|
Citation: 2008TCC475
|
|
Date: 20080825
|
|
Dockets: 2004-3012(GST)G
2004-3079(GST)G
2004-3582(GST)G
2004-3583(GST)G
|
|
BETWEEN:
|
|
SCHOOL DISTRICT NO. 44 (NORTH VANCOUVER),
|
|
Appellant,
|
|
and
|
|
|
|
HER MAJESTY THE QUEEN,
|
|
Respondent;
AND BETWEEN:
|
TORONTO DISTRICT SCHOOL BOARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent;
AND BETWEEN:
SCHOOL DISTRICT NO. 39 (VANCOUVER),
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent;
AND BETWEEN:
SCHOOL DISTRICT NO. 39 (VANCOUVER),
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Woods J.
[1] By
these appeals, school boards for the districts of Vancouver, North Vancouver and Toronto
seek rebates of goods and services tax (GST) that they submit was paid in error
with respect to course registration fees for adult continuing education courses.
The appeals of the three school boards were heard together but on separate evidence.
[2] There
are two discrete issues:
1. Are the course registration fees
exempt from GST by virtue of section 10 of Part VI to Schedule V of the Excise
Tax Act? This provision exempts a supply of a property or service provided
by a public sector body if all or substantially all of the supplies of the
property or service are made for no consideration.
2. Was the GST borne by the school
boards or the registrants? The appellants concede that they are not entitled to
the rebates unless they have borne the tax: West Windsor Urgent Care Centre
Inc. v. The Queen, 2008 FCA 11, [2008] GSTC 6.
General Background
[3] Each
of the appellant school boards operates elementary and secondary schools in
their respective territories. As such, they are each a “school authority” and a
“public sector body” as those terms are defined in s. 123(1) of the Act.
[4] In
addition to providing schooling at the elementary and secondary level, which is
provided for no consideration, the appellants provide continuing education
courses for adults for which fees are charged.
[5] All
of the appellants’ continuing education programs offer a wide variety of
general interest courses on a fee per course basis. Some of the courses offered
are similar in content to those provided in secondary schools (e.g. Spanish)
and others are more recreational in nature (e.g. bridge).
[6] During
the relevant periods, the appellants treated registration fees for continuing
education courses as subject to GST, and the tax was remitted to the government
in the usual manner. No GST was remitted with respect to courses on English and
French as a second language, however, because of a specific statutory exemption
for this type of course (s. 11, Part III, Schedule V of the Act).
[7] Early
in 2003, the appellants concluded that their handling of the GST with respect
to continuing education courses had been incorrect and that the tax had been
remitted in error. Steps were then taken to recover the GST previously remitted
within the relevant statutory limitation periods.
[8] Applications
for rebates were filed by all the appellants pursuant to section 261 of the Act,
relating to the period from January 1, 2001 to January 31, 2003. In addition,
the Vancouver school board made a further request in
respect of GST remitted for the period from December 1, 1999 to December 31,
2000. This request was made in a notice of objection for the July 2002
reporting period.
[9] The
Minister of National Revenue disallowed all the claims, with the result being
the amounts at issue set out below.
|
School Board
|
Rebate Claimed
|
|
School District No. 44
(North
Vancouver)
|
$60,440
|
|
Toronto District School Board
|
$333,921
|
|
School District No. 39
(Vancouver)
|
$430,357
|
Issue 1 – Are course registration
fees exempt?
[10] The
appellants submit that the registration fees earned on continuing education
courses are eligible for the exemption applicable to public sector bodies in
section 10, Part VI, Schedule V of the Act.
[11] In
general, section 10 provides an exemption from GST for a supply of a property
or service by a public sector body if it is usually provided for no
consideration. The provision reads:
10. [Supplies for nil consideration] – A supply made by a public sector body of
any property or service where all or substantially all of
the supplies of the property or service by the body are made for no
consideration, but not including a supply of blood or blood derivatives.
[12] The
factual underpinning for the appellants’ position is that the vast majority of
their courses are provided to elementary and secondary school students without
consideration. They therefore submit that the relatively few courses for which
fees are charged qualify for the section 10 exemption.
[13] The
respondent does not take issue with the fact that substantially all of the
courses offered by the appellants are given for no consideration. However, the
respondent disputes the applicability of section 10 on the basis that the
continuing education courses are of a different “kind and class” as the courses
provided to elementary and secondary school students.
[14] In the
submission of the respondent, section 10 should not be interpreted to exempt
adult continuing education courses because this would offend the object and
spirit of the legislation, which is to impose GST on courses that are not
provided primarily to elementary and secondary students. Counsel suggests that
the exemption should accordingly be more narrowly defined to include only courses
of the same kind and class as those provided for no consideration.
Statutory interpretation
[15] The
principles of statutory interpretation that should be applied in a case such as
this are set out in Minister of Finance (Ontario) v. Placer Dome Canada Ltd., 2006 SCC 20, 2006 DTC 6532. The relevant
paragraphs are reproduced below.
[21] In Stubart Investments Ltd. v.
The Queen, [84 DTC 6305] [1984] 1 S.C.R. 536, this
Court rejected the strict approach to the construction of taxation statutes and
held that the modern approach applies to taxation statutes no less than it does
to other statutes. That is, “the words of an Act are to be read in their entire
context and in their grammatical and ordinary sense harmoniously with the
scheme of the Act, the object of the Act, and the intention of Parliament” (p.
578): see 65302 British Columbia Ltd. v. Canada, [99 DTC 5799] [1999] 3
S.C.R. 804, at para. 50. However, because of the degree of precision and detail
characteristic of many tax provisions, a greater emphasis has often been placed
on textual interpretation where taxation statutes are concerned: Canada
Trustco Mortgage Co. v. Canada, [2005 DTC 5523] [2005] 2 S.C.R. 601,
2005 SCC 54, at para. 11. Taxpayers are entitled to rely on the clear
meaning of taxation provisions in structuring their affairs. Where the words of
a statute are precise and unequivocal, those words will play a dominant role in
the interpretive process.
[22] On
the other hand, where the words of a statute give rise to more than one reasonable
interpretation, the ordinary meaning of words will play a lesser role, and greater
recourse to the context and purpose of the Act may be necessary: Canada
Trustco, at para. 10. Morever, as McLachlin, C.J. noted at para. 47,
“[e]ven where the meaning of particular provisions may not appear to be
ambiguous at first glance, statutory context and purpose may reveal or resolve
latent ambiguities”. The Chief Justice went on to explain that in order to
resolve explicit and latent ambiguities in taxation legislation, “the courts must
undertake a unified textual, contextual and purposive approach to statutory interpretation”.
[23] The interpretive approach is thus
informed by the level of precision and clarity with which a taxing provision is
drafted. Where such a provision admits of no ambiguity in its meaning or in its
application to the facts, it must simply be applied. Reference to the purpose
of the provision “cannot be used to create an unexpressed exception to clear language”:
see P. W. Hogg, J.E. Magee and J. Li, Principles of Canadian Income Tax Law
(5th ed. 2005), at p. 569; Shell Canada Ltd. v. Canada, [99 DTC 5669]
[1999] 3 S.C.R. 622. Where, as in this case, the provision admits of more than
one reasonable interpretation, greater emphasis must be placed on the context,
scheme and purpose of the Act. Thus, legislative purpose may not be used to
supplant clear statutory language, but to arrive at the most plausible
interpretation of an ambiguous statutory provision.
[24] Although there is a residual
presumption in favour of the taxpayer, it is residual only and applies in the
exceptional case where application of the ordinary principles of interpretation
does not resolve the issue: Notre-Dame de Bon‑Secours, at p. 19.
Any doubt about the meaning of a taxation statute must be reasonable, and no
recourse to the presumption lies unless the usual rules of interpretation have
been applied, to no avail, in an attempt to discern the meaning of the
provision at issue. In my view, the residual presumption does not assist PDC in
the present case because the ambiguity in the Mining Tax Act can
be resolved through the application of the ordinary principles of statutory interpretation.
