ANGERS J.:—The suppliant, Dominion Bridge Co. Ltd., a body politic and corporate, incorporated under the laws of the Dominion of Canada, having its head office in the City of Montreal, in the Province of Quebec, claims from His Majesty the King the refund of a sum of $1,503, paid under protest to the Commissioner of Excise by cheque to the order of the Collector of National Revenue at Montreal, the said sum imputable as follows: $501 against the assessment in respect of the materials incorporated in the bridge constructed over the St. Lawrence River between St. Gregoire de Montmorency and Ste. Petronille de l’Isle d’Orleans; $501 against the assessment in respect of the materials incorporated in the bridge constructed over the Gatineau River between the City of Hull and Gatineau Point; $501 against the assessment in respect of the materials incorporated in the bridge constructed over the Richelieu River at the City of Sorel.
The petition of right alleges in substance (inter alia) :
By a contract made on September 29, 1933, before H. F. Methot, N.P., a copy whereof was filed as ex. 3, between His Majesty the King, represented by the Honourable J. N. Francoeur, in his quality of Minister of Public Works in His Majesty’s Government for the Province of Quebec, and. the suppliant company, the latter, in consideration of the sum of $813,747, undertook to erect the structural steel super-structure of the centre portion of a bridge over the St. Lawrence River between St. Gregoire de Montmorency and Ste. Petronille, Isle of Orleans, and to furnish all materials and labour necessary for the execution of said contract;
In virtue of said contract the said superstructure was erected and, in respect of the materials incorporated therein, the suppliant was assessed in the sum of $25,023.53 for sales tax allegedly due under the terms of the Special War Revenue Act, R.S.C. 1927, c. 179, and amendments ;
By a contract made on March 25, 1931, before H. F. Methot, N.P., a copy whereof was filed as exhibit 1, between His Majesty the King, represented by the Honourable J. N. Francoeur, in his quality of Minister of Public Works and Labour in his Majesty’s Government for the Province of Quebec, and the suppliant company, the latter, in consideration of the sum of $94,- 920, undertook to erect the superstructure of a bridge over the Gatineau River between the City of Hull and Gatineau Point and to furnish all materials and labour necessary for the execution of said contract ;
In virtue of said contract the said bridge was erected and, in respect of the materials therein incorporated, the suppliant was assessed in the sum of $2,766.68 for sales tax allegedly due;
By a contract made on August 21, 1931, before E. Boiteau, N.P., a copy whereof was filed as ex. 2, between His Majesty the King, represented by the Honourable J. N. Francoeur, in his quality of Minister of Public Works and Labour in His Majesty’s Government for the Province of Quebec, and the suppliant company, the latter, in consideration of the sum of $318,000, undertook to erect the structural steel superstructure of a bridge over the Richelieu River, at the City of Sorel and the structural steel work in the two approach spans, the counter weight, roadway and sidewalk materials and machinery with installation for the bascule span and also operator’s house, and to furnish all materials and labour necessary for the said structure;
In virtue of said contract the said erection was completed and, in respect of the materials incorporated therein the suppliant was assessed in the sum of $12,992.68 for sales tax allegedly due ;
No sales tax was payable by suppliant in respect of the materials supplied in virtue of the contracts aforesaid ;
Alternatively, if the said materials were taxable, the suppliant was entitled to a refund of all monies paid in respect of such taxes by reason of the fact that the said materials were sold, if sold at all, to His Majesty the King in the right of the Province of Quebec;
On February 1, 1937, suppliant’s solicitors sent to the Commissioner of Excise the suppliant’s cheque to the order of the Collector of National Revenue at Montreal for $1,508 to be imputed in the manner hereinabove mentioned, the payment being made under protest; concurrently with the said payment, the suppliant, by letter of its solicitors, made application for refund of the said amount;
The sum of $1,503 was paid, though not due, to the Collector of National Revenue at Montreal and in consequence the provisions of the Civil Code apply and the suppliant is entitled to reclaim from His Majesty the King in the right of the Dominion of Canada the said sum.
