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

Petitioner-appellant Commissioner of Internal Revenue has sought reconsideration
of our main decision in the above entitled case, claiming that this Court has miscontrued the issues involved in this case, and that
instead of resolving what is the market value
upon which should be based the ad valorem
tax imposed by section 246 of the Internal Revenue Code, as said section was
amended by Republic Act 1299, in force since June 16, 1955, this Court decided
the case “on an issue that was not raised by them” by ruling
“that cement is not a mineral product but a manufactured product, and as
such it is not subject to the ad valorem
tax” (Motion for Reconsideration, p.
6).  The appellant Commissioner therefore prays that this Court
declare:

(1) That cement is a mineral product subject to 1-1/2% ad valorem tax based on its selling price; or

(2) In the alternative, that the sales of cement by appellee Cebu Portland Cement Company are subject to sales tax of
7%.

The reconsideration must be denied.  The appellant Commissioner of Internal
Revenue has plainly miscontrued the language and
import of our main decision.  We there
stated the issue to be as follows:

“Herein petitioner^[1]
contends that the collectible ad valorem
tax should be based on the actual market value of the quarried minerals that were used in the
production of cement; whereas, respondent Commissioner of Internal Revenue
maintains that, as the cement produced by petitioner consists of minerals, the
same is a mineral product pursuant to the definition given in Section 246 of
the Tax Code and the ad valorem tax
should be based on its selling price.”

And we sustained the position of the
cement company, i.e. that the ad valorem
tax in question should be based on the actual market value of the quarried
minerals used in producing cement, reasoning that cement (as distinguished
from the original minerals used to produce it) is the result of a process, and
that the same “could not have been the state of mineral products
contemplated by the law” for the purpose of imposing the ad valorem
tax.  The necessary corollary of this
pronouncement is that the law
intended to impose the ad valorem tax
upon the market value of the component mineral products in their original
state before processing into cement.  For it can not be overlooked that the law
does not impose a tax on cement qua cement, but on mineral
products, at least 80% of which must be minerals
extracted by the lessee, concessionaire or owner of mineral lands.  Both parties concede that cement is made up
of 80% or more of minerals thus extracted.

The Court did not, and could not, rule
that cement is a manufactured product subject to sales tax, for the reason that
such liability had never been litigated by the parties.  What it did declare is that, while cement is a mineral product, it is no longer in
the state or condition contemplated by the law; hence the market value of the
cement could not be the basis for computing the ad valorem
tax, since the ad valorem tax is a
severance tax, i. e., a charge upon the privilege of
severing or extracting minerals from the earth, (Dec. p. 4) and is due and
payable upon removal of the mineral product from its bed or mine (Tax Code s. 245).  So that the tax is to be computed on the
basis of the market value of the mineral in its condition at the time of such removal
and before its being substantially changed by chemical or manufacturing (as
distinguished from purely physical) processing. 
Whatever mention was made in the decision of such process undergone by
the component minerals of cement, was made solely and exclusively to emphasize
the change in the condition of the minerals, from the primitive state
contemplated by the taxing statute.  This
is clear from the text of the decision (pp. 4-5) where we stated:

“This (respondent’s) line of argument suffers from two
infirmities.  First, while cement
is composed of 80% minerals, it is not merely an admixture or blending
of raw materials, as lime, silica, shale and others.  It is the result of a definite process — the
crushing of minerals, grinding, mixing, calcining,
cooling, adding of retarder
or raw gypsum.  In short, before cement
reaches its salable form, the minerals had already undergone a chemical change through manufacturing
process.  This could not have been the
state of mineral
products that the law contemplates for purposes of the ad valorem
tax.” (Emphasis supplied.)

WHEREFORE, all motions for reconsideration are denied.

SO ORDERED.

Concepcion, C.J., Bengzon,
Zaldivar, Sanchez, Ruiz Castro, Angeles and Fernando, JJ., concur.

Dizon and
Makalintal, JJ., did not take part.

^[1]
Evidently referring to the original petitioner Cebu Portland Cement Co.