CTA Case No. 947 (Decision)

CUBLIC CSURT 0 TAX APPEALS E PHILDTUT

REPURLIC CEMIGTT CORPORATION, Petitiotor C.T.ACASE

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- vergue - 0 T0. 94 COMNISSIONR OP INTERNAL W RV BUR Respondent.

DECISION

This is an appeel of petitione Republic Comont Corporation from the decision of th respondant Com

missionor or Intornal lovenue ansessing againet and

hol83ng it 1iable for the sun of 98,653.0asde

Tieiorcy xoyalty av/or nd vnlorem tax, inclusive of 255 urchnrgefor the poriod from Kay 1,1957 to de- cember 31, 1959.

Petitionery a omestic corporation organized in

aecordance vith the Lavs of the #hilippines, is engnged

in the production and snle of conent, It holds mineral

landa elther under lease contrecta vith, or wdem tom-

porary ertt ismed by the Govoent from which lnnd

It quarries lfmeatone, shnle end silica and othor mine

rais for uso in the produetion of conent.

During tho poriod from Nay l, 1957 to December 3l, 1959,petiionepnid.the aggregete amont of

P21730.08 as Poyelty and/o ad ylorem tnx on the

extracted.1imentone, ghele and ailica.

Upon realizing thnt petitionor had been paying

nd valorem tax on the basis or the -cost of unprocossed

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C.T.A.CASEO.97 DSGISION C

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linostono, shnle and silics and belioving that the

said tax should bs comgutod on the selling price of

the manfactured coment, respondent, on May 18, 1960 dotorained against petitioner a dericioney nl yaloram tax in tho m of 63,901.38,plus 2% surcharge, on the groos sales of packod uement sold aring the peri-

od from September 1959 to December 31,1959. Te pe

titioner requested thnt said deficionoy asmessment

be reconsidered, which request was denied by the res

pondent. In the deniai, resgoient also smgossed against petitioner deficiency royalty from May 1957 to Deoembor 1959 1n the amoont of 398,922.3, plus a aur-

charge of 99,730.61-and 10,000.00 a aomprome pen-

ty. Henco, the instant appeal.

After due honrin, respondent, in the memorandim

he ubnitted in support ef his stand, atated that pe titioner hns paid the aniount of 7249,326.52 mder er- Ncial Receipt o.4637 dated June 15, 1962, hich

anount represants one-half l/z of the tanes involvad in this cnse . Conaequentiy, he nov aeks that peti- tioner be ordored to pny the sum of 7249,326.52 repre- sonting alleged tinpaid belance of its tax liability.

Tho issuas radsed by the parties in the instant

appeal nre purely questions of law, to wit V

for the paymont of l royalty and/or ad ya- loron tax based on tha gross solling price of the packed cement which it tennfaeturodi and l. Whether or not petitioner is lindle

Lof 25 surcharge. 2. Whethor or net petitioner is linblo

Petitioner maintains that the i royalty and/or

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C CAS HO 9 DECISIOW -

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ad xelorem tax ahoua be computed m the cost of tho

unprocossad raw limestone, shele an4 stlica sand cer

ried aan ertracted from its mineholdings. Unon the

other hand, respondent, invoking our decisicn in Cebu

Po tland Cenent Co. vs. Cormissioner of Internal lev- ente,C.T..Case No.705 promlgated on 7unn 21 l i contends that the gross selling prico of the

packed coment shoule be the banis of the royalty mnd/

or ad ynloron tax. In othe words, it is trged upon

us that coment is the taxahlo mineral procucty not the Isyeralg compoging it.

Ne agred to respondent's contention that the tax- eble minernl product in the finished coent. Petitior

er admits thnt eighty per cent 805 of tho ceent produced by it during the period from May, 1957 to Docomber, 1959 conaist of 1imostone st1ien sand nd

shale extraeted from mineral lencs held by it mder lonse and/or minos temporary pormit x x xVction 26 ef the ax Code dofines mineral products as Ithing. prohced by the lesseo, concessionaire cr omer of

minoral lands, at least oighty per cont of which things

ust ho mimerals extracted hy such lesaeo, ooncession- aire, or owmer of minoral lands Undoubtedly, the cement in question is a mineral produet withtn the

contenplation of this codal mrovisiom. Heneo, che royalty and/or ad yelorom tax should be aeseasod and collected on the actual market value of the cement.

