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Docket: 2002-2721(GST)I
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BETWEEN:
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JUN MING YEUNG,
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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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____________________________________________________________________
Appeal heard on February 26, 2003 at Kelowna,
British Columbia
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Before: The Honourable Judge L.M. Little
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Appearances:
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For the Appellant:
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The Appellant herself
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Counsel for the Respondent:
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Nadine Taylor Pickering
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____________________________________________________________________
JUDGMENT
The
appeal from the assessment made under Part IX of the Excise
Tax Act, notice of which is dated April 11, 2002 and bears
number 64761, is allowed, without costs, and the assessment is
referred back to the Minister of National Revenue for
reconsideration and reassessment in accordance with the attached
Reasons for Judgment.
Signed at Vancouver, British Columbia, this 31st day of March
2003.
J.T.C.C.
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Citation: 2003TCC169
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Date:20030331
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Docket: 2002-2721(GST)I
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BETWEEN:
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JUN MING YEUNG,
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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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REASONS FOR JUDGMENT
Little, J.
A. FACTS
[1] The Appellant is a seamstress
employed by Far West Industries Ltd.
[2] The Appellant married Victor York
Fong Yeung ("Husband") at Vernon, British Columbia on
the 12th day of September 1992.
[3] Village Garden Restaurant Ltd.
("Village Garden") was incorporated under the laws of
the Province of British Columbia on the 15th day of August
1995.
[4] The main business of Village
Garden was owning and operating a restaurant in Vernon that
served Chinese food.
[5] Village Garden was registered
under Part IX of the Excise Tax Act (the
"Act") and was required to file Goods and
Services Tax ("GST") returns on a quarterly basis.
[6] On or about the 15th day of August
1995 the Appellant and her Husband were appointed directors and
officers of Village Garden.
[7] On or about the 1st day of June
1999 the Appellant and her Husband separated.
[8] On the 14th day of October 2000
the landlord seized the goods and chattels belonging to Village
Garden to cover the arrears of rent. Village Garden ceased to
operate following the seizure of its assets.
[9] The Minister of National Revenue
(the "Minister") was unable to obtain the GST from
Village Garden since Village Garden had no assets.
[10] On the 3rd day of October 2001 the
Minister assessed the Appellant pursuant to section 323 of the
Act for the failure by Village Garden to remit to the
Receiver General an amount of net tax as required by
subsection 228(2) of the Act plus interest and
penalties.
[11] On November 16, 2001 the Appellant
filed GST returns at the request of an official of the Canada
Customs and Revenue Agency for the reporting period March 1, 1998
to July 31, 1999 (the "Period") reporting GST of
$11,972.77, input tax credits ("ITC") of $3,504.72 and
net tax of $8,468.05.
[12] By Notice of Decision and Notice of
Assessment (Third Party) dated April 11, 2002 the Appellant
was reassessed for the amount of $7,578.15 representing net tax,
interest and penalties in respect of the failure by Village
Garden to remit tax pursuant to subsection 228(2) of the
Act. The amounts involved are:
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Net tax
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$5,772.99
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Interest
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820.62
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Penalty
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984.54
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Total
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$7,578.15
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B. ISSUES
[13] The issues to be decided are
whether:
(a) the Minister assessed the
Appellant within the time prescribed under subsection 323(5) of
the Act in respect of the Appellant's failure to remit
GST as required by subsection 228(2) of the Act;
(b) the Minister properly satisfied
the requirements of subsection 323(2) of the Act;
and
(c) the Appellant exercised the degree
of care, diligence and skill to prevent the failure to remit that
a reasonably prudent person would have exercised in comparable
circumstances.
C. ANALYSIS
[14] (1) Was the Notice of
Reassessment issued within the time specified by the
Act?
Subsection 323(1) of the Act reads as follows:
323. (1) Where a corporation fails to remit an amount of
net tax as required under subsection 228(2) or (2.3), the
directors of the corporation at the time the corporation was
required to remit the amount are jointly and severally liable,
together with the corporation, to pay that amount and any
interest thereon or penalties relating thereto.
Subsection 323(5) reads as follows:
323. (5) An assessment under subsection (4) of any
amount payable by a person who is a director of a corporation
shall not be made more than two years after the person last
ceased to be a director of the corporation.
According to the Register of Directors the Appellant resigned
as a Director of Village Garden on November 30, 1999. The Notice
of Assessment was issued on October 3, 2001. In other words, the
Notice of Assessment was issued within the two-year period
provided by the Act.
(2) Is the Appellant subject to tax under the Act by
reason of wording contained in section 323.1?
[15] As noted above the Appellant was a
Director of Village Garden in the relevant time and she is
therefore subject to the tax liability imposed on a Director by
subsection 323(1).
[16] The Appellant noted in her testimony
that the restaurant which was owned and operated by Village
Garden had failed because he had lost money in gambling.
[17] The Appellant cooperated fully with
officials of the CCRA when she was advised that her husband had
failed to ensure that GST was paid by Village Garden.
[18] The above facts indicate that the
Appellant (a passive director) has been reassessed because of her
husband's failure to ensure that GST was paid by Village
Garden. The Appellant is therefore caught by a technical
provision of the Act which makes directors liable for GST
assessed against a company.
[19] In my opinion this is not a situation
where a penalty should be imposed. I therefore find that the
penalty of $984.54 should be waived.
[20] I do not have the authority to waive
the interest that has been imposed. However, the Minister has the
authority to waive the interest and I recommend that in this
unfortunate situation the Minister exercise his discretion and
waive the interest.
[21] The appeal is allowed, without costs,
to permit the Minister to waive the penalty of $984.54. In all
other respects the appeal is dismissed.
Signed at Vancouver, British Columbia, this 31st day of March
2003.
J.T.C.C.
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