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Citation: 2006TCC159
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Date: 20060518
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Docket: 2005-2119(GST)I
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BETWEEN:
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PIERRE BÉLANGER,
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Appellant,
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And
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HER MAJESTY THE QUEEN,
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Respondent.
[OFFICIAL
ENGLISH TRANSLATION]
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REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
from a Goods and Services Tax ("GST") assessment dated
December 3, 2004, and bearing the number 231670. The assessment
was made under the Excise Tax Act ("the Act") and
pertains to input tax credits in respect of the rental of vehicles during the
periods from January 1, 2001, to December 31, 2001,
January 1, 2002, to December 31, 2002, and January 1, 2003,
to December 31, 2003.
[2] The issue to be
determined is whether, for the purposes of computing the input tax credit, the
Appellant chiefly used the following vehicles, to an extent greater than 50%,
for personal purposes: a Cadillac
Seville for the period of January 1, 2001 to July 21, 2002;
and a 2003 Jaguar for the period from July 22, 2002 to
September 30.
[3] During the periods
in issue, the Appellant operated a gas station on an independent basis in
Beauport. He had been operating the station since 1972.
[4] In this capacity,
during the periods in issue, he carried out all the duties involved in the
operation of such a business, which sold fuel only. He was responsible for
the management and maintenance of the equipment and premises.
[5] He stated that, as
the owner of such a business, he had to drive around several times a day in
order to check how much his competitors were charging per litre of fuel so that
he could react quickly. In other words, he had to ensure that he was selling
his fuel for the same price as the competition.
[6] In support of his
testimony, the Appellant produced maps showing the locations of the various gas
stations that he considered reference points for competition. The Appellant
drove the stated distance between his business and his competitors two or three
times a day, five days a week;
the distance of one itinerary was 14 km, and the distance of the other was
9 km.
[7] The Appellant claims
to have made three 9-km trips a day, 20 days per month, for a total of 540 km per month. To this he
adds trips from his home office to the gas station and back (which account for
60 km per month) plus 50 km per month to meet with representatives, go
to the bank, drive attendants and employees, deliver gas for vehicles in
emergencies, purchase parts and stationery, and run other errands, for an
overall total of 650 km per month. For all this travel, he claims to have used
a Cadillac Seville from the beginning of the first period in issue
until July 21, 2002, after which he allegedly used a 2003
Jaguar.
[8] The Appellant kept
no business‑related mileage log during the periods in issue; he began to keep
one after the assessment.
[9] Based on his journal
for the year 2005, which, he says, records essentially the same use, he claims
that he used his vehicle primarily for business purposes, and that personal use
was utterly marginal, ranging from two to five percent of the kilometres driven
each year.
[10] He went to the
barber for personal purposes six times and visited his chiropractor ten times,
which was a long trip and was followed by a drive to his place of business. The
trip to the chiropractor was 15 km and the trip to the barber was
3 km. Thus, he drove 10 x
15 km and 6 x 3 km, for a total of 168 km in the course of the year.
He also stated that after he visited the chiropractor, he would take the
opportunity to visit the gas station, thereby considerably reducing the distance
of personal travel.
[11] When the Court asked
him which vehicle he used for business travel and which one he used for
personal travel, the Appellant responded that the vast majority of his personal
travel was done in his girlfriend's Ford Focus in order to avoid parking his Cadillac Seville or his
Jaguar in public lots.
[12] As justification for
this rather unusual conduct, the Appellant claimed to be a fine-car enthusiast
and said that the cars in question were collector vehicles.
[13] As far as this was
concerned, the Court did not understand how a leased car could be a collector
vehicle.
[14] During the audit,
the Appellant explained that he retired subsequent to the period in issue. He
had worked for a while during
the period in issue. At that time, his work was 35 km from his home, which
meant that he had to drive 70 km round‑trip. He said that he did
not actually work each business day because he had accumulated many days of
sick leave and vacation over the years and over the course of his career and
had not taken them, which is why, during the last six months, he took
advantage, if you will, of his accumulated leave. The other claim that he made
was that he was part of a carpool. The evidence did not disclose whether he
used his spouse's car when it was his turn to drive the group, or whether he
was exempt from his responsibility because of the kind of car that he drove.
[15] When asked to do so,
the Appellant was unable to describe the vehicles that his co‑workers pooled.
He added that time had taken its toll and that he could no longer recall. This
is very unusual for someone who describes himself as a car enthusiast.
[16] The provisions of
the Excise Tax Act that
pertain to this question are in Part IX, Division II. They state:
170. (1) Restriction — In determining an input
tax credit of a registrant, no amount shall be included in respect of the tax
payable by the registrant in respect of
. . .
(c) a supply made in or before a
reporting period of the registrant of property, by way of lease, licence or
similar arrangement, primarily for the personal consumption, use or enjoyment
in that period of:
(i) where the registrant is an individual, the
registrant or another individual related to the registrant,
(ii) where the registrant is a partnership, an
individual who is a member of the partnership or another individual who is an
employee, officer or shareholder of, or related to, a member of the partnership,
(iii) where the registrant is a corporation, an
individual who is a shareholder of the corporation or another individual
related to the shareholder, and,
(iv) where the registrant is a trust, an
individual who is a beneficiary of the trust or another individual related to
the beneficiary,
except where the registrant makes a
taxable supply of the property in that period to such an individual for
consideration that becomes due in that period and that is equal to the fair
market value of the supply at the time the consideration becomes due.
