Date:
20020826
Docket:
2001-3361-GST-I
BETWEEN:
ALEXANDER NIX GROUP
INC.,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Reasons for
Judgment
McArthur
J.
[1] The Minister of National Revenue
denied the Appellant's claim for input tax credits (ITCs)
because its supplier's goods and service tax (GST)
registration number was invalid. We are dealing in particular,
with the specific requirements of subsection 169(4) of the
Excise Tax Act which reads as follows:
169(4) A
registrant may not claim an input tax credit for a reporting
period unless, before filing the return in which the credit is
claimed,
(a) the
registrant has obtained sufficient evidence in such form
containing such information as will enable the amount of the
input tax credit to be determined, including any such information
as may be prescribed;
(b)
...
Prescribed information
is included in paragraph 3(b) of the Input Tax Credit
Information Regulations (ITC Regulations) which boils down,
for our purposes, to the following selective passages:
3. For the
purposes of paragraph 169(4)(a) of the Act, the
following information is prescribed information:
(a)
...
(b)
...
(i)
... the registration number assigned under subsection 241(1)
of the Act to the supplier ...
...
(c) where the
total amount paid or payable shown on the supporting
documentation in respect of the supply ... is $150 or
more,
(i) the
information set out in paragraphs (a) and
(b),
(ii)
...
Simply put,
prescribed information includes a registration number. I take
that to mean a valid registration number.
Facts
[2] Douglas A. Nix is a chartered
accountant who very ably represented the Appellant corporation.
The Appellant, registered for the purposes of Part IX of the
Act, claimed ITCs in the amount of $3,766 on $53,874 of
services provided by 864116 Ontario Ltd. (864). The GST
registration number provided to the Appellant by 864 was invalid.
It was the original registration for 864 in 1990 but it was
deregistered in the early 1991. In sympathy to the
Appellant's position, the Minister registered 864 in 1998 but
deregistered it after being unable to contact the controlling
mind of 864.
Position
of the Appellant
[3] The Appellant submitted a
seven-page Notice of Appeal concluding on page 7 as
follows:
Claimant
acted in good faith in paying the GST as required under the
Act and as demonstrated above, Claimant fulfilled the
substantive conditions set out in s. 169(1) and s. 169(4)
and is entitled to receive the benefit of the disallowed
ITC.
Denying
Claimant the benefit of the input tax credit is punitive and
prejudicial to the Claimant and clearly not within the wording,
spirit or intent of the Act. Since Revenue has a statutory
obligation to recover the GST invoiced and paid to Contractor,
Claimant should not be penalized for Revenue's inability or
failure to collect from person's who have collected GST on
behalf of Her Majesty.
Position of the
Respondent
[4] There was insufficient and/or
inappropriate evidence submitted by the Appellant as required by
subsection 169(4) of the Act and paragraph 3(b)(ii)
of the ITC Regulations. The Minister added that the
language of subsection 169(4) is restrictive: "A registrant
may not claim an ITC ... unless ...", and the
Regulations clearly states a registration number. It is
deemed that this means a valid registration number.
Analysis
[5] The Minister referred to several
cases. There is no need to go beyond the case of Helsi
Construction Management Inc. v. The Queen and an article by
the highly respected author, David M. Sherman, in Canada GST
Service, Binder C3, Carswell 2001, regarding
ITCs.
[6] In Helsi Construction, Judge
Bowman held that the documentary requirements of subsection
169(4) are mandatory and not directory and that the absence of
compliance with the Regulations is fatal. The main reason
for the disallowance in Helsi was that the suppliers'
GST numbers were not shown on the invoices. He stated:
We are dealing with one of the technical requirements under a
statute that is somewhat unique for its specificity. Moreover, it
is the foundation of a self-assessing system that operates in the
commercial world. Unfortunate as it may seem to the appellant,
rules are rules. I can do nothing to help the appellant on this
point.
I agree with this
reasoning and apply it to the present case. As Mr. Sherman notes
in his article, a conflicting position was taken by Judge Lamarre
in Tremblay v. The Queen. In
Canada GST Service, Mr. Sherman reviews case law on
subsection 169(4). Near the end of his commentary at page
169-431 he states:
When the
registration number is false, the number is not considered as
having been obtained for the purposes of paragraph
3(b)(ii) of the Regulations. As a result, the
related ITC claim would be invalid because it did not meet the
condition provided for at paragraph 169(4)(a) where the
total amount paid or payable shown on the supporting
documentation in respect of the supply is $30 or more.
