Sandvik Tamrock Canada Ltd. v. Canada (Deputy Minister of National Revenue)

Sandvik Tamrock Canada Ltd. v. Canada (Deputy Minister of National Revenue) Court (s) Database Federal Court of Appeal Decisions Date 2001-11-09 Neutral citation 2001 FCA 340 File numbers A-550-00 Notes Digest Decision Content Date: 20011109 Docket: A-550-00 Neutral citation: 2001 FCA 340 CORAM: STONE J.A. NOËL J.A. SHARLOW J.A. BETWEEN: SANDVIK TAMROCK CANADA LIMITED and SECOROC, A DIVISION OF ATLAS COPCO CANADA INC. Appellants and THE DEPUTY MINISTER OF NATIONAL REVENUE FOR CUSTOMS AND EXCISE Respondent Heard at Ottawa, Ontario, on November 7, 2001. Judgment delivered at Ottawa, Ontario, on November 9, 2001. REASONS FOR JUDGMENT BY: NOËL J.A. CONCURRED IN BY: STONE J.A. SHARLOW J.A. Date: 20011109 Docket: A-550-00 Neutral citation: 2001 FCA 340 CORAM: STONE J.A. NOËL J.A. SHARLOW J.A. BETWEEN: SANDVIK TAMROCK CANADA LIMITED and SECOROC, A DIVISION OF ATLAS COPCO CANADA INC. Appellants and THE DEPUTY MINISTER OF NATIONAL REVENUE FOR CUSTOMS AND EXCISE Respondent REASONS FOR JUDGMENT NOËL J.A. [1] This is an appeal from a decision of the Canadian International Trade Tribunal (the "CITT") which held that certain goods imported by the appellants did not qualify for the benefits of tariff item No. 9908.00.00 in Schedule I to the Customs Tariff Act, R.S.C. 1985, c. 41 (3rd Suppl.), as amended. [2] Tariff item No. 9908.00.00 provides for the duty-free entry of certain goods used in the mining industry, namely: Utility vehicles of heading No. 87.03 and lorries (trucks) or shuttle cars of heading No. 87.04, for use underground in mining or in developing mineral deposits; Articles (excluding tires and inner tubes) for use in the foregoing equipment, or for use in loading machinery for loading coal or for loading minerals directly from the working face of a mine, or for use in extracting machinery for extracting minerals directly from the working face of a mine. Véhicules utilitaires de la position no 87.03 et chariots ou camions-navettes de la position no 87.04, devant servir à l'usage souterrain dans les mines ou à la mise en valeur de gisements minéraux; Articles (à l'exclusion des pneumatiques et chambres à air) devant servir dans les équipements qui précèdent, ou devant servir dans des machines de chargement pour charger du charbon ou pour charger des minéraux directement au front de taille, ou devant servir dans des machines d'extraction pour l'extraction des minéraux directement au front de taille. (My emphasis) [3] The articles in issue in this appeal are drill rods which are used in percussive drilling and which function to transmit the percussive energy to the host rock, provide rotation to the drill bit, transmit feed pressure to keep the bit constantly on the bottom of the hole and transmit a flushing medium to the bottom of the drill hole; and coupling sleeves which function to allow the attachment of the drill rod to other drill rods or to the rock drill. [4] According to the evidence before the CITT, the bulk of mining operations in Canada is hard-rock mining and the percussive drilling method is the primary drilling method used for that purpose. This method entails the formation of a drill hole by breaking the rock into fragments by means of a great force or energy on a continual basis until the proper depth has been reached. This energy is transmitted from the rock drilling machine to the rock via the drill string, which consists of the drill rods and coupling sleeves, with a drill bit at the end of the drill string against the rock face. Once the percussion drills achieve the required depth, an explosive charge is placed in the hole and detonated. The force from the charge breaks up the material being mined from the rock face. [5] The evidence before the CITT also revealed the existence of a machine called the "Continuous Miner" or "mechanical miner" that is used in coal mining operations. It has a rotating head with picks that are in physical contact with the working face of a mine. The head loosens the rock and the fragments are then directed along a conveyor system. The CITT notes in its reasons (page 3) that there is no comparable machine in hard-rock mining because "no single machine completes the extracting function on its own". [6] The Deputy Minister determined that the goods in issue do not qualify for the benefits of tariff item No. 9908.00.00. An appeal was brought before the CITT and by a decision rendered June 30, 2000, the CITT confirmed that the goods in issue do not qualify. [7] In its reasons, the CITT broke down tariff item No. 9908.00.00 into five distinct categories as follows: (1) utility vehicles, lorries and shuttle cars of certain headings for use in underground mining or in developing mineral deposits; (2) articles for use in equipment listed in (1); (3) articles for use in loading machinery for loading coal; (4) articles for use in loading machinery for loading minerals directly from the working face of a mine; or (5) articles for use in extracting machinery for extracting minerals directly from the working face of a mine. [8] The CITT found as a fact that the goods in issue are used in jumbo drills which in turn are used in hard-rock mining operations. Specifically, it found that jumbo drills allow holes to be drilled in the ore body so that explosives can be inserted and detonated thereby breaking up the ore body. [9] The CITT also appeared to accept that the word "extraction" as it is used in the mining industry has a wide meaning, i.e.: The process of mining and removal of coal or ore from a mine ... the separation of metal or valuable mineral from an ore, or concentrate .... extracting metal from ore, often expressed as a percentage (A Dictionary of Mining, Mineral and Related Terms, 1968). [10] However, the