[OFFICIAL ENGLISH TRANSLATION]
Date: 20020819
Docket: 2001-1450(GST)I
BETWEEN:
LUCILLE DION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
P.R. Dussault, J.T.C.C.
[1] This is an appeal from an
assessment made under Part IX of the Excise Tax Act
("the Act") concerning the Goods and Services
Tax ("the GST") for the period from January 1,
1991, to September 30, 1998. The Notice of Assessment dated
April 18, 2000, and numbered 19981207-01 that was issued
with respect to account 114706351 states that it cancels and
replaces the Notice of Assessment dated December 7, 1998, and
numbered 19981207 for the period from January 1, 1991,
to September 30, 1998. Although the new Notice of
Assessment dated April 18, 2000, also refers to a period
extending until September 30, 1998, it appears that on
April 30, 1999, the appellant's registration was
cancelled retroactively to December 31, 1995, with the
result that the amount of $5,040.24 in tax payable plus the
interest and the penalty would cover only the period from
January 1, 1991, to December 31, 1995
(Exhibit I-3).
[2] The appellant has operated a
hairdressing business since 1973. From 1977 to 1990, she operated
her business in a salon on rue Principale in Lachute, Quebec. At
that time, she had between three and five employees and her
annual business income was more than $30,000. Around mid-1990,
she closed the salon on rue Principale and continued to
operate her business by herself in her home at
490, rue Meikle in Lachute.
[3] Although the appellant estimated
that she did not earn more than $30,000 annually from her
business, which she now operated by herself without any
employees, she applied for GST registration on
December 13, 1990 (Exhibit I-2).
[4] The appellant's application
for registration was processed on January 11, 1991, and
made retroactive to January 1, 1991; she was assigned
account 114706351. However, as early as January 8,
1991, the appellant had already been registered and had been
assigned account 125262428. On May 17, 1991, that
registration was cancelled and only the registration under
account 114706351 was kept, as is shown by the computerized
statements from Quebec's Ministère du Revenu
("the Ministère"), adduced in evidence as
Exhibits I-5 and I-6. The statements
indicated that there was no activity in account 125262428 in
the appellant's name. As well, the computerized statements
for account 114706351 indicate some 22 letters or notices
sent between November 22, 1991, and November 1,
1995, to the appellant, who normally should have filed quarterly
returns. Subsequently, some 15 letters or notices were sent to
her until October 27, 1998.
[5] In her testimony, the appellant
acknowledged that she received these numerous notices and did not
respond to them because she was convinced that since
January 1991 she was no longer registered and that her
account had been closed. She claimed that she had requested that
her registration be cancelled as early as the beginning of
January 1991 and that, following her request, the tax
accounts had indeed been cancelled in 1991. According to the
appellant, she was also given confirmation during a telephone
conversation that her account was closed. She stated that she no
longer had any of the related documents because they had been
thrown out following damage caused by water in the basement of
her home.
[6] The appellant stated that she had
never collected taxes since January 1991, despite the fact
that an employee of the Ministère claimed that she had
said the opposite in an October 19, 1995, telephone
conversation. According to the appellant, it was at that time
that her tax number was reactivated.
[7] On November 18, 1998, a final
notice of non-filing was sent to the appellant requiring her to
file returns and pay taxes for the period from January 1,
1991, to September 30, 1998 (Exhibit I-4).
[8] On November 27, 1998,
the appellant replied in a letter that she had cancelled her tax
account in 1991 because her annual income was less than
$30,000, and that she had not immediately responded to the
correspondence from the Ministère because she was
convinced that the file had been closed since 1991
(Exhibit I-4).
[9] It was only on April 30,
1999, following the letter and the explanations received from the
appellant, that her GST account 114706351 was cancelled
retroactively to December 31, 1995 (Exhibit I-3).
[10] Alberte Théoret, who described
herself as a bookkeeper, also testified for the appellant. It was
Ms. Théoret who completed the December 13, 1990,
GST registration application that the appellant herself signed.
Ms. Théoret stated that she realized at the very end
of December 1990 that the appellant's income during the
last six months of the year was less than $15,000 and that,
as a result, at the very beginning of 1991 [translation] "we
cancelled the tax number and we received a paper". A few
months later, a new number was apparently issued;
Ms. Théoret, who said that she had then received
[translation] "the papers", apparently telephoned and
was told that it was [translation] "cancelled".
[11] Jean-Marc Beaudoin, chief of
registration and support, testified for the respondent. Using the
computerized statements (Exhibits I-3, I-5 and I-6),
he provided the history of the appellant's file. With the
exception of the two GST registration numbers issued in error to
the appellant in January 1991 and the cancellation of one of
these numbers (125262428) on May 17, 1991, that is,
several months before the first notice to file a return was sent
to the appellant on November 22, 1991, there is no
indication in the file suggesting that the appellant's
registration might have been cancelled in 1991. On the contrary,
Exhibit I-3 indicates that, with respect to
account 114706351, more than 35 letters or notices
requesting that the appellant file her returns were sent to her
between 1991 and 1998; the first notice is dated
November 22, 1991. It is rather surprising to see that the
appellant did not consider it appropriate to clarify the
situation unequivocally as soon as she received the first
notices.