As ve held in Cebu Portlond Cerent Compnny vs. Com- missioner of Intornal Hovemea e case aln to

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UICISIOE ColaAe CASE NO.97

the cno at har

vide for tho assesmant of inaral produets and ue of the rinerals or mineral on the actual merkot ibie prior to renovai Whare mined, hovaver, Tine the term actuai market value" tine and place of renoval. Itis true that vaiue that the said thereof the of Sectiong the aaid produets at ths Sae frou the B teotions L yaLOr Minerals or $s the Oa to colloct- the val- not locality DrG tax con

whon ono takas into conrideration Section 24 which provices in part, thntt his conclusion is rendored more obvious

minerals or mineral products, x x x Mith- out any daduction from miningy milling ref ining, tranaporting, hanai ing, narket- pretod as the actual markat value of in or any other expenses.x x . +Phe torm *groas outputt shall be intar-

patont thnt tho exponson for mining, miliing ref ining, tranaporting, handiing, marketins, minorals or mineral productn subioct to ad yalg- anmual gross output of the minerels or minornl Ilng nrice of tha cenont should be the'baais of eto., form part or the mnrkot vnine of the and procucts extraeted or produeod Ya the tax. eollocted on the aetnnl market value of the that the adl yaloran tax should be asseased tax. rom the above-qnoted proyisiong it is ince 8oetion 2,3 is dofinito in stnt- hence, the sol

Aethaltatkot valuet hs beon definod as

is conon sonse and rmeson. One Iundred ne Casas of Champagn Phranos,Vol.2,p.276. purchaser of the yooda in liine to ra ceiva for them, if they are sola in the ordinary course of tredei tho prico which a purchaser wst pny to get them. popular meaning of the term, and it i also the legal meaning. Pod. Cas.1168, Ribbon 2z Fec x x x the nrice which the owmer or Cases ar 1172. Six Caseg of Three thousand Itis the This S11K atd 23

3 al1 11418 L.116the cour definos thin netual mnricet valuet as x x In cliqnot Chapagne70 U. the price at hich the omor or ufae- turor of coods holds them Ton salet the

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C.A.CASEHO DKCJION g+7

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wiliing to recoive for thet if thoy are seld in the oreinnry course of er Caaks, etc. of Wino, 2+ Fed.Cam. price at which he freely offers the in the markot, such price an he is trado. Tvelve Imdred nnd Nine quert-- 398,405 e Vorda and Phrases:sera.

is the price for vhich it is bought and sold in niticnn aoove, the setunl merkot velue of a good tha open market. As could readily be seen from tha defi-

in ques tion, we arriva at the inavitabie con- clvsion that the aetunl merket value of the sane is the eelling price theraor. eluaion is utrengthened by the fact ment falls uncor thg clnssification Ta NOE produeta as cef inad in Section Code, which partly stetes Applying said definitton to the product that ce- cf This con 246 or the tnine-

minorai iands, at lcast aiehtz ner or omer of mineral iands shall maan things producgd by the cont of vhich things zmst be minerals extracted by such lessea, lesree, concessionaire or ovmer of mppIied.) x x The tar ineral Droduiete concessionnire (Underscoring

viaion wuet be haruonized and only by reading asch and overy provision. Lemakers aid not the entire context or the Tm ean this be at- tioner on the provieion of Secticn 245 of the an inportant canon ef statutory oonstruction togother se aa to eive meiing ana erroct to tntend to eive moaning to one section and nnl- lify the other. tained. Tex Code and, in so doing, failad to ayaroctate thnt provisions of lnv shcald bo eonntruod mhch roliarce has boen placed by gpeti- Saedngly contradictory pre-

nerel produets. ly conclnde that the cament in quegtion is com zequently falls onder the olaistrication of mi- almont completely derived froniimestone rock. Construinf, ly on the meaniag of iminorel products in rolation to Sections 23 and 25, ono can aafe posed of eighty per cont of minorals and ccn- tention thet tho d yalorca tex ahould heve been based on the cost of production (cuarryin nn cmshing) or rather on the enat nf ainasei the coment proouoed by potitioner company is "It is not aisputod by the perties het thorarore, Therefore potitioner's con- Seoton 246 particular

without hasis. rav mnterials beforo removal from tho ine is

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C...CASE NO. DRGISIOC 9h+?

