MAYBANK, J.:—In April, 1952, probably on the 7th of that month, the Canadian Minister of Finance brought down his annual budget in the House of Commons and by one of the declarations then made by him the excise tax upon the processing of furs was reduced from 25 per cent to 15 per cent, the effective date of the new rate being April 8.
The plaintiff herein claims that the defendant should pay certain excise taxes at the rate in force before the reduction was made, and the defendant insists that all it should have to pay is the amount levied after that event, which, as stated, is a sum reckoned at the rate of 15 per cent. The defendant has, in fact, paid this lesser sum.
It is agreed between the parties that the difference between them is the sum of $13,409.45; and the suit is for that amount.
The statute governing this matter is the Excise Tax Act, 1947, c. 60, first enacted a great many years ago and amended every year since its first appearance on the Canadian statute books. As of April 7, 1952, Section 80A(1) of that Act read as follows:
“There shall be imposed, levied and collected, an excise tax equal to twenty-five per cent of the current market value of all dressed furs, dyed furs and dressed and dyed furs,—
(ii) Dressed, dyed, or dressed and dyed in Canada, payable by the dresser or dyer at the time of delivery by him.’’
(Italics mine; and in these reasons the verb ‘‘to process” is used to comprehend the several verbs used above with reference to the treatment of furs.)
As intimated already the tax percentage was lowered as of April 8, 1952, from 25 per cent to 15 per cent by the budget presentation of the Minister of Finance and in due course the statute was formally amended.
The point at issue between the parties in this action is the determination of the true meaning of the word ‘‘delivery’’ in the aforesaid section. Under the Act certain regulations were made dealing with the question of ‘‘delivery’’ of goods. Mr. Green impugns these regulations; and it is unnecessary to deal with them because if the acts of the defendant to be noted hereafter constituted ‘‘delivery’’ the defendant is liable for the higher rate of tax under the above-quoted section itself, and the regulations add nothing to the plaintiff’s case or to the plaintiff’s argument.
The defendant is and has been for many years a processor of furs. The volume of business done by him is and has been large. In the year 1951 his volume of business was the largest of any of the fur processors in the Winnipeg area. His three largest and most important customers were Neaman Fur Co. Ltd., Stall Fur Co. Ltd., and J. H. Hecht and Son, Ltd.
The custom in vogue in the dealings of the defendant company with these three customers, and probably with its customers generally, was for the customer to put its furs into the possession of the defendant to have such work done upon them as the customer might desire; and the defendant would carry out the customer’s instructions and re-deliver the furs to the customer when the latter should desire re-delivery. The furs to be processed were the customer’s property. The defendant never had any property in them excepting, of course, the special property rights arising from its charges for work done and for any tax paid by it by reason of such work. The practice was for the defendant to bill or invoice the customer in respect of work done and tax payment made by it, not when the processing was completed but when it delivered the processed article back to the customer. The billing was (a) for work done, and (5) for excise taxes paid. The customer was expected to pay the latter amount immediately but the amount charged for the former was in what was termed 1 ‘an open account’? presumably settled up monthly or at stated times agreeable to the parties. As will be seen the tax was levied on the processor but he passed it on to his customer directly.
According to the evidence adduced on behalf of the defendant, Mr. Cohn, president of the defendant, spoke to a representative of each of the three above-mentioned customers in January, 1952, and requested them, severally, to receive from him furs belonging to them which were already processed in accordance with their requirements; and also that they should receive furs from him in the future when they were thus processed. The arrangement, Mr. Cohn said, was that the defendant would ship such furs to these customers in the usual way but as between the defendant and them the furs thus shipped would not be considered as “delivered”; the customer companies would simply receive them and hold them for the defendant company until such time as the former should wish to have the furs for their own commercial uses, at which time they would take the furs into their own stocks and notify the defendant of their action; and thereupon the defendant company would invoice the customer company for the processing done and the taxes it would then pay and the goods would be considered ‘‘delivered’’. The three above-mentioned customer companies agreed to Mr. Cohn’s proposals.
To evidence the relationship between the defendant company and one of its said customers which might result from the latter recelving furs under this arrangement the defendant company prepared a document of which the following may be taken as a sample :
“We are delivering to you to-day 1842 Muskrat Skins. These goods are to be held intact and remain the property of D. Cohn & Sons Limited, and to be fully covered by Insurance against Fire, Theft, etc. by the Stall Fur Co. Limited.”
Furs put in the hands of any of the said three customers were always accompanied by a document in these terms (mutatis mutandis) and the customer company always signed the document and gave it to the defendant company.