In his statement of defence the respondent admits the allegations of facts set forth in the petition, denies however that the materials in question therein were sold to His Maesty the King in the right of the Province of Quebec, denies further that the sum of $1,503 was paid, though not due, to the Collector of National Revenue at Montreal and that consequently the provisions of the Civil Code apply and says that the materials in respect of which the suppliant was assessed for sales tax were manufactured or produced by the suppliant for the performance of the contracts mentioned in the petition of right and that the suppliant became liable to pay sales tax in respect of said materials and was rightly assessed in the sums of $25,023.53, $2,766.68 and $12,992.68.
The issue was joined by an answer praying acte of the admissions contained in the statement of defence and denying the remainder thereof.
The contracts exs. 1, 2 and 3 stipulate that the contractor, Dominion Bridge Co., shall supply all the materials, merchandise and tools necessary for the execution of its contracts as well as the labour relating thereto.
The clause in the contract ex. 1 dealing with this subject reads thus: ‘‘(a) The Contractor will see to the furnishing of all the materials, merchandise, tools and all that is necessary for the execution of his contract, of whatever kind they may be, and of the manual labour, whatever it may apply.”
The clause in the contract ex. 2 is worded as follows: ‘‘ (a) The contractor shall, and he doth hereby agree, to find, provide, and furnish all and every kind of materials, merchandise, tools, labor, implements, carriages and scaffoldings and the requisite number of mechanics and workmen, and all things needful and proper for the due and proper performance and completion of the said works hereby undertaken and all matters and things incident to the same.”
The clause in the contract ex. 3 is similar to the one contained in the contract ex. 2.
William Baxter, assistant secretary of the suppliant company, asked to describe the nature of the work done to fabricate the material required for the execution of the contracts aforesaid, replied: ‘‘The material is received from the rolling mills in structural shapes, beams, channels, angles and structural steel plates. These are manufactured in our plant according to special plans prepared for the structure and consists of cutting into lengths, punching, drilling, reaming and operations of that sort, and the riveting of certain pieces together to form the members going into the structure. . . . Q. In connection with all three contracts, are you in a position to say whether the material that went into the members of the bridge was manufactured or fabricated or dealt with by your company in the manner you described particularly for these jobs? A. Yes, we have no stock of members ready, we must manufacture that particularly for each job.”
Baxter apportioned the cost of material and cost of erection as follows: Hull-Gatineau Point Bridge, cost of material 76% and cost of erection 24% ; River Richelieu Bridge at Sorel, cost of material 86% and cost of erection 14%; St. Gregoire de Montmorency-Ste. Petronille Bridge, cost of material 78.7% and cost of erection 21.3%. The cost of the material includes the cost of transportation.
Baxter said that, during the progress of the work or subsequent to its completion, his company was notified that the Excise Tax Department claimed sales tax in respect to these jobs; he had correspondence with the Department about the matter; he produced as exs. 4 and 5 copies of two letters from the Excise Division of the Department of National Revenue signed ‘J. F. Telford, for Superintendent Excise Tax Collec- tions,’’ dated respectively August 27, 1934, and July 30, 1935, addressed to the suppliant company.
The letter of August 27, 1934, reads in part as follows:
"‘The contents of your letter of August 23 with reference to the assessment of $16,262.14, sales tax arrears established against your company by Excise Tax Auditor F. A. Doughty in his report No. 27, have been carefully considered.
“It has been decided that the matter of settlement of that portion of the assessment representing tax due on sales to the Provincial Government of Quebec may be allowed to remain in abeyance pending disposal of the case of Eastern Canada Steel and Iron Works, Limited, against which a similar assessment has been established.
