Gibson, J:—In this action the Crown claims from the defendant consumption or sales tax, old age security tax, penalty interest, and other relief on the allegation, which is admitted, that during the period June 1, 1967 to September 30, 1968 the defendant sold or delivered to purchasers refuse burners to the value of $60,930 which the defendant had produced or manufactured in Canada. The defendant claims an exemption from tax for such sales.
The amount of consumption or sales tax and old age security tax claimed in respect to these sales is $7,311.60. The amount of penalty interest claimed is the sum computed pursuant to subsection 48(4)* [1] of the Excise Tax Act.
The defendant is a company incorporated under the laws of the Province of Quebec with head office and chief place of business at St Ephrem in the County of Beauce, in the Province of Quebec and is a manufacturer and distributor of wood working machinery.
The defendant claims that the refuse burners which it produced or manufactured in Canada and sold to purchasers were production or manufacturing equipment covered by the exemption in Schedule III of the Excise Tax Act at the relevant time and therefore not liable for such tax. Specifically, the defendant relies on paragraphs 1(a) and 1(d)* [2] of Part XIII of Schedule III of the said Act.
A representation of the type of refuse burner sold and delivered to the purchasers by the defendant was illustrated in Exhibit 1. It is a brochure of the defendant.
(5) The Minister may, before or after the day prescribed by subsection (3), specify in writing a later day for the filing of a return or the payment of the tax or any portion thereof; and where the Minister has specified a later day
(a) no penalty shall accrue or be deemed to have accrued under subsection (4) prior to such later day in respect of default in payment of the tax or portion thereof for the payment of which the later day was specified; and
(b) failure to pay, on or before the later day, the tax or portion thereof for the payment of which a later day was specified constitutes a default for the purposes of subsection (4).
48. (4) Sous réserve du paragraphe (5), à défaut de paiement de la taxe, ou de toute partie de celle-ci, exigible en vertu des Parties IV, V ou VI dans le délai prescrit par le paragraphe (3), it doit être versé, en sus du montant en souffrance, une amende égale aux deux tiers pour cent du montant en souffrance à l’égard de chaque mois ou fraction de mois pendant lequel de défaut de paiement se continue.
(5) Le Ministre peut, avant ou après la date prescrite par le paragraphe (3), fixer, par écrit, une date postérieure pour la production d’une déclaration ou le paiement de la totalité ou d’une partie de la taxe; et, lorsque le Ministre a fixé une date postérieure,
a) nulle peine ne court ou n’est réputée avoir couru selon le paragraphe (4) avant ladite date postérieure quant au défaut de paiement de la totalité ou d’une partie de la taxe pour le paiement de laquelle la date postérieure a été fixée; et
b) l’omission de payer, au plus tard à la date postérieure, la totalité ou une partie de la taxe pour le paiement de laquelle une date postérieure a été fixée, constitue un défaut pour les objets du paragraphe (4).
48. (4) Sous réserve du paragraphe (5), à défaut de paiement de la taxe,
Representatives of several of the purchasers of these refuse burners gave evidence. These purchasers were operators of saw mill factories. Their evidence was that this type of refuse burner was installed on a permanent foundation usually about 50 to 100 feet from the main factory which produced the end product of the saw mill, namely wood or lumber; that conveyors carried the waste from the saw mill operations during its various stages to such burners; and that the burners incinerated the waste into ashes.
Their evidence also was that it was necessary to have such a burner at a saw mill factory in the sense that it was economically essential.
The witness Mr Jean Paul Gagnon, the president of E Gagnon et Fils Limitée stated that many years ago, when the factory of this company was much smaller, it operated without a burner of this type, by disposing of waste by carrying it away in other fashions; but today, with a larger factory, these methods were not practical.
The evidence generally established also that at the present time there exists no more economical and practical way to dispose of waste during the various stages of production or manufacture in a saw mill factory than by having and using a refuse burner.
