Chateau Manufacturing Ltd. v. Dep. MNR, 84 DTC 6126, [1984] CTC 43 (FCA)

Heald, J:—This is an appeal, by leave of the Court, and pursuant to section 60 of the Excise Tax Act, from a declaration of the Tariff Board, wherein the Board, by a majority decision, dismissed the appellant’s application for a declaration to the effect that certain steel components manufactured by the appellant and sold by it as a unit in kit form for assembly as a garden storage house are included within the articles enumerated in paragraph 21 of Schedule V, Part 1 of the Excise Tax Act. Part 1 of Schedule V, bears the heading of “Construction Materials”. Paragraph 21 thereof reads as follows:

Structural metal and fabricated metal for buildings and other structures.

The relevant facts as established in evidence before the Board may be summarized as follows. The appellant fabricates and sells steel components intended to be assembled by the consumer into a garden storage shed or house. The components are made of prepainted galvanized steel cut to specific dimensions by the appellant and sold to customers in a kit form in a cardboard box. The box also contains an instruction manual describing how to assemble the components into a garden storage structure. The component parts are structural metal and fabricated metal and constitute the sides and roof for the storage house as well as the upright sections and the base frame. Fasteners are also included comprising sheet metal screws, nuts and bolts. In order to have a satisfactorily completed building, the user needs to purchase 2” x 4" pieces of lumberr to strengthen the frame by bracing the building in the centre of the beams, thereby enabling the building to withstand snow and wind. It is also necessary for the consumer to purchase stakes in order to attach the frame of the storage structure either to the ground of to a floor base. The evidence was to the effect that the floor base is constructed almost without exception by the consumer. The instruction manual recommends both the bracing and the construction of a floor base. It also suggests that the floor base may be made from concrete, slab patio stones or wood and describes the method of building a concrete base. The consumer purchases these materials elsewhere since the kit includes the base frame but not the floor.

The evidence established and all three members of the Board found that the metal used in the kit is structural and fabricated metal. Where they differed was that the majority held that the appellant was selling buildings whereas the dissenting member was of the view that the appellant was selling material for buildings rather than buildings.

The Board majority framed the question to be resolved in the following terms: (Appeal Book p 31)

. . . whether or not the goods under appeal qualify as construction materials under Schedule V, Part 1 of the Excise Tax Act.

The Board thereafter concluded as follows (Appeal Book p 31):

In the Board’s opinion the goods under appeal are not construction materials that may be used in a building or any other structure. They are essentially a unit in an unassembled form. The component parts have been cut to size, shaped and drilled for riveting, to the point that when assembled they can only constitute the fully assembled garden storage house in issue.

Therefore, the Board declares that the garden storage houses and/or structures in issue are not structural metal and fabricated metal within the meaning of Schedule V of the Excise Tax Act but are goods subject to the tax imposed by section 27(1) of the said Act.

The practical result to the appellant if the articles sold by it are included within paragraph 21 would be to reduce the consumption or sales tax payable by it to five per cent. If the articles are not to be included within paragraph 21, the tax payable pursuant to subsection 27(1) of the Act is 12 per cent up to and including November 16, 1978, and 9 per cent thereafter.

In my view the majority of the Board was in error when it decided that subject goods were not construction materials that may be used in a building or any other structure. What it was required to decide was whether the goods being sold were structural metal and fabricated metal for buildings and other structures. The evidence before the Board established clearly that the goods being sold were structural and fabricated metal. It also established that they were used as component parts for a garden storage shed. The Board however concluded that, because of the purpose for which they were to be used, this circumstance somehow changed the nature of the goods converting them into what the Board described as “a unit in an unassembled form”. The use for which the goods in question are intended does not alter their appearance, form, function or essential character as structural and fabricated metal.

The language used in paragraph 21 is common language bearing a plain meaning. Accordingly there is no reason, in my view, for not giving to the words used therein the broadest meaning possible consistent with the context in which those words are found.* [1] In so far as the context of Schedule V is concerned, I find nothing therein to require a departure from the plain meaning of the words used in interpreting the scope to be given to paragraph 21 of Schedule V. The majority of the Board held that the materials enumerated in that Schedule were restricted to materials that are brought to a construction site such as bricks, doors, wire, tiles, glass, lumber, nails, paint, plaster, plumbing fixtures, structural and fabricated metal and that to bring the goods in issue within Schedule V, it must be shown that they are construction material of that nature and since subject goods are not intended to be assembled on a construction site but are sold at retail in complete kit form for assembly in a garden, the context of Schedule V requires that they be excluded therefrom. I do not agree with this view of the matter. A perusal of Schedule V reveals that there are many items included therein which cannot be said to be construction material intended to be assembled on a construction site. Thus the context of the Schedule does not require the imposition of such a limitation on the scope of paragraph 21.

Furthermore, even assuming the subject goods to be “a unit in an unassembled form” as found by the Board majority, this would not, of itself, exclude material, which obviously consists of structural and fabricated metal for buildings, from being included in Schedule V pursuant to paragraph 21 thereof without express language therein so excluding it. I say this because of the language used by Parliament in paragraph 11 of Part 1 of Schedule V. Paragraph 11 includes a multitude of items such as lumber; plywood; sash etc, “and other such building components, not including assembled or unassembled furniture". (Italics added). It would take words of similar import to persuade me that Parliament intended to exclude subject structural and fabricated metal from paragraph 21.

I have an additional difficulty with the decision of the Board majority which relates to their conclusion that what is being sold here is essentially garden storage houses or structures in an unassembled form. The uncontradicted evidence before the Board revealed that the consumer was required to do more than merely assemble the components purchased from the appellant to satisfactorily complete his garden storage house. It would be necessary for him to purchase materials for the construction of a base floor if he wished a base floor; to purchase stakes in every case to attach the structure to the ground or base floor as the case may be; and to purchase the 2" X 4" lumber to brace the structure as referred to, supra. Accordingly I do not think it was reasonably open to the Board to conclude on this evidence that the appellant was selling a building or other structure. I agree with the dissenting Board member that what was being sold was structural and fabricated metal in the convenient form of a kit which is not a building but material for a building. Such being the case I conclude that such material is included within paragraph 21 of Schedule V.

In my view the comments of Kellock, J in the case of Canadian Lift Truck Company Limited v The Deputy Minister of National Revenue for Customs and Excise, [1956] 1 TBR 121 apply to the situation in this case At page 122 of the report he said:

While the construction of a statutory enactment is a question of law, and the question as to whether a particular matter or thing is of such a nature or kind as to fall within the legal definition is a question of fact, nevertheless if it appears to the appellate Court that the tribunal of fact had acted either without any evidence or that no person properly instructed as to the law and acting judicially, could have reached the particular determination, the Court may proceed on the assumption that a misconception of law has been responsible for the determination; Edwards v Bairstow, (1955) 3 All ER 48.

For the above reasons I have concluded that the majority of the Board proceeded on a misconception of law in this case which resulted in an erroneous determination.

I would therefore allow the appeal and declare pursuant to subsections 59(1) and 60(4) of the Excise Tax Act, that the components in issue herein are included within the articles enumerated in paragraph 21 of Part 1 of Schedule V of the Excise Tax Act.

In his memorandum of fact and law counsel for the appellant asked for costs. However, in his oral argument costs were not asked for nor were special reasons advanced to support an award of costs in this case. Accordingly and pursuant to rule 1312, I would not award costs.