CTA Case No. 2826 (Decision)

REPURT.lr. OF THE PniLJPrtN�%1 COURT OF TAX APPEALS ()t '-EZON CITY NATIONAL DENTAL SUPPLY Il'l:ORPORATED , Petitioner, - versus - C.I.A. CASE NO. 2826 THE COW~IS SI ONER OF CUSTOMS, Respondent . X- - - - - - - - - - - - - X DEC I S I 0 N This is an a ppeal interposed oy petitioner from the decis i on of respondent Commiss i oner of Customs, in Customs Ca s e No. 76-25 (Manila Prot est No. 9930), dated July 14, !976, denying the termer's claim for retund in the tota l amount ot Pll,056.13, as alleged exce ss duties and taxes paid i n connection with the petitioner's importation of Multivest Investment, Dental Floss, Tru- Pour Flask bases and TruPour Flask- Collars trom the United States, computed ( p. 1 , Customs Rec . ) as follows: COMPUTATION OF EXCE!::iS DUTIES �' r AND !::iALES TAxES PAID CON!::iTI- I TUTING THE TOTAL AMOUNT OF THIS CLAIM IArticles Dutiable Duty Rate Duty Rate t - Value Collected Claimed 3600 (~edium cans- 5 lbs.) MULTIVEST INVc!::iTMENT 30,589.64 15,294.82 (50%) 6,117,93 (20%) 550 rolls (150 yds.) in dispenser Nylon DENTAL FLOSS, WAXED 3,757,99 1,127.41 (30%) 365.81 (10%) ' 6 pkgs. (6) Dentsply TruPour FLASK: tiases only , assorted 220,73 154.51 (70%) 3 pkg s . (25) De:Jt sply TruPour FLASK: Col- lars only 176.06 123,24 P16,699.98 (70%) 11,61 (10%) including 25% mark-up P6,533,42 7% AST 6,533.42 �10,166.56 J:::.x.CESS DUTY PAID EXCESS SALES TAX PAID P12,708.20 889.57 J

DECISION - ~TA CASE NO. ~- _6 -2- THEREFORE : Excess Duty Paid: P10,166.56 Excess S. Tax Paid: 889.57 Pll,056 .. 13 TOTAL AMOUNT RE.l-'UNDAijLE ON THI::> CLAIM There exists in this case no dispute as to the facts. As gathered t r am the aforesaid decision ot respon- dent Commissioner of Customs dated July 14, 1976 (pp. 26- 27, Customs Rec.} the facts are as t ollows: "Records show that a shipment of dental suppl i es consisting of 3600 (medium cans - 5 lbs.) Multivest Investment, 550 rolls (150 yds.) in dis pe nser Nylon Dental floss, Waxed, 6 pkgs. TruPour fl ask, bases only, assorted, and 3 pkgs. TruPour Flask, Collars arrived from Philadelphia, U.S.A. at this P0rt on October 12, 1975 ex SS 'Phili ppine Rizal', Reg. No. 2035, covered by !jill of Lading No. 4 ar d consigned to Natio nal Dental Sup ply, Inc . , he r0 in importer-protestant; that said shipment was declared under Entry No. 98518-75 ; that upon appraisal, multivest was re- clas s ified trom T.H. No. 68.07 at 2~6 ad val. t o TeH. No . 38.19-B at 50% ad val.; dental tloss trom T.Ho No . 90.17 at 10% ad val . tp T. H. No. 39. 02-B at 50% ad val. and trupour tlasks, base and collar, from T.H. No. 90. 17 at 100/o ad val. to T. H. No. 39.07 at 7~6 ad val., thereby re- sul ting t o discrepancies in the amounts ot Pl0,166.56 and F889.57, or a total ot F11,056.13 in the term ot customs duty and advance sales tax, respectively ; these assessment and payment were contested oy the herein protestant claiming t hat duty and tax should have oeen based on the headings providing lower rate ot duty and the corre s ponding Protest was tiled on November 15, 1975 claiming refund of the alleged excess pay- ment by reas on thereof." This decision having affirmed i n toto the prior dec i sion of the Collector ot Customs, pe titioner, on August 13, 1976, appealed to this Court. During the hearing of this case, respondent did not question the arithmetical computation ot petitioner in its cla i m for refund in the total amount of P11,056.13 . The only issue is whether or not the total amount of P11 , 056.13 a l l egedly c l aime d by petit i oner a s over paid duties and advance sales tax on the i mportati ons of articles consisting of Multivest Investment, Dental Floss

