CONTACT LENS KING INC. Appellant v. HIS MAJESTY THE KING, 2022 FCA 154

Date: 20220915 Docket: A-233-20 Citation: 2022 FCA 154 [ENGLISH TRANSLATION] CORAM: BOIVIN J.A. GLEASON J.A. LEBLANC J.A. BETWEEN: CONTACT LENS KING INC. Appellant and HIS MAJESTY THE KING Respondent Heard at Montreal, Quebec, on June 8, 2022. Judgment delivered at Montreal, Quebec, on September 15, 2022. REASONS FOR JUDGMENT BY: LEBLANC J.A. CONCURRED IN BY: BOIVIN J.A. GLEASON J.A. Date: 20220915 Docket: A-233-20 Citation: 2022 FCA 154 CORAM: BOIVIN J.A. GLEASON J.A. LEBLANC J.A. BETWEEN: CONTACT LENS KING INC.

Appellant and HIS MAJESTY THE KING Respondent REASONS FOR JUDGMENT LEBLANC J.A. [ 1 ] The appellant, a non-resident corporation that is in the business of selling contact lenses online, is challenging a judgment that was rendered by Justice Guy R. Smith of the Tax Court of Canada (TCC) on July 28, 2020 (reasons amended on July 31, 2020) and that is cited as 2020 TCC 71 (the Decision). The issue before Justice Smith (or the TCC judge) essentially concerned whether the supply of such lenses to customers residing in Canada is a zero-rated supply within the meaning of the Excise Tax Act , R.S.C. 1985, c.

E-15 (the Act ), and more specifically,

section 9 of

Part II of

Schedule VI of the Act (

Section 9 ). [ 2 ] A zero-rated supply is a supply taxed at zero percent, meaning that the supplier that makes this supply does not have to collect goods and services tax (GST) on it. Otherwise, the supplier collects GST, as set out in subsection 221(1) of the Act . In the case of a supplier outside Canada, this obligation, still in respect of taxable supplies, arises if, as provided for in paragraph 143(1) (

b) of the Act , the

supplier is GST " “registered” " , which is the case for the appellant. [ 3 ]

Section 9 reads as follows:

Schedule VI,

Part II

Annexe VI,

Partie II " " 9 A supply of eyeglasses or contact lenses if the eyeglasses or contact lenses are, or are to be, supplied under the authority of a prescription prepared, or an assessment record produced, by a person for the treatment or correction of a defect of vision of a consumer named in the prescription or assessment record and the person is entitled under the laws of the province in which the person practises to prescribe eyeglasses or contact lenses, or to produce an assessment record to be used for the dispensing of eyeglasses or contact lenses, for the treatment or correction of the defect of vision of the consumer. 9 La fourniture de lunettes ou de lentilles cornéennes, lorsqu’elles sont fournies ou destinées à être fournies sur l’ordonnance écrite d’une personne, ou conformément au dossier d’évaluation établi par une personne, pour le traitement ou la correction d’un trouble visuel du consommateur qui y est nommé et que la personne est autorisée par les lois de la province où elle exerce à prescrire des lunettes ou des lentilles cornéennes, ou à établir un dossier d’évaluation devant servir à délivrer des lunettes ou des lentilles cornéennes, pour le traitement ou la correction du trouble visuel du consommateur. [ 4 ] The TCC judge ruled that in order to benefit from zero-rating, the appellant had to obtain and keep a copy of the prescription or assessment record (the Prescription) that was issued by a health care professional; this prescription is referred to in

Section 9 . According to the TCC judge, it was the only way for the respondent, represented here by the Minister of National Revenue (the Minister), to find that the appellant’s Canadian customers had a Prescription for the treatment and correction of a defect of vision. The TCC judge held that this requirement was an essential condition for the supplies at issue to receive zero-rated status; he arrived at this conclusion based on an analysis of the language, context and purpose of

Section 9 as well as of the duty to keep records, which also apparently stems from that

section and, alternatively, from subsection 286(1) of the Act . [ 5 ] The appellant argues that the TCC judge erred in his

interpretation of these two provisions of the Act , which, in the appellant’s view, do not impose on it a duty to obtain from its Canadian customers a copy of the Prescription referred to in

Section 9 and keep that copy. The appellant further claims that the

interpretation adopted by the TCC judge runs counter to the tax policy underlying the general zero-rating of supplies of contact lenses. Finally, the appellant criticizes the TCC judge for not having taken into consideration the evidence in the record showing that the appellant’s Canadian customers, to be able to submit an order to the appellant for contact lenses for the treatment or correction of a defect of vision, must have a Prescription because those customers must provide the appellant with specialized biometric information that can normally only be found on a Prescription. [ 6 ] For her part, the Minister conceded at the hearing that

Section 9 does not go as far as stating that the supplier must absolutely obtain and keep a copy of the Prescription; however, she submits that this provision requires, at the very least, that reasonable evidence be provided of the Prescription’s existence, which, according to the Minister, the appellant failed to do because the evidence that it submitted in this regard was strictly speculative.

The Minister contends that there is therefore no reason to interfere with the decision of the TCC judge. [ 7 ] For the reasons set out below, I am of the view that the appellant was not required under the Act to obtain and keep a copy of the Prescriptions relating to the supplies at issue, but that it still had to prove that the Prescriptions existed by providing sufficient and credible evidence. On this latter point, however, I consider that in finding that the appellant had not met this burden, the TCC judge did not commit any error that would justify this Court’s intervention. I.

