BIR Ruling [DA-536-A-99]

September 17, 1999 BIR RULING [DA-536-A-99] MEMORANDUM TO: The Assistant Commissioner Excise Tax Service This refers to the internal revenue tax case of Fortune Tobacco Corporation involving the amount of P1,296,689.76 representing late payment of inspection fees for 1998 together with the corresponding surcharge and interest, details of which are as follows: Local Export Total Inspection Fee P4,802,716.00 P84,076.00 P4,886,792.00 Surcharge 1,200,679.00 21,019.00 1,221,698.00 Interest 74,784.04 207.72 74,991.76 P1,275,463.04 P21,226.72 P1,296,689.76 Records of this case disclosed that Fortune Tobacco Corporation failed to pay the inspection fees in 1998 on cigarettes removed from its establishment within the time prescribed under Section 146 of the Tax Code of 1997, which provides: "Sec. 146. Inspection Fee . For inspection made in accordance with this Chapter, there shall be collected a fee of Fifty centavos (P0.50) for each thousand cigars or fraction thereof; Ten centavos (P0.10) for each thousand cigarettes or fraction thereof; Two centavos (P0.02) for each kilogram of leaf tobacco or fraction thereof; and Three centavos (P0.03) for each kilogram or fraction thereof, of scrap and other manufactured tobacco. "The inspection fee on leaf tobacco, scrap, cigars, cigarettes and other tobacco products as defined in Section 147 of this Code shall be paid by the wholesaler, manufacturer, producer, owner or operator or redrying plant, as the case may be, immediately before removal thereof from the establishment of the wholesaler , manufacturer , owner or operator of the redrying plant . In case of imported leaf tobacco and products thereof, the inspection fee shall be paid by the importer before removal from customs' custody. "Fifty percent (50%) of the tobacco inspection fee shall accrue to the Tobacco Inspection Fund created by Section 12 of Act No. 2613, as amended by Act No. 3179, and fifty percent (50%) shall accrue to the Cultural Center of the Philippines." LibLex that it can be adduced from its (Fortune Tobacco Corporation) letter-reply that its failure to comply with the above-cited section was not entirely due to its own fault, since Fortune Tobacco Corporation has been faithfully paying inspection fees on cigarette products under then Section 143 of the Tax Code, as amended, which requires that inspection fees on cigarettes should be paid by the manufacturer, producer or owner within ten days after the end of each month, but the want of rules and regulations implementing the same; that it is the contention of Fortune Tobacco Corporation, that the above-cited section is impractical to implement since the day to day demand of its dealers is erratic such that it has no idea as to the exact quantities required for a particular day; and that it is the position of this Office that the provisions in Section 146 of the Tax Code of 1997 is self-executory and should be complied with by the taxpayers, notwithstanding the absence of the implementing rules and regulations. Based on the foregoing, it is the opinion of this Office that since Section 146 of the Tax Code of 1997 is clear and unambiguous in its term, i.e., requiring the payment of inspection fees of cigarettes immediately before removal thereof from the establishment of the wholesaler, manufacturer, owner or operator of the redrying plant, Fortune Tobacco Corporation, in this particular case, should comply with the above-cited provision and not rely merely on the pretext that there are no rules and regulations implementing the above-cited section. Considering further that inspection fees are now categorized as excise taxes, the same may be collected in the same manner as excise taxes paid by the manufacturers or producers before removal of domestic products from place of production pursuant to Section 130(2) of the Tax Code of 1997. Finally, it is a cardinal rule under the Statutory Construction that where the language of a statute is plain and unambiguous, there is no occasion for construction, and the statute must be given effect according to its plain and obvious meaning. (82 C.J.S. Statutes & 322) Accordingly, the inspection fees on cigarettes should be paid immediately before the removal thereof from the establishment of the wholesaler, manufacturer, owner or operator of redrying plant, as the case may be. In view thereof, authority is hereby given to that Office to collect the late payment of inspection fees for 1998 together with the corresponding surcharge and interest in the total amount of P1,296,689.76 from Fortune Tobacco Corporation. cdll (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue