Docket UT94101.1
Order UT95-2

IN THE MATTER of an application by the Provincial Tax Commissioner for review of Commission Order UT94-2.

BEFORE THE COMMISSION

on Wednesday, the 28th day of June, 1995.

Linda Webber, Chair
John L. Blakney, Vice-Chair
Deborah MacLellan, Commissioner

Order

Contents

Reasons for Order

1. Introduction

2. Discussion & Findings

3. Disposition

Order

Reasons for Order

1. Introduction

The Provincial Tax Commissioner has applied to the Commission for a review of Commission Order UT94-2. The application has been filed under Section 12 of the Island Regulatory and Appeals Commission Act, Stats. P.E.I. 1994, Cap. I-11, which reads as follows:

12. The Commission may, in its absolute discretion, review, rescind or vary any order or decision made by it, or rehear any application before deciding it.

Order UT94-2-which was issued by the Commission on November 29, 1994-relates to an appeal by Bayview Construction Ltd. against a decision of the Provincial Tax Commissioner, dated February 1, 1994. At issue in the appeal was the Provincial Tax Commissioner's use of a fixed delivery charge allowance for ready-mix concrete. In its Order, the Commission allowed the appeal, reversed the decision of the Provincial Tax Commissioner and determined, among other things, that the delivery charge allowance should be based on actual delivery costs. By application dated December 14, 1994, the Provincial Tax Commissioner applied to us for the following relief:

...that:

1. The Commission reconsider and vary its decision that the [Provincial Tax] Commissioner is precluded from making any submissions to the effect that the liability of the taxpayer to Government may be greater than that indicated in the decision of the Provincial Tax Commissioner in response to the Notice of Objection;

2. The Commission reconsider and vary its decision equating "delivery charge" with "delivery cost";

3. If the Commission, on reconsideration, rules that delivery cost is the appropriate concept, the Commission entertain submissions by the parties in respect of the appropriate amount in respect of the delivery cost [sic]. 1

The Commission entertained written submissions on the application for review from Roger B. Langille, Q.C., Counsel for the Provincial Tax Commissioner, and John A. Carr, Q.C., Counsel for Bayview Construction Ltd.

2. Discussion & Findings

In an Order dated May 2, 1990, the former Public Utilities Commission addressed the issue of whether minimum criteria should be met before it proceeded with a review or rehearing:

The Commission is of the opinion that, as a matter of law and practicality, minimum criteria must be satisfied before the Commission will proceed with a review or rehearing under s.16 of the Public Utilities Commission Act. We agree with the National Energy Board in Newfoundland and Labrador Hydro, supra, that the power to review is a discretionary and unusual one which should be exercised sparingly and that the onus is on the Applicant to satisfy the Commission that a prima facie case for review exists in the particular circumstance of any case.

What, then, constitutes, a prima facie case?

Case law appears to support the proposition that the Commission's power to review should be exercised only to correct an error by the Commission or to meet changed circumstances. Changed circumstances may encompass either a situation which has developed after the decision or where new evidence emerges which was not known or available at the time the original evidence was adduced. Changed circumstances must be material.2

These comments are applicable here. Before deciding to proceed with a review, we must satisfy ourselves that a prima facie case for review exists.

Excerpts from the Provincial Tax Commissioner's written submissions on the three matters that he seeks reviewed are set out below:

1. Is the Commissioner precluded from making any submissions to the effect that the liability of the taxpayer to Government may be greater than that indicated in the decision of the Provincial Tax Commissioner's response to the Notice of Objection?

By virtue of subsection 10(6) of the Revenue Administration Act, the Commission is given jurisdiction to affirm, vary or reverse the decision of the Commissioner. Clearly, the authority of the Commission is very broad and includes varying the assessment upwards or downwards. If the assessment may be varied upwards, then the rules of natural justice would require that each party be given an opportunity to address that question. By way of example, it is quite easy to contemplate that in an appeal involving assessments containing many different items and varying deductions, some deductions may be allowed, some may be increased and some may be decreased which may have a net effect of either increasing or decreasing the assessment overall.

The Commission suggested that allowing the Provincial Tax Commissioner to argue that the assessment should be greater would be, in effect, to allow him to appeal his own decision. That is not true. The Commissioner is given no authority to launch an appeal. The argument that the Commissioner made in this was in response to an appeal. If the Appellant has not appealed, then the Commissioner obviously cannot make a submission to the Commission that the assessment might be larger.

2. Did the Commission err in equating 'delivery charge' with 'delivery cost'?

None of the bills by the Appellant to their customers show any amount for delivery charge. The guide refers specifically and exclusively to "delivery or transportation charge". It does not refer to "delivery cost". If any amount is to be allowed at all, it is to be on account of delivery charge. In the case here, there was no such charge and therefore, it was the Commissioner's submission that the taxpayer was liable to collect tax based on the full amount of the purchase price.

In short, the substitution by the Commission of the word 'cost' in place of the word 'charge' was in error...

...

3. Should the Commission entertain submissions by the parties in respect of the appropriate amount in respect of the delivery costs?

Neither of the parties in their written submissions to the Commission indicated a basis for calculating for a determination of delivery cost of $38.64. Reference is made to that figure only once in the brief of Bayview Construction. In the Commissioner's brief it is stated, at paragraph 22:

'There is no evidence before the Commission upon which to base a decision that any other amount in respect of the delivery cost would be appropriate.'

It is correct that the Notice of Appeal filed with the Commission had as an attachment a purported calculation of delivery costs. However, that was not referred to by either of the parties in their submissions...3

On the first issue, counsel for Bayview Construction Limited, Mr. Carr, makes the following submissions:

There is a duty of procedural fairness which encompasses a right to be heard. However, the rules are different for administrative tribunals whose decisions have been appealed, which is the position of the Applicant. These tribunals have the right to argue not the merits of their decision, but only their jurisdiction and interpretation of the statute...4

On the second issue, Mr. Carr submits, in part, as follows:

The Applicant argues that the Commission erred in equating 'delivery charge' with 'delivery cost'. He argues that if the Commission accepted the [Provincial Tax Commissioner's] Guide as a valid exercise of powers under subsection 7(3), 'then the Commission must apply the terms of that Guide, one of which is that there be a delivery charge.' He argues that there was no delivery charge shown on any of the bills that the respondent sent to their customers, and therefore a delivery charge was not 'charged' at all.

However, the Guide also provides a sample Manufacturer's Invoice. This sample invoice calculates the P.S.T. to be 10% of the amount of the Normal Retail Price plus G.S.T. minus the example delivery charge of $14.53. But nowhere on this sample invoice does it show a charge for delivery, as this charge is included in the Normal Retail Price.

To use the Applicant's own argument, 'if...the Commission accepted the Guide as an exercise of power under subsection 7(3), which the Commission must have done if it was going to allow any amount of a deduction, then the Commission must apply the terms of that Guide'.5

On the third issue, Mr. Carr makes the following submission:

The Applicant has submitted that there was no evidence led as to the actual cost of delivery. As well, he has argued that he should be given an opportunity to respond to such now that the Commission has determined that the delivery charge allowed by the Commissioner was incorrect.

The Provincial Tax Commissioner argues that the calculation of delivery costs suggested by Bayview Construction Ltd. in its appeal is not evidence until properly proven in evidence or consented to by the other side.

In the Respondent's (Provincial Tax Commissioner's) Brief, it was set out incorrectly at paragraph 20 that it was his belief that there would be no evidence led as to the basis of the calculation of actual cost by the Appellant. However, the parties in this matter agreed that there would be written submissions in the primary appeal and, in fact, each party submitted evidence of the delivery charge deduction. It was suggested by the Appellant in an attachment to the Notice of Appeal filed with the Commission that the delivery charge was the actual cost of $38.64 per cubic yard and this was further referred to at page 1 of the Appellant's (Bayview Construction Ltd.'s) submissions. It was suggested by the Respondent that the delivery charge was the figure of $14.53 found in the Guide's example and he further referred to this figure in his submission.

It is the submission of the Respondent that the Applicant's submissions that there was no evidence led as to the actual delivery cost is incorrect. There was evidence led which the Applicant had the opportunity to respond to in his submissions.

At page 4 of the decision, the Commission confirms that they accepted as a submission of evidence, the attachment to the Notice of Appeal regarding the calculation of actual cost of delivery. The decision of the Commission clearly sets out at page 6 that they accepted this calculation of actual cost as evidence;

'The evidence before us, uncontested by the Respondent, is that the actual delivery cost in this case is $38.64 per cubic yard.'

The Commission states in its decision that this evidence of actual costs was uncontested. The Provincial Tax Commissioner did contest that the actual cost of the deliveries was the proper figure to use. He did not, however, contest that, if it is, in the Commission's view, the proper figure to use, Bayview Constructions Ltd.'s submission as to actual cost was correct. However, it was open to him at the time to do so.6

It will be remembered that the Commission is, in this instance, making a determination of whether a prima facie case exists for review. We are not, by these reasons, discussing the merits of a review but merely whether one should be conducted.

In the case of item 1:

1. [that] [t]he Commission reconsider and vary its decision that the [Provincial Tax] Commissioner is precluded from making any submissions to the effect that the liability of the taxpayer to Government may be greater than that indicated in the decision of the Provincial Tax Commissioner in response to the Notice of Objection;

the application is dismissed. There is nothing before us to support the contention that our comments in Order UT94-2 are in error or that circumstances have materially changed.

The Commission notes the comments of Mr. Carr relating to the restrictions imposed upon administrative tribunals whose decisions have been appealed:

[t]hese tribunals have the right to argue not the merits of their decision, but only their jurisdiction and interpretation of the statute...

However, under Section 10 (4) of the Revenue Administration Act, the Provincial Tax Commissioner has the following rights:

10. (4) On the hearing of the appeal both the appellant and the [Provincial Tax] Commissioner are entitled to appear and be heard and to submit further evidence.

This section allows the Provincial Tax Commissioner to appear and present evidence with regard to its own decisions, but not to cross-appeal based on some argument that it had proceeded upon a wrong principle in making the original assessment. This is not to say that the Provincial Tax Commissioner may not present evidence of a wrong arithmetic calculation or other clerical error, or that the Provincial Tax Commissioner may not argue that if the principle used by it is overturned, then there are other consequential alterations necessary to the original assessment.

In this case, we believe the arguments of the Provincial Tax Commissioner are in the nature of a cross-appeal and therefore should not be considered.

In the case of item 2:

2. [that] [t]he Commission reconsider and vary its decision equating "delivery charge" with "delivery cost";

the application is dismissed. The Commission is not prepared to accept the argument that our use of the word "cost" in place of the word "charge" was in error when the Provincial Tax Commissioner's own submissions to us in the initial appeal make reference to the words "cost of delivery of the goods". In particular, at page 3 of the Provincial Tax Commissioner's written submission of August 30, 1994, the following words are found:

12. Sub-issues are:

(a) In determining the amount of tax that the Appellant should have collected and remitted to Government, is the Appellant entitled to deduct from the sale price of the goods an amount on account of the cost of delivery of the goods.

(b) If the Appellant is entitled to deduct an amount on account of the cost of delivery, is that amount of $14.53 per cubic yard of concrete or some other amount.

The Commission notes as well that, during the initial appeal, no argument was made that a charge on the face of the invoice (as opposed to the actual cost of delivery) was at issue. The Provincial Tax Commissioner is not entitled to raise this issue as a new ground now.

In the case of item 3:

3. [that] [i]f the Commission, on reconsideration, rules that delivery cost is the appropriate concept, the Commission entertain submissions by the parties in respect of the appropriate amount in respect of the delivery cost [sic].7

the application for review is granted. An analysis of the submissions on this issue has led us to the conclusion that a prima facie case for review does exit.

In our view, the Provincial Tax Commissioner was, during the course of initial appeal, of the impression that, if the issue of the calculation of the delivery cost or charge became an issue with the Commission, he would be permitted to adduce further evidence.

As a result, it appears to the Commission that a procedural error may have resulted in our reaching a conclusion without the benefit of complete submissions on all issues. We will, therefore, proceed with a review of Order UT94-2 on the issue of the calculation of the delivery charge. The parties will be expected to present evidence on these matters at a date to be fixed.

In summary,

1. The application for review of Commission Order UT94-2 on comments contained therein that the Provincial Tax Commissioner is precluded from making any submissions to the effect that the liability of the taxpayer to Government may be greater than that indicated in the decision of the Provincial Tax Commissioner is dismissed;

2. The application for review of Commission Order UT94-2 on the issue of the Commission equating delivery charge with delivery cost is dismissed; and

3. The application for review of Commission Order UT94-2 on the issue of the calculation of the delivery cost is granted.

3. Disposition

An Order will therefore issue.

Order

UPON the application of the Provincial Tax Commissioner for a review of Commission Order UT94-2;

AND UPON reading and considering written submissions from Roger B. Langille, Q.C., Counsel for the Provincial Tax Commissioner, and John A. Carr, Q.C., Counsel for Bayview Construction Ltd.;

NOW THEREFORE, for the reasons given in the annexed Reasons for Order;

IT IS ORDERED THAT

1. The application for review of Commission Order UT94-2 on comments contained therein that the Provincial Tax Commissioner is precluded from making any submissions to the effect that the liability of the taxpayer to Government may be greater than that indicated in the decision of the Provincial Tax Commissioner is dismissed;

2. The application for review of Commission Order UT94-2 on the issue of the Commission equating delivery charge with delivery cost is dismissed; and

3. The application for review of Commission Order UT94-2 on the issue of the calculation of the delivery cost is granted.

DATED at Charlottetown, Prince Edward Island, this 28th day of June, 1995.

BY THE COMMISSION:

Linda Webber, Chair

John L. Blakney, Vice-Chair

Deborah MacLellan, Commissioner

NOTICE

Section 12 of the Island Regulatory and Appeals Commission Act reads as follows:

12. The Commission may, in its absolute discretion, review, rescind or vary any order or decision made by it or rehear any application before deciding it.

Parties to this proceeding seeking a review of the Commission's decision or order in this matter may do so by filing with the Commission, at the earliest date, a written Request for Review, which clearly states the reasons for the review and the nature of the relief sought.

Sections 13.(1) and 13(2) of the Act provide as follows:

13.(1) An appeal lies from a decision or order of the Commission to the Appeal Division of the Supreme Court upon a question of law or jurisdiction.

(2) The appeal shall be made by filing a notice of appeal in the Supreme Court within twenty days after the decision or order appealed from and the Civil Procedure Rules respecting appeals apply with the necessary changes.

1 Excerpt from Application dated December 14, 1994 filed by Roger B. Langille.

2 Public Utilities Commission Order E90-8, pp. 13-14.

3 Written submission of Roger B. Langille, dated December 21, 1994, pp. 1-3.

4 Written submission of John A. Carr, dated January 4, 1995, p.3.

5 Written submission of John A. Carr, dated January 4, 1995, pp. 4-5.

6 Ibid, pp. 7-8.

7 Excerpt from Application dated December 14, 1994 filed by Roger B. Langille.