Date: 19980123
Docket: T-2393-97
BETWEEN:
ROTHMANS, BENSON & HEDGES INC.
Applicant
- and -
THE MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER
RICHARD J.:
NATURE OF THE PROCEEDINGS
[1] The moving party, the respondent Minister of National Revenue, seeks an order striking out the originating notice of motion and dismissing the within proceeding for want of jurisdiction, lack of standing, prematurity and abuse of the process of this Court.
[2] In the alternative the respondent seeks an order pursuant to Rule 1614 of the Federal Court Rules (the "Rules") extending the time limits prescribed in section Part V.1 of the Rules to allow, if necessary, an additional fourteen (14) days from the date of disposition of this motion in which to deliver the respondent's affidavit(s) pursuant to Rule 1603(3) together with leave to raise jurisdictional issues on the return of the application for judicial review.
[3] In support of the motion to strike, the moving party relied on the court record consisting of the applicant's (respondent on this motion to strike) originating notice of motion filed November 6, 1997, and the supporting affidavit of Larry Bowen, the Vice President of Leaf and Product Development at Rothmans, Benson & Hedges Inc. (RBH), sworn November 6, 1997.
[4] The originating notice of motion is made under the provision of section 18 of the Federal Court Act, and under Rules 1600 et seq. for relief as set out in the originating notice of motion, as follows:
| (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 RSC 1985, c. E-14. |
| (b) Its costs of this application for judicial review; and |
| (c) Such other relief as may appear just and appropriate to this Honourable Court. |
[5] The affidavit of Larry Bowen specifies that:
| RBH is applying for judicial review of certain rulings made by the respondent, the Minister of National Revenue ("Revenue Canada"), communicated to RBH via letter dated 7 October 1997, from Mr. Jean-Francois Abgrall, Deputy Director General, Excise Duties and Tax Directorate (the "Abgrall Letter"), and confirmed, after review, in an undated letter from Mr. Denis Lefebvre, Assistant Deputy Minister, Policy and Legislation Branch to Mr. D. P. Gracey of C. G. Communications received on 30 October 1997 (the "Lefebvre Letter") (together, the "Decision"). Attached to my affidavit as Exhibit "A" is a copy of the Abgrall Letter. Attached to my affidavit as Exhibit "B" is a copy of the Lefebvre Letter. |
BACKGROUND
[6] On September 16, 1997, the applicant met with Revenue Canada, Customs, Excise and Taxation ("Revenue") in order to present to Revenue four samples of prototype tobacco products. The applicant advised Revenue that it was presenting the four samples in order to discern more clearly where Revenue would draw its line of demarcation between products included under the statutory definitions of "cigarette" and "tobacco stick" in the Excise Act, R.S.C. 1985, c. E-14, section 6 and the Excise Tax Act, R.S.C. 1985, c. E-15, section 2.
[7] The rates of excise duty and excise tax for tobacco sticks are approximately one-third lower than for cigarettes.
[8] Among the four samples presented to Revenue by the applicant was Product "A" which was, for all intents and purposes, identical to a new product kit which the applicant believed was about to be introduced by a competitor, Imperial Tobacco Ltd. ("Imperial").
[9] On September 18, 1997, the applicant followed up on its earlier meeting with representatives of Revenue by sending a letter in which it requested that Revenue provide an advance ruling for each of the four samples that had been demonstrated at the meeting. Within this letter, the applicant made representations as to why Product "A" fell within the definition of "cigarette" rather than that of "tobacco stick" for purposes of establishing appropriate rates for duties and taxes under the Excise Act and the Excise Tax Act.
[10] At the meeting and in its letter of September 18, 1997, the applicant gave no indication that it intended to develop a product resembling any of the four samples.
[11] Imperial did not participate in the initial meeting between the applicant and Revenue, and did not join the applicant in requesting that Revenue provide advance rulings on each of the four samples. In its written request for rulings the applicant warned Revenue that the "letter and enclosures contain proprietary strategic business information, and therefore, are not to be released to any third-party under any circumstances under the Access to Information Act".
[12] The applicant currently holds a patent on a product which has been the sole product satisfying the definition of "tobacco stick" under the Excise Act. The applicant's product has been taxed and priced accordingly and generates substantial annual sales for the applicant, exceeding $41 million annually. The applicant has an essential monopoly over this segment of the Canadian tobacco market.
[13] On October 7, 1997, Revenue complied with the applicant's request for an advance ruling on whether the four samples would be regarded as a "tobacco stick" or "cigarette" if they were put on the market. Revenue gave its opinion that two of the four samples, including Product "A" which was the same as the Imperial product, required further preparation in order to be rendered smokeable and thus constituted tobacco sticks rather than cigarettes. The other two samples were regarded by Revenue as being cigarettes.
