The Saugeen Indian Band, as Represented by Its Chief, Vernon Roote, and by Its Councillors, Arnold Solomon, Roy Wesley, Oliver Kahgee Sr., Chesley Ritchie, Mildred Ritchie, Harriet Kewaquom, Marie Mason, and Franklin Shawbedees v. Her Majesty the Queen, [1989] 1 CTC 86, 89 DTC 5010

Reed, J.:—The main issue raised by the plaintiff in this case is whether section 87 of the Indian Act, R.S.C. 1970 c. 1-6, operates so as to entitle the plaintiff, as purchaser of certain commodities, to a refund of the federal sales tax paid with respect to those commodities.

Federal Sales Tax-Indirect Taxation-Agreed Statement of Facts

The taxes were paid pursuant to subsection 27(1) of the Excise Tax Act, R.S.C. 1970, c. E-13:

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

a) produced or manufactured in Canada . . .

b) imported into Canada . . .

c) sold by a licensed wholesaler. . .

d) retained by a licensed wholesaler for his own use or for rental by him to others . . .

The tax is paid by the manufacturer or producer of the commodity, unless the product is sold to a licensed wholesaler. In this latter case the tax is paid by the licensed wholesaler. In the case of importation the tax is paid by the importer or the transferee who takes the goods out of bond. The word "manufacturer" shall hereafter be used as referring to both manufacturers and producers. The word "importer" shall hereafter be used as including transferees and “importation” shall be used as including the taking of goods out of bond. When the word "taxpayer" is used in these reasons, it refers to the person having the legal obligation to pay the tax: the manufacturer, the licensed wholesaler or the importer.

The taxes payable are assessed on the sale price at which the manufacturer sells the product. Whether the tax is paid by the manufacturer or by a licensed wholesaler (who may be one or more steps removed from the manufacturer in the distribution chain) the amount of tax is the same, i.e., it is calculated on the basis of the manufacturer's sale price. In the case of imported goods the sale price is deemed to be the duty paid value of the goods (whether or not the goods are purchased on importation is irrelevant). When the product is produced for the use of the manufacturer, not for sale, the value of the commodity for the purposes of tax assessment may be determined by the Minister, see paragraph 28(1)(d) of the Excise Tax Act. The tax is often described as a manufacturer's sales tax. The rate of tax applied to the sale price can vary depending on the nature of the product (e.g., see subsections (1.2), (1.3) and (1.4) of section 27 of the Excise Tax Act).

The tax becomes payable at the time the commodity is delivered to the first unlicensed purchaser, or when the property in the commodity passes to that purchaser, whichever occurs first. When the product is appropriated by a manufacturer for its own use, or when a product is appropriated by a licensed wholesaler for its own use or for rental, the tax becomes payable on appropriation. There are special rules with respect to instalment sales. In the case of goods which are imported, the tax becomes payable on importation.

The person purchasing the product from a manufacturer will in many cases be a wholesaler (licensed or unlicensed). In some cases, that person may be what has been referred to in argument as the "end-user" of the product (for example, when the manufacturer performs its own wholesale and distribution functions). Counsel for the defendant objected to the notion of "end-user". He argued: commodities on which tax has been paid can be incorporated into new and different articles; the so called "end-use" purchaser can use the commodity as a component of a new article; federal sales tax paid on that component will be recouped by the "end-use" purchaser in the price charged for the new article. [1] In this regard, counsel referred to Cairns Construction Limited v. The Government of Saskatchewan, [1960] S.C.R. 619; 24 D.L.R. (2d) 1. I took counsel’s reference to the Cairns case to be a reference to the factual situation in that case and not to the legal conclusion drawn. The court held that materials purchased by a builder for incorporation into houses which were being built for resale, should be classified as being consumed by an end-user and provincial tax was therefore payable. As a factual matter, of course, the cost of the materials would be recouped by the builder in the price charged to the purchaser of the house. It is to this factual circumstance which I understood counsel for the defendant to refer. While I accept that an "end-user" may pass on the burden of the tax in this fashion, the concept is, nevertheless, a useful one. To me it describes the last person in a specific chain of distribution.

