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DEL CASTILLO CASE

BUREAU OF INTERNAL REVENUE VS. MANILA HOME TEXTILE, INC., GR 203057, JUNE 6, 2016

FACTS: Manila Home Textile (MHT) was issued a license by the Garments and Textiles Export Board
(GTEB) to operate a Customs Bonded Manufacturing Warehouse (CBMW); that as a rule, the CBMW
operates by having imported raw materials stored at the warehouse; that these raw materials are duty-
free provided that these are utilized and consumed for the manufacture of its final product, which are
intended for export, as the same would have a different treatment in terms of "tax incentives" than the
regular importations; that investigation of the MHI's importations documents revealed that for the
taxable years 2001 and 2002, the said company made several importations of raw materials used in the
manufacture of its end-product. BIR alleged that the "MHI, through its corporate officers, directors
and/or employees, wilfully under-declared the amount of its purchases and/or importations.

In refutation of the foregoing charges, MHT averred that they merely received on
consignment the raw materials which were brought to the Philippines tax-free; that these raw
materials were then processed at the MHT s customs bonded warehouse and eventually re-exported
as finished handbags, or CMT (cut, made and trim); that if they did not declare the imported raw
materials as purchases, it was because they did not in fact purchase these imported raw materials
which, to repeat, were merely consigned to them tax-free.

HELD: It must be borne in mind that tax exemptions, which respondents obviously want or
desire to avail of in this case, are strictissimi juris. Indeed, taxation is the rule and tax exemption the
exception.Tax exemptions should be granted only by clear and unequivocal provision of law on the
basis of language too plain to be misunderstood, We hold that in this case respondents have utterly
failed to make out even a prima facie for tax exemption in their favor.