CENTRAL AZUCARERA DE TARLAC, PETITIONER, VS. THE COLLECTOR OF INTERNAL REVENUE, ET AL., RESPONDENTS.

This is an appeal from the decision of the Court of Tax Appeals ordering the
petitioner to pay the sum of P19,980 as specific tax on 75 drums of rectified
alcohol.

It appears that on November 2& and 27, 1953, O’phir Drug & Cosmetic
Manufacturing Co., of Northern Hills, Malabon, Rizal, under a previously secured
authority from the respondent Collector of Internal Revenue, purchased from the
petitioner 25,508.75 gauge liters and 9,183.15 gauge liters of denatured alcohol
of the following formula:

“To every 100 gauge liters of ethyl alcohol of not less than 180 degrees
proof, there shall be added two (2) liters of methanol and thirty five (35)
cubic centimeters of uranin solution (0.25 grams of uranin to every 100 c.c. of
water).”

A Denaturing Committe of the Bureau of Internal Revenue was formed to direct,
control and supervise the denaturation of the above-mentioned alcohol.

Of the one hundred-seventy drums sold by the petitioner to O’phir Drug &
Manufacturing Co., the Government intercepted eighty-seven and, upon examination
of their contents, it was found that seventy-five drums contained rectified, and
not denatured alcohol. Hence, specific tax in the amount of P19,980.00 was
assessed against the petitioner on the contents of said seventy-five drums.

The petitioner does not dispute the finding of the N. B. I. ehemist that the
seventy-five drums in question contained rectified alcohol. While it is also not
disputed that said alcohol came from the distillery of the petitioner, the
latter contends it could not be held liable for specific tax upon alcohol
denatured under the supervision of a lawfully constituted Denaturing Committe of
the Bureau of Internal Revenue, and removed as such denatured alcohol upon
authority of certificates of denaturation duly issued by said Committee.

The Court of Tax Appeals upheld the contention of the respondent Collector of
Internal Revenue that the petitioner should have taken the necessary steps to
determine” whether the denaturants supplied by O’phir Drug & Cosmetic
Manufacturing Co. fully met the requirements set forth in Section 26, Part I, of
the United States Denatured Alcohol Regulations; that it should have observed
strict compliance with the requirements of law and regulations on the
denaturation of alcohol; and that having failed in both cases, the petitioner
should be liable for the consequent failure to denature said alcohol. The Court
of Tax Appeals found the petitioner guilty of palpable violation, if not
negligence, in the performance of its obligations under Section 64 of the Tax
Code, the circular implementing said statutory provision, and the instruction of
the Supervisor of Distilleries, because of the following uncontradicted acts:
the denaturation process was held in the premises of the petitioner and not in
a denaturing warehouse; it was done in individual drums; the remaining 80 drums
in which the denaturants were poured on November 25, 1953 were left for two days
in the premises. The procedure observed by the Denaturing Committee in allowing
all these acts was found to be highly irregular and improper.

As a licensed manufacturer of rectified and denatured alcohol, the petitioner
is responsible for the quality of its products. It cannot escape responsibility
by passing it over to the Denaturing Committee concerned primarily with the
prevention of frauds on the revenue. The petitioner should have complied with
the law and regulations bearing on the denaturation of alcohol.

We agree with the finding of the Court of Tax Appeals that the fact that the
alcohol in the Instant case had been passed upon and rectified to by the
Denaturing Committee as duly denatured, does not exempt the petitioner from
paying the specific tax. It is a cardinal principle of law and well settled in
jurisprudence that the government is not estopped by the neglect or omission of
its officers or agents (Bachrach Motor Co. vs. Uson, 50 Phil. 981; Pineda vs.
Court of First Instance of Tayabas, 52 Phil 803).

It follows, therefore, that since the alcohol in question is rectified and
not denatured, the petitioner is liable for the payment of P19,980.00 as
specific tax on the seventy-five drums of said alcohol.

The contention that the petitioner should be credited with the sum of P214.83
collected by the Collector of Internal Revenue as sales tax because specific tax
and sales tax cannot be concurrently due on the same article, is not supported
by sufficient evidence.

Wherefore, the decision appealed from is hereby affirmed with costs against
the petitioner. So ordered.

Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador,
Concepcion, Reyes, J. B. L., and Endencia, JJ., concur.