Statutes ; Interpretation ; Applicant manufacturing tobacco for
export and for sale to Indians and bands located on reserves ; Applicant not selling tobacco to retailers outside reserve or to customers who
are required to pay taxes under Tobacco Tax Act ; Minister seeking
security from applicant under s. 12(2)(f.1) of Act in relation to permits
which authorized sale of unmarked fine cut tobacco for export and to
First Nations retailers ; Minister reasonably interpreting s. 12(2)(f.1)
as requiring applicant to provide security even though tobacco was not
intended to be sold in taxable transactions ; Tobacco Tax Act, R.S.O.
1990, c. T.10, s. 12(2)(f.1).
The applicant manufactured tobacco on a reserve for export and also produced
tobacco products for sale to “Indians” and “bands” located on “reserves”. It did not
sell tobacco to retailers outside reserves, and did not sell to consumers who were
required to pay taxes under the Tobacco Tax Act. The minister issued two
permits to the applicant, one authorizing the possession, storage and sale of
unmarked fine cut tobacco (“UFCT”) for export, and the other authorizing the
sale of UFCT to First Nations retailers. The minister required the applicant to
provide security in relation to those permits under s. 12(2)(f.1) of the Act. Taking
the position that the minister’s demand for security was unlawful because no tax
was payable on tobacco produced for export and for sale on reserves, the applicant applied for judicial review of the minister’s demand for security. The Divisional Court dismissed the application. The applicant appealed.
Held, the appeal should be dismissed.
The minister reasonably interpreted s. 12(2)(f.1) of the Act as requiring the
applicant to provide security.
Section 12(2)(f.1) of the Act is constitutionally valid because it is incidental to
a scheme of direct taxation within the province. The pith and substance of the
Act is plainly the imposition of a tax on the consumption of tobacco. This is direct
taxation within the province and falls squarely within provincial jurisdiction
under s. 92(2) of the Constitution Act. Section 12(2) of the Act requires the minister to demand security from some 12 classes of persons. This security is plainly
intended to provide a source of funds for any assessment made by the minister
for taxes, interest or penalties in the event of a contravention of the Act. This,
in turn, ensures compliance with the statute. The provision of security is not
itself a tax; it is a means of ensuring collection of amounts payable under the Act,
including taxes, interest and penalties.
Guindon v. Canada,  3 S.C.R. 3,  S.C.J. No. 41, 2015 SCC 41,
342 C.R.R. (2d) 254, 21 C.R. (7th) 23, 327 C.C.C. (3d) 308,  6 C.T.C. 1,
387 D.L.R. (4th) 228, 473 N.R. 120, 2015EXP-2269, J.E. 2015-1269, EYB 2015-
254987, 256 A.C. W.S. (3d) 78, consd
Other cases referred to
Atlantic Smoke Shops, Ltd. v. Conlon,  J.C.J. No. 1,  A.C. 550, 
4 D.L.R. 81,  3 W.W.R. 113,  C.T.C. 294 (P.C.); Bank of Toronto v.
Lambe,  J.C.J. No. 1, [1917-27] C. T.C. 82, 12 App. Cas. 575, 9 C.R.A.C. 296,
4 Cart. 7, 57 L. T. 377, 3 T.L.R. 742 (P.C.); Bomberry v. Ontario (Minister of Revenue)
(1989), 70 O.R. (2d) 662,  O.J. No. 989, 63 D.L.R. (4th) 526, 34 O.A.C. 17,
 3 C.N.L.R. 27, 2 T.C. T. 4234, 18 A.C.W.S. (3d) 115 (Div. Ct.); Canada Post
Corp. v. Hamilton (City) (2016), 134 O.R. (3d) 502,  O.J. No. 5368, 2016
ONCA 767, 403 D.L.R. (4th) 695, 57 M.P.L.R. (5th) 1, 271 A.C. W.S. (3d) 511;
Canadian Western Bank v. Alberta,  2 S.C.R. 3,  S.C.J. No. 22, 2007 SCC 22,