CTA Case No. 4169 (Decision)

REPUBLIC OF THE PHILIPPINES � COURT OF TAX APPEALS QUEZON CITY BORDEN INTERNATIONAL PHILS . , C. T.A. CASES NOS. INC. , 4169 & 4329 Petitioner, - versus - THE HONORABLE COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - X DE c I sI 0 N Thi s is an appeal from the denial by the respondent of the prote s t filed by petitioner covering various deficiency assessments for s pecific and annual fixed taxes, surcharges an d interest covering the pel- iod 1982 and 198 4 in the total amount of P654,311.37 for CTA Case No. 4169, and another deficiency s peci �fic tax assess ments, s urcharges and interest covering 1983 a n d 1984 taxable years in the total amount of P3,0 2 8,5 4 9.08 for CTA Case No. 4329 . During the period from 1982 to 198 4 , p e titioner made importations of "met h anol " to be u se d as raw material for its main b u siness of manufacturing resin adhesives. Petitioner p aid advance sa l es tax for all the im p ortations i n v o lved 29 0

-- DECI S ION - CTA CAS ES NOS. 4169 & 43 2 9 - 2- a nd n ot s p ec ifi c ta x . Fo r which r eas on, r es pondent i ss u e d t wo a ssess ment s a ssess ing petitioner for t h e d i �f �f e r e n ce in t he t a x I" a te. Con se qu e ntly, on Se pt e mber 2 6, 1985 r es pond e nt i ss ued Dem a nd Le tter No . 0 0 2 - 8 5 I" e c e i v e d b y t h e p e t i t i o n e r o n J a n u a I" y 1 5, 198 6 d e ma nd i ng p a ym e nt o �f d e fi c ien cy s pe c ifi c ta x in th e amount of P6 2 9, 3 11. 3 7 inclu s i v e of s ur c h a 1� ge and P 2 5 , 000 . 00 for importer' s privilege t ax, in c lu s i ve of s urch a rg e or a total amou n t of P6 5 4 ,3 11 .3 7 . Ag ai n on Janu ar y 27 , 1988, re s pondent i ss ued anoth e r a s sess ment b e aring No. FA S- 4 - 84 - 88 - 00 4 88 in th e a moun t of P3 ,0 2 8,509 . 08 inclu s iv e of s urc h arge. Both a ssess me nt s we r e pr o tested by petitioner o n January 2 0. 19 8 6 and February 26, 1988 , 1� e s p ec ti ve ly. In a l e t ter d a t e d Mar c h 29, 1987 but l"ecei v ed by p e tition e r on May 3 0, 1987, r es ponde n t d e ni e d petit i on er ' s p r ote s t c ov ering t he P 65 4 ,3 11 . 3 7 a ss e ss me nt . Lik e wi s e, in a letter d a t e d Dece mb e r 2 6 , 1 9 88 but r ece i ve d by petitioner o n Dece mb e r 2 9, 198 9, through it s ex ternal a uditor, Joaquin Cunanan & Co . , l"e s pondent d e ni e d t h e p r o tes t . He n ce, th e in s t a nt p e tition f or r ev iew. 291

- DECISION - CTA CASES NOS. 4169 & 4329 - 3- The r"e is no disput e as to the aforementioned facts. The issue raised before this court is whether" Ol" not "met h anol" falls under" the term " solvents " as mentioned under Section 1 53(f ) of the National Intel"nal Hevenue Code, therefore, s ubject to s pecifi c tax. Petitioner alleged that the advance sales tax i t paid pur s uant to Section 193(b) in !"e lation to Section 199(a) of the Tax Code i s the a ppropriate tax because "m et h anol" is not a "solvent" as contemplated under Sec tion 153(f) of the sa me Code. Met hanol i s neither� "m ineral" Ol" "oil" d eriva tive and following the rule in sta tutory co n struction on noscit:ur a s� ocii5' a nd/or ejusdem generi�3 the sai d product doe s not belong to the sa me class of product s en um erate d under Section 153. Hespondent, on the other hand, believed t ha t the article i s so lvent be ca use it is d er ived from min er"al oil lik e all othe r" products enurne r"ate d in t h e said Sect ion 153. In the resolution o �f the i ss ue of this case, we have � to consider fir st whether "methanol" being also a solve n t will fall under Section 153(f) of 292