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VAnd ince the sane Seetion 26 of the Tax Codo

ordaine that "eross outputu af the extrncted or pro

duced mineral produets).ahall bo interpreted as the

actual market valne of tho minerals or nineral gro

duets without any deduetton fram, among others, mar-

ketingy it follong thnt the nctual market value ar

seliing price of tha finished coment, including the paper bmg wherein the sane is containod should be tho basis in computing the royalty and/or nd yalcrem tar

Por it cnn not ba denied thnt coment ts ordinarily

sold in bnge made of papor or othorwise.

V But petitioner arguos that the computation of the royalty and/or ad yalorem tex on the gross colling prico of the cenant voull, in erract, bo slapping a

tax on the sales of cenont in contraventlon of Section

188 e of toe ax Cod@ It is to de noted thet this

particular codal provision disanthoriges the imposition

of gnles tax upon minerals and mineral produets sold

by the lesaoe or concessicnire of the mineral iand

from Mhich romove. But whnt is being collected in the case at bar is royelty and/or yaleren tax which is computed on the acteni mnrket valum or gross selling

pvice or tho cemant.

Furthermere, petitianer sugeests that Taapondonts basis of computing the royalty ane/or ad yslomon tar which wa find to be in necordanee vith lav is pro duetive of abstrd anc/or discriminetory #eslts, for

minernl products which undergo auccesaive transrorma- tiong in form wonla become suscoptible to taxation al

+ 4 21

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$nt Sinilarly, this auggeation is without merit. What the iaw subjects to royalty ang/or ad yalorem tax i the mirsral product finally prooueed from the nine-

ral lnnd. Thus vhere, an in the case at bar, cerent is

the mimornl nroduet inally producod Prom raw materinls artracted from a minersl iand a royaity and/or a yalo ron tex camot be cclleetad on the rmv materimls.

caa be irposnd oniy on the resulting minerel produet

cnllod coment. And logically, the royelty ana/or ad mlerem tax vill hnve to vary in aecordance wth the actuel market valus of the ainernl prodnot finally pro-

cucod. We seo ao ahaurdity or aiscriminatovy renult in imposing the royalty and/or ad ynloron tax in accordance thetaveh

Petitioner s obection thnt respondont's bnsie of computing the roymlty and/or al ynlora tax woule effoct substantinl changea in itn mining leane con-

treets, theroby impairing the obligmtionn of maia con-

trecta, in alco ithout merit. The lease contracts

provide that petitioner ahall pay a royalty of one and one-helf l ner contum of the actual mrket val- ue of the grosa output of limestone z x x and all other minerals extractod from, or ninaral procucts of, mine- rel Iands x x x#. As ye have alreedy ruled, cemont is mieral produetMoreover provision ragarding the Peyment of rentals and royalties at the rator established

by the Tax Code nra deomod to bo a pnrt of every eontrect of lease govering minerel lands and minerel prodnet ec.2h of the Tar Code. In viow of this,Dstitionar cannot now complain of impairnont of sontraets

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C..A.CAEO.97 DECIBIOM

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Anent the issne of whother or not potitioner is

liahlo for 25 surcherge, the aiprono Court hns held

thnt the 25% sureharge imposed for feilure of taxpayers

to pay their taxes on time as preseribed hy lav is man

datory (Canlubang Sugar Zatate vs. Collector of Int

Rev..,T.A.Caso o.604, Septenber 28,1961 cifing

Lim Co Chi vsPosndaa,7 Phil460Ioppel Phi1 Inc., vs. Collecton of Int.Rev., 7 Phil.3+0 eoublic

Va.Luzon Ineustrial Corp, G..o.L-7992, 0ot.20 957G4037

Petitionsr having actnnlly paid the reopective sums

of 1130.28 uring tha ericd in ouestim nd r249,

326.52 on ue 15, 1902,hteh ahod be dednetod fro the total amount dus ss royalty ane/or al yaleeen tar thero sti1l remaino, therofoe,a belnge or P2+8,689.02

as doficioncy royalty and/or hd yeiom tax and mrcharge for the period fren 1ay, 1957 to Docomber, 1959.

Manavon petitioner Nepublie Coment Corporetion 1s heroby ordcsod to pay the um or 2,609.02 to the Comiaonar of ntspnal Havanuo within thirty (30 Cay from the ento thia decision becomes finel, Nith costs against potitionor.

SO ORDMED. Yantlay Iovenber 10, l962

w corcun Prasiaing Judge S TAOTS

Bu

Vsaooiata Jmdgo

4 23 0 ROMAN UNAI Aasouiate Julg MMAaal A33 4 23