Citation: 2011 TCC 544
Date: 20111205
Docket: 2011-1073(GST)I
BETWEEN:
PIERRETTE BARIBEAU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
AND:
Docket: 2011-1075(GST)I
BETWEEN :
LIBOIRE BEAULIEU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Hogan J.
INTRODUCTION
[1]
On March 4, 2010,
Liboire Beaulieu and his wife Pierrette Baribeau (the “appellants”) were each assessed in the amount of $20,563.32 for the
goods and services tax (GST), which, with interest and penalties, totalled
$23,898.14. In issuing the assessment, the Minister of National Revenue (the Minister)
made the assumption that the appellant sold 9,644 cartons of 200 contraband
cigarettes between January 1, 2006, and September 22, 2009. Each of
the assessments against the appellants is based on the same taxable supplies. Furthermore,
the uncollected and claimed GST was calculated by assuming consideration that
included $20.60 per carton sold as tax under the Tobacco Tax Act (Quebec).
[2]
The appeals were heard on common evidence.
THE FACTS
[3]
In assessing the appellant
Liboire Beaulieu, the Minister relied on the following assumptions of fact:
[Translation]
(a) On September 23, 2009, a search of the appellant’s
residence, situated at 19 Gauvreau Street, Trois-Pistoles, and vehicle, a Chevrolet
Venture bearing licence plate number ZSP647, was conducted;
(b) At the time of the search, 49 packs of 200
unstamped cigarettes each were seized, that is, a total of 9,800
cigarettes;
(c) The appellant told the police that he had
been selling unstamped tobacco de Gaston Parent for 3 to 4 years with his wife,
Pierrette Baribeau, for $25 per pack;
(d) The appellant also stated to the police
that in early June 2009 he started selling unstamped cigarettes with Ulric Jalbert;
(e) During the period in issue, the appellant
purchased two cases of 50 packs of 200 unstamped cigarettes on a weekly basis
and the tobacco was stored at his residence and sold by his wife, Ms. Pierrette
Baribeau, for $28 per pack of 200 cigarettes;
(f) The police investigation shows that
both the appellant and his wife, Pierrette Baribeau, unlawfully sold cigarettes
during the period from January 1, 2006, to September 22, 2009;
(g) During the period from January 1, 2006,
to June 30, 2009, the appellant sold 200 packs of 200 cigarettes per month and 400
packs of 200 cigarettes per month during the period from July 1, 2009, to
September 22, 2009, that is, a total of $9,644 packs of 200 cigarettes sold, as
appears in the following table:
|
January 1, 2006, to June 30, 2009
|
41 months X 200
|
8,200 packs
|
|
July 1, 2009, to August 31, 2009
|
3 months X 400
|
1,200 packs
|
|
September 1, 2009, to September 22, 2009
|
|
244 packs
|
|
400 X 22 / 30 = 293 – 49 packs
seized = 244
|
(h) The tobacco tax for the period in issue,
is $0.103 per cigarette or $20.60 for one pack;
(i) The GST for the period from August 1, 2006,
to December 31, 2007, is 6% and for the period from January 1, 2008, to
September 22, 2009, it is 5%;
(j) The selling price for one pack of 200
cigarettes for the period from January 1, 2006, to May 31, 2009, was $25 and
$28 until the end of the period in issue;
(k) Accordingly, following taxable sales of
$155,040 at the rate of 6% for the period from August 1, 2006, to December 31, 2007,
the appellant ought to have collected GST in the amount of $9,302.40;
(l) For the period from January 1, 2008, to
September 22, 2009, the appellant made taxable sales of $225,218.40 and at
the rate of 5% ought to have collected GST in the amount of $11,260.92;
(m) Accordingly, the appellant was assessed for an amount of
$20,563.32 in GST.
