Thurlow,
C
J:—This
is
the
first
of
two
applications
under
section
28
of
the
Federal
Court
Act
to
review
and
set
aside
refusals
by
the
Minister
of
National
Revenue
of
the
applicant’s
applications
for
refunds
of
amounts
paid
by
the
applicant
as
tax
on
sales
of
oil.
The
oil
was
useful
as
heating
oil
or
as
fuel
for
diesel
engines.
At
the
material
times
oil
for
heating
was
exempt
from
sales
tax,
that
for
use
as
diesel
fuel
was
subject
to
tax.
The
amounts
in
respect
of
which
refunds
were
applied
for
had
been
paid
by
the
applicant
in
respect
of
sales
of
oil
which
to
the
applicant’s
knowledge
would
be
used
by
the
purchasers
as
diesel
fuel.
The
earlier
of
the
applications
for
refund
was
made
on
May
5,
1981,
and
claimed
amounts
totalling
$16,582.53
paid
by
the
applicant
for
the
period
from
May
to
October,
1977.
Its
refusal
on
August
5,
1981,
is
the
subject
matter
of
this
application.
The
other
application
for
refund
was
made
on
January
27,
1982,
and
claimed
amounts
totalling
$107,196.77
paid
in
respect
of
sales
made
during
the
period
from
November,
1977,
to
April,
1980.
Its
refusal
on
February
24,
1982,
is
the
subject
matter
of
the
second
of
the
section
28
applications.
With
one
exception,
the
material
facts
are
the
same
with
respect
to
both
applications.
Throughout
the
material
times
the
applicant
was
an
oil
distributor.
It
simply
bought
oil
from
suppliers
and
sold
it
to
customers.
The
exception
was
that
in
the
months
of
December,
1977,
and
January
and
February,
1978,
and
in
the
months
of
December,
1979,
and
January
and
February,
1980,
the
applicant
blended
stove
oil
with
the
heating
oil
sold
as
diesel
fuel
to
prevent
jelling
and
maintain
its
usefulness
as
diesel
fuel
in
cold
weather.
Amounts
paid
as
taxes
on
sales
of
oil
in
those
periods
totalled
$10,537.81
and
were
included
in
the
second
of
the
applications
for
refund.
The
applicant’s
suppliers
were
manufacturers
or
producers
of
oil.
They
were
probably
aware
that
some
of
the
oil
sold
by
the
applicant
would
be
sold
by
it
for
heating
and
some
for
diesel
fuel.
But
they
did
not
charge
the
applicant
with
federal
sales
taxes
on
any
of
the
oil
sold
to
the
applicant
and
it
is
unlikely
that
they
paid
the
sales
tax
on
any
of
the
oil.
Nor
did
the
applicant
charge
its
diesel
fuel
customers
with
federal
sales
tax.
Nothing
in
the
evidence
indicates
that
the
applicant
ever
promised
or
represented
to
the
supplier
that
the
oil
would
be
sold
only
for
heating
purposes
or
that
tax
would
be
paid
by
the
applicant
on
behalf
of
the
supplier
on
any
of
the
oil
sold
for
use
as
diesel
fuel.
Indeed,
there
is
evidence
that
no
such
agreement
or
representation
was
ever
made.
In
1974,
on
becoming
an
independent
distributor
(it
had
formerly
been
a
distributor
of
Texaco
products),
the
applicant
had
inquired
of
the
Department
as
to
its
responsibility
for
the
sales
tax,
and
in
November
of
that
year,
on
the
insistence
of
the
Department,
had
applied
for
and
received
a
sales
tax
licence
under
the
Excise
Tax
Act.
The
respondent’s
memorandum
of
argument
asserts
that
the
licence
was
issued
after
the
applicant
advised
the
Department
of
the
blending.
Thereafter,
for
some
months,
the
applicant
filed
nil
returns.
What
happened
afterwards
is
described
as
follows
in
evidence
giving
by
F
M
Herdman,
the
secretary-treasurer
of
the
applicant,
on
discovery
in
another
proceeding,
which
evidence,
on
consent,
was
used
as
part
of
the
record
on
these
applications.
Q
All
right,
what
happened
after
two
or
three
months
when
you
started
sending
in
nil
returns?
A
Well,
I
got
a
frantic
call
one
night
about
—
I
remember
it
was
just
before
we
went
home
so
I
figured
it
was
about
five
o’clock
at
night
—
from
the
Department,
and
in
the
first
place
I
was
surprised
because
I
didn’t
know
they
worked
that
late.
I’m
sorry.
Mr
Finlay:
No,
Mrs
Herdman,
that’s
a
valid
observation,
in
my
experience.
The
Witness:
No,
it
seemed
it
was
a
very
frantic
call
because
they
said
they
decided
after
a
lot
of
talking
and
this
and
that
they
decided
yes,
we
did
have
to
pay
the
tax,
and
not
only
that,
they
were
going
to
make
it
retroactive
to
the
date
of
licencing.
Q
Mr
James:
And
what
did
you
do
in
response
to
that?
A
I
did
what
they
told
me.
They
said
I
had
to
pay
the
tax,
so
I
paid
it.
