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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-13032 August 31, 1959
PHILIPPINE-AMERICAN DRUG COMPANY, petitioner,
vs.
COLLECTOR OF INTERNAL REVENUE and COURT OF TAX APPEALS, respondents.
Jose F. Ochoa for petitioner.
Assistant Solicitor General Jose P. Alejandro and Attorney Alejandro B. Afurong for respondents.
BARRERA, J.:
Based on a stipulation of facts submitted by the parties, Philippine American Drug Co., petitioner,
and the Collector of Internal Revenue, respondent in CTA Case No. 265 the pertinent portions of
which are quoted hereunder:
2. That during the period from February 14, 1951 to December 31, 1954, petitioner did not
for purposes of computing the advance sales tax on its importations include as part of the
landed cost the difference (P.015) between the amounts actually paid by it to the bank on
said importations computed at the rate of P2.015 for every U. S. dollar and the value of the
imported goods computed at the legal rate of P2.00 for every U. S. dollar;
3. That the difference of P0.015 represents the premium on the dollar charged by the bank
and paid by the petitioner in the purchase of foreign exchange;
4. That in November 4, 1955, respondent demanded from petitioner (Demand No. 13756)
the payment of the sum of P10, 243.13 as deficiency advance sales tax, . .;
x x x x x x x x x
9. That the only question involved in this case is whether or not the difference of P0.015,
representing the premium on the dollar charged by the bank to the importer-petitioner and
paid by it in the purchase of foreign exchanged (U. S. dollar), should from part of the landed
cost of the imported articles for purposes of computing the advance sales tax, assuming that
respondent’s ruling dated June 21, 1954, as quoted in the 5th paragraph hereof, was issued
in accordance with law and reflects the correct interpretation thereof;
x x x x x x x x x
the Court of Tax Appeals rendered judgment in said case upholding the validity of the decision of the
Collector of Internal Revenue imposing sales tax on the bank premium of P0.015 for every U. S.
dollar purchased by the petitioner Philippine American Drug Co. required for its importations from
February 14, 1951, to December 31, 1954, which tax together with the surcharges thereon,
amounted to P10,243.13. Hence, this appeal by the taxpayer
In demanding collection of the disputed assessment, the respondent Collector of Internal Revenue
invokes Section 183-(B), as amended, of the National Internal Revenue Code which provides:
SEC. 183. Payment of percentage taxes. —
x x x x x x x x x
(B) Sales tax on imported articles. When the articles are imported, the percentage taxes
established in section one hundred eighty-four, one hundred eighty-five, and one hundred
eighty-six of this code shall be paid in advance by the importer, in accordance with
regulations promulgated by the Secretary of Finance and prior to the release of such articles
from custom’s custody, based on the import invoice value thereof, certified to as correct by
the Philippine Consul at the port of origin if there is any, including freight, postage, insurance,
commission, customs duty and all similar charges, plus one hundred per centum of such
total value in the case of articles enumerated in section one hundred and eighty-four;
fifty per centum of such total value in the case of articles enumerated in section one hundred
and eighty-five; and twenty-five per centum in the case of articles enumerated in section one
hundred and eighty-six . . . .
The questions presented herein actually revolve around the nature or characteristic of the above-
mentioned bank premium, that is whether said bank charge falls under the category of the charges
enumerated in Art. 183-(B) of the Tax Code as included in the taxable value of imported goods and,
therefore, must be declared for tax purposes. This case is not one of first impression to this Court,
because in our decision in the case of Genato Commercial Corporation vs. The Court of Tax
Appeals, et al., 104 Phil., 615; 55 Off. Gaz. (12), 2092 the same issue was resolved, thus:
As may be seen, an importer is required to pay in advance the necessary percentage tax on
the articles imported “based on the import invoice value thereof, certified to as correct by the
Philippine Consul at the port of origin if there is any, including freight, postage, insurance,
commission, customs duty, and all similar charges.” In other words, the law requires that it
be included in the assessment not only the import invoice value of merchandise, which
includes freight, postage, insurance, commission, and customs duty, but all other similar
charges which would necessarily increase the landed cost of the merchandise imported,
which, in our opinion, should include the difference of P0.015 paid by petitioner to a local
bank in the purchase of foreign exchange to carry out the importation. Indeed, the intention
of Congress in enacting the above-quoted provision is to include in the assessment all
charges, whether specified or otherwise, which an importer has to pay to complete his
importation.
Invoking the rule of ejusdem generis which provides that “where, in a statute, general words
follow a designation of particular subjects or classes of persons, the meaning of the general
words will ordinarily be presumed to be restricted by the particular designation, class or
nature as those specifically enumerated,” petitioner contends that the difference of P0.015
which it paid to a local bank in the purchase of foreign exchange to cover the importation in
question cannot be included in the assessment for the purpose of determining the advance
sales tax because they are not similar to the charges specifically enumerated in the law.
