|
Citation: 2005TCC507
|
|
Date: 20050823
|
|
Docket: 2004-3455(GST)I
|
|
BETWEEN:
|
|
R. MARCOUX & FILS INC.,
|
|
Appellant,
|
|
and
|
|
|
|
HER MAJESTY THE QUEEN,
|
|
Respondent.
[OFFICIAL
ENGLISH TRANSLATION]
|
REASONS FOR JUDGMENT
(Delivered orally on May 6, 2005, at Montréal, Quebec.)
Lamarre
Proulx J.
[1] This is an appeal
under the informal procedure concerning three assessments made under the Excise
Tax Act ("the Act").
[2] The first
assessment is dated April 28, 2003. It covers the period from February 1,
1999, to July 31, 2002. The notice bears the number 22022.
[3] The second
assessment is dated May 6, 2003. It covers the period from August 1, 2002,
to October 31, 2002.
[4] The third
assessment is also dated May 6, 2003. It covers the period from
November 1, 2002, to January 31, 2003. The notice bears the number
22027.
[5] The assessments
were confirmed on May 26, 2004.
[6] These documents and
a number of documents issued by the Appellant, were produced as Exhibit I‑1.
[7] The issue in the
case at bar is whether certain supplies of tangible personal property, made by
the Appellant, were made to recipients other than consumers.
[8] Specifically, this matter involves the
application of the introductory portion of section of Part V of Schedule VI of
the Act and the definition of the terms "recipient" and
"consumer" in subsection 123(1) of the Act.
[9] Schedule VI
describes zero-rated supplies within the meaning of subsection 123(1) of the Act. The
introductory portion of section 1 of Part V of Schedule VI reads as follows:
[Tangible personal property] — A supply of tangible personal
property (other than an excisable good) made by a person to a recipient (other
than a consumer) who intends to export the property where
. . .
[10] For the purposes of
these reasons, paragraph (a) of the definition of "recipient"
in subsection 123(1) of
the Act is sufficient. That paragraph reads as follows:
"recipient"
of a supply of property or a service means
(a) where
consideration for the supply is payable under an agreement for the supply, the
person who is liable under the agreement to pay that consideration;
. . .
[11] The term
"consumer" is defined in the same subsection of the Act as
follows:
"consumer" of property or a service means a particular
individual who acquires or imports the property or service for the particular
individual's personal consumption, use or enjoyment or the personal
consumption, use or enjoyment of any other individual at the particular
individual's expense, but does not include an individual who acquires or
imports the property or service for consumption, use or supply in the course of
commercial activities of the individual or other Activities in the
course of which the individual makes exempt supplies.
[12] At the beginning of
this hearing, counsel for the Appellant made the following admissions.
Subparagraphs 33(a) to 33(g) of the Amended Reply to the Notice of Appeal
("the Reply") were admitted to. Those subparagraphs state:
[TRANSLATION]
(a) The
Appellant is a registrant for the purposes of Part IX of the ETA.
(b) The Appellant operates a
business consisting of the supply, by way of sale, of doors and windows, and
has only one place of business in Canada, namely at Coaticook, Quebec.
(c) The
recipients of the supplies made by the Appellant include Canadians and
Americans.
(d) American recipients fall into
two categories: consumers, i.e. persons who receive the supplied property for
personal consumption or use (this excludes consumption, use or supply in
the course of commercial activities of the persons); or contractors and
merchants, i.e. persons who receive the supplied property for a completely
different purpose.
(e) The
property which the Appellant supplies to American recipients, whether they are
consumers, contractors or merchants, was delivered to said recipients in Canada, that is that the recipients took possession at the
Appellant's place of business.
(f) The
Appellant does not ship the property supplied to American recipients outside
Canada, and does not hire and pay for a common carrier to do so.
(g) The
Appellant did not collect GST upon making the supplies of property by way of
sale to American recipients who considered themselves consumers, and the said
American recipients did not pay said GST to the Appellant.
. . .
[13] The witnesses were Colleen Matthews, the auditor assigned
to this matter; and Richard Marcoux, the Appellant's president and owner.
[14] Ms. Matthews testified first in order to
explain the basis for the assessment.
[15] She explained that
the Appellant was audited because it had submitted negative tax accounts from
the beginning. It was always a creditor.
[16] The other facts
taken into consideration by the Minister of National Revenue ("the
Minister") are:
[TRANSLATION]
(h) For the first
period in issue, the amount of GST that the Appellant did not collect upon
making the supplies of property, by way of sale, to the American recipients who
considered themselves consumers, is $21,626.38.
(i) For the second
period in issue, the amount of GST that the Appellant did not collect upon
making the supplies of property, by way of sale, to the American recipients who
considered themselves consumers, is $5,218.21.