The defendant’s explanation for making the above-described arrangement was that space with it was at a premium and that this way of getting its customers to store goods for it, the defendant, would give relief from over-crowding of inventory. A second reason given by the defendant was that it, the defendant, could save some insurance premia because, as the above document makes clear, the customer had to carry the insurance cost of any furs it received under the above-described arrangement.
The defendant’s statement of defence alleges the abovedescribed arrangement between it and the three customer companies and, of course, denies any ‘‘deliveries’’ of furs by it to them. In his reply to the statement of defence the plaintiff pours scorn on the bona fides of the plan and avers that it was a mere pretence put up by the defendant and its customers to endeavour to escape payment of some excise tax. The reply suggests—and cross-examination by the plaintiff’s counsel amplifies the suggestion—that the defendant and its three customers speculated on the possibility that the Canadian Minister of Finance, in bringing down his budget, might reduce excise taxes, and that they concluded there was a good chance of him doing so; and that when they reached this conclusion they agreed that the defendant, in delivering furs to those customers, would receive from them at the time of delivery a document to the effect that the delivery was not a delivery at all and that then if the tax rate was reduced the defendant and his said customers would declare the one to the other that true delivery was effected on some date later than the date of tax reduction; and thus the defendant would pay only the excise taxes at the lower rate and charge the customers accordingly.
Whether or not such suspicions about the bona fides of the arrangement alleged by the defendant are justified they are understandable. It is a well-known fact that taxpayers are always trying, as the saying is, ‘‘to out-guess the Minister of Finance’’, in other words to estimate what taxation changes he will make when he brings down his budget; and that some taxpayers try to order their business lives in such a way as to derive a benefit from such tax changes as may be made. The defendant’s chief officer declared that the motivation of the plan described was twofold: The saving of space and the reduction of insurance premium outlay. As to the former it would appear that 56 boxes were sent by the defendant to the Neaman Company between January 25 and March 17. A box is 16 cubic feet; thus the space saving amounts to 912 cubic feet. Such a space saving might seem to many, and particularly to an excise man, too small to be a convincing reason for the institution of the plan asserted by the defendant to have been made. The shipments by the defendant to the Hecht Company were in volume about one-third of those to the Neaman Company, while to the Stall Company they were insignificant as to cubic content—only two or three boxes. Shipments had never been made before in this manner by the defendant to its customers. Shortly after the tax change date the customer companies began to ‘‘take delivery’’ of the processed furs; that is they and the defendant agreed with each other that the furs were no longer in storage for the defendant but that they were fully in the hands of the several customer companies. As respects the Neaman Company the goods it received under the arrangement at various times from January 25 onward were invoiced to it under date of May 14, i.e., they were then treated as ‘‘delivered’’. In the case of Hecht, goods were sent in both February and March and as late as April 7 and April 8; they were treated as ‘‘delivered’’ by or before April 30. Indeed this company received a shipment of 2,958 skins April 7 and one of 228 skins April 8, which were taken by it as “delivered” on April 10, just two days after the tax rate was lowered. The Stall company received two shipments of small volume, one Februray 26 and one March 19, which were treated as ‘‘delivered’’ on April 14, six days after the tax rate changed. On the whole, considering the small cubic volume to be saved to the defendant for its own use, the short period of time of such savings (sometimes an extremely short period), and finally the fact that this space saving need ended abruptly after the taxation change date, suspicion is at least understandable.
A consideration of the savings to be effected in insurance premia would not tend to lessen suspicion of the bona fides of the above described understanding. The customer was required, as evidenced by the above-quoted document, to keep the furs insured. The rate was 8¢ per $100 of value per month. In the case of many of the shipments the premium saving would certainly be quite small. One of the defence witnesses spoke of insurance saving as being quite unimportant. If an observer were suspicious after analyzing the ‘‘space-saving motive’’ the analysis of the ‘‘premia-saving motive” would not turn his suspicion into faith. Rather, after this analysis it is all the more easily understandable that an observer would conclude that the defendant company and its three customers were trying to execute a plan for avoiding a certain amount of tax and that their actions, as the plaintiff’s reply indicates, were only a pretence, and that delivery, as the term is used in the statute, was made by the defendant company. The very wording of the quoted document is odd in that it speaks of the goods remaining the property of the defendant when, in fact, the defendant never did own them.
