SNF L.P. v. The Queen

SNF L.P. v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2016-01-28
Neutral citation
2016 TCC 12
File numbers
2013-1207(GST)G
Judges and Taxing Officers
Gerald J. Rip
Subjects
Part IX of the Excise Tax Act (GST)
Decision Content
Docket: 2013-1207(GST)G
BETWEEN:
SNF L.P.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 12, 13, 14 and 15, and September 28, 29
and 30, 2015, at Montreal, Quebec.
Before: The Honourable Justice Gerald J. Rip
Appearances:
Counsel for the Appellant:
Louis Tassé
Rachel Robert
Counsel for the Respondent:
Catherine-A. Boisvert
Louis Riverin
JUDGMENT
The appeal from the assessment made under Part IX of the Excise Tax Act, notice of which is dated June 7, 2011 and bears no number, in respect of the period from January 1, 2009 to September 30, 2010, is allowed with costs and the appellant is entitled to the Input Tax Credits claimed, less the amount in respect of purchases from Ms. Bergeron and the purchase from Mr. Dubé‑Vanier on September 17, 2010. The quantum of the penalty assessed pursuant to section 285 of the ETA will be cancelled save and except for that portion attributable to the ITCs claimed for supplies acquired from Ms. Bergeron. Interest will be reduced accordingly.
Signed at Ottawa, Canada, this 29th day of January 2016.
"Gerald J. Rip"
Rip J.
Citation: 2016 TCC 12
Date: 20160201
Docket: 2013-1207(GST)G
BETWEEN:
SNF L.P.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Rip J.
Introduction [1] The issue in this appeal is whether, or to what extent, a purchaser of goods who pays the required Goods and Services Tax ("GST") under Part IX of the Excise Tax Act ("ETA" or "Act") to a person who is registered as a supplier, but may not be a supplier, is entitled to input tax credits ("ITCs") if the purported supplier, among other things, does not remit the GST to the Receiver General. And if the purchaser in such circumstances is not entitled to ITCs, is it entitled to a rebate of tax paid in error? (Section 261 and subsection 296(2.1) of the ETA.)
[2] In short, the appellant, SNF L.P. ("SNF"), carries on a business of recycling metals purchased from various sellers of metal, each having registered for and received a GST and a Quebec provincial sales tax ("PST") number. The appellant paid twelve identified sellers for metal it purchased, including GST and PST. However, apparently unknown to the appellant, during the period from January 1, 2009 to September 30, 2010 these sellers did not remit the GST on the sales of the metal to the government. Revenu Québec denied the appellant ITCs of $507,329.32 with respect to these sales, and also assessed a penalty of $126,832.33 pursuant to section 285 of the ETA as well as both arrears and refund interest of $33,929.11, the whole aggregating $668,090.76.
[3] The Crown's position is, among other things, that during the period of this appeal the sellers‑suppliers in question did not have the resources to make the actual supplies, that the names of the suppliers on the invoices for the supplies were not the names of the real suppliers, that they were "prête‑noms"[1] for the actual suppliers. At trial the Crown conceded that the invoices were not "invoices of convenience" and did not question that SNF actually did purchase the supplies described on the invoices for the price indicated on each invoice.
[4] Each of the 12 suppliers was registered with a GST number when the supply was made. Each supplier was paid in cash, which, Mr. Herbert Black, the principal of SNF, declared, was the "norm" in the industry and is usually the choice of the supplier.
FACTS [5] SNF is in the business of recycling industrial, commercial and residential metals (both ferrous and non‑ferrous), which it sells in Canada and elsewhere. The appellant's principal place of business is located in Laval, Quebec. SNF was acquired by American Iron and Metal Company Inc. ("AIM") in 2008 and at the date of the trial was controlled by AIM. AIM was described by its president, Herbert Black, as the largest, or second largest, recycler of scrap metal in Canada: AIM operates 70 scrap yards in North America, has over 18,000 suppliers and in 2010 had sales of $1.8 billion and made purchases of $700,000,000. The appellant's own sales in 2010 were $62,000,000. Mr. Black traced the history of AIM and how he made SNF into a profitable business. He stated that he himself is not involved in the day‑to‑day operations of SNF.
[6] SNF obtains scrap from four sources: (1) industrial production or manufacture of goods; (2) old cars and related products; (3) demolition of buildings; and (4) "bric‑à‑brac", that is, for example, people cleaning out their garages and disposing of metals.
[7] When a person, a supplier, brings scrap to the mill, SNF prepares an invoice (to itself) and pays the person for the scrap plus GST and PST. The reason SNF prepares its own invoices is that most suppliers themselves do not provide an invoice. Mr. Black stated that SNF relies on its own prepared invoices for the correct weight of material and the price that SNF will pay. Before paying a supplier, SNF will check if it has valid GST and PST numbers.