Background [ 8 ] The facts relevant to this case are relatively straightforward and are, for all intents and purposes, undisputed. They are set out, in part, in an agreement filed by the parties before the TCC judge and are based in particular on the information posted on the website that the appellant runs for the purposes of its business (the Transaction Site) and on the testimony of the appellant’s president, Samir Gad, who was the only witness heard at the trial. [ 9 ] These facts can be summarized as follows: (

a) The appellant is a company incorporated in the United States; it has been in business since the early 2000s; it is an authorized reseller of four major brands of contact lenses; its customers are people who wish to replenish their supply of contact lenses at an attractive price; (

b) The appellant makes most of its sales in the United States but has had customers in Canada for several years; it has been a GST registrant under the Act since 2013; as such, it submits quarterly reports to the Minister on its Canadian sales; these reports show that it does not collect GST on the said sales; it does not collect it because it considers these sales to be zero-rated supplies; (

c) In December 2014, the Minister initiated an audit of the appellant’s business, which covered the first three quarters of 2014; notices of assessment were issued as a result of this audit, the Minister being of the opinion that the sales that the appellant had made in Canada during this period were not zero-rated supplies because the appellant, who does not require that its Canadian customers provide a copy of the Prescription referred to in

Section 9 , was unable to provide evidence in this regard;

(

d) Indeed, when the appellant sells contact lenses to a customer who is in Canada, that person is not required to seek to have his or her Prescription verified by a health care professional—this is contrary to what is done in the United States, where there is a legal requirement to do so under the Fairness to Contact Lens Consumers Act ; the appellant does not make this a requirement either, in particular for reasons related to competitiveness, and does not check whether the biometric information recorded on the order form matches the information on the Prescription or even whether the Prescription is still valid; (

e) However, for the appellant to fill an order from a Canadian customer, this customer must be able to provide the appellant with the biometric information—such as the base curve, diameter and strength for each eye—that is normally only found on a Prescription or, if one is not available, on the box of the contact lenses that the customer would like to reorder. [ 10 ] The amount of GST that the appellant allegedly failed to collect for the audit period at issue is $29,770.97. II. Decision [ 11 ] Noting that

Section 9 had never been the subject of judicial

interpretation before, the TCC judge proceeded to analyze this provision by applying the well-known principle of statutory

interpretation according to which " “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act , the object of the Act , and the intention of Parliament” " (Decision at para. 32, citing Elmer A. Driedger, Construction of Statutes , 2nd ed., (Toronto: Butterworths, 1983) at p. 87 (Driedger)). However, he pointed out, this time citing the Supreme Court of Canada in Placer Dome Canada Ltd. v.

Ontario (Minister of Finance) , 2006 SCC 20 , [2006] 1 S.C.R. 715 at para. 21 ( Placer Dome ), that because of the degree of precision and detail characteristic of many tax provisions, " “a greater emphasis has often been placed on textual

interpretation” " (Decision at para. 33). [ 12 ] After listing what the TCC judge considered to be the five conditions for zero-rating set out in

Section 9, the TCC judge determined that the appellant, in order to benefit from zero-rating, had to establish that each criterion had been met and could therefore not take these criteria for granted. According to the TCC judge, a textual analysis of the provision also shows that if a supplier does not obtain from its customer, as was the case for the appellant, evidence that a Prescription was prepared for this customer, the supplier is not in a position to verify whether (

i) the lens order matches the Prescription; (ii) the Prescription was issued by an authorized person; (iii) the Prescription was issued for the customer who is named in that Prescription; and (iv) the lenses that were ordered will be used for the treatment or correction of a defect of vision (Decision at para. 36). The TCC judge also noted that

Section 9 does not apply differently because the appellant only provides a contact lens replacement service (Decision at para. 40). [ 13 ] The TCC judge then determined that this reading of the wording of

Section 9 was perfectly consistent with the objective of

Part II of

Schedule VI of the Act , which, in his view, is to provide zero-rated status to the supply of medical devices—unlike the supply of devices sold for cosmetic, aesthetic or non-medical purposes—provided that the medical devices are supplied by, or under the supervision of, a health care professional (Decision at paras. 42–43). According to the TCC judge, this presupposes the existence of a Prescription prepared by a health care professional (Decision at para. 46).

For a supplier who cannot provide evidence that this Prescription exists, the supply of such devices is taxable (Decision at para. 47). [ 14 ] In so finding, the TCC judge rejected the appellant’s argument that Parliament intended to provide zero-rated status to the supply of contact lenses regardless of how they are sold in Canada because simply dispensing such lenses in Canada is not

an act that provincial law reserves for health care professionals. In doing so, the TCC judge departed from provincial appellate court rulings establishing that the mere sale of contact lenses by a business operating in one province to a customer residing in another province was neither a violation of legislation governing the field of optometry nor an illegal practice of the profession. Indeed, according to the TCC judge, whether or not contact lenses sold in Canada by the appellant should be taxed does not depend on whether the appellant’s commercial activities comply with applicable provincial regulations; it depends solely on the

interpretation of

Section 9 (Decision at para. 56). [ 15 ] Finally, the TCC judge stated that he was of the opinion that the need to obtain and keep a copy of the Prescription relating to the dispensing of contact lenses to a Canadian customer also flowed from the appellant’s duty to keep records; according to the TCC judge, this duty arose not only from the wording of

Section 9, but also from the wording of subsection 286(1) of the Act , as evidenced by the TCC case law, which has repeatedly recognized the duty to keep records for zero-rated supplies (Decision at paras. 62–66). [ 16 ] The TCC judge was of the view that his finding would not have been different even if he had accepted the appellant’s submission that it was reasonable to assume that when customers place an order, they have a Prescription in their possession, because in such a scenario, the appellant would not be able to verify whether the Prescription had expired.

The TCC judge found that nevertheless, the testimonial evidence in the record did not make it possible to establish that the appellant had provided reasonable evidence that its Canadian customers had a Prescription in their possession within the meaning of

Section 9 when they ordered contact lenses (Decision at paras. 61–62). [ 17 ] In short, according to the TCC judge, it is not sufficient for " “the appellant’s website to inform consumers that they need a valid [P]rescription.” " For the supplies at issue to be zero-rated, the appellant must obtain and keep a copy of the Prescription; in his view, it is the only way to be able to conclude " “that a consumer has a [P]rescription on hand ‘for the treatment or correction of a defect of vision’” " (Decision at para. 69). III.

