Date: 19980210
Docket: 96-3559-GST-I
BETWEEN:
LES ENTREPRISES PHILIPPE PLAMONDON INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
LAMARRE, J.T.C.C.
[1] The appellant is appealing from an assessment bearing
No. 5213281 made by the Minister of National Revenue
("the Minister") pursuant to the Excise Tax Act
("the Act") in respect of the goods and services tax
("GST") not collected on the supply of meals, food and
drink during the period from January 1, 1992 to
June 30, 1995. The amount assessed comes to $29,611.64 in
GST, to which was added $2,676.89 in interest and $2,676.39 in
penalties.
[2] In assessing the appellant the Minister relied on the
facts contained in paragraph 6 of the Reply to the Notice of
Appeal, which read as follows:
[TRANSLATION]
(a) the appellant is a registrant for GST purposes;
(b) for the period from January 1, 1992 to June 30,
1995 the appellant operated a cafeteria in an outdoor
recreational centre known as "Le Centre de Plein Air
4 Saisons" ("the outdoor recreational
centre");
(c) the appellant was an agent of the Minister for the
purposes of collecting GST;
(d) during the aforementioned period neither the appellant nor
the outdoor recreational centre was a school, school authority,
university or public college;
(e) during the aforementioned period the appellant supplied
meals, food and beverages by sale without collecting the GST
payable by the recipients;
(f) these supplies were subject to GST since they were taxable
supplies;
(g) the GST the appellant failed to collect during this period
amounted to $29,611.64, which represented the net tax owed by the
appellant for the aforementioned period.
[3] Michel Robitaille, an accountant, who testified for
the appellant, admitted subparagraphs 6(a), (b) and (e). He
maintained that the appellant did not have to collect the GST on
the supply of meals, food and beverages since it was supplied in
an outdoor recreational centre, the Centre de Plein Air
4 Saisons ("the Centre"), which was a charitable
organization providing services to young people under
14 years of age, and which was itself exempt from collecting
the GST under s. 12 of Part VI of Schedule V of
the Act.
[4] He further maintained that the Centre is a school body
within the meaning of s. 123 of the Act, and the supply of
food services to a school body is exempt from GST under
s. 14 of Part III of Schedule V of the Act.
[5] According to the documents entered in evidence the Centre
is administered by the Corporation de l'Institut des
Frères de N.D. de la Miséricorde, and this
corporation is recognized as a charity. The Centre offers
educational activities firstly to school groups. It also offers
accommodation to other groups, such as families or YMCA groups,
by reservation and with the approval of the Frères de la
Corporation. The Centre charges flat rates for services including
accommodation, light meals, use of equipment and organized
activities.
[6] The Centre also offers a cafeteria service. In order to
provide this service, it made the appellant responsible for
administering the kitchen by contract. The appellant accordingly
leased premises at the Centre. It was the appellant who purchased
food. The appellant then billed the Centre, which in turn charged
back the cost of meals provided at the cafeteria to users of the
Centre. Kitchen charges were clearly identified on bills to users
and charged for in addition to the flat rate charges for a stay
at the Centre (Exhibit A-3). Further, in the financial
statements of the Centre the item "cafeteria" is found
under expenses, separate from the item "maintenance and
operation", which includes all expenses relating to
operation of the Centre.
[7] Additionally, the appellant is a company created under the
Quebec Companies Act, which files an annual financial
report and is completely separate from the Centre. Its income
comes exclusively from its sales at the Centre’s cafeteria.
It pays its own expenses.
Analysis
[8] The appellant argued, first, that the supply of food to
the Centre is exempt from GST under s. 14 of Part III
of Schedule V of the Act. It maintained that it provided
food and beverages to the Centre, which it characterized as a
school authority.
[9] Schedule V of the Act lists exempt supplies.
Section 14 of Part III of Schedule V exempts the
supply of food and beverages under a contract from GST. It reads
as follows:
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14. A supply of food and beverages,
including catering services, made to a person that is a
school authority, university, or public college under a
contract to provide food or beverages
(a) to students under a plan referred to in
section 13; or
(b) in an elementary or secondary school
cafeteria primarily to students of the school,
except to the extent that the food, beverages and
services are provided for a reception, conference or other
special occasion or event.
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14. Fourniture d'aliments ou de
boissons aux termes d'un contrat. La fourniture
d'aliments et de boissons, y compris les services de
traiteur, effectuée au profit d'une
administration scolaire, d'une université ou
d'un collège public aux termes d'un contrat
visant à offrir des aliments ou des boissons soit
à des étudiants dans le cadre d'un
régime visé à l'article 13,
soit dans la cafétéria d'une école
primaire ou secondaire principalement aux
élèves de l'école, sauf dans la
mesure où les aliments, les boissons et les services
sont offerts dans le cadre d'une réception,
d'une conférence ou d'un autre occasion ou
événement spécial.
