Date: 20051013
Docket: A-479-04
Citation: 2005 FCA 333
CORAM: SEXTON J.A.
EVANS J.A.
SHARLOW J.A.
BETWEEN:
800537 ONTARIO INC.
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Toronto, Ontario, on October 13, 2005)
SEXTON J.A.
[1] The appellant, an automobile dealer, in London, Ontario sold automobiles to purchasers in the U.S.A. In so doing, the appellant prepared two sets of sales form, one of which showed that Goods and Service Tax (GST) was being charged and one which did not. However, the total balance due from the purchaser was the same in each invoice. The purpose of the GST sales form was said by the appellant to be for the purpose of facilitating the passage of the automobile over the U.S. border. However, the Agreed Statement of Facts admitted that U.S. customs was not interested in whether or not GST was being charged.
[2] The purchasers then claimed rebates of the GST shown on one of the invoices, based on the fact that because the automobiles were exported from Canada, there was a zero-rated supply and thus no GST was payable.
[3] Rebates were paid to the U.S. purchaser but the appellant remitted no monies by way of GST to the respondent.
[4] Upon becoming acquainted with these facts, the respondent assessed the appellant for the GST which the sales form showed it had charged.
[5] The Tax Court dismissed the appellant's appeal holding that:
a. the appellant had charged the U.S. purchasers "an amount as or on account" of GST; and
b. that the appellant was obliged to remit the amounts so collected even if the automobiles were zero-rated.
[6] In so doing, the Tax Court Judge made crucial findings of credibility against evidence led by the appellant.
[7] On appeal to this Court, the appellant argued:
a. that because the automobiles were a zero-rated supply, there never was any tax payable and that hence the Ministry had no power to collect any tax;
b. that the Tax Court Judge made palpable and over riding errors in his assessment of the evidence in concluding that the true transactions were ones in which the appellant was charging GST.
[8] We can find no error in the legal reasoning or the findings of fact of the Tax Court Judge.
[9] As to the first argument, we find that sections 225(1)a and 222(1) make it clear that Parliament's intention was that where a person has collected amounts "as or on account of tax" such amounts must be remitted to the Receiver General.
[10]
| 222. (1) Where, in a reporting period, a person collects tax under Division II or amounts as or on account of tax under Division II, the person shall, for all purposes, other than the bankruptcy of the person, be deemed to hold the tax or amounts so collected in trust for Her Majesty until they are remitted to the Receiver General or withdrawn under subsection (2).
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222. (1) La personne qui, au cours d'une période de déclaration, perçoit la taxe prévue à la section II ou des montants au titre de cette taxe est réputée, à toutes fins utiles, sauf pour sa faillite, détenir cette taxe ou ces montants en fiducie pour Sa Majesté du chef du Canada jusqu'à ce qu'ils soient versés au receveur général ou retirés en application du paragraphe (2).
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| 225. (1) Subject to this Subdivision, the net tax for a particular reporting period of a registrant is the positive or negative amount determined by the formula
A - B
(a) all amounts that become collectible and all other amounts collected by the registrant in the particular reporting period as or on account of tax under Division II, and
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225. (1) Sous réserve des autres dispositions de la présente sous-section, la taxe nette pour une période de déclaration donnée d'un inscrit correspond au montant, positif au négative, obtenu par la formule suivante
A - B
(a) les montants devenus percevables et les autres montants perçus par l'inscrit au cours de la période donnée au titre de la taxe prévue à la section II;
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[11] The appellant argued that the word "tax" wherever it is used in part IX of the Excise Tax Act means "tax payable", by virtue of the definition contained in section 123(1) of the Act and that because no tax was ever payable on these transactions, there was no power in the respondent to assess any tax.
[12] We think this takes an unduly restrictive view of the meaning of these sections.
[13] In [1966] S.C.R. 384">Highway Sawmills Limited v. M.N.R., [1966] S.C.R. 384; Cartwright J. at p. 393 said:
The answer to the question what tax is payable in any given circumstances depends, of course, upon the words of the legislation imposing it. Where the meaning of those words is difficult to ascertain it may be of assistance to consider which of two constructions contended for brings about a result which conforms to the apparent scheme of the legislation.
[14] We think that the result which conforms to the apparent scheme of the legislation, and particularly sections 222 and 225, is that persons who purport to collect GST are obligated to remit such payments to the Receiver General. Otherwise, when rebates of GST are made to third parties in respect of contracts said to be ones where GST is collected, the Receiver General is then left to seek a return of the rebates from the third parties. This can be difficult when such third parties are not within Canada as in the present case.
[15] We think therefore, that the scheme of the legislation is that where, as in this case, a seller collects money, purportedly for GST, he is under a duty to remit it. If indeed no GST should have been charged, and no GST has been remitted to the Receiver General, then the third parties should not have received a rebate. However, neither should they have had to pay GST to the seller. This
arises through the fault of the seller in this case. The seller should be left to his remedies against the buyer in such circumstances.
[16] We are reinforced in this view by the reasons of Sharlow J.A. in Gastown Actors Studio Ltd. V. R., [2000] F.C.J. No. 2047 (FCA) para 10 where she said:
a taxpayer who has in fact collected GST, whether for services that are taxable or for services that are later determined to be exempt supplies, must remit those amounts and is liable to be assessed if they are not remitted.
[17] As to the findings by the Tax Court Judge that the true nature of the transactions was that GST was charged to the U.S. purchasers, these findings were made on his careful assessment of the documentary evidence and the creditability of the appellant's witnesses. We can detect no error in his conclusions.
[18] The Ministry had also assessed penalties and interest pursuant to sections 280 and 285 which were upheld by the Tax Court. As found by the Tax Court Judge, there was a deliberate deception by the appellant in using the two sets of sales invoices. We can find no error in the reasons of the Tax Court Judge in this respect.
[19] The appeal will therefore be dismissed with costs.
"J. Edgar Sexton"
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