16 October 2001 GST/HST Interpretation 35469 - Interaction Between Section 224 and Subsection 313(2) of the Excise Tax Act

Dear XXXXX:

Thank you for your letter of April 4, 2001 concerning the interaction between section 224 and subsection 313(2) of the Excise Tax Act (ETA).

Interpretation Requested

You are asking if subsection 313(2) of the ETA would restrict a registrant supplier from undertaking legal proceedings, in accordance with section 224 of the ETA, against a recipient in court to recover unpaid tax more than four years after the tax in respect of the supply became payable.

Interpretation Given

Subsection 313(1) of the ETA provides that all taxes, net taxes, interest, penalties, costs and other amounts payable under the provisions of the ETA are debts due to Her Majesty in right of Canada and are recoverable as such (i.e. debts owed to the Crown) in the Federal Court or other court of competent jurisdiction or in any other manner provided for under the ETA.

Paragraph 313(2)(a) of the ETA places a limitation on subsection 313(1) and prohibits the Crown from commencing proceedings in a court for the recovery of tax, net tax, penalty, interest or other amount payable or remittable by a person under the ETA unless, at the time the action is commenced, the person has been or may be assessed for that amount. By virtue of paragraph 313(2)(b) of the ETA, in any other case, the Crown shall not commence any recovery proceedings in a court more than four years after the person became liable to pay or remit the amount.

Section 313 of the ETA is situated under the heading "Subdivision e - Collection". All of the activities set out under the "Subdivision e - Collection" heading are activities of the Crown, and not of suppliers.

Pursuant to section 224 of the ETA, where a supplier has made a taxable supply to a recipient, is required to collect the tax from the recipient in respect of the supply, has correctly disclosed the tax liability to the recipient and has accounted for or remitted the tax payable by the recipient in respect of the supply but has not collected the tax from the recipient, the supplier may bring an action in a court of competent jurisdiction to recover the tax from the recipient as though it were a debt due by the recipient to the supplier.

In contrast to section 313 of the ETA, section 224 of the ETA appears under the heading "Subdivision a - Collection" and the activities set out under this heading are activities of suppliers in their capacity as tax collectors.

There is no four-year limitation imposed under the provisions of the ETA on the supplier's ability to bring an action in a court of competent jurisdiction to recover a debt due by the recipient to the supplier.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0419.

Yours truly,

Anne Kratz
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate