Supreme Court of Canada
Goodyear Tire & Rubber Co. of Canada Ltd. et al.
v. T. Eaton Co. Ltd. et al., [1956] S.C.R. 610
Date: 1956-06-11
The Goodyear Tire and Rubber Company of
Canada Limited, Firestone Tire And Rubber Company of Canada Limited, B. F. Goodrich
Company of Canada Limited Appellants;
and
The T. Eaton Company Limited and Others Respondents.
Present: Kerwin C.J., Rand, Fauteux, Abbott
and Nolan JJ.
ON APPEAL FROM THE EXCHEQUER COURT OF CANADA
Taxation—Sales and Excise taxes—Whether retailer
of "special brand" tires made by another company is a manufacturer—Jurisdiction
of the Tariff Board—Excise Tax Act, R.S.C. 1952, c. 100, s. 57.
On a reference to the Tariff Board
by the Deputy Minister of National Revenue (Customs and Excise) pursuant to s.
57 of the Excise Tax Act, R.S.C. 1952, c. 100, the Board declared that
the T. Eaton Co. Ltd. was not the "producer or manufacturer" of two
"special brand" auto-mobile tires sold by it and manufactured
exclusively for it by a rubber company, and was not therefore liable for excise
or sales tax on the sale of such tires. The Exchequer Court affirmed the
declaration as well as the authority of the Board to hear the reference.
Held: The appeal should be allowed and the judgment of the Exchequer Court
and the declaration of the Tariff Board set aside.
The Board had no jurisdiction to make
the declaration, and the Board, as well as the Exchequer Court and this Court,
was precluded from considering the merits of the issue. S. 57 of the Excise
Tax Act, which gives the Board power to decide whether any tax is payable
on an article and, if so, what rate of tax is payable, does not give the Board
power to decide whether a particular person is a person upon whom a tax is
imposed in respect of an article. That question is an issue between that person
and the Crown. To permit third parties to intervene in such an issue would be a
departure from the general system of the law.
APPEAL from the judgment of the Exchequer
Court of Canada, Thorson P., affirming the declaration of the Tariff Board.
J. J. Robinette, Q.C. and J. B. Lawson
for the appellants.
D. Arnup, Q.C. and G. F. Henderson, Q.C.
for T. Eaton Co.
Stuart Thom, Q.C. for General Tire &
Rubber Co.
R. M. Sedgewick and C. W.
Lewis for Simpsons-Sears Ltd.
E. Eaton for
Minister of National Revenue.
[Page 611]
The judgment of Kerwin C.J., Fauteux, Abbott and
Nolan JJ. was delivered by:—
FAUTEUX J.:—For some years, certain Canadian rubber companies have been
manufacturing "special brand" auto-mobile tires for sale to various
retail corporations as well as to other rubber companies. These tires bear the
names of the purchasers and the treads are molded with special markings which
are not sold to others. The first mentioned companies have been regarded by the
Department as the manufacturers or producers of the tires for the purposes of
the Excise Tax Act (R.S.C. 1952, c. 100). The appellants, competing
manufacturers of automobile tires, objected to this ruling and contended that
the "special brand" customers should be treated as the manufacturers
or producers of the tires within the meaning of section 2(a) (ii) of the Excise
Tax Act and subjected to sales and excise taxes on their sales. In a letter
dated August 19, 1954, wherein these facts are recited, the Deputy Minister of
National Revenue referred the matter to the Tariff Board for a 'declaration as
to the correctness or otherwise of the Department's ruling; this reference
purports to be made in accordance with section 57 of the Act, the relevant subsections
of which provide that:—
(1) Where any difference arises or where
any doubt exists as to whether any or what rate of tax is payable on any
article under this Act and there is no previous decision upon the question by
any competent tribunal binding throughout Canada, the Tariff Board constituted
by the Tariff Board Act may
declare what amount of tax is payable thereon or that the article is exempt
from 'Lax under this Act.
(2) Before making a declaration under
subsection (1) the Tariff Board shall provide for a hearing and shall publish a
notice thereof in the Canada Gazette at least twenty-one days prior to the day of the hearing; and any
person who, on or before that day, enters an appearance with the Secretary of
the Tariff Board may be heard at the hearing.