[4]
In assessing the
appellant Pierrette Baribeau, the Minister relied on the following assumptions
of fact:
[Translation]
(a) On September 23, 2009, a search of the
appellant’s residence, situated at 19 Gauvreau Street, Trois-Pistoles, and a
vehicle, a Chevrolet Venture bearing licence plate number ZSP647, was conducted;
(b) At the time of the search, 49 packs of
200 unstamped cigarettes each were seized, that is, a total of 9,800
cigarettes;
(c) The appellant’s husband told the police
that he had been selling unstamped tobacco de Gaston Parent for 3 to 4 years
with his wife, appellant Pierrette Baribeau, for $25 per pack;
(d) The appellant’s husband also stated to
the police that in early June 2009 he started selling unstamped cigarettes with
Ulric Jalbert;
(e) During the
period in issue, the appellant’s husband, Liboire Beaulieu, purchased two cases
of 50 packs of 200 unstamped cigarettes on a weekly basis and the tobacco was
stored at his residence and sold by the appellant for $28 per pack of 200
cigarettes;
(f) The police investigation shows that
both the appellant and her husband, Liboire Beaulieu, unlawfully sold
cigarettes during the period from January 1, 2006, to September 22, 2009;
(g) During the period from January 1, 2006,
to June 30, 2009, the appellant sold 200 packs of 200 cigarettes per month and
400 packs of 200 cigarettes per month during the period from July 1, 2009, to
September 22, 2009, that is, a total of $9,644 packs of 200 cigarettes sold, as
appears in the following table:
|
January 1, 2006, to June 30, 2009
|
41 months X 200
|
8,200 packs
|
|
July 1, 2009, to August 31, 2009
|
3 months X 400
|
1,200 packs
|
|
September 1, 2009, to September 22,
2009
|
|
244 packs
|
|
400 X
22 / 30 = 293 – 49 packs seized = 244
|
(h) The tobacco tax for the period in issue,
is $0.103 per cigarette or $20.60 for one pack;
(i) The GST for the period from August 1, 2006,
to December 31, 2007, is 6% and for the period from January 1, 2008, to
September 22, 2009, it is 5%;
(j) The selling price for one pack of 200
cigarettes for the period from January 1, 2006, to May 31, 2009, was
$25 and $28 until the end of the period in issue;
(k) Accordingly, following taxable sales of
$155,040 at the rate of 6% for the period from August 1, 2006, to December 31,
2007, the appellant ought to have collected GST in the amount of $9,302.40;
(l) For the period from January 1, 2008, to
September 22, 2009, the appellant made taxable sales of $225,218.40 and at
the rate of 5% ought to have collected GST in the amount of $11,260.92;
(m) Accordingly, the appellant was assessed for an amount of
$20,563.32 in GST.
ISSUES
[5]
In the case at bar, the
following issues arise:
(a)
Whether the appellants met
their initial burden of demolishing the assumptions made by the Minister in his
assessment.
(b)
Whether the amount of
consideration on which the GST not collected and not remitted to the Receiver
General is calculated includes the duty on tobacco products within the meaning
of the Excise Tax Act.
(c)
Whether the respondent can
amend her Reply to the Notice to the Notice of Appeal, inter alia to
claim that the appellants are jointly and severally liable for the assessments.
ANALYSIS
[6]
It is trite law that in
taxation the standard of proof is the civil balance of probabilities. . , and that within
balance of probabilities, there can be varying degrees of proof required in
order to discharge the onus, depending on the subject matter. The Minister,
in making assessments, proceeds on assumptions. . . and the initial onus is on
the taxpayer to "demolish" the Minister's assumptions in the
assessment. The initial burden is only to
"demolish" the exact assumptions made by the Minister but no more. This initial onus of "demolishing" the Minister's
exact assumptions is met where the appellant makes out at least a prima facie
case.
The first issue
[7]
In this case, it is
appropriate to deal with the following matter: whether the appellants met their
initial onus of “demolishing” the assumptions underpinning the Minister’s
assessment.
[8]
In my view, the answer
is no owing to the numerous contradictions in the testimonies of the witnesses
called by the appellants.
The
testimony of Gaston Parent
[9]
Counsel for the appellants
began presenting their case with testimony of Gaston Parent, who was the
subject of a search on November 4, 2008, during which police officers found 3,000
contraband cigarettes at his residence.
