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                                                 SUPREME COURT OF CANADA

 

 

Citation:  United Parcel Service Canada Ltd. v. Canada, 2009 SCC 20, [2009] 1 S.C.R. 657

 

Date:  20090423

Docket:  32546

 

Between:

United Parcel Service Canada Ltd.

Appellant

-and-

Her Majesty The Queen

Respondent

 

 

Coram: McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell JJ.

 

 

Reasons for Judgment:

(paras. 1 to 38)

 

 

Rothstein J. (McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Abella, Charron and Cromwell JJ. concurring)

______________________________


United Parcel Service Canada Ltd. v. Canada, 2009 SCC 20, [2009] 1 S.C.R. 657

 

United Parcel Service Canada Ltd.                                                                                   Appellant

 

v.

 

Her Majesty The Queen                                                                                                 Respondent

 

Indexed as:  United Parcel Service Canada Ltd. v. Canada

 

Neutral citation:  2009 SCC 20.

 

File No.:  32546.

 

2009:  January 15; 2009:  April 23.

 

Present:  McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell JJ.

 

on appeal from the federal court of appeal

 


Taxation — Goods and Services Tax — Rebate of payment made in error Overpayments made by courier acting as licensed customs broker — Courier crediting consignees for overpayments and deducting overpayments from its own GST liability as supplier of goods and services — Deductions disallowed — Whether courier entitled to rebate of overpayments — Excise Tax Act, R.S.C. 1985, c. E‑15, ss. 215.1 , 216(6) , 225(1) , 261(1) , (2) , (3) , 296(2.1) .

 

UPS, in its capacity as a licensed customs broker, overpaid $2,937,123 in GST from February 1, 1996 to December 31, 1997.  The overpayments were due to errors attributable either to UPS or to its customers.  They were not collected by UPS from its customers.  Instead, UPS reported the overpayments in its monthly GST returns by deducting the amount of the overpayments from its own GST liability as a supplier of goods and services.  The Minister of National Revenue reassessed UPS for the period of February 1, 1996 until December 31, 1997 and disallowed the deductions.  UPS successfully appealed to the Tax Court.  The Federal Court of Appeal overturned the Tax Court’s decision and dismissed UPS’s appeal from the Minister’s reassessment.

 

Held:  The appeal should be allowed.

 

UPS was entitled to a rebate of the overpayment.  While UPS was not the person liable for the GST, it was the person that paid an amount on account of GST within the meaning of s. 261(1)  of the Excise Tax Act .  That provision does not require an inquiry into liability for payment.  The consignees of UPS may well have the liability to pay the GST on the imported goods, but s. 261(1)  is worded broadly and it would not be in accordance with the ordinary and grammatical meaning of the provision to read it in such a way as to preclude persons who have actually paid or overpaid GST in error from obtaining a rebate.  [14] [16-17] [20]

 


Section 261(2) (c) of the Excise Tax Act  does not preclude payment of rebates under s. 261(1) just because a rebate could have been claimed under s. 215.1(1)  or 216(6).  Section 261(2) (c) was intended to avoid the double payment of rebates and only says that a rebate under s. 261(1) is not to be paid where a rebate is payable under s. 215.1 or 216(6).  No rebate is payable under those provisions because UPS did not seek a rebate under either of them.  Further, since no application for a rebate was made under s. 215.1(1) , s. 216(6) or within the two‑year time limit provided by s. 261(3), s. 261(1) and s. 296(2.1) were applicable.  Section 296(2.1)(c) expressly relieves against the limitation period in s. 261(3).  The Minister has agreed that $2,900,858 (after adjustment) is an overpayment and was not payable, and that UPS did not collect the overpayment from its customers.  By necessary implication, these concessions must mean that had the appropriate procedures been followed, the rebate would have been allowable.  In these circumstances, the Minister was obliged to apply the rebate to the net tax assessed against UPS pursuant to s. 261(1) and s. 296(2.1).  [27‑28] [31‑33]

