Kerr,
J:—This
is
an
Information
of
the
Deputy
Attorney
General
of
Canada
filed
in
the
Exchequer
Court
of
Canada
on
May
29,
1970,
claiming
payment
of
sales
tax
alleged
to
be
due
under
the
provisions
of
the
Excise
Tax
Act,
RSC
1952,
c
100,
and
penalties
and
interest
accruing
thereon.
The
defendant
is
an
Ontario
company
carrying
on
business
in
that
province.
At
all
material
times
it
held
a
manufacturer’s
sales
tax
licence
under
the
Excise
Tax
Act.
Its
business
is
in
part
in
the
commercial
field
of
transmission
of
music
and
sounds,
and
it
sells
records,
tapes
and
other
articles
used
in
providing
music,
commercials
and
sounds
in
that
commercial
field.
The
sales
tax
claimed
in
this
action
relates
mainly
to
articles
called
Ferropak
cartridges
and
to
audio
tapes
on
which
music
and
sounds
are
recorded.
The
plaintiff
alleges
that
in
the
period
from
October
1,
1964
to
December
31,
1967
the
company.
produced
or
manufactured
in
Canada
sundry
sound
recording
equipment
and
supplies
liable
to
sales
tax
under
the
Excise
Tax
Act,
and
that
the
company
sold
and
delivered
the
same;
that
by
reason
of
the
said
sales
and
deliveries
in
the
period
from
October
1,
1964
to
July
31,
1966
the
company
became
liable
to
Her
Majesty
for
tax
at
the
rate
of
11%
in
the
sum
of
$2,682.35
and
penalties
thereon,
that
the
company
paid
$555.63
on
November
13,
1967
and
a
further
$2,126.72
on
August
12,
1968,
but
failed
or
refused
to
pay
the
penalties
on
the
tax
liability
imposed
under
the
said
Act,
amounting
to
$602.10
on
the
last
said
date
(paragraph
4
of
the
Information).
The
plaintiff
also
alleges
that
by
reason
of
further
sales
and
deliveries
of
such
equipment
and
supplies
in
the
period
from
August
1,
1966
to
the
end
of
1967
the
company
became
further
liable
for
sales
tax
at
12%,
making
a
tax
liability
of
$715.55,
which
the
company
neglected,
failed
or
refused
to
pay
(paragraph
5
of
the
Information);
and
that
by
reason
of
non-payment
of
that
liability
the
company
became
liable
to
penalties
that
amounted
to
$159.79
to
April
30,
1970
(paragraph
6),
In
the
Information
the
plaintiff
alleges
that
the
amounts
remaining
unpaid
and
owing
to
Her
Majesty
by
the
defendant
were:
|
Penalties
to
August
12,
1968
|
,
|
$
602.10
|
|
Tax
unpaid
|
|
715,55
|
|
Penalties
on
said
tax
to
April
30,
1970
|
159.79
|
|
Total
|
$1,477,44
|
and
the
plaintiff
claims:
(a)
payment
of
that
sum
of
$1,477.
44:
(b)
payment
of
additional
penalties
and
interest
accruing
under
the
Act,
until
judgment;
(c)
costs.
The
sales
tax
here
in
issue
applies
to
goods
“produced
or
manufactured
in
Canada”.
Subparagraph
30(1
)(a)(i)
of
the
Excise
Tax
Act,
RSC
1952,
c
100,
as
amended
by
1966-67,
c
79,
which
was
in
force
when
the
Information
herein
was
filed,
reads
as
follows:
30.
(1)
There
shall
be
imposed,
levied
and
collected
a
consumption
or
sales
tax
of
nine
per
cent
on
the
sale
price
of
all
goods
(a)
produced
or
manufactured
in
Canada
(i)
payable,
in
any
case
other
than
a
case
mentioned
in
subparagraph
(ii)
or
(iii),
by
the
producer
or
manufacturer
at
the
time
when
the
goods
are
delivered
to
the
purchaser
or
at
the
time
when
the
property
in
the
goods
passes,
whichever
is
the
earlier,
In
addition
to
the
sales
tax
there
is
a
3%
old
age
security
tax
collected
with
it,
making
a
combined
tax
of
12%
(1959,
c
14,
subsection
1(1)).
One
contention
of
the
defendant
is
that
it
did
not
“produce
or
manufacture”
the
goods
in
question.
Another
contention
is
that,
as
regards
the
tapes
supplying
what
was
called
“background
music”,
what
the
company’s
customers
obtained
was
music
and
music
services
without
change
of
ownership
or
lease
of
the
tapes
themselves.
Evidence
was
given
at
the
trial
by
Edward
J
Cullen,
president
of
the
company,
as
to
the
goods
and
what
the
company
did
with
them,
and
as
to
its
business
dealings
in
respect
of
them;
and
portions
of
his
examination
for
discovery
were
put
in
evidence
by
the
plaintiff.
On
my
understanding
of
the
evidence*
the
so-called
Ferropak
cartridge,
the
components
of
which
were
made
in
Canada,
consists
of
a
plastic
top
and
bottom,
which
serve
as
a
container;
a
plastic
rotor
or
spool
on
which
audio
tape
is
wound;
a
foam
plastic
pressure
pad;
a
wire
spring
that
serves
as
a
locking
device;
and
a
screw
to
hold
all
the
saic
parts
together.
After
the
tape
is
put
on
the
spool
or
rotor
the
screw
is
inserted
through
the
top
and
bottom
and
through
the
spool,
and
all
are
held
together
to
form
a
unit
cartridge
ready
for
use.
The
container
can
also
be
sold
empty,
and
tapes
can
be
sold
separately
also.
Seemingly,
the
top
and
bottom
parts
and
the
rotors
were
ordered
from
time
to
time
in
the
period
concerned
and
came
to
the
company
together,
but
not
attached
or
connected
together
as
units;
the
pressure
pads,
wire
springs,
screws
and
tapes
came
from
other
suppliers
separately.
The
wire
was
cut
from
stock
for
each
individual
cartridge
as
needed.
When
a
cartridge
is
being
loaded
with
a
tape,
a
tape
winder
is
used.
It
has
a
drive
motor
and
a
disc.
The
amount
of
tape
specified
for
the
individual
order
is
cut
off
by
means
of
a
razor
blade;
it
is
spliced
with
a
kind
of
splicing
tape,
depending
upon
the
use
to
be
made
of
the
audio
tape;
the
tape
is
wound
on
the
cartridge
spool,
and
the
spool,
the
pressure
pad,
the
top
and
bottom
of
the
container
and
the
wire
spring
are
all
bound
together
by
the
screw.
The
audio
tape
is
a
popular
commercial
brand
that
is
blank
when
purchased.
In
respect
of
the
Ferropak
cartridges,
Mr
Cullen
said
that
the
defendant
company
supplies
its
customers
with
the
cartridge
and
tape
according
to
the
customer’s
specifications.
The
cartridge
may
be
returned
to
the
company
to
have
other
tape
inserted
and
to
be
reconditioned.
Reconditioning
orders
are
frequent,
day-to-day
occurrences,
and
the
price
charged
is
much
less
than
when
a
new
cartridge
and
tape
are
supplied.
The
price
depends
upon
the
amount
of
tape
and
service
supplied.
Mr
Cullen
said
that
there
really
is
no
difference
between
what
the
company
does
in
supplying
a
new
cartridge
with
tape
in
it,
on
the
one
hand,
and
reconditioning
a
used
cartridge
and
inserting
another
tape
in
it,
on
the
other
hand.
The
company
paid
sales
tax
on
the
components
and
did
not
charge
federal
sales
tax
on
what
it
sold
to
its
customers,
either
in
the
case
of
new
Ferropak
cartridges
or
reconditioned
cartridges.
The
Excise
Department
had
not
charged
sales
tax
in
the
case
of
sales
of
reconditioned
cartridges
or
in
the
case
of
cartridges
imported
from
the
United
States,
although
the
company
provided
the
same
service
in
all
three
kinds
of
transactions.
The
claim
is
also
as
regards
tapes
prepared
by
the
company
to
record
background
music.
