Deputy Minister of National Revenue, Customs and Excise v. MacMillan & Bloedel (Alberni) L

MacMILLAN & BLOEDEL (Alberni) LIMITED, THE ONTARIO-MINNESOTA PULP AND PAPER COM- PANY LIMITED, E.

HALL J.:-This is an appeal by the Deputy Minister of National Revenue for Customs and Excise from the judgment of the Honourable Mr. Justice Dumoulin of the Exchequer Court of Canada dated January 18, 1963, allowing R.C..

an appeal from a declaration made by the Tariff Board and a dated April 29, 1959.

The appeal relates to a Beloit 276 inch newsprint machine made by Beloit Iron Works of Beloit, Wisconsin, having a rated mechanical speed of 2,500 feet per minute. The respondent MacMillan & Bloedel stated its intent to purchase the newspaper machine from Beloit Iron Works by letter dated January 25, 1955. The said respondent became committed to purchase the newsprint machine on February 1,

1955. The formal contract was dated August 25, 1955. The newsprint machine was shipped to the said respondent in

Canada from Beloit Iron Works in a knocked-down condition during the period from November 26, 1956 to June 24,

The Port Appraiser classified the newsprint machine as being of a class or kind made in Canada and applied Tariff

Item 427 which provided for a rate of duty of 22'%. The said respondent requested that the newsprint machine be classified as of a class or kind not made in Canada and that

Tariff Item 427a be applied. Tariff Item 427a provides for a rate of duty of 7-%. The classification of the Port

Appraiser was affirmed by the Dominion Customs Appraiser.

MacMillan & Bloedel requested the Deputy Minister of

National Revenue for Customs and Excise to reconsider the classification made by the Dominion Customs Appraiser.

The Deputy Minister on June 14, 1957 affirmed the classification made by the Dominion Customs Appraiser. It is from this decision that the said respondent appealed to the

Tariff Board.

The appeal to the Exchequer Court from the declaration of the Tariff Board was upon the following grounds:

erred in law in failing to define the class or kind with a reasonable degree of narrowness as required by law.

MINISTER

machine was not made in Canada prior to any time material to these proceedings and in the alternative if it was made in Canada prior to a material time, one newsprint machine could not constitute "substantial quantities" within the meaning of section 6 of the said Customs Tariff. 10. The Tariff Board erred in law in concluding that ability to manufacture in Canada a class or kind of newsprint machine without unreasonable delay after such newsprint machine of such class or kind had been made outside Canada constitutes the making of a newsprint machine of that class or kind in Canada.

Willingness or ability to manufacture a newsprint machine of a particular class or kind does not constitute manufacture in Canada of a newsprint machine of that class or kind.

The Tariff Board erred in not classifying the imported newsprint machine under tariff item 427a.

The Tariff Board gave no reasons to justify the conclusion reached as to the classification of the imported machine.

The Tariff Items in question read as follows:

427. All machinery composed wholly or in part of iron or steel, n.o.p.; and complete parts thereof.

R.C.S.

The newsprint machine so imported is composed of iron or steel and is a large and complex piece of machinery composed of many parts. It was built to the specifications of the purchaser and cost approximately $3,000,000.

Although the Notice of Appeal to the Exchequer Court referred specifically to the calendar rolls and the differential drive (Grounds 16 and 17), these grounds were not argued in this Court nor referred to in the respondents' factum.

The respondent MacMillan & Bloedel took the position that the design speed of the newsprint machine in question should have been taken by the Tariff Board as the determining factor in arriving at a finding as to whether or not the said newsprint machine was of a class or kind not made in Canada and it argued that the Tariff Board had erred in law in not so finding.

It was also urged on behalf of the said respondent that there was in fact no evidence that newsprint machines of the size or speed of the one imported were being made in

Canada at any time material to the time when MacMillan

& Bloedel contracted to purchase the newsprint machine in question and on the question of the relevant time urged that the date for the determination of the rights of the parties should be taken as the date that said respondent entered into the formal contract to purchase, namely, August 25, 1955. This latter point can, I believe, be disposed of by a reference to s. 43 of the Customs Act, as amended by 3-4 Eliz. II, c. 32, (1955), which appears to say very clearly that the time for determining tariff classification is at the time of entry into Canada of the goods subject to duty, and having regard to the language of this section there can be no justification for fixing any other date as the date upon which the duty, if any, is to be determined.

The contention that there was no evidence of newsprint machines being made in Canada prior to the period from

November 26, 1956 to June 24, 1957, is untenable. There was considerable evidence upon which the Tariff Board could find that newsprint machines had been and were being manufactured in Canada in the relevant period and particular there was the evidence that Dominion Engineing Company Limited had, during the period from December 1955 and November 29, 1956, made in Canada and delivered to Powell River Company Limited a newsprint machine known as Powell River No. 9 which had a design speed minute, and there HaIJ.

dence that John Inglis 'Company Limited in the years 1954 and 1955 had rebuilt in Canada a number of newsprint machines upgrading those machines from design speeds of 1,800 feet per minute or less to design speeds of up to 2,500 feet per minute.

There was accordingly, in my opinion, ample evidence to support the findings of fact in this regard made by the Tariff Board and no error in law was made in arriving at those findings of fact.

On the main argument that the Tariff Board erred in law in refusing to find that design speed should be the deciding factor in arriving at a conclusion as to whether or not the said newsprint machine was of a class or kind not made in Canada, the respondent MacMillan & Bloedel relied strongly on the judgment of Judson J. in Dominion Engineering Works Limited v. Deputy Minister of National Revenue'. In that case a company known as A. B. Wing Limited had imported into Canada a certain power shovel described as having a nominal dipper capacity of 21 cubic yards. It was undisputed that power shovels with a nominal dipper capacity of 21 cubic yards or more were not made in Canada at the date of import. Power shovels with a nominal dipper ranging from cubic yard to 2 cubic yards were being made in Canada at that time. The Tariff Board found that a classification of power shovels by nominal dipper capacities was generally understood and accepted by the trade in both Canada and the United States and was probably the most practical single standard according to which these implements could be classified. "Nominal dipper capacity" defines a class of power shovel having certain specifications which indicate the work it is capable of doing. It defines the over-all capacity and performance of the machine and implies more than a mere difference in size. The submission made by the Deputy Minister of National Revenue in the Dominion Engineering case was that since machines ranging in size up to a nominal dipper capacity of 2 cubic yards were made in Canada, the machine next larger in size could not, by reason only of the difference in size, be of a different class or kind. The Board held that where the capacities of machines are established in clearly defined sizes

Judson J. went on to point out that the Board's finding was one of fact and that the Board had heard evidence directed to the question whether these two machines were competitive, interchangeable or equivalent to such a degree as to outweigh the choice of classification by size and further that the Board did not adopt the trade classification automatically and without regard to the other evidence.

Judson J. emphasized that it was not a case of a finding being made in the absence of evidence.

Items 427 and 427a of the Customs Tariff are, as Judson

J. points out, plain and unambiguous. Item 427 covers all machinery composed wholly or in part of iron or steel, n.o.p.

Item 427a covers all machinery composed wholly or in part of iron or steel, n.o.p. of a class or kind not made in Canada.

The machine in question in this action must fall within one or the other of these items according to findings of fact. The

Tariff Board had been asked to hold that the newsprint machine in question in these proceedings, because it had a rated mechanical speed of 2,500 feet per minute, came within Item 427a as being of a class or kind not made in

Canada, and MacMillan & Bloedel urged that this item of design speed should be the determining factor in classifying whether the newsprint machine in question came under

Item 427 or 427a. The Tariff Board dealt with that submission as follows:

COUR SUPRtME DU CANADA these differences, such as the use of a vacum transfer, a longer fourdrinier, more driers, a headbox designed to withstand higher pressure, and MINISTER certain differences in the frames, bearings and rolls, are associated with the increase in design speed. Others, in the opinion of one of the Department's witnesses, are improvements which make for greater efficiency or EXCISE convenience at any speed.

