BIR Ruling [DA-467-98]

October 29, 1998 BIR RULING [DA-467-98] Limay Grinding Mill Corporation Unit 2012 Herrera Tower, Herrera cor. Valero Streets, Ayala, North Makati City Attention: Benjamin R . Bernardo President S i r : This refers to your letter dated February 5, 1998 which was referred to this Office by the Department of Finance, bearing on your request for exemption from the payment of excise tax on your importation of 39,467.510 metric tons of cement clinkers from Japan which arrived in Manila on board MV "SV Trader" under Entry No. C227016. It is stated that you were required by the Bureau of Customs to pay the amount of P1,494,983.00 as 2% excise tax pursuant to Section 151 of the Tax Code which you paid under protest on the ground that cement clinker is neither a mineral nor mineral product as defined under Revenue Regulations No. 18-94; and that in support of your contention that clinker is a product of chemical change, you presented various documents showing the production process of clinker. In a letter dated August 26, 1998 sent to this Office by the Philippine Cement Manufacturers Corporation, it is stated that cement clinker is an industrial product produced from highly technical, complex and heat-intensive process of manufacture; that common raw materials such as limestone, sand, shale and iron ore are crushed and ground to desired fineness and composition and then blended thoroughly, subsequently burned to a sintering temperature of 1400 to 1500 degrees centigrade in a cement kiln to achieve the formation of clinker compound; and that as a result of the desired level of incipient fusion through pyro-processing operations, chemical changes occur allowing the production of clinker containing essential calcium silicates and aluminates. Based on the foregoing, clinkers cannot be considered mineral products which, as defined under Section 151 (B)(3) of the Tax Code of 1997, shall mean "things produced and prepared in a marketable state by simple treatment processes such as washing or drying, but without undergoing any chemical change or process or manufacturing by the lessee, concessionaire or owner of mineral lands. Such being the case, your importation of clinkers for the production of cement is exempt from the 2% excise tax imposed under Section 151 (A)(2) of the Tax Code of 1997 but subject to the 10% value-added tax imposed under Section 107 (A) of the same Code. (BIR Ruling No. 055-96 dated May 14, 1996) This ruling is being issued on the basis on the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)