Date: 20100121
Docket: T-1001-06
Citation: 2010 FC 72
Montréal, Quebec, January 21,
2010
PRESENT: The Honourable Mr. Justice Lemieux
BETWEEN:
LES PÉTROLES DUPONT INC. (#1A)
A body politic and duly incorporated
according to law,
having its head office at
904 Route 202, C.P. 504 Bedford, Quebec
J0J 1A0
Plaintiff
and
HER MAJESTY THE QUEEN
Defendant
REASONS FOR JUDGMENT AND JUDGMENT
Introduction and
Background
[1]
Les
Pétroles Dupont Inc. (Dupont), a distributor of various types of diesel fuel, appeals
to this Court, pursuant to section 81.28 of the Excise Tax Act (the Act),
the Minister of National Revenue’s (the Minister) decision of April 21, 2005 to
deny its refund request in the amount of $544,777.41 representing the excise
tax which it collected and remitted to the Minister, at the rate of $0.04 per
litre, on the sale and delivery to its customers, including farmers and business
establishments of over 13 million litres of stove oil and furnace oil (the
heating oil) as diesel fuel throughout the 2003 year, which its customers
actually used in their internal combustion engines (such as tractors).
[2]
There
is no dispute between the parties the tax of $0.04 per litre is properly
imposed on sales of “diesel fuel” pursuant to section 9.1 of the Schedule to
the Act. “Diesel fuel” is defined in subsection 2(1) of the Act to include “any
fuel oil that is suitable for use in internal combustion engines of the
compression-ignition type, other than any such fuel that is intended for use
and is actually used as heating oil.” There is no disagreement between the
parties the furnace oil, the stove oil and the diesel oil sold by Dupont to its
customers falls within the definition of “diesel fuel” in the Act. The parties agree
that furnace oil and stove oil qualifies as “heating oil” which is an undefined
term in the Act. The parties also agree the three types of oils (furnace oil,
stove oil and diesel oil) can be used interchangeably either for heating
purposes or to power an internal combustion engine of the compression
engine type.
[3]
The
legal question in this case is not whether Dupont’s sales to its customers
qualified for the tax exemption as heating oil. Such sales are not exempt because
the furnace and stove oil delivered by Dupont to its customers was not actually
used as heating oil. The sole question which arises in this case is upon whose
shoulders the obligation fell to collect and remit to the Minister the $0.04
per litre tax.
[4]
Dupont
argues the burden of collecting and remitting legally fell on the manufacturer
of the diesel fuel, in this case Shell, when Dupont’s trucks took delivery of
the furnace or stove oil at Shell’s refinery or depot. As a result, Dupont
argues it was in error to have collected the $0.04 per litre from its
customers. Counsel for the defendant HMQ argues Dupont was responsible for the
collection and remittance of the excise tax, by virtue of section 23(9.1) of
the Act, which, according to him, creates an exception to the normal rule in
subsection 23(2) of the Act providing an excise tax imposed under subsection
23(1) is payable by the manufacturer or the producer of the diesel fuel, i.e.
Shell, at the time of delivery of that fuel oil to the purchaser thereof,
i.e. Dupont. Counsel for Dupont counters the Crown’s reliance on section
23(9.1) of the Act is misplaced based on the wording of that provision and the
legislative history behind several provisions of the Act. In particular, he
argues the definition of diesel fuel in section 2 of the Act, which flows into
section 23(9.1), sets up a two part test in order to shift the legal burden
of collecting and remitting the excise tax from Shell to Dupont. That two part
conjunctive test is: (1) the diesel fuel oil when purchased from the
manufacturer must be intended for use as heating oil; and, (2) that
diesel fuel so purchased must be actually used as heating oil. Because Dupont
ordered the furnace or stove oil in question from Shell, counsel for Dupont concedes
the intention to use it as heating oil has been made out. However, he argues
Dupont did not and could not meet the actual use test because it is a
distributor and not the actual user of the furnace oil.
[5]
As
will be seen, the determination of this issue is a narrow question of law which
turns on when the two-step test of intended use and actual use as heating oil
in the definition of diesel fuel must be applied and this in one of two ways:
(1) either at the same point in time i.e. simultaneously; or, (2)
whether the application of intended use and actual use as heating oil can be
assessed sequentially at different points in time. Dupont argues for the
first interpretation; the Minister for the second. That issue has been the
subject of judicial determination by my colleague Justice Beaudry in W.O. Stinson & Son Ltd. v. Canada
(Minister of National Revenue - M.N.R.), 2005 FC 1427 (Stinson).