Q
And
did
you
pay
under
protest
of
any
nature?
Mr
Finlay:
Just
a
second.
You’re
asking
for
a
factual
basis
of
this?
Mr
James:
Yes.
Mr
Finlay:
Do
you
understand
the
question?
Did
you
pay
under
protest?
Do
you
understand
that
question,
Mrs
Herdman?
The
Witness:
Well,
yes,
of
course,
I
didn’t
want
to
pay
it.
Q
Mr
James:
But
did
you
send
any
correspondence
protesting
that
you
shouldn't
have
to
pay
the
tax?
A
Well,
I
don’t
really
understand
the
question.
I
didn’t
know
what
I
had
to
pay,
you
see.
I
asked
them.
Q
Did
you
seek
any
advice
from
anyone
other
than
the
Department?
A
Our
accountant,
and
he
didn’t
know
any
more.
Q
All
right,
anyone
else?
A
No,
there
was
nobody
else
we
could
go
to.
The
applicant
subsequently
made
payments
in
respect
of
all
the
oil
sold
for
diesel
fuel.
Its
accounts
were
audited
early
in
1977
and
it
was
asessed
by
the
Department
both
for
additional
taxes
and
for
penalties.
The
particular
amounts
assessed
are
not
involved
in
these
proceedings.
On
these
facts
I
think
it
is
apparent
that,
with
the
possible
exception
of
sales
of
fuel
oil
that
had
been
blended
by
the
applicant
with
stove
oil,
(1)
the
applicant
was
not
the
producer
or
manufacturer
of
the
oil
it
sold,
(2)
the
sales
made
by
the
applicant
were
not
the
sales
upon
which
liability
for
sales
tax
arises
under
subparagraph
27(1
)(a)(i)
of
the
Excise
Tax
Act‘,
(3)
the
applicant
was
not
a
person
required
by
the
Excise
Tax
Act
to
account
for
or
pay
sales
tax,
(4)
the
applicant
was
not
a
person
who
was
required
by
the
Excise
Tax
Act
to
apply
for
or
obtain
a
sales
tax
licence
or
to
file
returns
with
respect
to
its
sales
of
Oil,
(5)
the
payments
made
by
the
applicant
were
induced
by
and
resulted
from
the
representations
made
by
the
department
officials
that
the
applicant
was
liable
for
tax
on
its
sales
of
fuel
oil
and
their
demands
for
returns
and
payment
of
taxes.
The
reasons
given
for
the
refusal
of
the
first
application
for
a
refund
were
stated
as
follows
in
the
Department’s
letter
of
August
5th,
1981:
DETAILS
OF
ADJUSTMENTS
Section
1(d)
of
Schedule
IV
of
the
Excise
Tax
Act
levies
tax
on
diesel
fuel
at
4.618
cents
per
gallon.
There
is
no
provision
for
a
refund
of
the
tax
remitted
on
fuel
oil
purchased
unconditionally
exempt
and
diverted
for
resale
as
diesel
fuel.
I
should
note
at
this
point
that
the
applicant’s
case
is
not
one
of
a
claim
for
money
paid
under
duress
such
as
was
before
the
Court
in
The
Queen
v
Premier
Mouton
Products
Inc.
and
Mouton
Processors
(Canada)
Ltd
v
The
Queen.
It
is
founded
on
the
provision
for
refunds
contained
in
subsection
44(1)
of
the
Excise
Tax
Act.
At
the
material
times
subsection
44(1)
provided:
44
(1)
A
deduction
from,
or
refund
of,
any
of
the
taxes
imposed
by
this
Act
may
be
granted
(a)
where
an
overpayment
has
been
made
by
the
taxpayer;
(b)
where
a
refund
or
adjustment
has
been
made
to
the
taxpayer
by
a
licensed
air
Carrier
under
Part
Il
for
the
taxes
collected
or
paid
on
any
transportation
of
a
person
by
air
that
has
not
been
provided
or
only
partially
provided
by
the
air
carrier
or
that
has
been
collected
in
error
by
the
air
carrier;
(c)
where
the
tax
was
paid
in
error;
(d)
where
the
original
sale
or
importation
was
subject
to
tax,
but
exemption
is
provided
on
subsequent
sale
by
this
Act;
(e)
where
goods
are
exported,
under
regulations
prescribed
by
the
Minister;
(f)
where,
due
to
changes
in
statutory
rates
of
tax
or
for
other
reasons,
stamps
are
returned
for
exchange;
or
(g)
where
the
original
receipt
of
marketable
pipeline
gas
or
natural
gas
liquids
was
subject
to
tax
under
Part
IV.1,
but
exemption
is
provided
on
subsequent
use
by
that
Part.
Prior
to
July
8,
1981,
subsection
44(7)
applicable
at
the
time
of
the
first
application
read:
44
(7)
If
any
person,
whether
by
mistake
of
fact
or
law,
has
paid
or
overpaid
to
Her
Majesty
any
monies
that
have
been
taken
to
account
as
taxes
imposed
by
this
Act,
such
monies
shall
not
be
refunded
unless
application
has
been
made
in
writing
within
four
years
after
the
monies
have
been
paid
or
overpaid.
