Judgments

[1995] 2 F.C. 309

T-1499-92

Riverside Concrete Limited (Plaintiff)

v.

Her Majesty the Queen as represented by the Minister of National Revenue (Defendant)

Indexed as: Riverside Concrete Ltd. v. Canada (T.D.)

Trial Division, Rothstein J.—Toronto, January 9, 13; Ottawa, March 17, 1995.

Customs and Excise — Excise Tax Act — Action for refund of sales tax paid on concrete mixed at job sites between August 1, 1985 and September 25, 1988 — Taxpayer not deducting transportation costs from sale price to calculate tax Review — Protesting to M.N.R. tax unfair in letter of May 26, 1988 — On September 25, 1990, C.I.T.T., in another case, holding sales tax on concrete mixed at job site calculated after deducting transportation costs — Excise Tax Act, s. 68 imposing two-year limitation period on refunds of payments made under “mistake of fact or law or otherwise” — S. 68 limitation period applied — Voluntariness of payment, not protest, significant to determination of whether payment made under mistake of law — Involuntariness associated with extra-judicial sanctions, i.e. seizure of property, duress, denial of right to continue in business — Sales tax not paid under compulsion, duress after May 1, 1986, date of coming into force of s. 53.3, precluding collection action while taxpayer pursuing rights through official levels — No evidence of actual, threatened extra-judicial sanctions prior thereto.

Equity — Equitable remedies — Mistake — Taxing statute imposing limitation period on refunds where payment made under “mistake of fact or law or otherwise” — Whether payment made under mistake of law or under duress — Review of case law, authors on protest and mistake of law in context of tax payments — Tax paid voluntarily under mistake of law so limitation period applies.

Construction of statutes — Excise Tax Act, s. 68 imposing two-year limitation period on refunds of payments made under “mistake of fact or law or otherwise” — Addition of “or otherwise” not meaning s. 68 applies regardless of reason for payment, but making subject of mistake as applied in s. 68 more ambiguous — Reconsideration of s. 68 by Parliament warranted.

This was an action for a refund of sales tax paid between August 1, 1985 and September 25, 1988. The plaintiff sold concrete that was mixed at the job site. It did not deduct the cost of transporting the concrete to the job site from the selling price before calculating sales tax, unlike the calculation of sales tax on pre-mix concrete. By letter to Revenue Canada dated May 26, 1988, the plaintiff asserted that the difference in treatment between pre-mix concrete and concrete mixed at the job site gave the plaintiff’s pre-mix competitors an unfair advantage with respect to production costs. Plaintiff’s position was rejected and it continued to pay federal sales tax on the same basis. On September 25, 1990, the Canadian International Trade Tribunal (C.I.T.T.), in another case, held that sales tax on concrete mixed at the job site should be calculated after deducting transportation costs. The plaintiff applied, in the prescribed form, for a refund of sales tax paid between August 1, 1985 and December 31, 1990. The Minister allowed a refund for the period after September 25, 1988, but refused to allow a refund for the period prior thereto as this period was beyond the two-year time limit prescribed in Excise Tax Act, section 68. Section 68 imposes a two-year limitation period on refunds of payments made in error, “whether by reason of mistake of fact or law or otherwise.”

The plaintiff argued that because it had paid under protest it had not paid under a mistake and therefore the limitation period in section 68 was not applicable. The issue was whether the plaintiff paid under a mistake of law.

Held, the action should be dismissed.

The plaintiff’s letter of protest had limited legal significance. It did not argue that the tax charged on transportation costs was unlawful, but that it was “unfair” because it placed the plaintiff at a competitive disadvantage. The protest letter did not support plaintiff’s argument that the payment of excise tax was not made under a mistake of law.