“While the major portion of Excise Tax Auditor Doughty’s assessment against your company represents tax due on sales to the Provincial Government of Quebec, there is, however, included in the total of $16,262.14 an item of $500.68, tax on a sale to Anglin Noreross Limited, Montreal, Contract No. 11086, for supplying and erecting the structural steel work required for the Bank of Montreal at Ottawa.’’
The letter of July 30, 1935, contains, among others, the following statements:
“You were notified on August 27th last it had been decided that the matter of settlement of $15,761.46 sales tax arrears, established against your company on sales to the Provincial Government of Quebec, would be allowed to remain in abeyance pending disposal of the case of Eastern Canada Steel and Iron Works, Limited, against which a similar assessment had been established.
" " A further audit of the records of your company has recently been conducted and an additional assessment of $25,023.53 has been established for tax on similar sales made during the period from May 1st, 1934, to May 31st, 1935.”
The letter deals with the question of penalty and continues: “While the matter of settlement of the recently established assessment will likewise bé permitted to remain in abeyance pending disposal of the Eastern Canada Steel and Iron Works, Limited case, it is desired to draw to your attention at this time that penalty, computed at the statutory rate of two-thirds of one per cent per month, will continue to apply on both assessments so long as they remain outstanding, and that if it is finally decided the assessments themselves have to be paid, the penalty will then have to be paid also. ‘ ‘
I do not think that these letters are material; they cannot bind the Crown.
Witness stated that, if after fabricating the members required for the erection of the Gatineau River Bridge—I assume his answer applied to the three bridges—the Government of the Province of Quebec cancelled the contract and the bridge was not erected, the suppliant could not use them except possibly to sell them as scrap, unless it got an order for a similar structure.
In cross-examination Baxter maintained his statement that the steel parts prepared for a bridge would be useless in the event of the bridge not being erected, unless the suppliant got another bridge contract to exactly the same plans.
Baxter declared that the contracts had been executed, that the work had been accepted by the Provincial Government and that payment had been made to the suppliant in accordance with the terms of the contracts.
ASked if it had not been agreed between the suppliant and the Department of National Revenue that the erection cost would be figured at three-eighths of the total cost, the witness replied in the negative. According to him, the company said that it would pay the tax on the basis of making the usual deductions for transportation of the material and for erection; whether this basis was equivalent to three-eighths on any of the three jobs he could not say.
David Sim, Commissioner of Excise, was called as witness on behalf of the respondent. Shown the letters exs. 4 and 5, he stated that the subscriber, J. F, Telford, was at the time a clerk in the Excise Tax Administration Branch and that he had no authority to describe the tax therein mentioned as a tax due on sales to the Government of the Province of Quebec.
The witness filed as ex. A a copy of a document, dated July 4, 1934, signed by the Minister of National Revenue, made in virtue of the provisions of ss. (2) of s. 3 of the Department of National Revenue Act, R.S.C. 1927, c. 137, whereby the Minister assigned to the Commissioner of Excise the administration of Parts IV to XIV of the Special War Revenue Act, delegated to him the powers and duties in connection with the administration thereof which are conferred upon or directed to be performed by the Department of National Revenue or the Minister and authorized him to exercise each and all the powers conferred by the said Act upon the Minister.
The document was filed under reservation of an objection by counsel for supplant as to its relevancy; its purpose was to establish that the Commissioner had the necessary powers to make the assessments aforesaid; I am of opinion that its production was legal and the objection is overruled.
Sim declared that the assessments in question had been made in accordance with the Departmental Regulations, particularly cl. 13 thereof relating to contracts; a copy of the Regulations was produced as ex. B.
Asked to explain the process under which the assessments had been made, the witness stated: "‘The assessments were set up under s. 87 of the Act, as already pointed out, it being our belief there had been no sale of goods to the Province and that the transaction came within the ambit of s. 87(d), the goods being for use of the manufacturer or producer and not for sale and, under that section, we assessed the company. Q. (Mr. Vareoe) Can you say, Mr. Sim, just how this computation was made ? A. It was made in accordance with the Regulation which I have already filed, that is, on the contract price less these erection expenses arrived at by regulation. Q. Some proportion was arrived at by your Department and whether in conjunction with the Department or not it does not matter for the moment, but there was a proportionate basis, was there not? A. There was an amount set up by the auditor which I approved.”
