A-331-75
Great Canadian Oil Sands Supply Limited and
Wabco Equipment Canada Limited (Appellants)
v.
Deputy Minister of National Revenue for Customs
and Excise (Respondent)
Court of Appeal, Heald and Ryan JJ. and
MacKay D.J.—Toronto, February 25 and March
4, 1976.
Customs and excise Appeal and judicial review Whether
trucks and parts, being "machinery and apparatus for use ...
for operating oil sands by mining operations" of a "class or
kind made in Canada"—Whether question of fact or law—
Jurisdiction—Customs Act, R.S.C. 1970, c. C-40 and Tariff
Items 41006-1,49215-1,49216-1.
The Tariff Board supported the Deputy Minister's decision
that 17 trucks and parts thereof, purchased for overburden
removal in the Athabasca oil sands operations, were of a "class
or kind made in Canada" and dutiable under Tariff Item
49215-1 in the amount of $554,452.
Held, reversing the Board's decision, the trucks and parts are
not subject to any duty since they should have been classified
under Item 49216-1. Tariff Items 49215-1 and 49216-1 incor
porate a form of end use provision ("for operating oil sands");
in such a case, use becomes the basis for classification and, for
purposes of findings of class or kind, all goods that do not meet
the end use requirement are excluded. The Board construed the
Tariff Items as though they contained no references to oil sands
operations, thereby rendering almost meaningless the plain
meaning of the words used in the Items. The purpose of the
legislators was to grant an exemption for imported machinery
necessary for oil sand mining operations where competitive
Canadian made machinery is unobtainable. The Board erred in
failing to tie the end use to the determination of class or kind.
Such error was not one of fact, but of law, and the Court is not
without jurisdiction under section 48(1) of the Customs Act.
Canadian Lift Truck Co. Ltd. v. Dep. M.N.R. (1956) 1
D.L.R. (2d) 497, applied. Dominion Engineering Works
Ltd. v. Dep. M.N.R. [1958] S.C.R. 652; Dep. M.N.R. v.
MacMillan & Bloedel [1965] S.C.R. 366; Dep. M.N.R. v.
Saint John Shipbuilding (1966) 55 D.L.R. (2d) 503 and
Consumers' Gas Company v. Dep. M.N.R. [1972] F.C.
1057 (affirmed by S.C.C. Oct. 7, 1975), distinguished.
APPEAL and judicial review.
COUNSEL:
J. R. Houston, Q.C., and M. Sclisizzi for
appellants.
A. Garneau and W. G. St. John for
respondent.
SOLICITORS:
Tilley, Carson & Findlay, Toronto, for
appellants.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for judgment
rendered in English by
HEALD J.: This is a joint proceeding comprising
an appeal under section 48(1) of the Customs Act
on a question of law from a decision of the Tariff
Board and a section 28 application to review and
set aside said decision. The proceedings were
joined by order of the Chief Justice.
In the decision appealed from, the Tariff Board
dismissed the appeal of the appellant from two
decisions by the respondent to the effect that 17
Wabco 150 B Haul Pak Rear Dump Trucks and
parts thereof were of a "class or kind made in
Canada" and were thus dutiable under Tariff Item
49215-1, said duty amounting to $554,452.
The trucks and parts in issue in this appeal were
purchased by the appellant, Great Canadian Oil
Sands Supply Limited (hereafter G.C.O.S.) from
the appellant Wabco Equipment Canada Limited
(hereafter Wabco Canada) and were manufac
tured in Peoria, Illinois. Said trucks were imported
into Canada by Wabco Canada between July 6,
1971 and November 10, 1971 and certain parts for
the trucks were imported by the appellants be
tween September 29, 1971 and December 30,
1971.
The three tariff items which need to be con
sidered in these proceedings read as follows:
Tariff when
goods imported
(a) Tariff Item 41006-1 from U.S.A.
