CIR vs CA (GR No.

107135)
Facts: Petitioner Central Vegetable Oil Manufacturing Co., Inc. (CENVOCO) is a manufacturer of edible and coconut/copra meal cake and such other coconut related oil subject to the miller's tax of 3%. Petitioner also manufactures lard, detergent and laundry soap subject to the sales tax of 10%. In 1986, petitioner purchased a specified number of containers and packaging materials for its edible oil from its suppliers and paid the sales tax due thereon. After an investigation conducted by respondent's Revenue Examiner, Assessment Notice was issued against petitioner for deficiency miller's tax in the total amount of P1,575,514.70 CENVOCO requesting for reconsideration of the above deficiency miller's tax assessments, contending that the final provision of Section 168 of the Tax Code does not apply to sales tax paid on containers and packaging materials, hence, the amount paid therefor should have been credited against the miller's tax assessed against it - that since packaging materials are not used in the milling process then, the sales taxes paid thereon should be allowed as a credit against the miller's tax due because they do not fall within the scope of the prohibition. Respondent wrote CENVOCO regarding its position stating that since the law specifically does not allow taxes paid on the raw materials or supplies used in the milling process as a credit against the miller's tax due, with more reason should the sales taxes paid on materials not used in the milling process be allowed as a credit against the miller's tax due. There is no provision of law which allows such a credit-to-be made. CENVOCO filed a petition for review with the Court of Tax Appeals, which came out with a decision in favor of CENVOCO. Appealed to the Court of Appeals, the said decision was affirmed. Issue: 1. Whether or not a reversal of the ruling is violative of the rule on nonretroactivity of rulings of tax officials? 2. Whether or not the sales tax paid by CENVOCO when it purchased containers for its milled products can be credited against the deficiency miller's tax. Held: 1. NO. According to petitioner, to hold, as what the Court of Appeals did, that a reversal of the aforesaid ruling would be violative of the rule on

non-retroactivity of rulings of tax officials when prejudicial to the taxpayer (Section 278 of the old Tax Code) would, in effect, create a perpetual exemption in favor of CENVOCO although there may be subsequent changes in circumstances warranting a reversal. In the case, well-entrenched principle that the government is never estopped from collecting taxes because of mistakes or errors on the part of its agents, but this rule admits of exceptions in the interest of justice and fair play. Moreso is there no error in allowing the sales taxes paid by CENVOCO on the containers and packages of its milled products, to be credited against the deficiency miller's tax due thereon, for a proper application of the law. 2. NO. The sales, miller's and excise taxes paid on all other materials (except on raw materials used in the milling process), such as the sales taxes paid on containers and packaging materials of the milled products under consideration, may be credited against the miller's tax due therefor. Containers and packaging materials are certainly not raw materials. Cans and tetrapaks are not used in the manufacture of Cenvoco's finished products which are coconut, edible oil or coprameal cake. Such finished products are packed in cans and tetrapaks. *Decision of the CA affirmed.

Floro Cement vs Gorospe, August 12, 1991

Facts: The municipality of Lugait filed with the SC a verified complaint for collection of taxes against the defendant Floro Cement Corporation. The taxes sought to be collected by the plaintiff refers to "manufacturers" and' exporter's "taxes for the period from January 1, 1974 to September 30, 1975, inclusive, in the total amount of P161,875.00 plus 25% thereof as surcharge. Plaintiff alleged that the imposition and collection of these taxes is based on its Municipal Ordinance No. 5, otherwise known as the Municipal Revenue Code of 1974, which was passed pursuant to PD 231 and also Municipal Ordinance No. 10 passed pursuant PD 426,amending PD 231.Petitioner set up the defense that it is not liable to pay manufacturer's and exporter's taxes alleging among others that the plaintiffs power to levy and collect taxes, fees, rentals, royalties or charges of any kind whatsoever on defendant has been limited or withdrawn by Section 52 of PD 463. It also contended that the defendant was granted by the Secretary of Agriculture and Natural Resources a Certificate of Qualification for Tax Exemption, entitling defendant to exemption for a period of 5 years from April 30, 1969 to April 29, 1974from payment of all taxes, except income tax, and which Certificate was amended on November 5, 1974 CQTEP.D. 463-22), entitling defendant to exemption from all taxes, duties and fees except income tax, for five (5)years from the first date of actual commercial production of saleable mineral products that is from May 17, 1974to January 1, 1978; and that RA 3823, as implemented by Mines Administrative Order No. V-25, and P.D. No. 463which are the basis for the exemption granted to defendant are special laws whereas, the municipal ordinance mentioned in the complaint which are based on P.D. No. 231 and P.D No. 426, respectively, are general laws; and that it is axiomatic that a special law cannot be amended and/or repealed by a general law unless there is an express intent to repeal or abrogate the provisions of the special law. The trial court rendered a decision ordering defendant to pay the amount of P161,875 as manufacturer sand exporters taxes and surcharges.