The
company
uses
a
pre-recorded
or
master
tape
and
puts
the
sounds
on
that
tape
onto
blank
tapes,
in
other
words
reproduces
copies.
The
process
involves
the
feeding
of
the
sound
or
signal
from
the
live
tape
to
the
blank
tape.
The
blank
tape
is
put
on
one
tape
recorder,
the
master
tape
is
put
on
another
recorder,
both
recorders
are
switched
on,
and
there
is
a
reproduction
on
the
blank
tape
of
the
music
or
sound
that
is
on
the
master
tape.
Mr
Cullen
said
that
the
normal
use
of
such
copies
is
that
they
are
played
by
various
people,
either
in
a
control
location
where
the
music
is
transmitted
over
telephone
lines
by
the
defendant
company
or
by
other
persons
or
played
directly
on
location
from
a
tape
recorder
through
a
loud
speaker;
that
the
company
charges
a
fee
for
the
right
to
use
the
music;
the
tapes
remain
the
property
of
the
company;
the
customer
pays
a
percentage
of
his
earnings
from
the
use
of
the
tapes,
sort
of
a
royalty.
In
respect
of
these
background
music
tapes,
Mr
Cullen
regards
the
company
as
being
a
supplier
of
music
services
to
its
customers,
in
which
music
is
the
subject
of
the
commerce
and
in
which
the
tapes
were
used,
but
without
leasing
or
transfer
of
ownership.
George
Black
and
W
J
Brent,
auditors
of
the
Excise
Department,
testified
as
to
their
investigation
of
the
company
and
the
assessments
made.
Revisions
were
made
as
the
investigation
proceeded.
The
penalties
commenced
with
the
month
in
which
sales
tax
was
outstanding
and
they
were
adjusted
according
to
changes
in
the
assessment
of
sales
tax.
They
were
charged
while
the
investigation
was
being
conducted
and
while
revisions
of
the
tax
were
being
made.
This
was
one
of
the
features
of
the
claim
that
the
company
objected
to.
Exhibits
P-1,
P-2,
P-3,
P-4
and
P-6
give
details
of
the
assessments
of
tax
and
penalties.
There
is
no
real
dispute
as
to
the
correctness
of
the
calculation.
The
calculation
submitted
at
the
trial
on
September
13,
1972
was
$602.10
for
the
penalty
accruing
on
goods
on
which
the
company
paid
the
sales
tax
but
did
not
pay
the
penalty,
and
$715.55
tax
owed
in
respect
of
additional
goods
sold
and
penalties
of
$298.86
accrued
thereon.
Section
48
of
the
Excise
Tax
Act
provides
for
monthly
returns
of
sales
taxes,
and
for
penalties
upon
default
in
payment.
Subsections
(3)
and
(4)
read
as
follows:
48.
(3)
The
return
required
by
this
section
shall
be
filed
and
the
tax
payable
shall
be
paid
not
later
than
the
last
day
of
the
first
month
succeeding
that
in
which
the
sales
were
made.
(4)
Subject
to
subsection
(5),
upon
default
in
payment
of
the
tax
or
any
portion
thereof
payable
under
Part
IV,
V
or
VI
within
the
time
prescribed
by
subsection
(3),
there
shall
be
paid
in
addition
to
the
amount
of
the
default
a
penalty
of
two-thirds
of
one
per
cent
of
the
amount
in
default
in
respect
of
each
month
or
fraction
of
a
month
during
which
the
default
continues.
(5)
[Where
the
Minister
specifies
a
later
day
not-applicable
in
this
case.]
Section
31
of
the
Act
provides
in
part
as
follows:
31.
(1)
Whenever
goods
are
manufactured
or
produced
in
Canada
under
such
circumstances
or
conditions
as
render
it
difficult
to
determine
the
value
thereof
for
the
consumption
or
sales
tax
because
(a)
a
lease
of
such
goods
or
the
right
of
using
the
same
but
not
the
right
of
property
therein
is
sold
or
given;
(b)
such
goods
having
a
royalty
imposed
thereon,
the
royalty
is
uncertain,
or
is
not
from
other
causes
a
reliable
means
of
estimating
the
value
of
the
goods;
(c)
[not
applicable
here];
or
(d)
such
goods
are
for
use
by
the
manufacturer
or
producer
and
not
for
sale;
the
Minister
may
determine
the
value
for
the
tax
under
this
Act
and
all
such
transactions
shall
for
the
purposes
of
this
Act
be
regarded
as
sales.