Diesel-powered self propelled dump trucks,
mounted on rubber-tired wheels or on rubber-
tired wheels and half-tracks, having a rated
capacity by struck volume of not less than 9 1 / 2
cubic yards, and by payload weight of not less
than 15 tons, and parts thereof, for off-highway
use in carrying minerals or other excavated ma
terials at mines, quarries, gravel and sand pits or
at construction sites. 10 per cent
(b) and (c) Tariff Items 49215-1
and 49216-1
Machinery and apparatus for use in producing
unrefined oil from shales or for operating oil-
sands by mining operations or for extracting oil
from the sands so mined
49215-1—of a class or kind made in Canada;
parts thereof 10 per cent
49216-1 of a class or kind not made in Canada;
parts thereof Free
Originally, respondent's officials decided to clas
sify said trucks and parts under Tariff Item
41006-1. However, this decision was changed and
a redetermination made classifying them under
Tariff Item 49215-1.
G.C.O.S. has pioneered the mining of oil sands
and the extraction of oil from such sands. It was
the first and remains the only company to have
conducted such operations on a commercial scale
in Canada. G.C.O.S. has lease and patent rights in
the Athabasca oil sands region of Alberta and has
constructed and is operating a plant for extracting
oil from the oil sands so mined by it. Sustained
commercial production began about 1968.
The body of oil sands which is being mined by
G.C.O.S. is covered by a substantial thickness of
overburden (averaging 60 feet in depth) which
must be stripped and removed in order to expose
the oil sands and this operation is of vital impor
tance in the mining of these oil sands. In 1969 and
1970, G.C.O.S. removed 6' million tons of over
burden a year. Its estimate was that during the
year 1971 to 1980, it would have to remove 12
million yards a year in order to sustain its
operations.
The problem of disposal of the overburden
within the lease site so that mining of the oil sands
could continue, necessitates the construction, from
the overburden material, of a system of dikes. Any
equipment used to remove overburden must be
able to travel on the surface of the dikes. The
overburden is unusual in its composition, the larg
est component being a saturated silt with virtually
no compactability. Thus the dikes have an
extremely low bearing quality. From its experience
before 1970, G.C.O.S. ascertained that equipment
having a ground bearing pressure of 66 pounds
p.s.i. or less could function on the dikes most of the
time, but that equipment having a high ground
bearing pressure was unsuited to the conditions on
the dikes.
Prior to 1970, G.C.O.S. had been using Cater
pillar scrapers for overburden removal. In 1970, it
was necessary to replace them because they were
wearing out. G.C.O.S. was aware that a new and
larger type of truck tire, known as 36" x 51" tires
had recently been developed and that these tires
had the effect of materially reducing ground bear
ing pressure. Accordingly, it investigated what
large dump trucks were available having a capaci
ty great enough to make their operation economi
cal and a ground bearing pressure low enough to
permit them to operate on the dikes. A comparison
was also made of other features of large dump
trucks then on the market. Delivery time was a
critical factor since G.C.O.S. required the new
equipment on the site by May or June of 1971. '
After considering alternative dump trucks and
rejecting most of them for various reasons, the
choice was reduced to two prime contenders, the
Canadian made Unit Rig 120 (120 tons) and the
U.S. made Wabco 150 B truck (150) tons which is
in issue in this action. The latter was chosen
because it was said there was uncertainty on the
part of the Unit Rig Company truck relating to
tires and ground pressure; and also because the
power to weight ratio of the Wabco truck was
more favourable. There was some 141,000 lbs.
difference in net weight. This would have resulted
in a disastrous drop in payload. A strong factor in
the decision was the fact that the Wabco truck was
designed to be equipped with the new 36" x 51"
tires which meant G.C.O.S. could operate with an
economic, adequate loading of the vehicle for dif
ferent conditions of 65 or 66 pounds ground pres
sure. The commitment to purchase the Wabco
trucks was made on November 10, 1970.
There was some suggestion that a Canadian
made 150 ton Terex truck manufactured by Gen
eral Motors Diesel Division was a "contender".
However, on the evidence, it is clear that only 4 of
these units were manufactured between September
of 1970 and November of 1971 and that they were
merely prototypes and had not yet gone into pro
duction at the time of purchase of the Wabco
trucks by G.C.O.S. The evidence establishes that
on November 10, 1970, none of the four units were
in use. They were clearly not in contention as far
as G.C.O.S. was concerned nor were they available
to G.C.O.S. as an alternative to the Wabco trucks
at any relevant time.