(j) For the third
period in issue, the amount of GST that the Appellant did not collect upon
making the supplies of property, by way of sale, to the American recipients who
considered themselves consumers, is $763.27.
(k) The total amount
of GST that the Appellant did not collect upon making the supplies of property,
by way of sale, to the American recipients who considered themselves consumers
for the first, second and third periods in issue, is $27,607.86
($21,626.38 + $5,218.21 + $763.27), and the Appellant did not include this amount in the net tax
calculation that it reported to the Minister for the three periods in question.
(l) The Appellant
owes the Minister the amounts of the adjustments made to its reported net tax
for the first, second and third periods in issue, plus net interest and
penalties.
[17] Paragraph 34 of
the Reply must also be reproduced:
[TRANSLATION]
34. Subsidiarily,
and for information purposes only, for the first period in issue, the true
amount of GST that the Appellant did not collect upon making supplies of
property, by way of sale, to American recipients who considered themselves
consumers is $22,045.80, not $21,626.38 as assessed, and thus, there is a
difference of $419.42 that the Minister failed to assess, and the Court should
only take account of this amount if it allows the appeal and refers the
assessment in issue back to the Minister for reconsideration and reassessment.
[18] The auditor began
her investigation in the fall of 2002. She asked to see the sales invoices and
the general ledger. Sales to
Americans only truly became significant in the spring of 2000.
[19] The auditor drew up
a list of buyers. If they were building contractors, corporations or
independent businesspeople such as motel owners, she considered them recipients
other than consumers. Individuals
for whom she could identify no commercial activity as a reason to buy were
classified as consumers.
[20] At the hearing, the
auditor agreed that a few other sales were zero-rated supplies. The tax on these sales totals $1,033.62.
[21] Mr. Marcoux explained that 80 or 90 percent
of the individuals came along with building contractors, that certain
individuals were employees of building contractors, and that the names of
certain individuals appeared frequently, which could suggest that they were
making the purchases on behalf of commercial operations.
[22] He also linked
certain individuals to businesses that the auditor had accepted. When asked why
the invoices were made out to individuals rather than to a corporate name, he
replied that each of these individuals had built themselves a home.
Arguments
[23] Counsel for the
Appellant submitted that I should accept that certain individuals who can be
linked to contractors, were accompanied by contractors or were employed by
contractors, or who made a number of transactions, did not receive the property
as consumers.
[24] Counsel for the
Respondent noted that there was no letter or sworn declaration from the
recipients whom the auditor classified as consumers stating that they had
acquired the tangible personal property in the course of commercial activities.
He also submitted that it is
up to the Appellant to prove that these recipients were not consumers. As for
the additional tax that should be deducted from the total assessment following
the auditor's acceptance that certain other sales were zero‑rated,
counsel submits that it should be reduced by the amount, which, by virtue of a
calculation error, was not included in the total assessments, as stated in
paragraph 34 of the Reply, quoted above.
Conclusion
[25] As I mentioned at the end of the hearing, I
did not, and still do not, find it plausible that employees would use their own
name to purchase supplies intended for their employers. A corroborative
explanation by the employers and the employees would be necessary.
[26] The individuals who
were accompanied by building contractors were consumers if they made the
purchases. A contractor can
accompany an individual for whom he is building a house in order to point out
the choices to the individual. The contractor can make the purchase
himself and charge the amount to the individual as part of the total cost of
the house. If so, the recipient is not the consumer. However, if the individual
recipient does the purchasing, that recipient is a consumer.
[27] An individual can
make a purchase for the purpose of commercial activities. It is up to the Appellant to show, based on
the goods received and the activities of the individual, that the goods were
indeed received for commercial activities.
[28] Letters or sworn declarations
by the individuals can also be helpful.
[29] The evidence was
insufficient to satisfy me that the Minister erred in making the assessments.
[30] The last point made
by counsel for the Respondent was that I should take account of the Minister's
calculation error in making the assessment. I do not believe that this proposition is in keeping
with the decision in Harris v. M.N.R., 64 DTC 5332 (Exch. Ct.), 66 DTC 5189 (S.C.C.). It is a well settled
principle of tax law that the Minister cannot appeal from his own assessments.
He has the power to make additional assessments. If he does not, the
assessments are presumed valid, and this goes both ways. In Petro‑Canada v.
Canada, [2004] F.C.J. No. 734 (QL), at paragraphs 65 to 69,
the Federal Court of Appeal recently confirmed this position, holding that the
Minister cannot do indirectly what he could not do directly.
[31] The appeal is
allowed, without costs, to the extent that a deduction of $1,033.62 in tax is
permitted. In all other respects, the Minister's assessments are confirmed.
Signed at Ottawa, Canada, this 23rd day of August 2005.
Lamarre
Proulx J.
Translation
certified true
On this 20th day of
February, 2006.
Garth McLeod,
Translator
Email this Content