BIR Ruling

April 19, 1976 3rd Indorsement Returned to the Chief, Manufactured Tobacco Tax Division, thru the Revenue Service Chief (Specific Tax) the within papers relative to the request of Quality Tobacco Corporation, for a permit to manufacture "Contessa Menthol 100's" cigarettes under the P10.00 per thousand class. cdt It appears in the report of verification conducted by revenue inspectors Ponciano Orbeta and Paulino Santos that Quality Tobacco Corporation has been issued label approval for the manufacture of CONTESSA Menthol 100's cigarettes under the P14.00 per M class, hand packed in 20's and with a maximum retail price of P1.00 per pack, pursuant to Section 137(b) of the Tax Code, as amended by Section 5 of Presidential Decree Nos. 69, 88 and 149; and that despite said approval, there was no actual manufacture of said cigarette brand nor was the same ever placed in the market since the date of authority to manufacture said brand under the P14.00 per M class was granted. It is also stated in the same report that Quality Tobacco Corporation is, in effect, requesting an amendment of the authority granted it on June 23, 1973, insofar as the classification of the cigarette brand Contessa Menthol 100's from P14.00 per M class to P10.00 per M class is concerned. The question to be resolved here is whether the aforesaid request, if granted, will result in the downgrade classification of the Contessa Menthol 100's cigarette product of Quality Tobacco Corporation, considering the provision of Section 137(b) of the Tax Code, as amended by Presidential Decree No. 753 which provides, viz: "There is nothing under this sub-section which allows any downgrade reclassification of tax rates for existing brands of cigarettes duly registered at the time the herein rates become effective." The law is quite clear. Contessa Menthol 100's is an existing brand registered with this Office under the P14.00 per thousand class. The fact that there was no actual manufacture of said cigarette brand nor was the same even placed in the market since the date the authority to manufacture said brand under the P14.00 per M class was granted, is of no moment. At the time Presidential Decree No. 753 took effect on July 27, 1975, the aforesaid cigarette brand was an existing brand registered with this Office at P14.00 per M class. In view of the foregoing, the request of Quality Tobacco Corporation to be authorized to manufacture the aforesaid brand of cigarettes at P10.00 per M class will result in the downgrade reclassification of the tax rates for said brand and, therefore, in violation of the aforequoted provision of Section 137(b) of the Tax Code. Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."