J.P.L. International Diffusion Inc. v. Canada
T-3038-94
McGillis J.
26/2/98
23 pp.
Appeal by way of trial de novo from Canadian International Trade Tribunal decision dismissing plaintiff's appeal from Revenue Canada's rejection of plaintiff's application for refund of federal sales tax (FST)-Plaintiff alleging has erroneously paid FST on sales of products to its distributors on basis of advice received from Revenue Canada officials indicating required to remit tax-Question whether plaintiff had obligation, legally or by virtue of industry agreement with Revenue Canada, to remit FST-1981 amendment to Excise Tax Act shifting obligation to pay FST on cosmetics from manufacturers to distributors-Allied Beauty Association, composed of manufacturers and distributors of beauty products in Canada, and Revenue Canada agreed (Alternate Tax Accounting Method) manufacturer selling products to distributor could pay FST-Furthermore, distributor could pay tax on only mark-up portion of retail items sold by its customers, typically beauty salons, for products sold at retail level to customers-Products bottled in container larger than 450 ml considered destined for use by beauty salon, under 450 ml, for sale at retail level-Since then, norm in beauty industry for FST to be calculated and remitted by manufacturer on its price to distributor-Plaintiff manufactured professional hair care products, sold them to distributors who resold products to beauty salons-Obtained federal sales tax permit as manufacturer-Notified by Revenue Canada officials required pursuant to Act, s. 50 to submit each month declaration, whether or not there have been any sales-Unaware of Alternate Tax Accounting Method (never received any information thereon from Association or Revenue Canada), plaintiff paid FST on regular basis on belief company obliged by Act to do so-Simply followed procedure outlined to him by Revenue Canada officials-Plaintiff realized in 1990 that by virtue of Act, s. 50(5)(g), not required to pay FST on sale of its manufactured products since customers were distributors who were deemed under Act to be licensed manufacturers-Applied for refund ($1,140,586.10) covering period from July 1, 1988 to November 30, 1990-Also applied for, and obtained, refund ($378,148.28) for hair care products manufacturing company purchased in 1988 for period July 1, 1988 to June 30, 1989, for erroneously paid tax-Revenue Canada rejected plaintiff's application for refund-Appeal allowed-Evidence concerning notice of objection and ministerial decision not only admissible, but subject of case under appeal-Review of applicable provisions confirming statutory obligation to pay FST on products manufactured by plaintiff rested on distributors, who were deemed manufacturers by virtue of Act, s. 2(1)(d)-Indeed, by virtue of Act, s. 50(5)(g), plaintiff had no liability to pay FST on sales of its products to its distributors, and paid taxes in error within meaning of Act, s. 68-Effect of industry agreement on obligation to pay FST considered in Jack Herdman Limited (No. 2) v. Minister of National Revenue (1983), 37 DTC 5274 (F.C.A.), where Court held arrangement by Department with petroleum industry, of which applicant unaware, under which Department would disregard provisions of statute and collect tax from distributors who were not liable under Act for tax, not reason for keeping applicant's money-Defendant had originally (four years ago) admitted quantum of FST not in issue, but later attempted to withdraw admission-Not appropriate to permit defendant to withdraw admission now as would cause serious inconvenience and prejudice to plaintiff-Excise Tax Act, R.S.C., 1985, c. E-15, ss. 2(1)(d) "manufacturer or producer", 50(5)(g), 68 (as am. by R.S.C., 1985 (2nd Supp.), c. 7, s. 34).