T-4364-79
The Queen (Plaintiff)
v.
Canabec Trailers Inc. (Defendant)
Trial Division, Marceau J.—Quebec City, June
22; Ottawa, July 9, 1981.
Customs and excise — Defendant imported from the United
States for resale in Canada trailers equipped with refrigera
tion units — The defendant in declaring its acquisition costs
excluded the value of the units on the basis of the exemption in
tariff item 42700-1 — Plaintiff claims payment of the duty
not paid and a penalty on account of fraud — Whether
refrigeration units subject to separate importation — Whether
claim for penalty well founded — Customs Act, R.S.C. 1970,
c. C-40, ss. 163(1), 192(1) — Customs Tariff R.S.C. 1970, c.
C-41, Schedule A, tariff items 42700-1, 43910-1.
ACTION.
COUNSEL:
Françoise 011ivier and Claude Joyal for
plaintiff.
Robert Cayer for defendant.
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff.
Savard, Cayer, Gourde & Dutil, Lévis, for
defendant.
The following is the English version of the
reasons for judgment rendered by
MARCEAU J.: The defendant is a Quebec corpo
ration incorporated in 1976 to sell new and used
trailers. Between 1976 and 1978 it purchased a
number of trailers in the United States for resale
in Canada. Customs duty was payable on their
importation into Canada. The defendant accord
ingly made the declarations required by the Act in
respect thereof, filing the required certificates with
each, and paid the duty claimed at the time in
accordance with the rates provided for in the
Customs Tariff then in effect.
The plaintiff maintains that on eight occasions,
in connection with the importation of nine used
trailers, the defendant made false declarations,
supported by inaccurate invoices, indicating a pur
chase price lower than the amount in fact paid. In
this action the plaintiff is claiming payment of the
duty that was not paid and in addition a penalty on
account of fraud, which was imposed under section
192(1) of the Customs Act (R.S.C. 1970, c.
C-40)' and subsequently reduced by a decision of
the Minister under section 163 of the said Act. 2
Counsel agreed on most of the facts relied upon
and on all issues of valuation and calculation
involved. There thus remains only a much simpli
fied issue for which a few facts provide sufficient
background.
I have stated that nine trailers were involved,
but the false declarations referred to in fact con
cerned only eight of them, the ninth being the
subject of a claim for duty to which the defendant
acquiesced at the outset of the hearing. These
eight used trailers, concerning which false declara
tions were allegedly made, were equipped with
refrigeration systems when they were imported;
they were designed to be used to transport goods
that had to be kept at low temperatures. For
purposes of clearing these eight trailers through
customs, the defendant declared acquisition costs
that did not include the value of the refrigeration
units that had been installed. It did this after being
informed that Customs Tariff item 42700-1
' 192. (1) If any person
(a) smuggles or clandestinely introduces into Canada any
goods subject to duty under the value for duty of two
hundred dollars;
(5) makes out or passes or attempts to pass through the
custom-house, any false, forged or fraudulent invoice of any
goods of whatever value; or
(c) in any way attempts to defraud the revenue by avoiding
the payment of the duty or any part of the duty on any goods
of whatever value;
such goods if found shall be seized and forfeited, or if not found
but the value thereof has been ascertained, the person so
offending shall forfeit the value thereof as ascertained, such
forfeiture to be without power of remission in cases of offences
under paragraph (a).
2 163. (1) The Minister may thereupon either give his deci
sion in the matter respecting the seizure, detention, penalty or
forfeiture, and the terms, if any, upon which the thing seized or
detained may be released or the penalty or forfeiture remitted,
or may refer the matter to the court for decision.
exempted refrigeration units of the type installed
in the trailers (Thermo-King Super model) from
duty because they were "machines" or goods not
specifically referred to and not made in Canada.
When the plaintiff's officers realized, during an
inspection, that the declarations had been filed in
this manner, they acted immediately; since they
were of the view that the value for duty of the
trailers should be calculated on the basis of the
total purchase price,' they claimed the difference
in duty payable and suggested that a penalty be
imposed. The defendant disputed this and these
proceedings were instituted shortly thereafter.
Those are the facts at the root of this dispute, the
disposition of which seems straightforward to me.
I think that the claim for excess duty payable is
well founded. As stated in the internal directives of
the Minister responsible, which are themselves
based on a decision of the Tariff Board (No. 676
of 1963), the exemption in tariff item 42700-1
applies only where the goods referred to are being
imported as such. 4 The obvious reason for the
exemption and the wording used to create it indi
cate this clearly. Once it has been fixed to or
installed in a trailer, a refrigeration unit loses its
individuality; it is no longer the subject of a sepa
rate importation, identifiable on its own independ
ently of the vehicle in which it has been installed.
What is being imported is the trailer, as assem
bled, with all the parts which make it what it is
3 Under tariff item 43910-1, which covers "Cars, trailers
including house trailers and mobile homes, n.o.p., wheelbar
rows, trucks, road or railway scrapers and hand carts" and sets
the rate of duty at 17 1 / 2 %.
4 Tariff item 42700-1 reads as follows:
Machines, n.o.p., and accessories, attachments, control
equipment and tools for use therewith; parts of the forego
ing....
Except that in the case of the importation into Canada of
any goods enumerated in this item, the Governor in Council
on the recommendation of the Minister of Industry, Trade
and Commerce may, whenever he considers that it is in the
public interest and that the goods are not available from
production in Canada, remit the duty specified in this item
applicable to the goods, and subsections 17(2),(3),(4),(5) and
(8) of the Financial Administration Act apply in the case of
a remission granted under this provision.
The remission was in fact ordered by the Governor in Council.
and which, once put together, make it a well-
defined unit distinct from its parts.
On the other hand, the claim for a penalty
appears to me to be without foundation. The
defendant, through the testimony of its manager at
the time, has proved to my satisfaction that its
declarations were not made for the purpose of
misleading or avoiding the payment of duty. On
the contrary, the defendant acted in good faith, in
my view, its error in interpreting the scope of the
exemption being quite understandable, as indicat
ed by the fact that it has been made by certain
customs officers themselves. Moreover, counsel for
the plaintiff did not insist on this part of the claim.
Judgment will therefore be rendered granting
the action for the amount of the unpaid duty, that
is, for the sum of $11,950.13.
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.