[OFFICIAL ENGLISH TRANSLATION]
2000-4441(GST)I
BETWEEN:
CARAVANE TASCHEREAU INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on March 13, 2002, at Montréal, Quebec, by
the Honourable Judge P. R. Dussault
Appearances
Counsel for the Appellant: Serge Haman
Counsel for the Respondent: Benoît Denis
JUDGMENT
The appeal from the assessment made under Part IX of the Excise Tax Act, notice of which is dated July 28, 2000, and bears number GG20331 is allowed, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the amount assessed shall be reduced by $458.50 as a result of the respondent's admission that a transaction was assessed in error, the whole in accordance with the attached Reasons for Judgment.
Signed at Montréal, Quebec, this 25th day of June 2002.
|
"P. R. Dussault" |
J.T.C.C.
Translation certified true
on this 17th day of September 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20020625
Docket: 2000-4441(GST)I
BETWEEN:
CARAVANE TASCHEREAU INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
P. R. Dussault, J.T.C.C.
[1] This is an appeal from an assessment made under Part IX of the Excise Tax Act (the "ETA") for the period from July 1, 1996, to September 30, 1997, notice of which is dated July 28, 2000, and bears number GG20331.
[2] By that assessment, the Minister of National Revenue (the "Minister") made adjustments of $22,394.89 to the computation of the net tax reported and assessed a penalty of $915.83 and interest of $551.80, for a total of $23,862.52. By that assessment, the amount of net tax was established at $16,757.26.
[3] For the purpose of making the assessment, the Minister relied, inter alia, on the findings and assumptions of fact stated in subparagraphs (a) to (j) of paragraph 24 of the Reply to the Notice of Appeal (the "Reply"). Those subparagraphs read as follows:
[TRANSLATION]
(a) the facts admitted above;
(b) the appellant is registered for the purposes of Part IX of the Excise Tax Act, R.S.C. (1985), c. E-15, as amended (hereinafter "E.T.A.");
(c) the appellant operates a business selling trailers, caravans and other recreational vehicles of the kind, motorized and unmotorized, new and used (hereinafter "recreational vehicles");
(d) in operating its business, the appellant also sells on consignment used recreational vehicles belonging to third parties (hereinafter the "owners"), mainly individuals not registered for the purposes of Part IX of the E.T.A.;
(e) during the period concerned, the appellant made the taxable supply by sale of 46 used recreational vehicles belonging to owners as agent of the owners;
(f) the owners of the used recreational vehicles were not required to collect the GST in respect of the supply of their vehicle to a recipient;
(g) however, the appellant, acting as agent of the owners in the course of its commercial activities, failed to collect on behalf of the owners the GST on the taxable supplies that it made to recipients of the said 46 recreational vehicles at the rate of 7% of the value of the consideration of the supplies payable by the said recipients to the appellant and, consequently, did not include the said amount of GST in computing its net tax;
(h) the amount of GST payable that the appellant failed to collect was $24,881.50, the whole as appears in Schedule A forming an integral part of the Reply to the Notice of Appeal from the worksheet prepared by an agent of the Minister;
(i) however, the appellant did calculate an amount of GST on the value of the consideration of the supply of agency service that it made to the owners (GST included in the amount paid by the owners), an amount of GST that it included in computing its net tax;
(j) the amount of GST that the appellant collected on the supply of agency service to the owners totals $2,486.61, the whole as appears in Schedule B forming an integral part of the Reply to the Notice of Appeal from the worksheet prepared by an agent of the Minister.
(The schedules are omitted.)
[4] Counsel for the respondent admits that a transaction described in Schedule A involving a Viking 96 trailer sold for $6,550, resulting in tax of $458.50, should not be on the list of transactions assessed. Accordingly, total taxes stated in that schedule as $24,881.50 should be reduced to $24,423.00. Furthermore, in subparagraph 24(g) and paragraphs 25, 27, 28 and 29 of the Reply, the number 46 should be replaced by the number 45. In subparagraph 24(h) and in paragraphs 29 and 32 of the same document, the amount of $24,881.50 should be replaced by $24,423.00. Lastly, the amount of $22,394.89 stated in paragraph 32 should be replaced by $21,936.39.
[5] The sole point at issue in this appeal concerns the application of paragraph 177(1)(b) of the ETA. That paragraph reads as follows:
177(1) Supply on behalf of person not required to collect tax
Where
(a) a person (in this subsection referred to as the "principal") makes a supply (other than an exempt or zero-rated supply) of tangible personal property to a recipient (otherwise than by auction),
(b) the principal is not required to collect tax in respect of the supply except as provided in this subsection, and.