[6]
The
other legal issue which arises in this case is whether the principle of
judicial comity should apply and lead to a dismissal of this case since my
colleague Justice Beaudry in Stinson on similar facts found the burden of
collecting and remitting the $0.04 per litre fuel tax properly fell on Stinson, a distributor, because of section 23(9.1) of the Act. Stinson appealed that decision to the Federal Court of Appeal but
it was discontinued by Stinson when the Minister refused its consent to join
with the Stinson numerous other cases. A new case was started – the one
before me now – but this time the Minister agreed Dupont should be the lead
case upon which some 200 other cases are joined either by Prothonotary
Morneau’s order of February 16, 2009 or my order of January 19, 2010 (see
Appendix A to this judgment).
[7]
The parties agreed
this appeal, pursuant to section 81.28 of the Act, is to be considered de
novo and under the Federal Courts Rules, proceeds by way of an
action and not a judicial review of the Minister’s decision not to accede to Dupont’s
refund request. There is consequently no standard of review to be considered
and applied. The facts upon which the appeal was heard, is contained in an
agreed statement of facts and no witnesses were heard.
The
Agreed Statement of Facts
[8]
As
noted, it was agreed between the parties Dupont is a distributor of various
types of fuel oil “including coloured furnace oil and coloured stove oil
(commonly known as heating oil) and coloured diesel oil and clear diesel oil.”
I was informed by counsel for HMQ, the reference to “coloured” has no
significance in this appeal as it related to provincial enforcement
requirements. In these reasons, no use will be made of the words “coloured”
which appears throughout the agreed statement of facts.
[9]
It
was also agreed as follows:
1)
Furnace
oil, stove oil and diesel oil fall in the definition of “diesel fuel” in
subsection 2(1) of the Act when they are not subject to the exclusionary clause
thereof.
2)
Dupont
is not a manufacturer, producer or importer of furnace oil, stove oil or diesel
oil.
3)
Dupont
is not licensed as a wholesaler (holder of a “W” licence) under the Act.
4)
Dupont
is not a person who is licensed for purposes of Part III of the Act (i.e.
Dupont is not a holder of an excise licence, i.e. an “E” licence).
5)
Dupont
purchased the furnace oil and stove oil from various manufacturers
(suppliers) who did not remit the $0.04 per litre excise tax as imposed
pursuant to subsection 23(1) of the Act coupled with section 9.1 of Schedule 1
to the Act. This practice is in accordance with the policy of the Respondent
in EP-001 dated April 29, 2002.
6)
Furnace
oil and stove oil are generally intended for use as heating oil but are also
suitable for use in engines of the compression-ignition type.
7)
Dupont
is not the actual user of the furnace oil or stove oil as purchased by it from
its suppliers.
8)
Dupont
did not provide any end-use certificates to its suppliers when it purchased
stove oil or furnace oil.
9)
Dupont
also purchased diesel oil from its suppliers. The suppliers remitted the
$0.04 per litre excise tax to the Government and charged same to Dupont at the
time it took delivery.
10) Diesel oil is
used in internal combustion engines of the compression-ignition type, but can
also be used as heating oil.
11) Dupont is not
the actual user of the diesel oil as purchased by it from its suppliers, nor
did it provide any end-use certificates to its suppliers when it purchased diesel
oil.
12) Dupont sends
its own tankers to its suppliers’ place of business to take physical delivery
of the stove oil, furnace oil and diesel oil which it purchases from the
suppliers.
13) Dupont’s
tankers have from three (3) to six (6) separate compartments, three (3) of
which are used to store stove oil, furnace oil and diesel oil.
14) At the time
Dupont takes delivery of the stove oil, furnace oil and diesel oil from its
supplier, it does not know to which of its customers it will sell same, nor
does it know how its customers will use same.
15) For the
purposes of the present appeal, some of Dupont’s customers are farmers and
companies which use fuel oil to heat their buildings and to operate both
off-road vehicles and equipment which incorporates an internal combustion
engine of the compression-ignition type.
