CTA Case No. 645 (Decision)

./ REPUBLIC OF THE PHILIPPINES COURT OF T.6v'< APPEALS MANILA CE!\JTRAL AZUCARERA DON PEDRO 1 c �.T.A. Petitioner ,. CASE NO. 645 - versus - COMl\USSIONER OF ItJTEFJ~AL REVENUE , Respondent. X- - - - - - - - - - - - X DEC I S I 0 N This is an appeal from the decision of the :res- pondent holding the petitione:r. liable for the sum of ~;~40 , 522. 86 , representing alleged deficiency sa] es tax and surcharge on sales of denatured alcohol for industrial purposes during the period from October 1 , 1947 to Oct- ober 31, 1952. It appears that during the ?eriod in question , pe- titioner removed from its distillery and sold 4,218,749 liters of denatured alcohol on which it pa id the speci- fic tax pursuant to Section 142 {d) of the National In- ternal Revenue Code. Upon investi gation of t�he books and records of petitioner by agents of the Bureau of Internal Revenue ., respondent determined that the said alcohol was removed from petitioner ' s distillery not for motive power but for industrial purposes and, therefore , it is exempt from the specific tax. However , sales of such alcohol are subject to the sales tax under Section 186 of the Revenue Code.. Accordingly , an assessment was made against petitioner for deficiency sales tax, plus )

DECISI 0~! - C .. T .P .. CASE NO., 645 - 2- the corresponding surcharge, after crediting the speci- fic tax paid against the sales tax due on sales of saio a1cohol. On the other hand, petiti oner insists that said alcohol was denatured and sold for motive power which is subject to the specific tax and not to .the sales tax. t any rate, it is alleged that the right of respondent to assess the deficiency sales tax has already prescribed. Section 133 of the Bevenue Cqde imposes a specific tax on distilled spirits (alcohol). 1 ere alcohol is denatured for motive power, it is subject to a lesser amount of specific tax under Section 142 (d). In the case of ~lcohol not taxable under Section 133 or Section 142(d), such as denatured alcohol for industrial uses (Sec. 128, Rev. Code) it is subject to the sales tax un- der Section 186.1 The main issue presented is one of fact - whether the alcohol in question was removed from petitioner's distillery for motive oower, as contended by petitioner. or for industrial uses 1 as alleged by respondent. Petitioner relies solely on the presumption estab- lished in Section 142(d) of the Revenue Code , which provides: � For the purposes of this sub-section, the removal of denatured alcohol of not less than one hundred eighty degrees proof (nine- ty per centum absolute alcohol) shall be 1see Sec. 188(a) . Revenue Code, which exempts from sales tax articles subject to specific tax. Conversely articles which are exempt from specific tax are subject to the sales tax.

DECISION - C.I.A. CASE NO. 645 -3- deemed to have been removed for motive power , unless shown to the contrary.� In determining that the alcohol in question was re- moved from petiti oner ' s distillery for industrial pur- poses and not for motive power , respondent relies on the records of petitioner which show that alcohol denatured with gasoline was sold to persons who used the alcohol for motive power , while alcohol dena.tured with denaturants other than gasoline were sold to persons who used such alcohol for industrial uses. The names of the persons who allegedly bought said alcohol are listed in Exhibit 1-A. We think such evidence is sufficient to overthrow the presumption established in Section 142{d). It was in- c~mbent upon petitioner to prove that the denatured al- cohol in question , although denatured with denaturants other than gasoline, was removed from its distillery for motive power and not for industri81 uses. It has a com- plete record of the names and addresses of the purchasers. If it is true , as alleged, that the purchasers bought the denatured alcohol from petiti oners fo r motive power, no better evidence could have been presented in support of that fact except the testimony of said purchasers , or at least some of them. That petitioner did not find it necessary to Produce such evidence is a strong indication that, if presented , the same would have been adverse. In connection with the issue of prescription , petitioner failed to prove that any sales tax return was filed by it during the period under review. Appar- ently, the issue has been abandoned.. (,\

DECISIO c. T.A . CASE NO. 645 -4 - WHEREFOrE, finding respondent ' s assessment in the sum of -40.522.86 as deficiency sales tax and surcharge ag2inst petitioner in or der, the same is hereby affirmed , �t:it h costs against petitioner. SO ORDERED. Manila , February 25 , 1963. ~OM M. UMALI ssociate Judge ~~ Presiding Judge