GR L 17097; (September, 1964) (Digest)
G.R. No. L-17097; September 29, 1964
PHILIPPINE ACETYLENE COMPANY, plaintiff-appellee, vs. CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.
FACTS
The Philippine Acetylene Company paid the Central Bank special excise taxes on foreign exchange used to import twenty specialized skid tanks. These pressurized vessels were used to store and transport liquefied petroleum gas (LPG), which the company purchased in bulk from Caltex and then retailed to consumers in smaller containers. The company sought a refund of these tax payments, invoking the exemption under Section 2 of Republic Act No. 601, as amended, which spares from tax the importation of “machinery, equipment, accessories, and spare parts for the use of industries.” The Central Bank denied the refund, contending the company was a mere merchant or dealer in LPG, not engaged in an “industry” as contemplated by the law, and that the tanks were simply receptacles for a buy-and-sell business, not equipment for industrial use.
ISSUE
Whether the imported skid tanks qualify for tax exemption as equipment for the use of an industry under Republic Act No. 601, as amended.
RULING
Yes, the skid tanks are exempt. The Court rejected the Central Bank’s restrictive interpretation that “industries” refers only to manufacturing activities involving the transformation of raw materials. The law does not define “industries,” and the absence of a limiting qualifier like “manufacturing” indicates a legislative intent for a broad interpretation, consistent with the statute’s purpose of encouraging industrialization. The plaintiff was substantively engaged in the gas industry, manufacturing oxygen, acetylene, and nitrogen, and employing over a hundred workers with significant capital investment. Its activity of packaging and distributing LPG, while involving purchase rather than manufacture of the gas itself, constituted an industrial process. This process required technical skill, specialized equipment, and specially sealed pressurized containers to handle the gaseous product, moving it beyond simple merchandising into a packaging industry. The exemption only requires that the equipment be “for the use of” an industry, not that it be indispensable. The Court also dismissed the procedural defense that the action was improperly filed against the Central Bank, noting the Bank’s statutory authority to sue, be sued, and effect refunds under the relevant laws. The decision of the lower court ordering the refund was affirmed.