I will say more on this below.
Legislative scheme
[16] At the
time of the introduction of the GST in 1989, the Minister of Finance, the Honourable
Michael H. Wilson, issued an explanatory paper that included a description of
the general policy objectives for public sector bodies such as the appellants: Goods
and Services Tax – An Overview, Government of Canada, August 1989. According
to this paper, the new legislation aimed to exempt non‑commercial
services provided by public sector bodies, and it also tried to ensure that
services were given the same treatment regardless of whether they originated in
the public or private sector.
[17] This
is outlined in the following excerpt from the paper:
9.
The Public
Sector
In Canada,
the public sector is composed of the federal and provincial governments, and a
variety of other public bodies – such as municipalities, schools, colleges,
universities and hospitals – which are engaged in a wide range of activities.
In the context of the GST, the public sector represents a unique challenge. On
the one hand, consistent with the principle of a broad-based consumption tax,
the federal government must ensure that the GST is applied in a fair and
uniform manner to commercial supplies made by both the private and public
sectors. This will ensure competitive equity and minimize tax-based
distortions. At the same time, in designing the GST, the government recognizes
the special role that public bodies play in our society and, therefore, will
ensure that the tax system does not impede their non-commercial activities.
9.1
Public Sector
Sales
(a)
General Approach
To the extent that governments and their
emanations engage in commercial activities, they should be subject to the same
general rules as private sector organizations. As in the private sector, with
the exception of those supplies that will be zero-rated (e.g., basic groceries)
and tax-exempt (e.g., day care), supplies by governments will, in general, be
subject to GST if they are made in the course of a commercial activity.
This approach will preserve competitive
equity by ensuring that one type of supply receives the same tax treatment
regardless of its origin within the private or public sector. In other words,
it is the nature of the supply itself which will generally be the central
determinant of tax status, not the nature of the organization that makes the
supply.
[18] Schedule
V of the Act contains a number of parts, each of which lists specific
goods and services that are exempt from the GST. Two of these are relevant here,
Part III (Educational Services) and Part VI (Public Sector Bodies). Goods and
services provided by the appellants may be exempt under either of these parts.
[19] As for
exemptions that specifically relate to teaching provided by the appellants, a
basic exemption is provided in section 2, Part III for course instruction provided
to elementary and secondary school students. The exemption reads as follows:
2. [Schooling] – A supply
made by a school authority in a province of a service of instructing
individuals in a course that is provided primarily for elementary or secondary
school students.
[20] Since
this exemption is restricted to courses provided primarily to elementary and
secondary school students, it does not apply to adult continuing education
courses, which have age restrictions.
[21] There
are very few other exemptions for course instruction provided by the appellants.
As mentioned earlier, another exemption is provided for course instruction in
English or French as a second language (section 11, Part III).
[22] Part
VI (Public Sector Bodies) provides exemptions for public sector bodies, which
include entities such as school authorities, governments and hospitals. This
part potentially provides other exemptions for properties and services of the
appellants in addition to specific exemptions for educational services in Part
III.
Analysis
[23] These
appeals concern the application of section 10, Part VI (Public Sector Bodies).
In general, section 10 exempts a supply of a property or service by a public
sector body if the body normally provides the property or service for no
consideration.
[24] Section
10 is reproduced again, with emphasis on the parts that are especially relevant
here.
10. [Supplies for nil consideration] – A supply made by a public sector body of
any property or service where all or substantially all of the supplies
of the property or service by the body are made for no consideration,
but not including a supply of blood or blood derivatives.
[25] The
question to be decided turns on the meaning of the phrase “the property or
service” above.
[26] Although
the appellants’ submissions focus on the word “supply” and not the word “service,”
their argument implies that the word “service” in the phrase “the property or
service” should be interpreted as “instruction in courses.”
[27] I do
not agree with this interpretation.
[28] In general, I find section 10 to be difficult to interpret because the word
“service,” by itself, is ambiguous. As applied to course instruction, it could
be interpreted as broadly as “teaching courses,” or as narrowly as “teaching a
specific class at a specific time and location.”
