appellant's bank account were given to
Mr. Lefebvre in person;
(iv)
Mr. Tremblay himself
completed certain invoices for Trois Étoiles, at the request of Mr. Lefebvre when
he was too busy to do it;
(v)
the work related to the
contracts the appellant granted to Trois Étoiles was performed by Mr. Lefebvre
and other employees of Trois Étoiles, who were always supervised by Mr.
Lefebvre;
(vi)
the appellant was often
paid by the insurer one to six months after the work was completed. The insurer
sometimes made progressive payments. It was the appellant that financed the
sub-contractors such as Trois Étoiles (see transcript, p. 100). Mr. Lefebvre
also occasionally asked Mr. Tremblay for a cash advance (see transcript,
pp. 32, 99);
(vii)
Mr. Tremblay recently
learned that Mr. Lefebvre was being audited and had declared bankruptcy.
He added that he did not know that Trois Étoiles had been removed from the enterprise
register and its registration number (assigned in accordance with subsection 241(1)
of the ETA) was not longer valid (see transcript, pp. 102‑103);
[7]
Moreover, Mr. Tremblay
noted the following elements with regard to Pro‑Plus:
(i)
the contracts the
appellant granted to Pro‑Plus were mainly related to the installation of
drywall and filling joints;
(ii)
the only person
Mr. Tremblay spoke to from Pro‑Plus was Mr. Morin.
Mr. Tremblay added that Mr. Morin told him that Pro-Plus was [translation] "his company". The
appellant granted Pro‑Plus four or five contracts over a four of five
year period;
(iii)
Mr. Tremblay did
not know whether the work related to the contracts granted to Pro-Plus was
performed by Pro-Plus employees or sub‑contractors;
(iv)
Mr. Tremblay himself
prepared a Pro‑Plus invoice. He explained that he regularly prepared the
suppliers' invoices when their employees were illiterate. I must note that
Mr. Tremblay did not identify these illiterate employees;
(v)
the appellant did not
grant any contracts to Pro‑Plus after it received a letter explaining
that Pro-Plus owed more than $1.5 million in goods and services tax.
[8]
Moreover,
Mr. Tremblay's testimony about Entrepreneur D.F. Inc. (DF) essentially
indicates that he [translation]
"did not remember this company". He thinks it was probably a company
that had offered its services and he decided to give them a try. Mr. Tremblay
added that the quality of the work performed by DF was not acceptable because
the appellant only granted it one contract.
[9]
Lastly, Mr. Tremblay
noted the following with regard to Yvon Dubé:
(i)
Mr. Dubé was an
intermediary whose role was to convince owners of residences damaged by
disasters to grant the appellant a contract for repairs. Mr. Tremblay explained
that Mr. Dubé allegedly found five such contracts for the appellant during
the period in question. Mr. Tremblay also explained that the appellant
paid Mr. Dubé a commission for each repair contract the appellant obtained
through him (payable after the work was completed. Mr. Tremblay added that
the disaster victims involved required Mr. Dubé to ensure that the repair
work was properly carried out by the appellant;
(ii)
Mr. Tremblay had
known Mr. Dubé since the early 2000s. Mr. Dubé was introduced by Gérard
Gingras, a former business partner. Mr. Tremblay added that he no longer [translation] "heard anything
about Mr. Dubé" and did not know where he lived.
[10]
Mr. Tremblay's
testimony about Les Constructions Boutin Inc. (Boutin Construction) indicates
that his contact with this company was Gilles Séguin. Mr. Tremblay explained
that his efforts to contact Mr. Boutin and his daughter, to have them
testify, were unsuccessful.
