GR L 8888; (November, 1957) (Digest)
G.R. No. L-8888; November 29, 1957
SONG KIAT CHOCOLATE FACTORY, plaintiff-appellant, vs. CENTRAL BANK OF THE PHILIPPINES and VICENTE GELLA, in his capacity as Treasurer of the Philippines, defendants-appellees.
FACTS
The plaintiff-appellant, Song Kiat Chocolate Factory, imported sun-dried cocoa beans from January 8, 1953, to October 9, 1953, and paid a 17% foreign exchange tax totaling P74,671.04 under Republic Act No. 601 . The appellant claimed a tax refund under Section 2 of the same Act, which provided for a refund of the tax on foreign exchange used for importing, among other items, “chocolate.” The appellant filed a suit against the Central Bank and the Treasurer of the Philippines in the Manila Court of First Instance. The defendants filed a motion to dismiss on two grounds: (1) the complaint stated no cause of action because cocoa beans are not “chocolate,” and (2) it was a suit against the Government without its consent. Judge Gregorio S. Narvasa sustained the motion and dismissed the case, prompting this appeal.
ISSUE
Whether sun-dried cocoa beans are considered “chocolate” for the purpose of exemption from the foreign exchange tax under Section 2 of Republic Act No. 601 , as amended.
RULING
No. The Supreme Court affirmed the order of dismissal, holding that the term “chocolate” in the tax exemption provision does not include “cocoa beans.” The Court ruled that in common parlance and under the principle of strict construction of tax exemption statutes, “chocolate” refers to a manufactured or finished product ready for human consumption, not the raw material (cocoa beans). The Court noted that chocolate is produced through processes like roasting, grinding, and blending cocoa beans. It cited judicial definitions distinguishing chocolate as a preparation from roasted cacao beans. The Court also addressed the appellant’s argument that Republic Act No. 1197 , which later amended Section 2 by substituting “cocoa beans” for “chocolate,” indicated legislative intent to include cocoa beans in the original exemption. The Court found this amendment reflected a change in legislative policy to favor local manufacturers, not a clarification of the original law. The exemption for cocoa beans under the new law operated prospectively from September 3, 1954, and did not apply to the appellant’s imports in 1953. The Court deemed it unnecessary to rule on the second ground regarding suit against the Government.