A-588-79
Leonard Pipeline Contractors Ltd. (Appellant)
v.
The Queen (in right of the Minister of National
Revenue for Customs & Excise) (Respondent)
Court of Appeal, Heald and Le Dain JJ. and
MacKay D.J.—Toronto, May 13 and 15, 1980.
Customs and excise — Appeal from a declaration of the
Tariff Board that aircraft owned by the appellant is not for
use in the provision of air services related to the development
of natural resources and is subject to excise tax imposed by s.
21(1) of the Excise Tax Act and to sales tax imposed by s.
27(1) — Board held that appellant's argument that mainline
pipeline construction was directly related to natural resource
development, and that aircraft used by the Company was
therefore entitled to sales and excise tax exemptions, was not
supported by the evidence — Whether Board misdirected itself
as to the evidence — Appeal dismissed — Excise Tax Act,
R.S.C. 1970, c. E-13, ss. 21(1), 27(1) — Aircraft Sales Tax
Exemption Regulations, SOR/75-699, s. 2(c) — Aircraft
Excise Tax Exemption Regulations, SOR/75-697, s. 2(c).
APPEAL.
COUNSEL:
W. Dingwall, Q.C. for appellant.
P. B. Annis for respondent.
SOLICITORS:
Woolley, Dale & Dingwall, Toronto, for
appellant.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for judgment
rendered in English by
HEALD J.: This is an appeal from a declaration
of the Tariff Board dated August 10, 1979 that a
Rockwell Turbo Commander Aircraft owned by
the appellant is not for use in the provision of air
services related to the development of natural
resources in Canada and is, therefore, subject to
excise tax imposed by section 21(1) of the Excise
Tax Act, R.S.C. 1970, c. E-13 and to sales tax
imposed by section 27 (1) thereof. ' The appeal is
on a question of law pursuant to leave granted by
this Court under section 60 of the Excise Tax Act.
The appellant is engaged in "mainline" or "big
inch" pipeline construction in Canada and in other
parts of the world. The appellant's position is that
the development of an oil field and a mainline
pipeline have a direct relationship in that there are
no storage facilities involved, and therefore the
situation can be compared to a tap because the
capacity of the pipeline directly dictates the degree
of development of the resource. Accordingly, in its
submission, because the business of mainline pipe
line construction is a stage in natural resource
development, an aircraft used for the various needs
of the Company is entitled to the excise and sales
tax exemptions set forth supra.
The ratio of the decision of the majority of the
Board on this issue is to be found at page 26 (Vol.
1) of the Appeal Book and reads as follows:
The Board notes that the testimony of two highly qualified
witnesses for the respondent and the evidence of trade dictio
naries was that the term development relates to the drilling of
wells in a proven field. Pipeline construction, they stated, lies
outside the field of development and is related to transportation
of the product. No evidence to the contrary was introduced by
the applicant. The Board is satisfied, on the evidence, that
within the industry development is commonly understood to
refer to the drilling of wells in a field or proven area of
production. The services of the aircraft, the Board therefore
concludes, are not used for development of a natural resource
as that term is understood within the petroleum industry and
within the meaning of the exempting provisions. As the aircraft
is not used for the development of a natural resource it is not
necessary for the Board to determine whether or not it is used
exclusively for the class of air service prescribed by the Aircraft
Exemption Regulations.
On this appeal, appellant's counsel submitted
that the majority of the Board "had misdirected
' In order to be exempt from payment of said taxes, it was
common ground that the appellant would have to establish that
the aircraft in question came within the exemptions from sales
tax and excise tax set out in section 2(c) of the Aircraft Sales
Tax Exemption Regulations, SOR/75-699 and section 2(c) of
the Aircraft Excise Tax Exemption Regulations, SOR/75-697
and both of which read as follows:
(c) Air services directly related to the exploration and
development of natural resources in Canada.
itself as to the evidence" of the two witnesses
called by the respondent and that the total evi
dence of these witnesses taken in context did not
establish the facts as stated by the majority of the
Board supra.
After carefully perusing the evidence in its
entirety, I have concluded that this submission is
not substantiated by the evidence. The majority of
the Board said that the two witnesses together with
the evidence of definitions from trade dictionaries
established: (a) that the term "development"
relates to the drilling of wells in a proven field and
(b) that pipeline construction lies outside the field
of development and is related to transportation of
the product. In my view there was considerable
evidence before the Board, which was uncon-
tradicted, which the Board was entitled to accept
as establishing both (a) and (b) supra. 2
Appellant's counsel directed our attention to a
number of passages in the evidence which, in his
view, contradicted the Board's view of the evi
dence. I have considered those references and they
do not, in my view, alter or change, in any way, the
total thrust of that evidence which is, in my belief,
accurately stated by the Board in the passage
referred to supra.
Appellant's counsel also submitted that the evi
dence of Lepine when asked to define "develop-
ment" (Appeal Book—page 119) is at variance
with the definition of "development" as contained
in the trade dictionaries referred to in the majority
reasons. (See for ex.—Vol. 3—Appeal Book—
page 409) and that in his evidence, Lepine had
narrowed the dictionary definition.
With respect, I do not agree that Lepine's evi
dence, viewed as a whole, has that effect but even
if such be the case, as an expert in the trade, it was
quite open to him to express his expert views as to
the meaning which the term "development" is
generally given in the trade, and the Board corn
2 See evidence of Lepine—Appeal Book—Vol. 1—pages 118,
119, 133 and 134. Also see evidence of Rutherford—Appeal
Book—pages 158, 159.
mitted no error in accepting that expert opinion. 3
In my view, the facts as stated by the Board, and
the inferences drawn by the Board from these
facts, were manifestly open to them on the total
evidence before them.
I have therefore concluded that the majority of
the Board has made findings and drawn inferences
of fact which they were entitled to make. I have
further concluded that in applying the provisions
of the applicable statute and Regulations, to the
factual situation, they have committed no error in
law.
In view of this conclusion, it is not, in my view,
necessary to deal with the respondent's alternative
submission that appellant's aircraft was not used
by the appellant exclusively to provide the air
services in question.
For all of the above reasons I would dismiss the
appeal. Since the respondent did not ask for costs
in his memorandum I would make no order with
respect thereto.
* * *
LE DAIN J.: I agree.
* * *
MACKAY D.J.: I agree.
3 For a similar view, see Denbyware Canada Limited v.
D.M.N.R. Federal Court of Appeal—A-274-78 per Urie J. See
also Unwin v. Hanson [1891] 2 Q.B. 115 at 119 per Lord Esher
M.R.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.