The Tariff Board, in a split 2 - 1 decision
decided that subject trucks and parts were covered
by Tariff Item 49215-1—"of a class or kind made
in Canada". The dissenting member of the Board
would have classified subject trucks and parts as
being covered by Tariff Item 49216-1—"of a class
or kind not made in Canada". All 3 members of
the Board agreed that Tariff Item 41006-1 did not
apply. The parties to this appeal also agree that
Tariff Item 41006-1 does not apply (although the
intervenant in the proceedings before the Tariff
Board, General Motors of Canada did so submit
but said intervenant is not a party to this appeal).
While there is no issue between the parties on
the applicability of Tariff Item 41006-1, I should
say that I agree with the reasons expressed in the
majority judgment of the Tariff Board for holding
that Tariff Item 41006-1 does not apply, said
reasons being contained at pages 10 and 11 of the
majority judgment. (Appeal Book, pages 796 and
797.)
Accordingly, the question to be decided in these
proceedings is whether subject trucks and parts,
being undoubtedly "machinery and apparatus for
use ... for operating oil-sands by mining opera
tions ..." were "of a class or kind made in
Canada".
At page 13 of the majority judgment it is stated:
"From the evidence, ... , the Board has some
reason for believing that at the time when the
trucks in issue entered Canada, there were in fact
no trucks immediately available from Canadian
manufacturers which could negotiate the difficult
soil conditions which obtain on the dikes at the
GCOS mine site at Fort McMurray as successful
ly as did the trucks in issue; nor has the Board any
reason to doubt that this success was largely due to
the relatively low ground bearing pressure of the
Wabco 150 B Haulpak Rear Dump Truck." The
dissenting member of the Board agreed with the
above statement from the majority judgment. At
pages 16 and 17 of his judgment (pages 802 and
803 of the Appeal Book), the dissenting member of
the Board stated:
The tariff structure is a method of classifying goods for
import tax purposes by use of the tariff item. Characteristical
ly, the tariff item names or describes the goods that are to fall
under its provisions. Under this circumstance, the enactment of
a class or kind provision in conjunction with the description
contained in the item, provides for the establishment of such
categories of goods within the classification as described in the
item. The limits of such categories may vary in scope as the
relevant jurisprudence will show.
However, where end use is enacted as part of an item, the
item becomes only in part a description of goods as such.
Classification must then be based both upon the goods as
described, and the use as designated. While this adds a new
dimension to the requirements of an item, it also has the effect
of restricting its application. Inasmuch as the class or kind
concept has no relevance or identity except in relation to the
item in which it is enacted, it is' obvious that the finding of a
category of class or kind of goods in the context of an end use
provision, will necessarily be specific, because the item itself is
specific to a particular use. However, the nature and breadth of
the evidence to be considered in establishing appropriate cri
teria will be as broad as the scope and character of the activity
described in the item.
It is difficult to construe the wording of tariff items 49215-1
and 49216-1 as other than an expression or intent to assist in
the development of the oil sands. These items refer to ma
chinery and apparatus and describe the scope and character of
the activity as "for operating oil-sands by mining operations or
for extracting oil from the sands so mined", both specific
procedures. In the present appeal, the evidence is that mining of
the tar sands is a specific procedure which entails the meeting
of very specific requirements. Consequently it follows that to
the degree that the mining of the tar sands requires a particular
kind, type, size or capacity of machinery and apparatus, to that
degree specificity is appropriate in fixing the limits of a class or
kind finding in the present appeal.
I agree with the views of the dissenting member
as above expressed and I do not agree with the
view of the majority of the Board that the end use
should not be tied to the determination of class or
kind. I also agree with the view of the minority
member where he stated at page 16 of his judg
ment (page 802 of the Appeal Book):
... the present appeal is in respect to a tariff item which
incorporated a form of end use provision, namely, "for operat
ing oil-sands". Where a use provision is enacted use becomes
more than a facet of the evidence as to the nature of the goods,
it becomes the basis for classification under the item. This will
exclude for purposes of findings of class or kind, all goods that
do not meet this end use requirement, inasmuch as they will not
be the goods described in the item.