Asked in cross-examination if, assuming that there had been a contract between the suppliant and the Provincial Government in virtue whereof the former would have sold to the latter the material fabricated by it, the erection to be made by another contractor, the assessments would have been made on a different basis, the witness replied that there would be no assessment at all if there was a sale of goods to the Provincial Government, as there is an exemption.
Sim admitted, however, that he did not disagree with counsel’s statement that there is a right to claim a refund and not an exemption of tax.
Questioned about the manner in which the assessments had been arrived at, Sim summed up his explanation briefly: ‘‘We claim the goods were taken for the use of the manufacturer.”
According to him, the reason for this was that there was a contract involved.
In re-examination the witness was asked to produce the assessments, which he did; they were marked as ex. C. Sim said they were discussed and received his approval.
Frederick Arthur Doughty, assistant supervising auditor in the Department of National Revenue in Montreal, prepared the reports filed as ex. C. Asked how the amount of the tax was made up, he answered that this was done by deducting from the contract price the allowable deductions, i.e. the deductions which the taxpayer considered as allowable; a rather indefinite answer, I must say. He could not state what proportion of the contract price was deducted for erection cost in each case; the proportion would vary ; the amount of the deduction would depend on the amount of actual allowable deduction, which, may I suggest, appears unquestionable.
Doughty declared that, in the case of the Island of Orleans Bridge, there was an arrangement between him and Baxter, in virtue of which the proportion of the deduction or erection expenses was fixed at three-eighths of the contract price. He added that a similar arrangement was made in connection with the two other bridges; the proportion would be based on the actual assessment; at least witness said he imagined that was the basis of the arrangement; he and Baxter would reach a working basis.
In cross-examination, Doughty stated that in the reports ex. C he set up a claim for tax on the basis of the regulation, viz., the contract price less the deduction for erection; that is what Baxter said he set up in his books. Witness and Baxter agreed on the assessment.
The proportion of three-eighths was only in relation to the Island of Orleans Bridge.
There is no dispute about the amounts of the assessment; its validity alone is contested.
In opening, counsel for the suppliant declared that his client, for the purpose of raising the issue, had paid certain amounts on account and applied for a fiat for a petition of right to recover them so that the legal right to impose the tax might be decided.
Counsel for the suppliant submitted that the transactions in question are taxable under s. 86(a) of the Special War Revenue Act and that under s. 105 thereof the taxpayer is entitled to a refund. Counsel for the respondent, on the other hand, urged that the said transactions are subject to s. 87(d) and that s. 105 does not apply.
It will be convenient to cite the relevant provisions of ss. 86, 87, 104 and 105 :
" " 86(1) There shall be imposed, levied and collected a consumption or sales tax of six per cent on the sale price of all goods,—
(a) produced or manufactured in Canada, payable by the producer or manufacturer at the time of the delivery of such goods to the purchaser thereof . . . (amended 1932, c. 54, s.
11(1))."
"87(1) Whenever goods are manufactured or produced in Canada under such circumstances or conditions as render it difficult to determine the value thereof for the consumption or sales tax because . . . .
"‘(d) such goods are for use by the manufacturer or producer and not for sale;
the Minister may determine the value for the tax under this Act and all such transactions shall for the purposes of this Act be regarded as sales. ’ ‘
• 104. The taxes imposed by Parts X, XI, XII, and XIII of this Act shall apply to goods imported by
"" (a) His Majesty in the right of the Government of Canada: "‘(b) His Majesty in the right of the Government of any province of Canada, for the purpose of resale.''