As noted, it is the manufacturer, importer or licensed wholesaler who has the legal obligation to pay the tax. At the same time, it is expected (in the language of the jurisprudence "intended") that the tax will be “passed on". It is expected that, usually, the taxpayer will recoup the amount of tax paid in the price charged for the article to the next purchaser. It is expected that that purchaser will in turn recoup the amount paid, if the article is resold, in the sale price charged to any subsequent purchaser. The tax is a classic example of an indirect tax.

I do not think anyone disputes counsel for the plaintiff's claim that the tax fits John Stuart Mill’s definition, set out in Bank of Toronto v. Lambe (1887), 12 App. Cas. 575 (P.C.) at 582: [2]

A direct tax is one which is demanded from the very person who it is intended or desired should pay it. Indirect taxes are those which are demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another; such are the excise or customs.

The producer or importer of a commodity is called upon to pay a tax on it, not with the intention to levy a particular contribution upon him but to tax through him the consumers of the commodity, from whom it is supposed that he will recover the amount by means of an advance in price.

While the Mill definition has been adopted for constitutional purposes it is well to keep in mind that in an economic sense it is not a very satisfactory one (see infra page 14).

Counsel for the plaintiff also referred to the exemption and refund provisions of the Excise Tax Act as evidence of the tax's indirect nature. Reference was made to the exemptions provided for by section 29 and Schedule III of the Act:

29.(1) The tax imposed by section 27 does not apply to the sale or importation of the goods mentioned in Schedule III, other than those goods mentioned in Part XIII of Schedule III that are sold to or imported by persons exempt from consumption or sales tax under subsection 31(2).

Some Schedule III items are exempt unconditionally (e.g., foodstuffs); others are exempt conditionally on the basis of the status of the purchaser (e.g., hospitals, municipalities) or on the basis of the use to which the item is put (e.g., pollution control, municipal transportation systems). [3] When a commodity is conditionally exempt, the person who fulfils the condition (by virtue of its status or the use to which the commodity has been put) may apply for a refund of the taxes which were paid in respect to the commodity even though that person was not the taxpayer (see section 44 of the Excise Tax Act). In addition, as of February 16, 1984, when a taxpayer writes off, as a bad debt, the price charged with respect to the sale of a commodity, he may obtain a refund of the taxes which had been paid with respect to the commodity (section 44.2, added by S.C. 1986, c. 9, s. 34).

It must be emphasized, however, that while the legislature expects that the burden of an indirect tax will usually be borne by someone other than the taxpayer, there is no legal obligation on that other person to pay the tax as such. The legal obligation resides at all times with the manufacturer, importer or licensed wholesaler. It is a matter of contract between the taxpayer and the purchaser as to whether or not the tax is in fact passed on. The vendor might sell the goods at less than cost and not recoup the tax paid. In the case of taxes paid on appropriation for use by the manufacturer or by the licensed wholesaler the tax will not be passed on unless, of course, the use is of a commercial or business nature. In this latter case, the taxes paid will be recouped in the same way all costs of doing business are recouped: in the price charged for the goods or services which the business sells.

The plaintiff and the defendant filed, for the purposes of this case, an agreed statement of facts. Nine transactions were agreed upon, for inclusion in that statement, to allow the main question of law raised, by this case, to be dealt with by way of rule 474 of the Federal Court Rules. These transactions are illustrative of the types of situations which may occur. The goods dealt with in these transactions were purchased for use on the reserve (nuts and bolts, calcium chloride —both liquid and solid, road signs, hazard markers, service tubes used in plumbing, fluorescent lights, diesel fuel, thrust washers, machine plugs). The goods were used for purposes such as road maintenance and the building of houses on the reserve.

