11 August 1994 GST/HST Interpretation 1994-08-11[2] - Penalty Assessed on a Customs Seizure

Dear XXXXX

I refer to your letter of May 2, 1993 requesting clarification on whether input tax credits (ITCs) may be claimed for any portion of the amount paid to Customs as a result of a customs seizure and also to raise concerns about the size of the penalty assessed on a customs seizure. I apologize for the delay in providing this response.

Statement of Facts:

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Rulings Requested:

1. Whether an input tax credit may be claimed on GST paid on a Customs seizure?

2. To compare the amount of penalty assessed under the Customs Act for the seizure to the amount of penalty imposed by section 280 of the Excise Tax Act (ETA).

Department's Position:

The GST legislation provides for a registrant to claim ITCs for tax that is paid or payable on imported goods. The Customs legislation is quite specific that the amount paid to Customs to obtain the return of goods seized is a forfeiture amount and is not duties or tax. Thus there can be no eligibility for ITCs since there was in fact no tax paid or payable. As a result, the amount paid by your client is considered to be an amount paid to obtain the return of the goods seized and no portion of the amount paid is considered to be GST. Although the Customs documentation currently identifies some of the amount paid as GST, the amount is still considered to be a seizure payment, not GST, and is not eligible to be claimed as ITCs. During discussions with Customs on this issue, Customs indicated that they will be modifying their documentation to address this concern.

Your concern about the amount of penalty imposed under the Customs legislation is a customs issue and I have taken the liberty of forwarding your letter to XXXXX for his action and attention.

This interpretation is based upon our current understanding of the ETA and regulations thereunder in their present form and does not take into account the effects of any future amendments thereto or future changes in interpretation.

Further, while we trust that our comments are of assistance to you, we would advise that they do not constitute a GST ruling and are, therefore, not binding upon the Department in respect of any particular fact situation.

If you require any further information on Customs matters, please contact your local customs office. Questions relating to GST may be referred to your local GST office located at XXXXX[.]

Yours truly,

H.L. Jones
Director
General Tax Policy
Policy and Legislation
Excise/GST

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