Atlantic Smoke Shops Ltd. v. Conlon and Attorney-General for Quebec

Atlantic Smoke Shops Ltd. v. Conlon and Attorney-General for Quebec
Collection
Supreme Court Judgments
Date
1941-10-07
Report
[1941] SCR 670
Judges
Duff, Lyman Poore; Rinfret, Thibaudeau; Crocket, Oswald Smith; Davis, Henry Hague; Kerwin, Patrick; Hudson, Albert Blellock; Taschereau, Robert
On appeal from
New Brunswick
Subjects
Constitutional law
Decision Content
Supreme Court of Canada
Atlantic Smoke Shops Ltd. v. Conlon and Attorney-General for Quebec, [1941] S.C.R. 670
Date: 1941-10-07
Atlantic Smoke Shops Limited (Plaintiff) Appellant:
and
James H. Conlon, John Mcdonough and The Attorney-General for New Brunswick (Defendants) Respondents;
and
The Attorney - General for Quebec Intervenant.
1941: February 18, 19, 20; 1941: October 7.
Present: Duff C.J. and Rinfret, Crocket, Davis, Kerwin, Hudson and Taschereau JJ.
ON APPEAL FROM THE SUPREME COURT OF NEW BRUNSWICK, APPEAL DIVISION
Constitutional law—Tobacco Tax Act (N.B.)—Whether intra vires the province—Direct or indirect taxation within province—Whether tax equivalent to customs duty—Regulation of trade and commerce—Personal liability of agent for the tax—Tobacco Tax Act, 1940, (N.B.) 4 Geo. VI„ c. 44, ss. 2 (a) (d) (e), 3 (2) (3), 4, 5, 7, 8, 10, 20 (2)—B.N.A. Act, ss. 91 (2), 92 (2), 121, 122. The Tobacco Tax Act, 1940 (N.B.), c. 44, provides, inter alia, that "every consumer of tobacco purchased at a retail sale in the province shall pay to" the province "for the raising of a revenue, at the time of making his purchase, a tax in respect of the consumption of such tobacco" (section 4); and the Act also provides that "every person residing or ordinarily resident or carrying on business in" the province "who brings into the province or who receives delivery in the province of tobacco for his own consumption or for the consumption of other persons at his expense or on behalf of or as agent for a principal who desires to acquire such tobacco for consumption by such principal or other persons at his expense * * * shall pay the same tax in respect of the consumption of such tobacco" (section 5). Section 10 provides that "a consumer shall be and remain liable for the tax imposed by the Act until the same has been collected." Under section 2 (a) "consumer" means not only any person who within the Province purchases tobacco for his own consumption, but also any other person who purchases tobacco in the Province as agent for his principal who desires to acquire such tobacco for consumption by such principal. It was also enacted (section 3 (2)) that only retail vendors licensed under the Act may sell tobacco at a retail sale in the province. Regulations made under the Act by Orders in Council were declared to have the force of statute (section 20 (2)). Regulation 6 provides that "every application for a (retail) vendor's license * * * shall contain an undertaking by the applicant to collect and remit the tax * * * and shall be in Form 2"; and when signing that Form, the applicant undertakes "to act as the agent of the Minister for the collection of the tax * * * and to account to the province * * * for all moneys so collected."
Held, by a majority of the Court, that the Act is within the constitutional powers of the province, except as to the provisions making the agent, who buys tobacco for his principal personally liable for the tax, which provisions are severable.
The Chief Justice and Mr. Justice Davis were of the opinion that the entire Act was ultra vires the province.
Mr Justice Rinfret and Mr. Justice Crocket were of the opinion that the entire Act was intra vires the province.
Mr. Justice Kerwin was of the opinion that section 5 and also the provisions making the agent personally liable for the tax were ultra vires the province.
Mr. Justice Hudson and Mr. Justice Taschereau were of the opinion that the Act was intra vires the province, except as to the personal liability of the agent for the tax.
APPEAL from the judgment of the Supreme Court of New Brunswick, appeal division[1], which held that the Tobacco Tax Act, (N.B.) was intra vires the province.
