Leonard Pipeline Contractors Ltd. v. The Queen, 80 DTC 6236, [1980] CTC 305 (FCA)

Heald, J:—This is an appeal from a declaration of the Tariff Board dated August 10, 1979 that a Rockwell Turbo Commander Aircraft owned by the appellant is not for use in the provision of air services related to the development of natural resources in Canada and is, therefore, subject to excise tax imposed by subsection 21(1) of the Excise Tax Act, RSC 1970, c E-13 and to sales tax imposed by subsection 27(1) thereof.* [1] The appeal is on a question of law pursuant to leave granted by this Court under sec 60 of the Excise Tax Act.

The appellant is engaged in “mainline” or “big inch” pipeline construction in Canada and in other parts of the world. The appellant’s position is that the development of an oil field and a mainline pipeline have a direct relationship in that there are no storage facilities involved, and therefore the situation can be compared to a tap because the capacity of the pipeline directly dictates the degree of development of the resource. Accordingly, in its submission, because the business of mainline pipeline construction is a Stage in natural resource development, an aircraft used for the various needs of the Company is entitled to the excise and sales tax exemptions set forth supra.

The ratio of the decision of the majority of the Board on this issue is to be found at page 26 (Vol 1) of the Appeal Book and reads as follows:

The Board notes that the testimony of two highly qualified witnesses for the respondent and the evidence of trade dictionaries was that the term development relates to the drilling of wells in a proven field. Pipeline construction, they stated, lies outside the field of development and is related to transportation of the product. No evidence to the contrary was introduced by the applicant. The Board is satisfied, on the evidence, that within the industry development is commonly understood to refer to the drilling of wells in a field of proven area of production. The services of the aircraft, the Board therefore concludes, are not used for development of a natural resource as that term is understood within the petroleum industry and within the meaning of the exempting provisions. As the aircraft is not used for the development of a natural resource it is not necessary for the Board to determine whether or not it is used exclusively for the class of air service prescribed by the Aircraft Exemption Regulations.

On this appeal, appellant’s counsel admitted that the majority of the Board “had misdirected itself as to the evidence’’ of the two witnesses called by the respondent and that the total evidence of these witnesses taken in context did not establish the facts as stated by the majority of the Board supra.

After carefully perusing the evidence in its entirety, I have concluded that this submission is not substantiated by the evidence. The majority of the Board said that the two witnesses together with the evidence of definitions from trade dictionaries established: (a) that the term “development’’ relates to the drilling of wells in a proven field and (b) that pipeline construction lies outside the field of development and is related to transportation of the product. In my view there was considerable evidence before the Board, which was uncontradicted, which the Board was entitled to accept as establishing both (a) and (b) supra.* [2]

Appellant’s counsel directed our attention to a number of passages in the evidence which, in his view, contradicted the Board’s view of the evidence. I have considered those references and they do not, in my view, alter or change in any way, the total thrust of that evidence which is, in my belief, accurately stated by the Board in the passage referred to supra.

Appellant’s counsel also submitted that the evidence of Lepine when asked to define “development’’ (Appeal Book—page 119) is at variance with the definition of “development’’ as contained in the trade dictionaries referred to in the majority reasons, (see for ex—Vol 3—Appeal Book—page 409) and that in his evidence, Lepine had narrowed the dictionary definition.

With respect, I do not agree that Lepine’s evidence, viewed as a whole, has that effect but even if such be the case, as an expert in the trade, it was quite open to him to express his expert views as to the meaning which the term “development’’ is generally given in the trade, and the Board committed no error in accepting that expert opinion.f [3] In my view, the facts as stated by the Board, and the inferences drawn by the Board from these facts, were manifestly open to them on the total evidence before them.

I have therefore concluded that the Majority of the Boards has made findings and drawn inference of fact which they were entitled to make. I have further concluded that in applying the provisions of the applicable statute and regulations, to the factual situation, they have committed no error in law.

In view of this conclusion, it is not, in my view, necessary to deal with the respondent’s alternative submission that appellant’s aircraft was not used by the appellant exclusively to provide the air services in question.

For all of the above reasons I would dismiss the appeal. Since the respondent did not ask for costs in his memorandum I would make no order with respect thereto.