By
virtue
of
section
32
of
the
Act
the
tax
imposed
by
section
30
does
not
apply
to
certain
goods
mentioned
in
Schedule
Ill,
and
the
goods
there
mentioned
include:
PART
III
6.
Phonograph
records
and
audio
tapes
authorized
by
the
Department
of
Education
of
any
province
in
Canada
for
instruction
in
the
English
or
the
French
language,
and
materials
for
use
exclusively
in
the
manufacture
thereof.
Counsel
for
the
plaintiff
cited
the
following
cases:
The
Queen
v
Canadian
Pacific
Railway
Company,
[1971]
SCR
821;
[1971]
CTC
163;
71
DTC
5078;
The
King
v
Vandeweghe
Limited,
[1934]
SCR
244;
[1928-
34]
CTC
257;
1
DTC
265;
The
Queen
v
York
Marble,
Tile
and
Terrazzo
Limited,
[1968]
SCR
140;
[1968]
CTC
44;
68
DTC
5001;
Gruen
Watch
Company
of
Canada
Ltd
et
al
v
Attorney
General
of
Canada,
[1950]
OR
429;
[1950]
CTC
440;
4
DTC
784;
The
King
v
Fraser
Companies,
Limited,
[1931]
SCR
490;
1
DTC
215;
The
King
v
Dominion
Bridge
Company
Limited,
[1940]
SCR
487;
[1940-41]
CTC
99;
1
DTC
499-114.
The
defendant
argues
that
the
goods
were
not
“produced
or
manufactured”
by
the
defendant.
The
meaning
and
application
of
the
words
“produced
or
manufactured”
were
considered
by
the
Supreme
Court
of
Canada
in
The
Queen
v
Canadian
Pacific
Railway
Company
(supra),
in
which
the
goods
were
railway
ties
that
had
been
impregnated
with
a
creosoting
liquid
in
order
to
increase
their
life.
In
delivering
the
judgment
of
the
Court
Spence,
J
said
at
page
826
[
166-7,
5080]:
As
pointed
out
by
Duff,
C.
J.
in
The
King
v.
Vandeweghe
Limited,
[1934]
S.C.R.
244
at
248;
[1928-34]
C.T.C.
257
at
260:
“The
words
produced
and
manufactured
are
not
words
of
any
very
precise
meaning
and,
consequently,
we
must
look
to
the
context
for
the
purpose
of
ascertaining
their
meaning
and
application
in
the
provisions
we
have
to
construe.
and
at
page
827
[167-8,
5080-81]:
In
the
York
Marble
case
(supra),
this
court
adopted,
with
approval,
the
definition
of
“manufacturer”
used
by
Archambault,
J.
in
M.N.R.
v.
Dominion
Shuttle
Company
Limited
(1933),
72
Que.S.C.
15,
where
the
learned
judge
said:
“There
is
no
definition
of
the
word
manufacturer
in
the
Act
and
it
is
practically
impossible
to
find
a
definition
which
will
be
absolutely
accurate,
but
from
all
the
definitions
contained
in
leading
dictionaries,
Corpus
Juris,
Encyclopedias,
etc.,
the
Court
gathers
that
to
manufacture
is
to
fabricate;
it
is
the
act
or
process
of
making
goods
or
wares
of
any
kind;
it
is
the
production
of
articles
for
use
from
raw
or
prepared
material
by
giving
to
these
materials
new
forms,
qualities
and
properties
or
combinations
whether
by
hand
or
machinery.”
I
emphasize
particularly
the
words
“the
production
of
articles
for
use
from
raw
or
prepared
material
by
giving
to
those
materials
new
forms,
qualities
and
properties
or
combinations
whether
by
hand
or
machinery”.
and
at
pages
828-29
[168-9,
5081]:
As
pointed
out
by
McRuer,
C.J.H.C.
in
Gruen
Watch
Company
of
Canada
Ltd.
et
al.
v.