[10]
Although Mr. Parent pleaded
guilty on April 15, 2010, to two charges laid by the RCMP related to cigarette
contraband, one of the charges was that he was in possession of 74,400
cigarettes between January 1 and November 3, 2008, he appears to have claimed
in the Tax Court of Canada that he only pleaded guilty to the charge relating to
the 3,000 cigarettes found during the search of November 4, 2008.
[11]
Moreover, Mr. Parent admitted
during his examination that he had planned to acquire 74,400 cigarettes on
November 22, 2008, had he not been the subject of a police operation. However, when
asked about it, he seemed unable to explain to the Court the way in which he
disposed of his stocks. Mr. Parent stated that he sold all of his goods
without anyone’s help and that he was able to find on his own close to 180 different
clients in the city of Trois-Pistoles alone.
[12]
What is particularly
odd is that Mr. Parent claimed to have been threatened by the police
officers who arrested him on November 4, 2008. The police officers also
allegedly offered to pay him $400 if he agreed to identify his supplier.
Clearly, that statement was later denied by the police officers in the case.
[13]
Finally, although at
first glance Mr. Parent clearly stated that he never sold contraband cigarettes
to Mr. Beaulieu or Ms. Baribeau, it is certainly permissible to
analyze the man’s credibility. Mr. Parent has known the appellants for
over 30 years. Moreover, it must be noted that he declared bankruptcy
toward the end of December 2010 or in early January 2011 and that he no longer had
anything to fear in this case.
The
testimony of Liboire Beaulieu
[14]
Counsel for the appellants
then probed Mr. Beaulieu. There is no denying that the credibility of Mr. Beaulieu
is significantly diminished by a testimony fraught with confusion and inconsistencies.
[15]
From the outset, a
major shortcoming in the credibility of Mr. Beaulieu stemmed from the fact
that that he repudiated a voluntary statement he gave to the police on September
23, 2009. Although he at times recognized his signature or initials on the
written statement issued to the police, he denied their authenticity elsewhere
in the document. The appellant even stated that he signed the documents without
looking at them, that the statement was a figment of the police’s imagination and
that it resulted from anonymous tips, and that he remained completely silent at
both the police stations in Trois-Pistoles and in Rivière-du-Loup.
[16]
The voluntary statement
made to the police on September 23, 2009, contains the following admissions:
·
Mr. Beaulieu
purchased contraband tobacco from Gaston Parent for 3 years, until November
2008.
·
He
purchased 50 cartons of 200 cigarettes per week and his wife was in charge of
selling them at the house. He paid $18 a carton and resold them $25.
·
Mr. Beaulieu
stopped purchasing to Mr. Parent when the police officers searched his
home in November 2008.
·
Ulric
Jalbert subsequently met with Mr. Beaulieu at the wharf to ask him if he
wanted to sell tobacco with him.
·
They
went to the Indian reserve once a week to purchase 100 cartons of 200
cigarettes. Ulric Jalbert paid $950 for a box of 50 cartons. The
appellants sold the cigarettes purchased from Mr. Jalbert from June 2009 to
September 22, 2009.
·
It
was Ms. Baribeau who was in charge of selling 100 cartons of
cigarettes per week for $28.
·
The
appellants received 4 cartons of cigarettes each per month in addition to $1
for each carton sold.
[17]
During his examination,
Mr. Beaulieu formally denied having sold cigarettes purchased from Gaston
Parent, or even having purchased cigarettes from him. It is nevertheless odd
that the appellant admits having driven clients to Mr. Parent’s home with
his own car so that they could purchase contraband cigarettes. At the time, Mr. Beaulieu,
according to him, purchased his cigarettes at the restaurant and drove individuals
who wished to purchase cigarettes at Mr. Parent’s home simply to
accommodate them.