The question in issue in this case is the constitutionality of "An Act to provide for imposing a tax on the consumption of tobacco" (1940, (N.B.) 4 Geo. VI, c. 44), hereinafter referred to as The Tobacco Tax Act. The appellant caused a writ to issue in the Chancery-Division of the Supreme Court of New Brunswick claiming an injunction restraining the respondents Conlon and McDonough, and each of them, from entering upon the store premises of the appellant, in the city of Saint John, or from accosting, questioning, or otherwise interfering with customers of the appellant while on those premises, or on the streets adjacent thereto, with reference to any purchase of tobacco, or the payment of any tobacco tax under the authority of the Act above mentioned, or the regulations under it.
The parties agreed upon the following statement of facts:
That the plaintiff, Atlantic Smoke Shops Limited, is a corporation duly incorporated by letters patent issued under the Companies Act of the Dominion of Canada and having its head office at the city of Saint John in the province of New Brunswick.
That on the eleventh day of May, A.D. 1940, the legislature of the province of New Brunswick purported to enact a statute, being chapter 44, 4 George VI, cited as The Tobacco Tax Act. The said Act came into force on the 1st day of October, A.D. 1940, by proclamation of the Lieutenant-Governor in Council.
That under the authority of the said Act the Lieutenant-Governor in Council purported to make regulations styled "Regulations Under Tobacco Tax Act"
That on the fifteenth day of October, A.D. 1940, the said Atlantic Smoke Shops Limited opened a store on the northeast corner of Waterloo and Peters streets in the said city of Saint John, and thereafter carried on and now carries on therein the business of selling tobacco, including cigars and cigarettes.
That the said plaintiff carried on and now carries on its said business without having obtained any license so to do under the Tobacco Tax Act or the said regulations.
That in its said store the said plaintiff has since the fifteenth day of October, A.D. 1940, sold and is now selling at retail sale tobacco, including cigars and cigarettes, manufactured in provinces of Canada other than the province of New Brunswick, to persons defined by section 2 (a) of the said Tobacco Tax Act as "Consumers" or "Consumers of Tobacco," without collecting the tax imposed by the said Act.
That the defendant, James H. Conlon, was on the coming into force of said Tobacco Tax Act appointed to the office of Tobacco Tax Commissioner, being the office, created under the regulations hereinbefore referred to and has since occupied and now occupies said office.
That on the second day of November, A.D. 1940, and from time to time thereafter, the defendant John McDonough, an inspector appointed under the said Act, and others, all acting under the instructions of the other defendants, entered upon the plaintiff's said premises and proceeded to question customers of the plaintiff as to whether they had paid the provincial tax on the tobacco purchased by them from the plaintiff, to ask them to produce their tobacco tax receipts and to demand their names and addresses. The said defendant John McDonough and other persons so entering the said premises as aforesaid refused to leave the same when requested so to do by the plaintiff, and claimed that they were entitled to remain therein and to question the said customers of the plaintiff by virtue of certain provisions of the said Tobacco Tax Act and the regulations made thereunder.
That by reason of the said actions of the defendants the said business of the plaintiff has been and is now being injuriously affected.
The question for the opinion of the Court was expressed in these terms:
The question for the opinion of the Court is whether the Tobacco Tax Act, or any of the provisions thereof, and/or the regulations made thereunder or any of them, and in what particular or particulars or to what extent are ultra vires of the legislature of the province of New Brunswick.
If the Court shall be of opinion that the said Act and Regulations are wholly intra vires this action shall be dismissed.
If the Court shall be of opinion that the said Act and Regulations are wholly ultra vires, judgment shall be entered in favour of the plaintiff and against the defendants for an injunction order in the terms of the claim endorsed on the writ of summons herein.
If the Court shall be of the opinion that the said Act and Regulations, or any of them are intra vires in part and ultra vires in part, the Court shall make such order, by way of declaration and/or by way of substantive relief to the plaintiff, as it shall deem right and proper.
The stated case was submitted to the Supreme Court of New Brunswick, appeal division, which held unanimously[2] that the Act was within the constitutional powers of the province.
From that judgment, the Atlantic Smoke Shops Limited appealed to this Court by special leave granted by the Appeal Division of the Supreme Court of New Brunswick.
