Docket: T-1477-16
Citation:
2017 FC 483
[ENGLISH TRANSLATION]
Ottawa, Ontario, May 10, 2017
PRESENT: The
Honourable Madam Justice Gagné
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BETWEEN:
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MICHAUD
PETROLEUM INC.
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Applicant
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and
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THE ATTORNEY
GENERAL OF CANADA
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Respondent
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JUDGMENT AND REASONS
[1]
Michaud Petroleum Inc. is applying for judicial
review of a decision by the Appeals Division of the Canada Revenue Agency on
August 11, 2016. It is doing so even though the Agency granted its objection in
whole and refunded it the sum of $393,920, which represented the excise tax
paid on the purchase of a certain amount of petroleum products from Le Groupe
Harnois Inc. to be processed and sold.
[2]
The Agency concluded that since the applicant is
a licenced manufacturer within the meaning of paragraph 2(1)(f) of the Excise
Tax Act, RSC 1985, c. E-15 [ETA] and that the petroleum products purchased
from Harnois were incorporated into articles or products subject to an excise
duty, it is exempt from paying the tax under subsection 23(7) of the ETA. Since
the tax was paid by mistake of fact or law or otherwise, Michaud is entitled to
the refund.
[3]
The applicant is seeking several remedies, the
main one being an order compelling the Agency to amend its decision under
review so that the refund of the excise tax made by the Agency is done under
section 68.2 of the ETA, rather than under subsection 68(1).
[4]
The applicant is seeking that conclusion for the
vague reason that the Agency’s position that section 68.2 of the ETA does not
apply to the sale of petroleum products between Harnois and Michaud, and [translation] “hinders
the proper functioning of the company’s business and renders its manufacturer’s
licence useless [...] because its suppliers cannot and will not be able to
obtain directly from the Canada Revenue Agency the reimbursement for the excise
tax” that they paid (see Mr. Hermel Michaud’s Affidavit at paras 19-20).
[5]
In other words, and although the applicant does
not express it as clearly, it is asking the Court to interpret the ETA in such
a way that its supplier, Harnois, be exempt from paying the excise tax when it
seeks to acquire petroleum products, while the ETA does not grant it such an
exemption.
[6]
The respondent raises a certain number of
preliminary questions about the applicant’s application for judicial review,
which I will not discuss given my conclusion that section 68.2 of the ETA does
not apply to the sale of petroleum products between Harnois and Michaud.
[7]
The applicant based its objection on subsection
81.33(1) of the ETA, which provides that when a vendor of goods has submitted
an application for refund under section 68.2 and that the application has been
denied in whole or in part, and that the vendor was then subject to an
assessment by the Minister, the purchaser may, in place of the vendor,
institute recovery proceedings. The applicant therefore argues that it is
simply exercising Harnois’ rights of recovery.
[8]
Subsection 68.2(1) provides the following:
68.2(1) Where tax under Part III or VI has
been paid in respect of any goods and subsequently the goods are sold to a
purchaser in circumstances that, by virtue of the nature of that purchaser or
the use to which the goods are to be put or by virtue of both such nature and
use, would have rendered the sale to that purchaser exempt or relieved from
that tax under subsection 23(6), paragraph 23(8)(b) or subsection 50(5) or
51(1) had the goods been manufactured in Canada and sold to the purchaser by
the manufacturer or producer thereof, an amount equal to the amount of that tax
shall, subject to this Part, be paid to the person who sold the goods to that
purchaser if the person who sold the goods applies therefor within two years
after he sold the goods.
[9]
One of the conditions for this provision to
apply to the sale of goods between Harnois and Michaud is that Harnois has been
a licensed wholesaler under subsection 23(6) of the ETA.
[10]
However, it is not, and it is instead paragraph
23(7)(a) of the ETA that applies here and that exempts the sale between
Harnois and Michaud from tax. To be exempt under the terms of that provision,
the sale of goods must meet three conditions:
- A licensed manufacturer purchases or
imports goods under the terms of Part III of the ETA;
- It incorporates them “into and form a
constituent or component part of an article or product that is subject to
excise tax under this Act”;
- The tax must not have been collected.
[11]
Michaud has a manufacturer’s licence and it
purchases products to process and resell them to third parties. It is exempt
from sales tax, but when it resells products, that sale is subject to the
excise tax.
[12]
The Agency is therefore right in concluding that
the sale of products between Harnois and Michaud was exempt from tax under
paragraph 23(7)(a) of the ETA and that the tax had been paid by mistake.
[13]
And the applicant is wrong to cite the Canadian
International Trade Tribunal’s decision in Sani Métal Ltée v Canada
(National Revenue), 1997 CanLII 11986 (CA CITT). Aside from the fact that
that decision came from an administrative tribunal and that it does not apply
to this Court, there is reason to distinguish the facts of that case from the
facts of the case at hand. Sani Métal is a manufacturer and distributor of
material used to manufacture or produce food or beverages, and is therefore
exempt from the excise tax pursuant to subsection 51(1), to which section 68.2
of the ETA refers. As indicated above, that is the condition that the sale
between Harnois and Michaud does not fulfil.
[14]
For this reason alone, the applicant’s
application for judicial review will be dismissed, with costs.
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