Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
[Addressee]
Canada Revenue Agency
Legislative Policy and
Regulatory Affairs Branch
Excise and GST/HST Rulings Directorate
Excise Duty Operations Unit - Tobacco
20th Floor, 320 Queen Street
Ottawa, Ontario K1A 0L5
Case Number: 78967
Business Number: [...]
March 2, 2011
Dear [Client]:
Subject:
EXCISE RULING
Federal Excise Duty on Tobacco Products used in Research, Development, or Testing
Thank you for your letter of March 16, 2006, [...] concerning excise duty paid on tobacco products manufactured at the [...] [(Company)] plant in [City 1, Province X], which are diverted to a [Company] facility in [City 2, Province Y] or to third party facilities for research, development, or testing. I would also like to thank you for our recent conversation on this subject and apologize for the delay in providing you with a response.
All legislative references are to the Excise Act, 2001 (the Act) unless otherwise specified.
Statement of Facts
Based on your correspondence of March 16, 2006, we understand that:
1. [The Company] manufactures tobacco products at its plant in
[City 1, Province X].
2. All tobacco products manufactured at the [City 1] plant are packaged and stamped before they are removed from the plant.
3. Most of these products are distributed for retail sale, but some are diverted to a [Company] facility in [City 2, Province Y] or to third party facilities for research and development, quality testing and improvement, cigarette combustion testing, and government-mandated testing (we will refer to these activities collectively as "testing").
4. Tobacco products diverted for testing are fully consumed during the testing process.
5. [The Company] has historically absorbed the federal excise duties paid on tobacco products diverted for testing.
Ruling Requested
You would like to know whether there is any recourse for the excise duty paid on tobacco products manufactured, packaged, and stamped by [the Company] at its [City 1] plant that are subsequently diverted to other facilities for testing.
Ruling Given
Based on the facts set out above, we rule that there is no recourse for the federal excise duty paid on tobacco products manufactured, packaged, and stamped by [the Company] at its [City 1] plant that are subsequently diverted to other facilities for testing.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Services. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal, that no future change to the Act, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Section 181 of the Act permits the refund of "duty paid on a tobacco product that is re-worked or destroyed by the tobacco licensee in accordance with section 41 if the licensee applies for the refund within two years after the tobacco product is re-worked or destroyed." Subsection 41(1) allows for the re-working or destruction of a tobacco product "in the manner authorized by the Minister".
Tobacco products used for testing as detailed above would not be considered to be destroyed or re-worked for the purposes of subsection 41(1) and thus [the Company] would not qualify for a refund in respect of such products under section 181. Further, the Act does not provide for any other refund that could potentially apply in these circumstances. Consequently, there is no recourse available to [the Company] under the Act for the federal excise duty paid on packaged, stamped tobacco products that are diverted for testing.
Should you have any further questions or require clarification with respect to any of the issues discussed in this letter, please do not hesitate to call me directly at (613) 957-1140.
Yours truly,
Neil Varan
Excise Duty Operations Unit - Tobacco
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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