The legislature of the province of Quebec has adopted in 1940 a statute, 4 Geo. VI, c. 15, entitled the Tobacco Tax Act, which is somewhat similar in its provisions to the New Brunswick statute. The Quebec Act has been held intra vires the province by the Superior Court, Trahan J.[3], which judgment was affirmed by the Court of King's Bench, appeal side[4]. In view of that fact, the Attorney-General for the province of Quebec was allowed to intervene, on this appeal by order of this Court, in order to support the constitutionality of the New Brunswick Act.
The material provisions of the Tobacco Tax Act of New Brunswick are the following:
2. (a) "Consumer" or "Consumer of Tobacco" means any person who within the Province, purchases from a vendor tobacco at a retail sale in the Province for his own consumption or for the consumption of other persons at his expense or who, within the Province, purchases from a vendor tobacco at a retail sale in the Province on behalf of or as agent for a principal who desires to acquire such tobacco for consumption by such principal or other persons at the expense of such principal.
***
(d) "Purchaser" means any person who, within the Province, purchases from a retail vendor tobacco at a retail sale in the Province.
(e) "Retail Sale" means a sale to a consumer for purposes of consumption and not for resale.
(f) "Retail Vendor" means any person who, within the Province, sells tobacco to a consumer.
***
3. (2) No persons shall sell any tobacco in the Province at a retail sale unless he holds a retail vendor's license issued to him under authority of this Act and such license is in force at the time of sale.
(3) No wholesale vendor shall sell any tobacco in the Province for resale in the Province to a person who is not a vendor duly licensed
under this Act.
***
4. Every consumer of tobacco purchased at a retail sale in the Province shall pay to His Majesty the King in the right of the Province for the raising of a revenue, at the time of making his purchase, a tax in respect of the consumption of such, tobacco, and such tax shall be computed at the rate of ten per centum of the retail price of the tobacco purchased.
5. Every person residing or ordinarily resident or carrying on business in New Brunswick, who brings into the Province or who receives delivery in the Province of tobacco for his own consumption or for the consumption of other persons at his expense or on behalf of or as agent for a principal who desires to acquire such tobacco for consumption by such principal or other persons at his expense shall immediately report the matter to the Minister and forward or produce to him the invoice, if any, in respect of such tobacco and any other information required by the Minister with respect to the tobacco and shall pay the same tax in respect of the consumption of such tobacco as would have been payable if the tobacco had been purchased at a retail sale in the Province at the same price.
***
7. No retail vendor shall advertise or hold out or state to the public or to any consumer, directly or indirectly, that the tax or any part thereof imposed by this Act will be assumed or absorbed by the retail vendor or that it will not be considered as an element in the price to the consumer or, if added, that it or any part thereof will be refunded.
8. The tax shall be collected, accounted for and paid to the Minister by such persons, at such times and in such manner as the regulations may prescribe.
***
10. A consumer shall be and remain liable for the tax imposed by this Act until the same has been collected.
*** 20. (1) For the purpose of carrying into effect the provisions of this Act according to their true intent or of supplying any deficiency therein the Lieutenant-Governor in Council may make such regulations, not inconsistent with the spirit of this Act, as are considered necessary or advisable, and without limiting the generality of the aforegoing the Lieutenant-Governor in Council may make regulations:
***
(2) Such regulations may from time to time be repealed, amended or varied and, if repealed, may be re-enacted, and such regulations shall have the same force and effect as if enacted by this Act and shall be published in the Royal Gazette.
The material Regulations made under the Act are the following:
6. Every application for a vendor's license, other than a wholesale vendor's license, shall contain an undertaking by the applicant to collect and remit the tax in accordance with the provisions of the Act and these Regulations and shall be in Form 2 of the Schedule to these Regulations, as near as may be. The applicant shall state in his application for a license an estimated amount of his normal monthly Tobacco Sales.
Form 2 contains the following:
I/We, upon acceptance of License to Retail Tobacco, agree and undertake to act as the Agent of the Minister for the collection of the Tax imposed by said Act and to account to the Province of New Brunswick for all moneys so collected as provided by the Act and regulations.
