G.R. No. L-14229; July 26, 1960
CEBU PORTLAND CEMENT COMPANY, plaintiff-appellee, vs. CITY OF MANILA and THE CITY TREASURER OF MANILA, defendants-appellants.

FACTS

The Cebu Portland Cement Company, a manufacturer of cement with plants in Naga, Cebu and Bacnotan, La Union, maintains its principal office and a warehouse in Manila from which it distributes its products. For the period from July 1 to September 30, 1956, it made retail sales of cement totaling P3,805,895.60. The City Treasurer of Manila assessed and demanded from the company the sum of P38,058.95 as a retailer’s tax for the quarter ending December 31, 1956, based on these sales. The company paid P41,864.84 under protest, which included the tax and a 10% surcharge for late payment. The plaintiff contested the tax, arguing that as a manufacturer selling its own products, it was not subject to the dealer’s tax under City Ordinance No. 3816. The defendants contended that because the plaintiff maintained a warehouse in Manila apart from its factories and distributed its products from there, it was a retail dealer subject to the tax.

ISSUE

Whether the plaintiff-appellee, Cebu Portland Cement Company, a manufacturer selling its own products from a warehouse in Manila separate from its factories, is considered a “dealer” subject to the retailer’s tax under City Ordinance No. 3816, enacted pursuant to the Charter of the City of Manila.

RULING

No. The Supreme Court affirmed the lower court’s decision ordering the refund of the tax paid. The Court held that the plaintiff is not a “dealer” subject to the tax. The authority to tax under the ordinance derives from paragraph (o) of Section 18 of Republic Act No. 409 (the Manila Charter), which pertains to dealers in general merchandise, not from paragraph (n) which covers manufacturers. While a manufacturer may be considered a dealer if it carries on the business of selling its products at a store or warehouse apart from its manufactory, this exception applies only when the manufacturer actually engages in selling at that separate location. In this case, following the precedent of Central Azucarera Don Pedro vs. City of Manila, it did not appear that the company kept a store at its Manila warehouse or made sales there. The contracts of sale were perfected at the company’s central office in Manila, and deliveries were subsequently made from the warehouse. Therefore, the company did not engage in the business of selling at its warehouse and could not be considered a dealer. The Court further reasoned that requiring a manufacturer to sell only at its production site to avoid being taxed as a dealer would be impractical and contrary to the law’s intent, as manufacturers establish factories where raw materials and labor are accessible, but sell where demand is greatest. The law explicitly states that manufacturers shall not be subject to tax as retail dealers of their own products.