G.R. No. L-28271 July 25, 1975
SMITH, BELL AND CO. (PHIL.), INC., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respondent.

FACTS

From August 1963 to August 1965, petitioner Smith, Bell & Co. imported 119 cases of “Chatteau Gay” wine. The petitioner declared these as “still wine” under Section 134(b) of the Tax Code and paid the corresponding specific tax of P1.00 per liter. To verify the correct classification, the Commissioner of Internal Revenue ordered a laboratory analysis of the product. The Bureau of Internal Revenue analyst reported that the wine exhibited “explosion upon opening and effervescence due to CO2 (residual)” and contained 9.5% alcohol by volume. Based on this report and citing authoritative technical literature, the analyst concluded the product should be classified as “sparkling wine.”
Consequently, the Commissioner assessed a deficiency specific tax against the petitioner in the amount of P11,713.90 under Section 134(a) of the Tax Code, which imposes a higher tax of P12.00 per liter on sparkling wines. The petitioner did not contest the mathematical computation of the assessment but challenged its constitutionality.

ISSUE

Whether Section 134(a) of the Tax Code constitutes an unconstitutional delegation of legislative power by laying down an insufficient standard and granting the Commissioner blanket authority to determine what constitutes “sparkling wine.”

RULING

The Supreme Court affirmed the decision of the Court of Tax Appeals, upholding the deficiency assessment. The Court ruled that there was no unconstitutional delegation of legislative power. Section 134 of the Tax Code clearly states its purpose: to impose a specific tax on wines and imitation wines. The subsequent subsections merely classify wines into distinct categories (sparkling, still with 14% alcohol or less, still with more than 14% alcohol) and prescribe the corresponding tax rates for each class.
The legislative will is therefore plainly expressed. The role of the Commissioner and other revenue officers is limited to the administrative function of determining, based on objective criteria, under which statutory category a particular wine falls. This determination is guided by established practices and technology within the wine industry, a field with well-recognized standards. In this case, the Commissioner properly exercised this function by having the wine scientifically tested, with the results corroborated by authoritative technical texts. The petitioner, as a trader in wines, is charged with knowledge of the nature of its products for tax purposes and cannot claim ignorance. The law provides a sufficient standard, and its implementation did not violate the principle against delegation of legislative power or the due process clause.