A-1227-88
Saugeen Indian Band, as represented by its Chief,
Vernon Roote, and by its Councillors, Arnold
Solomon, Roy Wesley, Oliver Kahgee Sr., Chester
Ritchie, Mildred Ritchie, Harriet Kewaquom,
Marie Mason, and Franklin Shawbedees (Appel-
lant) (Plaintiff)
v.
Her Majesty The Queen (Respondent) (Defen-
dant)
INDEXED AS: SAUGEEN INDIAN BAND v. CANADA (CA.)
Court of Appeal, Heald, Stone and MacGuigan
JJ.A.—Ottawa, November 21, 22 and December
7, 1989.
Native peoples — Taxation — Excise Tax Act, s. 27(1)
imposing tax on sale of goods manufactured in Canada —
Indian Act, s. 87 exempting Indians and Indian bands from
direct and indirect taxation, but not from incidence of indirect
taxation such as federal sales tax — Band not entitled to
refund of federal sales tax paid on goods purchased for use on
reserve.
Customs and excise — Excise Tax Act — Indian Band
seeking to recover s. 27 federal sales tax paid by others on
goods purchased for use on reserve — John Stuart Mill's
definition of direct and indirect taxation adopted — Appellant
did not pay tax as such, but commodity prices which included
tax — Sales taxes under Excise Tax Act not taxes on prop
erty, but on business transactions, levied at time of transaction
— Indian Act, s. 87(1)(b) not applicable as tax paid by party
earlier in commercial chain, therefore not imposed on personal
property of Indian or band on reserve.
This was an appeal from the Trial Division judgment finding
that section 87 of the Indian Act should not be interpreted so as
to entitle the appellant to a refund of federal sales tax with
respect to certain commodities it purchased for use on the
reserve. Some of the transactions involved purchases directly
from manufacturers, one from a licensed wholesaler, and the
rest from vendors further down the distribution chain who
never had direct responsibility for paying federal sales tax to
the Crown. The Trial Judge reasoned that had "it been intend
ed that the Indians and Indian bands were to be exempt from
all incidence or burden of indirect taxes, as well as from direct
liability for taxes, surely section 87 would have been more
specifically worded to so provide".
Held, the appeal should be dismissed.
John Stuart Mill's definition of direct and indirect taxation,
adopted by the Judicial Committee of the Privy Council in
Bank of Toronto v. Lambe, could not be disregarded. Thus,
indirect taxes are "those which are demanded from one person
in the expectation and intention that he shall indemnify himself
at the expense of another". It is the burden of the tax which is
transferred, not the tax itself. In other words, consumers can be
considered as paying individual taxes, not as taxes, but as part
of the market price of the commodities purchased.
This point was decided in Price (Nfld.) Pulp & Paper Ltd. v.
The Queen. The Federal Court of Appeal held that the pur
chaser of machinery had no standing to claim from the Crown
recovery of the sales tax which the Crown had received from
the vendor and which had been included, by means of an
equivalent increase, in the price of the machinery bought by the
purchaser.
The appellant therefore could not be said to be taxed by the
Excise Tax Act, even though the burden of the tax is undoubt
edly passed on to it. The appellant did not pay tax as such, but
commodity prices which included the tax. The appellant was,
therefore, not the real taxpayer.
From the case law on the Excise Tax Act, it may be
concluded that the fact that several provisions of the Act allow
exemptions or refunds to certain end-users cannot be taken as a
rule for the others, or a guide to the intention of the statute as a
whole. As a result, sales taxes under the Excise Tax Act must
be taken, not as taxes on property, but as taxes on business
transactions, levied at the time of the transaction.
This interpretation of the Excise Tax Act excludes the
application of paragraph 87(1)(b) of the Indian Act because,
since the tax has been paid by a party earlier in the commercial
chain than the band, it cannot be said to be imposed on "the
personal property of an Indian or a band situated on a reserve".
This also excludes the application of subsection 87(2) since it
refers to "such property", that is, the same "personal property
of an Indian or a band situated on a reserve". The appellant is
therefore not entitled to any exemption with respect to any of
the transactions nor to any refund of the sales tax remitted.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Constitution Act, 1867, 30 & 31 Vict., c. 3 (U,K.) (as
am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule
to the Constitution Act, 1982, Item 1) [R.S.C., 1985,
Appendix I1, No. 5], s. 92(2).
Excise Tax Act, R.S.C. 1970, c. E-13, ss. 27(1),
44(1),(2).
Indian Act, R.S.C. 1952, c. 149, s. 86.
Indian Act, R.S.C. 1970, c. I-6, ss. 83, 87 (as am. by S.C.
1980-81-82-83, c. 47, s. 25).
CASES JUDICIALLY CONSIDERED
AFFIRMED:
Saugeen Indian Band v. Canada, [1989] 3 F.C. 186
(T.D.).
APPLIED:
Bank of Toronto v. Lambe (1887), 12 App. Cas. 575
(P.C.); C.P.R. v. A.G. for Saskatchewan, [1952] 2
S.C.R. 231; [1952] 4 D.L.R. 11; Délisle v. Shawinigan
Water & Power Co. (1941), 79 C.S. 353; [1941] 4
D.L.R. 556 (Que. S.C.); The Queen v. M. Geller Inc.,
[1963] S.C.R. 629; Price (Nfld.) Pulp & Paper Ltd. v.
The Queen, [1974] 2 F.C. 436 (C.A.), affd on another
ground, [1977] 2 S.C.R. 36.
DISTINGUISHED:
The Queen. Stevenson Construction Co. Ltd., [1979]
CTC 86; (1978), 79 DTC 5044; 24 N.R. 390 (F.C.A.);
Nowegijick v. The Queen, [1983] 1 S.C.R. 29; (1983),
144 D.L.R. (3d) 193; [1983] 2 C.N.L.R. 89; [1983] CTC
20; 83 DTC 5041; 46 N.R. 41; Re: Exported Natural
Gas Tax, [1982] 1 S.C.R. 1004; (1982), 37 A.R. 541; 42
N.R. 361; Brown v. R. in Right of B.C. (1979), 20
B.C.L.R. 64; 107 D.L.R. (3d) 705; [1980] 3 W.W.R. 360
(C.A.).
CONSIDERED:
Francis v. The Queen, [1956] S.C.R. 618; (1956), 3
D.L.R. (2d) 641; 56 DTC 1077.
REFERRED TO:
Air Canada v. British Columbia, [1989] 1 S.C.R. 1161;
(1989), 59 D.L.R. (4th) 161; [1989] 4 W.W.R. 97;
Dominion Distillery Products Co. Ltd. v. The King,
[1938] S.C.R. 458; [1938] 4 D.L.R. 289.
COUNSEL:
Maureen M. Gregory for appellant (plaintiff).
Dogan D. Akman for respondent (defendant).
SOLICITORS:
Tweedy, Ross, Charlottetown, for appellant
(plaintiff).
Deputy Attorney General of Canada for
respondent (defendant).
The following are the reasons for judgment
rendered in English by
MACGUIGAN J.A.: The principal issue in this
case is whether section 87 of the Indian Act,
R.S.C. 1970, c. I-6, as amended by S.C. 1980-81-
82-83, c. 47 [s. 25], should be interpreted to entitle
the appellant to a refund of federal sales tax with
respect to certain commodities it purchased. The
relevant part of section 87 reads as follows:
87. Notwithstanding any other Act of the Parliament of
Canada or any Act of the legislature of a province, but subject
to section 83, the following property is exempt from taxation,
namely:
(a) the interest of an Indian or a band in reserve or surren
dered lands; and
(b) the personal property of an Indian or band situated on a
reserve;
and no Indian or band is subject to taxation in respect of the
ownership, occupation, possession or use of any property men
tioned in paragraph (a) or (b) or is otherwise subject to
taxation in respect of any such property; ....