Whether the plaintiff’s scepticism as to the plan alleged by the defendant to have been made by it and its said customers is warranted or not is, perhaps, beside the point in view of the opinion I have formed respecting the defendant’s liability for further tax payment, but it is only fair to say first, that there is no law against attempting to order one’s business dealings in such a way that payment of a tax may be avoided, and, secondly, that there is no positive evidence to impugn the evidence given by and on behalf of the defendant. It is desirable to detail the events occurring immediately after the tax change date. Under the statute and regulations under its authority, it was the duty of a processor such as the defendant to keep the local excise tax office fully and accurately informed as to the volume and kind of inventory the processor had on hand. It was required that the processor should inform that office when it received furs to be processed; and immediately upon goods being delivered back to the customer, whether processed or not, information of the fact had to be supplied. And when the processor reported remitting goods back to a customer he (or it) had to pay the proper excise tax. Thus the excise tax office was in a position to know, at any time, the amount, kind and value of furs in the hands of any processor such as the defendant. The defendant discharged its duties fully with respect to the supplying of information.
Immediately upon the lower excise tax rate becoming effective representatives of the excise tax office visited all processors such as the defendant for the purpose of satisfying themselves that these processors did indeed have on hand the inventories they were supposed to have on hand in conformity with their reports. Mr. KR. L. Kergan was the representative who visited the defendant’s place of business; he interviewed Mr. David Cohn, its president. Mr. Kergan found the defendant’s inventories were all as they should be except certain furs which the defendant had reported itself to have received at various times from the three said customer companies and which it had never reported as being shipped out by it after such receipt. A query respecting these furs elicited from Mr. Cohn a candid description of the plan already described and that the goods and furs in question had been put in the hands of the three customers in pursuance of that arrangement. Mr. Kergan then checked the story told him by Mr. Cohn. He went to the Neaman factory and he found there all the furs which had been sent them by the defendant just as Mr. Cohn had said ; the furs were still boxed in the way they were boxed when they left the defendant’s place of business; they were not intermingled in any way with any stock of the Neaman Company, but rather they were sequestered away from any such stock. Mr. Kergan satisfied himself that the same situation prevailed with respect to furs in the hands of the Stall Company and in the hands of the Hecht Company which Mr. Cohn stated had been sent to them under the terms of the abovedescribed arrangement. The plaintiff, however, has concluded that the actions of the defendant in concert wtih his customers falls short of successful tax avoidance by it and has commenced this action.
In my opinion the plaintiff is right. I would hold that delivery of the furs was complete for purposes of the Excise Tax Act when the defendant put them into the hands of its customers who owned them. When one of the boxes of furs was put into the hands of, say, the Hecht Company that company had full control over it. All it had to do was open the box whenever its management wished and no permission of the defendant was required. True, it was the duty of the customer to the processor to tell the latter that the box had been opened and thus invite the latter to render its invoice but this was simply an agreement between the two of them as to when the customer would pay for the processing work. The defendant had no means of dealing with these boxes of furs after he put them into the hands of the company that owned them. It had no right of ingress and egress to and from its customer’s premises. The customer was only receiving its own property from the defendant. The customer insured the furs in question and the loss clause in the insurance policy was in favour of the customer as beneficiary. This owner of the furs had, at all times, a perfect right to sell them to anyone. The goods were in the stream of commerce at the will of their owner.
It seems to me that this fact of goods being, at the will of their owner, ‘‘in the stream of commerce’’, is the test to be applied in arriving at the meaning of the word ‘‘delivery’’ as used in this statute. Mr. Green has pointed out that the word “delivery” has more than one meaning and quoting 29 Halsbury, p. 16, refers to the need of close definition of the word as it has been used in statutes, notably the Sale of Gods Act, and, quoting both Maxwell on Interpretation of Statutes, 10th ed., and Craies on Statute Law, 5th ed., he argures that if there are alternative meanings of a word used in a statute the interpretation must favour the taxpayer. It is true that the term is used, at times, to denote transfer of title and, at times, to denote transfer of possession. It is clear beyond doubt that the word 4 delivery, ’ ’ as used in the Excise Tax Act with reference to furs that have been processed, could not have the meaning “transfer of title’’ because, always, the person to whom a processor delivers goods which have been processed is actually the person who already owns them. The term then must mean transfer of possession and, I think, physical possession such as we have here. Other citations by Mr. Green are: 28 Corpus Juris, pp. 634-5; Bank of Manhattan Trust Co. v. Gray, 166 Atlantic Reporter, p. 817; 6 Corpus Juris, p. 1109, 6(A); Pepper v. James, 7 Ga. A. 518; William R. Smith and Sons v. Bloom, 159 Iowa 592; Thompson v. Frakes, 84 N.W. 703. While these cases are instructive in many ways they do not, I feel, touch on the peculiar problem here and it is my view that the purpose of the Act is the best criterion from which to determine the meaning of the disputed word and, as already incidated, I regard the purpose of the Act to obtain tax payment at the time when the goods have been processed and are ready to enter the stream of commerce.
There will be judgment for the plaintiff with costs.