A-481-82
Les Entreprises Kato Inc. (formerly Les Plas-
tiques Maska Inc.) (Appellant)
v.
Deputy Minister of National Revenue, Customs
and Excise (Respondent)
and
Kord Products Limited and Tariff Board
(Intervenants)
Court of Appeal, Le Dain, Marceau and Hugessen
B.—Montreal, October 25; Ottawa, November
21, 1983.
Customs and excise — Appeal from Tariff Board finding
that plastic flower pots sold to wholesalers for resale to public
not exempt from sales tax pursuant to s. 1, Part I, Schedule
III Excise Tax Act — Exemption provision referring to con
tainers to be used exclusively for containing goods not subject
to consumption or sales tax but not including containers
designed for repeated use — "Marchandises" (goods) meaning
items intended for sale — Use of "marchandise" instead of
more general word "article" or "bien" (good) indicating
exemption applying only to containers for goods offered for
sale — Interpretation consistent with intent of provision to
complement sales tax exemption for certain consumer goods
— Flower pots sold empty to consumers not intended to
receive `goods" intended for sale — Appeal dismissed —
Dissenting opinion that flowers and plants may be objects of
commerce and therefore are "goods" within meaning of Act —
Excise Tax Act, R.S.C. 1970, c. E-13, ss. 27(1), 29 (as am. by
S.C. 1980-81-82-83, c. 104, s. 9), Schedule III, Part I, s. 1 —
Civil Code of Lower Canada, art. 1486.
CASE JUDICIALLY CONSIDERED
DISTINGUISHED:
Canadian Horticultural Council v. Deputy Minister of
National Revenue for Customs and Excise (1966), 3
T.B.R. 307.
COUNSEL:
R. Dorion for appellant.
Y. Perrier for respondent.
M. J. Penman for intervenant Kord Products
Limited.
SOLICITORS:
Guy, Mercier, Bertrand, Bourgeois & Lau-
rent, Montreal, for applicant.
Deputy Attorney General of Canada for
respondent.
Fraser & Beatty, Toronto, for intervenant
Kord Products Limited.
The following are the reasons for judgment
rendered in English by
LE DAIN J.: I have had the advantage of read
ing the reasons for judgment of my brothers Mar-
ceau and Hugessen. I agree with the reasons of my
brother Marceau and his proposed disposition of
the appeal. In my opinion the words "goods not
subject to the consumption or sales tax" in section
1 of Part I of Schedule III of the Excise Tax Act
[R.S.C. 1970, c. E-13], as it then was, mean goods
that, but for the exclusion or exemption, would be
subject to the sales tax because they are the object
of a transaction that gives rise to the tax. The
flower pots that were intended to be sold empty to
consumers were clearly not to be used to contain
such goods.
* * *
The following is the English version of the
reasons for judgment rendered by
MARCEAU J.: I have had an opportunity of
reading the reasons of my brother Hugessen J.,
and unfortunately I cannot agree with his interpre
tation. With respect, therefore, I must render an
opinion contrary to his own.
I do not consider that the Board erred in finding
that section 1, Part I of Schedule III of the Excise
Tax Act did not have the effect of exempting the
goods at issue (plastic flower pots intended for sale
empty to consumers) from the sales tax imposed
by subsection 27(1) of the said Act.
My conclusion is in no way based on the reasons
given by the Board in its decision, as in fact, the
way I read that decision, it does not give any. It is
based on a strict interpretation of the exempting
provision cited, which it will be recalled reads as
follows:
1. Usual coverings or usual containers to be used exclusively
for covering or containing goods not subject to the consumption
or sales tax but not including coverings or containers designed
for dispensing goods for sale or designed for repeated use ....
The ordinary and accepted meaning of the word
"marchandises" (goods) is that of items circulated
on the commercial market, items intended for sale.
The Robert dictionary defines "marchandise":
"Chose mobilière pouvant faire l'objet d'un com
merce, d'un marché" (a movable item which may
be the subject of an exchange or contract), but
immediately adds: "et spécial t. ... Tout objet
mobilier destiné â la vente à l'exclusion des pro-
duits alimentaires (dits denrées)" (and in particu-
lar—any movable item intended for sale, excluding
food products (known as comestibles)), while the
Larousse dictionary (1966) defines "marchandise"
directly: "Ce qui se vend et s'achète: Avoir ses
magasins pleins de marchandises. (Les produits
alimentaires portent plutôt le nom de denrées.)
Objets, matières ou fournitures acquis par l'entre-
prise et destinés à être revendus sans avoir subi
aucune transformation" (anything sold or bought:
having one's stores full of goods. (Food products
are known as comestibles.) Items, materials or
supplies purchased by a business and intended for
resale without undergoing any processing), and
similarly Quillet (1948): "Se dit de tout ce qui se
vend et se débite, en gros ou en détail, dans les
boutiques et magasins, sur les foires, marchés,
etc." (refers to anything which is sold or bought, at
wholesale or retail, in stores and shops, at fairs,
markets and so on). "Marchandise" (goods) is the
subject of a "marché" (contract), it is what a
"marchand" (merchant) sells, which one "mar-
chande" (buys and sells). No one would suggest
that his wife bought pots in which to put certain
"marchandises" (goods), which she was particu
larly fond of or which she took from her garden,
namely flowers.
