G.R. No. L-23632. June 30, 1977
ACTING COMMISSIONER OF CUSTOMS, PETITIONER, VS. MANILA ELECTRIC COMPANY AND COURT OF TAX APPEALS, RESPONDENTS.
FERNANDO, J.:
The reversal by respondent Court of Tax Appeals of a determination
by the then Acting Commissioner of Customs, the late Norberto Romualdez, Jr.,
that private respondent Manila Electric Company was not exempt from the payment
of the special import tax under Republic Act No. 1394[1]
for shipment to it of insulating oil, respondent Court entertaining the
contrary view,[2] led to this petition for review. The contention pressed in support of the
petition is that as a tax exemption is to be construed strictly, the decision
of respondent Court, which assumed that insulating oil
can be considered as insulators must be reversed and set aside. The appealed decision of responÂdent Court in
the light of applicable authorities supplies the best refutation of such
contention. It must be sustained.
The appealed decision[3] set
forth that petitioner Manila
Electric Co., now private respondent, in appealing from a
determination by the then Acting Commissioner of Customs, now petitioner,
“claims that it is exempt from the special import tax not only by virtue
of Section 6 of Republic Act No. 1394, which exempts from said tax equipÂment
and spare parts for use in industries, but also under Paragraph 9, Part Two, of
its franchise, which expressly exempts its insulators from all taxes of
whatever kind and nature.”[4] It then made reference to the franchise of
private respondent Manila Electric Co.: “Par. 9. The grantee shall be liable to pay the same
taxes upon its real estate, buildings, plant (not including poles, wires,
transformers, and insulators), machinery and personal property as other persons
are or may be hereafter required by law to pay. In consideration of Part Two of the franchise
herein granted, to wit, the right to build and maintain in the City of Manila
and its suburbs a plant for the conveying and furnishing of electric current for
light, heat, and power, and to charge for the same, the grantee shall pay to
the City of Manila two and one-half per
centum of the gross earnings received from the business under this
franchise in the city and its suburbs: *
* * and shall be in lieu of all taxes and assessments of whatsoever nature, and by whatsoever authority upon the
privileges, earnings, income, franchise, and poles, wires, transformers, and
insulators of the grantee, from which taxes and assessments the grantee is
hereby expressly exempted.”[5]. It noted that the above “exempts it from all taxes of whatever
nature, and by whatÂever authority,
with respect to its insulators in consideration for the payment of the
percentage tax on its gross earnings.”[6]
The question then,
according to such decision of respondent Court is: “Does the insulating
oil in question come within the meaning of the term ‘insulator’?”[7] Then it went on: “Insulating oils are
mineral oils of high di-electrics strength and high flash point employed in
circuit breakers, switches, transformers and other electric apparatus. An oil with a flash point of 285°F and fire
point of 310°F is considered safe. A
clean, well-refined oil will
have a minimum di-electric strength of 22,00 volts, but the presence of as low as 0.01% water will reduce the di-electric
strength drastically. The insulating oils, therefore, cannot be stored for long periods because of the danger of
absorbing moisture. Impurities such as
acids or alkalies also detract from the strength of the oil. Since insulating oils are used for cooling as
well as for insulating, the viscosity should be low enough for free
circulation, and they should not gum. (Materials Handbook by George J. Brady, 8th Edition 1956, pp. 421-423.) * * *.”[8]
The last portion of the
appealed decision explained why the determination of the Acting Commissioner of
Customs must be reversed: “There is no question that insulating oils of
the type imported by petitioner are ‘used for cooling as well as for
insulating,’ and when used in oil circuit breakers,
they are ‘required to maintain insulation between the contacts inside the tank
and the tank itself.’ * * * The decision appealed from not being in accordance
with law, the same is hereby reversed.
Respondent is ordered to refund to petitioner the sum of P995.00 within
thirty days from the date this decision becomes final, without pronounceÂment
as to costs.”[9] It was therein made clear that private
respondent was not liable for the payment of the special import tax under
Republic Act No. 1394.