[29] Because
of the ambiguity, it is tempting to apply the residual presumption in favour of
the taxpayer in these appeals. However, in my opinion this would contravene the
interpretation principles set out in the Placer Dome decision, and in particular
paragraph 24 of that decision that is reproduced above.
[30] What a
court must do is to consider whether the phrase “the property or service” in
section 10 can fairly be given the broad meaning suggested by the appellants
under a textual, contextual and purposive interpretation.
[31] An
important consideration in the interpretation of section 10, in my view, is the
language used in the section, which implies that the exemption is to have
narrow scope. This is inferred from both the words “the” and “property” in the
phrase “the property or service.” These words suggest that the properties or
services that qualify for the exemption must be the very same properties or
services that are provided for no consideration.
[32] This
interpretation is also consistent with a purposive interpretation. As suggested
by the government at the time of enactment of the GST, the Act aims to
subject some properties and services provided by public sector bodies to the
GST and exempt others, depending on their type. If the word “service” in
section 10 were given a very broad interpretation, the legislative scheme would
be frustrated because services provided by the private sector would be at a
competitive disadvantage. In the context of these appeals, if the phrase “the
property or services” were interpreted to include all courses provided by the
appellants, then general interest courses provided by the private sector would
be disadvantaged. This was the respondent’s main argument, and I agree with it.
[33] For these reasons, I conclude that Parliament did not intend by section 10 to
provide an exemption for properties or services that are normally provided for
consideration. None of the adult continuing education courses provided by the
appellants are given for no consideration and the section 10 exemption should
not, therefore, apply to them.
[34] The
appellants made the following submissions in support of their position:
(i) teaching is
teaching;
(ii)
the Act
considers “instructing individuals in a course” to be a supply;
(iii)
the Minister has
focused on irrelevant peripheral factors; and
(iv)
interpreting section 10
in the manner suggested by the Minister would make the section unworkable.
[35] In
respect of the first argument, the appellants submit that there is no difference
between teaching continuing education courses and teaching at the elementary
and secondary school level.
[36] I
disagree with this. Although it is correct to say that “teaching is teaching,”
and that “teaching courses is teaching courses,” it is also true that teaching
any two courses is not the very same thing. Differences between two courses
could be minor, such as being presented on different dates, or differences
could be substantial, such as having different subject matters. Regardless, it
is certainly not correct to say that there are no differences between courses.
[37] The
appellants also submit that adult continuing education courses and courses at
the elementary and secondary school level are not so different that they can
logically be put into separate classifications. In this regard, they suggest
that the differences suggested by the respondent (age of students, location and
time, experience of teachers, whether there is a grading system, oversight of
teachers, regulation by government) are not meaningful.
[38] I disagree
with this as well. All of the differences mentioned by the respondent are
relevant in the circumstances of these appeals.
[39] The
appellants also argue that the language used in Part III (Educational Services)
supports their position because it contemplates “teaching” as a supply.
[40] I also
reject this argument. Part III does not generally define teaching as a service.
Some sections in Part III define a service as being instruction in a particular
course (section 2) and others define a service as being instruction in courses
of a particular type (section 6). In no case, however, is a service defined so
broadly as “teaching.”
[41] The
appellants also argue that the test proposed by the respondent makes the
section unworkable. Although I agree that the language used in section 10 is
imprecise and may lead to uncertainty in a particular case, this is not such a
case in my view. The exemption only applies if the public sector body normally
provides a particular property or service for no consideration. That simply is
not the case here.
[42] This
conclusion is sufficient to dispose of these appeals. However, I will briefly
comment on the second issue which I believe is also fatal to the appeals.
Issue 2 – Are the appellants or the
registrants entitled to the rebate?
[43] The
appellants submit that they, rather than the registrants, paid the GST and are
entitled to recover amounts remitted in error.
[44] The
respondent disagrees with this. Counsel submits that the registrants paid the
tax and they are the only ones entitled to recover any overpayment.
