Republic Flour Mills Inc. vs. Commissioner of Customs

Bran and pollard produced in the Philippines from milling imported wheat grain are "products of the Philippines" subject to wharfage dues under Section 2802 of the Tariff and Customs Code, as the statute's plain language covers all goods produced in the country and exported, regardless of whether the raw materials were imported or whether the goods are byproducts or "waste" from the primary manufacturing process.

Republic Flour Mills, Inc. is a domestic corporation primarily engaged in the manufacture of wheat flour, importing wheat grain from abroad and milling it to produce flour. In the milling process, the corporation also produces bran (ipa) and pollard (darak), which it exports abroad. Section 2802 of the Tariff and Customs Code (1957) levies a wharfage dues charge of two pesos per gross metric ton on "all articles imported or brought into the Philippines, and on products of the Philippines … exported from the Philippines," with specified exceptions for certain commodities. The Commissioner of Customs assessed wharfage dues on petitioner's exportation of bran and pollard, which petitioner paid under protest before elevating the matter to the Court of Tax Appeals.

Republic Flour Mills, Inc. is a domestic corporation primarily engaged in the manufacture of wheat flour. It imports wheat grain from abroad and mills the grain in its flour mills in the Philippines to produce flour. In the course of the milling process, the corporation also produces bran (ipa) and pollard (darak), which it exports abroad.

During the period from December 1963 to July 1964, inclusive, petitioner exported pollard and/or bran, which was loaded from lighters alongside vessels engaged in foreign trade while anchored near the breakwater. No government or private wharves or government facilities were utilized in the exportation. The Commissioner of Customs assessed petitioner by way of wharfage dues on the said exportations in the sum of P7,948.00. Petitioner paid the assessment under protest.

Petitioner elevated the matter to the Court of Tax Appeals. Before that court, petitioner's main contention was that, inasmuch as no government or private wharves or government facilities were utilized in exporting the pollard and/or bran, the collection of wharfage dues was contrary to law. The Commissioner of Customs countered that petitioner was liable for wharfage dues upon receipt or discharge of the exported goods by a vessel engaged in foreign trade, regardless of the non-use of government-owned or private wharves. The Court of Tax Appeals sustained the Commissioner's action under the appropriate provision of the Tariff and Customs Code, relying on the Supreme Court's decision in Procter & Gamble Phil. Manufacturing Corp. vs. Commissioner of Customs. It did not address the question of whether bran and pollard qualify as "products of the Philippines," as petitioner raised that issue for the first time in its memorandum before that court.

Petitioner then filed the present petition for review before the Supreme Court, assigning as sole error that it should not be liable for wharfage dues on its exportation of bran and pollard because they are not "products of the Philippines," coming as they did from wheat grain imported from abroad and being merely waste from the milling process.

• Statutory Construction of "Products of the Philippines": Petitioner argued that bran and pollard are not "products of the Philippines" within the meaning of Section 2802 of the Tariff and Customs Code because they come from wheat grain imported from abroad and are merely waste from the milling process, the true product being the flour produced.
• Non-Use of Wharves: Before the Court of Tax Appeals, petitioner maintained that because no government or private wharves or government facilities were utilized in exporting the pollard and/or bran, the collection of wharfage dues was contrary to law.

• Liability Regardless of Wharf Use: Respondent Commissioner of Customs argued that petitioner was liable for wharfage dues upon receipt or discharge of the exported goods by a vessel engaged in foreign trade, regardless of the non-use of government-owned or private wharves.

• Statutory Construction: Whether bran and pollard produced from milling imported wheat grain are "products of the Philippines" subject to wharfage dues under Section 2802 of the Tariff and Customs Code.

• Statutory Construction: Yes. Bran and pollard produced in the Philippines from milling imported wheat grain are "products of the Philippines" under Section 2802 of the Tariff and Customs Code, and the wharfage dues assessment was proper.