This
provision
was
repealed
on
July
8,
1981,
and
substituted
by
a
provision
reading:
44
(7.1)
Subject
to
subsection
(7),
no
refund
of
moneys
paid
or
overpaid
in
error,
whether
by
reason
of
mistake
of
fact
or
law
or
otherwise,
and
taken
into
account
as
taxes
imposed
by
this
Act
shall
be
granted
under
this
section
unless
application
in
writing
therefor
is
made
to
the
Minister
by
the
person
entitled
to
the
refund
within
four
years
after
the
time
the
moneys
were
paid
or
overpaid.
Further
provisions
of
the
amending
Act
were:
44
(7.2)
An
application
under
subsection
(6),
(7)
or
(7.1)
shall
be
made
in
such
form
and
in
such
manner
as
the
Minister
may
prescribe.
(7.3)
Where
the
Minister
rejects
in
whole
or
in
part
an
application
under
subsection
(6),
(7)
or
(7.1)
for
a
refund,
deduction
or
amount,
the
application
ceases
to
have
effect,
for
the
purposes
of
determining
whether
the
refund,
or
deduction
may
be
granted
or
the
amount
may
be
paid,
ninety
days
after
notice
of
the
rejection
is
sent
to
the
applicant,
unless,
within
that
ninety
day
period,
an
application
in
respect
of
the
refund,
deduction
or
amount
is
made
to
the
Tariff
Board
under
section
59
or
to
the
Federal
Court
under
section
28
of
the
Federal
Court
Act.
The
applicant’s
case
is
that
the
amounts
were
paid
as
tax
in
error
within
the
meaning
of
paragraph
44(1
)(c),
that
under
that
subsection
when
a
payment
of
tax
in
error
has
been
made,
the
payer
is
entitled
to
a
refund
which
the
Minister
has
no
authority
to
refuse
and
that
even
if
the
authority
of
the
subsection
to
make
a
refund
is
permissive,
the
refusal
of
the
applicant’s
applications
was
based
on
extraneous
considerations,
including
the
fact
that
the
tax
should
have
been
paid
on
sale
of
the
oil
to
the
applicant,
even
though
the
applicant
was
not
responsible
for
the
payment
of
such
tax
and
the
alleged
arrangement
with
“the
petroleum
industry”,
of
which
the
applicant
was
not
aware,
to
forego
collection
of
the
tax
from
the
oil
producers
as
required
by
the
statute
in
favour
of
collecting
it
from
distributors.
The
respondent’s
answer,
in
summary,
was
that
the
refusals
are
not
proper
subjects
for
attack
under
section
28
of
the
Federal
Court
Act,
that
the
Minister
has
a
discretion
under
subsection
44(1)
of
the
Excise
Tax
Act
to
refuse
applications
for
refund
and
that
the
discretion
to
do
so
was
properly
exercised
in
respect
of
the
applicant’s
applications.
With
respect
to
the
respondent’s
first
point,
it
appears
to
me
that
there
is
in
subsection
44(7.3)
statutory
recognition
of
the
refusals,
or
rejections
as
the
subsection
calls
them,
as
decisions
that
are
reviewable
under
section
28.
Accordingly,
I
am
of
the
opinion
that
the
court
has
jurisdiction
to
entertain
the
application.
With
respect
to
the
second
point,
sections
28
and
3
of
the
Interpretation
Act
provide:
28
In
every
enactment
“may”
is
to
be
construed
as
permissive;
“shall”
is
to
be
construed
as
imperative;
3
(1)
Every
provision
of
this
Act
extends
and
applies,
unless
a
contrary
intention
appears,
to
every
enactment,
whether
enacted
before
or
after
the
commencement
of
this
Act.
(2)
The
provisions
of
this
Act
apply
to
the
interpretation
of
this
Act.
(3)
Nothing
in
this
Act
excludes
the
application
to
an
enactment
of
a
rule
of
construction
applicable
thereto
and
not
inconsistent
with
this
Act.
In
view
of
these
provisions
and
the
decisions
of
the
Privy
Council
in
McHugh
v
Union
Bank
,
of
the
Supreme
Court
in
Smith
&
Rhuland
Ltd
v
The
Queen
Ex
Rel
Brice
Andrews
et
al
,
and
of
this
Court
in
The
Queen
v
Stevenson
Construction
Co
Ltd
,
I
am
of
the
opinion
that
the
authority
of
subsection
44(1)
to
make
refunds
is
permissive
and
leaves
the
authority
charged
with
its
administration
with
a
discretion
whether
or
not
to
grant
the
refund.
But
that
is
far
from
saying
that
the
authority
can
be
exercised
arbitrarily
or
capriciously.
The
statute
authorizes
a
refund
in
particular
situations.
It
does
not
authorize
refusal
for
anything
but
sound
reasons,
for
example,
reasons
grounded
on
the
conduct
of
the
applicant
in
relation
to
its
proper
liability
for
tax
or
its
claim
for
a
refund.
