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Citation: 2003TCC889
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Date:20031223
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Docket: 2003-1202(GST)I
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BETWEEN:
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1116186 ONTARIO INC.,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
Agent for the Appellant: Duncan G. Bell
Counsel for the Respondent: Jocelyn Espejo
Clarke
____________________________________________________________________
REASONS FOR JUDGMENT
(Delivered orally from the Bench on
October 23, 2003, at Hamilton, Ontario)
McArthur J.
[1] This appeal is with respect to the
Appellant's entitlement to input tax credits (ITCs) for the
period July 1, 1997 to December 31, 1999, under section 169 of
the Excise Tax Act. The Minister of National Revenue
assessed goods and services tax of $58,216 and allowed ITCs of
$21,314, and also assessed penalties and interest of $7,700 and
$6,205, respectively. The Appellant carried on business under the
name of National Tickets or National Promotions and its director,
Steven Barber, gave evidence together with Duncan Bell, its
chartered accountant.
[2] The Appellant purchased and resold
tickets to entertainment and sporting events. The bulk of its
business was for sporting events in the United States which
transactions were exempt from GST. For the most part, they
included the purchase and sale of tickets to football games such
as the Rose Bowl, the Orange Bowl and the Super Bowl. These
transactions are not in issue. The problem arises from the
purchase and sale of tickets for Canadian-held sporting
events and concerts.
[3] The Appellant contracted the
services of casual labour to purchase the tickets. Depending on
the popularity of the event, the Appellant arranged to have as
many as 60 people attending in line at ticket outlets such as
Ticketmaster, Copps Coliseum, boutiques and Maple Leaf Gardens to
purchase tickets. The Appellant would have given each purchaser
cash for their purchases. It would resell these tickets to
individuals or groups. Most transactions were carried out in
cash.
[4] The Appellant was represented by
Duncan G. Bell, chartered accountant, who stated in theNotice of
Appeal:
... The business entails contracting the services of
substantial casual labour to fill tickets orders from a variety
of venues. Issuing cheques, utilizing credit cards and obtaining
receipts for ticket purchases in this fast paced environment, and
under these operating circumstances is not always viable; this is
for the most part a cash and carry operation. As we are all
aware, you cannot purchase tickets from box offices or ticketing
agencies such as Ticketmaster without paying GST.
...
Although supportive documentation is sometimes scarce in this
operating environment, it stands to reason that there is no
source from which our client could possibly purchase their ticket
inventory without paying GST on the product. We respectfully
request that a reasonable and fair determination for GST input
tax credits be determined based on the company's sales.
[5] The ITCs of $21,314 allowed by the
Minister were as a result of ticket purchases by the Appellant by
cheques primarily for Toronto Maple Leaf and Montreal Canadian
hockey games. The position of the Respondent is that the
Appellant did not maintain adequate books and records as required
by the Act and failed to file GST returns for the relevant
period. Also, the Minister did not allow the Appellant any
further ITCs than those allowed because sufficient and
appropriate evidence was not obtained and maintained by the
Appellant to allow the Minister to do so.
[6] In effect, the Appellant is asking
that I take judicial notice that the Appellant paid GST on all
ticket purchases. Mr. Barber stated that it did not file GST
returns because it had ITCs equal to the GST payable and he
believed it was under the $30,000 threshold.
[7] Included in evidence was
Exhibit A-1 consisting of nine letters signed by
individuals which state:
I ... acknowledge that I have purchased tickets on behalf
of National Tickets on numerous occasions. I would purchase
these tickets from a Ticketmaster outlet. The purchase was always
made with cash.
Also, Exhibit R-1 contains 16 similar letter from the
various casual agents for the Appellant. Exhibit A-2
includes financial statements prepared by Mr. Bell for the
taxation year 1999 which were prepared subsequent to the audit.
Exhibits R-3 and R-4 are reports prepared by the
Respondent's auditor, Brian Hassall, who also testified.
[8] The Appellant admitted that it was
a unique business and the Respondent should not be so stringent.
It purchased tickets for the most part with cash, paying GST,
receiving no receipts other than the tickets, and then selling
them for cash, again without receipts. Cheque stubs and bank
statements were presented to the Respondent's auditor. The
cheque stubs, written to cash used for the purchase of tickets,
indicated the event. Many tickets went unsold.
