Supreme Court of Canada
Biltrite Tire Co. v. The King, [1937] S.C.R. 364
Date: 1937-03-19
Biltrite Tire
Company (Defendant) Appellant;
and
His Majesty The
King, on the information of the Attorney-General of Canada
(Plaintiff) Respondent.
1937: February 22; 1937: March 19.
Present: Duff C.J. and Rinfret, Davis, Kerwin
and Hudson JJ.
ON APPEAL FROM THE EXCHEQUER COURT OF CANADA
Sales tax—Excise tax—Special War Revenue Act
(R.S.C. 1927, c. 179, and amendments), ss. 86(1) (a) (“goods produced or
manufactured”); 80(1)(b) and Schedule II, item 3 (“tires manufactured or
produced”)—Old tires bought, treated and retreaded, and retreaded tires
sold—Liability to said taxes.
Appellant purchased in bulk lots, by the
pound, old and worn-out motor vehicle tires and put them through a process of
repair, treatment and retreading, and sold the retreaded tires. Throughout the
process the sidewall of the tire was not dismantled or destroyed, the numerical
identification of the original tire was not destroyed, the name of the manufacturer
of the original tire was still clearly marked upon its sidewalls, upon which
appellant also marked a serial number.
Held: What
appellant sold after said process were “goods produced or manufactured” by
appellant within the meaning of s. 86 (1) (a) of the Special War
Revenue Act (R.S.C. 1927, c. 179, and amendments) and were “tires
manufactured or produced” by appellant within the meaning of s. 80 and Schedule
II (item 3) of said Act; and appellant was liable to pay in respect thereof the
sales tax and excise tax imposed by said sections respectively.
APPEAL by the defendant from the judgment of
Angers J. in the Exchequer Court of Canada whereby the plaintiff recovered
judgment against the defendant for $5,318.46 and costs.
The action was brought in the Exchequer Court
of Canada by information filed by the Attorney-General of Canada on behalf of
His Majesty the King, to recover sums alleged to be due from the defendant (a
firm carrying on business in Toronto, Ontario) for sales tax and excise tax under
the Special War Revenue Act (R.S.C. 1927, c. 179, and amendments), by
reason of the alleged manufacture or production, and sale, of tires or tubes.
Plaintiff also claimed penalties and licence fees. The defendant claimed that
it was not a “producer or manufacturer,” within said Act, of tires or tubes and
that the provisions in question of said Act did not apply to it.
[Page 365]
A statement of facts was agreed upon, the
material parts of which are set out in the judgment now reported. The appeal to
this Court was dismissed with costs.
Wilfrid Heighington K.C. for the
appellant.
J. E. Day K.C. and B. Matthews for the
respondent.
The judgment of the court was delivered by
Kerwin J.—Section 86 of the Special
War Revenue Act (R.S.C. 1927, chapter 179, and amendments) provides:—
86. 1. There shall be imposed, levied and
collected a consumption or sales tax of six per cent, on the sale price of all
goods,—
(a) produced or manufactured in Canada, payable by the producer or
manufacturer at the time of the delivery of such goods to the purchaser
thereof.
The first question arising for determination on
this appeal is whether the appellant produced or manufactured goods within the
meaning of this enactment and is therefore liable for the payment of sales tax.
Section 80
of the same Act, so far as applicable, enacts:—
80. 1. Whenever goods mentioned in
Schedules I and II of this Act are imported into Canada or taken out of
warehouse, or manufactured or produced in Canada and sold, there shall be
imposed, levied and collected, in addition to any other duty or tax that may be
payable under this Act or any other statute or law, an excise tax in respect of
goods mentioned
(a) * * *
(b) In Schedule II, at the rate set
opposite to each item in the said schedule.
Item 3 of Schedule II referred to reads as
follows:—
3. Tires and Tubes:
(iii) Tires in whole or in part of rubber
for automotive vehicles of all kinds, including trailers or other wheeled
attachments used in connection with any of the said vehicles—two cents per
pound.