The other material Regulations are:
9. No person, other than the holder of an itinerant salesman's license issued under the provisions of Regulation 11, shall, either as principal or agent, sell tobacco at retail at any place other than a place of business designated in a valid, subsisting license, issued to such person; Provided that nothing in this or the next preceding Regulation shall be construed to prohibit or restrict the solicitation of orders for or the sale of tobacco by a licensed wholesale vendor to a licensed retail vendor at any place.
***
12. No person shall sell tobacco at retail elsewhere than a named place of business, either as principal or as agent, without having obtained an itinerant salesman's license. No person shall sell tobacco at retail elsewhere than a named place of business through an agent or salesman unless such agent or salesman is the holder of a valid subsisting itinerant salesman's license.
***
19. Every licensed retail vendor is hereby constituted an agent of the Minister for the collection of the tax and shall collect the tax from the consumer at the time of purchase of tobacco by the consumer.
***
22. The retail vendor or his agent shall deliver to every purchaser, at the time of the sale, a receipt for the tax collected and no sale shall be made unless such receipt is given.
*** 30. No person shall purchase tobacco at retail without paying the tax or accept delivery of same without receiving from the retail vendor a receipt for such tax in accordance with the provisions of the Act and these Regulations.
The grounds of appeal raised by the appellant before this Court were as follows:
1. The Act is not legislation upon the matters assigned to the legislative jurisdiction of the province by sec. 92 of the British North America Act, but is in fact legislation upon matters within the exclusive legislative jurisdiction of the Dominion of Canada by virtue of sec. 91 of the British North America Act.
2. The Act purports to impose a tax for the raising of a revenue for provincial purposes, but such tax is neither,
(a) a direct tax, nor
(b) a tax within the province
as authorized by subsection 2 of sec. 92 of the British North America Act.
3. The tax is not confined in its effect to the province of New Brunswick nor to the persons upon whom it is levied.
4. The Act infringes upon the exclusive legislative jurisdiction of the Dominion of Canada to impose customs and excise duties.
5. The Act purports, in violation of the provisions of sec. 121 of the British North America Act, to impose a tax upon articles grown, produced or manufactured in another province of Canada when introduced into New Brunswick for purposes of consumption.
6. The licences provided for in the Act in question are not within the category of shop, saloon, tavern, auctioneer or other licenses in order to the raising of a revenue for provincial, local or municipal purposes under sec. 92 subsection 9 of the British North America Act.
7. The Regulations are invalid because the statute which authorizes them is wholly ultra vires.
W. F. Chipman K.C. and J. F. H. Teed K.C. for the appellant.
Peter J. Hughes K.C. for the respondents.
Aimé Geoffrion K.C. and R. Genest K.C. for the Attorney-General for Quebec.
The judgment of the Chief Justice and Davis J. was delivered by
The Chief Justice—It is necessary first to ascertain the characteristics of the tax, the validity of which is in question. The charging sections are sections 4 and 5 which must be read in light of the meanings attached to the phrases therein employed by the interpretation section. Sections 4 and 5 are as follows:—
4. Every consumer of tobacco purchased at a retail sale in the Province shall pay to His Majesty the King in the right of the Province for the raising of a revenue, at the time of making his purchase, a tax in respect of the consumption of such tobacco, and such tax shall be computed at the rate of ten per centum of the retail price of the tobacco purchased.
5. Every person residing or ordinarily resident or carrying on business in New Brunswick, who brings into the Province or who receives delivery in the Province of tobacco for his own consumption or for the consumption of other persons at his expense or on behalf of or as agent for a principal who desires to acquire such tobacco for consumption by such principal or other person at his expense shall immediately report the matter to the Minister and forward or produce to him the invoice, if any, in respect of such tobacco and any other information required by the Minister with respect to the tobacco and shall pay the same tax in respect of the consumption of such tobacco as would have been payable if the tobacco had been purchased at a retail sale in the Province at the same price.
