Section 299

During an audit of the appellant (Iris), CRA refused Iris’ requests for immediate payment of its refund claims, suspecting that Iris was participating in a “carousel” scheme (i.e., under which GST/HST is never remitted at the other end of the chain). Iris considered that the requirement in ETA s. 229(1) that net refund claims be paid “with all due dispatch” meant that it should be paid right away rather than awaiting the conclusion of the audit, and appealed the dismissal of its motion in the Federal Court, for an interim mandatory injunction to compel the payment of $62.3 million in GST/HST refunds, to the Court of Appeal.

Rennie JA endorsed the findings in Express Gold that “the obligation to pay a refund with all due dispatch did not displace the Minister’s obligation to verify that the refund is in fact payable under the ETA” (para.41) and that “’a reasonable interpretation of subsection 299(1) is that the Minister may choose to audit a claim for a net tax refund, in order to determine whether the amount is properly claimed’” (para. 42).

A partnership of which the appellant was a member was liable for unremitted GST given its improper reliance on the trade-in rule in s. 153(4). In finding that a direct assessment of the appellant as a partner of the partnership under the joint and several liability rule in s. 272.1(5) was valid, and (at para. 11) that it was "unnecessary to assess the partnership in order to assess a member of the partnership," Létourneau JA stated (at paras. 12-13)

…The tax debt arises not from the assessment but from the Act: see, by analogy under the Income Tax Act, Canada v. Riendeau, [1991] F.C.J. No. 559; The Queen v. Simard-Beaudry Inc. et al., 71 DTC 5511 (F.C.T.D.).

Furthermore, subsection 299(2) states that "liability under this Part to pay or remit any tax, penalty, interest or other amount is not affected by . . . the fact that no assessment has been made":

before going on to find that an assessment under s. 272.1(5) was directly authorized by s. 296(1)(e).

In its 3 June 1992 order appointing Coopers & Lybrand as the receiver-manager of an insolvent company (“Lundrigans”), the Newfoundland Supreme Court order “that no action, application or other proceedings…shall be taken against the Debtor…without the prior consent of the Receiver and Manager.” In finding that an assessment of Lundrigans a month later by the CRA for $1.3 million of GST did not violate this order, Osborn J stated (at p. 36-16):

The assessment, which is not to be confused with the demands, is issued by the… Minister…pursuant to subsec. 296(1)… . It represents a formal notification to the tax debtor of the amount asserted to be owing and breaks that amount down into taxes, interest, penalties and other specified categories. The assessment, of itself, does nothing other than provide information to the debtor. If nothing follows the assessment, it is of no legal consequence. …

In my view, the issuance of an assessment for GST is not an "action, application or other proceeding" within the contemplation of paragraph 8 of the Order.

After finding that CRA and ARQ could not use their statutory set-off rights to set off input tax credit and input tax refund claims generated by an insolvent company after it went into protection under the CCAA against (disputed) assessments made by them in which they denied ITCs and ITRs of $313 million that the company had claimed before the CCAA proceedings, Paquette J went on to state (at para. 122) that “the presumptions of validity and exigibility arising under tax statutes in favour of the Agencies are not applicable in the context of insolvency proceedings under the CCAA,” as such presumptions go against the principle of equality among creditors and the Crown's status as an unsecured creditor under the CCAA.