[18]
Mr. Beaulieu then
stated, against all logic, that prior to the search of his home on November
4, 2008, he did not know that Mr. Parent sold contraband cigarettes. Caught
in a trap when asked to specify the exact moment at which he took clients to Mr. Parent’s
home so that they could get cigarettes, the appellant finally admitted that he
had made a [Translation] “mistake.”
[19]
Mr. Beaulieu also mentioned
that he had only known Ulric Jalbert since 2009 and that he met him during a
visit with Mr. Jalbert’s mother. That statement is contrary to the statement
made to police that he met Mr. Jalbert at the wharf, a statement also confirmed
by Mr. Jalbert himself.
[20]
Mr. Beaulieu stated
that he only accompanied Mr. Jalbert five or six times to the Indian
reserve and that it was usually on Fridays. There most certainly seems to be
some confusion on that point, as Mr. Jalbert, for his part, submits that
the trips to Kanesatake were made on Saturdays and that Mr. Beaulieu accompanied
him during each trip.
[21]
Mr. Beaulieu stated
that the two men would go to Kanesatake twice a month and that each time they
would purchase one container of cigarettes for $475. He then corrected himself
by changing the price to $950. Mr. Jalbert, for his part, claimed that he
and his co-conspirator only went to the Indian reserve once a month to purchase
one container of cigarettes for $750. As mentioned earlier, the statement
provided to police indicated that the two individuals went to the Indian reserve
once a week to get two containers of cigarettes for $950 each.
[22]
Mr. Beaulieu admitted that he
and his wife each received four cartons of cigarettes per month but denied that
they received $1 per package sold.
[23]
Finally, Mr. Beaulieu denied
that his wife received the money directly form the clients. Mr. Beaulieu swore
that the clients paid Mr. Jalbert in person before picking up the tobacco
at his house. However, Mr. Beaulieu seemed unable to explain to the Court
how, for example, Ms. Baribeau knew whether the clients had actually paid Mr. Jalbert
for the packs they sought from him.
The examination of Ulric Jalbert
[24]
Although Mr. Jalbert
formally denied remitting $1 per pack sold to the appellants, and although he
confirmed, on the one hand, that the cigarettes found during the search
of September 23, 2009, at the appellants’ home belonged to him, and, on
the other hand, that the clients always paid him directly without the
appellants’ having to handle the money, again the credibility of the testimony is
still questionable.
[25]
First, it seems to me redundant
to revisit the numerous inconsistencies between the testimony of Mr. Jalbert
and that of Mr. Beaulieu.
[26]
Furthermore, it seems
to me relevant to note that Mr. Jalbert also declared bankruptcy owing to court
proceedings against him related to cigarette contraband and that he had nothing
to fear by stating that the illegal sales were made by him rather than the appellants.
Examination of Pierrette
Baribeau
[27]
Before completing the presentation
of his evidence with the testimonies of the police officers involved in the
case and that of the official who prepared the notices of assessment, counsel
for the appellants examined Ms. Baribeau.
[28]
Let us recall that when
examined, Mr. Beaulieu claimed that clients would go get their cartons of cigarettes
at the house but specified that his wife never handled the money. Ms. Baribeau
went further, claiming that except for Mr. Jalbert’s mother and brother, no
one ever came knocking at her door for cigarettes. According to her, it was
only clients who wanted to purchase marine worms.
The second issue
[29]
We must now address the
second issue: whether the amount of the consideration on which GST not
collected and not remitted to the Receiver General is calculated includes, within
the meaning of the Excise Tax Act (the ETA), the duty on tobacco
products.
[30]
First, it is important
to note that subsection 165(1) of the ETA states as follows:
Subject to this Part, every recipient of a taxable supply made in
Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the rate of 5% on the
value of the consideration for the supply.
[31]
“Consideration” is therefore
crucial to the calculation of the amount of GST to be paid by the receiver of a
taxable supply and to be collected by the supplier.
[32]
Sections 152 to 165 of
the ETA complement the short definition of the term “consideration” set out in subsection
123(1) of the ETA, which reads as follows:
“consideration” includes any amount that is
payable for a supply by operation of law.
[33]
Section 154 of the ETA is
relevant in determining whether the federal and provincial duties on tobacco
products are within the term “consideration.” The section reads in part as
follows:
154(1) In
this section, “provincial levy” means a tax, duty or fee imposed
under an Act of the legislature of a province in respect of the supply,
consumption or use of property or a service.
(2) For the purposes of this Part, the consideration
for a supply of property or a service includes
(a) any tax, duty or fee
imposed under an Act of Parliament that is payable by the recipient, or payable
or collectible by the supplier, in respect of that supply or in respect of the
production, importation, consumption or use of the property or service, other
than tax under this Part that is payable by the recipient;
(b) any provincial levy that is payable
by the recipient, or payable or collectible by the supplier, in respect of that
supply or in respect of the consumption or use of the property or service,
other than a prescribed provincial levy that is payable by the recipient; and
(c) any
other amount that is collectible by the supplier under an Act of the legislature
of a province and that is equal to, or is collectible on account of or in lieu
of, a provincial levy, except where the amount is payable by the recipient and
the provincial levy is a prescribed provincial levy.
[34]
In practice, section 154 of the ETA provides that for the purposes of computing the tax
payable for a supply of property or a service, the consideration includes any
tax, duty or fee provided for by an Act or Parliament or an Act of the
legislature of a province that is imposed on the supplier or the recipient. Taxes, duties and fees under the Taxes, Duties and
Fees (GST/HST) Regulations are,
however, excluded.
[35]
Three sections of the Tobacco
Tax Act involve
provincial duties relevant to this appeal, namely, sections 8, 7.1.1 and
11.
[36]
In short, section 11 of the TTA provides
that every retail vendor shall collect, as a mandatary of the Minister, the tax
provided for in section 8 of the TTA, that is, $20.60 for one carton of 200
cigarettes at the relevant time.
[37]
Thus, it is possible to observe not
only that the TTA imposes provincial duties when tobacco is sold by retail sale,
but also that the TTA provides, in section 7.1.1, that no person may sell tobacco at retail for a price that
is lower than the aggregate, in respect of the tobacco, of the excise duty
applicable under the Excise Act, 2001, the tobacco tax applicable under
the TTA and the tax applicable under Part IX of the ETA computed on the
aggregate of the excise duty and the tobacco tax.
[38]
Seeing as the tobacco tax under
the TTA is a provincial levy collectible by the appellants in respect of each
of their transactions in their capacity as suppliers of a taxable supply, subsection
154(2)(b) of the ETA is applicable and the amount of $20.60 is part
of the consideration for one carton of 200 cigarettes.
[39]
Thus, it is my opinion that the Minister
was right to include $20.60 in the consideration in computing the GST not collected
and not remitted to the Receiver General for each sale of contraband cigarettes
under appeal.
The third issue
[40]
Finally, let us address the third
issue: whether the
respondent can amend her Reply to the Notice to the Notice of Appeal, inter
alia to claim that the appellants are jointly and severally liable for the
assessments
[41]
In her Reply to the Notice of Appeal,
the respondent never stated that the appellants carried on a business or partnership
or that they were jointly and severally liable for the assessments. Moreover,
in her Reply to the Notice of Appeal, the respondent simply assumed that each
of the appellants made 100% of the sales of the cigarettes so assessed. The
respondent failed to submit that it was a partnership made up of the two appellants
which made the sales of the cigarettes which led to the assessments in issue. It
was only in her written submissions provided after I so requested at the hearing
that the respondent finally explained to the Court the foundation of the joint
assessment as to the uncollected GST.
[42]
Subsection 298(6.1) of the ETA, which
came into force in 2000, specifically provides that the Minister may advance an alternative argument in support
of an assessment.
[43]
In effect, subsection 298(6.1)
of the ETA, as well as its counterpart subsection 152(9) of the ITA, were added
following the decision of the Supreme Court of Canada in The Queen v. Continental
Bank of Canada, in which the Supreme Court stated that the
Minister should not be allowed to advance alternative reasons for an assessment after the limitation period has
expired.
