·~. Publi C 0 F the Phillt>T'Tnes ~Vurt of Tax Appeaj...S Qu£Zon City Manila Electric Company, et al. vs. Alfredo Pio De Roda, Jr., et al.

DECISION

CTA CASE NO. 2789 - 2 - personal property as other persons are or may be hereafter required by law to pay. I n con- sideration of Part Two of the franchise herein granted, to wit:

the right to build and main- tain in the City of Manila and its s uburbs a plant for the c onveying and furnishing of electric current for light, heat, and power and to charge f o r the same, the grantee shall pay to the Cit y of Manila a five per centum of t he gross earnings received from its business under t his franchise i n the City and suburbs:

Provided, That two and one half per centum of the gross earnings received from the business of the line to Malabon shall be paid to the Province of Rizal.

Said

perce ntage tax shall be due and payable at the times s tated in paragraph nineteen of Part One hereof, and after audit 1 like that provided in paragraph twenty of Part One hereof, and shall be in lieu of all taxes and assessments of what- soever nature, and by whatsoever authority upon privileges, earnings, income , franchise, and poles, wires, trans formers, and insulators of the grantee, from which taxes and assessments t he grantee is hereby expressly exempted." (Or-· d inance 44 Municipal Board City of Manila ) "Sec. 1 603 .

Finality of Liquidation . - When articles h ave been entered and passed free of duty or fi nal adjustment of duties made, with subsequent delivery, such entry and passage free of duty o r settlement of duties will, after the expiration of one year, from the date of the final payment of duties, in the absence of fraud or protest, be final and conclusive upon all parties, unl ess the liquidation o f the import entry was merely tentative ."

(Customs And Tariff

Code, as amended) As it appears 1) Petitioner is a holder of a franchi se to construct, maintain and operate elect ric light, heat and power system in the City of Manila and suburbs under Ordinance 44 of the Municipal Board of the City of Manila implementing Act 484 of the Philippine Commission, as renewed and extended by R. A. Nos . 150 and 4159; 2) In the maintenance and operat i on o f the

DECISION -

CTA CASE NO . 2789 - 3 - s ystem the petitioner imports, among other things, machinery, poles, wires, transformers and insulators ; 3 ) During the period o f 1967 to 1972 petitioner at i' variou s occasions i mported poles , wires, insulators and t ransformers which were r elease d from custo ms cus- tody without t he payment of the c orresponding taxes and duties o n the basis of the Collector of Customs • r ul ing in Manila Protest Case Nos. 289 and 290 dated February 4, 1959 exempting pe t i t i oner from such import liabilities under its franchise ; 4) The Collec tor's rul ing notwithstanding, the respondent Commissioner of Customs in a letter dated December 5 1 1975 demanded payment of a n aggregate amount of ~14 ,65 6,44 7 . 00 re- presenting unpaid compensating tax and customs duty on the imported poles, wires , insulators, and transformers dur ing the aforesaid period ; 5) Petitioner disputed the assessment and r equested cancel l ation and withdrawal t her eof for the reasons of the stipulation in Paragraph 9 of i ts f ranchise, supra, alternatively of the fi nality of the liqui dation in Section 1603 of the Tariff and Customs Code, supra ; but, 6) Re spondent Commiss i oner of Customs reiterated the demand under l etter to petitioner dated March 8, 1 976 .

Hence this petition for r eview .

The fi rst question raised requires no tortured ratiocination .

The Supreme Court construing the applicable 128

DECI SION -

CTA CASE NO. 2789 - 4 - scope of the t ax exemption privilege in Paragraph 9 of the petitione r's franchise , supra , in Meralco v . Com- missioner of Internal Revenue (GeR . Nos . L-2 9987 and L-23847, October 22, 1975, 67 SCRA 353 ), a case similar in many or so in tenor and identical in terms invo lving as i t does t he herein peti tioner ruled, "wha t the above provision exempts petitioner from, i s the payment of property tax on its poles, wires , transformers and insulators ; it does not exempt it from the payment of taxes like the one i n question which, by mere necessity or consequence alone, fall upon property . The first sentence of paragraph 9 of petitioner ' s franchise expressly s tates that the grantee like any other tax- payer shall pay taxes upon its real estate, buildings, plant (not including poles, wires, transformers, and insulators) , machinery, and personal property .

