A-144-73
Price (Nfld.) Pulp and Paper Limited (Appellant)
v.
The Queen (Respondent)
Court of Appeal, Thurlow, Pratte and Urie JJ.—
Ottawa, October 15-17, 1974.
Sales tax—Purchase of machine under instalment con-
tract—Payments of sales tax with instalments—Statutory
amendment exempting machinery purchased—No recovery
of tax paid before amendment—Excise Tax Act, R.S.C.
1952, c. 100, ss. 30, 32, 46 and Sch. Ill, amen. S.C.
1967-68, c. 29, ss. 11, 13.
The appellant brought a petition of right for repayment of
money paid by the Dominion Engineering Works Limited to
the Crown, in sales tax, on the price of a paper-making
machine constructed by Dominion Engineering for the
appellant. The contract for construction and sale stipulated
payment of about five million dollars in twelve instalments,
payment by the purchaser to the vendor of the sums paid by
the vendor to the Crown for sales tax, and passing of title to
the machinery when the price was finally paid. Nine instal
ment payments were made between December 23, 1965 and
March 8, 1967 and the sum of $440,000 was paid by the
vendor in sales taxes referable to such instalments. After the
sum remitted by the Crown following changes in the tax
rates during the period, the balance of $267,460 remained.
This was claimed by the suppliant on the ground that no
sales tax had been imposed or was payable by reason of
statutory amendment exempting from tax the machinery
under purchase. The petition was dismissed by the Trial
Division. The petitioner appealed.
Held, the provisions of section 30(1)(a)(ii) of the Excise
Tax Act had the effect of imposing tax immediately and
unconditionally on each instalment of the price of goods
sold on an instalment basis as the instalment fell due. The
amendment of Schedule III of the Act, extending exemption
from tax to the machinery in question, came with the
enactment of S.C. 1967-68, c. 29, s. 11(1). The Act received
assent March 6, 1968 but provided, by section 13(1), that
section 11(1) was deemed to have come into force on June
2, 1967. The provision of a particular date for the com
mencement of this amendment made it clear that it was to
have no further retroactive effect. The tax payments, of
which recovery was sought, had all become payable under
the statute as it existed when the payments were made and
before the exempting amendment came into force. More
over, no tax was imposed upon or received from the appel
lant and, as against the Crown, the appellant was never the
owner of the money which the Crown received from the
vendor in payment of the sales tax.
The King v. Dominion Engineering Company Limited
[1944] S.C.R. 371, distinguished. The Queen v. M.
Geller Inc. [1963] S.C.R. 629, considered.
APPEAL.
COUNSEL:
Gordon F. Henderson, Q.C., and Y. A. G.
Hynna for appellant.
Duff Friesen for respondent.
SOLICITORS:
Gowling & Henderson, Ottawa, for
appellant.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for judgment
delivered in English by
THURLOW J.: This appeal is from a judgment
of the Trial Division which dismissed the appel
lant's claim for repayment of money paid by
Dominion Engineering Works Limited as taxes
in respect of the sale price of a paper making
machine constructed by Dominion Engineering
Works Limited for the appellant and installed in
the appellant's premises by an engineering firm
known as Rust Associates Ltd.
In the Trial Division the claim was heard
jointly with a similar claim by The Price Com
pany Limited on some evidence common to
both and on an agreed statement of facts which
is set out in full in the reasons for judgment of
the learned Trial Judge [[1973] F.C. 964]. For
present purposes a brief outline will be
sufficient.
The contract for the construction and sale of
the machine by Dominion Engineering Works
Limited was made in June 1966. It provided for
payment of the purchase price of some five
million dollars in twelve specified instalments
on various dates extending over the period from
December 31, 1965 to September 30, 1967 and
that all applicable sales taxes should be payable
by the purchaser. It also provided that title to
the machine should not pass to the purchaser
until the price was fully paid. At the time when
the petition of right was brought the machine
had been installed and was in operation but
some $58,000 of the purchase price had not yet
been paid.
Between December 23, 1965 and March 8,
1967, nine instalments of the purchase price
totalling some $4,000,000 were paid, as
required by the contract, together with the
amounts necessary to pay the sales tax in effect
as they accrued due and amounts totalling
$440,000 were paid by Dominion Engineering
Works Limited to the Receiver General for
Canada in payment of the sales tax on such
instalments. Of this some $172,539.00 was later
remitted to Dominion Engineering Works Lim
ited as a result of changes in the tax rate during
the period. The appellant's claim is for payment
of the remainder of the $440,000, that is to say,
$267,460.62.
Shortly put, the basis of the claim is that no
tax was payable in respect of the instalments of
the purchase price because before the contract
for the sale of the machine matured into a sale,
sales of such machinery had been exempted
from tax and so no tax was imposed in respect
of the sale of the machine in question. The
Crown does not accept this position and also
challenges the right of the appellant to reim
bursement from the Crown even if no tax was
payable.
Subsection 30(1) of the Excise Tax Act,
which was in effect with no material change
throughout the relevant period, provided 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 manufac
turer 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,
(ii) payable, in a case where the contract for the sale of
the goods (including a hire-purchase contract and any
other contract under which property in the goods passes
upon satisfaction of a condition) provides that the sale
price or other consideration shall be paid to the manu
facturer or producer by instalments (whether the con
tract provides that the goods are to be delivered or
property in the goods is to pass before or after payment
of any or all instalments), by the producer or manufac-
' The rate has varied from time to time and in addition
there is a 3 per cent Old Age Security Tax collected with it.
turer pro tanto at the time each of the instalments
becomes payable in accordance with the terms of the
contract; and
Subsection 32(1) which was also in the Act at
all relevant times read as follows:
32. (1) The tax imposed by section 30 does not apply to
the sale or importation of the articles mentioned in Schedule
III.
