REPURT.LR. of the Pniljprtn£%1 Court of Tax Appeals T '-Ezon City National Dental Supply Il'L:Orporated vs. C.I.A. Case No. 2826 the Cow~Is Si Oner of Customs

DECISION -

~TA

CASE NO.

~- _6 - 2 -

THEREFORE :

Excess Duty Paid:

Excess S. Tax Paid:

P10,166.56 889.57 Pll,056 .. 13

TOTAL AMOUNT

RE.l-'UNDAijLE ON

THI::> CLAIM

There exists in this case no dispute as to the facts. As gathered t r am the aforesaid decision ot respon- dent Commissioner of Customs dated July 14, 1976 (pp. 26- 27, Customs Rec.} the facts are as t ollows: "Records show that a shipment of dental suppli es consisting of 3600 (medium cans - 5 lbs.) Multivest Investment, 550 rolls (150 yds.) in dispenser Nylon Dental floss, Waxed, 6 pkgs. TruPour fl ask, bases only, assorted, and 3 pkgs. TruPour Flask, Collars arrived from Philadelphia, U.S.A. at this P0rt on October 12, 1975 ex SS 'Philippine Rizal', Reg. No. 2035, covered by !jill of Lading No. 4 ard consigned to National Dental Supply, Inc . , he r0 in importer-protestant; that said shipment was declared under Entry No. 98518-75 ; that upon appraisal, multivest was re- class ified trom T.H. No. 68.07 at 2~6 ad val. t o TeH. No. 38.19-B at 50% ad val.; dental tloss trom T.Ho No . 90.17 at 10% ad val . tp T.H. No. 39.02-B at 50% ad val. and trupour tlasks, base and collar, from T .H. No. 90. 17 at 100/o ad val. to T.H. No. 39.07 at 7~6 ad val., thereby re- sul ting t o discrepancies in the amounts ot Pl0,166.56 and F889.57, or a total ot F11,056.13 in the term ot customs duty and advance sales tax, respectively ; these assessment and payment were contested oy the herein protestant claiming t hat duty and tax should have oeen based on the headings providing lower rate ot duty and the corre sponding Protest was tiled on November 15, 1975 claiming refund of the alleged excess pay- ment by reas on thereof."

This decision having affirmed i n toto the prior dec i sion of the Collector ot Customs, petitioner, on August 13, 1976, appealed to this Court. During the hearing of this case, respondent did not question the arithmetical computation ot petitioner in its cla i m for refund in the total amount of P11,056.13 . The only issue is whether or not the total amount of P11 ,056.13 al l egedly cl aimed by petit i oner as over paid duties and advance sales tax on the i mportations of articles consisting of Multivest Investment, Dental Floss

DECISION -

~TA

CASE NO. 2vL6 - 3 - Waxed , TruPour Flask Base and TruPour Fla sk Collars , are j us t ified and l~g al , and, therefore, refundable. As regards the classitication of the item or arti - cle multivest , we find the stand of petitioner t hat it is classifiable under T.H . No. 68 .07 at 200/o ad val. we l l taken .

This i ssue has already been passed upon by us i n the case of National Dental Suppl y, I nc . vs. The Commissioner of Customs C. I .A. Case No . 2757, May 16, 1979, wherein this Court held thus: "The records show that Mul t ivest i s a r eddish powder , consisting of 90% qua r tz and cristobalite, and 10% binders, ma gnesi um oxide and ac id phosphate , wh i ch if mixed in precise pr oportion with water, tur ns i nt o a plastic mass which harde ns in a tew minutes. It contains no gypsum nor any deriva t i ves. Ther efore it contains no plasters. The prin- cipal use of the article in question i s t o make high-heat resist ing and insulating molds into which molten chrome cobalt metal may be cast. Subsidiary uses are tor making cru ci~ bles, masonry tor furnaces, and other purposes where heat re sisting and insulating material is r equired.

(pp. 107- 108, CTA re cords. )"

"It seems clear, therefore, that Multi- vest is a mixture of mineral materi als that are by t hemselves heat-insulating. It is a heat-insulating miner al material, not by mere accident, but ny design , and i t s precise f unction is to store heat.