[44]
The Department of Finance
published an explanatory note in December 1999 as to the purpose of that provision:
New subsection 298(6.1) is added to clarify that the
Crown has the right, on an appeal of a GST/HST assessment, to advance an
alternative argument in support of that assessment even if the normal reassessment
period has expired. The amendment is made in light of remarks by the Supreme
Court of Canada in the case of The Queen v. Continental Bank of
Canada, which might otherwise have been interpreted as calling this right
into question. The provision expressly recognizes the Court protection afforded
taxpayers that an alternative argument nevertheless cannot be advanced to the
prejudice of the right of a taxpayer to introduce relevant evidence to rebut
the argument.
Subsection 298(6.1) applies to any assessment in respect
of which an appeal is disposed of after the day on which this subclause is
assented to, regardless of when the appeal was instituted.
[45]
Subsection 298(6.1) of the ETA reads
as follows:
The Minister may advance an
alternative argument in support of an assessment of a person at any time after
the period otherwise limited by subsection (1) or (2) for making the assessment
unless, on an appeal under this Part,
(a) there is relevant evidence that the person is no longer able to
adduce
without leave of the court; and
(b)
it is not appropriate in the circumstances for the court to order that the
evidence be adduced.
[46]
A cursory examination shows that
there is an extensive body of case law on subsections 298(6.1) of the ETA and
152(9) of the ITA. The decision
of the Federal Court of Appeal in Walsh v. Canada is particularly
instructive on the application of such subsections; Richard C.J. (as he then
was) established certain conditions for the application of such provisions:
The following conditions apply when the Minister seeks
to rely on subsection 152(9) of the Act:
1) the Minister cannot include transactions which did not
form the basis of the taxpayer's reassessment;
2) the right of
the Minister to present an alternative argument in support of an assessment is
subject to paragraphs 152(9)(a) and (b), which speak to the prejudice to the
taxpayer; and
3) the Minister cannot use subsection 152(9) to reassess
outside the time limitations in subsection 152(4) of the Act, or to collect tax
exceeding the amount in the assessment under appeal.
[47]
However, Walsh v.
Canada, like many other decisions rendered with respect to subsections 298(6.1)
of the ETA and 152(9) of the ITA, involves a motion by the Minister to amend
the Reply to the Notice of Appeal to include an additional legal argument in support of the
assessments in issue.
[48]
In the case at bar, the respondent
did not request that her pleadings be amended and the case law clearly indicates
that the respondent should not be in a better
position than if such a request would have been made.
[49]
As stated by Hugessen
J. of the Federal Court of Appeal in R. v. Bowens, “unpleaded assumptions have no effect on
the burden of proof one way or the other.”
[50]
Moreover, in Hickman
Motors Ltd. v. Canada, Heureux-Dubé J. indicates that the initial burden is only to
"demolish" the exact assumptions made by the Minister but no more.
[51]
According to Bowman J., formerly
Chief Justice of the Tax Court of Canada, procedural
fairness requires that in cases governed by the informal procedure the Crown
not be permitted at the 11th hour to spring a brand new argument on a taxpayer:
Neither of these arguments was
pleaded or advanced. In the circumstances, I am allowing the appeals on the
basis of the appellant's evidence that he paid $7,200 in each of the years in
satisfaction of his liability for 1994, 1995, 1996 and 1997, as required by the
Order of the Ontario District Court. See Tsiaprailis v. The
Queen, 2005 DTC 5119; R. v. Sills, 85 DTC
5096.
To permit the respondent to rely for
the first time at trial on a brand new basis of disallowance would violate a
fundamental rule of procedural fairness.
. . .
. . .
Here, the Crown did not ask for an
amendment and, for the reasons given in Poulton, I
would probably not have granted it. However, I do not think the Crown can be in
a better position by raising an unpleaded issue at trial than it would be if it
had asked for and been denied an adjournment.
