CTA Case No. 3038 (Decision)

I"CHAT' �RADE DEVELOPLvlEt;!'I' CORPORI\'l'IC;N I Petitioner( - versus - C.T .A . CASE NO. 3038 EFREN I. PLANA, COMMISSIONER OF INTERNAL REVENUE 1 Respondent. X- - - - - - - - - - - X DEC I GI 0 N Pursuant to a ruling dated September 28, 1970 of the Bu rea u of Inte!nal Reven~e holdi~g, among othe.sl th at imported c Qnn ed sardines and othe r cann ed food products are invariably subject to 10% advance sales tax# petitioner Chattrade Development Corpora~ioo was assessed by the Bureau of Customs d.ficiency a dvance sales tax in the amount o f ?62,031.00, rGpresenting the difference between 10 % and 5% of the tax, on its i mp ortat�an of 7.655 cartons of Ligo canned sa~dines from Jnp2n which arrived en September 8, 1978. A r equest for rscon- s iderat icn of the ruling and with~rawal of tle defici ency asses~illent on the ground that imported canned fish like sardines and mackerel should be subject to 5% advance sales tax pursuant to Sect ion 19~(b) in relation t0 Section 201 of the National Internal RvJenue Code hc:v ir.9 been der.ied by respc-nderH:. 143

DECISION - CTA CASE NO. 3038 - 2- Commissioner of Internal Revenue~ p2titioner appealed to this Court$ The following are the fac~s, which are alleged in the peti tion for review and admitted in the answer or supported by the evi~ence, that g~ve rise to the present controversy� l. Petitioner is a domestic corporn~ion organized and existing under the laws of the Philippines, with principal office at 822 Elcano, 3inondo, Manila; while respondent is the incumbent C�:J~nmicsioner of Intern � l Revenue and may be served w~th summons at the Bureau of Intern al Revenue 3uild~ng, Diliman, Quezon Ci t y. 2. It is engaged prin~ipally in the import- ation busiriess and seco~darily in real estate. 3. On its importations of canned fish prior to April 2lf 1978~ petitioner was paying 5% advance sales tax plus 25% m~:k-u? ~n the total landed cost thereof, pursuant to Section 201 of the National Internal Revenue Code. 4o Under Presidential Decree No. 1358, which took effect on April 21 , 1978 1 Section 201 (a) .was amended by providing that locally processed meat, milk, fish and other sea foods shall be subject to

DECISION - CTA CASE NO. 3038 -3 - 5. On September B, 1978; petitioner's impor~ed shipment of 7,655 cartons of Ligo canned fish from Ja~an arrived in Manila on which i t paid the am0unt of PC2,030.00 � s advance sales tax at tte rate of 5% based on the total l ande d :ost plus 25% mark-up, pursuant to Section 20l(a) of the National Internal Revenue Code. 6c In his letter da~ed September 28, 1978, respondent ad �; issd the Commissioner of Customs that imported canned sardines and other canned food pro- du~ts are subject to the 10% advance sales tax, pursuant to Section 20l(a) ~ as amended by Presi- dential Decree No. 1358 which took effect on Ap:r:il 21, 1973. ;. On the strength.of said letter of respondent, the Collector of Customs, Port of lanila, demanded from herein petitioner the pay- ment of the sum of P62t031.00 as deficiency a dvance sales tax en the above imported shipment of 7,655 cartons of Ligo canned fish under Import Entry No. 90455-78. 8. In the letter dated tvlarch 28; 19 9, counsel for p~~1 tioner requested respondent to rGvoke h1s ruling dated September 28, 1978 to tbc Commissioner of. Cu stoms D.nd the wi thdr tcw al 0 .-.F. the de[iciency ascess~~nt mentionP~ in paragrar i1 -7

DECISION ��� 30 38 C'I'A CASE 4- 9. In his letter dated September 24, 1979, respondent der.ied the request of petitioner and insisted in the coLLection of 10% (:'ldva.nce sales tax on importations of canned fish by petitioner. 10. The deficiency assessment of P62,03l.OO r epresents the difference between 10% and 5% of t.he ad�v-ance saJ. es 't-2i~ due on the ~:hiprr.en t. of 7 r 655 c""r tons -�,f Ligo ca:n'led sardines f>:orn ..Iapan. 11. The aforesaid decision of r espondent dated September 24, 1979 was received by counsel for petitioner on October 5 , 1979. Petitioner Chattrade Development Corporation now roses a single issue before us: Whether its i rnpo::::tatioi1 of canned fi~.,h is subject to 5% or 1 0~~ advance s ales tax. Petitioner asserts that the shipment should be subject to 5% advance sales tax while respondent insists that it is liable to 10% tax. In denying the request for reconsideration of the deficiency advance sales tax asse2sed as?inst petitioner amounting to F6~ 1 03 1.00 representing the difference between 10% and 5% advance sales tax on imported canned sa;dines, res~ondent held that the article~; en.umeral:c:d in pi.:!.ragt:aphs (c-A) '� {c)'� (d) .and (e) of Section 201 of t.he Natioral Inter:nal I~evenile 1 ,_t G