The material provisions of the interpretation section are 2 (a), (d) and (e), which are in the following words:—
2. (a) "Consumer" or "Consumer of Tobacco" means any person who within the Province, purchases from a vendor tobacco at a retail sale in the Province for his own consumption or for the consumption of other persons at his expense or who, within the Province, purchases from a vendor tobacco at a retail sale in the Province on behalf of or as agent for a principal who desires to acquire such tobacco for consumption by such principal or other persons at the expense of such principal.
(d) "Purchaser" means any person who, within the Province, purchases from a retail vendor tobacco at a retail sale in the Province.
(e) "Retail Sale" means a sale to a consumer for purposes of consumption and not for resale.
Section 8 provides that the tax shall be collected, accounted for and paid to the Minister by such persons, at such times and in such manner as the regulations may prescribe. The statute provides for the licensing of vendors and inter alia by section 3, subsection (2) that no person shall sell tobacco at a retail sale unless he holds a retail vendor's license.
The regulations, which have the force of statute (section 20, subsection 2)) provide (Regulations 5 and 6, Form II) that every application for a retail vendor's license shall contain an undertaking by the applicant to collect and remit the tax. The undertaking, in the Form, is that the applicant undertakes to act as agent for the Minister for the collection of the tax and to account to the province for all moneys so collected. On the license is printed a notice that failure on the part of a vendor to collect and remit the tax renders him liable to a fine and to imprisonment in default of payment. There are two forms of licenses, an itinerant salesman's license and a license to carry on the business of a retail vendor at a named place of business. The effect of Regulations 9 and 12 is that no person shall, either as principal or agent, sell tobacco at retail, other than a person having a license in one or other of these forms.
The regulations contain important provisions touching the payment of the tax. By Regulation 19 the licensed retail vendor is
hereby constituted an agent of the Minister for the collection of the tax,
and the Regulation also provides that the retail vendor
shall collect the tax from the consumer at the time of purchase of tobacco by the consumer.
By Regulation 22 the retail vendor, or his agent, shall deliver to every purchaser at the time of the sale a receipt for the tax collected, and it also provides that no sale shall be made unless such receipt is given. By Regulation 30 it is enacted that
no person shall purchase tobacco at retail without paying the tax,
and it is further provided that no person shall "accept delivery" of tobacco
without receiving from the retail vendor a receipt for such tax.
The condition of the obligation to pay under section 4 is that the tobacco in respect of which the liability arises has been purchased at a retail sale. It is true the section describes the purchaser as "consumer," but consumer means, as we have seen, a person purchasing tobacco at a retail sale for his own consumption, or for the consumption of other persons at his expense. It is a condition of a legal purchase at a retail sale that the tax be paid and of a lawful delivery of the tobacco to a purchaser that a receipt of the tax be also delivered to him by the seller. There can be no legal purchase without the payment of the tax; there can be no legal sale without the delivery of a receipt for the tax. In the ordinary case, sales will be cash sales. The price demanded will be the "price to the consumer," to use the words of section 7; that is to say, the price to the purchaser, which includes the amount of the tax, a sum which is earmarked as such, of course, by the delivery of the receipt. In a practical sense, as far as the purchaser is concerned, it is part of the price he pays for his tobacco. As regards the vendor, it is the sum for which he is accountable to the government and, in fact, it comes out of the "price to the consumer"—the price to the purchaser.
In other words, the payment of the tax is not only a condition of legal purchase; it is an integral element in the transaction of sale and purchase passing from the purchaser to the vendor as part of the price to the purchaser.
Moreover, the real security to the government for the payment of the tax is the vendor's responsibility. True enough, the statute declares that the consumer continues to be liable until the tax is collected, but the real sanction for the obligation of the purchaser lies in the fact that he cannot lawfully, or in practice, get his tobacco without paying the tax. There is no provision for keeping account of consumption. On the other hand, the vendor is obliged, as licensee, to keep account of his purchases, of his sales, of the tobacco he has on hand from time to time. Not only is his default in performing his duty to collect the tax a punishable offence, he must account for his stamps and as agent, under a contractual duty to collect the tax, he is directly responsible if he has made a sale of tobacco without performing that duty. The character of the tax, I think, can best be determined by considering the ordinary case and in the ordinary case, that is to say, in all but exceedingly few cases, the sale of tobacco by a licensed retail vendor will be carried out in the manner contemplated by the Act and the tax will be simply a predetermined fraction of the price to the purchaser which is paid to the vendor and by him remitted to the government. It seems to me to be proper to describe such a tax as a tax on tobacco in respect of the commercial dealing between the retail vendor and the purchaser.
