BIR Ruling

September 22, 1971 2nd Indorsement Respectfully returned to the Honorable, The Secretary of Finance, Manila, the within letter of Mr. Montano A. Tejam, counsel of Delgado Bros. Hotel Corporation dated August 2, 1971 relative to the importation of his client of articles manifested in the consular invoice as silver-plated wares and flatwares which this Office is subjective to the 70% compensating tax under Section 184(b) of the Tax Code, with the following comment. aisa dc Section 184(b) of the Tax Code provides as follows: "(b) All articles commonly or commercially known as jewelry, whether real or imitation; pearls, precious and se-precious stones, and imitations thereof; articles made of, or ornamented, mounted or fitted with, precious metals or imitations thereof or ivory (not including surgical instruments, silver-plated wares, frames, or mountings for spectacles or eyeglasses, and dental gold or gold alloys and other precious metals used in filling, mounting or fitting of the teeth); opera glasses, and lorgnettes. The term 'precious metals' shall include platinum, gold, silver and other metals of similar or greater value. The term 'imitations thereof' shall include platings and alloys of such metals." It should be noted that under the foregoing provisions of the law, the term precious metals include silver or imitation thereof and the latter also includes alloys of such metals. In the 1966 Edition of Young People's Science Encyclopedia, there appears on page 63 thereof the following, among others, viz.: cdt Some Important Percentage of Main Properties; Alloys Elements Uses Alloy silver Copper 60% Hard corrosion resistants, Nickel 15% silvery color; Zinc 25%; no tablewares, keys, medical silver instruments. In the letter of Mr. Montano A. Tejam to this Office dated June 16, 1971, he stated that the metal base of the silver-plated wares and flatwares imported by his client is an alloy of base metals consisting of 64% copper, 18% zinc and 18% nickel and plated with silver of varying weight per square inch. For the foregoing considerations this Office ruled that the importation in question falls under the category of articles made of precious metals or imitations thereof under the aforequoted provisions of the Tax Code. For certainly that Department will agree with this Office that a piece of punch bowl which cost $127.00 (P825.50) or a piece of coffee urn which cost $326.42(P2,121.73) (part of the shipment) are not mere silver-plated wares. They are in fact silver wares which are subject to the 70% sales tax. This Office is not unmindful of existing rulings on the matter. Indeed, this Office issued a ruling on February 11, 1949 wherein it was held that silver ware made of 18% nickel silver is subject to the 30% (now 70%) tax provided in Section 184 of the Tax Code. However, where the article is merely silver-plated ware, it is subject to the percentage tax of 5% (now 7%) established in Section 186 of the Tax Code, the said article being expressly excepted from the operation of Section 184(b) of the same Code. On July 31, 1954, this Office also ruled that imported silver-plated wares, being considered ordinary articles, are subject to the 7% advance sales, tax, based on the landed cost plus 25% mark-up, in accordance with Section 183(b) and 186 of the Tax Code. In 1963, this Office again issued BIR Ruling No. 63-089 wherein it was held that importation of silver halloware is subject to 50% advance sales tax plus 100% mark-up pursuant to Section 183(b) in relation to Section 184(b), both of the tax Code. However, if the holloware is merely silver-plated, it is subject to 7% advance sales tax established in Section 186 of the Tax Code. cdi Recently, this Office, in a ruling dated April 28, 1969 held that imported dining wares which are plated with 0.11 gram of silver per square inch and are made of an alloy consisting of 20% nickel, 46% copper and 34% zinc are subject to the 50% (now 70%) tax as articles made of, mounted or fitted with precious metals or imitations thereof under Section 184 (b) of the Tax Code. And on May 21, 1969, another ruling was issued holding that importation of silver-plated wares consisting of spoons, forks, knives, etc. which are plated with 0.11 gram of silver per square inch and that the base metal of which the plating is made is an alloy consisting of 20% nickel, 46% copper and 34% zinc, is subject to the 50% (now 70%) sales tax under Section 184(b) of the Tax Code. As could be gleaned from the foregoing the rulings of this Office had been uniform and consistent in holding that silver wares are subject to the 70% tax imposed in Section 184(b) of the Tax Code; that where the articles are merely silver-plated, the same are subject to the 7% sales tax under Section 186 of the same Code; and that silver-wares or articles which are manifested in the commercial or consular invoice as silver-plated ware but which contain 18% nickel are considered articles made of, ornamented, or mounted or fitted with, precious metals or imitations thereof, hence, subject to the 70% tax imposed in Section 184(b) of the Tax Code. In the instant case, it would seem that the counsel of the importer is relying heavily on the declaration of the imported articles in the consular invoice as the sole basis of classifying the imported articles as silver-plated wares and flat wares without giving due regard to the actual physical composition and nature of the articles. For this matter, it may be stated that the Government and the collection of revenues would be at the mercy of importers if the declaration in the consular invoice is considered conclusively as the correct classification of the articles for purposes of computing the compensating or advance sales taxes under the Tax Code. And obviously, it is for this reason that under the Tariff and Customs laws, the Bureau of Customs is authorized to appraise and examine all importations. In view of all the foregoing, it is believed that the ruling of this Office dated July 8, 1971 holding the importation of Delgado Bros. Hotel Corporation of silver wares subject to the 70% compensating tax is in accordance with law. MISAEL P. VERA Commissioner of Internal Revenue