Addy, J:
1 The defendant, a duly licensed wholesaler within the meaning of the Excise Tax Act, RSC 1952, c 100, purchased in November and December 1967, as it had in the past, its inventory of steel from a Canadian importer. The amount paid for the steel to the Canadian supplier included $14.60 per metric ton for ocean freight charges. The transportation costs were shown as a separate item on the invoices of the defendant's supplier.
2 The defendant alleged that, in computing the sales tax in accordance with the provisions of Regulation 28 of the Excise and Sales Tax Regulations, he was entitled to deduct the aforesaid sum of $14.60 per metric ton from the purchase price.
3 The Minister of National Revenue took the position that the sales tax had to be calculated on the total delivered price without deducting those particular ocean freight costs and claimed the sum of $721.82 for additional tax.
4 The facts were not disputed and were submitted by means of an agreed statement of facts. The licensed wholesaler was not the importer but purchased the goods from the Canadian importer who had imported them from a supplier overseas.
5 Since the case involves subparagraphs 30(1)(c)(i) and (ii) of the Excise Tax Act, as amended by SC 1959, c 23, and regulation 28(1)(c) of the General Excise and Sales Tax Regulations, they are reproduced hereunder for the sake of convenience:
30. (1) There shall be imposed, levied and collected a consumption or sales tax of eight per cent on the sale price of all goods- (c) sold by a licensed wholesaler, payable by him at the time of delivery to the purchaser, and the tax shall be computed
(i) on the duty paid value of the goods, if they were imported by the licensed wholesaler, or
(ii) on the price for which the goods were purchased by the licensed wholesaler, if they were not imported by him, and such price shall include the amount of the excise duties on goods sold in bond; or
28. (1) In this regulation,- • “cost of domestic goods” means the price at which domestic goods are invoiced by the supplier, including any amount that the purchaser is liable to pay to the vendor by reason of or in respect of the sale in addition to the amount charged as price, except that
(c) on goods purchased at a delivered price, transportation prepaid by the supplier of the goods to an independent carrier may be deducted from the invoiced price of the goods, provided that the amount of the transportation prepaid is shown as a separate item or as a note on the supplier's invoice and the licensed wholesaler has on file, for inspection by Excise Tax Auditors, a certified copy of the relevant transportation bill paid by the supplier. If this method of substantiating the amount of transportation prepaid is not practical, a licensed wholesaler may apply to the Department of National Revenue for permission to deduct a charge that is fair and reasonable.
6 The issue turns on the meaning of the word “price” in the expression “price for which the goods were purchased” in subparagraph 30(1)(c)(ii) above and more specifically on whether the ocean transportation costs, in the circumstances of the case at bar, do or do not constitute an element separate from the price of the goods as such.
7 Wherever applicable to the context, the basic or ordinary words of a fiscal statute, and as in the case of any other statute, should receive their ordinary popular meaning and natural sense. (See Gruen Watch Company of Canada Limited et al v The Attorney-General of Canada, [1950] C.T.C. 440, 4 D.T.C. 784, [1950] O.R. 429, and Her Majesty the Queen v Canadian Pacific Railway Company, [1969] C.T.C. 641 at 652, 69 D.T.C. 5434 at 5440.) Where, however in a taxing statute, there is any real doubt as to the meaning of a word or expression or where any word or expression is fairly capable of more than one interpretation, it is clear that the statute must be strictly interpreted against the taxing authority. This basic rule enunciated by Lord Cairns in Partington v. The Attorney-General (1869), LR 4 HL 100, has been frequently applied in Canadian decisions including the cases of Hon E Lapointe (Attorney-General of Canada) v. J T Wait Co et al, [1938–39] CTC 1 at 10, and B L Shaw v. MNR, [1938–39] CTC 346 at 348;1 D.T.C. 499-58.
8 The usual dictionary definition of the word “price” is the amount of money or its equivalent for which anything is bought, sold or offered for sale or that which must be given, done, or undergone. This definition is not of much help in the present case. However, it seems clear to me that if A purchases goods from B, the cost of transporting the goods from B's premises to A's premises may or may not be considered as a part of the price. The price may be f o b in certain point or expressed as the mere cost to the purchaser less cost of transportation or cost to the purchaser not inclusive of transportation. Where nothing is said and no particular custom or course of conduct has been established, it is normally up to A, the purchaser, to pay for the goods and to remove them at his expense. In other words, the transportation costs are not included in the price. However, the transportation costs, which B had to pay in order to obtain the goods in the first place before selling to A, are normally included as part and parcel of the price which the vendor B charges to A when the latter purchases the goods from him and are considered, along with other specific expenditures such as storage cost, etc, as an integral part of the costs of the goods in so far as B is concerned and, therefore, an integral part of the price to be charged to A for the goods themselves. It would be exceptional indeed for the cost of transportation from the original vendor to B not to be considered as an integral part of B's general cost for the goods for the purpose of determining his resale price and such expenditures would normally form an integral part of such price. From a profit standpoint, a middle man would normally add the cost of transportation in originally obtaining the goods plus any other specific incidental disbursements such as warehousing charges and packaging or handling disbursements, to the actual price paid for the goods themselves and then calculate his percentage profit mark up on the sum total of all the above items, with the resulting figure constituting his selling price.
