BIR Ruling

March 19, 1969 The Asst. General Manager La Suerte Cigar & Cigarette Factory South Super Highway, Paraaque Rizal Gentlemen : This refers to your letter dated March 12, 1969 stating the following: cdtech "The Chemical Products Corporation has requested us to give away our tobacco wastes, namely tobacco dust and tobacco stems to them for their raw material requirements in the extraction of nicetime and production of organic fertilizers. They have furnished us with a photostat copy of your letter to them dated February 23, 1969 (attached herewith for your reference) granting them special permit and certain-tax-exemption privilege subject to certain conditions. "For purpose of clarification, we would appreciate your answering our query on the following points: "(1) Does your permit to them include tobacco stems aside from tobacco dust? "(2) If the answer to the foregoing question is in the affirmative, are we exempt from the payment of the P0.75 per kilo tax as provided for in Section 136 of our Tax Code if we should get some recovery value from our tobacco wastes (dust and stems)? "(3) Will the tobacco wastes (tobacco dust and tobacco stems) be permitted for removal from our factory as they are and allowed to be denatured only at the Chemical Products Corporation Plant at Bocaue, Bulacan?" In reply, I have the honor to inform you as follows: Under the amendment effected by Section 6 of Republic Act No. 1608 to Section 132 of the Tax Code, re-refuse, stems or midribs were included to come within the purview of the term "products of tobacco" which may be sold in bulk as raw materials by one manufacturer directly to another, without the pre-payment of the tax. Also Section 20(c) of Regulations No. V-39, otherwise known as the Tobacco Products Regulations, as amended, provides, among others, as follows: "(c) Waste of tobacco removed for agricultural or industrial purposes to be inspected, weighed, denatured and invoiced; final disposition of waste tobacco. Only two forms of tobacco may be removed from a factory either for agricultural or industrial purposes without the payment of the specific tax, viz., tobacco stems and tobacco powder. . . .." Accordingly, the special permit granted by this Office to the Chemical Products Corporation on February 25, 1969 to procure wastes of tobacco from L-7 establishments subject to the conditions therein provided includes tobacco stems and tobacco dusts. And inasmuch as the aforesaid Section 132 allows products of tobacco to be removed free of tax for agricultural or industrial use, your sale of bulk tobacco stems and/or tobacco dusts to the aforementioned corporation for the latter's use as raw materials in the manufacture of insecticides and fertilizers is free of tax. Your third query is answered in the affirmative, the same being clearly stated in the letter of this Office dated February 25, 1969 to the Chemical Products Corporation. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue