CTA Case No. 2843 (Decision)

,._" 1t v'tn,!C Oil T H" PHI I..! I' I? IN :l {' ;.>.: <~ :~~ ;:" TA..X APPLU.:~ 1:;:, a.V.O!.'l t:;ny /NORBEH.TO J . QUISUMBII.-.JG, Pet itioner, - versus - C.T.A . CASE NO. 2843 '_:_'HB COM.i.iiSS lONER OF CUS'TOMS, Respondent . X- - - - - - - - - - - - - X DE C I S I 0 N ! Petitioner Norberta J. Quisumbing has appealed from the decision of respondent Com- I mi ssioner of Customs dated October 18, 1976, affirming t he de cision of the Collector of �' Customs of Mani l a dismi ss in g for l~ck o f merit Manila Pro t e s t No. 8670. As borne o u t by the pleadings and r ecords of th '~ Bure a u o �: Cu stoms pertinent to this pro�- ceeding, on the basis of wh i ch the parties sub- mitted this case for deci s ion, it a}pears that petitioner imported from Marseillffi, France , two (2) .complete self-propelled workshop type "froggy" with extra four SCR, twelve SC-cut , ten SON-BR, one PSM sub-painting tool assembly, which arrived at the Port of II! ani la on bo a rd the vessel S/S "Dona Angelina" under Registry No. 2. The said goods were duly covered by shipp i ng document s and declared .~" '�~ ( I

DECISION - CTA CASE NO. 2843 - 2- under Import Entry No. 09439-73. Petitioner was thereafter required to pay customs duties and taxes on the imported articles. Under protest, petitioner paid c ustoms duties of P30 , 05 0 .00 and internal revenue tax (compensating tax) of P21,389.00 which together with wharfage of P32.00 amounted to P51,47l . OO, on the ground that said importation is exempt from the payment of duties and taxes under Republic Act No. 6135 , otherwise known as the "Export Incentives Act of 1970 " , and under Section 190 of the then in force National Internal Revenue Code. The payment was covered by Central Bank of the Philippines Official Receipt No . 01128 dated February 20 , 1973 . The protest was docketed as Manila Protest No . 8670. After due hea r ing, the Collector of Customs of Manila, in a decision cated September l, 1975, dismissed petitioner's protest for lack of merit. Petitioner seasonably appea l ed the Collector's decision to the Commissioner of Customs. In a decision dated October 18, 1976, respondent Commissioner of Customs affirmed the decision of the Collector of Customs. He nce, this appeal. The parties are not in dispute on the com- putation of the customs duties and internal revenue tax paid by, or the amount refundable to,

DECISION - CTA CASE NO . 2843 -3 - petitioner as the case may be. The lone question tendered for resolution ln this appeal is whether petitioner is entitled to the refund of the customs duties and internal revenue tax paid on the importation involve d herein. Petitioner assails the Gove rnment's r ight to i mpose the customs dut i es and compensat i ng tax afor esaid. Argument advanced is that such i mpor t ed self-propelled workshop type "froggy" is used in the under-wate r brushing of hulls of ocea n-going vessels. The equipment therefore furnishes 'service e : ~ port activity" und e r the Export Incentives Act or "u sed by the importer himself in the manufacture or prepara t ion of article s for export" under Section 19 0 (c) of the th e n in force Na tional Internal Revenue Cod e . Hence , e xempt from the pa yme nt of d u t ies and taxes. Respondent however f ound no merit in petitioner's contention. The controlling statute is Section 7 (c) .of Republic Act No. 6135, otherwise known as the Export Ince ntives Act, the pertinent portion of which reads:

DECISION - CTA CASE NO. 2843 - 4- "SEC . 7. X X .".. (c) Tax exemotion on impos_~ed ~ital~~i2ment.- Within five years from registra t ion of the export pro- ducer , importations of machinery and equipment and spare parts shipped with s uch machinery and equipment shall not be subject t o tariff dut ie s and com- pensating tax: P~:ovided, That, ( 1) said machine r y , equipment ai1d immediate � componen t spare parts ar e not manuf- actured domestically in commercial quantity and quality or sold at reason- able prices; (2 ) are direc tly and actually needed arid will be used by the registered export producer in the manufactu r e, processing , handling and storage of its export products; (3) are covered by shippi n g documents in th~ n ame of the registered e xport producer to whom the shipment will be delivered d i rect by customs authorities; (4) the prior approval of the Board was o b ta ined by the registered export producer before placing the order for the importa ti on of such machinery, equipment and imme- diate component spare parts; and (5) the registered export producer choos~s not to avail of the privileges granted by Republic Act Numbered Thirty-one �hundred twenty-seven, as amended. x x x." From the foregoing provision of law, it seems clear beyond doubt that to be entitled to the tax exemption on imported capital equipment, a regis- tered export producer has to comply with certain requirements which include, among others, the prior approval of the Board of Investments before the o r der for the importation of such equipment is placed by the export~oducer , and the same is not manufactured locally in commercial quantity

DECISION �- CTA CASE NO. 2843 - 5- or quality or sold at reasonable prices. In the ca~e at bar, nothing in the records shows or sp~aks of the approval by the Board of Investments of the order for the importation o f the ~uipment in question, much less compliance with the provision of the law as to the non- availability domest icall y of such machinery in commercial quanti t y or quality, or r egistration of petitioner as an export producer wi th the Board of Investmenls. Consequently, petitioner js not e1 titled to exemption . And with regard to the claim for refund of the compensating ta x , we no t e that the same canno t be passed upon by this Court f or the reason tha t peti tioner has not filed a written claim for refund thereof with the Comm i~s ioner of Internal Revenue, and n8i ther was t he latte r impleaded as a par t y responde n t in this case . . ~"lithout satis- fying these jurisdictional requirements, peti- tioner's claim for refund of the c ompensating tax is fatally defective. (See Luna v. Commissioner of Customs, CTA Case No. 1947, November 29, 196 8; Philippine Wallboard Corp. v. Commissioner of Customs, CTA Case No. 2136, September 30, 1972; Tagum Electric Co . v. Commissioner of Customs, CTA Case !._Resolutio!:!_./ No. 2155, September 13, 1976;

