Citation: 2012 TCC 404
Date: 20121115
Docket: 2009-3063(GST)G
BETWEEN:
ALEXANDER TRAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Woods J.
[1]
The appellant, Alexander Tran,
operated an acupuncture clinic in Ottawa from 1998 until 2002. In 2009, he
pleaded guilty to evasion under the Income Tax Act and Excise Tax Act
relating to this business and was fined a total of $250,000 for the above
periods.
[2]
This appeal concerns goods and
services tax (GST) assessments relating to the business for periods from 1998
to 2003, inclusive. The Crown conceded at the hearing that the reassessment for
2003 should be vacated on the ground that the business had been sold to the
appellant’s son.
[3]
The amounts that have been
reassessed are reproduced from the Reply in the table below. The calculations
are not in dispute.
|
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
|
Net Tax
|
$27,472
|
$14,929
|
$30,976
|
$21,063
|
$26,813
|
$10,399
|
|
Penalties
|
$3,281
|
$3,491
|
$1,698
|
$4,252
|
$5,997
|
$1,369
|
[4]
The only issue raised in the
Amended Notice of Appeal is whether the acupuncture services performed at the
appellant’s clinic are exempt supplies for purposes of the Excise Tax Act
(the “Act”). Several types of relief were sought, some of which are
beyond the jurisdiction of this Court. I have assumed that all of the relief
sought, including the removal of interest and penalties, is consequential to
the exempt supply issue since this was the only issue raised in the Amended
Noticed of Appeal and at the hearing.
[5]
The appellant submits that the
acupuncture services performed at his clinic are an exempt supply as a listed
health service pursuant to section 2 of Part II in Schedule V of the Act.
[6]
At the hearing, the appellant
abandoned a further argument that the services were exempt on the basis that he
was a medical practitioner, as defined, for purposes of section 5 of Part II.
Background facts
[7]
The appellant was born
in Vietnam, where he received training and accreditation as an acupuncturist.
He came to Canada in 1988, and opened an acupuncture clinic in Ottawa shortly after his arrival. The appellant and his son both provided acupuncture
services at the clinic.
[8]
The appellant admits the following
facts which are reproduced from the respondent’s request to admit.
1.
From January 1, 1998 to October 31, 2002, the
appellant was the sole proprietor of Asian Acupuncture (the “Business”), a
business offering acupuncture treatments to the public.
2.
From November 1, 2002 to December 31, 2003, the
Business continued operating under the name New Acupuncture.
3.
From January 1, 1998 to October 31, 2002, the
appellant provided acupuncture treatment at the offices of Asian Acupuncture
(the “facility”) which was located at 1340 Wellington Street, Ottawa, Ontario.
4.
The acupuncture treatment provided by the
appellant consisted of supplying acupuncture needles and applying them to the
surface of a client’s skin.
5.
Blood tests, MRI scans, CT scans and x-rays were
never administered by the appellant or any other person working at the
facility.
6.
During the 1998, 1999, 2000, 2001 and 2002
taxation years, the appellant charged a flat fee for each acupuncture
treatment.
7.
For 1998, 1999, 2000 and 2003 the appellant
neither collected, reported or remitted GST on the consideration paid for the
acupuncture treatment provided in those years.
8.
For 2001 and 2002 the appellant reported GST on only
a portion of the consideration paid for the acupuncture treatment provide in
those years.
9.
At no time was the appellant a member of the College of Physicians and Surgeons of Ontario or a similar college established under the
legislation of any other Province or Territory of Canada.
10. At no time was the appellant a member of the Royal College of Dental
Surgeons of Ontario or similar college established under the legislation of any
other Province or Territory of Canada.
11. At no time during the period under appeal did the appellant hold a
licence to practice acupuncture issued under the authority of a legislative
enactment of any Province or Territory of Canada.
12. The appellant first became a member of the College of Traditional Chinese Medicine Practitioners and Acupuncturists of Ontario in December of 2010.
13. […]
14. […]
15. At no time did the facility operate for the purposes of providing
hospital care, including acute, rehabilitative or chronic care.
16. At no time did the facility operate primarily for the purposes of
treating individuals with mental health disabilities.
17. At no time did the facility have any residents.
18. […]
19. At no time did the treatment received by individuals at the facility
include the administration of drugs, biologicals or related preparations.
20. At no time did the acupuncture treatment include the use of medical
or surgical prosthesis.
21. At no time did the facility provide for the use of operating rooms,
case rooms or anaesthetic facilities.
22. At no time did the facility provide clients with rooms other than
one common room with thirteen beds separated by a distance of one metre from
each other.
23. […]
24. The only equipment used by the appellant for the purposes of the
acupuncture treatment were needles and a needle sterilizer.
25. At no time did the acupuncture treatment received by individuals at
the facility consist of radiotherapy, physiotherapy or occupational therapy.
