T-2340-84
The Queen in right of Canada (Plaintiff)
V.
The Government of Manitoba (Defendant)
INDEXED AS: R. V. MANITOBA (GOVERNMENT)
Trial Division, Joyal J.—Winnipeg, April 2;
Ottawa, November 14, 1985.
Customs and excise — Government of Manitoba purchasing
equipment and giving it to Manitoba fishermen under program
to promote economic development and aid native persons
Fishermen not Crown agents or servants — Sales tax assessed
on sale of equipment to provincial government under s. 27
Excise Tax Act — Defendant qualifying for refund under s.
44(2) — Meaning of "or use for other commercial or mercan
tile purposes" — Conjunctive construction preferred —
Whether for manufacturing or production purposes or for
other commercial or mercantile purposes, use must be by Her
Majesty, Her servants or agents — Analysis of text, structure
of statute, and French version of ss. 43(b)(iii) and 44(2)(c) —
Excise Tax Act, R.S.C. 1970, c. E-13, ss. 27, 43(b), 44(2),(3),
45, 46 — Official Languages Act, R.S.C. 1970, c. O-2, s. 8(1)
— Federal Court Rules, C.R.C., c. 663, R. 475.
This is a trial of a stated case. The Government of Manitoba,
under a special program designed to promote economic de
velopment and to aid native persons gave canoes and sleds to
Manitoba fishermen. The fishermen were not agents or servants
of Her Majesty. Sales tax was assessed on the sale of the
equipment to the provincial government under section 27 of the
Excise Tax Act. The issue is whether the Government of
Manitoba qualifies for a refund under the provisions of subsec
tion 44(2).
Held, the sales taxes paid on the goods qualify for an
application for a refund under subsection 44(2).
Section 27 of the Excise Tax Act imposes a tax on the sale
price of all goods produced or manufactured in or imported into
Canada. However, under subsection 44(2), a refund may be
granted under certain conditions when the sale of goods is to a
provincial government. Out of four conditions imposed, the only
condition in dispute is whether the goods were not purchased
for use by Her Majesty, Her agents or servants in connection
with the manufacture or production of goods or use for other
commercial or mercantile purposes. The question is narrowed
further to an analysis of the intent and meaning of "or use for
other commercial or mercantile purposes" in paragraph
44(2)(c).
If "use for other commercial or mercantile purposes" is read
in a conjunctive sense, a conjunction between use in connection
with the manufacture and production of goods and use for
other commercial or mercantile purposes would be established.
Whether for manufacturing or production purposes or whether
for other commercial or mercantile purposes, the use must be
by Her Majesty, Her servants or agents.
The conjunctive approach is preferred because there is no
separation between the specified persons in the opening words
and the two-pronged use in the remainder of the paragraph.
Also, the construction of the paragraph invites the two types of
uses mentioned therein to be read together. If so read, the uses
mentioned must be restricted to such uses by Her Majesty, Her
agents or servants. There is a conceptual relationship between
"manufacture or production" and between "commercial or
mercantile" purposes. The presence of the word "other" in the
expression "for other commercial or mercantile purposes" sug
gests that the manufacture and production of goods have
commercial connotations, but the paragraph intends to cover
commercial or mercantile uses which are not necessarily related
to or covered by manufacturing or production operations.
Otherwise "other" would have been redundant. A disjunctive
approach would lead to an anomaly whereby a particular
statutory provision directed particularly to use by Her Majesty
in connection with the manufacture and production of goods
would, when applied to commercial or mercantile purposes, be
directed generally to everyone. A more proper construction
would indicate that for use for commercial or mercantile
purposes as well as for use in connection with the manufacture
or production of goods, the paragraph refers exclusively to Her
Majesty, Her agents or servants.
The statute is a taxing statute and the tax imposed applies to
all goods produced and sold in or imported into Canada.
Paragraph 43(b) corresponds exactly to the wording found in
the three paragraphs of subsection 44(2), except that it is
drafted in positive language. Section 43 imposes a tax on
provincial government purchases whenever the goods are used
by a provincial government in connection with the manufacture
or production of other goods or used by such government for
commercial or mercantile purposes. Parliament did not intend
to bring into this section a charging provision on goods used for
commercial or mercantile purposes as section 27 already pro
vides for such a tax. Similarly, the legislative intent could not
have been to permit a provincial government to traffic in goods
by reselling them or using them for manufacturing or produc
tion purposes. Section 43 provides that in such circumstances,
the tax is payable on government purchases and that tax is not
refundable. Finally, if section 43 is a charging provision, a
stricter interpretation of its meaning may be applied. As section
43 as a whole imposes a tax on goods imported by the Crown
and, specifically in subparagraph (iii) thereof, when such goods
are for purposes or uses by the Crown, it should not be
interpreted so as to impose the tax when such use is by other
than Her Majesty, Her agents and servants.
The French version of both paragraphs 43(b)(iii) and
44(2)(c) is not helpful because there is an inconsistency be
tween the versions. The use of a comma after the word "mar-
chandises" and preceding "ou pour d'autres fins commerciales
ou mercantiles" opens the door to a disjunctive interpretation
of the paragraph. The French text should not be followed
because the comma appears to be merely a desire in the French
text to be faithful to the English text. In spite of this comma, a
conjunctive interpretation should prevail.
By providing the goods to the recipients, the sales tax
becomes refundable. The Court must be wary of interpreting a
statute in a manner which effectively frustrates its object. But,
qualifying for a refund and obtaining it are two different
matters. All refund provisions in the Excise Tax Act are at the
federal government's discretion.
CASES JUDICIALLY CONSIDERED
APPLIED:
Attorney-General v. Carlton Bank, [1899] 2 Q.B. 158.
REFERRED TO:
Partington v. The Attorney-General (1869), L.R. 4 H.L.
100; The King v. Crabbs, [1934] S.C.R. 523; The Queen
v Stevenson Construction Co Ltd et al, [1979] CTC 86
(F.C.A.).
COUNSEL:
Kimberly Prost for plaintiff.
Stewart J. Pierce for defendant.
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff.
Deputy Attorney General of Manitoba for
defendant.
The following are the reasons for judgment
rendered in English by
JOYAL J.: This is a trial pursuant to Rule 475 of
the Federal Court Rules [C.R.C., c. 663] on a
case stated by the parties with respect to the
imposition of an excise tax on certain transactions
involving cost-sharing programs undertaken be
tween the federal Government and the Govern
ment of Manitoba.
The material facts on which the parties have
agreed to state their case are briefly but clearly set
out in paragraphs 1 to 5 of the stated case as
follows:
1. Under The Agricultural and Rural Development Act
(ARDA) R.S.C. Chap. A-4, a Federal Provincial Cost-Sharing
Agreement (referred to as the Special ARDA Program) was
devised to promote economic development in Northern Manito-
ba, and specifically to aid native persons in the harvesting of
natural resources, including fishing and trapping. Pursuant to
the Program grants were allotted to individuals. Grants allotted
were not paid directly to the designated recipients but instead
were applied towards the purchase price of equipment required
by the individual in the plying of his trade.
2. During the period commencing the 1st day of July, 1974 to
and inclusive of the 31st day of July, 1978, Her Majesty the
Queen in Right of the Province of Manitoba purchased certain
sleds and canoes from Lake Winnipeg Boat Works Ltd. Her
Majesty the Queen in Right of the Province of Manitoba under
the Special ARDA Program through the Department of North
ern Affairs then provided the said goods to Manitoba fishermen
who were not at any time for the purpose hereunder either an
agent or servant of Her Majesty.
3. The Federal Government has assessed Federal Sales Tax
under Section 27 of the Excise Tax Act R.S.C. 1970 Chap.
c-10 (sic') against Lake Winnipeg Boat Works on the above
noted goods. The goods sold to the Province are taxable under
Section 27 of the said Act subject to any exemption under the
Act.
4. The goods have been assessed in the sum of $2,358.11
exclusive of penalty, the Province of Manitoba not having paid
the tax at the time of purchase. Penalty has been added to the
aforesaid sum pursuant to the Excise Tax Act on a monthly
basis and therefore the amount now claimed by the Federal
Government as owing stands at $6,091.05.
5. The Federal Government is not proceeding on its claim for
tax as against Lake Winnipeg Boat Works by virtue of an
agreement reached between the Federal Government and the
Provincial Government whereby the claim is only being
advanced as against the Government of Manitoba.
The facts make it clear that what is involved in
the A.R.D.A. program is an economic develop
ment scheme to assist native persons in the carry
ing out of their traditional occupations including
fishing and trapping. Under the program, certain
amounts of money which might have otherwise
been paid to recipients to enable them to buy
needed equipment were used instead to buy the
sleds and canoes from Lake Winnipeg Boat Works
Ltd. This equipment was then turned over to the
recipients free and clear. On the sale of this equip
ment by the manufacturer to the Government of
Manitoba, federal sales tax under section 27 of the
Excise Tax Act, R.S.C. 1970, c. E-13, was
' R.S.C. 1970, c. E-13.
assessed. The question before the Court is whether
the Government of Manitoba could qualify for a
refund under the provisions of subsection 44(2).
The charging provision in the Excise Tax Act,
as contained in section 27, is too lengthy to be
recited here in full. In essence, the section imposes
a tax of nine (9) percent (now ten (10) percent) on
the sale price of all goods produced or manufac
tured in Canada or imported into Canada. In this
light, the sale of boats and sleds by the Lake
Winnipeg Boat Works to the Government of
Manitoba attracts the application of section 27
and a sales tax is payable.
Under subsection 44(2) of the Act, however, a
refund may be granted under certain conditions
when the sale of goods is to a provincial govern
ment. When the conditions outlined in that section
are met, a refund of taxes may be granted to the
province or to whoever has paid or absorbed the
tax.
Subsection 44(2) of the statute appears to be the
relevant provision before me. It states:
44....
(2) Where goods have been purchased by Her Majesty in
right of any province of Canada for any purpose other than
(a) resale;
(b) use by any board, commission, railway, public utility,
university, manufactory, company or agency owned, con
trolled or operated by the government of the province or
under the authority of the legislature or the lieutenant gover
nor in council; or
(c) use by Her Majesty or by Her agents or servants in
connection with the manufacture or production of goods or
use for other commercial or mercantile purposes;
a refund of taxes paid under Part III, IV or V may be granted
to Her Majesty or to the manufacturer, producer, wholesaler,
jobber or other dealer as the case may require.
For the Government of Manitoba to succeed on
the facts before me, it is then necessary for the
following conditions to be met, namely:
1. that the goods in question were purchased by
the Government of Manitoba (44(2)). This condi
tion is not in dispute. It is admitted in paragraph 2
of the stated case;
2. that the goods were not purchased for resale
(44(2)(a)). It is admitted by the parties that the
goods were not sold to fishermen and trappers but
were given to them without charge;
3. that the goods were not purchased for use by
any board, commission, railway, public utility, uni
versity, manufactory, company or agency owned,
controlled or operated by the government of the
province or under the authority of the legislature
or the lieutenant governor in council (44(2)(b)).
Such, by common agreement, is not the situation
here;
4. that the goods were not purchased for use by
Her Majesty or Her agents or servants in connec
tion with the manufacture or production of goods
or use for other commercial or mercantile purposes
(44(2)(c)).
It is in respect of the interpretation of paragraph
44(2)(c) of the statute that there is an issue be
tween the parties.
A preliminary observation which might be made
here is that subsection 44(2) speaks of resale and
use. In the case of goods purchased for resale, the
refund provisions do not apply. In the case of use,
however, no monetary consideration need be
present. I conclude, therefore, that the free grant
of the goods by the Government to its constituents
in Northern Manitoba does not per se bring the
transaction within the allowable exemption. The
test remains: is the use of the canoes and sleds by
their owners the kind of use expressed in para
graph 44(2)(c) of the statute?
Obviously Parliament did not contemplate a
program in the nature of the one before me where,
instead of providing a segment of its population
with funds to buy equipment, the Government of
Manitoba provides it with the equipment itself. In
the event, absent special statutory provisions
exempting people of native ancestry from the
imposition of sales taxes, such taxes would have
been payable had these people purchased the goods
themselves.
If on the evidence, therefore, the said goods are
used by their recipients for commercial or mercan
tile purposes, they are in the nature of goods
which:
(1) are purchased by the Government;
(2) are not resold;
(3) are not used by Crown agencies, etc.;
(4) are not used in connection with the manu
facture or production of goods;
(5) are nevertheless used for mercantile or com
mercial purposes.
The question before me is therefore narrowed
down to an analysis of the intent and meaning of
paragraph 44(2)(c) of the statute. This paragraph
contains two provisions, the first one relating to
"use by Her Majesty or by Her agents or servants
in connection with the manufacture or production
of goods". This is not the provision with which we
are concerned. Even if it might be argued that a
canoe is used in the production of fish or a sled is
used in the production of animal skins, the goods
are not used by Her Majesty or by Her agents or
servants and therefore do not fall within that term.
We are thus left with the consideration of the
remaining part of paragraph 44(2)(c) namely "or
use for other commercial or mercantile purposes".
An analysis of the words and expressions used here
provides us with alternative interpretations:
1. The expression "use for other commercial or
mercantile purposes" is read in a disjunctive sense,
without reference to the provisions of the text
preceding it. In this light, any use of the goods by
anyone for commercial or mercantile purposes
would fit within the paragraph and the goods
would not be subject to the refund provision. If it
were assumed that the goods are used by their
recipients for purposes of commercial fishing or
commercial trapping, such would be in the nature
of a commercial use and no refund of the taxes
paid would be available.
2. The alternative interpretation would establish a
conjunction between use in connection with the
manufacture and production of goods and use for
other commercial or mercantile purposes. This
conjunctive interpretation would result in a finding
that whether for manufacturing or production pur
poses or whether for other commercial or mercan
tile purposes, the use must be by Her Majesty or
Her servants or agents. Any use by other than the
persons so specified would not fall within the
ambit of the paragraph.
I will readily admit that the choice between
these two alternatives is not without difficulty and
neither can be preferred without some challenge to
its validity. Nevertheless, I find myself adopting a
conjunctive interpretation and I will state my rea
sons therefor.
1. Textual Approach to the Wording of the
Paragraph
(a) The paragraph specifies in its opening words
"use by Her Majesty or by Her agents or serv
ants". The rest of the words in the paragraph
form one sentence without any qualifying word
coming in between to invite a separation be
tween the specified persons in the opening words
and the two-pronged use in the remainder of the
paragraph.
(b) The construction of the paragraph invites
the two types of uses mentioned therein to be
read together. If so read, the uses mentioned
must be restricted to such uses by Her Majesty
or Her agents or servants.
(c) There is, in my view, a conceptual relation
ship between "manufacture or production" on
the one hand and "commercial or mercantile"
purposes on the other. Indeed, there is most
often implied in the processes of manufacturing
or producing goods a commercial or mercantile
element. The presence of the word "other" in
the expression "for other commercial or mercan
tile purposes" (my emphasis) suggests to me
that the manufacture and production of goods
have commercial connotations but the para
graph intends to cover commercial or mercantile
uses which are not necessarily related to or
covered by manufacturing or production opera
tions. Were it otherwise, the word "other"
would have been redundant.
(d) I would submit that a disjunctive approach
would lead to an anomaly whereby a particular
statutory provision directed particularly to use
by Her Majesty in connection with the manu
facture and production of goods would, when
applied to commercial or mercantile purposes,
be directed generally to everyone. A more
proper construction would indicate that for use
for commercial or mercantile purposes as well as
for use in connection with the manufacture or
production of goods, the paragraph refers exclu
sively to Her Majesty or to Her agents or
servants.
2. The Structure of the Statute
I have already admitted that the choice between
the alternative interpretations of paragraph
44(2)(c) is a difficult one to make. This is all the
more so when the enquiry is limited to the narrow
context of the paragraph itself. It will be found
helpful, therefore, to take a view of the statute
generally and see if the interpretation to which I
subscribe is consonant with the substance of the
Act as a whole or of the ideas expressed in it.
(a) The statute is a taxing statute and the tax
imposed applies to all goods produced and sold
in Canada or imported into Canada. Paragraph
43(b) provides that with respect to goods
imported into Canada by any provincial govern
ment, the tax is applicable when such goods are
for purposes of:
43.(b)...
(i) resale,
(ii) use by any board, commission, railway, public utility,
university, manufactory, company or agency owned, con
trolled or operated by the government of the province or
under the authority of the legislature or the lieutenant
governor in council, or
(iii) use by Her Majesty or by Her agents or servants in
connection with the manufacture or production of goods or
use for other commercial or mercantile purposes.
(b) It is noted that the wording in the three
subparagraphs of paragraph 43(b) corresponds
exactly to the wording found in the three para
graphs of subsection 44(2). Contrary to section
44, however, section 43 is drafted in positive
language. Therefore, instead of deciphering
what section 44 excludes, we are faced with the
concurrent and perhaps easier task of determin-
ing what section 43 includes. In that respect, it
must necessarily have been the intention of Par
liament to impose the tax on provincial govern
ment purchases whenever the goods are used by
a provincial government in connection with the
manufacture or production of other goods or
used by such government for commercial or
mercantile purposes. It could not have been
Parliament's intention to bring into this section
a charging provision on goods used for commer
cial or mercantile purposes by anyone.
Section 27 already provides for a tax payable on
all such goods purchased.
(c) Similarly, the legislative intent could not
have been to permit a provincial government to
traffic in goods by reselling them or using them
for manufacturing or production or for other
commercial or mercantile purposes. Section 43
is clear that in such circumstances, the tax is
payable on government purchases and that tax is
not refundable.
(d) Finally, if section 43 can be construed as a
charging provision, perhaps a stricter interpreta
tion of its meaning may be applied. I am not
suggesting here that taxing statutes in particular
invite different interpretation techniques than
those applicable to other legislative enactments.
E. A. Driedger in Construction of Statutes,
(2nd ed. Toronto: Butterworths, 1983) at page
204 makes the point that taxation statutes are
not in a special position and that whatever com
ment might have been made from time to time
by the courts with respect to such 'statutes apply
to any statute. Lord Russell of Killowen C.J.
stated as much in Attorney-General v. Carlton
Bank, [1899] 2 Q.B. 158, at page 164, when he
said:
... I know of no authority for saying that a taxing Act is to be
construed differently from any other Act. The duty of the
Court is ... to give effect to the intention of the Legislature as
that intention is to be gathered from the language employed
having regard to the context in connection with which it is
employed.
I am nevertheless able to rely on the principles
enunciated in many decisions involving taxing
statutes that unless the burden of tax can be
supported four-square on the wording of the
statute, the tax cannot be imposed e.g. Parting-
ton v. The Attorney-General (1869), L.R. 4
(H.L.) 100, at page 122, reviewed in The King
v. Crabbs, [1934] S.C.R. 523. An adoption of
this view leads one to conclude that as section 43
as a whole imposes a tax on goods imported by
the Crown and, specifically in subparagraph (iii)
thereof, when such goods are for purposes or
uses by the Crown, it should not be interpreted
so as to impose the tax when such use is by other
than Her Majesty, Her servants and agents.
3. The French Version of the Statute
By virtue of subsection 8(1) of the Official
Languages Act, R.S.C. 1970, c. O-2, the French
text of the statute is as authentic and authoritative
as the English text. In this instance, unfortunately,
the French version of both subparagraph 43(b)(iii)
and paragraph 44(2)(c) is not helpful. There is, at
least at first blush, an inconsistency between the
two versions. The French version of these two
paragraphs reads as follows:
43. Les taxes imposées par les Parties III, IV et V
s'appliquent
b) aux marchandises importées par Sa Majesté du chef
d'une province du Canada, pour l'une des fins suivantes:
(iii) ['utilisation par Sa Majesté ou par ses mandataires
ou préposés relativement à la fabrication ou production de
marchandises, ou pour d'autres fins commerciales ou
mercantiles.
and:
44....
(2) Lorsque des marchandises ont été achetées par Sa
Majesté du chef de quelque province du Canada pour toute fin
autre que
c) ['utilisation par Sa Majesté ou par ses mandataires ou
préposés relativement à la fabrication ou production de
marchandises, ou pour d'autres fins commerciales ou
mercantiles;
un remboursement de taxes payées en vertu de la Partie III, IV
ou V peut être accordé à Sa Majesté ou au fabricant, produc-
teur, marchand en gros, intermédiaire ou autre commerçant,
selon le cas.
It will be noted that a comma appears after the
word "marchandises" and preceding "ou pour
d'autres fins commerciales ou mercantiles" in
paragraph (c). According to general rules of gram
mar and syntax, such a comma would have the
effect of separating the two uses mentioned in the
statute, making of each of them a separate catego
ry unrelated the one from the other. In effect, this
comma opens the door to a disjunctive interpreta
tion of the paragraph so that "use for commercial
or mercantile purposes" would apply whether such
use were by Her Majesty and Her agents or
servants or by anyone else. This in turn would
provoke an inquiry as to whether the use of the
specific goods, namely canoes and sleds by fisher
men and trappers constituted a commercial or
mercantile use.
Although a good argument may be made that
the French text has a disjunctive character, I am
of the opinion that it should not be followed. The
comma appears to me to be merely a desire in the
French text to be faithful to the English text, a
text which, as is obvious, is not representative of
clear and lucid draftmanship. In spite of this
comma, it is my view that a conjunctive interpreta
tion should prevail.
As a conclusion, the use of goods for commercial
or mercantile purposes in paragraph 44(2)(c) of
the Excise Tax Act is limited to such use by Her
Majesty or Her servants or agents.
4. Prologue
Since the trial of this action, counsel for the
parties have agreed upon and provided me with
additional facts relating to the purposes of the
A.R.D.A. program in the scheme to provide
Northern Manitoba natives with canoes and sleds.
Textually, the agreed facts are as follows:
The purpose of the Program was to provide people of native
ancestry who were not either agents or servants of the Province
and who earned less than $2,000.00 per year, with trapping and
fishing equipment to be used for the harvesting of renewable
resources for commercial purposes. On occasion the equipment
may be utilized by the owners for other non-commercial pur
poses such as emergency transportation.
In view of the disposition I have taken of the
interpretation of paragraph 44(2)(c) of the Excise
Tax Act, it is unnecessary to decide this subsidiary
issue. In any event, as I have noted before, such
goods, had they been purchased by the users them
selves, would have been subject to a sales tax no
matter what use to which they might have been
put.
I should nevertheless remark that in the matter
of any statute, a court must be wary of interpret
ing it in a manner which effectively frustrates its
object and purpose or the legislator's intent. By the
scheme instituted with respect to the A.R.D.A.
program, the sales tax on the goods become
refundable. Conceivably, Her Majesty in right of
the Province of Manitoba could multiply such
schemes and embark upon any number of similar
programs to provide tax-refundable goods to any
number of selected recipients. I am far from sug
gesting that such was Her Majesty's motive in
implementing the A.R.D.A. program, nevertheless
the statutory provision is there for the taking.
It must be remembered, however, that qualify
ing for a refund under paragraph 44(2)(c) is one
thing. Obtaining the refund is another. Her Majes
ty in right of Canada has a discretion in deciding
whether or not in a particular case or group of
cases a refund may be granted. Indeed, all refund
provisions in the Excise Tax Act are at the federal
government's discretion, including tax refunds on
such goods as are used for sewerage or draining
systems (subsection 44(3)); by institutions for the
care of the young, the elderly and the handicapped
(section 45); for the construction of educational
institutions, public libraries and provincially-
owned student residences (section 46) and other
public or non-profit uses as well.
The federal Crown's discretion in these cases
has been affirmed by the Federal Court of Appeal
in The Queen v Stevenson Construction Co Ltd et
al, [1979] CTC 86 (F.C.A.). Federal control is
always paramount.
In the circumstances, the consequences of the
interpretation I give the section of the statute
before me should not be any cause of concern.
There shall therefore be judgment dismissing
the plaintiff's action and a declaration that the
sales taxes paid on the goods in question qualify
for an application for a refund under subsection
44(2) of the Excise Tax Act. The defendant is
entitled to 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.