9 When considering the above-quoted subparagraph 30(1)(c)(ii) of the Excise Tax Act in the light of the above conclusion, and when applying it to the present case, it seems evident that the price which the defendant, a licensed wholesaler who had not imported the goods, paid for them, must include the cost of transportation to the original importer from whom he purchased the goods. This amount must be included when calculating tax.
10 The ocean transportation, which was prepaid in the case at bar, was prepaid by the original supplier overseas who supplied the goods to the importer who in turn supplied the goods to the licensed wholesaler. The prepayment of ocean transport was obviously for the transporting of the goods to the Canadian supplier and not for the transporting of the goods from him to the defendant. Since the ocean transport was prepaid at the time of the purchase by the importer, I fail to see how on a resale to the licensed wholesaler the payment of the ocean transportation can be considered a prepayment of transport in so far as the defendant is concerned since the latter was not involved in any way in the transaction pursuant to which the ocean transport was either paid or prepaid.
11 The defendant, however, argues that, as “price” is not defined in the Act and as the Minister of Finance, pursuant to the powers vested in him by subsection 38(1) of the Excise Tax Act to “make such regulation as he deems necessary or advisable for the carrying out of the provisions of this Act” has seen fit to enact Regulation 28(1)(c) above quoted, the effect of that regulation is to exempt the cost of transportation involved in the present case from the incidence of the excise tax. He maintains that “transportation prepaid by the supplier” in the regulation means transportation prepaid by the original supplier and that the word “price” in the Act is susceptible of an interpretation which would exclude such original transportation costs.
12 He concludes that the limited interpretation of the word “price” suggested by him should govern because the Act should be interpreted in such a way as to avoid any contradiction with the regulation. In support of this contention he quotes Joseph Bélanger v His Majesty the King, 54 S.C.R. 265 at 280. It is to be noted, however, that this case dealt with interpreting a regulation in order to conform with a statute and not interpreting a statute in order to reconcile it with a regulation.
13 The meaning of any word or expression, which necessarily arises from a fair reading of that word or expression taken in context and considered in the light of all the other provisions of the statute itself and of the Interpretation Act, cannot be varied, changed, modified or interpreted by a regulation issued pursuant to the authority of the statute one is seeking to interpret, unless the statute clearly and unequivocally delegates to the regulation making authority power to do so. It is elementary to state that the power and duty to enact laws rests with Parliament and the power and duty to interpret them is vested in the Courts.
14 Before dealing specifically with this aspect as it relates to the case at bar, the wording of the regulation itself must be considered to determine whether it does necessarily conflict with subparagraph 30(1)(c)(ii) if the word “price” in that subparagraph is given the meaning which I feel should normally be attributed to it.
15 Subparagraph 30(1)(c)(i) of the Act applies where the licensed wholesaler is the importer and in such a case imposes a sale tax on the duty paid value of the goods, which in effect excludes the cost of ocean transport. On the other hand where the licensed wholesaler is not the importer then, pursuant to subparagraph 30(1)(c)(ii), he must pay tax on the transportation cost from the original supplier to the importer if “price” is taken to include such cost. When considered in this context, Regulation 28(1) makes sense and does not conflict in any way with either subparagraph (i) or (ii) of paragraph 30(1)(c), that is, when “transportation prepaid by the suppliers” in the regulation is taken to mean the transportation which has been prepaid by the Canadian supplier who has imported the goods and sold them to a licensed wholesaler. If one extends this expression to also include transportation from the original supplier overseas to the Canadian importer, where the importer is not a licensed wholesaler, there would be a conflict with subparagraph 30(1)(c)(ii) unless a special meaning were attributed to the word “price” in subparagraph 30(1)(c)(ii). Suppliers, in my view, in Regulation 28(1) means Canadian suppliers, or, in the case at bar, the Canadian importer who has supplied to the defendant, the licensed wholesaler, and any such transportation prepaid by that person is not included in the amount for sales tax purposes. Regulation 28(1) relates to “domestic goods” and they are domestic goods once they become Canadian goods and, therefore, when applied to goods which were originally imported the regulation becomes applicable only after the goods have become domestic or Canadian. The first part of Regulation 28(1) refers to “domestic goods invoiced by the supplier”. They must mean “domestic goods” at the time of the invoicing and “supplier” in this regulation must mean the person who has supplied to the wholesaler who is to pay the tax and not the original supplier.
16 To the argument that the interpretation to which I have referred creates two different bases for taxation, the obvious answer is that, since subparagraphs (i) and (ii) do in fact exist separately, it seems clear that Parliament did in fact intend to tax a licensed wholesaler who was an importer and one who is not on a different basis, otherwise there would be no need for two subparagraphs. If the construction suggested by the defendant were put on Regulation 28, this would create a different basis for taxation in the regulation from that provided for in the Act and the regulation itself would be ultra vires.
17 Having first of all interpreted the relevant section of the Act independently of and without considering the text of the regulation and having then considered the regulation and subsequently concluded that the regulation in issue before me does not conflict with the Act, it becomes unnecessary for me to decide whether Parliament did, by the regulation-making powers given the Minister of National Revenue by subsection 38(1) of the Excise Tax Act, grant him power to either interpret or vary by regulation the ordinary meaning of the word “price” as contained in subparagraph 30(1)(c)(ii). I would like to add, however, that were I obliged to decide this issue I would have found that no such power has been granted the Minister by the wording of subsection 38(1) or of any other section of the Act.
18 There will therefore be judgment for the plaintiff in the amount of $781.82 plus costs.
Email this Content