Luzon Stevedori Rg Corponation, et al. vs. Oul Commissionrr of Inter al Srventt

DECISION -

CTA CASE NO, 1484 imported articles from custom's custody (Bxhs. A to @, including "xh. M whieh does not show pay- ment of compensating tax, CIA rece, pp. 50-66). The advance sales and compensating taxes covered by Validating Seceipts vos. S5OF, 44653, “OOD, 45007 and 34093 amounting to 719,795.00 were paid on Degember 315 1961 (fxhs. A to Ny CTA rece, pp. 50-54). The records show, however, that re- spondent has not acted on any of petitioner's elsims for refund. Consequently, petitioner appealed to this Court on January 2, 195%. . . The prineipel issues subsitted to this Court for resolution ere the followings

1. Whether or not petitioner is entitied to exemption and refund of the Susbtathens oft tax paid on various ons of engines, spare parts and ae aes t used in repeir and main of its tugboats; and

2. Whether cr not petitioner’ s right to the refund of wy sbakehenes’ on Deceaber’31 ty 1901 hes f Preseribed umer Seetion Savane Code, in tian 309 = Section 396 of the same Cote, Petitioner eontends thet deemie are embraced and inelude@ in the term gergo yesse] under the tax-exemption provisions of Section 19° of the ‘evenue Code, as amended by Nepublic Act No. 3176. Petitioner, therefore, concluded thet the en- gines, spare parte and equipment smported by it and used in the repair and maintenance of its

DECISION «

CTA CASE WO, 1484 3 tugboats are exempt from the compensating tex. This conclusion is reinforced by the argument that, in legal contempletion, the tugboat and « barge loaded with eargoes, the former towing the latter for loading and unloading of a vessel in port, constitute a single vessel.

Respondent opposed petitioner's contention ana insisted that petitioner's tuzboats are not “eargo vessel" because they were used exclusively for towing cargo or passenger vessel. A tugboat according to respondent was not designed and used for carrying and transporting either persons or goods as an independent undertaking. ‘eapondent concluded, therefore, that tugboats are neither — passenger nor cargo vessel within the purview of Section 190 of the Tax Code, as amended by Xe- publie Act No. 3176, which provides as follows: Seo. 190. a ae or preparation of articles subject to specific tex or those for con- In order that the imported engines, spare perts and equipment to be used by the importer

DECISION -

CTA CASE WO, 148% » himself as passenger and/or cargo vessel may be declared exempt from the compensating tex, it is indispensable that the requirements of the anend- atory law must be complied with, namely: (1) the engines end spare parts must be used by the importer himself as a passenger and/or cargo vessels and

(2) the said passenger and/or cargo vessel must be used in coestwise or ocean-going navigation. The question may be askeds are tugboats the equivalent of cargo vessel within the seaning and purview of the term “cargo vessel" specified in Section 190 of the Tax Code, as amended? The answer to the question pesediby the contending parties will resolve the legal question here at issue.

A. tugboat or o tug is defined as follows: a fu-beat is a strongly built power steam or power vessel, used for towing and, now, also used for attendance on vessel. (webster 5 aaa Dictionary, 2nd ed.

A tygbogt is a diesel or steam power vessel designed prina- rily for moving large ships to and from pliers for towing barges and lighters in harbors, Fivers and canals. (Eneyelopedia Interne- tional Grolier, Yel. 18, pe 256.) A tug is a steam vessel built for towing, synonymous with tugboat. (Bouvier's Lav Dictionary.)

+ 281 CTA CASE WO, 14854 b) \ Wntte lexicographers are agreed that tugboat 4s a vessel, they have not considered it as passenger and/or cargo yesge). The amendatory provisions of Nepublic Act To. 3175, sunra, limits the tax exemption from the compensating tax insofer as the imported engines and spare parte ere to be used by the importer hinself as operator of passenger and/or cargo vessel. Con- sequently, where the language of the amendatory statute is clear and unambiguous, it is purpose- less to resort to the rules of statutory inter- pretation. )

Where the la ge of a atatute is n and unam ané we @ clear end definite meaning

EP NF

and the court has no right to = So ass Subs 203, ype 2ORIOS) At any rate, even assuming that tugboats are vessels capable of transporting, by themselves, passengers and/or cargoes, still no evidence was adduced by petitioner to prove that tugboats are passenger and/or cargo vessels used in the ship- "ping industry as an independent business. On the contrary, all] the pleadings of petitioner indicate that it is engaged in business es a atevedore, thet is, the work of unlosding and leading of a vessel in port. Ané towing of barges containing cargoes is @ part of petitioner's un-

