G.R. No. L-21841; October 28, 1966
ESSO STANDARD EASTERN, INC., petitioner-appellant, vs. ACTING COMMISSIONER OF CUSTOMS, respondent-appellee.

FACTS

Petitioner Esso Standard Eastern, Inc., engaged in processing gasoline and manufacturing lubricating oil, grease, and tin containers, imported pump parts in 1956 and paid a special import tax of P722.84. It filed a claim for refund, contending the imported articles were exempt under Section 6 of Republic Act 1394 as “machinery, equipment, accessories, and spare parts, for the use of industries.” The pump parts were intended for, installed, and actually used by gasoline dealers (lessees of petitioner’s stations) in pumping gasoline from underground tanks into customers’ vehicles during retail sale. The Collector of Customs denied the claim, the Acting Commissioner of Customs affirmed, and the Court of Tax Appeals likewise rejected petitioner’s case.

ISSUE

Are the imported pump parts exempt from the payment of the special import tax under Republic Act 1394?

RULING

No. The Supreme Court affirmed the decision of the Court of Tax Appeals, denying the claim for refund. The Court held that the pump parts were not used in petitioner’s industry of processing gasoline or manufacturing lubricating oil, grease, and tin containers. Instead, they were used in the retail sale of gasoline by lessee dealers. Exemptions from taxation are construed strictly against the taxpayer and liberally in favor of the taxing authority. The exemption under Section 6 of Republic Act 1394 for equipment and spare parts “for the use of industries” cannot be expansively construed to include equipment used in dispensing gasoline at retail, as this is not part of the industrial operation itself. The marketing or retail sale of a finished product is not included within the tax exemption granted for the industrial activity.