Date: 19990309
Docket: 97-955-GST-I
BETWEEN:
MARY CAMPEAU DEVELOPMENTS LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for judgment
(Delivered orally from the bench at Ottawa, Ontario, on December 10, 1998 and revised in Ottawa, Ontario on March 9, 1999.)
Lamarre, J.T.C.C.
[1] The Appellant was assessed as follows by the Minister of National Revenue ("Minister") under Part IX of the Excise Tax Act ("Act") on June 13, 1996 for the period from July 1, 1991 to December 31, 1995: $94,743 in respect of net tax, $3,910 in interest and a penalty of $4,019.
[2] This assessment included an amount of net tax of $56,000 which had been remitted by the Appellant previously, on October 31, 1991, in respect of its GST liability resulting from the sale on September 18, 1991 of a property located at 817 Bayridge Drive, Kingston, Ontario (the "real property") for a purchase price of $800,000 (see Exhibit R-2). According to the Agreement of Purchase and Sale (Exhibit R-3), the vendor (the Appellant) had to pay any GST payable and owing as a result of the sale of the real property and provide a written warranty that such GST would be paid in full. It was understood according to that Agreement that the GST was included in the purchase price and was not to be added to the said purchase price.
[3] It is the testimony of Mary Campeau, president of the Appellant, that her solicitor at the time remitted the amount of $56,000 to the Receiver General in payment of the GST and that she, Mary Campeau, signed the return relating thereto on behalf of the Appellant. She now says that she believes there was no GST payable on that transaction. The Appellant therefore objects to the assessment on the basis that the amount of $56,000 was not payable and submits that the assessment should be reduced accordingly.
[4] It is the Respondent's position that the assessment dated June 13, 1996 is statute-barred in respect of net tax owing for the period ending October 31, 1991 and that the Notice of Assessment is not valid with respect to this period (see paragraph 17 of the Reply to the Notice of Appeal). The Respondent further states that the interest and penalty in the assessment are calculated on the unremitted amount of $38,743 representing the net tax owing for the period starting after the month of July 1992.
[5] The Appellant does not contest the amount of net GST for the period after the month of July 1992, that is, the amount of $38,743. However, Mrs. Campeau suggests that as, according to her, no GST was payable on the sale of the real property in September 1991, the amount of $56,000 that she has already paid in 1991 should be applied against the amount of $38,743 actually owed. At the same time, the interest and penalty should be cancelled.
[6] Even if Mrs. Campeau is of the opinion that the amount of $56,000 should never have been paid, she never informed Revenue Canada of the alleged mistake, if any, and never made any request, either verbally or in writing, to have such payment applied to any future GST owing by the Appellant. It is only upon the commencement of the audit by the Revenue Canada assessor in May 1996 that Mrs. Campeau felt it necessary to raise this point.
[7] Her solicitor at that time, Mr. David Hurley, sent a letter on January 27, 1997 explaining his error to Revenue Canada and the Appellant applied separately on March 5, 1997 for a refund of the $56,000 overpayment under subsection 230(1) of the Act.
[8] Counsel for the Respondent is of the opinion that it is now too late to raise this question as the transaction with respect to the real property occurred in a period which is now statute-barred. Section 298 of the Excise Tax Act states that an assessment of net tax for a reporting period of a person shall not be made "more than four years after the later of the day on or before which the person was required under section 238 to file a return for the period and the day the return was filed".
[9] I understand from both parties that they do agree on the fact that the GST return for the quarter ended September 30, 1991 (which would be the quarter during which the liability, if any, to pay the $56,000 arose) was required to be filed by October 31, 1991 (which it in fact was) and that the four-year period for assessment expired on October 31, 1995. They both agree that the Minister did not have authority to assess GST in respect of the reporting period ending October 31, 1991 in his June 13, 1996 assessment.
[10] Where they disagree is on the question of whether or not the amount of $56,000 was an overpayment. The Appellant is of the view that this amount should not have been paid and further submits that as it was not assessed during the prescribed time limit, it is too late for the Minister to assess the Appellant on a GST liability of $56,000. The Appellant, therefore, requests a refund of the overpayment. The Minister on the other hand submits that even if no such assessment took place within the prescribed time limit, the Appellant rightly remitted the amount of $56,000 as there was GST liability resulting from the sale of the Bayridge property. The fact that the Minister did not assess the Appellant for the 1991 period does not alter the Appellant's GST liability for that period. Indeed, subsection 296(1) of the Act is discretionary and does not impose upon the Minister the obligation to assess the net tax of the Appellant for the reporting period ending October 31, 1991 (see paragraph 16 of the Reply to the Notice of Appeal). The statute clearly states that the Minister may assess the net tax of a person for a reporting period of the person.