Where
it
is
apparent
that
the
applicant
is
entitled
to
the
money,
whether
because
he
has
made
errors
in
his
calculations
or
because
he
has
been
unlawfully
required
to
pay
taxes
that
he
did
not
owe
or
for
which
he
was
not
liable
to
the
Crown
it
would
take
reasons
of
equal
or
greater
weight
to
justify
keeping
his
money
and
depriving
him
of
it.
Here
the
reasons
given
in
the
letters
refusing
refunds
are
in
my
view
untenable.
They
miss
the
point
that
the
amounts
claimed
were
paid
in
error
by
a
person
who
was
not
responsible
for
them
and
who
was
induced
to
pay
them
by
the
representations
of
the
Department
that
that
person
was
liable
to
the
Crown
for
them.
The
reasons
given
in
the
letter
to
Price
Waterhouse
are
also
untenable.
An
arrangement
by
the
Department
with
the
“petroleum
industry”,
of
which
the
applicant
is
not
shown
to
have
been
aware,
under
which
the
Department
would
disregard
the
provisions
of
the
statute
and
collect
tax
from
distributors
who
were
not
liable
under
the
Act
for
the
tax,
could
scarcely
be
a
reason
for
keeping
the
applicant’s
money.
Nor
can
the
Department,
which
demanded
and
exacted
the
tax
from
the
applicant,
be
heard
to
say
that
the
fact
of
payment
by
one
not
legally
liable
for
the
tax
does
not
affect
the
situation
from
the
Department’s
point
of
view.
It
was
never
brought
home
to
the
applicant
that
it
was
being
required
to
pay
tax
on
behalf
of
its
supplier
or
anyone
but
the
applicant
itself.
Further,
what
might
result
between
the
supplier
and
the
applicant
if
the
supplier
were
now
assessed
for
the
taxes
besides
being
speculative
is
not
a
matter
between
the
Department
and
the
applicant.
Moreover,
in
my
view,
save
with
respect
to
oil
which
the
applicant
blended,
there
is
in
the
whole
situation
nothing
that
could
serve
to
justify
either
the
unlawful
exaction
by
the
Department
from
the
applicant
of
tax
of
the
amounts
in
question
or
the
refusal
to
refund
to
the
applicant
what
had
been
thus
unlawfully
exacted.
With
respect
to
the
oil
which
the
applicant
blended
with
stove
oil
before
selling
it,
on
such
material
as
appears
in
the
record,
I
am
of
the
view
that
the
applicant
was
liable
to
tax
as
a
producer
or
manufacturer
and
that
in
the
absence
of
facts
indicating
otherwise
the
refusal
of
a
refund
of
the
tax
paid
on
sales
of
such
oil
has
not
been
shown
to
be
unjustified.
That,
as
previously
indicated,
amount
to
$10,537.81
of
the
$107,196.77
claimed
by
the
applicant’s
second
application.
I
would
set
aside
the
refusals
of
refund
and
refer
the
matters
back
to
the
Minister
for
disposition
on
the
basis
that
the
applicant
is
entitled
to
the
refund
of
$16,582.53
asked
by
its
application
of
May
5,
1981,
and
to
$96,658.96
of
the
refund
asked
by
its
application
of
January
27,
1982.
Le
Dain,
J:—
This
is
a
section
28
application
to
review
and
set
aside
the
decision
of
the
Minister
of
National
Revenue
on
August
5,1981
rejecting
an
application
for
refund
of
sales
tax
under
section
44
of
the
Excise
Tax
Act,
RSC
1978,
c
E-13.
The
rejected
application
is
for
refund
of
sales
tax
in
the
amount
of
$16,582.53
which
the
applicant
claims
to
have
paid
in
error
on
sales
of
fuel
oil
for
use
as
diesel
fuel
during
the
period
May
to
October
1977.
The
rejection
on
February
24,
1982
of
a
further
application
for
refund
of
sales
tax
in
the
amount
of
$107,196.77,
which
the
applicant
claims
to
have
paid
in
error
on
sales
of
fuel
oil
for
use
as
diesel
fuel
during
the
period
October
1,
1977
to
April
23,
1980,
is
the
subject
of
a
second
section
28
application
in
Court
File
A-297-82.
The
two
applications
were
heard
together.
Although
there
is
an
additional
issue
raised
by
the
other
section
28
application
it
is
convenient
to
state
the
common
background
of
the
two
claims
for
refund
in
these
reasons.
During
the
relevant
periods
the
applicant
was
a
distributor
of
furnace
oil
and
stove
oil
which
it
bought
from
refiners
and
sold
to
retailers
and
consumers.
It
sold
a
certain
quantity
of
the
furnace
oil
for
use
as
diesel
fuel.
During
the
severe
weather
in
the
winter
months
it
blended
the
furnace
oil
with
stove
oil
to
prevent
jelling,
but
that
is
relevant
only
to
the
period
covered
by
the
second
claim
for
refund.
During
these
periods
the
sale
of
furnace
oil
and
stove
oil
was
exempt
from
federal
sales
tax,
except
when
sold
for
use
as
diesel
fuel.
This
resulted
from
subsection
29(1)
of
the
Excise
Tax
Act
and
item
5
of
Part
VI
of
Schedule
III
of
the
Act,
which
are
as
follows:
29
(1)
The
tax
imposed
by
section
27
does
not
apply
to
the
sale
or
importation
of
the
articles
mentioned
in
Schedule
III.