DECISION -

CTA CASE WO, 1484 6 dertaking as a stevedore. (sven petitioner's trade name is indicative that its sole and prin- cipal business is stevedoring and lighterage, taxed under Seetion 191 of the National Internal ‘Reveuss Code as a gontractor, and not a person whe transport pessengers or freight for hire which is taxed under Seetion 192 of the sane Code as a common carrier by weter. The forser is subject to the percentage tex of 3% of its gross receipts while the latter is subjeet to 2% only of its gross receipts. In other words, our "evenue Code distinguished a tugboat used in the stevedoring business and a passencer and/or cargo vessel used by @ common carrier by water. This distinetion belies the pretension of petitioner that a tugboat and @ pessenger and/or cargo vessel is one and the same for tex purposes. )

Vtne legislative intent in amending Section 199 of the Tax Code by Nepublic Aet Yo. 3176 is to provide incentive end inducements to bolster the shipping indestry and not the business of stevedor- ing. ‘This intention is sanifested in the spon- sorship speech of Senetor G11 Puyat in pushing the enactment of the bill which became Republic Act Noe 3175. He said:

"Mp. President and gentlenen of the Senate. This is a bill that seeks to give relief to the ship- * 283

DECISION «

cote case Ho. 148% 7 ng industry, and seeks to exempt hem from the payment of excise tax, purchase of articles to be used by tne importer hinself as a passen- ger or cargo vessel, whether coast~ wise or ———- including engines and spare parts of said vessels.

Considering that our shipping indua- try is one of the most basic and one of the industries whieh, sccording te our Committee on Transportation, is operating on the basis of ficat- ing coffins, there is need fer giving incentives and inducements to the — people in the industry te invest in any vessel or in sew quipment."

(Legislative Journal.)

Inasmuch as petitioner is engaged in busi- ness as a stevedore and not in the shipping in- dustry as a common carrier by water, we cannot classify petitioner's tugbeats in the same category as passenger and/or cergo vessels in order to extend to petitioner the wantle of tex iuaunity envisioned by the amendatory lew - Republic Act No. 3176. This notwithstanding, petitioner asserted that “One underlying principle of taxe ation is thet tex laws should be liberally con- strued in favor of the taxpayers and strietly con- strued against the taxing power. In line with this principle, the literal interpretation given by the respondent on ‘eargo vessel’ as used in Sec- tion 190 of the National Internal Revenue Code deserves no serious consideration” (Petitioner's MEMO e, CTA PeC. De 97).

* 284

DECISION ~

CTA CASE NO, 148% The argument that tax laws should be con- strued liberally in fewor of the taxpayers and strictly against the taxing power is not appli-. cable to laws involving the grant of tex exeuption. The grant of tax exemption is an act of legislative garage because it is in derogation of the sovereign power of the State to tax. As such, laws granting tex exemption are construed strictly against the taxpayer and liberally in favor of the taxing power (Comm. of Internal ®evenne vy. Guerrero et als, Geli. Now L-20942, September 22, 1967;

Phil. Acetylene Co., Inc. ¥. Comm. of Internal Sevenue, S.!. Soe i-19707, August 17, 1967;

Abad v. Court of Tax Appeals et al., O.%. “os. L=20834 and [-20903, Oetober 19, 1966; F550 Stan- dard ‘astern Inc. v. Act. Comm. of Customs, 0.%. No, L-21841, October 28, 19665 Comm, of Internal Revenue v. Viseyan lectric Co., et al., S.i. No. L-22611, May 27, 1968).

After 4isposing of the first issue in favor of respondent and sgeinst petitioner, it is idle and purposeless to diseuss the second question at issue.

WHERBPORE, finding petitioner's various claims for refund amounting to ®33,%+2.13 without sufft-

DECISION «

CTA CASE BO, 1h84 9 Gient legal justification, the said claims have to be, as they are hereby, denied. With costs against petitioner.

50 ORDERED, Quezon City, October 21, 1968.

Miike Ro ALVAREZ

Associate Judge Va

af conccRs

Presiding Judge

RAMON Le. AVANORSA

Associate Judge