"105. (1) A refund of the amount of taxes paid under Parts X, XI, XII and XIII of this Act may be granted to a manufacturer, producer, wholesaler, jobber or other dealer on goods sold to His Majesty in the right of the Government of any province of Canada, if the said goods are purchased by His Majesty, for any purpose other than purposes of resale. . . .”
To bring the transactions which took place between His Majesty the King in the right of the Province of Quebec and the suppliant within the scope of s. 86, one must conelude that the suppliant sold and delivered goods, produced or manufactured in Canada, to His Majesty the King. Counsel for the suppliant naturally -contended that this is what had occurred. If that is the case, the refund clause contained in para. 1 of s. 105 would apply: the superstructure of the three bridges in question erected by the suppliant with its materials on behalf of His Majesty the King in the right aforesaid was not acquired by the latter for purposes of resale.
Can it be said that the suppliant sold to His Majesty the King ‘‘goods,’’ or to use the word included in the French version of s. 86 to which my attention was drawn, "Marchandises”? Or is it more appropriate and judicious to say, as suggested by counsel for the respondent, that what the suppliant sold to His Majesty the King was an immovable property, viz., the superstructure of three bridges?
Three cases were cited to which I deem it convenient to refer : Dominion Press Ltd. v. Minister of Customs & Excise, [1927]
C.T.C.; [1927] 4 D.L.R. 225, S.C.R. 583; [1928] 3 D.L.R. 781; The King v. Fraser Companies, Ltd., [1931] C.T.C.; [1931] 4 D.L.R. 145, S.C.R. 490; The King v. Wampole (Henry K.) & Co., [1931] C.T.C.; [1931] 3 D.L.R. 754, 8.C.R. 494.
In the case of Dominion Press Lid. v. Minister of Customs & Excise, the latter had brought an action against the former in the Superior Court of the Province of Quebec claiming arrears of sales tax under the Special War Revenue Act, 1915, and amendments. The Superior Court held that the company was not liable for the tax. An appeal, taken direct to the Supreme Court, was allowed unanimously. The Judicial Committee of the Privy Council affirmed the decision of the Supreme Court.
As appears from the reports, Dominion Press Ltd. carried on business as job printers. Its operations consisted in printing to the order of individual customers stationery of a business character, such as cards, labels, order forms, price lists and statements. No privity of contract was created between the supplier of the paper used and the customers. The company supplied at a fixed price the material and the labour and delivered to its customers the finished article.
The judgment of the Judicial Committee of the Privy Council was delivered by Lord Hailsham L.C. ; it seems to me expedient to quote an extract therefrom (pp. 782-3) :
"‘The appellants contend that in these circumstances they do not come within the words of the taxing statute. . . . The Act of 1922 imposes a tax of 214% ‘on sales and deliveries by Canadian manufacturers or producers, and wholesalers or jobbers,’ and it contains two provisos. First of all, there is a proviso which enacts that the tax ‘shall not apply to sales or importations of . . . job printed matter produced and sold by printers or firms, whole sales of job printing do not exceed ten thousand dollars per annum.’ Secondly, there is a proviso that the taxes ‘shall not be payable on goods exported, or on sales of goods made to the order of each individual customer by a business which sells exclusively by retail under regulations by the Minister of Customs and Excise who shall be sole judge as to the classification of a business.’ . . .
“The Act of 1923, imposes a tax of 6% ‘on the sale price of all goods produced or manufactured in Canada;’ and it does not reproduce the provisos.
“The first question to be determined is obviously whether or not these transactions are sales and deliveries by Canadian manufacturers or producers within the enacting words of this section. In their Lordships’ opinion they do come within that language.
‘“There has been a discussion before the Board as to whether or not the contract was a contract of sale and delivery within such cases as Lee v. Griffin (1861), 1 B. & S. 272, 121 E.R. 716, or a contract for work and labour done and materials supplied within the authority of Clay v. Yates (1856), 1 H. & N. 73, 156 E.R. 1123.
“In their Lordships’ opinion the material matter to be considered is as to the meaning of the expression ‘sales and deliveries by Canadian manufacturers or producers’ as used in this statute.
“Having regard to the language of the first proviso and to the general scope of the enactment, their Lordships entertain no doubt that these contracts were contracts of sales and deliveries by Canadian manufacturers or producers, within the meaning of the taxing statute, and that the payments made under them constituted the sale price of goods produced or manufactured in Canada. That would be enough to dispose of the appeal with regard to the period after January, 1924.’’
The observations concerning the second proviso, which was not reproduced in the Act of 1923 (c. 70) nor in the subsequent Acts, offer no interest in the present case.
The Honourable Mr. Justice Rinfret, who delivered the judgment of the Supreme Court, expressed himself as follows (pp. 228-9) :
“On this evidence, the contract between the respondent and its customers is not one of lease and hire, but one of sale. It is a contract for the sale of a thing to be made (chose à faire or chose wne fois faite).
" ‘ Such is the solution of the Roman law and of the old French law which the commissioners have embodied in the Civil Code of Quebec. On this subject, a quotation from Pothier (4 Bugnet, 3rd ed., No. 394) is strictly in point:—‘Ce contrat (de louage d’ouvrage) a aussi beaucoup d’analogie avec le contrat de vente.
‘“* ‘Justinien en ses Institutes f au tit-de Loc. cond., dit qu’on doute à l’égard de certaines contrats, s’ils sont contrats de vente ou contrats de louage, et il donne cette règle pour les discerner : “lorsque c’est l’ouvrier qui fournit la matière, c’est un contrat de vente; au contraire, lorsque c’est moi qui fournis à l’ouvrier la matière de l’ouvrage que je lui fais faire, le contrat est un contrat de louage.’’ Par example, si j’ai fait marché avec un orfèvre pour qu’il me fasse une paire de flambeaux d’argent, et qu’il fournisse la matière, c’est un contrat de vente que cet orfèvre me fait de la paire de flambeaux qu ’il se charge de faire; mais si je lui ai fourni un lingot d’argent pour qu’il m’en fit une paire de flambeaux, c’est un contrat de louage.
‘Observez que, pour qu’un contrat soit un contrat de louage, il suffit que je fournisse à l’ouvrier la principale matière qui doit entrer dans la composition de l’ouvrage; quoique l’ouvrier fournisse le surplus, le contrat n’en est pas moins un contrat de louage.
" On peut apporter plusieurs exemples de ce principe.
" " “Lorsque j’envoie chez mon tailleur de l’étoffe pour me faire un habit : quoique le tailleur, outre sa façon, fournisse les boutons, le fil, même les doublures et les galons, notre marché n’en sera pas moins un contrat de louage, parce que je fournis est ce qu’il y a de principal dans un habit.
" " " Pareillement, le marché que j’ai fait avec un entrepreneur pour qu'il me construise une maison, ne laisse pas d’être un contrat de louage, quoique par notre marché il doive fournir les matériaux, parce que le terrain que je fournis pour y construire la maison, est ce qu’il y a de principal dans une maison, quum aedificium solo cedat.’
‘‘The modern doctrine and, jurisprudence in France should perhaps be accepted with caution, because art. 1711 of the Code Napoléon contains the following definition,—‘Les devis, marchés ou prix faits pour l’entreprise d’un ouvrage moyennant un prix déterminé sont aussi un louage lorsque la matière est fournie par celui pour qui l’ouvrage se fait,’ which is not to be found in the Civil Code of Quebec. But the preponderating opinion is that the above passage of Pothier well expresses the state of the old law (Fuzier-Herman, Répertoire, verbo Louage d’ouvrage, de services et l’industrie, no. 1105). Planiol (Droit Civil 6th ed., vol. 2, no. 1902) calls it the ‘solution traditionnelle. ’ On the authority of Clay v. Yates (1856), 1 H. & N. 73; 156 E.R. 1123, the situation would be the same under the common law.
