CTA Case No. 1973 (Decision)

RIPU~U C OF 'J!-H~ PntLTPPI'NEI COURT (~ ~~ TAl~ APPEALS Ol'EZON CITY u .Sp TOBACCO CORPORATION, Petitioner, - versus - C.T.A. CA?E NO. 1973 HON , MISAEL P . VERA, i n ~ is capacity as Com.issioner of Internal Rev nue, ~ -- Respondent. ---X DE C I S I 0 N Petitioner u.s. Tobacco Corporation (now Quqlity �roba,cco Corporation) .has initiated this proceedin~s for the recovery of the amount ot Pl7,022.33 as t obapco inspection fee for the month of September, ' I 1967 . collected pursuant to Revenue Memorandum Circular No . 3p-~7 dated August 22 , 1967, thr ough a petition for r view of the decision of respondent comroiqsioner of Ih.ernal Revenue dated September 2~, 1966. There is no dispute qbout the facts, both pa+ties having submitted a stipulation as follows: (pp. 41... 43, CTA records.) 1. Petitioner i s a corpor at i on organized and existing under the laws of the Republic of the Philippines with prin- cipal off i ce at 23rd and Chicago Street$, Port Area, Mqnila,, an9 is engaged in the business of manufacturing a,nd selling cigarettes. Respondent is the duly qualified and incumbent Commissioner of Internal Revenue. 2. On August 22, 1967, respondent issued Revenue Memorandum Circular No .

DECIS ION - CTA CASE NO. 1973 - 2- 30-67 in implementation of Act No. 2613, as amended (Tobacco Inspecti on Law) requ iring the payment of inspection �fees every 20th of the month and which took effect on September 1, 1967 . Said memorandum circular is made Annex "A" hereof . 3. In a letter dated September 13, 1967 of r espondent to petitioner, Annex "B" hereof, the respondent advi sed the pet itione r of the Circular, Annex A her eof , and required the payment of the inspection fees starting from October 20 and every 20th of the month thereafter. 4. That on October 20, 1967, the petit i oner as required by the circular filed the corresponding application , Annex "C" hereof, for the month of September, 1967, and was assessed for .tobacco inspection fees in the amount of ~17,022.33, Annex "D" hereof, and petitioner on the same date paid the said amount of ~17 ,02 2 . 33 per Official Receipt No. 1614901, dateu October 20, 1967, Annex "E" her eof . 5 . In a letter dated November 17, 1967, the petitioner through counsel , wrote t he respondent questioning the imposition of the inspection fees and reque s ting for the refund of s a id payment of Pl7,022.33 giv i ng r easons theref o r and alleging among other things t hat the cigarettes therein coveted were manufac- tured by the petitioner for domestic sal~ and , therefore, not subject t o t he inspection fees. Said lettei is made Annex "F" hereof. 6. In another letter da ted November 20, 196 7, Annex "G " he r eof, the pe titione r through coun sel again ~rote th e res p ondent that in the me anti.me that de c is ion o n the refund was pe nding, i n lieu o f actual pay- me nt, that peti tion er be allowed to fil e a surety bond to guarantee the payment of sai d inspection fee .

DECISION .- . CTA CASE NO. 1973 - 3- 7 . In a letter dated November 28, 1967, the respondent approved the filing of a bond as requested in Annex "G"~ Said letter of resp8ndent is made Annex "H" hereof. B. On January B, 1968, the peti- . tioner filed with respondent Surety Bond No. 10510 of the Pioneer Insurance & Surety Co., in the amount of ~208,973.28 representing the estimated amo unt of inspection fees for the period from November 20, 1967 to October 20, l~GB. Said SU:i:'ety b)nd is made Annex 11 1� hereof and the covering letter as Anne}~ "J". 9 . In a letter of respondent dated September 26, 1968 to plaintiff's counsel, Annex "K" hereof, and received on October 22, 1968 respondent denied the request for refund. 10. In a letter dated November ~6, 1968, the petitioner forwarded to respondent Surety Bond G(16) of the Workmen's Insurance Co., Inc:,in the amount o f P208,973.28 corresponding to the esti~ated inspection fees for the period November, 1968 to October, 1969. Said covering letter and surety bo~d are made Annexes "L" and "rtt" hereof. 11. That the parties reserve the right to present su6h additional evidence as they may desire. After the parties have filed the foregoing partial stipulation of .facts, this case was set for hearing for several times for the litigants to pre- sent such additional eviden6e as they may desire, but for some reason or another,� � Lhe t .r ial s we.r .:~ always postponed or cancelled until the case was submitted for decision upon the above agreed state- ment of facts. 367

