Société Asbestos Ltée v. Deputy Minister of National Revenue, Customs & Excise, [1985] 1 CTC 70, 85 DTC 5072

Hugessen, J [ORALLY]:—This is an appeal pursuant to section 60 of the Excise Tax Act from a declaration made by the Tariff Board under section 59 of that Act to the effect that the Air Transportation Tax payable by the appellant on the amounts paid by it for the transportation of its employees to and from Asbestos Hill/Deception Bay and Montreal from October 1975 to the date of the application (June 1, 1981) was the tax prescribed by subparagraph 3(a)(ii) of the Air Transportation Tax Order rather than the lower tax prescribed by subparagraph 3(a)(i) of the same Order.

The Air Transportation Tax is imposed by section 10 of the Excise Tax Act, the relevant parts of which read as follows:

10. (1) There shall be imposed, levied and collected an air transportation tax determined under subsections (2) and (3) on each amount paid or payable in Canada for transportation of a person by air where such transportation begins at a point in the taxation area and ends at a point in the taxation area.

(2) The tax imposed under subsection (1) or (1.1) on each amount paid or payable for transportation of a person by air shall be an amount that is the lesser of

(a) eight per cent on each amount paid or payable, and

(b) such amount as may, for the purposes of this subsection, be prescribed by order

of the Governor in Council on the recommendation of the Minister of Transport.

The Order of the Governor in Council adopted pursuant to paragraph 10(2)(b) is known as the Air Transportation Tax Order, whose relevant* [1] provisions in 1979 read as follows:

3. For the purpose of subsection 10(2) of the Act, there is hereby prescribed the amount of,

(a) in respect of the tax imposed under subsection 10(1) of the Act,

(i) $7.50, where the transportation by air for which an amount is paid or payable is restricted by the ticketing system of the air carrier to only one segment of air travel that does not include intermediate stops or return to the point of departure, and

(ii) $15.00, where the transportation by air for which an amount is paid or payable is not restricted as described in subparagraph (1).

The appellant mines asbestos in the Ungava Peninsula, at a remote site served by two airports which it owns in the neighbouring communities of Asbestos Hill and Deception Bay. All the appellant’s employees at the site are flown in from Montreal as there is no other means of access. An employee is expected to stay and work at the site for at least ten weeks, after which he is entitled to two weeks’ leave. The appellant pays to transport its employees to and from Montreal via Nordair, the only air carrier serving the area. For each flight in either direction Nordair issues a one-way group ticket to appellant. The ticket is accompanied by a manifest showing the names of all the employees making up the group. Return tickets are not issued either to the group or to the individual employees because, although such tickets are available, they would not suit appellant’s requirements. In respect of each employee on each flight in either direction, the appellant is assessed and pays Air Transportation Tax at the higher of the two rates provided in paragraph 3(a) of the Order, ie the rate mentioned in subparagraph 3(a)(ii).

The appellant’s application to the Tariff Board sought a declaration that the lower rate prescribed by subparagraph 3(a)(i) of the Order applies to transportation to and from Asbestos Hill/Deception Bay. In rejecting that application, the Board found as a fact that

[The] inbound and outbound flights were, by the terms of the arrangement between the applicant and Nordair, single segments of air travel which did not include intermediate stops or returns to the point of departure.

The Board went on, however, to reason that, because the appellant could have chosen to buy either group or individual return tickets,

the restrictions imposed on the type of ticket bought by the applicant for its employees were not imposed by the air carrier’s ticketing system but by the choice exercised freely by the applicant company.

With respect, this reasoning is nothing to the point. The rate of tax is determined by

the transportation . . . for which an amount is paid,

not by whether or not there might have been some other transportation purchased for the same or another amount. The restriction envisaged by subparagraph 3(a)(i) is not merely a restriction to a single segment of air travel, but rather to such a segment

that does not include intermediate stops or return to the point of departure. (Emphasis added).