To construe Tariff Items 49215-1 and 49216-1
in the manner they were construed by the majority
of the Board is to read these items as though the
references to oil-sands operations were entirely
absent therefrom. Such a construction would dis
tort and render almost meaningless the clear and
plain meaning of the words employed in said Items
by the legislators.
A reading of these tariff items makes it clear to
me that the legislators, in enacting them, intended
to grant an exemption for imported machinery,
necessary for oil sand mining operations where it
was not possible to obtain competitive machinery
"made in Canada"—that is—competitive in the
sense of being economically feasible and capable of
performing the same functions.
I have therefore concluded that the Board
majority made a serious error in construing said
tariff items in the manner above described.
It is submitted, however, by counsel for the
respondent, that if the majority of the Board were
in error, that said error was not an error on a
question of law, but rather one of fact and since
section 48(1) of the Customs Act provides for an
appeal to this Court only on a question of law, this
Court is without jurisdiction to grant the relief
asked for by the appellants. The leading authority,
in this connection, is the Supreme Court judgment
of Kellock J. in Canadian Lift Truck Co. Ltd. v.
Dep. M.N.R.' At page 498 of the judgment, Mr.
Justice Kellock said:
While the construction of a statutory enactment is a question
of law, and the question as to whether a particular matter or
thing is of such a nature or kind as to fall within the legal
definition is a question of fact, nevertheless if it appears to the
appellate Court that the tribunal of fact had acted either
without any evidence or that no person, properly instructed as
to the law and acting judicially, could have reached the particu
lar determination, the Court may proceed on the assumption
that a misconception of law has been responsible for the
determination; Edwards vs Bairstow, [1955] 3 All E.R. 48.
[The underlining is mine.]
In my view, the majority of the Board erred in
construing subject Tariff Items in failing to tie the
end use to the determination of class or kind and
such an error, on the authority of the Canadian
Lift Truck case referred to (supra) is an error of
law which clothes this Court with jurisdiction to
grant relief to the appellants.
In addition to the Canadian Lift Truck case
(supra) counsel also relied on the Dominion Engi
neering case,' the MacMillan Bloedel case,' the
(1956) 1 D.L.R. (2d) 497 at 498.
2 Dominion Engineering Works Ltd. v. Dep. M.N.R. [1958]
S.C.R. 652.
' Dep. M.N.R. v. MacMillan & Bloedel (Alberni) Limited
[1965] S.C.R. 366.
Saint John Shipbuilding case,' and the Consum
ers' Gas case,' in support of his submission that
whether subject trucks are of a class or kind made
in Canada within the meaning of Tariff Item
49215-1 is a question of fact and not of law.
However, the Canadian Lift Truck case, the
Dominion Engineering case, the MacMillan Bloe-
del case, and the Saint John Shipbuilding case
were all cases under old Tariff Item 427a which
read as follows:
427a. All machinery composed wholly or in part of iron or
steel, n.o.p., of a class or kind not made in Canada; complete
parts of the foregoing.
In my opinion, these cases have no application to
the present case, because, as pointed out in the
dissenting judgment (Appeal Book page 802), no
provision with respect to end use was contained in
Tariff Item 427a and thus those cases were decid
ed solely on the basis of the nature of the goods
per se.
