r v. L'AGENCE DU REVENU DU QU, 2014 QCCA 840

Lockwood Manufacturing Inc. c. Agence du revenu du Québec 2014 QCCA 840 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-022870-125 (500-80-013513-099) DATE: APRIL 24, 2014 CORAM: THE HONOURABLE ALLAN R. HILTON, J.A. DOMINIQUE BÉLANGER, J.A. MARTIN VAUCLAIR, J.A. LOCKWOOD MANUFACTURING INC. APPELLANT - Petitioner v. L'AGENCE DU REVENU DU QUÉBEC RESPONDENT - Respondent JUDGMENT [ 1 ] This appeal from a judgment of the Court of Quebec, District of Montreal, rendered on June 19, 2012 considers whether the trial judge (the Honourable Judge David L.

Cameron) correctly decided that the appellant Lockwood Manufacturing Inc. was not entitled to claim an input tax refund (ITR) of $57,418.87 for Quebec sales tax it paid on the supply of energy it used at its plant. The matter arose following Lockwood's receipt of a notice of assessment issued under An Act respecting the Québec sales tax . [1] [ 2 ] Cameron, J.C.Q. was sitting in his capacity as an appellate judge pursuant to

section 93.1.10 of the Tax Administration Act . [2] The proper standard of review that he had to apply was therefore one of correctness. [ 3 ] As the outcome of the appeal depends to a large extent on the judge's findings of fact, they are set out as follows in his judgment: [13] Lockwood was, at all relevant times, a manufacturer and seller of commercial baking pans to the food-service and baking industries in Canada and in the United States, with several establishments in various parts of Canada. [14] In addition to selling new baking pans to its customers, typically supermarkets, food-service providers and retail and wholesale commercial bakeries, Lockwood also caries out, for the benefit of its clients, in its Montreal facility, the application of new coatings onto commercial baking pans owned by its customers that Lockwood originally sold or onto pans its customers acquired elsewhere. [15] To recoat the baking pans, the Petitioner receives them, cleans and straightens them, blends the components required to achieve the correct formulation of the coating, applies the coating to the cleaned and straightened baking pans, cures the coating through the application of heat and then ships the finished product to its customer. [16] The Court heard the testimony of William Boswell, an assistant general manager of Lockwood.

Mr Boswell made the point that the Montreal Facility does not manufacture pans but it applies high-end coatings to pre-existing pans by cleaning them and re-glazing them. [17] In more detail, when a pan comes in from the bakery, Lockwood removes the residue of carbon and takes off the pre-existing coating by converting it into a powder form that settles in the tank; the pan is subjected to wash cycles and then a new coating is applied. [18] Lockwood chiefly uses a silicon coating made from a silicone base carried with a solvent, sprayed onto the pan. [19] Lockwood also offers Teflon (polymer coatings) and rubberised coatings. [20] The specific gravity of the solution is monitored hourly with hydrometers.

[21] To carry out its activities, Lockwood must maintain the room temperature between 68 and 75 degrees; Lockwood targets 72 degrees (Fahrenheit) [22] Air temperature is critical because the solution of silicone base and solvent is volatile.

Without a constant control of temperature, the specific gravity of the solution would be compromised. [23] The desired property of the coating is that it makes the baking pan better at releasing the baked product without generating burnt material and waste. [24] Baking pans may be used without any coating in which case other means of providing release are used such as parchment paper, constant washing, continual running, or the application of oil spays. [25] Mr Boswell summarises that the costs of the coating material itself represents approximately 50% of the total cost of the operation. [26] Lockwood purchases the silicone material in liquid form.

It is delivered from a U.S. supplier in drums. Lockwood then mixes it with the solvent to produce the formulation required for application to the metal pans. Energy use [27] Two sources of energy are used at Lockwood's Montreal Facility, natural gas and electricity. - Natural gas [28] 70% of the natural gas is used in the heating of the tank system, where the carbon residue, as well as the remaining coating are removed and also in the wash cycles. [29] Natural gas is also used in the ovens used for the curing process whereby, after the silicone carrier solution is applied to the pan, it is baked at 425 degrees F.