DECISION - ~TA CASE NO. 2v L6 - 3- Waxe d , TruP our Fl ask Base and TruP our Fla s k Col la rs , are j us t ified a nd l~gal , a nd, theref ore, refund a ble. As regards the classitication of the item or art i - cle multivest , we find the stand of petitione r t hat it is cl a ssifiable under T.H . No. 68 . 07 a t 200/o ad val. we l l taken . This i s sue has already been pass ed upon by us i n the case of National Dental Supp l y, I nc . vs. The Commissi oner of Customs C. I . A. Case No . 2757, May 16, 1979, wherein this Court held thus: "The records show that Mul t ivest i s a r eddish powde r , consisting of 90% qua r tz and cristobalite, a nd 10% binders, ma gnesi um oxide and ac id phosphate , wh i ch if mixed in pre cise pr op ortio n with water, tu r ns i nt o a plastic ma ss which harde ns in a tew minutes. It contains no gypsum nor any deriva t i ves. The r efore it c ontains no plasters. The prin- cipal us e of the arti cle in que s tion i s t o make high-he a t resis t ing and in su lating molds int o which molten chrome cobalt metal may be cast. Subsidiary uses are tor making cru ci~ bles, masonry tor furnaces, and other purposes where heat re s isting and insulating material is r equire d . (pp. 107- 108, CTA re co rds. )" "It seems clear, therefore, that Mult i- vest is a mixture of mineral materi als that are by t hemselves he a t-insulating. It is a heat-insulating mine r a l material, not by mere accident, but ny de sign , and i t s precis e f unction is to store heat. Onl y a h ea t- insu~ la t ing materia l can perform this �u ncti on . Since it is t he general use to whic h a r t icles a r e genera lly adap ted and tor which they are gene rally us ed whic h determi nes their charac- t er withi n the meaning ot the t ariff laws (La Compa nia Gene r al de Tabacos de Fi lip inas vs. Unit ed Sta tes, 8 Phil. 438), there se ems to be no doubt that Multivest shou l d f a ll under Ta r if f Head in g 68 . 07 at 20% ad val orem." As r egards the it:'m Dentc:l Flos s (Nylo n ), petitiene .- claimed that it sh ou ld be c l assified und e r Ta riff Heading No. 90. 17 at 10% ad va .:. orem i nstea d of Tari f f Heading �No. 39.02- B at 50% ad� .valorem as cl aimed by respondent. The issue i n the class i fi ca tion of thi s item ha s already been s ettl ed Dy this Court in the a f orecited case of

DECISION ".TA CASE NO .. L. L6 - 4- Nationa l Dental Supply, Inc. vs. The Commissioner of Customs, supra, wherein this Court again held: "This article is a t hread-l ike material of several extra-tine nylon strands, apparently not twisted along its axis, but waxed to form a thread-l i ke appearance. It is "spooled" to a length ot 150 yards, such that the oeginning ot the composite strand could be pulled out ot the center ot an i maginary s pool. The article is encased in a cylindrical glass container with a metal cover, the center ot which has a hole through which the thread comes through. Outside and near the periphery, one point ot the cover is indented outward to serve as a cutter. The article is commonly known as "dental floss." (p. 110, CTA records.)" "Dental floss is used to remove foreign matter trom proximal surfaces ot the teeth. It works into the crevice between the tooth and gingiva to remove oral debris and inter- rupt plaque formation. Dental Floss may be used also to detect overchanging fillings and in some cases incipient tooth decay. And be- cause ot its "waxed" quality it may be used as a vehicle for cleaning and polishing compounds, eve n flourides, to reach interproximal and slightly beyond the gingival margins. Its secondary function, because of its relative strength and the convenience ot its pr esence in a dental otfice, is for suturing as imita- tion catgut. The literature recommends steri- lization before use as a suture. (pp. 110-111, CTA r ecords.)" "As correctly pointed 0ut by respondent, an instrument is a tool, utensil or implement. As such it is capable of being reused over and over for the same purpose without being consumed or becoming useless. However, suoject imitation catgut is consumed or discarded after each use and, theref0re, has the nature ot "supplies" and not that ot an instrument. In other words, it is not an instrumeht, not even a dental ins- trument, which can be classified under Tariff Heading 90.17 as claimed by pe titioner." "Under Tariff Heading 51.02, under which respondent classified the suoject nylon imita- tion catgut or Dental Floss, imitation catgut made fr om yarn of man-made tibers covered therein consists ot highly twisted yarn with a heavy dressing to increase its strength and render it waterproof and sometimes translucent. It is sometimes dyed. Imitation catgut remains in this heading irrespective of its cross-sec- tional dimensions. (Explanatory Notes to the tlrussels Nomenclature quoted in Tejam, Commen- taries on the Revised Tariff and Customs Code of the Philippines, Vol. 11, 1973 Edition, p. 901]' .J

DECISION ':TA CASE NO . Lv26 - 5- "All these products are generally in long l engths, but remain classified here even if cut into short lengths and whether or not put up for retai l sale. They are used accord- ing to their different characteristics in the manufacture of , among others, brushes and sur- gical sutures. ( E ~planatory Notes to the Bruss e ls Nomenclature quoted in Te jam , Ibid . )" "The Dent a 1 Floss in quest ion was impor- t e d in 300 100-gram jars but not certified to be sterile. According to note 3 (a) t o Chapter 30 , Ta riff and Cus toms Code, ny lon imit ation catgut for suturing ~hen sterile is covered by Tariff Heading 30 . 05 . This material is , how- ever, usually put up in anti-septic solutions or in sealed sterile container, unlike the sub ject De ntal Floss which is s pooled and en- cased in a cylindrical glass container wit h a metal cover , with a hole through whi c; the thread comes through and not certified to be sterile . And the Brusse l s Explanatory Note s to Tari ff Paragraph 30. 05 state that this heading excludes non-sterile suture materials, which materi als according to their nature fall within Schedule XI. (p. 572, Tejam, Ibid) As stated above, according to the Explana tory Notes to the Brussels Nomenclature, non-ster ile nylon imitation catgut for suturing is classi- fied under Tar i ff Heading 51 .02 at 30% ad valorem which covers , among others , imitation catgut of ma n-made fiber materials. " "There v,:.Juld seem to be no doubt , ther e- fore, that the correct classif i cation of Ny lon Imitat i on Catgut for Suturing a nd Debri s Remo- ving (D ental Flos s) is Tariff Heading 51.02 at 30% ad valor em.) Accordingly, the claim of petitioner that the dental floss is cl2ssifiable under Tariff Headin g No. 90 .17 at 10% ad valorem not well take n, it is hereby denie d. As regards the impo~t ed items TruPour Flasks Ba se and TruPour Flask Collar , respondent, with respect to these two items contends that they should be classified under Tarif f Heading No. 39.07 at 70% ad valor em, ins- tead of Tariff Heading No. 90.17, at 10% ad valorem, as claimed by pet it ione.':- , because the said i terns are p las- tic materials , and un der Chapter 90 Note 1(e) of the Tariff and Cus toms Code , as amended , plastic materials, falls un der the cla ssifi cat ion of Tariff Heading No. 39.07 at 70% ad valorem . On the other hand , petitioner claims t hat for respondent to class i fy TruPour Flask

DECISION - :A CASE NO. 2826 - 6- Base and Collar under Tariff Heading 39 . 0? s i mply be- cause it is made of plas tic is erroneous, since Tariff Heading 39'o'07 is a general provision which may only oe invoked if the article is not specifically covered in any head ing of the nomenclature. This art i cle be ing a dental appliance used as a tool in molding dentures, by specific design and function, petitioner concludes that the correct classification would be under Tariff Heading 90.17 at 10% ad va l orem. We find petitioner 's stand, with respect to the TruPour Flasks Base and TruPour Flasks Co l lar , well taken. Tariff Heading No . 90 .17, at 10% ad valorem of the Tariff and Customs Code provides as follows: 11 90.17 Medic~l, dent a l, surgical and veterinary instruments and applia nces (includ- ing electro-medical apparatus and ophthalmic ins truments) � � � � . � � . . . � ad val. 10%" Under the aforesaid Tariff Head i ng No. 90.1 7, Montano A. Tejam, in his "Comment aries on the Revised Taritf and Customs Code," Vol. III, pp. 1868~1869, 1973 Ed., stated as follows: "This heading covers a very wide range of instruments and appliances which, in the vast majority of ~ a ses, are used only in professional practi ce (e.g., by doctors, surgeons , dentists, veterinary surgeons, midwives, etc.), either to make a diagnosis, or to prevent or treat an illness , or to operate, etc., i.e., generally speaking, to carry out some treatment on the patient. Instruments and appliances tor anatomical or autoptic work, dissecti on , etc., are also included, as are , under certain conditions, instruments and appliances tor dental laboratories (see (H) below). The instruments talling within the he ading may be made ot any material (inc luding precious metals)." Although the aforesaid flask and trupour bases are made .of plastic, it could not be deni ed that these items are dental ap~ : i ances and/or instruments intended