In using the word "marchandise" and not a
more general word such as "article" (article) (a
word used elsewhere in the Act) or the word
"bien" (good, item of property), in my opinion the
legislator disclosed that the exemption was to
apply only to containers in which are to be placed
goods, items in circulation on the commercial
market and destined to be sold, goods offered for
sale.
Additionally, this is the only interpretation
which is completely in keeping with the context in
which the provision occurs, and with its manifest
purpose, since it is intended to complement the
sales tax exemption which the legislator wished to
confer on certain consumer goods. It is clear that
flower pots sold empty to consumers are not
intended to receive "goods", within the meaning of
goods in circulation on the commercial market and
intended for sale.
I would dismiss the appeal with costs.
* * *
The following is the English version of the
reasons for judgment rendered by
HUGESSEN J. (dissenting): This is an appeal
from a finding by the Tariff Board that thin
plastic flower pots manufactured by appellant and
sold to wholesalers or retailers for resale to the
public are not covered by the sales tax exemption
contained in section 1 of Part I of Schedule III of
the Excise Tax Act, R.S.C. 1970, c. E-13.
At the relevant time, the exemption in question
read as follows:
1. Usual coverings or usual containers to be used exclusively
for covering or containing goods not subject to the consumption
or sales tax but not including coverings or containers designed
for dispensing goods for sale or designed for repeated use ....
For the purposes of the case at bar, this provi
sion contains three separate aspects:
a usual containers;
b to be used exclusively for containing goods not
subject to tax;
c not designed for repeated use.
At the hearing before the Board, respondent
formally admitted
[TRANSLATION] that the pots in question are usual containers
"of flowers or plants" and that the latter are exempt from
excise tax under the provisions of Part IV of Schedule III of the
Act. (Submission of Deputy Minister to the Board, Case, page
47.)
The Deputy Minister argued, before both the
Board and this Court, that the exemption applies
only when the pots in question are intended for
sale containing flowers or plants. This argument
was not accepted by the Board and is not in
accordance with the provision cited above.
However, the Board ruled in favour of the
Deputy Minister on another ground, namely that
the wording of Part I of Schedule III relates
exclusively to "commercial use". This interpreta
tion is also not in accordance with the provision
cited above. In support of its position, the Board
cited its own decision of June 10, 1966, in appeal
No. 829, Canadian Horticultural Council v.
Deputy Minister of National Revenue for Cus
toms and Excise (1966), 3 T.B.R. 307. But in that
decision, the Board was only dealing with the
words "designed for repeated use", found at the
end of the foregoing provision, and held, quite
properly, that those words did not apply to occasio
nal use in a non-commercial context.
A third argument is now advanced in support of
the position of the Deputy Minister, namely that
the use of the word "goods" in the foregoing
provision, to refer to the things to be covered or
contained, necessarily implies a limitation to items
which are in circulation on the commercial market
or intended for sale. As appellant sells a part of its
production to wholesalers or retailers, who resell
them empty to individuals, and as the plants and
flowers which the latter will put in the pots are not
necessarily intended for sale, the exemption does
not apply.
With respect for the contrary view, I consider
that this interpretation is incompatible with the
ordinary meaning of the word "marchandise"
(goods), which Robert defines as:
[TRANSLATION] 1° A movable item which may be the object
of commerce or trade. [Emphasis added.]
There is no doubt that flowers and plants may be
the object of commerce. Respondent admitted as
much, for he agreed that the pots produced by
appellant and sold to flower and plant producers
(greenhouses, nurseries and so on) are exempt.
Accordingly, if flowers and plants can be the
object of commerce, they are goods within the
meaning of the Act. In my opinion, they do not
cease to be so depending on whether their owner
decides to sell them or not. It is the intrinsic nature
of the thing, not the intent of its owner, which
determines its nature. In my view, the word
"goods" covers any movable object which is not
excluded from being an object of commerce.
(Compare article 1486 Civil Code.)
Furthermore, this interpretation is compatible
with the English wording, where the term used,
"goods", is surely not limited to things which are
actually in commerce (e.g. "household goods"),
but only to things which may be so.*
In my view, the Board committed an error of
law. I would accordingly allow the appeal and
refer the matter back to the Board for rehearing
and judgment in accordance with these reasons. I
would further allow appellant's application to
reflect its change of name in the heading of the
case at bar, and I would direct that the style of
cause henceforward read as it does at the begin
ning of these reasons.
* It is worth noting that, in the latest amendment to
section 29 (S.C. 1980-81-82-83, c. 104, s. 9 assented to on June
29, 1982), the legislator characterized everything in Schedule
III as "goods".
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.