The second question is whether the appellant
manufactured or produced tires within the meaning of this section and schedule
and is therefore subject to the payment of excise tax.
The matter was presented before the Exchequer
Court on an agreed statement of facts from which it appears that the appellant “purchased,
in bulk lots, by the pound, old and worn-out motor vehicle tires,” generally
from “junk dealers or storage yards” in Canada and the United States;
Furthermore, “any duty that was exacted upon the articles when brought into
Canada was paid on entry.” After receipt of the tires by the appellant at its
place of business,
[Page 366]
the first step was to place them in a heater
where “all dampness was taken from the tires, both inside and out.” Each tire
was next placed upon a rack where the holes or “blow-outs” in it were buffed
and cleaned. The tire was then placed in a frame against which a sharp dented
wheel revolved and the tread was removed.
Following this the tire was cemented on the
inside and the holes patched with cord material and the tire was then cemented
on the outside. After being placed in another machine, each tire received an
application of “callendered tread stock,” a plastic preparation.
As to the subsequent steps, the statement of facts
continues:—
The tire was then taken to what was termed
the “cure-room,” where it was placed first in an iron mould which was firmly
clamped about it. The mould was in the shape of a wheel and the mould, complete
with its encased tire, was placed flat on a press inside a large boiler. A
number of tires, each in a clamp as stated, were piled one on top of the other
until the boiler was filled with twenty tires or so. A lid was then placed upon
the boiler and firmly sealed. Hydraulic pressure was then applied for an hour
or an hour and a half. This had a squeezing effect upon the clamped tires, they
were firmly held and cooked into a state in which the repairs to the holes and
blow-outs, the cementing inside and without, and the new tread, were firmly and
permanently affixed to the carcass, i.e., the fabric and side walls of the
original tire. In no part of these steps, including the final one, was the
numerical identification of the original tire destroyed. The name of the
manufacturer of the original tire was still clearly marked upon its side walls
upon which the defendant company also marked a serial number.
The only other feature, and one upon which the
appellant lays particular stress, is that throughout all the steps taken by it “the
sidewall of the tire was not dismantled or destroyed.”
So far as the claim for sales tax is concerned,
what the appellant sold, after these proceedings in its establishment, would
undoubtedly be termed “goods.” Are they goods manufactured or produced by
appellant? What the appellant did was to remove part of the old or worn-out
tire and add to the remnant the plastic rubber preparation. It would appear
that the position is the same as if the appellant had purchased an old or
worn-out tire which had already been treated by the vendor in the manner
described above, down to and including the cutting off of the old tread. If
then the appellant had purchased from a third party the rubber preparation and
had applied the latter and continued with the subsequent steps, could it be suggested
[Page 367]
that the article in its final condition had not
been produced or manufactured by the appellant? The definitions of the words “manufacture”
and “produce” as nouns or verbs, in the standard dictionaries, clearly indicate
that such proceedings would constitute the appellant a manufacturer or
producer. And the mere fact that the appellant has itself performed the defined
operations on the old tire cannot exclude it from the operation of the section.
The point for determination in connection with
the claim for excise tax is a little different from that involved in the
question of the liability for sales tax. Is the appellant a manufacturer or
producer of tires? It is suggested that the old or worn-out tire did not lose
its identity qua tire and that, therefore, the appellant could not be
said to have manufactured or produced a tire. However, when one bears in mind
the various steps taken by appellant and particularly the state of the article
when the tread was removed, it would appear that appellant cannot be any less
the manufacturer of a tire because it started with something that had once been
a usable tire than if, as suggested in the preceding paragraph, it had
commenced with two substances purchased from different sources.
The liability of the appellant for licence fees
follows from what has been said, and, since we understand no question is raised
as to the proper amount for which judgment should go, the appeal must be
dismissed with costs.
Appeal dismissed with costs.
Solicitors for the appellant: Symons, Heighington
& Shaver.
Solicitor for the respondent: W. Stuart Edwards.