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Citation: 2004TCC305
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Date: 20040419
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Docket: 2003-2444(GST)I
2003-3091(GST)I
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BETWEEN:
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VISA JEWELLERY & THAI SILK CO.,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Bowie J.
[1] The issue in these informal procedure
appeals arises out of applications made by the Appellant to the Minister of
National Revenue (the Minister) for goods and services tax (GST) rebates in the
amount of $5,775.27 for GST paid in 2001 and in the amount of $6,756.39 for GST
paid in 2002.
facts
[2] The facts are not in dispute. The Appellant
is a company that carries on business in Thailand. It is a non-resident of
Canada and is not registered for GST purposes.
[3] The Appellant came to Canada in August 2001
and 2002, as it had for a number of years, to participate in the Canadian National
Exhibition as a jewellery merchant. Prior to departure, the Appellant shipped
jewellery that it manufactures to Thompson, Ahern & Co. Limited, a customs
broker (the Broker). The Broker paid duties and GST on the jewellery upon
entrance into Canada as agent of the Appellant. The Appellant picked up the
jewellery from the Broker, sold part of its jewellery inventory at the
exhibition and exported the remainder back to Thailand in September 2001 and
2002. The Appellant filed for a rebate of the GST paid on the unsold jewellery
that was returned to Thailand in each of 2001 and 2002. The Minister refused to
grant the rebate.
[4] The Appellant was represented by the Broker
at trial.
positions of the parties
[5] The Appellant's position is that it is entitled
to the GST rebates under subsection 215.1(1) of the Excise Tax Act (the Act)
as it acquired the jewellery on a sale-or-return basis. The Appellant
emphasized that GST, a domestic consumption tax, should not apply to the
returned jewellery as the goods were not consumed in the Canadian market. The
Appellant also pointed out that the Minister had granted the rebate to the
Appellant in previous years. Hence, if the GST rebate were denied, the
Appellant would suffer financial hardship because it did not have prior notice
in order to price its goods accordingly. Finally, the Appellant submitted that
it is incongruous that a drawback of duty can be allowed where a GST rebate
cannot.
[6] The Appellant did not
raise other provisions aside from section 215.1 of the Act in order to
contest the Minister's decision. In support of the Appellant's claim, the
Broker referred to guides RC4027E and RC4033E and memorandum D7‑4‑2
of Canada Customs and Revenue Agency (CCRA).
[7] Conversely, the Respondent stated that the
Appellant is not entitled to the rebate under subsection 215.1(1) of the Act
because: (i) the goods were not "acquired" since the Appellant was
the owner of the goods throughout; and (ii) in any event, the goods were not
acquired on a "sale-or-return basis".
issue
[8] The main issue in dispute is whether the
Appellant acquired the goods on a sale-or-return basis in order to be entitled
to the GST rebate under subsection 215.1(1) of the Act.
decision
[9] At this point, I must refer to the wording
of subsection 215.1(1) of the Act, which provides:
215.1(1) Where
(a) a person
paid tax under this Division on goods that were acquired by the person on
consignment, approval, sale-or-return basis or other similar terms,
(b) the goods
are, within sixty days after their release and before they are used or consumed
otherwise than on a trial basis, exported by the person for the purpose of
returning them to the supplier and are not damaged after their release and
before the exportation, and
(c) within two
years after the day the tax was paid, the person files with the Minister an
application, in prescribed form containing prescribed information, for a rebate
of the tax,
the Minister shall, subject to section 263,
pay a rebate to the person equal to the amount of the tax paid on the goods.
215.1(1) Sous réserve de l'article
263, le ministre rembourse une personne dans le cas où les conditions suivantes
sont réunies :
(a) la
personne a payé la taxe prévue à la présente section sur des produits qu'elle a
acquis sur approbation, en consignation avec ou sans reprise des invendus ou
selon d'autres modalités semblables;
(b) dans
les soixante jours suivant leur dédouanement et avant leur utilisation ou
consommation autrement qu'à l'essai, les produits sont exportés par la personne
en vue de leur retour au fournisseur et ne sont pas endommagés entre leur
dédouanement et leur exportation;
(c) dans
les deux ans suivant le paiement de la taxe, la personne présente au ministre
une demande de remboursement de la taxe, établie en la forme déterminée par
celui-ci et contenant les renseignements requis.
Le montant remboursable
est égal à la taxe payée sur les produits.
[10] In my view, the Appellant is not entitled
to succeed in its appeals. The Appellant did not acquire the goods on a
sale-or-return basis. The term "sale‑or‑return" is
defined neither in the Act nor in the Income Tax Act. As stated
by the Supreme Court of Canada in Will-Kare Paving & Contracting Ltd. v.
Canada,
in such an instance the "common commercial use" of the words applies.
The expression "sale-or-return" has a well-known meaning in the
commercial law context. The Supreme Court of Canada defined the expression in Sinnott
News Company, Limited v. M.N.R.:
S.