Issues and standard of review [ 18 ] The appellant submits that five issues arise in this appeal; the Minister is of the opinion that two issues arise in this appeal. In my view, the following two issues arise in this matter: (

a) Did the TCC judge err in finding that the appellant, in order for the supply of contact lenses to its Canadian customers to be zero-rated, had to obtain and keep a copy of the Prescription showing, for each customer, that the said lenses had to be used for the

treatment or correction of a defect of vision? (b)If he erred in so finding, did the TCC judge also err in holding that the appellant had failed to provide reasonable evidence ofthe existence of such Prescriptions for the supplies made during the audit period at issue? [19] It is now settled law that the applicable standard of review on appeal with respect to the first issue—an issue of statutoryinterpretation—is that of correctness (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 at para. 8 (Housen); Canada v. Villa Ste-Rose Inc., 2021 FCA 35, [2021] F.C.J. No. 174 (QL) at para. 27 (Villa Ste-Rose)).

As for the second issue, which is a question of fact orof mixed fact and law, it is, also according to Housen, only reviewable if there is a palpable and overriding error (Housen at para. 28). IV. Analysis A. The appellant was not required by the Act, as a sine qua non of the zero-rating, toobtain and keep a copy of the Prescriptions for the supplies at issue. (

a) It was not required to do so under

Section 9. [20] The TCC judge correctly identified the various components of

Section 9.

Thus, to be zero-rated, the supply of contact lenses musthave the following characteristics: (a)The lenses must be supplied, or be scheduled to be supplied, under the authority of a prescription prepared, or an assessmentrecord produced, by a person; (b)The persons issuing the prescription, or those producing the assessment record, must be authorized by the laws of the provincein which they practise to prescribe contact lenses or to produce an assessment record to be used for the dispensing of contactlenses; (c)The consumer must be named in the prescription or assessment record; and (d)The prescription—or assessment record—must be prepared for the treatment or correction of a defect of vision. [21] There is no dispute that each of these elements must be present to zero-rate a supply of contact lenses.

Rather, the issue raised in thisappeal is what is required to demonstrate that these elements are present. As we have seen, the TCC judge considered that the suppliermust obtain and keep a copy of the Prescription. According to him, this is an essential condition. In other words, without thisdocumentation, there is no way around it: the supply is taxable. [22] Does

Section 9 contain this requirement, without which zero-rated status cannot be demonstrated? The appellant does not think sobecause, in particular, that would be reading words into this provision, and as we have seen, the Minister concedes, as it were, thatSection 9 does not go as far as to make it a sine qua non that the supplier obtain and keep a copy of the Prescription. At most, accordingto the Minister’s arguments at the hearing, keeping the Prescription allows the supplier to provide the [translation] "“best evidence”" thatthe conditions for zero-rated status to apply have been met. [23] With respect, in my opinion, the TCC judge erred in extending the scope of

Section 9 in this way. [24] As required by the modern approach to statutory

interpretation, the words of

Section 9 are to be read "“in their entire context and intheir grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”"(Driedger at 87, cited at para. 32 of the Decision). [25] As this Court recently noted in Villa Ste-Rose, a case that also concerned the Act, this approach to

interpretation "“now applies totaxation statutes no less than it does to other statutes”" (Villa Ste-Rose at para. 39, citing Placer Dome at para. 21 and referring toCanada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601 at paras. 10–11; Canada v.

Cheema, 2018 FCA 45, [2018]4 F.C.R. 328 at para. 73; see also Pierre-André Côté and Mathieu Devinat, Interprétation des lois, 5th ed., (Montreal: Thémis, 2021) at p.541–544 (Côté & Devinat)). [26] More particularly with respect to the role that the words of a taxation statute play in this interpretative process, the Court also notedthat although they can play a dominant role in this process when they are "“precise and unequivocal”", the analysis of the context andpurpose of the Act "“is also useful in all circumstances as it can reveal or resolve latent ambiguities in a provision that may appear to beunambiguous at first glance”" (Villa Ste-Rose at para. 40, citing Placer Dome at paras. 21–22). [27] As the appellant points out, the wording of

Section 9 does not make any explicit reference to the fact that the contact lens suppliermust obtain a copy of the Prescription from its customers and then keep that copy. There is therefore a risk in this case that theinterpretation adopted by the TCC judge supplements the text of

Section 9, which the courts must refrain from doing. In other words, thecourts cannot, under the guise of interpreting legislation, read in words that are not there. This is the role of Parliament and not of thecourts (Wilson v. British Columbia (Superintendent of Motor Vehicles), 2015 SCC 47, [2015] 3 S.C.R. 300 at para. 27, citing R. v.McIntosh, (SCC), [1995] 1 S.C.R. 686, [1995] S.C.J. No. 16 (QL) at p. 701). It is therefore appropriate to exerciseconsiderable caution when dealing with an

interpretation that, as is the case here, appears to supplement the legislation. [28] Be that as it may, I am of the view that a few contextual elements weigh against the

interpretation adopted by the TCC judge,namely, Parliament’s objective in adopting

Part II of

Schedule VI of the Act, the internal structure of the Act, and—although it does not,in my opinion, have the scope that the appellant claims it has—the 1999 amendment to the text of

Section 9.

