. - Minister of National Revenue v. Samuel M. Ogulnik & Co. LTD, [1928-34] CTC 270

MARTINEAU, J.:—Seeing that the plaintiff claims from the defendant the sum of $14,976.80 with interest at 24 of 1% per month since December 1, 1930, as special taxes on the sale and manufacture of merchandise from 1921 to the end of October 1929 imposed under the Special War Revenue Act, 1915 (Can.), ce. 8 and its amendments;

Seeing that the defendant pleads in subustance that it is not a manufacturer but a merchant tailor and that as such it manufactured goods on account of which the plaintiff claims the said taxes which are not payable by merchant tailors, but only by manufacturers ;

1. Considering that the following facts require proof :

Certain transport companies notably the C.P.R. asked the defendant to make a tender for making uniforms—pants, vest and eoat—for each of their employees, according to the specifications accompanying this request and indicating the material to be used, the lining, the style and the names of the employees in several groups; these uniforms were to be made to the measure of each employee. The orders were renewed every year. The defendant made a tender each year containing the price for each of the groups, the tender was accepted and the employees went to give their measurements or forwarded them to the defendant who made the uniforms, sent them to the companies who accepted them with the agreement that if any were not made the defendant would be obliged to make the necessary changes. The company paid directly the price of the uniforms.

2. Considering that the defendant, before and during the years mentioned in the claim, was a merchant tailor in the ordinary sense. of the word, that is to say, he made suits according to the individual measurements for clients who ordered them.

3. Considering that in contracting thus with the said companies for the making of uniforms for their employees, but according to the measure of each one of them, the defendant did not, as to these orders, become a manufacturer, but that it carried on its trade as a merchant tailor.

Considering that if merchant tailors are not manufacturers the regulation of the Minister of Customs and Revenue which declares such only those who make clothes to the individual order of the client, is ultra vires (reg. 11).

Considering that if the defendant does not come under the tax imposed upon manufacturers in regard to the making of the said uniforms, the plaintiff has no right to the amount that was unduly charged as tax to its customers.

Considering that these clients alone have the right to claim what they thus unduly paid.

Doth maintain the defence and dismiss the action of the plaintiff with costs.

Reasons for judgment.

Although the text of the original Special War Revenue Act and the various amendments that have been made to it differ, it seems to me that this difference is only in form and that the intention of the Act was to tax the manufacturer.

Who is a manufacturer ?

It will be found from an examination of all the judgments which have been rendered on the subject that the definition is very difficult. Let us proceed by way of elimination. It may be said in general that a manufacturer is one who, upon a scale large enough to be trading, manufactures for sale to whomever wishes to buy his product.

The definition of merchant tailor is less difficult. He is a merchant tailor who carries on the trade of making of clothes for one person in particular,—as a result he must take their measurements or otherwise procure them.

The fact that the clothes might be ordered by a father or mother for their children or their servants does not change the nature of his work, for the merchant tailor still makes in this ease for the one person in particular.

Nor am I able to see that the merchant tailor becomes a manufacturer because the order, instead of being given by the head of the family for the persons of its household, is placed by the head of a commercial establishment for its personnel. It is equally immaterial, it seems to me, whether the price be paid by the person who places the order or by the person whom the tailor fits.

It is scarcely necessary to say that the Minister of Customs and Excise by regulations which is is authorized by law to make cannot classify as a manufacturer anyone who is not so in fact.

Therefore reg. 11, which reads as follows, is ultra vires :—

"‘11. Merchant tailors, dressmakers, milliners, and florists selling exclusively by retail to the consumer or user, are classified as retailers and are not required to take out a sales tax license.

"‘The terms ‘merchant tailor’ and ‘dressmaker’ in this regulation mean the ordinary merchant tailor and the ordinary dressmaker who fits, makes and sells his goods to the order of the individual customer on the same premises upon which they are mare and not through agents or chain of stores.”

One question remains which, though not the most important, is a nice point. During the two years 1921 and 1922, the defendant collected from his clients the tax which it now refuses to pay to the government. The defendant, evidently was then under the impression that it was or might be liable to the tax imposed upon manufacturers in connection with the making of these uniforms and it charged its clients with these taxes. Is it obliged to turn over this amount to the government? I do not believe so.

In fact, if the Court condemned the defendant to turn over the taxes in question the government would receive what was not due it.

Nor can the plaintiff invoke the principle that a person cannot enrich himself at the expense of another—first he would enrich himself at the expense of the clients of the defendant—then it is not at the expense of the government that the defendant was enriched, it is at the expense of his clients. It is therefore to them that the defendant ought to make restitution and it is to them that the right of action for the recovery of this money belongs.

See 38 Corpus Juris, pp. 987-8 (Manufacturers) :—

"‘V. Tailoring; Making Clothes.- While the literal definition of ‘Manufacturer’ would include a tailor in the popular sense of the term, a merchant tailor is not a manufacturer, and this has been so held regardless of the mere amount of business done and the mere manner of transacting it. Accordingly, the place where the tailoring business is conducted has been held not a ‘manufacturing establishment.’ It has been held that the making of wearing apparel by machines driven by electric power is " a manufacturing purpose. ‘ ‘ ‘

Idem Note 1. (a)

"Discussion of rule. No doubt, speaking in the broadest sense, a 4 manufacturer ’ is one who makes or fabricates anything for use, and that within the literal definition of manufacturer’ would come a tailor who works cloths into suits for wear. So, too a seamtsress would be brought within such a definition, for she makes handkerchiefs from linen; and the carpenter who takes raw lumber and prepares it for building a house; and a milliner, who makes and sells bonnets; and a blacksmith, who makes horseshoes or forges iron; and a cook, who makes bread or other articles to use as food; and many other persons, whose pursuits in life demand the working of some materials into certain forms. . . . We know of no technical meaning to be given to the word ‘manufacturer,’ used in the statute, and it is our best judgment that it should be understood in its popular sense. We therefore would include among manufacturers those who produce goods from a raw state by manual skill and labor, and goods which are commonly turned out of factories, and we would exclude a merchant tailor, who merely cuts and fashions a suit of clothes as ordered by a customer, from cloth purchased elsewhere, and kept to be made up as suits are ordered from him. State v. Johnson, 20 Mont. 367, 369, 51 P. 820.”