The King v. Fraser Companies Ltd.

the appellant, with costs here and in the Exchequer Court, MnIsTER upholding the income tax assessment in question.

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SMITa J.-The respondent was a manufacturer of lumber for sale, and consumed a portion of the lumber so manufactured in construction and building operations, carried on

S.C.R.]

over a period of years, the lumber so consumed having been TE KiNa taken from stock in the yards of the company, produced and manufactured in the ordinary course of the company's business of manufacturing for sale, and not produced or manufactured especially for the purpose for which it was Smith J. used.

The appellant sued the respondent company for sales tax on the lumber so consumed, amounting to the sum of $7,302.90.

Sections 86 and 87 of the Special War Revenue Act are as follows:

(a) produced or manufactured in Canada, payable by the producer or manufacturer at the time of the sale thereof by him; 87. Whenever goods are manufactured or produced in Canada under such circumstances or conditions as render it difficult to determine the value thereof for the consumption or sales tax because

(d) such goods are for use by the manufacturer or producer and not for sale;

the Minister may determine the value for the tax under this Act and all such transactions shall for the purposes of this Act be regarded as sales. The learned President of the Exchequer Court, before whom the case was tried, dismissed the action (1), on the ground that the lumber so consumed was produced in the ordinary course of business for sale, and not specifically for use by the manufacturer, within the meaning of the above quoted s. 87 (d).

With great respect, I am unable to take this view of the meaning and effect of these provisions of the Act. To so construe them is to put a narrow and technical construction upon the precise words used in clause (d), without taking into consideration the meaning and intent of the statute as a whole. It seems to me clear that the real intention was to levy a consumption or sales tax of four per cent. on the sale price of all goods produced or manufactured in Canada, whether the goods so produced should be sold by the manufacturer or consumed by himself for his own purposes.

(1) [1931] Ex. C.R.

The view taken in the court below would result in the introduction of an exception to the general rule that all goods produced or manufactured are to pay a tax, and would amount to a discrimination in favour of a particular consumer. As an example, it is not unusual for a manufacturer engaged in the production and manufacture of lumber for sale to engage at the same time in the business of a building contractor. He manufactures his lumber for sale, and, as a general rule, would not manufacture any specific lumber for use in connection with his building contracts, but would simply take lumber for these purposes from the general stock manufactured for sale, and might thus, under the view taken in the court below, escape taxation on all lumber thus diverted from the general stock manufactured for sale.

I am of opinion that, construing the provisions of the

Act as a whole, the respondent is liable for taxes on the lumber consumed by him, as claimed.

The appeal should therefore be allowed with costs, and judgment entered in the court below for the amount claimed, with costs.

J. (dissenting)-In the special case submitted for the opinion of the Exchequer Court of Canada, it is stated, and admitted by the Crown, that all the long and short lumber which we are called upon to declare liable to pay the " consumption or sales tax " " was taken from stock in the yards of the Company, and produced and manufactured for sale and in no instance had been produced or manufactured especially for the purpose for which the same was used."

On the facts as stated above, I agree with the learned

President of the Exchequer Court (1), because, although manufactured for sale, these goods were never sold; nor can they be taxed under section 86 of the Special War

Revenue Act, nor under section 87, because they were not manufactured or produced in Canada for use by the manufacturer or producer, but for sale, as appears by the above mentioned statement of facts. In this case as in the

Wampole case (2), in which judgment is rendered to-day,