Case Digest: San Pablo Manufacturing Corporation vs. CIR, G.R.No. 147749

San Pablo Manufacturing Corporation vs. CIR, G.R. No. 147749. June 22, 2006

Subject: Statutory Construction

ACTS

San Pablo Manufacturing Corporation (SPMC) is a domestic corporation engaged in the business of milling, manufacturing and exporting of coconut oil and other allied products. It was assessed and ordered to pay by the Commissioner of Internal Revenue miller's tax

and manufacturer's sales tax, among other deficiency taxes, for taxable year 1987 particularly on SPMC's sales of crude oil to United Coconut Chemicals, Inc. (UNICHEM) while the deficiency sales tax was applied on its sales of corn and edible oil as manufactured products.

SPMC opposed the assessments. The Commissioner denied its protest. SPMC appealed the denial of its protest to the Court of Tax Appeals (CTA) by way of a petition for review. docketed as CTA Case No. 5423. It insists on the liberal application of the rules because, on the the merit’s of the petition, SPMC was not liable for the 3% miller's tax. It maintains that the crude oil which it sold to UNICHEM was actually exported by UNICHEM as an ingredient of fatty acid and glycerine, hence, not subject to miller's tax pursuant to Section 168 of the 1987 Tax Code.

Since UNICHEM, the buyer of SPMC's milled products, subsequently exported said products, SPMC should be exempted from the miller's tax.

ISSUE

Whether or not SPMC's sale of crude coconut oil to UNICHEM was subject to the 3% miller's tax.

RULING

Yes, SPMC's sale of crude coconut oil to UNICHEM is subject to the 3% miller's tax.

Based on the rule of the maxim “Expressio unius est exclusio alterius”, anything that is not included in the enumeration is excluded therefrom and a meaning that does not appear nor is intended or reflected in the very language of the statute cannot be placed therein. The rule proceeds from the premise that the legislature would not have made specific enumerations in a statute if it had the intention not to restrict its meaning and confine its terms to those expressly mentioned.

In this case, the language of the exempting clause of Section 168 of the 1987 Tax Code was clear. The tax exemption applied only to the exportation of rope, coconut oil, palm oil, copra by-products and desiccated coconuts, whether in their original state or as an ingredient or part of any manufactured article or products, by the proprietor or operator of the factory or by the miller himself. The application of “Expressio unius est exclusio alterius” in this case is consistent with the construction of tax exemptions in strictissimi juris against the taxpayer. To allow SPMC’s claim for tax exemption will violate these established principles and unduly derogate sovereign authority.