ASTURIAS SUGAR CENTRAL, INC. v.

COMMISSIONER OF CUSTOMS and CTA September 30,

1969CASTRO, J.

Facts:
Asturias Sugar Central, Inc. is engaged in the production and milling of centrifugal sugar, the sugar so
produced being placed in containers known as jute bags. In 1957, It made two importations of jute bags,
free from customs duties and special import tax upon the Petitioner’s filing of re-exportation and special
import tax bond, conditioned upon the exportation of the jute bags within one year from the date of
importation.

However, out of the 44,800 jute bags imported first, only 8,647 were exported and only 25,000 were
exported out of the 75,200 jute bags imported on the second shipment. In other words, of the total number
of imported jute bags only 33,647 bags were exported within one year after their importation. The remaining
86,353 bags were exported after the expiration of the one-year period but within three years from their
importation.

Petitioner requested the Commissioner of Customs for a week's extension of Re-exportation and Special
Import Tax Bond no. 6 which was to expire the following day, citing reasons for its failure to export the
remaining jute bags within the period of one year. However, this request was denied by the Commissioner.

Due to the petitioner's failure to show proof of the exportation of the balance of 86,353 jute bags within one
year from their importation, the Petitioner was required to pay the amount of p28,629.42 representing the
customs duties and special import tax due thereon, which the petitioner paid under protest and later on
demanded the refund of the amount it had paid.

Issues:

a.) Whether or not the Commissioner of Customs is vested with discretion to extend the period of one year
provided for in section 23 of the Philippine Tariff Act of 1909.

b.) Whether or not interpretation or construction of an ambiguous or uncertain statute by the Executive
Department or other Administrative Agencies be given consideration? In the case at bar, the Bureau of
Customs.

Held:

a.) Section 23 of the Philippine Tariff Act Of 1909 and the superseding sec. 105(x) of the Tariff and Customs
Code, while fixing at one year the period within which the containers therein mentioned must be exported,
are silent as to whether the said period may be extended. By reason of this silence, the Bureau of Customs
Issued Administrative Orders 389 and 66 to eliminate confusion and provide a guide as to how it shall apply
the law, and, more specifically, to make officially known its policy to consider the one-year period mentioned
in the law as non-extendible.

b.) Considering that the statutory provisions in question (Section 23 of the Philippine Tariff Act of 1909 and
Sec. 105(x) of the Tariff and Customs Code)have not been the subject of previous judicial interpretation,
then the application of the doctrine of "judicial respect for administrative construction (in the case at bar the
Bureau of Customs issued Administrative Orders 389 and 66 to eliminate confusion and provide a guide as
to how it shall apply the law, and, more specifically, to make officially known its policy to consider the one-
year period mentioned in the law as non-extendible., " would, initially, be in order.

Only where the court of last resort has not previously interpreted the statute is the rule applicable that
courts will give consideration to construction by administrative or executive departments of the state.

The formal or informal interpretation or practical construction of an ambiguous or uncertain statute or

law by the executive department or other agency charged with its administration or enforcement is entitled
to consideration and the highest respect from the courts, and must be accorded appropriate weight in
determining the meaning of the law, especially when the construction or interpretation is long continued
and uniform or is contemporaneous with the first workings of the statute, or when the enactment of the
statute was suggested by such agency.

Considering that the Bureau of Customs is the office charged with implementing and enforcing the
provisions of our Tariff and Customs Code, the construction placed by it thereon should be given controlling
weight.

In applying the doctrine or principle of respect for administrative or practical construction, the courts
often refer to several factors which may be regarded as bases of the principle, as factors leading the courts
to give the principle controlling weight in particular instances, or as independent rules in themselves. These
factors are the respect due the governmental agencies charged with administration, their competence,
expertness, experience, and informed judgment and the fact that they frequently are the drafters of the law
they interpret; that the agency is the one on which the legislature must rely to advise it as to the practical
working out of the statute, and practical application of the statute presents the agency with unique
opportunity and experiences for discovering deficiencies, inaccuracies, or improvements in the statute.