Section 83 relates to the raising of money by a
band itself, and is not relevant to the case at bar.
In the 1985 Revised Statutes of Canada the
Indian Act appears as Chapter I-5. Section 87 is
divided into subsections as follows, but is otherwise
identical:
87. (1) Notwithstanding any other Act of Parliament or any
Act of the legislature of a province, but subject to section 83,
the following property is exempt from taxation, namely,
(a) the interest of an Indian or a band in reserve lands or
surrendered lands; and
(b) the personal property of an Indian or a band situated on
a reserve.
(2) No Indian or band is subject to taxation in respect of the
ownership, occupation, possession or use of any property men
tioned in paragraph (1)(a) or (b) or is otherwise subject to
taxation in respect of any such property.
Because of the greater ease in identifying different
parts of the section, I shall employ the 1985
version of the statute.
The taxes were paid pursuant to subsection
27(1) of the Excise Tax Act, R.S.C. 1970, c. E-13,
the relevant part of which is as follows:
27. (1) There shall be imposed, levied and collected a con
sumption or sales tax ... on the sale price of all goods
a) produced or manufactured in Canada...
b) imported into Canada ...
c) sold by a licensed wholesaler ...
d) retained by a licensed wholesaler for his own use or for
rental by him to others ...
The appellant seeks declaratory relief against
the sales tax but not against the consumption tax.
It is common ground that in every case where the
sales tax is paid the actual payment is made by a
manufacturer, wholesaler or licensed retailer, as
the case may be. It is also common ground that the
tax is usually passed on to the consumer. The issue
is whether this passing on of the tax to the end-
user of a commodity, when it occurs, is a matter of
contract or of law.
The parties filed an agreed statement of facts,
using nine transactions to illustrate the types of
situations that occur. The goods dealt with in these
transactions, all purchased for use on the reserve,
were as follows: (1) nuts and bolts; (2) solid
calcium chloride; (3) liquid calcium chloride; (4)
road signs and hazard markers; (5) service tubes
used in plumbing; (6) fluorescent lights; (7) diesel
fuel; (8) thrust washers; and (9) machine plugs.
Transactions 1, 3, 5 and 7 involved sales where the
property in the goods passed to the Indian band on
the reserve. Some of the transactions involved
purchases directly from manufacturers (2, 3, 4, 8
and 9), one from a licenséd wholesaler (1), and the
rest from vendors further down the distribution
chain who never had direct responsibility for
paying federal sales tax to the Crown (5, 6 and 7).
In all nine cases the appellant knew the amount of
federal sales tax, and in transactions 2 and 3 the
amount was shown on the invoices.
At trial [ [ 1989] 3 F.C. 186], Reed J. concluded
on the principal issue as follows [at page 2031:
In my view then, the words of section 87 stating that no
Indian band "is subject to taxation in respect of ...", must be
read as meaning that such bands are not to be taxed as
taxpayers. Had it been intended that the Indians and Indian
bands were to be exempt from all incidence or burden of
indirect taxes, as well as from direct liability for taxes, surely
section 87 would have been more specifically worded to so
provide.
* * *
The appellant argued that the Trial Judge erred in
her interpretation of both the Excise Tax Act and
the Indian Act.
With respect first to the Excise Tax Act, the
appellant's case in a nutshell is that federal sales
tax is a commodity tax, based on a percentage of
the selling price, which, although normally paid by
a vendor, is in reality paid by the end-user of the
commodity to whom it is passed on by law as a
tax.
The appellant contended that the Trial Judge
failed to appreciate the legal significance of her
own finding that federal sales tax is an indirect
tax. It was said that, although federal sales tax is
demanded of the manufacturer, it is not with the
intention that the manufacturer should pay the
tax, for that would make it a direct tax. It is not a
mere matter of contract that the excise tax is
passed on to the end-user of a commodity, but a
matter of law, for it is inherent in the legal nature
of an indirect tax that it clings as a burden to the
commodity and is passed on to subsequent pur
chasers in the chain of title as a tax and not simply
as an enhancement ,of the purchase price of the
goods.
The appellant urged on us the famous definition
of direct and indirect taxation of John Stuart Mill
that was adopted by the Judicial Committee of the
Privy Council in Bank of Toronto v. Lambe
(1887), 12 App. Cas. 575 (P.C.), at page 582:
"Taxes are either direct or indirect. A direct tax is one which
is demanded from the very persons who it is intended or desired
should pay it. Indirect taxes are those which are demanded
from one person in the expectation and intention that he shall
indemnify himself at the expense of another; such are the excise
or customs."
"The producer or importer of a commodity is called upon to
pay a tax on it, not with the intention to levy a peculiar
contribution upon him, but to tax through him the consumers
of the commodity, from whom it is supposed that he will
recover the amount by means of an advance in price."
This distinction has become a classic one in
Canadian constitutional law, because of the limita
tion on provincial taxing power in subsection 92(2)
of the Constitution Act, 1867 [30 & 31 Vict., c. 3
(U.K.) (as am. by Canada Act 1982, 1982, c. 11
(U.K.), Schedule to the Constitution Act, 1982
Item 1) [R.S.C., 1985, Appendix II, No. 5]] to
"Direct Taxation within the Province," and I
entirely agree with the appellant that it cannot be
disregarded in a case such as this either on the
basis that it is valid only for constitutional law or
for the reasons that it is not now, and never was,
satisfactory to economists.
However, to apply the distinction for non-consti
tutional purposes requires great precision in con
cept. Not even Mill himself asserted that an indi
rect tax is literally passed on: "indirect taxes are
those which are demanded from one person in the
expectation and intention that he shall indemnify
himself at the expense of another", and again, "to
tax through him the consumers of the commodity,
from whom it is supposed he will recover the
amount by means of an advance in price" [empha-
sis added]. Even an indirect tax is still truly paid
by the vendor. What he passes on to the purchaser
is the burden or incidence of the tax, by. indemni
fying himself through an advance in price. This is
in fact how Lord Hobhouse in Lambe introduced
the distinction, before quoting Mill supra, when he
stated (at page 581): "the economists are always
seeking to trace the effect of taxation throughout
the community, and are apt to use the words
`direct,' and `indirect,' according as they find that
the burden of a tax abides more or less with the
person who first pays it" [emphasis added].
Although Lord Hobhouse was not prepared to
leave the legal definition to the economists, I
believe he nevertheless accepted that the purpose
of the distinction was to locate the incidence of
taxation.
The appellant greatly relied upon the dictum of
Rand J. in his concurring reasons for judgment in
C.P.R. v. A.G. for Saskatchewan, [1952] 2 S.C.R.
231, at pages 251-252; [1952] 4 D.L.R. 11:
Lord Greene in the same case [British Columbia v.
Esquimalt & Nanaimo Railway Company, [1950] A.C. 87]
speaks of the "fundamental difference" between the "economic
tendency" of an owner to try to shift the incidence of a tax and
the "passing on" of the tax regarded as the hallmark of an
indirect tax ... If the tax is related or relateable, directly or
indirectly, to a unit of the commodity or its price, imposed
when the commodity is in course of being manufactured or
marketed, then the tax tends to cling as a burden to the unit or
the transaction presented to the market.
The key words relied upon by the appellant, "the
tax tends to cling as a burden," are, it seems to
me, clearly a metaphor, and connote the transfer,
not of the tax itself, but of its burden. I do not find
anything contrary to this view in the other case on
which the appellant relied, Air Canada v. British
Columbia, [1989] 1 S.C.R. 1161; (1989), 59
D.L.R. (4th) 161; [1989] 4 W.W.R. 97 at pages
1186-1187 S.C.R.:
The question 'Who pays the tax?', as opposed to
'Who bears the burden of the tax?' is in fact not
addressed by the constitutional cases at all, and
therefore seems to me to fall to be decided by a
different line of cases, one which deals directly
with issues as to payment and recovery.
In Dominion Distillery Products Co. Ltd. v. The
King, [1938] S.C.R. 458; [1938] 4 D.L.R. 289
where the suppliant under a petition of right
sought recovery of moneys paid to the Crown as
sales taxes and excise duties upon liquors which it
purchased at prices which it alleged included such
taxes, Davis J. said for the majority of the Court
(at page 462 S.C.R.):
We should find it difficult to decide, if it were necessary to do
so, that some one other than the manufacturer or producer,
upon whom the duties and taxes were imposed and by whom
they were actually paid to the Crown, could recover the pay
ments from the Crown.
Although obiter, this observation forecast the atti
tude of the Courts in cases to come.
The issue avoided in Dominion Distillery arose
in Délisle v. Shawinigan Water & Power Co.
(1941), 79 C.S. 353; [1941] 4 D.L.R. 556 (Que.
S.C.), where a wartime order-in-council allowed
suppliers of electricity to charge their customers
an additional amount equal to a wartime sales tax.
Demers J. held that this applied as well to Indians
resident upon a reserve in respect of electricity
supplied to them for use in their dwellings, despite
the provision of the Indian Act that "No Indian or
non-treaty Indian shall be liable to be taxed for
any real or personal property." He stated his
reason as follows (at pages 356-357 C.S.):
I maintain that there is no tax imposed on the [Indian]
plaintiff. The essential characteristics of a tax, says Thomas M.
Cooley, Taxation (1924) 4th ed., vol. 1, § 3, p. 68, are that it is
not a voluntary payment or donation, but an enforced
contribution.
The plaintiff is not bound to take electricity. People may
illumine their homes by other means. The party who is taxed by
the Order-in-Council and the law is the defendant;—nobody
else.
Then, as we see, this tax, which evidently is an indirect tax, is
imposed on the defendant, not on the plaintiff. That is what
Cooley, Taxation (1924) 4th ed., vol. 1, § 50, p. 141, says:
Indirect taxes are levied upon commodities before they reach
the consumer, and are paid by those upon whom they
ultimately fall, not as taxes, but as part of the market price
of the commodity."
It is of that tax, of the Customs Taxes or Excise Taxes—all
those indirect taxes are imposed on the importer or on the
manufacturer. In the end, it is the consumer or buyer who must
pay for the increase of the cost of the goods imported or
manufactured. Indians, when they buy imported goods subject
to Customs or Excise duties, must, like the others, pay higher
prices; so they must do for this indirect tax on their electricity,
and they cannot pretend that any tax is being imposed on their
"real or personal property".
I find particularly significant the view endorsed by
Demers J. that the consumer pays individual taxes,
not as taxes, but as part of the market price of the
commodities purchased.
In Francis v. The Queen, [1956] S.C.R. 618;
(1956), 3 D.L.R. (2d) 641; 56 DTC 1077, an
Indian resident on a reserve in Québec adjoining
one in New York brought articles from the United
States into Canada. He paid the customs duty
under protest and by his petition of right claimed
the return of the money. The Supreme Court, after
holding that rights under the Jay Treaty were
unenforceable without implementing legislation in
Canada, also held that then section 86 [the present
section 87] of the Indian Act [R.S.C. 1952, c. 149]
did not apply "because customs duties are not
taxes upon the personal property of an Indian
situated on a Reserve but are imposed upon the
importation of goods into Canada" (per Kerwin
C.J., at page 662). Kellock J. put it this way (at
page 630): "Before the property here in question
could become situated on a reserve, it had become
liable to customs duty at the border." I agree with
the appellant's contention that this case cannot be
taken as the last word as to the effect of section 87
of the Indian Act.