(3) A declaration by the Tariff Board under
this section is final and conclusive, subject to appeal as provided in section
58.
(4) …..
(5) …..
During the hearing of this reference, members of
the Board raised the question of jurisdiction. In the views they then
expressed, the difference arising in the matter is not, as contemplated in
subsection (1) of section 57 "whether any or what rate of tax is
payable" on these articles, under the Act-a question as to which,
admittedly,
[Page 612]
no difference or doubt existed in the premises-,
but whether the Canadian rubber companies manufacturing "special
brand" automobile tires for sale to various retail corporations or the.
retail corporations, should be regarded by the Department as the manufacturers
or producers, within the meaning of the section 2(a) (ii) and should there-fore
pay the tax-a question scarcely within the terms of a reference authorized
under section 57. The point was argued but not determined. The Board, acting
upon the suggestion of counsel for the Minister, continued the hearing,
"leaving the question of jurisdiction open to be settled elsewhere"
and, on the merits of the question referred to, approved the ruling of the
Department. This decision as well as the authority of the Board to entertain
the reference, were subsequently affirmed by the Exchequer Court on an appeal
by the present appellants who, continuing to assert the jurisdiction of the
Board, now attack the judgment rendered on the merits of the question.
The jurisdiction of the Board in the matter must
first be ascertained for, if there is no such jurisdiction, this Court, as well
as the Board and the Exchequer Court, is precluded from entering upon a
consideration of the merits of the issue. Okalta Oils Limited v. Minister of
National Revenue.
The contention that the question propounded to
the Board in the present case is one contemplated by the terms of section 57,
is predicated on the argument of counsel for the Minister that the words
"by any persons" must be understood to follow the word "payable"
twice appearing in the first paragraph of the section; and the reasons upon
which rests the decision of the Court below are expressed as follows:—
That the tax is imposed on a person in
respect of an article and not on the article itself, notwithstanding the
wording of section 57, seems clear: vide such cases as Provincial
Treasurer of Alberta
v. Kerr (1933) A.C. 710; Kerr v. Superintendent of Income Tax and Attorney-General
for Alberta (1942) S.C.R. 435; Smith v.
Vermillion Hills Rural Council (1916) 2 A.C. 569. The articles that
were the subject of the reference were "special brand" automobile
tires. As the hearing developed the specific articles before the Board were the
special brand "Bulldog" and "Trojan" tires sold by Eaton's.
Since there was difference or doubt whether Eaton's was the manufacturer or
producer of the tires there was difference or doubt whether tax was payable on
them on their sale by Eaton's. The Board
[Page 613]
could not determine such difference or
doubt and decide whether tax was payable on the tires or whether they were
exempt from tax on their sale by Eaton's without deciding whether Eaton's was
the manufacturer or producer of them. Failure to recognize this basic fact was
the fallacy in the submission of lack of jurisdiction. Since there was
difference or doubt whether any tax was payable on the "Bulldog" and
"Trojan" tires on their sale by Eaton's the Board had jurisdiction to
resolve such doubt or difference. And since the Board could not resolve such
doubt or difference without deciding whether Eaton's was the manufacturer or
producer of the tires it follows, as a matter of course, that it had jurisdiction
to decide that question.
With deference, I fail to see how this line of
reasoning is of any assistance in determining the specific jurisdiction of the
Tariff Board under section 57 of the Act. Whether a particular person is
a person upon whom a tax is imposed in respect of an article or whether a particular
article is one in respect of which a tax is imposed upon a person are two
separate questions;-indeed the whole argument at the hearing was centred
exclusively upon the former, nothing being said as to the latter, as to which
there was admittedly no point of difference. While these two questions, as well
as a variety of others, are proper ones in an action for the recovery of taxes,
it does not follow that they are all equally so in a reference to the Tariff
Board under section 57 if, on a proper construction of the whole section, the
question as worded in paragraph (1) "whether any or what rate of tax is
payable on any article" means only whether any article is one in respect
of which any and, if so, what rate of tax is imposed.