[12] Counsel for the respondent has argued
that, the appellant being a registrant until December 31,
1995, she should have collected and remitted the GST on her
business activities, even if she could have been considered a
small supplier given that her annual income was less than
$30,000 during the period from January 1, 1991, to
December 31, 1995. According to counsel for the respondent, the
obligation to collect and remit the GST results from the very
wording of section 166 of the Act, which provides for
an exception only if the person making the supply is a small
supplier who is not a registrant.
[13] Counsel for the respondent has also
relied on the decision in The Hamilton Hunt Company Ltd.
v. Her Majesty the Queen, [1999] G.S.T.C. 112 (French version
[1999] A.C.I. no 860 (Q.L.)). As well, counsel has
referred to the Federal Court of Appeal decision in Hegerat v.
R., [2000] G.S.T.C. 48 (French version
[2000] A.C.F. no 1062 (Q.L.)), while pointing out
that he disagrees with the Court's finding that the appellant
was not required to collect and remit the GST in the
circumstances of that case. Indeed, in that case, despite the
fact that the appellant was a GST registrant, the Court decided
to accept the appellant's argument that he was not required
to collect and remit the GST because his income was substantially
less than $30,000, "... having regard to the fact that
the Minister of National Revenue was unable to respond in any
meaningful way to this argument ...." First, it is important
to note that the appellant did not make that argument before the
Tax Court of Canada, the decision of which is reported at [1999]
G.S.T.C. 95 (French version [1997] A.C.I. no 1400 (Q.L.)).
As well, at paragraph 3 of its decision, the Federal Court
of Appeal appears to acknowledge that the appellant was a
registrant. It is surprising that counsel for the respondent did
not argue at that point that the exception provided for in
section 166 of the Act did not apply since the
appellant was a registrant and, therefore, he was obliged to
collect and remit the GST.
[14] Counsel for the respondent has
therefore considered that the Federal Court of Appeal decision in
Hegerat (supra) was rendered per incuriam
and must not be followed.
[15] I agree. Section 166 of the
Act provides for an exception solely for a small supplier
who is not a registrant. Section 166 of the Act reads
as follows:
Supply by small supplier not a registrant
166. Where a person makes a taxable
supply, other than a supply of real property by way of sale, and
the consideration or a part thereof for the supply becomes due,
or is paid before it becomes due, at a time when the person is a
small supplier who is not a registrant, that consideration or
part thereof, as the case may be, shall not be included in
calculating the tax payable in respect of the supply.
[16] The evidence adduced in the present
case has established that the appellant was a registrant
beginning on January 1, 1991, as a result of the
registration application she signed on December 13, 1990.
Although one of the two GST accounts under which she was
registered was cancelled on May 17, 1991, her
registration under account 114706351 was always maintained.
In my opinion, the dozens and dozens of notices to file quarterly
returns that were sent to her beginning on
November 22, 1991, leave no room for doubt on that
point. Following the appellant's November 27, 1998,
letter, on April 30, 1999, her registration was finally
cancelled retroactively to December 31, 1995. The
assessment at issue has to do with an amount of tax for the
period from January 1, 1991, to December 31, 1995,
during which the appellant was a registrant. During that period,
she was required, as a registrant, to collect and remit the GST
on her business activities, which she did not do. The assessment
setting the amount of tax payable for that period as well as
interest and a penalty is therefore justified.
[17] In conclusion, I consider it important
to recall the conditions set out in subsection 242(2) of the
Act governing cancellation by the Minister of a
registration at the request of a small supplier.
Subsection 242(2) reads as follows:
Request for cancellation
(2) The Minister
shall cancel the registration of a person who is not carrying on
a taxi business, effective after the last day of a fiscal year of
the person, where
(a) the person is
a small supplier and has filed with the Minister in prescribed
manner a request, in prescribed form containing prescribed
information, to do so; and
(b) the person has
been registered for a period of not less than one year ending on
that day.
[18] Therefore, despite the statement by the
appellant and Ms. Théoret, there is nothing to
establish that in early January 1991 the appellant filed a
request to cancel the registration. Nor is there anything
indicating that the registration under account 114706351
might have been cancelled as a result of such a request and then
reactivated. The documents adduced in evidence establish that the
registration under account 114706351 was always maintained
until April 30, 1999, and was then cancelled retroactively
to December 31, 1995. Only the registration under
account 125262428 was cancelled early in the process and,
unlike the registration under account 114706351, notices to
file quarterly returns were never issued in connection with that
account.
[19] In any case, I point out that the
appellant clearly could not have met the condition set out in
paragraph 242(2)(a) of the Act in early
January 1991 since she had just been registered. The
Minister of National Revenue could not have cancelled her
registration as early as then.
[20] Having regard to the foregoing, the
appeal is dismissed.
Signed at Ottawa, Canada, this 19th day of August 2002.
J.T.C.C.
Translation certified true
on this 26th day of November 2003.
Sophie Debbané, Revisor
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