For 1 1/2 hours removing the solvent and curing the silicone solid onto its surface. [30] As well, gas is used in an air make-up system to maintain the air temperature. For environmental reasons, the tanks have to be exhausted, which removes a great deal of air from the premises. This air has to be replaced by air brought in through a ventilation system and heated. The air make-up system consists of exhaust fans, intake fans and radiant heaters. [31] Because of environmental laws, the solvents must be burned off before being discharged into the outside air.

The after-burner operates at 725 degrees Celsius. - Electricity [32] Electricity is used for the motors in the exhaust systems and in the pan washing system, the hoist and in lighting. Only a small proportion of the electricity is used for things other than the motors' exhaust systems, pan washing, the hoist, etc, i.e. in the lighting of the premises and the operation of computer system, etc. [33] When asked how much, Mr Boswell answered: "I would say no more than 10%". [34] To maintain the air temperature, the problem is one of heating, not of cooling.

Despite the fact that an enormous amount of energy is used to heat both in the boiler system and in the curing process, the use of an exhaust system to remove the contaminated air results in an intake of cold air, which must be reheated. [35] The witness spoke of 12 exchanges of air per minute. [36] In the warmer periods in the year, heating is less of a problem because the blend of silicone and solvent can be modified to deal with it. [37] There are, however, periods where the plant is simply closed because it does not have the air-cooling capacity that would be required to maintain the ambient temperature within the required range. [ 4 ] The legislation on which the appeal turned is complicated by the continuing application of statutory provisions that have been otherwise repealed. [3] These are s ections 206.1 and 206.3 QSTA , which are to the following effect:

206.1. In determining an input tax refund of a registrant, no amount shall be included in respect of the tax payable by the registrant in respect of the supply or bringing into Québec of the following property or services : (1) a road vehicle that must be registered under the Highway Safety Code (R.S.Q.,

chapter C- 24.2 ) or a law of another jurisdiction; (2) the motive fuel acquired or brought to power the engine of a road vehicle in respect of which (

a) paragraph 1 applies, or would apply if the vehicle were acquired, or brought into Québec, after 30 June 1992; or (

b) section 243.1, the third paragraph of

section 252 or

section 253.1 applied; (3) electricity, gas, combustibles or steam; (4) a telephone service; (5) a telecommunication service or any telecommunication in respect of which the tax prescribed by the Telecommunications Tax Act (R.S.Q.,

chapter T-4 ) would apply but for

section 14 of that Act; (6) the food, beverages or entertainment in respect of which sections 421.1 to 421.4 of the Taxation Act (R.S.Q.,

chapter I-3 ) apply, or would apply if the registrant were a taxpayer under that Act, during a taxation year of the registrant. [Emphasis added.] 206.1. Dans le calcul du remboursement de la taxe sur les intrants d’un inscrit, aucun montant ne doit être inclus à l'égard de la taxe payable par celui-ci relativement à la fourniture, ou à l'apport au Québec, des biens ou des services suivants : 1) un véhicule routier qui doit être immatriculé en vertu du Code de la sécurité routière (L.R.Q., c. C-24.2 ) ou d’une loi d’une autre juridiction; 2) le carburant acquis ou apporté pour alimenter le moteur d’un véhicule routier à l’égard duquel:

a) soit le paragraphe 1 s’applique ou s’appliquerait si le véhicule était acquis, ou apporté au Québec, après le 30 juin 1992;

b) soit l’article 243.1, le troisième alinéa de l’article 252 ou l’article 253.1 s’est appliqué; 3) l'électricité, le gaz, le combustible ou la vapeur; 4) un service de téléphone; 5) un service de télécommunication ou une télécommunication à l’égard duquel la taxe prévue par la Loi concernant la taxe sur les télécommunications (L.R.Q., c. T-4 ) s’appliquerait si ce n’était de l’article 14 de cette loi; 6) la nourriture, les boissons ou les divertissements à l’égard desquels les articles 421.1 à 421.4 de la