Voluntariness of the tax payment, and not any protest, is significant in determining whether payment has been made under a mistake of law. Payment will be voluntary if it can only be enforced through judicial proceedings in which the validity of the tax could be put in issue. Involuntariness requires some actual or threatened exercise of power for which the payer has no immediate relief other than by making payment. It is associated with extra-judicial sanctions such as seizure of property, duress of the person, or denial of the right to continue in business. The existence of extra-judicial sanctions of themselves is insufficient to make payment of tax involuntary in the absence of an intent by a governmental authority to implement such sanctions. Even if some doubt is felt about the validity of the authorizing statute, payments still cannot be recovered unless made in circumstances amounting to judicially cognizable duress.

As of May 1, 1986, collection could only have been enforced through judicial proceedings. Section 53.3, which came into force on May 1, 1986, precludes government officials from taking collection action while a taxpayer asserts specified rights through official levels and courts. The Minister may not impose extra-judicial sanctions to collect taxes during the time the taxpayer’s challenge is outstanding. The plaintiff did not pay sales tax due to compulsion or duress following May 1, 1986. There was no evidence that between August 1, 1985 and April 30, 1986 the Minister sought to implement extra-judicial sanctions. As the plaintiff paid voluntarily, the taxes were paid under a mistake of law and the two-year limitation period in section 68 applied.

An informal application for refund does not have a continuing effect which would protect the plaintiff’s entitlement to refund for the period extending back two years. The plaintiff chose not to follow the procedures for refunds established by the Excise Tax Act. It could not now argue that section 68 was inoperative on the strength of an informal letter.

Addition of the words “or otherwise” to modify the words “mistake” or “error” did not make section 68 apply regardless of the reason for the payment, but made the subject of mistake as it is applied in section 68 even more ambiguous. Some reconsideration by Parliament of this provision is warranted.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Excise Tax Act, R.S.C. 1952, c. 100, s. 46(6).

Excise Tax Act, R.S.C. 1970, c. E-13, ss. 52(4) (as am. by S.C. 1986, c. 9, s. 38), 53 (as am. idem, s. 40), 53.3 (as enacted idem).

Excise Tax Act, R.S.C., 1985, c. E-15, ss. 68 (as am. by R.S.C., 1985 (2nd Supp.), c. 7, s. 34), 72(2) (as am. idem), (6) (as am. idem), 81.2 (as enacted idem, s. 38; R.S.C., 1985 (4th Supp.), c. 47, s. 52), 81.17 (as enacted by R.S.C., 1985 (2nd Supp.), c. 7, s. 38), 81.19 (as enacted idem; R.S.C., 1985 (4th Supp.), c. 47, s. 52), 83 (as am. by R.S.C., 1985 (2nd Supp.), c. 7, s. 41), 86 (as am. idem; R.S.C., 1985 (4th Supp.), c. 47, s. 52).

Federal Court Act, R.S.C., 1985, c. F-7.

Federal Court Rules, C.R.C., c. 663.

CASES JUDICIALLY CONSIDERED

APPLIED:

Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R. 536; (1984), 10 D.L.R. (4th) 1; [1984] CTC 294; 84 DTC 6305; 53 N.R. 241; Bain v. Corporation of Montreal (1883), 8 S.C.R. 252.

NOT FOLLOWED:

Monarch Concrete Products Ltd. v. Canada, [1990] 1 C.T.C. 1; (1989), 29 F.T.R. 218; 2 TCT 4321; 1 TST 2201 (F.C.T.D.).

DISTINGUISHED:

Queen, The v. Premier Mouton Products Inc., [1961] S.C.R. 361; (1961), 27 D.L.R. (2d) 639; [1961] C.T.C. 160; 61 DTC 1105.

CONSIDERED:

Pick-a-Mix Concrete Ltd. v. M.N.R. (1990), 3 TCT 2347 (C.I.T.T.); 474245 Ontario Ltd v. M.N.R. (1993), 1 GTC 4086 (C.I.T.T.); Vancouver Growers Ltd. v. G. H. Snow Ltd. (1937), 52 B.C.R. 32; [1937] 4 D.L.R. 128; [1937] 3 W.W.R. 121 (C.A.).

REFERRED TO:

Maskell v. Horner, [1915] 3 K.B. 106 (C.A.); Air Canada v. British Columbia, [1989] 1 S.C.R. 1161; (1989), 59 D.L.R. (4th) 161; [1989] 4 W.W.R. 97.

AUTHORS CITED

Pannam, Clifford L. “The Recovery of Unconstitutional Taxes in Australia and in the United States” (1964), 42 Tex. L. Rev. 779.

Sullivan, Ruth. Driedger on the Construction of Statutes, 3rd ed. Toronto: Butterworths, 1994.

ACTION claiming a refund of sales tax paid established under protest and outside the two-year limitation period established by Excise Tax Act, section 68 for refunds of payments made “by reason of mistake of fact or law or otherwise.” Action dismissed.

COUNSEL:

Ian R. Blain for plaintiff.

P. Christopher Parke for defendant.

SOLICITORS:

Parker, Ross, Blain & Rodenhurst, Ingersoll, Ontario, for plaintiff.

Deputy Attorney General of Canada for defendant.

The following are the reasons for judgment rendered in English by

Rothstein J.: In this proceeding, the plaintiff seeks a refund of federal sales tax paid between August 1, 1985 and December 31, 1990. The defendant allowed a refund of that portion of the tax paid after September 25, 1988. With respect to the plaintiff’s claim for refund of the tax paid before that date, the issue is whether the limitation period in section 68 of the Excise Tax Act, R.S.C., 1985, c. E-15 [as am. by R.S.C., 1985 (2nd Supp.), c. 7, s. 34] is applicable.

Facts

The plaintiff sold concrete that was mixed at the job site. It did not deduct the cost of transporting the concrete to the job site from the selling price for purposes of calculating sales tax. On May 26, 1988, in a letter to Revenue Canada, the plaintiff protested that sales tax on pre-mix concrete was calculated after deducting the cost of transporting concrete to the job site. It claimed the difference in treatment between pre-mix concrete and concrete mixed at the job site gave the plaintiff’s pre-mix competitors an unfair advantage with respect to production costs. The plaintiff’s protest was rejected by Revenue Canada in a letter dated June 6, 1988. The plaintiff continued to pay federal sales tax on the total sale price of concrete including that portion attributable to transportation costs.

On September 25, 1990, in an appeal by Pick-a-Mix Concrete Limited, the Canadian International Trade Tribunal (C.I.T.T.) decided that sales tax on concrete mixed at the job site should be calculated after deducting transportation costs: Pick-a-Mix Concrete Ltd. v. M.N.R. (1990), 3 TCT 2347.

On March 22, 1991, and presumably because of the Pick-a-Mix decision, the plaintiff filed with Revenue Canada an application, in the prescribed form, for a refund of sales tax for the period August 1, 1985, to December 31, 1990. The refund claimed was $46,092.08. On June 11, 1991, by notice of determination, the Minister allowed a refund of $20,342.31 for sales tax paid on transportation costs for the period September 25, 1988 (two years prior to the Pick-a-Mix decision) to December 31, 1990. The Minister refused to allow a refund for the period prior to September 25, 1988 as this period was “beyond the two-year time limit as prescribed in section 68 (previously section 44) of the” Excise Tax Act.

Issue

The issue in this case is whether the plaintiff is entitled to a refund for the period prior to September 25, 1988.

Analysis

Section 68 of the Excise Tax Act provides:

68. Where a person, otherwise than pursuant to an assessment, has paid any moneys in error, whether by reason of mistake of fact or law or otherwise, and the moneys have been taken into account as taxes, penalties, interest or other sums under this Act, an amount equal to the amount of those moneys shall, subject to this Part, be paid to that person if he applies therefor within two years after the payment of the moneys.