Indeed it is difficult, if not impossible, to conceive of an air carrier having a ticketing system which would obligatorily restrict its customers to the purchase of single segments of air travel, ie one-way tickets from point of departure to destination. Even the so-called “self-write” procedure, which respondent’s counsel suggested might be such a system, would not qualify in the Board’s reasoning for the customer always has the choice not to use the “self-write” and to buy his ticket in the ordinary way. And I am hard pressed to think of any reason why a “self-write” ticket should benefit from a lower rate of tax. In my view, the restriction of air transportation to one segment of air travel will always be the result, not of the carrier’s ticketing system, but of the customer’s choice that that is the kind of trip he wants to take. That being so, subparagraph 3(a)(i) as interpreted by the Board would never have any practical application and would be, in effect, devoid of meaning.

The reference in the Order to the carrier’s “ticketing system” 1s, as I see it, a recognition of the fact that the restriction of a traveller’s right to make intermediate stops on a single segment one-way flight may not always result, or be apparent, simply from the ticket itself. “Ticketing system” is a term which has no precise legal meaning but which must include the whole body of rules, tariffs, orders, schedules and practices in virtue of which the carrier issues tickets to the travelling public. It is, in fact, a compendious description of the contract of carriage, including its implied and imposed terms. That being so, it then becomes easy to envisage a traveller choosing a certain type of single segment air travel which the ticketing system might or might not restrict so as to prohibit intermediate stops. Such restrictions may indeed be beyond the control of either the passenger or the carrier to vary contractually, but that is not the governing consideration. If the method of travel chosen does not permit stopovers or return, either because the ticket itself or the underlying tariffs prohibit them, or simply because the schedule calls for a direct one-way flight without any stops en route, then, in the language of the Order,

the transportation . . . is restricted by the ticketing system . . . to one segment of air travel that does not include intermediate stops or return to the point of departure.

In the light of the Board’s findings of fact, that is precisely the position in which the appellant found itself.

I would add that, in my view, this interpretation of the Order is the only one suggested which has the merit of giving some rational meaning to, and room for practical application of, the language of subparagraph 3(a)(i). The tax imposed by section 10 is an “Air Transportation Tax” and is charged on the price of airline tickets. Tax is set by the Order at a certain rate on one-way tickets, and at double that rate on return tickets. Where, however, a one-way ticket includes stopover privileges, necessarily involving a greater use of public facilities, it is assimilated to a return ticket and taxed at the higher rate.

I would allow the appeal and order that there be substituted for the Board’s declaration a declaration that tax in the amount prescribed under subparagraph 3(a)(i) of the Air Transportation Tax Order is applicable to the appellant’s air transportation in virtue of one-way group tickets purchased from Nordair for travel in either direction between Deception Bay/Asbestos Hill and Montreal from 1975 to 1981.

MacGuigan, J:—I regret that I cannot agree with my colleagues.

In my view the only question raised by this case is whether the air transportation contracted for by the appellant was restricted by the ticketing system of the air carrier to a single segment of air travel, as required by subparagraph 3(a)(i) of the Air Transportation Tax Order in its various incarnations between October 1975 and June 1981. In that event and only in that event would the appellant qualify for the lower tax.

The Tariff Board, in the decision appealed from, concluded that ‘‘the restrictions imposed on the type of ticket bought by the appellant for its employees were not imposed by the air carrier’s ticketing system but by the choice exercised freely by the applicant company. Therefore, section 3(a)(i) of the Air Transportation Tax Order does not apply’’.

While I agree with the Tariff Board in the result, I would emphasize that it can be only a ticketing system limitation, not the exercise of choice by the air traveller, that constitutes the statutory requirement for the lower tax. In fact, in my view a ticketing system limitation is consistent with a certain degree of choice, as where a traveller without baggage chooses to take advantage of a self-ticketing system by which only one-segment tickets are available. This is no less a restriction arising from the ticketing system because the traveller could have chosen a regular ticket without such a limitation. Whether there is any reason a selfticketed purchaser should benefit from a lower rate is a policy consideration for Parliament, not for the Courts, but it would not be unreasonable for Parliament to protect an air traveller who could not within the confines of an express ticket purchase a return fare.

In the instant case, no restriction arises from the ticketing system. The very notion of a return or round-trip ticket, whether for an individual person or for a group, denotes a coming back to a place by the same person or group. This is not an arbitrary limitation imposed by a ticketing system.

In sum, it is the particular air transportation contract which governs: that is the meaning of the phrase “the transportation by air for which an amount is paid or payable [Emphasis added]”. It is that particular contract which must be restricted by the ticketing system of the air carrier.

I would accordingly dismiss the appeal.