G.R. No. L-3029. July 25, 1950
SANTIAGO M. BERMEJO, PLAINTIFF AND APPELLANT, VS. THE COLLECTOR OF INTERNAL REVENUE, DEFENDANT AND APPELLEE.
BENGZON, J.:
On June 25, 1946, said officer determined, and so informed Bermejo,
that for sales of nipa shingles and charcoal made in the third quarter
of 1945 and from October to November of 1945, the latter owed the
Government the sum of P1,083.75. He objected to the assessment,
contending mainly that the products were agricultural, and as such,
free from taxation; but after the exchange of some correspondence he at
last proposed to pay the tax by installments, without prejudice to
whatever action he may take on the matter. His request was granted.
After paying the first installment, he sued for recovery.
The defendant made answer maintaining the validity of the
assessment and levy. But before the trial, he submitted a motion for
dismissal of the complaint on the ground that the plaintiff had not
complied with the provisions of section 306 of the Internal Revenue
Law, inasmuch as said plaintiff had not, before suing, filed a claim
with the Collector for the refund of the amount he had delivered. The
court postponed decision on the motion and heard the case. Afterwards,
the Honorable Fernando Hernandez, Judge, absolved the defendant on two
grounds, to wit: (a) plaintiff failed to comply with section 306; and (b) the tax had been properly imposed.
The plaintiff appealed.
Refuting the first ground of dismissal, he argues that section 306
had been substantially complied with, because previous to the
institution of this proceeding, there were letters sent to the
Collector protesting against the tax. Section 306 reads as follows:
“Sec. 306. Recovery of tax erroneously or illegally collected.—No
suit or proceeding shall be maintained in any court for the recovery of
any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, or of any sum alleged
to have been excessive or in any manner wrongfully collected, until a
claim for refund or credit has been duly filed with the Collector of
Internal Revenue; * * *.” (Com. Act No. 466)
The law clearly stipulates that after paying the tax, the citizen
must submit a claim for refund before resorting to the courts. The idea
probably is, first, to afford the Collector an opportunity to correct
the action of subordinate officers; and second, to notify the
Government that such taxes have been questioned, and the notice should
then be borne in mind in estimating the revenue available for
expenditure. Previous objections to the tax may not take the place of
that claim for refund, because there may be some reason to believe
that, in paying, the taxpayer has finally come to realize the validity
of the assessment. Anyway, strict compliance with the conditions
imposed for the return of revenue collected is a doctrine consistently
applied here and in the United States[1]
Going into the merits of the controversy, we notice that the issue is the application of section 194(x) of the National Internal Revenue Code to a person who, for profit, makes nipa shingles or produces charcoal.
For convenience, said provision of law is reproduced:
“(x) ‘Manufacturer’ includes every person who by physical
or chemical process alters the exterior texture or form or inner
substance of any raw material or manufactured or partially manufactured
product in such manner as to prepare it for a special use or uses to
which it could not have been put in its original condition, or who by
any such process alters the quality of any such raw material or
manufactured or partially manufactured product so as to reduce it to
marketable shape or prepare it for any of the uses of industry, or who
by any such process combines any such raw material or manufactured or
partially manufactured products with other materials or product of the
same or of different kinds and in such manner that the finished product
of such process or manufacture can be put to a special use or uses to
which such raw material or manufactured or partially manufactured
products in their original condition could not have been put, and who
in addition alters such raw material or manufactured or partially
manufactured products, or combines the same to produce such finished
products for the purpose of their sale or distribution to others and
not for his own use or consumption. (Sec. 194[x], Com. Act No. 466)
Nipa shingles are made in this manner: Nipa leaves (the compound
leaves) are cut from nipa trees, which are grown and cultivated like
other plants. The small long leaflets are than removed from the stem or
stalk. These leaflets are folded over a bamboo stick of convenient
length and then sewed together with nipa midribs locally known as
“pipis”. Then the shingle is ready for the market, for use as roofing
material. Unless converted into shingles, nipa leaves may not be used,
and are not used, for roofing; although they may be utilized for
partitions, windows and doors.
In the light of section 194(x), it seems clear that in
making nipa shingles, the plaintiff altered by physical process the
exterior form of the nipa leaves in such manner as to prepare them for
special use (as roofing material), to which the leaves could not be
dedicated in their original condition. He also combined nipa raw
materials with other materials (bamboo sticks) in such manner that the
finished product (nipa shingle) may be put to a special use (roofing)
to which neither the bamboo nor the nipa could have been destined.
In principle, the nipa shingle industry could not be distinguished
from hat-weaving or mat-weaving or the making of sawali. These are
admittedly Philippine “manufactures”. (See Miller, Principles of
Economics Applied to the Philippines, pp. 466 et seq.)
On the other hand, charcoal is produced by plaintiff as follows:
Trees growing in the swamps are felled and cut into pieces of a certain
length and size. The pieces are piled in a pit or oven. They are
covered with cogon and earth. Then fire is set on them for several
days. When the smoke becomes clear, the pit or oven is closed, the fire
is extinguished and the wood has become charcoal.
It is common knowledge that charcoal is locally used for ironing
clothes. Firewood would not do. Charcoal has also some scientific
usefulness which is not possessed by firewood.
” * * * Charcoal is used in the arts as * * *; a
filter, a defecator and decolorizer of solutions and water; an
absorbent of gases and aqueous vapors; a non-conducting packing in
ice houses, safes and refrigerators; an ingredient in gunpowder and
fireworks; and in the galvanic battery and the electric light, * * *”
(The Encyclopedia Americana, Vol. 6, p. 303.)
The application of section 194(x) to charcoal is more
easily perceivable. The process is a chemical or physical process
altering the .exterior texture and inner substance of the firewood in
such manner as to prepare it for special uses to which firewood may not
be dedicated. Wherefore, in making charcoal for the market, plaintiff
became a manufacturer within the meaning of the law.
Judgment affirmed, with costs.
Ozaeta, Pablo, Tuason, Montemayor, and Reyes, JJ., concur.
[1] Wee Poco vs. Posadas, 64 Phil., 640.