REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

WARNER-LAMBERT PHILIPPINES,
INC.,
Petitioner,
-

C. T. A. CASE NO. 392S

Vet'S US

COMMISSIONER OF INTERNAL
REVENUE,
Respondent .
X -

This suit
credit

or

J:

total

J:

claim

amounts

represer.t i r.g
erroneously

involves a

the

P171,856.57

fot~

of

of

P449,657. 2 4

manufacturer's
paid

Pet it i or.er
the

by

is

petit ior.er

kno wn

trademarks.
is

domest i c
and

health - care
and

and

for

allegedly
tax

sales
the

year

1983

inclusive.

corporati o n

er.gaged

sale

c e rtain

of

confecti o nery

and

identified

under

different

Among the produc ts sold by petitioner

pharmaceutical

manufactured
Trade

manufacture

pharmaceutical,
products

refund or tax

P277,800.67

and for the three quarters of 1984,

in

for

Corporation

it

soap
by

under the

"Neko"

brand,

Manufacturing Services

<MSTC

for

2 56

short>,

and

domestic

DEC I SION
CTA CASE NO. 392S
- 2corpot~at

ion with office address at

417G Del

Aver-rue,

Quezon City,

processi Yrg and

pac~.agir-rg

cor-rtract

pursuar-rt

<Exh.

I,

to a

pp.

94-103,

Mor-rte

CTA rec. >

it entered into with Park Davies and Company,

Inc.,

whose operation was consolidated with petitioner.

For the year 1983 or all the
and

of

the

fot~

petitioner filed

the

in the total

period

<Exhs.
It
issued

January

A to G-2,
appeat~s

BIR

1984,

its quarterly returns and paid

manufacturer's sales tax on Neko soap and

the same

thereof

q~arters

percentage tax

1,

1983

pp. 77-92,
that

Rulir-rg

to

135-84,

August

30,

1984

1984,

addressed

included

payments for

CTA rec. ).

or-r July 31,

5~

to

respcYrder-rt
MSTC,

wit:
"Gentlemen:
In reply to your letter dated June
28,
1984
requesting
a
ruling
as
to
whether you should be classified as a
manufacturer or contractor,
pleas e
be
informed
that
for
operating
and/or
maintaining a complete line of equipment,
manpower ar-rd facilities for toilet soap
production
for
the
purpose
of
manufacturing your own house brand of
soap e.g.
NEKO soap for your client
Warr-rer Lambert Philippines, Inc., whereir-r
you provide the soap base comprising
97.G~
of the soap and your client the
soap additives ccmprisir-rg 2.4~ thet~eof,
you
come
within
the
purview
of
manufacturer as defined
under Section
187Cx> of the Tax Code.
Accordingly, you
are subject to the 10~ sales tax on the
NEKO
soap
as
prescribed
in
Sections

to

,I

DECISION
CTA CASE NO. 392S
- 3-

192(1) and 199(a) respectively of the Tax

Code. "
<Exh. H, p. 93, CTA rec. >.
In

view

of

letter dated
for a
the

Apri 1

ruling,

18,

1985,

petitioner
requested

amount

soap

it

of

P449,651.00

its

respcndent

allegedly

paid

cot~responding

BIR ruling is beneficial to it,

effect

rett~ oactive

for

et~t~oneously

periods in question and avers that

giver

in

refund or tax credit of percentage taxes in

total

NEKO

said

to

to
the

inasmuch as the

the same should be

the

end

that

it

may

enjoy a refund or tax credit of the manufacturer's

sales
pp.

taxes

erroneously

paid

by

it

<Exh.

K,

106-108, CTA rec. ).

No action having

been taken o n the claim for

refund and to obviate the tolling of the statute of

limitation,
for

petitior.er

filed

the

ir.stant

t~eview.

Respor.der.t

in

h is

answer

ar.d

as

s pecial

affirmative defenses alleges among others,

1.
and,

petition

Petitionet~

therefore,

is

that:

rnanufacturet~

subject to the manufacturer's sales

tax provided under the

2.

admittedly

and

Rev ~nue

Code;

Revenue Rulings are not given retroactive

effect unless expressly so provided;

3.

lr

an

act ion

fot"'

refund

of

taxes,

the

burden of proof is upon th e taxpayer to show that

258

DECISION
CTA CASE NO.

392S

- 4taxes

the

collected.

paid

remitted

ot~

et~ rone o us 1 y

were

Failure to sustain this burden is fatal

to the action for refund as taMes paid are presumed

to have been collected in accordance with law; and
Claims for refund are constr.ted strictly

4.

against the claima nt,

th e same being in the nature

of an exemption.
The main issue presented before this Co urt

is

whether or not petitioner is entitled to the refund

of the amount of P449,657.24 for the year 1983 and
the first three quarters of 1984.
The

applicable

provisions

Internal Revenue Code,

of

the

as amended by P.D.

