Suncor Inc. v. Canada
A-265-95
Hugessen J.A.
21/3/96
11 pp.
Appeal and cross-appeal from Trial Division decision allowing in part claims by respondent in respect of alleged overpayments of tax imposed by Excise Tax Act, s. 23-Respondent, synthetic crude oil producer, extracting oil sands near Fort McMurray, Alberta-Transforming bitumen into kerosene, gas oil and naphta-Part of kerosene used as "belt spray" (sprayed on conveyor belts to prevent oil sands from sticking to belts)-Large portion of sprayed kerosene absorbed by oil sands and then extracted again as product at end of production process-Trial Judge found two-thirds of belt spray adhered to oil sands and was reintroduced into production process-Also found respondent entitled to relief in respect of belt spray-Crown contesting respondent's right to claim any exemption at all and seeking to collect excise tax imposed by s. 23 on entire amount of belt spray kerosene used-Respondent arguing entitled to exemption with respect to entire amount of belt spray kerosene and not merely two-thirds thereof-Appeal and cross-appeal dismissed-As to cross-appeal, argument belt spray not "used" without merit-Word "use" quite broad enough to cover what respondent does with belt spray kerosene-One-third lost to evaporation used up in process in much same way as other kerosene used by respondent for fuelling engines in plant-As to main appeal, deeming provision of s. 23(10) attracted if goods in question meet two conditions: must be for use by manufacturer and must not be for sale-All of belt spray used-However, two-thirds of belt spray which remains in production stream cannot be said to be "not for sale"-Not withdrawn from sale-Part of belt spray returned to production process does not engage deeming provision of s. 23(10) and does not attract tax-Even if s. 23(10) applied, Trial Judge right to find respondent entitled to claim exemption provided by s. 23(7)(b), meant to avoid taxation of constituent or component parts of goods which are themselves going to attract payment of said tax-No basis to argument belt spray not constituent or component of final product-No requirement component or constituent in final product should retain its identity from time it is introduced into process until end-Excise Tax Act, R.S.C., 1985, c. E-13, s. 23(7)(b),(10).