Loi sur les impôts (L.R.Q., c. I-3 ) s’appliquent, ou s’appliqueraient si l’inscrit était un contribuable en vertu de cette loi, au cours de l’année d’imposition de celui-ci. [Soulignage ajouté.] 206.3. Paragraph 3 of

section 206.1 does not apply in respect of property referred to in that paragraph, where the exemption provided for in paragraph aa of

section 17 of the Retail Sales Tax Act (R.S.Q.,

chapter I-1 ) would apply in respect of such property but for

section 49 of that Act. For the purposes of the first paragraph, the expressions “sales of electricity, gas or fuel” and “other than meals and services including telephone services” in paragraph aa of

section 17 of the Retail Sales Tax Act (R.S.Q.,

chapter I-1 ) shall read as “sales of electricity, gas, combustibles or steam” and “other than meals, mobile homes and services including telephone service”, respectively. [Emphasis added.] 206.3.

Le paragraphe 3 de l'article 206.1 ne s'applique pas à l'égard des biens visés à ce paragraphe, dans le cas où l'exemption prévue au paragraphe aa de l'

article 17 de la Loi concernant l'impôt sur la vente en détail (L.R.Q., c. I-1 ) s'appliquerait relativement à ces biens, si ce n'était de l'article 49 de cette loi. Pour l'application du premier alinéa, les expressions «la vente d'électricité, de gaz ou de combustible» et «autres que les repas et les services dont celui du téléphone» prévues au paragraphe aa de l'

article 17 de la Loi concernant l'impôt sur la vente en détail , doivent se lire «la vente d'électricité, de gaz, de combustible ou de vapeur» et «autres que les repas, les maisons mobiles et les services dont celui du téléphone». [Soulignage ajouté.] [ 5 ] The provisions of the Retail Sales Tax Act [4] to which

section 206.3 above refers is to the following effect:

17. The tax provided for by this

chapter does not apply to the following : […] ( aa ) Subject to

section 19, sales of electricity, gas or fuel which a person of a category other than those determined by the Minister under

section 20 uses to produce movable property other than meals and services including telephone service, intended for sale or for the design or production of production equipment or conditioning materials used for the production of such movable property, either as an agent of production or to operate production equipment; this exemption does not apply to sales of electricity, gas or fuel used in equipment for the air conditioning, lighting, heating or ventilation of the production site; […] [Emphasis added.] 17. La taxe prévue par le présent

chapitre ne s'applique pas : […] aa ) sous réserve de l'article 19, à la vente d'électricité, de gaz ou de combustible qu'une personne d'une catégorie autre que celles que détermine le ministre en vertu de l'article 20 utilise à la production de biens mobiliers , autres que les repas et les services dont celui du téléphone, destinés à la vente ou à la conception ou à la production de matériel de production ou de matières de conditionnement utilisés à la production de tels biens mobiliers, soit comme agent de production, soit pour actionner du matériel de production; cette exemption ne s'applique pas à la vente d'électricité, de gaz ou de combustible utilisé à l'alimentation du matériel de climatisation, d'éclairage, de chauffage ou de ventilation des lieux de production; […] [Soulignage ajouté.]

18.3. For the purposes of paragraphs y, z and aa of

section 17 and of this section, the following mean : […] (c) “production” : all those activities consisting of the assembling, processing or conditioning of property from which is derived other property that is different from the first property by its nature or characteristics, the restoring of movable property by its owner, the taping of pictures or the recording of sound and the generating of electricity, the building and maintenance of forest access roads in the course of carrying on a timber business, the piling up, at a first point of depot, of residues of carrying on mine business derived from the first stage of concentration, including, whenever performed by the same person in conjunction with the preceding activities: (

