T-1706-79
General Bearing Service Ltd. (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Cattanach J.—Ottawa, September
17 and 21, 1979.
Prerogative writs — Declaration — Sales or consumption
tax exacted pursuant to Excise Tax Act — Plaintiff imported
goods for resale — Refund of tax claimed but refused —
Whether or not sales tax payable and more particularly,
whether or not goods were taken out of bond 'for consump
tion" as that phrase is used in context of s. 27(1)(b) of Excise
Tax Act — Excise Tax Act, R.S.C. 1970, c. E-13, ss. 27(1)(b),
58 — Customs Act, R.S.C. 1970, c. C-40, s. 80(1).
Plaintiff seeks a declaration that a consumption tax exacted
pursuant to section 27(1)(b) of the Excise Tax Act by the
Department of National Revenue was improperly exacted and
should be refunded. Plaintiff imported iron couplings from the
United States, took the goods out of the customs warehouse for
resale and paid the sales or consumption tax. Plaintiff later
claimed a refund which was refused by defendant on the
ground that plaintiff was not a licensed wholesaler. The issue is
whether or not the sales tax is payable when plaintiff took the
goods out of bond from the warehouse, and more particularly,
whether or not the plaintiff, in taking the goods out of bond for
resale, took the goods out of bond "for consumption", as that
phrase is used in the context of section 27(1)(b) of the Excise
Tax Act.
Held, the application is denied. All statutes are to be con
strued so as to give effect to the intention of the statute. When
the main object of a statute is clear it is a very serious matter to
reduce it to a nullity as a result of an ill expression and of
course the intention of a statute is to be gleaned from reading it
as a whole. Neither section 27(1)(b) of the Excise Tax Act nor
the Excise Tax Act is to be read in isolation. The Excise Tax
Act and the Customs Act must be taken and construed together
as one system and explanatory of each other. Pursuant to
section 80(1) of the Customs Act, all warehoused goods are
imported either for exportation or home consumption. These
two purposes are exhaustive. Plaintiff did not import the goods
for exportation. It therefore imported them for home consump
tion and it is in that sense that the phrase "for consumption"
must be read in section 27(1)(b) of the Excise Tax Act. "Home
consumption" means that the goods are taken out to be used for
the purpose for which the importer imported the goods into
Canada.
APPLICATION.
COUNSEL:
P. Dioguardi for plaintiff.
D. Sgayias for defendant.
SOLICITORS:
Quain, Dioguardi, Kennedy, Watt, Barnes &
Sammon, Ottawa, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
CATTANACH J.: The plaintiff by its action
herein seeks a declaration that a consumption tax
exacted by the Department of National Revenue
(presided over by the Minister of National Reve
nue and his lawful deputy, the Deputy Minister of
National Revenue for Customs and Excise, who,
as his title indicates, is charged with the control,
regulation, management and supervision of taxes
imposed by the Excise Tax Act, R.S.C. 1970, c.
E-13) from the plaintiff by virtue of section
27(1)(b) of that Act was improperly exacted and
should be refunded.
Section 27(1)(b) reads:
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
(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;
Prior to trial the parties agreed upon a state
ment of facts which reads:
1. The Plaintiff is a body corporate and politic duly incorpo
rated under the laws of the Dominion of Canada.
2. On or about December 8, 1978, the Plaintiff imported into
Canada from the United States of America certain couplings of
iron or steel (hereinafter referred to as "the goods in
question").
3. The goods in question entered Canada in bond and were
placed in a customs warehouse at Ottawa.
4. The goods in question were entered at the Port of Ottawa
under entry number 017040. A copy of the entry form is
Schedule 1 hereto and copies of the related invoices are
Schedule 2 hereto.
5. On or about December 18, 1978, the Plaintiff took the goods
in question out of the customs warehouse.
6. On or about December 19, 1979*, the Department of Na
tional Revenue claimed and the Plaintiff paid consumption or
* This is an error in the agreed statement of facts and should
be 1978.
sales tax in the amount of $63.77 as shown on Schedule 1
hereto.
7. The goods in question were imported and were taken out of
the customs warehouse for the purpose of resale within Canada
at a later date.
8. On or about February 28, 1979, the Plaintiff claimed from
the Department of National Revenue a refund of the sum of
$63.77 paid as consumption or sales tax in respect of the goods
in question. A copy of the Plaintiff's claim for refund dated
February 28, 1979, is Schedule 3 hereto.
9. On or about March 15, 1979, the said claim for refund was
refused. A copy of the letter from the Refund Officer of the
Department of National Revenue to the Plaintiff is Schedule 4
hereto.
I have not considered it necessary to reproduce
the schedules annexed to the statement of agreed
facts because they are merely documents suppor
tive of the agreed facts with the exception of
schedule 4. However it is abundantly clear from
paragraph 2 of the statement of claim that
application for a refund of the tax exacted was
made by the plaintiff and that the application was
refused by the Department of National Revenue
on the ground that the plaintiff was not a licensed
wholesaler which allegations are admitted in para
graph 2 of the statement of defence even though
no letter from an officer of the Department of
National Revenue was written and sent to the
plaintiff.
In fact I would proffer the gratuitous suggestion
that the relevant facts were settled by the plead-
ings as was the issue arising from those facts so
that the statement of agreed facts was superfluous
other than to set forth the facts alleged and admit
ted in the pleadings in a summary and convenient
form.
Neither do I think that oral testimony was
required but I permitted it to be given because in
the joint application for trial it was agreed be
tween the solicitors for the parties that there would
be one witness for the plaintiff.
That witness, the president of the corporate
plaintiff, merely testified that the couplings
imported by it were not put to the use by the
plaintiff for the purposes for which the couplings
were designed. That was the limitation placed
upon the evidence permitted to be given in light of
the admissions made in the pleadings. As alleged
in the pleadings the goods in question were placed
in the plaintiffs premises against the eventuality
of a prospective purchaser buying a coupling for a
use to which the purchaser had for that device.
The issue between the parties is whether the
consumption or sales tax imposed by the section on
the sale price of the goods imported into Canada
by the plaintiff is payable by the plaintiff when the
plaintiff took the goods out of bond from the
warehouse in which they had been placed.
This in turn, narrows the issue still further. It is
simply whether the plaintiff took the goods out of
bond "for consumption".
The matter falls for determination on the mean
ing to be ascribed to the simple phrase "for con
sumption" in the context it is used in the section.
Counsel for the plaintiff contends that the goods
when removed by the plaintiff were not removed
for consumption but for resale.
On the other hand counsel for the defendant
contends that despite the fact that the plaintiff
removed the goods for resale they were neverthe
less removed "for consumption" within the mean
ing that must be given to that phrase in the context
it is used in the section.
Statutes must be interpreted according to well
recognized rules of interpretation but the great
difficulty in all cases is applying rules of interpre
tation to the particular case.
The task of construction is not an easy one and
that task is not made less difficult when the will of
the legislature is ill-expressed. However a court
must, in each case, apply the admitted rules of
interpretation to the case in hand, not deviating
from the literal sense of the words used without
sufficient reason, or more than is justified, yet not
adhering slavishly to them where to do so would
obviously defeat the intention which may be col
lected from the whole statute.
Section 27(1)(b) clearly provides that a con
sumption or sales tax shall be imposed and collect
ed on the sale price of goods imported into
Canada. That tax shall be paid by the importer
(excepting in the case of a transferee which is not
applicable on the facts in this action).
The next question is when that tax shall be
payable by the importer.
I would expect that if the goods were not placed
in bond or warehouse then the tax would be pay
able at the time of importation by the importer.
That was not the case in this instance.
The plaintiff imported the goods into Canada on
December 8, 1978 but did not take actual posses
sion of them on that date.
Paragraph 3 of the statement of agreed facts
recites that the goods in question entered Canada
in bond and were placed in a customs warehouse in
Ottawa, Ontario, no doubt the port of entry.
I am not certain from these admitted facts that
the goods were imported into Canada for ware
house but I expect a combination to be the case.
The goods were imported in bond for warehouse.
Certainly they were not imported for exportation.
The agreed statement of facts, in paragraph 5,
states that the plaintiff took the goods "out of the
customs warehouse" on December 18, 1978, that is
ten days after entry. The plaintiff paid the tax
demanded by the Department of National Reve
nue on December 19, 1978 (see paragraph 6 of the
agreed facts).
Therefore the plaintiff took the goods "out of
bond" or "out of warehouse" on December 18,
1978. I do not think it material which was the case
or if the cases were coincidental.
What is material is that the tax is payable by
the importer by virtue of section 27(1)(b) at the
time that the importer "takes the goods out of
bond for consumption at the time when the goods
are imported" or "taken out of warehouse for
consumption".
In either instance the goods to attract excise tax
must be taken out of bond or warehouse by the
importer "for consumption". That is the time the
tax is payable by the importer.
