CIR VS La Tondea and CTA

FACTS:
LT, a licensed rectifier, is in the business of manufacturing wines
and liquors at a distillery at Tondo, Manila.
Since 1929, LT has been purchasing the alcohol used in the
manufacture of its products, and removing it from the centrals to
LTs distillery under joint bonds, without prepayment of specific
taxes, with express permission and approval of CIR. There is a log
with the BIRs Official Register Books of the quantity of alcohol
purchased and received by LT, as attested to by the inspector
assigned to LT distillery.
LT sometimes uses low test alcohol, purchased in crude form,
and subject it to further distillation because LT only produces
high quality products. As such, there are losses due to
evaporation that CIR has given LT an allowance of not more than
7%. The process has then made Manila Rum the best selling rum
in the Philippines, also leading to the rise in specific tax it easy to
the government. (1950-1954: 3,172,515 to P4,973,123)
On May 8, 1954, petitioner wrote a demand letter to respondent
for the payment of specific taxes, in the total amount of
P154,663.10 on alcohol lost by evaporation, thru re-rectification
or re-redistillation, covering the period from June 7, 1950 to
February 7, 1954. LT responded on August 6, protesting the
assessment but CIR refused (August 26) and requested that it be
paid within 3 days of August 31.
LT appealed to the Conference Staff of CIR on Sept. 1 and was
given due course Sept. 3. Before any assessment, LT received
a letter from the petitioner dated December 22, 1954, requiring
it to comply with Department of Finance Order No. 213, to
deposit one-half of the amount of assessment in cash and the
balance guaranteed by a surety bond. LT asked for
reconsideration but was denied 2x, and so LT approached CTA.
CTA ruled that LT only had to pay Cir 672 pesos for specific tax,
declaring LT exempt from liability from the assessed specific
taxes.
Appeal to Supreme Court:
CIR alleges that CTA erred in exempting LT for
payment of specific tax for the alcohol lost during
rectification. Cir used Sec. 133 of the Tax Code.
SEC 133. Specific tax on distilled spirits. On

distilled spirits there shall be collected, except as

hereinafter provided, specific taxes as follows: (a) If
produced from sap of the nipa, coconut, casava,
camote, or buri palm, or from the juice syrup, or
sugar of the cane, per proof liter, forty-five centavo.
(b) If produced from any other material, per proof
liter, one peso and seventy centavos.

ISSUE: Whether or not LT should pay specific tax.

HELD: No.
RA 592 amended Sec 133 such that not all alcoholic substances
and only distilled spirits
SEC 129. Removal of spirits or cigar under bond. Spirits
requiring rectification may be removed from the place of their
manufacture to some other establishment for the purpose of
rectification without the prepayment of the specific tax, provided
the distiller removing such spirits and the rectifier receiving them
shall file with the Collector of Internal Revenue their joint bond
conditioned upon the future payment by the rectifier of the
specific tax that may be due on any finished product.
When R.A. No. 1608 became a law, the tax on alcohol did not
attach as soon as it was in existence as such, but on the finished
product. And this must be so, otherwise a great injustice would
be caused upon a duly licensed rectifier, who, like the
respondent herein, will be made to pay the specific tax on the
alcohol lost thru evaporation, from which no one has been
benefited, based on the provision of laws then extant, of doubtful
application. In every case of doubt, tax statutes are construed
most strongly against the government and in favor of the
citizens, because burdens are not to be imposed beyond what
the statutes expressly and clearly import