[9] Paragraph 169(4)(a) of the
Act reads as follows:
169(4) A registrant may not claim an input tax credit
for a reporting period unless, before filing the return in which
the credit is claimed,
(a) the
registrant has obtained sufficient evidence in such form
containing such information as will enable the amount of the
input tax credit to be determined, including any such information
as may be prescribed;
"Information" is described in Regulation 3 of
the Act and it outlines in detail the prescribed
information.
3 For
the purposes of paragraph 169(4)(a) of the Act, the
following information is prescribed information:
(a) ...
if the supply is less than $30,
(i) the name
of the supplier ...
(ii) ...
(iii) where an invoice is
not issued ... the date on which there is tax paid ...
and
(iv) the total amount paid
... for all of the supplies;
3(b) where the total
amount paid ... is $30 or more and less than $150,
The information required includes that set out in subparagraph
3(a)(iii) and (iv) together with considerably more detail.
Without question, the Appellant did not satisfy the requirements
of those subparagraphs
[10] The technical requirements in the
Regulations are very rigid. Subsection 286 of the
Act requires that a person, which includes a corporation,
carrying on business must keep books and records "as will
enable the determination of the person's liabilities and
obligations under this Part or the amount of any rebate or refund
to which the person is entitled".
[11] In the present instance, the Appellant
did not file GST returns until audited. Mr. Barber had been
in the ticket purchase-and-selling business since
1981. He has a university degree. He taught school for a year
before going into business on his own. He simply ignored the GST
requirements. In the situation, it would be reasonable for him to
have sought professional advice and/or consulted with GST
officers concerning the Appellant's situation rather than
turning his back on it.
[12] After the Minister's audit, he had
Mr. Bell prepare corporate statements that were accepted by
Canada Customs and Revenue Agency. The Appellant asked that the
cancelled cheques and bank statements be accepted as evidence of
amounts paid. Clearly, these do not satisfy the technical
requirements in the Input Tax Credit Information
Regulations and particularly section 3. The cheques were made
to cash. An individual was given the cash to buy tickets, pay his
or her fee of $20 or $30 and perhaps other
out-of-pocket expenses. I am asked to accept in blind
faith that the entire cheque proceeds less a small amount went to
buy tickets and that GST was paid on those tickets in all
instances. Subsection 169(4) and Regulation 3 do not give
me that latitude.
[13] The following comments by Bowman,
A.C.J. in Helsi Construction Management Inc. v. The Queen,
[2001] T.C.J. No. 149, apply equally to the present appeal:
[13] We are dealing with one of
the technical requirements under a statute that is somewhat
unique for its specificity. Moreover, it is the foundation
of a self-assessing system that operates in the commercial
world. Unfortunate as it may seem to the appellant, rules
are rules. I can do nothing to help the appellant on this
point. The problem is to some extent the appellant's
own doing. Mr. Familamiri has made great efforts to correct
the situation created by original chaotic state of the records
and he has succeeded to some extent. However, there is only
so much that one can do to correct years of disarray.
Also, in the decision of E.R. Design Ideas Inc. v. The
Queen, [1999] T.C.J. No. 198, Lamarre Proulx J. stated
under similar circumstances to the present appeal:
[22] ... Sometimes a
cancelled cheque or a bank statement may be used as evidence when
the invoice is lost, but the audit has to make sure that this is
the case and that the amount is not computed twice. In my view,
the audit has been carefully made and to a certain extent to the
advantage of the Appellant. If no better evidence was
provided by the Appellant, it can only be assumed from what I
heard and saw at the hearing and that it was because it could not
do so.
This is relevant to this appeal.
[14] The Appellant no doubt faces difficulty
in satisfying the requirements of the Act, but to do
nothing surely is not the approach to take. There is no doubt
that the Appellant was entitled to additional ITCs. I do not have
the discretion to guess on a reasonable allocation. The Minister
has been given some discretion in subsection 169(5). This
may be a situation where his discretion, to "exempt a
specified registrant" should have been exercised. I do not
have the same opportunity nor can I interfere with the
Minister's decision.
[15] In cross-examination, the
Respondent introduced negative publicity that Mr. Barber
received in 1998 in a Hamilton Spectator article. Apparently, he
was charged under provincial legislation for selling $37 tickets
to a rock concert for $100. I believe this information has no
place in the context of this hearing. It is hopeful that this
background did not taint the decision of the Minister in arriving
at his assessment.
[16] For these reasons, the appeal is
dismissed.
Signed at Ottawa, Canada, this 23rd day of December, 2003.
McArthur J.
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