[11] In my view, the Appellant could only raise an objection to the taxability of the transaction with respect to the real property within the prescribed four-year limitation period.
[12] As was decided by the Federal Court of Appeal in The Queen v. Canadian Marconi Company, 91 DTC 5626, under the terms of subsection 152(4) of the Income Tax Act, in the absence of a waiver or misrepresentation within the prescribed four-year limitation period, the Minister may not reassess at any time at the taxpayer's whim.
[13] I am of the view that the same reasoning applies to section 298 of the Excise Tax Act, as I do not find any ambiguity in that section which reads in part as follows:
298. (1) Period for assessment -- Subject to subsections (3) to (6), an assessment of a person shall not be made under section 296
(a) in the case of
(i) an assessment of net tax of the person for a reporting period of the person,
. . .
more than four years after the later of the day on or before which the person was required under section 238 to file a return for the period and the day the return was filed;
. . .
(4) Idem -- An assessment in respect of any matter may be made at any time where the person to be assessed has, in respect of that matter,
(a) made a misrepresentation that is attributable to the person's neglect, carelessness or wilful default;
(b) committed fraud
(i) in making or filing a return under this Part,
(ii) in making or filing an application for a rebate under Division VI, or
(iii) in supplying, or failing to supply, any information under this Part; or
(c) filed a waiver under subsection (7) that is in effect at that time.
. . .
(7) Waiver -- Any person may, within the time otherwise limited by subsection (1) or (2) for assessing the person, waive the application of subsection (1) or (2) by filing with the Minister a waiver in the prescribed form specifying the matter in respect of which the person waives the application of that subsection.
[14] The Appellant did not file a waiver within the prescribed four-year limitation period and admitted in its Notice of Appeal that there was no misrepresentation or fraud. It is now too late for the Appellant to raise an objection as to its GST liability resulting from the sale of the property in 1991.
[15] With respect to the Appellant's submission that the GST liability no longer exists as the Minister did not assess the Appellant in due course for the reporting period ending October 31, 1991, I will simply refer to the decision of the Federal Court of Appeal in Riendeau v. The Queen, 91 DTC 5416, in which Stone J.A. said at page 5417:
As the cases and statutory provisions which were cited by Cullen J. well show, liability for tax is created by the Income Tax Act, not by a notice of assessment. A taxpayer's liability to pay tax is just the same whether a notice of assessment is mistaken or is never sent at all. ...
The same comments apply under the Excise Tax Act.
[16] The argument that the Appellant could not object to any assessment for the 1991 period as there was none does not stand up either. As I mentioned earlier, the Appellant did not inform Revenue Canada in due course of its objection to the taxability of the transaction and did not indicate that the amount of $56,000 should be credited to further payments owing. It was the Appellant's responsibility to do so, and its passivity cannot justify in law the reopening of a statute-barred period.
[17] For the above reasons, I therefore do not accept the Appellant's submissions.
[18] In my judgment dated December 11, 1998 and issued on December 17, 1998, I simply dismissed the appeal and thereby confirmed the assessment. Indeed, even if the net tax owing included the amount of $56,000, the net result of the assessment was to assess only the net tax owed by the Appellant for the period starting after the month of July 1992, which was within the four-year limitation period at the time the assessment was made.
[19] However, I now realize that in spite of this and taking into account the admissions of the parties, the assessment should be cancelled and referred back to the Minister for reassessment and reconsideration on the basis that only the net tax owing ($38,743) for the period from June 13, 1992 to December 31, 1995, plus interest and penalty, should appear in the assessment. The Tax Court of Canada has inherent jurisdiction to vary a judgment where there has been a slip in drawing it up or where it does not express the true intent of the Court's decision (see Laskaris v. M.N.R., [1990] 1 C.T.C. 2464 (T.C.C.) which refers to Paper Machinery Ltd. v. J.O. Ross Engineering Corporation, (1934) S.C.R. 186). My judgment dated December 11, 1998 contains an error arising from an accidental slip. I therefore amend this judgment to allow the appeal on the above-mentioned basis only.
Signed at Ottawa, Canada, this 9th day of March 1999.
"Lucie Lamarre"
J.T.C.C.