On its face, section 68 sets forth a two-year limitation period on refund claims for excise tax paid in error.[1]

A case with facts similar to the ones at bar is 474245 Ontario Ltd. v. M.N.R. (1993), 1 GTC 4086 (C.I.T.T.). In that case, the appellant claimed a refund for a period prior to two years before the filing of the refund application. The C.I.T.T. denied the appeal, stating at page 4088:

The limitation period set out in section 68 of the Act is two years after the payment of the moneys. Since the Tribunal has no equitable jurisdiction to ignore or vary a limitation period such as the one prescribed under section 68 of the Act on the basis that it would be fair or just, the time-frame to be considered in determining the appellant’s entitlement to a refund must be two years prior to the filing of the refund application in the prescribed form, or March 6, 1989, to March 6, 1991. The appellant, therefore, is not entitled to a refund for moneys paid prior to March 6, 1989, and this appeal is dismissed.

The plaintiff asserts that 474245 Ontario Ltd. was wrongly decided because the C.I.T.T. did not have regard to the relevant jurisprudence.

Counsel claims that because the plaintiff paid under protest, as a result of its May 26, 1988 letter, it did not pay under a mistake, and therefore the limitation period in section 68 is not applicable. In support of this proposition counsel relies on Queen, The v. Premier Mouton Products Inc., [1961] S.C.R. 361, which, as he noted, was not discussed in 474245 Ontario Ltd. In Premier Mouton, the taxpayer paid excise tax on the “mouton” it produced from 1950 to 1952. Mouton was made from sheepskins. The tax was charged under a statutory provision pertaining to fur. In another case, decided in June 1956, the Supreme Court of Canada determined that sheepskin could not be described as a fur and that no excise tax was therefore payable. In October 1957, Premier Mouton Products Inc. commenced proceedings to recover the excise tax it had earlier paid. This case was argued before the Supreme Court of Canada in 1960. A decision was rendered in 1961.

When the decision in Premier Mouton was rendered, the predecessor provision to what is now section 68 was subsection 46(6) of the Excise Tax Act, R.S.C. 1952, c. 100:

46. …

(6) If any person, whether by mistake of law or fact, has paid or overpaid to Her Majesty, any moneys that have been taken to account, as taxes imposed by this Act, such moneys shall not be refunded unless application has been made in writing within two years after such moneys were paid or overpaid.

The issue was whether the two-year limitation period under subsection 46(6) was applicable. The majority of the Supreme Court of Canada found it was not. It held that Premier Mouton Products Inc. had not been mistaken as to the law. It found that the company’s real reasons for paying were that its officers had been intimidated and threatened by officers of the Department and for fear of having its business closed up. As a result, the two-year limitation period for claiming refunds of excise tax under subsection 46(6) of the Excise Tax Act was found not to apply.

While plaintiff’s counsel argues that Premier Mouton is applicable to the case at bar, he concedes that section 68 is worded more broadly than its predecessor subsection 46(6). The words “or otherwise” have been added to section 68 so that errors contemplated by the section are “whether by reason of mistake of fact or law or otherwise.” However, plaintiff’s counsel says that the words “or otherwise” qualify the word “mistake.” He says there was no mistake of any kind in this case because the plaintiff had protested the payment of tax, and the addition of the words “or otherwise” have no bearing.^”

The defendant submits that the words “or otherwise” are not limited to qualifying the word “mistake” but rather are intended to render section 68 applicable to any refund claim, irrespective of the reason for the payment of moneys by the taxpayer.

I confess to having some doubt as to the effect of the addition of the words “or otherwise” to section 68. As far as I am aware, in the legal context, the subject-matter of mistake is either law or fact. In my view, when Parliament used the words “whether by reason of mistake of fact or law” in section 68, it must have had regard to the general law of mistake as understood by lawyers. The words “or otherwise” seem to have been added to ensure that the limitation period in section 68 applied even if monies were paid for reason other than mistake of fact or law. However, it appears that the words “or otherwise” modify the word “mistake,” or at least the word “error.” In either case, I have difficulty conceiving of what type of error or mistake Parliament had in mind with the addition of these words. If it was Parliament’s intention that section 68 apply regardless of the reason for the payment, I do not think that objective was accomplished by the addition of the words “or otherwise” to modify the words “mistake” or “error.” In my view, the addition of these words make even more ambiguous the difficult subject of mistake as it is applied in section 68. Some reconsideration of this provision by Parliament seems warranted. In any event, I do not think the addition of the words “or otherwise” distinguishes this case from Premier Mouton.