Mr. Lefebvre's testimony
[11]
Mr. Lefebvre corroborated
Mr. Tremblay's testimony about Trois Étoiles and himself. However, he
added that:
(i)
he is a [translation] "carpenter
foreman";
(ii)
he worked for Trois
Étoiles [translation] "with a
commission on the net profit" (see transcript, p. 142) for 4 to 5
years;
(iii)
the director of Trois
Étoiles with whom he interacted during the period in question was [translation] "someone called
Jacques...oh boy! Jacques… not Riendeau. Anyway, the head office was on montée
St‑Hubert." There was also another director, called "Joe"
(see transcript, p. 143);
(iv)
Mr. Lefebvre could not
enter into a contract on behalf of Étoiles without the approval of
"Jacques";
(v)
considering that near
the end of his relationship with his employer, Mr. Lefebvre feared he
would not be paid, he required that the appellant pay his employer's invoices
with cheques to the joint order of his employer and himself. He explained that
he did not give the cheque to his employer (after he signed it) until after he
was paid by his employer. I immediately note that Mr. Lefebvre was unable
to explain why the appellant had issued cheques to the joint order of Trois
Étoiles and himself from the beginning of its relationship with his employer
(in this case, in 1999 and 2000) (see transcript, p. 148). I would add
that the evidence showed that almost all the cheques drawn on the appellant's
bank account to pay Trois Étoiles's invoices were to the joint order of these
persons;
(vi)
Mr. Lefebvre had [translation] "cashed maybe one or
two cheques at the beginning" at cheque cashing businesses (see transcript,
p. 154). I note that Mr. Lefebvre had previously stated that he did
not go to "cheque-cashing centres" (see transcript, p. 145);
(vii)
he ended his
relationship with Trois Étoiles because [translation]
"it was no longer working the way he wanted" and "it was a lot
of travel to get to the work sites" (see transcript, pp. 145‑150);
(viii)
Mr. Lefebvre knew
Mr. Dubé and the nature of his work. He also knew Pro‑Plus because
his son and his best friend were employees of that company.
Mr. Fugère and Ms. Roy's testimony
[12]
Their testimony
indicates that:
(i)
the dubious suppliers
were all, for at least part of the period in question, in default of at least
one tax law;
(ii)
the supplies listed on
the invoices the appellant filed to evidence are not described in sufficient
detail;
(iii)
certain supporting
documents (for the ITCs claimed) by a given supplier do not have a numerical
sequence;
(iv)
many cheques written by
the appellant and payable to these dubious suppliers were cashed at a cheque
cashing business.
Analysis and conclusion
[13]
Hickman Motors Ltd. v.
Canada, [1997] 2 S.C.R.
336, indicates that the Minister relies on assumptions to make assessments and
the taxpayer has the initial burden of demolishing the Minister's assumptions.
This is met when the taxpayer makes out at least a prima facie case
demolishing the Minister's assumptions. Then, after the taxpayer has met the
initial burden, the onus shifts to the Minister to rebut the prima facie
case made by the taxpayer and prove the assumptions. As a general rule, a prima
facie case is one with evidence that establishes a fact until the contrary
is proven. In Stewart v. M.N.R., [2000] T.C.J. No. 53 (QL), Judge Cain
stated that "[A] prima facie case is one supported by evidence which
raises such a degree of probability in its favour that it must be accepted if
believed by the Court unless it is rebutted or the contrary is proved."
Moreover, in Orly Automobiles Inc. v. Canada, 2005 FCA 425, at
paragraph 20, the Federal Court of Appeal stated that "the burden of
proof put on the taxpayer is not to be lightly, capriciously or casually
shifted", considering "[i]t is the taxpayer's business." The
Federal Court of Appeal also stated in the same decision that it is the
taxpayer who "knows how and why it is run in a particular fashion rather
than in some other ways... He has information within his reach and under his
control." As a result, the appellant in this case must demonstrate a prima
facie case that it actually purchased the supplies from the dubious suppliers...
Lastly, the appellant must also show that the invoices allegedly issued by the
dubious suppliers meet the requirements of the ETA and the Regulations.
[14]
The issue now is the
following: was the evidence submitted by the appellant sufficient to demolish
the Minister's assumptions? Since the evidence submitted by the appellants was
essentially based on the testimony of Mr. Tremblay and Mr. Lefebvre, we
will analyze their probative value.
