Commissioner of Internal Revenue v. Wrigley Philippines, Inc.

SEVENTH DIVISION [CA-G.R. SP No. 36828. June 28, 1996.] (C.T.A. Case No. 4292) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . WRIGLEY PHILIPPINES, INC. and THE COURT OF TAX APPEALS , respondents . D E C I S I O N MONTENEGRO , J p : This is a petition for review of the a) January 10, 1995 decision of the Court of Tax Appeals in C.T.A. Case No. 4292 entitled "WRIGLEY PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE", ordering the Commissioner of Internal Revenue to refund private respondent Wrigley Philippines, Inc. the amount of P10,206,165.93; and b) March 2, 1995 resolution denying petitioner's motion for reconsideration. The antecedent facts: Private respondent Wrigley Philippines, Inc. is engaged in the manufacture and sale of chewing gum (tabs and sticks), bubble gum and menthol gum carrying the brand names Juicy fruit, Spearmint, Double Mint, Big Boy and Cool Crunch (collectively referred to as "Gum products"). For the period covering August 1, 1986 to December 31, 1987, private respondent paid the 20% sales tax due on the sale of their gum products by applying its accumulated tax credit on purchases and paying the additional amount in excess of the tax credits (Rollo, p. 28). On February 26, 1988, private respondent filed a written claim for refund alleging overpayment of sales tax in the total amount of P12,788,632.66 (Rollo, p. 49), since starting August 1, 1986 "processed food products for human consumption" are subject only to 10% tax rate pursuant to Section 163 (2) (a) of National Internal Revenue Code, as amended by Executive Order No. 36 (Rollo, pp. 50-51). On May 6, 1988, private respondent reiterated its claim for refund in a letter to the Bureau of Internal Revenue, Attention: Assistant Chief, Revenue Service - legal (Rollo, pp. 52-55). On August 26, 1988, private respondent Wrigley Philippines, Inc. filed a petition for review with the Court of Tax Appeals since until said date, petitioner Commissioner of Internal Revenue has not acted on private respondent's claim for refund (Rollo, pp. 43-48). On January 10, 1995, public respondent Court of Tax Appeals rendered the assailed decision, the dispositive portion reading: "WHEREFORE, in all the foregoing, the claim for refund in the amount of P10,206,165.93 is hereby GRANTED and the Respondent is hereby ORDERED to PAY said amount to the Petitioner." (Rollo, p. 37) On February 7, 1995, petitioner filed a motion for reconsideration which was denied by the public respondent in its resolution dated March 2, 1995 (Rollo, pp. 40-41). Hence, this petition for review raising the following issues: "I WHETHER GUM PRODUCTS PRODUCED BY RESPONDENT WRIGLEY PHILIPPINES, INC. ARE ESSENTIAL PROCESSED FOOD PRODUCTS FOR HUMAN CONSUMPTION AS PROVIDED FOR UNDER SECTION 163 (2) (a) OF THE TAX CODE AS AMENDED. HENCE, SUBJECT TO A REDUCED RATE OF 10% SALES TAX. II WHETHER RESPONDENT IS ENTITLED TO THE REFUND OF P10,206,165.93 AS GRANTED BY RESPONDENT TAX COURT REPRESENTING RESPONDENT'S OVERPAID SALES TAXES FOR THE PERIOD FROM AUGUST 1, 1986 TO DECEMBER 31, 1987." (Petition, pp. 5-6; Rollo, pp. 20-21) We find the petition without merit. The two issues actually boil down to one. To begin with, the Court of Tax Appeals is a court of special jurisdiction (RA 1125: Ker & company, Ltd. vs. Court of Appeals, 4 SCRA 160, 163). By the very nature of its function, dedicated exclusively to the study and consideration of tax problems, it has necessarily developed an expertise on the subject (Commissioner of Internal Revenue vs. Wander Philippines, Inc., 160 SCRA 573; 576). It is because of this recognized expertise of the Court of Tax Appeals in tax matters that it has been held that the tax court's finding will not be reviewed in the absence of showing of gross error or abuse (The Coca-Cola Export Corporation vs. The Commissioner of Internal Revenue, 56 SCRA 5; Nasiad vs. Court of Tax Appeals, 6 SCRA 238). The law involved is Section 163 (2) (a) of the Tax Code, as amended by Executive Order No. 36 which reads: "Section 163. Percentage tax on original sales of articles . There shall be levied, assessed and collected, once only on every original sale, barter, exchange, or similar transaction for nominal or valuable consideration intended to transfer ownership of, of title, the articles herein below enumerated a tax based on the gross selling price or gross value in money of the articles so sold, bartered, exchanged, or transferred, such tax to be paid by the manufacturer, producer or importer; xxx xxx xxx (2) Ten per cent (10%), on the following essential articles ; (a) Processed meat, fruits, vegetables, fish and other sea foods and other processed food products for human consumption." Petitioner says it does not dispute that gum products are food for human consumption but argues that they are "not essential processed food products for human consumption that are analogous to those processed food products as enumerated under Section 163(2) (a) of the Tax Code" and as such, are subject to the 20% sales tax pursuant to Section 163 (4) of the same Code and not