16) When a
customer orders from Dupont heating oil, Dupont supplies either
stove oil or furnace oil to the customer (when Dupont’s tanker contains stove
oil or furnace oil) and delivers same directly into a building, farm house
or silo in which a furnace is located. In such cases, Dupont invoices stove
oil or furnace oil to its customers as stove oil or furnace oil. Dupont does
not charge excise tax to its customer at the time of delivery of the stove oil
or furnace oil to its customers.
17) When a
customer orders heating oil, but Dupont’s tanker contains only diesel oil (Dupont’s
tanker does not have any stove oil or furnace oil), Dupont delivers diesel
oil to its customer and Dupont invoices the diesel oil as stove oil or furnace
oil to its customer. Dupont does not charge excise tax to its customer
notwithstanding that, when Dupont purchased the diesel oil from its
supplier, the supplier remitted the $0.04 excise tax to the Defendant and
included an amount equal to the $0.04 excise tax in the sale price to Dupont.
The diesel oil referred to in this paragraph is not the subject of this appeal.
18) When a
customer orders fuel oil for use in off-road vehicles or equipment with an
internal combustion engine of the compression-ignition type, Plaintiff delivers
diesel oil to the customer if Dupont has diesel oil [in its tankers].
19) When a
customer orders fuel oil for use in off-road vehicles or equipment with an
internal combustion engine of the compression-ignition type, but the Dupont’s
tanker contains only furnace oil or stove oil, Dupont delivers furnace oil or
stove oil to its customer.
20) Dupont
proceeded as follows:
(i) when Dupont
delivers diesel oil to its customer, Dupont invoices same as diesel
oil and does not charge or remit excise tax because excise tax was remitted by
Dupont’s supplier when Dupont bought the diesel oil from its supplier.
(ii) when Dupont delivers
furnace oil or stove oil to its customer, Dupont invoices same
as diesel oil and sells same at the price of diesel oil [which is
at a higher price than furnace oil or stove oil]. Dupont includes excise tax
in the sale price to its customer, and remits the excise tax to HMQ because
no excise tax was remitted by Dupont’s supplier when Dupont bought the furnace
oil or the stove oil from its supplier. Such sales are [the sole] the
subject of the present appeal.
21) For the
period extending from January 1, 2003 to December 31, 2004, the Plaintiff sold
and delivered to its customers 13 619 435 litres of stove or furnace oil as
diesel fuel.
22) As required
by the Excise Tax Act, Dupont collected $544,777.41 of excise tax at a
rate of $0.04/litre which it then remitted to HMQ.
23) The
13,619,435 litre of stove or furnace oil were actually used by Dupont’s
customers as diesel fuel in internal combustion engines. [All
underlinings are mine.]
The Legislative Scheme
[10]
For
the purposes of this appeal, I set out below in both official languages, the
following relevant provisions:
1) In subsection
2(1), the definition of diesel fuel:
|
“diesel fuel” includes any fuel
oil that is suitable for use in internal combustion engines of the
compression-ignition type, other than any such fuel that is intended for
use and is actually used as heating oil.
[Emphasis mine.]
|
|
«
combustible diesel » S’entend notamment de toute huile combustible qui
peut être utilisée dans les moteurs à combustion interne de type allumage
par compression, à l’exception de toute huile combustible destinée à être
utilisée et utilisée de fait comme huile à chauffage.
[Je
souligne.]
|
2) Under Part
III of the Act dealing with excise taxes, subsection 23(1) headed “Tax on
various articles at schedule rates” reads:
|
23. (1) Subject to subsections (6) to
(8), whenever goods mentioned in Schedule I are imported or are
manufactured or produced in Canada and delivered to a purchaser of those
goods, there shall be imposed, levied and collected, in addition to any
other duty or tax that may be payable under this or any other law, an excise
tax in respect of the goods at the applicable rate set out in the
applicable section of that Schedule, computed, if that rate is specified
as a percentage, on the duty paid value or the sale price, as the case may
be. [Emphasis mine.]
|
|
23.