I am likewise of the view that the Consumers'
Gas case does not assist the respondent. In that
case the appellant public utility companies
appealed from a declaration of the Tariff Board
that regulators used by them in reducing the pres
sure of gas delivered to their customers were not
used "in the manufacture or production of goods"
within the meaning of paragraph 1(a) of Part XIII
of Schedule III of the Excise Tax Act, so as to be
exempt from sales tax. The appeal was dismissed
by the Federal Court of Appeal. In the majority
judgment, Chief Justice Jackett said at page 1062:
It would appear to me from this decision that the question as
to whether, in the circumstances of a particular case, a particu
lar process is one of "manufacture" or "production" is, within
wide limits, a question of fact for decision by the Tariff Board
in a case that arises as this one did. In other words, as I
understand it, what is "manufacture" or "production" depends
on the sense in which those words are used in the context of
different situations. In the context of this case, I cannot con
clude that the Tariff Board was wrong in law in not finding
4 Dep. M.N.R. v. Saint John Shipbuilding & Dry Dock Ltd.
(1966) 55 D.L.R. (2d) 503.
5 Consumers' Gas Company v. Dep. M.N.R. [ 1972] F.C.
1057—affirmed by Supreme Court of Canada—October 7,
1975 [(1976) 59 D.L.R. (3d) 610].
that changing the pressure of the natural gas in the regulators
is "manufacture" or "production".
If I am wrong in my view that the question is one of fact—if,
in other words, once the basic facts are established, it is a
question of law for the Court as to whether they fall within the
exemption provision—then, I am of the view that the Tariff
Board's decision was correct.
What is "manufacture" or "production" within the ordinary
sense of those words is something that varies according to the
context or class of activity involved. A merchandiser or retailer
does many things in the course of distribution that are neces
sary to make his goods acceptable to, or usable by, his custom
ers. Generally speaking, if those things are things normally
done by the distributor in the course of distribution, they would
not be regarded by the business community as manufacture or
production. Certainly, it would be a shock to a retailer if he
found that such acts made him liable to consumption or sales
tax on the retail sale price. On the other hand, a retailer can
combine the role of manufacturer and retailer, and it is a
question, if not of fact, of characterization, to decide whether
border line acts fall in one class or the other. In my view,
merely changing the pressure of natural gas, when it is a
reversible act such as it appears to be in this case, cannot,
within the ordinary sense in which the words are used, be
regarded as either "manufacture" or "production".
The situation in that case is quite different from
that in the case at bar. What I perceive the learned
Chief Justice to be stating in the passage above
quoted, is that, in his view, the question as to
whether a particular process is one of "manufac-
ture" or "production" is one of fact depending on
the circumstances of a particular case but, if it is a
question of law, then, in that case, the Tariff
Board did not misdirect themselves on the question
of law. In the case at bar, the Tariff Board was
required to interpret and construe Tariff Items
49215-1 and 49216-1, and in so doing, the majori
ty of the Board erred in law in effectively ignoring
the end-use provisions thereof, thus approaching
the task of classification under said Tariff Items,
on an improper basis. Accordingly, the majority
decision of the Board cannot be allowed to stand,
and must be reversed.
Section 48(17) of the Customs Act provides the
way in which the Court may dispose of an appeal
of this kind and reads as follows:
(17) The Court may dispose of an appeal by making such
order or finding as the nature of the matter may require, and,
without limiting the generality of the foregoing, may
(a) declare what rate of duty is applicable, or that no rate of
duty is applicable, to the specific goods or the class of goods
with respect to which the appeal to the Tariff Board was
taken,
(b) declare the value for duty of the specific goods or class of
goods, or
(c) refer the matter back to the Tariff Board for re-hearing.
Accordingly, pursuant to section 48(17)(a), I
would declare that the 17 Wabco 150 B Haul Pak
Rear Dump Trucks and parts thereof owned by
the appellants herein are not subject to any duty
since they should have been classified under Tariff
Item 49216-1. It is also not in dispute that duty in
the sum of $554,452 was paid on subject trucks
and parts (see notice of appeal, paragraph 2 of
statement of facts and statutory provisions—see
also reply to notice of appeal, paragraph 1 of
statement of facts and statutory provisions).
Since the Court is empowered to make such an
order "as the nature of the matter may require," I
would order, additionally, that the duty in the sum
of $554,452, referred to (supra) be returned to the
appellants by the respondent. The appellants, not
having asked for costs, either in the pleadings or in
the submissions before us, there will be no order as
to costs.
* * *
RYAN J.: I concur.
* * *
MACKAY D.J.: I concur.
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.