Décary,
J:—The
issue
is
whether
or
not
the
products
sold
by
defendant,
being
cleaning
compounds,
solvents
and
rust
and
corrosion
inhibitors,
to
the
third
parties
in
this
case,
were
sales
meeting
the
requirements
of
Item
5,
Part
IX,
Schedule
III
of
the
Excise
Tax
Act
and
therefore
exempt
from
tax
if
used
as
required
by
the
provisions
of
Item
5.
Item
5
reads
as
follows:
5.
Materials
for
use
exclusively
in
the
equipment
and
repair
of
ships
for
use
exclusively
for
commercial
purposes.
The
plaintiff
has
assessed
the
defendant
under
the
provisions
of
paragraph
27(1
)(a)
of
the
Excise
Tax
Act
and
section
24
of
the
Old
Age
Security
Act
for
an
amount
of
$2,253.93
which
amount
is
still
unpaid
as
per
September
13,
1976.
In
doing
so,
plaintiff
has
disregarded
the
certificate
of
the
client
as
to
the
use
of
the
product.
It
is
in
evidence
that
it
is
customary
for
defendant
to
rely
on
the
certificate
of
the
client.
One
must
remember
that
defendant
in
this
case
sells
to
customers,
not
to
suppliers,
in
other
words,
to
persons
who
use
the
product
themselves,
who
do
not
buy
it
to
sell
it.
It
was
admitted
during
the
hearing
that
there
is
no
regulation
requiring
a
certificate
from
the
purchasers
as
to
the
use
of
the
product.
The
Excise
Tax
Act
requires
certain
formalities
to
be
complied
with
when
a
sale
is
made
to
a
supplier
who
buys
for
resale,
but
is
silent
as
to
the
sale
to
the
user,
dependent
on
the
type
of
use
the
object
is
going
to
be
put
to.
In
my
view,
the
different
treatment
is
due
to
different
causes
and
when
the
manufacturer
sells
to
a
supplier
it
is
generally
for
resale,
whereas
when
a
manufacturer
sells
to
a
user,
it
is
the
use
to
be
made
of
the
product
that
counts
for
the
exemption
purposes.
The
use
the
product
is
to
be
put
to
is
known
by
the
user
who
states
his
intention
in
the
certificate
when
he
orders
the
merchandise.
It
is
on
account
of
that
certificate
that
the
manufacturer
does
not
charge
the
tax
required
by
the
Excise
Tax
Act,
being
9%,
and
the
one
required
by
the
O/d
Age
Security
Act,
being
3%.
As
far
as
the
use
to
be
made
of
the
product
purchased,
I
do
believe
that
the
matter
of
Skuttle
Manufacturing
Co
of
Canada
Ltd,
B
D
Wait
Co
Limited
v
Her
Majesty
the
Queen,
[1965]
SCR
217;
[1964]
CTC
572;
64
DTC
5348,
decided
by
the
Supreme
Court
of
Canada
is
authority
to
the
effect
that
the
certificate
is
sufficient
evidence
for
the
manufacturer
for
not
collecting
excise
tax.
At
page
221
we
read
these
remarks
of
Judson,
J
speaking
for
the
Court,
relating
to
the
regulations
dealing
with
the
certificate
of
exemption:
These
do
not
require
the
manufacturer
of
humidifiers
to
enter
into
contractual
relations
as
to
the
use
to
which
the
manufacturer
of
furnaces
can
put
the
goods
and
to
conduct
an
investigation
for
the
purpose
of
ensuring
that
the
goods
are
in
fact
put
to
that
use.
There
being
no
enactment
in
the
statute
or
the
regulations
as
to
the
method
of
checking
the
use
of
the
merchandise
purchased,
the
reliance
on
the
so-called
certificate
appears,
in
the
circumstances,
to
be
a
practical
one.
Like
the
situation
referred
to
in
the
excerpt
of
the
Skuttle
case,
the
legislator
has
not
required
that
the
manufacturer
verify
the
use
and
if
that
had
been
done,
it
would
have
created
quite
an
inconvenience
because
it
is
after
the
use
is
made
that
one
can
determine
the
purpose
of
the
purchaser
of
the
product.
That
means
that
the
bill
could
not
be
sent
by
defendant
before
actual
use
is
made
and
verified.
There
is
nothing
to
that
effect
in
the
Act.
If
there
is
any
abuse
made
of
the
exemption,
I
believe
that
once
the
manufacturer
has
seen
the
certificate,
any
misrepresentation
is
not
on
his
part
but
on
the
part
of
the
purchaser.
I
believe
that
the
onus
of
proof
is
met
with
the
reliance
on
the
certificate
and
then
it
is
up
to
the
Crown
to
give
evidence
that
the
use
purported
in
the
certificate
is
not
the
proper
use
the
merchandise
was
put
to.
No
such
evidence
was
proffered
by
plaintiff.
With
reference
to
the
case
of
Star
Shipping
Co
(Canada)
Ltd
v
Deputy
Minister
of
National
Revenue
for
Customs
and
Excise
(Federal
Court
of
Appeal,
1973,
unreported)
Thurlow,
J,
as
he
then
was,
said:
“Materials
for
use
exclusively
in
the
equipment
and
repair
of
ships”
means
materials
to
be
used
for
that
purpose
once
and
for
all
so
that
they
are
subsequently,
so
far
as
they
thereafter
exist,
part
of
the
ship
equipped
or
repaired.
I
do
believe
that
in
this
instance
the
goods,
by
their
very
nature,
do
not
exist
as
such
after
use
but
it
is
not
that
characteristic
that
precludes
them
from
being
exempt.
The
products
manufactured
by
defendant
are
used
in
the
repair
of
ships
and
exclusively
for
that
purpose.
In
my
view,
these
products
are
exempt
under
the
provisions
of
Item
5.
The
action
is
dismissed
with
costs.
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