CTA Case No. OC-615 (Decision)

AIPUBLIC OF , ..BE PliiLlPPIN!;:~ COURf OF TAX A.P.P.iiA.l..;) - l4AN.u..A FELIX G/:uiK.lAN., C. I . A. CASE NO . 615 Petitioner , ... vers us - iviEI.ECIO R . OOMINOO , in his c apa c ity as Ac ting Commis- sioner of Internal aevenue , Re s pondent . X- - - ~ - - - - - - - ~ - X DECI SIQl\j This i s an appeal by the petitioner from the deci - s ion of the re s pondent d�ated Oc tober 8 , 1958 , holding him liable , as fi s h producer . for the payment of privilege and percentage taxes, surcharge and penalties amounting / to ~ 727. 2.) . \ The fa ct s are s tated in the following stipulation s ubmitted by the par tie s on Dec ember 16 , 1959 ; 0 l . That the petitioner , Felix Gaer lan , ~s of legal age , Filipino c itizen , and a r e- s ident of Daet , Camarine s Norte; the re s pon- dent i s the duly appointed Commiss ioner of Inter nal Re venue ; n2. That in 1951 and 1952, inclu s ive , the petitioner was .engaged in busine ss of c atc hing fi s he s in the open s ea and s elling the fi s he s caught to the public ; u3. That the gr oss s ale s or rec eipt s de - r i ved by the pet itioner out of his fishing venture in 1951 and 1952 totaled the sum of 7, 168. 00; 11 4 . That the petitioner did not pay any privilege tax (C- 14) or percentage ( s ales) ta xe s on his fi s hing venture during the above - mentioned period ; u5. That s ometime in February , 1957 , the .. petitioner re ceived a letter of demand dated Januar y 7 , 1957 f r om the t{egional Dire ctor of the Bureau of Internal Revenue , Regional Dis- tric t No . 5 ~ at Naga City, requiring the pe - titioner to pay the sum of ~727 o 2J , c omputed as follows:

DECISION - C. T. A. CASE 1\lO o 615 - 2- Privilege tax {C-14) for 7~ 1t9a5x1 &due19o5n2 ~-7--, -16-8--. 0-0---------------- ~� a:l . OO C25o~mpsruormcihseargfoe r --la-t-e--p-a-y-m--e-n-t------- _501 . 76 125. 44 ~ . 00 Compromise for violation of Bookkeeping Law ---------- 50 . 00 TOTAL AM:)UNT DUE ��������� ~ 727. a> u6o That the petitioner contested the cor- rectness and legality of the said letter of de- mand mentioned in paragraph 5 hereof contending that a fisherman and/or fish operator is not a producer as contemplated under the provisions of the Tax Code, as amended; ~7 . That a waiver of Statute of Limitations was duly executed and signed by the petitioner on August 28 , 1957 , duly accepted and approved by the respondent on October 1 , 1957 . '18. That the petitioner's request for recon- sideration of the Regional Director's letter of demand mentioned in paragraph 5 hereof was denied by the latter, which denial was appealed oy the petitioner to the Commissioner of Internal Re- venue; � u9. That on October 8, 1958, the respondent affirmed the decision of the B. I . R. Regional Di- rector of Naga City and reiterated the demand for payment of the sum of �727 . 2) representing the privilege and percentage taxes, surcharge and compromise penalties, for engaging in business as producer of fish for the years 1951 and 1952, inclusive; "10. That the petitioner appealed the res- pondent 's decision mentioned in paragraph 8 hereof to this Honorable Court on January 9, 1959 and that the respondent filed his answer thereto on February 11 , 1959. 11 The only issue presented to us for resolution in this case is whether or not petitioner , who is a fisherman or fishing operator, was a producer of fish in 1951 and 1952 subject to the payment of the 7~ tax prescribed in Section 186 of the National Internal Revenue Code . j

