Date: 19990707
Docket: T-1356-92
OTTAWA, ONTARIO, JULY 7, 1999
BEFORE: J.E. DUBÉ J.
BETWEEN:
ABZAC CANADA INC.,
Plaintiff,
- and -
HER MAJESTY THE QUEEN,
Defendant.
JUDGMENT
The application is dismissed: judgment for the defendant with costs.
Certified true translation
Bernard Olivier, LL. B.
Date: 19990707
Docket: T-1356-92
BETWEEN:
ABZAC CANADA INC.,
Plaintiff,
- and -
HER MAJESTY THE QUEEN,
Defendant.
REASONS FOR JUDGMENT
DUBÉ J.
[1] The question for solution in the case at bar is simply whether the cylindrical forms manufactured by the plaintiff are "construction materials" pursuant to s. 50(1.1)(b) and Part I of Schedule IV, in particular s. 16, of the Excise Tax Act ("the Act").1
1. Statement of facts
[2] The parties were agreed on the facts. The plaintiff has worked in the cardboard industry in eastern Canada since 1930. It manufactures among other things cylindrical forms in cardboard of various diameters, used exclusively in the construction industry for pouring concrete columns. The inner surface of certain pipes is covered with a plastic membrane and the outside is treated with hot wax. The pipes may be removed within 24 to 48 hours, but not later than 5 days, after the pouring. Once the concrete has been poured and dried in the cylinders, the latter are generally removed except when the columns are buried in the ground.
[3] For the period from September 1, 1988 to December 1, 1989 the plaintiff paid the Minister of National Revenue, as sales tax under the Act, a tax at the overall rate of 12 %, whereas it alleged that this tax should have been paid at the rate of 8% (or 9%) applicable to construction materials. Such an adjustment, which was disallowed by the Minister, would have resulted in a refund to the plaintiff of $46,002.
2. Act
[4] The relevant provisions of the Act are the following:
| 50. (1) There shall be imposed, levied and collected a consumption or sales tax at the rate prescribed in subsection (1.1) on the sale price or on the volume sold of all goods |
. . . . .
| (1.1) Tax imposed by subsection (1.1) is imposed |
. . . . .
| (b) in the case of goods enumerated in Schedule IV (Construction Materials and Equipment for Buildings), at the rate of nine per cent;2 |
. . . . .
. . . . .
| 16. Pipe, conduit and tubing designed for use in buildings, sewers, irrigation or drainage systems, pipelines and other construction; valves and fittings therefor. |
3. Plaintiff's arguments
[5] The plaintiff submitted that its cylindrical forms are cardboard tubes designed, advertised and sold exclusively for construction. It argued that although the tube is a cylindrical form for pouring concrete, it is clear that it is a "tube" as mentioned in s. 16 above. It referred to the principles and liberal interpretation mentioned in s. 12 of the Interpretation Act,3 which provides that "Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects". It submitted the following dictionary definitions:
| Le Nouveau Petit Le Robert, a French dictionary: |
[TRANSLATION]
| TUBE: cylindrical apparatus or conduit with circular section, generally rigid, open at one or both ends. |
Le Petit Larousse, large size, 1995:
[TRANSLATION]
| TUBE: cylindrical pipe or apparatus. |
Webster's Ninth New Collegiate Dictionary:
| TUBE: a hollow elongated cylinder. |
[6] The agreement on the facts was that what was at issue was "cylindrical forms of various diameters used exclusively in construction for the pouring of concrete columns" (paragraph 2). The cardboard tube may be removed after the cement is laid (paragraph 3). Once the concrete has been poured and dried in the cylinders in question they may be removed, if necessary, although generally those which are in the ground are not removed (paragraph 4).
[7] The purpose of the Act is clearly to promote the construction industry. The Court therefore should not impose a limiting interpretation of the definition in s. 16. The plaintiff's cylindrical forms are tubes designed for use in the construction of buildings, as indicated by their physical shape, design and use. The tubes mentioned in s. 16 are not limited to sewers, irrigation or drainage but may also be used "in . . . other construction". The cylindrical forms meet the above dictionary definitions and it is well established that reference may be made to dictionaries for the current definition of a word. According to a decision of the Exchequer Court of Canada on May 25, 1948, the Court must use the ordinary meaning of words.4
[8] The plaintiff further referred to CUQ v. Corp. Notre-Dame de BonSecours,5 and in particular to the judgment of Gonthier J. which held that in the past an ambiguity in a taxing provision was resolved in the taxpayer's favour and an ambiguity in an exempting provision was resolved in the Crown's favour. However, an ambiguity is now usually resolved openly by reference to legislative intent. At 18, the learned judge added:
| In other words, it is the teleological interpretation that will be the means of identifying the purpose underlying a specific legislative provision and the Act as a whole; and it is the purpose in question which will dictate in each case whether a strict or a liberal interpretation is appropriate and whether it is the tax department or the taxpayer which will be favoured. |
[9] The plaintiff therefore submitted that s. 16 should be considered in terms of the purpose of the Act: promoting the construction industry, and thus with a liberal interpretation of that section.