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[10] Under s. 123 of the Act, the expression "school
authority" means an organization or part of an organization
that operates in a province an elementary or secondary school in
which it provides instruction that meets the standards of
educational instruction established by the government of the
province.
[11] I concur with counsel for the respondent that the
evidence does not allow me to conclude that the Centre meets such
a definition. For it to do so the Centre would have to offer
instruction that meets the standards of educational instruction
established by the Government of Quebec, and that was not shown
to be the case.
[12] Secondly, the appellant suggested that it provided its
cafeteria services for a public authority, since the students at
school boards, which are themselves public authorities, are the
ones who attended the Centre. I do not accept this second
argument either. First, while school board students attend the
Centre it is as part of extracurricular activities organized by
school boards themselves and financed by them. The fact that
these school boards use the services of the Centre does not make
the latter a school authority. Moreover, the Centre accommodates
organizations other than school boards. Thus, for example, it is
used by YMCA members and by families who wish to take advantage
of it.
[13] It cannot be said that because the services are primarily
offered to students attending school boards that the cafeteria
service is offered "to" a public authority. The
cafeteria service is offered under a contractual agreement
between a company operating a business, the appellant, and the
Centre. The contract entered in evidence (as
Exhibit A-2) makes this quite clear. Just as a museum
contracts with a business for cafeteria services, that business
will not be exempt from charging GST because the cafeteria is
used by school groups.
[14] I therefore conclude that s. 14 of Part III of
Schedule V does not apply in the instant case and that it
does not exempt the appellant from charging GST for the supplying
of its meals.
[15] Finally, the appellant cannot benefit either from the
exemption contained in s. 12 of Part VI of
Schedule V as it is not covered by the definition of a
public sector body offering a service supplied as part of an
educational program covered by that section.
[16] Section 12 of Part VI of Schedule V reads
as follows:
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12. A supply made by a public sector body of
a membership in, or services supplied as part of, a program
established and operated by the body that consists of a
series of supervised instructional classes or activities
involving athletics, outdoor recreation, music, dance,
arts, crafts or other hobbies or recreational pursuits
where
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12. Droit d'adhésion à un
programme consistant en une série de cours ou
d'activités de formation. La fourniture par
un organisme du secteur public d'un droit
d'adhésion à un programme, établi
et administré par l'organisme, qui consiste en
une série de cours ou d'activités de
formation, sous surveillance, dans des domaines tels
l'athlétisme, les loisirs de plein air, la
musique, la danse, les arts, l'artisanat ou
d'autres passe-temps ou activités de loisir,
ainsi que des services offerts dans le cadre d'un tel
programme, si :
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(a) it may reasonably be expected,
given the nature of the classes or activities or the degree
of relevant skill or ability required for participation in
them, that the program will be provided primarily to
children 14 years of age or under, except where the
program involves overnight supervision throughout a
substantial portion of the program; or
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a) il est raisonnable de
s'attendre, compte tenu de la nature des cours ou des
activités ou du niveau d'aptitude ou de
capacité nécessaire pour y participer,
à ce que le programme soit offert principalement aux
enfants de quatorze ans ou moins, sauf si une grande partie
du programme comporte une surveillance de nuit;
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(b) the program is provided primarily
for underprivileged individuals or individuals with a
disability.
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b) le programme est offert
principalement aux particuliers défavorisés
ou ayant un handicap physique ou mental.
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[17] Under s. 123 of the Act, the expression "public
sector body" means a government or a public service body,
and the latter means a non-profit organization, a charity, a
municipality, a school authority, a hospital authority, a public
college or a university.
[18] Although the Centre is a public service body within the
meaning of the Act, it is not the Centre that provides the
cafeteria services but the appellant, which regularly obtains
payment for those services and which could derive profits from
them if it increased its sales or reduced its expenses.
[19] It cannot be said either that the cafeteria services are
offered in connection with the program offered by the Centre, or
"as part of a program established and operated by the
[public sector] body", since the cafeteria expenses are
charged separately from the accommodation expenses of the Centre
offering the recreational program. Additionally, the cafeteria
services are not administered by the Centre, as required by
s. 12 for entitlement to the exemption.
[20] I therefore conclude that the cafeteria service offered
by the appellant is not a service offered as part of a program
established and operated by a public sector body within the
meaning of s. 12 of Part VI of Schedule V of the
Act. The appellant should accordingly have collected GST on the
supply of meals, food and beverages to users of the Centre since
it was making a taxable supply within the meaning of the Act.
[21] The appeal is accordingly dismissed.
Signed at Ottawa, Canada, February 10, 1998.
"Lucie Lamarre"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true this 19th day of
March 1998.
Mario Lagacé, Revisor
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