[8] Mr. Black challenged the respondent's view that it is necessary to have resources such as a scrap yard, trucks and employees to be in the scrap metal business and make supplies. He also complained of Revenu Québec's insistence that SNF make greater inquiries about its suppliers.
[9] In his evidence in chief and in cross‑examination, which took the better part of a day, Mr. Black relaled his history in the scrap metal business. He explained that a scrap metal dealer does not have to have a yard to operate. Some people "work out of an office and buy and sell material all over the world" without yards. He recalled someone working out of the old Mount Royal Hotel lobby buying and selling scrap over a pay phone. Mr. Black added that a dealer can use SNF trucks to pick up and deliver scrap for sale. He himself had part ownership in a company, Cardinal Metal, that has no scrap yard but is in the business; the company buys scrap at various yards and sells the scrap to AIM. As Mr. Black explained it: "Sometimes you call a guy who has a yard but he has no trucks. Sometimes you have a guy who has trucks but he has no yard. Sometimes you have guys who have no trucks and no yards."
[10] Mr. Black complained that AIM and its related companies have "no resources [to determine the legitimacy of a supplier] without cooperation from the tax department to find out if [a] . . . company was paying their taxes properly or doing what they were supposed to do . . . " AIM and its related companies have a system in place to ensure they are dealing with legitimate suppliers. Out of over a thousand suppliers, transactions with only 12 suppliers are being questioned by the tax authorities. He stated that he has gone to Revenu Québec to report a person going bankrupt with one company and starting a new company also selling scrap. He also reported, he said, people constantly changing company names. He insisted that he even suggested paying the GST and PST on purchases directly to Revenu Québec but this offer was not considered. He also remarked that if he knows of a "prête‑nom" operating in the business, he does not purchase from that person.
[11] SNF also keeps watch to ensure it does not purchase stolen materials, Mr. Black testified. If, for example, brand new ingots are being sold, SNF concludes they were stolen and does not purchase them.
[12] Respondent's counsel queried Mr. Black with respect to litigation in Superior Court undertaken by AIM against several former employees of SNF, as well as against corporations in which they may have had an interest, for fraud at its facilities in Lévis, Quebec and other locations. The fraudulent transactions apparently took place before AIM acquired SNF.
[13] One of the defendants was Daniel Picard, erstwhile general manager in Lévis. The defendants were sued by AIM for, among other things, fraud and theft, including fiscal fraud and false deliveries of metal in 2003, involving "prête‑noms" corporations. Four defendants, including one Daniel Picard and his son Steve, were accused of issuing false purchase invoices to several companies acting as "prête‑noms" for metal delivered or "allegedly delivered" by a corporation, Nittolo Metal (2000) Inc., the total amount paid being "at least $10,624,608.59", of which $499,964.28 was GST and $745,946.46 was PST, none of which was remitted to the proper fiscal authorities. In the pleadings, AIM named five corporations involved in the sales and the people for whom each "prête‑nom" was acting.
[14] One of the purported suppliers acting as a "prête‑nom" in Lévis was "Impériale", which was using the GST and PST numbers of Imperial Oil Ltd. and used a post office box as its postal address.
[15] Mr. Black strongly denied that the Lévis scheme could be compared to the situation at bar and that, therefore, SNF ought to have been aware of it. He questioned the Crown's claim that as a result of the Lévis situation in which a fictitious invoice scheme had been in place earlier, SNF ought to have been more alert and cautious concerning the 12 suppliers. In Lévis, he said, false GST and PST numbers were being used. At bar, GST and PST numbers were given to the purported suppliers and any verification with the government would have confirmed that any given supplier did have valid tax numbers. Also, at bar, there was no collusion by SNF employees. Also, neither SNF nor anyone at SNF could or did benefit from the actions of the 12 suppliers.
[16] When Mr. Black discovered what was taking place in Lévis, he recalled, all the "15 people . . . were fired in the same day" and the government was informed. Apparently what Mr. Black referred to as a "scam" had begun before AIM purchased SNF. He explained that Mr. Picard had been fired earlier by SNF, before AIM owned SNF, and when AIM hired Mr. Picard later on, he had no idea of Picard's history. Later, AIM hired Sylvain Ouellette, who, Mr. Black testified, had a scheme in concert with Mr. Picard. In all, Mr. Black estimated he was "robbed" of $27.5 million "over a period of six, seven years" not only through false invoices but also through gas coupons and, as AIM's pleadings state, false expense account claims, theft of cash, and charging for personal renovations and a multitude of personal expenses. The police also were called by SNF to investigate what had transpired.
