CEBU PORTLAND CEMENT COMPANY, PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Petitioner Cebu Portland Cement Co., is a government owned and controlled corporation engaged
in the making of APO portland
cement.  Admittedly, cement is at least
80% composed of limestone, silica and shale – raw materials which petitioner
quarries from its own mineral lands.

For the period from July
1, 1959 to December 31,
1960, petitioner realized from its gross sales P13,924,415.80.  The
Commissioner of Internal Revenue then levied and collected from petitioner P190,115.24 as ad valorem
tax under Sec. 243 of the Tax Code using as basis therefor
the amount of the gross sales minus the cost of cement bags, which is
P1,188,248.56.

Petitioner paid the P190,115.24
assessment under protest and on May 8,
1961, sought refund for P174,032.85 on the theory that the ad
valorem tax should be based on the cost of the
raw materials, which is P1,072,159.28. 
On June 29, 1961,
without awaiting the resolution of its claim for refund, petitioner sought its
redress in the Court of Tax Appeals which, on February 8, 1964, denied the refund.

Hence, the present recourse.

The issue tendered concerns the correct basis of the 1-1/2% ad
valorem tax under Sec. 243, in connection with
Sec. 246, of the Tax Code when made to apply on cement.^[1]
The State says it is the gross selling price of cement qua cement.  Petitioner insists that it cannot be the
gross selling price.

The parties here have assumed that cement is a mineral product
within the purview of Sec. 243 of the Tax Code. 
Our view is otherwise.  As we
expressed it in Cebu Portland Cement Co. vs.
Commissioner, L-18649, February 27,
1965, cement qua cement is no longer a mineral product in
the condition envisaged by the Tax law. 
Very recently We reiterated and reaffirmed this
stand thru Justice J.B.L. Reyes when We denied a plea to reconsider the
original decision rendered therein.^[2]

It results that Sec. 243 of the Tax Code cannot be applied
directly to cement.  What is taxable thereunder are the
minerals constituting cement, i.e., limestone, silica and shale.^[3]
Hence, the correct basis of the 1-1/2% ad valorem
tax is the market value of the quarried raw materials.

This was petitioner’s stand before the Tax Court.  But as the Solicitor General points out,^[4]
and the records bear him out, petitioner abandoned that stand here.  At the most, petitioner in its alternative
prayer here, asks that the ad valorem
tax be based on the “bin cost”^[5]
of cement, in which case it would be entitled to a refund in the sum of P42,810.11.

The equities of the case weigh more heavily on petitioner’s side
than on the State’s.  Its claim for
refund, based at least on the “bin cost” of cement, should be
granted.

WHEREFORE, the appealed decision is, as it is hereby,
reversed and set aside.  Respondent
Commissioner of Internal Revenue must refund the sum of P42,810.11
to petitioner Cebu Portland Cement Co. as prayed for
in the petition.  No costs.

SO ORDERED.

Concepcion, C.J., Reyes, Dizon, Zaldivar, Sanchez, Castro,
Angeles, and Fernando, JJ., concur.

Makalintal, J., took no part.

^[1]
Sec. 243 levies “on the actual market value of the annual gross output of
the minerals or mineral products extracted or produced from all mineral lands,
not covered by lease, an ad valorem
tax, payable to the Collector of Internal Revenue, in the amount of one and
one-half per centum of the value of said output” while Sec.
246 defines the term “mineral product” as “things produced by
the lessee, concessionaire, or owner of mineral lands, at least eighty per cent
of which things must be minerals extracted by such lessee, concessionaire, or
owner of mineral lands.”

^[2] Cebu Portland Cement v.
Commissioner, L-18649, Dec. 29, 1967.

^[3]
Gypsum, though also a constituent of cement, cannot be included since it is imported
from abroad.

^[4]
See Rollo, pp. 6-8; Petitioner’s Brief, pp. 16-20.

^[5]
Cost of production minus cost of cement bags.