Attorney
General
of
Canada,
[1950]
O.R.
429;
[1950]
C.T.C.
440,
and
adopted
by
this
Court
in
the
York
Marble
case,
the
words
used
in
the
Excise
Tax
Act
are
“produced
or
manufactured”
and
those
words
were
not
synonymous,
that
is,
that
a
thing
may
be
“produced”
even
though
it
is
not
“manufactured”;
an
example
would
be
the
growth
of
a
crop
from
seed.
Again,
as
in
the
York
Marble
case,
I
would
be
strongly
of
the
opinion
that
even
if
there
had
not
been,
in
the
present
case,
such
an
alteration
of
the
forms,
qualities
and
properties
of
the
untreated
tie
as
would
justify
it
being
described
as
“manufactured”,
nevertheless,
it
should
be
said
that
it
was
“produced”.
For
this
reason,
I
am
of
the
opinion,
with
respect,
that
the
learned
trial
judge
was
in
error
and
it
should
be
held
that
the
process
carried
out
by
Domtar
for
the
respondent
did
result
in
these
untreated
ties
being
“produced
or
manufactured”.
In
the
York
Marble
case
(supra)
Spence,
J
in
delivering
the
judgment
of
the
Court
referred
to
the
Gruen
Watch
case
as
follows
at
page
146
[49,
5003-4
I:
In
Gruen
Watch
Company
of
Canada
Ltd.
et
al.
v.
Attorney
General
of
Canada,
[1950]
O.R.
429;
[1950]
C.T.C.
440,
McRuer,
C.J.H.C.
considered
the
same
question
in
reference
to
the
same
statute.
The
facts
may
be
briefly
stated
from
the
first
paragraph
of
his
judgment
at
p.
430
[p.
442]:
“The
plaintiffs
in
this
action
have
been
engaged
for
many
years
in
the
importation
of
watch
movements
from
abroad.
They
import
or
purchase
in
Canada
watch
cases
adapted
to
the
particular
movements
imported,
and
by
a
very
simple
operation
performed
by
unskilled
labour,
taking
only
a
very
few
minutes
at
an
expense
of
from
1.25
to
3.6
cents
each,
the
watch
movement
is
placed
in
the
case
and
a
watch
ready
for
sale
is
produced.
In
some
cases
wrist-bands,
bracelets
or
brooches
are
attached
to
the
watch
case
for
the
personal
convenience
of
the
purchasers.
The
plaintiffs
do
not
manufacture
either
watch
movements
or
watch
cases.”
At
p.
442
[p.
454],
the
learned
Chief
Justice
said:
“I
cannot
find
that
the
simple
operation
of
putting
a
watch
movement
into
a
watch
case
is
manufacturing
a
watch
in
the
ordinary,
popular
and
natural
sense
of
the
word,
but
I
feel
clear
that
the
plaintiffs
produced
watches
adapted
to
household
or
personal
use.
It
may
well
be
that,
as
counsel
for
the
plaintiffs
argued,
the
movement
as
imported
in
the
tin
or
aluminum
case
will
keep
time
and
could
be
used
as
a
watch.
It
is
not
a
watch
adapted
to
household
or
personal
use
as
the
term
is
used
in
its
ordinary
and
popular
sense,
and
the
movement
in
the
aluminum
case
would
be
quite
unsaleable
as
such.
.
It
is
to
be
noted
that
the
learned
Chief
Justice
used
the
firmly
established
principle
that
the
taxing
statute
must
be
interpreted
by
the
consideration
of
the
words
thereof
in
the
ordinary,
proper,
and
natural
sense,
and
that
doing
so
he
found
himself
able
to
distinguish
between
the
two
words
“produced”
and
“manufactured”.
and
at
page
147
[
50,
5004]
he
said:
.
.
.
I
adopt
the
course
of
McRuer,
C.J.H.C.,
in
Gruen
Watch
Co.
v.
