G.R. No. L-21633-34 June 29, 1967.
COMMISSIONER OF INTERNAL REVENUE and COMMISSIONER OF CUSTOMS, petitioners, vs. BOTELHO SHIPPING CORPORATION and GENERAL SHIPPING CO., INC., respondents.

FACTS

The Reparations Commission entered into separate “Contracts of Conditional Purchase and Sale of Reparations Goods” with Botelho Shipping Corporation (for the vessel “M/S Maria Rosello”) and General Shipping Co., Inc. (for the vessel “M/S General Lim”) under Republic Act No. 1789 (the Original Reparations Act). The contracts stipulated that the Commission retained title and ownership until the vessels were fully paid for under a deferred payment plan. Upon the vessels’ arrival in the Philippines, the Bureau of Customs refused to process their registration applications unless the buyers paid compensating taxes (P483,433.00 and P494,824.00, respectively). The buyers filed petitions for review with the Court of Tax Appeals. While the cases were pending, Republic Act No. 3079 amended R.A. No. 1789 , exempting buyers of reparations goods from the compensating tax. Section 20 of R.A. No. 3079 allowed end-users with pre-existing contracts to apply for renovation of their utilization contracts to avail of any more favorable provision of the new law, provided they voluntarily assumed all new obligations therein. The buyers applied for and were granted renovation of their contracts by the Commission and subsequently filed supplemental petitions for review.

ISSUE

Whether the respondents (Botelho Shipping Corporation and General Shipping Co., Inc.) are exempt from paying the compensating tax on the reparations vessels after the renovation of their utilization contracts pursuant to Republic Act No. 3079 .

RULING

Yes. The appealed decision of the Court of Tax Appeals is affirmed. The respondents are exempt from the compensating tax. Under Section 20 of Republic Act No. 3079 , end-users who purchased reparations goods prior to the law’s enactment could apply for renovation of their utilization contracts to avail of any provision more favorable to them, on condition they assume all new obligations under the amendatory act. Once renovated, they are to be treated “in like manner and to the same extent as an end-user filing his application after the approval of this amendatory Act.” Since R.A. No. 3079 exempts buyers of reparations goods from the compensating tax, and the respondents’ contracts were duly renovated, they are entitled to the same exemption. The law intended to place pre-enactment and post-enactment buyers on equal footing, removing any discriminatory distinction. The exemption is constitutional as it applies to a class (buyers of reparations goods) and not particular persons arbitrarily.