DECISION - ~ATA CASE NO,. 2LL6 - 7- to be used tor denta l mol din g proce s se s or outa i n cer- tain objecti ves in denta l medici ne. (pp. 7 & 14. t . s . n. Oct. 4 , 1979 ) This fact is supporte d by the Brochure which says i n effect that t rupour flask , colla r and ba s e a re instrume nts or appli a nces used i n the exerc i se of professional prac t ice a nd the J ctual use of sai d i tems ar e clearly illustrated in pictures 1 to 12 ot t he said brochure . (see Exh. "J 11 ; see also pp . 12-13 , t .s.n., Oct . 4, 1979 . ) The very tact that the s e items ( t rupour t lask, base and collar) are made ot plastic materials will not justify respondent in classifying the m unde r Ta r iff Heading No. 39 . 07 at 7rJl/J a d valorem because th is tari ff heading refers only to those articles whic h may not be classified under a specifi c ta riff hea ding . The Exp l a- na tory Note s to the Brussels Nome nclature a s comme nted by Montano Tejam, clearly i l lustrates tha t s a id items or articles are denta l i ns t r uments or applia nc e s which are used e xclus ively for t he purpose of de nt ure molding procedure as illustrated i n the said picture of the brochure. Thes e items (TruPour Flask , Base and Col l ar) the r efor e, having the appella tion or de si gnatien as ins t ruments or appliance s fo r dental proces ses, we are convi nced to so hol d that t he same should be classif ied und e r heading 90 . 17 at 10% ad valorem. However , as regard s t he portion c orre sp onding to the advance sales tax claimed by petiti oner to be refund- ed in the amount ot P889.57, we are cont ra i ned to deny the r e f und of the af or esaid adva nc e sales tax in view of the t ac t that nothi ng i n the rec or ds s how that peti- tioner had f iled it s wri tten cla im f or re f und with the ' .�~ � # .... :-...,..,.. --

DECISION � ':TA CASE NO . L..-.~ 26 - 8- Commissioner of Internal Revenue and that the latter was not made a party to this case. (Wise and Company vs. Commissioner of Cus toms, CIA. Case No. 2717, Dec. 29, 1977. ) And,in a subsequent resolution in the said case of Wise and Company v s . Commissioner of Customs, C.T,A. Case No. 2717 1 dated January 15 , 1979 , upon a motion tor reconsideration, this Court ruled as follows: "We disagree with the argume nts presented by petitioner. The thinking of this Court in thi s matter :J.s otherwise. In the case of !:5ell Hobart Manufacturing Incorporated vs. Commis- sio ner of Customs (CTA Cases Nos. 2750, 2751, 2752 and 2753) the consolidated decision of whic h was pr omulgated on March 10, 1978, this Court, i n not granting the claim tor refund of petitioner insofar as the advance sales taxes are concerned and then attirming the de cisio n in this case, has rendered the follow- ing ruling: x x x. We note however, that insofar as the claims tor refund of the taxes (advance sa les tax)Lare concerned (sicl7 in the amount of P3,522.00, Pl,444.00, Pl ,449.00 and Pl,224.00 are concerned, the Commiss ioner of Internal Revenue had not been impleaded in these judicial suits tor re covery of an internal revenue tax erroneously or illegally collected so that this Court did not acquire jurisdiction over hi m. (~ection 306, National Internal Revenue Code). As held by this court in the recent cases of Wi se and Company, Inc., vs. Rolando G. Geotina , supra; NCR Corpo- ration (Philippines) vs. Commiss i oner of Customs, supra, the Court of Tax Appeals has no jurisdiction as petitioner tailed to ti l e the claim for refund in writing with the Commissioner ot Internal Revenue in accordance with Se cti on 309 of the National Internal Revenue Code, and that said Commissioner ot Internal Revenue has not been made a party re spondent. (Luna vs. Commissioner ot Customs, CIA Case No. 1947, November 29, 1968; Philippi ne Wall- board Corp. vs. Commissioner ot Customs, CTA. Case No. 2136, September 30, 1972; Proctor and Gamble Philippine Manufacturing Corporat iGn vs. Commis sioner of Customs, CTA Case No e 2155, Resolution dated April 15, 1971; Ace Publications, Inc. vs. The � commissioner of Customs and Collector of Customs, L-18808, May 29, 1964, 11 SCRA 147; Tagum Electric Company, Inc., vs. Commissioner of Customs, CTA Case Not 2749, Resolution dated September 13, 1976.)