5
Fuel
for
lighting
or
heating,
but
not
including
fuel
when
for
use
in
internal
combustion
engines;
crude
oil
to
be
used
in
the
production
of
fuel.
Tax
payable
in
respect
of
the
sale
of
goods
produced
or
manufactured
in
Canada,
as
was
the
case
here,
is
payable
by
the
producer
or
manufacturer,
according
to
paragraph
27(1
)(a)
of
the
Act,
which
reads
in
part
as
follows:
27
(1)
There
shall
be
imposed,
levied
and
collected
a
consumption
or
sales
tax
of
nine
per
cent
on
the
sale
price
of
all
goods
(a)
produced
or
manufactured
in
Canada
(i)
payable,
in
any
case
other
than
a
case
mentioned
in
subparagraph
(ii)
or
(iii),
by
the
producer
or
manufacturer
at
the
time
when
the
goods
are
delivered
to
the
purchaser
or
at
the
time
when
the
property
in
the
goods
passes,
whichever
is
the
earlier.
Although
the
applicant’s
suppliers
knew
that
it
was
selling
some
of
the
furnace
oil
for
use
as
diesel
fuel,
they
did
not
require
payment
of
sales
tax.
The
furnace
oil
and
stove
oil
was
sold
to
the
applicant
as
exempt
from
federal
sales
tax.
The
applicant,
which
began
business
in
the
mid-1960s,
did
not
pay
sales
tax
on
its
sales
of
fuel
oil
for
use
as
diesel
fuel
until
1975.
In
November
1974,
after
hearing
from
a
competitor
that
there
was
some
“hidden
tax”
involved,
the
applicant
enquired
from
the
Department
as
to
whether
there
was
any
tax
payable.
After
looking
into
the
nature
of
the
applicant’s
business
the
Department
informed
the
applicant
that
it
should
take
out
a
manufacturer’s
or
producer’s
sales
tax
licence
but
that
no
tax
would
be
payable
on
its
sales
of
fuel
oil,
and
that
the
applicant
should
file
nil
returns.
A
licence
was
issued
to
the
applicant
on
November
26,
1974,
and
it
filed
returns
as
suggested
until
April
1975,
when
it
was
informed
by
the
Department
that
it
would
be
required
to
pay
tax
on
its
sales
of
fuel
oil
for
use
as
diesel
fuel
with
effect
from
the
date
of
its
licence.
The
applicant
did
as
directed.
When
its
business
was
sold
in
1980
the
applicant
learned
that
it
had
not
been
legally
obliged
to
pay
sales
tax
on
the
sales
of
diesel
fuel
and
that
its
competitors
in
the
distribution
of
fuel
oil
had
not
paid
the
tax.
As
a
result
the
applicant
claims
to
have
been
placed
at
a
competitive
disadvantage.
It
made
the
application
for
refund,
the
particulars
of
which
have
been
set
out
above,
on
May
5,
1981
and
January
27,
1982
respectively.
The
reasons
given
on
behalf
of
the
Minister
for
rejection
of
the
applicant’s
claim
for
refund
of
May
5,
1981,
which
are
to
be
taken
as
applicable
to
the
claim
of
January
27,
1982
as
well,
are
contained
partly
in
a
letter
of
August
5,
1981
informing
the
applicant
of
the
rejection,
but
mainly
in
a
letter
of
November
2,
1981
from
K
M
Burpee,
Director,
Tax
Interpretations,
Excise,
to
Price
Waterhouse,
the
applicant’s
accountants.
In
the
letter
of
August
5,
1981
it
is
said:
Section
1(d)
of
Schedule
IV
of
the
Excise
Tax
Act
levies
tax
on
diesel
fuel
at
4.618
cents
per
gallon.
There
is
no
provision
for
a
refund
of
the
tax
remitted
on
fuel
oil
purchased
unconditionally
exempt
and
diverted
for
resale
as
diesel
fuel.
The
letter
of
November
2,
1981
contains
the
following
paragraphs:
The
exemption
from
tax
for
fuel
for
lighting
or
heating
is
not
an
unconditional
exemption.
The
condition
“but
not
including
fuel
when
for
use
in
internal
combustion
engines”
clearly
limits
the
exemption.
Since
fuel
oil
for
use
in
internal
combustion
engines
is
specifically
excluded
from
exemption,
sales
of
fuel
oil
which
include
fuel
oil
for
use
in
internal
combustion
engines
are
subject
to
tax
at
the
time
of
sale
by
the
manufacturer.
Since
the
exemption
is
conditional,
fuel
should
have
been
purchased
tax
paid
by
distributors
and
exemption
claimed
on
fuel
used
for
lighting
or
heating.
At
the
request
of
the
petroleum
industry,
the
Department
agreed
that
all
heating
fuel
could
be
sold
tax
exempt
to
distributors
and
the
sales
taxes
owing
on
any
fuel
diverted
to
a
taxable
use
would
be
remitted
by
the
distributor
to
the
Department
either
directly
or
via
the
manufacturer.
