A-231-73
Superior Pre-Kast Septic Tanks Ltd. and Lloyd-
minster Pre-Kast Septic Tanks Ltd. (Appellants)
(Plaintiffs)
v.
The Queen (Respondent) (Defendant)
Court of Appeal, Jackett C.J., Pratte and Urie
JJ.—Vancouver, March 3 and 4, 1977.
Excise tax — Appeal from judgment in action launched by
way of petition of right Precast septic tanks — Not
manufactured on site — Partial fitting of parts on site —
Whether included in words "other structure" to be exempt
from sales tax Meaning and intent of s. 26(4) of Excise Tax
Act — Petition ambiguous Whether proper case for
declaratory judgment Appeal dismissed Excise Tax Act,
R.S.C. 1970, c. E-13, ss. 26(4) and 27(1).
APPEAL.
COUNSEL:
A. N. Patterson for appellants.
G. O. Eggertson for respondent.
SOLICITORS:
Kirchner & Patterson, Victoria, for
appellants.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for judgment
delivered orally in English by
JACKETT C.J.: This is an appeal against a judg
ment of the Trial Division dismissing with costs an
action, launched by way of petition of right in the
Exchequer Court of Canada, for a "Declara-
tion ..." that the appellants "be deemed neither
manufacturers nor producers of precast septic
tanks as defined by Section 29(2b) of the Excise
Tax Act, R.S.C. 1952, chapter 100, and Amend
ments thereto."
The allegations in the petition of right are:
1. THAT the suppliants manufacture at their plants located
in Nanaimo, British Columbia, and Lloydminster, Alberta,
respectively, structures known as precast concrete septic tanks.
2. THAT the structures manufactured as aforesaid are manu
factured by pouring concrete into already manufactured
moulds in various sizes.
3. THAT the suppliants maintain at their respective plants
supplies of manufactured precast septic tanks and these septic
tanks are delivered and placed in position by the suppliants in
accordance with the requirements of the purchaser.
4. The suppliants are in competition with individuals and
Companies who construct similar structures on the site where
they are to be used.
5. Section 30 of the Excise Tax Act, R.S.C. 1952, Chapter
100, and Amendments thereto, imposes a Sales Tax on the sale
price of all goods produced or manufactured in Canada payable
upon delivery or when the property and goods passes to the
purchasers.
6. The provisions of the said Excise Tax Act, Section
29(2b)(a) provides that where a person manufactures or pro
duces a structure otherwise than at the site of construction in
competition with persons who construct them on site he shall be
deemed not to be a manufacturer or producer thereof.
It is to be noted that the petition of right is,
throughout, expressed in the present tense. It does
not seek a declaration, in terms, with reference to
the liability to pay tax in respect of septic tanks
sold by the appellants during some period before
the action was launched nor does it seek a declara
tion, in terms, with reference to septic tanks to be
sold by the appellants after the action was
launched. It is indeed, in my view, ambiguous as to
whether what was sought was the former, the
latter or a declaration applicable to septic tanks
sold by the appellants during some period before
the action was launched and septic tanks to be sold
by the appellants after the action was launched.
The Trial Judge apparently read the prayer for
relief as a request for a declaration in respect of
septic tanks to be sold by the appellants after the
action was launched and dismissed the action by
the appellant Superior Pre-Kast Septic Tanks Ltd.
on the following reasoning:
The Superior Pre-Kast Septic Tanks Ltd., one of the
co-plaintiffs, was incorporated in 1969 and carried on business
for three years at Nanaimo, B.C. and then sold to another
company and the co-plaintiff Lloydminster Pre-Kast Septic
Tanks Ltd. is the only company of the two now operating. The
action is therefore dismissed as to the Superior Pre-Kast Septic
Tanks Ltd. as the declaration asked is for merely academical or
hypothetical questions. Annual Practice (1973) p. 212; Tindall
v. Wright [1922] W.N. 124; Re Barnato [1949] Ch. 258
(C.A.).
In so far as the other appellant is concerned, the
Trial Judge dismissed the action on the ground
that the septic tanks that it sells do not fall within
the word "structure" in the provision in question.
While the petition of right was launched before
the Revised Statutes of Canada of 1970 came into
force, the trial took place after that event, and the
Trial Judge refers to the relevant provision in those
statutes and the parties in this Court also refer to
such provisions. There is no suggestion of any
relevant change and I will refer to the same
provisions.
Section 27(1) of the Excise Tax Act, R.S.C.
1970, c. E-13, imposes a consumption or sales tax
on the sale price of all goods "produced or manu
factured in Canada" (subject to certain exemp
tions and modifications) payable, in the typical
case, by the "producer or manufacturer". Section
26(4) provides inter alia, that where a person
manufactures or produces a building or other structure other
wise than at the site of construction or erection thereof, in
competition with persons who construct or erect similar build
ings or structures not so manufactured or produced,
he shall, ... , be deemed not to be, in relation to any such ... ,
structure, ... so manufactured or produced by him, the manu
facturer or producer thereof.