Only a h ea t - insu~ la t ing materia l can perform this ±unction. Since it is t he general use to whic h ar t icles ar e generally adapted and tor which they are generally used which determi nes their charac- t er withi n the meaning ot the t ariff laws (La Compania General de Tabacos de Fi lipinas vs. United Sta tes, 8 Phil. 438), there seems to be no doubt that Multivest shoul d f all under Ta r iff Heading 68 .07 at 20% ad valorem." As r egards the it:'m Dentc:l Flos s (Nylon), petitiene .- claimed that it should be cl assified under Tariff Heading No. 90. 17 at 10% ad va ..:.. orem i nstead of Tarif f Heading ·No. 39.02- B at 50% ad· .valorem as cl aimed by respondent. The issue i n the class i fi cation of this item has already been settl ed Dy this Court in the af orecited case of

DECISION

CASE NO ..

".TA L. L6 - 4 - Nationa l Dental Supply, Inc. vs. The Commissioner of Customs, supra, wherein this Court again held: "This article is a t hread-l ike material of several extra-tine nylon strands, apparently not twisted along its axis, but waxed to form a thread-l i ke appearance.

It is "spooled" to a length ot 150 yards, such that the oeginning ot the composite strand could be pulled out ot the center ot an i maginary spool. The article is encased in a cylindrical glass container with a metal cover, the center ot which has a hole through which the thread comes through. Outside and near the periphery, one point ot the cover is indented outward to serve as a cutter.

The article is commonly known as "dental floss."

(p. 110, CTA records.)"

"Dental floss is used to remove foreign matter trom proximal surfaces ot the teeth. It works into the crevice between the tooth and gingiva to remove oral debris and inter- rupt plaque formation.

Dental Floss may be used also to detect overchanging fillings and in some cases incipient tooth decay. And be- cause ot its "waxed" quality it may be used as a vehicle for cleaning and polishing compounds, eve n flourides, to reach interproximal and slightly beyond the gingival margins.

Its

secondary function, because of its relative strength and the convenience ot its pr esence in a dental otfice, is for suturing as imita- tion catgut.

The literature recommends steri- lization before use as a suture. (pp. 110-111, CTA r ecords.)"

"As correctly pointed 0ut by respondent, an instrument is a tool, utensil or implement. As such it is capable of being reused over and over for the same purpose without being consumed or becoming useless.

However, suoject imitation catgut is consumed or discarded after each use and, theref0re, has the nature ot "supplies" and not that ot an instrument.

In other words, it is not an instrumeht, not even a dental ins- trument, which can be classified under Tariff Heading 90.17 as claimed by petitioner." "Under Tariff Heading 51.02, under which respondent classified the suoject nylon imita- tion catgut or Dental Floss, imitation catgut made from yarn of man-made tibers covered therein consists ot highly twisted yarn with a heavy dressing to increase its strength and render it waterproof and sometimes translucent. It is sometimes dyed.

Imitation catgut remains in this heading irrespective of its cross-sec- tional dimensions.

(Explanatory Notes to the

tlrussels Nomenclature quoted in Tejam, Commen- taries on the Revised Tariff and Customs Code of the Philippines, Vol. 11, 1973 Edition, p. 901]' .J

DECISION

':TA CASE NO . Lv26 - 5 - "All these products are generally in long l engths, but remain classified here even if cut into short lengths and whether or not put up for retai l sale.

They are used accord- ing to their different characteristics in the manufacture of , among others, brushes and sur- gical sutures.

( E ~planatory Notes to the Brusse ls Nomenclature quoted in Te jam , Ibid. )" "The Dent a 1 Floss in quest ion was impor- t ed in 300 100-gram jars but not certified to be sterile.

According to note 3(a) t o Chapter 30, Tariff and Customs Code, nylon imitation catgut for suturing ~hen sterile is covered by Tariff Heading 30. 05 .

