CTA Case No. 3417 (Decision)

_....Lte OJ' 1Bt f'tULlt9JI''",.. COURT OF TAX A.PPEAU -~� Qty LOVSTED & CO., INC . , Petitioner, - versus - C.T . A. CASES NOS . 3417, 3480 , 3484 , 3512, COMMISSIONER OF INTERNAL 3525 , 3565 , 3584, 3633 & 3670 REVENUE , X- - - - R-e-sp�-on-d-eXnt. DECI S I 0 N The above-captioned cases involving the same parties with identical issues on question of the refund of alleged overpaid advance sales taxes on importations are consolidated and jointly submitted for dec~sion . The material facts are found accordingly . Petitioner corporation organized and existing under Philippine laws had a number of importations con- sisting of refrigeration equipment and parts for resale . In addition to the other import liabilities , these ship- ments were subjected to the payment of 25% advance sales tax inclusive o f the corresponding 50% mark-up pursuant to Section 196(i) and (m) in relation to Section 193(b), 57 (

DECISION - CTA CASES NOS . 3417 , 3480, 3484, 3512, 3525 , 3565, 3584, 3633 & 3670 - 2- all of the Tax Code , in effecting withdrawal thereof from Customs ' custody. The full payment nevertheless, petitioner took exception by asserting that the rate of only 10% advance sales tax inclusive of the 25% mark-up prescribed in Section 199 in relation with Section 193(b), both of the ~ax Code of 1977 should have been levied . Claims for the refund of the alleged excess payments of percentage taxes were accordingly filed but the resolution thereof by the respondent Commissioner of Internal Revenue remains pending to date. Hence the filing of these petitions for review . in accordance with the provision of Section 292 of the Tax Code, encapsulated as follows: CTA CASE NO . 3417 One box - Turbo ice-maker C & F Value $17,955 . 00 Vessel : "Arnold Maersk" Registry No . 1973 with Entry No . 95333 827 , 679 . 00- additional advance sales tax allegedly paid CTA CASE NO . 3480 12 cartons - Commercial refrigerating equipment C & F Value $11,072 . 00 Vessel: "Anna Maersk" Registry No . MIT-90 with Entry No. 007960 827,679 . 00 -additional advance sales tax allegedly paid 57o

DECISION - CTA CASES NOS. 3417 , 3480, 3484 , 3512, 3525, 3565, 3584 , 3633 & 3670 - 3- CTA CASE NP. 3484 30 packages - Commercial type refrigeration equipment C & F Value $27,615 . 00 Vessel: "Oriental Executive" Registry No . 1074 with Entry No. 44907 e64,033.00 - additional advance sales tax allegedly paid CTA CASE ~0 . 3512 25 cases - Industrial refrigeration machine and parts F 0 B Value GBP 966 . 34 Vessel : "Hongkong Express" Registry No . 1479 with Entry No . 66931 e70,308 . 00 ~ additional advance sales tax allegedly paid CTA CASE NO . 3525 9 crates - Condensing unit refrigerating equipment C & F Value $19,989 . 78 Vessel : "Wiser Express" Registry No . 1649 with Entry No . 71326 e49 , 130 . 00 - additional advance sales tax allegedly paid CTA CASE NO . 3565 1 box - Industrial automatic ice plant C & F Value $17,142 . 00 Vessel: "Ar ild Maersk" Registry No . MIP-275 with Entry No . 021406 e42,537 . 00 - additional advance sales tax allegedly paid CTA CASE NO . 3584 2 boxes - Automatic ice plant C & F Value $22 , 356.00 Vessel: "Anna Maersk" Registry No . 8 with Entry No . 003225 e52,360 . 00 - additional advance sales tax allegedly paid 57CJ

--- DECISION - CTA CASES NOS. 3417, 3480, 3484, 3512, 3525, 3565, 3 5 8 4 ' 3 6 3 3 ' & 36 7 0 - 4- CTA CASE NO. 3633 2 crates - Industrial refrigeration spare parts C & F Value $16,665.00 Vesse 1: "Alva Maersk '' Registry No. NIP-47 with Entry No. 05979 , e43,774.00- additional advance sales tax allegedly paid CTA CASE NO. 3670 3 cartons - Refrigerating equipment parts F A S Value $495.00 Vessel: "Arild Maersk" Regisl . ~ y No. TABAC-143 with Entry No. 71326 el,324.00 - additional advance sales tax allegedly paid In assailing the assessment and payment of the additional advance sales taxes on the entered ship- ments of refrigeration equipment and parts, petitioner contends that the articles are of the industrial or commercial type and not among those enumerated in Sections 194, 195, 196, 197, 198 and 201 of the Tax / Code, as amended, hence, classifiable as "other articles" under Section 199 of the same Code and subject to only 10% advance sales tax, inclusive of 25% mark-up, which reads: Sec. 199(a). Pertentag~ t~x oh sales of other artidles. - There shall be levied, assessed and collected once only on every 58 u