(1) Sous réserve des paragraphes (6) à (8), lorsque les marchandises énumérées
à l’annexe I sont importées au Canada, ou y sont fabriquées ou produites,
puis livrées à leur acheteur, il est imposé, prélevé et perçu, outre les
autres droits et taxes exigibles en vertu de la présente loi ou de toute
autre loi, une taxe d’accise sur ces marchandises, calculée selon le taux
applicable figurant à l’article concerné de cette annexe. Lorsqu’il est
précisé que ce taux est un pourcentage, il est appliqué à la valeur à
l’acquitté ou au prix de vente, selon le cas. [Je souligne.]
|
3) Under the
same Part, subsection 23(2) headed “By whom and when payable”:
|
23. (2) Where goods are imported, the
excise tax imposed by subsection (1) shall be paid in accordance with the
provisions of the Customs Act by the importer, owner or other person
liable to pay duties under that Act, and where goods are manufactured or
produced and sold in Canada, the excise tax shall be payable by the
manufacturer or producer at the time of delivery of the goods to the
purchaser thereof. [Emphasis mine.]
|
|
23. (2)
Lorsque les marchandises sont importées, la taxe d’accise prévue par le
paragraphe (1) est payée conformément à la Loi sur les douanes, et
lorsque les marchandises sont de fabrication ou de provenance canadienne et
vendues au Canada, cette taxe d’accise est exigible du fabricant ou du
producteur au moment de la livraison de ces marchandises à leur acheteur.
[Je souligne.]
|
4)
Under
the same Part, subsection 23(9.1) headed “Diversion to taxable sale or use”:
|
23 (9.1) Where fuel other than aviation gasoline has
been purchased or imported for a use for which the tax imposed under this
Part on diesel fuel or aviation fuel is not payable and the purchaser or
importer sells or appropriates the fuel for a purpose for which the fuel
could not have been purchased or imported without payment of the tax at the
time he purchased or imported it, the tax imposed under this Part on diesel
fuel or aviation fuel shall be payable by the person who sells or
appropriates the fuel
(a)
where the fuel is sold, at the time of delivery to the purchaser; and
(b) where the fuel is appropriated, at the time of that
appropriation.
[Emphasis mine.]
|
|
23 (9.1)
Lorsque du combustible autre que de l’essence d’aviation a été
acheté ou importé à une fin pour laquelle la taxe imposée par la présente
partie sur le combustible diesel ou le carburant aviation n’est pas payable
et que l’acheteur ou l’importateur vend ou affecte le combustible à une fin
pour laquelle il n’aurait pas pu alors l’acheter ou l’importer sans le
paiement de la taxe au moment de l’achat ou de l’importation, la taxe imposée
en vertu de la présente partie sur le combustible diesel ou le carburant
aviation le devient au moment où il vend ou affecte le combustible :
a)
lorsque le combustible est vendu, au moment de la livraison à l’acheteur;
b)
lorsque le combustible est affecté, au moment de cette affectation.
[Je
souligne.]
|
5) According to
section 9.1 of Schedule I of the Act, a tax of $0.04 per litre is levied on the
sale of “diesel fuel” as defined in section 2 above.
Justice Beaudry’s
decision in Stinson & Son Ltd.
[11]
The
parties agree the facts and legal issues in Stinson bear great
resemblance to this case. In Stinson, however, there was no agreement as
to the facts but Stinson’s controller testified to the same facts as contained
in the agreed facts before me. Moreover, counsel in that case were the same as
appeared before me. Stinson is a distributor of furnace and stove oil
and other types of diesel fuel. The issue before Justice Beaudry was whether Stinson
was liable to remit the excise tax pursuant to subsection 23(9.1) of the Act on
the sale of heating oil to customers who actually used that oil in their
internal combustion engines of the compressor ignition type. It was said by Stinson,
the manufacturers from whom it purchased the heating oil did not deduct and
remit the excise tax on diesel fuel because these manufacturers were acting in
accordance with administrative practices issued by the Minister.
[12]
The
legal issue before me is the same as in Stinson – namely, whether under section 23(9.1) of the Act,
Dupont was liable to collect and remit the excise tax to the Minister in
identical circumstances – actual use by Dupont’s customers of heating oil in
their internal combustion engines. If the answer is yes, Dupont is not entitled
to the refund it claims. Dupont claims Shell did not deduct and remit the
excise tax on heating oil because it was acting in accordance with departmental
administrative practices.
[13]
The
legal arguments put to Justice Beaudry were the same as argued before me. Stinson
argued, as Dupont now does, the manufacturer of the fuel oil had an obligation
to deduct because it was unable to prove, at the time it took delivery from the
manufacturer, the fuel oil it was purchasing would actually be used as heating
oil and section 23(9.1) was inapplicable to shift the legal burden on it of
collecting and remitting the excise tax as subsection 2(1) of the Act – the
definition of diesel fuel -- established the two-prong test of intended and
actual use which must be met simultaneously, not sequentially.