DECISION CTA CASE NO. 2843 - 6 -� Wis e & Company v. Commissioner of Customs, CTA Cas e No. 271 7, December 29, 1977, see also reso- lution dated January 15, 19 79, certi o rari denied in G.R. No. L-51242, March 7, 1980; National J Dental Supply Incorporated v. Commis s ioner of Customs, CTA Case No . 2826, June 30, 1980.) It bears emphasis that he who claims to be e xempt fr om the payment of a particu l ar tax must do so unde r clear and unmi stakable t erms found in the statute. Tax exemptions are strictly � const rued agains t the taxp,tyer , the y be ing highly d i sfavo::ed and ma y almost be said "to be odious t o the law." He who claims an exemption must be a ble to po int to some positive p r ovision of law creating t he right; it cannot be allowed to exist upon a mere vague imp lic at ion or inference. (Asiatic Petr ole um vs. Llanes, 49 Phil. 466, 47 1 ; Union Garmen t Co., Inc. vs. Cour t of Tax Appeals, L-16809, January 31, 1962, 4 SCRA 304; Phili ppine Acety l ene Co ., Inc. vs. Commissioner of Internal Revenue, L-19707, August 17, 19 67, 20 SCRA 1056; Republic Flour Mills, Inc . vs. Commissioner of Inter nal Revenue , L-25602 , Fe bruary 18, 1970, 31 SCRA 520; Comm issioner of Custo ms vs. Philippine Acety l ene Co . & Court of Tax Appea ls , L-22443,

DECISION -- CTA CASE NO. 2843 - 7- May 29 , 1971 , 39 SCRA 7 1; D~vao Lig h t and Powe r Co . , Inc . vs. Commissioner of Customs , L-28902, March 29, 1972 , 44 SCRA ~2.) The right of t a xation will not be held to have been surrendered un less the intention to surrender is manifes t ed by words too plain to be mistaken (Ohio Life Insurance & Trust Co. vs . Debolt, 60 Howard, 416) ~ for the state cannot strip itself of the most esse ntial p o wer of t~xati o n by doubtful words; it cann o t, by ambiguous language, be deprived of this highest attribute of sovere i g n ty. (Erie Railway Co . vs . Commonwealth of Pennsylvania, 21 Wallace, 492, 499) . So, when exemption is claimed, it must be s hown indubit ably to exist, for every presumption i s against it , a nd a well-founded doubt is fatal to the claim Farrington vs . Tenne sse e & County of Shelby, 95 U .S . 679 , 686) . {As i atic Petrol e~ m Co. vs. Llanes, 49 Phil. 46 6 , 471; Manila E lect r ic Company vs. Commissioner of Internal Revenue, L-29987 & 23844, October 22, 1975, 67 SCRA 351 . ) As stresse d by the Supreme Court in Acting Commissioner o f Customs vs. Manila Electric Company and Court of Tax Ap p e als , L- 2 3632, Jun e 30, 1977, 77 SCRA 469, said Cou rt is committed to the prin- ciple that an e xemption fr om t axatio n mus t be justified by wo r d ~ too clea r t o be mi sre ad. As

i:JEC ISION - CTA CASE NO. 2843 -� 8 -� s e t forth in Commi ssione r of Inte rn al Rev enue v s . Guerrero, L-20812, September 22 , 1 967 , 21 SCRA 180: " From 1906, in Cat holic Church v. Ha s ting s to 19 66 , in Esso Standa rd Ea ster n, Inc. v. Acting r...... omm � s s l� O n er 1. of Customs, it has been the c onstan t a nd uniform holding that exemption from taxation is not f~vored and i s never presumed , so that if granted it mu s t be st rictly constr ued against the tax payer . Affirmat i vely put , the l aw frowns on exemption from taxation, hence , a n exe mpting p rovision should (Catholic Church vs . Has tings , 5 Phil. 701 ; Esso S t andard Easte rn, Inc . v s . Acti ng Commi ss ioner of Customs , L-21841 , Oc t obe r 28, 1966 , 18 SCRA 48 8 . The op i nion also cited Government vs . Monte de Piedad , 35 Phi l. 42 ; As i atic Petroleum Co . vs . Lla ne s , 49 Ph il. 466; House vs. Posadas, 53 Phi l. 3 38 ; Ph il. Te l. and Tel . Co . vs. Collector , 58 Phil; 639; Gree n field v s . Meer, 77 Phil. 394 ; Collector of Internal Revenue vs. Mani la Jacky Club, 98 Phil. 67 0; P il. Guur2nty Co. , I nc. vs. Commiss i oner, L-2 2074 , September 6, 1965, 15 SCRA 1; Abad vs . Co urt of Tax Appeals, L-20834, Oct ober 19, 1966 , 1 8 SC RA 3 7 4.) IN VI EW OF THE FOREGOING, the decision T II ;--, �-~

" DECISION -- CTA CASE NO. 2843 -- 9 - appealed from is hereb y aff ir med . Wi th costs against petitioner . SO OIWERED. Que zon City , Me tro Ma nila, De c ember 23 , 1 981 . (~k;:;;t-:�~j~~J AMAN'l'E FiLLER Presiding Judge WE CONCUH: -~ ~ . a~\ ./~~) / ~ s~ As s oc i Z .'n EJY� uEdgS~,...,. te a