GR L 21171; (January, 1967) (Digest)
G.R. No. L-21171 January 31, 1967
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. VICTORIAS MILLING CO., INC., and COURT OF TAX APPEALS, respondents.
FACTS
Victorias Milling Co., Inc. (the Company), a domestic corporation engaged in manufacturing and selling sugar, imported ready-made cloth sugar bags and materials for conversion into sugar containers from April to July 1959. The Company requested the Commissioner of Internal Revenue to release these importations without payment of compensating or advance sales tax, arguing they were not for resale but for exclusive use as containers for its refined sugar, for which it already paid the percentage tax under Section 189 of the Tax Code. The Commissioner denied the requests, ruling that when the imported goods are used as containers for sugar sold domestically, they are subject to advance sales tax under Section 183(b) in relation to Section 186. The Company paid under protest the total sum of P80,823.38 as compensating taxes and claimed a refund. After the Collector of Customs credited P13,873.53 against the Company’s subsequent importations, the refund claim was reduced to P66,949.79. The Court of Tax Appeals ruled in favor of the Company, declaring the importations exempt from advance sales tax and ordering the refund. The Commissioner appealed.
ISSUE
Whether or not the imported sugar bags are subject to advance sales tax under Section 183(b) in relation to Section 186 of the National Internal Revenue Code.
RULING
No. The Supreme Court affirmed the decision of the Court of Tax Appeals. The Court found that the Company, as a sugar central, pays a 2% tax under Section 189 on the selling price or market value of all sugar manufactured. The Court of Tax Appeals took judicial notice that the selling price of the sugar includes the value of the imported sugar bags. Therefore, the value of the sacks is already subjected to the 2% tax under Section 189, and pursuant to Section 188(d) of the Tax Code, articles subject to tax under Section 189 are exempt from sales tax. Alternatively, if the price paid by the buyer is for the sugar alone, then the container is given away gratis and not sold, so there is no sale of the container to subject to the percentage sales tax. Thus, the importations are not subject to advance sales tax.