A-684-88
Deputy Minister of National Revenue for Customs
and Excise (Appellant)
v.
J.B. Williams Inc. (Respondent)
and
Beecham Canada Inc. (Intervenant)
INDEXED AS: DEPUTY M.N.R., CUSTOMS AND EXCISE V. J.B.
WILLIAMS INC. (CA.)
Court of Appeal, Pratte, Mahoney and Stone
JJ.A.—Ottawa, March 14 and 19, 1990.
Customs and excise — Excise Tax Act — Appeal from
Tariff Board decision declaring in-home pregnancy test kit,
Acu- Test, preparation for use in diagnosis of "disorder or
abnormal physical state" within meaning of Excise Tax Act,
Sch. III, Part VIII, s. 1, and therefore exempt from consump
tion or sales tax — Appeal dismissed — Board erred in law in
deciding, based on sociological considerations, pregnancy
abnormal physical state except for those seeking it = Statu
tory provision contemplating physical abnormality in medical
sense — However, there was evidence on which Board could
find Acu- Test sold for use in diagnosis of disease, disorder or
abnormal physical state — Package insert advising user to
repeat test then seek medical help without further delay where
test negative but menstruation not commencing within week as
"there could be other important reasons".
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Excise Tax Act, R.S.C. 1970, c. E-13, ss. 27 (as am. by
S.C. 1970-71-72, c. 62, s. 1; 1973-74, c. 24, s. 3;
1974-75-76, c. 24, s. 13; 1976-77, c. 6, s. 3; c. 15, s. 7;
1980-81-82-83, c. 68, s. 10; 1985, c. 3, s. 16), 29 (as
am. by S.C. 1980-81-82-83, c. 104, s. 9), 60(1) (as am.
by R.S.C. 1970 (2nd Supp.), c. 10, s. 65), Sch. III,
Part VIII, s. 1 (as am. by S.C. 1973-74, c. 24, s. 5(6)).
Federal Court Rules, C.R.C., c. 663, R. 1312.
CASES JUDICIALLY CONSIDERED
REFERRED TO:
D./M.N.R. for Customs and Excise v. G.T.E. Sylvania
Canada Ltd., [19861 1 C.T.C. 131; (1985), 64 N.R. 322
(F.C.A.); The Dentists' Supply Co. of New York v.
Deputy Minister of National Revenue for Customs and
Excise, [1956-1960] Ex.C.R. 450; (1960), 42 D.L.R.
(2d) 88.
COUNSEL:
Susan D. Clarke for appellant.
John W. Adams, Q.C. and Clayton W. Caver-
ly for respondent and intervenant.
SOLICITORS:
Deputy Attorney General of Canada for
appellant.
Fraser & Beatty, Toronto, for respondent and
intervenant.
The following are the reasons for judgment
rendered in English by
STONE J.A.: This appeal is from a decision of
the Tariff Board rendered February 5, 1988. The
Board declared that Acu-Test, an in-home preg
nancy test kit, was "a preparation that is sold or
represented for use in the diagnosis of a disorder or
abnormal physical state, or the symptoms thereof
in humans" within the meaning of section 1 of
Part VIII of Schedule III of the Excise Tax Act,
R.S.C. 1970, c. E-13, as amended [by S.C. 1973-
74, c. 24, s. 5(6)]' and, in consequence, was
exempt from the consumption or sales tax imposed
by section 27 [as am. by S.C. 1970-71-72, c. 62, s.
1; 1973-74, c. 24, s. 3; 1974-75-76, c. 24, s. 13;
1976-77, c. 6, s. 3; c. 15, s. 7; 1980-81-82-83, c. 68,
s. 10; 1985, c. 3, s. 16] of the Act by virtue of
subsection 29(1) [as am. by S.C. 1980-81-82-83, c.
104, s. 9] thereof.
Section 1 of Part VIII of Schedule III of the
Excise Tax Act provides:
SCHEDULE III
PART VIII
HEALTH
1. Any material, substance, mixture, compound or prepara
tion, of whatever composition or in whatever form, including
materials for use exclusively in the manufacture thereof, sold or
represented for use in the diagnosis, treatment, mitigation or
' Now, R.S.C., 1985, c. E-15.
prevention of a disease, disorder, abnormal physical state, or
the symptoms thereof, in humans or animals or for restoring,
correcting or modifying organic functions in humans or ani
mals, but not including cosmetics.
Two issues are raised by the appellant, namely:
(1) whether pregnancy is an "abnormal physical
state" within the meaning of the Excise Tax Act;
and
(2) whether the confirmation that the absence of
menses is not due to pregnancy can be said to
constitute the diagnosis of disease or abnormal
physical states within the meaning of the Excise
Tax Act.
The respondent and intervenant also advance
two further grounds for upholding the Board's
decision. Acu-Test, it is said, is of use in the
prevention of disease and disorders in the foetus
and, also, in the diagnosis of problem or high-risk
pregnancies, which are an abnormal physical state.
Secondly, the test is of use in the diagnosis of a
disease or disorder which may cause infertility. In
the view I take of the case, it is not necessary to
deal with these grounds.
I am able to deal shortly with the first issue. The
question is whether pregnancy is an "abnormal
physical state" within the meaning of the Act. It is
clear that the Board's conclusion is based upon its
appreciation of the meaning of that term from a
sociological standpoint, for at page 21 of the
majority decision 2 the following passage appears:
While no one would dispute that pregnancy is the normal
physical state as the result of the encounter of sperm and ovum
viviparous couples, whether in utero or now in vitro, nor will
anyone challenge the experts' view that pregnancy is a normal
physical state for a fertile woman exposed to such encounter at
the appropriate time in relation to her menses, the evidence of a
birth-rate of 1.6 per female in our society establishes, without
going any further, that pregnancy is no longer in the normal
order of a woman's life, regardless of her sexual activity or
menstrual normality. In our society's social philosophy and
personal practices, pregnancy has become an abnormal physical
state except for those seeking it.