(2) Further restriction — In determining an
input tax credit of a registrant, no amount shall be included in respect of the
tax payable by the registrant in respect of property or a service acquired,
imported or brought into a participating province by the registrant, except to
the extent that
(a) the consumption or use of property
or services of such quality, nature or cost is reasonable in the circumstances,
having regard to the nature of the commercial activities of the registrant; and
. . .
280. (1) Penalty and interest — Subject to this
section and section 281, where a person fails to remit or pay an amount to the
Receiver General when required under this Part, the person shall pay on the
amount not remitted or paid
. . .
computed for the period beginning
on the first day following the day on or before which the amount was required
to be remitted or paid and ending on the day the amount is remitted or paid
. . .
Analysis
[17] First, I must acknowledge that counsel for the Appellant prepared his
case very well. In support of the evidence, he tendered a photograph of the
location, various maps, a copy of the daily form that the Appellant completed
for the year 2005, a "Value Plus" program participation
agreement setting out the nature and type of obligations between the Appellant
and the oil company with which he was associated, and the transaction register which
showed how frequently gas prices changed as well as the revenues for the years
in issue.
[18] Unfortunately, good preparation cannot make
credible or plausible that which is neither. Indeed, I lend no credence to the
explanations, which I find utterly implausible, to the effect that a reasonable
person would lease a Cadillac Seville for a certain period, and a 2003
Jaguar for a subsequent period, at a cost of more than $800 per month — a
cost that would have been even higher but for the fact that down payments had
been made in order to keep the monthly costs as low as possible — and
that more than 95% of the use of the vehicle was related to the operation of a
gas station and was essentially devoted to visiting competing gas stations to check
their prices.
[19] In my view, this harsh assessment of the quality of the Appellant's
testimony is warranted by a string of explanations that are as implausible as
they are outlandish. I refer, among other things, to the fact that the
Appellant claimed that his personal use of the vehicle was completely marginal,
and perhaps even symbolic. As stated, this is completely implausible,
especially since any automobile enthusiast would generally take pleasure in
using a vehicle that he his proud of whenever the ideal opportunity arises.
[20] When the Court asked him which car was used for personal and family
outings, the Appellant claimed that it was his wife's car — an ordinary, low-end compact or
subcompact, because he did not want to park his Cadillac or Jaguar in public
shopping centre lots.
[21] However, vehicles are not used solely to get to shopping centres.
There are several opportunities for outings in which the vehicle can be parked
in a safe place where there is no risk of it getting scratched. In fact, such
outings are generally more numerous and frequent when one is retired.
[22] While the year 2005 is not in issue, it is relevant in that the
Appellant said that his pattern of vehicle use was essentially the same as it
was during the years in issue. And, in 2005, he allegedly used his vehicle ten
times to visit the chiropractor (carefully noting that this was on the way to
the gas station, where he drove after the visit to do the weekly bookkeeping)
and six times (for a total of 18 km) to visit the barber.
[23] The Appellant explained that this situation was due to the fact that
he was practically obsessed with preventing damage to his vehicle, which, as
stated, was leased. The Appellant, who was retired most of the time during the
three periods in issue, allegedly used a vehicle of subcompact or similar class
for his personal travel. It would probably have been better for him not to go
quite that far with a description that bordered on the ridiculous.
[24] The evidence does not enable me reliably to ascertain any percentage
of use. In contrast, the estimate of the Minister of
National Revenue is not only reasonable, but actually very generous under the
circumstances, so there is no reason for me to intervene. As for the penalties,
I confirm them given the Appellant's patently exaggerated representations.
[25] The person responsible for auditing this file said that she came to
this conclusion because the vehicle was the only one registered under the
Appellant's name and there was no log; she said that she took account of the
type of vehicle and the number of visits, and correctly determined that abuse
was clearly involved.
[26] The use of a log is a validating element of sorts; it is a relevant
reference document that may permit a more reliable assessment, but it is
certainly not sufficient to protect a vehicle user from a challenge against the
merits of a description that is totally unreasonable on its face.
[27] A log is a useful and appropriate instrument with which the use of a
motor vehicle can be measured mathematically. The mere existence of such a log
is not in itself a sufficient basis on which to make an absolute determination.
[28] Essentially, it is an appropriate document to illustrate with greater
accuracy and reliability the extent to which a vehicle is being used.
[29] Like any bookkeeping, report or document, a log can be analyzed to gauge
its quality and reliability. In fact, the effect of having a log can be the
complete opposite of the effect that had been sought, where, for example, it is
clear that the log was filled out after the fact or in a totally arbitrary
manner. Such a finding would show that the person who made the report might
have wished to hide or mask the true use of the vehicle involved.
[30] In the case at bar, the explanations struck me as far-fetched and
simply implausible for the many reasons discussed. Thus, I do not accept the
claims made and the explanations given by the Appellant in support of his
appeal, and I find that the Appellant did not discharge his burden of
proof. Consequently, his appeal is dismissed and the assessment, including the
penalties, is confirmed.
Signed at Ottawa, Canada, this 18th day of May 2006.
Tardif
J.
Translation certified true
on this 29th day of
February 2008.
Brian McCordick,
Translator
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