International Pharmaceuticals, Inc. (IPI), on Importation of Efficascent Premix

October 5, 1999 BIR RULING NO. 152-99 152-99 MEMORANDUM FOR : Solomon Cua Undersecretary, Department of Finance FROM : Beethoven L. Rualo Commissioner of Internal Revenue SUBJECT : International Pharmaceuticals, Inc. (IPI), on Importation of Efficascent Premix DATE : October 4, 1999 This refers to the position paper of International Pharmaceuticals, Inc. dated September 21, 1999 pertaining to the excisability on their importation of EFFICASCENT PREMIX (used as raw materials for the manufacture of Efficascent Oil, Manzanilla Oil and Omega Pain Killer all of which are medicinal preparations). LexLib Please be informed that under Section 4(g) of Republic Act 8180 in relation to Republic Act 8184 as implemented by Revenue Regulations 8-96, " Efficascent Premix " falls under the definition of petroleum product classified as petrolatum . Moreover, based on the Supreme Court Decision (MEGA GENERAL MERCHANDISING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. L-69136, September 30, 1988) "paraffin wax/petrolatum" is subject to specific (excise) tax irrespective of kind , nature and purpose . EFFICASCENT PREMIX is, therefore, subject to excise tax under Section 148(c) of the National Internal Revenue Code of 1997 at P3.50 per kilogram. (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue ATTACHMENT MEMORANDUM For : BEETHOVEN L. RUALO Commissioner of Internal Revenue From : ANTONIO I. ORTEGA Chief of Staff, CIR MAGDALENA A. ANCHETA Technical Assistant, CIR Subject : International Pharmaceuticals, Inc., (IPI) on importation of "Efficascent Premix" Date : October 4, 1999 Relative to the query of International Pharmaceuticals Inc. on their importation of "EFFICASCENT PREMIX", please be informed as follows: a) Laboratory test/analysis : 1) Seojin Chemical Co . Ltd . (supplier) "Efficascent Premix" is a raw medical material containing 100% liquid saturated hydrocarbon, that is paraffin oil/white mineral oil or liquid form of petrolatum. LibLex 2) International Pharmaceuticals Inc . ( importer ) the result of which showed the presence of pharmaceuticals grade refined mineral oil. 3) SGS Philippines , Inc . the result showed 86% oil. (Note: The laboratory test report, however, declared that "Analysis based on sample(s) submitted by BUREAU OF CUSTOMS, SGS Phils. Inc. does not guarantee the shipment/delivery corresponds to sample(s) submitted nor does SGS Phils. Inc. guarantee that sample(s) submitted is a (are) random preparation of the shipment/delivery".) b) Definitions : Petrolatum is a class of paraffin wax , semi-solid or liquid mixture of hydrocarbons derived by distillation of paraffin base petroleum fractions ( Hawley ' s Condensed Chemical Dictionary ). The liquid form ( white mineral oil ) is used as laxative, textile lubricant and dispersing agent. White pharma oil falls under the definition of petrolatum as a white liquid-mineral oil used for baby oil and hair care products. The solid form ( mineral jelly ) may be either water-white or pale yellow. Petroleum products shall refer to products formed in the course refining crude petroleum through distillation, cracking, solvent refining and chemical treatment coming out as primary stocks from the refinery such as, but not limited to LPG, Naphtha, gasolines, solvent, kerosenes, aviation fuels, diesel oils, fuel oils, waxes and petrolatums , asphalts, bitumens, coke and refinery sludges, or such refinery petroleum fractions which have not undergone any process or treatment as to produce separate chemically-defined compounds in a pure or commercially pure state and to which various substances may have been added to render them suitable for particular uses: Provided, That the resultant product contains not less than fifty percent (50%) by weight of such petroleum products. (Section 4(g), R.A. 8180 in relation to R.A. 8184 as implemented by RR 8-96) c) Supreme Court Decision as to the taxability of petrolatum Importation of paraffin wax/petrolatum, irrespective of kind, nature and purpose is subject to specific tax (MEGA GENERAL MERCHANDISING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. L-69136, SEPTEMBER 30, 1988) It is further informed that a meeting was conducted at the Office of Undersecretary Solomon Cua, Department of Finance, Manila last September 22, 1999 regarding on the issue of the excisability of Efficascent Premix. The attendees in the meeting were: Pio Castillo, President of IPI, Congressman Simeon L. Kintanar (Representative of 2nd District of Cebu), USEC Cua (DOF), Rommel Santiago (DOF) and the undersigned as BIR representatives. After the meeting, USEC Cua ordered the BIR to submit its position paper/study within two (2) weeks from the date of meeting whether or not the imported Efficascent Premix is subject to excise tax under Chapter V Section 148(c) of the NIRC. Likewise, he required the taxpayer (IPI) to submit to the BIR the data/statistics on 1) Total importations of Efficascent Premix for the period from 1996 up to present; 2) Percentage of sale of Efficascent Oil in relation to total sales; and 3) Total number of employees directly involved in the operation of said product. However as of this date, not a single data/statistics had submitted by the taxpayer. In view thereof, since " Efficascent Premix " falls under the definition of petroleum product classified as petrolatum , said product is, therefore, subject to excise tax under Section 148(c) of the National Internal Revenue Code of 1997 at P3.50 per kilogram. (SGD.) ANTONIO I. ORTEGA (SGD.) MAGDALENA A. ANCHETA