Misamis Lumber Co., Inc. vs. Collector of Internal Revenue

Concepcion, J.:

The Misamis Lumber Co., Inc. seeks the review of a decision of the Court of Tax Appeals, denying its claim for refund of the sum of P60,153.11, representing the amount paid by said company by way of percentage tax on its sales of lumber and logs to foreign buyers from the 2nd quarter of 1951 to the 2nd quarter of 1953.

It appears that during the aforementioned period, but prior to June, 20, 1953, the petitioner shipped-for export, under terms F. O. B. (free on board) Misamis City Port — on board foreign merchant vessels, in said port, lumbers and logs valued P1,263,215.31, which have been purchased by foreign buyers established abroad; that pursuant to the contract with said buyers, petitioner defrayed all expenses incurred from the sawmills up to the loading of the lumber and logs on board said foreign vessels, whereas all freight and insurance charges were borne by the buyers; that the price of the said lumbers and logs was paid in Manila; that respondent Collector of Internal Revenue collected, and petitioner paid sum of P60,153.11, representing 5 per cent of the gross value of said sales, as percentage tax under section 186 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code; and that petitioners request for the refund of said sum was denied by said respondent. The only issue in this case is whether the aforementioned were subject to the tax of 5 per cent provided for in said section 186. In this connection, it appears that this section and section 187 of Commonwealth Act No. 466 originally read.

SEC. 186. Percentage tax on sales of other articles. — There is levied, assessed, and collected once only on every original sale, barter, exchange, and similar transaction intended to transfer ownership of, or title to, the articles not enumerated in section 184 and 185 a tax equivalent to three and one-half per centum of the gross selling price or gross value in money of the articles so sold, bartered, exchanged, or transferred, such tax to be paid by the manufacturer, producer or importer: Provided, That where the articles are manufactured out of materials subject to tax under this section, the total cost of such materials as duly established, shall be deductible from the gross selling price or gross value in money of the manufactured articles: And provided, further, That where the said articles are consigned abroad by the manufacturer or producer thereof, the shipment shall be subject to the tax established in section 187 and not to the tax imposed by this section.

Sec. 187. Percentage tax on consignment abroad. — Every person, whether he is a merchant or not, and not herein specifically exempted, shall pay a tax of one and one-half per centum of the gross value in money of the commodities, goods, wares , and merchandise consigned by him abroad, such tax to be based on that actual selling price of the things in question at the time they are consigned abroad, whether consisting of raw materials or of manufactured or partially manufactured products or whether of domestic of foreign origin: Provided, That the tax prescribed in this section shall no be imposed on articles upon which the tax prescribed in sections 184, 185, 186, and 189 has previously been paid. The tax upon things consigned abroad shall be refunded upon satisfactory proof of the return thereof to the Philippines unsold, subject to the limitation established in section 309 of this code.

Pursuant to these provisions, sales of the articles referred to in section 186 were subject to a tax of three and one half per cent of the gross sale price, except when the goods sold were "consigned abroad by the manufacturer or producer thereof" which in case the one and one-half per cent tax established in section 187 shall apply.

On October 1, 1946, section 186 was amended by Republic Act No. 41, to read:

There is levied, assessed, and collected once only on original sale, barter, exchange or similar transaction intended to transfer ownership of, or title to, the articles not enumerated in sections one hundred and eighty-four and one hundred and eighty-five a tax equivalent to five per centum of the gross selling price or gross value in money of the articles so sold, bartered, exchanged or transferred, such tax to be paid by the manufacturer, producer or importer: Provided, That where that articles are manufactured out of materials subject to tax under this section, the total cost of such materials as duly established, shall be deductible from the gross selling price or gross value in money of the manufactured articles.

Said Act (Sec. 4), also, repealed the above-quoted section 187. Thus, the sales tax was increased to 5 per cent of the gross selling price and the tax on consignments abroad was abolished. Hence, the tax of 5 per cent was demanded by the collector of Internal Revenue and paid by petitioner herein.

It is urged by the latter that it is exempt from the payment of said tax because the explanatory note to the bill, which, later on, became Republic Act No. 41, said:

Section 4 of the bill repeals Section 187 of the National Internal Revenue Code imposing a tax of one and one-half on consignments abroad, because this tax is essentially an export tax and we should as a matter of policy, encourage exports. (Emphasis ours.)

Petitioner's pretense is untenable, for the lumber and logs above mentioned were consigned abroad by the purchasers thereof, not by herein petitioners. The latter placed said lumber and logs on board foreign merchant vessels in the Port of the City of Ozamis, pursuant to a contract fixing a price F. O. B. merchant vessels in said port. Consequently, petitioner was divested of its title to said property upon the aforementioned delivery in the Philippines, and the buyers, who became the owners of said port. Consequently, petitioner was divested of its title to said property upon before it left our jurisdiction, were the exporters and consignors thereof. Upon the other hand, petitioner paid the sales tax provided in section 186, not the tax on consignments established in section 187, before its repeal by Republic Act No. 41.