i) the generation or transformation of any form of energy; (ii) the detecting, measurement, treatment, reduction or elimination of water, soil or air pollution which is attributable to the production of movable property; (iii) the transport to a first point of depot of refuse or waste derived from production; (iv) the quality control of the property being produced or the control of the production material; (

v) the cleaning, screening, sifting, wrapping, packing or putting into containers; but does not include the storage of finished products or the assembly, transformation or preparation of movable property by a retail business; […] [Emphasis added.] 18.3. Aux fins des paragraphes y, z et aa de l'

article 17 et du présent article, on entend par : […]

c) «production» : l'ensemble des activités d'assemblage, de transformation ou de conditionnement de biens desquelles résultent d'autres biens différents des premiers par leur nature ou leurs propriétés, la remise en état de biens mobiliers par leur propriétaire, l'enregistrement d'images ou de son, la génération d'électricité, la construction et l'entretien de voies d'accès en forêt effectués dans le cadre de l'exploitation forestière, le tassement à un premier point de dépôt des résidus provenant du premier stade de concentration d'une exploitation minière, incluant, lorsqu'effectués par une même personne en corrélation avec les activités précédentes: i. la génération ou la transformation de toute forme d'énergie; ii. la détection, la mesure, le traitement, la réduction ou l'élimination des polluants de l'eau, du sol ou de l'air qui sont attribuables à la production de biens mobiliers; iii. le transport à un premier point de dépôt des rebuts ou déchets découlant de la production; iv. le contrôle de la qualité des biens en voie de production ou le contrôle du matériel de production; v. le nettoyage, le tri, le criblage, l'emballage, l'empaquetage ou la mise en contenant; mais ne comprend pas l'entreposage de produits finis ni, dans le cadre d'un commerce de détail, l'assemblage, la modification ou la préparation de biens mobiliers; […] [Soulignage ajouté.] [ 6 ] The critical issue thus becomes whether Lockwood's processing of pans, as described by the judge, falls within the meaning of paragraph 17(aa) RSTA . [ 7 ] He concluded that Lockwood's commercial activity constituted “production” pursuant to paragraph 18.3(

c) RSTA . The “production” in question could be said to amount to “assembling, processing and conditioning”, because both the silicone coating and the pans were transformed, and ultimately assembled together. [ 8 ] Next, he held that Lockwood's production did not constitute production of movable property “intended for sale” under paragraph 17( aa ) RSTA .

His conclusion in this respect was based on two key findings: first, that the narrower definition of sale under the RSTA , unlike that of the QSTA , was applicable; and second, that the routine contracts between Lockwood and its clientele were in reality contracts of enterprise involving the performance of work rather than contracts of sale. In this respect,

article 2098 C.C.Q. provides as follows:

2098. A contract of enterprise or for services is a contract by which a person, the contractor or the provider of services, as the case may be, undertakes to carry out physical or intellectual work for another person, the client or to provide a service, for a price which the client binds himself to pay. [Emphasis added.] 2098.

Le contrat d'entreprise ou de service est celui par lequel une personne, selon le cas l'entrepreneur ou le prestataire de services, s'engage envers une autre personne, le client, à réaliser un ouvrage matériel ou intellectuel ou à fournir un service moyennant un prix que le client s'oblige à lui payer. [Soulignage ajouté.] [ 9 ] In analyzing whether the judge erred in this respect, it is useful to begin with an explanation of how the retail tax system operates, and what the purpose is of ITRs in that context. [ 10 ] In Reference re Quebec Sales Tax , [5] the Supreme Court considered the constitutionality of proposed amendments to the QSTA .

In doing so, Gonthier J., writing on behalf of the court, said this: [6] The principal difference between the existing QST and the GST derives from the concept of "non-taxable supplies" present in the provincial regime. This concept ensures that the QST is a retail sales tax , that is, one which is collected at the retail level. The GST, in contrast, is a value- added tax which is collected and reimbursed at every stage along the production and marketing chain with the final consumer ultimately being the one to pay the tax.