DECISiui'J - C. T. ri. G. SE 1'-IO . 615 - 3- The provision of the Ta x Code , upon Wlicn respondent justifies the imposition of the 7;u tax in question , provides: ~sec . 186. Per c entage tax on sales of other artic les . - There k shall oe levied g assessed , and c ollected onc e only on every original sale , oarter , exchange ) and similar transaction either for nominal or valuaole c onsideration to transfer owners hip of , or title to , the articles not enumerated in s ections one hundred and eighty- four and one hundred and eighty- five a tax equiva- lent to seven per centum of the gross sell- ing price or gross value in money of the articles so sold , oartered, exchanged , or transferred , suc h tax to be paid by the � manufacturer, producer , or importer ' x x x~ (As amended by ~ep . Act No . 588 o ) lUnder scoring supplied. ) The aoove - quoted provision was suo s equently amended by Congress o Let us examine and analyze the amendatory act so These enac tments are determinative of the i ssue pre s ented in this c ase . Repuolic Act No . 588 was approved and be c ame effective on September 22 1 1950 . As expre s sly provided therein , the increased tax provided therefore s i1all c ontinue in for ce and effe c t until December 31 , 1952, after which period the original rate s of tax shall again be in force . However , before the expiration of this date , Congress enacted ~epuolic Act No . 726 (approved on June 6, 1952) , extending the force and effec tivity of the in- crea s ed tax provided for in Hepublic Act No . 588 to Dec emoer 31 , 1953, after which 8 the original rate of tax s hall again be enforc ed . 11 On June 2J , 1953 , ~epuolic Ac t No . 969 took effect and amended subparagraph (o) of the first paragraph of Section 188 of the Tax Code , as amended , to read as follows:

DECISION - C. T . : � <:.;nSE NO . 615 - 4- ~~ (b) Agricultu-ral products and the ordinary salt when sold , bartered , or ex- changed in this country by the producer or owner of the land where produced p as well as fish and its by- products when sold, bartered or exchanged oy the fishennan or fishing operator , whether in their original state or not . u Subsequently , Republic Act 1'-lo . 1612 was passed and oecame effe c tive on August 24 , 1956. It amended Section 186 of the ~ational Internal Revenue Code to read as follows: J'Sec . 186. Percentage tax on s ales of other artic les . - x x x And provided , further , That with respect to fish and its by- products when sold , bartered , or ~xchanged by the fi sherman or fis hing operator whether in their original state or not , a tax equivalent to five per centum only of the selling price or gross value in money s hall be levied, assessed , and c ollected . iJ Republic ct \Jo . 1856 , which took effect on June 22 , 1957 1 further amended Section 188 of the Tax Code , to read as follows: 1'Sec . 188. Trans actions and persons not suoiect to percentage tax. - In computing the tax imposed in s ection s one hundred eighty four , one hundred eighty- five and one hundred eighty-s ix , tran s actions in the following c om- moditie s shall be exc luded . (a) X X X X X (b) gricultural products and the ordi- nary s alt whether in their original form or not when sold , bartered , or exc hanged in this c ountry by the producer or owner of the land where produced , as well as all kinds of fish and its by- produ c ts when sold , bartered , or exchanged by the fisherman or fi shing operator whether in their or iginal state or not. fl Finally, Republic Ac t No . ~25 , whic h took effec t on June 27 , 1957 , amended se c tion 186 of the Tax Code so as to read as follows ;

... DECISION - C. T�� CASE NO . 615 - 5- 1 Sec . 186. Percentage tax on sales of other articles. - There shall be levied, as- sessed, and collected onc e ~ only on every ori- ginal sale , barter , exchange, and similar transaction either for nominal or valuaole considerations, intended to transfer owner- ship�of , or title to , the articles not enume- rated in sections one hundred and eighty-four and one eighty-five a tax equivalent to seven per centum of the gross selling price or gross value in money of the article s so sold, bar- tered, exchanged or transferred such tax to be paid by the manufacturer or producer& Pro- vided, That where the articles subject to tax under this section are manufactured out of ma - terials likewise suoject to tax under this section and section on~ hundred and eighty- nine, the total cost of such materials, as duly established , shall oe deductible from the gross sellin~ price or gross value in money of such manufactured articles . u A perusal of the foregoing various enactments compels the observation that a fisherman or fishing operator is not a producer liable for the 7~ tax prescribed in Section 186 of the Tax Code , as amended by Republic cts Nos . 588 and 726. It will be noted, that the Explanatory Note of Hou se Bill No . 3870 , which later became Republic ct l' o. 969 , discloses that 11 under existing practice , sales tax is paid on the gross re ceipts of fish soldn x x x and that, uthe remedy is to exempt the fishing industry from the payment of sales tax on fish and fish products . u If, as argued oy respondent , prior to enactment of s aid Repuolic \Ct ~o . 969 , the fisherman or fishing operator is included in the term vproducerv found in Section 188 of the Tax Code, as amended , said nexplanatory noten should have used the ex- pre ssion, under existing law instead of the phra seg 11 under exi sting practic~. 11 It is precisely oecause of the_ then existing out illegal practice of exacting payment of sales