The declaration of the Board as to the question
within its jurisdiction to entertain is, subject to appeal by leave on a
question of law only, final and conclusive as against any of the parties to the
proceedings, and perhaps as against anyone in Canada who, after publication in
the Canada Gazette of a notice of as hearing, has failed to avail himself
of the right to appear before and to be heard by the Board. In the result, one
at least of the many issues, which ordinarily it would be for the Exchequer
Court or some other competent tribunal to determine, either in an action for
recovery of taxes or penal proceedings, is finally and conclusively decided by
the Board. That section 57 thus affords a substantial alteration of the general
system of the law and particularly of the provisions of the Act dealing
[Page 614]
with the recovery of taxes, is manifest. In like
circumstances, the construction of this subsequent enactment, section 57, is
subject to the rule that a Legislature is not presumed to depart from the
general system of the law without expressing its intentions to do so with
irresistible clearness, failing which the law remains undisturbed. (Maxwell On.
Interpretation of Statutes, 9th edition, page 84). There being a
presumption against the implicit alteration of the law, effect cannot be given
to the suggestion of counsel for the Department to read after the word
"pay-able" twice appearing in the first paragraph of the section, the
words "by any persons". To do so would not only extend the scope of
the question but stretch it to a point creating clear conflict between the
English and the French texts of paragraph (1). Indeed if one refers, .as one
may under the authorities (Composers, Authors and Publishers Association
Limited v. Western Fair Association),
to the French version, the latter makes it abundantly clear that the real
question is "whether any particular article is one in respect of which any
or what rate of tax is imposed":‑
57. (1) Lorsqu'il se produit un différend
ou qu'un doute existe sur la question de savoir si, aux termes de la présente
loi, un article est assujéti à la taxe ou sur le taux applicable à l'article et qu'aucun tribunal compétent
n'a jusque-là rendu, en l'espèce, une décision visant tout le Canada, la
Commission du tarif, instituée par la Loi sur la Commission du tarif, peut déclarer quel montant de taxe est exigible sur l'article ou
déclarer que l'article est exempt de la taxe en vertu de la présente loi.
In the context, the word "payable"
does not appear; and the context does not either lend itself to the inclusion
of the words "payable par quiconque". While, on these views, it must
be held that there was no jurisdiction for the Board to entertain the question
propounded in the letter of the Deputy Minister, this conclusion, if the
examination of the section is pursued, finds, I think, further support.
As is manifested by the reasons for the
declaration of the Board and for the judgment of the Court below upon the
merits of the question referred to the Board, the declaration as well as the
judgment rest on findings of facts as to the relationship between the T. Eaton
Company Limited and the Dominion Rubber Company Limited.
[Page 615]
Under paragraph (1) of section 57, a condition
precedent to the jurisdiction of the Board to entertain a reference upon the
question stated in the section is that there be "no previous decision upon
the question by a competent tribunal binding throughout Canada". The
section, there-fore, contemplates that the question to be propounded to the
Board is, of its nature, susceptible to be one upon which a previous decision
binding throughout Canada might have been rendered. Of its nature, the question
here arising can hardly give rise to a decision having such an effect.
Under paragraph (2), the Board is precluded from
deciding the question, which under paragraph (1) is within its jurisdiction to
entertain, unless a hearing be provided for and notice thereof published in the
Canada Gazette, so that anyone,‑other than the person who applies
for the declaration, the Deputy-Minister of National Revenue for Customs or
Excise,‑may be given an opportunity to enter an appearance and be heard
in the matter. Whether or not a particular article is one in respect of which a
tax is imposed raises a question of general concern throughout Canada and is a
matter justifying notice being given to third parties so that they may be heard
if they so elect. But whether a particular person is the person liable for the
payment of a tax imposed in respect of an article is an issue between that
person and the Crown. To permit third parties to intervene in such an issue would
be a departure from the general system of the law. The intention of Parliament
to do so would have to be indicated in explicit terms, which, in my view, has
not been done under the section.
Paragraph (3) provides that "a declaration
by the Tariff Board under this section is final and conclusive, subject to
appeal as provided in section 58". Prior to 15 Geo. VI, c. 28, s. 7,
enacted in 1951, what is now paragraph (3) read as follows:‑
A declaration by the Tariff Board, under
this section, shall have the same force and effect as if it had been sanctioned
by statute.
