G.R. No. L-6574 July 31, 1954
GOOD DAY TRADING CORPORATION, petitioner, vs. BOARD OF TAX APPEALS, respondent.

FACTS

The petitioner, Good Day Trading Corporation, imported 238 cases of Chesterfield cigarettes on February 18, 1952. A surety bond was filed to secure the payment of P52,360 in specific taxes, and the shipment was stored in a bonded warehouse. On September 23, 1952, while the cigarettes were still in storage, petitioner sold them to Buenaventura Isleta for P32,000, exclusive of specific taxes, with the condition that the buyer pay all specific taxes or file a surety bond within 15 days. Isleta later informed petitioner that he bought the cigarettes on behalf of companions who intended to pay the specific taxes with their backpay certificates or certificates of indebtedness. Petitioner advised the Collector of Internal Revenue of the sale and requested cancellation of its surety bond if the certificates were accepted. After extensions, the buyers failed to pay the taxes or file a bond. Petitioner then rescinded the sale and made an initial cash payment of P8,800 to the Collector of Internal Revenue on December 8, 1952, attempting to withdraw 40 cases. The warehouseman refused delivery because Isleta and companions claimed ownership, having submitted certificates of indebtedness for payment of all specific taxes, which they claimed were approved. The Bureau of Internal Revenue eventually approved the certificates of indebtedness as payment, authorized the release of the shipment to the buyers, who withdrew and sold the cigarettes. Petitioner sought a refund of the P8,800 cash payment. The Collector of Internal Revenue granted the refund, approved by the Secretary of Finance. Under Executive Order No. 401-A, section 9, because the amount involved exceeded P5,000, the case was brought before the Board of Tax Appeals for final resolution. The Board reversed the Collector’s decision, denied the refund, rejected the payment via certificates of indebtedness, and ordered petitioner to pay the balance of P43,560 in cash. Petitioner’s motion for reconsideration was denied.

ISSUE

1. Whether the Board of Tax Appeals erred in holding that only the petitioner, as the importer, was liable to pay the specific taxes in cash.
2. Whether the Board of Tax Appeals had the authority to order the petitioner to pay the balance of P43,560 when only the refund of P8,800 was at issue.

RULING

The Supreme Court reversed the resolution of the Board of Tax Appeals.
1. The Board erred in holding that only the petitioner could pay the specific taxes. Under Section 125 of the National Internal Revenue Code, specific taxes on imported articles shall be paid by the owner or importer. Thus, if the sale to the buyers was valid, the purchasers as owners could pay the specific taxes. The definition of “importer” is not controlling because the law allows either the owner or importer to pay.
2. The Board exceeded its authority by ordering payment of the balance of P43,560. Only the question of the refund of P8,800 was at issue before the Board, as there was no appeal from the Collector’s decision granting the refund. The Board’s review under Executive Order No. 401-A, section 9, was limited to the matter submitted—the refund—and it could not adjudicate the liability for the entire tax amount.
The Court noted the Board’s concern about potential speculation with backpay certificates but held that the legality of accepting such certificates was a matter for the Treasurer of the Philippines and the Department of Finance, not for the Board to decide in this case. The resolution denying the refund and ordering payment of the balance was reversed. No costs were awarded.