BIR Ruling

September 3, 1976 Replacement Shipment Still Subject to Advance Sales Tax This refers to your letter dated July 22, 1976 requesting that your replacement shipment of 100 compressor units be released from customs custody without the prepayment of the advance sales tax due thereon. From the documents submitted, it appears that you imported a total of 2,720 compressor units from the Tool Research Argentina S.A.I.C. of Buenos Aires, Argentina during the years 1973 to 1975 to be used in the manufacture of your air-conditioning units; that advance sales taxes were paid on said importations; that after the use of said imported compressor units in the manufacture of your airconditioning units, failures were detected on the compressor units thus used; that on account of these failures, you filed a claim for damages from the supplier; that instead of paying damages as demanded, your supplier agreed to replace the compressor units with defects; that on July 19, 1976 you shipped 100 compressor units to the supplier for replacement; and that the replacement units will soon arrive. In reply, I have the honor to inform you that since the compressor units which were found to be defective were already used in the manufacture of your finished products which were sold to your customers, then the advance sales tax paid on such units returned for replacement cannot be applied to the advance sales tax to be due on the brand new compressor units. Such being the case, your request is hereby denied for lack of legal basis. cdtech