Ripu~U C of 'J!-H~ Pntltppi'Nei Court ~ ~~ Tal~ Appeals Ol'Ezon City U.SP Tobacco Corporation vs. C.T.A. CA?E No. 1973 Hon, et al.

DECISION -

- 4 - Petitloner 1 s contention is, in substance, that Act No . 2613, otherwise known as the Tobacco Inspection Law, as amended by Republic Act No. 31, me rely empowers the Comrnissionar (formerly Collector) ?f Internal Revenue to inspect only tobacco for domestic sale or for factory use and manufacturers of tobacco for export.

RGvenue Memorandum Circular No. 30-~7 dated August 22r 1967, promulgated as implementing order thereto, insofar as it requires the inspection of ~~actured cigaJ:e ttes for sale and the collection of inspe c tion fees thereon, is therefore invalid . Hence, the amount of Pl7,022 . 33 collected by respon- dent as tobacco inspection fee on 56,741,050 sticks of cigarettes .manufactured by petitioner for domestic sale in the month of September 1967 is refundgble. Respc:1dent Commissioner of Internal Revenu·s, on the other hand; contends that the word 11 tobacco'' and the phrase "tobacco for domestic sale" found in Section 6 (c) _of Act No. 2613, as amended by Republic Act No. 31, comprehend ~anufactured tobacco such as cigars and ciga!ettes for domestic sale and con- sumption.

Consequently, cig~rettes for domestic sale covered by Revenue Memorandum Circular No. 30.67 are subject to inspection and payment of the corres- ponding tobacco inspection fees at the ra t e provide d for in Section 30 2 of the then in f o rce Na t i onol .. J {"' 8 ~ '0 ( - 5 - Internal Revenue Code.

The amount of Pl7,022.33, according to respondent, was therefore collected in accordance with law, hence, not re fundable. The issue us presented by the parties is whether or not Revenue Memorandum Circular No. 30.67 is null and void.

And the resolution of this question depends on whether or not the terms "tobacco" and "tobacco for domestic sale" found in Section 6(c) .of Act No. 2613, otherwise known as the Tobacco Inspection Law, as amended by Republic Act No. 31, include manufactured tobacco products such as cigars and cigarettes. Four -- ,...quare \<lith the case at bar on this FCd .11t, by reason of the exact similarity of the facts, the law involved and the issue litigated, as well as the close identity of the parties, is CTA Case No. 2031 of this Court, entitled "Alhambra Industries, Inc., La Flor de la Isabela, Incorporada, and Columbia Tobacco Company, Inc. vs. Ho~. Misael P. Vera, in his capacity as Commissioner. of Internal Revenue", November 28, 1970.

In that case, this Court unequivocally ruled that the \<lord "tobacco" and the phrase "tobacco for domestic sale" found in Section 6 (c) .of Ac t No . 2013, as amended by Republic Act No. 31, include manufactured tobacco such as cigars and cigarettes. The collection therefore of tobacco inspection fees pursuant to

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DECISION -·

- 6 - Memorandum Circular No. 30.6 7 dated August 22, 1967 6n the ctgars and cigarettes removed by the petitioners therein from their factories for domest:ic cale is legal and justif ied .

Bec ause of its controlling effe~ts on the instant case, and the possibi.J_ity of appeal.- we will quo t e at length from the d e ci ~ ion . Pctii:ioners' .contention that the phr ase "tobacco for domestic sale" refers to leaf tobacco alene is restrictive, misleading, and against sound statutory construction. Webst2r'~ New International Dictionary 2nd edition,- p. 2658, define s tobacco as the leaves of the tobacco plant, prepared by drying and v~ricus manufacturing processes, and '-1 r;; c~d either for smoking or che\ving, or as snuff, or the manufactur ed products from tobacco leave s;smok ing-orche~\.7in~ttoSac-c:D;· C-igarS 1 CigaretteS 1 etC o COlleCti 1Jely 0 From the above definition, it is clear. that the word "tobacco" refers both to leaf and manufactured tobacco such as cigars and cigar ettes .

It is to be noted that either Section 6(c) of Act No. 2613 or the amend- atorv law dci s not make a distinction as t6 the meaning of the \vord 11 tobacco".

Since our la'\.v- making body used the · word tobacco in a general sense without any quali~ication, this Court is powerless to give it a restrictive meaning. Thus, it was held:

".

w • I t i s wcll- s_ettled th t statutor y provisions should not be given a restricted meaning where n0 restriction is .indicated by the terms of the statute itself.

(Lo

Cham v. Ocampo, 77 Phil. 635.) Or, stated i n broader and more fam{liar terms, where the law does not dis- tinguish, neither may we.

(Board of

Assessment Appeals of Laguna v.

Court of

'Ea )~ Appeals , G. R,, No. L-· - 7 - 18125, Hay 31, 1963.)"