In some of the nine transactions, the property in the article passed from the vendor to the band off the reserve (e.g., at the vendor's place of business or when delivered to a carrier f.o.b. plant gate). In other cases, the property in the article passed to the band on the reserve. Transactions numbered 1, 3, 5 and 7 involved sales where the property in the goods passed to the Indian band on the reserve. Of these, transactions 5 and 7 involve situations where the federal sales tax had become payable before the delivery of the article to the reserve. Transactions 5 and 7 were sales to the band by vendors who were themselves neither manufacturers nor licensed wholesalers and therefore had not been taxpayers—the tax with respect to the goods purchased in those transactions had become payable at an earlier stage in the distribution chain. Transactions 1 and 3 involve sales where the federal sales tax became payable at the time of delivery of the property to the band on the reserve. Transaction 1 was a purchase from a licensed wholesaler; the commodity (nuts and bolts) was delivered to the band by courier f.o.b. the reserve. Transaction 3 was a purchase from the manufacturer; the commodity (liquid calcium chloride) was delivered to the band f.o.b. the reserve.

Of the nine transactions, some involve a purchase directly from the manufacturer (numbers 2, 3, 4, 8 and 9), some involve a purchase from a licensed wholesaler (number 1) and the rest involve purchases from vendors further down the distribution chain who never had direct responsibility for paying the federal sales tax to the Crown (numbers 5, 6 and 7).

In all of the nine cases which have been included in the agreed statement of facts the plaintiff knows how much federal sales tax was paid with respect to the commodity. In transactions 2 and 3 the amount paid is shown on the invoice which the plaintiff received. In the other cases the plaintiff has been able to ascertain how much was paid from the records of the manufacturer or licensed wholesaler, who paid the tax. The plaintiff's statement of claim, however, encompasses some several thousand transactions. In many of these, the amount of federal sales tax which has been paid is neither known nor easily ascertainable. This is particularly the case where the plaintiff purchased the product from vendors who had not themselves been directly liable to the Crown for the tax. (see infra: arguments with respect to the calculation of refunds).

Exemption created by section 87 of the Indian Act

Section 87 of the Indian Act provides:

Notwithstanding any other Act of the Parliament of Canada or any Act of the legislature of a province, . . . the following property is exempt from taxation, namely:

(b) the personal property of an Indian or band situated on a reserve;

and no Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in . . . paragraph (b) or is otherwise subject to taxation in respect of any such property; .. . .

The question raised is whether federal sales taxes, which have been levied with respect to commodities which are purchased by an Indian band, should be characterized as (1) the taxation of personal property of an Indian band situated on a reserve or (2) taxation of a band in respect of the characterization of the tax, the "otherwise" caveat at the end of section 87 governs. All taxes are in one sense taxes on persons because it is persons who pay them. The federal sales tax is, in this sense, a tax on persons with respect to property. As such, it cannot escape the strictures of section 87 by being classified as a transaction tax rather than as a tax on property or a tax on persons.

Secondly, I will refer to the federal sales taxes payable on importation (even though the fact situations in the agreed statement of fact do not deal with importation); there is existing jurisprudence relating thereto. The jurisprudence seems to demonstrate that federal sales taxes payable on importation do not fall within the protection afforded by section 87 of the Indian Act. In Francis v. The Queen, [1954] Ex. C.R. 590, an Indian imported his own goods into Canada. That individual, the plaintiff, lived on the St. Regis reserve; this was adjacent to another reserve belonging to the same tribe in the United States. The plaintiff brought two items across the international boundary to his home on the reserve; a third item was delivered by the seller. The goods were not taken through a port of entry. The plaintiff argued that he was exempt from paying customs duties and federal sales taxes on the importation of the goods. He argued that this tax exempt status was assured to him by virtue of the provisions of the Jay Treaty. Alternatively he argued that such exemption existed by operation of the then section 86 of the Indian Act (now section 87). At pages 608-9 of the Exchequer Court decision, Mr. Justice Cameron held:

This provision [section 87] first appeared in that form in the Indian Act, Statutes of Canada, 1951 ch. 29, s. 86; prior thereto a somewhat similar right was provided in a different form in the Indian Act, R.S.C. 1927, ch. 98, s. 102. I am of the opinion that subsection (11)(b) [sic] is of no assistance to the suppliant in this case. The exemption from taxation therein provided relates to personal property of an Indian or band situated on a reserve, and not elsewhere. The importance of that limitation is seen also from a consideration of sections 88 and 89.