CITT held that the term "extracting machinery" cannot extend to all machinery used in the extraction process because if that were so, there would be no need for the fourth category identified in its reasons (articles for use in loading machinery for loading minerals directly from the working face of a mine) as it would be covered by the fifth category (articles for use in extracting machinery for extracting minerals directly from the working face of a mine). The CITT reasoned that in order to give meaning to all the terms of the tariff item, a more restrictive interpretation of the term "extracting machinery" had to be found. [11] In this respect, the CITT found that the term "extracting machinery" refers to a distinct machine that performs the function of extracting minerals on its own. As the evidence revealed that there was such a machine (the Continuous Miner), the CITT reasoned that its restrictive interpretation did not have the effect of rendering the fifth category empty of meaning. [12] The precise reasoning of the CITT appears at page 6 of its reasons: Accepting the appellant's definition of the extraction process as including the mining of the ore, the concentration or milling of the ore, smelting and refining, if the term "extracting machinery" were interpreted to mean all machinery used in the extraction process, there would be no need for the fourth category, as the loading machinery of the fourth category would be covered by the fifth category. In order to give meaning to all the terms of the tariff item, a more restrictive interpretation of extracting machinery is necessary. It is the Tribunal's view that the term "extracting machinery" refers to a distinct machine that performs the function of extracting minerals. The evidence before the Tribunal is that the Continuous Miner performs that function. Therefore, this interpretation of the tariff item does not render the fifth category, set out earlier, empty of meaning. It is the Tribunal's view that the jumbo drill does not perform the function of extracting minerals. The jumbo drill performs the function of a drill. It drills a hole which is then filled with explosives. The extraction function is not performed at this stage in the process. It is the Tribunal's view that any minuscule amount of minerals that is flushed out by the flushing medium during the drilling process is insufficient to change the characterization of the drill's function from one of a drill to one of an extracting machine. [13] The reasoning of the CITT for excluding the articles in issue from the ambit of tariff item No. 9908.00.00 is in my view clearly wrong, and cannot withstand the type of scrutiny which the "reasonableness simpliciter" standard of review calls for. A decision does not meet this standard if: ... in the main, [it] is not supported by any reasons that can stand up to a somewhat probing examination. Accordingly, a court reviewing a conclusion on the reasonableness standard must look to see whether any reasons support it. The defect, if there is one, could presumably be in the evidentiary foundation itself or in the logical processes by which conclusions are sought to be drawn from it. An example of the former kind of defect would be an assumption that had no basis in the evidence, or that was contrary to the overwhelming weight of the evidence. An example of the latter kind of defect would be a contradiction in the premises or an invalid inference. (Canada, Director of Investigation and Research v. Southam Inc., [1997] 1 S.C.R. 748 at para.56. See also para. 60 which equates the "clearly wrong" test to the standard of reasonableness simpliciter). [14] The uncontradicted evidence before the CITT was that in the context of mining, extraction is a process and all parties were agreed that this process encompasses the removal of ore from a mine and the steps required to isolate the mineral from the ore. It follows that in the absence of some limitation to be found in the tariff item, machinery used to extract minerals in the course of that process is "extracting machinery". This could include drilling machinery, excavating machinery, loading machinery, smelting machinery and refining machinery. [15] The only limitation to be found in the tariff item insofar as it relates to the articles in issue is with respect to the use of the extracting machinery. Amongst the categories identified by the CITT in its reasons, the fifth category (like the fourth) refers to machinery used "directly from the working face of a mine". It follows that in order to come within this category, the machinery must be put to this specified use. The drilling machinery in issue in this appeal met this requirement. [16] Nevertheless, the CITT held that a further limitation had to be inferred based on its view that if the term "extracting machinery" was interpreted to mean all machinery used in the extracting process, there would be no need for the fourth category as it would be covered by the fifth. In so holding, the CITT misconstrued the purpose of what it identified as the fourth category and erred in law when it held that the wording of this category had the effect of restricting the term "extracting machinery" to a machine that functions like the "Continuous Miner". [17] The third and fourth categories identified by the CITT in its reasons are comprised within commas which suggests that they should be read together. These categories deal with loading machinery and extend the benefits of tariff item No. 9908.00.00 to articles for such machinery when used for loading coal (category 3) or when used for loading minerals directly from the working face of a mine (category 4). [18] As can be seen, the loading machinery referred to in the third category is not restricted as to its place