Federal Court Decisions

T-1841-88

BETWEEN:

SASKATCHEWAN GOVERNMENT INSURANCE,

Plaintiff

- and -

HER MAJESTY THE QUEEN IN RIGHT OF CANADA,

Defendant

REASONS FOR JUDGMENT

JEROME A.C.J.:

     This action was tried before me in Toronto, Ontario on March 12, 1997. At issue is whether the plaintiff is entitled to an excise tax refund from the defendant pursuant to s. 44.19 of the Excise Tax Act, R.S.C. 1970, c. E-13, as amended by S.C. 1986, c. 9, s. 34 ("ETA") (now R.S.C. 1985, c. E-15, s. 68.19, as amended by R.S. 1985, c.7 (2nd Supp.), s. 34 effective December 12, 1988 SI/88-239). At the conclusion of argument, I took the matter under reserve and indicated that these written reasons would follow.

     The plaintiff, Saskatchewan Government Insurance ("SGI"), applied for an excise tax refund with regard to the purchase of vehicle licence plates in the 1986 tax year. The Minister of National Revenue disallowed SGI's claim by notice of determination on November 20, 1987. SGI filed a notice of objection on February 16, 1988 and the Minister confirmed his previous determination in a notice of decision dated June 30, 1988. The plaintiff started this action by filing its statement of claim, appealing the decision of the Minister, on September 28 1988.

BACKGROUND

     Under the Vehicle Administration Act S.S. 1986, c. V-2.1 ("VAA") and the Saskatchewan Government Insurance Act, 1980 S.S. 1979-80, c. S-19.1 ("SGIA") SGIA is the administrative body which manages both the licensing of motor vehicles and the compulsory state-run automobile insurance scheme. Under the Automobile Accident Insurance Act R.S.S. 1978, c. A-35 ("AIAA"), SGI is also the administrator of the Saskatchewan Auto Fund.

     During the 1986 tax year, January 1, 1986 to December 31, 1986, SGI purchased license plates from Signal, a license plate manufacturer. SGI paid for the license plates by cheque drawn on the SGI Saskatchewan Auto Fund. The Federal Sales Tax for these plates was included in the purchase price. The license plates were distributed by SGI to branch offices across Saskatchewan and subsequently issued to the public pursuant to s. 29 of the VAA upon payment of a registration and insurance fee. These payments were deposited into the Saskatchewan Auto Fund. All of the payments, except for fees paid for vanity and ham radio plates, were transferred to the consolidated fund for Saskatchewan pursuant to s. 89(1) of the VAA.

ANALYSIS

     The main issue in this dispute centers around paragraph 44.19(1)(b) of the ETA. The plaintiff's basic position and chief argument is that the plaintiff did not "use" the license plates in this context. The plaintiff presents a narrow definition of the word "use" and supported its position with a variety of jurisprudence. The plaintiff contends that it is the registered vehicle owners and not SGI which "use" the license plates. Since SGI does not "use" the license plates, it does not fall within paragraph 44.19(1)(b) and is therefore entitled to the full federal sales tax refund. However, the parties both agreed that SGI was an entity described in s. 44.19(1)(b).

     Section 44.19 of the Excise Tax Act, 1970, supra reads as follows:     

44.19 (1) Where tax under Part III, IV, or V has been paid in respect of any goods and Her Majesty in right of a province has purchased or imported the goods for any purpose other than

(a)      resale,

(b) use by any board, commission, railway, public utility, university, manufactory, company or agency owned, controlled or operated by the government of the province or under the authority of the legislature or the lieutenant governor in council of the province, or

(c)      use by Her Majesty in that right, or by any agents or servants of Her Majesty in that right, in connection with the manufacture or production of goods or use for other commercial or mercantile purposes,

an amount equal to the amount of that tax shall, subject to this Part, be paid either to Her Majesty in that right or to the importer, transferee, manufacturer, producer, wholesaler, jobber or other dealer, as the case may require, if Her Majesty or the dealer applies therefor within two years after Her Majesty purchased or imported the goods.

     The defendant submits that a broad approach to the word "use" should be adopted. As a result, SGI would have used the license plates in the administration of the vehicle licensing scheme of the VAA. I agree with this approach and find that any use by SGI constitutes use under the Act. I do not accept the plaintiff's argument that "use" has to refer to a specific "use" and not an incidental "use", nor do I accept the reasoning that there must necessarily be one specific use and alternative incidental uses. Although the plaintiff contends that it is no more than a conduit between the Queen in Right of Saskatchewan and the vehicle owners who use the license plates, I find that SGI uses the plates in some general capacity during the administrative processes which comprise both licensing and insuring vehicle owners. This general use, whether specific or incidental, is sufficient to bring SGI within the meaning of s. 44.19(1)(b) of the ETA and therefore excludes it from a federal sales tax refund.

     Although not required to examine the following issues I will examine them in the event that I am wrong with regard to this general approach of "use".

     The defendant submits that in the event a broad approach is not adopted, a double specific use may exist. Moreover, the plaintiff used the registration and licensing of vehicles as part of its administration of the compulsory state-run automobile insurance program mandated by the SGIA and the AIAA.

     There was no evidence or jurisprudence presented by the plaintiff that would prohibit goods from having two or more specific uses. The plaintiff tried to distinguish the Strayer, J. decision in British Columbia Telephone Company v. The Queen (1992) 1 G.T.C. 6039 (F.C.T.D.) by stating that it was relevant to only those particular circumstances. I find that the instant matter closely mirrors that case. Both matters deal with goods that have potential double uses; telephone books and license plates, and both matters are in the Excise Tax Act context dealing with the meaning of the word "use". In that case Strayer, J. stated:

It cannot be denied, I think, that subscribers also "use" these directories. It is they who took up the numbers of businesses or individuals they wish to contact. They may even "use" these directories for purposes never contemplated by the telephone company. But this does not mean that the plaintiff does not "use" the directories within the meaning of the Excise Tax Act.

     . . .

The language of the statute here is "appropriated for use" and I see nothing to preclude that describing the plaintiff supplying directories to its subscribers, in apart for the benefit of the subscribers but in part for the company's own benefit...

I conclude, therefore, that the license plates can potentially have more than one specific use.

     The plaintiff has made the argument that "you do not administer things for the sake of administering" with regard to its role of issuing license plates to the Saskatchewan drivers and concludes, by this reasoning, that it does not use the license plates. However, SGI is also the administering body for automobile insurance in Saskatchewan and a vehicle owner cannot register a vehicle and receive a licence plate without having this compulsory state-run automobile insurance. In Saskatchewan, the issuing of license plates and statutory insurance coverage are inextricably linked. You cannot have one without the other. In its capacity as an insurer, SGI can recommend, among other things, that the administrator, also SGI, revoke a vehicle registration. SGI is one administrative body performing two different functions but relying on each of those functions for the administration of the other. In this manner, SGI, uses the license plates it purchased and issued as badges indicating that vehicle owners are both validly licensed and insured. This constitutes use within the meaning of s. 44.19(1)(b).

     For these reasons the plaintiff is not entitled to a federal sales tax refund with respect to the 1986 tax year.

O T T A W A

May 22, 1997                      "James A. Jerome"

                             A.C.J.