 

Lastly, the intermingling of rebates under s. 261(1) for overpaid GST on imported goods and for tax collected and remittable by UPS under Division II as a remitting supplier is authorized by the Excise Tax Act  itself.  The definition of “net tax” in s. 225(1) provides that “an amount that may be deducted by the person under this Part” (namely, Part IX of the Act which includes both Division II “Goods and Services Tax” and Division III “Tax on Importation of Goods”) may be set off against tax collected by a person as a remitting supplier under Division II.  Rebates under s. 261(1) are amounts that may be deducted under Division III in Part IX of the Excise Tax Act [35]

 


Cases Cited

 

Referred to:  West Windsor Urgent Care Centre Inc. v. R., 2005 TCC 405, [2005] G.S.T.C. 179, aff’d 2008 FCA 11, [2008] G.S.T.C. 5.

 

Statutes and Regulations Cited

 

Customs Act , R.S.C. 1985, c. 1 (2nd Supp .), ss. 58(5), (6), 60 to 65.

 

Excise Tax Act , R.S.C. 1985, c. E‑15 , ss. 215.1(1) , (2) , 216(2) , (6) , 225(1) , 261(1) , (2) , (3) , 296(2.1) , Part IX.

 

APPEAL from a judgment of the Federal Court of Appeal (Pelletier, Nadon and Sexton JJ.A.), 2008 FCA 48, 372 N.R. 347, [2008] G.S.T.C. 34, 2008 G.T.C. 1182, [2008] F.C.J. No. 178 (QL), 2008 CarswellNat 248, reversing a judgment of Bowman C.J.T.C., 2006 TCC 450, [2006] G.S.T.C. 146, 2007 G.T.C. 660, [2006] T.C.J. No. 516 (QL), 2006 CarswellNat 3980.  Appeal allowed.

 

Jeff W. Galway and David E. Spiro, for the appellant.

 

Wendy Burnham, David Jacyk and Bonnie F. Moon, for the respondent.

 

The judgment of the Court was delivered by

 


Rothstein J.

 

I.     Overview

 

[1]                        From February 1, 1996 to December 31, 1997, United Parcel Service Canada Ltd. (“UPS”), in its capacity as a licensed customs broker, overpaid $2,937,123 in GST to the Minister of National Revenue on goods brought into Canada on behalf of  persons to whom it had delivered shipments from outside of Canada.  UPS reported the overpayments in its monthly GST returns by deducting the amount of the overpayments from its own GST liability as a supplier of goods and services.  On reassessment, in March 2000, the Minister disallowed these deductions.  UPS was out of pocket for the overpayments and did not seek reimbursement from its customers.  The issue is whether, in the circumstances of this case, UPS is entitled to a rebate of the overpayments.  In my opinion,  UPS is entitled to the rebate and  I would allow the appeal. 

 

II.   Facts

 

[2]                        UPS provides delivery services to among others: (i) persons outside of Canada who request a shipment be picked up outside of Canada and delivered to an address within Canada (“shippers”) and (ii) persons in Canada who have received delivery of a shipment that is located outside of Canada at an address that is within Canada (“consignees”).  The term “customers” includes both shippers and consignees of delivered goods.

 


[3]                        In carrying on its business as a courier, UPS acts as a licenced customs broker for goods entering Canada from a foreign country.  With some regular consignees, UPS acted as a broker under the authority of a general agency agreement with these consignees.  With other  consignees, UPS acted as a broker through a one-time power of attorney from these consignees.  Acting as a broker, UPS was authorized to take all steps necessary to clear Canadian customs and to pay or remit duties and taxes on behalf of its customers.  Only the overpayment of GST is at issue in this appeal.

 

[4]                        It was not uncommon for there to be errors that resulted in the overpayment of GST.  According to the statement of agreed facts, there were many reasons for these overpayments, including wrong value for duty, returned shipments, Canadian goods returning to Canada, GST free goods and others.  The errors were attributable either  to UPS or to its customers.