[52]
In Adler v. The Queen, supra, the Tax
Court of Canada had to decide an issue very similar to the one in this case. Webb J. had to decide whether the
respondent could, during closing arguments, raise an additional basis for the
denial of the taxpayer’s expenses. He stated as follows:
It is not appropriate for counsel
for the Respondent, during closing arguments, to raise a particular provision
of the Act as a basis for reassessment when there is
no indication in the Reply that the particular provision formed the basis for
the reassessment or was an alternative basis for the reassessment.
Paragraph 6 of the Tax Court of Canada Rules (Informal
Procedure) provides that:
6.(1) Every reply to a notice of appeal
shall contain a statement of
(a) the
facts that are admitted,
(b) the
facts that are denied,
(c) the facts of
which the respondent has no knowledge and puts in issue,
(d) the findings or assumptions
of fact made by the Minister when making the assessment,
(e) any
other material facts,
(f) the issues to
be decided,
(g) the
statutory provisions relied on,
(h) the reasons the
respondent intends to rely on, and
(i) the relief sought.
. . .
In Walsh v. The Queen, Chief Justice Richard (as he then was) of the Federal Court of
Appeal made the following comments in relation to subsection 152(9) of the Act:
[18] The following conditions apply when the Minister seeks
to rely on subsection 152(9) of the Act:
1) the Minister cannot include transactions
which did not form the basis of the taxpayer's reassessment;
2) the right of the Minister to present an
alternative argument in support of an assessment is subject to paragraphs
152(9)(a) and (b), which speak to the prejudice to the taxpayer; and
3) the Minister
cannot use subsection 152(9) to reassess outside the time limitations in
subsection 152(4) of the Act, or to collect tax exceeding the amount in the
assessment under appeal.
It seems to me that in addition to
the conditions as set out above, the Minister should not be able to circumvent
procedural fairness by raising a basis for reassessment during closing
arguments that was not disclosed in the Reply. Procedural fairness would dictate
that the proper procedure for the Respondent to have followed, if the
Respondent had wanted to advance a new basis for the reassessment, would have
been for the Respondent to have brought a Motion, prior to the commencement of
the hearing, to amend the Reply to include the new basis. It does not seem to
me that the provisions of subsection 152(9) of the Act
should be interpreted as dispensing with the procedural requirement of amending
pleadings to include a new argument. Subsection 152(9) of the Act provides that the Minister may advance an alternative
argument at any time but it seems to me that such argument must be advanced in
compliance with the rules of this Court and the rules of procedural fairness.
[53]
According to the decision in Rijonta,
cited with approval in Adler, procedural fairness requires that I dismiss
the respondent’s argument raised for the first time in argument. For these
reasons, I find that the respondent cannot claim that the appellants are
jointly and severally liable
for the uncollected GST. Seeing as such
an argument must be dismissed, I believe each of the appellants is responsible
for the GST for half of the sales, in the absence of better evidence as to the
manner in which the sales must be divided between them.
CONCLUSION
[54]
The appellants have not adduced a prima
facie case displacing the Minister’s assumptions of fact. The testimonies of the appellants, as those of Mr. Parent
and Mr. Jalbert, are fraught with inconsistencies and confusion.
[55]
However, the respondent
did not claim in the Reply to the Notice of Appeal that the appellants carried
on a business or that they were jointly and severally liable for the
assessments. Nor did the respondent seek to amend her pleadings so as to include
an additional legal argument in support of the assessments in issue. The case law clearly indicates that the Minister
cannot circumvent procedural
fairness by raising a basis for assessment during closing arguments that was
not disclosed in the Reply to the Notice of Appeal.
[56]
In the absence of
better evidence, I conclude that half of the sales so assessed must be attributed
to each of the appellants. However, each of the appellants is entitled to
benefit from the fact that they are a small supplier with the result that only
the sales that were made when the appellants were not small suppliers are
subject to the duties imposed by the assessments in issue.
Signed at Ottawa, Canada, this 5th day of December 2011.
“Robert J. Hogan”
Translation certified true
on this 18th day
of January 2012.
Daniela Possamai,
Translator
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