DECISICli : - c. T. A . c -.SE i'-iO . 615 - 6- tax on gro s s re ceipts of fi s h s old t~at i epublic l et ~o . 969 , whic h expr e ss ly e xempt s from the payment thereof , wa s enacted . And the fa c t that it wa s the pr�actic e of t e Bureau to tax the sales of fi s h ba s ed on the gro ss re ceipts of the produ cers thereof prior to June :;:o , 1953 ," doe s not ju stify the impo s ition of priv ilege and perc en - tage taxe s on re c eipt s derived by petitioner on his fishing venture during the years 1951 and 1952. Moreover, it i s the general rule in the interpreta- tion of statute s levying ta xe s or dutie s not to e xtend their provis ions beyond the clear import of the language used . � In c ase of douot , such statutes are construed against the Government and in favor of the c itizen , be c ause burdens are not to be impo s ed , nor pre sumed to be imposed , beyond what the s tatutes expressly and c learly declare . (iv1anila Hail- road Co . v. Collec tor , 52 Phil. 950; Luzon Stevedor i g Co . v. Trinidad , 43 hil . 803. ) Finding that petitioner is not liable for privilege and perc entage taxes on the receipts he derived from his / fi s hi:?::vghture during the years 1951 and 1952, it follows that h is equally not liable for surcharge and penalties. tl~~EfQrlE , the de c ision appealed from i~ereby re - versed , without pronouncement as to costs .~ 00 unDE.r\ED . i~ianila , l.I ar c h 16 , 1960 . ~~-=11 Pres iding Judge I Associate Judge Roman -M. Umali dissents in a se parate opinion.

FELIX GAERLAN , Petitioner , - versus - C. T. A. CASE NO. 615 l'vlELECIO R. IXJ,U NGO , in his capacity as Acting Con~is sioner of Internal Revenue , Respondent. X- - - - - - - - - - - X DISSENTING OPINION I dissent. The majority opinion states that a fisherman or fishing operator is not a producer within� the meaning of Section 186 of the Revenue Code , and therefore not subject to the percentage tax prescribed in said se c- tion even prior to the amendment of Section 188(b) providing for the exemption of fish and its by- products when sold , bartered , or ex changed by the fisherman or fishing operator whether in their original state or not . The opinion , to my mind , gives a very restricted meaning to the term �producer". The term "producer" does not differ essentially from "manufacturer" , except that it is more commonly used to denote a person who raises agricultural crops and puts them in a condition for the market. (50 c. J. 631. ) The more common and generally accepted meaning of "producer" is broader in scope. It includes a per- son who makes an article or commodity available for the satisfaction of human wants . The term Mproduce� , as a �verb , means "to make , or to create so as to be , available for satisfaction

DIESSENTING OPINI ON - C. I . A. CASE NO. 615 - 2- of human wants . n The term �produce� , as a noun , means "that which is produced , brought forth , or yielded ; product; yield . " (Webster ' s New Collegiate Dictionary . ) If �produce" means "to make available for the satis - faction of human wants , " it follows that a 11 produ cer" means a person who makes an article or commodity avail - able for the satisfa ction of human wants ; hence , it is not limited to one who manufactures or creates an arti - cle or commodity and to those who raise agricultural crops . A person who gathers sand and gravel from river beds or from the seashore .and sells them is a "producer") And a pe r son who gathers forest products or cuts timber � from the forests for sale, without . manu~acturing such articles , is also a producer. Such person does not create or manufacture sand and gravel or forest products , but he is nonetheless a producer because he makes avail - able such articles for public consumption , i. e., for the satisfaction of human wants . The same must be true in the case of a person who gathers or catches fish from the sea; he does not , it is true , create or manu - facture the fish , but he makes it available for human consumption by catching and selling the same . I can not perceive any distinction , for tax p urposes , prior to the enactment of Rep . Act No. 969 , between a person who gathers sand and gravel , or one who cuts or gathe r s forest products , from a pers on who is engaged in catch - ing fish from the sea. They have all been considered producers under Section 186 of the Revenue Code from the date it was enacted in 1939.

D!ESSENTING OPINION - C. I . A. CASE NO. 615 - 3- It is claimed that the amendment of Sectiqn 188 (b providing for exemption from the sales tax of fish and fish by-products when sold by fishermen is to cor- rect an illegal practice of the Bureau of Internal Rev- enue. I think this is a misstatement of the congres - sional purpose . To quote from the explanatory note of the bill which became Rep . Act No. 969: "The fishing industry has been clamor- ing during the last few years up to the pre - sent time about its losses in its operations. In oraer to enable the industry to survive and to continue its operations which are vital �in the furtherance of the food produc- tion campaign of the Government and to sav~ as much dollars as possible by avoiding im- portation of canned and salted fish , the remedy is to exempt the fishing industry from the payment of sale s tax on fish and fish b~ products. " (Explanatory Note of H,. No. 3870. ) FOR THE FOREGOING CONSIDERATIONS , I vote to af - firm the decision of respondent. RCMAN M. UMALI Associate Judge