Attorney
General
of
Canada
in
holding
that
an
article
may
be
“produced”
aithouch
it
is
not
“manufactured”.
In
that
case,
although
he
was
unable
to
come
to
the
conclusion
that
the
mere
insertion
of
the
movement
into
the
watch
case
was
the
manufacture
of
the
watch,
he
found
no
difficulty
in
determining
that
such
a
process
was
the
production
of
a
watch.
The
defendant
also
argues
that
some
of
the
background
music
tapes
were
used
by
the
defendant
in
its
own
business,
and
that
others
were
supplied
to
customers
without
lease
or
transfer
of
title
and
that
the
music
and
music
services
were
the
subject
matter
of
the
commerce.
In
the
Canadian
Pacific
creosoted
ties
case
(supra)
the
Supreme
Court
of
Canada
held
the
company
liable
for
the
tax
even
although
the
ties
were
mostly
for
its
own
use.
The
incidence
of
sales
tax
on
goods
used
by
the
manufacturer
in
its
own
business
was
also
dealt
with
by
the
Supreme
Court
of
Canada
in
the
Fraser
Companies
case
(supra).
The
judgment
of
the
majority
of
the
Court
was
delivered
by
Smith,
J
who
said
at
pages
491-92:
The
respondent
was
a
manufacturer
of
lumber
for
sale,
and
consumed
a
portion
of
the
lumber
so
manufactured
in
construction
and
building
operations,
carried
on
over
a
period
of
years,
the
lumber
so
consumed
having
been
taken
from
stock
in
the
yards
of
the
company,
produced
and
manufactured
in
the
ordinary
course
of
the
company’s
business
of
manufacturing
for
sale,
and
not
produced
or
manufactured
especially
for
the
purpose
for
which
it
was
used.
The
appellant
sued
the
respondent
company
for
sales
tax
on
the
lumber
so
consumed,
amounting
to
the
sum
of
$7,302.90.
Sections
86
and
87
of
the
Special
War
Revenue
Act
are
as
follows:
“86.
In
addition
to
any
duty
or
tax
that
may
be
payable
under
this
Act
or
any
other
statute
or
law,
there
shall
be
imposed,
levied
and
collected
a
consumption
or
sales
tax
of
four
per
cent
on
the
sale
price
of
all
goods
(a)
produced
or
manufactured
in
Canada,
payable
by
the
producer
or
manufacturer
at
the
time
of
the
sale
thereof
by
him;
87.
Whenever
goods
are
manufactured
or
produced
in
Canada
under
such
circumstances
or
conditions
as
render
it
difficult
to
determine
the
value
thereof
for
the
consumption
or
sales
tax
because
(d)
such
goods
are
for
use
by
the
manufacturer
or
producer
and
not
for
sale;
the
Minister
may
determine
the
value
for
the
tax
under
this
Act
and
all
such
transactions
shall
for
the
purposes
of
this
Act
be
regarded
as
sales.”
The
learned
President
of
the
Exchequer
Court,
before
whom
the
case
was
tried,
dismissed
the
action
((1931)
Ex.
C.R.
16),
on
the
ground
that
the
lumber
so
consumed
was
produced
in
the
ordinary
course
of
business
for
sale,
and
not
specifically
for
use
by
the
manufacturer,
within
the
meaning
of
the
above
quoted
s.
87(d).
With
great
respect,
I
am
unable
to
take
this
view
of
the
meaning
and
effect
of
these
provisions
of
the
Act.
To
so
construe
them
is
to
put
a
narrow
and
technical
construction
upon
the
precise
words
used
in
clause
(d),
without
taking
into
consideration
the
meaning
and
intent
of
the
statute
as
a
whole.
It
seems
to
me
clear
that
the
real
intention
was
to
levy
a
consumption
or
sales
tax
of
four
per
cent
on
the
sale
price
of
all
goods
produced
or
manufactured
in
Canada,
whether
the
goods
so
produced
should
be
sold
by
the
manufacturer
or
consumed
by
himself
for
his
own
purposes.
