CTA Case No. 220 (Decision)

~� �PUBLT_C O'fl' TRP.: PHILTPPINEa .COURT OF TAX APPUl...S AIANJ..l.4 J � nc., � et1t1oner, ... versus - C.T.A. C E O. 220 ILVS4 I t \, 1n his cap citi as Collector of Int rra ev n e, espond nt. X~ � � � � � ~ - ~ � � ~ - X CI 0 fhis ~~ an app al f1l d b t1t1oner La ranja� Inc . fro..a the ec1s1on of r spondent Coll ctor of J.n.. tern 1 ev ~~e. sse aing and de andin from tit loner th SJ of ction 133 of the Natlon~l Int rn al � v nu Cod t plu the sum of 5� v. ~~ ccrrtpro 1s penalt�.t. P t1t1oner 1s a cor orat1~n ul or nized and existing und r th 1 ws of tho Philippines with busi� eas ddress at Aparri, C garan. lt p ratas c poundltl esta l1sh ont hich anufactures liquor pro� duct�, sing as raw mator1als d1st1llod spirits con- sist1n9 of leohol a d nipa wine supplied v dul li- censed disttll r1es. It has a selling depart ent which conducts the a le of its own 11 u r products , and also the 11 or products, stl�t nipa 1n � purchased fro outside sources for resale. So etl!. in 195 , an 1nv &t1gat1on and exa ina� tion of the boo~& of ccounts and other reoor s of petitioner was c onduct ed cov rirlg t he period fro June , 1949 to -~ove er. 1952� and as � result ot th x m1na� 322

0 lli IO - ... I' � � � ~ ~~ v. 2?.0 � - 2- tion, respondent , on .ay 2a, 19~ . issued again t pe- tit ner t 16 based n th ollo~~n gr undsa ( xhlb1ta �A� and "2") (1) hat t tione u&e 1n t co n 1ng f liquor � th foll ing u ntit1 s of nipa 1ne ut fall d to d 1 th un r p1ri Rece ved� of o. G. 213.60 �. w 174. 60 223. 8 �7 S2'> � �u ( 2) Th t a c n of t ~b1ch 1n tltioner� off e1 1 Is er 0 0 ch ar 1n its r�g1 t r ilVO c � t s l s of petitioner ur n t rio l.n st on ;:;X� !'t r 1n c ed d 1ts pr due on , th~ exc s in proo follo as ners 12 ��7 . 60 0, 58 82 . 70 � 1, 703 596. 65 41 , 6~'~ l � 69 . 8 l 195 .10 1, 50 � 295 , 425 ____�___., f L .. ~~

- 0 'I.;~ I .T. A. C E � 220 - 3- (3) t at petitioner, using unr gi&t red "�1&s1ng� invoices ~1th erial numbers fro. 1 to 4 � sold de ijohn of liquors , d ta il d os follows . - Dem1�JoKind (~pee 1ftc ex Per Proof Proof liters 28 Dar1&,a� 620 ... 2 2, 678 .�60 1, 606. 80 252 Old Tata 20 3,7 0 1, 6 1 .CIFlC TAX DUE ___ ..._......... TL Tax uc ........ 1,337.90 'f x Due -�--� 15, 31. 10 Tax u - ---� 2. 786,~.Q T The ol ow g r the _!:lsuos n the c t bar, th fir t tl~oe of ~hlch r f ctuel -nd th last 1 gal n nature: {1) t, r or not tit1on~r !n ~�c. rec 1v o nd us in co pounding of 11. dr~ to qunnt1t1 of nipa in nt.onod 1n o. (l} a ova, ~ithout r co � ing th . 1n i ts offic i al r gist r boo under � p1r 1ts eea lv d" ; (2) h ther or not p t it!oner !n i ct produc~d th 14 or oduets ention d !n o. (~) ove , ithout accounting f or hem in 1ts offictal r ~1stor bookJ and (3) .h th r or not tte p titioner 1n f ct sod th 54 d !johns of 11 uor nttonod !n o. (3) b ve , nd u d unregister d " 1ss1n � voices. \lith s ri ,. 3 2 11