 

[5]                        Until late 1996, UPS used two different methods to recover overpaid GST. Where the consignee was not a GST registrant, UPS would credit the consignee’s account for the amount of the overpayment after the error was discovered so that, as between UPS and the consignee, the consignee was only charged the correct GST.  UPS would then deduct the same amount against its own GST liability as a supplier of goods and services.

[6]                        When there was an error pertaining to a consignee who was a GST registrant, UPS would credit the consignee’s account with the amount of the overpayment as it did for consignees who were not GST registrants.  However, instead of deducting the amount of the overpayment from its own GST liability, UPS would file documentation with the Minister to recover the amount of the overpayment.  The time between the date the rebate application was made and the time when UPS would receive the rebate varied from 30 days to one year.

 


[7]                        Commencing in late December 1996, UPS began treating GST registrants and non-registrants alike.  When an overpayment was discovered, UPS credited the consignee’s account for the amount of the overpayment so that all consignees would be charged only the correct amount of GST.  In all cases, UPS would then deduct the overpayment of GST from its own GST liability.  Under this procedure, UPS no longer filed GST rebate claims on behalf of any of the consignees.  It simply deducted all of the overpayments from its own GST liability in its monthly GST returns.

 

[8]                        During the period of February 1, 1996 to December 31, 1997, the GST paid in error amounted to $2,937,123.

 

III.  Decisions Below

 

[9]                        The Minister assessed UPS for the period of February 1, 1996 until December 31, 1997 and disallowed the amount of $2,937,123 which UPS had  deducted from its own GST liability.  By Notice of Decision, the Minister allowed an adjustment of $36,265, leaving a reassessed balance of $2,900,858.  In addition, the Minister assessed interest of $456,606.20 and a penalty of $632,229.77. 

 

[10]                    UPS appealed to the Tax Court.  Chief Justice Bowman allowed the appeal (2006 TCC 450, [2006] G.S.T.C. 146).  The Federal Court of Appeal overturned Chief Justice Bowman’s decision and dismissed UPS’s appeal from the Minister’s reassessment (2008 FCA 48, [2008] G.S.T.C. 34).

 

IV.  Issue


 

[11]                    The issue is whether UPS is entitled to a rebate of $2,900,858 for the period February 1, 1996 to December 31, 1997. 

 

V.   Analysis

 

[12]                    The Statement of Agreed Facts states in its preamble and at para. 27:

 

 

The parties also agree that the word “overpayment” as used below [in the statement of agreed facts] reflects an amount of GST that would not have been payable had the errors described in paragraph 19 below [in the statement of agreed facts] not been made.  The Respondent does not agree that the word “overpayment” as used below implies any right to the repayment of that amount to UPS or to anyone else.

 

. . .

 

27.       The amount of the GST overpayments for the 1996/1997 period that was offset against the amount of GST reported by UPS as shown on line 105 of its GST return was $2,937,120.00 [after adjustment $2,900,858].  UPS did not collect those overpayments as GST from its customers.

 

 

[13]                    From these agreed facts, four conclusions may be drawn.  First, there were overpayments of GST in the 1996-1997 period amounting to $2,937,123.  Second, it was UPS that paid the overpayments to the Minister.  Third, UPS did not collect these overpayments of GST from its customers and it was “out of pocket” for these overpayments.  And fourth, the Minister did not agree that the word “overpayment” implied any right of repayment.  However, this does not detract from the Minister’s factual concession that there was an overpayment.  In a statement of agreed facts, it is the facts that are agreed upon, not the legal consequences of those agreed facts. 

