BIR Ruling

January 24, 1973 E.G. Tanjuatco & Associates Attorneys and Counsellors-at-law 500-502 Merchants Bank Building Buendia Avenue Ext., Makati Rizal Attention: Mr . Emigdio S . Tanjuatco , Jr . Gentlemen : This refers to your letter dated October 1, 1972 requesting information in behalf of your client, Iligan Cement Corporation as to whether or not said corporation in selling its manufactured cement product is liable to the 7% sales tax. aisa dc In reply, I have the honor to inform you that your client in selling its manufactured cement product is subject to the payment of the 7% tax imposed under Section 186 of' the Tax Code. Cement is not a mineral product contemplated under Section 246 of the Tax Code but is a distinct product, having substantially undergone a chemical transformation through a manufacturing process, hence is not exempt from the sales tax under the provision of Section 188(e) of the Tax Code. In this connection, it may be stated that in the case of Cebu Portland Cement Company v. Commissioner of Internal Revenue, G.R. No. L-18649, February 27, 1965 (13 SCRA 333), it was ruled that while cement is composed of 80% minerals, it is not merely an admixture or blending of raw materials, as lime, silica, shale and others. It is the result of a definite process the crushing of minerals, grinding, mixing, calcining, cooling, adding of retarder or raw gypsum. In short, before cement reaches its saleable form, the minerals had already undergone a chemical change through manufacturing process. This could not have been the state of "mineral products" that the law contemplates for purposes of imposing the ad valorem tax. Section 243 of the Tax Code cannot be applied directly to cement. What is taxable thereunder are the minerals constituting cement, i. e., limestone, silica and shale. Hence, the correct basis of the 1-1/2% (now 2%) ad valorem tax is the market value of the quarried raw materials. (Cebu Portland Cement Co. v. Commissioner of Internal Revenue, G.R. No. L-22605, January 17, 1968, 22 SCRA 56) Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue