CTA Case No. 413

DECISION

The petitioner, @ corporation engeged in the importation snd sale of automobiles, has appesied from the decision of respondent holding it liable for the sums Of °32,193.67 and 035,354.18, representing defi- ciency advence sules tax on’ certain automobiles inport- ed by it from 1951 te 1953. The oppeal with respect to the sum of "38,193.67 having been vithdrewn, the only question left fcr our consideration relates te the legal- ity of the assesement of 935,254.12.

in the snswer of respondent the question wes roised es regezds the jurisdiction of this Court te entertain the eppesl, it being slleged that the anpeal wos filed beyond the 30-dey peried prescribed in Section 11, ftepub- lic Act Now 1125. Apparently, respondent besed ite claim of insck of jurisdiction on the silegetion in paragraph 8 of the petition for review that the decision of resp- ondent dated April 4, 1956 was received by petitioner on April 16, 1956. This wes clarified in the emended petition for review filed on Mezeh 16, 1998 wherein it is alleged thet seid decision wes received on April 21, 987 a GeTede CASE WO. 413 1958. Thie fect is admitted by respondent. (See par.

4, Stipulation of Facte.) in view of this development, respondent has apparently abendoned its defense of lack eof jurisdiction, his counsel having failed te meke any mention thereof in their memorandum. At any rate, m examination ef the records shows that the apesl was filed within the stetutery period.

The facts meterial to the case are embodied in the stipuletion of fects subaitted by the parties, which is quoted below te :

i ie id inte fee i i iil il 1 ae a ie ean tld ath * 3 ea “ d atta i eae bee ant 7 ~ 588

DECISION «

C.TeAe CATE MO. 413 "S. That the deficiency sales tax assess- ment mentioned in the next p peragraph hereof was arrived at by the suant to his ruling and computsetion that with respect to the sbovementioned mobiles the 7 the © mark-up is 100% and the pli rate of seles tax is 75% in words, it is the contention thet for advance scles tax pumoses, landed ey ay i

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DECISION =

C.T+Ase CASE NO. 413 a4 The sum of 735,354.15, representing deficiency advance sales tex on 17 Pontiac cars, wes arrived at by respondent as follows le On 2 Pontiac cats which arrived per the 55 Ajox"s Cost per Car a——_wewn- & 4,696.50 P SOx Ene se oy eo enee ae

Tetal == ——-———

TSE tax on 97,206.14 «a000- © 5,479.6] Tax on 11 cars -<--....... © 275.66 Less amount paid ------..-- Deficiency tax

3. On 4 Pontéag ears which exrived per the 53 “Steel Admirals Landed cost pex caP «<----- >» 5,666.60 Pll, » 7,590.90 W , 363.

Om the other hend, it is contended on behalf of petitioner thet, instesd of « deficiency, it wade an overpayment in the sum of *17,272.69, computed as 590 5,

DECISION «

CeTeae CASE NO. 413 follows

1. n2 Bove pow A cars which arrived per the

SS “Ajax

Lended cost per car <e--- © 4,096.50 07 gO44. 73 wnmae © 2,115.43 Son Gn Us Ais Getty decmmen 4,22. % 2 “nm 1l Pontiac cars which errived per the SS *Tunqus*s Lended cost pet Car «aacoe © 4,876, 76 ss * Landed cost per car «es... ' 5,{60,00

3. On 4 Pontise cers which arrived per the

Steel Admirals

.

SO% tex on oP a= © 5,060.60 sa ann P20 ,242. 40 Less emount paid Oeficiency tax e

SiseARY

mvepeeenes Sree aynent on second on=--------- 19, 7H. 51 Deficiency tax on third Totel overpayment =~ ee (Pp. 24-36, Memorendum for Petitioner. } While beth perties eqtee es to the mark-up, they disegree as to the rate of tex applicable on each ship- ment of cars. espondent is of the opinion that all the 17 care in question are texable st the rate of 75%, 2 2,739.49 a91 7 5%,

DECISICN =}

C.T.Ae CASE NO. 413 while petitioner believes thet the first two shipments (13 Pontiac cers) ere tanable at the rate of 20% and = Section 163 (B) and Sections 184 end 185 of the National Internal Revenue Code gevern the taxebility of autorobiles imported for the pumpese of resele.* For convenicnce, Section 183 (B) end the pertinent por- ake SRO yet ee:

the last shipment (consisting of 4 Pontiec care) is tax- able ot the rate of 93%.

a Hi : see 5° afl r ae at ae cat ert a Sigs tie

Bu

"Gece 184,

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Sale, berter, 992 te the compensating tex under Sece 19%, Hey, euch case, the previston fn “ec. FRBR) re~ wa Gite imported for use by the importers therect mazk-ups does net apply.

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rfl 3 fer nowinal or valuehle considerations ine

DECI SICH «

C.TeAe CATE WO. 413 _$/2 il sedis i ii ; a ie if if < : fe be if at ee He tf hi gE "i

DECISION «

G.T.Ae CASE OD. 413 — for purposes of the sales tax, automobiles manu- factured logally ere of three cleeses, vizt (1) auto- mobiles the gross selling price of which does not ex- ceed 95,000,003 (2) automobiles the gross selling price of which exceeds 5,000.00; but does not exceed ©7000. 603 and (3) sutemobiles the'gress selling price of which ex- Geode &7,000,00, The first clees, automobiles vith « gross selling price of not exceeding 95,005.00, are tax~- | able at the mate of 30% (Section 185 (a); the second class, automobiles whose gross selling price exceeds 5,000.00 but does not exceed 87,000.00, are taxable at the rete of SOF (Sete 184 (2))s and the third class, those with a gross selling price in excess of 97,000.00, ate taxable at the rete of 75% (Sec. 184(a)). It is obvious from this classificetion thet the rete of tax appliceble to en automobile (75%, 5G or 3%, es the case may be) is detexmined by the gross selling price or the texeble value of the automobile. In other words, while the percentage tax of 75%, 50% or SOR) es the cease mey bes is based upon the gross selling price or the texeble value of an automobile, the rate of the tax eppliceble is in turn detemmined by the gross sell- ing price or texable velue of such sutomobile.

In the case of impoxted automobiles, Section 163 (R) provides thet the percentage taxes established in Sections 184 and 185 shall be peid jn _advance by the im- perter “based on the import invoice value therecf, « « « including freisht, postage, insurance, commission, cus- toms duty, end all similer charges, plus one hundred per centem of such total #alue in the cose of articles 294

Nese

DECISION «

= 9 « enumerated in section one hundred eighty-four; fifty ex Senta in the case of articles cnumersted in saction one hundred ond eighty-five..." The evident guzpose of the lew is to classify inported autoncbiles in the Same manner as these lecally manufactured, the only dif- .ference being that in the cese of the latter the basis of the tex op the toxeble value is the gross selling price, while inthe cose of the former the tax is besed on the import invoice value, including expenses, plus the corzesponding maxk-up. In other words, in tie case of an igported autonobiles. the basis of the tax or the taxable velue is the total of the import invoice valve, including emenses, plus the proper mazkeup (see Gensto Com. Come ve Coll. of Int. Reve, GoTo. Oe 2I8, Kot. 5S. 1956, affcG. in Ge Re NOs L=-11727, Sent. 29, 1958), and such texable vaiue in turn detesdnes the rate of the tax.

it is the contention of petitioner thet “the landed cost’ is the besis for determining the appliceble oark- up end the applicable rete of sales tax, sitheugh the tax bese or the amcunt subject te tex is the total of the landed cost plus the mark-up.” (Vege 9, Memorandum for Petitioner.) Under this theory, one of the two Pon- tisc cers imported per the SS "Ajax" with a landdld cost of ©4,696.% would be subject to the tax of 3, conputed as follows import invoice value, including freight ine Surance, comission, customs catty, ond 21)" sindles 995 370 eres ae On the assumption thet the rate of wark-up used in the competetion of the tax by petitioner, as shorn above, is correct, to which we do not agree as will be discussed later, the amount of the tex due is only 2,113.43. if the seme caz) were locally wanufsetured oF assenbled end was sold fox the sane price, or at 97 £44.75, the tate of tax applicable would be 75%, and the amount of the tex would be 75% of ¥7,044.75 af 15,283.56, Surely, it could not have been the intention of Cengress to diccrininate against locally menufectured os sssembled cars in favor of imported cars. “nm the con~ trory, the manifest intention of the lew is te give pre~ ferential treatment to lecally manufactured articles.

