http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/65405/index.do
Construction S.Y.L. Tremblay Inc. v. The Queen (December 17, 2013 – 2013 TCC 406) was a GST/HST appeal dealing with the Minister’s disallowance of ITC’s in respect of six suppliers:
[4] The first issue to address in this appeal is whether the appellant was eligible for ITCs of $33,179.09 in the calculation of its net tax for the period in question. As underlying issues, the Court must determine:
(i) whether the appellant truly acquired from the six dubious suppliers the supplies for which it claimed ITCs of $33,179.09 in the calculation of its net tax;
(ii) whether the invoices allegedly prepared by the appellant’s dubious suppliers meet the requirements set out in the ETA and the
Input Tax Credit Information (GST/HST) Regulations (the Regulations).
The second issue to address in this appeal is whether the Minister was correct in imposing the penalty provided under section 285 of the ETA.
The appellant operated its business without any employees other than its owner:
[5] Mr. Tremblay essentially reported the following:
(i) during the period in question, he was the sole officer and director of the appellant, which has always operated a construction business;
(ii) during the period in question, the appellant mainly repaired single-family residences that were damaged by fire or flood. The appellant’s services were mainly retained by various insurance companies. Mr. Tremblay described the various steps resulting in a contract with an insurance company after a disaster: the insurance company sends a disaster expert to the site of the disaster. The disaster expert retains the services of an estimator who establishes the specifications, giving a detailed quote of the work to be completed with an estimate of the cost. Mr. Tremblay conducted his own estimation of costs. Then, Mr. Tremblay and the disaster expert negotiated the details of the cost and the work to perform, using the specifications established by the estimator. In my opinion, the specifications (once an agreement was reached on the cost) constituted the written contract between the appellant and the insurance company. Once the agreement was entered into, the appellant could begin carrying out the work according to the specifications.
(iii) during the period in question, the appellant did not have any employees. All the work it agreed to execute was contracted out to sub‑contractors;
…
The court found that the receipts relied upon by the appellant were deficient and dismissed the appeal, upholding the imposition of penalties:
[23] In this case, the evidence showed that the amount paid for each of the supplies by the dubious suppliers was $150 or more. As a result, the invoices the appellant submitted to evidence were to contain a description sufficient to identify each supply, among other things. Since the purpose of paragraph 169(4)(a) of the ETA and the Regulations is to protect the consolidated revenue fund against both fraudulent and innocent incursions, I feel that a description is sufficient when it allows the Agency to identify the work performed by the suppliers. In my opinion, invoices the appellant submitted to evidence cannot meet the condition set out at sub-paragraph 3(c)(iv) of the Regulations unless they contain the following information:
(i) the exact place the supplier in question rendered services. By exact place, I mean the street address where the work was carried out;
(ii) the exact nature of the supply. In this case, the invoices could have referred to the estimates that, I repeat, described the exact nature of the work to be carried out and the payment conditions.
[24] My review (see appendices) of all the invoices submitted to evidence led me to find that none of them meet section 169 of the ETA and the Regulations because in each, at least one mandatory element of information is missing. As a result, the appellant cannot claim the ITCs related to these invoices.
[25] The following question must now be answered: did the Minister meet his burden pursuant to section 285 of the ETA? Since I am convinced that the appellant did not truly acquire the supplies for which it claimed ITCs in its net tax calculation, the Minister met his burden of proof as set out in section 285 of the ETA. I note that the appellant did not present any arguments on this.
[26] For all these reasons, the appeal is dismissed.