[15]
In assessing the
evidence submitted by the appellant, it is essential to make note of the
failure to call certain individuals to testify (including the directors of the
dubious sub-contractors during the period in question, experts in the types of
disasters involved, the estimators involved and the owners of the single-family
dwellings involved) and to submit documentary evidence (such as the plans for
the work to be done and the estimates initialled by the appellant and dubious
sub‑contractors) in support of Mr. Tremblay's statements. When the
appellant claimed that attempts to call certain people to testify were unsuccessful,
it should at least have explained what steps were taken. In Huneault v. The
Queen, 98 DTC 1488, at paragraph 25, my colleague Judge Lamarre recalled
certain observations made by Sopinka and Lederman in their treatise "The
Law of Evidence in Civil Cases" cited by Judge Sarchuk of this Court in Enns v. M.N.R.,
No. APP-192(IT), February 17, 1987, 87 DTC 208, at page 210:
[TRANSLATION]
In
The Law of Evidence in Civil Cases, by Sopinka and Lederman, the authors
comment on the effect of failure to call a witness and I quote:
In Blatch v. Archer, (1774), 1
Cowp. 63, at p. 65, Lord Mansfield stated:
"It is certainly a maxim that all evidence is
to be weighed according to the proof which it was in the power of one side to
have produced, and in the power of the other to have contradicted."
The application of this maxim has led to a well-recognized rule that the
failure of a party or a witness to give evidence, which it was in the power of
the party or witness to give and by which the facts might have been elucidated,
justifies the court in drawing the inference that the evidence of the party or
witness would have been unfavourable to the party to whom the failure was
attributed.
In the case of a plaintiff who has the evidentiary burden of establishing
an issue, the effect of such an inference may be that the evidence led will be
insufficient to discharge the burden.(Lévesque et al. v. Comeau et al. [1970] S.C.R. 1010, (1971), 16 D.L.R. (3d) 425)
[16]
We will now examine the
probative value of the testimony of those who supported the appellant's
position. Mr. Lefebvre testified that he executed all the contracts for
his employer that had been granted by the appellant (sometimes alone, sometimes
with other Trois Étoiles employees). I find it hard to grant any probative
value to Mr. Lefebvre's testimony because when he spoke of the nature of
the work performed for the appellant and of his alleged employer's other
employees, whom he apparently supervised on the appellant's work sites, he was
deliberately vague and unclear; the testimony was therefore unverifiable.
Moreover, the fact he was unable to name any of the employer's directors, even after
he claimed to be the superintendent for his employer for four years
(specifically from 2000 to 2004) only increased my doubts about his
credibility. Additionally, his testimony that it was only near the end of his
relationship with his employer that he asked the appellant to pay his
employer's invoices with cheques in his and his employer's names was
contradicted by the evidence, which showed that this method was implemented in
2000 and continued until the relationship ended. The fact Mr. Lefebvre and
his employer cashed substantial amounts at cheque cashing businesses and his
employer was not in compliance with many tax laws (recall that Trois Étoiles's
GST QST number was cancelled in August 2002) is revealing enough in itself. It
is certainly not by presenting such a witness that the appellant could hope to
convince me that services were actually rendered by Trois Étoiles.
[17]
I do not find Mr. Tremblay's
testimony any more probative or credible considering the following:
(i)
his testimony was
deliberately vague and unclear, and therefore unverifiable with respect to the
following elements:
1. the exact nature of
the work performed by the dubious suppliers. On this, the appellant could have
submitted the estimates to evidence, which Mr. Tremblay's testimony (see
para. 5(ii)) indicates were signed by the appellant and the sub-contractor
involved. Moreover, these estimates described the details of the type of work
the sub-contractor in question was to perform and the consideration that would
be received for the work performed. The estimate, in my opinion, constituted the
contract between the parties, a very detailed contract in all respects. In my
opinion, the submission of these estimates was essential in the circumstances.
