Goodyear Tire & Rubber Co. of Canada Ltd. et al. v. T. Eaton Co. Ltd. et al., 56 DTC 1060, [1956] SCR 610

Supreme Court of Canada

Goodyear Tire & Rubber Co. of Canada Ltd. et al. v. T. Eaton Co. Ltd. et al., [1956] S.C.R. 610

Date: 1956-06-11

The Goodyear Tire and Rubber Company of Canada Limited, Firestone Tire And Rubber Company of Canada Limited, B. F. Goodrich Company of Canada Limited Appellants;

and

The T. Eaton Company Limited and Others Respondents.

Present: Kerwin C.J., Rand, Fauteux, Abbott and Nolan JJ.

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA

Taxation—Sales and Excise taxes—Whether retailer of "special brand" tires made by another company is a manufacturer—Jurisdiction of the Tariff Board—Excise Tax Act, R.S.C. 1952, c. 100, s. 57.

On a reference to the Tariff Board by the Deputy Minister of National Revenue (Customs and Excise) pursuant to s. 57 of the Excise Tax Act, R.S.C. 1952, c. 100, the Board declared that the T. Eaton Co. Ltd. was not the "producer or manufacturer" of two "special brand" auto-mobile tires sold by it and manufactured exclusively for it by a rubber company, and was not therefore liable for excise or sales tax on the sale of such tires. The Exchequer Court affirmed the declaration as well as the authority of the Board to hear the reference.

Held: The appeal should be allowed and the judgment of the Exchequer Court and the declaration of the Tariff Board set aside.

The Board had no jurisdiction to make the declaration, and the Board, as well as the Exchequer Court and this Court, was precluded from considering the merits of the issue. S. 57 of the Excise Tax Act, which gives the Board power to decide whether any tax is payable on an article and, if so, what rate of tax is payable, does not give the Board power to decide whether a particular person is a person upon whom a tax is imposed in respect of an article. That question is an issue between that person and the Crown. To permit third parties to intervene in such an issue would be a departure from the general system of the law.

APPEAL from the judgment of the Exchequer Court of Canada, Thorson P.[1], affirming the declaration of the Tariff Board.

J. J. Robinette, Q.C. and J. B. Lawson for the appellants.

D. Arnup, Q.C. and G. F. Henderson, Q.C. for T. Eaton Co.

Stuart Thom, Q.C. for General Tire & Rubber Co.

R. M. Sedgewick and C. W. Lewis for Simpsons-Sears Ltd.

E. Eaton for Minister of National Revenue.

[Page 611]

The judgment of Kerwin C.J., Fauteux, Abbott and Nolan JJ. was delivered by:—

FAUTEUX J.:—For some years, certain Canadian rubber companies have been manufacturing "special brand" auto-mobile tires for sale to various retail corporations as well as to other rubber companies. These tires bear the names of the purchasers and the treads are molded with special markings which are not sold to others. The first mentioned companies have been regarded by the Department as the manufacturers or producers of the tires for the purposes of the Excise Tax Act (R.S.C. 1952, c. 100). The appellants, competing manufacturers of automobile tires, objected to this ruling and contended that the "special brand" cus­tomers should be treated as the manufacturers or producers of the tires within the meaning of section 2(a) (ii) of the Excise Tax Act and subjected to sales and excise taxes on their sales. In a letter dated August 19, 1954, wherein these facts are recited, the Deputy Minister of National Revenue referred the matter to the Tariff Board for a 'declaration as to the correctness or otherwise of the Department's ruling; this reference purports to be made in accordance with sec­tion 57 of the Act, the relevant subsections of which provide that:—

(1) Where any difference arises or where any doubt exists as to whether any or what rate of tax is payable on any article under this Act and there is no previous decision upon the question by any competent tribunal binding throughout Canada, the Tariff Board constituted by the Tariff Board Act may declare what amount of tax is payable thereon or that the article is exempt from 'Lax under this Act.

(2) Before making a declaration under subsection (1) the Tariff Board shall provide for a hearing and shall publish a notice thereof in the Canada Gazette at least twenty-one days prior to the day of the hearing; and any person who, on or before that day, enters an appearance with the Secretary of the Tariff Board may be heard at the hearing.

