Importations of Acetate Tow Exclusively Used by La Suerte in the Manufacture of Cigarette Products are Exempt from Internal Revenue Taxes

August 19, 1980 BIR RULING NO. 115-80 Messrs. Angara, Abello, Concepcion Regala & Cruz Law Offices 5th Flr., ACCRA Bldg. 122 Gamboa St., Legaspi Village Makati, Metro Manila Attention: Atty . Jose Mario C . Buag Gentlemen : This refers to your letter dated January 24, 1980 stating that your client, Telengtan Brothers & Sons, Inc. operating under the business style of La Suerte Cigar & Cigarette Factory, is a domestic corporation engaged in the manufacture of various brands of cigarettes; that in consonance with its manufacture of said products, it has a complete line of machineries, one of which machinery to process filter rods exclusively for its own products; that concomitant with the processing of filter rods, your client imports regularly acetate tow which is processed into filter rods used as raw materials in the manufacture of its different cigarette brands, in a single and continuous process. Under the foregoing facts, you request confirmation that the importations of your client of acetate tow are exempt from the advance sales and/or compensating tax. In reply, I have the honor to inform you that under Section 193 (b) of the National Internal Revenue Code, as amended, imported raw materials to be used by the importer himself in the manufacture or preparation of articles subject to specific tax are exempt from advance sales tax upon certification by the National Economic and Development Authority that such imported raw materials are not domestically available in sufficient quantity, comparable quality and price to meet the needs of manufacturers subject to specific tax. In an investigation conducted by an agent of this Office, it was ascertained that acetate tow is the main raw materials in the manufacture of filter rods; that acetate tow after its transformation into filter rods by a manufacturing process are used in the manufacture of filtered cigarettes. It also appears in the letter of the NEDA to that Office dated May 11, 1979 that it has not issued any certification to the effect that acetate tow is available locally in sufficient quantity, comparable quality and price to meet the needs of manufacturers subject to specific tax. In view of all the foregoing, it is the opinion of this Office, as it hereby holds, that the importations of your aforesaid client of acetate tow which it exclusively use in the manufacture of its cigarette products are exempt from internal revenue taxes. aisadc Very truly yours, TOMAS C. TOLEDO Acting Commissioner