These

are direct taxes i mposed upon t he thing or property itself.

Thus, while the grantee is to pay tax on its plant, i ts poles, wi res , tra nsformers , and ins ulators as forming part of t he plant or installation (s igni - ficantly the enumeration is in parenthesis and f o llows t he word 1plant 1 ) are exempt and as such are not to be included in the assessment of property tax to be paid .

The ending clause of pa ragraph 9 providing i n effect that the percentage tax imposed upon 129

DECISION -

CTA CASE NO . 2789 - 5 - petitioner shall be in lieu of 0 all t axes and assessments of whatsoever nature and by whatsoever authori ty• cannot be said to have grant ed it exemption from the payment of compensating tax.

The phrase ' all taxes and assess- ments o f whatsoever nature and by whatsoever authority! is not so broad and sweeping, as petitioner would have us think• as to include the tax in question because there is an immediately succeeding phrase which limits the scope of the exemption to taxes and assessments ' upon the privileges, earnings, income, f ranchise , and poles, wires, transformers, and insulators of the grantee•.

The last c lause of paragraph 9 merel y re- affirms# with regards to poles, wires, transformers. and insulators. what has been expressed in t he first sentence of t he same paragraph namely, exemption of petitioner from payment of property tax. It is a prin- ciple of statutory construction that general terms may be restricted by spec i fic wo rds , with the result that the gene ral language will be limited by the specific language which indicates t he statute's ooject and pur pose . "

(Statutory Construction by Crawford, 1950 ed . p. 324-325) .

(Underscoring supplied) We do not think that any different conclusion ought to follow . In rejecting MERALC0 1 s claim of exemption from the payment of compensat ing t ax on its shipments 130 /

DECISION -

CTA CASE NO . 2789 - 6 - the Court stresses that, 11 lt i s a wel l settled rule or principle in taxation that a compensating tax is not a property tax but an excise t ax (129 A.L.R . p . 223 , 230; 103 A.LeR. 93; Henneford v . Silas Mason Co. 81 L . Ed. 814 ; Connecticut Light & Power Co. v . Walsh 1 A.L . R. 2d, 453; Watson Industries v . Shaw, 69 SE 2d 505 ; Northern P.R. co . v . Henneford (126 ; DC) 15 F. Supp. 302).

Generally stated, an excise tax is one that is imposed on t he performance of an act, the en- gaging in a n occupation, or the enjoyment of a privilege (State v . Brown 1 48 NE 95, 11 2 Ohio St . 590 ; Buckstuff Bath House Co., v. McKinley, 127 s.w. 2d. 802 1 806 1 198 Ark . 91 ; State v . Fields, Ohio Appe NE 2d 744, 747) . A tax levied upon property because of its ownership i s a direct t ax, whereas one levied upon property because of its use is an excise duty .

(Manufacturer ' s Trust Co . v. United States, Ct, CI, 32 F . Supp. 289 1 296 ) • 11 So is the nature of customs duty 11 an indirect tax imposed on the importation or consumption of goods. 11 (Pellock v. Trust Co ., 158 u.s. 601 , 15 Sup . Ct. 912, 39 Ed . 1108 ) levied in a similar manner as compen- sating tax.

Both impositions partake the attribute of excises brought to bear upon the importations. Upon t he record there is nothing to t ake t he present case out of the context of the operative effects of the said rule.

We hesitate to further fa:sh ion an issue into a satisfactorily settled legal situation .

DECISION -

CTA CASE NO . 278 9 - 7 - The fina l ity of liquidation precipitately broached in t he second t owards adding a justifica tion for t e cancellation of the assessment c a n hardly be a reassuring prospect that c a n easily be reconciled with t he sta t u- tory intendmen.t • For , equally determinative of the sense and extent of t he import of Section 1603 o f t he Tariff a nd Customs Code , supra, is t he pro scription of t he "absence o f fraud or protest " which in the in s tant situat ion poses t he rubG The 1 95 9 rul i ngs of the Collector of Customs (Manila Protest Nos . 289 and 290 ) used to infuse validity in effecting t he tax- free re l eases of petitioner's import a tions are largel y nostalgic illusions having been eviscerate d by sub- sequent decisions, but, " Petitioner, however, wa s not candid enough to disclose to the Collector that pur- suant t o the rulings of the Court of Ta x Appeals in CTA Cases 1 493 and 1 495 , appea l ed to the Supreme Court as G. R. Nos. L-29 98 7 and L-23847 1 supra, MERALCO ~s subject to compensating tax .