Having regard to Premier Mouton, the issue is whether the plaintiff paid under a mistake of law, in view of its letter of protest and its obligation to pay federal sales tax under the Excise Tax Act. I have concluded that the plaintiff’s letter of protest has limited legal significance and that the plaintiff did not pay sales tax under compulsion or duress. As a result, the plaintiff paid under a mistake of law and the two-year limitation period in section 68 is applicable.

I would first observe that even if some legal significance is to be attached to a letter of protest, such significance would not assist the plaintiff to demonstrate that payment was not made under a mistake of law in this case. The plaintiff’s letter of protest states:

This is a letter of protest, against the portion of Exice [sic] tax which we pay on transportation, in the delivery of our product.

This is an unfair tax, in that, our competetors [sic] in the Ready-mix concrete business are exempt from paying this portion of tax which gives them an unfair advantage in production cost.

What is noteworthy is that the plaintiff did not argue that the tax charged on transportation costs was unlawful. The argument was that it “is an unfair tax” because it placed the plaintiff at a competitive disadvantage relative to its competitors who “are exempt from paying this portion of tax.” The thrust of the plaintiff’s argument was that all competitors should be treated the same, not that the tax was unlawful. As such, the letter of protest does not assist the plaintiff in the argument that the payment of excise tax was not made under a mistake of law.

In any event, as I have said, a letter of protest generally has limited legal significance as to whether tax is paid under a mistake of law. The issue is whether the tax is paid voluntarily. In Premier Mouton, duress was the most important consideration in determining whether the tax had been paid voluntarily. Protest was of little significance. The judgment of Taschereau J. seems to be the clearest on this point. At page 369, he holds that:

… the mere fact that the payment was made “under protest” is not conclusive but, when all the circumstances of the case are considered, it flows that the respondent clearly intended to keep alive its right to recover the sum paid.

Paraphrasing Lord Reading in the well-known case Maskell v. Horner, [1915] 3 K.B. 106 (C.A.), Taschereau J. states [at page 369]:

… I am satisfied that the payments made were not prompted by the desire to discharge a legal obligation, or to settle definitely a contested claim. The pressure that was exercised is sufficient, I think, to negative the expression of the free will of the respondent’s officers, with the result that the alleged agreement to pay the tax has no legal effect and may be avoided. The payment was not made voluntarily to close the transaction…. [T]he payment was made for the purpose of averting the threatened evil, and not with the intention of giving up a right, but with the intention of preserving the right to dispute the legality of the demand. The threats and the payments made under protest support this contention of the respondent.

Fauteux J. [as he then was] concurred in the result with Taschereau J. Like Taschereau J., he focused on the voluntariness of the payment of tax and not the protest. In Bain v. Corporation of Montreal (1883), 8 S.C.R. 252, cited by Fauteux J. [at page 374], it was held:

… a protest is of no avail when the payment or execution of the obligation is otherwise voluntary.

Thus, Premier Mouton suggests that it is the voluntariness of the tax payment, and not any protest, that is of significance in determining whether payment has been made under a mistake of law.

In an article which I found useful entitled “The Recovery of Unconstitutional Taxes in Australia and in the United States” (1964), 42 Tex. L. Rev. 779, to which La Forest J. made reference in Air Canada v. British Columbia, [1989] 1 S.C.R. 1161, at page 1210, Clifford L. Pannam concurs with this approach, at page 786:

Thus the mere fact that a protest has been made at the time of payment is a neutral factor. The loudest protest will not make a payment involuntary if there is in fact a choice as to whether the payment will be made. On the other hand, if there is in fact no choice, the existence of a protest is irrelevant. In borderline cases, however, a protest may afford some evidence of compulsion. [Footnotes omitted.]

