Strict interpretation of Excise Tax Act was reasonable and consistent with past jurisprudence

Federal court | Tax | Goods and Services Tax | Administration and enforcement

Remission order. Registrant delivered travel trailers to US customers on Canadian side of border and customers transported trailers through US customs. Registrant did not collect Harmonized Sales Tax (HST) from US customers based on mistaken understanding that supply was made outside Canada and not taxable under s. 142 of Excise Tax Act (ETA). Registrant paid assessed HST and interest. Canada Revenue Agency (CRA) officer refused to recommend that remission order be granted under s. 23(2) of Financial Administration Act (FAA) in respect of HST. Registrant brought application for judicial review. Application dismissed. Officer reasonably concluded that for business with average annual revenues of $7 million, tax debt of less than $300,000 did not constitute financial setback justifying remission order. Officer’s failure to conduct proper analysis of financial records or explicitly acknowledge registrant’s contention that tax amount represented 90 per cent of annual after tax income did not make decision unreasonable. Officer’s conclusion that there was no extenuating factors was reasonable, even though he did not mention registrant’s error in not collecting HST. Officer’s failure to pursue registrant’s offer of sworn statutory declaration as to advice given by CRA did not result in procedural fairness violation. Officer’s strict interpretation of s. 142 of ETA, that goods and services received by final consumer in Canada were taxable, which led to conclusion that trailers should be subject to HST, was reasonable and consistent with past jurisprudence. Interpretation may not have been correct as it frustrated intent of ETA to tax consumption of goods in Canada and was at odds with equitable underpinnings of s. 23(2) of FAA.

Escape Trailer Industries Ltd. v. Canada (Attorney General) (2019), 2019 CarswellNat 60, 2019 FC 31, Michael D. Manson J. (F.C.).

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