T-2507-72
Thyssen Mining Construction of Canada Ltd.
(Plaintiff)
v.
The Queen (Defendant)
Trial Division, Addy J.—Ottawa, December 5,
1974; January 17, 1975.
Customs duty—Request for re-classification of imported
goods—Time limitation from date of entry—Customs Act,
R.S.C. 1970, c. C-40, ss. 20, 21, 27, 46, 51, 106, 112-114-
Customs Tariff, R.S.C. 1970, c. C-41, Items 41012-1 and
44603-1—Interpretation Act, R.S.C. 1970, c. I-23, s. 28.
A mining construction company imported tubbing for the
lining of mine shafts, on payment of duty under Customs
Tariff item 44603-1. The shipment at issue in this action was
imported under the terms of a written agreement, for use in
mine shafts in Saskatchewan, on May 16, 1969, the duty being
paid under the same tariff item. Four months later, the com
pany filed a claim for refund, on the ground that these goods
were entitled to enter duty-free, under tariff item 41012-1. In
respect of other shipments, the dispute over the application of
tariff item 44603-1 (maintained by the Department of National
Revenue, Customs and Excise) and tariff item 41012-1 (relied
on by the company) was decided in the company's favour by
the Tariff Board. The Department then refunded all the duties
paid on the company's importations of tubbing, except one.
Refund of the duty paid on May 16, 1969 was refused on the
ground that the request for the re-determination of a tariff
classification should have been made within ninety days. The
company sued to recover the amount of duty involved, in the
sum of $106,175.
Held, dismissing the action, the plaintiff was bound by the
provision in section 46(1) of the Customs Act, that classifica
tion or appraisal of goods on entry was "final and conclusive
unless the importer within ninety days of the date of entry,
makes a written request ... ". This language overrode the
permissive terms of section 46(4), allowing a request for
re-classification within two years. The same period was permit
ted in the application of section 114 of the Act to section 113,
but the latter section was relevant only where the goods were
imported for one purpose and "diverted" to another purpose.
The goods here were applied to the very purpose for which they
were ordered and imported.
Julius v. Lord Bishop of Oxford (1880) 5 App. Cas. 214,
[1874-1880] All E.R. (Rep.) 43 and Re Pentagon Con
struction Co. Ltd. (1960) 20 D.L.R. (2d) 485, applied.
ACTION.
COUNSEL:
Hon. C. H. Locke, Q.C., and J. M. Coyne,
Q.C., for plaintiff.
A. C. Pennington and R. Côté for defendant.
SOLICITORS:
Herridge, Tolmie, Gray, Coyne & Blair,
Ottawa, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
ADDY J.: The plaintiff, for some years, had been
importing into Canada from Germany tubbing for
the lining of mine shafts, its main business being
the design and sinking of mine shafts in the Prov
ince of Saskatchewan. In order to sink a shaft
through quicksand the ground has to be frozen and
the tubbing was employed to prevent the high
pressure formations from flooding the shafts after
the ground had thawed.
For some period of time the tubbing had been
imported and entered through customs under tariff
item 44603-1 with duty paid thereon at 22 1 / 2 % ad
valorem, in accordance with a ruling obtained
from a federal customs appraiser through the
plaintiff's customs brokers. Representations were
made from time to time to change the ruling
without success.
In 1968, the plaintiff having changed customs
brokers, the latter requested the Department to
confirm their own opinion that the tubbing could
be imported on a duty-free basis as it was classifi
able under tariff item 41012-1 as "mine wall
supports or support systems of metal." Before
receiving the reply from the Department, eight
shipments of tubbing were entered under the above
duty-free classification and no duty was paid. A
federal customs appraiser then advised the plain
tiff's customs brokers that the Department took
the position that the tubbing was not exempt of
duty but was dutiable at 20% under the first
above-mentioned tariff item that is, item 44603-1.
Notwithstanding this the plaintiff's brokers
entered two further shipments under the duty-free
classification. Subsequently, namely on the 16th of
May 1969, a further shipment was entered under
item 44603-1 and the sum of $106,175.61 was paid
as duty and the sum of $79,799.35 was paid as
sales tax. This shipment of tubbing was in fact
imported for use in mine shafts in Saskatchewan
under the terms of a written agreement previously
entered into by the plaintiff. On the 22nd of
October 1969, that is, over four months later, the
plaintiff filed a claim for refund.
Meanwhile, on the 14th of August 1969, the
Department of National Revenue Customs and
Excise had advised the plaintiff that it took the
position that a false declaration had been made for
the ten above-mentioned shipments, which had
been imported duty free under item 41012-1, and
that a seizure had been made and that the Depart
ment was claiming duty and might in addition be
imposing a penalty. While disputing liability the
plaintiff paid the duty under protest and thereafter
three further entries of the same goods were made
and the duty thereon was paid.
The plaintiff having requested re-determination
of the classification of the three last-mentioned
entries and having received an adverse ruling from
the Deputy Minister, appealed to the Tariff Board
and succeeded in having the ruling reversed. Fol
lowing this decision, the Department refunded to
the plaintiff the duties paid on all of the above-
mentioned importations of tubbing except the
entry of the 16th of May, 1969 above mentioned.
As to this entry the defendant, although it refund
ed the monies paid as sales tax, refused to refund
the sum of $106,175.61 paid as duty, basing its
refusal on the provisions of section 46(1) of the
Customs Act' which provides that an application
for the re-determination of a duty classification
must be made within ninety days.
R.S.C. 1970, c. C-40.
The plaintiff, thereupon, instituted the present
action under which it claims a judgment against
the defendant in the amount of $106,175.61, being
the amount paid for duty on the tubbing above
referred to, entered on the 16th of May, 1969. The
plaintiff also claims interest at 5% per annum on
the said sum from the 21st of October 1969 to the
date of judgment.
It is clear that the tubbing involved in the
present action, which was imported through the
Port of Winnipeg, was originally ordered and
imported for the specific purpose of lining mine
shafts in a potash mine near Rocanville, Saskatch-
ewan, and was actually installed and used there as
the plaintiff had, at all relevant times, intended to
use it and was not ordered as general stock and
subsequently installed at Rocanville.
The fact that the tubbing, imported on the 16th
of May 1969, qualifies for exemption under tariff
item 41012-1 is not disputed by the defendant. The
only dispute is over the right of the plaintiff to a
refund of the tariff paid having regard to its
failure to request the re-determination of the tariff
classification within the time limited in the Act.
It is clear from the tariff classification of the
tubbing that it qualifies for exemption for tariff
only by reason of its end use as part of a mine wall
support or supports system of metal and not by
reason of an exemption of tubbing as such.
Sections 20, 21, 27(3) and 51 of the Act, which
deal with the requirements of a bill of entry and
the details to be shown therein as well as with the
details and contents of invoices which are to
accompany bills of entry, do not impose any obli
gation to declare the use to which the goods are to
be put. It is obvious, however, that where an item
intrinsically bears a tariff classification, which will
be subject to a certain rate of duty and where that
item, when imported for a specific use or for the
use of a person who enjoys an exemption or a
lower rate of duty, is to benefit from a preferential
rate or from an exemption, that specific preferred
use to which it is to be put must be declared at the
time of entry if the importer wishes to enjoy, at the
time of entry, the preferred rate of tariff or the
exemption as the case may be. If the specific use is
not declared, then there is absolutely nothing
which would justify the lower rate of tariff being
used or exemption being granted at the time of
entry. For instance, section 106(1) of the Act, in
the case of goods being exempt under any other
Act, requires that the goods be described as they
are in that Act.
When goods have not been imported for a use
which will carry an exemption or a reduced rate of
duty and they are subsequently diverted to such a
use, section 113 of the Act provides for a right of
refund of the duty paid in the case of a use
carrying a complete exemption from duty or the
difference between the amount of duty in the event
of the use calling for a lower rate of duty. That
section reads as follows:
113. Where any duty has been paid on goods imported into
Canada and, before any use is made of the goods in Canada
other than by their incorporation into other goods, the goods or
the other goods into which they have been incorporated are
diverted
(a) to the use of a person who would have been entitled by
law to import the goods for his own use, without the making
of a special entry in a form and manner prescribed by the
Minister, free of duty or at a rate of duty lower than that
applied at the time of importation, or
(b) to a specific use that would have entitled the importer
thereof to import the goods, without the making of a special
entry in a form and manner prescribed by the Minister, free
of duty or at a rate of duty lower than that applied at the
time of importation,
subject to subsection 114(1), a refund may be made to the
importer of the goods in an amount equal to the difference
between the duty paid thereon and the duty, if any, that would
have been payable on the goods at the time of their entry for
home consumption if the goods had been imported as being for
or intended for the use to which they were so diverted.
Section 114(1) requires that all claims for
refund arising otherwise than from an erroneous
classification or an erroneous appraisal be made
within two years. Section 112, which applies to the
case of a refund for a deficiency in quantity,
requires that notice be given to the collector within
ninety days from the date of entry and section 115
in the case of a misdescription likewise requires a
misdescription to be reported in writing within
ninety days. The general time limit of two years
under section 114 would therefore apply to section
113.
The plaintiff claims that section 113 applies to
his case on the grounds that the word "diverted"
can be interpreted as meaning "employed".
If the word "diverted" were an ambiguous word,
then it should be interpreted in favour of the
plaintiff and against the taxing authority. In my
view, however, "diverted" is not an ambiguous
word either intrinsically or in the context in which
it is used in section 113. The basic meaning of
"divert" is: "to turn aside from a direction or
course, to deflect, to turn from one destination to
another" and all uses of that word include the
concept of a change of course or direction. In the
context of section 113 it obviously also has that
meaning as it deals with goods which were import
ed for one purpose and then were diverted to
another use. This is clear from paragraphs (a) and
(b) and is abundantly clear from the closing words
of section 113 "... if the goods had been imported
as being for or intended for the use to which they
were so diverted." It is therefore obvious that
section 113 applies solely to cases where the goods
were imported for one purpose and were subse
quently diverted to another use. In such a case, if
the other use carries an exemption of tariff or a
lower tariff then, the person who paid the import
duty may claim a refund of the whole tariff or part
of the tariff paid, as the case may be, providing he
makes the claim within two years as provided in
section 114.
In the case at bar, it is uncontested that the
goods were ultimately used for the identical pur
pose for which they were originally ordered and
imported. There can be no question therefore of
there being a diversion. It is to be noted here that
at the time of entry the invoice accompanying the
goods describes them in German as "tubbing, seg
ments, cast iron for shaft lining." The specific use
for which they were intended was declared at the
time of entry. This use would qualify for total
exemption from duty under tariff item 41012-1
but entry was in fact requested under item
44603-1 as above stated. The question is therefore
one of tariff classification.
I now turn to section 46 of the Act, the relevant
parts of which read as follows:
46. (1) Subject to this section, a determination of the tariff
classification or an appraisal of the value for duty of any goods,
made at the time of their entry, is final and conclusive unless
the importer, within ninety days of the date of entry, makes a
written request in prescribed form and manner to a Dominion
customs appraiser for a re-determination or a re-appraisal.
(4) The Deputy Minister may redetermine the tariff classifi
cation or re-appraise the value for duty of any goods
(a) in accordance with a request made pursuant to subsec
tion (3),
(b) at any time, if the importer has made any misrepresenta
tion or committed any fraud in making the entry of those
goods,
(c) at any time, to give effect to a decision of the Tariff
Board, the Federal Court of Canada or the Supreme Court
of Canada with respect to those goods, and
(d) in any other case where he deems it advisable, within
two years of the date of entry of those goods.
The plaintiff claims that, by virtue of paragraph
(d) of section 46(4) above quoted, since the
Deputy Minister may determine the tariff classifi
cation or re-apply the value for duty of any goods
within two years of the date of entry, its claim is
not barred by the ninety-day provision of subsec
tion (1) of section 46. Counsel bases his argument
on the fact that the word "may" in section 46(4) is
mandatory on the Deputy Minister.
There are several cases which lay down the
principle that where a power is vested in a public
officer for the purpose of being used for the benefit
of persons specifically designated and where condi
tions are specified when persons are entitled to call
for the exercise of that power, the power ought to
be exercised and the Court will order it to be
exercised. In certain circumstances, a mere power
may carry with it the duty to exercise that power
even though such an obligation to exercise is not
specifically mentioned. Enabling words are often
construed as compulsory wherever the object of
power is to effectuate a legal right. But where the
words are, according to their natural meaning,
only permissive, then the burden is on the person
who contends that an obligation exists to exercise
the power to show something in the circumstances
of the case which creates this obligation. Refer
Julius v. Lord Bishop of Oxford'.