This material is , how- ever, usually put up in anti-septic solutions or in sealed sterile container, unlike the sub ject Dental Floss which is s pooled and en- cased in a cylindrical glass container wit h a metal cover , with a hole through whic; the thread comes through and not certified to be sterile .

And the Brusse l s Explanatory Notes to Tariff Paragraph 30. 05 state that this heading excludes non-sterile suture materials, which materi als according to their nature fall within Schedule XI.

(p. 572, Tejam, Ibid) As stated above, according to the Explanatory Notes to the Brussels Nomenclature, non-sterile nylon imitation catgut for suturing is classi- fied under Tar i ff Heading 51 .02 at 30% ad valorem which covers , among others , imitation catgut of ma n-made fiber materials. " "There v,:.Juld seem to be no doubt , there- fore, that the correct classifi cation of Ny lon Imitat i on Catgut for Suturing and Debris Remo- ving (Dental Floss) is Tariff Heading 51.02 at 30% ad valor em.)

Accordingly, the claim of petitioner that the dental floss is cl2ssifiable under Tariff Heading No. 90.17 at 10% ad valorem not well taken, it is hereby denie d. As regards the impo~t ed items TruPour Flasks Base and TruPour Flask Collar , respondent, with respect to these two items contends that they should be classified under Tariff Heading No. 39.07 at 70% ad valor em, ins- tead of Tariff Heading No. 90.17, at 10% ad valorem, as claimed by pet it ione.':- , because the said i terns are plas- tic materials , and un der Chapter 90 Note 1(e) of the Tariff and Customs Code , as amended , plastic materials, falls under the classificat ion of Tariff Heading No. 39.07 at 70% ad valorem.

On the other hand , petitioner claims t hat for respondent to class i fy TruPour Flask

DECISION -

:A

CASE NO. 2826 - 6 - Base and Collar under Tariff Heading 39 .0? si mply be- cause it is made of plastic is erroneous, since Tariff Heading 39'o'07 is a general provision which may only oe invoked if the article is not specifically covered in any heading of the nomenclature. This arti cle being a dental appliance used as a tool in molding dentures, by specific design and function, petitioner concludes that the correct classification would be under Tariff Heading 90.17 at 10% ad va l orem.

We find petitioner's stand, with respect to the TruPour Flasks Base and TruPour Flasks Col lar , well taken. Tariff Heading No . 90.17, at 10% ad valorem of the Tariff and Customs Code provides as follows: 11 90.17 Medic~l, dental, surgical and veterinary instruments and applia nces (includ- ing electro-medical apparatus and ophthalmic instruments) ••••.••...• ad val. 10%" Under the aforesaid Tariff Headi ng No. 90.17, Montano A. Tejam, in his "Comment aries on the Revised Taritf and Customs Code," Vol. III, pp. 1868~1869, 1973 Ed., stated as follows:

"This heading covers a very wide range of instruments and appliances which, in the vast majority of ~ a ses, are used only in professional practice (e.g., by doctors, surgeons , dentists, veterinary surgeons, midwives, etc.), either to make a diagnosis, or to prevent or treat an illness , or to operate, etc., i.e., generally speaking, to carry out some treatment on the patient. Instruments and appliances tor anatomical or autoptic work, dissection , etc., are also included, as are , under certain conditions, instruments and appliances tor dental laboratories (see (H) below).

The instruments talling within the heading may be made ot any material (including precious metals)."

Although the aforesaid flask and trupour bases are made .of plastic, it could not be denied that these items are dental ap ~ : i ances and/or instruments intended

DECISION -

~ATA

CASE NO,. 2LL6 - 7 - to be used tor dental molding proce sses or outa i n cer- tain objecti ves in dental medicine. (pp. 7 & 14. t . s . n.

Oct. 4 , 1979 ) This fact is supported by the Brochure which says i n effect that t rupour flask , collar and base are instruments or appliances used i n the exerci se of professional pract ice and the Jctual use of said i tems ar e clearly illustrated in pictures 1 to 12 ot t he said brochure .