Whatever be the extent of the exemption from taxation granted to Indians in respect of their personal property on a reserve, it does not in my view extend to an exemption from customs duties and excise taxes. The section has no application whatever to the payment of customs duties or excise taxes.

The Supreme Court upheld this decision; see [1956] S.C.R. 618. While the Supreme Court decision referred, in the main, to customs duties it is clear that it dealt also with the federal sales taxes payable on importation. At page 620 of the Supreme Court decision, the Chief Justice summarized the question arising for decision:

. . . the question is whether three articles, a washing machine, a refrigerator and an oil heater, brought by him [the appellant] into Canada from the United States of America are subject to duties of custom and sales taxes under the relevant statutes of Canada.

[Emphasis added.]

The Supreme Court held that the goods did not enjoy tax exempt status.

The present fact situations before me, of course, do not involve any federal sales taxes paid on importation. The fact situations relate only to taxes paid with respect to goods manufactured or produced in Canada.

The plaintiff argues that the tax is one with respect to the personal property of an Indian band situated on a reserve. I do not find this argument compelling. While the tax may be in the nature of a commodity tax, it is not a tax which is levied with respect to property situated on a reserve belonging to an Indian or Indian band. To the extent that the federal sales tax is a tax on commodities (i.e., on personal property), it is a tax on the commodity at the time it is owned by the manufacturer. The tax is, in general, calculated by reference to the sale price from the manufacturer to the first purchaser in the distribution chain. It is in the first instance paid by the manufacturer (except of course when sold to a licensed wholesaler). When the tax is paid by a licensed wholesaler the amount paid is that which would have been paid by the manufacturer had it been levied from him.

Counsel for the plaintiff argues that the federal sales tax is a consumption tax; a tax on property that was purchased for consumption on the reserve and therefore the property is exempt from taxation pursuant to section 87 of the Indian Act. In this regard she argues that whether the property in the various articles passed to the band on or off the reserve is an irrelevant consideration since the property was intended for use on the reserve and was in fact used on the reserve. I think this argument confuses the nature of the federal sales tax with that of the provincial retail sales taxes. Provincial retail sales taxes are levied on the consumption of end-users; the vendor of the product is the collector of the tax [4] , as agent for the Crown. Federal sales taxes are levied on the vendor not the purchaser and the primary focus of the tax is the sale of finished products at the manufacturer's level. The word “consumption” is used to describe the tax; subsection 27(1) of the Excise Tax Act refers to the tax as a "consumption or sales tax". This may signify no more than the fact that the subsection encompasses both taxes triggered by a sale and taxes triggered on appropriation (by manufacturer or licensed wholesaler) or on importation. Whatever may be the significance of the use of that description, it is not accurate to classify the tax imposed by subsection 27(1) as a tax on the consumption or purchase of the property by the end-user.

Not only is it difficult to characterize the tax as being one in respect to the personal property of an Indian band, it is also difficult to characterize it as a tax in respect to property situated on a reserve. The passing of property from the vendor to the purchaser and the delivery of the commodity by the vendor to the purchaser are factors relevant for determining the time at which the tax becomes payable. The fact that, after the property has passed, the article becomes the property of an Indian band, and it is situated on the reserve does not make the tax one in respect of personal property of an Indian band situated on a reserve. It would be absurd to say that the tax levied with respect to transaction number 3 (where property passed to the band on the reserve and the purchase was made directly from the manufacturer) constituted a tax on the personal property of a band on a reserve while the tax levied with respect to transaction number 5 (where the property passed to the band on the reserve but the purchase was from an unlicensed vendor who had not itself paid any federal sales tax to the Crown) was not.

The plaintiff argues that the federal sales tax constitutes the "otherwise" taxation of the band “in respect of personal property . . . situated on the reserve" because, while not directly liable as a taxpayer, the band indirectly bears the burden of the tax. It is argued that this indirect bearing of the burden, constitutes taxation from which the band is exempt by virtue of section 87 of the Indian Act.

Counsel argues that support for the proposition, that section 87 exempts the plaintiff from all incidence of federal sales tax can be found in the Constitution Act, 1867. In that Act a distinction was made between direct and indirect taxes; the provinces were given authority to levy direct taxes only. Since the distinction between direct and indirect taxes was known at the time of the drafting of the Constitution Act, 1867 (from the writings of John Stuart Mill) it is argued that this distinction was present to the minds of the drafters of the Indian Act in 1876 (S.C. 1876, c. 18, ss. 64, 65) and the precursor to section 87 was not, at that time, limited to direct taxes only.

I have difficulty with this argument. In the first place, the Constitution Act, 1867 and the Indian Act are not in pari materia. They were not even passed by the same legislature. Secondly, it is far too tenuous an argument to conclude that, because the drafters of the Constitution Act, 1867 restricted the provincial taxing authority to direct taxation, the drafters of the Indian Act, either in 1876 [5] (when the precursor to section 87 was enacted) or in 1951 (when the text in its present form was drafted) consciously considered the distinction between direct and indirect taxation. Nevertheless, I agree that section 87 encompasses both direct and indirect taxation. But, that does not in itself assist the plaintiff. The plaintiff’s argument requires that section 87 be interpreted not only as according an exemption to Indians and Indian bands as taxpayers of indirect taxes but also as the bearers of any incidence or burden of such taxes. The reference to the Constitution Act, 1867 simply does not assist this argument.

If section 87 does provide an exemption from the incidence of taxation, as well as from its direct liability, then there is a need to draw a line between those incidence which are too remote or indirect to fall within the scope of section 87 and those which are not. Many taxes are in fact indirect in an economic sense: income taxes paid by business corporations; property taxes paid by businesses. These are in fact indirect because they are passed on to the consumers of the goods and services sold by the respective businesses.

Counsel for the plaintiff argues that the test of an indirect tax which has been developed for constitutional purposes should be adopted to determine the dividing line between those incidences which are too remote to fall within section 87 and those which are not. That test states that, if the general tendency of a tax is such that the burden of the tax is borne by someone other than the taxpayer, then the tax is indirect. The test classifies those taxes which "cling as a burden to the unit of commodity" as indirect. If the tax is likely to be recouped only because, like other expenses, it is a cost of doing business, then it is not considered to be indirect for constitutional purposes (see Hogg, Constitutional Law of Canada, 2nd ed. 1985, pages 604-9). Counsel for the plaintiff argues that, similarly, indirect taxes which cling to a commodity should be considered as falling within section 87 while those which are recouped only as a general cost of doing business should not.

As noted, the test which counsel for the plaintiff proposes was developed for the purpose of determining the extent of provincial taxing jurisdiction. Hogg, at page 606, states:

. . . it is obviously neither possible nor desirable to exclude from the provincial taxing power all taxes that are in fact recouped by the initial taxpayer. The test of directness is a justifiable means of excluding from provincial power at least those taxes that are most likely to be passed on, and thereby confining provincial power to those taxes the burden of which is most likely to remain within the province.