ASTURIAS SUGAR CENTRAL V. COMMISSIONER Facts:Asturias Sugar Central, Inc. is engaged in the
production and milling of centrifugal sugar, the sugar so produced being placed in containers known as jute
bags. In 1957, It made two importations of jute bags, free from customs duties and special import tax upon
the Petitioners filing of re-exportation and special import tax bond, conditioned upon the exportation of the
jute bags within one year from the date of importation. However, out of the 44,800 jute bags imported first,
only 8,647 were exported and only 25,000 were exported out of the 75,200 jute bags imported on the
second shipment. In other words, of the total number of imported jute bags only 33,647 bags were exported
within one year after their importation. The remaining 86,353 bags were exported after the expiration of the
one-year period but within three years from their importation.Petitioner requested the Commissioner of
Customs for a week's extension of Re-exportation and Special Import Tax Bond no. 6 which was to expire
the following day, citing reasons for its failure to export the remaining jute bags within the period of one
year. However, this request was denied by the Commissioner.Due to the petitioner's failure to show proof
of the exportation of the balance of 86,353 jute bags within one year from their importation, the Petitioner
was required to pay the amount of p28,629.42 representing the customs duties and special import tax due
thereon, which the petitioner paid under protest and later on demanded the refund of the amount it had
paid.Issues:a.) Whether or not the Commissioner of Customs is vested with discretion to extend the period
of one year provided for in section 23 of the Philippine Tariff Act of 1909.b.) Whether or not interpretation
or construction of an ambiguous or uncertain statute by the Executive Department or other Administrative
Agencies be given consideration? In the case at bar, the Bureau of Customs.Held:a.) Section 23 of the
Philippine Tariff Act Of 1909 and the superseding sec. 105(x) of the Tariff and Customs Code, while fixing
at one year the period within which the containers therein mentioned must be exported, are silent as to
whether the said period may be extended. By reason of this silence, the Bureau of Customs Issued
Administrative Orders 389 and 66 to eliminate confusion and provide a guide as to how it shall apply the
law, and, more specifically, to make officially known its policy to consider the one-year period mentioned in
the law as non-extendible.b.) Considering that the statutory provisions in question (Section 23 of the
Philippine Tariff Act of 1909 and Sec. 105(x) of the Tariff and Customs Code) have not been the subject of
previous judicial interpretation, then the application of the doctrine of "judicial respect for administrative
construction (in the case at bar the Bureau of Customs issued Administrative Orders 389 and 66 to eliminate
confusion and provide a guide as to how it shall apply the law, and, more specifically, to make officially
known its policy to consider the one-year period mentioned in the law as non-extendible., " would, initially,
be in order. Only where the court of last resort has not previously interpreted the statute is the rule applicable
that courts will give consideration to construction by administrative or executive departments of the state.
The formal or informal interpretation or practical construction of an ambiguous or uncertain statute or law
by the executive department or other agency charged with its administration or enforcement is entitled to
consideration and the highest respect from the courts, and must be accorded appropriate weight in
determining the meaning of the law, especially when the construction or interpretation is long continued
and uniform or is contemporaneous with the first workings of the statute, or when the enactment of the
statute was suggested by such agency. Considering that the Bureau of Customs is the office charged with
implementing and enforcing the provisions of our Tariff and Customs Code, the construction placed by it
thereon should be given controlling weight. In applying the doctrine or principle of respect for administrative
or practical construction, the courts often refer to several factors which may be regarded as bases of the
principle, as factors leading the courts to give the principle controlling weight in particular instances, or as
independent rules in themselves. These factors are the respect due the governmental agencies charged
with administration, their competence, expertness, experience, and informed judgment and the fact that
they frequently are the drafters of the law they interpret; that the agency is the one on which the legislature
must rely to advise it as to the practical working out of the statute, and practical application of the statute
presents the agency with unique opportunity and experiences for discovering deficiencies, inaccuracies, or
improvements in the statute.BPI LEASING CORP. V. CA AND CIR FACTS:For the calendar year 1986,
BPI Leasing Corporation, Inc. (BLC) paid the Commissioner of Internal Revenue (CIR) a total of
P1,139,041.49 representing 4% "contractors percentage tax" then imposed by Section 205 of the National
Internal Revenue Code (NIRC), based on its gross rentals from equipment leasing for the said year
amounting to P27,783,725.42.On November 10, 1986, the CIR issued RR 19-86. Section 6.2 thereof
provided that finance and leasing companies registered under Republic Act 5980 shall be subject to gross
receipt tax of 5%-3%-1% on actual income earned. This means that companies registered under Republic
Act 5980, such as BLC, are not liable for "contractors percentage tax" under Section 205 but are, instead,
subject to "gross receipts tax" under Section 260 (now Section 122) of the NIRC. Since BLC had earlier
paid the aforementioned "contractors percentage tax," it re-computed its tax liabilities under the "gross
receipts tax" and arrived at the amount of P361,924.44. BLC filed a claim for a refund with the CIR for the
amount of P777,117.05, representing the difference between the P1,139,041.49 it had paid as "contractors
percentage tax" and P361,924.44 it should have paid for "gross receipts tax."The CTA dismissed the
petition and denied BLCs claim of refund and held that RR 19-86, may only be applied prospectively such
that it only covers all leases written on or after January 1, 1987. The CTA ruled that, since BLCs rental
income was all received prior to 1986, it follows that this was derived from lease transactions prior to
January 1, 1987, and hence, not covered by the RR.A motion for reconsideration of the CTAs decision was
filed, but was denied. BLC then appealed the case to the Court of Appeals. BLC submits that the Court of
Appeals and the CTA erred in not ruling that RR 19-86 may be applied retroactively so as to allow BLCs
claim for a refund of P777,117.05.Respondents, on the other hand, maintain that the provision on the date
of effectivity of RR 19-86 is clear and unequivocal, leaving no room for interpretation on its prospective
application.ISSUES:WON RR 19-86 is legislative or interpretative in nature.WON RR 19-86 is prospective
or retroactive in nature. WON BPI failed to meet the quantum of evidence required in refund
cases.RULE:1ST ISSUE BLC attempts to convince the Court that RR 19-86 is legislative rather than
interpretative in character and hence, should retroact to the date of effectivity of the law it seeks to interpret.
A legislative rule is in the matter of subordinate legislation, designed to implement a primary legislation by
providing the details thereof. An interpretative rule, on the other hand, is designed to provide guidelines to
the law which the administrative agency is in charge of enforcing. The Court finds the questioned RR to be
legislative in nature. Section 1 of RR 19-86 plainly states that it was promulgated pursuant to Section 277
of the NIRC (now Section 244), an express grant of authority to the Secretary of Finance to promulgate all
needful rules and regulations for the effective enforcement of the provisions of the NIRC. Verily, it cannot
be disputed that RR 19-86 was issued pursuant to the rule-making power of the Secretary of Finance, thus
making it legislative, and not interpretative as alleged by BLC.BLC further posits that, it is invalid for want
of due process as no prior notice, publication and public hearing attended the issuance thereof. To support
its view, BLC cited CIR v. Fortune Tobacco, et al.,wherein the Court nullified a revenue memorandum
circular which reclassified certain cigarettes and subjected them to a higher tax rate, holding it invalid for
lack of notice, publication and public hearing. In this case, RR 19-86 would be beneficial to the taxpayers
as they are subjected to lesser taxes. Petitioner, in fact, is invoking RR 19-86 as the very basis of its claim
for refund. If it were invalid, then petitioner all the more has no right to a refund.2ND ISSUE The Court now
resolves whether its application should be prospective or retroactive. Statutes, including administrative
rules and regulations, operate prospectively only, unless the legislative intent to the contrary is manifest by
express terms or by necessary implication. In the present case, there is no indication that the RR may
operate retroactively. Furthermore, there is an express provision stating that it "shall take effect on January
1, 1987," and that it "shall be applicable to all leases written on or after the said date." Thus, BLC is not in
a position to invoke the provisions of RR 19-86 for lease rentals it received prior to January 1, 1987.3RD
ISSUE Tax refunds are in the nature of tax exemptions. As such, these are to be strictly construed against
the person or entity claiming the exemption. The burden of proof is upon him who claims the exemption
and he must be able to justify his claim by the clearest grant under Constitutional or statutory law, and he
cannot be permitted to rely upon vague implications.Nothing that BLC has raised justifies a tax
refund.WHEREFORE,the petition for review is herebyDENIED, and the assailed decision and resolution of
the Court of Appeals areAFFIRMED. No pronouncement as to costs.SO ORDERED.PRINCIPLES
INVOLVED: Legislative or Interpretive nature of Statute Prospective or Retroactive effect of
OrdinancesPBCOM vs. CIR FACTS:Petitioner, Philippine Bank of Communications (PBCom), a
commercial banking corporation duly organized under Philippine laws, filed its quarterly income tax returns
for the first and second quarters of 1985, reported profits, and paid the total income tax of P5,016,954.00
by applying PBCom's tax credit memos for P3,401,701.00 and P1,615,253.00, respectively. Subsequently,
however, PBCom suffered net loss of P25,317,228.00, thereby showing no income tax liability in its Annual
Income Tax Returns for the year-ended December 31, 1985. For the succeeding year, ending December
31, 1986, the petitioner likewise reported a net loss of P14,129,602.00, and thus declared no tax payable
for the year.But during these two years, PBCom earned rental income from leased properties. The lessees
withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in
1986. On August 7, 1987, petitioner requested the Commissioner of Internal Revenue, among others, for a
tax credit of P5,016,954.00 representing the overpayment of taxes in the first and second quarters of
1985.Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their
lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69.Pending the
investigation of the respondent Commissioner of Internal Revenue, petitioner instituted a Petition for Review
on November 18, 1988 before the Court of Tax Appeals (CTA). The petition was docketed as CTA Case
No. 4309 entitled: "Philippine Bank of Communications vs. Commissioner of Internal Revenue."The CTA
decided in favor of the BIR on the ground that the Petition was filed out of time as the same was filed
beyond the two-year reglementary period. A motion for Reconsideration was denied and the appeal to
Court of Appeals was likewise denied. Thus, this appeal to Supreme Court.Issues:a) Whether or not
Revenue Regulations No. 7-85 which alters the reglementary period from two (2) years to ten (10) years is
valid.b) Whether or not the petition for tax refund had already prescribed.Ruling:RR 7-85 altering the 2-year
prescriptive period imposed by law to 10-year prescriptive period is invalid.Administrative issuances are
merely interpretations and not expansions of the provisions of law, thus, in case of inconsistency, the law
prevails over them. Administrative agencies have no legislative power.When the Acting Commissioner of
Internal Revenue issued RMC 7-85,changing the prescriptive period of two years to ten years on claims of
excess quarterly income tax payments, such circular created a clear inconsistency with the provision of
Sec. 230 of 1977 NIRC. In so doing, the BIR did not simply interpret the law; rather it legislated guidelines
contrary to the statute passed by Congress.It bears repeating that Revenue memorandum-circulars are
considered administrative rulings (in the sense of more specific and less general interpretations of tax laws)
which are issued from time to time by the Commissioner of Internal Revenue. It is widely accepted that the
interpretation placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great
respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially
found to be erroneous. Thus, courts will not countenance administrative issuances that override, instead of
remaining consistent and in harmony with, the law they seek to apply and implement.Further, fundamental
is the rule that the State cannot be put in estoppel by the mistakes or errors of its officials or agents. As
pointed out by the respondent courts, the nullification of RMC No. 7-85 issued by the Acting Commissioner
of Internal Revenue is an administrative interpretation which is not in harmony with Sec. 230 of 1977 NIRC,
for being contrary to the express provision of a statute. Hence, his interpretation could not be given weight
for to do so would, in effect, amend the statute.By implication of the above, claim for refund had already
prescribed.Since the petition had been filed beyond the prescriptive period, the same has already
prescribed. The fact that the final adjusted return show an excess tax credit does not automatically entitle
taxpayer claim for refund without any express intent.WHEREFORE, the petition is hereby DENIED. The
decision of the Court of Appeals appealed from is AFFIRMED, with COSTS against the
petitioner.PHILIPPINE HEALTH CARE PROVIDERS V. CIR (GR NO. 167330)Facts:Philippine Health
Cares objectives were:"[t]o establish, maintain, conduct and operate a prepaid group practice health care
delivery system or a health maintenance organization to take care of the sick and disabled persons enrolled
in the health care plan and to provide for the administrative, legal, and financial responsibilities of the
organization.It lost the case in 2004 when it was made to pay over 100 million in VAT deficiencies. At the
time the MFR was filed, it was able to avail of tax amnesty under RA 9840 by paying 5 percent of the tax
or 5 million pesos.Petitioner passed an MFR but the CA denied. Hence, this case.Issue:Was petitioner, as
an HMO, engaged in the business of insurance during the pertinent taxable years, and was thus liable for
DST?Held: No. Mfr granted. CIR must desist from collecting tax.Ratio:Section 185 of the NIRC . Stamp tax
on fidelity bonds and other insurance policies. On all policies of insurance or bonds or obligations of the
nature of indemnity for loss, damage, or liability made or renewed by any person, association or company
or corporation transacting the business of accident, fidelity, employers liability, plate, glass, steam boiler,
burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire
insurance).Two requisites must concur before the DST can apply, namely: (1) the document must be a
policy of insurance or an obligation in the nature of indemnity and (2) the maker should be transacting the
business of accident, fidelity, employers liability, plate, glass, steam boiler, burglar, elevator, automatic
sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance).Under RA 7875, an
HMO is "an entity that provides, offers or arranges for coverage of designated health services needed by
plan members for a fixed prepaid premium."Various courts in the United States have determined that HMOs
are not in the insurance business. One test that they have applied is whether the assumption of risk and
indemnification of loss are the principal object and purpose of the organization or whether they are merely
incidental to its business. If these are the principal objectives, the business is that of insurance. But if such
is incidental and service is the principal purpose, then the business is not insurance.Applying the "principal
object and purpose test," there is significant American case law supporting the argument that a corporation,
whose main object is to provide the members of a group with health services, is not engaged in the
insurance business.For the purpose of determining what "doing an insurance business" means, we have
to scrutinize the operations of the business as a whole. This is of course only prudent and appropriate,
taking into account laws applicable to those in the insurance business.Petitioner, as an HMO, is not part of
the insurance industry. This is evident from the fact that it is not supervised by the Insurance Commission
but by the Department of Health. In fact, in a letter dated September 3, 2000, the Insurance Commissioner
confirmed that petitioner is not engaged in the insurance business.As to whether the business is covered
by the DST, we can see that while the contract did contains all the elements of an insurance contract, as
stated in Sec 2., Par 1 of the Insurance Code, the primary purpose of the company is to render service.
The primary purpose of the parties in making the contract may negate the existence of an insurance
contract.Also, there is no loss, damage or liability on the part of the member that should be indemnified by
petitioner as an HMO. Under the agreement, the member pays petitioner a predetermined consideration in
exchange for the hospital, medical and professional services rendered by the petitioners physician or
affiliated physician to him.In other words, there is nothing in petitioner's agreements that gives rise to a
monetary liability on the part of the member to any third party-provider of medical services which might in
turn necessitate indemnification from petitioner. The terms "indemnify" or "indemnity" presume that a liability
or claim has already been incurred. There is no indemnity precisely because the member merely avails of
medical services to be paid or already paid in advance at a pre-agreed price under the agreements.Also, a
member can take advantage of the bulk of the benefits anytime, e.g. laboratory services, x-ray, routine
annual physical examination and consultations, vaccine administration as well as family planning
counseling, even in the absence of any peril, loss or damage on his or her part.Petitioner is obliged to
reimburse the member who receives care from a non-participating physician or hospital. However, this is
only a very minor part of the list of services available. The assumption of the expense by petitioner is not
confined to the happening of a contingency but includes incidents even in the absence of illness or
injury.Consequently, there is a need to distinguish prepaid service contracts (like those of petitioner) from
the usual insurance contracts.However, assuming that petitioners commitment to provide medical services
to its members can be construed as an acceptance of the risk that it will shell out more than the prepaid
fees, it still will not qualify as an insurance contract because petitioners objective is to provide medical
services at reduced cost, not to distribute risk like an insurer.If it had been the intent of the legislature to
impose DST on health care agreements, it could have done so in clear and categorical terms. It had many
opportunities to do so. But it did not. The fact that the NIRC contained no specific provision on the DST
liability of health care agreements of HMOs at a time they were already known as such, belies any legislative
intent to impose it on them. As a matter of fact, petitioner was assessed its DST liability only on January
27, 2000, after more than a decade in the business as an HMO.In view of petitioners availment of the
benefits of [RA 9840], and without conceding the merits of this case as discussed above, respondent
concedes that such tax amnesty extinguishes the tax liabilities of petitioner.21 Our Insurance Code was
based on California and New York laws. When a statute has been adopted from some other state or country
and said statute has previously been construed by the courts of such state or country, the statute is deemed
to have been adopted with the construction given.CITY OF ILOILO VS. SMART FACTS:SMART received
a letter of assessment dated February 12, 2002 from petitioner requiring it to pay deficiency local franchise
and business taxes, in the amount of P764,545.29, which it incurred for the years 1997 to 2001. SMART
protested the assessment, claiming exemption from payment of local franchise and business taxes based
on Section 9 of its legislative franchise under Republic Act (R.A.) No. 7294 (SMARTs franchise). Under
SMARTs franchise, it was required to pay a franchise tax equivalent to 3% of all gross receipts, which
amount shall be in lieu of all taxes. SMART contends that the in lieu of all taxes clause covers local franchise
and business taxes. SMART similarly invoked R.A. No. 7925 or the Public Telecommunications Policy Act
(Public Telecoms Act) whose Section 23 declares that any existing privilege, incentive, advantage, or
exemption granted under existing franchises shall ipso facto become part of previously granted-
telecommunications franchise. SMART contends that by virtue of Section 23, tax exemptions granted by
the legislature to other holders of telecommunications franchise may be extended to and availed of by
SMART.The petitioner posits that SMARTs claim for exemption under its franchise is not equivocal enough
to prevail over the specific grant of power to local government units to exact taxes from businesses
operating within its territorial jurisdiction under Section 137 in relation to Section 151 of the LGC. More
importantly, it claimed that exemptions from taxation have already been removed by Section 193 of the
LGC, which provides that tax exemptions or incentives granted to, or presently enjoyed by all persons,
whether natural or juridical, including government-owned or controlled corporations, except local water
districts, cooperatives duly registered under RA No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this Code.ISSUE: whether or not
SMART is exempt from the payment of local franchise and business taxes under Section 9 of its franchise
and Section 23 of the Public Telecoms Act.HELD:The basic principle in the construction of laws granting
tax exemptions is he who claims an exemption from his share of the common burden of taxation must justify
his claim by showing that the Legislature intended to exempt him by words too plain to be beyond doubt or
mistake.We have indeed ruled that by virtue of Section 193 of the LGC, all tax exemption privileges then
enjoyed by all persons, save those expressly mentioned, have been withdrawn effective January 1, 1992
the date of effectivity of the LGC. The first clause of Section 137 of the LGC states the same rule. However,
the withdrawal of exemptions, whether under Section 193 or 137 of the LGC, pertains only to those already
existing when the LGC was enacted. The intention of the legislature was to remove all tax exemptions or
incentives granted prior to the LGC. As SMARTs franchise was made effective on March 27, 1992 after the
effectivity of the LGC Section 193 will therefore not apply in this case.But while Section 193 of the LGC will
not affect the claimed tax exemption under SMARTs franchise, we fail to find a categorical and
encompassing grant of tax exemption to SMART covering exemption from both national and local
taxes:R.A. No 7294 does not expressly provide what kind of taxes SMART is exempted from. It is not clear
whether the in lieu of all taxes provision in the franchise of SMART would include exemption from local or
national taxation. What is clear is that SMART shall pay franchise tax equivalent to three percent (3%) of
all gross receipts of the business transacted under its franchise. But whether the franchise tax exemption
would include exemption from exactions by both the local and the national government is not
unequivocal.The uncertainty in the in lieu of all taxes clause in R.A. No. 7294 on whether SMART is
exempted from both local and national franchise tax must be construed strictly against SMART which claims
the exemption.SMARTs claim for exemption from local business and franchise taxes based on Section 9
of its franchise is therefore unfounded. Whether Section 23 of the Public Telecoms Act extends tax
exemptions granted by Congress to new franchise holders to existing ones has been answered in the
negative in the case of PLDT v. City of Davao. The term exemption in Section 23 of the Public Telecoms
Act does not mean tax exemption; rather, it refers to exemption from certain regulatory or reporting
requirements imposed by government agencies such as the National Telecommunications Commission.
The thrust of the Public Telecoms Act is to promote the gradual deregulation of entry, pricing, and
operations of all public telecommunications entities, and thus to level the playing field in the
telecommunications industry. The language of Section 23 and the proceedings of both Houses of Congress
are bereft of anything that would signify the grant of tax exemptions to all telecommunications entities. Intent
to grant tax exemption cannot therefore be discerned from the law; the term exemption is too general to
include tax exemption and runs counter to the requirement that the grant of tax exemption should be stated
in clear and unequivocal language too plain to be beyond doubt or mistake.