[17] I infer that the evidence respecting this activity was presented to demonstrate that SNF had a history of complicity in fraudulent schemes and the supplies acquired from the 12 suppliers were nothing new. I agree with Mr. Black that the facts at bar do not resemble what took place in Lévis.
APPELLANT'S EVIDENCE [18] The twelve suppliers, referred to in the appellant's pleading as "Contentious Suppliers", and the ITCs claimed and disallowed are as follows:
Name of supplier
ITCs claimed and disallowed
(a) 9165‑4384 Québec Inc. (Robert McDuff)
$ 125,191.96
(b) 9222‑1043 Québec Inc. (Patrick Parent)
17,761.52
(c) Alain Deroy, Recyclage de métaux
16,289.46
(d) Alexandre B. Riel, Recyclage de L'Épiphanie
35,875.62
(e) Jérémie Sergerie, Recyclage de L'Épiphanie
32,929.77
(f) Éric Dubé Vanier
112,655.42
(g) Benoît Scott, Métallique Ben
22,374.77
(h) Noël Nicolas
30,558.39
(i) Patrick Scott enr.
9,914.57
(j) Pierre Daraiche
53,122.58
(k) Réjean Trudeau
27,723.06
(l) Valérie Bergeron
13,545.67
[19] Éric Roussel is the manager of the Logistics/Transportation Division at AIM. He is responsible for everything related to the transportation of containers, for the scales, the truck scales and car crushing. He has worked for SNF since 2004 and held many positions before becoming the manager of Logistics/Transportation.
[20] SNF, Mr. Roussel stated, purchases all types of metal, ferrous and non‑ferrous, magnetic and non‑magnetic for recycling. Brass and copper, for example, are non‑ferrous metals. Non‑ferrous metals, according to Mr. Roussel, have greater value then ferrous metals. The value of metal, he said, depends on its quality, including the type of alloys in the metal. Invoices prepared by SNF sometime refer to Number 1 and Number 2 copper for example. Number 1 copper is clean copper; Number 2 copper may be contaminated (e.g. with paint or other impurities) and is of a lower quality. The value of metals also fluctuates based on the market.
[21] The majority of the metal provided to SNF by the 12 suppliers was non‑ferrous, Mr. Éric Roussel testified. He stated that SNF purchases approximately 45,000 tons of non‑ferrous metal, mainly copper, in a year compared to purchases of 550 tons of ferrous metal. He estimated that on any given day there are at least 200 deliveries to SNF.
[22] Mr. Roussel divided SNF's suppliers into four groups: pedlars, pedlar‑dealers, dealers and industrial accounts. Each type of supplier is dealt with differently. The pedlar is a person who comes in off the street and brings supplies to SNF that may originate from cleaning a garage or from junk collected on the street. He is asked for photo identification, usually a driver's permit, his address and his social insurance number. A pedlar is not in the scrap business and is not registered for GST purposes. A register of authorized persons is maintained for pedlars, however.
[23] Pedlar‑dealers have a better appreciation of metal and bring larger quantities to SNF. They may have contacts in the business and secure scrap from building demolitions, for example. They are registered for GST purposes.
[24] Dealers usually have a scrap yard of their own, an area where they purchase and store scrap and keep containers and trucks. They may make deliveries to SNF with their own container trucks or SNF may pick up scrap at a dealer's site and deliver to its own premises. Of the 12 suppliers, only two, Alexandre B. Riel and Jérémie Sergerie, are dealers; the others are pedlar‑dealers, according to Mr. Roussel.
[25] An industrial supplier may be a railway, for example, or other business in an industry that uses various metal products and sells any excess to SNF.
[26] Container trucks bringing material to SNF's yard may be owned by SNF or the supplier, or borrowed or rented by the supplier from third parties. If it is an SNF container, the supplier is charged for its use. In such a case, the supplier would phone SNF and arrange a pick‑up for delivery to SNF.
[27] A supplier would have opened an account with SNF before it could sell material to SNF. On opening an account, Mr. Jean Masson, a buyer for SNF, would usually meet the prospective supplier and obtain the supplier's tax numbers, both GST and PST, usually by receiving a copy of a Revenu Québec stamped receipt of an application for registration for GST and PST, including a registration number, address and [translation] "as many details as possible to open the account". He would then refer the application for a new account to head office, that is, AIM's head office, for approval.