Machines of the kind in question were not
mentioned in Schedule III at the time when the
contract was made but by Statutes of Canada
1967-68, c. 29, s. 11(1), Schedule III was
amended so as to include:
(a) machinery and apparatus sold to or imported by
manufacturers or producers for use by them directly in
the manufacture or production of goods;
and by subsection 13(1) it was provided that
13. (1) Sections 5 and 12 and subsections (1), (3), (4), (6)
and (10) of section 11 of this Act shall be deemed to have
come into force on June 2, 1967, and to have applied to all
goods mentioned therein imported or taken out of ware
house for consumption on or after that day and to have
applied to goods previously imported for which no entry for
consumption was made before that day.
The appellant's contention with respect to the
meaning of subsection 30(1)(a)(ii) was founded
largely on a passage in the judgment of Rand J.
in The King v. Dominion Engineering Company
Limited 2 where, in discussing the statutory
provision then in effect, the learned Judge
referred to the total tax payable thereunder in
an instalment sale contract situation as being
inchoate pending completion of the contract and
as depending for its efficacy upon the maturing
contract, and counsel went on to point out that
in that statute there was a provision deeming the
transactions to be sales, which does not appear
in subsection 30(1)(a)(ii). In my opinion there
are manifest differences between the legislation
interpreted in the Dominion Engineering case
and that applicable to the present case and it is a
wrong approach to the interpretation of the ap
plicable provision to seek its meaning by a
2 [1944] S.C.R. 371 at 375.
search for differences in it from former legisla
tion. The correct approach, as I understand it, is
to read the section to be construed to see what
it says and if the meaning is plain that is the end
of the matter.
So approaching subsection 30(1) it appears to
me that the meaning of subparagraph (ii) of
paragraph (a) is not influenced by subparagraph
(i) because subparagraph (i) applies only to sit
uations not included in subparagraphs (ii) and
(iii) and that what subparagraph (ii) does is to
identify the person upon whom the tax is
imposed in cases of transactions of the kinds
therein described and to prescribe the events
upon which tax becomes payable. The events so
prescribed are the accruals of instalments in
accordance with the terms of the contract and
neither the time when the contract matures into
a sale nor the time of delivery of the goods nor
the time when title passes is of any significance.
The effect, in my opinion, is to impose tax
immediately and unconditionally upon each
instalment of the price of goods sold on an
instalment payment basis as the instalment falls
due. It may be that liability for tax on the
remainder of the price remains inchoate in the
sense that it is dependent on the future instal
ments becoming due under the agreement and it
may also be that even tax paid on accrued
instalments may become refundable if a total
rescission of the agreement of sale occurs but it
appears to me to be plain from the language of
the subparagraph that (subject to such possible
exigencies) liability for the tax attaches once
and for all on the instalment of price as it
accrues due. The liability, as I see it, is not one
to make an advance or payment on account of a
total tax on the total price, to become final upon
the contract maturing into an actual sale. So
long as there is a "maturing contract" or a
continuing executory agreement for a sale or
other transaction referred to in the subpara-
graph the tax so imposed on the instalment of
the price is final as to that portion of the price
and no actual sale is necessary to support it.
Moreover, so far as the reasoning of Rand J.
in the Dominion Engineering case may be appli
cable there is nothing in the foregoing which in
my view is not in accord with it.
On the facts of the present case there was at
all material times up to and including the date of
the presentation of the appellant's petition of
right a subsisting executory contract for the sale
of the machine to support the imposition of the
tax which had accrued and had been paid on the
instalments which became due prior to the
amendment of the statute which provided that
from June 2, 1967, the tax imposed by section
30 should not apply to the sale of the goods in
question. The effect of this was that no tax
became payable on instalments of the price
which became payable after that date but the
provision of a particular date for commence
ment of the amendment' in my opinion makes
clear that it was to have no further retroactive
effect. The tax payments of which recovery is
sought all became payable under the statute as it
existed when they were made and in my opinion
the amendment placing such goods on the
exempt list from that date has not had the effect
of making the instalments in question not sub
ject to tax or the tax paid in respect of them
repayable.
With respect to the other point, even if it is
accepted that the tax already paid became non-
exigible and therefore returnable, that recovery
is not barred by any of the limitation provisions
in section 46 of the Excise Tax Act and that for
that reason the decision of the Supreme Court
in the The Queen v. M. Geller Inc.'', on which
the learned Trial Judge relied, is not strictly
applicable (which it is not necessary to decide)
the appellant in my opinion has established no
right against the Crown to recover the amount
claimed. The fact as asserted by counsel that
the appellant was the only person interested in
obtaining reimbursement of the money is not, in
my opinion, sufficient to afford the appellant a
right of action therefor against the Crown
because no tax was imposed upon or received
7 The amending Act was assented to March 7, 1968.
4 [1963] S.C.R. 629.
from the appellant, and in my view it cannot be
affirmed that as against the Crown the appellant
was ever the owner of the money which the
Crown received from Dominion Engineering
Works Limited as payments of the tax.
I would dismiss the appeal with costs.
* * *
PRATTE J.: I agree.
* * *
URIE J.: I concur.
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.