(c) a registrant (in this subsection referred to as the "agent"), in the course of a commercial activity of the agent, acts as agent in making the supply on behalf of the principal,
the following rules apply:
(e) in any other case, the supply of the property to the recipient is deemed, for the purposes of this Part, to be a taxable supply made by the agent and not by the principal and the agent is deemed, for the purposes of this Part other than section 180, not to have made a supply to the principal of services relating to the supply of the property to the recipient.
...
[6] The respondent contends that the appellant acted as agent of the owners of the used recreational vehicles sold, whereas the appellant claims that this was not the case.
[7] Yvan Gauvreau, the president of the appellant, testified for the appellant. Stéphane Deshaies testified for the respondent.
[8] Mr. Gauvreau holds 50 percent of the shares of the appellant's capital stock. The remaining 50 percent is held by his spouse, Sylvie Lavigne. Mr. Gauvreau and Ms. Lavigne acquired the shares of the appellant in 1996. The appellant's activities, that is, the sale of new recreational vehicles and what Mr. Gauvreau characterized as the sale of used recreational vehicles "on consignment", were carried on at the time, although it stopped selling on consignment.
[9] In his testimony, Mr. Gauvreau explained that the appellant put part of its property at the disposal of persons wishing to sell their used recreational vehicles. A consignment agreement was then signed between those persons and the appellant (Exhibit A-1). When a potential buyer appeared, an employee of the appellant handed that person the keys to the recreational vehicle that he or she wished to examine or see, which that person did, according to Mr. Gauvreau, without the help of an employee of the appellant. If the potential buyer made an offer, usually written, the seller was informed of the fact by an employee of the appellant. If the seller accepted the offer, the two parties met to finalize the transaction and an invoice was issued. Exhibit A-2, filed in evidence to illustrate a typical transaction, contains the consignment agreement, the offer to purchase and the invoice or contract. Payment could be made by cheque or in cash. If the buyer paid by cheque, the cheque was made out to the appellant to ensure that it was paid what it was owed. If the buyer paid cash, the seller received the money and handed over to the appellant the share that it was owed. Mr. Gauvreau stated that the seller and buyer met in all cases to complete the transaction and then to go to the office of the Société d'assurance automobile du Québec ("SAAQ") to transfer the registration.
[10] In cross-examination, Mr. Gauvreau acknowledged that the contract drawn up on a numbered invoice forming part of Exhibit A-2 appeared on the appellant's letterhead. He stated that this was a mistake and was not usually done. Although only the buyer had signed the document, Mr. Gauvreau stated that the handwritting on the document had been done by the seller. The invoice states the date and the buyer's name and telephone number. The document reads as follows:
[TRANSLATION]
I (seller's name) agree to sell my trailer (description) for the sum of ($ ). This trailer is sold as seen, inspected, examined and accepted by the buyer.
Amount of the sale $( )
Deposit received $( )
Paid by cheque (date)
Outstanding balance of $( )
will be payable in cash or by certified cheque to Caravane Taschereau Inc. payable upon the closing of the transaction.
Signature
(buyer)
[11] In addition, counsel for the respondent filed in evidence all the contracts of the recreational vehicles in issue in the instant case. These are Exhibits I-2 to I-46A. Mr. Gauvreau stated that he did not recognize the writing of the persons who had drawn up those contracts. However, an analysis of the documents reveals the following elements:
(1) Virtually all the contracts (Exhibits I-2 to I-41) are drafted on identical invoices numbered sequentially. A number of those invoices bear the mark of a stamp indicating the name and address of the appellant.
(2) The other contracts (Exhibits I-42 to I-46A) are written on new recreational vehicle sales contract forms on which the words "Recreational Vehicle Sales Contract" have been struck out and replaced by the word "Consignment". Mr. Gauvreau explained that they had been short of invoices and that the decision had been made to use the other forms and makes changes to them.
(3) The wording of the contracts, with the exception of the specific notations, is virtually always the same or very similar. It almost always contains the following notation, which is adapted to the vehicle sold and slightly changed from one contract to the next: "This trailer is sold as seen, inspected, examined and accepted by the buyer."
(4) Except in four cases (Exhibits I-18, I-24, I-25 and I-39), the document always appears to have been written by the same person.
(5) The contracts are not signed by the sellers. The signature of Sylvie Lavigne, the co-shareholder of the appellant, appears on a number of contracts. Others are signed by the buyers. Lastly, some contracts bear no signature.
(6) Some contracts bear the letterhead "Caravane Taschereau Inc. for: (seller's name)" (Exhibits I-42, I-44A and I-46A).
(7) In one case, a buyer gave the appellant a deposit on his Visa card. In the cases where a deposit was given by "certified cheque", the cheque was evidently made out to the appellant. This fact moreover was confirmed by Mr. Gauvreau himself.
[12] Thus, as the contracts were drafted on the appellant's invoices, in most cases by the same person and, in virtually all cases, using the same wording, it is difficult to conclude that the appellant was not acting as the sellers' agent. Moreover it is clearly stated in certain contracts that the appellant was acting in that capacity. Furthermore, the absence of any signature by the sellers merely supports that conclusion. It may simply be inferred that, contrary to what Mr. Gauvreau stated, the sellers were not present when the contracts were signed and that the appellant had acted on their behalf and had been given the deposit by cheque or in cash.
[13] But there is more. The legal relationship between the seller of a used recreational vehicle and the appellant is above all established in a contract that the appellant had each seller sign at the outset. That document, which appears as Exhibit A-1 and, in an earlier version, as part of Exhibit A-2, is entitled: "Consignment Agreement". The most relevant clauses of that agreement, which provides first for the identification of the owner and the description of the vehicle, are quoted word for word below, with the specific references omitted:
[TRANSLATION]
...
I, identified above and declaring that I am the owner of the vehicle described above, declare that the vehicle is registered in my name and that the said vehicle is free and clear of any lien, right of seizure or forfeiture and/or charge and is subject to no contract of sale with certain reservations. I authorize Caravane Taschereau Inc. to sell the vehicle subject to certain clauses, conditions, amendments or reservations stated above and below in this agreement.
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CLAUSES, CONDITIONS AND RESERVATIONS BETWEEN THE TWO PARTIES TO THE AGREEMENT
A. Throughout this agreement, the word "company" in all cases shall mean and designate Caravane Taschereau Inc. described above, and the word "seller" shall in all cases mean the owner of the vehicle for sale described above, and the word "buyer" shall in all cases mean and designate the person acquiring the vehicle.
B. The clauses, conditions and reservations stated above and below shall apply to both sides of this agreement.
C. Caravane Taschereau Inc. and its representatives will act solely as sales agents for the owner and will at no time, in any way or in any circumstance before the courts [sic] for false statements by the seller for certain hidden defects in the seller's vehicle not reported in this agreement.
D. To avoid any misunderstanding between seller and buyer, the name of the seller will always be kept confidential from the buyer and the name of the buyer from the seller. There is therefore no point in requesting it; we will protect the confidentiality of both parties.
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CLAUSES:
1. The seller agrees to accept the amount of $ - dollars accepts $ .00 dollars on / / accepts $ .00
date / / .
2. A commission of $ . 00 dollars shall be deducted from the amount accepted by the seller for the seller's vehicle at the time payment is made by the company to the seller for the seller's vehicle.
3. The company will consider it a duty to transmit to the seller all offers lower than the one described above, and the seller may accept or reject the offer. And if the option of a lower offer is accepted by the seller, the commission will remain the same as the one described in this agreement.
4. The commission shall be the same even if the vehicle is sold in a record period of time.
5. The commission shall also remain as described above in the agreement should the seller make the sale himself to one of our customers to whom the vehicle has been shown or to a buyer whom the seller himself has found during the time that the seller's vehicle is for sale on our lot.
6. The seller grants Caravane Taschereau Inc. the exclusive right to sell the vehicle described above in the agreement until such time as the owner of the vehicle repossesses that vehicle.
[14] Those provisions of the agreement, more particularly clause 6, leave little room for interpretation. The appellant indeed had a mandate to represent the sellers for the purposes of proceeding with the sale of their vehicles. The mandate is specific and expresses the essence of this contract, as stated in article 2130 of the Civil Code of Quebec, contrary to what counsel for the appellant claimed. That provision reads as follows:
Art. 2130. Mandate is a contract by which a person, the mandator, empowers another person, the mandatary, to represent him in the performance of a juridical act with a third person, and the mandatary, by his acceptance, binds himself to exercise the power.
The power and, where applicable, the writing evidencing it are called the power of attorney.
[15] It may also be helpful to recall that the Petit Robert defines the commercial meaning of the French term "consignation" ["consignment in English"] as the [TRANSLATION] "handing over of goods to a merchant (consignee) for sale".
[16] Counsel for the appellant also argued that the sale of a recreational vehicle was not complete unless the seller and buyer went together to the SAAQ to change the registration. This statement is utterly false from the civil law standpoint. That control measure in no way affects the validity of the transaction between the parties. Furthermore, for the purpose of completing that formality, the seller may direct anyone, the buyer or even the appellant, to represent him. The SAAQ has even provided a specific power of attorney form for that purpose, a copy of which, obtained from the appellant by the auditor, was filed in evidence as Exhibit I-47.
[17] Having regard to the foregoing, I find that the assessment made under paragraph 177(1)(b) of the ETA is correct. However, the appeal is allowed and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that the amount assessed shall be reduced by $458.50 as a result of the respondent's admission that the transaction indicated in paragraph 4 of these reasons was assessed in error.
Signed at Montréal, Quebec, this 25th day of June 2002.
|
"P. R. Dussault" |
J.T.C.C.
Translation certified true
on this 17th day of September 2003.
Sophie Debbané, Revisor