.. DECISION - CTA CASE NOg 3038 - 5- Code, in order to be subject t o the 5% percentage tax imposed therein, rnubt be "locally" processed or manufactured. Sj.nce impor ted canned sardines are not locally processed or manufactured 1 they are subject to the 10% sales tax impcsed in Se.tion 199 of the same Code. Petitioner, on the ether hand, contends that: (a) The 5~ rate specified under Section ~01 of the Code is the same rat::~ of percent:tge ta- (aavD.nce sales tax) .on iDported c&nned sardines. Sine : there is no other rate under Section 201 except 5%; and locally processed fish cannot be imported, the im- p0rted articles referred to under Section 193(b) ?f the same Code must be processed meat, milk, fish and other sea foods. (b} If it \�Jas the int::.ention to levy 'che 1.0% rate on imported fish, that should have been provide~ in Section 201 in the same ~anner that it was provided in Sections 197 and 199 of the Natio0nl Internal Revenue Code. (c) The imposition of the 5% rate on canned fish is supported by the essentiality of tLc commo- dity, whether imported or locally processed. Broadly stated; the articles subject to the advance sales ta~ are the same artiGleG ~ubj~ct tu the sales tax enumerated in Sections 194, 195,

DECISIOH C'I',A CASE NO~ 30 38 197, 198, 199 and 201 of th0 National Internal Revenue Code which are imported from abroad fo r sale or for the use in t he manufac ur e of articles for sa l e . The rate s of the sal es tax and the a dv ~nce s ales tax are b asical l y the same. (S~c6 193 (b)'� id.) The art ic les ar e cl assifie d .�i,. \.:.~.. +:--rv. �� .a ) ~on-~ssential; (b) (C) rSSSCl tial ; - ..:CiClr icul t~r al 1he articles which are classified as non-~ssent i al and taxable at the rate of SO% are enumerated � nder Section 194 of the National Intern~~ Bevenue Code. The rate of percentage tax cf automobil�::~ , which are also class i fied c.s non-ecsential and taxed under Section 195, id. , is graduated depend- ing upon the suggested retai l or l i st price or actual retail price, whichever is higher, or upon t he landed est plus mar k-up as esta blishe d by Section 19 3 (b) . of the Cod e , if i mported. Semi-~ssential a rticle& are of two kinds, namely: .(a) .articles taxable at under Section 196, id ., and those taxable at the graduated rates from 10~ to 25% depending on the pric e, if locally manufactured, and 25% under Section 197. l'.C1! 0 1 when the articles arc importedo The following are classified as es3ent i a l articles and are taxed at the rate of 5% under Section 201: ( Z;lj roc;.tlly processed (by curing, c:ann L19 1 148

DECISION - CTA CASE NO. 3033 �~ 7 - bottling or simil~r prec esses but excluding simple preserv in g processes like freezin~, refr i gerating , dr:'ying, salting o .r smoking,. meat, milk, fis h and other sea foods ; (b) Wheat f l our; (c) Locally manufactured medicine; {d) Locally manufactu r ed laundry soap and detergents; (e) Locally manufactured '��lr i tir..g pads r note- . books and ordinary lead penci l s ; (f) Poultry, swine and cattle feeds; and (g) Cement~ Agricultural products, including ordinary salt and all kinds of fish and i ts by-products , whether ln t heir oiigi~al stat~ br not, ar~ subject to tax of 1% under Section lSB oF the Code . The phrase "whether in 'ch-:.:d.r original state or not" mea'1s th~ said produ_cts !u.-~�� T the application of simple processes to preserve or otherwise prepare said products for the market such as freezing, drying, salting, smoking or stripping. When imported, agri- cultural products are classified as ordinary articles and are taxable at ]0% of the landed cost p l us mark- up. (Sec. 198, id e ) All a:ticles not coming ur~er the cl~ssification of non-essentiDl, semi-~sseDtinl, esssnt131 and