the 10% sales tax (Petition, p. 7; Rollo, p. 22). We find no error sufficient to warrant reversal or modification of the findings of respondent Court of Tax Appeals which We quote with approval: " . . . nothing in the said law speaks of 'essential food' in order that one can avail of the 10% tax rate. The subject law speaks of ' essential articles ' and food is cited only as one example of an essential article which is covered by the 10% tax rate. This enumeration of what are 'essential articles likewise includes "clothes and textiles", "medicines", "soaps, detergents, toothbrush and toothpaste", "writing pads, notebooks, etc.", "fertilizers, pesticides . . ." "spare parts and accessories of motor vehicles" and many others which are not and can not be classified as food. The term "essential" which is in the heading of Section 163 (2) of the Tax Code is only descriptive of the term "articles". Hence, it qualifies the term "articles" being enumerated thereunder as essential and certainly, does not only refer to the term "food" or to the other items enumerated therein. To insist on following the argument of the Respondent would strike an absurd if not a hilarious interpretation referring the 10% tax rate not only to "essential food" but also to "essential soaps", essential toothbrush" and probably "essential toothpaste", which we cannot imagine being the intention of the legislators. We, therefore, cannot accept such interpretation, made by the respondent's counsel." (Rollo, pp. 33-34) It is a basic rule of statutory construction that a meaning that does not appear nor is intended or reflected in the very language of the statute cannot be placed therein (Manikad vs. Tanodbayan, 127 SCRA 724; Chang Yung Fa. et al. vs. Gianzon, 97 Phil. 913). It bears emphasis that there is nothing in the context of said Section 163 (2) (a) which speaks of "essential processed food products for human consumption". The term "essential" only qualifies the word articles" and not "processed food products". It is worth noting that in Section 10 (e) of Republic Act 3720, otherwise known, as the Food, Drug, and Cosmetic Act, "chewing gum" is classified as food. Quoted hereunder is Section 10(e) which provides: "SEC. 10. For the purposes of this Act, the term: xxx xxx xxx (e) ' Food ' means (1) articles used for man, (2) chewing gum , and (3) articles used for components of any such article." (underscoring supplied) Such being the case, the gum products of private respondent clearly fall within the ambit of "processed food products for human consumption" as contemplated by Section 163 (2) (a) of the Tax Code and as such, subject to the 10% sales tax therein and not the 20% sales tax. The law is couched in such a general term and does not distinguish. In the case of Philippine British Assurance Co., Inc. vs. Intermediate Appellate Court , 150 SCRA 520, 527-528, Supreme Court ruled: "It is well recognized rule that where the law does not distinguish, courts should not distinguish. Ubi lex non distinguit nec nos distinguere debemos (Colgate-Palmolive Phil., Inc. v. Gimenez, G.R. No. 14787, Jan. 28, 1961, 1 SCRA 267 (1961); Libudan v. Gil, G.R. No. 21163, May 17, 1972, 45 SCRA 17 (1972); Dominador v. Derahunan, 49 PHIL 452 (1926); Guevarra v. Inocentes, G.R. No. 25577, March 15, 1966, 16 SCRA 379 (1966) Director of Lands v. Gonzales, G.R. No. 32522, Jan. 28, 1963; Alfato v. Commission on Elections, G.R. No. 52749, March 31, 1981, 103 SCRA 741 (1981); Statutory Construction by Ruben E. Agpalo, 1986, pp. 143-144). The rule, founded on logic, is a corollary of the principle that general words and phrases in a statute should ordinarily be accorded their natural and general significance (Lo Cham v. Ocampo, 77 Phil. 636 (1946). The rule requires that a general term or phrase should not be reduced into parts and one part distinguished from the other so as to justify its exclusion from the operation of the law (Social Security System v. City of Bacolod, G.R. No. 35726, July 21, 1982, 115 SCRA 412 (1982); Director of Lands v. Gonzales, G.R. No. 32522, Jan. 28, 1983). In other words, there should be no distinction in the application of a statute where none is indicated (Lo Cham vs. Ocampo, supra ). For courts are not authorized to distinguish where the law makes no distinction. They should instead administer the law as they think it ought to be but as they find it and without regard to consequences (Velasco v. Lopez, 1 Phil. 720 (1903)." In view of the foregoing, respondent Court of Tax Appeals correctly ruled: "Hence, gum products are indeed classified under 'processed food products for human consumption' which has a tax rate of only 10% and not 20% as erroneously paid by the Petitioner." (Rollo, pp. 34-35) It should be pointed out that in BIR Ruling No. 293-87, the Bureau of Internal Revenue ruled that candy (which is more or less of the same nature as "chewing gum") is considered processed food product for human consumption and thus, subject to the 10% sales tax. WHEREFORE, premises considered the petition is DISMISSED and DENIED DUE COURSE for lack of merit. SO ORDERED. Cui and De La Rama JJ . , concur.