National Importers Ltd. And Grantham Foods Ltd. v. Her Majesty the Queen, [1993] 1 CTC 227

Robertson, J.A.:—These two appeals arise from a decision of a learned trial judge wherein he dismissed the appellants' appeals with respect to certain notices of assessment issued by the Minister of National Revenue. Pursuant to those notices, the appellants were assessed as follows for taxes pursuant to the Excise Tax Act (R.S.C. 1985, c. E-15) for the years 1986 and 1987: (1) excise tax on the importation of bulk cooking wine (levied on the appellant “Grantham” only); and (2) federal sales tax on the sale of re-packaged cooking wine (levied on both "Grantham" and National").

The appellants were unable to persuade the trial judge that the cooking wine which had been imported and sold was not subject to the taxing provisions of that Act. That is the issue raised on these two appeals. However, it must be noted, at the outset, that we are dealing with the imposition of two distinct taxes under the Excise Tax Act, as it then read.

Excise tax

Section 24 of the Excise Tax Act imposes an“ "excise tax" on imported wine at a rate which varies with the alcoholic content thereof. For example, paragraph 24(1)(a) reads as follows:

24.(1) There shall be imposed, levied and collected the following excise taxes:

(a) a tax of one and seventy-nine one-hundredths cents per litre on wines of all kinds containing not more than one and two-tenths per cent of absolute ethyl alcohol by volume

[Emphasis added.]

Subsection 24(5) of the Act provides a broad, but inconclusive, definition for the term wine:

(5) In this section, "wine" includes spirituous liquors that are the products of fruits, vegetables, roots, herbs, grain, molasses, sugar or other fermentable substances and are obtained by the normal alcoholic fermentation of the juices or extracts therefrom and not by distillation.

[Emphasis added.]

The legal argument advanced by the appellants is premised on the fact that cooking wine is produced by adding 1.5 per cent salt by weight to non-vintage bulk wine. It is an accepted fact that the addition of salt renders the wine unfit to drink as an alcoholic beverage. This explains why in provinces such as British Columbia this particular product can be sold in grocery stores (see Liquor Control and Licensing Act, R.S.B.C. 1979, c. 237, section 62, which exempts cooking wine from the scheme of that Act because it is unfit for consumption as an alcoholic beverage). Thus, the appellants argue that the impotability of the product takes it outside the ambit of the taxing provisions outlined above. In other words, if this product cannot be regarded as a "beverage" or "drink" it cannot be described as wine. Rather, cooking wine must be looked upon as an ingredient to be mixed with or used in the preparation of food.

The learned trial judge rejected this argument on the basis that the Act does not include any reference to the potability of the wine, but only to its "spirituous nature"; that is, its alcoholic content and the method whereby it is extracted. In my opinion, the addition of salt to the product in question and the resulting impotability of the beverage does not detract from the fact that the appellants' cooking wine falls within the parameters of the relevant provisions. My reasoning is straightforward. First, and most importantly, it must be acknowledged that the excise tax is imposed "on wines of all kinds”. Second, wine is broadly defined to" include” spirituous liquors, products which are not normally considered wine. Third, the fact that wine is defined in such a manner as to "include" various substances indicates that the definition is not intended to be restrictive. Finally, the appellants have been unable to demonstrate that the interpretation being given to the term wine, insofar as the excise tax is concerned, is somehow contrary to the scheme of the Act or in conflict with another statutory provision.

Against this backdrop, I am not persuaded that Parliament intended a distinction to be drawn between wine which is or is not potable. The fact that it chose to include "wines of all kinds" is, in my opinion, conclusive with respect to this aspect of the appeal. Accordingly, the assessment in regard to the excise tax must be deemed valid. However, that determination is not necessarily applicable in regard to the "sales tax” provisions which establish an additional and separate framework for raising revenue.

Federal sales tax

The other tax imposed under the Act is labelled the "consumption or sales tax" (later to become the "GST"). It is imposed pursuant to section 27 and applies to all goods. The section makes specific reference to wines:

27.(1) There shall be imposed, levied and collected a consumption or sales tax at the rate prescribed in subsection (1.1) on the sale price or on the volume sold of all goods

(1.1) Tax imposed by subsection (1) is imposed

(a) in the case of wines and goods on which a duty of excise is imposed under the Excise Act, or would be if the goods were produced or manufactured in Canada, at the rate of eighteen per cent.

(6) In this section, "wine" has the meaning given that term by subsection 24(5).

However, certain goods are exempt from the blanket sales tax imposed by section 27. Section 29 provides that section 27 is inapplicable with respect to goods mentioned in Schedule 3. That schedule reads as follows:

SCHEDULE III

PART V

FOODSTUFFS

1. Food and drink for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food and drink), other than:

(a) wine, spirits, beer, malt liquor and other alcoholic beverages;

[Emphasis added.]

In my opinion, the appellants' argument that cooking wine is exempt from sales tax is unassailable. First, the above schedule makes specific reference to the potability criterion —"food and drink for human consumption". Second, even though wine becomes an exception to the exemption, wine is referred to along with "other alcoholic beverages". Finally, cooking wine can fairly and reasonably be regarded as falling within the exemption accorded food for human consumption in that sweetening agents, seasonings and ingredients to be mixed with food are also expressly exempted.

Conclusion

The appeal of "Grantham" (A-1156-91) should be allowed in part and the matter referred back to the Minister for reassessment on the basis that cooking wine is subject to the excise tax under section 24 of the Excise Tax Act, but is not subject to the federal sales tax under section 27 of that Act. With respect to this appeal, there should be no costs.

I would allow the appeal of "National" (A-1155-91) and refer the matter back to the Minister for reassessment on the basis that cooking wine is not subject to the federal sales tax under section 27 of the Act. This appellant should be entitled to costs in this Court and in the Court below.

Létourneau, J.A.:— I agree with the reasoning and the result, but I would like to add a few remarks concerning the excise tax on importation.

In common parlance, the word "wine" refers to an alcoholic beverage. There is uncontradicted evidence that cooking wine is obtained by the addition of salt to non-vintage wine and is therefore altered to the point of making it unfit to drink as a beverage. As my colleague Robertson, J.A. mentions, cooking wine can fairly and reasonably be regarded as an ingredient to be used in the preparation of food and therefore as food for human consumption. Were it not for the words "wines of all kinds" found in section 24 of the Act, I would have concluded that cooking wine is not taxable at all under the Excise Tax Act, whether it is under section 24 or section 27 of the Act, because it is not a wine in the common and usual sense of the word.

However, the definition of wine in subsection 24(5) and the use of the words “wines of all kinds" in section 24 reveal an intention on behalf of Parliament to levy a tax on all sorts of wines and not only on drinking wines that people are familiar with.

The definition of wine in subsection 24(5) includes wines such as palm wine, cherry, apple or potato wine, ginger wine, rice wine and dandelion wine to name but a few. The words "wines of all kinds" apply not only to table wines, but also to sacramental, medicinal and cooking wines. Having said that, I do not want, however, to be understood as saying that "wines of all kinds" cover anything that is made out of wine. There comes a time when a product originally made out of wine ceases to be wine. This is certainly the case with wine vinegar. The same could be said of a medicinal wine when the quantity of medicine in it transforms the original product into a medication notwithstanding it may still be loosely called "medicinal wine". [1] In the case at bar, I am satisfied that the addition of a quantity of salt to wine so as to make it a cooking wine, though such process alters the primary function of that wine as a beverage, does not change the fact that the end product remains wine, one of a kind among wines of all kinds.

Appeal allowed in part.