G.R. No. L-22443, May 29, 1971
THE COMMISSIONER OF CUSTOMS, petitioner, vs. PHILIPPINE ACETYLENE COMPANY and THE COURT OF TAX APPEALS, respondents.

FACTS

The respondent, Philippine Acetylene Company, imported a custom-built liquefied petroleum gas tank in 1957. The Commissioner of Customs assessed and collected a special import tax of P3,683.00 on this importation, which the company paid under protest. The company is engaged in the business of packaging liquefied petroleum gas. It purchases the gas in bulk from a refinery, transports it to its plant using the imported tank, and then repackages it into smaller cylinders labeled with its trademark for sale to consumers. The gas itself undergoes no chemical change or transformation during this process.
The company sought a refund from the Commissioner of Customs, claiming exemption from the special import tax under Section 6 of Republic Act No. 1394. This law exempts from tax the importation of machinery and equipment “for the use of industries.” The Court of Tax Appeals granted the refund, ruling that the company’s packaging operation constituted an “industry” as it employed considerable capital and labor for profit.

ISSUE

Whether the Philippine Acetylene Company’s operation of packaging and selling liquefied petroleum gas qualifies as an “industry” under Section 6 of Republic Act No. 1394, thereby exempting its imported gas tank from the special import tax.

RULING

No. The Supreme Court reversed the decision of the Court of Tax Appeals and upheld the assessment of the Commissioner of Customs. The legal logic centers on the proper statutory construction of the term “industries” within the tax exemption provision. Section 6 of R.A. No. 1394 uses the term “industries” in two distinct contexts: first, in reference to “new and necessary industries” as defined by another law, and second, grouped with “miners, mining enterprises, planters and farmers.”
The Court rejected the Tax Court’s broad interpretation that “industry” means any enterprise employing large capital or labor. Such an interpretation would render the specific classification for “new and necessary industries” superfluous, as all industries would already be exempt. Applying the rule that tax exemptions are construed strictly against the taxpayer, the Court held that the second use of “industries” must be read in ejusdem generis with the accompanying terms—miners, planters, etc.—which all denote productive enterprises that create, manufacture, or produce goods.
The company’s activity was merely packaging and marketing an already finished product. It did not engage in production or manufacture, as the liquefied petroleum gas was purchased in its final state and underwent no substantive change. The imported tank was used for storage and transport, not in a productive industrial process. Therefore, the operation did not fall within the meaning of “industries” entitled to the tax exemption under the law. The exemption is reserved for machinery used in productive endeavors, not in mere commercial repackaging.