“According to the evidence before us, the respondent does not undertake to print on material (such as tags, cards, or paper generally) supplied by the client. It contracts to sell and deliver printed business cards, labels, order forms, price lists, statements and general stationery. The transactions described in the evidence and in respect of which the Minister seeks to recover taxes are sales. In the words of Pothier, ‘elles participent du contrat de vente.’ ”
In that case the goods involved were movables and remained so; in the present instance the goods, originally movables, were incorporated in an immovable property and are now an integrant part thereof. It was urged on behalf of respondent that the members which the suppliant fabricated and incorporated in the superstructure of the bridges were not sold and delivered to His Majesty the King but that the object of the sale, if there were a sale, was the superstructure of the bridges fully completed and erected. I do not think that it makes a particle of difference that, instead of being sold separately and distinctly, the members of the superstructures in question, manufactured expressly for His Majesty the King, were incorporated in the constructions which the suppliant had undertaken to make for him. The transactions which took place between the suppliant and His Majesty the King, in so far as the supply of the materials required for the erection of the superstructure of the bridges is concerned, constitute a sale.
The next case cited is that of The King v. Fraser Companies, Ltd., [1931] C.T.C.; [1981] 4 D.L.R. 145. The defendant respondent was a manufacturer of lumber for sale ; it consumed a portion of the lumber so manufactured in the construction and repair of pulp and other mills and of houses for its employees. The lumber so consumed was taken from stock in the yards produced and manufactured, in the ordinary course of the com- pany’s business, for sale and not produced or manufactured for the purpose for which it was used.
The majority of the Supreme Court (Newcombe, Rinfret, Lamont and Smith JJ., Cannon J. dissenting) held that the company was liable for sales tax on the lumber so consumed.
Smith J. who delivered the judgment, after relating the facts and quoting ss. 86(a) and 87(d), continued as follows (p. 146) :
"‘Maclean, P., before whom the case was tried, dismissed the action, [1931] 2 D.L.R. 212, on the ground that the lumber so consumed was produced in the ordinary course of business for sale, and not specifically for use by the manufacturer, within the meaning of the above quoted s. 87(d).
“With great respect, I am unable to take this view of the meaning and effect of these provisions of the Act. To so construe them is to put a narrow and technical construction upon the precise words used in ss. (d), without taking into consideration the meaning and intent of the statute as a whole. It seems to me clear that the real intention was to levy a consumption or sales tax of 4% on the sale price of all goods produced or manufactured in Canada, whether the goods so produced should be sold by the manufacturer or consumed by himself for his own purposes.
“The view taken in the Court below would result in the introduction of an exception to the general rule that all goods produced or manufactured are to pay a tax, and would amount to a discrimination in favour of a particular consumer. As an example, it is not unusual for a manufacturer engaged in the production and manufacture of lumber for sale to engage at the same time in the business of a building contractor. He manufactures his lumber for sale, and, as a general rule, would not manufacture any specific lumber for use in connection with his building contracts, but would simply take lumber for these purposes from the general stock manufactured for sale, and might thus, under the view taken in the Court below, escape taxation on all lumber thus diverted from the general stock manufactured for sale/’
It is quite clear that the lumber in question, although manufactured for sale, was used by the manufacturer for its own purpose and benefit. I do not think that this decision has any application in the present case.
The third case to which reference was made is that of The King v. Wampole (Henry K.) & Co., [1931] C.T.C.; [1931] 3 D.L.R. 754.
The company, in the course of its business as manufacturer of pharmaceutical products, put up in small packages and distributed free among physicians and druggists samples of its products for the purpose of acquainting them with their character and quality.
A special case was agreed upon for the opinion of the Court, cl. 4 of which was drafted as follows: "‘4. The cost of producing such samples was paid by the company as a necessary expense of business, and the company in its books treated such expense as a necessary cost of production of articles manufactured and sold, in respect of which last mentioned articles the company has paid sales tax.’’