As regards section 5, the tax is imposed upon the importer of tobacco who imports it for his own consumption, or the consumption of others at his expense and that, I think, is a tax on tobacco in respect of the import of it for consumption.
To turn now to the legal questions involved. Section 5 imposes an import duty applying to imports from other parts of Canada, as well as from places outside of Canada. Although not collected in a manner in which customs duties are collected by the Dominion Government in this country, it is of the nature of a duty of customs. In the Attorney-General for British Columbia v. McDonald Murphy Lumber Co.[5], Lord Macmillan, speaking for the Lords of the Judicial Committee, said:—
In Wharton's Law Lexicon "Customs" are defined as "duties charged upon commodities on their importation into or exportation out of a country," and a similar definition is given in Murray's New English Dictionary.
I shall revert to section 5 after discussing the tax imposed by section 4.
The enactment in section 4 and the ancillary enactments in the statute and regulations are justified on the ground that they constitute legislation in relation to direct taxation within the province within the meaning of section 92 (2). The question whether the tax is an excise duty of the class falling within the exclusive authority of the Parliament of Canada to impose can be considered more conveniently with section 5.
If I may say so without presumption, the subject of direct and indirect taxation as it affects the application of section 92 (2) has been put in a very clear light in the judgment delivered by Lord Thankerton on behalf of the Lords of the Judicial Committee in the Attorney-General for British Columbia v. Kingcome Navigation Co. Ltd.[6]. At p. 55 it is said, after a review of some of the previous decisions of the Judicial Committee, these decisions, in their Lordships' opinion, make clear that if the tax is demanded from the
very person who it is intended or desired should pay it, the taxation is direct.
His Lordship proceeds to point out that in the case of typical direct taxes, the taxation on property and income, for example, mentioned by Lord Cave in the City of Halifax v. Fairbanks Estate[7], such taxes
are imposed in respect of the particular taxpayer's interest in property or the taxpayer's own income, and they are a peculiar contribution upon him, and it is intended and desired that he shall pay it, though it is possible for him, by making his own arrangements to that end, to pass the burden on in the sense of the political economists.
Such taxes are contrasted with those as regards which the taxing authorities are indifferent as to who ultimately bears the burden, such as taxes in respect of transactions and taxes in respect of some dealing in commodities, such as their import or sale. The words of the judgment are these:
* * * where the tax is imposed in respect of a transaction, the taxing authority is indifferent as to which of the parties to the transaction ultimately bears the burden, and, as Mill expresses it, it is not intended as a peculiar contribution upon the particular party selected to pay the tax. Similarly, where the tax is imposed in respect of some dealing with commodities, such as their import or sale, or production for sale, the tax is not a peculiar contribution upon the one of the parties to the trading in the particular commodity who is selected as the taxpayer.
I have said sufficient to show why, in my opinon, the tax imposed by section 4 is a tax in respect of a dealing with tobacco, the sale and purchase of it, and this dealing falls, I think, within the class of dealings with commodities envisaged by such passages in their Lordships' judgment.
On behalf of the respondent it is said that this is a tax in respect of consumption and that it stands in the same category as that in question in the Attorney-General for British Columbia v. Kingcome Navigation Co. Ltd.[8]. The tax in question there was payable by every person who consumes fuel oil in the province in respect of the fuel oil consumed and at the rate of one-half cent a gallon. Every person consuming fuel oil was obliged to keep such books and records and furnish such returns as might be prescribed by the regulations, the failure to do so being a punishable offence. The amount of the tax was recoverable by action and in every such action the burden of proving the quantity consumed by the defendant was upon him. There are no such provisions in the statute before us. The tax is not payable by the consumer as such. It is payable by the purchaser, or the agent of the purchaser, and the statute itself contemplates that neither of them may be the consumer. No liability attaches to the consumer as such. To repeat, in the practical administration of the Act there can be no manner of doubt that the payment of the tax and the delivery of the receipt take place as acts in the transaction of sale and purchase. The matter of consumption never comes into question.
