Date: 19980414
Docket: T-241-98
BETWEEN:
ROTHMANS, BENSON & HEDGES INC.
Applicant
- and -
THE MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER
TEITELBAUM J.:
[1] On February 12, 1998, Rothmans, Benson & Hedges Inc. (Rothmans) filed into the Federal Court Registry an originating notice of motion for the purpose of obtaining:
| (a) An order quashing the decision of the Minister of National Revenue that certain tobacco products meet the definition of "tobacco stick" set out in the Excise Act, R.S.C. 1985, c.E-14, s.6 and the Excise Tax Act, R.S.C. 1985, c.E-15, s.2; |
[2] According to the said motion, the decision referred to is in respect of a decision of the Minister of National Revenue (Minister) that a product sold by Rothmans in Canada under the trade-mark Mark Ten Presto Pack meets the definition of "tobacco stick" set out in the Excise Act and Excise Tax Act. The decision was allegedly made by the Minister on January 30, 1998 "in accepting, without further comment at the time or thereafter, payment by the applicant of tax and duty on said product as if it were a "tobacco stick"."
[3] The grounds for the said motion, as stated by Rothmans in its originating notice of motion are:
| (a) Revenue Canada erred in law and acted beyond its jurisdiction in making the Decision, and based the Decision on an erroneous finding of fact that it made in a perverse or capricious manner or without regard to the material before it because: |
| (i) It based the Decision on an incorrect and unreasonable interpretation of the definition of "tobacco stick" contained in the Excise Act, R.S.C. 1985 c.E-14 (The "Excise Act") and, by incorporation by reference with the Excise Tax Act, RSC 1985, c.E-15, s.2 (the "Definition") that does not require further preparation of the product for it to be consumed (i.e., smoked); |
| (ii) It based the Decision in whole or in part on the irrelevant consideration of Revenue Canada's own "view" of how the product will be consumed; |
| (iii) Further, and in the alternative to grounds (i) and (ii), it based the Decision on erroneous findings of facts, namely, that the products in question could not be consumed (i.e., smoked) as is and that the products will be further prepared before being smoked; |
| (iv) The Excise Act, supra, the Excise Tax Act, supra, the Department of National Revenue Act, R.S.C. 1985, c.N-16, and the Federal Court Act, R.S.C. 1985, c.F-7 (sections 18 and 18.1). |
| (b) RBH is directly affected by the Rulings. The Rulings misinterpret the category of "tobacco stick"; |
[4] It is most important to note that Rothmans speaks of quashing a decision of the Minister that is made by virtue of the Minister "accepting without comment ... payment by the applicant (Rothmans) of tax and duty on the said product (that sold by Rothmans) as if it were a "tobacco stick"."
[5] What Rothmans alleges is that by the mere fact that the Minister accepted and cashed a cheque forwarded to the Minister by Rothmans for payment of Excise taxes on a product sold by Rothmans as a "tobacco stick". The Minister decided the product was a "tobacco stick".
[6] It must also be noted that it was Rothmans itself that, in sending in the taxes and duties owing for "tobacco sticks" believed the product sold by them was a "tobacco stick". Surely if Rothmans had thought the product sold by them was not a "tobacco stick" but a "cigarette" it would if, pursuant to the Excise Act and Excise Tax Act, sent in the taxes due on "cigarettes" which is substantially higher than those excise taxes due for "tobacco sticks".
[7] In any event, after Rothmans filed its notice of motion, the Minister, on March 13, 1998, filed a notice of motion into the Federal Court Registry for the following relief:
| 1. That the Originating Notice of Motion herein be struck out and the proceedings dismissed as being so clearly improper as to be without any possibility of success in that the Applicant's position is grounded upon a legal absurdity, and that the proceedings are beyond this Court's jurisdiction and otherwise constitute an abuse of the process of this Court. |
| 2. In the alternative, if the relief requested in paragraph 1 is denied, for an Order extending the time limits prescribed in Part V.1 of the Rules to allow an additional fourteen (14) days from the date of disposition of this motion or such other period as this Court may deem appropriate together with leave to raise jurisdictional issues on the return of the application for judicial review. |
[8] To better understand the Minister's motion to strike, I believe it necessary to list the grounds for the motion as given by the Minister in the motion to strike.