Design speed does appear in all the detailed specifications entered & as exhibits; it does define one of the important characteristics of a LD. et al. newsprint machine; and it does convey information with respect to the construction and, given the width, the size and mechanical capacity of the machine. There is no overlapping of design speeds, though the design speed of one very wide machine described in the evidence is midway between 2,000 feet per minute and 2,500 feet per minute. However, as appears from the evidence, design speed indicates only one of the primary determinants of the construction and mechanical capabilities of the machine and it is not universally, or even commonly, recognized as a single measure by which the whole machine may be characterized when it is being bought, sold or advertised. We do not accept design speed as the criterion or determinant of class or kind.

This is a finding of fact and, in my opinion, there was ample evidence before the Board to justify the finding it made. It is not a case of finding having been made in the absence of evidence. I adopt the language of Judson J. in the Dominion Engineering case where at p. 656 he says:

Where are the errors in law asserted by the appellant in this case? I have already stated that in my opinion there was ample evidence before the Board to justify the finding made. This is not a case of a finding being made in the absence of evidence. Further, I am totally unable to discover that in making this classification the Board applied the wrong principle or failed to apply a principle that it should have applied. The task of the Board was to classify a piece of machineryto determine whether it was of a class or kind not made in Canada. This is a task involving a finding of fact and nothing more. It is not error in law to reject the classification by potential or actual competitive standards and to prefer classification according to a generally accepted trade classification based on size and capacity. I do not think there is any error in the Board's decision but if there were, it could only be one of fact.

In my view, Dumoulin J. erred in concluding that the Tariff Board was in error in not finding that the newsprint machine in question was machinery of a class or kind not made in Canada. The finding of the Tariff Board, being one of fact and there being no error in law, should not have been disturbed.

The respondent MacMillan & Bloedel, in its Notice of Appeal to the Exchequer Court, raised a question as to DEPR the validity of the decision of the Board as follows: That which purports to be a decision of the Tariff Board was not delivered in accordance with section 3 of the Tariff Board Act. ExcisE Subsections (1), (2) and (8) of s. 3 of the Tariff Board Act &^BLOEDEN were amended by 4-5 Eliz. II, c. 15, to read as follows: LrD. et al. 3. (1) There shall be a Board, to be called the Tariff Board, consisting of five members appointed by the Governor in Council. (2) The Governor in Council shall appoint one of the members to be Chairman and two members to be Vice-Chairmen; and at sessions of the Board the Chairman shall preside and in his absence one of the Vice-Chairmen.

(8) With respect to an appeal to the Board under the provisions of the Customs Act or the Excise Tax Act three members, including the Chairman or in his absence one of the Vice-Chairmen, may exercise the powers of the Board.

and a new subsec. (9) was added reading

(9) A vacancy on the Board does not impair the right of the remaining members to act.

It was argued before the Exchequer Court but not decided by Dumoulin J. that the decision of the Tariff Board was invalid on the ground that the Board at the time it made its decision was not properly constituted. It was alleged that there was no Vice-Chairman at the time of rendering the decision and that Mr. Leduc's appointment as Vice-Chairman had expired after the hearing but before the decision was made and that his reappointment to the Tariff Board was as a member and not as a Vice-Chairman. It was not suggested that the Board was not properly constituted at the time of the hearing. The record of the proceedings as contained in the case of appeal shows that the hearing commenced February 17, 1959, before Francois J. Leduc, Esq., Vice-Chairman, G. A. Elliott, Member, F. L. Corcoran, Member and J. C. Leslie, Secretary. The decision of the Tariff Board is contained in its declaration dated April 29, 1959, and is signed by J.

Vice-Chairman at the time of the rendering of the decision. In the absence of such evidence, it must be presumed that the Board was properly constituted throughout at all relevant times. See Brunet v. The King'.

E

The appeal should accordingly be allowed with costs throughout, and it is declared that duty is payable under Tariff Item No. 427.

Appeal allowed with costs.