[14] Upon receiving this interpretation, the applicant sought to have more senior officials at Revenue overrule the opinion delivered by the officers who participated in the first meeting with representatives of the applicant. Senior management at Revenue confirmed the interpretation made by their officials.
[15] In its written submission in answer to the moving party's motion to strike counsel for the applicant acknowledged that the applicant requested Revenue to provide to it an advance ruling as to the taxable nature of four types of tobacco products.
[16] The applicant now seeks to have this Court quash the advance ruling made by Revenue.
[17] The applicant characterizes this action as a decision.
ISSUES
[18] The moving party raised three issues at the hearing of the motion to strike the applicant's originating notice of motion:
| (a) does the ruling given by Revenue constitute a decision reviewable under section 18.1 of the Federal Court Act? |
| (b) if so, does the applicant have a sufficient genuine interest so as to confer standing and thereby engage the jurisdiction of this Court to review the interpretation given by Revenue? |
| (c) the proceeding is an abuse of the process of this Court. |
GOVERNING PRINCIPLES
[19] 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. |
[20] 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. |
[21] 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.
[22] A further question may arise as to whether the applicant is directly affected by the matter in respect of which relief is sought under section 18.1 of the Federal Court Act.
ANALYSIS
[23] In its letter of September 18, 1997, the applicant asked Revenue "for advance rulings" for each of the four products that were enclosed in prototype form.
[24] In its letter of reply dated October 7, 1997, Revenue, after stating that it had examined the samples and considered the definitions of the Excise Act, concluded as follows:
| Therefore, it clearly appears that for purposes of the Excise Act, Products A and B meet the definition of a "tobacco stick" while Products C and D are "cigarettes". The definition of a tobacco stick under the Excise Tax Act refers to the Excise Act meaning, and so the same ruling would apply for excise tax purposes. |
[25] In response to a further letter from the applicant, the Assistant Deputy Minister wrote to the applicant on October 30, 1997, to say that he had reviewed this issue in great detail with officers who were involved in the initial decision regarding a recent ruling on a tobacco stick product and that he had recommended that the original decision be upheld and that the product in question be ruled to be tobacco stick. He added that Revenue would closely monitor the manner in which tobacco sticks are consumed and if it becomes evident that persons are effectively smoking these sticks without affixing the filter cover, the Department would then be justified in reversing the ruling and requiring that these products be taxed at the same rate as fully manufactured cigarettes.
[26] Clearly, both the applicant and Revenue considered the matter to be an advance ruling based on a prototype submitted by the applicant. The fact that the Assistant Deputy Minister also used the word "decision" in the correspondence does of itself not transform the action taken by Revenue into a decision within the meaning of section 18.1 of the Federal Court Act. In the same letter, the Assistant Deputy Minister warned that the ruling may be reversed.
[27] The moving party recognizes that, as a matter of policy, the Department will respect an advance tax ruling. However, the Department's advance rulings and technical interpretations have no binding legal effect1 and the Department would not be estopped by its ruling2. A taxpayer must prove that it meets the requirements of the legislation on its own terms; the Minister's tax treatment of its competitors cannot assist it3.
[28] The advance ruling does not grant or deny a right, nor does it have any legal consequences4. It does not have the legal effect of settling the matter or purport to do so. It is at the most a non-binding opinion. Moreover, there is no evidence that any tax has been levied on a product corresponding to the prototype of the product in the advance ruling.
CONCLUSION
[29] I have therefore concluded that the ruling in the letter from Revenue is not a "decision" within the meaning of section 18.1 of the Federal Court Act.
[30] Since the jurisdiction of the Court ratione materiae depends on whether there is a "decision" within the meaning of section 18.1 of the Federal Court Act, the motion to strike is granted.
[31] Accordingly, in these exceptional circumstances, the applicant's originating notice of motion is struck out and the within proceeding is dismissed without costs.
__________________________
Judge
Ottawa, Ontario
January 23, 1998
__________________1 Owen Holdings Ltd. v. The Queen, [1997] D.T.C. 5401 at 5404 (F.C.A.).
2 Woon v. Minister of National Revenue [1950] 50 D.T.C. 871 at 875 (Ex.); Rothmans Ltd., et al. v. Minister of National Revenue, et al. [1976] C.T.C. 332 at 338 (F.C.T.D.).
3 Ford Motor Co. of Canada Ltd. v. Minister of National Revenue, [1997] 212 N.R. 275 at 289.
4 See Demirtas v. Canada , [1993] 1 F.C. 602 and Singh v. Canada, (1994), 82 F.T.R., 68 at 71.