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Citation: 2003TCC661
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Date: 20030930
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Docket: 2002-4619(GST)I
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BETWEEN:
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FOREVER DANCE INC.,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Bonner, J.
[1] This is an appeal from an
assessment of tax and penalty under Part IX of the Excise Tax
Act (the "Act"). The assessment relates to
the period January 1, 1999 to December 31, 2000.
[2] During the period, the Appellant
operated a school providing dance instruction to students. The
assessment under appeal is based on the premise that the supply
of such instruction was a taxable supply. The Minister assessed
tax in the amount of $14,932.44 in respect of the supply, allowed
an input tax credit and imposed penalty and interest.
[3] It is the Appellant's position
that the supply was an "exempt supply" within the
definition of that term in s. 123(1) of the Act because it
was a supply included in Schedule V to the Act.
[4] A brief outline of the statutory
chain may be helpful:
(a) Section 165 of the
Act imposes tax in respect of a taxable supplies.
(b) The term taxable supply is defined
in s. 123(1) as a supply that is made in the course of a
commercial activity.
(c) Commercial activity is defined in
s. 123(1) to mean a business carried on by a person except to the
extent that the business involves the making of exempt
supplies.
(d) Exempt supply is defined in s.
123(1) as a supply included in Schedule V.
[5] The Appellant relies on s. 8 of
part III of Schedule V. Section 8, in the form
applicable to the early part of the period covered by the
assessment read:
"A supply, other than a zero-rated supply, made by a school
authority, vocational school, public college or university of a
service of instructing individuals in, or administering
examinations in respect of, courses leading to certificates,
diplomas, licences or similar documents, or classes or ratings in
respect of licenses, that attest to the competence of individuals
to practise or perform a trade or vocation where
(a) the document,
class or rating is prescribed by federal or provincial
regulation;
(b) the supplier is
governed by federal or provincial legislation respecting
vocational schools; or
(c) the supplier is
a non-profit organization or a public institution."
[6] Section 8 was amended in 2001
applicable, broadly speaking, to supplies the consideration for
which became due after October 4, 2000. In its
post-amendment form it read:
"A supply, other than a zero-rated supply, made by a
government, a school authority, a vocational school, a public
college or a university of a service of instructing individuals
in, or administering examinations in respect of, courses leading
to certificates, diplomas, licences or similar documents, or
classes or ratings in respect of licences, that attest to the
competence of individuals to practise or perform a trade or
vocation, except where the supplier has made an election under
this section in prescribed form containing prescribed
information.
(a) to supplies for
which all of the consideration becomes due after October 4, 2000
or is paid after that day without having become due; and
(b) to any supply
for which consideration becomes due or is paid on or before that
day if no amount was charged or collected as or on account of tax
under Part IX in respect of the supply on or before that day,
except that, with respect to that supply, s. 8 of Part III of
Sch. V shall be read without reference to the words "except
where the supplier has made an election under this section in
prescribed form containing prescribed
information"."
[7] The dispute in this case centres
on the question whether the Appellant operated a vocational
school. That term is defined in s. 1 of Part III of
Schedule V as follows:
"1. In
this Part, ...
"vocational school" means an organization
that is established and operated primarily to provide students
with correspondence courses, or instruction in courses, that
develop or enhance students' occupational skills."
The French version reads:
« 1. [Définitions] - Les
définitions qui suivent s'appliquent à la
présente partie.
« école de formation
professionnelle » Institution établie et
administrée principalement pour offrir des cours par
correspondance ou des cours de formation qui permettent à
l'étudiant d'acquérir ou
d'améliorer une compétence
professionnelle. »
[8] Thus the focus of the dispute is
whether the evidence shows that the Appellant's school was
established and operated primarily to provide instruction in
courses that develop or enhance the students' occupational
skills.
[9] At the hearing of the appeal
evidence was given by one witness, Brandie Bellavance,
president of the Appellant. She testified that the age of
students upon arrival at the school ranges from three to eighteen
years. Students are placed in courses based on their age and
capabilities. The program at the school is not directed
exclusively toward the development of the student's skills in
dancing. It is also directed toward the development of the
student's knowledge and skills in other areas required to
qualify the student as a teacher of dancing. The progress of
students is measured against grade levels established by the
British Association of Teachers of Dance (the Association). The
Association appears to serve the function of a professional
standards body. Upon reaching the age of sixteen students become
eligible to apply to take an examination for a student
teacher's certificate issued by the Association. In order to
qualify a candidate must not only possess skill as a dancer. The
student must also demonstrate knowledge of steps, movements,
anatomy and the accommodation of the physical limitations of
individual dancers.
[10] After further study and progress
students may take examinations for certificates attesting to
progressively higher levels of qualification. At the highest
level the student receives a teacher's certificate from the
Association. A relatively small number of students reach this
level. However those who earn certificates at lower levels are
able to use their certificates as evidence of qualification as a
teacher of dancing. Ms. Bellavance indicated that parents of
prospective dance students will normally seek proof of the
qualifications of instructors and that certificates issued by the
Association are recognized on in such cases. She emphasized that
the focus of the school operated by the Appellant is on the
education of teachers. She added, during cross-examination, that
training at the school is also an "enhancement" for
professional dancers.
[11] Counsel for the Respondent directed his
argument to the primary objective or goal of the school. He
pointed out that, in order to satisfy the statutory definition of
the term vocational school, the organization must not only be
established but also be operated primarily to provide instruction
in courses that develop or enhance the students' occupational
skills. Counsel proceeded to argue that, because the great
majority of students do not reach the highest (teacher's
certificate) level, the operation of the school is directed
primarily to the majority of students who ultimately settle for
certificates of attainment at a lower level. Thus far I agree.
However the argument seemed to assume that courses directed
toward the training of students who seek certificates of
qualification at lower level are not directed toward the
development or enhancement of occupational skills. Here I
disagree. In my view the language of the statutory definition
encompasses the provision of instruction in courses that develop
occupational skills at all levels. It is clear from the evidence
of Ms. Bellavance that the Appellant's school provides
instruction in courses which develop the occupational skills of
potential teachers not only at the "teachers
certificate" level but also at lower levels. Ms. Bellavance
indicated that persons possessing lower level certificates
typically find employment as instructors in dance programs
operated by schools and community parks and recreation
organizations. The assessment therefore appears to have been
based upon a misapprehension of the nature of the courses taught
by the Appellant.
[12] The appeal will therefore be allowed
and the assessment referred back to the Minister for reassessment
on the basis that the tax, penalty and interest were not
exigible.
Signed at Toronto, Ontario, this 30th day of September
2003.
Bonner, J.
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