-�- � 220 n r fr 1 to 450. (4) he her.or not pet1t1 ner 1s l18ble for the c penaltv of 5, 000. � us no prQce d to consider the thre f ctual qu t1ons separ tel,. ( l) Thi r- port to r pondent. D atil� ler1 s nu itio er u d c ... poul'l.dlng of 1 quor tlti� of nipa dt not cord the s in tts offici 1 re 1Gter oo und r tt col dmits ce1v d. t1t1on r that t � th gra s of nipa wtne in <:U� � tlo r u pro ctlon of 11 r o uct � t tt � re u1 nter d ln s of 1c1 1 r � .. � t tt�� nt1� recorded. n t c � ln n c ntrov ra t 't s o n1pa d. clin a to 11 v h nd d0u t � o n stora a- nt, e of hich 11 for alco ol d he ot r se .or t or n1pa � as 1t 1a pul 1 or n1p w1ne e cl ss1f1 an adet an � ��� r h c tn !nt.n d. Those of the vor usu ll tor d to t r in nk , it u ta 1n lnt ccount

DE.C JS I - C . T. A. ~ ...., L , u. 220 -~ - t ho fact t ha t t sa c. CJ:llQ s pir i ts er e oi dii i&xent grades. r ult 1s t h t t ho cr ud s pirits of c! 1t - ferent ra s. h 1Cl ere rev :>uslv r&CC:f.VI an later tor ed t o thar , lo5 th 1.r 0 ig nal iden 'it�r or gra n 11 r.�1xi:urc .1.tt. a co..... cr r de . in t e t ank . lt i s na t urol f or cruoe p !.t ferent gr des t o los thet= r!. n � rn s h .. n st r d or ixe to~ th r . �hen Cl.''Jd spu- t~ � "=' t o e r - oved fr o the 01: n� fer us the an f ac tu.t� c _ c lu n of liquor -.. � th Pir it ~ Us ed I. 'Jf l c r h Oti. !S i.: � ...r ade o,...t t t. d ... - erent xtur w 1cl. � ra. 1: 1 1 c rc.:. under t c .u- 1ts ..~ c 1 d . '' Th proc a ...r outllr. c. t~bova wh1c h ~ t1. ner fo1 - lowed ct t at th re er ce in radea o� nlp J.ne c un r u colu .. p.~.... i t s o not n 1 � .... Pirit ' C 1V d" of pe t it i~u r' fie l r g t r ~ ok. n tlv , all the pl.r1t s h en app r t:na r t e c lu G sed� � r 1n f ct pr viou 1 r corded n r p l'1t& or ectlve w the o fficial rc~ & ar 000 � n or hi r eason t he sp fie tax as 1, 337. factu 1 o.~ho u J.d be ...t c .r~ n Fu.rt l.Ilg t . r d 1 or r ' iel, official r e �t�r book ind1c ate& t t pot 1oner .ec 1v d an r cor ed mor roof liters of p!r i t t an it u d . 326

lS � o.. 220 C. 1'. A. Thi& !a n unmist akable s13n that petitioner did not use distill d sp its ln t o c pound ng of 11 uor whic h ere not previouslv du v recorded. this con� n ction, o s rve that petitioner could not hav re- c orded under t h columnar sp ce "~ptrtts Us d" the spirit which ~or not prev ousl, r rted as received. If pet1t1o1 r did othe 1s � it cite the su&p1� cion of respondent th t it was eva 9 the pa�nnent of taxe& with 1nt nt to defrnud t e gover rnen � (2 h w 1 o t.!s ass s~~ .tis the fat tat a co. par.a.son of the ! .. ures ~.hie. a P<h r in tit1oner �a off1ci l r st r 0 nd thos 1hlc h p~ e in tts re.. glster d invo ...ces :&.Sclo~ed hat the sales of p titloner durin th per 1 questto c ee eo its pro uctlon . Petition r adm t hat t ol � re liquor produc ts than wh�t :vere :roduced in its compounding est liihrn n � owever. utit!o r c .�t nds ~hat th~s f ct l s no proof that it und r~t ted nctu 1 ro uct1on of 1ts c - poundi n e ta l s~~a t . Th e ces of sales over pro- duct ion . p t1t1ort r explains . is du to 'th f ct t at it sold not onl� 1 qu r p:::o ucts producC'd n i ts com- poundin establ1 .an"t t>ut illso li .uor pro ucts, ostlv ntp ~�in~ . purc has d from ul.. 1 �censed sup 1 crs for resal � t he oth r hand , respond nt claims t at t h sa1d exces re presents compound 11 ors manuf ctured 1n the co oun ln establi h nt o petitioner , a d that as th� n pa 1ne sed in anufecturing th said 327

