GR L 22605; (January, 1968) (Digest)
G.R. No. L-22605 January 17, 1968
Cebu Portland Cement Company, petitioner, vs. Commissioner of Internal Revenue, respondent.
FACTS
Petitioner Cebu Portland Cement Company is a government-owned and controlled corporation engaged in manufacturing APO portland cement. The raw materials for cement (limestone, silica, and shale, constituting at least 80% of cement) are quarried from its own mineral lands. For the period from July 1, 1959, to December 31, 1960, the Commissioner of Internal Revenue levied and collected from petitioner an ad valorem tax under Section 243 of the Tax Code in the amount of P190,115.24, using as the tax base the gross sales minus the cost of cement bags (P1,188,248.56). Petitioner paid this under protest and sought a refund of P174,032.85, contending that the tax should be based on the cost of the raw materials (P1,072,159.28). After filing its claim for refund, petitioner elevated the case to the Court of Tax Appeals, which denied the refund on February 8, 1964.
ISSUE
What is the correct basis for the 1-½% ad valorem tax under Section 243, in relation to Section 246, of the Tax Code when applied to cement?
RULING
The Supreme Court reversed the decision of the Court of Tax Appeals. It held that cement, as a finished product, is not a “mineral product” within the purview of Section 243 of the Tax Code, as previously established in Cebu Portland Cement Co. vs. Commissioner (G.R. No. L-18649). Therefore, Section 243 cannot be applied directly to cement. The ad valorem tax should be levied on the minerals constituting cement (limestone, silica, and shale), with the correct basis being the market value of the quarried raw materials. However, the Court noted that petitioner had abandoned this argument before the Supreme Court and, in its alternative prayer, asked that the tax be based on the “bin cost” of cement (cost of production minus cost of cement bags). Granting petitioner’s alternative plea on equitable grounds, the Court ordered the respondent Commissioner of Internal Revenue to refund the sum of P42,810.11 to petitioner.