(

b) Objective of

Part II of

Schedule VI [29] Even if the Act sets out the rule that all supplies are taxable and that therefore, zero-rated status is, as the Minister argues, anexception to this rule, Parliament’s objective in adopting

Part II of

Schedule VI of the Act, which deals with the zero-rating of supplies ofmedical and assistive devices, appears to have been to ease the economic burden of persons who have a disability or impairment and forwhom these devices are a necessity—a social objective that supports a generous

interpretation of

Section 9. [30] At least, that is the opinion of tax expert and author David Sherman, who has stated that there is no reason to treat the provisions ofPart II of

Schedule VI of the Act differently, in terms of their

interpretation, from the provisions of sections 118.2 to 118.4 of the IncomeTax Act, R.S.C. 1985, c. 1 (5th Supp.), which deal with medical expense credits and credits for mental and physical impairments;according to a principle endorsed by this Court in Johnston v. Canada, (FCA), [1998] F.C.J. No. 69 (QL), 52 D.T.C.6169, these provisions must be given a broad and liberal

interpretation and not a narrow and technical one (David M. Sherman, “Sch.""VI –

Part II – Medical and Assistive Devices: C. Liberal

Interpretation Required” in Canada GST Service: Analysis/Commentary(Toronto: Thomson Reuters, 1990) at VI-173 (Sherman, “Sch." "VI –

Part II”)). [31] As David Sherman pointed out, Ontario courts have also endorsed this same principle in the context of tax exemptions provided forin the Retail Sales Act, R.S.O. 1990, c. R.31, and related to the purchase of medical equipment designed for the use of persons who havechronic issues or who have a disability or impairment. These courts held that these exemptions reflect important social values that justifythat they be interpreted generously (Toronto Transit Commission v. Ontario (Minister of Finance), , [2008] O.J. No.5251 (QL) (ONSC) at para. 68, aff’d 2009 ONCA 658, [2009] O.J. No. 3771 (QL); Sherman, “Sch. VI –

Part II” at VI-173 and VI-174). [32] I also fail to see why the provisions of

Part II of

Schedule VI of the Act should not, given their underlying objective, also be given abroad and liberal

interpretation insofar as the text of these provisions allows for it. In this case, the TCC judge seems to have overlookedthis contextual element as he did not mention it at all in the Decision. In my view, this undermines his reading of

Section 9, whichimposed such a stringent burden on the appellant to demonstrate the tax status of its supplies of contact lenses to its Canadian customers. (

c) Internal structure of the Act [33] As the appellant points out, if Parliament had intended to impose specific obligations on contact lens suppliers with respect toobtaining and keeping supporting documents, it could have said so expressly, as it did elsewhere in the Act. [34] As an example, the appellant cites what the Act requires of "“registered”" suppliers who claim input tax credits, which includesinformation prescribed by regulations, namely, the Input Tax Credit Information (GST/HST) Regulations, SOR/91-45. With respect tocertain other zero-rated supplies,

Schedule VI of the Act also contains specific provisions as regards obtaining and keeping supportingdocuments that may satisfy the Minister that the conditions for zero-rated status have been met. This is the case, in particular, forparagraph 1(

e) and subparagraph 15.1(a)(

v) of

Part V, which concern the zero-rating of supplies of goods for export; these provisionsrequire that the supplier concerned maintain evidence satisfactory to the Minister that some or all of the conditions for zero-rated statushave been met. This is also the case for the definition of "“continuous journey”" in

section 1, as well as for

section 10 of

Part VII, whichdeals with the zero-rating of supplies related to certain transportation services. These two provisions also require that the supplier obtainand keep supporting documents, deemed satisfactory by the Minister, to establish that all or at least some of the applicable conditions forzero-rated status have been met. [35] I am of the opinion that the definition of the term "“prescription”" in

Part I of

Schedule VI, which deals with the zero-rating ofprescription drugs, is another example of more specific and compelling wording than the wording in

Section 9 because it specifies thatfor supplies to be zero-rated, the prescription must, among other things, have been given to a pharmacist by a medical practitioner.Section 9 contains no such wording, which in my view made it risky, as the appellant argues, for the TCC judge to have relied on thedefinition of the term "“prescription”" in

Part I of

Schedule VI as a contextual element supporting his

interpretation of

Section 9. [36] In short, when Parliament requires suppliers to keep supporting documents to substantiate their entitlement to certain benefits underthe Act (zero-rated status for certain supplies, input tax credits), it seems that it does so explicitly. It did not do this in

Section 9. [37] In light of the principle that it is presumed that the legislature avoids superfluous words and does not speak in vain and that what itsays in one case but does not say in another is presumed to reveal its intention (Canada v. Canada North Group Inc., 2021 SCC 30, 2021D.T.C. 5080 at para. 64, quoting McDiarmid Lumber Ltd. v. God’s Lake First Nation, 2006 SCC 58, [2006] 2 S.C.R. 846 at para. 36;Côté & Devinat at pp. 316–317; Ruth Sullivan, Sullivan on the Construction of Statutes, 7th ed., (Toronto: LexisNexis, 2022) at p. 211), Ibelieve that the TCC judge could not, without erring in law, give an

interpretation to

Section 9 that would require the supplier to obtainand keep a copy of the Prescription that the customer received from an optometrist or another eye specialist. It is a matter of the internalconsistency of the Act. Again, the Minister does not seem—or at least no longer seems, according to the arguments made at the hearing—to disagree with this point of view. (

d) The 1999 Amendment [38] In my opinion, the 1999 amendment to the text of

Section 9 is another contextual element that weighs against the

interpretationadopted by the TCC judge. It was at that time that the words "“are supplied”" in this text were expanded to "“are, or are to be,supplied”".

Thus, contact lenses prescribed for the treatment or correction of a defect of vision, instead of only being eligible for zero-rated status when they are supplied under the authority of a prescription prepared by a person entitled under the laws of the province inwhich that person practises to prescribe contact lenses, as was the case up until that time, became eligible for zero-rated status not only ifthey were supplied under the authority of a prescription prepared by such a person, but also if they were "“to be . . . supplied”" under theauthority of such a prescription. [39] According to the material entered in the record in this case, Parliament’s intention was to extend zero-rated status to the stagespreceding the retail sale of contact lenses for the benefit of the various stakeholders in the supply chain—manufacturers, wholesalers and

distributors—in order to "“remove inconsistencies in treatment between different types of prescription eyewear and ease complianceburdens for suppliers, who currently must distinguish between those pre-retail supplies that are zero-rated and those that are not”"(Department of Finance, “Secretary of State Announces Sales Tax Measures Including a Change in the Effective Date Of PreviouslyProposed Passenger Transportation Measures”, 1999-086 news release (October 8, 1999) at para. 5). [40] According to an opinion issued by the Minister via the Canada Revenue Agency on October 2, 2000 (the October 2000 Opinion),this meant that henceforth, supplies could be zero-rated without a Prescription (at least for supplies made at the pre-retail level) providedthat the contact lenses at issue were of the same type as those normally supplied under the authority of a Prescription (GST HeadquartersLetters (online), 30920 GST/HST

