CTA Case No. 157 (Decision)

Lhi TioNG (Manila Lumber). Petitioner.

- versue -- C.T.A. CASE ND, 157

COLISCTOR OF INTERNAL REVENVE Reapondent.

I 2Z (9L

DHCISION

This is an appeal from the deciaion of the respondent Collector ot Internal Ravenue assessing and domanding from the petitionor the payment of

the oun t P2,938,20 s doficieney sales tax ani

surcharge. and the additionai oum of P250.00 in

extrajudteial oettlement of his panal liability for

violation of the provisions of the National Interual

Revenuo Code, cx total of P3,la3.20.

It appears that petitioner lim Tiong owns and

operates the Menila Lumber which is provided with

C-l3 priviiege tax recoipt for buying and selling

logs and lumber. and C-l4 privilego tax receipt for

buying logs intendod to be sold after having been Cut into otandard sizes of lumoar. The petitioner.

not being an owner of a sowmill, merely buys logs

and have theu processed inte lwmber of various sizes

Dy the Criantal Sowmill, Tio Barretto & Sons and

other oavenills in Manile. He then pays tMe sawmill

owners for their services rendered eomputed on the

number of board feet out and/or sawn, Memor andum

155

C.I.A.CASE NO,157 DECISICN -

S

for the Petitioncr,Pr it Stipulation ot Faata, par.

Prior to $eptember 22, l950, the date when Re-

puhlic Act No. 58a took etfect. the petitioner had

been paying the M sales tax on tho gross'celling

price of the iumber after deducting the eost of the

logs. After the date Just mentioned, tho Petitionor

cqntinued o pay the sales tax but computed on the

33 l/3% of the gross coat of logs purehased and from which said lumber were processed, pursuant to the ce-

cond paragraph of section ls6 of the National Inter-

nol Revenue Code, as amended by Nopublic Act Nos.

508.594ond 94.

Qa May 21. 1954. the respondeot Collector Of

Internal Revenue issuod an assessment and domand

against the petitioner requiring the payment ct the ovm ot P2.938.20 as deficiency sales tax and sur- charge covering the period from 1949 to 1903, inclusive plus the additional anount of 250.00 in extrajudieial settioment of his penal liability. The said defi

ciency assessnent which ts the Subject of the prosent

appeal, was computed by the respondent on the basis ot

aales tax on the gross saleo ot lumber loss the

cost ot the logs converted intosuch iumber in accord-

anee with the first paragraph ot Section ls6 of th

Tax Codo. as amended. The potitioner admit the Cor-

rectness amd accuracy ot the figures in the defi-

cioncy assessment but questions the basis on which

15 6

G.I.A.CASE .157 DICISION

the said assossment was Gonputed.

The only question at issue in this case is

the determination of whether or not the petitioner

in "an operator cf a sawmill- in order that ho can

teke advantage of the provisions of the second

Daragraph cf section i86 ot the National Internal

Revenuo Code with reapect to the paynent ct the

sales tax cn the lumiber ho ts aelling.

Section l86 of the Tax Code reads in Dart as

followst

original eale, barter, exchange. and oimi of the gross celiing price or gross value iar traneaction either for nominai ar ship of, or title to, the articles not paid by the manufacturor or produceri Pro of other artic enunerated in section one hundrod and eighty-four and one hundrod and eighty- five a tax equivalent to sovon per contum valuehle considerations to tranofer owner- in noney of th articies oo soid, htrtered. exchangod, or transferred, such tax to be vided. arsscd, and coliected onee oniy on every aiue.innonev oftha.monuractured.orticigs urod outoi materDs subDot to tax undnr ialn.as duy atablighed, shali be cecuc- toleirom the cross solnc pice oroross Ie section thototal cost of ovch nate 300. 186. That where the articles are nanuoo CT Percntaoe tox on.cale Inoro shan be loviod.