The net result of the two taxes is identical: the ultimate consumer pays the tax; however, the mechanism for achieving this end differs. [Emphasis and bold added.] La différence principale entre la TVQ et la TPS réside dans le concept des "fournitures non taxables" que l'on trouve dans le régime provincial. Ce concept fait en sorte que la TVQ soit une taxe de vente au détail , c'est-à-dire une taxe perçue à l'étape de la vente au détail.

Par contre, la TPS est une taxe à la valeur ajoutée qui est perçue et remboursée à chaque étape de la chaîne de production et de commercialisation, et qui est en fin de compte payée par le consommateur final. Les deux taxes ont un même résultat: le consommateur ultime paie la note. Cependant, il y a différence quant au moyen de réaliser cette fin. [Soulignage et gras ajoutés.] [ 11 ] Gonthier, J. then went on to explain the tax mechanism that was proper to the QSTA : [7]

The general operation of the proposed tax [QST] is clear from an examination of the concept of taxable supply. A taxable supply is defined in s. 1 of the draft Act as the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, lease, gift or alienation in the course of a commercial activity. Every purchaser of a taxable supply must pay a tax equal to 8 percent of the value of the consideration given for the supply (in certain cases reduced to 4 or 0 percent (zero-rated supplies); draft Act, s. 2).

As with the GST, the purchaser of a taxable supply who uses that good or service in the production of other taxable supplies will be entitled to a refund from the government equal to the amount of tax initially paid on its inputs (the input tax refund or the input tax credit under the GST; draft Act, s. 13). To the extent that taxable supplies are not used by the purchaser to produce other taxable supplies, by definition they will be consumed by the purchaser for non-commercial purposes. In such a case, the purchaser will not be eligible for an input tax refund.

The tax will thus be collected and refunded at each stage of the production and marketing process until the ultimate consumer is reached. The input tax refund mechanism, in the case of taxable supplies, thus ensures that the tax is paid by the ultimate consumer. [Emphasis added.] L'examen du concept de la fourniture taxable illustre le fonctionnement général de la taxe proposée.

L'article 1 de l'avant-projet de loi définit une fourniture taxable comme la délivrance d'un bien ou la prestation d'un service, de quelque manière que ce soit, y compris par vente, transfert, troc, échange, licence, louage, donation ou aliénation, dans le cadre d'une activité commerciale. Tout acquéreur d'une fourniture taxable doit payer une taxe égale à 8 pour 100 de la contrepartie de la fourniture (dans certains cas, le taux de la taxe est réduit à 4 pour 100 ou est nul ("les fournitures détaxées"), art. 2 de l'avant-projet de loi).

Comme dans le cas de la TPS, l'acquéreur d'une fourniture taxable qui utilise le bien ou service pour la production d'autres fournitures taxables aura droit à un remboursement du gouvernement, d'un montant égal à la taxe initialement payée sur les intrants (le remboursement de la taxe sur les intrants ou le crédit d'impôt sur les intrants en vertu de la TPS, art. 13 de l'avant-projet de loi). Dans la mesure où des fournitures taxables ne sont pas utilisées par l'acquéreur pour produire d'autres fournitures taxables, elles sont par définition consommées par l'acquéreur à des fins non commerciales.

Dans ce cas, l'acquéreur n'a pas droit à un remboursement de la taxe sur les intrants. Par conséquent, la taxe est perçue et remboursée à chaque étape du processus de production et de commercialisation jusqu'au consommateur ultime.

Le mécanisme de remboursement de la taxe sur les intrants, dans le cas des fournitures taxables, fait donc en sorte que le paiement de la taxe soit à la charge du consommateur final. [Soulignage ajouté.] [ 12 ] Thus, the retail sales tax is levied only upon the final "sale", and as we know, its calculation includes the GST that is added to the sale price. [ 13 ] For these purposes, therefore, what is an input? [ 14 ] An input is generally understood as “the total resources including raw materials, manpower, etc. necessary to production, which are deducted from output in calculating profits.” [8] The French term, “intrant”, is defined as “[é]lément entrant dans la production d’un bien.” [9] In a retail sales tax system, when a retail sales tax is levied upon an input, the tax ought to be refunded to avoid double taxation.