ASTURIAS SUGAR CENTRAL, INC. vs. COMMISSIONER OF CUSTOMS and COURT OF TAX
APPEALS (1969) penned by CASTRO
The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of centrifugal sugar for
exert, the sugar so produced being placed in containers known as jute bags. In 1957 it made two
importations of jute bags. In the first shipment, the petitioner filed Re-exportation and Special Import Tax
Bond no. 1 in the amounts of P25,088 and P2,464.50 and in the second shipment, the petitioner filed Re-
exportation and Special Import Tax Bond no. 6 in the amounts of P42,112 and P7,984.44, On February 6,
1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd., requested the Commissioner of
Customs for a week's extension of Re-exportation and Special Import Tax Bond no. 6 which was to expire
the following day, this request was denied by the Commissioner. Due to the petitioner's failure to show
proof of the exportation of the balance of 86,353 jute bags within one year from their importation, the
Collector of Customs of Iloilo, on March 17, 1958, required it to pay the amount of P28,629.42
representing the customs duties and special import tax due thereon, which amount the petitioner paid
under protest. The petitioner demanded the refund of the amount it had paid, on the ground that its
request for extension of the period of one year was filed on time, and that its failure to export the jute
bags within the required one-year period was due to delay in the arrival of the vessel on which they were
to be loaded and to the picketing of the Central railroad line. Alternatively, the petitioner asked for refund
of the same amount in the form of a drawback under section 106(b) in relation to section 105(x) of the
Tariff and Customs Code. The Collector of Customs denied the claim for refund. Court of Tax Appeals
affirmed the decision.
The petitioner argues that not having availed itself of the full exemption granted by sec. 105(x) of the
Tariff and Customs Code due to its failure to export the jute bags within one year, by authority of section
106 (b) of the Tariff and Customs Code, it is entitled to a 99% drawback of the duties it had paid, averring
further that sec. 106(b) does not presuppose immediate payment of duties and taxes at the time of
importation.

WON petitioner is entitled to a drawback of the duties it had paid, by virtue of sections 106 (b) of the Tariff
and Customs Code and sec. 105(x) of the Tariff and Customs Code.

No. The provisions invoked by the petitioner (to sustain his claim for refund) offer two options to an
importer. The first, under sec. 105 (x), gives him the privilege of importing, free from import duties, the
containers mentioned therein as long as he exports them within one year from the date of acceptance of
the import entry, which period as shown above, is not extendible. The second, presented by sec. 106 (b),
contemplates a case where import duties are first paid, subject to refund to the extent of 99% of the
amount paid, provided the articles mentioned therein are exported within three years from importation.
The basic purpose of the two provisions is the same, which is, to enable a local manufacturer to compete
in foreign markets, by relieving him of the disadvantages resulting from having to pay duties on imported
merchandise, thereby building up export trade and encouraging manufacture in the country. 12 But there
is a difference, and it is this: under section 105(x) full exemption is granted to an importer who justifies the
grant of exemption by exporting within one-year. The petitioner, having opted to take advantage of the
provisions of section 105(x), may not, after having failed to comply with the conditions imposed thereby,
avoid the consequences of such failure by being allowed a drawback under section 106(b) of the same
Act without having complied with the conditions of the latter section. For it is not to be supposed that the
legislature had intended to defeat compliance with the terms of section 105(x) thru a refuge under the
provisions of section 106(b). A construction should be avoided which affords an opportunity to defeat
compliance with the terms of a statute. 13 Rather courts should proceed on the theory that parts of a
statute may be harmonized and reconciled with each other. A construction of a statute which creates an
inconsistency should be avoided when a reasonable interpretation can be adopted which will not do
violence to the plain words of the act and will carry out the intention of Congress.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-19337 September 30, 1969

ASTURIAS SUGAR CENTRAL, INC., petitioner,

vs.
COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS, respondents.

Laurea, Laurea and Associates for petitioner.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Esmeraldo Umali and Solicitor
Sumilang V. Bernardo for respondents.