| 1. The Applicant is seeking to have this Court quash a "decision" which it contends results from the silence of Revenue Canada following the Applicant's payment of excise duties and taxes on its tobacco product. |
| 2. The Applicant has "marketed" one case of a product labelled "Mark Ten Presto Pak" and has paid excise duties and taxes on that case of tobacco products. The Applicant has calculated and paid excise duties and taxes at the tobacco stick rate and not at the cigarette rate. |
| 3. Tobacco sticks enjoy a lower rate of excise duty and taxation than do cigarettes. |
| 4. In the Fall of 1997, the Applicant's competitor, Imperial Tobacco Ltd. ("Imperial"), introduced a product which is, for all intents and purposes, the same as the Mark Ten Presto Pack product. The Applicant sought and received rulings from Revenue Canada in respect of prototypes of this and other products and applied by Originating Notice of Motion to this Court for judicial review of the ruling related to the prototype product identical to the Imperial one. The Respondent successfully brought a motion to strike the Originating Notice of Motion upon the basis that the ruling was not a "decision" within the meaning of section 18.1 of the Federal Court Act. |
| 5. The core of the Applicant's position in both this and the prior proceeding is that its competitor's product should be subject to higher rates of excise duty and taxes in order that the Applicant's monopoly position in this segment of the tobacco market be preserved. |
| 6. After unsuccessfully attempting to enlist this Court in its marketplace struggle by attempting to have judicially reviewed the "advance rulings" from Revenue Canada, the Applicant has now reframed its position to effectively require this Court to impose a higher level of excise duty and taxation than that remitted to Revenue Canada. |
| 7. The mere payment by a taxpayer of duty and taxes upon manufactured products does not imply any decision on the part of Revenue Canada. In a self-assessing system of taxation, liability for taxes (and duties) arises by application of law upon facts particularly within the knowledge of the taxpayer. |
| 8. However, even assuming, arguendo, the existence of a 'decision' on the part of Revenue Canada, the position of the Applicant is grounded upon a legal absurdity: increasing the levels of duties and taxes upon its own manufactured product. This Court is without jurisdiction to do so. |
| 9. Similarly, this Court cannot increase the rates of taxation upon the product produced by the Applicant's competitor. Such a request is outside the jurisdiction of this Court, is improper, and constitutes an abuse of the Court's process. |
| 10. Accordingly, the within proceeding is clearly improper and entirely without any possibility of success and ought to be dismissed. |
[9] It is a fact that Rothmans marketed one case of a product labelled "Mark Ten Presto Pak" and paid excise duties and taxes on that case to the Minister. The duties and taxes were calculated and paid for by Rothmans at the tobacco stick rate and not the cigarette rate and which rate is lower than the rate for cigarettes. The product "Mark Ten Presto Pak" is "for all intents and purposes" the same product as that sold by Rothmans competitor Imperial Tobacco Ltd. Before Rothmans marketed its "Mark Ten" product it sought and received a ruling from the Minister that the prototype of the Mark Ten product which, as I have said, is virtually identical to the Imperial Tobacco product was a tobacco stick. Rothmans not being satisfied with the ruling filed a judicial review application pursuant to section 18.1 of the Federal Court Act to have this "decision" quashed.
[10] Mr. Justice Richard, on January 23, 1998, allowed a motion to quash brought by the Minister. Mr. Justice Richard decided that a ruling is not a "decision" subject to judicial review. (see exhibit "e" to affidavit of Larry Bowen dated February 11, 1998)
[11] I am satisfied that Rothmans, by bringing its originating notice of motion, wants the Minister to subject Rothmans Mark Ten Presto Pak product to the "cigarette" rate of duties and taxes under the Excise Act and Excise Tax Act and not to be "taxed" as a tobacco stick and this, so as to compel the Minister to "tax" Imperial Tobacco's product as a "cigarette" and not as a tobacco stick.
[12] This, I believe, is an obvious conclusion to come to. Why else would Rothmans want its Mark Ten Presto Pak product to be "taxed" at a higher rate?
