Executive Summary: Key Legal and Evidentiary Issues

• Dispute over whether Supermarché Boucher inc. could claim Quebec input tax refunds (RTI) on a portion of its electricity and propane costs used to produce qualifying food products during specified 2013 periods.
• Core issue around whether the “Respecs” energy-allocation methodology is a “just and reasonable” method under the Loi sur la taxe de vente du Québec for isolating energy costs tied to production of eligible movable goods other than meals.
• Evidentiary burden on Supermarché to rebut the statutory presumption of validity of Revenu Québec’s 2017 assessments and to establish, with sufficient precision, the value of energy subject to exemption under the Loi concernant l’impôt sur la vente en détail.
• Conflicting expert engineering evidence on energy modeling and allocation, including criticism that the Respecs method overestimates refrigeration-related energy and improperly treats refrigerated display counters as part of production rather than excluded storage.
• Legal question whether alleged methodological imperfections and inclusion of refrigerated display cases nonetheless fall within the tolerance of a “just and reasonable” approximation where precise metering is economically unrealistic.
• Separate procedural and limitations issue on whether Supermarché could late-claim additional RTI for the 2013 periods via the contestation process despite having failed to file the required RTI declarations within the statutory two-year deadline.

Facts of the case

Supermarché Boucher inc. operates five supermarkets in the Lanaudière region under the Métro banner. For two consecutive periods in 2013 (20 May to 11 August and 12 August to 3 November), it claimed input tax refunds (remboursements de taxes sur les intrants, RTI) in respect of Quebec sales tax (TVQ) paid on energy—electricity and propane—used in producing certain food items sold in its stores. These items are “produits d’alimentation transformés” that fall within the category of “biens mobiliers, autres que des repas, destinés à la vente,” which, following the 2018 Boucherie Veilleux decision, are recognised as potentially giving rise to RTI even for “grandes entreprises.” Supermarché used a specialized engineering-based allocation model developed by Respecs inc. (the “méthode Respecs”) to estimate the proportion of its total energy consumption attributable specifically to the production of eligible products rather than to non-eligible activities such as lighting, IT, general store operations or non-transformational food handling. Revenu Québec issued two notices of assessment (avis de cotisation) in 2017, contesting Supermarché’s RTI claims and, in effect, challenging the acceptability of the Respecs methodology. The assessments covered all five stores, but for the purposes of the litigation both parties focused on a single “typical” establishment in St-Jean-de-Matha as the test site for analyzing whether the Respecs approach was legally acceptable and technically sound.

Regulatory and statutory framework

The case is anchored in the interplay between the Loi sur la taxe de vente du Québec (LTVQ) and the Loi concernant l’impôt sur la vente en détail (LIVD), as interpreted in light of prior jurisprudence, in particular Boucherie Veilleux inc. c. Agence du revenu du Québec. Under article 17 aa) LIVD, certain energy used in the production of movable property, other than meals, destined for sale can be exempted, and article 19 LIVD places on the taxpayer the burden to establish, to the satisfaction of the Minister, the value of electricity, gas or fuel subject to that exemption. The LTVQ complements this with article 42.0.7, which requires that methods used in a fiscal year to determine the extent to which goods and services are acquired or consumed in making taxable supplies must be “justes et raisonnables” and used consistently throughout the year. In addition, article 1014 of the Loi sur l’impôt creates a presumption of validity in favour of tax assessments, meaning that their underlying factual assumptions are presumed correct unless sufficiently rebutted by the taxpayer. On procedure and timeliness, articles 431 and 468 LTVQ establish the mechanism and a two-year filing deadline for claiming RTI via the required tax return. Articles 30.5 and 30.6 of the Loi sur l’administration fiscale (LAF) permit certain compensations of RTI against assessed tax debts even if normal RTI time limits have expired, but only in the context of offsetting amounts the taxpayer owes the fisc, not for generating new out-of-time payments in the taxpayer’s favour.

