Executive Summary: Key Legal and Evidentiary Issues

• The applicant sought judicial review of a Canada Revenue Agency (CRA) decision granting only partial relief from arrears interest on a disallowed GST/HST New Housing Rebate.

• Eligibility for the rebate was previously decided and not appealed to the Tax Court of Canada, leaving it outside the Federal Court's jurisdiction.

• The CRA’s discretionary power to waive interest under s. 281.1 of the Excise Tax Act was the focus of the judicial review.

• The court assessed whether the CRA’s Second Level Review decision was reasonable under the standard set in Vavilov.

• Evidence not before the original decision-maker was largely excluded, with a few exceptions for documents clearly reviewed by the CRA.

• Ultimately, the court found the CRA’s decision justifiable and intelligible, denying the application without costs.

Facts and outcome of the case

Background and rebate disallowance

Alex Chan, the applicant, purchased a new home in 2015 and received a GST/HST New Housing Rebate of $25,578.96 in 2017. In 2018, following an audit, the CRA disallowed the rebate on the basis that the property was not Chan’s primary place of residence, as required under s. 254 of the Excise Tax Act (ETA). Chan filed a Notice of Objection, but the CRA’s Appeals Division confirmed the disallowance in October 2018. He chose not to appeal that decision to the Tax Court of Canada.

Accrual of arrears interest and initial relief request

After the disallowance, Chan contacted the CRA multiple times to obtain information about the balance owed and payment methods but claimed he received no meaningful response. In late 2019, the CRA issued a warning letter with the balance, including approximately $6,000 in interest, but Chan stated he never received it. A second letter followed in March 2021, which prompted his eventual payment through three installments between April 2021 and September 2022.

In April 2021, Chan submitted a request for relief from arrears interest under s. 281.1 of the ETA, arguing CRA delay and miscommunication prevented timely repayment. A first-level review by the CRA agreed to cancel interest accrued between October 2018 and November 2019 due to CRA delay in communication. Chan requested reconsideration, leading to a second-level review.

CRA’s second-level review decision

The second-level reviewer granted partial relief for the period of CRA delay in auditing the rebate application, from August 21, 2017, to February 26, 2018. However, no additional relief was provided. The reviewer concluded that the applicant knew or should have known of his liability after receiving the Notice of Assessment and failed to act for over two years. The decision also pointed to multiple available payment methods, including successful in-person payment, to refute claims of CRA fault.

Judicial review and court’s findings

Chan applied for judicial review, asserting that the CRA’s limited relief was unreasonable and that he should not be liable for any interest. He also attempted to reargue his eligibility for the rebate, which the court dismissed as outside its jurisdiction since he had not appealed to the Tax Court. On judicial review, the court applied the reasonableness standard from Vavilov, examining whether the CRA’s decision was justifiable and within the bounds of its discretionary authority.

The Federal Court found the CRA’s decision reasonable, transparent, and well-founded. The court noted that the applicant had been aware of his liability since 2018 and did not attempt to pay until 2021. While acknowledging some difficulty in dealing with CRA systems, the judge found no evidence of further unreasonable delay or misinformation by the CRA that would justify additional relief.

Costs and final disposition

The application for judicial review was dismissed. Although the respondent sought costs, the court declined to award any, noting the applicant was self-represented and had acted in good faith. Thus, the matter concluded without any damages or cost awards.