CTA Case No. 1147 (Decision)

- '� PHILIPPINE ACETYLENE COMPANY, . Petitioner, - veiSUs- C.T.A. CASE NO. 11~7 THE COMMISSIONER OF CUSTOMS, Respondent. X� - - ~ ~ - - - - ~ - - - X DE C I S I 0 N This is an appeal from the decision of res- pondent Commissioner of Customs affirming that of the Collector of Customs of Manila denying petition- er's claim for refund of the special import tax which w~ paid under protest in connection with the import- ation of one custom-built li,uefied petroleum gas tank. The facts of the case are stated in the memo- randum of counsel for respondent, from which we quote: Petitioner, a duly organized and existing corporation under the laws of the Philippines, is engaged in the manufacture of oxygen, acetylene and nitrogen. And as a se par ate vpeanctkuarge11ngp etiti one r is also engaged in the and dis tribu tion of liquefied petroleum gas in cylinders and skid tanks � On or about October 1, 1957 peti- tioner imported from the United jtates one custom-built liquefied petroleum gas tank which arrived at the Port of Manila on board the S/S ".Pleasantville" with Re- gistry Noo 1356, entered and declared for purposes of tax assessment in Formal Im- port Entry No. 9~060, series of 1957. Among the impos t s levied upon the subject tank was a Special Import Tax in the amount of ~,683.00 which was collected and paid for by the petitioner under pro~est the retund of which is now the, subject matter of the case at bar. The questions presented for resolution by the parties are:

DECISION - C.T.A. CASE NO. ll~'l - 2- (l) Whether or not petitioner is engaged� in an industry in connection with its business of packaging and selling li- quefied petroleum gas; and (2) Whether or riot the custom-built liquefied petroleum gas tank ih question is an equipment ~7awx hiifchimispoerxteemd pftofrroumse t he speci al import of indus~ries. . Section 6 ot Republic Act No. 139~ exempts from the special import tax 'machinery, equipment, accessories and spare parts, tor the use of industries ��, vi Petitioner contends that it is engaged in anindustry. On the other hand, respondent believes that it is not so engaged; hence, it is not entitled to exemption from the special import tax on the importation of the aforesaid custom-built liquefied petroleum gas tank. Respondent contends that petitioner is not engaged in an industry because it is not a manufac- turer of liquefied petroleum gas; it is merely pack- aging liquefied petroleum gas purchased by it for the purpose of saleo In other words, it is merely a dealero Respondent would limit the meaning or "in- dustry" to the business of manufacturing. The term ttindustry" has been defined as any department or branch of art, occupation or business conducted as a means of livelihood or for profit; especially one which employs much labor and capital and is a distinct branch of trade. (Black 1s Law Dictionary.) Tbe Secretary of Finance has interpreted 11 industryu as including any productive enterprise which employs relatively large amounts of capital

DECISION- C.T.A. CASE NO. 11~7 -3- and/or labor� . (1st Indorsement of the See. of Finance to the Commissioner of Customs, Nov. 19, 1956, cited an page 5 of the Memorandum for Respondent. ) What is meant by ��productive enterpriselt? The word "productive" bas been defined as follows: 1. Having quality or power of producing; bringing fortht or able to bring for~h, esp. in abundance; gen- erative; creative; fertile; as, pro- ductive soil, races, or imaginations. 2. Effective in bringing f orth or forward; originative; causative. 3. Yielding or furnishing results, " profits 1 or benefitsi� as productive r' enterprlses or legis ation. ~. Econ. a. Effectiag, or contri- buting to effect, production. b. Yield- ing, or devoted to the production wofid2 a net return of wealth; - used with ely different meanings by different authors according to their different economic theories as to what kinds of labor or expenditure will contribute such an increment to the world's wealth as will support like production or ex- penditure in an endless series of cycles and yield a net result. Thus the mercantilists called productive any labor or expenditure that increased the stock of precious metals of a nation; the physiocrats called agricultural labor alone productive� Adam Smith extended ~ ductive to Include the labor of agriculture, manufacturing, and commerce, and now many forms of labor and expenditure contributing only indirectly or remotely to the world's wealth, as by increasing the mental effi- ciency of some classes of laborers, are included as productiv~. (Webster's New International Dictionary, Second Edition, unabridged.) And an enterprise means an undertaking or a venture. Tested by the foregoing definitions, we think that the term 11 industrytt as used in Section 6 of Re- 7

DECISION - C.T.A. CASE NO. 1147 . public Act No. 1394 is ,not limited to manufacturers. A person engaged in commerce or trade employing much labor 'and capital is engaged in industry because the enterprise is productive of results, profits or bene- fits. Petitioner, employing much labor and capital, is engaged in packaging liquefied petroleum gas pur- chased by it and selling the same. It is, therefore, engaged in industry within the meaning of Section 6 of Republic Act No. 1394. The second issue involves the question whether the custom-built liquefied petroleum gas tank imported by petitioner is an equipment. This question was not passed upon either in the decision of the Collector of Customs or in that of the Commissioner of Customs. Neither has the memorandum of the Solicitor General discussed the issue. Nevertheless, we shall pass upon the issue as raised by the parties. The term ttequ~pnent11 in industry has been defined as the physical facilities available for production, including buildings, machineries, tools, etc. It does not include materials used in the packing or preparation for the market of the finished products and are sold with the finished articles. (Lu Do & Lu Ym Corporation v. Central Bank of the Phil. , G. R. Nos . L-13033 & L-13701, May 31, 1960.) We think that the said custom-built liquefied petroleum gas tank which is used by petitioner in the operation of its industry is an "equipment."

DECISION - C.T.A. CASE NO. 1147 - 5- IN VIEW OF TEE FOREGOING, the decision appealed from is hereby reversed, and respondent is ordered to refUnd to petitioner the sum of '3,683.00. Without pronouncement as to costs. SO ORDERED . Manila, December 26, 1963. ROMAN 1-1. ID1ALI Associate Judge WE CONCUR: MARIANO' NABt Presiding Judge