Use of a Specially Denatured Alcohol in the Manufacture of a Mouth Wash, known as "Astringosol"

February 12, 1959 BIR RULING NO. 101-59 Muller & Phipps Bonifacio Drive, Port Area Manila Gentlemen : This has reference to your pending internal revenue case involving the sum of P18,013.10 as specific tax and P1,000.00 as penalty. The subject matter of the instant assessment and demand is the use of a specially denatured alcohol by you, in the manufacture of a mouth wash, known as "Astringosol", the chief ingredient of which excluding water is distilled spirits. Astringosol with distilled spirits as its chief ingredient although denatured, has been classified as a medical preparation by the Institute of Science and Technology. The denatured alcohol, therefore, to be used in its manufacture is subject to the specific tax prescribed in Section 133 in relation to Section 127, both of the Tax Code. Your contention that the alcohol in question was used in industry and, therefore, exempt from specific tax under Section 128 of the Tax Code is untenable. The Court of Tax Appeals had the occasion to dispose of this contention in the La Tondea case, saying: ". . . that the exemption under Section 128 of the Tax Code refers to domestic denatured alcohol used in the operation of industries and not to denatured alcohol to be used merely as an ingredient in the manufacture of another product." You further maintain that no specific tax is due on the denatured alcohol in question in view of the authority of exemption contained in the letter of this Office dated June 6, 1951. It is now elementary that the Commissioner of Internal Revenue is not bound by a previous ruling of his predecessor. This is now too well settled in this jurisdiction to need any extensive explanation. Furthermore, it has been repeatedly held that the government is not estopped by the neglect or omission of its officers or agents. While it is true that the denatured alcohol, as a raw material in the manufacture of astringosol, was manufactured by La Tondea Inc., yet the finished products (astringosol) of which this denatured alcohol formed the chief ingredient, is a product of your manufacture. It should be noted that Section 127 of the Tax Code imposes the specific tax on medicinal preparations containing distilled spirits as chief ingredient. The person liable thereto must necessarily be the manufacturer of the medicinal preparation. Being the manufacturer of astringosol, a medicinal preparation, you are, therefore, liable for the payment of the specific tax due on the alcohol used in the manufacture thereof. In view of the foregoing, you are requested to effect the immediate settlement of the tax and penalty in order that this case may be close, otherwise, this Office will be constrained to enforce the collection thereof by means of summary remedies provided for by law. prll Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue