Compensating Tax Exemption on the Importation by San Miguel Corporation of Papain Pure

February 17, 1987 BIR RULING NO. 048-87 169 (b) (2) 000-00 048-87 S i r : This refers to your request for a ruling as to whether or not the importation by San Miguel Corporation of 12 boxes of Papain Pure which will be used in the manufacture of beer is exempt from compensating tax. It appears from the laboratory analysis conducted by the BIR laboratory that papain is used for clearing or clarification of beer, i.e., that "Freshly prepared beer product contains soluble complexes of proteins with carbohydrates and tannins. These complexes, however, tend to become less soluble when the beer is cooled and held for sometime. Although the complexes are insoluble, they do not precipitate out completely but form a turbidity known as chill-haze in the beer. In this particular, the use of haze removing materials is employed to produce a clear, bright and good quality beer. Papain, a proteolytic enzyme is an excellent means of prevention of haze formation. Upon addition of papain to the beer, the proteins are converted to the smaller amino acids and peptides thus breaking up the large polyelectrolyte proteins which appear to be the core of the chill-haze complex. Papain after its chemical activity is then removed by filtration or by any means of separation from the beer." In reply, please be informed that pursuant to Section 169 (b)(2) of the Tax Code, as amended, articles to be used by the importer himself in the manufacture or preparation of articles subject to excise tax are not subject to compensating tax. In the instant case, under the foregoing findings papain is used by the importer, San Miguel Corporation itself in the manufacture or preparation of beer which is subject to excise tax (Sec. 124, Tax Code); hence, papain is exempt from the payment of the compensating tax. BIR Ruling No. 114-84 dated June 29, 1984 is not applicable herein for the reason that said ruling involves imported coloring material (ceramic colors) which is not used in the preparation or manufacture of the beer. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner