Mark Anthony – Tax Court of Canada chooses the significantly, rather than hugely, absurd interpretation permitted by the text of an excise exemption

Mark Anthony’s Canadian production of alcoholic beverages included cider which was fermented from Canadian apples but had some concentrate from non-Canadian apples that had been added after fermentation. CRA denied an excise duty exemption for “wine” (which was defined so as to include cider) that was “produced in Canada and composed wholly of agricultural or plant product grown in Canada.” The CRA position was that the quoted test required that, at the time of packaging, all of the agricultural or plant products in the wine had been grown in Canada, so that the addition of the foreign juice after fermentation but before packaging put the cider offside.

Graham J found that the text of the quoted test required that, at the time of testing, all the ingredients in the cider or other wine must be agricultural or plant product grown in Canada – so that if the time of testing is the packaging, the previous addition of even economically-trivial additives -such as preservatives, colouring, carbonation or water - which were not plant products, would scupper the exemption. To avoid this extremely absurd result, Graham J determined that the time of applying the quoted test was the time of fermentation. However even this approach produced results which Parliament would not have intended (i.e., the better of the two interpretations still was absurd). It would mean, for example, that spirits could be imported free of duty on the basis that they would be used to fortify a domestically-produced wine, even though the resulting fortified wine was 1% wine and 99% imported spirits. Furthermore, the addition of (non-Canadian) sugar during the fermentation process would likely deny the exemption.

Neal Armstrong. Summary of Mark Anthony Group Inc. v. The Queen, 2017 TCC 141 under Excise Act, 2001, s. 135(2)(a).