After quoting this clause, Anglin C.J.C. delivering the judgment of the majority of the Court (Anglin C.J.C. and Rinfret, Lamont and Cannon JJ., Neweombe J. dissenting) said (p. 754) :
"‘It is obvious to me that it cannot have been the intention of the Legislature to tax the same property twice in the hands of the manufacturer. Having regard to the admission of para. 4, above quoted, such double taxation would ensue were we to hold the samples here in question to be now subject to the consumption or sales tax, it being there admitted that the cost of producing such samples is included in the ‘cost of production of articles manufactured and sold, in respect of which . . . the Company has paid sales tax.'
“If the cost or value of these goods used as samples has already been a subject of the sales tax in this way, it would seem to involve double taxation if they should now be held liable for sales tax on their distribution as free samples. But for the admission of para. 4, however, I should certainly have been prepared to hold that the ‘use’ by the company of goods manufactured by it as free samples for advertising purposes is a ‘use’ within clause (d) of s. 87.”’
The dissent of Newcombe J., related to the interpretation to be given to cl. 4 of the special case aforesaid; the learned Judge expressed the following opinion (p. 799) :
“I am in agreement with my Lord and my learned brethren as to the interpretation of the charging section; but I am not persuaded that the facts admitted by clause 4 of the case, constitute payment, or operate to relieve the respondent company of its liability for the tax. If the sale price of the goods were increased by the company’s method of bookkeeping, I do not doubt that the fact would have been stated.
“I see nothing in the case to justify a finding of double taxation, or that the tax upon the samples, to which, in the view of the Court, the Government was* entitled, has been paid; . . . .’’
Here again it is evident that the goods upon which His Majesty the King wanted to impose a sales tax were used by the manufacturer thereof for its own benefit and advantage, and I do not think that the decision has any bearing on the question at issue.
The underlying principle of the Act, to my mind, is that all goods produced or manufactured in Canada shall be subject to a consumption or sales tax on the sale price or value thereof, according as they are sold by the producer or manufacturer or consumed by him for his own purposes.
It was contended on behalf of the respondent that the matter in controversy herein is governed by s. 87(d) and not by para. (a) of ss. (1) of s. 86, because there was no sale of the goods but use thereof by the suppliant. I cannot agree with this contention ; I do not think that the members incorporated in the superstructure of the bridges can be considered as goods made for the use of the suppliant and not for sale.
Although I believe that the material matter to be determined is the meaning of the expression ‘‘on the sale price . . . at the time of the delivery,’’ I may perhaps note that, under the law of the Province of Quebec, the contracts entered into between His Majesty the King in the right. of the Province of Quebec and the suppliant are not contracts of lease and hire but are contracts of sale : Mignault, Droit Civil, vol. 7, p. 401, para. 11; Pothier (ed. Bugnet) vol. 4, No. 394; Guillouard, Traité du Contrat de Louage, vol. 2, no. 772; Fuzier-Herman, Répertoire Général, vol. 26, no. 1105; Lyon-Caen & Renault, Traité de Droit Commercial, 4th ed., vol. 5, no. 152 ; Planiol, Traité Elémentaire de Droit Civil, 9th ed., vol. 2, no. 1902; Planoil & Ripert, Traité Pratique de Droit Civil Français, ed. 1932, vol. 11, no. 912.
After a careful perusal of the evidence and of the argument of counsel and the authorities cited, I have reached the conclusion that the materials supplied by the suppliant company and incorporated by it in the superstructure of the three bridges aforesaid must be considered as goods sold and delivered to His Majesty the King in the right of the Province of Quebec within the meaning of s. 86(a) of the Special War Revenue Act and are consequently liable to a sales tax thereunder.
As these goods were not purchased by His Majesty The King in the right of the Province of Quebee for purposes of resale, I am of opinion that ss. (1) of s. 105 applies and that the suppliant is entitled to a refund of the sum of $1,503, without interest.
The suppliant will have its costs of the action.
Judgment accordingly.