DECISION - ~TA CASE NO. 2c.... L6 - 9- t'-we r~l� t era t e our pos1� t 1� on th at the court of Tax Appea ls did not acquire jurisdiction as petitioner failed to file tDe claim for refund of the advance sales tax in writing with the Commissioner of Internal Revenue in accordance with ~ecti on 306 of the National Internal Reve- nue Code, and that the said Commissioner of Internal Revenue has not been ma de a party res- pondent. (Luna vs. Commissioner of Customs, CIA Case No. 1947, Novembe r 29, 1968; Philippi ne Wallboard Corp. vs. Commissioner of Customs, CIA Case No. 2136 September 30, 1972; Proctor and Gamole Philippine Manufacturing Corporation vs . Commissioner ot Customs, CTA Case No. 2155, Resol uti on dated April 15, 1971, Ace Publica tions, Inc. vs . The Commissioner of Customs and Collec- tor of Customs, L-18808, May 29 , 1964, 11 SCRA 147; Tagum Elec tric Company, Inc., vs. Commis- sioner of Customs, CTA Case No. 2749, Resolution dated September 13, 1976.) ~..Again, in Bell Hobart Manufac turing Incor- porated vs. Commissioner of Customs (CIA Case Nos. 2750 , 2751, 2752 and 2753) supra, we have expla ined thus- We are not unaware of the provisions of the second paragraph ot Section 1708 of the Tariff and Customs Code, as amended by Presidential Decree No. 34, that "if as a result of the refund ot customs duties there would necessarily result a corres- ponding refund of internal revenue t axes on th0 same i mportation, the collector shall likewise certify the same to the Com- mi s sioner who shall cause the said e xc ess t axes to be paid, refunded or tax credited in favor of the importer, with advice to the Commissioner of Internal Revenue." However, under t he fundamental rule of statutory construction that all statutes relati ng to the same subject are to be construed with reference to each other so that effect may be given t o all the provi- sions of each {Madrigal vs. Rafferty, 38 Phil. 414; 51 Am. Jur. 363), the afore- quoted provisions of law should be L , or- pre ted in connection with Section 306 of the Nation: l Internal Revenue Code. The Commissioner of Internal Revenue being a person who is bound by the judgment to be rendered in a judicial suit for the recovery of any national internal revenue tax alleged te have been erroneously or illegally assessed or collected, he is a party neces- � sary to a complete determination and settle- ment ot the questions involved therein. ~The interpretation that the Commissioner of Interna l Revenue has no more power to determine the legality of a claim for refund of internal ..I

DECI SI ON - "A CASE NO. 2c_6 - 10 - revenue ta xes such a s sale s tax and c ompensating ta x on imported artic les , and thus clai ms for re fund of sai d taxes which should be filed with the Commiss ion er of Internal Revenue as required under Sections 306 and 309 of the Internal Reve- nue Code are no longer necessary is not justified. The l aw is not clear enough to support such a conclusion . Such ar gument and constru ct ion would mea n an implied partia l re peal or a mend ment of Sections 306 and 309 of the National Interna l Re venue Code and will certai nly affe ct the proce ~ dure fo r appeal provided f or in Rep. Act No. 11 25. This is not the correct i nterpret ation because, as stated earlier, Section 1708 of t he Tariff and Cu stoms Code is ambig uous and not cle ar to this effect. Repeal by implication is not f avored unless it is mani f est that the l egis lature s o inte nde d i t. (Commissioner of Customs vs . Es s o Stan dard Eastern, Inc., 66 SCM 113 . ) And statutes must be construed so as to harmonize all apparent conflict s and give effect to all provisions when- ever possible. (Iecho c o vs. Civil Ae ronautics Board, 43 SCF.A 670; The Philippine Amer ica n Manage - ment Employees Assoc iation, 49 SCRA 194; Jalandoni vs. Endaya, 5 5 SCRA 261. ) .f' On appeal of our decision and re so l ution by petitioner Wise an d Company in the aforecited case, the Supr eme Court, in a mi nute re solution in GR . L-51242 denied the ap peal on Mar ch 7 , 1980. WHEREFORE, r espon de nt Commissi oner of Customs is hereby ordere d to refund petitioner , Nationa l Dental Supplyt In c . , "L11e amount of 179 , 414.9 6 wh ich corre s ponds only to the exce s s duties paid on its im ported articles . Wi thout pronounce ment as to cos ts. SO ORD ERED. Que zon City , Metro Ma nila, June 30 , 1980 ROAQUIN . J udge I CONCUR: ~ C/~ Al\ilANT E PI LLER Acting Presiding Judge