It is true, that Republic Act No. 894 amended section 186 to read as follows:

There shall be levied, assessed, and collected once only on every original sale barter, exchange and similar transaction either for nominal or valuable considerations to transfer ownership of, or title to, the articles not enumerated in section one hundred and eighty-four and one hundred and eighty-five a tax equivalent to seven per centum of the gross selling price or gross value in money of the articles so sold, bartered, exchanged or transferred, such tax to be paid by the manufacturer, producer or importer; Provided that where the articles are manufactured out of materials, subject to tax under this section, the total cost of materials, as duly established shall be deductible from the gross selling price or gross value in money of the manufactured articles: And Provided, further, That with respect with all forest products, whether manufactured or in the original form, a tax equivalent to five per centum only of the selling price or the gross value in money shall be levied, assessed, and collected: And Provided finally, That with respect to goods or products shipped or exported abroad, no percentage tax shall be levied there won irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods or products exported.

In the case of operators of sawmills who buy logs for the purpose of sawing and/or cutting them into lumber of standard sizes, the tax prescribed in this section shall be computed on thirty-three and one-third per centum of the gross cost of logs purchased during any given quarter intended for manufacture. Operators or proprietors of sawmills entitled to the privilege of paying the tax on thirty-three and one-third per centum of the gross cost of the logs purchased by them shall keep a complete record of their transactions specially their purchase of logs together with the corresponding vouchers, such as official invoice, in which commercial invoices covering the logs and the names and addresses of the vendors shall be indicated. They shall keep a complete record of lumber purchased by them for sale.

This legislation became effective, however, upon its approval on June 20, 1953, or subsequently to the sales involved in the case at bar, and hence, such sales are not entitled to the benefits of said enactment.

Petitioner, likewise, cites the explanatory note to the bill, which eventually became said Republic Act No. 894, in an effort show that the same is merely declaratory of the intent of Congress when it passed Republic Act No. 41. However, these legislations have been approved by two different Congresses, and, accordingly, neither is qualified to speak about the intent of the other. Again, in the words of its sponsor, Republic Act No. 41 sought to abolish the consignment tax, and hence, not the sales tax. As we said in Soriano y Cia. vs. Collector of Internal Revenue ( 51 Off. Gaz., 4548, 4553-4554).

It should not be forgotten that the consignment tax formerly imposed on exports by section 187 of the Tax Code (now repealed by R. A. 41) is different from the sales tax imposed by Article 186, which has not been repealed. The distinction between the two kinds of tax was pointed out by this court in the case of Vegetable Oil Cor. vs. Trinidad, 45 Phil., 834-835, where we held:

That the consignment tax is not a sales tax is, however, too obvious for argument; the fact that is provided for in the same section as the sales tax does not necessarily make it so. There is all the difference in the world between a consignment and a sale. As stated by counsel for the appellee, the tax on consignments is a privilege tax pure and simple; it is a tax on the business of consigning commodities abroad from this Islands.*** If the tax were one on sales we would readily agree that the sales, in order to be taxable in the Philippines must be consummated there.

When the above case was decided, the sales tax and the consignment tax were both provided in section 1459 of the Administrative Code. Later, obviously to avoid confusion, the legislature separated the two taxes, the sales tax having been provided under Section 184, 185, and 186 of the Internal Revenue Code, while the consignment tax placed under Section 187. The latter section was subsequently repealed by Republic Act No. 41, so as the consignment tax on exports no longer exists, while sales tax remains.

Petitioner contends that the tax who sells goods intended for export would be to nullify the legislative intent behind the repeal of the tax on consignment abroad which is to encourage exports. The argument is fallacious. The law subjects to the payment of the sales tax not the buyer who intends to export what he buys, but the seller, because such sale is domestic and therefore liable for the payment of the sale tax in this country. (Emphasis ours.) Lastly,

The rule is recognized elsewhere that the legislature cannot pass any declaratory act or act declaratory of what the law was before its passage, so as to give it any binding weight with the courts. A legislative definition of the word as used in statute is not conclusive of its meaning as used elsewhere; otherwise the legislature would be usurping a judicial function in defining a term (11 Am. Jur., 914) (Quoted in Pastor M. Endencia and Fernando Jugo vs. Saturnino David [193 Phil., 696, 49 Off. Gaz., 4822, 4825].)

Wherefore, the decision appealed from is hereby affirmed, with costs against the petitioner. It is so ordered.

Bengzon, Paras C.J., Padilla, Montemayor, Reyes, A., Bautista Angelo, Reyes, J.B.L., Endencia, and Felix, JJ., concur.