Philippine Acetylene Co.

Inc v CIR (1967)

Philippine Acetylene Co. Inc. v CIR GR No L-19707, August 17, 1967

FACTS:
Philippine Acetylene Co. Inc. is engaged in the manufacture and sale of oxygen
and acetylene gases. It sold its products to the National Power Corporation
(Napocor), an agency of the Philippine Government, and the Voice of America
(VOA), an agency of the United States Government. When the commissioner
assessed deficiency sales tax and surcharges against the company, the company
denied liability for the payment of tax on the ground that both Napocor and VOA
are exempt from taxes.

ISSUE:
Is Philippine Acetylene Co. liable for tax?

RULING:
Yes. Sales tax are paid by the manufacturer or producer who must make a true
and complete return of the amount of his, her or its gross monthly sales, receipts
or earnings or gross value of output actually removed from the factory or mill,
warehouse and to pay the tax due thereon. The tax imposed by Section 186 of
the Tax Code is a tax on the manufacturer or producer and not a tax on the
purchaser except probably in a very remote and inconsequential sense.
Accordingly, its levy on the sales made to tax- exempt entities like the Napocor is
permissible.

On the other hand, there is nothing in the language of the Military Bases
Agreement to warrant the general exemption granted by General Circular V-41
(1947). Thus, the expansive construction of the tax exemption is void; and the
sales to the VOA are subject to the payment of percentage taxes under Section
186 of the Tax Code. Therefore, tax exemption is strictly construed and
exemption will not be held to conferred unless the terms under which it is granted
clearly and distinctly show that such was the intention.