The King v. Consolidated Lithographing Mfg. Co. Ltd., [1934] SCR 298

Supreme Court of Canada

The King v. Consolidated Lithographing Mfg. Co. Ltd., [1934] S.C.R. 298

Date: 1934-02-06.

His Majesty The King (Plaintiff) Appellant;

and

Consolidated Lithographing Manufacturing Company, Limited (Defendant) Respondent.

1933: November 8; 1934: February 6.

Present: Duff C.J. and Rinfret, Cannon, Crocket and Hughes, JJ.

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA

Sales tax—Playing cards—Excise tax—Whether included in sale price—Special War Revenue Act, R.S.C, 1927, c. 179, s.s. 82, 85 (a) (b), 86 (i).

The respondent, a licensed manufacturer under Part XIII of the Special War Revenue Act (R.S.C., 1927, c. 179), manufactured and sold playing cards. It paid the sales tax on all cards sold, said tax being computed on the sale price of the cards exclusive of the excise tax imposed by section 82 of the Act. The Crown contended that the sales tax should have been computed on the sale price including the excise tax.

Held, Crocket J. dissenting, reversing the judgment of the Exchequer Court of Canada ([1933] Ex. C.R. 204), that the excise tax should have been included in the sale price of such cards for the purpose of calculating the sales tax. The definition of “sale price” in the Act (s. 85, ss. (a)) is very comprehensive: “sale price” is inclusive of every item entering into the price just before the consumption or sales tax is added and must therefore include the excise tax.

Per Crocket J. (dissenting).—A taxing statute is always to be construed strictly against the taxing authorities and a tax upon a tax ought not to be held to be imposed in the absence of language which leaves no doubt whatever as to the intention to impose it. The omission from

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the definition which the statute gives of the term “sale price” of any mention of excise taxes, together with its inclusion of excise duties when goods are sold in bond and its express provision making the excise tax part of the duty paid value and of the sale price in the case of imported playing cards leaves the intention of Parliament in such doubt that the trial judge was fully warranted in resolving the question against the taxing authorities.

APPEAL from the judgment of the Exchequer Court of Canada, Angers J.[1], dismissing an action brought by the Attorney General of Canada to recover the sum of $2,611.58, which it was claimed was owing by the respondent as sales tax in respect of the sale of playing cards made from December 1st, 1931 to July 31, 1932.

The material facts of the case and the question at issue are stated in the above head note and in the judgments now reported.

F. P. Varcoe K.C. for the appellant.

L. A. Forsyth K.C. and J. de M. Marler for the respondent.

The judgment of the majority of the court (Duff C.J. and Rinfret, Cannon and Hughes JJ.) was delivered by

Hughes J.—This is an appeal from a judgment of Mr. Justice Angers of the Exchequer Court of Canada dismissing an action brought by the Attorney-General of Canada to recover the sum of $2,611.58, which it was claimed was owing by the respondent in respect of sales of playing cards made from December, 1931, to July 31, 1932.

During the period in question each pack of cards manufactured was subject to an excise tax imposed by Part XII of the Special War Revenue Act, R.S.C., 1927, chapter 179, section 82, of which reads as follows:—

S. 82. There shall be imposed, levied and collected, an excise tax on playing cards for every fifty-four cards or fraction of fifty-four in each package, of ten cents per pack

2. The excise taxes imposed by the preceding subsection shall be payable at the time

(a) of importation or removal from warehouse for consumption in addition to the duties of customs; or

(b) of sale by the Canadian manufacturer.

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Regulations 1 and 2 pertaining to Part XII are as follows:—

1. The tax of ten cents per pack shall be payable by means of excise tax stamps issued by the department of National Revenue.

2. Excise tax stamps on playing cards manufactured in Canada shall be affixed to the individual packs and be cancelled, before the playing cards are removed from the premises of the manufacturer.

By section 86 (1) of the Act the respondent was liable to pay a consumption or sales tax of four per cent on the sale price of all goods (a) produced or manufactured in Canada payable by the producer or manufacturer at the time of the delivery of such goods to the purchaser thereof. On April 7th, 1932, a new subsection was substituted whereby the tax became six per cent.

It is conceded that the respondent paid sales tax during the period in question on its sales exclusive of the excise taxes imposed by virtue of section 82 of the Act. The appellant contends that the sales tax should have been computed on the sale price including the excise taxes. Two copies of invoices of the defendant were produced. Invoice exhibit 1 mentioned the excise tax separately from the remainder of the price, and the sales tax was computed on the total. Invoice exhibit 2 indicated the price, including the excise tax, in a lump sum. The respondent had charged its customers sales taxes on the prices including excise taxes, but explained that this was only as a protection in case the contention of the Crown were correct.

It is agreed that the amount in question is $2,611.58.

Section 85 subsection (a) of the Special War Revenue Act defines the expression “sale price” as follows:—

(a) “sale price”, for the purpose of calculating the amount of the consumption or sales tax, shall mean the price before any amount payable in respect of the consumption or sales tax is added thereto, and shall include the amount of other excise duties when the goods are sold in bond; in the case of imported goods the sale price shall be deemed to be the duty paid value thereof.

Subsection (b) of section 85 defines the words “duty paid value” as follows:

(b) “duty paid value” shall mean the value of the article as it would be determined for the purpose of calculating an ad valorem duty upon the importation of such article into Canada under the laws relating to the customs and the customs tariff, whether such article be in fact subject to ad valorem or other duty or not, and in addition the amount of the custom duties, if any, payable thereon: Provided that in computing the “duty paid value” of tea purchased in bond in Great Britain the amount of the customs duty payable on tea for consumption in Great Britain shall not be included in the value of such tea for purposes of

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this Part; and that in the case of matches or playing cards, the excise taxes imposed by Parts X and XII of this Act shall be included in the duty paid value.

The respondent urged strongly that since excise taxes were expressly mentioned in the definition of “duty paid value” and not mentioned in the definition of “sale price” except that the latter should include the amount of other excise duties when the goods were sold in bond, there was no intention on the part of the legislature that the sales tax should be imposed upon the sale price including excise tax. It must be kept in mind, however, that “duty paid value” has reference only to imported goods where there may not be a price at all, as for example, where there are being brought into Canada goods such as an automobile or painting purchased abroad. In the case of goods sold in bond, there may again be special circumstances requiring specific mention in the statute that “sale price” shall include the amount of other excise duties. For example, a distiller sells a consignment of spirits to a purchaser such as a provincial liquor board, which purchaser has a bonded warehouse. The goods in such a case are sold in bond and the excise duty is not payable by the distiller at the time of sale, but is payable only when the purchaser removes them. The mention of excise duties by way of definition in respect of these special cases should not in the absence of plain language be held to cut down the wide definition of “sale price” as given. The earlier part of section 85, subsection (a) provides that for the purpose of calculating the amount of the consumption or sales tax, “sales price” shall mean the price before any amount payable in respect of the consumption or sales tax is added thereto. Now, as already indicated, regulation 2 pertaining to Part XII provides that the excise tax stamps on playing cards manufactured in Canada shall be affixed to the individual packs and be cancelled before the playing cards are removed from the premises of the manufacturer. Therefore the amount of the excise tax must truly be a part of the price of every package of cards leaving the premises of the manufacturer. The definition of “sale price” in the statute is very comprehensive. “Sale price” is inclusive of every item entering into the price just before the consumption or sales tax is added and must therefore include the excise tax.

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In Partington v. Attorney General[2], Lord Cairns said, page 122:

I am not at all sure that, in a case of this kind—a fiscal case—form is not amply sufficient; because, as I understand the principle of all fiscal legislation, it is this: if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.

I am of opinion, therefore, that the appeal should be allowed and that judgment should be entered for the appellant for $2,611.58 and costs throughout.

Crocket J. (dissenting).—This is an appeal from the judgment of Mr. Justice Angers of the Exchequer Court dismissing an information brought by the Attorney-General of Canada to recover the sum of $2,611.58, which it was claimed the defendant became liable to pay to His Majesty as sales tax in respect of the sale of playing cards from December 1st, 1931, to June 30th, 1932.

The defendant is a Canadian licensed manufacturer of playing cards, and, as such, paid sales tax on playing cards manufactured and sold by it during the period mentioned to the amount of $6,808.56. This amount represented 4 per cent on its sales down to the time of the coming into force of the amendment which was made in 1932 to the Special War Revenue Act, R.S.C. 1927, c. 179, increasing the sales tax rate to 6 per cent, and 6 per cent on all sales subsequent to that date, but the sales prices on which the tax was paid did not include the special tax of ten cents per pack, imposed by s. 82 of the Act, though the invoice prices at which the playing cards were billed to its customers did include it.

