GR L 13051; (August, 1918) (Digest)
G.R. No. L-13051; August 10, 1918
THE ASIATIC PETROLEUM COMPANY (PHILIPPINE ISLANDS) LTD., plaintiff-appellee, vs. JAMES J. RAFFERTY, Collector of Internal Revenue, defendant-appellant.
FACTS:
The plaintiff, Asiatic Petroleum Company, imported a shipment of mineral oils into the Philippines from a country other than the United States. With the approval of the defendant Collector of Internal Revenue, the oils were entered in bond for storage in Internal Revenue Bonded Warehouse No. 59 in Manila, and a bond was given for the payment of all internal revenue taxes and charges accruing on the oils. A permit was issued for the oils to be discharged from the ship into the bonded warehouse. However, during transportation from the ship to the warehouse, part of the shipment (2,845 cases of gasoline and 500 cases of kerosene) was completely destroyed by an accidental fire before reaching the warehouse. Subsequently, the defendant required the plaintiff to execute applications for withdrawal of the destroyed oils from the bonded warehouse and to pay the sum of P3,033.20 as internal revenue taxes, under penalty for failure to do so. The plaintiff complied under protest and paid the amount on February 23, 1916. The plaintiff then filed an action to recover the paid sum with interest and costs.
ISSUE:
Whether the defendant Collector of Internal Revenue had the legal right to compel the plaintiff to pay internal revenue taxes on the mineral oils that were destroyed by fire before being deposited in the bonded warehouse.
RULING:
No. The Supreme Court affirmed the judgment of the lower court, ordering the refund of the sum paid. The Court held that, under the authorized regulations promulgated by the defendant himself, internal revenue taxes on imported merchandise deposited in a bonded warehouse are not due and payable until the merchandise is about to be removed from the warehouse. By permitting the plaintiff to enter the oils in bond, the defendant had waived the right to collect taxes at the time of importation. Since the oils were destroyed before reaching the warehouse and thus never entered commerce or trade, the taxes never became due. The defendant’s act of compelling payment under threat of penalty, despite knowing the oils had been destroyed, constituted an illegal exaction. Therefore, the collection was unlawful, and the plaintiff was entitled to recover the amount paid under protest.