(see Exh. "J 11 ; see also pp . 12-13, t .s.n., Oct . 4, 1979 . )

The very tact that these items (t rupour t lask, base and collar) are made ot plastic materials will not justify respondent in classifying them under Tar iff Heading No. 39 .07 at 7rJl/J ad valorem because this tari ff heading refers only to those articles which may not be classified under a specific tariff heading .

The Expl a-

natory Note s to the Brussels Nomenclature as commented by Montano Tejam, clearly i l lustrates that said items or articles are dental i nst r uments or applia nces which are used exclusively for t he purpose of de nt ure molding procedure as illustrated i n the said picture of the brochure.

These items (TruPour Flask , Base and Coll ar) ther efor e, having the appellation or designatien as ins t ruments or appliances for dental processes, we are convinced to so hol d that t he same should be classif ied under heading 90 . 17 at 10% ad valorem. However , as regards t he portion corre sponding to the advance sales tax claimed by petitioner to be refund- ed in the amount ot P889.57, we are cont ra i ned to deny the r ef und of the afor esaid advance sales tax in view of the t act that nothi ng i n the recor ds show that peti- tioner had f iled its written cla im f or re f und with the ' .·~ • # ....

:-...,..,..

--

DECISION · ':TA

CASE NO .

L..-.~ 26 - 8 - Commissioner of Internal Revenue and that the latter was not made a party to this case.

(Wise and Company

vs. Commissioner of Cus toms, CIA. Case No. 2717, Dec. 29, 1977. ) And,in a subsequent resolution in the said case of Wise and Company vs . Commissioner of Customs, C.T,A. Case No. 2717 1 dated January 15 , 1979 , upon a motion tor reconsideration, this Court ruled as follows: "We disagree with the arguments presented by petitioner.

The thinking of this Court in thi s matter :J.s otherwise.

In the case of !:5ell Hobart Manufacturing Incorporated vs. Commis- sioner of Customs (CTA Cases Nos. 2750, 2751, 2752 and 2753) the consolidated decision of which was promulgated on March 10, 1978, this Court, i n not granting the claim tor refund of petitioner insofar as the advance sales taxes are concerned and then attirming the decision in this case, has rendered the follow- ing ruling:

x x x.

We note however, that insofar as the claims tor refund of the taxes (advance sa les tax)Lare concerned (sicl7 in the amount of P3,522.00, Pl,444.00, Pl ,449.00 and Pl,224.00 are concerned, the Commissioner of Internal Revenue had not been impleaded in these judicial suits tor recovery of an internal revenue tax erroneously or illegally collected so that this Court did not acquire jurisdiction over hi m.

(~ection 306, National Internal Revenue Code).

As held by this court in the recent cases of Wise and Company, Inc., vs. Rolando G. Geotina , supra; NCR Corpo- ration (Philippines) vs. Commiss i oner of Customs, supra, the Court of Tax Appeals has no jurisdiction as petitioner tailed to ti l e the claim for refund in writing with the Commissioner ot Internal Revenue in accordance with Section 309 of the National Internal Revenue Code, and that said Commissioner ot Internal Revenue has not been made a party respondent.

(Luna

vs. Commissioner ot Customs, CIA Case No. 1947, November 29, 1968; Philippine Wall- board Corp. vs. Commissioner ot Customs, CTA. Case No. 2136, September 30, 1972;

Proctor and Gamble Philippine Manufacturing

CorporatiGn vs. Commissioner of Customs, CTA Case No e 2155, Resolution dated April 15, 1971; Ace Publications, Inc. vs. The · commissioner of Customs and Collector of Customs, L-18808, May 29, 1964, 11 SCRA 147; Tagum Electric Company, Inc., vs. Commissioner of Customs, CTA Case Not 2749, Resolution dated September 13, 1976.)

DECISION -

~TA

CASE NO. 2c....L6 - 9 - t'-w · t t · t · th t th c t e r~l era e our pos1 1on a e our of Tax Appeals did not acquire jurisdiction as petitioner failed to file tDe claim for refund of the advance sales tax in writing with the Commissioner of Internal Revenue in accordance with ~ecti on 306 of the National Internal Reve- nue Code, and that the said Commissioner of Internal Revenue has not been made a party res- pondent.