(3) A declaration by the Tariff Board under this section is final and conclusive, subject to appeal as provided in section 58.

(4) …..

(5) …..

During the hearing of this reference, members of the Board raised the question of jurisdiction. In the views they then expressed, the difference arising in the matter is not, as contemplated in subsection (1) of section 57 "whether any or what rate of tax is payable" on these articles, under the Act-a question as to which, admittedly,

[Page 612]

no difference or doubt existed in the premises-, but whether the Canadian rubber companies manufacturing "special brand" automobile tires for sale to various retail corporations or the. retail corporations, should be regarded by the Department as the manufacturers or producers, within the meaning of the section 2(a) (ii) and should there-fore pay the tax-a question scarcely within the terms of a reference authorized under section 57. The point was argued but not determined. The Board, acting upon the suggestion of counsel for the Minister, continued the hear­ing, "leaving the question of jurisdiction open to be settled elsewhere" and, on the merits of the question referred to, approved the ruling of the Department. This decision as well as the authority of the Board to entertain the refer­ence, were subsequently affirmed by the Exchequer Court on an appeal by the present appellants who, continuing to assert the jurisdiction of the Board, now attack the judg­ment rendered on the merits of the question.

The jurisdiction of the Board in the matter must first be ascertained for, if there is no such jurisdiction, this Court, as well as the Board and the Exchequer Court, is precluded from entering upon a consideration of the merits of the issue. Okalta Oils Limited v. Minister of National Revenue[2].

The contention that the question propounded to the Board in the present case is one contemplated by the terms of section 57, is predicated on the argument of counsel for the Minister that the words "by any persons" must be understood to follow the word "payable" twice appearing in the first paragraph of the section; and the reasons upon which rests the decision of the Court below are expressed as follows:—

That the tax is imposed on a person in respect of an article and not on the article itself, notwithstanding the wording of section 57, seems clear: vide such cases as Provincial Treasurer of Alberta v. Kerr (1933) A.C. 710; Kerr v. Superintendent of Income Tax and Attorney-General for Alberta (1942) S.C.R. 435; Smith v. Vermillion Hills Rural Council (1916) 2 A.C. 569. The articles that were the subject of the reference were "special brand" automobile tires. As the hearing developed the specific articles before the Board were the special brand "Bulldog" and "Trojan" tires sold by Eaton's. Since there was difference or doubt whether Eaton's was the manufacturer or producer of the tires there was difference or doubt whether tax was payable on them on their sale by Eaton's. The Board

[Page 613]

could not determine such difference or doubt and decide whether tax was payable on the tires or whether they were exempt from tax on their sale by Eaton's without deciding whether Eaton's was the manufacturer or producer of them. Failure to recognize this basic fact was the fallacy in the submission of lack of jurisdiction. Since there was difference or doubt whether any tax was payable on the "Bulldog" and "Trojan" tires on their sale by Eaton's the Board had jurisdiction to resolve such doubt or difference. And since the Board could not resolve such doubt or difference without deciding whether Eaton's was the manufacturer or producer of the tires it follows, as a matter of course, that it had jurisdic­tion to decide that question.

With deference, I fail to see how this line of reasoning is of any assistance in determining the specific jurisdiction of the Tariff Board under section 57 of the Act. Whether a particular person is a person upon whom a tax is imposed in respect of an article or whether a particular article is one in respect of which a tax is imposed upon a person are two separate questions;-indeed the whole argument at the hearing was centred exclusively upon the former, nothing being said as to the latter, as to which there was admittedly no point of difference. While these two questions, as well as a variety of others, are proper ones in an action for the recovery of taxes, it does not follow that they are all equally so in a reference to the Tariff Board under section 57 if, on a proper construction of the whole section, the question as worded in paragraph (1) "whether any or what rate of tax is payable on any article" means only whether any article is one in respect of which any and, if so, what rate of tax is imposed.