Interpretation Proposed Law, “Application of GST/HST to Frame and Clip-on Sets: SpecificallyDesigned for Prescription Eyeglasses” (October 2, 2000)). [41] The appellant submits that the objective of the 1999 amendment was to ensure the zero-rating of the supply of contact lensesthroughout the supply chain, namely, from the manufacturer to the consumer, provided that the lenses are used for the treatment orcorrection of a defect of vision.

The appellant added that according to the October 2000 Opinion, this amendment meant that for asupplier to benefit from zero-rating, even at the stage of the sale to the consumer, it was no longer necessary to obtain a physical copy ofthe Prescription at each stage of the supply chain.

It was sufficient for the Minister to be satisfied that the contact lenses at issue were ofthe same type as those that are normally supplied under the authority of a Prescription. [42] The appellant goes on to argue that Parliament therefore intended to make unconditional the zero-rating of contact lenses suppliedfor the treatment or correction of a defect of vision. [43] The TCC judge briefly discussed the 1999 amendment. He expressed the view that its objective was to provide zero-rated status tothe sale of contact lenses before the final sale to the consumer (Decision at para. 39).

However, he refused to give the expression "“are tobe . . . supplied”" a meaning that would make the requirement to obtain a copy of the Prescription an optional step, therefore refusing tomitigate the imperative aspect of the word "“supplied”" (Decision at para. 37).

From this, I understand that the TCC judge meant that the1999 amendment did not have the effect of making the obligation to obtain a copy of the Prescription an optional step at the stage of thesale to the consumer by the retailer because otherwise, it would be virtually impossible for the contact lens manufacturers or distributorsto fulfill this obligation given that it is impossible to associate a sale of lenses with a Prescription at these stages of the supply chain. [44] The appellant claims that the TCC judge’s position on this issue has the effect of imposing on the supplier—or the retailer—aheavier burden than the burden imposed on stakeholders in the contact lens industry who are involved earlier on in the supply chain,which would run counter to Parliament’s intention.

It also criticizes the Minister for doing an about-face by taking a position in this casethat is contrary to the October 2000 Opinion; in the appellant’s view, this opinion clearly shows that obtaining and keeping a copy of aPrescription are no longer required for zero-rating. This opinion reads as follows: An amendment has been proposed to

section 9 of

Part II of

Schedule VI of the [Excise Tax Act] which will include in thatprovision corrective eyeglasses that are, or are intended to be, supplied under the written order of an eye-care professionalfor a consumer named in the order. The proposed amendment, which will apply to supplies made after October 8, 1999, willextend zero-rated status to supplies of corrective eyeglasses made at the pre-retail level, i.e. from manufacturing ordistributor to the retailer.

The proposes amendment has the effect of providing zero-rated status to a supply made in theabsence of a written prescription from an eye-care professional issued to a customer.

The eyeglasses must still be of the typethat are supplied under a written order by an eye-care professional for the treatment or correction of vision of a customernamed in the order, i.e. prescription eyeglasses. … [45] Therefore, according to the appellant, the determining factor in establishing whether a supply of contact lenses is taxable or zero-rated has not been, since 1999, the way in which these lenses are sold; rather, this factor is the requirement that the lenses be of the sametype as those supplied to a consumer under the authority of a Prescription.

The appellant submits that this is the understanding of allthose in the business of selling contact lenses online in Canada. However, there is no evidence to this effect in the record. [46] It is settled law that an administrative practice that is based on an administrator’s

interpretation of a statutory provision that theadministrator is responsible for applying is not binding on the courts but can nevertheless be an "“important factor”" to be considered incase of doubt about the meaning of this provision (Placer Dome at para. 40, citing Nowegijick v.

The Queen, (SCC),[1983] 1 S.C.R. 29, 83 D.T.C. 5041 at p. 37). [47] In this case, I find that the appellant is going too far and that the words "“are supplied”" were expanded to "“are, or are to be,supplied”" for the benefit of manufacturers, wholesalers and distributors and not for the benefit of retailers, i.e., those who do businessdirectly with the consumer who pays the tax.

I am of the view that this is how the October 2000 Opinion should be construed; thisopinion clearly concerns "“pre-retail level”" sales and, in my opinion, best reflects the purpose of this amendment. [48] In my view, this purpose was not to make the zero-rating of contact lenses unconditional; this position appears to me to beinconsistent with the text of

Section 9. Otherwise, it would be appropriate to consider why Parliament did not amend the rest of the textof

Section 9, which retained the requirement that, in order to be zero-rated, the lenses must have been supplied under the authority of aPrescription for the treatment or correction of a defect of vision of a consumer named in the Prescription prepared by a person entitledunder the laws of the province in which the person practises to prescribe contact lenses for the treatment or correction of the defect ofvision of the consumer. It seems to me that if Parliament had wanted to make the zero-rating of contact lenses unconditional, it wouldhave taken a different approach.