Then, in The Queen v. M. Geller Inc., [1963]
S.C.R. 629, where the vendor of dressed sheep
skins had paid excise tax which was admitted to be
not legally owing but was itself barred from recov
ery by a two-year limitation period and the pur
chaser also sought recovery, Taschereau J. held for
the Court (at page 631):
The person obliged to pay the tax is the dresser, and the
person entitled to a refund is the dresser if the tax has been
paid through mistake of law or fact. In the present case, the tax
was paid by the dresser Nu-Way and it was the sole person
entitled to a refund. This was denied by the Exchequer Court,
and rightly in view of the terms of s. 105, para. 6.
The respondent has no legal right to claim. It is true that M.
Geller Inc. reimbursed Nu-Way, but this payment does not give
a right of action to the former, which the law denies.
The arrangements made between Geller and Nu-Way are of
no concern to the appellant. They are "res inter alios acta" and
cannot affect the rights of the Crown.
The appellant attempted to cast doubt on these
cases in the light of developments in the law of
restitution, as summarized in Air Canada, supra.
But the restitution cases deal with unjust enrich
ment following a mistake of law or fact by an
admitted taxpayer, and raise no issue as to a
claimant's status as a taxpayer. In my view they
are therefore of no assistance on the issue of who
paid the tax.
The very point at issue in the case at bar, it
seems to me, has already been decided by this
Court in Price (Nfld.) Pulp & Paper Ltd. v. The
Queen, [1974] 2 F.C. 436 (C.A.). There the appel-
lant/purchaser had already made nine of twelve
instalment payments, which by the contract
included payment by the purchaser to the vendor
of the sums paid by the vendor to the Crown for
sales tax, before thè machinery under purchase
was exempted from sales tax by a statutory
amendment. On a petition of right by the purchas
er it was held that the amendment had no retroac
tive effect upon the payments already made. How
ever, the Court held as a second ground that the
purchaser had no standing to claim recovery.
Thurlow J. (as he then was) wrote for the Court
(at pages 441-442):
[T]he appellant in my opinion has established no right
against the Crown to recover the amount claimed. The fact
as asserted by counsel that the appellant was the only person
interested in obtaining reimbursement of the money is not in
my opinion, sufficient to afford the appellant a right of
action therefor against the Crown because no tax was
imposed upon or received from the appellant, and in my view
it cannot be affirmed that as against the Crown the appellant
was ever the owner of the money which the Crown received
from Dominion Engineering Works Limited as payments of
the tax.
The Supreme Court, [1977] 2 S.C.R. 36, affirmed
the decision on the first ground alone, leaving the
second open, but the decision by this Court on the
second ground is nonetheless binding on us.
I would therefore conclude on this point that the
appellant cannot be said to be taxed by the Excise
Tax Act, even though the burden of the tax is
undoubtedly passed on to it, as several of the
invoices made explicit. What the appellant paid
was not the tax as such, but commodity prices
which included the tax. This is sufficient, for
constitutional purposes, to make the tax indirect.
But it is not enough, for tax purposes, to establish
the appellant as the real taxpayer.
It is true that by the Excise Tax Act some items
are exempt from tax unconditionally (e.g. food
stuffs) and others are exempt conditionally, either
on the basis of the status of the purchaser (e.g.
diplomats, hospitals, municipalities) or on the
basis of the use to which the item is put (e.g.,
pollution control, municipal transportation sys
tems). If there is no legal obligation on the licensee
to pass on the tax and if end-users are not in law
taxed, the appellant asked why would the Act
allow refunds and exemptions based upon the
status of, or the intended use by, the end-user of
the goods? On this basis the appellant submitted
that the very scheme of the Act itself illustrates
that the tax is legally passed on to the end-user.
