Case against Mrs. Concepcion David Castañeda and the Atlas Drug House

March 18, 1959 BIR RULING NO. 156-59 8th Indorsement Returned to the Regional Director, BIR Regional District No. 3, Manila, the entire record of the case against Mrs. Concepcion David Castaeda and the Atlas Drug House involving a deficiency advance sales tax in the amount of P7,462.39 on 1952 drums of petrolatum imported by Mrs. Concepcion David Castaeda under Invoice of Merchandise No. D-15981 and Bill of Lading No. 86. prcd A careful perusal of the records of this case disclose the following: The 152 drums of petrolatum were originally imported by Mrs. Concepcion David Castaeda. On April 1, 1954, while the shipment was in transitu , Mrs. Castaeda sold the shipment to Mr. Antonio B. Bernal, proprietor of the Atlas Drug House. The sale was evidenced by Sales Invoice No. 015, dated April 1, 1954 executed by Mr. Castaeda in favor of Mr. Bernal. On April 2, 1954, upon due representation of Mr. Bernal, this Office issued an "Authority to Release Imported Goods" dated April 2, 1954 authorizing the Commissioner of Customs to release the shipment from customs custody upon the payment of only 7% advance sales tax because the petrolatum is to be used in the manufacture of medicinal products. (See letter of Mr. Bernal dated April 2, 1954). Investigation in fact disclosed that the 152 drums of petrolatum were found intact in the premises of the Atlas Drug House. (4th Indorsement of Agent Caizares dated November 23, 1954). Investigation further disclosed that the Atlas Drug House never engaged in manufacturing medicinal products. It does not even keep books of accounts. LLpr The question now posed is who is liable for the delinquency advance sales tax, Mrs. Castaeda or Mr. Bernal? The result of investigation clearly shows that the imported petrolatum was found intact in the premises of the Atlas Drug House. The motive of Mr. Bernal in denying the delivery to him of the petrolatum is quite obvious, that is, he cannot explain the disposition thereof. It is to be observed that the petrolatum was subjected only to the 7% advance sales tax because of the manifestation of Mr. Bernal that he was going to use the same in the manufacture of medicinal products. Not being actually a manufacturer, he must have disposed of the petrolatum by sale. If anybody is liable for the deficiency tax in such transactions, it must be those persons who purchase the petrolatum from the importers thereof under the condition that they are to use the same in the manufacture of medicinal products. Hence, this Office has always looked into the disposition of petrolatum thus used. In the light of the forgoing, Mr. Bernal is the person liable for the deficiency tax. Accordingly, the corresponding letter of demand should immediately be issued and collection of the tax enforced with vigor. prll (SGD.) JOSE ARAAS Commissioner of Internal Revenue