[OFFICIAL ENGLISH TRANSLATION]
2001-1450(GST)I
BETWEEN:
LUCILLE DION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on July 31, 2002, at Montréal, Quebec, by
the Honourable Judge P. R. Dussault
Appearances
For the Appellant: The Appellant herself
Counsel for the Respondent: Alain-François Meunier
JUDGMENT
The appeal from an assessment made under Part IX of the Excise Tax Act concerning the Goods and Services Tax for the period from January 1, 1991, to September 30, 1998, the Notice of assessment of which is dated April 18, 2000, is numbered 19981207-01, and concerns account 114706351 is dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 19th day of August 2002.
|
"P. R. Dussault" |
J.T.C.C.
Translation certified true
on this 26th day of November 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20020819
Docket: 2001-1450(GST)I
BETWEEN:
LUCILLE DION,
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 Act") concerning the Goods and Services Tax ("the GST") for the period from January 1, 1991, to September 30, 1998. The Notice of Assessment dated April 18, 2000, and numbered 19981207-01 that was issued with respect to account 114706351 states that it cancels and replaces the Notice of Assessment dated December 7, 1998, and numbered 19981207 for the period from January 1, 1991, to September 30, 1998. Although the new Notice of Assessment dated April 18, 2000, also refers to a period extending until September 30, 1998, it appears that on April 30, 1999, the appellant's registration was cancelled retroactively to December 31, 1995, with the result that the amount of $5,040.24 in tax payable plus the interest and the penalty would cover only the period from January 1, 1991, to December 31, 1995 (Exhibit I-3).
[2] The appellant has operated a hairdressing business since 1973. From 1977 to 1990, she operated her business in a salon on rue Principale in Lachute, Quebec. At that time, she had between three and five employees and her annual business income was more than $30,000. Around mid-1990, she closed the salon on rue Principale and continued to operate her business by herself in her home at 490, rue Meikle in Lachute.
[3] Although the appellant estimated that she did not earn more than $30,000 annually from her business, which she now operated by herself without any employees, she applied for GST registration on December 13, 1990 (Exhibit I-2).
[4] The appellant's application for registration was processed on January 11, 1991, and made retroactive to January 1, 1991; she was assigned account 114706351. However, as early as January 8, 1991, the appellant had already been registered and had been assigned account 125262428. On May 17, 1991, that registration was cancelled and only the registration under account 114706351 was kept, as is shown by the computerized statements from Quebec's Ministère du Revenu ("the Ministère"), adduced in evidence as Exhibits I-5 and I-6. The statements indicated that there was no activity in account 125262428 in the appellant's name. As well, the computerized statements for account 114706351 indicate some 22 letters or notices sent between November 22, 1991, and November 1, 1995, to the appellant, who normally should have filed quarterly returns. Subsequently, some 15 letters or notices were sent to her until October 27, 1998.
[5] In her testimony, the appellant acknowledged that she received these numerous notices and did not respond to them because she was convinced that since January 1991 she was no longer registered and that her account had been closed. She claimed that she had requested that her registration be cancelled as early as the beginning of January 1991 and that, following her request, the tax accounts had indeed been cancelled in 1991. According to the appellant, she was also given confirmation during a telephone conversation that her account was closed. She stated that she no longer had any of the related documents because they had been thrown out following damage caused by water in the basement of her home.
[6] The appellant stated that she had never collected taxes since January 1991, despite the fact that an employee of the Ministère claimed that she had said the opposite in an October 19, 1995, telephone conversation. According to the appellant, it was at that time that her tax number was reactivated.
[7] On November 18, 1998, a final notice of non-filing was sent to the appellant requiring her to file returns and pay taxes for the period from January 1, 1991, to September 30, 1998 (Exhibit I-4).
[8] On November 27, 1998, the appellant replied in a letter that she had cancelled her tax account in 1991 because her annual income was less than $30,000, and that she had not immediately responded to the correspondence from the Ministère because she was convinced that the file had been closed since 1991 (Exhibit I-4).
[9] It was only on April 30, 1999, following the letter and the explanations received from the appellant, that her GST account 114706351 was cancelled retroactively to December 31, 1995 (Exhibit I-3).
[10] Alberte Théoret, who described herself as a bookkeeper, also testified for the appellant. It was Ms. Théoret who completed the December 13, 1990, GST registration application that the appellant herself signed. Ms. Théoret stated that she realized at the very end of December 1990 that the appellant's income during the last six months of the year was less than $15,000 and that, as a result, at the very beginning of 1991 [translation] "we cancelled the tax number and we received a paper". A few months later, a new number was apparently issued; Ms. Théoret, who said that she had then received [translation] "the papers", apparently telephoned and was told that it was [translation] "cancelled".
[11] Jean-Marc Beaudoin, chief of registration and support, testified for the respondent. Using the computerized statements (Exhibits I-3, I-5 and I-6), he provided the history of the appellant's file. With the exception of the two GST registration numbers issued in error to the appellant in January 1991 and the cancellation of one of these numbers (125262428) on May 17, 1991, that is, several months before the first notice to file a return was sent to the appellant on November 22, 1991, there is no indication in the file suggesting that the appellant's registration might have been cancelled in 1991. On the contrary, Exhibit I-3 indicates that, with respect to account 114706351, more than 35 letters or notices requesting that the appellant file her returns were sent to her between 1991 and 1998; the first notice is dated November 22, 1991. It is rather surprising to see that the appellant did not consider it appropriate to clarify the situation unequivocally as soon as she received the first notices.
