Date: 20011127
Docket: 2001-885-GST-I
BETWEEN:
510577 ONTARIO LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor
Judgment
Beaubier, J.T.C.C.
[1]
This appeal pursuant to the Informal Procedure was heard at
Sudbury, Ontario on November 21, 2001. The Appellant called its
chief officer and shareholder, Gilles Courtemanche, to testify.
The Respondent called its auditor on the file, Terry Labrick, to
testify.
[2]
Paragraphs 5 to 10 inclusive of the Reply to the Notice of Appeal
read:
5.
The Appellant filed a quarterly Goods and Services Tax return for
the period of February 1, 1999 to April 30, 1999 on
June 24, 1999.
6.
By Notice of Assessment dated March 27, 2000, the Minister of
National Revenue (the "Minister") notified the
Appellant that the Input Tax Credit in the amount of $5,965 has
been disallowed.
7.
By Notice of Decision dated December 19, 2000, the Minister
confirmed the assessment.
8.
In so assessing the Appellant, the Minister made the following
assumptions of fact:
a)
the Appellant was a registrant under Part IX of the
Excise Tax Act (the
"Act") effective
January 1, 1991;
b)
during the period under appeal, the Appellant operated a business
of windshield repairs;
c)
the Appellant claimed, among other things, an Input Tax Credit in
the amount of $5,965 for the excess of GST charged on the
insurance deductibles;
d)
The Appellant claimed the Input Tax Credit as shown by the
following example:
Total labour &
parts
$ 260.00
Provincial Sales
Tax
20.80
Goods & Services Tax
(collected &
remitted)
18.20
Sub-total
299.00
Less deductible (not
collected)
100.00
Amount paid by the insurance
companies
$ 199.00
The Appellant claimed 7% of the deductible that was never
collected from the clients;
e)
the Appellant waived part of all of the deductibles;
f)
the Appellant charged 100% of the GST to the insurance companies;
and
g)
the Appellant did not refund or credit the insurance companies
for the excess GST charged.
B.
ISSUE TO BE DECIDED
9.
The issue is whether the Appellant is entitled to deduct an
amount of $5,965 in determining the net tax for the portion of
GST on the insurance deductibles that was uncollected by the
Appellant.
C.
STATUTORY PROVISIONS, GROUNDS RELIED ON AND RELIEF
SOUGHT
10.
He relies on section 232 of the Act as
amended.
[3]
None of the assumptions were refuted by the evidence.
[4]
Gilles Courtemanche testified that when a customer came to the
Appellant for a new windshield he received an immediate estimate
which contained the price of the installed windshield, the goods
and services tax ("GST") and the provincial sales tax
("PST"), all itemized. Thereupon the customer told the
Appellant the name of his insurance company and the amount of the
deductible. The Appellant then wrote a discount for the amount of
the deductible and collected the remainder of the estimate,
including all of the estimated taxes, from the insurer. When the
Appellant received the money from the insurer it paid all of the
GST and the PST received to the respective governments. After
paying all of these taxes for a number of years, the Appellant
applied for input tax credits of the excess taxes paid on the
discounted deductible amount (in the example, $7. equalling 7% of
the $100. deductible). In total, this amounted to $5,965.
[5]
In particular, the example described in assumptions 8 d), e) and
f) were confirmed, exactly, by Exhibits R-1 and R-2. The
Appellant discounted the $100. to its customer at the time of the
estimate. But it did not refund or credit the $7. GST to anyone.
Instead it billed the entire balance of $199. to the insurance
company and then paid the entire $18.20 GST to the Respondent,
including the $7. GST on the discounted $100.
[6]
Section 232 of the Excise Tax Act reads:
232.
(1)
Where a particular person has charged to, or collected from,
another person an amount as or on account of tax under Division
II in excess of the tax under that Division that was collectible
by the particular person from the other person, the particular
person may, within two years after the day the amount was so
charged or collected,
(a)
where the excess amount was charged but not collected, adjust the
amount of tax charged; and
(b)
where the excess amount was collected, refund or credit the
excess amount to that other person.