National
No.

1358,

in part pertinent reads as follows:

Sec.

199.
Percentage Tax on Sales
be
_.!..A:..:r_t:::..,.!!.i.=c:. :l!:...:e::..:s::;.
There shall
levied, assessed, and collected once only
on every original sale, barter, exchange,
and
similar
transaction
either
for
nominal
or
valuable
cor.siderat _ion,
intended to transfer ownership of,
or
title to,
the at~ t icles not covered in
Sect ions 194, 195, 196, 197, 198 and 201,
a tax equivalent to ten (10~) . per centum
of the gross value
in money o f
the
articles so sold, bartered, exchanged, or
transfert~ ed,
such tax to be paid by the
manufacturer
or
producer:
xxx.
<Underscoring supplied.>
o::::..:..f_.....;O=t~h~e:.!r
_

Petitioner
inadvertently
which

is

contends
paid

supposed

that

percentage
to

be

paid

entitled to the refund the reof.

beca.tse
tax
by

on

it

has

Neko

soap

MSTC,

it

is

On the o ther hand,

DECISION
CTA CASE NO. 392!5
- !5-

respondent

insists

petitioner

that

being

manufacturer is subject thereto.

We find petitioner's contention well - taken.
into
payments f::.r

petitioner's

percentage

the periods lmder review,

tax

the reccrd

shows:

TOT~ ~S

AIO.HT
CORRESPIH) Itt;

RTR fi.J,

C. R. fi.J.

DATE

TAXES PAID (p)

TO t1<0 !P)

UST QTR.)
0874426

0886230

4/20/83

1, 092,705.00

41,843.93

(2ND QTR.)
1187002

2259306

7/20/83

1,363,643.00

69,762.53

!3RD QTR.)
1796728

2156664

10/20/83

1,595,897.00

76,300.23

!4TH QTR.)
1889182

9511894

1/20/84

1,178,386.00

89,893.98

T 0 T AL

227,800.67

1984

UST QTR.)
2750783

3612561

3/21/84

3,475,610.00

52,893.90

!2ND QTR.)
275574

3613071

6/20/84

2,683,518.00

81,737.29

!3RD QTR.)
3802031

4602634

9/20/84

2, 173, 418. 00

37,225.38

T 0 T A L
T 0 T AL

<See Exh.

K,

171,856.57

---449,657.24

supra.)

2 60

'

DECISION
CTA CASE NO.

392~

- 6-

And,

analyzing

readily

be

question,

seen

the

to

soap

were

can

periods

the

manufacturer's

Neko

it

schedule,

during

that

petitioner's

corresponding

above

sales

irtcluded

in

taxes
irt

the

total percentage tax payments for said periods.

Of

course the insistence of respondent that petitioner

is liable for the percentage tax is understandable
because
<Pls.

petitioner

see

can

3,

pat~.

However,

rec.>.

safely

is

admittedly

Petition for

manufacturer

Review,

p.

1,

CTA

with respect to the Neko soap,

say

petitioner

that

is

more

of

We
a

distributor rather than a manufacturer.

This is substantiated by petitioner's witness,
particularly Marina Curnagon,

Accounting Supervisor

of MSTC who testified to the effect

engaged

in

toilet

mar.ufactm~ing

are Persona,

Nova,

bills

p~ice

separately
BIR;
filed
tax,
<Exh.

that
a

L>,

via

and

which

that as

provides 97" of raw

sales

invoice

manufacturer's

indicated,

and

remit

wherein

sales
the

and

evidenced

paid
by

Confirmation

the

the

are

to

the

same

manufacturer's
corresponding

Receipts

251

and

BIR

the

tax

fot' the calendar year ending 1983,

retut~r.

as

is

100" of labor and 100" overhead; that it

petitioner

selling

it

MSTC

amor.g

Success and Neko soap;

manufacturer of Neko soap,

materials,

soap,

that

MSTC
sales

returns
Payment

DECISION
CTA CASE NO. 392S
Orders

<Exhs.

year endiYg

L-1

to

as evidenced
and

BI R

the

by the

tax

of

fot~

that

1984,

MSTC

annual

calendat~

the

also

returns and

corresponding

Paymer-.t

Hearing

L-4> ;

December 31,

manufacturer's sales

M>

7 -

filed

paid

sales tax

the

returns

its
tax,

<Exh.

Confirmation Receipts

Oders

<Exhs.

March

12,

to

M-8.

ESee

This

. 1987J>.

and

t. s. Y1.,

testimony

remained undisputed.
Ur-,der
the

BIR

Ruling

manufacturer

subject

to

of

10~

the

135-84,

Neko

soap

sales

tax

MSTC
ay,d
on

is
as

cor-.sidered
SJ..tch,

its

sales

of

facts,

it
of

is
the

product.
From

the

abundar-t ly
one

by

fot~egoing

clear

MSTC

that

and

the

fir-.dir-.g

two

sales

other

by

taxes

it

were

petit ior-.er,

is

paid,
on

the

same i tern.
I t must

be noted

that

under the

Section 199 of the Tax Code,

levied,
original
been

assessed
sale,

and

of

producer

<Sec.