4. Defendant's arguments
[10] The defendant, for her part, argued that the plaintiff's cylindrical forms are not "pipe, conduit and tubing" within the meaning of s. 16, since they are not a network used to transport material such as liquid, gas or wires. These forms are not "designed for use in buildings . . . and other construction". On the contrary, they are forms designed for use in pouring concrete which are subsequently removed. They are not incorporated into the structure of buildings. They are not permanently installed. The defendant also submitted her definitions:
[TRANSLATION[
Le Petit Robert, Dictionnaire de la langue française:
| DUCT: narrow channel, pipe through which liquid is poured. Channel which conveys liquid, fluid. |
| CONDUIT: channel which conveys liquid, fluid. |
| PIPE: closed channel, conduit with circular or rounded section for use in conveying liquid, gas. |
The Shorter Oxford English Dictionary defines the following terms:
| TUBE: a hollow body, usu. cylindrical, and long in proportion to its diameter, of wood, metal, glass, etc., used to convey or contain a liquid, or for other purposes. |
| CONDUIT: an artificial channel or pipe for conveying water, etc.; an aqueduct, a canal. |
| PIPE: a cylindrical tube or stick for other purposes. A hollow cylinder of wood, metal, etc., for the conveyance of gas, water, vapour etc., or for other purposes. |
[11] Section 16 describes the pipes, conduits and tubing as designed for use in buildings, whereas the plaintiff's cylindrical forms are designed for use in the construction of buildings. In other words, they do not form part of the buildings once they have been constructed, but are concealed underground or removed from the pillars or columns once the concrete has dried. Further, the tubing in question is described in s. 16 as for use in sewers, irrigation or drainage systems and pipelines, including valves and the fittings therefor. Clearly the cylindrical forms in question do not meet the definitions of pipes, conduits and tubing, do not convey liquid and do not have valves or fittings.
5. Analysis
[12] At first sight it would appear that s. 16 is of such general application that it may cover many products used in construction. There is no doubt that in a broad sense the plaintiff's cylindrical forms are associated with construction. At the same time, Parliament has not simply used general language. At the outset, it gave 23 specific definitions of construction materials covered by the Act. In 1985 Parliament added 12 more to the list. It must follow that construction materials not described in the list are excluded. The Court cannot therefore adopt a general and inclusive interpretation: it must consider whether the materials in question may be regarded as covered in one of the sections, in the case at bar s. 16.
[13] In my opinion, cylindrical forms are not designed for use "in buildings". They are designed for use in the construction of buildings and are not part of those buildings once those constructions are complete. Further, the cylindrical forms are not designed to convey liquid inside buildings or to sewers or irrigation or drainage systems or pipelines, or in other constructions. Clearly, such forms have no valves or fittings.
[14] Section 16 has never been considered by the courts at the Federal Court or Supreme Court level. However, it has been interpreted by the Canadian International Trade Tribunal in appeal No. AP-89-267.6 That case concerned construction forms known as Perma Forms or Perma Tubes used in the construction of buildings and other structures. Liquid concrete was poured into a tube and kept in place by the sides of the tube. As the concrete hardened, it supported the structure of the building under construction. The following passages from the Tribunal's reason are worth reproducing:
| The Tribunal must determine whether Perma Tubes are "designed for use in buildings ... or other construction." Because the term "other construction" is preceded by "buildings, sewers, irrigation or drainage systems, pipelines" the Tribunal interprets "buildings . . . and other construction" as the completed structure and not as the process of construction. Accordingly, the question is not whether the goods are used in constructing the buildings or other structures but whether they are used in the buildings or structures themselves. |
| There is no question that the goods in issue are used in the construction or building of various structures; however, they are not used in the sense of being incorporated into the structure. The Tribunal notes that the goods are designed to be removed from the hardened concrete that they were employed to form. In situations where the tubes are not removed, the Tribunal does not believe that the tubes form part of the structure, but are left on as a matter of convenience. Accordingly, the Tribunal finds that the tubes are not "designed for use in buildings . . . and other construction." |
[15] Clearly, I am not bound by this decision, but I am entirely of the same view. In my opinion, the plaintiff's cylindrical forms are not pipes, conduits or tubing within the meaning of s. 16 since they are not used to convey or transport anything. They are designed to support the concrete while it is drying and their usefulness is then at an end. They are also not designed to be used in buildings, but in the construction of buildings. In s. 16 Parliament defined as a construction material a conduit conveying liquids inside buildings and remaining there once the buildings had been constructed. For example, s. 16 covers piping infrastructure inside buildings which conveys liquid to sewers, and such a system will include valves and fittings. That is not the case. The cylindrical forms are not conduits and are only used at the time of construction.
[16] The action is accordingly dismissed: judgment for the defendant with costs.
OTTAWA, ONTARIO
July 17, 1999
Certified true translation
Bernard Olivier, LL. B.
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
| STYLE OF CAUSE: ABZAC CANADA INC. v. HER MAJESTY THE QUEEN |
PLACE OF HEARING: MONTRÉAL, QUEBEC
DATE OF HEARING: JUNE 29, 1999
REASONS FOR ORDER AND ORDER BY: DUBÉ J.
DATED: JULY 7, 1999
APPEARANCES:
| Claude Desaulniers FOR THE PLAINTIFF |
| Francisco Couto FOR THE DEFENDANT |
SOLICITORS OF RECORD:
Claude Desaulniers FOR THE PLAINTIFF
McCarthy, Tétrault, Montréal
Jean Lavigne FOR THE DEFENDANT
Department of Justice, Montréal
__________________
1 R.S.C. 1985, c. E-14.
2 For the period from September 1 to December 31, 1988 the applicable reduced rate was 8%.
3 R.S.C. 1985, c. I-23.
4 See Orrin H.E. Might v. M.N.R., [1948] C.T.C. 144.
5 [1994] 3 S.C.R. 3.
6 Perma Tubes Ltd. and the Minister of National Revenue.
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