The Respecs methodology and the technical problem

The key practical problem is that the St-Jean-de-Matha store, like most supermarkets, does not have separate meters or sub-meters on each production appliance (e.g., ovens, grinders, mixers, refrigerators, HVAC units) that would directly track energy use tied to the transformation of qualifying goods. The only precise data available are the store’s total annual consumption of electricity and gas from its utility bills. From there, both sides accept that certain clearly identifiable, largely fixed loads—such as general lighting and computer systems—can be deducted. What remains after these deductions is a composite pool of energy used for heating, air conditioning and refrigeration, which in turn serves a mix of activities: producing eligible transformed products, handling non-eligible goods, maintaining regulated temperatures in food preparation and display areas, and the overall comfort of staff and customers. The Respecs method responds to this complexity by building detailed Excel-based models listing every relevant piece of equipment, its rated power, assumed operating hours, and the share of its use that relates to eligible production. It then allocates the total measured energy consumption across end uses by successive subtractions and proportional allocations, ultimately estimating the share of electricity and gas attributable to the production of qualifying food products. This approach relies heavily on engineering assumptions, empirical observations drawn from many supermarkets, and technical documentation (such as architectural plans, equipment specifications and environmental regulations on required temperatures). Because all of this is done without sub-metering, some degree of imprecision is inevitable.

Evidence and expert testimony

On Supermarché’s side, the court heard from Respecs engineer André Deschênes, who had decades of experience quantifying energy use for tax purposes, particularly for industrial and large commercial clients, and from an independent expert, Christian Belleau, a PhD electrical engineer and university professor. Belleau reviewed and supported the Respecs method, acknowledging imperfections but opining that, considered as a whole, it provides a reasonable and globally coherent method to allocate energy consumption to production in supermarkets. He stressed that the method had been calibrated and refined over numerous similar projects and that achieving higher precision would require installing extensive metering systems at an estimated cost of $150,000 to $200,000 per store—far exceeding the value of the RTI and inconsistent with how the law and jurisprudence view proportional allocation methods. Revenu Québec presented its own expert, Marc-Antoine Jean of Pageau & Morel, who used an advanced building energy simulation tool (eQuest) to model the store’s energy use by zone and system. He candidly admitted that this simulation, too, required extensive assumptions and was not exact, and he identified significant limitations due to incomplete operational data on HVAC systems and store processes. Jean’s modelling suggested that the Respecs approach substantially overestimated the share of total energy that should be attributed to refrigeration and thus to production of eligible products, leading Revenu Québec to assert that the Respecs method overstated RTI-eligible energy by roughly 27% for electricity and 31% for gas in a comparative year. The verifier, Isabelle Bourgeois, adopted Jean’s modelling as the basis for her own recalculations.

Presumption of validity and burden of proof

Although the assessments enjoy a statutory presumption of validity, the court found that Supermarché had effectively “demolished” that presumption. The taxpayer’s evidence showed that it did produce the types of transformed food products recognized as RTI-eligible in Boucherie Veilleux; Revenu Québec itself had accepted that some portion of its energy costs qualified, both historically and in the verification reports. The real dispute was not whether any RTI were available but how much energy could justifiably be attributed to production under a reasonable allocation method. The court held that the Respecs method, with its layered calculations, written documentation, and independent expert support, was “sufficiently serious and precise” to overcome mere presumptions and unfounded assumptions, shifting the focus to whether the method met the statutory “just and reasonable” standard.

What “just and reasonable” means in this context

Drawing on federal and Quebec jurisprudence on similar “fair and reasonable” allocation clauses in GST/HST and TVQ contexts, the court emphasized several principles. First, the court’s role is not to choose the “best” or theoretically ideal method among competing models; it is to decide whether the taxpayer’s method falls within the range of methods that are just and reasonable in the circumstances. If it does, the tax authority cannot simply replace it with a method it prefers, even if the latter might be more refined. Second, the law does not require businesses to implement perfect cost-accounting or metering systems that isolate energy use down to each piece of equipment where the cost of such precision would be disproportionate to the tax at stake. Third, “just and reasonable” methods may legitimately rely on estimates and assumptions and need not deliver mathematical exactitude, especially where activities are “mixed” and energy consumption for different uses is intertwined. Finally, the method must not distort the economic reality of the taxpayer’s operations and must be applied consistently throughout the relevant fiscal periods.