(Luna vs. Commissioner of Customs, CIA Case No. 1947, November 29, 1968; Philippine Wallboard Corp. vs. Commissioner of Customs, CIA Case No. 2136 September 30, 1972; Proctor

and Gamole Philippine Manufacturing Corporation

vs . Commissioner ot Customs, CTA Case No. 2155, Resolution dated April 15, 1971, Ace Publications, Inc. vs . The Commissioner of Customs and Collec- tor of Customs, L-18808, May 29 , 1964, 11 SCRA 147; Tagum Electric Company, Inc., vs. Commis- sioner of Customs, CTA Case No. 2749, Resolution dated September 13, 1976.)

~ .. Again, in Bell Hobart Manufacturing Incor- porated vs. Commissioner of Customs (CIA Case Nos. 2750 , 2751, 2752 and 2753) supra, we have expla ined thus- We are not unaware of the provisions of the second paragraph ot Section 1708 of the Tariff and Customs Code, as amended by Presidential Decree No. 34, that "if as a result of the refund ot customs duties there would necessarily result a corres- ponding refund of internal revenue t axes on th0 same i mportation, the collector shall likewise certify the same to the Com- missioner who shall cause the said e xcess t axes to be paid, refunded or tax credited in favor of the importer, with advice to the Commissioner of Internal Revenue." However, under t he fundamental rule of statutory construction that all statutes relating to the same subject are to be construed with reference to each other so that effect may be given t o all the provi- sions of each {Madrigal vs. Rafferty, 38 Phil. 414; 51 Am. Jur. 363), the afore- quoted provisions of law should be L , or- preted in connection with Section 306 of the Nation: l Internal Revenue Code. The Commissioner of Internal Revenue being a person who is bound by the judgment to be rendered in a judicial suit for the recovery of any national internal revenue tax alleged te have been erroneously or illegally assessed or collected, he is a party neces- · sary to a complete determination and settle- ment ot the questions involved therein. ~The interpretation that the Commissioner of Interna l Revenue has no more power to determine the legality of a claim for refund of internal I ..

DECI SI ON -

"A CASE NO. 2c_6 - 10 - revenue ta xes such as sales tax and compensating ta x on imported artic les , and thus claims for re fund of sai d taxes which should be filed with the Commiss ioner of Internal Revenue as required under Sections 306 and 309 of the Internal Reve- nue Code are no longer necessary is not justified. The l aw is not clear enough to support such a conclusion .

Such argument and construct ion would mean an implied partia l re peal or a mendment of Sections 306 and 309 of the National Interna l Revenue Code and will certainly affe ct the proce ~ dure for appeal provided f or in Rep. Act No. 1125. This is not the correct i nterpretation because, as stated earlier, Section 1708 of t he Tariff and Customs Code is ambiguous and not clear to this effect. Repeal by implication is not f avored unless it is manif est that the legis lature s o intended i t.

(Commissioner of Customs vs . Es s o Standard Eastern, Inc., 66 SCM 113 . ) And statutes must be construed so as to harmonize all apparent conflict s and give effect to all provisions when- ever possible.

(Iechoco vs. Civil Aeronautics Board, 43 SCF.A 670; The Philippine America n Manage - ment Employees Association, 49 SCRA 194; Jalandoni vs. Endaya, 55 SCRA 261. ) .f' On appeal of our decision and reso lution by petitioner Wise and Company in the aforecited case, the Supr eme Court, in a minute resolution in GR. L-51242 denied the appeal on March 7 , 1980.

WHEREFORE, r espondent Commissioner of Customs is hereby ordere d to refund petitioner , Nationa l Dental Supplyt Inc . , "L11e amount of 179 , 414.96 which corre s ponds only to the exces s duties paid on its imported articles . Wi thout pronouncement as to costs.

I CONCUR:

~C/~

Al\ilANT E P I LLER

Acting Presiding Judge

ROAQUIN .

J udge