 


[14]                    The first question, then, is whether UPS was entitled to a rebate of the overpayment of $2,900,858 (after adjustment by the Minister) under the provisions of the Excise Tax Act , R.S.C. 1985, c. E-15 Section 261(1)  of the Excise Tax Act  provides that:

 

261. (1)  Where a person has paid an amount

 

(a) as or on account of, or

 

(b) that was taken into account as,

 

tax, net tax, penalty, interest or other obligation under this Part in circumstances where the amount was not payable or remittable by the person, whether the amount was paid by mistake or otherwise, the Minister shall, subject to subsections (2) and (3), pay a rebate of that amount to the person.

 

 

 

[15]                    On its face, subject to subss. (2) and (3), s. 261(1) would appear to  support UPS’s claim that it was entitled to a rebate of the GST overpayment.  UPS paid an amount on account of GST on imported goods in circumstances where the  amount was not payable or remittable because it was an overpayment.  The overpayment resulted from mistakes by UPS and its customers.  In these circumstances, s. 261(1) provides that the Minister shall pay a rebate of the amount of the overpayment.

 


[16]                    However, the Minister says that s. 261(1) cannot be interpreted in a contextual vacuum.  The Minister’s first argument is that UPS was not the person who paid the amount on account of GST.  He says UPS as customs broker acted as an agent for the consignees  and that it was the consignees  who were liable to pay the GST and not UPS.  The Minister says that, for the purposes of s. 261(1), the person who “has paid an amount” is the person who has the legal liability to pay, not the person who simply transmitted the money to the Minister.

 

[17]                    I cannot agree.  This argument would impose an inquiry into liability for payment instead of actual payment where no such inquiry is mandated by the statute.  It may well be that it was the consignees of UPS who had the liability to pay the GST on the imported goods.  But that does not detract from the fact that in actuality it was UPS — and UPS alone — who paid and was out of pocket for the GST.  At first blush, the words “or other obligation” in s. 261(1) might be thought to import the notion of liability to pay.  However, the words “other obligation” must be read in the context of the provision as a whole.  Section 261(1) applies where a person pays an amount as or on account of “tax, net tax, penalty, [or] interest”.  These terms refer to categories of amounts that are to be paid as or on account of obligations established by the Excise Tax Act .  In this context, “other obligation” simply refers to an obligation under Part IX of the Excise Tax Act  that is not specifically enumerated in s. 261(1).  Actual liability is not relevant in this context since there is no liability to pay tax that was paid in error.  If the Minister’s argument were correct, a stranger who mistakenly paid GST on goods imported by someone else (perhaps because the names of two importers were similar) could not obtain a rebate.  It cannot have been the intention of Parliament that persons who were not liable for GST but paid GST in error could not obtain a rebate.

 

[18]                    The Minister relies on West Windsor Urgent Care Centre Inc. v. R., 2005 TCC 405, [2005] G.S.T.C. 179, aff’d 2008 FCA 11, [2008] G.S.T.C. 5, to argue that the only person entitled to a rebate is the person who was liable to pay the GST.  West Windsor does not stand for that proposition.  Rather, it stands for the proposition that the person who in fact paid and was out of pocket for the GST is the person that can claim a rebate under s. 261(1). 


 

[19]                    In West Windsor, Hershfield J. found that the appellant — a remitting supplier who sought a rebate under s. 261(1) — had collected GST and remitted it to the Minister, but had not in fact paid it.  The appellant was a clinic that supplied infrastructure to physicians who in turn provided medical services paid by their patients or, more commonly, by insurers such as the Ontario Health Insurance Plan.  The physicians, as recipients of the clinic’s services, paid a fee to the clinic including GST and the clinic remitted these GST payments to the Minister.  Hershfield J. found that it was the physicians, not the clinic, who in fact paid the GST (West Windsor, at para. 49).  The clinic therefore lacked standing to seek a rebate under s. 261(1) since it had simply collected and remitted the GST.  In this case, there is no doubt that it was UPS and UPS only who in fact overpaid the GST in error.  The overpayments were not collected by UPS from its customers.

