Cancellation of Bonded Denaturing Warehouse Permits

September 25, 1958 BIR RULING NO. 572-58 MEMORANDUM FOR: The Chief, Alcohol and Prohibited Drugs Division B.I.R., Manila This is in connection with your request for an opinion as to whether or not this Office can, without due cause legally cancel the permits issued to persons for the establishment of bonded denaturing warehouses. Section 164 of the National Internal Revenue Code provides as follows: "SEC. 164. Requirements incident to process of denaturing alcohol . Where alcohol is withdrawn for denaturing for use in the arts and industries, or as motor fuel, the process of denaturing shall be effected either on the distillery premises or in a bonded warehouse designated by the Collector of Internal Revenue for denaturing purposes only. To such warehouses alcohol may be transferred under bond and under conditions prescribed in the regulations of the Department of Finance." From the abovequoted provision of law, denaturing can be effected in a bonded distillery designated by the Commissioner. The act of designating necessarily involves the exercise of discretion. The privilege of denaturing alcohol in a bonded warehouse must, therefore, arise from the exercise of the discretion of the Commissioner. The Commissioner may or may not, therefore, allow denaturation in a bonded warehouse. However, considering your manifestation to the effect that the permittees involved herein had invested considerable amount of capital in the construction and equipping of the denaturing warehouses, it will be oppressive if we are to withdraw their permits without cause. If it is desired to put a stop to the denaturation of alcohol in a bonded warehouse, we must stop the giving of permits for such purpose. Accordingly, no permit shall henceforth be granted for the denaturation of alcohol in a bonded warehouse. cdll Very truly yours, (SGD.) MELECIO R. DOMINGO Acting Commissioner of Internal Revenue