The Issues
[13] I am satisfied, from the facts of this case, the following are the issues to be decided:
1) Is there jurisdiction in the Court to entertain a motion to strike out and dismiss an originating notice of motion? Put another way, the issue is to determine whether the Minister has demonstrated that the originating notice of motion filed by Rothmans is wholly without merit so as to be struck out without a hearing on the judicial review?
2) Does the silence of the Minister following remittance of excise duty and taxes by Rothmans upon its case of tobacco product constitute a "decision or order" reviewable under sections 2 and 18.1 of the Federal Court Act; and
3) As stated by the Minister, "is the subject matter of the originating notice of motion properly within the jurisdiction of this Court and does it otherwise constitute an abuse of this Court's process"?
1) Does this Court have jurisdiction to entertain a motion to strike out and dismiss an originating notice of motion?
[14] To answer the above issue, I can do no better than to quote Mr. Justice Richard from the case of Rothmans, Benson & Hedges Inc. v. The Minister of National Revenue, T-2393-97, January 23, 1998 at pages 6 and 7:
| The principles governing a motion to strike out an originating notice of motion are set out in a decision of the Federal Court of Appeal indexed as David Bull Laboratories (Canada) Inc. v. Pharmacia Inc., reported in [1995] 1 F.C. 588, where Strayer, J.A. stated at pages 596-597 that: |
| ... the direct and proper way to contest an originating notice of motion which the respondent thinks to be without merit is to appear and argue at the hearing of the motion itself. |
| In that case, he held that the ultimate adequacy of the allegations and evidence must be addressed by the judge hearing the application for prohibition on its merits. However, he added at page 600: |
| ... This is not to say that there is no jurisdiction in this Court either inherent or through Rule 5 by analogy to other rules, to dismiss in summary manner a notice of motion which is so clearly improper as to be bereft of any possibility of success. Such cases must be very exceptional and cannot include cases such as the present where there is simply a debatable issue as to the adequacy of the allegations in the notice of motion. |
| The jurisdiction of the Trial Division to hear and determine the applicant's application for judicial review depends on how the action taken by officers of Revenue is categorized: is it a decision within the meaning of section 18.1 of the Federal Court Act. |
[15] I take the above to mean, that it is only in exceptional cases that a Court would strike an originating motion on a motion to strike and it would have to be plain and obvious that the case is beyond doubt before such an application to strike would be granted.
2) Is it plain and obvious and beyond doubt that the originating notice of motion for judicial review is without merit?
[16] With the utmost of respect that this Court has for counsel for Rothmans, I am satisfied that Rothmans cannot succeed with its originating notice of motion as I am satisfied that it cannot be assumed that because the Minister received a cheque for excise duties and taxes for an item described by Rothmans as a tobacco stick and cashed the said cheque without doing or saying anything else, that the Minister made a decision subject to judicial review. What Rothmans is really saying, is that the mere fact that the Minister accepted and cashed the cheque sent to the Minister indicates a decision by the Minister that the product for which the taxes and duties were paid is a tobacco stick.
[17] I cannot accept such a proposition. I cannot accept that because the Minister, after cashing Rothmans' cheque and failed to contact Rothmans, this fact can be deemed a decision that the product is a tobacco stick. There is nothing in the law to prevent the Minister from notifying Rothmans to request that duties and taxes be paid at the cigarette rate. Failure to act by the Minister in the facts of this case cannot be conceived as a decision of the Minister that is subject to judicial review pursuant to section 18.1 of the Federal Court Act.
[18] Therefore, in the circumstances of this case, when would Rothmans expect to receive a "decision" subject to be reviewed pursuant to section 18.1 of the Federal Court Act?
[19] I would agree with the submissions of counsel for the Minister when he states that there is no decision that can be made under the present circumstances that is subject to review. That is to say, there cannot be issued a decision that would be subject to judicial review if no amounts of duties and taxes are being claimed by the Minister.
[20] I am satisfied that, as with a nil assessment under the Income Tax Act, when no duties and taxes under the Excise Act or Excise Tax Act are being claimed, then there is no "decision" issued by the Minister subject to review.
[21] The application to strike is allowed.
"Max M. Teitelbaum"
J.F.C.C.
OTTAWA, ONTARIO
April 14, 1998