 

[20]                    Section 261(1) is worded broadly.  There is no limitation of the kind argued for by the Minister in the language of the provision.  Nothing in the context of s. 261(1) supports such a limitation, nor has the Minister pointed to any other provision of the Excise Tax Act  or Customs Act , R.S.C. 1985, c. 1 (2nd Supp .), to support such a limitation.  It would not be in accordance with the ordinary and grammatical meaning of the provision to read s. 261(1) in such a way as to preclude persons who have paid or overpaid GST in error from obtaining a rebate from the Minister. 

 

[21]                    I would therefore conclude that UPS was the person that paid an amount on account of GST within the meaning of s. 261(1)  of the Excise Tax Act .

 


[22]                    The Minister’s second argument is that, in order to invoke s. 261(1), the amount paid must be an amount that was “not payable”.  The Minister says that until a designated customs officer has revised the amount of GST owing as the result of a reappraisal of the value of the goods or a redetermination of their tax status, the amount reported by UPS, even if incorrect, is deemed to be correct and is not subject to review except through the processes provided for in the Customs Act  (s. 58(5)  and (6) ) and the Excise Tax Act  (s. 216(2)  and (6) ).

 

[23]                    Putting aside for a moment the issue of the procedure to obtain a rebate under the Excise Tax Act  and Customs Act , which I deal with as a third argument by the Minister, I would only observe at this point that the Minister’s position is contradicted by the facts in the record.  The Minister has agreed that the sum of $2,900,858 constituted overpayment of GST and that this amount would not have been payable had errors not been made.  The facts agreed to by the Minister come squarely within s. 261(1) (subject to subss. (2) and (3)).  UPS paid $2,900,858 which was not payable due to mistakes.  In these circumstances, s. 261(1) requires the Minister to rebate that amount to UPS.

 

[24]                    I turn to the Minister’s third argument which is that UPS did not follow the required procedure for obtaining a rebate and therefore was not entitled to a rebate under s. 261(1).  Payment of a rebate under s. 261(1) is “subject to subsections (2) and (3)”.  Under s. 261(2)(c), no rebate is to be paid under s. 261(1) to the extent it is payable under s. 215.1(1) or (2) or s. 216(6).  Section 261(2)(c) provides that:

 

261. . . .

 

(2) A rebate in respect of an amount shall not be paid under subsection (1) to a person to the extent that

 


                                                                            . . . 

 

(c) a rebate of the amount is payable under subsection 215.1(1) or (2) or 216(6) . . . .

 

 

[25]                    Under s. 261(3) an application for rebate must be made within two years after the day the overpayment was made.  Section 261(3) provides:

 

261. . . .

 

(3) A rebate in respect of an amount shall not be paid under subsection (1) to a person unless the person files an application for the rebate within two years after the day the amount was paid or remitted by the person.

 

[26]                    The Minister says s. 215.1(1) and s. 216(6) could have applied had the importers made a claim under these provisions.  He submits that a rebate would have been payable under s. 216(6) in a number of categories (e.g.  incorrect value for duty, incorrect tariff classification, non-taxable goods, goods returned to Canada) or possibly under s. 215.1(1) (e.g. goods imported on consignment, approval, sale or return basis or other similar terms) had UPS followed the procedures provided in ss. 60  to 65  of the Customs Act  or s. 215.1  of the Excise Tax Act .  He says a reappraisal or a redetermination would have been conducted by a designated customs officer had an application for a reappraisal or a redetermination been made by the importer within the time specified.  The Minister further submits that since a reappraisal or a redetermination of the goods was available under the regime prescribed in the Customs Act , recourse for seeking a rebate by the importer was through s. 215.1(1) and s. 216(6), not s. 261(1) and that UPS did not follow the prescribed procedure to obtain rebates under either s.  215.1(1) or s. 216(6).