D 1:i o. 220 � T. A. -7- exc ess was no recor ded 1n th o!f1eial ~istar b ok, r��pon nt conclud s that th specific tax thereon has not been pa1d. fence , the pre ent ~!i ss.et 1n the .mount of 1~ , 9~1.10. The ev idercc present d b r uoth a:t tJ$ r tbe contention of pot lti oner . It r.rust noted that petitioner here lJl 1s not a producer of r,i i e . It merely purchases its rn ateri ls ~ the manufec tur of liquor products fro dul license 1st1llerie w o are t ~mselv th proP~r per �ns 114ble for the Pt� clfie taxes on the �~n� � or in the a sence of pr of to th� contrarv, it 1~ r� son ole to proau � n c nclud. I t hat t he specific Lex on th � raw atorials hev lreadv been pe1d before the' ere r oved fro the p o uc tn ule 23, ules of Court). distilleries {~ c. 691 (ee) , he sales over the produc- ith r egard to th exces& o t 1on of pGt1t-one~ dur1ny the period 1n e t'on . th preponderanc of evidence 15 to the ff ct t at th s id e x~eaa was not produce ov t t n r ut purch s d from supplier~ and so d o it cu l O r � horeover, the e i t no direct and poGi~ ve oof to ho that et t1on r herein actuall v under t te ita pro t ton. fher or � the deDland of J:es ond n for t p nt of lb.931 . 10 �� SJ)*Cifi c t x on the S"' exce&& shoul � be 1 hdrl.l n. ( 3) foll~ ing portion of the report of on A~~lnal'o , u rv!s or of D til~ lertes, who conducted t he i nvestigation egJX in9 th 328

D � 220 � T.A. - 8- .pecific t x liab111tv of petitioners ( xh1b1t �1d � p. ~. rec. 1 e1at1v to the l.n n invo (; s en.. toned � ineldo' r c.� t hi t " " to 8� ) , � f in h t no ct .res(Jnt ... d h that anv of t s " invoice re xi t � or if t ,. ex1st � that p tl- t1oner here in the f liquor~. tl oner e a lor. _o r ue v 1 nd respond nt h s not s wn t. r ~ rea on b e a11 to sau th these 1: :.>l.c a l nu :& 4 t 1,1 as well s OVOJ.C witt r al n rt. 1 to 400) ore u ad -.>' tition&i. . 1 f ct th is vi enee to 0 tl t th ... re 'll us oy ellers r kno to or author z uv re 1 no reas nable ~ s to c .clu , as r sponden\ assu es. 9 t<")")') I>#

DfC lS I � � 220 C . T. A. C -9- t at on t hese alleged � m1ss~19� i vo1 es , p tit i oner - - sold 540 dem1jo~s of liquor on hi CJ d t r 1nat - cn ' was base s olo!�, on 'the qunnt i t , c over d v th - voices ith serial nu oers to 1. 100. Ass 1 arguendo that these invoices ere 1n f ct b longing o pet1t1oQer 1 i t does not nectss ~11 � f ollo t hat t � quantitv sold !thin o aeries of !nvoic s ould rc n1n the s � ather th u nt it r s ld u t t on so f ac ts o.r evid nee fro whic re sona l - fertnce c an b r n t o doter �n or or 1 sG f i rlv such quant1t,, ld.. A s ss nt shou l d not r e pr u pt1on i t OU f CtU l as!s , no at~ r aO reason bl or logic 1 s ld pr su ptions c ' b � (Al- erto D. nip vo v � Coll ctor of lnt r n l ev u, c� � � � c s o. 1. J nu rv 2 , 19-S . ) H V1n und pe t ition r not liable ! r t f ie t ax r in ou ht to c llcct d r ros p find i t unn c sGar to discu s nd dis sa of t 1 s t 1ssue. that s lt v b � t h t thi o rt h s n po ~r t c 1 o t p r t p y a co pr 11 penaltv. t h coll etl n of hich b n fun- da ntall � up n a volunt r .cnt of oth parties to tt sa at 11no Ign cio vs. C 11 cto , c.r�� c �� o. 170 , ~.rc h 24 , l ). cc1- a\ATI VIE nc s1on of r spondent C lle t or of Int ernal n � d t d Mav 28, 1954 . ass ss ! n an La ~anja . Inc., t tot. l s of 33 0

I� C.T.A. ASS � � 220' � 10 - t~ll .and penalt'lv sfi'ould ~ � �� 1t 1; ht'reb � rev rsed, without pronou ce � t �� to costa . an1la. Jul 16, 1 � I /~~~ n -QI'V� ., � 1 L Associate Ju e I 331