COMMISSIONER OF CUSTOMS, PETITIONER, VS. ESSO STANDARD EASTERN, INC., (FORMERLY STANDARD-VACUUM OIL COMPANY) AND HONORABLE COURT OF TAX APPEALS, RESPONDENTS.

Commissioner of Customs versus Esso Standard Eastern

The Case

This is a petition brought by the Commissioner of Customs against Esso Standard Eastern, Incorporated, formerly the Standard-Vacuum Oil Company, and against the Court of Tax Appeals itself as respondent. The Commissioner asks the Supreme Court to review and reverse a decision of the Court of Tax Appeals which declared Esso exempt from the special import tax levied under Republic Act Number 1394 on equipment, materials, and supplies that Esso imported for use in its petroleum exploration concessions. The case matters because it fixes the reach of the tax-exemption privilege granted to petroleum concessionaires under the Petroleum Act of 1949, and because it shows how the Court disposes of a later case that is identical in every essential respect to one it has already decided.

Procedural History

Esso paid the special import taxes under protest before the Collector of Customs of the Port of Manila. After hearing, the Collector overruled the protests and denied Esso's petition for refund. Esso appealed to the Commissioner of Customs, who affirmed the Collector's ruling in a decision rendered in December 1965. Esso then elevated the matter to the Court of Tax Appeals, which in a decision dated May 6, 1968 reversed the Commissioner and ordered the refund to Esso of the total sum paid under protest. The Commissioner of Customs then brought the matter to the Supreme Court by petition to review and reverse the decision of the Court of Tax Appeals.

Facts

Esso is the holder of Refining Concessions Number 2, issued by the Secretary of Agriculture and Natural Resources in December 1957, and it operates a petroleum refining plant in Limay, Bataan. Invoking the Petroleum Act of 1949, Republic Act Number 387, which grants to any oil exploration and development concessionaire the privilege of importing, free of customs duty, all equipment, machinery, materials, instruments, supplies, and accessories for its own use, Esso made several importations for its concessions.

Among these were bags of Bentanite, drums of drilling mud additives, boxes of pump parts, oil well drilling equipment and machinery parts, bags of Lignex, and oil well supplies. The Collector of Customs assessed the special import tax under Republic Act Number 1394 on these importations. Esso paid the tax under protest, in amounts that totaled 7,072 pesos across the several protests.

The Collector overruled the protests and denied the refund. The Commissioner of Customs affirmed. The Court of Tax Appeals reversed and ordered the refund, and the Commissioner brought the present petition. The Court noted that the case is identical in all its essential ingredients with an earlier case between the same parties, decided in August 1975, where the same privilege was invoked, the same tax was assessed and paid under protest, the same rulings were rendered below, and the Court affirmed the Court of Tax Appeals.

Issues

• Whether or not the term customs duty under the Petroleum Act of 1949 includes the special import tax levied under Republic Act Number 1394.
• Whether or not Esso, as a petroleum concessionaire, is exempt from the special import tax on equipment, materials, and supplies imported for use in its exploration concessions.
• Whether or not the Court should apply to this case the rationale and decision in the earlier identical case between the same parties.

Applicable Provisions

The Petroleum Act of 1949, Republic Act Number 387, grants the importation privilege invoked by Esso, and the Court treats its term customs duty as embracing the special import tax. The decision describes the privilege in these words:

The Petroleum Act of 1949 (Republic Act No. 387) which grants to any oil exploration and development concessionaire the privilege of importing, free of customs duty, all equipment, machinery, materials, instruments, supplies and accessories for its own use.

This is the provision that bears on the case, because the whole question is whether the special import tax falls within the customs duty from which the concessionaire is freed.

Ruling

On the first issue, the Court upheld the ruling of the Court of Tax Appeals that the term customs duty under the Petroleum Act includes the special import tax. The exemption therefore reaches the levy under Republic Act Number 1394.

On the second issue, because the special import tax is embraced within customs duty, Esso is exempt from it on the importations made for its own use in its petroleum exploration concessions, and the amounts it paid under protest must be refunded.

On the third issue, the Court held that the present case is identical in all its essential aspects with the earlier case between the same parties. The Court put the point plainly:

We repeat, the two cases being identical in all their essential aspects, this Court feels that the rationale and decision in G.R. No. L-28329 may as well be applied to the present case.

The Court therefore applied the earlier ruling and declined to reverse the Court of Tax Appeals.

Doctrine

The term customs duty, as used in the exemption granted to petroleum concessionaires under the Petroleum Act of 1949, includes the special import tax levied under Republic Act Number 1394. A concessionaire that imports equipment, machinery, materials, instruments, supplies, and accessories for its own use is exempt from that special import tax, and taxes paid under protest must be refunded. Where a later case is identical in all its essential aspects with an earlier case already decided by the Court, the rationale and decision of the earlier case may be applied to the later one.

Disposition

The petition of the Commissioner of Customs was dismissed, and the decision of the Court of Tax Appeals exempting Esso and ordering the refund was left standing, with no costs.

Remember This

Remember the single line: customs duty in the Petroleum Act of 1949 includes the special import tax, so the concessionaire's exemption covers it. Examiners use this case on the scope of tax-exemption privileges of petroleum concessionaires and on the Court's practice of applying a prior identical ruling to a later case between the same parties.