DECISION - CTA CASES NOS. 3417, 3480, 3484, 3512, 3525, 3565, 3584, 3633 & 3670 - 5- original sali, barter, exchange, and similar transaction either for nominal or valuable consideration, intended �to transfer ownership of, or title to, the articles not covered in Sections 194; 195, 196, 197, 198 and 201, a tax equi- valent to ten _per centum (10%) of the gross selling price or gross value in money of the articles sold, bartered, exchanged, or transferred, such tax to be paid by the manufacturer or producer: X X X. Petitioner further stresses that, "assuming, arguendo, that the imported articles are analogous or similar to food and beverage storage cabinets mentioned in paragraph (i), Section 196, Tax Code of 1977, the law further mandates that an enumeration or listing of analogous or similar to 'those enume- rated above' lnu st first be recommended by the Commissioner of Internal Revenue to the Secretary of Finance for determination or approval, which Was not done in the case at bar. It says: 1 S ~ m- ila� r �or� �analogo�us �ar�tic.les to thd~~ enum~rated above as determihed by the Minist~n df Finance upon ~e~ommendation of the Co~mi~siohe~ of lnterhal R~veriue 1 based on th~ inh~rent es~entialit of the product.' Sec. � l96 m unde J? scoring supplied." The respondent Commissioner of Internal Revenue did impose t he perc e ntage taxes at the rate prescribed 58

DECISION - CTA CASES NO S . 3417, 3480, 3484, 3512, 3525, 3565, 3584, 3633 & 3670 - 6- in Section 196 in relation ~ ith Section 193(b), of the Tax Code of 1977, irifra, based on the find- ings that the imported refrigeration equipment are actually coolers/refrigerators to be used for storing an d cooling food. In other words, they are similar or analogous to food and beverage storage cabinets operated by electricity. So that while subject importations are not among those enumerated in Section 196(i) of the Tax Code, they are similar or analogous to the articles enumerated therein, which are subject to advance sales tax at the rate of 25% inclusive of the 50% mark-up. Section 196 insofar as pertinent provides: Sec . 196. Perc e ntage tax on sales of semi-essential articles. - There shall be levied , assessed and collected on every original sale, barter, exchange, or similar transaction intended to transfer ownership of, or title to, the articles hereinbelow enumerated, a tax equivalent to twenty-five per centum of the gross selling price or gross value in money . of the articles sold, bartere~, exchanged or transferred, such tax to be paid by the manufacturer or producer: XXX XXX XXX

DECISION - CTA CASES NDS.3417, 3480, 3484, 3512, 3525, 3565, 3584, 3633 & 3670 - 7- (i) Beverage coolers, ice cream cabinets, water coolers, food and beverage storage cabinets, ice-making machines, and mild cooler cabinets, each having or being primarily designated for use with a mecha- nica i refrigerating unit operated by electricity~ gas, kerosene, or other means; XX X XX X XXX (m) Similar or analogo us articles to those enumerated above as determined by the Ministry of Finance upon recommendation of the Commi~sioner of Internal Revenue based on the inherent essentiality of the product. An earlier ruling in a similar case invwlving refrigeration show cases is of no different mold of what appears posited in the instant case, to wit: "Par. (i), Sec. 196 of the Tax Code, as amended by P.D. 1358, classifies, among others, 'food and beverage storage cabinets', iritl0sive of 'any mat~tial, part or accessory' thereof; or any articles similar or analogous thereto under par. (m) of said section, as 'semi-essential' articles taxable at the rate of 25%. The term 'cabinet' is defined as 1 a chamber having temperature and humidity controls' (Webster's 7th New Collegiate Dictionary, p. 115) whereas, the word 'cooler' means 'one that cools~ x x x refrigerator' (Webster's supra, p. 183). Conse- quently, viewed against the above-quoted definitions, the imported electrical refrigeration equipment in question is similar or analogous to 'food and beverage cabinets' within the context of par. (i) of Section 196 of the Tax Code, as amended. , 583