CASTRO, J.:

This is a petition for review of the decision of the Court of Tax Appeals of November 20, 1961, which
denied recovery of the sum of P28,629.42, paid by the petitioner, under protest, in the concept of customs
duties and special import tax, as well as the petitioner's alternative remedy to recover the said amount
minus one per cent thereof by way of a drawback under sec. 106 (b) of the Tariff and Customs Code.

The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of centrifugal sugar for
exert, the sugar so produced being placed in containers known as jute bags. In 1957 it made two
importations of jute bags. The first shipment consisting of 44,800 jute bags and declared under entry 48
on January 8, 1967, entered free of customs duties and special import tax upon the petitioner's filing of
Re-exportation and Special Import Tax Bond no. 1 in the amounts of P25,088 and P2,464.50, conditioned
upon the exportation of the jute bags within one year from the date of importation. The second shipment
consisting of 75,200 jute bags and declared under entry 243 on February 8, 1957, likewise entered free of
customs duties and special import tax upon the petitioner's filing of Re-exportation and Special Import Tax
Bond no. 6 in the amounts of P42,112 and P7,984.44, with the same conditions as stated in bond no. 1.

Of the 44,800 jute bags declared under entry 48, only 8,647 were exported within one year from the date
of importation as containers of centrifugal sugar. Of the 75,200 jute bags declared under entry 243, only
25,000 were exported within the said period of one year. In other words, of the total number of imported
jute bags only 33,647 bags were exported within one year after their importation. The remaining 86,353
bags were exported after the expiration of the one-year period but within three years from their
importation.

On February 6, 1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd., requested the
Commissioner of Customs for a week's extension of Re-exportation and Special Import Tax Bond no. 6
which was to expire the following day, giving the following as the reasons for its failure to export the
remaining jute bags within the period of one year: (a) typhoons and severe floods; (b) picketing of the
Central railroad line from November 6 to December 21, 1957 by certain union elements in the employ of
the Philippine Railway Company, which hampered normal operations; and (c) delay in the arrival of the
vessel aboard which the petitioner was to ship its sugar which was then ready for loading. This request
was denied by the Commissioner per his letter of April 15, 1958.

Due to the petitioner's failure to show proof of the exportation of the balance of 86,353 jute bags within
one year from their importation, the Collector of Customs of Iloilo, on March 17, 1958, required it to pay
the amount of P28,629.42 representing the customs duties and special import tax due thereon, which
amount the petitioner paid under protest.

In its letter of April 10, 1958, supplemented by its letter of May 12, 1958, the petitioner demanded the
refund of the amount it had paid, on the ground that its request for extension of the period of one year
was filed on time, and that its failure to export the jute bags within the required one-year period was due
to delay in the arrival of the vessel on which they were to be loaded and to the picketing of the Central
railroad line. Alternatively, the petitioner asked for refund of the same amount in the form of a drawback
under section 106(b) in relation to section 105(x) of the Tariff and Customs Code.

After hearing, the Collector of Customs of Iloilo rendered judgment on January 21, 1960 denying the
claim for refund. From his action, appeal was taken to the Commissioner of Customs who upheld the
decision of the Collector. Upon a petition for review the Court of Tax Appeals affirmed the decision of the
Commissioner of Customs.

The petitioner imputes three errors to the Court of Tax Appeals, namely:

1. In not declaring that force majeure and/or fortuitous event is a sufficient justification for the
failure of the petitioner to export the jute bags in question within the time required by the bonds.

2. In not declaring that it is within the power of the Collector of Customs and/or the Commissioner
of Customs to extend the period of one (1) year within which the jute bags should be exported.

3. In not declaring that the petitioner is entitled to a refund by way of a drawback under the
provisions of section 106, par. (b), of the Tariff and Customs Code.

1. The basic issue tendered for resolution is whether the Commissioner of Customs is vested, under the
Philippine Tariff Act of 1909, the then applicable law, with discretion to extend the period of one year
provided for in section 23 of the Act. Section 23 reads:

SEC. 23. That containers, such as casks, large metal, glass, or other receptacles which are, in
the opinion of the collector of customs, of such a character as to be readily identifiable may be
delivered to the importer thereof upon identification and the giving of a bond with sureties
satisfactory to the collector of customs in an amount equal to double the estimated duties
thereon, conditioned for the exportation thereof or payment of the corresponding duties thereon
within one year from the date of importation, under such rules and regulations as the Insular
Collector of Customs shall provide.1

To implement the said section 23, Customs Administrative Order 389 dated December 6, 1940 was
promulgated, paragraph XXVIII of which provides that "bonds for the re-exportation of cylinders and other
containers are good for 12 months without extension," and paragraph XXXI, that "bonds for customs
brokers, commercial samples, repairs and those filed to guarantee the re-exportation of cylinders and
other containers are not extendible."

And insofar as jute bags as containers are concerned, Customs Administrative Order 66 dated August 25,
1948 was issued, prescribing rules and regulations governing the importation, exportation and
identification thereof under section 23 of the Philippine Tariff Act of 1909. Said administrative order
provides:

That importation of jute bags intended for use as containers of Philippine products for exportation
to foreign countries shall be declared in a regular import entry supported by a surety bond in an
amount equal to double the estimated duties, conditioned for the exportation or payment of the
corresponding duties thereon within one year from the date of importation.
It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding sec. 105(x) of the
Tariff and Customs Code, while fixing at one year the period within which the containers therein
mentioned must be exported, are silent as to whether the said period may be extended. It was surely by
reason of this silence that the Bureau of Customs issued Administrative Orders 389 and 66, already
adverted to, to eliminate confusion and provide a guide as to how it shall apply the law, 2 and, more
specifically, to make officially known its policy to consider the one-year period mentioned in the law as
non-extendible.

Considering that the statutory provisions in question have not been the subject of previous judicial
interpretation, then the application of the doctrine of "judicial respect for administrative
construction," 3 would, initially, be in order.