/ Aecordingly, it ie our opinion thet, es already steted above, the rate of tax applicable to imported core is determined net by the Lended cost alene but by ite tex- able value, which means the lanced cost plus the corres- pending merkeups Having axzived at the cone¢lusion thet the rete of tax appliceble te on inperted cer is determined by ites taxable velue (lended cost plus mazkeup), we now come to the consideration of the question in tegard to the detesminetion of the rete of mazkeup properly appli- cable to imported cars, This is necessery to determine the correctness of the sssessment mede by reependents / eomae for petitioner has correctly stated the mile 596.

DECISION «

CeT.Ae CATE NG. 413 «ll « thet, although the parties have agreed that the rate of mork-up is determined solely by the landed cost, the seme is net binding on this Court it being merely a@ conclusion of lew. (Poge 9, Memozandum for Petitioner. )

We have had occasion to express the same opinion in a.

recent case.

ee eee, Crone Sree Savane sae Sone Pog intezretation of a law given te shes nabadens The obligoaticn of the s is to intexzpret the lew involved in.a Given Gece, « « « #8 it should be intemreted, not a6 the arties would want it interpreted." (Mithi ng Beyan Cooperative Marketing Association vy. Are- NEta, CeTsAe Noe 79, Cot. GB, 1958, ) We shall, therefore, proceed to consider whether or not the corzect rete of mark-up has been applied in this cease notrithstanding the agreement of the parties. Section 183(B) provides for the addition to the lended cost (import invoice value plus expenses) of an i automobile of LOOX of “such total value" in case the automobile is enumesnted in Section 194 and SOW of “such total volue* in case the eutomobile is gnumezsted in Sec- tion 185. ‘het sutomebiles are gnymezgated in Section 184? in Section 1997 An article is gnpwpexated in Section 184 if it is toxable under thet section, Similarly, an article is erumexated in Section 165 if it is taxable under the some section. An article cannot be enumersted in one . section and taxable under another section, As already indicated above, sutomobiles the gross selling price of whieh exceeds 95,( 400 are taxable under Section 184, 1 Referring to the lended cost, or the import in- voice value pilus expenses.

397

SES

Cctane GATE NOs 413

» 32 « while these whose gross selling price does net exceed 95,000.00 exe taxable under Section 195.

in the instant case, in whet section are the 17 Pontiec cars in question enumerated? Let us take the case of the lowest priced car, one of the two Pontiac cers which arrived per the 35 "Ajax". It had a landed cost of 94,696.%. If a mark-up of SOK is added to the landed cost, the texable value would be °7,044.75. (See page 1, supra.) Therefore, it would not be considered enumerated in Section 185; it would come under Section 184 end the rate of tax applicable is 75% ‘Since the taxable value of the car (landed cost plus the mark-up) is more than #7,000.00, it is enumerated in Section 184 and the rete of the mark-up properly applicable is 100%, not SOM. All the 17 Pontiac cars in question are, there- fore, subject to the mork-up of LOOM becouse ali of them have @ taxable value of more than P7000, Tt ise mistake for respondent te consider « car as enumerat in Section 185 and yet texable under Secticn 184. lew leaves no room for doubt that the rete of the mark- up applicable te an imperted eutemobile is determined by the inquiry whether the car comes under Section 164 or under Secticn 165, although the amount of the mark. up, once the sate thereof has been determined, is com- puted on the basis cf the landed costs Maving arrived at the conclusion thet all the i7 Pontiac cars in question are subject to the markeun, of 100% and the percentage tax of 75% of their landed cost plus mark-up, the deficiency tax due from peti- 598 67

DECISION «

C.aT.Ae CASE WO. 843 | | = 13 « titioner is ¥56,968.43, instead of 935,754.18 as assessed by respendent, computed as followss Landed cost of the 17 Ponticc —- * TSK Of 9266,427.82 --~---~-2-----—~ #124,820,64 o FOR Teh FORBGOING COMSIDERATIGIS, the decision appealed from in hexeby modified, ond petitioner is hereby required to pey the sum of °66,968,43. Conse- quently, the cloim of petitioner for refund of the sum ef 17,272.69 is denied, With costes against petiticnes. . 80 ORDERED, Menile, Gecerber 27, 1954, we © OURS 999 bo