GR L 11092; (September, 1958) (Digest)
G.R. No. L-11092; September 30, 1958
CENTRAL AZUCARERA DE TARLAC, petitioner, vs. THE COLLECTOR OF INTERNAL REVENUE, ET AL., respondents.
FACTS
On November 25 and 27, 1953, O’phir Drug & Cosmetic Manufacturing Co., under authority from the Collector of Internal Revenue, purchased from petitioner Central Azucarera de Tarlac a total quantity of alcohol intended to be denatured according to a specified formula. A Denaturing Committee of the Bureau of Internal Revenue was formed to supervise the denaturation. Of the 170 drums sold, the government intercepted 87. Examination revealed that 75 of these drums contained rectified alcohol, not denatured alcohol. Consequently, a specific tax assessment of P19,980 was levied against the petitioner on the contents of the 75 drums. The petitioner did not dispute the chemical finding that the alcohol was rectified but contended it could not be held liable because the alcohol was denatured under the supervision of the official Denaturing Committee and removed under certificates issued by that Committee.
ISSUE
Whether the petitioner, as the licensed manufacturer, is liable for the payment of the specific tax on the alcohol found to be rectified instead of denatured, despite the supervision and certification by the government’s Denaturing Committee.
RULING
Yes. The Supreme Court affirmed the decision of the Court of Tax Appeals ordering the petitioner to pay the specific tax. The Court held that the petitioner, as a licensed manufacturer, is responsible for the quality of its products and for strict compliance with the laws and regulations governing the denaturation of alcohol. This responsibility cannot be shifted to the Denaturing Committee, whose primary function is to prevent fraud on the revenue. The Court found the petitioner guilty of palpable violation or negligence in its obligations, citing irregularities in the denaturation process (e.g., conducting it on its premises in individual drums, leaving drums unattended). The principle that the government is not estopped by the errors or omissions of its officers was applied. Since the alcohol was rectified, not denatured, the specific tax was properly due. The petitioner’s claim for a credit on sales tax was denied for lack of sufficient evidence.