G.R. No. L-10666; September 24, 1958
Lim Hoa Ting, plaintiff-appellee, vs. Central Bank of the Philippines, defendant-appellant.

FACTS

Plaintiff-appellee Lim Hoa Ting, an importer, paid the defendant-appellant Central Bank of the Philippines the total sum of P2,176.49 as a 17% exchange tax on foreign exchange used for importing “mono-sodium glutamate” on November 11, 1954, and April 5, 1955. Prior to these payments, the Central Bank had been refunding exchange taxes paid for importing the same substance, having approved exemption applications from other importers under Republic Act No. 601 , as amended. Section 2 of said Act provided for the refund of exchange tax on foreign exchange used for importing “stabilizers and flavors.” Mono-sodium glutamate had been consistently classified as a “flavoring extract” or “flavoring preparation” by the Import Control Commission (under Republic Act No. 650 ) and later by the Central Bank’s Monetary Board in its implementing regulations (Regulation No. 1 to Circular No. 44, Appendix A, item No. 510147: “Flavoring preparations — Mono-Sodium Glutamate”).
On September 15, 1953, however, the Monetary Board passed Resolution No. 756, “eliminating ‘mono-sodium glutamate as flavor’ under existing Central Bank regulations,” based on a suggestion from its exchange tax officer. This resolution was not published in the Official Gazette. Subsequently, the same officer, after a conference with the Director of the Institute of Science and Technology, reversed his position. In a memorandum dated August 3, 1955, he informed the Monetary Board of the Director’s technical opinion that “flavor” is a general term that includes condiments and that mono-sodium glutamate falls under the term “flavors” exempt from exchange tax. Acting on this, the officer advised the plaintiff’s counsel that mono-sodium glutamate was considered a “flavor” and that applications for exemption and refund could resume. Accordingly, plaintiff filed an application for refund, but the Central Bank refused, leading to this collection suit.

ISSUE

Whether mono-sodium glutamate is classified as a “flavor” under Republic Act No. 601 , as amended, thereby entitling the importer to a refund of the exchange tax paid on its importation.

RULING

The Supreme Court AFFIRMED the trial court’s decision, with modification as to costs, ordering the Central Bank to refund the sum of P2,176.49 to the plaintiff.
The Court held that mono-sodium glutamate is a “flavor” or “flavoring extract” exempt from the exchange tax under the law. It based its ruling on the following:
1. Contemporaneous Administrative Construction: The Import Control Commission and the Central Bank itself had consistently classified and treated mono-sodium glutamate as a flavoring extract in their official regulations and by granting prior refunds. This administrative practice is highly persuasive.
2. Technical Opinion of the Institute of Science and Technology: The Court gave weight to the opinion of the Director of the Institute of Science and Technology, which stated that “flavor” is a general term that includes condiments and that mono-sodium glutamate falls under this exemption.
3. Ineffectiveness of the Reversal: The Monetary Board’s Resolution No. 756, which sought to eliminate mono-sodium glutamate from the classification as a flavor, was ineffective for lack of publication in the Official Gazette. Citing the Revised Administrative Code, the New Civil Code, and jurisprudence (U.S. vs. Tupasi Molina; People vs. Que Po Lay), the Court ruled that such circulars and regulations, especially those prescribing penalties or affecting rights, must be published to be effective and bind the public.
The Court modified the trial court’s decision by eliminating the award of costs against the Central Bank, noting the Bank acted in good faith and is a government agency charged with administering the exchange law. No costs were awarded in the appeal.