A very old case R. v. Barlow' also laid down the
principle that where a statute authorizes the doing
of a thing for the sake of justice or the public good
the word "may" is equivalent to "shall" although
Lord Blackburn in the Julius v. Lord Bishop of
Oxford case, (supra), doubted the last-mentioned
statement and felt that the rule really applied
where private rights rather than public rights are
involved. It has also been held that an express
reference to the existence of a discretion on the
part of the authorized person does not render the
power less imperative and "may" followed by such
an expression as "if they think fit" may still be
considered as indicating an obligation to exercise
the power. See R. v. Adamson 4 ; R. v. Cambridge 5 ;
R. v. Finnish; R. v. Boteler 7 ; and R. v. Evans'.
It is to be noted here that, in all of the above
cases, the interpretation of "may" was decided on
the basis of common law principles and it further
appears that no interpretation statute dealt with
the subject at the time. Section 28 of the Interpre
tation Act 9 reads as follows:
28. In every enactment
"may" is to be construed as permissive;
2 [1874-80] All E.R. (Rep.) 43; (1880) 5 App. Cas. 214, at
225 and 241.
3 (1693) 2 Salk. 609; 91 E.R. 516.
4 [1875] 1 Q.B.D. 201.
(1839) 8 Dowl. 89.
6 (1859) 28 L.J. 263; M.C. 201.
(1864) 33 L.J. 129; M.C. 101.
8 (1890) 54 J.P. 471.
9 R.S.C. 1970, c. I-23.
This provision was in effect at the time that section
46 of the Customs Act was enacted.
More importantly, however, in the context of
section 46, if "may" is to be construed as compul
sory, then the effect in that section of the words
" . .. a determination of the tariff classification or
an appraisal of the value for duty of any goods
made at the time of their entry is final and conclu
sive unless the importer, within ninety days of the
date of entry, makes a request ..." [the underlin
ing is mine] would be completely nullified. If
"may" is, in subsection (4) of section 46, interpret
ed as obligatory on the part of the Minister,
paragraph (d) of subsection (4) would necessarily
impose a duty on him to re-classify or to re-value
wherever within two years after entry, he becomes
aware that there has either been an error in clas
sification or of valuation at the time of entry. This
duty would be enforceable at law and the ninety-
day limitation provided for above would be abso
lutely nullified and non-effective.
In all fiscal statutes, it is in the public interest to
provide for some finality in fixing liability for
taxes. To achieve this end, taxing and appeal
mechanisms invariably provide for limitations in
this area. It is obvious that in enacting section 46
of the Customs Act it was the intention of Parlia
ment to apply this general principle and it is
obvious also that its intention was to provide for a
ninety-day limitation for compulsory reconsidera
tion of duty classification or of valuation for duty
purposes, subject to certain very limited exceptions
mentioned in the section. Since the interpretation
of "may" as obligatory in section 46(4) would
have a contrary effect, then it must be interpreted
as permissive only.
This very question was dealt with at some length
by Hughes J. in Re Pentagon Construction Co.
Ltd. 10 . He was considering what at that time
(1959) was section 48(1) and (2) of R.S.C. 1927,
c. 42, a predecessor section of present section 46.
The section, which he was considering, was some
10 (1960) 20 D.L.R. (2nd) 485.
what differently worded than section 46 but, in my
view, the difference in wording does not in any
way modify the factors to be considered in inter
preting the meaning of the word "may". In consid
ering whether "may" is mandatory or merely per
missive, he concluded his judgment at page 493 of
the above-mentioned report with the following
statement:
With the greatest deference to the able and acute argument of
Mr. Henderson I cannot see that the use of the word "may" in
s-s. (2) can be any other than permissive and, in my view, s-s.
(2) merely invests the Deputy Minister with a discretionary
power which he decided not to exercise. Applying the principle
of the McHugh case it cannot be said that such a use of the
word in its permissive sense in the context provided by s. 49 is
irrational and unmeaning and the applicant has failed to satisfy
me that the statute has laid upon the Deputy Minister a duty
which the Court can compel him to exercise.
The same must be said of section 46 as it
presently exists.
The action is therefore dismissed with costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.