G.R. No. L-13032; August 31, 1959
PHILIPPINE-AMERICAN DRUG COMPANY, petitioner, vs. COLLECTOR OF INTERNAL REVENUE and COURT OF TAX APPEALS, respondents.

FACTS

The petitioner, Philippine American Drug Co., imported goods from February 14, 1951, to December 31, 1954. For these importations, it purchased U.S. dollars from a bank at the rate of P2.015 per dollar, paying a premium of P0.015 over the legal exchange rate of P2.00 per dollar. In computing its advance sales tax, the petitioner did not include this P0.015 bank premium as part of the landed cost of the imported articles. On November 4, 1955, the respondent Collector of Internal Revenue demanded payment of a deficiency advance sales tax amounting to P10,243.13, asserting that this bank premium should be included in the taxable value. The sole issue submitted to the Court of Tax Appeals was whether this bank premium should form part of the landed cost for computing the advance sales tax under Section 183-(B) of the National Internal Revenue Code. The Court of Tax Appeals upheld the Collector’s assessment, leading to this appeal.

ISSUE

Whether the bank premium of P0.015 per U.S. dollar paid by the importer for purchasing foreign exchange should be included as part of the “landed cost” under the phrase “all similar charges” in Section 183-(B) of the National Internal Revenue Code for the purpose of computing the advance sales tax on imported articles.

RULING

The Supreme Court affirmed the decision of the Court of Tax Appeals, ruling that the bank premium must be included in the landed cost for tax computation. The Court held that Section 183-(B) requires the advance sales tax to be based on the import invoice value, including freight, postage, insurance, commission, customs duty, “and all similar charges.” The bank premium paid to complete the importation is a necessary expense that increases the landed cost and falls within the scope of “all similar charges.” The Court rejected the petitioner’s argument based on the ejusdem generis rule, stating that the legislative intent is to include all charges incurred to bring the importation into the country. It also found no merit in the argument that a 1951 amendment replacing “total value” with “import invoice value” limited the charges to be included, nor in the contention that the premium was absorbed by the statutory mark-up. The Court further held that the government’s right to reassess upon discovery of an underassessment is not barred by the prior failure of tax agents to detect the error, absent a valid defense of prescription.