Thus the meaning of the phrase "for consump
tion" as used in the context of section 27(1)(b) is
critical to the determination of this matter.
Basically the contention of counsel for the plain
tiff is the very simple and straightforward one that
the word "consumption" is not a technical word or
a word relating to an art or science and therefore
must be given its popular meaning.
The etymological meaning of a word is not
necessarily the meaning which the context requires
and dictionaries are only to be resorted to for the
purpose of ascertaining the uses of a word in
popular language.
Subject to that admonition counsel for the plain
tiff sought instruction in those books and he par
ticularly referred me to the definition of the word
"consumption" in Webster's New World Diction
ary reading: "Econ. the using up of goods or
services, either by consumers or in the production
of other goods". Paramount in that dictionary
meaning is the concept that the goods must be
"used up" or "consumed" in the sense that they
are used in the use for which the goods were
intended. Thus rat poison would be used up when
devoured by a rat. "Used up" would be the ulti
mate use of the goods.
As counsel for the plaintiff has put it, the word
ing of section 27(1)(b) "is very clear in calling for
a consumption of the goods before tax is payable".
In the example I gave I do not think that conten
tion would mean when a rat ate the poison but
rather when the person wishing an end to the rat
laid out the poison.
That counsel contends is the plain meaning.
Assuming that to be so the consumer would be
the person who purchased a coupling from the
plaintiff (it being admitted and agreed that the
plaintiff imported the goods for resale) and until
that happened there would be no consumption.
Because the section prescribes that the time the
tax is payable is when the goods are taken out for
consumption that time arises only when the goods
are so used.
Assuming this to be so it would be a practical
impossibility for the Department to collect the tax
at the time it is so contended that the tax is
payable.
Regardless of this result counsel for the plaintiff
reiterated for me a cardinal rule of legal interpre
tation that where the language of a statute is clear
and explicit that language must be given effect to
whatever may be the consequences for in that case
the words of the statute speak the intention of the
legislature.
But there is also the rule applicable to statutes
that the plainest words may be controlled by a
reference to the context, but then, as has been
often said, you must have a context even more
plain, or at least as plain (it comes to the same
thing) as the word to be controlled.
All statutes are to be construed so as to give
effect to the intention of the statute. When the
main object of a statute is clear it is a very serious
matter to reduce it to a nullity as a result of an ill
expression and of course the intention of a statute
is to be gleaned from reading it as a whole.
In this instance neither section 27(1)(b) of the
Excise Tax Act nor the Excise Tax Act is to be
read in isolation.
Section 58 of the Excise Tax Act provides that
where an excise tax is payable upon the importa
tion of any article into Canada the Customs Act,
R.S.C. 1970, c. C-40, is applicable in the same
way and to the same extent as if the excise tax
were a customs tax.
Thus the Excise Tax Act and the Customs Act
must be taken and construed together as one
system and as explanatory of each other.
Bearing that in mind section 80(1) of the Cus
toms Act provides:
80. (1) All warehoused goods shall be finally cleared, either
for exportation or home consumption, within two years from
the date of the first entry and warehousing thereof.
All warehoused goods are imported either for
exportation or home consumption. These two pur
poses, exportation or home consumption, are
exhaustive.
The plaintiff did not import the goods for expor
tation. Therefore it imported them for home con
sumption and it is in that sense that the phrase
"for consumption" must be read in section
27(1)(b) of the Excise Tax Act.
When the plaintiff took the goods out of the
customs warehouse on December 18, 1978 it took
them out for "home consumption".
What then does "home consumption" mean?
In my view these words mean that the goods are
taken out to be used for the purpose for which the
importer imported the goods into Canada.
If I recall a contention by counsel for the
defendant correctly it was that the goods were
"taken out for consumption" when introduced into
the channels of trade. That would be so in the case
of the plaintiff but not necessarily in the case of all
importers. By way of example a person might
import a quantity of novelty wares for distribution
as Christmas gifts. This would not be introduction
into the channels of trade and it is for that reason
that the use must be for the purpose for which the
importer imported the goods. That to me is a
significant qualification which must be present.
In this instance it is admitted that the goods
were imported for resale and they were taken out
for resale.
That being so when the plaintiff took the goods
in bond out of the customs warehouse it took them
out "for consumption" within the meaning of that
phrase within the context in which it is used.
For the foregoing reasons the plaintiff's action is
dismissed but in the circumstances peculiar to this
action without costs to the defendant.
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.