It is widely recognized that the definition of indirect taxes which has been developed for constitutional purposes is not economically sound. In fact Hogg, at page 605, notes: “economists would no longer accept the validity of Mills’ distinction”. While that test plays a significant role in determining the division of legislative authority as between the federal and provincial governments, it is not immediately obvious why it should be adopted for the purposes of section 87 of the Indian Act. There is no compelling legal reason why the test should be adopted for the purposes for which counsel argues; there may be administrative reasons or reasons stemming from familiarity with the definition.

The Supreme Court decision in Nowegijick v. Minister of National Revenue et al., [1983] 1 S.C.R. 29; [1983] C.T.C. 20 is cited for the proposition that the wording of section 87 is "wording of the widest possible scope". The Supreme Court's statement, however, did not relate to section 87 as a whole. At page 39 (C.T.C. 25), Dickson, J. said that the words “in respect of” are words of the widest possible scope. The argument being made was that taxes in respect of income were not taxes in respect of wages or personal property situated on a reserve. This it was argued followed from the fact that "income" is a notional concept, the content of which is determined by a series of calculations. In the Nowegijick case it was admitted that the s/tus of the plaintiff's wages was on the reserve. It was clear that the taxpayer was an Indian. The only argument was whether or not income tax fell outside the scope of section 87 because it is a tax on income which is an aggregate or net concept. The Chief Justice held that the distinction between a tax in respect of wages and a tax in respect of income was too fine a one for his liking. He stated, at page 38 (C.T.C. 25): “If wages are personal property it seems to me difficult to say that a person taxed “in respect of” wages is not being taxed in respect of personal property".

I do not think the Nowegijick decision helps the plaintiff. There is absolutely no indication, in that decision, that the Supreme Court was of the view that section 87 accorded Indians and Indian bands exemption from the incidence of tax as well as exemption as a taxpayer. In the present case, the property being taxed is not the property of an Indian band situated on a reserve, nor is the taxpayer an Indian or Indian band. I do not think the Supreme Court's comments in the Nowegijick case, regarding the words “in respect of” assist the plaintiff.

The Supreme Court in the Nowegijick case, at page 36 (C.T.C. 23), made certain statements concerning the principles of interpretation applicable to statutes relating to Indians.

It is legal lore that, to be valid, exemptions to tax laws should be clearly expressed. It seems to me, however, that treaties and statutes relating to Indians should be liberally construed and doubtful expressions resolved in favour of the Indians. If the statute contains language which can reasonably be construed to confer tax exemption that construction, in my view, is to be favoured over a more technical construction which might be available to deny exemption. In Jones v. Meeham, 175 U.S. 1 (1899), it was held that Indian treaties ”must . . . be construed, not according to the technical meaning of [their] words . . . but in the sense in which they would naturally be understood by the Indians".

However, I do not find section 87 doubtful or ambiguous. I think it relates to Indians and Indian bands as taxpayers.

In my view then, the words of section 87 stating that no Indian band "is subject to taxation in respect of . . . ", must be read as meaning that such bands are not to be taxed as taxpayers. Had it been intended that the Indians and Indian bands were to be exempt from all incidence or burden of indirect taxes, as well as from direct liability for taxes, surely section 87 would have been more specifically worded to so provide.

Right to Refund-Limitation Period-Refund Calculation

Strictly speaking, since I do not find that section 87 gives the exemption claimed, it is not necessary to consider: whether and how a right to a refund arises; what limitation period would pertain; how such refund should be calculated. Nevertheless, for the sake of completeness, I shall set out the arguments made.

Counsel for the plaintiff argues that section 87 of the Indian Act should be read as creating an exemption to subsection 27(1) of the Excise Tax Act, comparable to the express exemptions provided for by subsection 29(1) of that Act and a commitant right to a refund. As noted above subsection 29(1), read together with Schedule III, establishes a number of exemptions. When the exemption is a conditional one, the person who satisfies the condition may seek a refund of the taxes, which were paid in respect to the commodity, even though that person was not the taxpayer. It is argued that section 87 of the Indian Act should be read together with the Excise Tax Act to allow the plaintiff, in a similar fashion, to claim a refund of the taxes which were paid on the commodities which the band purchased. It is argued that a refund should be paid on proof that the goods were purchased by an Indian band and were used on the reserve.

