HAROLD K.G. LEACH, D-JOE SIGNS
Decisions
v.
THE MINISTER OF NATIONAL REVENUE
Appeal No. AP-91-209
TABLE OF CONTENTS
Ottawa, Friday, January 15, 1993
Appeal No. AP-91-209
IN THE MATTER OF an appeal heard on October 19, 1992, under section 81.19 of the Excise Tax Act, R.S.C. 1985, c. E-15;
AND IN THE MATTER OF a decision of the Minister of National Revenue dated December 27, 1991, with respect to a notice of objection served under section 81.17 of the Excise Tax Act.
BETWEEN
HAROLD K.G. LEACH, D-JOE SIGNS Appellant
AND
THE MINISTER OF NATIONAL REVENUE Respondent
The appeal is allowed.
Sidney A. Fraleigh ______ Sidney A. Fraleigh Member
Desmond Hallissey ______ Desmond Hallissey Member
Michel P. Granger ______ Michel P. Granger Secretary
The issue in this appeal is whether the appellant is entitled, under subsection 120(3) of the Excise Tax Act, to a rebate of federal sales tax paid on the goods in issue. Such goods are used in the appellant's business of manufacturing and selling signs. They include silk screen inks, paints for backing and lettering, cleaning fluids for paints and screens, vinyls, decal materials, process camera films, developing fluids, and metals and plastics on which signs are printed or painted. Specifically, the Tribunal must determine whether these goods qualify as tax-paid goods held in inventory on January 1, 1991, for taxable supply by way of sale to others in the ordinary course of the appellant's business.
HELD : The appeal is allowed. The Tribunal believes that goods on which tax was paid and held for further manufacture, or held as inputs into the manufacture of goods, still constitute "taxable supply" and qualify for the rebate.
Tribunal Members: Arthur B. Trudeau, Presiding Member Sidney A. Fraleigh, Member Desmond Hallissey, Member
Counsel for the Tribunal: David M. Attwater
Clerk of the Tribunal: Dyna Côté
Appearances: Harold K.G. Leach, for the appellant Linda J. Wall, for the respondent
This is an appeal under section 81.19 of the Excise Tax Act [1] (the Act) of a determination of the Minister of National Revenue (the Minister) disallowing the appellant's application for a federal sales tax inventory rebate in the amount of $1,673.44. The Minister's determination was made on the basis that the appellant's "inventory of raw materials to be used ... in the manufacturing of goods does not qualify for a rebate since those goods are not for sale, lease or rental to customers." The appellant objected to the determination, which was confirmed by a notice of decision of the Minister.
In 1990, the appellant was in the small sign business with sales not exceeding $50,000 per year. As such, the company was considered a small manufacturer for purposes of the Act and was not required to hold a licence for purposes of Part VI of the Act, being the consumption or sales tax provisions. Accordingly, the appellant had to pay tax on its purchases of material inputs, but was exempt from the payment of consumption or sales tax on the goods manufactured or produced by it.
The goods in issue are used in the appellant's business of manufacturing and selling signs. They include silk screen inks, paints for backing and lettering, cleaning fluids for paints and screens, vinyls, decal materials, process camera films, developing fluids, and metals and plastics on which signs are printed or painted.
The issue in this appeal is whether the appellant is entitled, under subsection 120(3) [2] of the Act, to a rebate of federal sales tax paid on the goods in issue. Specifically, the Tribunal must determine whether the goods qualify as tax-paid goods held in inventory on January 1, 1991, for taxable supply by way of sale to others in the ordinary course of the appellant's business.
For purposes of this appeal, the relevant rebate provisions of the Act are found at subsection 120(3), which state,
Subject to this section, where a person who, as of January 1, 1991, is registered under Subdivision d of Division V of Part IX has any tax-paid goods in inventory at the beginning of that day,
(a) where tax-paid goods are goods other than used goods, the Minister shall, on application made by the person, pay to that person a rebate in accordance with subsections (5) and (8).
At the hearing, counsel for the respondent acknowledged that her arguments in opposition to the appellant's eligibility to the rebate were similar to those expressed in a recent appeal, [3] which were rejected by the Tribunal. As such, she instructed the Tribunal that her client, the respondent, without consenting, would not oppose the appeal.
In the Techtouch appeal, counsel for the respondent admitted that the components in issue were tax-paid goods within the meaning of section 120 of the Act. However, relying upon the definition of "inventory" in section 120, which refers to "tax-paid goods that are described in the person's inventory in Canada at that time and that are ... held at that time for taxable supply ... by way of sale, lease or rental," counsel contended that components for which the rebate was claimed were used in the manufacture or production of finished goods rather than in the provision of a taxable supply.
Contrary to the position of the respondent, the Tribunal believes that goods on which tax was paid and held for further manufacture, or held as inputs into the manufacture of goods, still constitute "taxable supply" and qualify for the rebate. Accordingly, the appeal is allowed.
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1. R.S.C. 1985, c. E-15.
2. S.C. 1990, c. 45.
3. Techtouch Business Systems Ltd. v. The Minister of National Revenue, Canadian International Trade Tribunal, Appeal No. AP-91-206, September 18, 1992.
Initial publication: July 2, 1997