[14]
The
Minister’s counsel in Stinson made the same arguments as he did before
me and, in particular, submitting subsection 23(9.1) was specifically
designed to reflect the possibility of the diversion of heating oil to use
other than heating and clearly imposes on the person who sells fuel oil that
was otherwise acquired exempt from tax the obligation to collect and remit in
the case of diversion. He further argued the two steps must be sequential for
the reasons found by Justice Beaudry in Stinson.
[15]
Justice
Beaudry, in his decision, was of the view there were no questions of fact or
credibility in the case before him and that it resolved around the statutory
interpretation of the definition of diesel fuel in subsection 2(1) and
subsection 23(9.1) of the Act. He applied the principle of statutory
interpretation stated by the Supreme Court of Canada in Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27.
[16]
Justice Beaudry’s
main findings are contained in paragraphs 27, 28 and 29 of his judgment which I
will quote:
27 A
contextual approach to the wording of the relevant provisions of the Excise
Tax Act reveals that the purpose of subsection 23(9.1) of the Act was
to address situations involving intermediary purchasers such as the
plaintiff between manufacturers of fuel oil and consumers. Indeed, by
placing the responsibility for the payment and remittance of the excise tax on
the person who diverts tax-exempt fuel oil from the purpose the exemption in
subsection 2(1) stemmed from, subsection 23(9.1) of the Act carves out an
exception to the taxation scheme laid out in subsections 23(1) and (2), which
makes excise tax payable by the manufacturer or importer of the fuel oil.
28 The
two-step test included (i.e. intended use and actual use) in the definition
of "diesel fuel" in subsection 2(1) of the Act would be absurd if
it were to be applied simultaneously, as the plaintiff suggests, since
manufacturers and importers would practically always be unable to verify that
the goods in issue are actually used for their intended purpose by consumers.
In my opinion, manufacturers and importers can rely on prima facie indications
of "intended use" of resellers and distributors like the plaintiff to
meet the "intended use" test and not include the $0.04 excise tax per
litre sold. Resellers and distributors are in a much better position to ensure
that the "actual use" test is met, because they interact with the
end-users. This is precisely why Parliament chose to enact subsection 23(9.1)
of the Act.
29 The
two-step test cannot be applied simultaneously in a transaction between a
manufacturer and a reseller, and the reseller thus becomes responsible for the
payment of the excise tax if the intended use of the goods in issue upon resale
is incompatible with the intended use that rendered the purchase exempt from
the payment of the excise tax of $0.04 per litre in the first place.
Furthermore, and though this has no direct bearing on the present case,
subsection 23(9.1) of the Act would also apply to consumers whose use of
tax-exempt heating oil do not meet the "actual use" test when they
divert the oil from a furnace's tank to power a diesel combustion engine. [Emphasis
mine.]
Analysis
[17]
For the reasons that
follow, I am of the view these appeals must be dismissed for the reason that
the Stinson case is not
distinguishable and, in my view, was correctly decided.
[18]
In Almrei v. Canada (Minister of Citizenship and
Immigration), 2007 FC
1025, I had the opportunity of canvassing the law with respect to judicial
comity. At paragraph 61 of my reasons, I stated as follows:
61 The principle of judicial comity is
well-recognized by the judiciary in Canada. Applied to decisions rendered by judges
of the Federal Court, the principle is to the effect that a substantially
similar decision rendered by a judge of this Court should be followed in the
interest of advancing certainty in the law. I cite the following cases:
-
Haghighi v. Canada (Minister of Public Safety and Emergency
Preparedness),
[2006] F.C.J. No. 470, 2006 FC 372;
-
Benitez v. Canada (Minister of Citizenship and
Immigration),
[2006]
F.C.J. No. 631, 2006 FC 461;
-
Pfizer Canada Inc. v. Canada (Minister of Health), [2007] F.C.J.
No.
596, 2007 FC 446;
- Aventis Pharma Inc. v. Apotex Inc.,
[2005] F.C.J. No. 1559, 2005
FC 1283;
-
Singh v. Canada (Minister Citizenship and Immigration),
[1999]
F.C.J. No. 1008;
-
Ahani v. Canada (Minister Citizenship and Immigration),
[1999]
F.C.J. No. 1005;
-
Eli Lilly & Co. v. Novopharm Ltd. (1996), 67 C.P.R. (3d) 377;
-
Bell v. Cessma Aircraft Co. (1983), 149 D.L.R. (3d) 509 (B.C.C.A.)
