http://decision.tcc-cci.gc.ca/site/tcc-cci/decisions/en/item/62731/index.do 
Foley et al. v. The Queen[1] (September 6, 2013) is a case that presents a fine point of statutory interpretation under the
Excise Act, 2001.[2] The appellants were winemakers. They produced wine in Canada made entirely from Canadian produce with the exception of a syrup they obtained from Poland which contained sugars and fruit juice. The expert evidence was that this syrup permitted them to adjust the level of sweetness and aided in the fermentation process. The expert evidence also indicated that since the fruit used in the wine making was not grapes, the addition of sugar was a necessity.
The case turned on paragraph 135(2)(a) of the EI which exempted from duty wine produced in Canada composed wholly of products grown in Canada:
135(1) Duty is imposed on wine that is packaged in Canada at the rates set out in Schedule 6.
(2) Subsection (1) does not apply to wine that is
(a) produced in Canada and composed wholly of agricultural or plant product grown in Canada;
The Crown contended that the addition of the Polish syrup disentitled the appellants to the exemption they sought:
[5] The only assumptions of the Minister in dispute were those found in paragraphs 9(e) and (f) of the Reply which read as follows:
(e) The wine bottled by the appellant during the First and Second Periods contained fruit juice/syrup produced in Poland and composed of ingredients grown outside of Canada (the “Additive”); and
(f) The Additive was used to alter the flavour composition of the wine packaged by the appellant, and was not used solely to facilitate the fermentation of the wine.
Thus the court was faced with a very interesting point of statutory interpretation.
The court first observed that the Crown’s position seemed at odds with the published position of CRA:
[16] The Respondent argues that paragraph 135(2)(a) effectively prohibits the use of any components in wine that is not an agricultural or plant product grown in Canada, including sugar, yeast or any flavouring or sweeteners for that matter. The Appellant argues that paragraph 135(2)(a) only requires that the principal ingredients used in the wine must be an agricultural plant or product grown in Canada and that sugar or other incidental minor products are not caught by such definition. The Appellant relies on Excise Duty Notice 15 or EDN 15 issued by the Canada Revenue Agency (“CRA”) in June 2006 which states:
In order to qualify for this exemption, wine that is packaged must be made from 100% Canadian-grown agricultural products. This means that all of the primary ingredient that is fermented (e.g. grapes, berries, other fruit, honey, dandelions and rice) must have been grown in Canada.
…
The 100% Canadian rule will apply to any juice added in the winemaking process, but will not apply to incidental agricultural-based ingredients that are added in the winemaking process (e.g. sugar).
[17] Frankly, I am of the view that the Appellant’s position as confirmed by the CRA’s EDN 15 is consistent with the clear wording of paragraph 135(2)(a). There is no question that the Appellant was producing wine in Canada. The only issue in dispute is whether the wine was composed wholly of agricultural plant or product grown in Canada. On first thought one might be tempted to assume that all ingredients throughout the entire process should be included in analysing this factor but this would be a ridiculous and impossible result for several reasons.
The court applied a purposive interpretation to the meaning of “wine” as defined in the EI:
[18] Firstly, the definition of wine itself refers to an agricultural or plant product that is subject to the fermentation process. The terms agricultural or plant products referred to in the section 2 definition section of wine are the same terms used in paragraph 135(2)(a). A common sense interpretation would suggest that it is the ingredients that are fermented that must be wholly grown in Canada, not the ingredients that cause the fermentation process such as sugars and yeast. In the case at hand, the Respondent’s auditor acknowledged that the Appellant’s fruit products that are the subject of fermentation were grown on the Appellant’s farm in Canada or were grown on other farms in Canada and purchased by the Appellant and so I find this criteria to be met.
[19] By requiring that the agricultural or plant products be alcoholically fermented, Parliament has clearly acknowledged that those products must undergo a process that it chose not to restrict to ingredients grown or otherwise produced in Canada. If Parliament had intended that the sugars and yeast necessary for the process of fermentation that is a requirement of the definition of wine and without which wine could not be produced according to the testimony of the Respondent’s expert witness; especially where the fruit used was not high enough in sugar content to start off with, as is the case for the Appellant’s products the majority of time, then it should have said so.
[20] It follows as well that if Parliament was only concerned that the products being fermented were grown in Canada, then any ingredients added as sweeteners at later stages to raise the sweetness level of wine or affect its flavour for that matter, are not included as part of the agricultural or plant products that had to be grown in Canada.
This was bolstered by the expert evidence that it was essentially impossible to acquire 100% Canadian grown sugar for use in making wine:
[24] Finally, it must be said that based on the testimony of the Respondent’s expert witness, sugar is commonly added to the liquid from the grapes or other fruit together with yeast to ferment it. If, as she testified, Canadian sugar refineries use only about 10% Canadian sugar beet sugar mixed with sugar cane sugar in their product, it would be almost impossible to buy 100% sugar on the market in Canada for use in fermenting wine. There was no evidence proffered by the Respondent suggesting a pure form of Canadian beet sugar is separately refined and sold, only that the refineries blend it with non-Canadian product. It would make no sense to assume Parliament intended to create an exception not readily obtainable or even possibly so without using more specific language.
In the result, the appellants were successful in claiming the exemption from duty.
Reported decisions under the EI are not common but the interpretive principles emerging from this decision will likely be quite helpful in other areas of tax jurisprudence.
[1] 2013 TCC 276.
[2] S.C. 2002, c. 22, as amended (the “EI”).