The input is not the targeted final sale but rather a sale along the chain of production. [ 15 ] The question then becomes this: does Lockwood's processing of pans include the "sales of electricity, gas or fuel / la vente d'électricité, de gaz ou de combustible" that it "uses to produce moveable property … intended for sale / utilise à la production de biens mobiliers … destiné à la vente" within the meaning of paragraph 17(aa) RSTA ? [ 16 ] Clearly, the silicone coating and the pans are movable property. There is also no doubt that Lockwood's commercial activity constitutes production.

But is that moveable property "intended for sale / destiné à la vente"? Subsection 2(9) RSTA provides a definition of "sale / vente", while subsection 2(10) defines "retail sale / vente en detail":

In this Act and the regulations, unless the context indicates a different meaning, […] (9) “sale” includes a sale pure and simple, a conditional sale, a sale by instalments, an exchange, a lease or any other contract whereby, for a price or other consideration, a person delivers or binds himself to deliver , to another, movable property ; it also includes any contract whereby a person grants to another the enjoyment of movable property for a certain time for a rental or price which the latter binds himself to pay him but it does not include any such contract when it is provided that the movable property is furnished with the services of its operator; (10) “retail sale” means a sale for purposes other than exclusively of resale, lease or sub-lease; […] [Emphasis added.] 2.

Dans la présente loi et les règlements, à moins que le contexte n'indique un sens différent: […] 9° «vente» comprend une vente pure et simple, une vente conditionnelle, une vente à tempérament, un échange, un bail et tout contrat où, pour un prix ou toute autre considération, une personne livre ou s'oblige à livrer à une autre personne un bien mobilier , ainsi que tout autre contrat par lequel une personne accorde à une autre personne la jouissance d'un bien mobilier pendant un certain temps moyennant un loyer ou prix que celle-ci s'oblige à lui payer mais ne comprend pas un tel autre contrat lorsqu'il y est prévu que le bien mobilier est fourni avec les services de son opérateur; 10° «vente en détail» signifie toute vente à des fins autres qu'exclusivement la revente, la location ou la relocation; […] [Soulignage ajouté.] [ 17 ] The judge's

interpretation of the meaning of "deliver / livrer" was fundamental to the outcome. Here is what he wrote: [70] In comparing the civil-code articles on sale and those on lease, it can be seen that delivery does not necessarily involve a transfer of title, and it is common to sale and to lease.

Delivery is distinct from the concept of acceptance, which is a difference between sale and lease on the one had, and the contract of enterprise for works on the other. [71] Because of the way the sections 206.1 and 206.3 of the QSTA make sections 17 and 18.3 of the RSTA apply, i.e. by deeming the law to still apply, the Court is of the view that the definition of "sale" found in the RSTA should still apply, not that of the QSTA. In other words, the old rule exists in the confines of its own vocabulary.

If Lockwood's contract can be defined as a "sale" as that term is defined in the RSTA, the exemption applies. [72] Applying that definition to the present case, the contract here, which does involve a production, does not qualify as a production of movable property intended for sale, because it is a contract for enterprise involving a work. The juridical act is accomplished by the acceptance when the work is completed, not by delivery, as is the case for a sale or a lease.

Although the definition of sale in the RSTA is broader than the civil-code definition, it is not broad enough to include Lockwood's contract. [ 18 ] Lockwood argues that even if the silicone coating was applied or attached to the baking pans, there is still “delivery” of the silicone coating to its clients. This argument appears to be based on this Court’s judgment in Constructions Beauce-Atlas Inc. v. Québec (Ministère du Revenu) . [10] There, the appellant sold steel beams which it also usually ended up incorporating into real property.