-
Glaxco Group Ltd. et al. v. Minister of National Health and
Welfare
et al, 64 C.P.R. (3d) 65;
-
Steamship Lines Ltd. v. M.N.R., [1966] Ex. CR 972.
[19]
At paragraph 62 of
that case, I set out the exceptions to the principal of judicial comity. I
wrote:
62
There are a number
of exceptions to the principle of judicial comity as expressed above they are:
1. The existence of a different
factual matrix or evidentiary basis between the two cases;
2. Where the issue to be decided is
different;
3. Where the previous case failed to
consider legislation or binding authorities that would have produced a
different result, i.e., was manifestly wrong; and,
4. The decision it followed would
create an injustice.
[20]
In this case, I
cannot see how any of the exceptions to the principle of judicial comity are
applicable. The factual matrix or evidentiary basis is the same as in Stinson; the issue
to be decided is identical. Justice Beaudry interpreted, correctly in my view,
the same two sections I am called upon to do and, by following Stinson,
no injustice would be created, quite to the contrary.
[21]
I touch briefly on
the last exception. Counsel for the Minister, in his opening remarks stressed accurately
that, in this case, nobody is losing anything. Dupont collected and remitted
the excise tax from persons who under the law, it was properly deductible –
Dupont’s customers who did not use the heating oil for that purpose but rather
for a use where the tax applied. Dupont is not a loser because, in the normal
course, it would have charged the tax to its customers. The Minister does not
gain anything more than what the law provides he is entitled to.
[22]
Counsel for Dupont recognized
the importance of comity doctrine in its application to judicial decisions by
members of the same Court. He argued this doctrine did not apply in this case
because Justice Beaudry did not have the benefit of the legislative history
behind certain provisions of the Act. The legislative history, according to him,
makes a difference because it impacts upon statutory interpretation and, in
particular, the purpose of subsection 23(9.1) which is the central provision
relied upon by the Minister in this case.
[23]
There were several
elements to Mr. Kaylor’s
submission the legislative history behind relevant sections of the Act which
Justice Beaudry did not have the benefit of should make a difference in the
result. Some background is useful in order to appreciate his argument.
[24]
The excise
tax on diesel fuel was first imposed in 1981 which necessitated the following
amendments to the Act:
(1)
The addition of a
definition of “diesel fuel” to subsection 2(1). Its wording has never been
changed by Parliament.
(2)
The definition of
“manufacturer” or “producer” in that same subsection 2(1) was amended to
include in its paragraph (e):
(e)
any person who sells gasoline, diesel fuel or aviation fuel, other than an
person who sells such goods exclusively and directly to consumers, and
This paragraph was repealed in 1988:
(3)
Section 27 was
amended to add the following subsection whose marginal note reads “Division of
fuel purchased for heating or lighting”:
“(5)
Where fuel has been purchased or imported for use for heating or lighting and
the purchaser or importer, as the case may be, sells or appropriates the fuel
for a purpose for which the fuel could not have been purchased or imported
exempt from tax under this Part at the time he purchased or imported it, the
tax imposed under this Part shall be payable by the person who so sells or
appropriates the fuel, on the sale price
(a)
where the fuel is
sold, at the time of delivery to the purchaser, and
(b)
where the fuel is
appropriated, the time of such appropriation,
and
the Minister may determine the value of the fuel for the purpose of calculating
the tax imposed under this Part.”
Subsection 27(5), with modified
wording, became the current section 23(9.1) by an amendment to the Act –
Statutes of Canada 1986, chapter 9.
[25]
In his oral argument,
counsel for Dupont focused on the addition to the definition “of manufacturer
or producer” in paragraph (e) when the excise tax on diesel fuel was first
imposed. He labeled this paragraph as “the deemed manufacturer clause” and
argued it conferred manufacturer status on a distributor like on Dupont which
made it such that when the distributor purchased from the manufacturer of the
diesel fuel oil, the manufacturer did not have to collect or deduct the tax
because that burden legally was shifted to the distributor who now had the obligation
to collect and deduct the excise tax in appropriate circumstances based on
the actual use by its customers. This circumstance, according to him, casts a
different light on the interpretation to be given to now section 23(9.1). Its
purpose was not to shift the legal burden of collecting and remitting from the
manufacturer of the diesel fuel to its distributor; that was the purpose of the
deemed manufacturer provision.