2 Appeal Book, Vol. 3, at p. 469.
With respect, I think the Board erred in law on
this aspect of the case. The language of the excep
tion is addressed to "the diagnosis, treatment,
mitigation or prevention of a disease, disorder,
abnormal physical state, or the symptoms thereof,
in humans or animals". I am not persuaded that
anything but physical abnormality in a medical
sense was here contemplated. The medical evi
dence on both sides was in agreement that preg
nancy is a normal physical state. Detection of that
state through the use of Acu-Test does not result
in the diagnosis of an "abnormal physical state" in
the sense that phrase is used in the Act.
That said, I have difficulty in accepting the
appellant's second attack on the Board's decision.
The argument here is that the Board had before it
no evidence on which it could find that the goods
are "sold or represented for use in the diagnosis of
a disease, disorder, abnormal physical state". All
that the evidence shows, it is contended, is that,
within certain limits, the goods may be used to
diagnose the existence of pregnancy or, more accu
rately, the presence in the human body of a certain
hormone (HCG) commonly present in the body of
a pregnant woman. If, as I have concluded, the
Board did err in construing the phrase "abnormal
physical state", its decision should nevertheless be
upheld if it correctly determined the issue under
discussion.
Both sides led expert evidence on the point. This
evidence rather shows that Acu-Test can only
diagnose the existence of pregnancy and that it
cannot diagnose other possible causes for absence
of menses. On the other hand, the record before
the Board includes the package insert which
accompanies the goods at the time of purchase. It
contains the following message which is obviously
addressed to the user of Acu-Test:
WHAT THE RESULTS MEAN
A pregnant result indicates that your urine contains HCG and
you can assume you are pregnant. You should now consult with
your physician who is best able to guide you.
A non-pregnant result means that no HCG has been detected
and you can assume you are not pregnant. If a week passes and
you still have not started menstruating, you should do the test
again. There is the possibility that your urine gave a "Fake
Negative" result. If it is still negative in this latter test, there is
little chance that you are pregnant but because there could be
other important reasons, you should see your doctor without
further delay. [Emphasis added.] 3
Dr. Muggah, the medical expert called by the
respondent and intervenant, was questioned about
this message before the Board:
Q. Again, getting back to the test and now the situation where
it tests negative but the period has been missed; you have the
amenhorrhea. Would it be fair, then, to characterize the test as,
in those circumstances — and, again, I do not want to overstate
it — being an aid in the detection of the cause of the amenhorr-
hea — a starting point, if you like?
A. Yes, and I think that J.B. Williams is correct in suggesting
that you repeat the test in a week and pregnancy may be the
diagnostic point that you have reached. In the absence of a
positive test with a negative test, that should trigger an
approach with the physician to seek out the reason for this and,
yes, she does not appear to be pregnant so that is one diagnostic
point that you have established.
Q. And you were referring — and I just want to make sure
that I have got the right wording for the Board. You were
referring to some wording in the literature that goes with this
tester. Is this it — and I am referring to the section, "WHAT
THE RESULTS MEAN", the third line from the bottom of the
second paragraph under that heading:
"There is the possibility that your urine gave a `False Nega
tive' result. If it is still negative in this later test..."
— that is the second test
` ... there is little chance that you are pregnant, but because
there could be other important reasons, you should see your
doctor without further delay."
Would you agree with that statement, doctor?
A. Yes. 4
This evidence, in my view, does support a find- .
ing that Acu-Test is sold or represented for use in
the diagnosis of a disease, disorder or abnormal
physical state. While Acu-Test does not and,
indeed, cannot diagnose the existence of a particu
lar problem in a woman who it indicates is not
pregnant, that person may be led nevertheless to
seek medical advice explaining the absence of
menses and which, on the evidence, could well be
3 Appeal Book, Vol. 3, at p. 341.
4 Appeal Book, Vol. 2, at pp. 149-150.
some disease, disorder or abnormal physical state. 5
It seems to me, therefore, that there was some
evidence before the Board that could reasonably
support its finding and conclusion on the point.
The Court in an appeal such as this is limited by
subsection 60(1) [as am. by R.S.C. 1970 (2nd
Supp.), c. 10, s. 65] of the Act to questions "of
law". Though egregious error in fact finding may
thereby be attacked, we are not otherwise to inter
fere with a function reserved to the Board. (See
D./M.N.R. for Customs and Excise v. G.T.E. Syl-
vania Canada Ltd., [1986] 1 C.T.C. 131 (F.C.A.),
at pages 134-135; The Dentists' Supply Co. of
New York v. Deputy Minister of National Reve
nue for Customs and Excise, [1956-1960] Ex.C.R.
450 at page 455.
The respondent and intervenant ask for costs.
However, as this is an appeal to which Rule 1312 6
in Division C of the Federal Court Rules [C.R.C.,
c. 663] applies, and there being no "special rea
sons" for allowing costs, I would dismiss this
appeal without costs.
PRATTE J.A.: I agree.
MAHONEY J.A.: I agree.
5 See the evidence of Dr. Muggah, Appeal Book. Vol. 2, at
pp. 147-148.
6 Rule 1312. No costs shall be payable to any party to an
appeal under this Division to another unless the Court, in its
discretion, for special reasons, so orders.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.