The declaration of the Board as to the question within its jurisdiction to entertain is, subject to appeal by leave on a question of law only, final and conclusive as against any of the parties to the proceedings, and perhaps as against anyone in Canada who, after publication in the Canada Gazette of a notice of as hearing, has failed to avail himself of the right to appear before and to be heard by the Board. In the result, one at least of the many issues, which ordinarily it would be for the Exchequer Court or some other competent tribunal to determine, either in an action for recovery of taxes or penal proceedings, is finally and conclusively decided by the Board. That section 57 thus affords a substantial alteration of the general system of the law and particularly of the provisions of the Act dealing

[Page 614]

with the recovery of taxes, is manifest. In like circum­stances, the construction of this subsequent enactment, section 57, is subject to the rule that a Legislature is not presumed to depart from the general system of the law without expressing its intentions to do so with irresistible clearness, failing which the law remains undisturbed. (Maxwell On. Interpretation of Statutes, 9th edition, page 84). There being a presumption against the implicit alteration of the law, effect cannot be given to the suggestion of counsel for the Department to read after the word "pay-able" twice appearing in the first paragraph of the section, the words "by any persons". To do so would not only extend the scope of the question but stretch it to a point creating clear conflict between the English and the French texts of paragraph (1). Indeed if one refers, .as one may under the authorities (Composers, Authors and Publishers Association Limited v. Western Fair Association[3]), to the French version, the latter makes it abundantly clear that the real question is "whether any particular article is one in respect of which any or what rate of tax is imposed":‑

57. (1) Lorsqu'il se produit un différend ou qu'un doute existe sur la question de savoir si, aux termes de la présente loi, un article est assujéti à la taxe ou sur le taux applicable à l'article et qu'aucun tribunal com­pétent n'a jusque-là rendu, en l'espèce, une décision visant tout le Canada, la Commission du tarif, instituée par la Loi sur la Commission du tarif, peut déclarer quel montant de taxe est exigible sur l'article ou déclarer que l'article est exempt de la taxe en vertu de la présente loi.

In the context, the word "payable" does not appear; and the context does not either lend itself to the inclusion of the words "payable par quiconque". While, on these views, it must be held that there was no jurisdiction for the Board to entertain the question propounded in the letter of the Deputy Minister, this conclusion, if the examination of the section is pursued, finds, I think, further support.

As is manifested by the reasons for the declaration of the Board and for the judgment of the Court below upon the merits of the question referred to the Board, the declara­tion as well as the judgment rest on findings of facts as to the relationship between the T. Eaton Company Limited and the Dominion Rubber Company Limited.

[Page 615]

Under paragraph (1) of section 57, a condition precedent to the jurisdiction of the Board to entertain a reference upon the question stated in the section is that there be "no previous decision upon the question by a competent tribunal binding throughout Canada". The section, there-fore, contemplates that the question to be propounded to the Board is, of its nature, susceptible to be one upon which a previous decision binding throughout Canada might have been rendered. Of its nature, the question here arising can hardly give rise to a decision having such an effect.

Under paragraph (2), the Board is precluded from deciding the question, which under paragraph (1) is within its jurisdiction to entertain, unless a hearing be provided for and notice thereof published in the Canada Gazette, so that anyone,‑other than the person who applies for the declaration, the Deputy-Minister of National Revenue for Customs or Excise,‑may be given an opportunity to enter an appearance and be heard in the matter. Whether or not a particular article is one in respect of which a tax is imposed raises a question of general concern throughout Canada and is a matter justifying notice being given to third parties so that they may be heard if they so elect. But whether a particular person is the person liable for the payment of a tax imposed in respect of an article is an issue between that person and the Crown. To permit third parties to intervene in such an issue would be a departure from the general system of the law. The intention of Par­liament to do so would have to be indicated in explicit terms, which, in my view, has not been done under the section.

Paragraph (3) provides that "a declaration by the Tariff Board under this section is final and conclusive, subject to appeal as provided in section 58". Prior to 15 Geo. VI, c. 28, s. 7, enacted in 1951, what is now paragraph (3) read as follows:‑

A declaration by the Tariff Board, under this section, shall have the same force and effect as if it had been sanctioned by statute.