In argument counsel for the defendant conceded that to succeed in this action the defendant had to bring itself within the exemption provisions of paragraph 1(a) in that it was impossible to bring itself within the provisions of paragraph 1(d). This was so because to be within the exempting provisions of paragraph 1(d) the defendant would have had to prove that this particular type of refuse burner was “equipment sold to or imported by manufacturers or producers for use by . . . [it] in carrying refuse or waste from machinery and apparatus . . (italics mine); and this was impossible. Instead, in all the subject cases the evidence established that the refuse was carried to this type of refuse burner and there incinerated.
As to paragraph 1(a) of Part XIII, Schedule III, the defendant submitted that a broad construction should be put on it and that the important words employed were “machinery and apparatus” and “manufacture or production”; that the fact that the defendant could have used something else was irrelevant; that it was too narrow an interpretation to consider the words in the subsection “directly in the manufacture or production of goods” in relation to the time sequence; that instead what should be considered were the things that contributed to the end result, that is the manufacture or production of lumber; that the word “directly” should not be used in the sense of “to the exclusion of”; and that what should be considered was the saw mill factory operation as a whole, from which it should be concluded that without such a type of refuse burner to dispose of waste such a factory could not operate at any of the various stages of manufacture, culminating in the production of lumber.
Counsel for the plaintiff submitted that the key word in paragraph 1(a) was “directly” (in the manufacture or production); that “directly” does not mean “essential” (conceding that these refuse burners are economically essential to operate a saw mill factory); that “directly” in this subsection is in contradistinction to “collateral”; that during the various stages of operation in a saw mill factory waste comes off which can be disposed of in many ways but in any event, wood is the end product that is manufactured or produced and that wood would be that end product whether or not any of these factories referred to in evidence employed a refuse burner of this type; that such a refuse burner is an advantage to the big operator but it does not cause them to manufacture or produce the end product, namely, wood; and that a saw mill factory can get rid of the waste in other ways, even though at the present time the employment of a refuse burner such as was referred to in the evidence is the most economical way.
After carefully considering this matter, I am of the opinion that the key word in the English version of paragraph 1(a) of Part XIII of schedule III of the Excise Tax Act is “directly” (in the manufacture or production of goods) or “directement” (dans la fabrication ou la production de marchandises) in the French version of the statute.
In determining the meaning of the word “directly” or the word “directement” in this item of Schedule III no usage of the trade was proved.
The ordinary meaning of these words then must prevail; and in this case the use of dictionaries will assist if not guide exclusively.
In an unreported decision of the Tariff Board (concerning an item referred to as an “environmental control system in a mine”), the Board used a dictionary definition of the word “directly” in this item of Schedule III in reaching its conclusion in appeal numbered 919 entitled
The Foundation Company of Canada Limited and Canadian Corn- stock Limited, carrying on business as a joint venture under the name and style of Foundation Comstock Joint Venture and the said The Foundation Company of Canada Limited and Canadian Comstock Limited v Deputy Minister of National Revenue for Customs and Excise.
The Tariff Board Reasons in part read:
Dealing with paragraph (a) [ie, paragraph 1(a) of Part XIII of Schedule III of the Excise Tax Act], the issue depends on what is meant by the word “directly”.
Both counsel for the appellants and for the respondent attributed the same meaning to the word “directly” and that is, the meaning “immediately”, in the sense of without the intervention of a medium or agent as given in ‘the Oxford English Dictionary, 1933, Volume III. However, counsel for the appellants argued that the environmental control system did so function, in the manufacture or production of electricity, whereas counsel for the respondent argued that the system did not so function.
As mentioned earlier there is no question that the environmental control system is essential to the successful operation of the project; one could say it is essential to the production of electricity for this project but there are many things which may be essential to the manufacture or production of goods but which are not used “directly” in the manufacture or production of the goods. The Board agrees with the argument put forward by counsel for the respondent that the use of the word “directly” in the legislation implies that there may also be things used indirectly in such manufacture or production.
