Supreme Court grants Iristel leave to appeal

The Supreme Court of Canada (SCC) will hear Iristel Inc.’s appeal over millions of dollars in denied tax credits the company wants restored. Last Thursday the SCC accepted Iristel’s application for leave to appeal over audits by the Canada Revenue Agency (CRA) that is costing the company ten of millions, The appeal will be heard alongside another dispute involving the agency and Dow Chemical Canada ULC, the court said in its news release. Irsitel’s longstanding tax dispute began in 2018 when the CRA audited Iristel’s tax returns. The first audit started in December 2018, covering the period of Jan. 1, 2017 to Dec. 31, 2018. The CRA completed the audit in October 2019, and no adjustments were made to Irsitel’s GST/HST returns. During that audit, the CRA initially withheld the company’s GST/HST refunds for the periods following Dec. 31, 2018, but later agreed to release them because of Irsitel’s financial hardships. In October 2019 the CRA initiated a second audit covering the period ending September 2019, and then expanded the audit to include all periods between Jan. 1, 2019, and Feb. 29, 2020. The CRA said it thinks Iristel may have been using a “carousel scheme” to claim refunds on tax that it did not pay in the first place. Iristel brought a case against the Minister of National Revenue in March 2020, arguing it should be refunded $62.3 million in GST/HST while the investigation was ongoing. The company argued it faced financial hardships due to the COVID-19 pandemic. The federal court ruled against Iristel having found that it owed more taxes than what was being withheld. Iristel then appealed the Federal Court’s decision to no avail in September 2020. Iristel then sought interim relief in the form of approximately $21.85 million of GST/HST refunds. That motion was dismissed by the federal court and upheld by the court of appeal last March. In June 2022 the Federal Court of Appeal sided with the attorney general of Canada by striking an application by Iristel to the federal court in which the company alleged that it was denied procedural fairness in the audit and assessment process. According to the June 2 decision, the attorney general submitted that a lower court judge erred by dismissing its move to strike out Iristel’s application for judicial review because “the judge failed to recognize that the true essence” of Iristel’s application “was an attack on the validity” of its tax assessments, a matter within the exclusive jurisdiction of the Tax Court of Canada.

Supreme Court grants Iristel leave to appeal

Brief | March 20, 2023

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