The appellant did not feel it was necessary to submit them to evidence when it
was able to do so. I infer from this that the evidence would have been
unfavourable;
2. Mr. Tremblay
testified that he stopped using the services of a dubious supplier when a
cheque cashing business called him for background verifications. Once again,
Mr. Tremblay did not feel it was necessary to clarify which dubious
suppliers were the subjects of such calls or when these calls were made;
(ii)
the contradictions
between Mr. Tremblay's testimony and the statements made to Ms. Roy (recorded
as Exhibits I‑2, 3.15 and 3.16 submitted to evidence) (see page 232 of
the transcript);
(iii)
there was no
verification of where the cheques drawn on the appellant's bank account payable
to the dubious suppliers were cashed (and he knew almost nothing about the
suppliers) even after having received calls from the cheque cashing businesses
that wanted to conduct background verifications. These calls should have raised
suspicions and caused the appellant, from the first call from a cheque cashing
business, to verify where the other suppliers, whom he knew nothing about,
cashed the cheques issued by the appellant considering Mr. Tremblay admitted
that he knew a supplier who cashed cheques in this manner is not likely upstanding.
The appellant certainly cannot rely on good faith here, not even for the very
first call from a cheque cashing business.
(iv)
the fact there was no
verification with the CCQ or the CSST of the hours of work of the dubious
suppliers' employees. I can understand the practice of givers of work not
conducting such verifications on suppliers they use regularly and whose
integrity and financial stability are known. However, I find not verifying
suppliers who are almost completely unknown difficult to explain considering
the significant financial consequences that could result for the givers of
work. Indeed, anyone giving work who does not seek status letter from the CCQ and
the CSST could be held solidarily liable with their sub‑contractors for
the assessments that should have been paid by the sub‑contactors;
(v)
the fact the appellant
conformed to Mr. Lefebvre's payment directive without asking questions.
Indeed, the appellant, at Mr. Tremblay's request, prepared cheques to the
joint order of Trois Étoiles and Mr. Lefebvre because he wanted to be
sure he was paid by Trois Étoiles. An ordinarily cautious contractor would
not have accepted such a directive, considering he testified that he knew
Mr. Lefebvre had a partner at Trois Étoiles.
[18]
The following question
must now be answered: do the invoices issued by the dubious suppliers meet the
requirements prescribed under the ETA and the Regulations?
[19]
First, the two
following questions must be asked:
a.
What is the purpose of
the Regulations?
b.
Are the requirements of
the Regulations mandatory and should they be strictly enforced?
[20]
On this, I concur with Justice
Bowie when he states the following in Key Property Management Corp. v. The
Queen, 2004 TCC 210:
The
whole purpose of paragraph 169(4)(a) and the Regulations is to
protect the consolidated revenue fund against both fraudulent and innocent
incursions. They cannot succeed in that purpose unless they are considered to
be mandatory requirements and strictly enforced. The result of viewing them as
merely directory would not simply be inconvenient, it would be a serious breach
of the integrity of the statutory scheme
[21]
On this, I also agree
with Justice Campbell when she states the following in Davis v. The Queen,
2004 TCC 662:
Because
of the very specific way in which these provisions are worded, I do not believe
they can be sidestepped. They are clearly mandatory and the Appellant has
simply not met the technical requirements which the Act and the Regulations
place upon him as a member of a self-assessing system.
