CTA Case No. 941 (Decision)

a&PU.Bdc 01" 'rRB PJ.;fiLIPPIND COURT OF T. X APPF..Al .-.. MANII.....A THE SOUTHERN INDUSTRIAL c.T.A. PROJECTs 1: INC 0 I CASE NO. 941 Petitioner-� - versus - THE COMMISSIONER OF INTERNAL REVENUE, Respondent. X~ ~ - ~ - ~ - - - - - - � � X DECISIO N Petitioner Southern Industrial Projects, Inco seeks to recover from respondent Commissioner an alleged over-payment of advance sales tax on im- portations effected by it. Petitioner is engaged in the manufacture of galvanized iron sheets, a new and �necessary industry under the provisions of Republic Acts Nos. 35 and 901. It imported raw materials, consisting of anti- mony ingots, steel strapped load ingots, cold rolled black sheets, ammonium chloride and branding ink, which arrived at the Port of Cebu in November and December 1959p and on which it paid only 10% of the customs duty in accordance With the diminishing ex- emption provision of Section 1 of Republic Act Noo 90lo Subsequently, petitioner also paid 10% of the advance sales tax on the imported raw materials, computed, among other things, on the full customs duty, instead of on the amount actually paid by ito

DECISIQ\J - C. T. A. CASE NO. 941 = 2- On the theo~y that the advance sales tax should be computed, among others, on the 1a~ of the customs duty which it actually paid , petitioner requested respondent for the refund of the total amount of ~5 , 128 . 44 as over- paid advance sales tax . The re- quest for refund having been denied, the instant ap- peal was instituted . However , in the memorandum sub- mitted in support of its appeal, petitioner seeks to recover only the amount of ~646 . 99* the correctness of which amount is not disputed by respondent in case of a decision adverse to himo Consequently, we take it that this appeal is limited only to the recovery of ~646 . 99o The only question raised for our consideration ' is the interpretation of the phrase 11 CUstoms duty11 found in Section 183(b) of the Tax Code. The perti- nent provisions of this law reads: : / c II SEC"- 1:83. X X X (b) Sales. tax on imported articleso- ~hen the articles are imported , the per- centage taxes established in sections one hundred eighty-four , one hundred eighty- five , and one hundred eighty-six of this Code shall be paid in advance by the im- porter, in accordance with regulations promulgated by the Secretary of Finance and prior to the release of such articles from customs custodyg based on the import invoice value thereof, certified to as correct by the Philippine Consul at the port of origin if there is any, including freight, postageJ insurance, commissi()n, customs duty ~ and all similar charges, plus x x x; and twenty-five ~r centum -in the case of articles enumerated in section one hundred eighty-sixo x x x"

I DECISI C.I.A. CASE Oo 941 -3- It is suggested on behalf of the respondent that the customs duty adverted to above should be interpreted as referring to the leo% customs duty on the imported articles, whether wholly or par- tially paid by the importero In other words, it is argued that for the purpose of computing the ad- vance sales tax, the full customs duty should be included in the total landed cost of the articles plus mark-up, regardless of the amount of customs duty due and actually paid. The suggestion is without merit. The advanc e sales tax is based on the import invoice value of the imported article, including expenses at the time it was received by the importer, plus mark-upo In the determination of this tax., "landed costs" has been interpreted as synonymous with the phrase .,total value," which means the import invoice value of the article, including freight, postage, insurance, com- mission. customs duty� and all similar chargeso The landed cost plus mark-up represents theoretically the selling price of the imported article (Mayon Motors, Inc. vs. Acting Commissioner of Internal Revenue, G. Ro Noo L�l5000l March 29,. 1961). Since the selling price of the imported article is determined by its landed cost or import invoice value, including expenses at the time it was received by the importer, plus mark-up, what is not related to the article as an actual expense cannot be determinative of its selling priceo , As a

DECISIOO - C.T.A. CASE ~Oo 941 - 4- corollary, it cannot be a basis of the advance sales taxo And , if, as in the case at bar 1 the importer is entitled to a customs duty exemption of 9~ and as a consequence thereof actually pays only 1~ of the full customs duty , the latter percentage of duty should be considered in the computation of the ad- vance sales taxo In fine , we rule and so hold that the phrase "customs duty" found in Section 183(b) of the Tax Code should pe interpreted to mean the amount of customs~ty legally due and paid by the importero ~HEREFORE, the respondent Commissioner of In- ternal Revenue is hereby ordered to refund to peti- tioner Southern Indust ~ Projects, Inco the sum of =- 646o99o No costs. / SO E.H.ED . a ila , November 20, 1961o Ve concura Associate Judge