The appellant (“Hedges”) sold illegally produced dried marihuana to an intermediary (“BCCS”) which, in turn, sold it to individual members suffering from ailments. Although it was accepted by the Crown that the product was a “drug,” it was not zero-rated under Sched. VI-I-2(d) if it could “be obtained without a prescription or Ministerial exemption” (para. 4). Although Hedges and BCCS in fact had not been issued authorizations to possess marihuana (ATPs) by Health Canada, Hedges argued inter alia that the ATPs constituted “exemptions” permitting the sale of marihuana - so that marihuana did not come within this carve-out for drugs which could be sold without an exemption.
After first concluding (at para. 20) that “the zero-rated supply was intended to apply to certain drugs that could be legally sold to a consumer,” and noting (at para. 24) that “it would be illogical to tax a drug that may be lawfully sold to a consumer, (i.e., all the drugs captured by the carve out) but to exempt from taxation a drug that is not lawfully sold,” Rennie JA went on to reject the above argument, stating (at paras. 25, 29):
An ATP is an authorization…[and] is not an exemption.
… While holding an ATP may exempt one from the application of the criminal law, it is not an “exemption” as contemplated by fiscal legislation… .