The question which could then be referred to the Board was exactly the same as it is to-day. If the question con­templated by section 57 is whether a particular article is

[Page 616]

one in respect of which any .and what rate of tax is imposed, it is not difficult to understand why Parliament wanted to give to the determination of this question the same force and effect as if it had been sanctioned by statute, but there would appear to be no reason for the attribution of such an effect to the determination of tax liability of a person aris­ing out of the relationship existing between that person and another.

Upon the ground that the Tariff Board had no jurisdic­tion to make its declaration of December 7, 1954, I would allow the appeal and set aside the judgment of the Exchequer Court and the Tariff Board's declaration. There should be no costs in this Court or in the Exchequer Court.

RAND J.:‑I agree with the conclusion and with the reasons generally of my brother Fauteux, but I desire to state shortly my own view of s. 57 of the Excise Tax Act. S-s. (1) declares:

Where any difference arises or where any doubt exists as to whether any or what rate of tax is payable on any article under this Act and there is no previous decision upon .the question by any competent tribunal binding throughout Canada, the Tariff Board constituted by the Tariff Board Act may declare what amount of tax is payable thereon or that the article is exempt from tax under this Act.

The language "whether any or what rate of tax is payable on any article" raises a question that, in effect, asks for a decision in rem, a decision determining the rate as applied to the article regardless of personal liability for the tax. It is only for that reason that a general hearing is required and that the declaration is to be, by s-s. (3), "final and con­clusive". That is the only question authorized by the sec­tion to be put by the Deputy Minister to the Board.

It is argued that the language "may declare what amount of tax is payable thereon" evidences an intention to have such a question .as that submitted passed upon. The point is, no doubt, arguable, but what is to be resolved, is a doubt or difference as to the rate; the price is assumed; and once the rate is ascertained the amount of the tax mathematically

[Page 617]

follows. Even considering s-s. (1) alone, I think the jurisdiction is clearly confined to the question specified in two lines, "any or what rate of tax", and the use of the word "amount" cannot, in the context, affect it. Confirmed, how-ever, as that interpretation is by the subsequent subsec­tions, I entertain no doubt of the limit of jurisdiction.

What is sought here is something quite 'different: it is, who, as the "manufacturer or producer" of the goods, is, as between two parties, liable for the tax? The article and the rate are admitted. S. 23(2) and s. 30(1) (a) (i) provide for the payment of the excess and consumption taxes respec­tively by the "manufacturer or producer". S. 2(1) (a) (ii) defines "manufacturer or producer" to include:

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,

The question is, therefore, one of fact and law whether the respondent retail dealers, by reason of their partial participation in the processes that end in the ultimate product, bring themselves within that description. The interest of a taxpayer in that question is not the general interest in a definitive determination which s. 57, s-s. (1) contemplates. Each instance depends on its own par­ticulars; they may be changed in any case tomorrow by adding, subtracting or combining old or new items; and the declaration would be only upon the particulars then exist­ing of the party immediately concerned. That is here an issue between the retailer and the Crown with which ordinarily other parties have nothing directly to do. They may be interested in the language of the statute and might seek its change; they have an interest in the uniform and proper administration of the Act as of taxing law generally; but as between the taxing authorities and the "manufac­turer or producer" that is not the interest for which the sec­tion provides a general hearing.

[Page 618]

I would, therefore, allow the appeal, set aside the judg­ment below and declare the Tariff Board to have had no jurisdiction to make the declaration. There will be no costs in this Court or in the Exchequer Court.

Appeal allowed; no costs.

Solicitors for the appellants: McCarthy & McCarthy.

Solicitors for T. Eaton Co.: Gowling, MacTavish, Osborne & Henderson.

Solicitors for Simpsons-Sears Ltd.: Tory, Miller, Thom-son, Hicks, Arnold & Sedgewick.

Solicitor for Atlas Supply Co.: J. F. Barrett.

Solicitors for General Tire & Rubber Co.: Osler, Hoskin & Harcourt.

Solicitor for Minister of National Revenue: K. E. Eaton.

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