G.R. No. L-2927 February 26, 1951
SAURA IMPORT AND EXPORT CO., INC., plaintiff-appellant, vs. BIBIANO L. MEER, as Collector of Internal Revenue, defendant-appellee.

FACTS

The plaintiff, Saura Import and Export Co., Inc., bought jeeps, weapons carriers, and trucks from the Foreign Liquidation Commission (a United States Government agency) in February and March 1946. At the time of purchase, the goods were located in different United States Army depots in the Philippines. The plaintiff took delivery of the goods soon after and later sold them to third persons in the Philippines. The Collector of Internal Revenue levied a percentage tax on these motor vehicles under sections 185 and 186 of Commonwealth Act No. 466 (the National Internal Revenue Law), amounting to P22,593.62, which the plaintiff paid under protest and subsequently sought to recover.

ISSUE

Whether the plaintiff was an importer, making its sales to third parties “original sales” subject to the percentage tax under sections 185 and 186 of Commonwealth Act No. 466 .

RULING

Yes. The Supreme Court affirmed the decision of the lower court, holding that the plaintiff was an importer and its sales were original taxable sales. The Court ruled that the goods, while originally brought into the Philippines by the U.S. Army for military supply purposes and not for commerce, became articles of trade only when the plaintiff purchased them for business. The “original sale” subject to tax was the plaintiff’s sale to the Philippine public, not the prior sale by the Foreign Liquidation Commission to the plaintiff. Furthermore, the Court held that, at the time of the purchase, the United States Army enjoyed jurisdictional rights over its bases and depots in the Philippines, akin to belligerent occupation or extraterritoriality. Thus, when the plaintiff took the goods from these U.S. Army depots into the general Philippine territory, it constituted importation within the meaning of the law. The tax assessment was therefore proper.