The importance of determining whether a payment of taxes has been made voluntarily is explained by Pannam, at page 784:

Apart from the exceptions that have been established, an important limitation on the operation of the mistake of law rule is to be found in its very formulation. The rule only applies where there has been a voluntary payment so that, if it appears a payment has been made involuntarily, or under compulsion, then it can be recovered in an action for money had and received. The distinction between a voluntary and an involuntary payment thus becomes critical. It determines in any particular case whether or not there will be recovery. This explains why almost every reported case in the United States and in Australia dealing with the recovery of taxes paid under an unconstitutional statute is entirely devoted to an examination of whether the payment in question was made under compulsion or not. The same is true of the approach of the Canadian courts to this problem. The character of the payment is treated as determining its recoverability. [Footnote omitted.]

An early statement on the voluntariness of tax payments was made by Macdonald J.A. in Vancouver Growers Ltd. v. G. H. Snow Ltd. (1937), 52 B.C.R. 32 (C.A.). Generally, he was of the view that merely because a statute compels compliance with its terms and imposes penalties, or that government officials are in a superior position to the individual, does not negate the assumption that all citizens voluntarily discharge obligations involving payments of moneys compelled by statute. At pages 37 and 38 he states:

If payments made pursuant to an invalidated Act are to be regarded as made involuntarily because presumably the parties making the payments were not on equal terms with the authority purporting to act under the statute it may be difficult to procure officials willing to assume the necessary risk. A declaration of invalidity may be made after many years of operation and large amounts might be recoverable if it is enough to show in a literal sense that “the payments were made under circumstances which left the party no choice,” or that “the plaintiff really had no choice and the parties … were not on equal terms.” Every Act for taxation or other purposes, whether valid in fact, or for the time being thought to be valid, compels compliance with its terms under suitable penalties. The payee has no choice and the authorities imposing it are in a superior position. It does not follow, however, that all who comply do so under compulsion, except in the sense that every Act imposes obligations, or that the respective parties in the truest sense are not “on equal terms.” It should be assumed that all citizens voluntarily discharge obligations involving payments of money or other duties imposed by statute.

On the subject of voluntariness of tax payments, Pannam says, at pages 785 and following:

(1) Each case will depend on its own facts.

(2) As a general proposition, a voluntary payment is not necessarily one the payer wishes to make.

(3) Payment will be voluntary if it can only be enforced through judicial proceedings in which the validity of the tax can be put in issue.

(4) Involuntariness requires some actual or threatened exercise of power for which the payer has no means of immediate relief other than by making payment.

(5) Involuntariness of payment is associated with extra-judicial sanctions such as seizure of property, duress of the person, or denial of the right to continue in business (these were factors that were found to be present in Premier Mouton).

(6) The existence of extra-judicial sanctions of themselves is insufficient to make payment of tax involuntary in the absence of an intent by a governmental authority to implement such sanctions.[2]

Pannam concludes, at pages 788-789:

If taxes are promptly paid on the assumption that the statute authorizing them is valid, they cannot be recovered if in fact it turns out to be invalid. A mistake of law has been made and money paid under such a mistake cannot be recovered. Even if some doubt is felt about the validity of the authorizing statute, payments still cannot be recovered unless made in circumstances amounting to judicially cognizable duress, involuntariness or compulsion.

I think Pannam’s analysis is consistent with the finding of the Supreme Court of Canada in Premier Mouton. It is, to my knowledge, the most exhaustive explanation relating to protest and mistake of law in the context of the obligation to pay tax, and I find it persuasive.

In the case at bar, even if it could be construed that the plaintiff entertained some doubt as to its liability for the tax (which I have already explained I do not think is the case), at most its letter of protest is evidence that it did not want to pay the tax. But, the real question is whether the plaintiff had a choice as to whether or not to make the payment. Was it paid voluntarily or under duress? If there was a choice, the moneys have been paid under a mistake of law.

