Executive summary: key legal and evidentiary issues

• Twisted Leaves Ltd., a tea-selling corporation, sought a declaration that its Notice of Objection was effective after the Minister assessed net GST payable of $23,204.43 for the 2020 reporting period following the company's failure to file during the COVID-19 pandemic.

• An adjustment request was erroneously filed instead of a proper Notice of Objection, and the filing date of that request remained undetermined throughout the proceedings.

• The central dispute concerned whether the Applicant's electronic filing of an application for an extension of time to object was made before the statutory deadline of August 29, 2024, despite the TCC Registry stamp showing November 12, 2024.

• Credible oral testimony from the Applicant's owner, supported by an email from the accountant dated August 20, 2024, was assessed against the absence of an acknowledgment of receipt from the Court.

• Rule 4.2 of the Tax Court of Canada Rules distinguishes between "deemed" and "presumed" filing dates, with the electronic filing date deemed to be the date on the Court's acknowledgment of receipt rather than the Registry stamp.

• The Court invoked Rule 19(3) and the interests of justice to dispense with strict compliance, finding that denying access over a missing acknowledgment would undermine public confidence in the adjudicative process.

Background and the COVID-19 impact on Twisted Leaves Ltd.

Twisted Leaves Ltd., represented by its owner, Ehsan Movasaghi, is a corporation that sells tea, which is classified as a zero-rated supply under the Excise Tax Act, s 123(1), Schedule 4, Part III:1. While zero-rated supplies are subject to GST at 0%, suppliers of zero-rated supplies are entitled to claim full input tax credits on their expenses. The corporation was registered for GST for this purpose and was an annual filer. In 2020, the Applicant experienced considerable financial difficulties due to the COVID-19 pandemic. All of its stores were closed, and it lost all of its employees, including its accountant. Consequently, Twisted Leaves Ltd. did not file its annual GST return for the period ending December 31, 2020.

The Minister's assessment and the Applicant's procedural missteps

On September 16, 2021, the Minister of National Revenue assessed the Applicant for the 2020 reporting period, determining net GST payable of $23,204.43, exclusive of interest and penalties. The Court noted that in issuing the assessment, the Minister may well have estimated the Applicant's sales and input tax credits by reference to the prior year, and the Minister may well have assumed that the Applicant's sales are subject to GST at the full rate, notwithstanding that it sold tea, a zero-rated supply. Instead of filing a proper Notice of Objection, the Applicant erroneously submitted an adjustment request. The precedent in Schneidmiller v R, 2009 TCC 354 established that an adjustment request can constitute a timely Notice of Objection if submitted before the deadline to file a Notice expired, but in this case, the evidence did not disclose when that request was submitted. The Applicant did not specify the filing date in its pleadings or testimony, and the Respondent's documentation disclosed only when the adjustment request was denied — not when it was received by the Agency. The Minister denied the adjustment request on September 9, 2022.

The extension of time application and the filing date dispute

The deadline to file a Notice of Objection under s 301(1.1) was December 15, 2021, and the deadline to ask the Minister for an extension of time to object under s 303 was December 15, 2022. On June 25, 2024, the Applicant filed a Notice of Objection, which the Minister refused to accept on July 30, 2024, also denying an extension of time. This triggered a deadline of August 29, 2024 for the Applicant to apply to the Tax Court of Canada for an extension of time under s 304(1). The TCC Registry stamp on the application showed a date of November 12, 2024, well past the deadline. However, unlike the precedent in Popovich v R, 2024 TCC 44, where the application was filed by fax engaging Rule 4.2(a), the present application was filed electronically, engaging Rule 4.2(b). This meant the filing date was deemed to be the date shown on the acknowledgment of receipt emailed by the Court to the Applicant, not the date on the stamp placed by the Registry on the documents. The Applicant was unable to produce this acknowledgment of receipt.

Credibility of oral testimony and evidentiary principles

The Applicant tendered an email from its accountant dated August 20, 2024, indicating that the application for an extension of time had been prepared on that date — nine days before the statutory deadline. The Court found Mr. Movasaghi credible in his testimony as to the transmission of the application and reliable in his assertion that he did forward the appropriate document within the time limits. The Court observed that it was more likely than not that the application was electronically filed on or shortly after August 20, 2024, noting that the Applicant's owner was impressive in his belief that no such financial penalty might arise given the rules, and that his indignant perspective led him to act on the very day he received material from his accountant. In reaching this conclusion, the Court relied on established case law including Abramson v MNR, [1992] T.C.J. No. 786, which held that when a document is unavailable, credible and compelling oral evidence can prove a fact on the balance of probabilities, though the evidence must be credible, clear, and strong. The Court also drew on Benjamin v R, 2006 TCC 69, for the guidance that it is not the policy of the Court, unless the taxing statute specifically requires it (as in the case of charitable donations), to require documentation to support an expense, a payment or a deduction, and that if a taxpayer makes out a prima facie case unrefuted by the Crown, the taxpayer should win. Additionally, Lesnick v R, 2008 TCC 522, provided that a highly probable event can be proven with weaker evidence than an improbable event.

The interests of justice and Rule 19(3)

The Court further considered Rule 19(3), which provides that the Court may, where and as necessary in the interests of justice, dispense with compliance with any rule at any time. The Court noted there is no case law where this rule was used to extend a missed deadline. To the contrary, the Federal Court of Appeal held in Dawe v. R., [1994] F.C.J. No. 1327, that a rule permitting a court to dispense with compliance with any rule where necessary in the interests of justice cannot be used to enlarge a statutory limitation period. On the other hand, the Federal Court of Appeal acknowledged in Hutton v. Sayat, 2023 FCA 22, that "the interests of justice" has been interpreted broadly and includes a consideration of the integrity of the judicial process, not merely the interests of the party. The Court also referred to Hryniak v Mauldin, 2014 SCC 7, for the principle that reaching a correct conclusion as to what is in the interests of justice often calls for a comparative inquiry, considering things like cost, speed of procedure, the availability of evidence, and proportionality. In this case, the Court found that the Applicant faced extraordinary circumstances arising from the pandemic; the underlying assessment appears to rest on an arguably incorrect assumption regarding the tax status of zero-rated supplies; and there is highly credible and reliable evidence suggesting timely electronic filing. The Court concluded that insisting on formal proof of an acknowledgment of receipt, in these circumstances, will undermine public confidence in the fairness of the adjudicative process. The Court further observed that, taken to its logical conclusion, strict adherence would bring about a result contrary to law — if a public official refused capriciously to provide a stamp or receipt of filing, the Applicant would be denied access to the Court, a result the Court described as inconceivable.

Ruling and outcome

Deputy Judge Gilles Renaud found as a fact that the Applicant's owner did transmit to the Court Registry the necessary documentation to justify its day in Court on August 20, 2024. The Application for a declaration that the Notice of Objection by the representative of the Applicant corporation was, factually and legally, effective as of August 20, 2024, was allowed in favour of Twisted Leaves Ltd. However, the Court awarded no costs, as the Applicant brought about the need for a contested hearing due to the failure to provide sufficient supporting documentation. No specific monetary amount was awarded or ordered in this proceeding, as the case concerned the effectiveness and timeliness of the Notice of Objection rather than the merits of the underlying GST assessment.