In
the
situation
at
hand
there
is
no
question
that
the
sales
tax
paid
was
actually
owing
to
the
Crown.
The
fact
that
the
tax
was
paid
by
a
person
other
than
the
one
who
was
legally
liable
for
it
does
not
affect
the
situation
from
the
Department’s
point
of
view.
Had
the
sales
tax
been
paid
properly
in
the
first
place
the
tax
would
have
been
remitted
by
the
manufacturer
and
billed
to
Herdman.
If
a
refund
of
the
sales
tax
was
paid
to
Herdman
and
assessed
to
the
manufacturer
at
this
time,
the
manufacturer
would
recover
the
tax
from
Herdman
for
the
sales
tax
assessment.
The
relevant
part
of
section
44
of
the
Excise
Tax
Act
provides
for
refund
as
follows:
44
(1)
A
deduction
from,
or
refund
of,
any
of
the
taxes
imposed
by
this
Act
may
be
granted
(c)
where
the
tax
was
paid
in
error;
Subsection
(7.1)
of
section
44
provides:
(7.1)
Subject
to
subsection
(7),
no
refund
of
moneys
paid
or
overpaid
in
error,
whether
by
reason
of
mistake
of
fact
or
law
or
otherwise,
and
taken
into
account
as
taxes
imposed
by
this
Act
shall
be
granted
under
this
section
unless
application
in
writing
therefor
is
made
to
the
Minister
by
the
person
entitled
to
the
refund
within
four
years
afer
the
time
the
moneys
were
paid
or
overpaid.
Subsection
(7.3)
of
section
44
reads
as
follows:
(7.3)
Where
the
Minister
rejects
in
whole
or
in
part
an
application
under
subsection
(6)
(7)
or
(7.1)
for
a
refund,
deduction
or
amount,
the
application
ceases
to
have
effect,
for
the
purposes
of
determining
whether
the
refund,
or
deduction
may
be
granted
or
the
amount
may
be
paid,
ninety
days
after
notice
of
the
rejection
is
sent
to
the
applicant,
unless,
within
that
ninety
day
period,
an
application
in
respect
of
the
refund,
deduction
or
amount
is
made
to
the
Tariff
Board
under
section
59
or
to
the
Federal
Court
under
section
28
of
the
Federal
Court
Act.
Before
considering
the
merits
of
the
section
28
application
it
is
necessary
to
deal
with
the
respondent’s
contention
that
the
Court
is
without
jurisdiction
to
entertain
the
application
because
the
Minister’s
decision
in
rejecting
a
claim
for
refund
under
section
44
of
the
Excise
Tax
Act
is
not
a
decision
required
by
law
to
be
made
on
a
judicial
or
quasi-judicial
basis.
Reference
was
made
to
the
criteria
indicated
in
MNR
v
Coopers
and
Lybrand,
[1979]
1
SCR
495;
[1979]
1
CTC
352;
79
DTC
5273,
for
determining
when
a
decision
is
of
this
character.
I
do
not
find
it
necessary
to
consider
their
application
to
the
Minister’s
decision
because
there
is
a
clear
indication
in
subsection
(7.3)
of
section
44
of
the
Excise
Tax
Act,
which
I
have
quoted
above,
that
the
decision
is
to
be
subject
to
attack
under
section
28
of
the
Federal
Court
Act.
This
expression
of
legislative
intention
disposes
conclusively,
in
my
opinion,
of
the
question
of
jurisdiction.
The
applicant
contends
that
the
Minister
erred
in
law
in
rejecting
its
claim
for
refund.
It
supports
this
contention
by
alternative
submissions
which
may
be
summarized
as
follows:
1
Where
sales
tax
has
been
paid
in
error
and
an
application
for
refund
has
been
made
in
accordance
with
section
44,
there
is
a
right
to
a
refund,
and
it
is
an
error
of
law
to
refuse
such
refund
for
any
reason,
and
in
particular
for
the
reason
that
the
tax
was
payable
by
another
person;
2
If
the
Minister
has
a
discretion
under
section
44
as
to
whether
to
make
a
refund
of
tax
paid
in
error,
the
reason
given
for
the
rejection
in
this
case
was
extraneous
or
irrelevant
to
the
exercise
of
the
discretion,
and
was
therefore
an
error
of
law.
These
contentions
were
opposed
by
the
respondent,
who
further
submitted,
in
support
of
the
Minister’s
decision,
that
the
tax
was
not
paid
in
error
within
the
meaning
of
paragraph
44(1
)(c)
of
the
Act.
The
respondent
argued
that
the
word
“error”
in
paragraph
44(1
)(c)
should
not
be
construed
to
include
mistake
of
law
as
well
as
mistake
of
fact
because
of
the
common
law
rule
that
there
is
no
right
to
recover
money
paid
under
mistake
of
law
in
cases
in
which
the
doctrines
of
in
pari
delicto
and
compulsion
are
not
applicable.
Reference
was
made
to
the
majority
judgment
of
the
Supreme
Court
of
Canada
in
Hydro
Electric
Commission
of
Township
of
Nepean
v
Ontario
Hydro,
[1982]
1
SCR
347.