The question which could then be referred to the
Board was exactly the same as it is to-day. If the question contemplated by
section 57 is whether a particular article is
[Page 616]
one in respect of which any .and what rate of
tax is imposed, it is not difficult to understand why Parliament wanted to give
to the determination of this question the same force and effect as if it had
been sanctioned by statute, but there would appear to be no reason for the
attribution of such an effect to the determination of tax liability of a person
arising out of the relationship existing between that person and another.
Upon the ground that the Tariff Board had no
jurisdiction to make its declaration of December 7, 1954, I would allow the
appeal and set aside the judgment of the Exchequer Court and the Tariff Board's
declaration. There should be no costs in this Court or in the Exchequer Court.
RAND J.:‑I agree with the conclusion and with the reasons generally of my
brother Fauteux, but I desire to state shortly my own view of s. 57 of the Excise
Tax Act. S-s. (1) declares:
Where any difference arises or where any
doubt exists as to whether any or what rate of tax is payable on any article
under this Act and there is no previous decision upon .the question by any
competent tribunal binding throughout Canada, the Tariff Board constituted by
the Tariff Board Act may declare what amount of tax is payable thereon or that
the article is exempt from tax under this Act.
The language "whether any or what rate of
tax is payable on any article" raises a question that, in effect, asks for
a decision in rem, a decision determining the rate as applied to the article
regardless of personal liability for the tax. It is only for that reason that a
general hearing is required and that the declaration is to be, by s-s. (3),
"final and conclusive". That is the only question authorized by the
section to be put by the Deputy Minister to the Board.
It is argued that the language "may declare
what amount of tax is payable thereon" evidences an intention to have such
a question .as that submitted passed upon. The point is, no doubt, arguable,
but what is to be resolved, is a doubt or difference as to the rate; the price
is assumed; and once the rate is ascertained the amount of the tax
mathematically
[Page 617]
follows. Even considering s-s. (1) alone, I
think the jurisdiction is clearly confined to the question specified in two
lines, "any or what rate of tax", and the use of the word
"amount" cannot, in the context, affect it. Confirmed, how-ever, as
that interpretation is by the subsequent subsections, I entertain no doubt of
the limit of jurisdiction.
What is sought here is something quite
'different: it is, who, as the "manufacturer or producer" of the
goods, is, as between two parties, liable for the tax? The article and the rate
are admitted. S. 23(2) and s. 30(1) (a) (i) provide for the payment of the
excess and consumption taxes respectively by the "manufacturer or
producer". S. 2(1) (a) (ii) defines "manufacturer or producer"
to include:
any person, firm or corporation that owns,
holds, claims, or uses any patent, proprietary, sales or other right to goods
being manufactured, whether by them, in their name, or for or on their behalf
by others, whether such person, firm or corporation sells, distributes,
consigns, or otherwise disposes of the goods or not,
The question is, therefore, one of fact and law
whether the respondent retail dealers, by reason of their partial participation
in the processes that end in the ultimate product, bring themselves within that
description. The interest of a taxpayer in that question is not the general
interest in a definitive determination which s. 57, s-s. (1) contemplates. Each
instance depends on its own particulars; they may be changed in any case
tomorrow by adding, subtracting or combining old or new items; and the
declaration would be only upon the particulars then existing of the party
immediately concerned. That is here an issue between the retailer and the Crown
with which ordinarily other parties have nothing directly to do. They may be
interested in the language of the statute and might seek its change; they have
an interest in the uniform and proper administration of the Act as of taxing
law generally; but as between the taxing authorities and the "manufacturer
or producer" that is not the interest for which the section provides a
general hearing.
[Page 618]
I would, therefore, allow the appeal, set aside
the judgment below and declare the Tariff Board to have had no jurisdiction to
make the declaration. There will be no costs in this Court or in the Exchequer
Court.
Appeal allowed; no costs.
Solicitors for the appellants: McCarthy & McCarthy.
Solicitors for T. Eaton Co.: Gowling, MacTavish, Osborne & Henderson.
Solicitors for Simpsons-Sears Ltd.: Tory, Miller, Thom-son, Hicks, Arnold & Sedgewick.
Solicitor for Atlas Supply Co.: J. F. Barrett.
Solicitors for General Tire & Rubber
Co.: Osler, Hoskin & Harcourt.
Solicitor for Minister of National
Revenue: K. E. Eaton.
[ScanLII Collection]