As noted at the outset,
the decision speaks for itself. It
cannot be stigmatized as suffering from any flaw that would call for its
reversal.
1. It is to be admitted, as contended by petitioner, that this
Court is committed to the principle that an exemption from taxation must be
justified by words too clear to be misread.
As set forth in Commissioner of Internal Revenue v. Guerrero:[10]
“From 1906, in Catholic Church v. Hastings to 1966, in Esso Standard
Eastern, Inc. v. Acting Commissioner of Customs, it has been the constant and
uniform holding that exemption from taxation is not favored and is never
presumed, so that if granted it must be strictly construed against the
taxpayer. Affirmatively put, the law frowns on exemption from taxation, hence, an exempting provision should be construed strictissimi
juris.”[11]
Such a ruling was reaffirmed in subsequent decisions.[12]
It does not mean, however, that petitioner should prevail, for as was
unequivocally set forth in the leading case of Republic Flour Mills v. Commissioner
of Internal Revenue,[13]
this Court speaking through Justice J.B.L. Reyes: “It is true that in the
construction of tax statutes tax exemptions (and deductions are of this nature)
are not favored in the law, and are construed strictissimi juris against the
taxpayer. However, it is equally a
recognized principle that where the provision of the law is clear and
unambiguous, so that there is no occasion for the court’s seeking the
legislative intent, the law must be taken as it is, devoid of judicial addition
or subtraction. In this case, we find
the provision of Section 186-A ? ‘whenever a tax free, product is
utilized, * * * ? all encompassing to comprehend tax-free raw materials,
even if imported. Where the law provided
no qualification for the granting of the privilege, the court is not at liberty
to supply any.”[14]
That is what was done by
respondent Court of Tax Appeals. It
showed fealty to this equally
well-settled doctrine. It construed the
statutory provision as it is written. It
is precluded, in the language of the Republic Flour Mills opinion, considering
that the law is clear and ambiguous, to look further for any legislative
intent, as “the law must be
taken as it is, devoid of judicial addition or
subtraction.”[15]
If there is an extended discussion
of this point, it is due solely to the emphasis placed on the matter by
petitioner.
2. Moreover, the decision of respondent Court under review finds
support in Balbas v. Domingo.[16]
Thus: “No other conclusion is possible in view of the well-settled
principle that this Court is bound by the finding of facts of the Court of Tax
Appeals, only questions of law being open to it for determination. As stated in another decision, ‘only errors
of law, and not rulings on the weight of evidence, are reviewable by this
Court.’ The facts then as above ascertained cannot be
disturbed. In our latest
decision, there is a categorical assertion that where the question is one of
fact, it is no longer reviewable.”[17] Such a doctrine is not of limited
application. It is a
recognition of the wide discretion enjoyed by the Court of Tax Appeals
in construing tax statutes. So it was
categorically held in Alhambra Cigar and Cigarette Manufacturing Co. v.
Commissioner of Internal Revenue:[18]
“Nor as a matter of principle is it advisable for this Court to set aside
the conclusion reached by an agency such as the Court of Tax Appeals which is,
by the very nature of its function, dedicated exclusively to the study and
consideration of tax problems and has necessarily developed an expertise on the
subject, unless, as did not happen here, there has been an abuse or improvident
exercise of its authority.”[19]
That same approach was reflected in Reyes v. Commissioner of Internal Revenue,[20]
Chu Hoi Horn v. Court of Tax Appeals,[21]
Vi Ve Chemical Products v. Commissioner of Customs,[22]
and Nasiad v. Court of Tax Appeals.[23]
The Vi Ve decision has some relevance. There the stand of the state that the Court
of Tax Appeals could rightfully determine that “‘priopionic glycine’ is
the same as glutamic acid”[24]
was considered as well within the authority of respondent Court. It would be an affront to the sense of
fairness and of justice if in another case, respondent Court, in the exercise
of its discretionary authority, after deterÂmining that insulating oil comes
within the term insulator, is not to be upheld.