Just ice,

November

1 000 >

collected

to mean the

exchange

Phi 1

aforecited,
only

barter or exchange.

interpreted
the

5,

articles
Ccm.
14,

first

by

Act
1946;

provisions of

the

No.

the tax

once

on

is

every

The terms have

sale,

barter or

mar-.ufact urer

503;

People v.

Op.

ot~

Sec.

of

Pastor,

77

DECISION
CTA CASE NO. 392S
- 8It

will

offered

be

its

this

Court,

case

on

evidence
counsel

the

without

stressed

basis

offering

allegations

in

>.

wh ich
for

of

were

all

respondent

the

his

petitioner
admitted

by

submitted

records

answer

and

<See

his

pleadings,

minutes

held on May 3,

In short,

his evidence,

after

proof as to the truth of his own

session of the Court

CTA rec.

that

of

1989,

the

p.

151,

respondent

failed to present

oral cr otherwise,

in Sltppcrt of his

case.

for

Well-settled

is

judgment

the

proof as

to the

understood
material
party and

on

to

and
to

the

truth

have

his

that

pleadings
of

his

admitted

relevant
t~est

rule

orte

without

prays

oftering

allegations must

the

truth

allegations of
motion

who

for

of
the

all

be
the

opposing

judgment

OYt

t h'e

allegations taken together with such of his own are

admitted

<Bauerman

Evangelista v.

v.

De la Rosa,

Casa,
et.

10

al.,

Phi 1.
76 Phil.

386;
115>.

Respondent may as well be deemed as not questioning

seriously petitioner's entitlement to its claim for
refund

<CoMmonwealth Management & Service Corp.

Commissioner
3232,

June 26,

Commissioner
3213,

July 28,

of

Internal

Revenue,

CTA

Case

v.
No.

1985; Ateneo de Manila University v.

of

Internal

Revenue,

CTA

Case

No.

1989; Ateneo de Manila University v.

DECISION
CTA CASE NO. 392S
- 9-

Commissioner

of

June 5,

4231,

Internal

CTA

Revenue,

1991; and City Bank N.S.

Case

No.

Phil. Banker

v. The Acting ComMissioner of Internal Revenue, CTA

Case No.
of

August

3378,

petitioner

in

1991 >.

30,

its

The allegations

petition

for

review

may

therefore be considered beyond dispute.

Viewed
that

petitioner

soap.
the

in this

light,

is

rtot

We are of

the

the opiniort
of

manufacturet~

Nekc

It necessarily follows that it has sustained

burden of

that

pt~ oving

the

sales tax

thereor

was paid and remitted to the BIR erroneously.

As

to

the

Ruling

135-84

effect

pursuant

suffice

it

argument
should
to

to

148

circular

proves

is

Ccde,

retroactive

where

the

revocatior.,

cases

or

circulars

thereof

the

taxpayer

of Tax

Appeals,

Cor. sequent 1 y,
beneficial

inclir.ed to

grar.t

refund or tax credit.

,.
2.., 6.. 'i

will

be

<ABS-CBN Broadcasting

to

L-52306,
if
the

the

108

ruling

taxpayer,

same must be given retroactive effect.

Court

Tax

rto

or

[1981]).

the

have

in

Court

of

327

retroactive

BIR

only

to

given

BIR

rulings

application

v.

be

that

that

the

Corp.

respor.dent

state

by

prejudicial

not

Sect ion

promulgated

modification

of

SCRA
or
the

Hence, this

petitioner's claim for

DECISION
CTA CASE NO.

392S
-

WHEREFORE,

judgrner.t

is

rendered

in

favor

cf

Respondent is hereby order ed to refund

petit ioY.er.
or credit

10 -

to petitior.er the amount

erroneously

paid

as

manufacturer's

of P44'3,657.24
sales

tax

for

the year 1'383 and the first three quarters of 1'384.

Without pronouncement as to costs.
SO ORDERED.

Quezon City, Metro Manila,

1 '3'32.

lf!t /'--Atnl C. ROAQUIN

Judge
WE CONCUR1

ct~ ~. Gl-Jh.ERNEBTD D. ACOSTA

Presiding Judge

B~LA
DADIVAB~~RRALEB
Acting Associate Judge

,I

265

..

'

DECISION
CTA CASE NO.

392~

- 11 C E R T I F I C A T I 0 N

hereby

certify

that

this

decision

was

reached after due consultation between the members

of

the

Court

of

Tax

Appeals

in

accordance

with

Section 13, Article VIII of the Constitution.

<t~G.~
ERNESTO D. ACOSTA
Presidir,g Judge
Court of Tax Appeals

266