The Customs officials were unaware of the Tax Cour t decision .

Petitioner

herein, being t he petitioner in those cases, knew of the ruling, yet it suppressed the information , which suppression amounts t o misrepresentation and fraud on the part of petitioner."

(Respondent ' s Brief, p. 7).

The record makes it clear that insofar as the same is 13~

DECISION -

CTA CASE NO . 2789 - 8 - brought to bear upon the circumstances in the case a t bar petitioner's posture would have s t retched too far t he effective r a nge o f expediency as to gravely i mpair t he ends for which t he privilege was granted and un- j ustif i ably fett e rs per fectly legit imate methods o f enfo rce ment and col l ection of t he lawful dues.

Peti-

tione r should have c ome to grip with the facts obtaining, nothing more .

It i s no t therefore difficult to under- s tand respondent 1 s righteous indignation in disr egarding the claim t o any fin a lity of liqu i dation alternatively invoked by the petitioner on its i mportations during t he period in q uestion .

Connected with the question j ust discussed and as interposed by petitioner is the attendant good faith and apparent clout of official panache i n authorizing the tax exemption on the v arious i mportations.

It

might be, and indeed• we think i t should be necessary to r epeat what so often may have been said and what so plainly apply to the case at bar the well-settled rule as readily a ttested by a host of decisions t hat "errors committed by public offi cers cannot be set up as estop- pel against the Government or bar its future action in accordance with l a w."

(Zamora v. CTA & Commissioner of Interna l Revenue~ 36 SCRA 85 : Government v . Monte de Piedad, 35 Phil. 72 8 : Pineda v. CFI 1 52 Phil. 803; Estate of Dela Vina v. Government , 65 Phil . 262 ; Cu 133

DECISION -

CTA CASE NO . 2789 - 9 Unj ieng v. Boa~d o f Tax Appeals, 100 Phil . ; Hilado v . Collector of Internal Revenue, 100 Phil. 288; Canlubang v. Standard Alcohol Co., L-10887, April 1 6 , 1958 ~ Genato v . CTA, 1 04 Phil. 615; Phil . American Drug Co., v . Collector of Internal Revenue, 1 06 Phil. 161; Lewin v. Galang, 60 O. G. 73 66 ; Visayan Cebu Terminal Co . v. Commissioner of Int e r nal Revenue, L-195 30 & L-19 444 . February 27 1 1 96 5). Moreover, exemption "cannot be a llowed unl ess granted in the most e xpl i c it and c ategorical language " (Resins , I nc .

v. Auditor General, L-17388, October 29, 1968 ; Commis- sioner of Interna l Revenue v. Guerrero, 21 SCRA 1 80 ; Union Garments Co . Inc . v . CTA, 45 SCRA 304 ; Rep. Flour Mill s , Inc . v . Commissioner of Internal Revenue 31 SCRA 520), because the "law does not l ook with favor a tax exemption and that he who would seek to be thus privileged must justify it by words t oo plain to be mistaken and too categorical to be misinter- preted. "

(Reagan v. Commissioner of Inter nal Revenue , 30 SCRA 968; Ohio Life Ins. & Trust Co. v. Debolt , 60 Howard 416 ; Commissioner of Internal Revenue v . P . J . Keiner Co. Ltd . , 65 SCRA 153). All that need be stated is any such claim for entitlement to tax exemption must prove compl i ance with the terms and conditions pe remptorily required by law l est the integ- r i ty of collection of lawful dues be placed in the 134

DECISION -

CTA CASE NO. 2789 - 10 - quicksand of sel f - i nter est, so to speak. The pri vi- lege petitioner seeks t o enj oy comes ·as a random quirk and f a lls sharply at odds with the t a x e xemption con- templated in its fran chise.

ACCORDINGLY, the petition for review is hereby dismi ssed at petitioner' s costs.

WE CONCUR:

,...._

• ROAQUIN

Judge

135

Associate Judge

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