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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 236785
Dear [Client]:
Subject: EXCISE RULING
Bunker C fuel oil
Thank you for your letter of November 3, 2021, concerning the application of the Excise Tax Act (the Act) to the Bunker C fuel oil used in your manufacturing process.
All legislative references are to the Act.
STATEMENT OF FACTS
We understand the following:
1. […] (the Corporation) is a […] manufacturer […].
2. […][Information about the Corporation’s manufacturing process].
3. [The Corporation] purchases Bunker C fuel oil from licensed manufacturers under the Act. An amount equivalent to the Federal Excise Tax (FET) of $0.04 per litre is embedded in the Corporation’s purchase price.
4. […].
5. [The Corporation] uses Bunker C fuel oil exclusively in its manufacturing process […] and does not use Bunker C fuel oil in a combustion engine or as heating oil to provide heat to a home, building or similar structure.
RULINGS REQUESTED
You would like to know:
a. Is diesel fuel, specifically Bunker C fuel oil, taxable under Part III of the Act when used in the manufacturing process and not purchased or used in a combustion engine or as heating oil for providing heat to a home, building or similar structure?
b. Can a manufacturer such as the Corporation and its related entities purchase diesel fuel (Bunker C fuel oil) for the sole purpose of using it in its manufacturing process exempt of FET from their suppliers?
c. Where the FET has been levied and paid, can a refund be claimed from the Canada Revenue Agency (CRA) or is there some other remedy under which the excise tax can be recovered?
RULINGS GIVEN
Based on the facts set out above, we rule that Bunker C fuel oil is taxable under Part III of the Act when used in [the Corporation’s] manufacturing process. We further rule that [the Corporation] cannot purchase Bunker C fuel oil exempt of FET from its suppliers and is not eligible for a refund of the excise tax embedded in the purchase price.
EXPLANATION
In accordance with the definition of diesel fuel in subsection 2(1) of the Act, Bunker C fuel oil is taxable if it is “any fuel oil that is suitable for use in internal combustion engines of the compression-ignition type,” […]. Although [the Corporation] does not use Bunker C fuel oil in an internal combustion engine, but rather to […], it is still suitable for use in an internal combustion engine of the compression-ignition type.
The latter part of the definition of diesel fuel excludes “fuel oil that is intended for use and is actually used as heating oil”. Heating oil is defined in subsection 2(1) of the Act to mean “any fuel oil that is consumed exclusively for providing heat to a home, building or similar structure and that is not consumed for generating heat in an industrial process, including any commercial process that involves removing moisture from a good. The term “exclusively” would be interpreted as meaning solely or 100% for these purposes.
The definition of “heating oil” was introduced in 2016 to ensure that excise tax relief for heating oil applies exclusively to heat a home, building or similar structure.
[The Corporation] uses Bunker C fuel oil […][in the] manufacturing process. As the Bunker C fuel oil is not used exclusively to heat a home, building or similar structure, but rather used in an industrial process, it is therefore subject to excise tax at a rate of $0.04 per litre in accordance with section 9.1 of Schedule I to the Act.
In conclusion, based on the information provided, the Bunker C fuel oil that the Corporation purchases and uses in its manufacturing process is taxable for FET purposes and cannot be purchased exempt of FET from its suppliers. No refund can be claimed under these circumstances.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the rulings given in this letter provided that: none of the issues discussed in the rulings are currently under audit, objection, or appeal; no future changes to the Act, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please reach me directly at 613-299-6343.
Sincerely,
Annie Smith
Manager
Excise Taxes and Other Levies Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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