On behalf of the respondent it is argued that the purchase from the retail vendor is a purchase for consumption because the tobacco cannot lawfully be sold by the purchaser unless he takes out a vendor's license which insures that he can never sell except at a loss. There is no limit, however, as to the quantity which may be purchased from a retail vendor and any purchaser is entitled to obtain a license as a retail vendor and the license fee is only fifty cents. However, as a rule, tobacco sold at retail, in the ordinary sense, is purchased with the intention that it will be consumed by the purchaser, or his friends or associates, and the vast majority of the purchases of tobacco at retail will be purchased for immediate consumption.
It does not at all follow from this that the tax is a tax in respect of consumption, especially when it is so obviously a tax in respect of the sale and purchase. There is nothing in the statute, truly, which can fairly be said to give to the tax the character of a tax in respect of consumption, except the declaration of the legislature to that effect and some collateral provisions which are relied upon as supporting the contention that such is its character.
I do not think too much importance can be attached to the declaration of the legislature that the tax is payable in respect of consumption. The British North America Act "must have contemplated some tangible dividing line referable to and ascertainable by the general tendencies of the tax and the common understanding of men as to those tendencies" (Bank of Toronto v. Lambe[9], City of Halifax v. Fairbanks' Estate[10]. Nor was it probably contemplated that the "tangible dividing line" between direct and indirect taxation could be shifted at will by the declarations of the legislature as to its expectations, or intentions, in respect of the ultimate incidence of a tax. It is especially important, I think, in the application of Mill's test not to be led away by legislative declarations, or collateral legislative provisions, imparting to the legislation a form calculated to give a colour of legality to the legislative effort.
I return now to section 5. As I have said it imposes a duty in respect of import. Such a duty is one of those mentioned in the passage quoted from Lord Thankerton's judgment[11] as being not imposed as a peculiar contribution upon one of the parties and as being, consequently, an indirect tax. It seems clear, moreover, to be a tax within section 122. There were customs duties levied on manufactured tobacco by the provinces at the time of Confederation. The Dominion has always imposed customs duties in respect of imports of tobacco and it would seem an extraordinary thing if each one of the provinces could impose such duties upon persons who import for their own consumption and who should be obliged to pay this duty after paying the duty imposed by the Dominion; and equally extraordinary in the case of raw tobacco imported by an importer in Montreal, who has paid the customs duty upon it and manufactured it there, that it should, on shipment into New Brunswick to a consumer, be subjected to a further import duty in that province. The importation which brings section 5 into operation seems clearly to be a dealing in tobacco within the meaning of the judgment quoted above. So also, I think, the tax imposed by section 4 is an excise duty within the contemplation of that judgment. At pp. 58, 59, Lord Thankerton says:—
In their Lordships' opinion the customs or excise duties on commodities ordinarily regarded as indirect taxation, referred to in the judgments in Fairbanks' case[12] and the McDonald Murphy Lumber Co.'s case[13], are duties which are imposed in respect of commercial dealings in commodities, and they would necessarily fall within Mill's definition of indirect taxes. They do not extend, for instance, to a dog tax, which is clearly direct taxation, though the machinery of the excise law might be applied to its collection, or to a license duty, such as was considered in Lambe's case[14]. Customs and excise duties are, in their essence, trading taxes, and may be said to be more concerned with the commodity in respect of which the taxation is imposed than with the particular person from whom the tax is exacted.
The tax imposed by section 4 fulfils the conditions of this "definition of customs and excise duties," as the judgment describes this passage. The distinction between the New Brunswick statute and the provisions of the British Columbia Fuel-Oil Act, with which the judgment is concerned, is brought out very clearly in the part of the judgment I now quote at p. 59:—
Turning then to the provisions of the Fuel-Oil Act here in question, it is clear that the Act purports to exact the tax from a person who has consumed fuel-oil, the amount of the tax being computed broadly according to the amount consumed. The Act does not relate to any commercial transaction in the commodity between the taxpayer and some one else. Their Lordships are unable to find, on examination of the Act, any justification for the suggestion that the tax is truly imposed in respect of the transaction by which the taxpayer acquires the property in the fuel-oil nor in respect of any contract or arrangement under which the oil is consumed, though it is, of course, possible that individual taxpayers may recoup themselves by such a contract or arrangement; but this cannot effect the nature of the tax. Accordingly their Lordships are of opinion that the tax is direct taxation within the meaning of s. 92, head 2, of the British North America Act.