(Procter &

Gamble Manufacturing ~orporation v. Comm . of Int . Rev., C.T . A. Case No. 1 861, I'1ay 30, 1970.) .

Moreover, whenever our Revenue Code uses the term "tobacco", \·lhether as manufacturer or cbaler:, it refers to tobacco products. Instances of the legislative intent is manifested in the following provisions: SEC. 19<1.

defined$ x x

X

Words and phrase2

X

X

X

(m) "Manufacturer of tobacco" includes 'every person v;hose· busi=·. ness it is ~o manufacture tobacco or snuff, or who employs othersT.o ffi'anu·- fac(LiJ;e tobacco or snuff, \vhethe_r __ SUc,hiDanufacture be by CUtting 1 p~essing, grinding, or rubbing any raw or leaf tobacco, or otherwise 12..rep,9r in~~ OE._ le~~~ obac<.:?._L_£~ ~fadur_~d or partiaU,y rnanufac- . tured tobacco and snuff, or put ting c\T-) for co-nsumption SCra ~} S 1 refuse, or stems of tobacco resulting from any process of handling tobacco stems, scraps, clippings, or waste 0y sifting, twisting, screening, or by any other process.

X

X

X

X

X

(o) "Wholesale tobacco dealer" cornpreher1ds every pers0i1 .. \;fio for him- self or on commission sells or offers for sale sJ.9.5.:~-.£j~.£§j:_!=e~:. manu- . J.~:;tured tobacco in larger quantities t han two hundred cigars • • • (Under- seer ing supplied.)· If we were to adopt petitioners' restlctjve view of. t.he meaning of tobacco ";;; .ref crr i.ng solely to leaf tobacco, then this Court \1/0uld be declaring the action of our :l aw-making · body a mere exercise in futility, thereby rendering nu9~tory the prov isions of Sections 6(a) ~ - 8 - 6( b), 6( c ), a nd 7 of Act No. 2613, as amended by ·Republic Act No. 31, which read as follows:

"SEC. 6. The Collector of In- t~ rn a l Revenue shall have the power and it shall be his duty:

n~:>) To establish general and l oc a l ruies respecting the classi- f i c ation, mar king, and packing of tobacco for dom jstic sale or factory use and for exportation so far as may be n~cessary to secure leaf tobacco of good quality and to secu~e its handling under sanitary conditions, and to the end that leaf tobacco be not mixed, packed, and rearked as of the same quality when it is not of the same class and origin.

"(b) To establish from time to time adeq~ate rules defining the standard and the type of leaf and manufactured tobacco which may be exported, as well also as the manne- in which standard tobacco, shall be packed.

Before establ ishing the rules above specified, the Collector of Internal Revenue shall give due notice of the proposed rules or amend- ments to those interested and shall give them an opportunity to present their objections to such rules or amendments.

11 (c) To requ i re, whenever it: s ha l l be deemed expedient, t he i n- spection of i nd affixture of inspec- t ion l a hels t o tob~cco r emov8d f rom the province of its orig i n to another or other provinces befo re such re- moval, or to tobac6o for domestic sale or factory use . "

"SEC. 7.

No leaf tobacco or manu- factuLed tobacco shall be exported until it shall have been insoected by the Col lector o f Internal .. Re ve n.• lE.:. or his duly au tho.d zed H~ p r:es<-:n t a tivc ~_) r'"') ~) u ' /..., ~ ! I r i -~ - 9 - and found to be s t andard f or export. Collector of Customs shall no t per- . mit the exportation of tobac co i~om the Philippines unless t he shipment be in conformity with the require- ments s e ~ forth in this Act. The proh ibit i on c ontained in this sec- t ion shal l not apply to waste and refuse tobacco accumulated in the manufacturing process when i t is in- voiced and marked as such waste and r '3fuse."

Fr om the fore going provisions, it can be seen tha t leaf tobacco and tobacco produc t s for export are subject to the tobacco inspec- tion f e es.

If Congress o f the Philippine s really intended to restrict the meaning of the word "tobacco" under Republic Act No. 31, which took effect October 1, 1946 in order to . limit the scope of the ter m tobacco under the law originally passed in 1916 and its imple- ment i ng Regulations Nos. 1 7 and 47, it c ould hav e easily inserted the word "leaf" to modify "tobacco" con ca ined in the amendatory lavl. An examination of Section s 6(a), 6(b) and 7, ~P.~, reveals t.ha t , if ou r l alv..:Il'\a king body inten J ed to limit the coverage of said sec- . tions to either l e af or manufactur r: d tobacco, it qualified the v10r d "tobacco" \'lith such antecedent words.

In Section 6(c) of Act No. 2613 , as amende d , no such qualif f ca t ion was made by Congress, thereby s howing the broad scope and meaning of the word tobacco.

For t.he Court to adop t petitioner ' s. contruction that tobacco means "leaf tobacco" would be engaging in unauthorized judic i al leg islation by rewri t ing the law and inser t ing words' and phrases not found in it.