DECISION - CTA CASE NO. 3038 - 8- agr~cultural products ao enumerated in Sections 1 94 , 195, 190, 197, 198 and 20 1 a re considered ��.2.i!:l..�!.!J!. articles and are t:_x:~ble a t 10 % under Section 1 99 of the Code. We quote the pe r tinent portion of Section 199 : "SEC. 199. Percent~ge tax on sales -oa-sf-s-eos-ths-ee-dr- -aa-nr-dti-cc-loe-ls-l�e. ct-edT here e shall be leVIed , onc only on every original s~le, bar ter, e xchange, and similar txan 0act ion either for nominal or valuable considera~ion, intended to transfer owner~hip of , or title to, the articles not cove red in Section 194, 19 5 , 196, 197, 198 and 20lf a tax equivalent to te n (10%) per centum of the gross selling price or gios s value in money of the articles so sold, bartered, exchanged, or transfe rred such t ax to be pa id by t he manufa c t urer or producer~ x x x x~~ As expressly stated in Section l93(b} ?f the National Internal Revenue Code , the a dvance sales tax is a sales tax on imported ar ticles. It. is a pe rcentage t aY impos e d upon articles imported from abroad for the purpose of sale or for use in the manufacture of articles for ' sale and a re subj e ct to the sales tQx. It is in lieu of the sales tax on imported articles. The main purpose o: said tax is to collect the sa les tax i n ~dvance cf the sale , that is, before the withdrawa l of the goods from the customshouse, to pre?ent leakage and simplify collection with least exp~nse. (Procter & Gamb 1 e Philippine Manufacturing Corporation vs. Commissioner

DECISION - CTA CASE NO. 3038 of Internal Revenue, CTA Case No. 2156, April 21, 1977 1 citing Umali, Roman , Reviewer in Taxation , 1971 ed. vh � {- oo.., .,' Thus, Section 193 (b) _of the Nationa l Intern C<l. Revenue Code provides that 11 '/Jhen the articles are irnportc~, the percent~ge taxes established in Sections 194, 1cs, 196, 197, 198,19 and 201 of this Code sr:all be paid in advance iJy the i.mpcn ter v in acco:cdar;ce with the regulations pro- . mulgated by ~he Secretary (no;�J Minister\. .of Finance and prior to the release of such articles from customs custody x x x." Now back to t he case at bar; we find no merit ~n petitioner ' s cause~ 1. Petitioner ' s p0sition may not be absolutely imp. ausible but it must yield to the clear and s� ecific lar.guage ot the law vJhich is c~c .. trolling Q Adve~ting to the terms of the statute, i t is quite ap?ar nt that the taxpayer~~ liability to the 5% percentage tax imposed in Section 20l(a} ?f the National Internal Revenue Code is anchored upon the condit.ion that the '1 meat , r:�~ilk, fish and ot.h"':r e~nploys the ~Vends "locally processed" - nothing more. The lang~age cf the law leaves no room for doubt 15 l

DECISIOl\i --- CTA CASE NO. 30 ' 8 - 10 curing, canning, bottling or similar processes, but excludes simple pro~esses of freezing, refrig~rati .g , drying, salting or smoking~ The law is specific and mandatory. It calls for applic~tion as thus worded. The intent ~f th2 law-making authority to be ascertained and enforced is the i ntent expreqsed in the words of t~e statute. If the lang age of the law is plain and free fr m ambiguity and expresses a definite and sensible meaning, it must be applied literally for ~hat is the cm�c lusive presumption of the meaning i !~te nded to be conveyed. (Regalado vs. Yulo, L-42935, February ~5, 1935, 61 Phil. 173.) What petitioner really wants us to do, but which cannot be done with- out amending the law, is .t.o de lete the word "locally . " It seems well-settled that a statute, free fiom any constitutional i1firrnity, must be enforced as written. To the extent that respondent adhered literally to the law applicable 1 it cannot th_re~ore be assailed 2. Petitioner's submission that since the o1ly rate specified in Section 201 is 5% 1 this should be th:~ rate appl ico.ble to i111por ted procet>sed meat, rnilk, fish and other sea foods Linder Section 193 (b) _is positiv~ly \,�ithcut merit. Tie Cv~lrt cannot c.ver- look the specific and m-pdatory provision of