[28] The supplier usually would telephone Mr. Masson to negotiate a price, which depended on the quality of the metal, whether it was ferrous or non‑ferrous, and, of course, the market price at the time. Quantity may also be factored into the quoted price. Mr. Masson estimated that in 2009‑2010 he himself would get 40 calls a day from 100 to 120 suppliers, mainly pedlar‑dealers and dealers, selling about $30 million worth of scrap a year. He would process suppliers' accounts. Once a price was negotiated, it was valid for a limited number of hours. Mr. Masson would enter the details of the proposed transaction in the appellant's electronic system.
[29] The process of how a supplier would approach AIM to sell metal, including the weighing of the metal, the issuance of a scale ticket, the issuance of an invoice and payment in cash by AIM, was similar to the procedure applied by SNF in the appeal at bar.
[30] Mr. Masson is not present on delivery of the material nor is he involved in preparation of the invoice. His responsibilities end when he hangs up the telephone after negotiating the price of the delivery. The head office does not require any specimen signatures when an account is opened and Mr. Masson is not required to secure from the supplier a list of persons who will make deliveries on its behalf or who are authorized to receive payment in cash for the supplier.
[31] SNF has at least two scales to weigh scrap being sold to it. Nancy Bouliane was in charge of SNF's main or large scale. She supervises the weighing of the trucks as they enter. When a truck arrives at the scale, the driver informs her who the supplier is. If the supplier is already a client and registered, identification is not requested. Her main job is to prepare a scale ticket for suppliers. She cannot always confirm, on delivery of the scrap, that it is the same scrap as that with respect to which the supplier negotiated with Mr. Masson, and in such a case she would get in touch with Mr. Masson.
[32] A scale ticket contains the contract number, the date of the transaction and the name of the supplier; it may contain the licence plate number of the truck, the material delivered, the gross weight of the material and the truck, and the weight of the empty truck without the material, and indicate whether the truck is an AIM truck or a supplier's vehicle. There is an adjustment for any waste in the truck such as dirt, snow, ice, or water. Ms. Bouliane says she checks the tax numbers for each invoice. She issues the invoice for SNF but verifies neither the signature nor identity of the person acting for the supplier. She would ask for a pedlar's and new client's identification.
[33] Ms. Bouliane stated that she knows nine of the 12 suppliers, that they made the disputed deliveries themselves and that it was they who received payment. This is not in accord with Mr. Masson's evidence that some suppliers had others make deliveries. She does not know Patrick Parent, Patrick Scott and Réjean Trudeau.
[34] Michel Belisle is an attendant on the non‑ferrous scale. He is not involved in billing, payment or negotiations. Mr. Belisle stated that the driver or supplier would hand him a scale ticket prepared by Ms. Bouliane. Mr. Belisle weighs the scrap on his scale and the truck is weighed on the large scale. If there is a difference between the two scales, the material is reweighed. If there is a dispute as to quality, Mr. Belisle is expected to make a decision. If everything is in order, Mr. Belisle enters the information on the computer and issues a material purchase ticket identifying the customer, i.e. the supplier, and indicating the supplier's address, the date of transaction, the payment amount, the GST number, the PST number, the contract number, the vehicle, the commodity, the weight, the unit price and the total price and whether payment is by cheque or in cash at an ATM machine. The material purchase ticket is the invoice.
[35] Information on scale tickets may vary. For example, a scale ticket issued to Jérémie Sergerie includes the truck registration number and indicates whether the material was delivered in the supplier's truck or an AIM truck. This is not indicated on a scale ticket issued to Éric Dubé Vanier. The former scale ticket consists of two pages and indicates the gross weight ("full truck") on page 1 and both the gross weight and the weight of the empty truck on page 2 to determine net weight. The adjustment for impurities or contaminants is on page 2. The scale ticket for Mr. Dubé Vanier describes the truck licence number or driver as "Rouge" and describes the metals and their weight, as well as the contaminant factor, all on one page. On several other invoices, the driver is referred to by a nickname, Megadeth, because someone at SNF thought the driver reminded him of a member of a heavy metal band known as "Megadeth". Ms. Bouliane identified this person as Alain Deroy although, according to Mr. Roussel, Mr. Deroy was never asked to identify himself because he made deliveries for several suppliers, including Pierre Daraiche.
[36] Mr. Masson was questioned concerning his knowledge of each of the 12 suppliers when each became a client of SNF. He acknowledged that he met Robert McDuff, Patrick Parent, Éric Dubé Vanier, Benoît Scott, Noël Nicolas, Pierre Daraiche and Valérie Bergeron. He knew of Alexandre Riel. He apparently knew Jérémie Sergerie.
[37] Mr. Masson did not recall meeting Alain Deroy, Patrick Scott and Réjean Trudeau.
[38] According to Mr. Masson, Robert McDuff himself delivered metals to SNF. Mr. Parent, said Mr. Masson, also delivered material himself or had a person named Sylvain deliver for him. Sylvain also delivered material to SNF on behalf of Mr. Dubé Vanier, stated Mr. Masson. Mr. Dubé Vanier also delivered material himself. Although Mr. Masson did not know Alain Deroy. Mr. Deroy received cash payments aggregating $375,000 from SNF during a five‑month period.
[39] Alexandre Riel, Mr. Masson recalled, worked with the same Luc Pimparé who was associated with Mr. Sergerie. It was Mr. Pimparé who sent the documents required by SNF for Mr. Riel. The business address of Recyclage de l'Épiphanie was the same address as that of Mr. Pimparé and Jérémie Sergerie; they purportedly used the same yard.
[40] Mr. Benoit Scott and Mr. Pierre Daraiche delivered material themselves as did Mr. Noël Nicolas, although Mr. Nicolas frequently had another person deliver for him.
[41] Ms. Valérie Bergeron was introduced to Mr. Masson by Mr. Robert McDuff. On the opening of her account, Robert McDuff informed Mr. Masson that it would be he who would call Mr. Masson to negotiate the sales and it would be he who would deliver the scrap for Ms. Bergeron. I note that Ms. Bergeron began to transact business with SNF at the time when the GST and PST numbers registered to Mr. McDuff ceased to be valid.
[42] At trial, there were various invoices to the same supplier that contained apparently different or illegible signatures. Catherine Legault also works at the scales with Ms. Bouliane; she was not a witness. However, Ms. Bouliane testified that Ms. Legault issued for a supplier several invoices that had different signatures, none of which correspond to that of the supplier. In particular, respondent's counsel pointed out to her two invoices issued in the name of Éric Dubé Vanier, each with different purported signatures of Mr. Dubé Vanier. Similarly, purported signatures of Mr. Pierre Daraiche on three invoices were different; no signature was verified. It appears that SNF's main search was to ensure that the GST registration number was that of the purported supplier.
CROWN'S EVIDENCE [43] The auditors of Revenu Québec, Daniel Fugère, Sylvie Jasmin, Caroline Tanguay, Jean‑Yves Barrette, Sylvie Larocque, Vivianne Abd‑el Malek, Caroline Marcil, Martin Delisle and Sophie Claveau, who worked on the files of the 12 suppliers reviewed information available to the public as well as information in the Revenu Québec files that are of a confidential nature, including, I infer, income tax returns of the 12 suppliers. The following is a summary of evidence by these Revenu Québec auditors with respect to each of the 12 suppliers, some of the evidence having been mentioned earlier in these reasons:
i) 9165‑4384 Québec Inc. ("4384") (12 invoices in evidence) The GST registration number for 4384 was issued on July 1, 2006 and was cancelled April 19, 2011. SNF created an account for 4384 on March 10, 2009 and 4384 made sales to SNF during the period from March 10, 2009 to August 18, 2010.
Mr. McDuff appears to be the sole shareholder of the corporation.
During the 19‑month period at issue, 4384 made supplies to SNF in the amount of $2,503,839.20. SNF paid GST on these supplies. All supplies were paid in cash. On some days, 4384 made more than one delivery. 4384 owned a few – the number is not in evidence – commercial trucks.
According to Mr. Fugère and Ms. Jasmin, who audited both Mr. McDuff and 4384, Mr. McDuff had not filed any personal income tax return with Revenu Québec for the years 2006 to 2009 and 4384 did not file any income tax and GST/PST returns. Mr. McDuff, they add, filed for bankruptcy on two occasions before 2006. There is no record of discharge.
Twelve invoices were produced at trial. On the scale tickets the drivers were identified as "Ben", "Mc Duff", "Bleu", "Delvan" and another as "Lavigne". The tax numbers are not included on ten of the invoices produced but are stated on the other two invoices. The signatures on the invoices varied and included "McDuff", "René Paré", "Dalpé" and "Marie‑Michelle Ouellette".
4384 did not report to the Registraire des entreprises of Quebec that it had any employees.
ii) 9222‑1043 Québec Inc. ("1043") (5 invoices) The GST registration number for 1043 was issued on April 21, 2010 and was cancelled December 21, 2010. SNF created an account for 1043 on September 1, 2010 and purchased supplies from 1043 during September 2010.
On receipt of 1043's application for a GST/PST registration a Revenu Québec official apparently wrote on the application [translation] “risky registration”.
The shareholder of 1043 is Patrick Parent. 1043 carried on its business as Recyclage Inter‑Rives, as well as under its own name.