[26]
According to Dupont’s
counsel, this workable scheme was destroyed when, for reasons unknown, the
deemed manufacturer clause was repealed in 1988. This repeal, according to
counsel, forced the Government to adopt illegal means to try to repair the
damage done – administratively shift the burden back to the distributor. He
points to ET/SL Policy Statement EP-001 and the notice by the Minister
of Finance of proposed legislation to enact proposed section 68.01 into the Act
for the purpose of allowing a refund on diesel fuel for end users and
unlicensed vendors.
[27]
I am not persuaded by
Mr. Kaylor’s able
arguments for the following reasons:
1)
I agree with counsel
for the Minister, on the facts of this case, the deemed manufacturer clause
would not have applied to a distributor like Dupont because, based on the agreed
statement of facts, the furnace and stove oil which was sold was sold
exclusively and directly to consumers. I have no evidence otherwise.
2)
The interpretation he
urges would in effect repeal section 23(9.1), which is directly aimed at the
problem which underlies this case – diversion of use.
3)
The refund scheme in now
section 68.01 would not be applicable to Dupont because it refunds excise tax-paid
diesel fuel used for heating purposes, which is the reverse of
the situation before me.
[28]
Mr. Kaylor made
another argument which was not put to Justice Beaudry – the argument the excise
tax imposed under the Act is a single incidence tax. He relies on the Federal
Court of Appeal’s decision in Her Majesty the Queen v. Suncor Inc., (1996) 4 G.T.C. 6060 and specifically on the
following extract from Justice Hugessen’s reasons:
20 The
tax imposed by section 23 is a single incidence tax. It is charged upon
manufacturers, producers, importers and wholesalers at the time that their
goods are released into the stream of commerce leading to their distribution to
the ultimate consumers thereof. Unlike a value added tax, which is imposed at
multiple stages along the way, the scheme of exemptions built into section 23
of the statute is carefully designed to avoid the tax attaching to any given
product more than once. Thus, subsection 23(6) provides that a manufacturer
or producer who sells to a licensed wholesaler is freed from payment of the
tax; manifestly, this is because it is the wholesaler who is made responsible
for the tax by subsection 23(4). Subsection 23(7) is an integral part of this
same scheme. Its clear intent is to avoid the taxation of constituent or
component parts of goods which are themselves going to attract payment of the
tax. [My emphasis.]
[29]
Mr. Savary did not dispute the
fact the excise tax in question was a single incidence tax – one which is
charged only once – unlike GST. In this case, the evidence is that it was only
charged once. I agree with Mr. Savary’s submission.
[30]
As a
result, Dupont has failed to convince me any of the exceptions to the rule of
judicial comity have any application. Having made this finding, I also conclude
the administrative policy referred to by Mr. Kaylor was not tainted with any
illegality because it was validly based on section 23(9.1) of the Act.
[31]
I conclude
by expressing the view Justice Beaudry’s interpretation of section 23(9.1) is
clearly correct applying the principle of statutory interpretation set out in Rizzo & Rizzo Shoes Ltd. (Re). In that case, Justice Iacobucci wrote
there was only one principle or approach to statutory interpretation namely: “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.”
[32]
Applying that
principle to section
23(9.1), it is abundantly clear the two step test of intended use and actual
use cannot be applied simultaneously because it speaks to two separate
transactions: (1) a prior purchase of diesel fuel on a tax exempt basis because
it was for a non taxable use (the purchase by Dupont from Shell of furnace or
stove oil) and a subsequent sale by Dupont to its customers who told Dupont the
use was for a taxable use, i.e. for use in their internal combustion engine.
Section 23(9.1) then provides that the tax imposed on diesel fuel shall be
payable by the person who sells the diesel fuel (Dupont) at the time of the
delivery to the purchaser (Dupont’s customer). The statutory scheme is
very clear in my view.
JUDGMENT
THIS COURT
ORDERS AND ADJUDGES that this
action is dismissed with costs as are all of the joined actions (appeals) listed
in Appendix A to this judgment but, in their case, without costs.