On this point, I agree with the TCC judge that the term "“supplied”" continues to have meaning andremains fully relevant. [49] That said, the 1999 amendment also unquestionably reflects Parliament’s intention to adopt a more flexible approach with regard tothe conditions for the zero-rating of contact lenses sold for the purpose of treating or correcting a defect of vision, as well as with regardto what is needed to demonstrate that these conditions have been met. [50] Therefore, in my opinion, it cannot have been Parliament’s intention to ease the compliance burden on manufacturers anddistributors to this extent while requiring that retailers meet a burden as stringent as the one imposed on them pursuant to the TCC

judge’s

interpretation. It must be recalled that retailers are involved at the stage of the supply chain that has the most direct impact on theconsumer who is supposed to benefit from the zero-rated status. As we have seen, a generous

interpretation is warranted. [51] In short, I am of the opinion that

Section 9, both by its wording as amended in 1999 as well as by its underlying objective and theinternal structure of the Act, did not impose on the appellant, as a sine qua non for the zero-rating of its Canadian supplies, the burden ofobtaining and keeping the Prescriptions of its Canadian customers. [52] However, this did not relieve the appellant of the burden of demonstrating, by means of reasonable or [translation] "“sufficient andcredible”" evidence, that its supplies to its Canadian customers qualified as zero-rated supplies. In my opinion, to hold otherwise woulddrain

Section 9 of its substance. [53] Therefore, the

interpretation upon which I prefer to rely in no way affects, within the limits that it imposes, the auditing powerconferred on the Minister under the Act. What this

interpretation essentially implies is that the Minister, when performing an audit ofsupplies referred to in

Section 9, cannot decide to tax such supplies on the sole basis that the supplier or retailer did not require from itscustomers a copy of the Prescriptions related to its supplies and did not keep this copy on file. [54] Now, does subsection 286(1) of the Act allow the Minister to do so? In my view, it does not. (e) Subsection 286(1) of the Act is of no assistance to the Minister. [55] The TCC judge ruled that if there was any doubt as to the obligations imposed on a registered retailer for a supply to receive zero-rated status under

Section 9, including the obligation to obtain and keep a copy of the Prescription, this doubt was removed by subsection286(1) of the Act, pursuant to which any person required to file a return under the Act shall keep "“records”".

The TCC judge furtherstated that on the basis of the settled case law of the TCC, this obligation would apply to zero-rated supplies (Decision at paras. 64–65). [56] The appellant essentially argues that subsection 286(1) of the Act only requires that records be kept of the accounting and financialdocumentation needed to determine the amount of tax to be collected and remitted, and that by ruling that this provision requires thatPrescriptions be obtained and kept, the TCC judge gave it a scope of application that it does not have. [57] The appellant adds that the two decisions cited by the TCC judge—namely, 1882320 Ontario Inc. v.

The Queen, 2019 TCC 81,2019 D.T.C. 1077 (1882320 Ontario) and Nwaukoni v. The Queen, 2018 TCC 252, 300 A.C.W.S. (3d) 212 (Nwaukoni)—in support ofhis assertion that the TCC has repeatedly applied subsection 286(1) to zero-rated supplies did not support his finding that the duty tokeep records extends to documents other than accounting or financial documents, such as the Prescriptions referred to in

Section 9. [58] The Minister did not address this issue in her memorandum; she was of the opinion that it was superfluous because in her view, evenassuming that the appellant had not been required to obtain and keep a copy of the Prescriptions for the supplies at issue, the evidence inthe record did not support the conclusion that the appellant had met, for the reporting periods at issue, the substantive conditions forzero-rated status to apply pursuant to

Section 9. [59] Subsection 286(1) is in Subdivision C, entitled “General”, of Division VIII of the Act, which relates to the administration andenforcement of the Act. This subsection reads as follows: Keeping books and records Obligation de tenir des registres" " 286

(1) Every person that carries on abusiness or is engaged in a commercialactivity in Canada, every person that isrequired under this Part to file a return andevery person that makes an application fora rebate or refund shall keep all records thatare necessary to enable the determinationof the person’s liabilities and obligationsunder this Part or the amount of any rebateor refund to which the person is entitled. 286

(1) Toute personne qui exploite uneentreprise au Canada ou y exerce uneactivité commerciale, toute personne quiest tenue, en application de la présentepartie, de produire une déclaration ainsi quetoute personne qui présente une demandede remboursement doit tenir les registrespermettant d’établir ses obligations etresponsabilités aux termes de la présentepartie ou de déterminer le remboursementauquel elle a droit. [60] As is clear from its wording, this provision creates an obligation for every person who is bound under the terms of

Part IX of theAct, which concerns GST, to keep records. This obligation is important because the Canadian tax system, it should be recalled, is basedon the principles of self-assessment and self-reporting; this is why the Minister has been given broad powers to ensure compliance (R. v.McKinlay Transport Ltd., (SCC), [1990] 1 S.C.R. 627, 90 D.T.C. 6243 at p. 648). [61] Subsection 2(1) of the Act defines the documents and information that "“are included in the records”". Pursuant to subsection286(1.1), the Minister may always specify the form a record is to take and any information that the record shall contain.

In 2013, theMinister published a guide that aims to use "“plain language to explain the most common requirements for keeping records”" (CanadaRevenue Agency, Keeping Records (Guide), RC4409, (Ottawa: CRA, 2013) at p. 2 (Keeping Records Guide)). [62] According to this guide, records are "“accounting and other financial documents that should be kept in an organized way”" and thatare "“generally substantiated by supporting documents”", namely, documents that provide "“evidence of transactions”".

Ultimately,records "“summarize the information contained in the supporting documents”" (Keeping Records Guide at p. 4). [63] As the appellant points out, it is true that the documents listed in the Keeping Records Guide as examples of supporting documentsare accounting or financial in nature and that, unlike prescriptions that health care professionals issue to their patients, these documentsgenerally attest to transactions in which the taxpayer concerned is a party. However, this guide specifies that the list of these examples is

not exhaustive ( Keeping Records Guide at p. 4) . This reflects the fact that the list of documents and information in the definition of the term " “record” " in the Act is itself not exhaustive, as evidenced by the introductory words of the said definition: " “ record includes …” " / " “ registre Sont compris parmi les registres …” " .

