Section 120

The respondent, which was the Quebec liquor marketing board, sought a full refund of the federal sales tax (imposed at a 19% rate) that was included in the cost of its alcoholic-products inventory on January 1, 1991, but instead was allowed only a rebate equalling the factor of 8.1% applied to the value of that inventory. ETA s. 120(3) provided that the Minister shall, on application of a registrant with “any tax-paid goods in inventory at the beginning of” January 1, 1991 (other than used goods) “pay to that person a rebate in accordance with subsections (5) and (8),” with s. 120(5) relevantly providing that such rebate was “the amount determined by a prescribed method using prescribed tax factors.” Ss. 3(b) and (c) of the Federal Sales Tax Inventory Rebate Regulations provided or a full rebate of the included sales tax, whereas s. 3(h) provided a rebate for goods not otherwise specified of 8.1% of their value.

After finding (at para. 45) that “subsection 3(h) is ultra vires in so far as it applies to alcoholic beverages,” and in concluding that the respondent was entitled to a rebate based on the 19% rate if tax actually imposed rather than the 8.1% rate in s. 3(h), Noël J.A. stated (at para. 68):

The purpose of the Act in this case is … clear. The Minister of Finance did not have the power to determine the amount of the rebates as he saw fit. He had to prescribe the factors most apt to provide for the refund of the taxes paid under the former Act for each category of goods. In the case of alcoholic beverages, this factor, in order to achieve that goal, had to be equivalent to the rate of the tax levied under the former Act. Accordingly, in my opinion, the Trial Judge was justified in concluding that the respondent was entitled to a rebate calculated on the basis of that rate, despite the regulatory vacuum.