It is important to note that the Federal Court of
Appeal affirmed, in Systematix Technology Consultants Inc. v. Canada,
2007 FCA 226, the positions of Justices Bowie and Campbell in this respect.
[22]
Section 3 of the
Regulations state the following:
3. For the purposes of paragraph 169(4)(a) of the Act, the
following information is prescribed information:
(a) where
the total amount paid or payable shown on the supporting documentation in
respect of the supply or, if the supporting documentation is in respect of more
than one supply, the supplies, is less than $30,
(i)
the name of the supplier or the intermediary in
respect of the supply, or the name under which the supplier or the intermediary
does business,
(ii)
the name of the supplier or the intermediary in
respect of the supply, or the name under which the supplier or the intermediary
does business,
(iii)
where an invoice is not issued in respect of the
supply or the supplies, the date on which there is tax paid or payable in
respect thereof, and
(iv)
the total amount paid or payable for all of the
supplies;
(b) where the total
amount paid or payable shown on the supporting documentation in respect of the
supply or, if the supporting documentation is in respect of more than one
supply, the supplies, is $30 or more and less than $150,
(i)
the name of the supplier or the intermediary in
respect of the supply, or the name under which the supplier or the intermediary
does business, and the registration number assigned under subsection 241(1) of
the Act to the supplier or the intermediary, as the case may be,
(ii)
the information set out in subparagraphs (a)(ii) to (iv),
(iii)
where the amount paid or payable for the supply
or the supplies does not include the amount of tax paid or payable in respect
thereof,
(A)
the amount of tax paid or payable in respect of each
supply or in respect of all of the supplies, or
(B)
where provincial sales tax is payable in respect of
each taxable supply that is not a zero-rated supply and is not payable in
respect of any exempt supply or zero-rated supply,
(I)
the total of the tax paid or payable under Division II
of Part IX of the Act and the provincial sales tax paid or payable in respect
of each taxable supply, and a statement to the effect that the total in respect
of each taxable supply includes the tax paid or payable under that Division, or
(II)
the total of the tax paid or payable under Division II
of Part IX of the Act and the provincial sales tax paid or payable in respect
of all taxable supplies, and a statement to the effect that the total includes
the tax paid or payable under that Division,
(iv)
where the amount paid or payable for the supply
or the supplies includes the amount of tax paid or payable in respect thereof
and one or more supplies are taxable supplies that are not zero-rated supplies,
(A)
a statement to the effect that tax is included in the
amount paid or payable for each taxable supply,
(B)
the total (referred to in this paragraph as the “total
tax rate”) of the rates at which tax was paid or payable in respect of each of
the taxable supplies that is not a zero-rated supply, and
(C)
the amount paid or payable for each such supply or the
total amount paid or payable for all such supplies to which the same total tax
rate applies, and
(v)
where the status of two or more supplies is
different, an indication of the status of each taxable supply that is not a
zero-rated supply; and
(c) where the total
amount paid or payable shown on the supporting documentation in respect of the
supply or, if the supporting documentation is in respect of more than one
supply, the supplies, is $150 or more,
(i) the information set out in
paragraphs (a) and
(b),
(ii) the recipient’s name, the name
under which the recipient does business or the name of the recipient’s duly
authorized agent or representative,
(iii) the terms of payment, and
(iv)
a description of each supply sufficient to
identify it.
[Emphasis added]
[23]
In this case, the
evidence showed that the amount paid for each of the supplies by the dubious
suppliers was $150 or more. As a result, the invoices the appellant submitted
to evidence were to contain a description sufficient to identify each supply,
among other things. Since the purpose of paragraph 169(4)(a) of the ETA
and the Regulations is to protect the consolidated revenue fund against both
fraudulent and innocent incursions, I feel that a description is sufficient
when it allows the Agency to identify the work performed by the suppliers. In
my opinion, invoices the appellant submitted to evidence cannot meet the
condition set out at sub-paragraph 3(c)(iv) of the Regulations unless
they contain the following information:
(i)
the exact place the
supplier in question rendered services. By exact place, I mean the street
address where the work was carried out;
(ii)
the exact nature of the
supply. In this case, the invoices could have referred to the estimates that, I
repeat, described the exact nature of the work to be carried out and the
payment conditions.
[24]
My review (see
appendices) of all the invoices submitted to evidence led me to find that none
of them meet section 169 of the ETA and the Regulations because in each, at
least one mandatory element of information is missing. As a result, the
appellant cannot claim the ITCs related to these invoices.
[25]
The following question
must now be answered: did the Minister meet his burden pursuant to section 285
of the ETA? Since I am convinced that the appellant did not truly acquire the
supplies for which it claimed ITCs in its net tax calculation, the Minister met
his burden of proof as set out in section 285 of the ETA. I note that the
appellant did not present any arguments on this.
[26]
For all these reasons,
the appeal is dismissed.
Signed at Ottawa,
Canada, this 17th day of December 2013.
"Paul Bédard"
Translation
certified true
on this 19th day
of March 2014.
Elizabeth Tan,
Translator
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