of use whereas the loading machinery referred to in the fourth category must, in order to qualify, be used "directly from the working face of a mine". It seems clear that the machinery in question is referred to in contradistinction so as to provide a broad exemption for that which is used for loading coal and a limited one for that which is used for loading other minerals. This particular treatment of loading machinery was not intended to modify or restrict the meaning of the term "extracting machinery" as the CITT concluded; it has a distinct and clearly identifiable purpose which the CITT did not appear to grasp. [19] In addition, the interpretation of the CITT rested entirely on its ability to find that there was a machine capable of extracting mineral in the manner envisaged by its reasons so that, in its own words, meaning could be given to the fifth category. In this respect, the CITT found as a fact that such a machine did exist in the form of the "Continuous Miner" and concluded that this was the only kind of machine contemplated by the fifth category. [20] This conclusion is untenable. First, as a practical matter, the framers of the tariff item could not have intended the term "extracting machinery" to refer to a particular machine the use of which is limited to coal or other soft-rock mining. The evidence before the CITT was that the majority of mining in Canada is hard-rock mining. An interpretation that excludes all extracting machinery used in the course of the bulk of mining operations conducted in Canada would have to flow from the clearest of language. Not only is such language missing, but the language that does appear embraces all extracting machinery, the only limitation being as to its place of use. [21] Second, the wording of tariff item 9908.00.00 did not allow for the conclusion reached by the CITT. Specifically, there is no reference in the English version of tariff item to the word "machine". The relevant expression is "machinery". [22] "Machinery" is defined as: machines, or their parts, taken collectively, the mechanism or works of a machine or machines ... The Shorter Oxford English Dictionary on Historical Principles (Oxford: Clarendon Press, 1973) at 1254. any collection or functioning unit of machines or mechanical apparatus; the parts of a machine, collectively... New Webster's Dictionary of the English Language (U.S.A.: Delair Publishing Company, Inc., 1981) at 571. [23] "Machine", on the other hand, is defined as: a more or less complex combination of mechanical parts, as levers, gears, sprocket wheels, pulleys, shafts and spindles, ropes, chains, and bands, cams and other turning, and sliding pieces, springs, confined fluids, etc., together with the framework and fastenings supporting and connecting them, as when it is designed to operate upon material to change it in some preconceived and definite manner ... Ingersoll-Rand Door Hardware Canada Inc. v. Minister of National Revenue (Customs and Excise) (1987), 80 N.R. 397 at 400 (F.C.A.) [being] comprised of a more or less complex combination of moving and stationary parts and works through the production, modification or transmission of force and motion. Canper Industrial Products Ltd. v. The Deputy Minister of National Revenue, (January 24, 1995), [1995] C.I.T.T. No. 6, AP-94-034, at 4. Spacesaver Corp. v. Canada (Deputy Minister of National Revenue - M.N.R.), (March 26, 1996), [1996] C.I.T.T. No. 92, AP-95-013, AP-95-073 & AP-95-078, at para 33. an apparatus, appliance, instrument .. an apparatus for applying mechanical power, consisting of a number of parts, each having a definite function ... any instrument for transmitting force, or modifying its application ... The Shorter Oxford English Dictionary on Historical Principles (Oxford: Clarendon Press, 1973) at 1254. an apparatus, consisting of interrelated parts with separate functions, and used in the performance of some kind of work; a mechanical apparatus or contrivance; something operated by a mechanical apparatus; ... a device which transmits and modified force or movement, as the lever, wedge, wheel and axle, pulley, screw, and inclined plane ... New Webster's Dictionary of the English Language (U.S.A.: Delair Publishing Company, Inc., 1981) at 571. [24] It is apparent from these definitions that the word "machinery" in contrast with the word "machine" means a collectivity of machines, rather than a single one. The same interpretation flows from the French version of the tariff which refers to the word "machines" in the plural. It follows that the word "machinery" (or "machines") in tariff item No. 9908.00.00 cannot be construed as referring to a single machine and that it was not open to the CITT to hold that the "Continuous Miner" was the only kind of machine which qualified. [25] The CITT therefore erred when it held that drilling machinery in issue in this appeal fell outside the ambit of the tariff item on the basis that the term "extracting machinery"excluded any extracting machinery which did not function the same way as the "Continuous Miner". Drilling holes on the working face of a mine so as to allow for the break up of the ore body though blasting is an integral part of the extraction process and the machinery used to perform this function is "extracting machinery" within the meaning of tariff item No. 9908.00.00. As the articles in issue were for use in this machinery, they qualify for the benefits which extend thereunder. [26] For these reasons, I would allow the appeal, set aside the decision of the CITT and determine that the drill rods and coupling sleeves imported by the appellants come within the meaning of tariff item No. 9908.00.00, the whole with costs in favour of the appellants. "Marc Noël" J.A. "I agree A.J. Stone J.A." "I agree K. Sharlow J.A."