 

[27]                    Section 261(2)(c) provides that a rebate shall not be paid under s. 261(1) where a rebate “is payable under subsection 215.1(1) . . . or 216(6)”.   The Minister argues that s. 261(2)(c) prevents a rebate claim from being filed under s. 261 where a rebate is available under s. 215.1(1) or under s. 216(6).  However,  s. 261(2)(c) does not say that a rebate is not to be paid under s. 261(1) where a rebate is available through another enumerated rebate provision.  Rather, s. 261(2)(c) says that a rebate under s. 261(1) is not to be paid where a rebate  “is payable under subsection 215.1(1) or (2) or s. 216(6)”.  No rebate is payable under those provisions because UPS did not  seek a rebate under either of them.

 

[28]                    I do not read s. 261(1) or 261(2)(c) as precluding payment of rebates under s. 261(1) just because a rebate could have been claimed under s. 215.1(1) or 216(6).  In my view, s. 261(2)(c) was intended to avoid the double payment of rebates.  Obviously no one may claim the same rebate under both s. 215.1(1) or 216(6) and s. 261(1).  But s. 261(2)(c) does not say that the only way in which a rebate may be obtained is under s. 215.1(1) or 216(6).  It only says that no rebate is to be paid under s. 261(1)  “to the extent that . . . (c) a rebate of the amount is payable under subsection 215.1(1) or (2) or  216(6)”.  It seems to me to follow that  the Minister is required to pay a rebate under s. 261(1)  if no rebate is payable under s. 215.1(1) or (2) or s. 216(6) and the Minister agrees that a person has paid or overpaid an amount on account of GST that was not payable by reason of mistake.

 


[29]                    Further, s. 296(2.1) provides that in the assessment process,  if the Minister determines that a rebate would have been payable had it been claimed in an application, that it was not so claimed and that the period for claiming the rebate has expired, the Minister shall, unless otherwise requested, apply the rebate against the net tax of the person.  Section 296(2.1) provides:

 

296. . . .

 

(2.1) Where, in assessing the net tax of a person for a reporting period of the person or an amount (in this subsection referred to as the “overdue amount”) that became payable by a person under this Part, the Minister determines that

 

(a) an amount (in this subsection referred to as the “allowable rebate”) would have been payable to the person as a rebate if it had been claimed in an application under this Part filed on the particular day that is

 

(i) if the assessment is in respect of net tax for the reporting period, the day on or before which the return under Division V for the period was required to be filed, or

 

(ii) if the assessment is in respect of an overdue amount, the day on which the overdue amount became payable by the person,

 

and, where the rebate is in respect of an amount that is being assessed, if the person had paid or remitted that amount,

 

(b) the allowable rebate was not claimed by the person in an application filed before the day notice of the assessment is sent to the person, and

 

(c) the allowable rebate would be payable to the person if it were claimed in an application under this Part filed on the day notice of the assessment is sent to the person or would be disallowed if it were claimed in that application only because the period for claiming the allowable rebate expired before that day,

 

the Minister shall apply all or part of the allowable rebate against that net tax or overdue amount as if the person had, on the particular day, paid or remitted the amount so applied on account of that net tax or overdue amount.

 


[30]                    As I read s. 296(2.1), even if no application for a rebate was made within the applicable limitation period, the rebate shall be applied by the Minister against the net tax owed by the taxpayer in the reassessment process if the Minister determines that a rebate would have been payable had it been claimed.  The section refers to “allowable rebate”.  Allowable rebate must mean a rebate that would have been allowable had the applicable procedure been followed.  In other words, where these procedures have not been followed, it is not fatal to the rebate claim. 

 

[31]                    In the circumstances of this case, s. 215.1(1) and s. 216(6) were not applicable because no application was made under s. 215.1(1) and no reappraisal or redetermination by a Customs officer was made under s. 216(6).  Further, no application was filed by UPS within the time limit provided by s. 261(3).

 

[32]                    Because no application was made under s. 215.1(1), s. 216(6) or within the time limit provided by s. 261(3), s. 261(1) and s. 296(2.1) were applicable.  Section 296(2.1)(c) expressly relieves against the time limit of two years provided for in s. 261(3).

