ACTING COMMISSIONER OF CUSTOMS V MANILA ELECTRIC COMPANY AND CTA

(1977, Fernando)

FACTS:

 Meralco imported insulating oil for use in its plant operations.

 Acting Commissioner of Customs Norberto Romualdez held that these insulating
oils are subject to a special import tax, in which Meralco had to pay P995, under
protest.
 Meralco claims that the insulating oils are exempt by virtue of:
o §6 of RA No. 1394 – exempts equipment and spare parts for use in
industries from the special import tax
o ¶9, Part Two of Meralco’s franchise – expressly exempts insulators
from taxes of whatever kind and nature in consideration for the
payment of the percentage tax on its gross earnings
 The Court of Tax Appeals (CTA) reversed the holding of the Commissioner of
Customs
o Citing Gregory J. Brady’s Materials Handbook, it considered insulating
oils as insulator because insulating oils are used for cooling as well as
for insulating.
o It also cited the use of Meralco for said oils, in oil circuit breakers
where they are required to maintain insulation between the contacts
inside the tank and the tank itself.

ISSUE/s:

1. Can insulating oils be construed as insulators exempt under the special import
tax?
2. Can the CTA be overturned in this case?

HELD/RATIO:

1. Yes. Regarding the construction of tax statutes and citing JBL Reyes in Republic
Flour Mills v CIR, “"It is true that in the construction of tax statutes tax
exemptions are not favored in the law, and are construed strictissimi juris
against the taxpayer. However, it is equally a recognized principle that where the
provision of the law is clear and unambiguous, so that there is no occasion for
the court's seeking the legislative intent, the law must be taken as it is, devoid of
judicial addition or subtraction.”

2. No. This time citing Balbas v Domingo, “No other conclusion is possible in view
of the well-settled principle that this Court is bound by the finding of facts of the
Court of Tax Appeals, only questions of law being open to it for determination.”
Where the question is one of fact, it is no longer reviewable.
 This is in line with the recognition that the CTA enjoys a wide discretion in
construing tax statutes.
 By the very nature of its function, dedicates exclusively to the study and
consideration of tax problems, it has developed an expertise on the subject. The
only exception to overruling the CTA is if there has been an abuse or improvident
exercise of its authority (which is not the case here).
 It would be an affront to the sense of fairness and of justice if in the
exercise of its discretionary authority, after determining that insulating
oil comes within the term insulator, is not be upheld.