The judge in that case found those sales to be sales of real property instead of sales of movable property. In this Court, however, the judgment was set aside and the Notice of Assessment cancelled on the basis that “[l]e fait que ces poutrelles soient devenues immeubles par leur incorporation à un immeuble ne change rien au fait qu'il s'agissait au départ de biens mobiliers." [11] After this Court’s judgment, the law was amended to deny refunds in such cases.

As such, Lockwood contends that the ratio from Construction Beauce-Atlas still ought to apply to movable property incorporated into other movable property, which is what it does. [ 19 ] While Lockwood's argument is superficially appealing, it fails to take account of the specific set of facts in its own case. Unlike those in Construction Beauce-Atlas , where the steel beams were sold and subsequently incorporated into real property, Lockwood receives baking pans its clients already own to be cleaned and coated before it returns the refurbished product to them.

Such commercial activity cannot possibly amount to a “sale” under the RSTA , since Lockwood simply does not deliver movable property as provided for in subsection 2(9) RSTA . [ 20 ] What is operative in that provision is not so much the notion of transfer of ownership but the legal notion of delivery.

In this respect, it is worth noting that the main impediment to Lockwood's argument is that the French version uses the term “livrer" instead of “délivrer”; only this last term is the legal equivalent of the English term “deliver.” [ 21 ] Lockwood's legal relationship with its clients, however, is not one of sale, lease, or “any other contract” where there is "delivery" in the legal sense of that term.

Rather, that legal relationship better corresponds with the definition of a contract of enterprise involving a work or service, [12] which simply results in the return of the product the client already owns on which Lockwood has performed work. [ 22 ] As Professor Jacques Deslauriers writes: “ [l]a finalité ou l’objectif du contrat de l’entrepreneur n’est pas tant de fournir son travail ou ses matériaux, mais plutôt de réaliser un bien ou de fournir un service." [13] From the evidence in the record, it is obvious that the used baking pans are serviced, which includes the application of a silicone coating, and not that the silicone coating is sold to clients. [ 23 ] This finding is also supported by the mechanism in place: the client’s used commercial pans are sent onsite, they are serviced (which includes the silicone coating, but also cleaning and resurfacing) by Lockwood, and then returned to the client.

Equating this with

the sale of a movable property (silicone coating) is akin to indirectly widening the RSTA ’s tax base to include services instead of only “retail sales” (section 2(10) RSTA ). [ 24 ] Subsidiarily, Lockwood also contends that the trial judge erred when he concluded that the concept of sale should not be interpreted in the context of the QSTA . [ 25 ] The respective tax bases of the QSTA and RSTA differ substantially.

While the QSTA taxes “taxable supply”, the RSTA taxed “retail sales". [ 26 ] Within the statutory scheme of the QSTA , ITRS are an exception to the general principle that purchases of taxable supplies are subject to taxation (section 16 QSTA ). In that regard, the meaning of the language used in

section 206.1 QSTA , and as well as 206.3 QSTA , is unmistakeable. [14] The scheme of the QSTA thus generally supports a restrictive

interpretation in order not to impede on the general principle. [ 27 ] Second, the legislature deliberately chose to use an exception arising from a prior tax regime. The language of the QSTA does not provide for an adapted reading of the RSTA . In fact, the only restriction provided by

section 206.3 QSTA for reading paragraph 17( aa ) RSTA is that of “but for

section 49 of that Act / si ce n'était de l'article 49 de cette loi.” [15] A “but for / si ce n'était” provision could have been but was not used to refer to the notion of sale under the QSTA instead of the RSTA . [ 28 ] That is enough to dispose of this subsidiary argument, which also fails. FOR THESE REASONS, THE COURT: [ 29 ] DISMISSES the appeal with costs. ALLAN R. HILTON, J.A. DOMINIQUE BÉLANGER, J.A. MARTIN VAUCLAIR, J.A. Mtre Julie Robert MITCHELL GATTUSO For the appellant Mtre Danny Galarneau LARIVIÈRE MEUNIER (REVENU QUÉBEC) For the respondent Date of hearing: March 18, 2014