The
short
answer
to
that
contention
is,
I
think,
that
the
wording
of
subsection
44(7.1)
of
the
Act
—
“paid
or
overpaid
in
error,
whether
by
reason
of
mistake
of
fact
or
law
or
otherwise”
—
makes
it
plain
that
“error”
in
paragraph
44(1
)(c)
is
to
be
understood
as
including
mistake
of
law
as
well
as
mistake
of
fact.
The
respondent
also
argued
that
“error”
in
paragraph
44(1
)(c)
refers
to
error
as
to
whether
the
tax
is
payable
at
all
and
not
error
as
to
the
person
who
is
obliged
to
pay
it.
In
my
opinion
this
contention
is
without
merit.
There
is
no
reason
to
distinguish
the
two
kinds
of
error.
They
are
both
errors
as
to
whether
there
is
a
legal
obligation
to
pay
the
tax.
Finally,
the
respondent
contended
that
the
applicant
had
not
discharged
the
burden
of
proving
that
the
payment
was
made
in
error
because
it
had
not
rebutted
the
possible
inference,
arising
from
the
understanding
with
the
petroleum
industry
to
which
Mr.
Burpee
referred
in
his
letter
of
November
2,
1981,
that
the
tax
was
paid
voluntarily
pursuant
to
an
understanding
with
the
producer
or
manufacturer
that
if
tax
became
payable
because
of
the
sale
of
the
fuel
oil
for
use
as
diesel
fuel
it
would
be
paid
by
the
distributor
in
discharge
of
the
liability
of
the
producer
or
manufacturer.
In
my
opinion
the
evidence
given
on
behalf
of
the
applicant
by
Mrs
Herdman,
in
the
discovery
that
was
made
part
of
the
record,
excludes
such
an
inference.
It
shows
that
the
tax
was
paid
by
the
applicant
not
because
of
an
understanding
with
the
refiners
but
because
the
applicant
was
told
by
the
Department
that
it
was
required
to
do
so.
The
applicant
paid
the
tax
under
the
mistaken
belief
that
it
was
legally
obliged
to
pay
it.
During
the
period
that
is
relevant
to
this
section
28
application
there
was
no
question
of
the
applicant
being
a
producer
or
manufacturer
by
reason
of
the
blending
of
furnace
oil
and
stove
oil.
The
applicant
was,
therefore,
not
legally
obliged
to
pay
the
tax,
and
the
tax
was
accordingly
paid
in
error
within
the
meaning
of
paragraph
44(1)(c)
of
the
Act.
I
turn
now
to
the
question
whether
a
refund
in
the
cases
specified
in
subsection
44(1)
of
the
Act
is
a
matter
of
right
or
discretion.
That
is
the
question
whether
the
word
“may”
in
subsection
44(1)
is
to
be
construed
as
permissive
or
imperative.
The
general
rule,
of
course,
is
that
which
is
found
in
section
28
of
the
Interpretation
Act,
RSC
1970,
c
1-23:
the
word
“may”
is
to
be
construed
as
permissive,
and
the
word
“shall”
is
to
be
construed
as
imperative.
Although
section
28
does
not
contain
the
provision
found
in
other
interpretation
statutes
that
the
rules
which
it
declares
are
to
apply
unless
the
context
otherwise
requires,
I
think
a
similar
result
is
effected
by
section
3
of
the
Act
which
declares
that
the
provisions
apply
“unless
a
contrary
intention
appears”
and
that
the
Act
does
not
exclude
an
applicable
rule
of
construction
that
is
not
inconsistent
with
it.
In
my
opinion
this
provision
permits
one
to
look
at
the
context
in
which
the
word
“may”
appears
and
to
consider
the
possible
application
of
the
principle
affirmed
in
Julius
v
Lord
Bishop
of
Oxford
(1879-80),
5
App
Cas
214
that
a
power
may
be
coupled
with
a
duty
when
its
exercise
is
necessary
to
the
effectuation
of
a
right.
In
so
far
as
context
is
concerned,
subsections
(6),
(7)
and
(7.1)
of
section
44
speak
of
the
person
“entitled”
to
the
refund.
That
is
an
indication
in
my
opinion
that
a
refund
is
regarded
by
the
statute
as
a
matter
of
entitlement
or
right
in
the
cases
specified
in
subsection
44(1)
and
that
the
authority
conferred
on
the
Minister
to
make
a
refund
is
conferred
as
the
means
for
giving
effect
to
this
right
and
thus
gives
rise
to
a
duty
on
the
principle
recognized
in
Julius
v
Lord
Bishop
of
Oxford.
It
must
be
noted,
however,
as
was
pointed
out
in
argument,
that
this
Court
held
in
The
Queen
v'
Stevenson
Construction
Co
Ltd,
[1979]
CTC
86;
79
DTC
5044
that
there
was
a
discretion,
and
not
a
duty,
to
grant
a
refund
in
the
cases
specified
in
subsection
44(2)
of
the
Act.