19, Rule 4, of the Sale of Goods Act of Ontario was taken verbatim from
Rule 4 of s. 18 of the Sale of Goods Act 1893 (Imp.). The expression
delivery "on sale or return" had a well known meaning under the law
merchant prior to being incorporated in that statute. That meaning was stated
by Sir George Jessel M.R. in Ex parte Wingfield [(1879) L.R. 10 Ch. D.
591 at 593], as follows:
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Let us consider, then what is the position of a man who has goods sent
to him on sale or return. He receives the goods from the true owner with an
option of becoming the owner, which can be exercised in one of three ways --
by buying the goods at the price named by the vendor; by selling the goods to
some one else, which is taken to be a declaration of his option; or by
keeping them so long that it would be unreasonable that he should return
them.
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This
definition was adopted by the Court of Appeal four years after the passing of
the statute in Kirkham v. Attenborough [(1897) 1 Q.B.D. 201].
Furthermore, in Harlequin Enterprises Ltd. v.
Canada
the Federal Court of Appeal distinguished "sales" from consignments
and sale-or-returns by outlining that in sales, title passed to the purchasers
before the returns were made, contrary to sale-or-returns and consignment
transactions.
[11] M.G. Bridge
defines sale-or-return and sale on approval transactions as types of
consignment transactions and further elaborates that a consignment transaction
"is therefore not a sale of goods agreement at all since the potential
buyer has not 'bought or agreed to buy' the goods, though it may ripen into a
sale".
[12] Of interest is the French wording of
subsection 215.1(1) of the Act. As noted by counsel for the Respondent, the French
version reads: "des produits qu'elle a acquis sur approbation, en consignation
avec ou sans reprise des invendus ou selon d'autres modalités semblables". Hence, the French version does not refer specifically to
"sale-or-return" transactions. The expression
"sale-or-return" is normally rendered in French as "vente avec
faculté de retour" as is the case in the French version of the Sale
of Goods Act, R.S.O. 1990, c. S-1 at section 19, rule 4.
Therefore, the shared or common meaning rule applies. The two versions
of the Act can be reconciled since a sale-or-return transaction is a
type of consignment transaction.
[13] Consignment transactions, and more
specifically sale or return or sale on approval transactions, all have two
characteristics in common: (i) the transaction involves the title owner of the
good and a bailee; and (ii) the bailee may obtain title to the goods, transfer
the goods to a third party or return the goods to the title owner. In this
case, there is no bailee involved. The Appellant maintained title to the goods
throughout. The Appellant would have had to obtain ownership from a prior owner
for the purpose of selling the goods at the Exhibition in order for it to be
said that it acquired the jewellery on a sale-or-return basis. The Broker did
obtain possession of the goods for the purpose of clearing customs. However, it
cannot be said that the Appellant acquired the goods from the Broker on a
sale-or-return basis since the Broker did not possess title to the goods.
[14] Notwithstanding the fact that I appreciate
the Appellant's interpretation of the CCRA's memorandum on duty drawback
D7-4-2, which implies that importers can file for a GST rebate, other
publications of CCRA have indicated that an individual who imports goods and
subsequently exports them is only entitled to a GST rebate if they meet the
requirements of subsection 215.1(1).
In any event, as outlined in R. v. Nowegijick, the Court is not
bound by departmental practice, although it is not uncommon to look at it if it
can be of any assistance in resolving a doubt. In addition, I am confined by
the words of the Supreme Court of Canada which stated in M.N.R. v. Inland
Industries Ltd.:
"that the Minister cannot be bound by an approval given when the
conditions prescribed by the law were not met". In my mind, there is no
doubt as to the meaning of "acquired by the person on consignment, approval,
sale-or-return basis or other similar terms" in subsection 215.1(1)
of the Act. Unlike the Goods Imported and
Exported Refund and Drawback Regulations,
S.O.R./96-42,
which clearly states under subsection 9(1) that a duty drawback "may
be claimed by any person who is the importer or exporter of the imported or
exported goods", subsection 215.1(1) of the Act makes it clear that
several conditions need to be met in order to be eligible for a GST rebate.
More precisely, subsection 215.1(1) requires the goods to have been acquired by the taxpayer on consignment, approval,
sale-or-return basis or other similar terms. Although the Minister mistakenly
allowed the GST rebates in previous taxation years, the Appellant does not have
the right to have this mistake repeated annually in perpetuity.
[15] In spite of the fact that GST is a
consumption tax and the Appellant's goods were not consumed on the Canadian
market, my hands are tied. The words of the Act are plain. As the
Supreme Court of Canada said in Friesen v. Canada:
"the plain meaning of the relevant sections of the Income Tax Act
is to prevail unless the transaction is a sham".
[16] In this case, the
meaning of the statutory language is clear and so I have no alternative but to
dismiss the appeals.
Signed at Ottawa, Canada, this 19th day of
April, 2004.
J.T.C.C.
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