GR L 3029; (July, 1950) (Digest)
G.R. No. L-3029; July 25, 1950
SANTIAGO M. BERMEJO, plaintiff-appellant, vs. THE COLLECTOR OF INTERNAL REVENUE, defendant-appellee.
FACTS
Santiago M. Bermejo was assessed by the Collector of Internal Revenue for taxes on his sales of nipa shingles and charcoal during 1945. He objected, claiming these were agricultural products and thus tax-exempt. After correspondence, he agreed to pay by installments, reserving his right to challenge the assessment. After paying the first installment, he filed a suit for recovery. The Collector moved to dismiss, arguing Bermejo failed to first file a formal claim for refund as required by Section 306 of the Internal Revenue Law. The trial court dismissed the complaint on two grounds: (1) non-compliance with Section 306, and (2) the tax was properly imposed. Bermejo appealed.
ISSUE
1. Whether Bermejo complied with the statutory requirement for filing a claim for refund before suing.
2. Whether the production of nipa shingles and charcoal constitutes manufacturing subject to tax under the National Internal Revenue Code.
RULING
1. No, Bermejo did not comply. The Court held that Section 306 requires a formal claim for refund after payment, not merely prior objections to the assessment. Previous protest letters do not substitute for this mandatory claim. Strict compliance with tax refund procedures is required to give the Collector an opportunity to correct errors and to notify the government of disputed revenues.
2. Yes, Bermejo is a manufacturer subject to tax.
For nipa shingles: The process of cutting nipa leaves, folding them over bamboo sticks, and sewing them alters the leaves’ form and combines materials to create a product (roofing shingles) for a special use not possible in their original state. This falls under the definition of manufacturer in Section 194(x) of the Code.
For charcoal: The process of burning wood in a pit to produce charcoal involves a chemical or physical change, altering the wood’s texture and substance to prepare it for special uses (e.g., ironing, filtration) to which firewood cannot be put. This also qualifies as manufacturing.
The Court affirmed the dismissal of the complaint, upholding the tax assessment.
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