Executive Summary: Key Legal and Evidentiary Issues

• At issue was whether the appellants qualified for a selected public service body rebate under subsection 259(3) of the Excise Tax Act for reimbursing employees' healthcare-related expenses.
• Central to the analysis was section 175's deeming provision, which applies only where a service is acquired "for consumption or use in relation to activities of the employer."
• The appellants' core argument was that the binding precedents ExxonMobil and Westcoast are "manifestly wrong" and therefore need not be followed, rather than that they could be distinguished on the facts.
• Governing that argument was the Miller test, under which a prior decision is manifestly wrong only if it overlooked a relevant statutory provision or a case that ought to have been followed.
• Whether the interpretation of sections 174 and 175 disregarded the overall scheme of the Act formed a further branch of the appellants' submissions.
• A remaining question was whether the earlier decisions had overlooked General Motors, which the Court found addressed a materially different factual situation.

Facts of the case

The appellants, IWK Health Centre and Nova Scotia Health Authority, reimbursed their employees for healthcare expenses that included acupuncture, massage therapy, naturopathy and homeopathy services. As selected public service bodies, they claimed a rebate under subsection 259(3) of the Excise Tax Act in respect of those reimbursements. The Minister of National Revenue disallowed the rebate, and the appellants appealed the resulting assessments — made under Part IX of the Act — to the Tax Court of Canada. In its decision (2025 TCC 44), the Tax Court declined to intervene. Seven appeals were consolidated before the Federal Court of Appeal under lead file A-145-25, and the Court heard and decided the matter from the bench in Toronto on June 11, 2026.

Statutory framework and contractual obligation at issue

The rebate under subsection 259(3) is calculated using "non-creditable tax charged," which is defined partly in terms of tax deemed under section 175 to have been paid. Section 175 applies only where an employee acquires a service for consumption or use in relation to activities of the employer, the employee pays the tax on that acquisition, and the employer reimburses the employee. The appellants relied on their contractual obligation to reimburse employees for the services, but the Tax Court had held that this obligation was "not a sufficient nexus or connection between the Services and the employer's activities to displace the highly personal nature of these supplies." The Tax Court characterized the services as "of a particularly personal and individual nature, designed to be consumed by the person purchasing the supply," and concluded that section 175 did not apply.

The court's reasoning and analysis

On appeal, the appellants did not attempt to distinguish the two governing precedents — ExxonMobil Canada Ltd. v. Canada, 2010 FCA 1, and Westcoast Energy Inc. v. Canada, 2022 FCA 57 — on their facts. Instead, they argued that both decisions were manifestly wrong and should not be followed. The Court applied the standard from Miller v. Canada (Attorney General), 2002 FCA 370, under which it must follow its earlier decisions unless they can be distinguished or are manifestly wrong, meaning the earlier court overlooked a relevant statutory provision or a case that ought to have been followed. After considering each argument, the Court found none had merit. It held that submissions describing ExxonMobil and Westcoast as absurd or inconsistent with one another amounted to disagreement with the statutory interpretation those cases adopted, not proof that a provision or authority had been overlooked. The Court was equally unpersuaded that the interpretation of sections 174 and 175 ignored the scheme of the Act, noting that Justice Marc Noël had examined section 174 in detail in ExxonMobil and that Justice David Stratas in Westcoast had applied that reasoning equally to section 175 — a point of equal application that was not in dispute. As for General Motors of Canada Ltd. v. Canada, 2009 FCA 114, which neither precedent had mentioned, the Court found the appellants had not shown it was overlooked; that case concerned section 169 and employer-incurred pension plan expenses, which the Court treated as distinct from the employee-incurred, employer-reimbursed expenses at issue in ExxonMobil, Westcoast and the present appeals.

Ruling and overall outcome

The Federal Court of Appeal held that it remained bound by ExxonMobil and Westcoast and dismissed the consolidated appeals, leaving the denial of the rebate intact. Despite acknowledging the able submissions of counsel for the appellants, the Court found no basis to depart from its precedents. The respondent, His Majesty the King, was the successful party and was awarded one set of costs; the reasons do not state a dollar figure, so the monetary amount is not specified.