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Docket: 2004-804(GST)I
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BETWEEN:
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LEE HUTTON KAYE MALOFF & PAUL HENRIKSEN,
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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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____________________________________________________________________
Appeal heard on June 25, 2004 at Nelson, British
Columbia
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Before: The
Honourable Justice L.M. Little
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Appearances:
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Agent for the
Appellant:
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Paul Henriksen
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Counsel for the
Respondent:
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Bruce Senkpiel
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____________________________________________________________________
JUDGMENT
The appeal from the assessment made under
Part IX of the Excise Tax
Act, notice of which is
dated December 4, 2003 and bears number 11EU‑033081741095, is dismissed,
without costs, in accordance with the attached Reasons for Judgment.
Signed at
Vancouver, British Columbia, this 20th day of August 2004.
Little
J.
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Citation: 2004TCC537
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Date: 20040820
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Docket: 2004-804(GST)I
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BETWEEN:
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LEE HUTTON KAYE MALOFF & PAUL HENRIKSEN
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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
Little, J.
A. Statement of Facts
[1] The Appellant is a
partnership.
[2] The Appellant
registered under Part IX of the Excise Tax Act (the "Act")
effective May 9, 1996 and was assigned Number 867211033RT.
[3] The Appellant owned
a building located in the City of Trail, British Columbia (the
"Property") in which it operated a coffee shop and a pool hall.
[4] The Appellant
requested that the GST registration be cancelled effective on December 31,
1998.
[5] On or about
September 29, 2000 the Appellant sold the Property and contents for $100,000.00
to a Society known as "The Heart of Trail Society" (the
"Society").
[6] The Appellant did
not collect and remit the GST for the sale of the Property because it was
advised by its lawyer that it was not responsible for GST. In this connection
the Society advised the Appellant that they were a registrant for GST purposes
and agreed to self-assess and remit any GST to the Canada Customs and Revenue
Agency (the "CCRA").
[7] The Appellant
subsequently determined that the GST registration of the Society had been
cancelled on April 1, 1999.
[8] The Society was not
a registrant for GST purposes at the time that it purchased the Property from
the Appellant.
[9] By a Notice of
Reassessment issued on December 4, 2003 the Minister of National Revenue (the
"Minister") reassessed the Appellant to impose GST of $7,000.00 plus
penalty of $1,139.77 and interest of $603.73 for the reporting period January
1, 1998 to December 31, 2000 the Period.
B. Issue
[10] The issue is whether
the Appellant is liable for GST interest and penalty in respect of the sale of
the Property to the Society.
C. Analysis and Decision
[11] As noted above at
the time of the sale of the Property to the Society, no GST was collected.
Furthermore, as indicated, neither the Appellant nor the Society was a
registrant at the time of the sale.
[12] Subsection 221(2) of
the Act provides that the Purchaser of property must be a registrant for
GST purposes to avoid liability for failing to collect and remit GST on the
sale.
[13] Mr. Paul Henriksen,
one of the partners represented the Appellant. Mr. Henriksen argued that
the Appellant should not be liable for the GST that was imposed in this
situation since the Society fraudulently misrepresented its GST registrant
status to the Appellant at the time of the sale of the Property.
[14] Mr. Henriksen also
noted that the Appellant's solicitor Mr. R.S. Bogusz advised the Appellant and
R. Ann Lessard, Notary Public, the agent for the Society on October 17, 2000 as
follows:
The GST form is executed
on the basis that this is a taxable transaction and the purchase is liable to
self-assess (See Exhibit A-2).
[15] By letter addressed
to Mr. Bogusz and dated October 31, 2000 R. Ann Lessard advised as
follows:
Further to my telephone
call to your office this morning, I confirm that my client will self-assess the
GST and for your information their GST number is 871738555 (See Exhibit A-3).
[16] After a careful
analysis of the relevant facts, I have concluded that the Appellant made a
taxable supply of real property during the Period and the Appellant was
required to collect GST under subsection 221(1) of the Act. The
Appellant is not able to escape liability for GST by relying on the
misrepresentation made by the Society's agent that the Society was a registrant
for GST purposes and would be liable for GST.
[17] In support of my
conclusion, I have referred to a number of court decisions including the
decision of Madam Justice Lamarre Proulx in Makhtia Grewal v. Her
Majesty The Queen, (1996) 4 GTC 3166. In that decision, Justice Lamarre
Proulx said at page 7:
The Appellant has made a taxable supply to
the purchasers, who were not registered. Therefore, the Appellant had to
collect the tax and remit the net tax to the Receiver General of Canada. This
scheme is similar to the scheme found in the Income Tax Act, where the employer
shall deduct and remit the income tax on the salaries of the employees. If the
employer fails to do so, he may be assessed for the tax although the employee
is responsible for this tax as well. The Minister was therefore correct in
assessing the Appellant pursuant to section 296 of the Act for the net tax owed
on the making of a taxable supply.
[18] In this situation
the Appellant was unfortunately misled by the fraudulent statement made by the
agent for the Society. However, the wording in the Act is clear and I
find that the Appellant is responsible for the GST on the sale.
[19] The appeal is
dismissed without costs.
Signed at
Vancouver, British Columbia, this 20th day of August 2004.
Little J.
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