With this we disagree, for it cannot be denied that the intention of the law is to include all
charges that may be paid by the importer to bring the importation into the country. In other
words, all items of expense that may be incurred by the importer in bringing the importation
into the country and which would necessarily increase the landed cost must be deemed
included in the phrase “all similar charges” mentioned in the law. The doctrine of ejusdem
generis is but a rule of construction adopted as an aid to ascertain and give effect to the
legislative intent when that intent is uncertain or ambiguous, but the same should not be
given such wide application that would operate to defeat the purpose of the law. In other
words, the doctrine is not of universal application. Its application must yield to the manifest
intent of Congress (State vs. Prather, 21 L.R.A. 23, 25)
But it is contended that, even assuming that the difference of P0.015 paid by the petitioner
be considered as a proper charge to be included in the assessment of the advance sales
tax, still the same should be deemed as covered and absorbed by the corresponding mark-
up prescribed by law. This contention is erroneous as being contrary to the clear import of
the law. Thus, the law requires that the importer should pay the advance sales tax based on
the import invoice value of the merchandise, including those charges therein enumerated,
plus one hundred per centum of such total value in the case of articles enumerated in
section one hundred and eighty-four; fifty per centum in case of articles enumerated in
section one hundred and eighty-five; and twenty-five per centum in the case of articles
enumerated in section one hundred and eighty-six.” In other words, the mark-up prescribed
by law is to be considered in addition to the invoice value and all incidental expenses of
importation.
There is no dispute that in the Parity Exchange Law (Republic Act No. 77) the legal rate of
exchange is P2.00 for every U. S. dollar and that this rate has always been maintained by
the government through various proclamations of the President of the Philippines, but the
existence of such legal rate does not preclude the government from including in the landed
cost the difference paid by the importer in the purchase of foreign exchange if such
difference has actually been paid in carrying out the importation. The importer could have
paid the legal rate in purchasing the foreign exchange but if he chooses to pay a different
rate he should declare the difference for that goes to increase the cost in completing the
importation.
As an additional argument not urged in the Genato case, appellant herein cites the change in the
wording of the law as an indication of the intention of Congress to limit the meaning of the phrase “all
similar charges.” Before Section 183-(B) of the National Internal Revenue Code was first amended
by Republic Act 594 on February 16, 1951, it provided that the tax was imposed on imported articles
“based on the total value thereof at the time they are received by the importer, including freight,
postage, insurance, commission, customs duty, and all similar charges.” Republic Act No. 594
amended the section so that the tax on imported articles shall be “based on the import invoice value
thereof, certified to as correct by the Philippine Consul at the port of origin if there is any, including
freight, postage, insurance, commission, customs duty, and all similar charges.” Ascribing undue
import to this amendment, counsel for appellant argues:” Though we might concede that the term
‘total value’ in the provision just quoted could be interpreted to include the premiums that banks
charged the importers for opening letters of credit, we cannot subscribe to the proposition suggested
by the Court of Tax Appeals that the term ‘import invoice value’, which Republic Act 594 introduced
in lieu of the term ‘total’ value, can be so interpreted. For to admit the correctness of said pro position
is to entirely render meaningless the deletion of the term ‘total value’ and the insertion in its stead of
the term ‘import invoice value’ accomplished by Republic Act 594.”
The inference sought to be drawn by appellant from this change in the law is unjustified. Whether we
interpret the phrase “all similar charges” as component part of and therefore already included in the
“total value therefore”, as appellant seems to accept, or we merely add “all similar charges” as a
separate item to “the import invoice value thereof”, as the present law provides, the result will be the
same: the tax is to be based upon the total landed cost of the imported articles, as pointed out in the
Genato case.
Appellant herein further assails the legality of the assessment because, it is claimed, retroactive
effect is being given to the ruling of the Collector of June 21, 1954 which is void for lack of approval
by the Secretary of Finance, and is made to apply to transactions long closed in the books of the
taxpayer. We find no merit in this contention. As the Court of Tax Appeals has rightly said “The
validity or invalidity of the ruling of respondent of June 21, 1954 is not material to this case. What is
material here is the correctness of respondent’s decision of November 4, 1955, which is the decision
appealed from. (See par. 3, Petition for Review.) Even if the ruling of June 21, 1954 is invalid for lack
of approval of the Secretary of Finance, upon which we do not here express an opinion, it would not
affect the correctness of the decision of November 4, 1955, which we have found to be in
accordance with Section 183-(B) of the Revenue Code.”
As to the claim that transactions long closed in the books of the taxpayer can no longer be examined
for the purpose of making a reassessment, suffice it to say that the underassessment of the total
landed value of the imported merchandise was brought about by the importer’s failure to add to the
aforesaid landed value the premium collected by the bank on foreign exchange transactions. Hence,
the same remained undetected until later when, in connection with its claim for credit for overpaid
sales tax, the taxpayer’s record was investigated. Moreover, even granting arguendo that the tax
agent’s inability to make the correct assessment reflected against their efficiency or ability, such fact
alone does not preclude the Government from effecting a corrected assessment upon discovery of
the error. As this court has explicitly ruled:
If in assessing income tax (or other kinds of tax) upon the return of the taxpayer, an error is
made with the result that the tax is underassessed, the Collector has the power to reassess
and collect any additional tax upon the returns for said years, even after the death of the
taxpayer. The government is not estopped by error or mistake on the part of its agents
(Pineda vs. Court of First Instance of Tayabas, et al., 52 Phil., 803).
This of course understood to be without prejudice to the defense of prescription inappropriate cases.
Wherefore, the decision of the Court of Tax Appeals being an accordance with the evidence and the
applicable law, the same is hereby affirmed, with costs against the appellant. It is so ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Concepcion and Endencia,
JJ., concur.
The Lawphil Project – Arellano Law Foundation
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