Issue: WON Ordinances Nos. 5 and 10 of Lugait apply to Floro Corporation notwithstanding the limitation on the taxing power of local government as provided for in Sec. 52 of P.D. 231 and Sec. 52 of P.D. 463. HELD: Yes. Floro Cement Corporation holds that since Ordinances Nos. 5 and 10 were enacted pursuant to P.D. No.231 and P.D. No. 426, respectively, said ordinances do not apply to its business in view of the limitation on the taxing power of local government provided in Sec. 5m of P.D. No. 231 [(m) Taxes on mines, mining operations and mineral products and their byproducts when sold domestically by the operator.]. Petitioner likewise contends that cement is a mineral product, relying on the case of Cebu Portland Cement Company vs. CIR. Petitioner further contends that the partial exemption was rendered absolute by Sec. 52 of P.D. No. 463, which expressly prohibits the province, city municipality, barrio and municipal district from levying and collecting taxes, fees, rentals, royalties or charges of any kind whatsoever on mines, mining claims and mineral products, any law to the contrary notwithstanding. On other hand, while respondent municipality admits that petitioner undertakes exploration, development and exploitation of mineral products, the taxes sought to be collected were not imposed on these activities in view of the mentioned prohibition under Sec. 52 of P.D. No. 463. Said taxes were levied on the corporation's business of manufacturing and exporting cement. The business of manufacturing and exporting cement does not fall under exploration, development nor exploitation of mineral resources as defined in Sec. 2of P.D. No. 463, hence, it is outside the scope of application of Sec. 52 of said decree. On the question of whether or not cement is a mineral product, this Court has held that it is not a mineral product but rather a manufactured product. While cement is composed of 80% minerals, it is not merely an admixture or blending of raw materials, as lime, silica, shale and others. It is the result of a definite process-the crushing of minerals, grinding, mixing, calcining adding of retarder or raw gypsum In short, before cement reaches its saleable form, the minerals had already undergone a chemical change through manufacturing process. It appears that the foregoing cases overruled the case of Cebu Portland Cement Company vs. CIR which was cited by petitioner. On the exemption claimed by petitioner, this Court has laid down the rule that as the power of taxation is a high prerogative of sovereignty, the relinquishment is never presumed and any reduction or diminution thereof with respect to its mode or its rate, must be strictly construed, and the same must be coached in clear and unmistakable terms in order that it may be applied. More specifically stated, the general rule is

that any claim for exemption from the tax statute should be strictly construed against the taxpayer. He who claims an exemption must be able to point out some provision of law creating the right; it cannot be allowed to exist upon a mere vague implication or inference. It must be shown indubitably to exist, for every presumption is against it, and a wellfounded doubt is fatal to the claim. The petitioner failed to meet this requirement. As held by the lower court, the exemption mentioned in Sec. 52 of P.D. No. 463 refers only to machineries, equipment, tools for production, etc., as provided in Sec. 53 of the same decree. The manufacture and the export of cement do not fall under the said provision for it is not a mineral product. It is not cement that is mined only the mineral products composing the finished product. Furthermore, by the parties' own stipulation of facts submitted before the court a quo, it is admitted that Floro Cement Corporation is engaged in the manufacturing and selling, including exporting of cement. As such, and since the taxes sought to be collected were levied on these activities pursuant to Sec. 19 of P.D. No. 231,Ordinances Nos. 5 and 10, which were enacted pursuant to P.D. No. 231 and P.D. No. 426, respectively, properly apply to petitioner.

COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS G.R. No. 115349 April 18, 1997
Facts: ADMU Institute of Philippine Culture is engaged in social science studies of Philippine society and culture. Occasionally, it accepts sponsorships for its research activities from international organizations, private foundations and government agencies. On July 1983, CIR sent a demand letter assessing the sum of P174,043.97 for alleged deficiency contractors tax. Accdg to CIR, ADMU falls under the purview of independent contractor pursuant to Sec 205 of Tax Code and is also subject to 3% contractors tax under Sec 205 of the same code. (Independent Contractor means any person whose activity consists essentially of the sale of all kinds of services for a fee regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties of such contractors or their employees.) Issue: 1) WON ADMU is an independent contractor hence liable for tax? 2) WON the acceptance of research projects by the IPC of ADMU a contract of sale or a contract for a piece of work? NEITHER.

Held: Hence, to impose the three percent contractors tax on Ateneos Institute of Philippine Culture, it should be sufficiently proven that the private respondent is indeed selling its services for a fee in pursuit of an independent business. Records do not show that Ateneos IPC in fact contracted to sell its research services for a fee. In the first place, the petitioner has presented no evidence to prove its bare contention that, indeed, contracts for sale of services were ever entered into by the private respondent. Funds received by the Ateneo de Manila University are technically not a fee. They may however fall as gifts or donations which are tax-exempt. Another fact that supports this contention is that for about 30 years, IPC had continuously operated at a loss, which means that sponsored funds are less than actual expenses for its research projects. In fact, private respondent is mandated by law to undertake research activities to maintain its university status. In fact, the research activities being carried out by the IPC is focused not on business or profit but on social sciences studies of Philippine society and culture. Since it can only finance a limited number of IPCs research projects, private respondent occasionally accepts sponsorship for unfunded IPC research projects from international organizations, private foundations and governmental agencies. However, such sponsorships are subject to private respondents terms and conditions, among which are, that the research is confined to topics consistent with the private respondents academic agenda; that no proprietary or commercial purpose research is done; and that private respondent retains not only the absolute right to publish but also the ownership of the results of the research conducted by the IPC.

SALE vs. CONTRACT FOR PIECE OF WORK By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. By its very nature, a contract of sale requires a transfer of ownership. In the case of a contract for a piece of work, the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. If the contractor agrees to produce the work from materials furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. Whether the contract be one of sale or one for a piece of work, a transfer of ownership is involved and a party necessarily walks away with an object. In this case, there was no sale either of objects or services because there was no transfer of ownership over the research data

obtained or the results of research projects undertaken by the Institute of Philippine Culture.