[12] Counsel for the respondent has argued that, the appellant being a registrant until December 31, 1995, she should have collected and remitted the GST on her business activities, even if she could have been considered a small supplier given that her annual income was less than $30,000 during the period from January 1, 1991, to December 31, 1995. According to counsel for the respondent, the obligation to collect and remit the GST results from the very wording of section 166 of the Act, which provides for an exception only if the person making the supply is a small supplier who is not a registrant.
[13] Counsel for the respondent has also relied on the decision in The Hamilton Hunt Company Ltd. v. Her Majesty the Queen, [1999] G.S.T.C. 112 (French version [1999] A.C.I. no 860 (Q.L.)). As well, counsel has referred to the Federal Court of Appeal decision in Hegerat v. R., [2000] G.S.T.C. 48 (French version [2000] A.C.F. no 1062 (Q.L.)), while pointing out that he disagrees with the Court's finding that the appellant was not required to collect and remit the GST in the circumstances of that case. Indeed, in that case, despite the fact that the appellant was a GST registrant, the Court decided to accept the appellant's argument that he was not required to collect and remit the GST because his income was substantially less than $30,000, "... having regard to the fact that the Minister of National Revenue was unable to respond in any meaningful way to this argument ...." First, it is important to note that the appellant did not make that argument before the Tax Court of Canada, the decision of which is reported at [1999] G.S.T.C. 95 (French version [1997] A.C.I. no 1400 (Q.L.)). As well, at paragraph 3 of its decision, the Federal Court of Appeal appears to acknowledge that the appellant was a registrant. It is surprising that counsel for the respondent did not argue at that point that the exception provided for in section 166 of the Act did not apply since the appellant was a registrant and, therefore, he was obliged to collect and remit the GST.
[14] Counsel for the respondent has therefore considered that the Federal Court of Appeal decision in Hegerat (supra) was rendered per incuriam and must not be followed.
[15] I agree. Section 166 of the Act provides for an exception solely for a small supplier who is not a registrant. Section 166 of the Act reads as follows:
Supply by small supplier not a registrant
166. Where a person makes a taxable supply, other than a supply of real property by way of sale, and the consideration or a part thereof for the supply becomes due, or is paid before it becomes due, at a time when the person is a small supplier who is not a registrant, that consideration or part thereof, as the case may be, shall not be included in calculating the tax payable in respect of the supply.
[16] The evidence adduced in the present case has established that the appellant was a registrant beginning on January 1, 1991, as a result of the registration application she signed on December 13, 1990. Although one of the two GST accounts under which she was registered was cancelled on May 17, 1991, her registration under account 114706351 was always maintained. In my opinion, the dozens and dozens of notices to file quarterly returns that were sent to her beginning on November 22, 1991, leave no room for doubt on that point. Following the appellant's November 27, 1998, letter, on April 30, 1999, her registration was finally cancelled retroactively to December 31, 1995. The assessment at issue has to do with an amount of tax for the period from January 1, 1991, to December 31, 1995, during which the appellant was a registrant. During that period, she was required, as a registrant, to collect and remit the GST on her business activities, which she did not do. The assessment setting the amount of tax payable for that period as well as interest and a penalty is therefore justified.
[17] In conclusion, I consider it important to recall the conditions set out in subsection 242(2) of the Act governing cancellation by the Minister of a registration at the request of a small supplier. Subsection 242(2) reads as follows:
Request for cancellation
(2) The Minister shall cancel the registration of a person who is not carrying on a taxi business, effective after the last day of a fiscal year of the person, where
(a) the person is a small supplier and has filed with the Minister in prescribed manner a request, in prescribed form containing prescribed information, to do so; and
(b) the person has been registered for a period of not less than one year ending on that day.
[18] Therefore, despite the statement by the appellant and Ms. Théoret, there is nothing to establish that in early January 1991 the appellant filed a request to cancel the registration. Nor is there anything indicating that the registration under account 114706351 might have been cancelled as a result of such a request and then reactivated. The documents adduced in evidence establish that the registration under account 114706351 was always maintained until April 30, 1999, and was then cancelled retroactively to December 31, 1995. Only the registration under account 125262428 was cancelled early in the process and, unlike the registration under account 114706351, notices to file quarterly returns were never issued in connection with that account.
[19] In any case, I point out that the appellant clearly could not have met the condition set out in paragraph 242(2)(a) of the Act in early January 1991 since she had just been registered. The Minister of National Revenue could not have cancelled her registration as early as then.
[20] Having regard to the foregoing, the appeal is dismissed.
Signed at Ottawa, Canada, this 19th day of August 2002.
|
"P. R. Dussault" |
J.T.C.C.
Translation certified true
on this 26th day of November 2003.
Sophie Debbané, Revisor