In one month during the period in issue, 1043 sold to SNF supplies aggregating $355,230.40, all paid for in cash. Deliveries to SNF were made by "Sylvain".
1043 did not own any vehicle registered with the Société de l'assurance automobile du Québec ("SAAQ"), nor did it hold any commercial recycling permit. 1043 did not declare to the Registraire des entreprises that it had any employees. The address of 1043 was a single‑family residential property, the owner of which is unknown.
1043's address indicated on SNF invoices could not be found, according to Ms. Tanguay.
No Quebec income tax return or GST/PST tax returns were filed by 1043 for any period in issue. Mr. Parent also failed to file income tax returns since 2006; his sources of income for 2006 and 2007 were in part employment insurance and welfare.
A scale ticket from SNF refers to 1043 delivering metal in a "Beige" truck. The signatures on the invoices were illegible, according to the auditor.
The respondent's evidence is that 1043 was a "prête‑nom" for "Sylvain". There was no evidence to the contrary.
iii) Alain Deroy (8 invoices) The GST registration number for Mr. Deroy was issued on January 7, 2008; he became bankrupt on March 22, 2001. SNF created an account for Mr. Deroy on January 29, 2010 and purchased supplies from him from February to June 2010.
Mr. Deroy sold SNF supplies for the sum of $325,798.20 during a five‑month period, all paid in cash. Deliveries were made by "Megadeth".
Both Mr. Deroy and Mr. Parent faxed their applications for GST/PST registration from the same dépanneur.
Mr. Deroy's telephone number was that of his father. He gave this number on his GST application as well as to SNF. His declared place of business was a residential building owned by his father in St‑Amable, according to Mr. Barrette and Ms. Jasmin.
Mr. Deroy owned three pleasure vehicles and one truck that was registered with the SAAQ. He did not report any employees to the Registraire des entreprises.
According to his 2006 and 2007 Quebec income tax returns, Mr. Deroy reported income of [TRANSLATION] "more or less" $6,000. He did not file income returns for 2008 and 2009, nor did he file any GST return.
According to at least one scale ticket, Mr. Deroy, or "Megadeth", delivered supplies to SNF in a "Ram Blanc". The GST number and Mr. Deroy's name and purported signature were on all invoices.
The evidence by Ms. Jasmin that Mr. Deroy was a "prête‑nom" of Megadeth was not controverted.
iv) Alexandre B. Riel (13 invoices) The GST registration number for Mr. Riel was issued on April 15, 2010; his file was lost by Revenu Québec. SNF created an account for him on April 29, 2010 and purchased supplies from Mr. Riel between May 6 and September 29, 2010.
Mr. Riel claimed to be carrying on business as "Recyclage de L'Épiphanie". In his application for GST/PST registration, he entered two addresses, one in Yamachiche and one in L'Épiphanie, the latter being used on SNF invoices.
During a five‑month period, M. Riel supplied SNF with $717,512.40 of material, all paid for in cash. All invoices included the GST number.
On a number of occasions, Mr. Riel used an SNF truck to deliver material. Also, on various scale tickets, "Pimparé", "Blanc" and "Laforce" appear as the driver. Signatures on invoices included "ABR" and "Johanne Vallières", who is Mr. Pimparé’s spouse, according to Ms. Jasmin.
Mr. Riel's address corresponded with the address of one Luc Pimparé, the [TRANSLATION] "recycling yard" in L'Épiphanie. According to Ms. Jasmin and Mr. Masson, Mr. Pimparé was an SNF supplier before the period in which Mr. Riel did business with SNF and Mr. Pimparé’s address is the same as Mr. Riel’s. Ms. Jasmin concluded that Mr. Riel is a "prête-nom" for Mr. Pimparé, and there is no evidence to the contrary.
v) Jérémie Sergerie (6 invoices) The GST registration number for Mr. Sergerie was issued on March 18, 2009 and was cancelled April 18, 2011 or May 13, 2011; the exact date is unknown. SNF created an account for him on March 27, 2009 and purchased supplies from Mr. Sergerie from mid‑March 2009 to May 7, 2010.
Mr. Sergerie’s business address is the same as Mr. Riel's, that is the same recycling yard in L'Épiphanie as Mr. Pimparé. Like Mr. Riel, Mr. Sergerie also entered an address in Yamachiche as well as in L'Épiphanie when applying for GST/PST registration but used the L'Épiphanie address on SNF invoices.
The total amount of the supplies made to SNF during a 15-month period was $658,595.40, all paid in cash. All invoices included the GST number.
Mr. Sergerie did not report any employees to the Registraire des enterprises.
The income Mr. Sergerie reported in 2007 and 2008 was from social assistance. There were no income tax returns or GST/QST returns in 2006 or 2009.