I find it difficult to agree that the Indian Act and the Excise Tax Act should be read together in this fashion. It is not sound statutory construction. At the time the precursor of section 87 of the Indian Act was enacted federal sales taxes were not in existence. At the time the Excise Tax Act was first enacted, no express provision was made therein to provide for refunds to Indians and Indian bands. As a policy matter certain exemptions and refund provisions were provided (e.g., to make the tax less regressive by exempting foodstuffs). I cannot, however, read the absence of an express exemption, for Indians and Indian bands, in the Excise Tax Act as any indication that Parliament intended an exemption and refund to apply by operation of the Indian Act. The argument that Parliament considered it unnecessary to expressly provide for a conditional exemption in the Excise Tax Act because it considered that such exemption already existed by virtue of the operation of section 87 of the Indian Act is a difficult one to accept.

With respect to the limitation period, the plaintiff argues that its cause of action arises under the Indian Act and since no period of limitation is set out therein, the claim is not subject to any limitation period. Alternatively, it is argued that the claim is governed by paragraph 45(1)(b) of the Limitations Act, R.S.O. 1980, c. 240 (made applicable by operation of section 38 of the Federal Court Act). [6] Paragraph 45(1)(b) provides that when an action is "upon a bond or other speciality . . . ” a limitation period of 20 years applies. The plaintiff argues that a claim which arises by statute is a speciality debt: A.M. Smith & Co. v. The Queen (1981), 20 C.P.C. 126 at 135 citing Cook v. Brandon Ry. (1983), 13 C.B. 826.

The defendant's position is that if a right to a refund exists, subsection 44(6) of the Excise Tax Act applies. Under that provision, as of May 23, 1985, the limitation period is two years (Stats. Can. 1986, c. 9, ss. 44-49). Prior to that time subsection 44(6) provided for a four year limitation period:

(6) Subject to subsections (7) and (7.1), no refund of or deduction from any of the taxes imposed by this Act shall be granted, and no payment of an amount equal to tax paid shall be made, under this section unless application in writing therefor is made to the Minister by the person entitled to the refund, deduction or amount within four years after the time the refund, deduction or amount first became payable under this section or the regulations.

Alternatively, counsel for the defendant argues that if the Ontario Limitations Act applies it is paragraph 45(h) of the Act which is applicable. Under that clause a two year period is prescribed. That clause relates to actions "for a penalty, damages or sum of money given by any statute to the Crown or the party aggrieved”.

Counsel for the plaintiff argues that the limitation period set out in subsection 44(6) of the Excise Tax Act only applies with respect to exemptions and refunds expressly provided for in the Excise Tax Act. She argues that since the exemption claimed by the plaintiff in this case arises under the Indian Act, subsection 44(6) of the Excise Tax Act would not apply to that exemption nor to the right to a refund arising therefrom. She supports this position by reference to section 46.1 of the Excise Tax Act [7] :

46.1. Except as provided in this or any other Act of Parliament, no person has a right of action against Her Majesty for the recovery of any moneys paid to Her Majesty that are taken into account by Her Majesty as taxes, penalties, interest or other sums under this Act.

It is argued that, since section 46.1 refers to a recovery of moneys paid as taxes "provided in this or any other Act of Parliament", it is clear that recovery of a refund is intended to be available pursuant to other Acts as well as pursuant to the Excise Tax Act. In this case it is argued that it is the Indian Act which so provides.