26. At no time did the appellant provide accommodations or meals at the
facility for individuals receiving acupuncture treatment.
Preliminary matter
[9]
It is worth mentioning that the
parties acknowledged that a finding in favour of the appellant would be
inconsistent with his guilty plea in the criminal proceeding. Often in these
circumstances an argument based on estoppel is made by the Crown. Counsel chose
not to make an estoppel argument in this case partly because the criminal
proceeding focused almost entirely on the income tax charge. Therefore, I have
not considered whether estoppel should apply.
Analysis
[10]
The appellant submits that the services provided at
Asian Acupuncture are exempt supplies by virtue of section 2 of Part II of
Schedule V of the Act. This provision, as it read during the relevant
period, is reproduced below.
Applicable
on or before December 10, 1998
2. A supply of
an institutional health care service made by the operator of a health care
facility to a patient or resident of the facility, but not including a service
related to the provision of a surgical or dental service that is performed for
cosmetic purposes and not for medical or reconstructive purposes.
Applicable
after December 10, 1998
2. [Institutional health care service] - A supply of an institutional health care service
made by the operator of a health care facility if the service is rendered to a
patient or resident of the facility, but not including a supply of a service
related to the provision of a surgical or dental service that is performed for
cosmetic purposes and not for medical or reconstructive purposes.
[11]
There are two elements
of section 2 that are relevant in this case. The service must be provided by an
operator of a health care facility and the service must be an institutional
health care service. Both of these terms are defined in section 1 and are
reproduced below.
1.
In this Part,
“health
care facility” means
(a)
a facility, or a part thereof, operated for the purpose of providing medical or
hospital care, including acute, rehabilitative or chronic care,
(b)
a hospital or institution primarily for individuals with a mental health
disability, or
(c)
a facility, or a part thereof, operated for the purpose of providing residents
of the facility who have limited physical or mental capacity for
self-supervision and self-care with
(i) nursing and personal care under the direction or
supervision of qualified medical and nursing care staff or other personal and
supervisory care (other than domestic services of an ordinary household nature)
according to the individual requirements of the residents,
(ii) assistance with the activities of daily living and
social, recreational and other related services to meet the psycho-social needs
of the residents, and
(iii) meals and accommodation;
[…]
“institutional health care
service”
means any of the following when provided in a health care facility:
(a) laboratory,
radiological or other diagnostic services,
(b) drugs, biologicals or
related preparations when administered, or a medical or surgical prosthesis
when installed, in the facility in conjunction with the supply of a service
included in any of paragraphs (a) and (c) to (g),
(c) the use of operating rooms,
case rooms or anaesthetic facilities, including necessary equipment or
supplies,
(d) medical
or surgical equipment or supplies
(i) used by the operator of
the facility in providing a service included in any of paragraphs (a) to (c)
and (e) to (g), or
(ii) supplied to a patient
or resident of the facility otherwise than by way of sale,
(e) the use of radiotherapy,
physiotherapy or occupational therapy facilities,
(f) accommodation,
(g) meals (other than meals
served in a restaurant, cafeteria or similar eating establishment), and
(h) services rendered by persons
who receive remuneration therefor from the operator of the facility;
[12]
It is sufficient in
this case to consider the definition of “institutional health care service.”
This provision provides an exemption for listed services. Acupuncture is not among the services listed.
[13]
The appellant relies on the
reference to other diagnostic services in paragraph (a) of the definition of
“institutional health care service.”
[14]
The evidence reveals that the
appellant is required to conduct an examination of the patient for the purpose
of making a proper diagnosis so that the acupuncture service may be properly
performed.
[15]
This is not sufficient to enable
an acupuncture service to be a diagnostic service for purposes of the relevant
definition. It is the essential part of the service that must be looked at, and
in this case the essential part is the treatment, which consists of the
insertion of needles into the skin. The diagnostic work performed by the
appellant is only an incidental part of the service. It was acknowledged in
argument that the diagnostic service would only comprise about 5 percent of the
value of the service as a whole.
[16]
A contextual and purposive
interpretation of the definition of “institutional health care service”
suggests that the diagnostic services that are included in this provision are
diagnostic services that are performed as the essential element of the service.
Diagnostic services that are made as incidental to the provision of treatment are
not intended to be included.
[17]
The appellant also suggests that
the needles used in the service are exempt as medical supplies under paragraph
(d) of the definition of “institutional health care service.” The problem with
this argument is that medical supplies qualify only if they are used in
providing a service recognized in this definition. Since the services provided
by the appellant’s clinic do not qualify as a institutional health care
service, equipment used such as needles likewise do not qualify.
Conclusion
[18]
The appeal will be dismissed, except for the period in
which the Business was owned by the son. The evidence suggests that this period
began on November 1, 2002.
[19]
The Crown is entitled to its
costs.
Signed at Toronto, Ontario this 15th day of November 2012.
“J. M. Woods”
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