The manufacture or production of the electricity would seem to take place in the turbines, generators and transformers. Undoubtedly, without the circulation of the conditioned air these pieces of equipment could not be expected to function properly in this installation, but the Board does not consider that the circulation of this conditioned air is “directly” involved in the manufacture or production of electricity in the turbines, generators, or transformers. However, the evidence of the witness for the appellants on this aspect dealt more particularly with the return of the conditioned air through the shafts containing the isolated phase bus ducts. Electricity passing through the ducts generates heat and it is, therefore, necessary to cool these ducts. Some of the conditioned air from the power-house area is returned through the shafts containing the isolated phase bus ducts and acts as a coolant; if these ducts were not so cooled they would fail due to the extreme heat generated.
The question then is, is the cooling action of the conditioned air, manufacturing or producing electricity directly? A narrow interpretation of the words, manufacturing or producing, could lead to the conclusion that the cooling action does neither. The cooling action simply makes it possible for the ducts to convey low voltage electricity from the generator to the primary transformers. However, even if the cooling action were part of the manufacturing or production of the electricity it would seem to be indirectly used rather than directly.
In an examination of the legal publications on interpretation of words, it is interesting to note that in The Earl of Jowitt’s Dictionary of English Law (1959) — the word “direct” is defined as being. ‘‘opposite to collateral”. In this sense, it would seem that the equipment in issue must be adjudged to be “collateral” to the main apparatus for the production of electricity. Therefore, under this definition, it is not “directly” involved in the production of goods, to wit: electricity.
In any event, the use of some of the returning air as a coolant is incidental to the main function of the environmental control system which is simply to create an atmosphere in the excavated areas in which equipment and personnel could operate. The Board declares that such a function is neither for use in the “prevention of accidents”, nor for use “directly” in the manufacture or production of electricity.
Accordingly, the appeal is dismissed.
The words “directly”, “direct” and “directement” are expressed in the following terms in these dictionaries:
The Random House Dictionary of the English Language, The Unabridged Edition, 1966 —
directly adv. 1. in a direct line, way, or manner; straight. . . .
Worcester’s Dictionary, Unabridged, 1888 —
DIRECTLY, ad. 1. In a direct manner; rectilinearly. “Directly downwards.” Woodward.
2. In a direct manner; not by implication or circumlocution. . . .
The Concise Oxford Dictionary, 4th edition, 1958 —
direct, a. & adv. Straight, not crooked-(ly) or round about, (the — road; went — to heaven; — action, exertion of pressure on the community by strikes instead of on Parliament by votes to force political measures on the Government; — ray, not reflected or refracted; — shot, hit, without ricochet); (Astron.) proceeding from W. to E., not retrograde; (of descent) lineal(ly), not collateral(ly); (of argument) following uninterrupted chain of cause & effect etc.; . . .
The Dictionary of English Law, Earl Jowitt, 1959 —
Direct, an epithet for the line of ascendants and descendants in genealogical succession, opposed to collateral. . . .
Black’s Law Dictionary, revised 4th edition, 1968 —
DIRECTLY. In a direct way without anything intervening; not by secondary, but by direct, means. Clark v Warner, 85 Okl. 153, 204 P. 929, 934; Olsen v Standard Oil Co., 198 Cal. 20, 204 P. 390, 396.
Dictionnaire Alphabétique et Analogique de la Langue Française, Paul Robert, 960 —
DIRECTEMENT. adv. (XIV&s.; de direct, et ment).
1° D’une manière directe; en droite ligne, sans détour.
V. Droit (tout droit). Le train va directement à . . . . Aller directement au but. Cf. Aller (ne pas aller par quatre chemins), but (aller droit au but); couper (couper par le plus court).
