G.R. No. L-12867; November 28, 1959
COMMISSIONER OF CUSTOMS, petitioner, vs. ARNALDO BORRES, ET AL., respondents.

FACTS

Respondents Arnaldo Borres, et al., owned eight motor boats of five gross tons each, registered with the Bureau of Customs and used for deep-sea fishing within Philippine waters. They regularly paid the Bureau of Fisheries’ annual commercial fishing license, tonnage dues, clearance and entrance fees, and annual coastwise license fees to the Bureau of Customs since 1949. On April 13, 1956, they requested exemption from coastwise license fees, which the Collector of Customs denied based on a Secretary of Justice opinion. On June 23, 1956, they requested a refund of P3,828.59 for diesel and bunker fuel oil used, pursuant to Section 21 of the Philippine Tariff Act of 1909, which allows a duty refund for fuel used by vessels engaged in specific trades. The Commissioner of Customs denied the refund, citing another Secretary of Justice opinion that deep-sea fishing does not constitute coastwise trade and that the request did not follow the prescribed form. Respondents appealed to the Court of Tax Appeals, which reversed the Commissioner’s ruling and ordered the refund of P3,828.59 but denied the refund of P1,800.20 for coastwise license fees. The Commissioner of Customs appealed this decision.

ISSUE

Whether the respondents’ vessels, engaged in deep-sea fishing and bringing their catch to port for sale, are considered engaged in “Philippine coastwise trade” under Section 21 of the Philippine Tariff Act of 1909, thereby entitling them to a tax refund on fuel used.

RULING

Yes. The Supreme Court affirmed the Court of Tax Appeals’ decision, with modification. The Court held that vessels engaged in deep-sea fishing that bring their catch to a port for sale are engaged in “coastwise trade” within the meaning of Section 21 of the Philippine Tariff Act of 1909. This interpretation aligns with the Court’s prior ruling in Abueg, et al. vs. San Diego, which rejected a narrow definition of “coastwise and interisland trade” limited to carrying passengers or merchandise for hire between ports. The Court stated that fishing is an industry, and when the catch is brought to port for sale, it constitutes trade. Therefore, respondents’ vessels qualified for the fuel duty refund. The Court found respondents had satisfied the refund requirements, as their fish was brought to Iloilo port for sale and the refund forms were properly accomplished. However, the Court modified the decision by eliminating the order for the government to pay legal interest on the refund amount, citing established doctrine that the National Government cannot be required to pay interest on tax refunds in the absence of a clear statutory provision. The decision was affirmed with this modification.