The Crown contends that the defendant was not entitled to deduct the excise tax of ten cents per pack from the invoice price at which it billed its playing cards to its customers, and the $2,611.58 claimed in the information represents the additional amount the defendant would be required to pay on its sales during the period mentioned if the excise tax forms part of the sale price for the purpose of computing the sales tax.

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This is the whole question involved in the case, whether the excise tax is to be included in or excluded from the sale price for the purpose of computing the sales tax.

The excise tax is imposed, as already stated, by s. 82 of the Act. Ss. 2 of this section is as follows:

The excise taxes imposed by the preceding subsection shall be payable at the time

(a) of importation or removal from warehouse for consumption in addition to the duties of customs; or

(b) of sale by the Canadian manufacturer.

Section 86 is the section which imposes the sales tax. Prior to the amendment of 1932, it read, in so far as is here material:—

In addition to any duty or tax that may be payable under this Act or any other statute or law, there shall be imposed, levied and collected a consumption or sales tax of four per cent on the sale price of all goods.

(a) produced or manufactured in Canada, payable by the producer or manufacturer at the times of the delivery of such goods to the purchaser thereof.

The amendment of 1932 substituted for these words the following:

There shall be imposed, levied and collected a consumption or sales tax of six per cent on the sale price of all goods,

(a) produced or manufactured, payable by the producer or manufacturer at the time of the delivery of such goods to the purchaser thereof.

It will be observed that the only change which the amendment effected beyond the substitution of the six per cent for the four per cent rate was the omission of the opening words, “in addition to any duty or tax that may be payable under this Act or any other statute or law Whatever the significance of these words and their omission from the substituted section may be, I agree with the learned trial judge that the solution of the question with which he was concerned is to be found in the definitions which the Act itself gives of the words “sale price”, and “duty paid value” in s. 85. “ ‘Sale price’,” says this section,

for the purpose of calculating the amount of the consumption or sales tax shall mean the price before any amount payable in respect of the consumption or sales tax is added thereto, and shall include the amount of other excise duties when the goods are sold in bond; in the case of imported goods the sale price shall be deemed to be the duty paid value thereof.

“Duty paid value” shall mean the value of the article as it would be determined for the purpose of calculating an ad valorem duty upon the importation of such article into Canada * * * Provided * * * that in the case of matches and playing cards the excise taxes imposed by Parts X and XII of this Act shall be included in the duty paid value.

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The definition of “sale price”, as pointed out by the learned judge, excludes the sales tax and includes the amount of other excise duties when the goods are sold in bond, but makes no mention of excise tax, while in the case of imported goods it is provided that the sale price is to be deemed the duty paid value thereof, and in the case of matches and playing cards expressly enacts that the duty paid value shall include in addition to any customs duties payable thereon the excise tax imposed by s. 82.

Had the statute itself not defined the term “sale price”, it might well be argued that the sale price was what the purchaser paid to the vendor as consideration for the object of the sale and that since the purchaser had to pay the excise tax to the vendor, such excise tax should be treated as part of the purchase price. Since the statute, however, itself states not only what the term “sale price” means, but what it includes and does not include, I am of opinion that the tax which Parliament has imposed as a sales tax upon the sale price of goods produced or manufactured in Canada ought not to be held to be imposed upon another special tax as part of such sale price, as in the case of the excise tax on playing cards, unless that special tax is clearly indicated in the statutory definition as part of the sale price upon which the sales tax is imposed. A taxing statute is always to be construed strictly against the taxing authorities, and, in my opinion, a tax upon a tax ought not to be held to be imposed in the absence of language which leaves no doubt whatever as to the intention to impose it. The omission from the statutory definition of any mention of excise taxes, together with its inclusion of excise duties when goods are sold in bond and its express provision making the excise tax part of the duty paid value and of the sale price in the case of imported playing cards, leaves the question in such doubt that I think the learned trial judge was fully warranted in resolving the question against the taxing authorities.

The appeal should, therefore, be dismissed with costs.

Appeal allowed with costs.

Solicitor for the appellant: W. Stuart Edwards.

Solicitor for the respondent: L. A. Forsyth.