DECISION - CTA CASES NOS. 3417, 3480, 3484, 3512, 3525, 356.5, 3584, 3633 & 3670 - 8- It should be noted that one of the salient features of the amendments to the Tax Code brought about by P.D. 1358, is the inclusion of the phrase 'similar or analogous article' in the prov1sions dealing on classification of articles subject to the ' different rates of sales taxes. As such, the enumeration therefore 6f articles under Sec. 196 is not exclusive in nature considering par. (m) thereof, which authoiizes the Commissioner of Internal Revenue to classify a particular product based on the inherent essentiality of said product, as 'similar or analogous' to articles mentioned in the said provision." (BIR Ruling, March 29, 1979, pp. 68-69, BIR rec.) All told, the material facts are relatively simpl~ and so are the issues under resolve but the parties seem trying to get the better of each other over by a quibble as to what rate of percentage taxes applies to the subject importations. It may suffice to state that the imported articles for resale in the Philippines are subject to the per- centage taxes mandated under Section 193(b) of the Tax Code, viz.: Sec. 193. Payment of percentage taxes. - (a) In genetal. x x x (b) Sales tax on imported articles. - When the articles are imported, the percentage taxes established in Sections 194, 195, 196, 197, 198, 199 and 201 of this Code shall be paid in advance by the importer, in accordance with

DECISION - CTA CASES NOS. 3417, 3480, 3484, 3512, 3525, 3565, 3584, 3633 & 3670 - 9- the regulations promulgated by the Minister of Finance and prior to the release of such articles from the Bureau of Customs' custody, based on the home consumption value or price (excluding internal revenue excise taxes) thereof, x x x plus one hundred per centum of such total value in the case of articles enumerated in Section 194 and 195, fifty per centum in the case of articles under Section 196 and 197 and twenty-five per centum in the case of articles under 198, 199 and 201. xxx In the cares � at bar We find nothing ambiguous nor obscure in the language of Section l96(i) and (m), supra, taken in relation with Section l93(b), above, insofar as the same are brought to b~ar upon the sub- ject importations. By design and purpose the imported refrigeration equipment can readily slip into that warm legal cubby-hole of articles deemed "similar or analogous" to those enumerated in Section l96(i), so to speak. As such the rate of 25% advance sales tax inclusive of the 50% mark-up tacked to the articles in Section l96(i) finds imposition on the importations. l� What ~rgues strongly for the amount of levy appears well contemplated in Section l96(m) subjecting the same rate of percentage tax on "similar or analogous u- 8' L��-r

DECISION - CTA CASES NOS. 3417, 3480, 3484' 3512' 3525' 3565' 3584, 3633 & 3670 - 10 - articles to those enumerated above as determined by the Minister of Finance upon recommendation of the Commissioner of Internal Revenue based on the inherent essentiality of the product." Even more significant is the fact that the amend- ment by P.D. 1358 incorporating the provision on "similar or analogous articles", now Section 196(m) of the. Tax Code is not a legal legerdemain ascribed as a mere quirky insight of the drafter but a well crafted and coherent choice extending the coverage of the tax imposition over such other class of articles with attributes closely hewed to those specified under the various classifications in Section 196, supra. The pellucidity of the intendment requires no further exegesis. The provision is a revenue measure rather than a tool of limitation and curtailment. As earlier pointed out "As such, the enumeration therefore of articles under Section 196 is not exclusive in nature considering that paragraph (m) thereof, which authorizes the Commissioner of Internal Revenue to classify a part~cular product based on the inherent essentiality

DECISION - CTA CASES NOS. 3417, 3480, 3484, 3512, 3525, 3565, 3584, 3633 & 3670 - 11 - of said propuct, as 'similar or analogous' to articles mentioned in said provision." The ruling lends settling eloquence to the precise issue in the case at bar. Again, even if We were to entertain petitioner's proposition. that the listing of articles analogous and similar to "those enumerated above" must first be recommended by the Commissioner of Internal Revenue to the Secretary of Finance for determination and approval, such elenchus will not necessarily yield the desired result. It does not need to be, as "The authority of the Minister of Finance to determine articles similar or analogous to those subject to a rate of sales tax under ce~tain category enumerated in Sections 194, 196 and 197 of this Code shall be without prejudice to the power of the Commissioner of Internal Revenue to make rulings or opinions in con- nection with the implementation of the provisions of internal revenue laws, including rulings on the classi- fication of articles for sales tax and similar purposes." (Sec. 326, Tax Code) u~ 8 ' ~{~

DECISION - CTA CASES NOS. 3417, 3480, 3484, 3512, 3525, 3565, 3584, 3633 & 3670 - 12 - So it appears and We so hold that the respondent Commissioner of Internal Revenue fared consistent with the mandate of the law in the assessment and collection of the rightful percentage taxes due on the petitioner's entered importations. WHEREFORE~ petitions are hereby dismissed with costs against petitioner. SO ORDERED. Quezon City, Metro Manila, October 30, 1987. WE CONCUR: ~4,?/ � Presiding Judge (On leave) C0 NSTANTE C� .R0 AQUIN Associate Judge 58G