FCA dismisses appeal of telco and cross-appeal of Minister of National Revenue
Iris Technologies Inc. has called a recent decision by the Federal Court of Appeal a win for taxpayers, in spite of the dismissal of its motion for an interim mandatory injunction.
In Iris Technologies Inc. v. Canada (National Revenue), s, the appellant, a long-distance telecommunications service provider, filed an application for mandamus in the Federal Court, seeking to compel the assessment and release of GST/HST refunds that the Minister of National Revenue had withheld for certain reporting periods subject to an ongoing audit.
The appellant argued that the withholding of refunds had severe impacts on its financial position. The appellant also filed a motion for interim relief, asking for the release of $62.3 million in GST/HST refunds on the grounds that this would help it continue its business operations.
The minister made reassessments and additional assessments that resulted in a balance of about $52 million, inclusive of interest and penalties for gross negligence, owed in favour of the minister. The minister also filed a motion to strike the appellant’s motion for interim relief and the underlying judicial review application on the basis of mootness.
The Federal Court dismissed both the appellant’s motion for interim relief and the minister’s motion to strike. The appellant then brought the current appeal before the Federal Court of Appeal, while the minister cross-appealed.
The FCA dismissed both the appellant’s appeal and the Minister’s cross-appeal. On the issue of mootness, the court said that the evidence adduced, as well as the fresh evidence introduced, showed there was a live controversy between the parties and an ongoing dispute regarding the appellant’s alleged entitlement to GST/HST refunds.
The appeal court agreed with the Federal Court’s finding that the appellant had failed to show a strong prima facie case for mandamus, which would entitle it to interim relief. For this, the appeal court cited the test for granting an order of mandamus in Apotex Inc. v. Canada (Attorney General), 1993 CanLII 3004 (FCA), [1994] 1 FC 742.
The first two requirements of the Apotex test were met because it had been shown that the minister had a public legal duty to act under the Excise Tax Act, and that the minister owed this duty to the appellant, said the FCA. However, the appellant’s clear right to the performance of the Minister’s duty had not been established, it said.
The appeal court also affirmed the Federal Court’s jurisdiction over the case, stating that it retained jurisdiction over the “application of administrative law principles and obligations to the exercise of discretion by the Minister in the application of the ETA.” The court disagreed with the Minister’s argument that the issuing of notices of assessments had ousted the Federal Court of jurisdiction.
Samer Bishay, president and chief executive officer at Iris Technologies, called the appellate court’s decision a victory. “Yes, we wanted interim relief, but this is still a win because the Federal Court will hear our case, and whenever the CRA uses these aggressive and intimidating tactics on other taxpayers, our case will be cited,” Bishay said.
While the government might express its concerns and support for employers during the COVID-19 pandemic, the Canada Revenue Agency appeared “bent on choking us, an essential service provider and lifeline, on a suspicion about other companies’ compliance with the Excise Tax Act,” Bishay said.
“The fight is not over yet, but the court has certainly sent a message to all taxpayers being harassed and wrongfully accused by the CRA,” Bishay concluded.