Therefore, efforts should be made not to use the Keeping Records Guide to draw firm conclusions on the specific meaning to be given to the term " “records” " . [ 64 ] Be that as it may, in my opinion, the problem that lies in the TCC judge’s position on subsection 286(1) of the Act is that it has long been recognized that the concepts of " “records” " and of their sufficiency, for the purposes of determining whether a taxpayer has complied with this provision, are vague and subjective and are more a question of fact than a question of law, subject to express statutory requirements that the taxpayer must satisfy.

Therefore, each case must be assessed on its merits, including by means of testimonial evidence, provided that it is credible (David M. Sherman, “Division VIII: 286 – Keeping Books and Records” in Canada GST Service: Analysis/Commentary , (Toronto: Thomson Reuters, 1990) at 286-103-104, 108.2-111; Chandan v. The Queen , 2005 TCC 685 , D.T.C. 1563 at para. 34 , 59; Rotondi v. The Queen , 2010 TCC 378 , 192 A.C.W.S. (3d) 668 at paras. 16–17 ). [ 65 ] Ultimately, records, to satisfy the obligation created by subsection 286(1), must be " “proper” " ( P.R. Investments Inc. v.

The Queen , 2006 TCC 686 , [2006] G.S.T.C. 160 at para. 4 ), and the fact that they do not contain everything that the Minister would have liked them to contain is not necessarily fatal ( Atlantic Mini & Modular Homes (Truro) v. The Queen , [1999] T.C.J. No. 431 (QL), 7 G.T.C. 3197 (TTC) at para. 25 ). [ 66 ] 1882320 Ontario and Nwaukoni , which were cited by the TCC judge in support of his

interpretation of subsection 286(1), do not state otherwise. While these decisions emphasize the importance of keeping records in accordance with subsection 286(1) of the Act , they note that it is ultimately the sufficient and reliable evidence test, which may include testimonial evidence, that must be met by taxpayers defending themselves against a notice of assessment issued by the Minister ( Nwaukoni at para. 14 ; 1882320 Ontario at para. 28 ). [ 67 ] Both cases involved taxpayers who claimed that the supplies at issue—motor vehicles—were zero-rated supplies because they were sold abroad and were therefore intended for export. It is important to note that under subsection 1(

e) of

Part V of

Schedule VI of the Act , these taxpayers were expressly required to maintain " “evidence satisfactory to the Minister” " of the exportation of the supplies at issue. As we have seen,

Section 9 does not contain any such requirement. In this sense, these two cases certainly do not have the effect sought by the TCC judge. [ 68 ] In short, the Act does not dictate the specific contents of the records referred to in subsection 286(1). Whether a person referred to in this provision kept proper records is a question of fact. In the Minister’s view, an incomplete record is not in itself fatal because ultimately, taxpayers can provide sufficient and credible evidence to establish the merits of their claims against the notice of assessment that they are challenging.

This includes testimonial evidence. [ 69 ] Consequently, I am of the opinion that the TCC judge erred in law insofar as he added into subsection 286(1) of the Act a requirement that does not appear in that subsection, namely, the requirement that the appellant would have had to obtain and keep, within the records that it maintained under that subsection, a copy of the Prescriptions issued to its Canadian customers by health care professionals.

These records, however important they may have been, provided a way, but not the only possible way, to determine the tax status of the supplies at issue during the reporting periods referred to in the notices of assessment issued by the Minister. [ 70 ] Having determined that

Section 9 does not impose such a requirement, I am of the opinion that the TCC judge could not use subsection 286(1) to compensate for this silence without erring. Under the circumstances, the question that he had to ask himself was whether the appellant had submitted sufficient and credible, or reasonable, evidence making it possible to conclude that the supplies at issue in this case were zero-rated supplies within the meaning of

Section 9; the TCC judge asked himself this question in the alternative. [ 71 ] This brings me to the second part of this appeal. B. In finding that the appellant had not provided reasonable evidence that the supplies at issue were zero-rated, the TCC judge did not make any errors that would warrant this Court’s intervention. [ 72 ] The evidence in the record is rather succinct. The TCC judge, in paragraphs 11 to 15 of the Decision, which are in the

summary of the facts section, referred to two excerpts from the Transaction Site and gave a brief overview of the testimony of the appellant’s main representative, Mr. Gad. Essentially, the excerpts in question indicate that: (

a) it is important for U.S. residents to have the validity of the prescription referred to on an order verified; (

b) orders from outside the United States are not verified; and (

c) customers who do not have a Prescription on hand can " “[t]ake a look at one of [their] contact lens boxes” " to see " “the brand name and prescription parameters . . . indicated on the box” " ; [ 73 ] On the basis of Mr. Gad’s testimony, which he found " “candid and honest” " , the TCC judge noted that (

i) Canadian consumers are not required to provide a Prescription and that (ii) it is assumed that they have a valid Prescription and that the information entered on the order form is indeed the information shown on the Prescription. [ 74 ] In his analysis, the TCC judge asserted that if he had erred in finding that

Section 9 requires that a copy of a valid Prescription be obtained and kept as an essential condition for zero-rated status, the " “testimony does not support the conclusion that the appellant had ‘reasonable proof’ that a prescription had been issued” " (Decision at para. 62). I understand that this assertion is based on Mr. Gad’s explanations that it is assumed that when Canadian customers place an order, they have a valid Prescription in their possession and that the information that they enter on the order form reflects the information shown on the Prescription.

[75] The appellant’s evidence was sparse and based on assumptions and deduction, without any verification. This is what led theMinister to state that the appellant had not discharged its burden of demonstrating, by means of reasonable evidence, that the supplies atissue in this case met the conditions of

Section 9. [76] I would point out that the error is palpable if it is plain to see and that it is overriding if it also leads to a wrong result (Housen atparas. 4–5).

This standard requires that I, as an appellate judge, accord a high degree of deference to the TCC judge’s findings of fact andinferences of fact (Housen at paras. 10–21) and to any findings of mixed fact and law that he may have made (Housen at para. 36). [77] As I have already mentioned, the appellant submits that given the specific and specialized nature of some of the informationrequired to place an order, Canadian customers must have a Prescription in their possession because the consumer cannot reasonably beexpected to know this information without such a document.