Assessment of the competing methodologies

The court acknowledged that the Respecs method is built on a chain of hypotheses and that some errors and omissions existed in its calculations, including potential misclassification of certain equipment or discrepancies with architectural plans. However, it noted that Revenu Québec’s simulation-based approach also depended on numerous assumptions and exhibited its own limitations, particularly the risk of misallocating energy between end uses even when the global calibration to total energy bills looked acceptable. Crucially, only Belleau was mandated to opine expressly on whether the Respecs methodology, taken as a whole, met the threshold of being “just and reasonable” in the legal sense; Jean was tasked primarily with producing an alternative technical quantification, not with characterizing the legal adequacy of Respecs’ approach. After weighing the credibility, scope and caveats of both expert opinions, the court preferred Belleau’s global assessment over Jean’s more narrowly framed simulation critique. The judge placed significant weight on Deschênes’s candid testimony about the structural lack of objective data in the supermarket context and on the fact that Revenu Québec had itself engaged in detailed back-and-forth with Respecs over many versions of the method, at one point acknowledging in writing that it would be difficult to say that the proposed calculations were not reasonable.

The refrigerated display counters controversy

One specific technical and legal disagreement concerned whether the energy consumed by refrigerated display counters should be treated as part of the qualifying production process or as excluded “entreposage de produits finis” under article 18.3 LIVD. Revenu Québec argued that once products are ready for sale and placed in display cases awaiting customer selection, the refrigeration relates purely to storage and should not be counted as production energy. Supermarché contended that these counters play a continuing role in “transforming” the goods in the sense of maintaining required temperatures, ensuring food safety, and completing the preparation process up to the point of sale. While recognizing that this debate could be intricate in isolation, the court declined to treat the inclusion of display counters as a fatal flaw. Even on Revenu Québec’s own numbers, the portion of alleged overstatement specifically attributable to product eligibility and classification issues (such as this one) was much smaller than the overall 27% discrepancy; most of the difference stemmed from higher-level disagreements over total energy allocation between uses. Given the pervasive use of estimates and the absence of precise metering, the court found it speculative to attribute a definite quantum of overvaluation to the display case treatment and held that this contested point did not render the entire Respecs method unjust or unreasonable.

Late attempt to increase the RTI claim

In 2025, well into the litigation, Supermarché amended its originating application to add a new head of claim seeking additional RTI amounts (approximately $3,425.39 and $4,092.91 for the 2013 periods), beyond those originally requested in its 2013 returns. This raised a separate procedural issue: whether the taxpayer could, via the appeal/contestation process, effectively make a late RTI claim outside the two-year filing window set by the LTVQ. The court held that it could not. It reasoned that the statutory scheme treats the filing of RTI through the prescribed declaration mechanism, within the set time limit, as a condition to obtaining such refunds. The compensatory mechanism developed in cases like UPS and A OK Payday Loans allows taxpayers to offset otherwise time-barred RTI against assessed tax debts where the fisc is seeking to collect, but that doctrine is rooted in compensation logic: it prevents the government from collecting net amounts that would not be owing if both sides’ positions were fully recognized. Here, by contrast, Revenu Québec was not suing to collect unpaid taxes; the RTI at issue for the 2013 periods had already been paid, and Supermarché’s new claim would require an additional outflow of public funds. In that context, the court found no legal basis to circumvent the explicit two-year limit and refused to treat the late amendment as a permissible continuation or recharacterization of the original RTI claim.

Final outcome and consequences

The court ultimately declared that the Respecs method, in its latest version on the record, is a “just and reasonable” method for calculating the share of Supermarché’s energy costs that are eligible for RTI in the periods at issue, and that this method validly includes energy consumption associated with refrigerated display counters. It ordered the matter referred back to the Minister so that new TVQ assessments could be issued for the 2013 periods using the Respecs methodology as the governing allocation framework. At the same time, the court rejected Supermarché’s attempt to obtain additional RTI beyond what had originally been claimed, finding that the new amounts were sought far outside the statutory time limits. On costs, the court applied the usual rule that costs follow the event: given that Supermarché succeeded on the central question of methodological validity, it awarded judicial costs against Agence du revenu du Québec, explicitly including the taxpayer’s expert expenses. As the judgment does not itself quantify either the net RTI impact of the reassessment or the amount of costs to be paid, the exact monetary value obtained by Supermarché cannot be determined from the decision alone; only the fact that it is the successful party on the principal issue and that costs are awarded in its favour is clear, while the precise sums will result from subsequent administrative calculations and cost taxation processes.