- DE CI S IO N -- CTA CA SE S NO S. 416 9 & 4329 4- t .l1 e Na t i o 11 a l I n t e rn al He v e nu e Co d e. ~.J e �~ ';) 1� e e �..J i t h t il e p o t : i. t i o n e ,. th at pu t�s ua n t to t h e g e n e 1� a ll y ac ce pt e d p t� in c i p .l e s o f n o s ci t:ur i3 a nd eJusdem g c n e r i s, t h r te rm " s o l v e n t " s hould b e u nder s t oo d w i thin tlt e co nt e xt o 'f t h e c l a s s o r e n urn e 1� a t ion t h a t go es with i t in th e pa rti c ular p t- o v l s i o n of l aw. Sec ti on 15 3 i s ��1 e ,. y c .1. e a ,- � t hat i t cove t�s on l y " n a fi n e q a nd ma n ul <1c t u r e q min e r a l oi .L s an d mot o r f u els " a nd a ll ot h er p1� od u c t s e n um e ra t e d li ke k e r ose ne , lubr i c a ting o il s , n a pt ha , gas o l i n e . d e nat u r e cl al c o t10l fo r mot i ve p owe r , pro cessed ga s , th inn e r , li qu i fl ed p et r o le um g as , di es e l 'f ue l, as ph a l t , � g r e ase, wa xes c3 nd a v i a tion t urbo jet f u e l bel o n g t o th e s a me c l a s s, So l v e nt s me n t i o n e rl i n s u b 1 e t t P ,. ( f ) t o g e t h e ,.. w i t l1 t h i n n e r s h o ul d i k e I,J 1 s e b (: u r'1d e ,.. s to o d to b o u i t h in t h e s a rn e e; lass . :3 o 1 v e n t s a c: 11 <.:> o d i n t h e J. <i 1 1 �~ 11 o u 1 d n o t b e u nd e t�s t oo d in l h el !� o l- ~ inat� y me an i11q but s h o uld b e u nd e, t"s t o o d ~in i t s �t ec: hn ic i:tl s e n se , ot h erw ise, e ve n e a \,J t I' fTI a y f a 11 u n d e ,.. �n ti s L, a t e g 0 ,.. y I,J h i. c IT i s c 1 e a r l y no t t h e l. nte n ti on of� t h e f a w . At li t i s poi nt , e ve n t h e r� e s p o n d e n t a g t" e e �; wi t h t h 1 s i n t e r� p t� e t a t 1 o n b u t l 11 s i s t o d t:l 1at t h e tnet.l ta n o l s ubj ec t o 't' Lh i s. c as e i s '- 293

- DECISION - CTA CA SE S NO S. 41 69 & ~329 - 5- s 0 1 \1 (! 11 t rn a n u �f a c I u r e d out of Ill i rre r� "� i 0 i 1 or rh r> Na tiona l Jrrt.e r� nal Hevenu e Code fa il e d to p r� ovi d e u s wit h s ut� f'icie n t g u idelirr es h o<,r we wi ll c l ass if y "m e t h a no l" . Co n s id ering t hat th e " me than o l" s ubject ot� thi s case i -:. imp o rted, the a p r� o v i s i o n o f t h e TCl r i f f n d C u s t o rn s ~ o d e. i s t h e pes t s ou r�ce of 1] u i d e 1 i n e s for the proper� c 1 ass if Lca tion o f tIt e prod u ct "rn e t h u rro i '' . Ta riff ge n era ll y di vi d e d into s chedul e s, the la tter into ~hapt e r s an d further s ubdiv1 d ed into t arl. ff lteadings. 1 hu s, S chedu l e I pertain �; to ~ive Ani mals, Sc hedl.ll e JI to Vegeta bl e P r�o duct; s a nd so f orth. Mi r:reral Pr� oduct s i s u nder S ched u l t> \1 a il d Pr �o duc.t s of Ch emi c al a nd Allied Indu s tr ies under S (.he cl u 1 e V+ . rn i 11 ~ r� a 1 oil s a nd Re fine d a n d moto r� ft te ls a r�e forincJ � on Chclpter 2/ o f Sc h edu l e V. f'lote tl ra t t he S.:li d cha .pte. r ' in c l r1d es all th e p I" 0 d lJ c t �; fl1 f.l 11 t i 0 II e d ln NcJ t i 0 n a 1 sec t 10 n 153 0 r l he lnLerna J Re ve nu e coJe . i n c ludin ~ s om e known so lvents lihe Berrz ole , Tolu ole, Xy l ole, Nap t l1alene ,�. Phe n o l s r.l f'l d l o \..J a 1 o Ill a t 1 c � . �.. o l v e n t s � ( T a r i t� f He a d i n q t~ 0 s. ? 1 0 7. 2 0' �,)/ ()7 . 3 0 , ~>7 0/ . 60 and 294-

