Tax Court strikes parts of Saskatchewan’s appeal of carbon tax assessments

The Tax Court of Canada granted a motion to strike portions of the Saskatchewan government’s notice of appeal challenging the national revenue minister’s assessments against it based on its failure to collect and remit $71,000,000 in fuel charges. 

In 2018, the Greenhouse Gas Pollution Pricing Act (GGPA) and the Fuel Charge Regulations began applying a fuel charge, also known as a carbon tax, to fuel sales in Saskatchewan and other provinces that, according to the governor in council, lacked a sufficiently strict greenhouse gas pricing mechanism. 

The Saskatchewan government – the appellant in The Government of Saskatchewan v. The King, 2025 TCC 181 – and others challenged the GGPA’s constitutionality. In 2021, the Supreme Court of Canada upheld its constitutionality. 

In late 2023, the federal government announced that it would exempt light fuel oil for heating homes from the GGPA’s application, which it did through the Regulations Amending the Fuel Charge Regulations, No. 2. 

The appellant refused to remit any fuel charges relating to its natural gas supplies for home heating purposes but kept remitting fuel charges in connection with its other natural gas supplies. 

The appellant’s position was that the Canadian government rendered the GGPA’s application to any fuel forms used for heating homes unconstitutional when it amended the regulations for purely political purposes. 

Canada’s national revenue minister assessed the appellant based on the appellant’s failure to collect and remit about $71,000,000 in fuel charges. The appellant appealed those assessments. 

The respondent moved to strike multiple portions of the appellant’s notice of appeal under s. 53(1) of the Tax Court of Canada Rules (General Procedure), SOR/90-688a, based on their alleged failure to disclose reasonable grounds of appeal. 

The disputed portions fell within the following categories: 

• the constitutionality of applying a fuel charge to natural gas for heating homes 
• interjurisdictional and Crown immunity 
• the minister’s attempts to collect fuel charges from the appellant 

Portions struck

The Tax Court of Canada allowed the respondent’s motion to strike. The Tax Court struck the following portions of the notice of appeal: 

• paragraphs 3, 4, 6, 24, 26, 28 to 50, 60 to 63, 64(iv), 68 to 78, 90 to 94, 97(ii), 97(v), and 97(vi) 
• the phrase “(or Penalties)” in paragraph 64(vi) 
• the phrase “100,” in paragraph 66 
• the headings above paragraphs 28 and 93 
• the phrase “and penalties” in paragraph 97(vii) 

First, the Tax Court addressed the respondent’s argument that it lacked the jurisdiction to hear the constitutional issue because a party should attack the vires of a regulation through a judicial review before the Federal Court. 

The Tax Court did not consider it plain and obvious that it lacked such jurisdiction. The Tax Court emphasized that it had the authority to: 

• Determine the constitutional validity, applicability, or operability of any parliamentary act or its regulations when ruling on an assessment’s correctness or validity, pursuant to s. 19.2 of the Tax Court of Canada Act, 1985, and the decisions in Canada v. Domtar Inc., 2009 FCA 218, and Hunt v. Canada, 2020 FCA 118 
• Consider regulations enacted by the governor in council ultra vires, pursuant to Canada v. BCS Group Business Services Inc., 2020 FCA 205 

Second, the Tax Court found it plain and obvious that it lacked jurisdiction to hear the argument on the constitutionality of the amending regulations. 

The Tax Court explained that it could only decide whether the amending regulations were ultra vires in the context of determining the validity and correctness of the appellant’s assessments. 

The Tax Court noted that the assessments pertained entirely to the appellant’s natural gas supplies and that the amending regulations impacted the fuel charges on light fuel oil, not natural gas. The Tax Court concluded that the amending regulations’ vires or lack thereof would not affect the correctness of the assessments. 

Third, the Tax Court tackled the appellant’s claim that it was arguing that the amending regulations rendered the regulations (as amended) ultra vires, rather than simply arguing that the amending regulations were ultra vires. The Tax Court stated that the appellant was making a distinction without a difference. 

The Tax Court noted that the appellant was trying to frame the argument in a manner suggesting that the trial judge might interpret the regulations in a way that decreased or removed the fuel charge on natural gas. 

The Tax Court pointed out that, even if a judge considered the regulations (as amended) ultra vires, the only possible solution would be declaring that the changes under the amending regulations lacked force and effect. 

According to the court, a Tax Court judge would not grant the desired relief or choose to step into the shoes of the governor in council by setting a national greenhouse gas pricing policy. 

Next, the Tax Court noted the respondent was not seeking to strike the notice of appeal’s novel issue of whether interjurisdictional and Crown immunity prevented the federal government from assessing the appellant. 

The Tax Court allowed the appellant to amend the notice of appeal to add a paragraph explaining why it changed its mind and ceased remitting the fuel charge after initially complying with the GGPA. 

The Tax Court noted that the paragraph could explain that the appellant believed that it did not need to abide by the GGPA, as the amending regulations were ultra vires because they served political purposes and no longer set minimum national standards of greenhouse gas price stringency to decrease emissions. 

The Tax Court also permitted the appellant to add a paragraph stating that it did not consent to the minister’s attempt under the GGPA to collect the fuel charges through seizing its consolidated revenue fund.