One of the largest cannabis companies in the world is appealing a nearly half-million-dollar fine stemming from a 2019 outdoor cultivation operation that allegedly preceded the proper licensure in Canada’s largest market.
Ontario-based Canopy Growth Corp. was fined CA$434,611 in 2020 by the Canada Revenue Agency (CRA), a penalty that the company is now appealing in Federal Court, the National Post reported.
After Canada legalized adult-use cannabis in late 2018, Canopy Growth set up a corporate subsidiary in early 2019 that applied for a cultivation license from Health Canada for an outdoor farm. The company is now arguing that it complied with federal regulations, according to court documents obtained by the daily newspaper.
Canopy Growth received a license from Health Canada in June 2019, and then additional licensure allegedly needed to begin cultivation came from CRA roughly a month later. About a year after that, CRA officials sent the company notice of the fine for allegedly beginning cultivation too early (between the two forms of licensure), implying that it violated Canada’s Excise Act.
“The receipt and cultivation of vegetative cannabis plants prior to obtaining a cannabis licence under the [Excise Act] is a contravention of the [Excise Act],” reads a CRA letter to Canopy Growth, as quoted in the obtained court document.
In its appeal, Canopy Growth’s defense argues it fully complied with the law because it believes nothing in the Excise Act prevents it from beginning cultivation while waiting for the follow-up licensure from CRA, the National Post reported.
According to the obtained court document, the amount of the fine was based on two-thirds of CRA’s estimated market value of the 2019 crop, or roughly CA$652,000, but Canopy Growth ended up destroying that crop and argued in its appeal that the fair market value was therefore $0.
Canopy Growth is now asking the Federal Court to cancel the fine or, if the court does determine the company was not in compliance, then lower the amount of the fine.