OECI S IOrl - ern c nsEs Nos. ~169 & 4329 - 6- ? 7 1 () . 0030. ) ..~./ Howover, "rnet h a no l" or "methyl alcohol" i s n ot on � of t h o se e nu merated in the sa id Charter 27 bu t i s f o und under Chapter 29, Organic Cit mica l s, of �~ o h ~du l fl VI. Mo re s p ci fically i t is T a r� t f �f Hoading No. :'(), 0/IA, f.\S Acy c lio Alcohol s and th eir II 1 o q e ,, t e d , S u phonflte d , Nit r ate d or Nttr o a nted Dar ivetl vnq, T h if"l is no w T ariff Hea ding No. 2 9 .05 und e r the 1 r ' ff a nd Cu s tom s Code of 1991 w i 1: t' t: h n s arne c 1. r'. H<: r:; i �Fi c e t i o 11 � Ln 'f' (1 c t ' or partictllar s ltipmP.nts in vo l v~ d (E><hibi 1 �.. 3 ) covo n !l d by c. It o h Invoice No. [8 02088 dn ed s~rta mb � r 1 2 , 1984 was class ified by t: lt e Bur ea u of C u st om s as or gani c c hemic al under T nrif f HGa ding No. 29.0 11 at 3 0 % tari f f rate of duty ( f ><II l b l t I - � 4 ) . ll ao -t:: l d.:; b ef! n c l assifie d as min er al o i 1 1111 d e ,. T a ,. i f f He a d i n g ~~ o . 2 7 . 0 7 wh e r e mo s t o f the s olvent de ived minere l oil s are c .l a.,,~ �. if i o d , the t: & l"i f f' ,� .:!1 t n w � 11 o t"''l y be 1 0% du t y : We d '' t1 o t be 1 i v e hn t t h e law int en ds to h ave a .I multJple clam~ific ' ion of t he arne article or p t� oduct and mor e s o to class ify the sa me as t o fall und e t a diffe r� �nt c tego ry depending up on which imp oses t h e h ig h er rate mo r e fav o rabl e to t h e ...~./ Exhibit "G- 0"; Philipp ne Standard � Co!Tmod! ty Cl ass5. flcation, National Economic and Development Authority 1983, p. 176; Ha rmoni zed Corrmodity Description and Coding System, Tariff a nd Customs Code , 1991 p. 75. 295 .. ., .

UECIS IQ N. - CTA CAS ES NOS . 416 9 & ~32 9 7- 1n' vo ,.. rrn rf� 11 t . lo etdo;'' t:h e s ta nd o f t h o pond e nt t lr at "nr P I.h a noJ " s lr otdd b e c l a ss ified d S rrr i.nu r�a l o il � Bea r� inq i n rn ind that la1.1s irnpo si rr g t ax i s c o n st: r� rr ed � s tr �o ngl_y ay ,'1i rr s t th e ta >: i.rrq autiHJ I i t y a nd i. n f avo r-- of t: h e L~ itj ze n, becau se bur� d o n s a rB rr o t to b P i rrr p or,-,'.! d rr o r� p '.' e s tlnr 0 d to b e i mp osed b ey o n cl �..J h a t ti re s tatrrtes ex p r- es slv a nd cl e ar l y� uP (� l fJ r�s..~ / . t h e re i. s n o t.l1 e. r� a 1 t e ,.. n at i \/ e f or the co u r� t but to ca n c e 1 ' u t he as c> e �; ~; nr e n t s i s s o d b y t h e r� e s pon d e 11 t . WHE REFO RE. in vie ':" o f all th e foregoin g . the co;..Jrt h er eby orde r s of t h e two ' assessment s. th~ amou nt of P6 5 4 . 3lt . 37 and P 3 .0 2 B.5 .119 . 08 i s s u .e .d by respond e nt. � without .� . .: pronounc e men t as to c osts . SO ORDERED . Qu e ; on Cl ty, l"l e tro t1l a rri J a , Apr� i l til , 1 99 11 . <?~1;2.~ ERN ES TO 0 . ACOST A P r.e c; i d iqg JudcJe .~ 1 Manila Railr o a cJ Co . vs. Col l ector of Cus toms, 52 P ili 1� CJ50 . 29 6

- - DECISION - CTA CASES NOS. 4169 & 4329 - 8- WE CONCUR: L !J~~~ RAMON 0. DE VEY As soc iate Judg CERT:t:F CA TION I h e r e by certify that this deci sio n was reached after due consultatio n among the members of the Court of Tax Appeals in accordance with Section 13. Article VIII of the Constitution. ~~ � a_~ ER NESTO D. ACOSTA Presiding Judge Court of Tax Appeals �' 297