1) CIR v CA, Central Vegetable Mfg Co & CTA, GR 107135, 23 Feb 1999

(Fortich Ver)
Facts:

CENVOCO is a manufacturer of edible and coconut/coprameal cake and such other coconut
related oil subject to the miller's tax of 3%. Petitioner also manufactures lard, detergent and
laundry soap subject to the sales tax of 10%. In 1986, petitioner purchased a specified
number of containers and packaging materials for its edible oil from its suppliers and paid
the sales tax due thereon. After an investigation conducted by respondent's Revenue
Examiner, Assessment Notice No. FAS-B-86-88-001661-001664 dated April 22, 1988 was
issued against petitioner for deficiency miller's tax in the total amount of P1,575,514.70 x x
x.

On June 29, 1988, petitioner filed with respondent a letter dated June 27, 1988 requesting
for reconsideration of the above deficiency miller's tax assessments, contending that the final
provision of Section 168 of the Tax Code does not apply to sales tax paid on containers and
packaging materials, hence, the amount paid therefor should have been credited against the
miller's tax assessed against it. Again, thru letter dated September 28, 1988, petitioner
reiterated its request for reconsideration,

Section 168 of the Tax Code provides that sales, miller's or excise taxes paid on raw materials
or supplies used in the milling process shall not be allowed against the miller's tax due.
CENVOCO contend that since packaging materials are not used in the milling process then,
the sales taxes paid thereon should be allowed as a credit against the miller's tax due because
they do not fall within the scope of the prohibition. according to BIR, since the law specifically
does not allow taxes paid on the raw materials or supplies used in the milling process as a
credit against the miller's tax due, with more reason should the sales taxes paid on materials
not used in the milling process be allowed as a credit against the miller's tax due. There is no
provision of law which allows such a credit-to-be made.

Issue:
Whether or not the sales tax paid by CENVOCO when it purchased containers and
packaging materials for its milled products can be credited against the deficiency millers
tax due thereon.

Decision:

Yes. Notably, the law relied upon by the BIR Commissioner as the basis for not allowing
Cenvoco's tax credit is just a proviso of Section 168 of the old Tax Code. The proviso,
however, is limited only to sales, miller's or excise taxes paid "on raw materials used in
the milling process which shall not be allowed against miller’s tax due

Under the rules of statutory construction, exceptions, as a general rule, should be strictly
but reasonably construed. They extend only so far as their language fairly warrants, and
all doubts should be resolved in favor of the general provisions rather than the exception.
Where a general rule is established by statute with exceptions

The exception provided for in Section 168 of the old Tax Code should thus be strictly
construed. Conformably, the sales, miller's and excise taxes paid on all other materials
(except on raw materials used in the milling process), such as the sales taxes paid on
containers and packaging materials of the milled products under consideration, may be
credited against the miller's tax due therefor.

It is a basic rule of interpretation that words and phrases used in the statute, in the
absence of a clear legislative intent to the contrary, should be given their plain, ordinary
and common usage or meaning.

From the disquisition and rationalization aforequoted, containers and packaging materials
are certainly not raw materials. Cans and tetrakpaks are not used in the manufacture of
Cenvoco's finished products which are coconut, edible oil or coprameal cake. Such
finished products are packed in cans and tetrapaks.

2) Luzon Stevedoring v CTA, GR 30232, 29 Jul 1988, 163 SCRA 647 (fortich
ver)

FACTS:

Petitioner-appellant Luzon Stevadoring Corporation (LSC), in 1961 and 1962, for the repair
and maintenance of its tugboats, imported various engine parts and other equipment for
which it paid, under protest, the assessed compensating tax. Unable to secure a tax refund
from the CIR, on January 2, 1964, it filed a Petition for Review with the CTA, praying among
others, that it be granted the refund of the amount of P33,442.13.

Petitioner contends that tugboats are embraced and included in the term cargo vessel
under the tax exemption provisions of Section 190 of the Revenue Code, as amended by
Republic Act. No. 3176. He argues that in legal contemplation, the tugboat and a barge
loaded with cargoes with the former towing the latter for loading and unloading of a vessel
in part, constitute a single vessel. Accordingly, it concludes that the engines, spare parts
and equipment imported by it and used in the repair and maintenance of its tugboats are
exempt from compensating tax.

The CTA, however, in a Decision dated October 21, 1969 denied the various claims for tax
refund. Its Motion for Reconsideration was also denied.

ISSUES:

Whether or not petitioner’s tugboats can be interpreted to be included in the term “cargo
vessels” for purposes of the tax exemption provided for in Section 190 of the National
Internal Revenue Code, as amended by Republic Act No. 3176.
HELD:

Petition without merit. Section 190 of NIRC provides that the tax imposed in this section shall
not apply to articles to be used by the importer himself in the manufacture or preparation of
articles subject to specific tax or those for consignment abroad and are to form part thereof
or to articles to be used by the importer himself as passenger and/or cargo vessel, whether
coastwise or oceangoing, including engines and spare parts of said vessel.

This Court has laid down the rule that “as the power of taxation is a high prerogative of
sovereignty, the relinquishment is never presumed and any reduction or dimunition thereof
with respect to its mode or its rate, must be strictly construed, and the same must be coached
in clear and unmistakable terms in order that it may be applied. More specifically stated, the
general rule is that any claim for exemption from the tax statute should be strictly construed
against the taxpayer.

As correctly analyzed by the Court of Tax Appeals, in order that the importations in question
may be declared exempt from the compensating tax, it is indispensable that the
requirements of the amendatory law be complied with, namely: (1) the engines and spare
parts must be used by the importer himself as a passenger and/or cargo, vessel; and (2) the
said passenger and/or cargo vessel must be used in coastwise or oceangoing navigation.

As pointed out by the CTA, the amendatory provisions of RA 3176 limit tax exemption from
the compensating tax to imported items to be used by the importer himself as operator of
passenger and/or cargo vessel.

As quoted in the decision of the Court of Tax Appeals, a tugboat is defined as follows:

A tugboat is a strongly built, powerful steam or power vessel, used for towing and, now, also
used for attendance on vessel. (Webster New International Dictionary, 2nd Ed.)

A tugboat is a diesel or steam power vessel designed primarily for moving large ships to and
from piers for towing barges and lighters in harbors, rivers and canals. (Encyclopedia
International Grolier, Vol. 18, p. 256).

A tug is a steam vessel built for towing, synonymous with tugboat. (Bouvier’s Law
Dictionary.).

Under the foregoing definitions, petitioner’s tugboats clearly do not fall under the categories
of passenger and/or cargo vessels. Thus, it is a cardinal principle of statutory construction
that where a provision of law speaks categorically, the need for interpretation is obviated,
no plausible pretense being entertained to justify non-compliance. All that has to be done is
to apply it in every case that falls within its terms (Allied Brokerage Corp. v. Commissioner
of Customs, L-27641, 40 SCRA 555 [1971]; Quijano, etc. v. DBP, L-26419, 35 SCRA 270
[1970]).
And, even if construction and interpretation of the law is insisted upon, following another
fundamental rule that statutes are to be construed in the light of purposes to be achieved
and the evils sought to be remedied (People v. Purisima etc., et al., L-42050-66, 86 SCRA 544
[1978], it will be noted that the legislature in amending Section 190 of the Tax Code by
Republic Act 3176, as appearing in the records, intended to provide incentives and
inducements to bolster the shipping industry and not the business of stevedoring, as
manifested in the sponsorship speech of Senator Gil Puyat.