A-270-78
Deputy Minister of National Revenue for Customs
and Excise (Appellant)
v.
Robertson Building Systems Limited (Respond-
ent)
Court of Appeal, Pratte, Urie and Ryan JJ.—
Ottawa, September 6 and 10, 1979.
Excise tax — Appeal from decision of Tariff Board holding
that span rib rolls purchased by respondent and used in
production of structural flooring sections exempt from tax
imposed by s. 27(1) of the Excise Tax Act — Span rib rolls to
be pieces of machinery and apparatus imported by producers
for use by them directly in production of goods — Appellant
contending that rolls sold respondent used exclusively to pro
duce fabricated structural steel in conditions described in s.
26(4)(d) so that respondent not deemed to be a producer of
goods and hence ineligible to benefit from the exemption —
Whether or not the goods fall within the exemption provided
for in s. 1(a) of Part XIII of Schedule III — Excise Tax Act,
R.S.C. 1970, c. E-13, ss. 26(4)(d), 27(1), 29(1), Schedule III,
Part XIII, s. 1 (a)(i).
APPEAL.
COUNSEL.
P. B. Annis for appellant.
A. de Lotbinière Panet, Q.C. for respondent.
SOLICITORS:
Deputy Attorney General of Canada for
appellant.
Perley-Robertson, Panet, Hill & McDougall,
Ottawa, for respondent.
The following are the reasons for judgment
rendered in English by
PRATTE J.: This is an appeal, pursuant to sec
tion 60 of the Excise Tax Act, R.S.C. 1970, c.
E-13, from a decision of the Tariff Board holding
that certain span rib rolls purchased by the
respondent and used by it in the production of
structural flooring sections were exempt from the
tax imposed by section 27(1) of the Excise Tax
Act.
Section 27(1) reads in part as follows:
27. (1) There shall be imposed, levied and collected a con
sumption or sales tax of twelve per cent on the sale price of all
goods
(a) produced or manufactured in Canada
(b) imported into Canada, payable by the importer or trans-
feree who takes the goods out of bond for consumption at the
time when the goods are imported or taken out of warehouse
for consumption;
The provisions which, according to the Board's
decision, would create an exemption in favour of
the goods purchased by the respondent are found
in section 29(1) and in section 1(a)(i) of Part XIII
of Schedule III.
Section 29(1) provides that:
29. (1) The tax imposed by section 27 does not apply to the
sale or importation of the articles mentioned in Schedule III.
As to section 1 of Part XIII of Schedule III, it
reads in part as follows:
1. All the following:
(a) machinery and apparatus sold to or imported by manu
facturers or producers for use by them directly in
(i) the manufacture or production of goods,
The Board held, in the decision under attack,
that the rolls purchased by the respondent were
exempt from tax as pieces of "machinery and
apparatus . .. imported by ... producers for use by
them directly in the ... production of goods".
It is common ground that the machinery pur
chased by the respondent falls within the exemp
tion provided for in section 1(a) of Part XIII of
Schedule III if that provision is read in isolation.
However, the appellant submits that a different
conclusion must be reached if that section is read
as it should be in conjunction with section 26(4) of
the Act.
Section 26(4) reads in part as follows:
26....
(4) Where a person
(d) manufactures or produces from steel that has been pur
chased by or manufactured or produced by that person, and
in respect of which any tax under this Part has become
payable, fabricated structural steel for buildings,
he shall, for the purposes of this Part, other than subsection
29(1), be deemed not to be, in relation to any such building,
structure, building sections, building blocks or fabricated steel
so manufactured or produced by him, the manufacturer or
producer thereof.
It is the appellant's contention that the rolls sold
to the respondent were used exclusively to produce
fabricated structural steel in the conditions
described in section 26(4)(d). It follows, according
to the appellant, that the respondent is deemed for
the purposes of Part V of the Act (which includes
section 29(1) and its reference to Schedule III) not
to have produced that structural steel. The appel
lant concludes that the respondent is not a pro
ducer of goods and, for that reason, cannot benefit
from the exemption provided for in section 1(a) of
Part XIII of Schedule III.
The appellant's submission is, in my view,
untenable. The sole problem to be resolved here is
whether the goods in question fall within the
exemption provided for in section 1(a) of Part
XIII of Schedule III. In order for an article to fall
within that provision, it must fulfil three condi
tions: first, it must be a machinery or an
apparatus, second, it must be purchased by a
producer and, third, it must be purchased by the
producer for use by it directly in the production of
goods.
The appellant does not challenge the finding of
the Board that the rolls purchased by the respond
ent are "machinery and apparatus" within the
meaning of the section, but merely contends that
those rolls do not meet the second and third pre
scribed conditions.
It is clear, in my view, that the second condition
was met at the time of the purchase, which, in my
view, is the time when the taxability of an article
under section 27(1)(b) must be determined. At
that time, it is common ground that the respondent
was a manufacturer of a great variety of building
products. Even if certain of those products may
perhaps have fallen within section 26(4), it never
theless remains that the respondent was a producer
of goods and that the rolls here in question were
purchased by a producer of goods.
As to the last condition prescribed by the sec
tion, it was also clearly fulfilled at the time of the
purchase by the respondent. The appellant
acknowledges in his factum that, at that time, the
span rib rolls were purchased by the respondent
with the intention, not only of using them in the
production of structural steel for buildings, but
also for making a range of other products. It
follows, in my view, that it cannot be denied, in
spite of section 26(4), that the rolls were pur
chased to be used by the respondent in the produc
tion of goods. The fact that, for reasons unknown,
the rolls may not have been used for the purpose
for which they had been purchased cannot support
the conclusion that they had been purchased for a
different purpose.
For those reasons as well as for the reasons
given by the Board, I would dismiss this appeal
with costs.
* * *
URIE J.: I agree.
* * *
RYAN J.: I agree.
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.