y_ SCISION - CTA CASE NO. 303 Section 199 vf t':E: Revenue Code thc-t t the "articlec not covered 1n Sections 194, 195, 196, 1 97 , 199 a.:d 201" are subject to a percentage tax of lOSe The test of the inclu sion of "meat, milk, fish and othe ,- sea food" in Section 201 {a) subject to 5% percentage tax is that the article must be "locally }recessed"; otherwise, it will be subject to 10% tax under Section 199. It has been said that it is to be fair:y and justly presumed that the law-making authority , which possesses a power so comparative y unrest~ained in its force and searching in : ts extent as the power of taxation has so shaped the law as , without ambiguity or doubt, to bring within its provision everything it was meant should be embraced ~ Section 20l (a) should not therefore be construed to incl ude within ths subjAct taxed any "meat, m ~lk, fish and other sea foods " unless it i s }o~J.Y in question are not locally proce3sed, the shipment must necessarily be to the lG% percentage tax imposed in Se~tion 199 of the Code. 3. The limitation of meat, milk, fish and ----- o t her sea foods to locallv pr ..~.-..--~ ocessed. under paragraph _. (a}; m2di.:::in8r l.:.i.2ndt} co(lp nnd detergents ; v1rii:.~ . 19 pads 1 notebooks cmd ordine.r:y lo:td pe1:cils to locally

DECISION - CTA CASE NO. 303 8 - 1.2 - u;:.der par.agral:::'hs (c),_ (d) _and (e);. without i1posing the same limitation to wheat flou~� poultry 1 swine and cattle feeds; and cement uncer pal:~ 3.g:r aphs { w h}' f. \t t..-_\! . a '�-" \''';"j') f. c":".-.l... l u���-':=� "''�-"'CJl......:l..U.....�,..�. 201~ l.U __ __ is another oddi~ional in~ex to the sense that ire..o__orted ,o_ ~ocessed meat. milk, fich and other sea foods, including medicine, laundry soap, detergents, writing pads, notebooks and ordinary lead pencils, are not taxaLle at 5% ~nder Section 193(b) in relation to Section 201 of the Code. Th i s change in termi- nology in the law cannot l i ghtly be disregarded. Fer it-- a we l l-settle d principle in statutory construction that 1n making material changes in the language of a statute ; the law-making authority have reg~cdod such changes as without significance but must ~e a~sumed to have had a rea~onabl e motive. The presumption is that every change or difference in the wordings of a statute i s made to ~ffec t some purpose and effect must be gi ven to '�he law in a manr..er consistent with the language thereof . The omission of a word or words of a statute will be as~umed to have bQ~n intentional, so that an omission of words implies an intended change ~ n the liiC '-� il ing of the statute. (50 Am. Jur. 263.) Co1 soquentlyr it can ncvar be said thot si~~e th~ law limits the taxability 0� meat, milk, fis~

DECISIO::.J - CTA CASE NO. 3038 - 13 - cannJd fish not locally procesFed or manufactured are subject to 5% percentage tax imposed in Section 201 of tbe Revenue Code. 4. Nonetheless, we look in retrospect at the philosophy behind the limitation of the imposition of the 5% pe r centage tax to loc a lly processed rns~t, milk, fish and other sea foods or locally manufactured medicine, laundry soap, de tGrgcnts, wri~ing pads, notebooks and ordinary lead pencils. Or viously, because of their essenti~lity in the day to day needs of the masses, more than wheat flo~ r; po ~ltry , ~wine, cattle feeds or cement, the law was moti vat~ d by the desire to gi.v0 .:m imp::::tus to the growth and development of local ind~stries engaged i~ the processing or manufacture of these commo ditie s . Taxa tion, aside from its basic purpose of securing revenue for the s~ppc r t of ~he Governmen t , is often resorted to f0r the protection of home industries ag a inst foreign competition. In lim i t i ng the 5% parce n tage tax to loc ally proc~s sc d or man u factu r ed a r t i c l e s enumerated in p_ a(; ,.-'~ �C��i-gr- oo~,.,..,. pbc� ov (, ar ) I . (c)'� (d) _and (e) o f Se ction 20 1 , 1n rel a tion to Section l93(b) ~ the law-making authority, in all probability, took t h e vi e w t:.; a t lo(; a l indnst r ies eng aged in the pr o- d"l:t:i on or n;anufacture of thes e com;~ cd i ties ~u;.;;t be 1.55

.DBCISION - CTA CASE NO. 3038 . given a chance to grow without being hampered bv the competition offered by imported art icles. We, accordingiy, sustain the decision under r~viow~ Petitioner Chattrade Development Corpo- ration is therefore ordered t o pay to respondent Commissioner of Internal Revenue the amount of P62,03l.OO as deficiency advance sales tax on its shipment of 7,655 cartons of Ligo canned sardines from Japan, plus the 25% surcharge and 14% annual interest from March 28 , 1978 to its date of full payment thereof pursuant to Section 193 of the National Inte~nal Revenue Code. WHEREFORE, the judgment appealed from is hereby affirmed at petitioner ' s coatsc SO OR.DE RED~ Qu2zon City, Hetro i�1an il.a, .t-'larch 1 (\ ! 1981~ ;,J VJE CONCUR: 156