BETWEEN:
HEIRLOOM CLOCK COMPANY
Appellant
and
HER MAJESTY THE QUEEN
Respondent
Heard at Toronto, Ontario, on January 8, 2007.
Judgment delivered from the Bench at Toronto, Ontario, on January 8, 2007.
REASONS FOR JUDGMENT OF THE COURT BY: SEXTON J.A.
Docket: A-121-06
Citation: 2007 FCA 15
CORAM: NADON J.A.
SEXTON J.A.
SHARLOW J.A.
BETWEEN:
713460 ONTARIO LTD. o/a
HEIRLOOM CLOCK COMPANY
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Toronto, Ontario, on January 8, 2007)
SEXTON J.A.
[1] This is an appeal by 712460 Ontario Ltd. o/a Heirloom Clock Company from a decision of the Honourable Mr. Justice Blanchard dated February 23, 2006.
[2] The appellant states that the trial judge erred by concluding that it manufactures grandfather clocks within the meaning of the ExciseTax Act (the “ETA”), and is required therefore to pay excise tax in respect of those grandfather clocks.
[3] When a customer orders a grandfather clock, the appellant installs the mechanism and the dial in each clock cabinet before shipping them, but does not install the pendulum or weights before shipment thus requiring the buyer to install them upon delivery. The appellant therefore says that it has not manufactured and shipped a grandfather clock.
[4] The Minister of National Revenue (the “Minister”) considers that the appellant is required, pursuant to subsection 23(1) and para (f) of the definition of “manufacturer or producer” in subsection 2(1) of the ETA, to pay excise tax in respect of the clocks.
[5] The appellant appealed the Minister’s assessment to the Canadian International Trade Tribunal (the “CITT”) pursuant to section 81.19 of the ETA. On August 13, 2004, the CITT allowed the appeal and reversed the Minister’s assessment of the excise taxes against the appellant.
[6] The CITT essentially stated that since the primary function of a clock is to keep time, the appellant had to render its grandfather clocks functional by installing all the components in the clock cabinet in order to be considered as the person who manufactures the grandfather clocks.
[7] The Crown appealed the CITT’s decision. On February 24, 2006, the Federal Court allowed the appeal and ordered the appellant to pay to the Crown the sum owing in excise taxes plus penalty and interest.
[8] Based on the record we are of the view that the product manufactured and sold by the appellant was a grandfather clock. It is true that for the clock to work it would be necessary to install the weights and the pendulum after delivery. However this requires little skill and effort.
[9] In conclusion, we agree with the trial judge that the appellant must be considered a manufacturer of grandfather clocks within the meaning of section 23(1) of the ETA and thus is required to remit unpaid excise taxes to the Crown.
[10] In view of our conclusion, it is unnecessary to consider the application of section 23(11) which, as a deeming section, applies only if section 23(1) has not otherwise been satisfied.
[11] For these reasons and despite the able submissions of Mr. Eickmeier on behalf of the Appellant the appeal is dismissed with costs.
“J. Edgar Sexton”
J.A.
FEDERAL COURT OF APPEAL
Names of Counsel and Solicitors of Record
DOCKET: A-121-06
STYLE OF CAUSE: 713460 ontario ltd. o/a HEIRLOOM CLOCK
COMPANY
Appellant
and
HER MAJESTY THE QUEEN
Respondent
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: January 8, 2007
REASONS FOR JUDGMENT
OF THE COURT BY: (NADON, SEXTON & SHARLOW JJ.A.)
DELIVERED FROM THE
BENCH BY: SEXTON J.a.
APPEARANCES BY:
PETER EICKMEIER FOR THE Appellant
MARIE CROWLEY For the Respondent
SOLICITORS OF RECORD:
PETER EICKMEIER
Grimsby, Ontario for the appellant
John H. Sims, Q.C.
Deputy Attorney General of Canada FOR THE RESPONDENT