COMMISSIONER OF CUSTOMS VS PHILIPPINE ACETYLENE

COMPANY
Facts: Philippine Acetylene Company is engaged in the manufacture of oxygen,
acetylene and nitrogen, and packaging of liquefied petroleum gas in cylinders and
tanks. It imported from the United States a custombuilt liquefied petroleum gas tank. For
the said importation, the company
was assessed a special import tax amounting to PhP 3,683.00. The company paid the
tax under protest. Philippine Acetylene Company argues that it is exempt from the
payment of the special import tax. It cites as basis for its exemption Sec 6 of RA
No.1394 which states that special import taxes shall not be imposed on machinery,
equipment, accessories and spare parts, imported into the Philippines, for the use of
industries. The company maintains that it is an
industry as defined in Sec 6 of RA No. 1394. The Court of Tax Appeals sustained
Philippine Acetylene Companys contention and declared the latter exempt from the
payment of the
special import tax.
Issue: Whether or not Philippine Acetylene Company may be considered engaged in an
industry as contemplated in Sec 6 of RA No. 1394 and, therefore, exempt from the
payment of the special import tax.
Held: Philippine Acetylene Company is not an industry as defined in Sec 6 of RA No.
1394. To be an industry, the company must be engaged in some productive enterprise,
not in merely packaging an already finished product. The operation for which the
company employs the gas tank in question does not involve manufacturing or
production. It is nothing but packaging; the liquefied gas, when obtained from the
refinery, has to be placed in some kind of container to facilitate its transportation. When
sold to consumers, it undergoes no change or transformation, but is merely placed in
smaller cylinders for convenience. The process is certainly not
production in any sense. The decision of the CTA is reversed and Philippine Acetylene
Company is held liable for the payment of the special import tax, as it is not an industry
exempt from the payment of such tax.