In
support
of
his
argument
that
the
defendant
did
not
“produce
or
manufacture”
the
goods
in
question
counsel
for
the
defendant
cited
The
Deputy
Minister
of
National
Revenue
for
Customs
and
Excise
v
Research-Cottrell
(Canada)
Limited
et
al,
[1968]
SCR
684,
in
which
components
of
electrostatic
precipitators
were
assembled
and
erected
at
a
mining
plant
in
Copper
Cliff,
Ontario.
The
respondent
company
claimed
a
drawback
of
customs
duties
paid
on
the
components,
basing
its
claim
on
subsection
11(1)
of
the
Customs
Tariff
set
forth
in
the
judgment
of
the
majority
of
the
Court
delivered
by
Martland,
J.
The
Deputy
Minister
refused
the
claim
on
the
ground
that
the
respondent
did
not
perform
any
manufacturing
operation
in
connection
with
the
precipitators.
An
appeal
to
the
Tariff
Board
was
rejected
on
the
ground
that
the
work
carried
out
at
Copper
Cliff
was
assembly
and
erection
rather
than
manufacture.
A
further
appeal
to
the
Exchequer
Court
was
allowed
on
the
ground
that
the
Tariff
Board
had
erred
in
law.
On
appeal
to
the
Supreme
Court
of
Canada
the
Court
held
(Cartwright,
CJ
and
Pigeon,
J
dissenting)
that
on
the
facts
it
was
open
to
the
Tariff
Board
to
find,
as
it
did,
that
the
assembly
and
erection
of
the
fabricated
components
was
not,
in
that
case,
manufacture
within
the
meaning
of
the
relevant
tariff
items,
and
that
it
could
not
be
held,
as
a
matter
of
law,
that
what
was
done
at
the
mining
site
constituted
manufacture
of
the
precipitators.
Martland,
J
in
delivering
the
judgment
of
the
majority
of
the
court
said
at
pages
693-94:
The
judgment
of
the
Court
below
has
held
that
the
Tariff
Board
erred
in
construing
the
statutory
items,
because,
as
a
matter
of
law,
where
the
articles
did
not
exist
until
after
the
acts
performed
at
the
site,
they
must
be
regarded
as
having
been
manufactured
in
Canada.
It
follows,
from
this
proposition,
that
in
every
case,
where
fabricated
parts
are
assembled
in
Canada
into
a
whole,
the
article
which
then
comes
into
existence
must
have
been
manufactured
in
Canada.
With
respect,
I
am
not
prepared
to
accept
this
broad
proposition
when
considering
the
meaning
of
the
word
“manufacture”
in
the
relevant
tariff
items
under
consideration.
The
assembly
of
parts
may,
in
certain
circumstances,
constitute
manufacture,
but
I
do
not
agree
that
this
must
be
so
in
all
circumstances.
The
Tariff
Board,
in
its
reasons,
stated:
“It
will
not,
for
the
purposes
of
this
appeal,
seek
to
establish
any
definition
of
general
application
to
all
cases
but
rather
to
declare
whether
or
not
the
actions
performed
in
this
case
constituted
manufacturing.”
For
the
respondent
it
was
contended
that
the
Tariff
Board
misdirected
itself
when
it
stated
the
issue
to
be
whether
what
was
done
by
Cottrell
(Canada)
constituted
manufacture
in
Canada,
and
that
the
only
issue
was,
in
the
words
of
the
relevant
tariff
items,
“were
the
materials
used
in
the
manufacture
of”
the
precipitators?
But
the
tariff
items
must
be
read
with
s.
11(1)
which
authorizes
drawbacks
on
materials
“when
used
for
consumption
in
Canada
for
the
purpose
specified”.
In
the
light
of
that
wording
I
think
it
was
proper
for
the
Tariff
Board
to
decide
whether
the
action
of
Cottrell
(Canada)
constituted
manufacture
of
the
precipitators
in
Canada.
The
evidence
before
the
Board
showed
that
the
agreement
of
Cottrell
(Canada)
with
the
Foundation
Company
was
to
supply
and
erect
eight
precipitators.
They
were
designed
and
all
components
built
or
ordered
by
Cottrell
Inc.,
to
be
delivered
at
the
site.