One of Mr. Sergerie’s scale tickets indicates he used an SNF truck to deliver supplies; another indicates he used a "Beige" truck. The signatures on the invoices are either illegible or are those of other people such as "Johanne Vallières" or "Gilles Parent".
vi) Benoit Scott (6 invoices) The GST registration number was issued to Mr. Scott on November 11, 2009 and was cancelled April 7, 2011. SNF created an account for him on November 12, 2009 and purchased supplies from Mr. Scott from mid‑January to September 27, 2010.
Mr. Scott made supplies under the name Métallique Ben for a total of $447,495.40 over a nine-month period. The supplies were paid for in cash.
Mr. Scott’s place of business was in an apartment in a residential building.
He registered for GST/QST after Patrick Scott’s tax numbers were revoked, but there is no evidence they were working together.
Mr. Scott owns a passenger vehicle and a Ford F-150 truck acquired from Noël Nicolas. He would call SNF and deliver the metal himself.
He did not report any employees, if he had any.
Mr. Scott had low income from 2006 to 2009, which included social assistance income in 2008 and 2009. Mr. Scott declared bankruptcy in 2007.
The various invoices submitted as evidence were ostensibly signed by Benoit Scott and include his tax numbers.
There is no evidence that Benoit Scott is a "prête‑nom".
vii) Éric Dubé Vanier (24 invoices) The GST registration number for Mr. Dubé Vanier was issued on June 16, 2008 and was cancelled September 17, 2010. SNF created an account for him on February 16, 2009 and purchased supplies from Mr. Dubé Vanier from February 25, 2009 to September 17, 2010.
On his GST/QST registration application is the notation [translation] "risky registration".
Over a 19-month period, Mr. Dubé Vanier sold supplies to SNF for the amount of $2,253,108.40, all paid for in cash. There was one day during which there were six transactions, said Ms. Jasmin, for the equivalent of $130,000, also paid in cash. Over four different dates, two or three invoices can be traced to the same day. The GST number was included on all invoices. Signatures on invoices included a check mark, "Éric Dubé Vanier" and many illegible signatures.
Ms. Larocque testified that Mr. Dubé Vanier had two known addresses, which corresponded to residential addresses. His address shown on SNF invoices, according to Ms. Jasmin, is an apartment in a residential building where there is no commercial activity related to metal recycling SNF trucks would go to collect scrap metal at this residential address; in other instances, Mr. Dubé Vanier sent a red, white, black or a green truck.
Mr. Dubé Vanier did not own a vehicle registered in the SAAQ system. He did not report any employees.
In his Quebec income tax returns for 2008 and 2010, Mr. Dubé Vanier reported [TRANSLATION] "income security" income (social assistance benefits), and FOR 2009, no return was filed.
Ms. Larocque considered Mr. Vanier to be a "prête‑nom" for Sylvain Lizotte. There is no evidence to suggest the contrary.
viii) Noël Nicolas (10 invoices) The GST registration number was issued to Mr. Nicolas on June 18, 2009 and was cancelled November 4, 2010. SNF created an account for him on June 29, 2009 and purchased supplies from Mr. Nicolas from June 30 to December 23, 2009.
The amount of Noël Nicholas’s supplies was $611,167.80 over a six‑month period. The supplies were generally paid for in cash; but sometimes payment was made with cheques, which were cashed at a cheque-cashing centre.
His business address was an apartment in a residential building.
Noël Nicolas did not file any tax returns during the period in question, but he was receiving social assistance benefits. He did not report any employees.
It seems that Mr. Nicolas owned several vehicles that were not authorized to operate. There was also a truck that Ms. Jasmin said was sold to Benoît Scott, but we do not have any supporting evidence. He called SNF and delivered the materials himself, but sometimes Megadeth delivered for Mr. Nicolas, according to Ms. Jasmin.
On one of the scale tickets, his truck is described as "Gris" ("Grey") and on another, as "Beige". Mr. Nicolas also used an SNF truck. There is no signature on the invoices or the signatures are illegible. Three of the invoices were issued on the same date.
The auditors believe that Mr. Nicolas is a "prête‑nom" for Megadeth.
ix) Patrick Scott (2 invoices) The GST registration number was issued to Mr. Scott on July 20, 2009; he ceased business operations October 22, 2010. SNF created an account for Mr. Scott on July 24, 2009 and purchased supplies from him from July 24 to October 22, 2009.
When Mr. Scott applied for GST/QST registration, Revenu Québec submitted his application to one of its auditors.
Patrick Scott sold metal to SNF, for $222,923.40 in supplies over a three-month period. The supplies were paid for in cash.
