DUMOULIN, J.:—Clear-cut and uncomplicated, the facts giving rise to the moot question of law at issue are set out in the parties’ “Agreement as to Facts’’ filed of record on June 20 last.
The suppliant company is described in its petition of right dated March 22, 1967 as incorporated under the laws of the province of Ontario, and as constituted under the Canada Corporations Act in the agreed statement of facts produced some 27 months later.
It admittedly is a Canadian firm with its head office in Toronto, carrying on the business of selling, leasing and servicing Caterpillar ’ ’ heavy construction machinery in the province of Ontario.
For the better furtherance of its industrial pursuits, Crothers occasionally employed an executive aircraft that it owned and used to bring customers to the various job sites where Caterpillar equipment was set at work. Prior to the material date of January 19, 1960, the suppliant had possessed, successively, two such promotional planes of which it eventually disposed and was then in need of a third one.
On January 19, 1960, as above indicated, Crothers Limited and Timmins Aviation Limited of Montreal, a distributor for Grumman Aircraft Engineering Corporation of Bethpage, New York, U.S.A., entered into a ‘‘Final Purchase Agreement” (exhibit 2) with respect to the purchase of a Grumman “Gulfstream” twin-engine transport aircraft, Model No. G-159, for a price of $820,000. U.S. funds (cf. exhibit 1).
However, it so happened that the afore-mentioned Gulfstream plane, according to paragraph 5 of the agreed statement, ‘‘ could not, on delivery pursuant to the purchase contracts’’ (exhibits 1 and 2) ‘‘be used for the transportation of Crothers’ executives or customers. Crothers therefore entered into a further agreement with Timmins, at the time of the Final Purchase Agreement’’ (January 19, 1960) ‘‘whereby Timmins undertook to install an executive interior. electronic and radio equipment for the price of $197,601 (Canadian funds)’’. This additional undertaking appears minutely detailed in exhibits 5 and 6.
Paragraph 6 of the agreed statement of facts next states that :
On or about February 12, 1960, pursuant to the Final Purchase Agreement, Exhibit 2; the Gulfstream was flown from Grumman’s plant at Bethpage, New York, to Montreal where Timmins took possession of it .
I now intersect this article 6 by reason of what, in my opinion, seems a most significant statement to which I, accordingly, attach a correlative degree of importance; it reads thus:
. . . For the purpose of making the Ferry Flight from Bethpage, New York, to Timmins’. plant at Montreal, Grumman loaned to Timmins certain instruments and equipment temporarily installed in the Gulfstream which are referred to as a “Flyaway Package”. The instrument and equipment which make up the Flyaway Package remained the property of Grumman at all times, and they were removed from the Gulfstream and returned to Grumman after the aircraft had been flown to Montreal. The Flyaway Package consisted of:
Magnetic Compass
Turn and Bank indicator
Air speed indicator
Clock
Rate of Climb indicator
Sensitive altimeter
Compass
Gyro Horizon
Transceiver
Omni Receiver
ADF
Type R20A Marker Receiver
VHF Antenna
Omni Antenna 37J-3
Marker Antenna 37X-2
Flux Gate Valve
Compensator
Such were the 17 implements comprised in this Flyaway Package.
While the Timmins Aviation engineers, designers and craftsmen were at work on this unfinished plane, the price stipulated of $197,601 underwent a rather slight increase to $205,582 necessitated by 38 amendments to the original quotation and specifications outlined in exhibit 6.
After completion of the work at the Timmins shops in Montreal, the aircraft was returned to Bethpage, New York, to have its exterior painted; on June 27, 1960, Crothers Limited took possession of the now finished plane and, on that same day, the Minister of Transport ‘‘granted a certificate of airworthiness in respect thereto’’ (para. 9 of the agreed statement of facts).
