Montgomery, J:—This is an application to this court by way of trial provided for under subsection 2 of section 20 of The Retail Sales Tax Act, RSO 1970, c 415, and amendments thereto. There is also provision for the court to hear viva voce evidence on the appeal, and that was done in this case.
The Minister of Revenue levied sales tax in the amount of $32,265.31 against the appellant with respect to a piece of equipment which forms part of the appellant’s production line in the manufacture of lumber from logs. The equipment in question is a lumber sorting system. I must add that there was also an interest factor paid by the appellant on the tax assessed in the amount of $473.99. The appellant filed the appropriate notice of objection to the tax levied and thus found himself before this court.
The appellant describes the bundling and sorting machine as an automatic lumber sorting and stacking machine, and contends that it is exempt from retail sales tax pursuant to the provisions of paragraph 38(a) of subsection (1) of section 5 of The Retail Sales Tax Act, as amended by The Retail Sales Tax Amendment Act, 1976, c 82, subsection 3(1), which reads as follows:
the manufacture or production of tangible personal property, the development by such manufacturer or producer of goods for his manufacture or production, or the development by such manufacturer or producer of manufacturing or production processes for his own use;
The appellant says the automatic lumber sorting and stacking machine is equipment purchased for the use of a manufacturer, or for the use of a producer, and was used directly in the manufacture and production of tangible personal property, namely the production of lumber.
The viva voce evidence explained in some considerable detail the entire process of turning logs in their native state, as they come out of the bush, into kiln dried lumber which is in packages ready to be placed on freight cars or otherwise transported. A detailed explanation of the process was given.
I am satisfied on the viva voce evidence before me that the lumber sorting and stacking equipment was a part of the production line, and that the latter was a continuous line. I am not persuaded by the argument of the respondent that this equipment can in any way be construed as material handling equipment as defined in subsection 13(2) of Regulation 784, which reads as follows:
Subject to subsections 3 and 4, the following types or classes of machinery or equipment are excluded from the exemption conferred by paragraph 38(a) of subsection 1 of section 5 of the Act in respect of the sale of such machinery or equipment after the 7th day of August, 1977.
(t) machinery or equipment to which clause (a) of paragraph 38(a) of subsection 1 of section 5 of the Act applies and that does not, by its specific function, alter the goods in process.
It seems to me that the entire thrust of the argument of the respondent is to suggest that nothing is done to the product, the end product, as a result of the piece of equipment upon which tax has been assessed by the Minister.
I cannot agree. I am of the view that this piece of equipment is an essential part of the manufacturing of turning logs into finished lumber.
I therefore find that the appeal should succeed, that the amount of tax levied, together with the interest levied thereon, shall be remitted to the appellant, and further that the appellant shall have interest upon the sums paid from September, 1,1978, to August 1,1980, at a 9% rate, and thereafter until payment at a 12% rate. These rates of interest are prescribed in subsection 20(2) of the Act. Costs, gentlemen?
Mr Adamcyk: My friend, I believe, has asked for costs in this case. I would suggest party and party cost.
Mr Pirie: That is agreeable, my lord.
His Lordship: Cost to follow the event on a party and party basis.