“François Lemieux”
APPENDIX “A” TO THIS JUDGMENT
1. Pursuant to
the Order of Prothonotary Morneau, dated February 16, 2009:
|
T-1623-05
T-1630-05
T-1639-05
T-1655-05
T-1661-05
T-1668-05
T-1715-05
T-1733-05
T-1854-05
T-1861-05
T-1867-05
T-1879-05
T-1898-05
T-1904-05
T-1910-05
T-1930-05
T-1936-05
T-1942-05
T-1959-05
T-117-06
T-618-06
T-1006-06
T-1016-06
T-1309-06
T-1318-06
T-443-07
T-449-07
T-769-07
T-1785-07
|
T-1624-05
T-1631-05
T-1641-05
T-1656-05
T-1662-05
T-1669-05
T-1716-05
T-1734-05
T-1855-05
T-1862-05
T-1869-05
T-1893-05
T-1899-05
T-1905-05
T-1911-05
T-1931-05
T-1937-05
T-1944-05
T-112-06
T-118-06
T-706-06
T-1007-06
T-1017-06
T-1310-06
T-1319-06
T-444-07
T-450-07
T-1641-07
T-1786-07
|
T-1625-05
T-1632-05
T-1650-05
T-1657-05
T-1663-05
T-1673-05
T-1717-05
T-1736-05
T-1856-05
T-1863-05
T-1871-05
T-1894-05
T-1900-05
T-1906-05
T-1912-05
T-1932-05
T-1938-05
T-1946-05
T-113-06
T-119-06
T-1001-06
T-1009-06
T-1019-06
T-1313-06
T-1320-06
T-445-07
T-451-07
T-1781-07
T-1789-07
|
T-1626-05
T-1635-05
T-1652-05
T-1658-05
T-1664-05
T-1674-05
T-1718-05
T-1737-05
T-1857-05
T-1864-05
T-1875-05
T-1895-05
T-1901-05
T-1907-05
T-1927-05
T-1933-05
T-1939-05
T-1947-05
T-114-06
T-120-06
T-1002-06
T-1010-06
T-1020-06
T-1314-06
T-427-07
T-446-07
T-452-07
T-1782-07
T-469-08
|
T-1627-05
T-1636-05
T-1653-05
T-1659-05
T-1665-05
T-1678-05
T-1720-05
T-1738-05
T-1859-05
T-1865-05
T-1876-05
T-1896-05
T-1902-05
T-1908-05
T-1928-05
T-1934-05
T-1940-05
T-1948-05
T-115-06
T-226-06
T-1003-06
T-1011-06
T-1307-06
T-1316-06
T-441-07
T-447-07
T-453-07
T-1783-07
|
T-1629-05
T-1637-05
T-1654-05
T-1660-05
T-1667-05
T-1714-05
T-1731-05
T-1852-05
T-1860-05
T-1866-05
T-1877-05
T-1897-05
T-1903-05
T-1909-05
T-1929-05
T-1935-05
T-1941-05
T-1953-05
T-116-06
T-234-06
T-1005-06
T-1012-06
T-1308-06
T-1317-06
T-442-07
T-448-07
T-454-07
T-1784-07
|
The
joined files
2. Pursuant
to my order dated January 19, 2010 as amended:
|
T-1835-08
T-1842-08
T-219-09
T-225-09
T-484-09
T-492-09
T-498-09
T-875-09
T-1009-09
T-1735-09
T-1742-09
T-1748-09
|
T-1836-08
T-214-09
T-220-09
T-226-09
T-486-09
T-493-09
T-499-09
T-876-09
T-1010-09
T-1736-09
T-1743-09
T-1749-09
|
T-1837-08
T-215-09
T-221-09
T-227-09
T-487-09
T-494-09
T-870-09
T-877-09
T-1011-09
T-1737-09
T-1744-09
|
T-1838-08
T-216-09
T-222-09
T-232-09
T-488-09
T-495-09
T-872-09
T-878-09
T-1012-09
T-1738-09
T-1745-09
|
T-1839-08
T-217-09
T-223-09
T-481-09
T-489-09
T-496-09
T-873-09
T-879-09
T-1718-09
T-1740-09
T-1746-09
|
T-1841-08
T-218-09
T-224-09
T-482-09
T-491-09
T-497-09
T-874-09
T-880-09
T-1734-09
T-1741-09
T-1747-09
|
The joined files
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