In order to reach a conclusion on this issue, it is necessary to determine whether collection could only have been enforced through judicial proceedings or whether, as in Premier Mouton, the governmental authorities could have embarked and intended to embark upon extra-judicial sanctions against the plaintiff such that the collection was involuntary. I have concluded that as of May 1, 1986, collection could only have been enforced through judicial proceedings. Prior to May 1, 1986, it could be that collection through extra-judicial sanctions was possible but there is no evidence of an intention by the Minister to take such steps. Both before and after May 1, 1986, payment of tax by the plaintiff could not be characterized as involuntary.

Section 53 of the Excise Tax Act, R.S.C. 1970, c. E-13, as amended,[3] provided:

53. (1) The Minister may certify that any tax, penalty, interest or other sum payable under this Act has not been paid as and when required by this Act.

(2) On production to the Federal Court, a certificate made under this section shall be registered in the Court and, when registered, has the same force and effect, and all proceedings may be taken thereon, as if the certificate were a judgment obtained in the Court for a debt of the amount specified in the certificate.

After certification by the Minister that tax payable has not been paid when required, garnishment and other collection proceedings may be taken. While undoubtedly collection proceedings under the Federal Court Act [R.S.C., 1985, c. F-7] and Rules [Federal Court Rules, C.R.C., c. 663] will clearly be judicial in nature, they follow from what, with nothing more, may appear to be the unilateral judgment of the Minister that taxes are owing. However, section 53.3 of the Excise Tax Act, which came into force on May 1, 1986[4] precludes governmental officials from taking collection action while a taxpayer asserts specified rights through the various official levels and courts having jurisdiction to deal with the matter. Under subsection 53.3(4), the Minister may not make a certificate under section 53 until ninety days after a notice of assessment is sent to the taxpayer. Under subsections (5) and (6), if the taxpayer files a notice of objection within the prescribed period, the Minister may not take collection action until the notice of objection and any appeals following therefrom have been disposed of.

As I read the provisions of section 53.3, they do establish a judicial process whereby, if the taxpayer elects to take the steps open to him or her, the taxpayer may challenge the liability for payment of the tax in question. The Minister may not impose extra-judicial sanctions to collect taxes during the time the taxpayer’s challenge is outstanding. There is therefore no basis for any argument that payment of taxes was due to compulsion or duress following May 1, 1986.

To the extent an argument could be made that between August 1, 1985 and April 30, 1986 the defendant could have enforced payment through extra-judicial means, such argument would not avail to the benefit of the plaintiff. The reason is that there is no evidence that during this period the defendant sought to implement extra-judicial sanctions. As indicated by Pannam, the mere existence of extra-judicial sanctions is insufficient to make a payment of tax compulsory in the absence of evidence of an intent to implement such sanctions.

Having determined that the plaintiff paid voluntarily, I am of the opinion that taxes were paid under a mistake of law as envisaged by section 68.

Counsel for the plaintiff also relied on Monarch Concrete Products Ltd. v. Canada, [1990] 1 C.T.C. 1 (F.C.T.D.) for the proposition that informal applications for refunds have an ongoing effect. If the plaintiff’s letter of protest of May 26, 1988 could be characterized as the application for refund envisaged by section 68, the question is whether it has a continuous effect so that it could be treated as protecting the plaintiff’s entitlement to refund for the period extending back two years to May 26, 1986.

I do not think an informal application for refund alone can have a continuing effect. Parliament has established a process under the Excise Tax Act for taxpayers to claim refunds. That process commences with an application for refund utilizing a prescribed form, pursuant to subsection 72(2) [as am. by R.S.C., 1985 (2nd Supp.), c. 7, s. 34]. Presumably, such a form is to fulfil Revenue Canada’s need to have specified information in order to verify the validity and amount of the refund claimed. There is then a notice of determination by the Minister under subsection 72(6) [as am. idem]. The taxpayer may then file a notice of objection under section 81.17 [as enacted idem, s. 38]. Following this, the Minister issues a notice of decision under subsection 81.17(5). Under sections 81.19 [as enacted idem; R.S.C., 1985 (4th Supp.), c. 47, s. 52] and 81.2 [as enacted by R.S.C., 1985 (2nd Supp.), c. 7, s. 38; (4th Supp.), c. 47, s. 52], the taxpayer may elect to appeal a negative notice of decision to the C.I.T.T. or to this Court. Pick-a-Mix Concrete Limited followed this course of action in bringing its appeal before the C.I.T.T., from the notice of objection stage forward.