The authority principally relied upon for this
interpretation is The Queen v. Stevenson Con
struction Co. Ltd., [1979] CTC 86; (1978), 79
DTC 5044; 24 N.R. 390 (F.C.A.), a decision of
this Court. In that case the federal sales tax on
construction materials which were integrated or
otherwise consumed into ferry terminals had been
paid by predecessors in title to the respondents but
passed on to them in the price they paid. Because
the ferry terminals were being built and repaired
by the Government of British Columbia, the
refund provisions of subsection 44(2) of the Excise
Tax Act [R.S.C., 1985, c. E-15, subsection 68(3)]
applied, and the only question was whether the
respondents, whose contracts with the provincial
government provided that the federal sales tax
should not be included in the cost of the works to
the government, could claim the refund. Subsec
tion 44(2) (for sake of simplicity as it appears in
R.S.C. 1970, c. E-13) reads as follows:
44....
(2) Where goods have been purchased or imported by Her
Majesty in right of a province for any purpose other than
(a) resale,
(b) use by any board, commission, railway public utility,
university, manufacturer, company or agency owned, con
trolled or operated by the government of the province or
under the authority of the legislature or the lieutenant gover
nor in council, or
(c) use by Her Majesty or by Her agents or servants in
connection with the manufacturer or production of goods or
use for other commercial or mercantile purposes,
a refund of taxes paid under Part III, IV or V may be granted
to Her Majesty or to the importer, transferee, manufacturer,
producer, wholesaler, jobber or other dealer as the case may
require.
This Court held that the respondents should
succeed. Le Dain J., for the Court, said as follows
(at page 91 CTC):
With respect to the fourth point—whether the respondents
do not qualify for a refund because they did not initially pay
the tax—I agree with the conclusion of the Trial Judge that
subsection 44(2) does not impose as a condition of refund that
the person who seeks the refund must have paid the tax
initially, but rather contemplates that a refund may be made to
one to whom the tax has been passed on. This, I think, is
indicated by the words "as the case may require" in subsection
44(2). [Emphasis added.]
He added (at page 91 CTC):
.... the word "dealer" in subsection 44(2) appears to me to
be broad enough in that particular context to include persons
who have dealt with the goods in the manner of the respond
ents. The purpose of the description of the persons to whom a
refund may be made is not so much to limit such persons to
specific categories but to encompass anyone who has borne the
ultimate burden of the tax in dealing with the goods.
It seems clear to me that the Court was in no
way purporting to make a general pronouncement
upon the scheme of the Excise Tax Act but merely
interpreting a particular refund provision. I believe
this is emphasized by the words I have highlighted
in the first passage quoted, viz., that subsection
44(2) "does not impose as a condition of refund
that the person who seeks the refund, must have
paid the tax initially" but may be "one to whom
the tax has been passed on." This is not a reversal
of the Price decision, but rather an exception to it,
in the sense that the particular refund provision is
generous in its terms. It is, in short, a subsection
44(2) decision, not one interpreting subsection
44(1), which deals generally with deductions and
refunds.
In my view the fact that several provisions of the
Act allow exemptions or refunds to certain end-
users cannot be taken as a rule for the others, or a
guide to the intention of the statute as a whole.
That intention has already been established by this
Court in Price. As a result, sales taxes under the
Excise Tax Act must be taken, not as taxes on
property, but as taxes on business transactions,
levied at the time of the transaction.
The next question, then, is as to the effect of
subsection 87(2) of the Indian Act. In my view,
the interpretation I have given to the Excise Tax
Act excludes the application of paragraph 87(1)(b)
because, since the tax has been paid by a party
earlier in the commercial chain than the band, it
cannot be said to be imposed on "the personal
property of an Indian or a band situated on a
reserve." The appellant, however, invoked the pro
tection of subsection 87(2), and particularly the
words "or is otherwise subject to taxation," argu
ing that the burden of an indirect tax is such that
the band may be said to be "otherwise subject" to
it. In support of this contention, the appellant
referred to the "notwithstanding clause" with
which section 87 begins and the recent decision of
the Supreme Court of Canada in Nowegijick v.
The Queen, [1983] 1 S.C.R. 29; (1983), 144
D.L.R. (3d) 193; [1983] 2 C.N.L.R. 89; [1983]
CTC 20; 83 DTC 5041; 46 N.R. 41. Re: Exported
Natural Gas Tax, [1982] 1 S.C.R. 1004; (1982),
37 A.R. 541; 42 N.R. 361, at pages 1078-1079
S.C.R., was also cited to support the argument
that immunities from taxation (in that case of
provincial governments) should not be rendered
illusory by purely formalistic devices.
In Nowegijick an Indian living on a reserve
claimed that income earned through employment
by an Indian corporation with its head office on
the reserve and which was paid to him on the
reserve was exempt from income tax under section
87, even though the actual work was done off the
reserve. In the course of allowing the exemption
for the reason that section 87 should be read as
creating an exemption for persons, as well as for
their personal property, Dickson J. (as he then
was) laid down this principle in relation to section
87 (at page 36 S.C.R.):
It is legal lore that, to be valid, exemptions to tax laws should
be clearly expressed. It seems to me, however, that treaties and
statutes relating to Indians should be liberally construed and
doubtful expressions resolved in favour of the Indians. If the
statute contains language which can reasonably be construed to
confer tax exemption that construction, in my view, is to be
favoured over a more technical construction which might be
available to deny exemption. In Jones v. Meehan, 175 U.S. 1
(1899), it was held that Indian treaties "must ... be construed,
not according to the technical meaning of [their] words ... but
in the sense in which they would naturally be understood by the
Indians".
He also said (at page 39 S.C.R.):
The words "in respect or' are, in my opinion, words of the
widest possible scope. They import such meanings as "in rela
tion to", "with reference to" or "in connection with". The
phrase "in respect of is probably the widest of any expression
intended to convey some connection between two related sub
ject matters.
The respondent argued that this general princi
ple of liberal construction for Indian treaties and
statutes should have application only when the
statute is doubtful or ambiguous, but my own view
is that it should be applied whenever the statutory
language is reasonably open to a liberal construc
tion. The language was thus open in Nowegijick
since taxable income is after all personal property,
and was paid to an Indian on a reserve. As Dick-
son J. put it (at page 38 S.C.R.):
A tax on income is in reality a tax on property itself. If income
can be said to be property I cannot think that taxable income is
any less so.
But in the case at bar I find a legal barrier in
the way of a liberal construction to subsection
87(2), essentially the same as that to subsection
87(1). The concluding phrase of the subsection is
"in respect of any such property," that is, the same
"personal property of an Indian or a band situated
on a reserve." The tax was not, however, paid on
the personal property of a band on a reserve,
because it was not paid by the band at all, but by a
licensed manufacturer, importer, or wholesaler.
Thus, even where as in transactions 1, 3, 5 and 7
the goods passed to the appellant on the reserve,
that is immaterial, because the tax was levied on
the vendor with respect to his sale of the goods,
and not on the Band as purchaser or on the
property of the Band. Brown v. R. in Right of B.C.
(1979), 20 B.C.L.R. 64; 107 D.L.R. (3d) 705;
[1980] 3 W.W.R. 360 (C.A.), is distinguishable as
the provincial tax in question was a direct tax paid
by a reserve Indian on personal property (electrici-
ty) delivered on the reserve.
I find the conclusion inevitable that subsection
87(2) does not assist the appellant in the case at
bar. The appellant is therefore, not entitled to any
exemption with respect to any of the nine transac
tions set out in the agreed statement of facts, and
consequently cannot be entitled to any refund of
the sales taxes remitted.
Since the other matters argued before us were
dependent upon the favourable resolution of this
first issue for the appellant, it becomes unneces
sary to decide them.
The appeal should therefore be dismissed with
costs.
HEALD J.A.: I concur.
STONE J.A.: I agree.
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.