• Statutory Construction: The language of Section 2802 is explicit: it levies wharfage dues on "all articles imported or brought into the Philippines, and on products of the Philippines … exported from the Philippines." One category refers to what is imported; the other mentions products of the Philippines that are exported. As long as goods are produced in the country, they fall within the terms of the section. Petitioner itself had categorically asserted in its petition before the Court of Tax Appeals that it produces bran and pollard "in the process of milling" wheat grain into flour. To exclude what petitioner calls "waste" resulting from the production of flour processed from imported wheat grain would require an unduly strained reading of the statute. The first and fundamental duty of courts is to apply the law; construction and interpretation come only after it has been demonstrated that application is impossible or inadequate without them. The law is clear and must be obeyed. Moreover, fidelity to legislative purpose requires that the scope of the statute not be contracted through ingenious argument; if petitioner were to prevail, subsequent pleas seeking exclusion from the coverage of the Tariff and Customs Code would likewise be entitled to sympathetic consideration, frustrating the clear legislative mandate. The interpretation should not be at war with the end sought to be attained, and the gates to undue restriction of the Act's coverage must remain closed.

• Plain Meaning Rule / Verba Legis — Where the language of a statute is clear and explicit, courts must apply the law as written; construction and interpretation come only after it has been demonstrated that application is impossible or inadequate without them. The Court applied this doctrine by holding that Section 2802's reference to "products of the Philippines" plainly covers all goods produced in the country and exported, including bran and pollard, regardless of the origin of the raw materials or their characterization as "waste."
• Fidelity to Legislative Purpose — Statutory construction must remain faithful to the legislative purpose; what Congress intended is not to be frustrated, and the interpretation should not be at war with the end sought to be attained. The Court relied on this principle to reject petitioner's attempt to narrow the statute's coverage, warning that accepting such an ingenious argument would invite further exceptions and undermine the legislative mandate.
• Reasonable Interpretation / Common Sense in Statutory Construction — While statutory construction involves the exercise of choice, the temptation to roam at will and rely on predilections as to what policy should prevail is to be resisted; the search must be for a reasonable interpretation, using common sense in construing laws as saying what they obviously mean. The Court invoked this principle to emphasize that familiar statutory language should be confined to its usual signification and that interpolation must be eschewed while evisceration is avoided.

• "The first and fundamental duty of courts, in our judgment, is to apply the law. Construction and interpretation come only after it has been demonstrated that application is impossible or inadequate without them." — This passage, quoting Justice Moreland, articulates the Court's starting point in statutory construction: plain application precedes interpretation, and only when application is impossible may courts resort to construction.
• "It does take a certain amount of hair-splitting to exclude from its operation what petitioner calls 'waste' resulting from the production of flour processed from the wheat grain in petitioner's flour mills in the Philippines." — This statement captures the Court's rejection of petitioner's argument that bran and pollard, as byproducts of milling imported wheat grain, fall outside the statutory phrase "products of the Philippines."
• "What Congress intended is not to be frustrated. Its objective must be carried out. Even if there be doubt as to the meaning of the language employed, the interpretation should not be at war with the end sought to be attained." — This passage states the fundamental postulate of fidelity to legislative purpose, which the Court used to foreclose attempts at contracting the scope of the statute through ingenious exceptions.

• Lizarraga Hermanos vs. Yap Tico, 24 Phil. 504 (1913) — Cited for Justice Moreland's formulation that the first duty of courts is to apply the law, and that construction comes only when application is impossible or inadequate. The Court relied on this as the foundational principle governing its refusal to adopt petitioner's strained reading of Section 2802.
• Procter & Gamble Phil. Manufacturing Corp. vs. Commissioner of Customs, L-22819, April 27, 1967, 19 SCRA 883 — Cited by the Court of Tax Appeals in sustaining the Commissioner's assessment. The cited portion of Justice Bengzon's opinion established that wharfage dues are assessed against cargo discharged by a vessel engaged in foreign trade and are distinct from harbor fees or berthing charges on the vessel.
• Rosehen vs. Ward, 279 US 337 (1929) — Cited for Justice Holmes's reminder that "there is no canon against using common sense in construing laws as saying what obviously means," supporting the Court's approach of confining statutory language to its usual signification.

• Section 2802, Tariff and Customs Code (1957) — This provision levies, collects, and pays a charge of two pesos per gross metric ton as a fee for wharfage on "all articles imported or brought into the Philippines, and on products of the Philippines … exported from the Philippines," with specified exceptions for certain commodities (coal, lumber, cement, guano, minerals and ores of base metals, sugar molasses, among others). The Court held that bran and pollard, as goods produced in the Philippines and exported, fall squarely within the phrase "products of the Philippines" and are not among the enumerated exceptions, making petitioner liable for the wharfage dues assessed.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Villamor, and Makasiar, JJ., concurred.