The
erection
was
done
by
Noront,
by
agreement
with
Cottrell
Inc.
In
these
circumstances
I
do
not
think
it
should
be
held,
as
a
matter
of
law,
that
what
Noront
did
at
the
site
constituted
manufacture
by
Cottrell
(Canada)
of
eight
precipitators.
On
the
facts,
it
was
open
to
the
Board
to
find,
as
it
did,
that
the
assembly
and
erection
of
the
fabricated
components
was
not,
in
this
case,
manufacture
within
the
meaning
of
the
relevant
tariff
items.
My
conclusion
is
that
the
Board
did
not
misdirect
itself
as
to
the
law,
and
that
there
was
evidence
on
which
its
finding
of
fact
could
properly
be
made.
I
do
not
find
in
the
Research-Cottrell
judgment
of
the
Supreme
Court
any
rule
or
interpretation
the
application
of
which
would
lead
to
a
conclusion
that
what
was
done
by
the
defendant
in
this
case
in
respect
of
the
goods
in
question
was
not
production
or
manufacture
of
such
goods.
As
to
the
Ferropak
cartridges
with
tape
in
them,
the
evidence
establishes,
in
my
opinion,
that
the
defendant
company
took
the
components
and
by
hand
work
and
the
use
of
apparatus
that
has
been
called
tape
winders
brought
into
being
useful
and
marketable
entities
that
had
new
forms,
qualities
and
properties
or
combinations.
When
a
customer
ordered
a
loaded
Ferropak
cartridge
he
received
a
readily
useful
unit,
not
a
handful
of
unconnected
articles.
In
my
opinion,
the
loaded
Ferropak
cartridges
were
“produced
or
manufactured”
by
the
company,
within
the
meaning
of
those
words
as
used
in
the
Excise
Tax
Act.
Also,
where
the
company
assembled
and
put
together
the
components,
other
than
the
tapes
for
subsequent
loading
with
tapes,
it
thereby
brought
into
being
useful
and
saleable
commercial
articles
that
had
new
forms,
qualities
and
combinations,
and
so
“produced”
such
cartridges.
As
regards
the
background
music
tapes,
I
think
that
the
company
“produced”
them
and
that
it
is
liable
to
pay
the
sales
tax
on
them.
This
is
so
in
respect
of
the
tapes
that
it
used
itself
to
transmit
music.
It
is
also
so
where
it
supplies
the
tapes
to
customers
for
their
use.
By
virtue
of
paragraph
31
(1)(b)
of
the
Excise
Tax
Act
all
such
transactions
are
for
the
purposes
of
the
Act
to
be
regarded
as
sales.
It
may
be
that
the
Excise
Department
treated
the
cartridges
that
the
company
made
from
imported
components
and
the
cartridges
that
it
reconditioned,
differently
from
the
Ferropak
cartridges
that
it
made
from
Canadian
components,
in
that
it
did
not
charge
sales
tax
on
those
other
cartridges,
but
the
propriety
of
the
tax
treatment
accorded
to
them
is
not
before
the
Court
for
determination,
and
I
express
no
opinion
in
that
respect.
I
am
therefore
of
the
opinion,
and
find,
that
Her
Majesty
is
entitled
to
recover
from
the
defendant,
as
claimed,
the
amount
of
$602.10
for
the
penalty
accruing
on
the
goods
on
which
the
defendant
paid
sales
tax
but
did
not
pay
the
penalty,
and
the
amount
of
$715.55
tax
owed
in
respect
of
additional
goods
and
penalties
of
$298.86
accrued
thereon
to
September
7,
1972,
plus
the
amount
of
additional
penalties
accruing
under
the
Act
from
the
latter
date
to
the
date
of
judgment.
The
amount
of
such
additional
penalties
shall
be
calculated
and
proved
to
the
Court
before
judgment
is
entered.
Her
Majesty
shall
also
be
entitled
to
recover
her
costs
of
the
action.
Pursuant
to
Rule
337(2)(b),
counsel
for
the
plaintiff
may
prepare
a
draft
of
an
appropriate
judgment
to
implement
the
Court’s
conclusions
and
move
for
judgment
accordingly.
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