Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 140498
October 24, 2012
Dear [Client]:
Subject: EXCISE INTERPRETATION
Eligibility of […] [Product X] for Excise Tax Refund
Thank you for […] [Company A’s] letter of November 29, 2011 concerning the application of the Excise Tax Act to […] [Product X], an oil-soluble additive.
All legislative references are to the Excise Tax Act and the regulations therein, unless otherwise specified.
INTERPRETATION REQUESTED
You would like to know whether [Company A] is entitled to a refund of the 4¢ per litre excise tax paid on the diesel fuel used in the manufacture of [Product X], a fuel additive, that is exported to countries outside of Canada.
INTERPRETATION GIVEN
Based on the information provided, [Company A] is not entitled to a refund of the excise tax paid on the diesel fuel.
[Company A] manufactures [Product X], an oil-soluble additive. This additive is then sold to oil-producing countries outside of Canada, who add it to heavy crude oils for the purpose of powering hydroelectric turbines.
[Product X] consists of […]% “clear fuel oil”, which meets the subsection 2(1) definition of “diesel fuel”. [Company A] purchases this diesel fuel from […] [Company B], and has been paying 4¢ per litre excise tax thereon. Diesel fuel “includes any fuel oil that is suitable for use in internal combustion engines of the compression-ignition type, other than any such fuel oil that is intended for use and is actually used as heating oil”.
Under Subsection 23(1) – Tax on various articles at schedule rates, “whenever goods mentioned in Schedule I…are manufactured or produced in Canada and delivered to a purchaser of those goods, there shall be imposed, levied and collected…an excise tax in respect of the goods at the applicable rate set out in the applicable section of that Schedule…” Under Schedule I Section 9.1, the excise tax payable on diesel fuel is 4¢ per litre.
In the instant case, [Company A] correctly pays the 4¢ per litre excise tax on the diesel fuel it purchases from [Company B] because at the time of purchase, it is suitable for use in internal combustion engines of the compression-ignition type, and is not intended for or actually used as heating oil. Rather, it is intended for use in the production of a fuel additive. As such, it is not exempt from federal excise tax as heating oil.
Subsection 68.1(1) – Payment where goods exported, provides that “where tax under this Act has been paid in respect of any goods and a person has…exported the goods from Canada, an amount equal to the amount of that tax shall…be paid to that person if that person applies therefor within two years after the export of the goods.”
Subsequent to the initial purchase, [Company A] uses the diesel fuel in the production of its [Product X] fuel additive. This final product is then “sold outside of Canada.” In our letter dated [mm/dd/yyyy], we requested more information regarding the product. Subsequently, in our telephone conversation of [mm/dd/yyyy], you confirmed that after having checked with an engineer at [Company A], [Product X] “consists of more than […]”, and that it therefore “does not burn or support combustion”.
While Subsection 68.1(1) provides for a refund of the excise tax paid on goods that are subsequently exported, in this case, the final product that is being exported has at that point ceased to meet the definition of “diesel fuel” as it is no longer suitable for use in internal combustion engines of the compression-ignition type. Therefore, it is no longer the “goods” upon which excise tax has been paid under the Act. Accordingly, no refund can be granted.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Goods and Services Tax Rulings, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the Excise Tax Act, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-1140.
Yours truly,
Neil Varan
Excise Taxes and Other Levies Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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