(2)
Where a particular person has charged to, or collected from,
another person tax under Division II calculated on the
consideration or a part thereof for a supply and, for any reason,
the consideration or part is subsequently reduced, the particular
person may, in or within four years after the end of the
reporting period of the particular person in which the
consideration was so reduced,
(a)
where tax calculated on the consideration or part was charged but
not collected, adjust the amount of tax charged by subtracting
the portion of the tax that was calculated on the amount by which
the consideration or part was so reduced; and
(b)
where the tax calculated on the consideration or part was
collected, refund or credit to that other person the portion of
the tax that was calculated on the amount by which the
consideration or part was so reduced.
(3)
Where a particular person adjusts, refunds or credits an amount
in favour of, or to, another person in accordance with subsection
(1) or (2), the following rules apply:
(a)
the particular person shall, within a reasonable time, issue to
the other person a credit note, containing prescribed
information, for the amount of the adjustment, refund or credit,
unless the other person issues a debit note, containing
prescribed information, for the amount;
(b) the
amount may be deducted in determining the net tax of the
particular person for the reporting period of the particular
person in which the credit note is issued to the other person or
the debit note is received by the particular person, to the
extent that the amount has been included in determining the net
tax for the reporting period or a preceding reporting period of
the particular person; and
(c) the
amount shall be added in determining the net tax of the other
person for the reporting period of the other person in which the
debit note is issued to the particular person or the credit note
is received by the other person, to the extent that the amount
has been included in determining an input tax credit claimed by
the other person in a return filed for the reporting period or a
preceding reporting period of the other person.
(4)
This section does not apply in circumstances in which section 161
or 176 applies.
[7]
The premise of the GST is that GST collected by the Appellant is
trust money. That is, the tax was paid by the Appellant's
customer and the Appellant is only holding it in trust for the
Government of Canada. Section 232 describes a situation where the
Appellant collected excess tax in the previous years before June
24, 1999. That is what happened here.
[8]
On June 24, 1999 the Appellant claimed input tax credits of
$5,965. consisting of the GST it collected from the insurance
companies on the discounts which it had granted over the four
years preceding April 30, 1999. The Respondent refused to pay the
Appellant the $5,965. The Appellant appealed.
[9]
The Respondent's counsel referred the Court to subsection
232(3). The Appellant has not issued a credit note to its
customer (or to the insurance company) for the GST overpaid on
the discounted amount pursuant to subsection 232(3).
Therefore, the Appellant is not entitled to an input tax credit
in determining the net tax it must pay. (See also Gastown
Actors' Studio Ltd. v. Canada [2000] F.C.J. No. 2047
(FCA) paragraph 10.)
[10] The
appeal is dismissed.
Signed at Ottawa, Canada this 27th day of November, 2001.
"D. W. Beaubier"
J.T.C.C.
COURT FILE
NO.:
2001-885(GST)I
STYLE OF
CAUSE:
510577 Ontario Limited v. The Queen
PLACE OF
HEARING:
Sudbury, Ontario
DATE OF
HEARING:
November 21, 2001
REASONS FOR JUDGMENT
BY:
The Honourable Judge D. W. Beaubier
DATE OF JUDGMENT:
November 27, 2001
APPEARANCES:
Counsel for the
Appellant:
Gilles Courtemanche
Counsel for the
Respondent:
Gabrielle St-Hillaire
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-885(GST)I
BETWEEN:
510577 ONTARIO LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on November 21, 2001 at Sudbury,
Ontario
by the Honourable Judge D. W. Beaubier
Appearances
Counsel for the
Appellant:
Gilles Courtemanche
Counsel for the
Respondent:
Gabrielle St-Hillaire
JUDGMENT
The
appeal from the assessment made under the Excise Tax Act,
notice of which is dated March 27, 2000 is dismissed in
accordance with the terms of the attached Reasons for
Judgment.
Signed at Ottawa, Canada this 27th day of November, 2001.
J.T.C.C.
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