This appeal has been argued on the basis that it
is common ground that a septic tank manufac
tured by an appellant is not a "building" within
the meaning of the word in section 26(4)(a). The
only serious question between the parties arises
from the appellants' contention, which the
respondent contests, that such a septic tank is a
"structure" within the meaning of the provision.
The facts as stated by the appellants in their
memorandum in this Court are as follows:
1. The Appellant Lloydminster Pre-Kast Septic Tanks Ltd. is
now and both Appellants were manufacturers licenced under
the provisions of the Excise Tax Act, R.S.C. 1970, Chapter
E-13.
2. At all material times the Appellant Lloydminster Pre-Kast
Septic Tanks Ltd. manufactured pre-cast concrete septic tanks
by pouring concrete into molds and then delivering the finished
tank in pieces to the site of use.
3. The Appellant Superior Pre-Kast Septic Tanks Ltd. used to
manufacture pre-cast concrete septic tanks in an identical
manner.
4. At the site where the tank is to be used the parts of the
pre-kast tank are lowered into a hole in the ground dug
especially for the purpose and assembled. After assembly the
septic tank is connected to the sewer pipe servicing the building
and to a disposal field.
5. After assembly and connection the septic tank is covered by
up to 6 feet of earth.
6. Provision is made in the tank for a manhole in the top for
cleanout purposes.
7. The construction of the tank is of reinforced concrete using
steel reinforcing rods.
8. The shape of the tank is rectangular rather than square.
9. Sales by the Appellants were made in two ways:
(a) directly to the user who installed them or paid for their
installation or;
(b) to a backhoe operator who in turn would contract to
install the tanks for the consumer.
10. At all times the Appellants paid all required sales tax with
respect to the materials, e.g. steel reinforcing used in the
construction of the tanks.
11. The Appellant Superior Pre-Kast Septic Tanks Ltd. sold its
assets in or about the month of August, 1971 but prior to that
time had been assessed for sales tax on the selling price of the
complete septic tank including delivery costs, cement, steel,
gravel and labour as had the Appellant, Lloydminster Pre-Kast
Septic Tanks Ltd.
12. Both Appellants claim exemption from tax by reason of
Section 25 of the Excise Tax Act and particularly Section
26(4) thereof.
13. The Appellant, Lloydminster Pre-Kast Septic Tanks Ltd.
has a plant at Lloydminster, Alberta and a trading area
surrounding that location in which it competes with septic tank
builders who construct concrete septic tanks of a similar design
and function at the place of use.
14. The Appellant, Superior Pre-Kast Septic Tanks Ltd. used
to have a plant at Nanaimo, British Columbia and a trading
area surrounding that location in which it competed with septic
tank builders who construct concrete septic tanks of a similar
design and function at the place of use.
15. The weight of the septic tanks manufactured by the Appel
lants is in excess of two tons and they are transported by
vehicles with special cranes mounted on them.
16. The septic tanks which are in competition with those
manufactured by the Appellants are constructed or erected at
the site of use in the following manner:
(a) an excavation is dug in the ground.
(b) forms are placed in the excavation in a rectangular
shape.
(c) concrete is poured into the forms with reinforcing steel
placed in the concrete for strength.
(d) when concrete walls have hardened the forms are
removed.
(e) then a top with a manhole is constructed and placed on
top.
(f) the tank is then connected to a building and buried in a
similar manner to the pre-cast septic tanks.
(g) builders of these septic tanks pay tax only on material,
i. e. cement and steel only.
17. Once the septic tanks are connected to the house or other
building and the disposal field they are seldom, if ever,
removed, and remain buried in the ground permanently. There
fore they form part of the realty.
The respondent agrees with paragraphs 1 to 14
inclusive and paragraph 17 of the appellants'
memorandum. The respondent also agrees with
paras. 15 and 16 but with the following
qualifications:
re: para. 15: The weight of the standard septic tank manufac
tured by the Plaintiff is just under 3 tons. At Lloydminster a
1,000 gallon tank is manufactured which weighs just under 4
tons.
re: para. 16: The Respondent denies that the septic tanks made
by competitors of the Appellants are "erected" at the site of
use.
The respondent also states by its memo certain
additional facts and makes certain comments with
regard to the facts as stated by the appellants, viz:
A. The septic tanks manufactured or produced by the Appel
lant are made in two sections. When put together they form
what is in effect a hollow box. One section is the lower part of
the tank, the other section is the upper part of the tank.
B. The sections are so made that the upper or male section of
the tank fits into the lower or female portion of the tank.
C. There is a ridge around the upper portion of the lower or
female portion of the tank which is designed to allow a seal to
be formed with a sealant or caulking compound where the two
sections meet.