Once a person makes the application envisaged by section 68, the Minister must consider it, and either accept or reject it in whole or in part; see subsection 72(6). If the Minister fails to make a determination, the applicant could presumably force the Minister to do so through mandamus. If the Minister accepts the application, the matter would seem to be concluded. However, if it is rejected, the applicant has available to it the review and appeal procedures to which I have referred.

I do not think an applicant can simply make an informal application, receive a negative response, discover a positive determination on the same issue in another proceeding some years later, and then claim a refund of the taxes paid from the point in time commencing two years prior to its original informal application. If Monarch was meant to suggest such an approach, I must respectfully disagree.

It was open to the plaintiff to follow the procedure prescribed in the Excise Tax Act. However, it only sent a letter of protest on May 26, 1988. Instead of sending this letter, had the plaintiff sent in an application for refund in the prescribed form, and followed the review and appeal procedures in the Act, it may well have obtained a refund extending back, if not to August 1, 1985, then to May 26, 1986. An extension back to May 26, 1986 would be predicated on a successful result to a proper claim for refund. In other words, had Riverside made its refund application on May 26, 1988, followed the review and appeal procedures, and, like Pick-a-Mix, been successful at the C.I.T.T., it would have obtained a refund of the tax it paid, extending back two years before its claim.

In short, the plaintiff chose not to follow the procedures for refunds prescribed by the statute. I do not think, on the strength of an informal letter of protest, in the absence of duress, it may now argue that section 68 is inoperative.

Although a finding that the section 68 limitation period is applicable to the plaintiff may appear harsh, it should be remembered that limitation periods are well known in the law and where statutes prescribe procedural steps and time limits, there must be compliance with them. Of course, in some circumstances, legislation confers a discretion on a court or tribunal to extend time. And in exceptional cases such as Premier Mouton, there may be other reasons why a limitation period would not be applicable. But that is not the case here.

Counsel for the plaintiff argued that a taxing statute must always be construed strictly against the taxing authority and that a very clear statutory direction is required to absolve the government from paying a refund that would be due but for the existence of a limitation period. However, it would appear that since the Supreme Court of Canada decision in Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R. 536, taxing statutes are to be read in their entire context having regard to the legislative purpose and scheme. See Ruth Sullivan, Driedger on the Construction of Statutes (Toronto: Butterworths, 1994), at page 406. Although the presumption in favour of the taxpayer survives, it must be examined in light of the purpose of the taxing provision. See Driedger, at page 408.

Having regard to these rules of statutory construction respecting taxing statutes and to the statutory scheme respecting refunds under the Excise Tax Act, I am satisfied that section 68 imposes a two-year limitation period which is applicable in the case at bar. If that were not the case, any taxpayer who filed a letter of protest, no matter how lacking in merit, could stop the limitation period from running. That is not a reasonable interpretation of section 68. At a policy level, it may be arguable that the Government should not be able to avoid paying refunds for taxes paid in error by reliance on a limitation period or that the limitation period should be longer. But that is a matter for Parliament and not the Court.

The plaintiff has unnecessarily paid sales tax (according to the Pick-a-Mix decision) on the transportation cost component of its selling price of concrete. Not only did it pay tax for which it was not liable, but because its pre-mix concrete competitors had not been charged sales tax on transportation costs, it was rendered less competitive in its marketplace and therefore may have lost sales. In a case such as this, a court is strongly inclined to try to interpret the law to avoid an inequitable result. However, the Court is bound by the statute. The law is written for general application and there may be cases in which the result of the application of the law may be harsh. That is the situation here. During the course of argument, I discussed various alternative approaches with counsel for both parties but I have been unable to discover any approach that would yield a favourable result to the plaintiff.

With regret, I must dismiss this action. I shall make no order as to costs.

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