Shipment of Reparation Goods Consigned to the Reparation Commission for the Pamplona Redwood, Inc.

October 20, 1958 BIR RULING NO. 580-58 3rd Indorsement Respectfully returned to the Executive Director, Reparation Commission, Manila. This refers to the shipment of seventeen (17) crates of reparation goods consigned to the Reparation Commission for the Pamplona Redwood, Inc. as end-user. The release of the aforesaid shipment from customs custody without the prepayment of the compensating tax is sought under the provisions of Section 14 of Republic Act 1789 (Reparation Law) which reads as follows: prll "Sec. 14. Exemption from Tax . All reparations goods obtained by the government shall be exempt from the payment of all duties, fees and taxes. Reparations goods obtained by private parties shall be exempt only from the payment of customs duties, consular fees and the special import tax." (Emphasis ours) It will be noted from the aforequoted provisions of the law that it distinguishes reparations goods obtained by the Government from those obtained by private parties, the former being exempt from " all duties, fees and taxes", while the latter, " only from customs duties, consular fees and the special import tax". And it will be noted further that the law uses the word "obtained" and not the term "imported". Such facts clearly point to the conclusion that even if the reparations goods are not imported by private parties but are merely obtained by them from the Reparation Commission, said goods are nevertheless subject to the compensating or advance sales tax, depending on whether they are for use of those obtaining them or for resale. For, as heretofore pointed out, while the law expressly exempt from taxes reparations goods obtained by the government, it does not expressly, or even impliedly, exempt from taxes those obtained by private parties. As regards the contention that the compensating tax is included within the term "customs duties", it may be stated that in this jurisdiction, said term is never understood as including internal revenue taxes such as the compensating tax. Moreover, Section 14 of the law in question, which is quoted hereinabove, clearly shows that the term "customs duties" or "duties" is not intended to include internal revenue taxes. For if the former were intended to include the latter, Section 14 would have mentioned therein only customs duties and would not have made mention of taxes. But as will be noted, said section of the law mentions both in the first sentence, exempting from customs duties, fees and taxes reparations goods obtained by the government but limiting exemption of reparation goods obtained by private parties to only customs duties, consular fees and the special import tax. If, as alleged by the Pamplona Redwood, Inc., the term "customs duties" include taxes, there would be neither reason nor basis for distinguishing the exemption of reparations goods obtained by the government form the exemption of those obtained by private parties. For then the exemption of both would be the same, and all reparation goods would be exempt from duties, fees and taxes. But Congress expressly and clearly made such a distinction, thus disproving the allegations that the term "customs duties" include the compensating tax. In view of the foregoing, this Office is of the opinion that reparations goods imported by the Reparation Commission for a private entity, or which are obtained by the latter from the former are subject to the compensating tax or advance sales tax, depending on whether they are obtained by the latter for use or for resales. Accordingly, the seventeen (17) crates of reparations goods consigned to the Reparations Commission for the Pamplona Redwood, Inc., which shall be the end-user thereof, are subject to the compensating tax. cdta (SGD.) MELECIO R. DOMINGO Acting Commissioner of Internal Revenue