D. The caulking compound is smeared on the top part of the
bottom section before the section is lowered into the hole made
ready for it, but sometimes applied in the hole.
E. The lower section is lowered into the hole by a hydraulic
rigging on a truck.
F. The upper section is then lowered onto the lower section.
The weight of the top section squeezes the sealant. Workers go
inside and smooth off the excess sealant with a trowel. The
sealant on the outside will be smoothed also if it can be
reached. In Alberta because of danger of frost the tanks are set
deeper than in British Columbia. In these instances a manhole
pipe with cover would be set into the manhole on top of the
tank. These manhole pipes could be in the range of 5 feet in
length. Positive drainage of sewage from the building into the
tank is required.
G. The appellants where they supply a tank do not dig the hole
for the tank. They put the tank down the hole for the customer,
seal it, put the baffles in and sometimes put the manhole
extensions on. The customer is responsible for connecting the
sewage pipes and outlet pipes to the tank, finishing the job and
backfilling.
H. There are two plastic baffles supplied with the tank. Some
times these are bolted on at the plant and in any event they are
bolted on before the tank sections are lowered.
I. The Respondent takes exception to the use of the word
"assembled" and "assembly" to describe, in paragraphs 4 and 5
of the Appellant's Statement of Facts, how the top half of the
septic tanks in question are lowered into place to rest on the
inner lip of the lower half which has already been lowered into
place.
J. The Respondent denies there is any "assembly" or that
anything is "assembled" at site of use of the tanks.
K. The process of placing the two sections of the tank into their
position of final use is more correctly described as "installing"
the septic tank, in the sense of putting its constituent parts in
position for use.
The appellants did not by their argument in this
Court take issue with the respondent's qualifica
tions in respect of paragraphs 15 and 16 or with
the additional facts stated by the respondent. The
size of a typical tank manufactured by the appel
lants is, according to counsel, shown by the record
to be 8'2'4" x 3'6" x 5'7".
Without describing such machinery in detail, I
think it is worthy of note that there is machinery
in the Excise Tax Act whereby the appellants
may, if they cannot utilize section 26(4), obtain
the materials from which they make their septic
tanks free of sales tax, which machinery could not
be utilized in the case of the same materials if they
were used to construct such a tank in the hole.
Similarly such machinery will not be available to
the appellants if they are entitled to take advan
tage of section 26(4). The result is, as I see it, that
the difference between section 26(4) applying and
not applying is the difference between
(a) sales tax on the materials going into the
making of a septic tank, and
(b) sales tax on a manufactured tank which
would include, in addition to the sales tax on the
materials, sales tax on the labour, overhead and
profits, etc.
This difference represents the amount by which
the sales tax burden of the appellants exceeds that
of builders on site if the appellants cannot take
advantage of section 26(4).
It is also worthy of note that, when all of section
26(4) is read it is found that it applies to
(a) a building or structure manufactured or
produced otherwise than at the site in competi
tion with persons who construct or erect on the
site,
(b) structural building sections for incorpora
tion into such building or structure, in competi
tion with persons who construct or erect on the
site,
(c) concrete or cinder building blocks, and
(d) prefabricated structural steel for buildings.
Section 26(4) would appear therefore, to be an
attempt to define in a more or less arbitrary
fashion, the principal articles that may give rise to
sales tax discrimination as a result of being manu
factured off the eventual site of a building or
structure. There is no attempt to eliminate all such
discrimination by some general provision.
After considering the various authorities
referred to by the learned Trial Judge and the
parties concerning the meaning of the word "struc-
ture" when used in other statutes, I have conclud
ed that it is not possible to substitute any defini
tion for the word itself as found in the statute. In
my view, a septic tank used as part of the sanitary
system of a residence that is not on a sewer line is
not a "structure" within the words "building or
other structure" any more than a furnace or other
similar fixture inside a building and forming a part
thereof essential for its efficient use is such a
structure. As I see it, all such equipment is essen
tially part of the building or an accessory to the
building and in the phrase "building or structure",
as used in section 26(4)(a), the word "structure" is
something other than a "building", a part of a
building or an accessory to a building.
For the above reasons, I am of the view that the
appeal should be dismissed with costs. In so con
cluding, I must not be taken as expressing any
opinion as to whether, if I had come to the oppo
site conclusion, I coud have found it possible to
agree that this was a proper case for a declaratory
judgment. This question was not argued by the
parties. Having regard to the difficulty of framing
a declaration if the appellants were right, and the
ease with which the question at issue could have
been solved in the traditional way by a test case on
a set of actual facts, I cannot refrain from express-
ing my reservations as to whether the Court
should, in such a case, exercise its discretion to
grant a declaration.
* * *
PRATTE J. concurred.
* * *
URIE J. concurred.
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.