[7] Not being a small supplier, 864 was
required to be registered. It was deregistered in 1991. To assist
the Appellant, the Minister reregistered it on July 1, 1998
but was unable to find the corporation's directors or
operators. It was then deregistered retroactive to July 1, 1998.
The registration number provided to the Appellant and in turn
provided by the Appellant to the Minister was false.
[8] The bottom line is that at the time
864 rendered the services it was not registered and provided an
invalid or false registration number to the Appellant. I conclude
that the invalid registration number is fatal to the
Appellant's appeal. The onus was on the Appellant to overturn
the Minister's assessment and it failed to do so.
[9] In Helsi Construction, Judge Bowman
stated:
While
there may be some justification in certain cases for treating
technical or mechanical requirements as directory rather than
mandatory (for example see Senger-Hammond v. R., [1997] 1
C.T.C. 2728) that is not so in the case of the GST provisions of
the Excise Tax Act.
Judge
Lamarre had a different view in Tremblay.She found that
the requirement in subsection 169(4) was not mandatory. As Mr.
Sherman states, the conflicting conclusions between
Tremblay and Helsi will have to be resolved at some
time.
[10]
The following taken from the final 2 pages of the Sherman article
have been of assistance to me and are worth quoting:
Q. Can an input
tax credit (ITC) be invalidated if the vendor who collected
GST/HST on purchased goods or services was not registered or
provided a false registration number?
A. Yes. The ITC
claim would be identified as an invalid claim.
Where the
substantive conditions for claiming the ITC provided for at
subsection 169(1) are met, the documentary requirements provided
for at subsection 169(4) must also be met.
Once of the
conditions for claiming an ITC is that tax must be payable in
respect of the supply. Subsection 221(1) requires every person
who makes a taxable supply to collect the GST/HST payable thereon
from the recipient of the supply. ...
...
Paragraph
169(4)(a) provides that, before filing the return for the
reporting period in which the ITC is claimed, the registrant must
have obtained sufficient evidence (in such form and containing
such information) as will enable the amount of the ITC to be
determined, including information which may be prescribed under
the Input Tax Credit Information Regulations (the
Regulations).
The
requirement to obtain the registration number of the supplier is
found under paragraph 3(b)(ii) of the Regulations.
This requirement exists where the total amount paid or payable
shown on the supporting documentation in respect of the supply is
$30 or more.
[11]
There are several cases where this Court has held that a lack of
a GST registration number is fatal. As stated in
Helsi, the documentary requirements of subsection 169(4)
are mandatory and not directory and for this reason, I cannot
grant relief to the Appellant. The appeal is
dismissed.
Signed at Ottawa, Canada,
this 26th day of August, 2002.
J.T.C.C.
COURT FILE
NO.:
2001-3361(GST)I
STYLE OF
CAUSE:
Alexander Nix Group Inc. and
Her Majesty the Queen
PLACE OF
HEARING:
Hamilton, Ontario
DATE OF
HEARING:
May 29, 2002
REASONS FOR JUDGMENT
BY: The Honourable Judge C.H.
McArthur
DATE OF
JUDGMENT:
August 26, 2002
APPEARANCES:
Agent for the
Appellant:
Douglas Nix
Counsel for the
Respondent: Bobby Sood
COUNSEL OF
RECORD:
For the
Appellant:
Name:
N/A
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-3361(GST)I
BETWEEN:
ALEXANDER NIX GROUP
INC.,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Appeal heard on May 29,
2002, at Hamilton, Ontario, by
the Honourable Judge
C.H. McArthur
Appearances
Agent for the
Appellant:
Douglas A. Nix
Counsel for the
Respondent:
Bobby Sood
JUDGMENT
The appeal from the assessment of goods and services tax made
under the Excise Tax Act, notice of which is dated January
14, 2000, for the period June 5, 1998 to December 31, 1998, is
dismissed.
Signed at Ottawa, Canada,
this 26th day of August, 2002.
J.T.C.C.
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