I should add that section 5, in my opinion, comes within the ban of section 121. I do not think either the decision in the Gold Seal case[15], or the observations in the judgments, are in any way in conflict with this.
The duty imposed by section 5, as I have already observed, being a duty imposed by a provincial legislature, is, of course, not collected through the machinery of the customs, but levied in New Brunswick prior to Confederation it would have been levied as a customs duty; and considered even from the point of view of its application to goods imported from other provinces, it is of the nature of a customs duty, if the expression is properly applicable in such circumstances. Section 5 is moreover, in my opinion, an enactment in regulation of trade and commerce within the ambit of the exclusive authority in relation to that subject vested in the Dominion by section 91.
I should add that the tax under section 4 is payable by the purchaser's agent where the purchase is made by an agent. On the principle of the Manitoba Grain case[16], this provision appears to be invalid.
For these reasons, I think the appeal should be allowed.
Rinfret J.—The question in this case is about the constitutionality of "An Act to provide for imposing a tax on the consumption of tobacco" (c. 44 of the Acts of New Brunswick, 1940), hereinafter referred to as The Tobacco Tax Act.
The appellant caused a writ to issue in the Chancery Division of the Supreme Court of New Brunswick claiming an injunction restraining the defendants, and each of them, from entering upon the store premises of the appellant, in the city of Saint John, or from accosting, questioning, or otherwise interfering with customers of the appellant while on those premises, or on the streets adjacent thereto, with reference to any purchase of tobacco, or the payment of any tobacco tax under the authority of the Act above mentioned, or the regulations under it.
The parties concurred in stating the questions arising for the opinion of the Court as follows:
The appellant is a Dominion company having its head office in the city of Saint John, in the province of New Brunswick.
On May 11, 1940, the legislature of the province of New Brunswick enacted The Tobacco Tax Act, which came into force on October 1st, 1940, by proclamation of the Lieutenant-Governor in Council.
Certain regulations were made under the authority of the Act.
On October 15, 1940, the appellant opened a store, in the city of Saint John, and thereafter carried on, and now carries on, therein the business of selling tobacco, including cigars and cigarettes, without having obtained any license so to do under The Tobacco Tax Act, or the regulations.
In its store, the appellant sells at retail sale tobacco, including cigars and cigarettes, manufactured in provinces of Canada other than the province of New Brunswick, to persons defined, by section 2 (a) of the said Tobacco Tax Act, as "consumers" or "consumers of tobacco," without collecting the tax imposed by the said Act.
The respondent James H. Conlon was, on the coming into force of the said Tobacco Tax Act, appointed to the office of Tobacco Tax Commissioner, it being an office created under the regulations.
On November 2, 1940, and from time to time thereafter, the respondent John McDonough, an inspector appointed under the Act, and others, while acting under the instructions of the other respondents, entered upon the appellant's premises and proceeded to question customers of the appellant as to whether they had paid the tax on the tobacco purchased by them, to ask them to produce their tobacco tax receipt and to demand their names and addresses. They refused to leave the premises when requested so to do by the appellant, and claimed that they were entitled to remain therein and to question customers by virtue of the said Tobacco Act and the regulations made thereunder. By reason of these actions of the respondents, the business of the appellant has been and is now injuriously affected.
The question for the opinion of the Court is whether the Tobacco Tax Act, or any of the provisions thereof, and the regulations made thereunder, or any of them, are ultra vires of the legislature of New Brunswick; and, if so, in what particular, or particulars.
It was agreed that, if the Court should be of the opinion that the Act and the regulations were wholly intra vires, the appellant's action should be dismissed. If the Court should be of opi