2° Sans intermédiaire. V. Immédiatement. Ces deux pièces communiquent directement (Cf. Conque, cit. 4). Etre directement en rapport avec quelqu’un. (Cf. Altération, cit. 2; bora, cit.; comportement, cit. 4). Ce qui se rapporte directement à la question (Cf. Concret, cit. 2). Témoigner directement de quelque chose (Cf. Main : tenir de première main). Etre directement mis en cause (Cf. Cause, cit. 53). Produire directement (Cf. Commerce, cit. 1, convertir, cit. 12). Agir directement (Cf. Antitoxine, cit. 1; conflit, cit. 7; curare, cit.). Exercer directement son action sur . . . (Cf. Avion, cit. 4). S’adresser directement à quelqu’un .. . .
Nouveau Petit Larousse, 1968 —
DIRECTEMENT adv. De façon directe.
DIRECT, E adj. (lat. directus). Droit, sans détour : voie directe. Sans intermédiaire : rapport direct. Se dit d’un train qui entre deux stations principales ne s’arrête à aucune station intermédiaire. Qui a lieu de père en fils : succession en ligne directe. Astron. et Mécan. Se dit du sens d’un mouvement opposé au mouvement des aiguilles d’une montre. Complément direct, complément introduit directement sans l’intermédiaire d’une préposition. (Ex. : aimez vos PARENTS; il SE lave; je veux PARTIR.) Tir direct, tir pour lequel le pointage de l’arme sur l’objectif se fait à vue.
Harrap’s Standard French and English Dictionary, 1944 —
direct . l.a. (a) . . .
2. adv. (Aller) directement, tout droit. To dispatch goods direct to s.o., expédier des marchandises directement à qn. / shall communicate with you d., je vous écrirai directement.
ly. I. adv. (a) (Aller, conduire) directement, tout droit, sans détours. To go
d. to the point, aller droit au fait.
Le sens des mots “direct” et “directement”, qui convient dans ce cas, est le sens usuel (ou courant) et celui que donnent les dictionnaires cités supra, c’est-à-dire le sens de “sans détour”. Ce sens est opposé à “collatéral” ou “intermédiaire”, c’est-à-dire, le même sens que dans les dictionnaires de Earl Jowitt et de Black cités supra.
In my view therefore, using the said dictionaries of definitions to assist and also considering the matter from a practical common sense point of view, in determining the ordinary meaning of the words in said paragraph 1(a) in relation to the subject matter of this case, these subject refuse burners are not machinery or apparatus sold by the defendant to these purchaser manufacturers for use by them directly in the manufacture or production of wood.
It follows therefore, that the defendant has not satisfied the onus of proving that these refuse burners are items within the said Schedule III.
The result therefore is that the judgment will go against the defendant for the sum of $7,311.60 together with the amount of penalty interest computed pursuant to section 48 of the Excise Tax Act and for this purpose the parties may agree on the proper sum, but failing agreement, the matter may be spoken to.
The plaintiff is also entitled to costs.
*48. (4) Subject to subsection (5), upon default in payment of the tax or any portion thereof payable under Part IV, V or VI within the time prescribed by subsection (3), there shall be paid in addition to the amount of the de fault a penalty of two-thirds of one per cent of the amount in default in respect of each month or fraction of a month during which the default continues.
*1 . . .
(a) machinery and apparatus sold to or imported by manufacturers or producers for use by them directly in the manufacture or production of goods;
(d) equipment sold to or imported by manufacturers or producers for use by them in carrying refuse or waste from machinery and apparatus used by them directly in the manufacture or production of goods;
1
a) les machines et appareils vendus aux fabricants ou producteurs ou importés par eux et destinés à être utilisés par eux directement dans la fabrication ou la production de marchandises;
d) le matériel vendu aux fabricants ou aux producteurs ou importé par eux et devant servir au transport des déchets ou des rebuts des machines et appareils qu’ils utilisent directement dans la fabrication ou la production de marchandises;