 

[33]                    The Minister has agreed that $2,900,858 is an overpayment and was not payable. The Minister has also agreed that UPS did not collect the overpayment from its customers.  By necessary implication, these concessions must mean that had the appropriate procedures been followed, the rebate would have been allowable.  In these circumstances, the Minister was obliged to apply the rebate to the net tax assessed against UPS pursuant to s. 261(1) and s. 296(2.1).

 


[34]                    In this case, the fact and the amount of the overpayment of GST by UPS  were conceded by the Minister in the Statement of Agreed Facts.  In another case, a party that has been reassessed and who wishes to rely on s. 261(1) and s. 296(2.1) may have to prove the fact and the amount of overpayment by leading evidence.  Although one might question why the Excise Tax Act  would permit a party to lead evidence to establish that there was an allowable rebate for the purposes of s. 261(1) and s. 296(2.1) instead of following other procedures provided for in the Excise Tax Act  or the Customs Act , I am compelled to reach this conclusion based on the text and context of s. 261(1) and s. 296(2.1).

 

[35]                    The Minister further submits that there is “no statutory basis for intermingling Division II tax collected in respect of the appellant’s own supplies of goods and services and deemed held in trust for Her Majesty, with Division III tax paid by importers on their importation of goods”.  However, this “intermingling” is provided for by the terms of the Excise Tax Act  itself. The definition of “net tax” in s. 225(1) provides that “an amount that may be deducted by the person under this Part” — namely  Part IX of the Excise Tax Act  (which includes both Division II “Goods and Services Tax” and Division III “Tax on Importation of Goods”) — may be set off against tax collected by a person as a remitting supplier under Division II.  Rebates under s. 261(1) are amounts that may be deducted under Division III in Part IX of the Excise Tax Act .  In other words, the “intermingling” of rebates under s. 261(1) for overpaid GST on imported goods and tax collected and remittable by UPS as a remitting supplier is authorized by the Excise Tax Act  itself.

 


[36]                    One of the Minister’s concerns is that any of UPS’s customers could have claimed a rebate or input tax credit for the same rebate claim made by UPS and that there would be no way of knowing this without undertaking an audit of each and every customer.  He says that any agreement between UPS and its customers not to claim a rebate is simply a private agreement that cannot override statutory provisions.  I agree with the Minister that a private agreement cannot override statutory provisions.  But that is not the point.  The Minister is essentially arguing that a customer of UPS could fraudulently claim a rebate or an input tax credit knowing that UPS had already made a claim for the same rebate.  A person who fraudulently sought a rebate of a GST overpayment or an input tax credit would be subject to criminal sanctions.  With respect, I do not think it lies in the mouth of the Minister to raise such an argument on the facts of this case where he has agreed that there has been an overpayment and where his position is that he is entitled to retain overpaid  GST.  In any event, if this is a matter of concern to the Minister, he may ask Parliament to amend the Excise Tax Act  to address it.

 

[37]                    Where the Minister has admitted the underlying facts for a s. 261(1) rebate and where subss. (2) and (3) of s. 261 were not applicable, the conclusion must be that there was an allowable rebate within the meaning of s. 261(1) and s. 296(2.1) and that the rebate should be applied to reduce the net tax otherwise payable.  The Minister should have allowed the amount of the rebate of $2,900,858 to reduce the GST otherwise  remittable by UPS.

 

VI.  Conclusion

 

[38]                    I would allow the appeal, set aside the decision of the Federal Court of Appeal, restore the decision of the Tax Court and disallow the Minister’s reassessment in its entirety.  UPS is entitled to its costs in this Court and the courts below. 

 

Appeal allowed with costs.

 

Solicitors for the appellant:  Blake, Cassels & Graydon, Toronto.

 


Solicitor for the respondent:  Department of Justice, Ottawa.

 

 

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