The aggregate amount of taxes claimed from the suppliant is itemized and adversely commented upon in paragraphs 6, 7 and 9 of the petition, hereunder reproduced verbatim :
6. Sales tax in the amount of $76,676.17 has been paid on the value of the aircraft at the time it was imported into Canada. In addition sales tax in the amount of $9,045.62 was paid on the materials used in the installation contract. However, as at October 29, 1965, the Company had not paid sales tax on the portion of the sale price represented by the commission of $12,500 paid to Timmins nor on the contract value (exclusive of taxable materials) of its agreement with Timmins for interior furnishings and electronic equipment installation.
7. By letter of October 29, 1965, the Department of National Revenue, Customs and Excise, claimed from the Company sales tax in the amount of $14,943.43 and penalties of $6,176.62.
These sums were paid by Crothers Limited on November 30, 1965, and now, the suppliant, by its petition (para. 9) :
. . . admits its liability to tax of $1,375 on the $12,500 commission paid to Timmins and to penalties thereon but claims that it is not liable for the $13,568.43 balance of tax assessed by the Department and paid by the Company nor to any penalties in respect of that amount.
I thought it useful to quote these three paragraphs of the petition for a fuller review of the case although the litigants narrowed it down considerably by an Agreement as to Issue, dated June 25, 1969, stating that—
. . . the question to be determined in this action is whether, within the meaning of section 30(1)(a) of the Excise Tax Act, goods were “produced or manufactured in Canada” by Timmins Aviation Limited through its operations with respect to the aircraft referred to in the Petition of Right.
In the agreement’s own terms, the alternative replies are that:
If, by the said operations, Timmins Aviation Limited did not produce or manufacture goods in Canada, then the parties agree that there should be judgment in favour of the Suppliant in the amount of $19,176.31 with costs to the Suppliant . . .
Conversely, continues the agreement :
If, by the said operations, Timmins Aviation Limited did produce or manufacture goods in Canada, then the parties agree that the Petition of Right should be dismissed with costs to the Respondent . . .
In answer to the petition of right, the respondent urges in law a general denial of any cause of action against Her Majesty predicated on the ensuing averment:
1. (b) the Suppliant owned, held and claimed a proprietary right to an executive aircraft being manufactured or produced for or on behalf of the Suppliant by Timmins Aviation Limited for the use of the Suppliant and not for sale, and upon the manufacture or production of the said executive aircraft, the Suppliant became liable to consumption or sales tax imposed by the Excise Tax Act and to old age security tax imposed by the Old Age Security Act.
The pertinent statutory legislation assented to by the parties, Section 30(1) (a) of the Excise Tax Act (R.S.C. 1952, ¢. 100) enact as follows:
30. (1) There shall be imposed, levied and collected a consumption or sales tax of eight per cent (plus a three per cent Old Age Security tax) on the sale price of all goods
(a) produced or manufactured in Canada.
To this should be conjoined the Act’s own definition of the expressions ‘‘manufacturer or producer”? in Section 2(1) and its subsections (aa) and (ii)
2. (1) In this Act
(aa) “manufacturer or producer” includes
(ii) any person, firm or corporation that owns, holds, claims, or uses any patent, proprietary, sales or other right to goods being manufactured, whether by them, in their name, or for or on their behalf by others, whether such person, firm or corporation sells, distributes, consigns or otherwise disposes of the goods or not.
Of the two witnesses heard, the first, Joseph Anckner, is Grumman’s Aireraft’s project engineer, a situation he has had for the last twenty years. Anckner testifies that the plane in question, of the ‘‘Gulfstream’’ class, was manufactured by his company in the summer of 1959 and ‘‘exclusively intended for passenger transportation and not at all for cargo. Its maximum carrying capacity was 19 people’’. He adds that: “the plane is structurally complete and fit to fly, less interior decoration and furnishings and, also, with only a primary greenish preservative paint on its outside. It is in such condition that airplanes leave the Grumman plant for delivery to customers. All the instruments listed in Appendix F of document (exhibit) 7 (mentioned supra under the caption of Flyaway Package) were installed. by Grumman Aircraft previously to the delivery of the Gulfstream plane to Timmins Aviation, but merely on a temporary basis as explained in paragraph 6 of the Agreement as to Facts’’.
