[1] This is an application for judicial review under section 28 of the Federal Court Act of a decision of the Tax Court dated April 5, 2001. The Tax Court dismissed the applicant's claim for input tax credits (ITCs) in the amount of $68,438.26 in relation to the supply of transportation services to the applicant and secondly the Tax Court dismissed the applicant's alternative claim for a rebate of goods and services tax (GST) with respect to tax allegedly paid in error in the amount of $50,950.10.

[2] The applicant provided delivery services to four customers. For the most part, the products being delivered were developed and undeveloped film to stores throughout southern Ontario for those customers.

[3] The applicant picked up the product at the customers' plants, transported it to its premises where it was sorted according to destination and then turned over to independent truckers who used their own vehicles to deliver the packages to their final destination.

[4] The applicant was paid by its customers on a per delivery basis and the applicant in turn paid the independent truckers for their services.

[5] At the Tax Court, the applicant took the position that it was entitled to the ITCs claimed on the basis that it was the shipper and the delivery drivers were "brokers"; accordingly they were required to charge GST. The applicant also took the position that there was no "continuous freight movement" and thus no interlining was involved.

[6] Interlining is a process whereby several carriers participate in the supply of a freight transportation service in the course of a continuous freight movement from the shipper's premises to the customers' premises. If the applicant was the shipper and there was only one carrier, no question of interlining arose.

[7] The applicant took the position before the Tax Court that it was a shipper. However, the Tax Court Judge held that the shippers were in fact the customers and that the applicant fell squarely within the definition of "carrier" and was a person which supplied a freight transportation service within the meaning assigned by subsection 1(1) of Part VII of Schedule VI. The Tax Court accordingly held that the Minister was correct in assessing on the basis that the supply provided to the applicant by other carriers that participated in the continuous freight movement was a zero rated supply. Thus since no GST was payable by the applicant to the independent truckers there could be no rebate of ITCs.

[8] At the Tax Court, as an alternative measure, the applicant applied for rebate of tax paid in error in the amount of $50,950.10, taking the position that GST had in fact been paid by the applicant to the independent truckers in error.

[9] The Tax Court ruled that the evidence was to the effect that the drivers entered into oral contracts with the applicant and were paid for their services primarily on a per diem basis. The Tax Court further ruled that there was no credible evidence to establish whether the drivers accepted the applicant's position that their services were subject to GST. The documents tendered by the applicant in support of its case that amounts paid to the drivers were inclusive of GST were suspect and difficult to accept as adequate proof of the arrangement with respect to GST having been paid by the applicant to the truckers. There was further evidence that an affidavit filed by the applicant and allegedly signed by one of the truckers testifying as to GST having been paid in fact was not an affidavit indeed provided by that witness. He indicated that the signature on the affidavit was not his and that the facts were not true.

[10] On balance the Tax Court Judge found that the evidence fell short of establishing that amounts paid by the applicant to its drivers included GST.

[11] A tax is payable under the Excise Tax Act by a recipient of a taxable supply made in Canada and the tax is generally calculated at the rate of 7% on the value of the consideration for the supply. The tax rate in respect of a taxable supply that is a zero rated supply is 0%.

[12] The supply of freight transportation services by one carrier of property to a second carrier of the same property (interlining) is a zero rated service for the purposes of the Excise Tax Act, where the services are part of a continuous freight movement and the second carrier is neither the shipper nor the consignee of the property being transported.

[13] In the present case, we are unable to conclude that the Tax Court erred in finding that the applicant was a carrier rather than shipper and that the services provided by the independent truckers amounted to interlining and were therefore zero rated services for the purposes of the Excise Tax Act.

[14] Hence, in our view, the Tax Court was correct in disallowing the claim by the applicant for ITCs.

[15] We are also unable to conclude that the Tax Court erred in concluding that the applicant had failed to establish that it had paid GST to the independent truckers. We can find no error in the conclusions as to the frailty of the applicant's evidence in this respect. Consequently the Tax Court was also correct in concluding that there could be no rebate of GST.

[16] In the Applicant's Record, the applicant submitted new evidence which had not been tendered before the Tax Court.

[17] In our view, the applicant has failed to show that the new evidence was not discoverable at the time of the trial in the Tax Court by the exercise of reasonable diligence, nor has the applicant shown that the evidence is practically conclusive on any of the issues on this application for judicial review.

[18] Therefore the applicant has not established a basis on which the new evidence can be introduced.

[19] This application will therefore be dismissed with costs.

"J. E. Sexton"

J.A.

FEDERAL COURT OF CANADA

APPEAL DIVISION

Names of Counsel and Solicitors of Record

DOCKET: A-266-01

STYLE OF CAUSE: 482733 ONTARIO INC.

Applicant - and -

ATTORNEY GENERAL OF CANADA

Respondent

DATE OF HEARING: MONDAY, JANUARY 27, 2003

PLACE OF HEARING: TORONTO, ONTARIO

REASONS FOR JUDGMENT

OF THE COURT BY: SEXTON J.A.

DATED: TUESDAY, JANUARY 28, 2003

JUDGMENT DELIVERED FROM THE BENCH ON MONDAY, JANUARY 27, 2003.

APPEARANCES BY: Mr. Howard Winick

For the Applicant

Ms. Carol Calabrese

For the Respondent

SOLICITORS OF RECORD: Howard Winick

641 Briar Hill Avenue

Toronto, Ontario

M5N 1N4

For the Applicant

Morris Rosenberg

Deputy Attorney General of Canada

For the Respondent

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482733 Ontario Inc v. Canada (Attorney General), 2003 FCA 43

Citations2003 FCA 43

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2003 FCA 43