mine the tranefer of ownership of the goods uucts shipped or exported abroad, no per- centage taxohall be levied thereon lrre- or products oxported. peetive of any shipping arrangonent that may or grosvuon aoneyshn bepvind. be agreed upon which may influonce or deter- G rnossocrand coeardr Ane provided. awna.ancvorcuiino thmntonwbor oi inalY, That with respect to goods or pro- tve percentu ony oi thsoln in the oraino sanillrrmhobuypaorthepurpoaeoi iorest products rovicec. In the case of oporatora ox proprietors furthers ornatax euveni whethor aanuadturec hat with Teepoct DTICO CG

1 57

G.I.A. CA$E NO. IS7 DICISION C

Aet Mos.Cne.594 ar.d 69a (Uncarscor Croaeonoioos prdhaa aurng anY slven surterintendnfor aenufeetura. ing gupplied) tren anc oneohrc cer eontu pt tue Ens soon ahe1 tandard sizeaothe tax prescribed ic XX X (As anandod by Ropunlic Is comutoion thirs

The petitioner contenda that he is an operetor

ot a sawmiil and therafore his tax liabtlity pn tho

sales of lumber ahould b cooputed on 33 l/3% of the

gross cost of logs purchased during cach cuarter.

Wo find this contention of the petitioaer without

merit. It is not aupported by the facta as provad

and astnblished at tho trial ot the Caoe. Cn the

contrary. tho records clearly ahow that h does not

on opozato G dii he, ot om tind or ano-

ther, aver ET a contraet ot lease ot n santll.

No iota of evidonce wes preucnted to ahow that curing

the period tn cuantion, the petittoner wos in posses-

sion of, or at loast had oomethiny to do with thg run-

ning ct any aamill. H uerely hired the servicos of

operatora and ownars of ceweailis on a picee gf work

basis, and paid thou for thair work rondered Computed

oa tho uuator of board feod cut and/or sawm.

However, the petitioner insists that he is an

operator of a sramill, at ienst by fiction of law.

Me argiea that # aammtll ia a factory or manufectur-

ing eatablieinnnt wirs the converseon of logs into

iumber of diiferent sires in ctfected. Inaanrch as

tn tro paymene of lin eales tax, the pctitioner in

coneidcred a manufacturor of lumber undor section lo6

158

DECSIN -- C.T.A. CASB M. 157

of tho Tax Code. he coacludes that he to also an

operator of a sswaill because ono cannot be mam-

fecturar of lunber without being an oporator cf a

Sowmill, at ieist by fiction ot iaw.

Wo cannot.Subscribe to the xesult of the legal

gyunastist ot the petitionar which unreasonably cr- tend the meaning and import of worde VIt is wr

considered opinion that the term operators of saw-

milla as used in section le6 of the National Inter-

nal Revenue Code refors only to those who actually

supervise, manage and control tho operation of saw-

aills. In the instant case, the petitioner has no

Say whatsoever tn the manageent and operation of

any sawmill and we hold that he ia not an operator

of sawmill.

Moreover, the petitioner does not possess the

necessary pernit frou the Director of Forestry for tm

operation of a sawaill which ia recuired hy Republte Aet N0. 460. To our mind, this i a clear index thet

the setitioner in in reality not an operetor of

sawaill which he pretenis to bco and Dolters our con-

clusion that we should pay the percentage salos tax

under the first paragraph of Section la6 of tho Na- tional Internal Revenue Code.

whReFone, tne patitioner is hereby ordored to

pay th cum of 2.93a.20 as deficiency sales tax aod

suxcharge covaring the neriod from l949 to 1953

inclusiva.

15 9 A

DECISIONS C.I.A.CASE ND.157

SO ORDERND

Nantla, Philippines. April 27 l956.

Preaiding Judge MARIANO NABLE a

I conCua.

Absociato Judge A

Assoeiate Judgo NCiAN M. UNALI did not take part in the proceddings.

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