DECISION - CTA CASE NO. 1973 - 4- Petitloner 1 s contention is, in substance, that Act No . 2613, otherwise known as the Tobacco Inspection Law, as amended by Republic Act No. 31, me rely empowers the Comrnissionar (formerly Collector) ?f Internal Revenue to inspect only tobacco for domestic sale or for factory use and manufacturers of tobacco for export. RGvenue Memorandum Circular No. 30-~7 dated August 22r 1967, promulgated as implementing order thereto, insofar as it requires the inspection of ~~actured cigaJ:e ttes for sal e and the collecti on of inspec tion fees thereon, is therefore invalid . Hence, the amount of Pl7,022 . 33 collected by respon- dent as tobacco inspection fee on 56,741,050 sticks of cigarettes .manufactured by petitioner for domestic sale in the month of September 1967 is refundgble. Respc:1dent Commissioner of Internal Revenu�s, on the other hand; contends that the word 11 tobacco'' and the phrase "tobacco for domestic sale" found in Section 6 (c) _of Act No. 2613, as amended by Republic Act No. 31, comprehend ~anufactured tobacco such as cigars and ciga!ettes for domestic sale and con- sumption. Consequently, cig~rettes for domestic sale covered by Revenue Memorandum Circular No. 30.67 are subject to inspection and payment of the corres- ponding tobacco inspection fees at the ra t e provided for in Section 30 2 of the then in f o rce Na t i on ol 8 ..J {'0"' ( ~

DECISION - CTA CASE NO. 1973 - 5- Internal Revenue Code. The amount of Pl7,022.33, according to respondent, was therefore collected in accordance with law, hence, not re fun dable. The issue us presented by the parties is whether or not Revenue Memorandum Circular No. 30.67 is null and void. And the resolution of this question depends on whether or not the terms "tobacco" and "tobacco for domestic sale" found in Section 6(c) .of Act No. 2613, otherwise known as the Tobacco Inspection Law, as amended by Republic Act No. 31, include manufactured tobacco products such as cigars and cigarettes. Four -- ,...qua re \<lith the case at bar on this FCd .11t, by reason of the exact similarity of the facts, the law involved and the issue litigated, as well as the close identity of the parties, is CTA Case No. 2031 of this Court, entitled "Alhambra Industries, Inc., La Flor de la Isabela, Incorporada, and Columbia Tobacco Company, Inc. vs. Ho~. Mis ael P. Vera, in his capacity as Commissioner. of Internal Revenue", November 28, 1970. In that case, this Court unequivocally ruled that the \<lord "tobacco" and the phrase "tobacco for domestic sale" found in Section 6 (c) .of Ac t No . 2013, as amended by Republic Act No. 31, include manufactured tobacco such as cigars and cigarettes. The collection therefore of tobacco inspection fees pursuant to 3G 9

DECISION -� CTA CASE NO. 1973 - 6- Memorandum Circular No. 30.6 7 dated August 2 2 , 1967 6n the ctgars and cigarettes removed by the petitioners therein from their factories for domest:ic cale is legal and justi f ied . Bec ause of its c ontrolling effe~ts on the instant case, and the possibi.J_ity of appeal.- we will quo t e at length from the d e ci ~ ion . Pctii:ioners' .contention that the p h r a se "tobacco for domestic sale" refers to leaf tobacco alene is restrictive, misleading, and against sound statutory construction. Webst2r'~ New International Dictionary 2nd edition,- p. 2658, define s prteopbaacrecdo as th e leaves of the tobacco plant, by drying and v~ricus manufacturi ng processes, and '-1r;; c~d ei ther for smoking or che\ving, or as snuf f, or esth;semmoakniunfga-cotruchree~d\.7pirno~dtutocStasc-cf:rDo;m� tob acco l eav C-igarS 1 CigaretteS 1 etC o COlleCti1Jely 0 From the above definition, it is clear. that the word "tobacco" refers both to leaf and manufactured tobacco such as cigars and cigar ettes . It is to be noted that either Section 6(c) of Act No. 2613 or the amend- atorv law dci s not make a distinction as t6 the meaning of the \vord 11 tobacco". Since our la'\.v- making body used the � word tobacco in a general sense without any quali~ication, this Court is powerless to give it a restrictive meaning. Thus, it was held: ". w � I t i s wcll - s_ettled th t statutor y provisions should not be given a restricted meaning where n0 restriction is .indicated by the terms of the statute itself. (Lo Cham v. Ocampo, 77 Phil. 635.) Or, stated i n broader and more fam{liar terms, where the law does not dis- tinguish, neither may we. (Board of Assessment Appeals of Laguna v. Court o f 'Ea )~ Appea ls , G. R,, No. L-�

DECISION - CTA CASE NO. 1973 - 7- 18125, Hay 31, 1963.)" (Procter & Gamble Manufacturing ~orporation v. Comm . of Int . Rev., C.T . A. Case No. 1 8 61, I'1ay 30, 1970.) . Moreover, whenever our Revenue Code uses the term "tobacco", \�lhether as manufacturer or cbaler:, it refers to tobacco products. Instances of the legislative intent is manifested in the following provi sions: SEC. 19<1. Words and phrase2 defined$ x x X X X X (m) "Manufacturer of tobacco" includes 'every person v;hose� busi=�. ness it is ~o manufacture e tobacc offi'aonur�- snuff, o r who employs oth rsT.o fac(LiJ;e tobacco or snuff, \vhethe_r__ SUc,hiDanufacture be by CUtting 1 p~essing, grinding, or rubbing any raw or leaf tobacco, or otherwise 12..rep,9r in~~ OE._ le~~~ obac<.:?._L_�~ ~fadur_~d or partiaU,y rnanufac- . tured tobacco and snuff, or put ting c\T-) for co-nsumption SCra~} S 1 refuse, or stems of tobacco resulting from any process of handling tobacco stems, scraps, clippings, or waste 0y sifting, twisting, screening, or by any other process. X X X X X (o) "Wholesale tobacco dealer" cornpreher1ds every pers0i1 .\;fio for him- self or on commission sells or offers for sale sJ.9.5.:~-.�j~.��j:_!=e~:. manu- . J.~:;tured tobacco in larger quantities t han two hundred cigars � � � (Under- seer ing supplied.) � If we were to adopt petitioners' restlctjve view of. t.he meaning of tobacco ";;; .re f crr i.ng solely to leaf tobacco, then this Court \1/0uld be declaring the action of our :l aw-making � body a mere exercise in futility, thereby rendering nu9~tory the prov is ions of Sections 6(a) ~

