LU DO & LY YM CORP v.

CENTRAL BANK
May 31, 1960 | Bayona, J. | Aids to Construction - Dictionaries

PETITIONER: Lu Do & Lu YM Corporation doing business as PH Corn

RESPONDENT: Central Bank of the Philippines, et al.

SUMMARY: Lu Do & Lu YM Corp imported 211,187 pieces of empty cotton bags and were necessarily taxed by the CB. They paid, but
they requested for a refund, asking that the cotton bags were tax exempt, citing the Tax Exemption Certificate issued by the Secretary of
Finance, under “machinery.”

After defining the said word using its plain dictionary meaning, the SC held that the cotton bags hardly falls within its ordinary meaning,
and therefore, it shall not be tax exempt.

DOCTRINE: The Court may use the dictionary to determine the plain meaning of a particular word in the statutory enactment in
question.

FACTS:
1. Between January 1954 and March 1955, the petitioner corporation imported from the US 212 bales or 211,187 pieces of empty
cotton bags for use in the packaging, storage, distribution,and sale of its manufactured corn starch.
2. Central Bank (CB) imposed 17% excise tax on foreign exchange amounting to Php 24,498.43, and the sum of Php 13,654.92
demanded by the Bureau of Customs (BoC) on behalf of the Collector of Internal Revenue (CIR), as 7% sales or compensating tax
on the articles. These were all paid.
3. Philippine Corn Products (PH Corn) filed with the CIR and the CB separate demands for the refund of the aforementioned
amounts, which was denied on the ground that the imported articles were not covered by the tax exemption certificate issued by
the Department of Finance (DoF).
4. PH Corn filed a petition before the Court of Tax Appeals (CTA) for the refund, which was granted.
5. PH Corn also filed an action for recovery before the CFI claiming that the collection of the said amount of 17% excise tax used
was made in violation of RA 35, as amended by RA 901, which was denied. Hence, this petition.

ISSUE/s:
1. WoN the imposition of tax was violative of RA 35, as amended by REA 901 – NO

RULING: SC affirmed the CFI and the CTA’s decision.

RATIO:
1. The exemption covers:
a. “peerceentage tax on sales of manufactured products of manufactured products in respect to which exemption is
granted and on raw materials and supplies to be used exclusively in the manufacture of such products
b. The compensating tax on machinery and equipment to be exclusively used in the new and necessary industry x x x
2. It is being contended byu respondents that if the empty cotton bags do not come with the exempted raw materials, they however
fall in the category of equipment covered by Exemption No. 3 (letter B dito sa taas)
3. SC disagreed with this and used the Webster’s New International Dictionary to define equipment as “materials or articles used in
equipping as for an expedition; the articles comprised in an outfit, as furnishings, or apparatus; equipage; as laboratory equipment
x x x in industry, physical facilities available for production, including buildings, machineries, tools, etc”
4. SC took this together with “machinery” used in Exemption No. 3, the equipment referred to therein must relate to furnishings or
equipage necessary for the operation of the industry.
5. Empty cotton bags actually used in the packaging or preparation for the market of the finished products can hardly be
considered as falling within the group.
6. SC ruled that the refund is indeed not proper in vivew of the conclusion that such importation is NOT within the exemption
granted to PH Corn