Only where the court of last resort has not previously interpreted the statute is the rule applicable that
courts will give consideration to construction by administrative or executive departments of the
state.41awphîl.nèt

The formal or informal interpretation or practical construction of an ambiguous or uncertain

statute or law by the executive department or other agency charged with its administration or
enforcement is entitled to consideration and the highest respect from the courts, and must be
accorded appropriate weight in determining the meaning of the law, especially when the
construction or interpretation is long continued and uniform or is contemporaneous with the first
workings of the statute, or when the enactment of the statute was suggested by such agency. 5

The administrative orders in question appear to be in consonance with the intention of the legislature to
limit the period within which to export imported containers to one year, without extension, from the date of
importation. Otherwise, in enacting the Tariff and Customs Code to supersede the Philippine Tariff Act of
1909, Congress would have amended section 23 of the latter law so as to overrule the long-standing view
of the Commissioner of Customs that the one-year period therein mentioned is not extendible.

Implied legislative approval by failure to change a long-standing administrative construction is not

essential to judicial respect for the construction but is an element which greatly increases the
weight given such construction.6

The correctness of the interpretation given a statute by the agency charged with administering its
provision is indicated where it appears that Congress, with full knowledge of the agency's
interpretation, has made significant additions to the statute without amending it to depart from the
agency's view.7

Considering that the Bureau of Customs is the office charged with implementing and enforcing the
provisions of our Tariff and Customs Code, the construction placed by it thereon should be given
controlling weight.1awphîl.nèt

In applying the doctrine or principle of respect for administrative or practical construction, the courts often
refer to several factors which may be regarded as bases of the principle, as factors leading the courts to
give the principle controlling weight in particular instances, or as independent rules in themselves. These
factors are the respect due the governmental agencies charged with administration, their competence,
expertness, experience, and informed judgment and the fact that they frequently are the drafters of the
law they interpret; that the agency is the one on which the legislature must rely to advise it as to the
practical working out of the statute, and practical application of the statute presents the agency with
unique opportunity and experiences for discovering deficiencies, inaccuracies, or improvements in the
statute; ... 8

If it is further considered that exemptions from taxation are not favored, 9 and that tax statutes are to be
construed instrictissimi juris against the taxpayer and liberally in favor of the taxing authority, 10 then we
are hard put to sustain the petitioner's stand that it was entitled to an extension of time within which to
export the jute bags and, consequently, to a refund of the amount it had paid as customs duties.

In the light of the foregoing, it is our considered view that the one-year period prescribed in section 23 of
the Philippine Tariff Act of 1909 is non-extendible and compliance therewith is mandatory.

The petitioner's argument that force majeure and/or fortuitous events prevented it from exporting the jute
bags within the one-year period cannot be accorded credit, for several reasons. In the first place, in its
decision of November 20, 1961, the Court of Tax Appeals made absolutely no mention of or reference to
this argument of the petitioner, which can only be interpreted to mean that the court did not believe that
the "typhoons, floods and picketing" adverted to by the petitioner in its brief were of such magnitude or
nature as to effectively prevent the exportation of the jute bags within the required one-year period. In
point of fact nowhere in the record does the petitioner convincingly show that the so-called fortuitous
events or force majeure referred to by it precluded the timely exportation of the jute bags. In the second
place, assuming, arguendo, that the one-year period is extendible, the jute bags were not actually
exported within the one-week extension the petitioner sought. The record shows that although of the
remaining 86,353 jute bags 21,944 were exported within the period of one week after the request for
extension was filed, the rest of the bags, amounting to a total of 64,409, were actually exported only
during the period from February 16 to May 24, 1958, long after the expiration of the one-week extension
sought by the petitioner. Finally, it is clear from the record that the typhoons and floods which, according
to the petitioner, helped render impossible the fulfillment of its obligation to export within the one-year
period, assuming that they may be placed in the category of fortuitous events or force majeure, all
occurred prior to the execution of the bonds in question, or prior to the commencement of the one-year
period within which the petitioner was in law required to export the jute bags.

2. The next argument of the petitioner is that granting that Customs Administrative Order 389 is valid and
binding, yet "jute bags" cannot be included in the phrase "cylinders and other containers" mentioned
therein. It will be noted, however, that the Philippine Tariff Act of 1909 and the Tariff and Customs Code,
which Administrative Order 389 seeks to implement, speak of "containers" in general. The enumeration
following the word "containers" in the said statutes serves merely to give examples of containers and not
to specify the particular kinds thereof. Thus, sec. 23 of the Philippine Tariff Act states, "containers such as
casks large metals, glass or other receptacles," and sec. 105 (x) of the Tariff and Customs Code
mentions "large containers," giving as examples "demijohn cylinders, drums, casks and other similar
receptacles of metal, glass or other materials." (emphasis supplied) There is, therefore, no reason to
suppose that the customs authorities had intended, in Customs Administrative Order 389 to circumscribe
the scope of the word "container," any more than the statures sought to be implemented actually intended
to do.

3. Finally, the petitioner claims entitlement to a drawback of the duties it had paid, by virtue of section 106
(b) of the Tariff and Customs Code, 11 which reads:

SEC. 106. Drawbacks: ...

b. On Articles Made from Imported Materials or Similar Domestic Materials and Wastes Thereof.
— Upon the exportation of articles manufactured or produced in the Philippines, including the
packing, covering, putting up, marking or labeling thereof, either in whole or in part of imported
materials, or from similar domestic materials of equal quantity and productive manufacturing
quality and value, such question to be determined by the Collector of Customs, there shall be
allowed a drawback equal in amount to the duties paid on the imported materials so used, or
where similar domestic materials are used, to the duties paid on the equivalent imported similar
materials, less one per cent thereof: Provided, That the exportation shall be made within three
years after the importation of the foreign material used or constituting the basis for drawback ... .
The petitioner argues that not having availed itself of the full exemption granted by sec. 105(x) of the
Tariff and Customs Code due to its failure to export the jute bags within one year, it is nevertheless, by
authority of the above-quoted provision, entitled to a 99% drawback of the duties it had paid, averring
further that sec. 106(b) does not presuppose immediate payment of duties and taxes at the time of
importation.