~ !I r i DECISION - CTA CASE NO. 1973 - 8- 6( b), 6( c ), a nd 7 of Act No. 2613, as amend ed by �Republic Act No. 31, which read as follows: "SEC. 6. The Co llector of In- t~ rn a l Revenue sh a ll have the power and it s hall be his duty: n~:>) To establish general and l oc a l ruies respecting the classi- f i c ation, mar king, and packing of tobacco for dom j stic sale or factory use and for exportation so far as may be n~cessary to secure leaf tobacco o f good quality and to secu~e its handling under sanitary conditions, and to the end that leaf tobacco be not mixed, pac ked, and rearked as of the same quality when it is not of the same class and origin. "(b) To establish from time to time adeq~ ate rules d e fining the standard and the type of leaf and manufactured tobacco which may be exported, as well also as the manne- in which standard tobacco, shall be packed. Before establ ishing the rules above specified, the Collector of Internal Revenue shall give due notice of the proposed rules or amend- ments to those interested and shall give them an opportunity to prese nt their objections to such rules or amendments. 11 (c) To requ i re, whenever it: s ha l l be deemed expedient, t he i n- spection of i nd affixture of inspec- t ion l a hels t o tob~cco r emo v8d f rom the province of its orig i n to another or other provinces befo re such re- moval, or to tobac6o for domestic sale or factory use . " " SEC. 7. No leaf tobacco or manu- factuLed tobacco shall be exported until it shall have been insoected by the Co l lector o f Internal .. Re v e n.� lE.:. or his dul y a u tho .d ze d H~ p r:es<-:n t a tivc ~_) r'")' ~) u ' /...,

DECISION -~ CTA CASE NO. 1973 - 9- and found to be s t andard f or export. Collector of Customs shall no t per- . mit the exportation of toba c co i~om the Philippines unless t he shipme nt be in conformity with the require- ments se ~ forth in this Act. The proh ibit i on c ontained in this sec- t ion shal l not apply to waste and refuse tobacco accumulated in the manufacturing process whe n i t is in- voiced and marked as such waste and r '3 fuse." Fr om the fore g oing provisions, it can be seen tha t leaf tobacco and tobacco produc t s for export are subject to the tobacco inspec- tion f e es. If Congress o f the Philippine s really intended to restrict the meaning of the word "tobacco" under Republic Act No. 31, which took effect October 1, 1946 in order to . limit the scope of the ter m tobacco under the law originally passed in 1916 and its imple- ment i ng Regulations Nos. 1 7 and 47, it c ould have easily inserted the word "leaf" to modify "tobacco" con ca ined in the a mendatory lavl. An examination of Se ction s 6(a), 6(b) and 7, ~P.~, reveals t.ha t , if ou r l alv..:Il'\a king bo d y inten J ed to limit the coverage of said sec- . tions to either l e af or manufactur r: d tobacco, it qualified the v10r d "tobacco" \'lith such antecedent words. In Section 6(c) of Act No. 2613 , as amende d , no such qualif f ca t ion was made by Congress, thereby s ho wing the broad scop e and meaning of the word tobacco. For t.he Court to adop t petitioner ' s. contruction that tobacco means "leaf tobacco" would be engaging in unauthorized judic i al leg islation by rewri t ing the law and inser t ing words' and phrases not found in it. I t is a sett l e d doctr ine in sta t utor y construction that whe n the language o f a particular sec t ion o f a statute a dm i ts o f more than one mean i ng, the e v i de n t purpos e and object sought t o be a ttained by the enac t - me n t of the statute as a whole must be gi ven fo r c e and effect. The inspection, t herefor e, of both leaf and manu f actur e d tob e:: cco u n der 3 ,. . ; 0 ~) I

I,. I DECISION - CTA CASE NO. 1973 - 10 - Section 6(c) of Act No. 2613, as amended, falls within "the legislative object and purpose as manifes ted in the title of the amendatory la\v which reads as follows: "An Act to l_!N?..~ the Hethods of Productior>. and _!;:he Q�.~l:.i~Y of 2:ob_acco i!!;,. _!;.h~ . Philip.eines a~d . to Develop the Export Trade therein." (under.scoring-c.)Urs. > - - - -- - - - � Eve n the Philippine Tobacco Board (peti- . tionArs are members ther eof) , after Memorandum Circular No. 30-~7 of respondent was prcmul- . gated, adopted Resolution No. 2-67 interpreting the phrase "tobacco for domestic sale" as referring to wholesale disposal of tobacco products by cigar ,md cigarette factories to its dealers while the phrase 11 tobacco for factory use" meant "imported leaf tobacco" intended for us c by cigar and cigarette factories in t he manufacture of tobacco products. Petitioners claimed that before the enactment of Republ ic Act No. 31, amending Section 6(c) of Act No. 2613, former Collectors and Commissioners of Internal Revenue had never impos ed and collected tobacco inspection fees on cigar and cigarettes removed for domestic sale o ;.~ consumption. It is argued , therefore, that re spondent should f nll ow the i nterpre t ation of his preciecessors who ruled that the word "tobacco" refers to leaf tobacco alone. The fallacy of petttioners' ~rgument lies in the fact that , long before the last war up to �the pre se nt time, tobacco inspection fees we re collected on manufactured cigars for export and, therefore, the word " tobacco" is not applied to leaf tobacco alone � but it also included tobacco p~oducts for export like cigars, chewing tobacco, etc . Petitioners relied mainly on the expla- . natory note to the bill which became Republic Act No. 31 . They alleged that the word "tobacco" refers to "leaf tobacco" for domeS t-~-~~ Salt:_Or' f_?..E.._~20f ta ti~!l� rrhe pl1r a~~e "tobacco for ��� factory use" undoubtedly

DECISION - CTA CASE NO. 1973 .. 11 - refers to "leaf tobacco" under the ;;;mand- atory law (Sec. 6Lc7, Republic Act No. 31)~ Congress, however, omitted the descriptive word "leaf" and us2d the phrase "tob e<c~:o f or do~estic sale or factory use". Since tobacco products for expor t ation such as cigars and chewing tobacco are subject to tobacco inspection fees long before the last war and up to the present time, the dele t ion or non-inclusion of the descrip- tive word "leu�" from the cont:coversial phrase "tobacco for domestic sale or factory use" indicates a legislative intent to prob;ct the local consumers of tobacco products. Cer t ainly, our lawmakers cannot be more solicitous of the health and smoking pleasure of foreign consumers of tobacco products than of our own local consumers. Moreover, con- . sidering the amendatory law a nd even under the original law, respondent is not precluded from rectifying the erroneous interpretation of the law made by his .tredecessor s. (Tan Guan v. Court of Tax Appeals, et al., G.R. No. L-23676, Aptil 27, 1967; Philippine American Drug Co. v. Cell . of Int. Rev., G.R. No. L-13032, Aug . 31, 1959.}. Petitioners assailed the discriminatory ruling of responde nt in tha t the uniformity rule in taxation prescribed by the Constituti on was not observed because said respondent failed to impose and collect tobacco inspection fees on i mported cigars and cigarettes. We are not impressed with petitioners' argument on this point because the uniformity rule in taxation r-efers to "geoS{raphical uniformity" and cannot be made applicable to imported cigars and cigarettes which were manufactured outside the Philippines. We find no cogent and valid reason to mod i fy, much less depart from the conclusion reached in Alhambra Industric~, as expressed in the above - qu ot ed o pinion of this Court there, and the same should resolve t he identical p roblem now brought before us in this appeal. Respondent's Revenue Memorandum Circular No. 30-~7- 375

I Ir DECISION - CTA CASE NO. 1973 - 12 - dated August 22, 1967 is therefore legal and valid, and the collection of the tobacco inspection fee in question pur s uant thereto is in accordance with law. Accordingly, the decision of respondent Commissioner of Internal Revenue dated September 26, 1968 denying t he request for refund of petitioner u.s. Tobacco Corporation (now Quality Tobacco Corporation) ?f the a mount of ~17,022.33 as inspection fee paid on October 20, 1967 has to be denied. WHERE FORE , the petition for review filed in the above-entitled case is hereby dismissed at petitioner's. costs. SO ORDERED. Quezon C ~ ty, Metro Manila, November 18, 1980. AMANTE ILLER Pr.esiding Judge WE CONCUR: ~REYES Associate Judg