I t is a sett l e d doctr ine in sta t utor y construction that whe n the language o f a particular sec t ion o f a statute adm i ts o f more than one mean i ng, the e v i de n t purpose and object sought t o be a ttained by the enac t - me n t of the statute as a whole must be given fo r c e and effect.

The inspection, t herefor e, of both leaf and manu f acture d tob e::cco under 3 ,....; 0

I

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- 10 - Section 6(c) of Act No. 2613, as amended, falls within "the legislative object and purpose as manifes ted in the title of the amendatory la\v which reads as follows: "An Act to l_!N?..~ the Hethods of Productior>. and _!;:he Q£.~l:.i~Y of 2:ob_acco i!!;,. _!;.h~ . Philip.eines a~d . to Develop the Export Trade therein." (under.scoring-c.)Urs. > -------- · Eve n the Philippine Tobacco Board (peti- . tionArs are members ther eof) , after Memorandum Circular No.

30-~7 of respondent was prcmul- . gated, adopted Resolution No. 2-67 interpreting the phrase "tobacco for domestic sale" as referring to wholesale disposal of tobacco products by cigar ,md cigarette factories to its dealers while the phrase 11 tobacco for factory use" meant "imported leaf tobacco" intended for us c by cigar and cigarette factories in t he manufacture of tobacco products.

Petitioners claimed that before the enactment of Republ ic Act No. 31, amending Section 6(c) of Act No. 2613, former Collectors and Commissioners of Internal Revenue had never impos ed and collected tobacco inspection fees on cigar and cigarettes removed for domestic sale o ;.~ consumption.

It is argued , therefore, that re spondent should f nllow the i nterpre t ation of his preciecessors who ruled that the word "tobacco" refers to leaf tobacco alone. The fallacy of petttioners' ~rgument lies in the fact that , long before the last war up to ·the pre sent time, tobacco inspection fees we re collected on manufactured cigars for export and, therefore, the word " tobacco" is not applied to leaf tobacco alone · but it also included tobacco p~oducts for export like cigars, chewing tobacco, etc . Petitioners relied mainly on the expla- . natory note to the bill which became Republic Act No. 31 .

They alleged that the word "tobacco" refers to "leaf tobacco" for domeS t-~-~~ Salt:_ Or' f_?..E.._~20f ta ti~!l• rrhe pl1r a~~e "tobacco for ••• factory use" undoubtedly

I

,.

I

.. 11 - refers to "leaf tobacco" under the ;;;mand- atory law (Sec. 6Lc7, Republic Act No. 31)~ Congress, however, omitted the descriptive word "leaf" and us2d the phrase "tob e<c~:o f or do~estic sale or factory use".

Since

tobacco products for expor t ation such as cigars and chewing tobacco are subject to tobacco inspection fees long before the last war and up to the present time, the dele t ion or non-inclusion of the descrip- tive word "leu£" from the cont:coversial phrase "tobacco for domestic sale or factory use" indicates a legislative intent to prob;ct the local consumers of tobacco products. Cer t ainly, our lawmakers cannot be more solicitous of the health and smoking pleasure of foreign consumers of tobacco products than of our own local consumers.

Moreover, con- .

sidering the amendatory law a nd even under the original law, respondent is not precluded from rectifying the erroneous interpretation of the law made by his .tredecessor s.

(Tan

Guan v. Court of Tax Appeals, et al., G.R. No. L-23676, Aptil 27, 1967; Philippine American Drug Co. v. Cell . of Int. Rev., G.R. No. L-13032, Aug . 31, 1959.}. Petitioners assailed the discriminatory ruling of respondent in tha t the uniformity rule in taxation prescribed by the Constituti on was not observed because said respondent failed to impose and collect tobacco inspection fees on i mported cigars and cigarettes. We are not impressed with petitioners' argument on this point because the uniformity rule in taxation r-efers to "geoS{raphical uniformity" and cannot be made applicable to imported cigars and cigarettes which were manufactured outside the Philippines.

We find no cogent and valid reason to mod i fy, much less depart from the conclusion reached in Alhambra Industric~, as expressed in the above - quoted opinion of this Court there, and the same should resolve t he identical problem now brought before us in this appeal. Respondent's Revenue Memorandum Circular No. 30-~7- 375

- 12 - dated August 22, 1967 is therefore legal and valid, and the collection of the tobacco inspection fee in question pur s uant thereto is in accordance with law. Accordingly, the decision of respondent Commissioner of Internal Revenue dated September 26, 1968 denying t he request for refund of petitioner u.s. Tobacco Corporation (now Quality Tobacco Corporation) ?f the amount of ~17,022.33 as inspection fee paid on October 20, 1967 has to be denied.

WHEREFORE , the petition for review filed in the above-entitled case is hereby dismissed at petitioner's. costs.

WE CONCUR:

~REYES

Associate Judg

AMANTE

ILLER

Pr.esiding Judge

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