WHEREFORE, the petition for review is dismissed. No costs.
Barredo, Antonio, and
Concepcion, Jr., JJ., concur.
Aquino, J., in the result.
[1]
Cf. Sec. 9 of Rep. Act No. 1394 (1955).
[2]
The decision was penned by the then Judge Roman Umali.
[3]
Annex C, Petition.
[4]
Ibid, 1.
[5]
Ibid, 1-2.
[6]
Ibid, 2.
[7]
Ibid.
[8]
Ibid, 2-3.
[9]
Ibid, 3-4. While reference was
made to the franchise of private respondent, the decision was likewise made to
rest on the language of Republic Act No. 1394.
[10]
L-20812, September 22, 1967, 21 SCRA
180.
[11]
Ibid, 183-184. Catholic Church v.
Hastings is reported in 5 Phil. 701
(1906) and Esso Standard Eastern, Inc. v. Acting Commissioner of
Customs, L-21841, October 28, 1966,
in 18 SCRA 488. The opinion also cited
Government v. Monte de Piedad, 35 Phil. 42 (1916); Asiatic Petroleum Co.
v. Llanes, 49 Phil. 466 (1926); House v. Posadas, 53 Phil. 338
(1929); Phil. Tel. and Tel. Co. v. Collector, 58 Phil. 639 (1933) ;
Greenfield v. Meer, 77 Phil. 394 (1946); Collector of Internal Revenue v.
Manila Jockey Club, 98 Phil. 670 (1956); Phil. Guaranty Co., Inc. v.
Commissioner, L-22074, September 6, 1965, 15 SCRA 1; and Abad v. Court
of Tax Appeals, L-20834, October 19, 1966, 18 SCRA 374.
[12]
Cf. Commissioner of Internal Revenue v. Visayan Electric Co., L-22611,
May 27, 1968, 23 SCRA 715; E. Rodriguez v. Collector of Internal
Revenue, L-23041, July 31, 1969, 28 SCRA 1119; Asturias Sugar Central v.
Commissioner of Customs, L-19337, Sept. 30, 1969, 29 SCRA 617; Philippine Iron
Mines v. Commissioner of Customs v. Philippine Acetylene Co.,
L-22443, May 29, 1971, 39 SCRA 70; Davao Light and Power Co. v.
Commissioner of Customs, L-28739, March 29, 1972, 44 SCRA 122; Wonder
Mechanical Engineering Corp. v. Court of Tax Appeals, L-22805, June 30,
1975, 64 SCRA 555; Commissioner of Internal Revenue v. P. J. Kiener Co.,
L-24754, July 18, 1975, 65 SCRA 142; Manila Electric Co. v. Vera,
L-29987, Oct. 22, 1975, 67 SCRA 351.
[13]
L-25602, February 18, 1970, 31 SCRA
520.
[14]
Ibid, 527.
[15]
Ibid.
[16]
L-19804, October 23, 1968, 21 SCRA 444.
[17]
Ibid, 448.
The opinion cited Sanchez v. Commissioner of Customs, 102 Phil. 37 (1957); Castro v.
Collector of Internal Revenue, 114 Phil.
1032 (1962); Commissioner of Internal Revenue v. Priscila Estate,
Inc., L-18282, May 29, 1964, 11
SCRA 130; Philippine Guaranty Co., Inc. v. Commissioner of Internal
Revenue, L-22074, Sept. 6, 1965, 15 SCRA
1; and Republic v. Razon, L-17462, May 29, 1967, 20 SCRA 234.
[18]
L-23226, November 28, 1967, 21 SCRA
1111.
[19]
Ibid, 1118-1119.
[20]
L-24020, July 29, 1968, 24 SCRA 198.
[21]
L-22046, October 29, 1968, 25 SCRA 809.
[22]
L-28693, September 30, 1974, 60 SCRA
52.
[23]
L-29318, November 29, 1974, 61 SCRA
238.
[24]
60 SCRA 52, 59.