I, then, questioned Mr. Anckner about the technical importance of the instruments thus loaned for the flight from Bethpage to Montreal. The answer obtained was, textually, that ‘without such instruments, flying a plane would be very hazardous’’.
From this admission would seemingly flow the unescapable assumption that a plane devoid of those implements, the lack of which jeopardizes its normal flying security, could hardly be considered as completely “produced” or fully ‘‘manufactured”’. Only after the proper fitting of each and every safety device is an aircraft truly produced and deserving of an official airworthiness certificate.
The other witness, Alexander J. Spencer, presently is, but was not at the material times, chief inspector of Atlantic Aviation of Canada, successor to Timmins Aviation Company. The specification given in document or exhibit 6, concerning the completion work of interior furnishing done by Timmins Aviation, are known to him. ‘‘The structural condition of the plane was strengthened by Timmins, although it would have been strong enough as set up by Grumman Engineering’’, says Spencer, who enters upon a lengthy description of those “interior finishing’’ jobs performed at the Montreal plant and listed in exhibit 6. Most fixtures thus installed, according to the witness, “are bought from various. producers and not fabricated by Timmins’’ who, nevertheless, ‘‘connected the electrical appliances, adjusted sheets of aluminum lining cut and prepared by their own mechanics, installed the aluminum bulkhead mentioned on page 5 of exhibit 6 ( paragraph 3-2) to separate the hydraulic and galley compartments’’. Also fabricated and set up by the Montreal firm were some hinged doors, a wardrobe compartment, three sliding drawers, a utility cabinet housing an A.M./F.M. tuner, other bulkheads, thus described respectively on pages 8 (para. 4- 1) and 15 (para. 5-1) of exhibit 6, part I:
A bulkhead shall be installed at the forward end of the cabin area to separate the cabin and companionway compartments and a second bulkhead will be installed at the aft end of the cabin for cabin/lavatory separation . . .
Then :
Existing rear bulkhead in the lavatory section shall be extended to the full width of the fuselage, and a door shall be installed in this section. Door and bulkhead construction shall be of aluminum honeycomb. sandwich construction . ..
Further evidence in this vein led Mr. Spencer to acknowledge, at least, that ‘‘the value of all materials ‘fabricated or produced’ by Timmins Aviation amounted to about 20% of those obtained from outside furnishers’’
To this should be coupled. since literal proof conveys a more compelling influence, a paragraph of exhibit 11, a letter dated May 16, 1960, written on behalf of Timmins Aviation Limited, signed by the company’s general manager, Victor R. Bennett, and addressed to the “Deputy Minister of National Revenue (Customs and Excise), attention : J. J. A. Senecal, Esq., Director, Port Administration’’. I quote most of the fourth paragraph, on page 62 of a binder containing exhibits 1 to 15 inclusive :
The aircraft (i. e. the Gulfstream purchased by Crothers Limited) is delivered in an entirely unfinished and bare condition, without any interior installations whatever, and with only sufficient radio equipment to permit the ferry flight from the manufacturer’s plant. This equipment is subsequently returned to the manufacturer as being his property. Accordingly, prior to the aircraft being given a Certificate of Airworthiness by the Department of Transport, approximately $190,000 (extended, subsequently quently to $205,582) of labour and materials are applied to the aircraft in Canada. (Italics not in text.)
The respondent called no witnesses, limiting its evidence to reading: into the record questions and answers 1 to 7, 72 to 91 and 131 to 135 inclusively, of one Allan W. Alderson’s examination on discovery. An officer of the suppliant company, Mr. Alderson was thus examined at Toronto, on August 29, 1967, in keeping with Rule 293. of the Exchequer Court.
The only part effectively suitable to the object of our research is derived from questions and answers 151 to 135 hereunder reproduced.
131. Q. When they put in the bulkheads do you know what they
did? Were these prefabricated completely and just installed or did they (Timmins Aviation) have to assemble them? To What extent did they have to make them on the scene? A. I don’t know to what extent Timmins had ‘to go to create these,
132. Q. Your company does not have any information? A.
There may be somebody with knowledge of the Timmins operation that would know whether they fabricated or bought readymade sections for installing. It seems logical they would do the fabrication there.
