CIR V. CA, CTA, & Fortune Tobacco
(BIR Rules and Regulations)
CIR, through RMC 37-93, aims to collect deficiencies onad valorem taxes against Fortune Tobacco following areclassification of foreign branded cigarettes, as per RA 7654.Fortune Tobacco raised the issue of the propriety of theassessment to the CTA, which decided against the CIR. CTAwas affirmed by CA.
Is RMC 37-93 a mere interpretative ruling, therefore notrequiring, for its effectivity, hearing and filing with the UP LawCenter?
1. When an administrative rule is merely interpretative, itsapplicability needs nothing further than its bare issuance for it gives no real consequence more than what the law itself has already prescribed.2. When, upon the other hand, the administrative rule goesbeyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law butsubstantially adds to or increases the burden of thosegoverned, it behooves the agency to accord at least tothose directly affected a chance to be heard, and thereafter to be duly informed, before that new issuance is given theforce and effect of law.
3. A reading of RMC 37-93, particularly considering thecircumstances under which it has been issued, convincesus that the circular cannot be viewed simply as a correctivemeasure or merely as construing Section 142(c)(1) of theNIRC, as amended, but has, in fact and most importantly,been made in order to place "Hope Luxury," "PremiumMore" and "Champion" within the classification of locallymanufactured cigarettes bearing foreign brands and tothereby have them covered by RA 7654.4. Specifically, the new law would have its amendatoryprovisions applied to locally manufactured cigarettes which
at the time of its effectivity
were not so classified as bearingforeign brands. (Prior to the issuance of the questionedcircular, "Hope Luxury," "Premium More," and "Champion"cigarettes were in the category of locally manufacturedcigarettes
bearing foreign brand subject to 45%
tax.)5. Hence, without RMC 37-93, the enactment of RA 7654,would have had no new tax rate consequence on privaterespondent's products.6. Evidently, in order to place "Hope Luxury," "Premium More,"and "Champion" cigarettes within the scope of theamendatory law and subject them to an increased tax rate,the now disputed RMC 37-93 had to be issued.7. In so doing, the BIR not simply intrepreted the law; verily, itlegislated under its quasi-legislative
authority. The dueobservance of the requirements of notice, of hearing, and of publication should not have been then ignored.
CTA, CA affirmed.
CIR v. Telefunken
(BIR Rules and Regulations)
Telefunken is a domestic corporation registered withthe Board of Investments (BOI) as an
export producer on apreferred pioneer status
From October 1979 to September 1981, Telefunken producedsemi-conductor devices amounting to P92,843,774.00 whichwere entirely sold to foreign markets. BIR denied Telefunken’srequest for a tax refund/tax credit from the
which it paid for said amount.Telefunken contended that under the provisions of Section 7 of RA 6135 in relation to Section 8 (a) of RA 5186 (TheInvestment Act), it was exempted from the payment of allnational internal revenue taxes for the period in question,except for income tax.
of RA. 6135
(the law under which Telefunken isregistered) provides that registered export producers in apioneer status are entitled to the
incentives provided insection 8 (a) of RA 5186.
On the other hand CIR argues that the law speaks of firmsregistered under RA 5186
and thus, the privilege of taxexemption does not apply to firms registered under RA 6135.
WON Telefunken, registered under RA 6135 as apioneer export producer, is exempted from payment of the 3%contractor's tax from October 1979 to September 1981.
. The controlling statute is Section 205 (16) of the 1977National Internal Revenue Code which states:
Contractors, proprietors or operators of dockyardsand others.
A contractor's tax of three
of grossreceipts is hereby imposed on the following:xxx xxx xxx(16) Business agents and other independent contractorsincluding private detective or watchman agencies, exceptgross receipts of a pioneer enterprise registered with the Boardof Investments under Republic Act 5186. (As amended by P.D.No. 1457 , June 11, 1978)There is no difference between the gross receipts of pioneer enterprises registered with the Board of Investments under RA 6135 and the gross receipts of registered pioneer enterprises under RA 5186. In factthe CIR himself had ruled in this vein on February 4,1974 in the case of Asian Transmission Corporation.
This 1974 ruling was based the same on Section191(16) of the Tax Code which states:
Incentives to registered export producers
— Registeredexport producers. — Registered export producers unless they alreadyenjoy the same privileges under other laws
shall be entitled to theincentives set forth in parahraphs (h), (i) and (j) of Section 7 of Republic Act Numbered Fifty-one hundred eigthy-six, known as theInvestment Incentives Act; and
registered export producers that are pioneer enterprises shall be entitled also to the incentives set forth in paragraphs (a), (b) and (c) of Section 8
of the said Act
. Inaddition to the said incentives, and in lieu of other incentives providedin Section 7 and in Section 9 of that Act, registered export producer shall be entitled to benefits and incentives as enumerated hereunder:
“ Pursuant to Section 7 of Republic Act No. 6135, that corporation asa registered export producer on a pioneer status is entitled to the sametax incentives granted to a pioneer industry set forth in section 8(a) of republic Act No. 5186. Under this latter provision, a pioneer industry isexempt from all taxes under the National Internal Revenue Code,except income tax.
In other words, both a registered exportproducer on a pioneer status under Republic Act No. 6135 and apioneer industry under Republic Act No. 5186 are entitled to thesame tax exemption benefits under the Tax Code