As evidence, the appellant provided the list of this information, which isposted on the transaction page of the appellant’s website (Appeal Book at p. 83). [78] The appellant also argues that the TCC judge should have taken into account the legislative framework governing the practice ofoptometrists and opticians.

It submits that he would thus have found that in Quebec, for example, these health care professionals mustmaintain and keep, at the place where they practise their profession, a record for each of their patients; that an expiration date is notinformation that must be entered in patient records (Regulation respecting the keeping of the optometrical record, C.Q.L.R., c. O-7, r.20, s. 2.02); that an optometrist is authorized to give a prescription verbally (Règlement sur les ordonnances verbales ou écrites d’unoptométriste, C.Q.L.R., c.

O-7, r. 15, art. 5); and that such a prescription is only required to state a period of validity if warranted by thepatient’s condition (C.Q.L.R., c.

O-7, r. 15, art. 1(6°)). [79] In light of the evidence in the record and this legislative framework, the only finding that the TCC judge had to make, according tothe appellant, is that this evidence [translation] "“attests to the existence, for each consumer who acquired contact lenses from theappellant, of a prescription or an assessment record that has been kept by a person entitled, under the laws of the province in which theperson practises, to prescribe contact lenses for the treatment or correction of the defect of vision of any such consumer”" (Appellant’sMemorandum of Fact and Law at para. 76).

In its view, this evidence was sufficient, on a balance of probabilities, to rebut thepresumption that the notices of assessment at issue in this case were valid. [80] Is the fact that the TCC judge did not accept these arguments a palpable and overriding error? In my view, it is not. [81] The TCC judge was asked to make inferences of unknown facts (the existence of a Prescription) based on known facts (theinformation that must accompany an order form) against the backdrop of the regulatory framework governing the practice ofoptometrists and opticians in Quebec. He was asked to do so when he also had Mr.

Gad’s candid testimony before him indicating that theappellant does not perform any verification of the validity of the Prescription, which is assumed to exist, or of the information entered onthe order form.

This testimony put into perspective the information posted on the Transaction Site regarding the supplies that theappellant made in Canada. [82] I would point out that even though the appellant was not required to obtain and keep a copy of the relevant Prescriptions, theappellant, in order to demonstrate that it was entitled to zero-rating, was still required to provide [translation] "“sufficient and credible”"evidence of their existence. [83] However, the task of whether or not to make inferences or presumptions of fact is a core function of the trier of fact.

As we haveseen, an appellate court can only overturn the resulting conclusions in the presence of a palpable and overriding error (Housen at para.21; see also Tiger-Vac International inc. c. Mambro, 2021 QCCA 53, [2021] J.Q. No. 129 at para. 18). Furthermore, however tempting itmay be, an appellate court "“must not retry a case and must not substitute its views for the views of the trial judge according to what theappellate court thinks the evidence establishes on its view of the balance of probabilities”" (Housen at para. 3, citing Underwood v.Brown (1987), (BC CA), 12 B.C.L.R. (2d) 199, [1987] B.C.J.

No. 470 (BCCA) at 204). [84] To use the well-known metaphor, when arguing palpable and overriding error, it is not enough "“to pull at leaves and branches andleave the tree standing. The entire tree must fall”" (Canada v. South Yukon Forest Corp., 2012 FCA 165, [2012] F.C.J. No. 669 (QL) atpara. 46). [85] Here, I cannot conclude that the appellant was successful, especially since the evidence in the record shows that the appellant cando more to discharge its burden of meeting the conditions for

Section 9 to apply. Indeed, Mr. Gad testified that since its disputes with theMinister over the notices of assessment at issue in this case, the appellant now requires that Canadian customers who place an order withit attest that they have a Prescription in their possession. This requirement did not exist at the material time, and in this context, it is notfor this Court to assess its impact on the burden that the appellant must meet.

The issue is bound to arise at some point. [86] Nor is there any evidence that the appellant performs random checks or that it asks, but does not require, customers who are willingto do so to send it a copy of their Prescription.

Although the appellant is not required to provide them to the Minister, nothing ispreventing it from doing so of its own volition in keeping with the best evidence rule. [87] It is this total lack of even the slightest amount of effort that, I think, led the TCC judge to find, in the alternative, that the appellanthad not met its burden of establishing, by means of sufficient and credible evidence, the existence of Prescriptions for the supplies taxedby the Minister.

Given the little leeway that I have, I cannot criticize the TCC judge, in light of the evidence in the record, for havingruled as he did because there was some evidence upon which he relied to reach his conclusion on this point (Housen at para. 1). [88] I would therefore dismiss the appeal, but because success is divided, I would do so without costs in this Court. [89] Pursuant to the Practice Direction issued by the Chief Justice of this Court on September 9, 2022, to members of the legal professionand all parties to proceedings in this Court, the designation of the respondent in this appeal was changed to “His Majesty the King”. “René LeBlanc”

J.A. “I agree. Richard Boivin J.A.” “I agree. Mary J. L. Gleason J.A.” FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-233-20 STYLE OF CAUSE: CONTACT LENS KING INC. v. HIS MAJESTY THE KING PLACE OF HEARING: Montreal, Quebec DATE OF HEARING: June 8, 2022 REASONS FOR JUDGMENT BY: LEBLANC J.A. CONCURRED IN BY: BOIVIN J.A. GLEASON J.A. DATED: SEPTEMBER 15, 2022 APPEARANCES : Guillaume Rochon Marie Arcand For the appellant CONTACT LENS KING INC. Pavol Janura Charles Junior Jean For the respondent HIS MAJESTY THE KING SOLICITORS OF RECORD : Ravinsky Ryan Lemoine, L.L.P.

Montreal, Quebec For the appellant CONTACT LENS KING INC. A. François Daigle Deputy Attorney General of Canada Ottawa, Ontario For the respondent HIS MAJESTY THE KING