[45] The
relevant facts may be summarized briefly.
[46] Each
of the appellants communicated to prospective registrants, either in brochures
or in course registration forms, that the registration fees included GST “where
applicable.”
[47] In
some cases, receipts were subsequently provided to registrants stating that the
GST was included. In other cases, registrants were not informed as to whether
GST was included or not. In such cases, though, registrants could have asked
the school for this information as contemplated by subsection 223(2) of the Act.
Subsection 223(2) provides:
223(2) A person
who makes a taxable supply to another person shall, on the request of the other
person, forthwith furnish to the other person in writing such particulars of
the supply as may be required for the purposes of this Part to substantiate a
claim by the other person for an input tax credit or rebate in respect of the
supply.
[48] In the
usual case under the Act, any GST that has been remitted by a vendor has
been collected from a purchaser and the purchaser is entitled to apply to the
tax authority for a refund if the tax has been paid in error. The vendor is not
also entitled to the refund: West Windsor Urgent Care Centre Inc., supra.
[49] Counsel
for the appellants referred to two decisions of this Court in support of their
position. Both decisions were heard under the informal procedure and concluded
that tax remitted in error could be recovered by a vendor who had borne the tax:
Simard v. The Queen, [2006] GSTC 172; R. Mullen Construction Ltd. v.
The Queen, [1997] GSTC 106.
[50] Counsel
also referred to another decision, also under the informal procedure, where the
Court addressed this issue in obiter and seemed to reach the same
conclusion on a tentative basis. In McDonell v. The Queen, 2005 TCC 301,
[2005] GSTC 134, Bowman C.J. stated:
[35] I do not think that it is
necessary in this case to decide whether there can never
be circumstances in which a supplier could successfully assert a claim for a
refund of tax under section 261. It is sufficient to say that in my view where
a supplier collects an amount as GST from a recipient of a supply in
circumstances in which GST was not exigible and remits it to the government (as
it must: see ITA Travel Agency Ltd. v. R (2000), [2001] G.S.T.C. 5
(T.C.C. [General Procedure])) it is the recipient, not the supplier who is
entitled to claim the refund under section 261. I do not intend these
reasons to be taken as saying that a supplier can never claim a refund under
section 261. At least two situations occur to me where a claim by a supplier
might be considered:
(a) where a supplier
does not collect GST from a recipient in respect of an exempt or zero-rated
supply and then, erroneously, remits from its own funds an amount as GST to the
government.
(b) where a supplier
collects, rightly or wrongly, GST from a recipient and then by mistake remits
to the government more than was collected.
[36] I need not answer the questions
raised by these two hypothetical situations but I do not think that for the
supplier to be entitled to claim a refund of the amount paid under example (a)
or the excess over the amount collected under example (b) does violence to either
the scheme of the Act or the wording of section 261.
[51] The
problem that I have with the appellants’ position on this issue is that I am
not satisfied that the appellants bore the tax. In my view, the registrants
would have a better argument than the appellants that they paid the GST,
regardless of whether or not the registrants were informed that the GST was
collected.
[52] Moreover, if a vendor is to be entitled to a refund on the basis that it paid the
tax, I am of the view that it should be clear that the vendor has not collected
the tax from the purchaser. Otherwise, the tax authority is in the difficult
position of interpreting contracts between vendors and purchasers and
determining which party is entitled to the GST refund.
[53] Finally,
I wish to make a brief comment about The Queen v. United Parcel Service
Canada Ltd., 2008 FCA 48, [2008] GSTC 34 where the issue was whether
someone other than purchasers were entitled to rebates of GST paid in error.
Although the issue in that case is similar to the one in these appeals, the
circumstances in United Parcel Service are considerably different and I
have not found the decision to be of much assistance. At the time of writing,
the Supreme Court of Canada recently granted leave to appeal that decision.
Conclusion
[54] For
these reasons, the appeals will be dismissed. If the parties are not able to
agree on costs, they may file written submissions within three weeks.
Signed at Ottawa,
Canada this 25th day of August 2008.
Woods
J.
Email this Content