CTA Case No. 387 (Decision)

' Tl HlLIPPlNF.31 Of 1 X APPEAU. MA!'olLA of 3 , 6 6. � co pro penalty o 10, for �11� ed v ol t!on of a et ons 12 l l� tlon to sect un 127, all of the a ter al � � e pet t oner r edro, 1s a do, st c corporation t llsh and r an1zed under t l s t es, 1 h a 1 place of b stne s at asu � etan ��� thu thin a, t uthorize to operate a uly registered d stlllery pl nt. t en e p r u t 3, pet! on� . manufactured in t d st llery, � 23 proof 1 ter of dtnature ale hol n er for 1 tt lty oth p�rtles tn their lea 1 t � �� o low '

E � .,-, / � 2. every 100 gauge liters of r c� lcobol of not 1 as th n 1 de� rees oof, there shall ad 1 lt rs o sopropyl. ts n ture alcoh l was sold y he pet !oner to t tc th fie Industrial anufact 1n � o of ru leo 1 conn:)Ou a1n1n spec grecl t ru 1n lc t t la yere ~ taln � as a ar- f.n la els paa t 1 � te � as a fec.t t ri� � ��� T � ep ~rat! , le , 1 of th t ly nt oi t fro t tlt rt p th p - effie tax e5t!on. th ndi l s t X on the natur leo ol ol to the wo y rs . � heretof r t natur1z ti n r .. done ln acc;or anc th for ula p rov y nt. h of den tur % t 0 � ev nc d en tur n '1 Xh it -25, as �It n� c itt� co at a of th r ponc.l nt. ft r th f n- 75 ~I

1 �� !z on, t d.tlr g t t a �1 c - lttee tee �t~tz�tton cart!f!c�t��� xh ts A test g to c lef ~le ~ �tU%lng 1��d of f ltt.ua DrC~:M �s 11 �� the 1oa~rcttn %' 1 el Ql'el � � . .,.. or er ef the c: or�t M ntun 1 t at��� 4eftature4 alcohol � �� D Mtu.- f � �~��.......,-t t Xft b t 3 (pp. rec.) , y 26, , of e te 1ano � u, an Vefth4: r.d. � l�ttu, et.!.� ..... ftg f 199� 6. 10 �� spec 1f1c h f nat � ale ta. t tale � 1 423 'l~IHU f 'I"AfflftV.e(l Z'OQ ttt �� tt rs lly u.sM � WI- �l � leo u� x� ot a letter. t �.....,.,"U.~'" t t t on 76

c. � 3S7 c ounsel th.-t the or � nal a s .,m nt nd deuumd for speetf�c tax a �n t t a reduced fro- 199, 906. 10 t o 33, 96. exclus ve o the co pro ~� penalty o 10, It app ars oy � r e ��t the p tt � ~ that th r s of th d n tur d l cohol a u t'ng tQ 236, 28- proo 1� ers ter _d uct n th ount us d i n th� anu cture of rubb~n lcoho � by the two uyer- orporattons 'n -ch of shellac , v 1 ~ quer h<~tm r . oo y � cleanser au c 1 �l tn f i �~ds. -� Th d oy t P� p al �a wh th r or n t t o ,138 p~ of l ' t rr. f de - ~ natur d alcohol Produc t& tnc. n th Pe~ ~f'c Industr al enuf~ctur ng nd s d by the 1 tt r t r" ls �n th anuf c- tur nd r ctton of lcohol c pound ould to ect � o, t2 "n r lat on to '-- th v nu Codt: . r Cod pon which respondent ' s s~ s ~nt � d de and is b $ed ar reproduc d er a er:

� Slt7 - exir�~ s , ~d -all o r ~~� feb, e.C lu4f nngvrweaa�i�ert1 � �at ll e d r tbe cbt ef , sha ll t � sa tax �� oh ch � n- 1 nt v s; or �� � D� t�lle p r t �, � u~� � tnclu all suostarices kno as ethyl al- e _ 1, h}Grated �x�d of � yl, -r �P-'r ts of wtM�� f.c are co 1y rodutecl y tie fe~ntat n ano subsequent d at lla- tten of a - � starcl\1 aoias es; ~ GUI,lai, or ef � yrup r aa � nolud n ali d�� batt~� or �txtues. � .. nature ale ol w �c s r ved from fts d� t�llery Y. tbe t yers and uM4 y th4t latter n the prodUct on _n _ aanufacture f Ject t �~�~ f c _tax un4ea- sect 'en 127 of the ~)x C �� Co4e. Pet t oner ~at n tng"'alcohel. x x_x._ �� a �4 c nal ep ratfora, t �� not Jec, _to �~ f�c tax r _section 127 �� ~ect o subjects � t!_X aly thOf! !l'tfcles ttoa.4 theretn ~he cbt� fc t 0 !.. - � cannot .ua � n the con ntfon of the pet~t on r . ,, 78

, c c.r. � 3.17 -i - t wa& roven by the te t ony of Dr. Benjam1n en- auceso, r �~dent ph s �e� n of the h11 pp'n ~neral ~ Hospital . t~at don~tur d alcohol is edie~nal pre- ~ p~at !_on � .; .Oes"d ~ . we have .naC! occaa-fon to old �n � case nv .v ~ ng th~$ same quest on t t enatured al� cohol. wh4ch was de the ch~e� �n reotent of rub tog alcohol compound, �s La Tondetla � 1'nc. vs. Collector of nt~rnal Revenu��� C. T. A. Cast No . 182. December 1 � 1 ~7.} The foet that the m d c nal prep r t-'4n& .r ot c pablo of oral �ntake ~ nte nal eonsu ~tfon ' of no �rnpor- thereon. Th law n �1 end sp ak of � ed1ctnal and t~�let prepar t ort$" lld "all t.>ther pro par t ~ons~ of wh tch dfsttlled p fr "tJ fs the ch' f 'n red~ent. It does not a � ny d"st nctfon hethe those pro- ducts are pota le or not ~ (La ond na, !nc. vs. C ollector. ~. ) The pet t oner further contends that tl d n - tured alcohol produced nnd sold to the two corpora- t�ons are exe pt fro~ spec~ e tax under s ~tton 12P o� the Internal evenue ode. ~h~ch prov~oe ' .J 11 J

DEC ~I � <;.f. � cASE O. 387 - 7- Alt oug t waa proven by petit1oner th t the t o c orporat ons to hfch 1 t sold t he den tured al- cohol ~ re engaged fn an fnoustry � the manufactur of ch ~~cal products - �nd ut~l�z~ng a se zable emount of lei or and cap1 tal ( pp. 42-44 , t . s . n.) yet , ~ as ,. prev�ously i ld !n th L Tondefia _caso � ~uera , ~n order that the denatur d lcohol t n qu s- tfon could be exempted under the prov�s~on of the fax Code jus quote� a ov � t ust be so used for the _. / op rat�on of suc h ~ndustr�es and no rely aa an 'n- gred�ent �n _the anufac t ur e of anoth r product .J rant~nq th t the ru �ng lcohol compound �n controv rsy fs subject to spec �� c tax , th pet�t�oner a'nt ~ ns th t t t �a not l ' ablc for tho pay ont of the sa � t4ttonor argues that und r ct on 1?4 of th at�onal tnt rnal � venue od � p c f�c tax s on omest~c products shall produc r* wn r or p rson ha ng possess on of the same x x x ef rc removal rom the pl c of pro uct'on.N !nas JC'h as t he _r b ng lcohol eo Qound �s not pro� P c{ftc P oduets, nc. � and aciffc �ndu tr� 1 t nufactur~ng , the t"'t-toner concludes that t e sat t o corporat ons should be made to pi y the spect f �c t x on th rubb .tng alcohol. �� ftn th' & la t alterne~v contentron of the pet4t~oner to be er~tor�ous. v(.t s true th t the de� natured ale tol wh.,c ior ' th c h#e fngr d ent of t _e ruub#ng alcohol co~poun , wa m nufactured v the pet'� /I t oner . H~ ver, the denature alcohol as never re-

1 � � � c E �c. 597 - 8- ove~ by the p t it oner fro. tf a: st~llery �Jth (/ ev d "n - pa nt of tho pa� cff ' c ta:x 'th r on , n t h contr ry, the s m as old y th petit 1 on r to ro cts. Inc ., ~ ac f1c !n ust 1 nuf ctur'ng , and h n tne GC'{d t c rpor t on ass d c ntrol nd po s as on of t he denatured alcohol , t h y c �r ov the _sa e. (Arts . 1477 n 1 ~7. C�vrl Cog of th� Ph~l~pp'r.es ) . ~ bs qucntly. w"tt th per saron d the author"'t � h r spondont t the r ov d tl den tw:-e tt h ~t a t _ r�nc nuf c- tur d t �1o :ru n~ alcolol ompound on h �.h he res- po d nt ..s s ero to coll c~ th apoc t'c tax. ro ut� cf c ~oduc t , ln: �� and c e th � nuf cturor , pr ucor , ~nd/ � n r& o t :u t n leoll 1 c p un , n co "d r'n t th l \ (v C � 12 t rn 1 od t do & e qu o th x to 4 t ly :fore 6 ! ( � oG c � ' . h ol ctor ~f nt rn 1 \lV nue , �� t & op n�on nd so - hold thnt t c orpor t ~en c� who purch t n...tu:i:'ed lcotvl h P- ttt'ono~. Qr or c pay nt of c� ... ~c tax *� qu st" n, n not the pet~ttv � .J � e dec s�on ~ r spon nt pp 1 f o , aho ld � � t t on r 1 1r

�C - � 387 �T. � -9- C_ntral zucarur Don P dro a her e y declared not l'able for the P.O nt of th &u of 33, 696. 60 re- present ng s ~� f�c tax assessed y t h r espond nt , w t hout rej u ce t o hat o r c t~on th . espond nt ay ~ec � de to t e a nst roper party or part ea 1 1 ther for . tthout pronounc nt a t o costs. ru ry 28 � 1958. 31 il 2 '