While the plaintiff eschews the Excises Tax Act for the purposes of determining a limitation period, it seeks the benefit of that Act and the regulations passed pursuant thereto for the purpose of determining, in certain cases, the amount of refund it should obtain. When the exact amount of tax paid is not easily ascertainable the plaintiff asks that the Formula Refund Regulations, C.R.C. 1978, c. 591, passed pursuant to the Excise Tax Act be applied. Section 3 of those regulations states:

3.(1) Where by the Act a person is entitled

(a) to make a deduction from tax payable by him,

(b) to a refund of tax paid, or

(c) to receive a payment from the Minister in an amount equal to tax paid,

and circumstances exist that render it difficult to determine the exact amount of such deduction, refund or payment by the Minister, the amount of the deduction, refund or payment by Minister shall, where the person consents, be determined in manner set out in subsection (2).

(2) The exact amount of deduction, refund or payment by the Minister, determined for the purpose of subsection (1), shall be equal to the tax that would have been paid at the time the imposition of the tax on the foods on a price or value determined by reducing

(a) the sale price of the goods in the transactions in respect of which the deduction, refund or payment by the Minister is applied for, or

(b) the contract price where the goods were used in carrying out a contract and no sale price of the goods in the transaction in respect of which the education, refund or payment by the Minister is applied for can be established, by a percentage thereof determined by the Minister after taking into account the class of the goods and the nature of and parties to the transaction that resulted in the application of a deduction, refund or payment by the Minister.

[Emphasis added.]

Counsel for the defendant argues that the Formula Refund Regulations cannot apply because they are expressly stated, in subsection (1), to apply to deductions and refunds to which a person is entitled by operation of "the Act", that is, the Excise Tax Act. Since there are no refund provisions in the Excise Tax Act applicable to Indian bands, it is argued that the regulations can not apply.

As I have already indicated, if I am wrong with respect to the proper interpretation of section 87 and if that section exempts the plaintiff from the incidence of federal sales taxes, there would still remain the difficulty of finding a legal basis for granting the plaintiff the refund sought. With respect to counsel's arguments concerning the appropriate limitation period, it is difficult to characterize the claim as a “speciality debt" in order to bring it under paragraph 45(1)(b) of the Ontario Limitations Act. The amounts in question are not ascertained. The jurisprudence to which counsel refers, while relating to debts arising by statute, clearly indicates that an action on a speciality is an action for a liquidated or ascertained amount. In addition, I think section 46.1 of the Excise Tax Act pertains but not to effect the result for which counsel for the plaintiff argues (i.e., not as an escape from the two (four) year limitation period set out in subsection 44(6)). Section 46.1 provides “no person has a right of action against Her Majesty for the recovery of any moneys paid . . . as taxes . . . under this Act" except as provided “in this or any other Act" [Emphasis added.] Even if section 87 of the Indian Act provided an exemption from the incidence of indirect taxes it does not provide for "a right of action against Her Majesty for the recovery of moneys paid" . . . as taxes under the Excise Tax Act. Nor is such right of action found in the Excise Tax Act itself. I read section 46.1 as denying any right of action for a refund of amounts paid as taxes unless such is expressly set out in a statute. This accords with the jurisprudence, cited to me by counsel for the defendant, illustrating the common law principle that moneys cannot be taken out of the Consolidated Revenue Fund except by authorization from Parliament. In this respect see Harbour Board v. The King, [1924] A.C. 318 (P.C.). Thus, even if a successful argument could be made that section 87 of the Indian Act created an exemption as claimed, I do not see how the plaintiff could successfully assert a right to the refunds sought.

With respect to the calculation of refunds, counsel for the defendant is clearly right when he says that the Formula Refund Regulations only apply to refunds which are expressly provided for by the Excise Tax Act.

Conclusion

The first question set out in the order of the Associate Chief Justice, filed September 15, 1988 will be answered as follows:

The plaintiff is not entitled to any exemption with respect to any of the nine transactions set out in the agreed statement of facts, nor is it entitled to any refund from the Defendant of the sales taxes remitted pursuant to section 27 of the Excise Tax Act with respect thereto.

The plaintiff's claim will accordingly be dismissed. The defendant shall have her costs of the action.

Claim dismissed.