That
subsection,
which
is
in
the
same
terms
as
it
was
then,
except
for
a
reference
to
a
new
subsection
44(2.1),
reads
as
follows:
(2)
Where
goods
have
been
purchased
by
Her
Majesty
in
right
of
any
province
of
Canada
for
any
purpose
other
than
(a)
resale;
(b)
use
by
any
board,
commission,
railway,
public
utility,
university,
manufactory,
company
or
agency
owned,
controlled
or
operated
by
the
government
of
the
province
or
under
the
authority
of
the
legislature
or
the
lieutenant
governor
in
council,
or
(c)
use
by
Her
Majesty
or
by
Her
agents
or
servants
in
connection
with
the
manufacture
or
production
of
goods
or
use
for
other
commercial
or
mercantile
purposes,
a
refund
of
taxes
paid
under
Part
Ill,
IV
or
V
may
be
granted
to
Her
Majesty
or
to
the
importer,
transferee,
manufacturer,
producer,
wholesaler,
jobber
or
other
dealer
as
the
case
may
require.
The
Court
based
its
conclusion
in
Stevenson
Construction
on
what
was
said
in
McHugh
v
Union
Bank,
[1913]
AC
299
and
Smith
&
Rhuland
Limited
v
The
Queen
Ex
Rel
Brice
Andrews
et
al,
[1953]
2
SCR
95
concerning
the
importance
and
application
of
a
statutory
direction
such
as
that
found
in
section
28
of
the
Interpretation
Act.
The
pertinent
passages
from
these
decisions
are
quoted
in
the
reasons
which
I
wrote
for
the
Court
in
Stevenson
Construction.
The
essential
burden
of
them
is
that
there
must
be
compelling
reasons
in
the
context
for
departing
from
the
rule
that
“may”
is
to
be
construed
as
permissive.
While
the
word
“entitled”
was
in
subsection
44(6)
of
the
Excise
Tax
Act
as
it
applied
to
that
case,
I
attached
particular
importance
to
the
fact
that
in
Smith
&
Rhuland
six
of
the
seven
judges
in
the
Supreme
Court
of
Canada
held
that
the
power
to
certify
a
union
was
a
discretionary
one
despite
the
existence
of
the
statutory
conditions
for
certification
and
a
provision
referring
to
a
union
as
“entitled”
to
certification
in
a
particular
case.
That
use
of
the
word
“entitled”
was
a
principal
reason
for
the
opinion
of
the
seventh
member
of
the
Court
that
there
was
a
duty.
to
certify
upon
satisfaction
of
the
statutory
conditions.
This
Court
also
attached
importance
to
the
concluding
words
of
subsection
44(2)
—
“to
the
importer,
transferee,
manufacturer,
producer,
wholesaler,
jobber
or
other
dealer
as
the
case
may
require”
—
as
indicating
in
its
opinion
why
the
subsection
should
be
construed
as
conferring
a
discretion.
It
said:
“It
would
appear
that
a
discretion
is
necessary
if
only
because
of
the
need
to
determine
the
particular
person
or
persons
in
a
chain
of
transactions
to
whom
a
refund
should
be
made
in
the
circumstances
of
a
particular
case
and
the
conditions
of
waiver
or
indemnity
upon
which
such
a
refund
should
be
made.”
While
these
words
may
have
given
particular
support
to
the
conclusion
in
Stevenson
Construction,
as
indicating
a
reasonable
scope
for
a
discretion,
I
am
of
the
opinion
that
the
conclusion
in
that
case
should
not
be
applied
to
the
authority
to
grant
a
refund
conferred
by
subsection
44(1),
where
it
is
difficult
to
perceive
a
comparable
justification
for
a
residual
discretion.
It
has
occurred
to
me,
upon
further
reflection,
that
the
decisive
and
overriding
consideration
in
Smith
&
Rhuland,
in
so
far
as
context
was
concerned,
was
the
contrasting
use
throughout
the
Act
of
the
words
“shall”
and
“may”.
It
was
this
which
was
given
particular
emphasis
in
the
majority
opinion
which
did
not
refer
to
the
word
“entitled”
in
a
provision
of
the
Act
referring
to
certification
in
a
particular
case.
A
contrasting
use
of
“shall”
and
“may”
was
also
a
principal
reason
for
the
opinion
in
Re
Falconbridge
Nickel
Mines
Ltd
and
Minister
of
Revenue
for
Ontario,
32
OR
(2d)
240
(CA),
25
OR
(2d)
117
(Div
Ct)
that
the
word
“may”
in
subsection
2(8)
of
the
Retail
Sales
Tax
Act,
RSO
1970,
c.
415,
before
it
was
amended
in
1975,
should
be
construed
as
conferring
a
discretion
rather
than
a
duty
to
make
a
refund
of
tax
wrongfully
paid.
There
is
nothing
comparable
in
the
context
of
subsection
44(1)
of
the
Excise
Tax
Act.
In
the
result
I
am
of
the
opinion
that
the
applicant
was
entitled
to
a
refund
and
that
the
Minister
erred
in
law
in
refusing
it.
For
these
reasons
I
would
allow
the
section
28
application,
set
aside
the
Minister’s
decision
refusing
the
application
for
refund
and
refer
the
matter
back
to
the
Minister
for
disposition
upon
the
basis
that
the
applicant
was
entitled
to
the
refund
of
$16,582.53.
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