His place of business is an apartment in a residential building. He did not have any employees registered with the Registraire des entreprises. He had no vehicle registered in the SAAQ system.
Ms. Jasmin testified that Mr. Scott received social assistance benefits in 2007. He did not file income tax returns for 2006, 2008 or 2009.
The invoices issued to Patrick Scott were signed by him and include his tax numbers. Mr. Scott used a white Ford truck to make the supplies.
x) Pierre Daraiche (10 invoices) The GST registration number for Mr. Daraiche was issued on March 4, 2008 and was cancelled April 1, 2010. There is no evidence as to when SNF created an account for Mr. Daraiche but it purchased supplies from him during the period from January 5, 2009 to March 30, 2010.
Pierre Daraiche did $1,062,461.60 worth of business with SNF over 15 months. The supplies were paid for in cash.
Mr. Daraiche was not registered with the Registraire des entreprises.
Mr. Daraiche had social assistance income in 2009 and low income in 2007. He did not file an income tax return for 2008. His reported income in 2006 was $0.
The business address is an apartment in a residential building. He did not file any tax returns, but was registered from 2008 to 2010.
Ms. Jasmin and Mr. Delisle, Revenu Québec auditors, believe that Mr. Daraiche is a "prête‑nom" for "Megadeth" and "Sylvain".
On the scale tickets, Mr. Daraiche’s truck is identified as "Rouge" ("Red"), "Noir" ("Black") or "UHAUL".
On three different occasions, there are two or three invoices issued for the same day.
The signatures on the invoices, Ms. Jasmin stated, were illegible or different.
xi) Réjean Trudeau (6 invoices) The GST registration number for Mr. Trudeau was issued on November 9, 2009 and was cancelled April 7, 2011. SNF created his account on November 11, 2009 and purchased supplies from Mr. Trudeau between November 12, 2009 and September 29, 2010.
The total of the supplies made to SNF was $742,191.80 over an 11‑month period. The supplies were paid for in cash. Mr. Trudeau signed the invoices, which included the GST number.
Mr. Trudeau had social assistance income in 2006 and 2008 and low employment income in 2007, according to Ms. Jasmin’s testimony. He did not file an income tax return for 2009.
His business address is an apartment in a residential building. He did not report any employees.
Mr. Trudeau owned a few passenger vehicles registered with the SAAQ. Megadeth would deliver supplies for Mr. Trudeau. A truck identified as "350 Blanc" ("350 White") was noted on a scale ticket.
Ms. Jasmin believes that Réjean Trudeau is a "prête‑nom" for Megadeth.
xii) Valérie Bergeron (9 invoices) The GST registration number for Ms. Bergeron was issued on December 21, 2009 and was cancelled November 19, 2010. SNF created her account on January 19, 2010 and purchased supplies during August and September 2010.
Valérie Bergeron began doing business with SNF when Mr. McDuff’s tax numbers ceased to be valid. She delivered to SNF a total of $270,913.40 worth of metal over a two-month period. The tax numbers are included on the invoices and scale tickets.
Valérie Bergeron did not report any employees.
Ms. Claveau stated that Valérie Bergeron provided sales invoices she prepared regarding janitorial work for relatives. Her spouse is Steve McDuff, Robert McDuff’s nephew. Ms. Claveau noted that the signatures, which appear on the SNF invoices are not Ms. Bergeron but in certain cases, Mr. McDuff’s signatures. Other invoices are signed "Marie‑Michèle Ouellette", "Franchesca D.", "Dalpé" and perhaps "MS".
Ms. Bergeron declared bankruptcy in 2008.
She had a passenger vehicle registered with the SAAQ but no licence to conduct trade in auto parts.
Ms. Bergeron’s place of business is a residential address.
There were occasionally multiple trips on the same day for SNF and another company, PMR Refiners, according to Ms. Claveau. Two SNF invoices are for the same day and three other invoices are all for another date.
Ms. Claveau concluded that Valérie Bergeron was a "prête-nom" for Robert McDuff.
ANALYSIS [44] Subsection 169(4) describes the requirements to be met in order to make an ITC claim for a reporting period:
A registrant may not claim an input tax credit for a reporting period unless, before filing the return in which the credit is claimed,
L’inscrit peut demander un crédit de taxe sur les intrants pour une période de déclaration si, avant de produire la déclaration à cette fin :
(a) the registrant has obtained sufficient evidence in such form containing such information as will enable the amount of the input tax credit to be determined, including any such information as may be prescribed; and
a) il obtient les renseignements suffisants pour établir le montant du crédit, y compris les renseignements visés par règlement;
(b) where the credit is in respect of property