The contention is palpably devoid of merit.

The provisions invoked by the petitioner (to sustain his claim for refund) offer two options to an importer.
The first, under sec. 105 (x), gives him the privilege of importing, free from import duties, the containers
mentioned therein as long as he exports them within one year from the date of acceptance of the import
entry, which period as shown above, is not extendible. The second, presented by sec. 106 (b),
contemplates a case where import duties are first paid, subject to refund to the extent of 99% of the
amount paid, provided the articles mentioned therein are exported within three years from importation.

It would seem then that the Government would forego collecting duties on the articles mentioned in
section 105(x) of Tariff and Customs Code as long as it is assured, by the filing of a bond, that the same
shall be exported within the relatively short period of one year from the date of acceptance of the import
entry. Where an importer cannot provide such assurance, then the Government, under sec. 106(b) of said
Code, would require payment of the corresponding duties first. The basic purpose of the two provisions is
the same, which is, to enable a local manufacturer to compete in foreign markets, by relieving him of the
disadvantages resulting from having to pay duties on imported merchandise, thereby building up export
trade and encouraging manufacture in the country. 12 But there is a difference, and it is this: under section
105(x) full exemption is granted to an importer who justifies the grant of exemption by exporting within
one-year. The petitioner, having opted to take advantage of the provisions of section 105(x), may not,
after having failed to comply with the conditions imposed thereby, avoid the consequences of such failure
by being allowed a drawback under section 106(b) of the same Act without having complied with the
conditions of the latter section.

For it is not to be supposed that the legislature had intended to defeat compliance with the terms of
section 105(x) thru a refuge under the provisions of section 106(b). A construction should be avoided
which affords an opportunity to defeat compliance with the terms of a statute. 13 Rather courts should
proceed on the theory that parts of a statute may be harmonized and reconciled with each other.

A construction of a statute which creates an inconsistency should be avoided when a reasonable

interpretation can be adopted which will not do violence to the plain words of the act and will carry out the
intention of Congress.

In the construction of statutes, the courts start with the assumption that the legislature intended to
enact an effective law, and the legislature is not to be presumed to have done a vain thing in the
enactment of a statute. Hence, it is a general principle, embodied in the maxim, "ut res magis
valeat quam pereat," that the courts should, if reasonably possible to do so without violence to
the spirit and language of an act, so interpret the statute to give it efficient operation and effect as
a whole. An interpretation should, if possible, be avoided under which a statute or provision being
construed is defeated, or as otherwise expressed, nullified, destroyed, emasculated, repealed,
explained away, or rendered insignificant, meaningless, inoperative, or nugatory. 14

ACCORDINGLY, the judgment of the Court of Tax Appeals of November 20, 1961 is affirmed, at
petitioner's cost.

Concepcion, C.J., Dizon, Zaldivar, Fernando, Capistrano, Teehankee and Barredo, JJ., concur.
Makalintal and Sanchez, JJ., took no part.
Reyes, J.B.L., J., is on leave.
Footnotes

1This section was superseded by sec. 105(x) of the Tariff and Customs Code which took effect on
July 1, 1957. Section 105 (x) provides:

"Large containers (e.g., demijohns, cylinders, drums casks and other similar receptacles
of metal, glass or other material) which are, in the opinion of the Collector of Customs, of
such a character as to be readily identifiable may be delivered to the importer thereof
upon identification and the giving of a bond in an amount equal to one and one-half times
the ascertained duties, taxes and other charges thereon, conditioned for the exportation
thereof or payment of the corresponding duties, taxes and other charges within one year
from the date of acceptance of the import entry."

2Magruder v. W.B. & A. Realty Corp., 316 U.S. 69; Skidmore v. Swift & Co., 323 U.S. 134; see 2
Am. Jur. 2d 61, 63.

3In applying this doctrine courts often refer generally to the "administrative practice," a term taken
to include any formal or informal act of the administrative agency by which it construes, interprets,
or applies the law (2 Am. Jur. 2d 69).

4Ahlers v. Farmers Mut. Ins. Co., 264 NW 894.

52 Am. Jur. 2d 66-67.

62 Am. Jur. 2d 70, footnote 11, par. 2.

72 Am. Jur. 2d 70, footnote 11, par. 3; see also Phil. Sugar Centrals Agency v. Collector of
Customs, 51 Phil. 131, cited in Cia. Gen. de Tabacos de Filipinas v. Acting Commissioner of
Customs, 23 SCRA 600, wherein this Court held that the very fact that Congress has not seen fit
to repeal or change the law is a very potent argument in favor of sustaining a construction given
to it by courts.

82 Am. Jur. 2d 69-70.

9Comm. of Int. Rev. v. Visayan Electric Co., 23 SCRA 715, 726, citing Esso Standard Eastern,
Inc. v. Actg. Comm. of Customs, 18 SCRA 488; Farm Implement & Machinery Co. v. Comm. of
Customs, 24 SCRA 905.

10EssoStandard Eastern, Inc. v. Actg. Comm. of Customs, supra; La Carlota Sugar Central v.
Jimenez, L-12436, May 31, 1961; Phil. Int'l. Fair, Inc. v. Collector, L-12928 & L-12932, March 31,
1962.

11Which is a substantial reproduction of sec. 22 of the Philippine Tariff Act of 1909, the law in
force at the time the importations of the jute bags in question were made.

1225 C.J.S. 530-531; U.S. v. Passavert, 169 U.S. 16; U.S. v. Whidden, 28 F. Cas. No. 10, 670
cited in 25 C.J.S. 530; Tidewater Oil v. U.S., 171 U.S. 210, 219; U.S. Code Congressional News,
Vol. 2, p. 3577 (85th Congress, 2nd Session).

13State v. Lipkin, 84 SE 340, LRA 1915F 1018, cited in 50 Am. Jur. 366.

1450 Am. Jur. 358-359.