Citation: 2007TCC744
Date: 20071211
Docket: 2006-2593(GST)I
BETWEEN:
2000676 ONTARIO LIMITED,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(Delivered orally from the
bench on November 26, 2007, in Toronto, Ontario.)
Boyle, J.
[1] The Appellant, 2000676 Ontario Limited, has
appealed a GST reassessment disallowing approximately $189,000 of input tax
credits and assessing penalties in respect of the ITC claimed.
[2] This appeal originally was heard over two
partial days in July of this year. At the close of the Appellant’s evidence in
July, the Crown asked for an adjournment to consider bringing a motion to quash
the appeal.
The Crown did this after the Appellant’s
representative and sole witness gave inconsistent and evasive answers to
questions about his relationship with the Appellant.
[3] The Crown argued that motion this morning
and I reserved. This is an informal appeal, and the Appellant’s representative
has put in evidence that he had a relationship with the Appellant at the
material times. As well, he made
available to the Court a document, which he had not previously made available
to the Court or the Crown, in response to the motion. This document purported
to be an express authorization by the sole shareholder for the representative
to represent the Appellant and expressly ratified the institution of this
appeal.
[4] In contrast, the Crown has merely continued
to question his authority, and its motion materials were from a former
shareholder and director to the effect that the affiant had no relevant
relationship with the Appellant at any time relevant to the institution of the
appeal.
[5] Given my decision that the Appellant’s
appeal has to be dismissed on the ITC matter, this motion has become moot since
either the appeal was properly authorized and instituted or the time has lapsed
for appealing the CRA decision on the objection in question.
[6] In July, after the close of his evidence,
the Appellant’s representative moved to be allowed to introduce more evidence. That
July motion was withdrawn shortly thereafter.
[7] Today, the Appellant’s representative sought
to again move for the introduction of further evidence. He had not made the
Crown aware of that or the materials he sought to introduce ahead of time. The Appellant
had numerous binders at its table, but when asked, and given a further 25-minute
adjournment to find some, could not show me that there were any documents which
could independently corroborate or confirm its version of events. These were purportedly documents which in July he testified had
never been returned to the Appellant by the CRA, which he has since found and
confirms had been returned. These are not a few documents. In July, he was talking about several box
loads of documents. In the circumstances, I ruled against allowing the Appellant’s
representative to introduce further evidence after the close of his evidence.
[8] With respect to the evidence, the sole
witness for the Appellant was its representative. The Appellant’s exhibits did
not include any invoices from suppliers showing GST was paid or payable, nor
any schedules showing the names, amounts or registration numbers of such
suppliers.
[9] That is what is required by section 169 of
the GST provisions of the Excise Tax Act and the Regulations. The Appellant’s
representative was aware that this is what would be needed or helpful to this Court
since July. None of the witness’ testimony provided any such information
either.
[10] With respect to the July testimony of the Appellant’s
representative as a witness, I found it to be unsatisfactory and not
particularly credible. Not only were inconsistent answers given, in cross-examination
the witness seemed to be glib and evasive throughout his evidence by clear
bobbing, weaving and dodging.
[11] The representative’s performance in July as
a witness influenced my review with him today of what he thought the relevance
and usefulness would be of the additional evidence sought to be introduced.
[12] The Appellant argued that CRA accepted
these same amounts as expenses in calculating the Appellant’s income for income
tax purposes and that this should also apply for GST purposes.
[13] Unfortunately for the Appellant, that is
not sufficient. The specific documentary requirements of subsection 169(4) and
the Regulations must be satisfied. See, for example, the decision of Associate
Chief Justice Bowman, as he then was, of this Court in the Helsi matter,
which was upheld by the Federal Court of Appeal, as well as the Federal Court
of Appeal’s more recent decision in Systematix.
[14] The Appellant argued that CRA not allowing
any ITC in respect of any of its inputs is unreasonable and it would be
unreasonable for this Court to do so. Again,
my preceding comments about the express statutory requirements of
subsection 169(4) apply.
[15] The Appellant acknowledged this Court has
no evidence before it that could possibly satisfy subsection 169(4). The Appellant had ample notice of the need
and time to locate it and prepare it. It did not do so. While much was said
about the asset-backed lending or factoring arrangements through which the Appellant
received its revenues and paid its expenses, that cannot substitute for the
documentary information and requirements of the legislation, nor can I deal
with what CRA was or wasn’t satisfied with at any earlier point. Returning to
any status quo ante is not a realistic option for me in this case, even
if it was permitted.
[16] The Appellant’s argument regarding an
inferred transference of the GST debt to the supplier from the purchaser as a
result of section 224 is without merit. No such inference should or need be
drawn from a provision which is clearly giving the supplier the right to sue
its customer for unpaid GST in certain circumstances.
[17] I cannot conclude that the Respondent was
incorrect to not allow any ITCs. The Appellant has not met the onus of showing
that the Crown’s assumption 8 h) in its Reply is not correct. I therefore
dismiss the Appellant’s appeal with respect to the ITC claimed.
[18] The Appellant’s only dispute with respect
to the penalties assessed is the amount shown on the reassessment and in the
Reply as total amount owing. It is concerned that there may be a whole or
partial doubling up of the amount assessed. It appears from my calculations
that it is the initial $44,926 of refundable ITC claimed that is shown in the
amount owing to bring it as high as it is shown. Certainly, the last column of the chart on page 4 of
the Crown’s Reply and CRA’s Summary of Changes appended to the Notice of Appeal
appear to show the reassessment is for an amount in excess of the sum of net
tax, penalties and interest by exactly the amount of $44,926.80 of ITC claimed
by the Appellant to be owing to it, which amount I am told was never paid. This
same concern arises in the numbers in the Notice of Reassessment itself.
[19] Since the net tax and penalty amounts shown
in the Notice of Reassessment are not in dispute and the problem is with
respect to the makeup of the total showing "Amount Owing", I am
dismissing the Appellant’s appeal with respect to the ITC and associated
penalty. I have no jurisdiction to deal with the
reassessment beyond that as regards either the interest charged or the proper
accounting for the amount showing as owing.
[20] This appeal is dismissed.
Signed at Ottawa, Canada, this 11th day of December 2007.
"Patrick Boyle"
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