I interrupt to note that Mr. Spencer’s evidence and the specification book, exhibit 6, did conclusively establish the fabrication of these bulkheads and of several other fixtures by the Timmins company.
133. Q. And similarly the galley, your company has not any
information as to whether it was installed or to what extent the pipes were screwed together on the scene or . . .
A. No. We understood this was Timmins business to carry out and put it together—manufacturing.
134. Q. The aircraft as delivered by Grumman at the premises
at Timmins could not be used for transportation of your executives or customers? A. No. It would not be known as an executive aircraft at this stage.
135. Q. It could not be used for the purposes which you had in
mind and for which you have subsequently used the aircraft. A. No.
Suppliant’s learned counsel, commenting on the verbal and written evidence, submitted that the work done by Timmins Aviation did not amount to a manufacture or production of goods in Canada as visualized by Sections 30(1) (a) and 31(1) (d) of the Excise Tax Act. Nothing in the nature of “manufacture or production’’ attaches to the several jobs made in the plane at the Timmins shops.
In Mr. Mogan’s view ‘‘this plane always was, as intended, an executive plane’’. Grumman manufactured or produced the aircraft itself but left to Timmins and their client, Crothers Limited, the care of finishing and furnishing the car’s interior, according to the purchaser’s taste. This contention is summed up by the learned counsel in the triple enunciation that:
1. Timmins Aviation acted as interior decorators and, in this capacity, took certain necessary materials and fitted them in the plane so as to make it attractive and suitable to its purpose of ‘‘executive transportation”.
2. Timmins purchased and installed ‘‘avionic instruments.
3. It also had to fabricate certain furnishing items, such as partitions, shelves, drawers, one or two tables, a window ledge, an A.M./F.M. tuner and tapedeck.
Such deductions, however, “that Timmins’ participation did not amount to manufacture or production’’ and, more particularly, ‘‘that this plane always was, as intended, an executive plane’’, seem categorically refuted by Timmins’ chief inspector, Alexander J. Spencer, whose testimony was all the more convincing when he valued the material “fabricated or produced’’ by Timmins Aviation ‘‘at 20% of that bought elsewhere for furnishing the plane’s interior’’.
A reference to. exhibit 11, supra, that, “The aircraft is delivered in an entirely unfinished and bare condition, without any interior installations whatever, and with only sufficient radio equipment to permit the ferry flight from the manufacturer’s plant’’, disposes of the other proposition. ; ; . . ,
In law, it is my humble opinion that Section 2(1) (aa), above cited, defining ‘ ‘manufacturer or producer’’, and the clear and precise wording of the ‘parties’ agreement as to;issue are nowise affected by Sections 30(1) (a) (i) and 31(1) (d) of the Act.
My preceding remarks are, I trust, in line with the plea delivered by respondent’s learned counsel, Mr. Munro, Q.C., who estimated the cost of implements produced by Timmins, over a time period of some four months, at approximately one-fourth of the plane’s total cost. His concluding point was that Timmins did more than interior decoration; they were converting a plane that was not usable at all into a perfectly usable one’’, a justified paraphrase of the suppliant’s Mr. Alderson’s two last answers, numbers 134 and 135, of his examination on discovery.
Due to the fact that unambiguous evidence, oral and literal, if not even admissions, of ‘‘manufacture or production” in Canada by Timmins Aviation Limited are of record herein, and comply both with the: statutory requirements relative thereto, and the agreement as to issue, it appears purportless to review the authorities invoked by the litigants; those precedents, of valuable assistance in more complex cases, are of slight avail where, practically, no complexity exists.
The conclusion should be that this executive aircraft had two indispensable producers: Grumman and Timmins, such as house building, for instance, needs several co-producers : masons, bricklayers, carpenters, plumbers, roofers. The Excise Tax Act makes no mention of proportionate contribution to the achievement of entirety, nor does the agreement as to issue.
For the reasons above, the suppliant’s petition of right is dismissed with costs accruing to the respondent.