Supervision and Control Over Establishments Manufacturing Articles Subject to Excise Taxes

June 26, 1986 REVENUE MEMORANDUM ORDER NO. 18-86 SUBJECT : Supervision and Control Over Establishments Manufacturing Articles Subject to Excise Taxes TO : All Revenue Officials and Others Concerned I. Objectives This Order is Issued: 1. To prescribe and delineate the functions of the Operating Units under the Specific Tax Office as a precautionary measure to counteract any adverse effect that may arise from the reduction of revenue enforcement officers assigned to factories and the withdrawal of the requirement of affixing strip stamps to packages of cigarettes. 2. To create and define the functions of Mobile Teams to conduct spot inspection on a round-the-clock basis of the operations of establishments producing articles subject to excise taxes and countercheck the work of revenue enforcement officers detailed to supervise the removals of finished products therefrom. acd 3. To provide tighter control on the movements of raw materials to be used in the production of articles subject to excise taxes particularly tobacco leaf, cigarette papers in bobbins, molasses, malt or distilled spirits for compounded liquors among others. II. Field Operating Personnel and Mobile Teams A. On-Premises Supervision - There shall be detained on a day-to-day basis revenue enforcement officer(s) to check or supervise the production and removal of finished products from every unit of any establishments producing or manufacturing articles subject to excise taxes, at least three (3) revenue enforcement officers in such establishment that operates 24 hours a day; two (2) revenue enforcement officers if it operates more than eight (8) hours and at least one (1) in a small factory who shall render an eight (8) hours duty except in small compounders located in contiguous places and to perform the following specific duties and functions, to wit: 1. To supervise and take up in the corresponding official register book or auxiliary book set up to monitor all phases of factory operations, particularly, the receipt of raw materials, the production and removals of products subject to excise tax from the factory premises. To see to it that all taxes are paid when due and are properly covered by the requisite permits when exempt and such other factory operations which will ensure a sanitary output and safeguard the revenue of the government. 2. To check at the first hour of every business day, the actual stocks of raw materials, as well as, the finished products whether they tally with the balances in the corresponding official register book or auxiliary books he keeps for the purpose and to see to it that the requisite official tax receipts, sales invoice or official delivery invoice (guia) and other documents covering such removals or transfer as the case may be are in accordance with law or regulations pertinent thereto. 3. Establishments producing articles subject to excise tax shall remain closed until the internal revenue enforcement officer on duty thereat is present and no finished products or raw materials shall be removed from their respective premises in the absence of the revenue enforcement. Unless otherwise especially allowed by the Commissioner, excisable articles shall be removed from the place of production either between 7:00 a.m. to 4:00 p.m. or 8:00 a.m. to 5:00 p.m. 4. To receive and verify the Daily Manufacturer's Sworn Statements to be filed by the Manufacturer concerned as required by law and regulations; to administer the oath of affiant or signatory thereof and to forward the same to the Office of the Commissioner thru the Division who has jurisdiction over the establishment concerned. 5. To render his report to his superior any violation of the law and/or regulations that he may uncover together with the evidences necessary to prosecute the case. Every Chief of Division and Chief of Specific Tax Regional Team shall submit in advance to the Specific Tax Office a weekly schedule or assignment of revenue enforcement officer to perform on-premises supervision in the different establishments within their respective jurisdiction. B. Composite Mobile Teams . - There shall be created Mobile Teams of not more than two (2) members to each group in every Division under the Specific Tax Office to conduct counter-checking activities relative to the business operations of the different factories, as well as, the performance of the revenue enforcement officers detailed thereat, with the following specific duties and functions, to wit: 1. To conduct on-the-spot inspection, on a round-the-clock basis of all factories and/or outlets, whether individuals or corporate entities manufacturing and/or dealing in articles subject to excise taxes in order to check and ensure that the laws and regulations relative to the manufacture and sale of articles subject to excise taxes are accordingly observed by the manufacturers concerned. 2. To counter-check performances of revenue enforcement officers detailed to establishments producing articles subject to excise taxes. 3. To render their report on any violation of the revenue laws and regulations by factory owners and/or operators or any malfeasance or misfeasance committed by revenue enforcement officers prejudicial to the interest of the government together with the evidences necessary to prosecute the case. 4. To conduct detection and surveillance of such person or establishment who may be engaged in illicit production of trade of articles subject to excise tax, the tax of which has not been duly paid. C. Revenue Officers to Accompany Transfer of Raw Materials . - Every transfer of raw materials, except coming from other provinces whether imported or locally procured like, tobacco, leaf cigarette paper in bobbins, grains, malts, molasses, or under bond distilled spirits for compounded liquors, among others shall not be allowed unless, in addition to the requisite permits and other documentation required by existing laws and regulations is accompanied by a revenue enforcement officer specifically designated for the purpose with the following duties, among others, to wit; 1. To check whether or not the transfer of raw materials from the place of source to the factory, distillery or brewery premises is covered by the requisite permit granted/issued by the Office. 2. To check whether or not the sales invoice, official delivery invoice (guia), official tax receipt or other BIR Forms or documents covering such delivery or transfer, whenever necessary, indicate the correct quantity authorized to be transferred. 3. To accompany shipment from the place of source to the factory or establishment of destination and to have the receipt thereof acknowledged by owner/operator or their duly authorized representative. D. Additional Safeguard . - The following additional safeguards shall be instituted in the corresponding establishments for optimum enforcement, efficiency and effectivity, to wit: I. For Distilleries - 1. To check the quantity in liters of the molasses charged into the diluting tank and the brix reading of the resulting mixture. 2. To check the volume in liters of the "beer" charged to the still and the percentage by volume of the alcohol they contain. II. For Breweries - 1. To maintain a Raw Material Account of the Brewery wherein to record, among others, the quantity of Malt received and used daily in beer manufacture. III. For Compounding Establishments - 1. To check the quantity in gauge and proof liters of the alcohol received and used in compounding and the specific tax paid thereon. 2. To check the quantity in gauge and proof liters of the compounded liquors produced in and removed from the compounding premises and the ad valorem tax paid thereon. IV. For Cigarette Factories - 1. To check and record the entries on every machine sheet of cigarette factories particularly the time each cigarette making machine was opened; the brands produced, the number of cigarette paper bobbins fed and consumed and the time it was closed. Said machine sheets shall be collected and submitted together with the Manufacturer's Sworn Statement as herein-required. 2. In case cigarette manufacturers affix a cigarette paper strip in lieu of BIR strip stamps on every package of cigarette of his manufacture, the design of which, shall be at his discretion, such paper strip shall be registered with the Bureau submitting at least ten (10) samples thereof as the basis for any comparative analysis arising from any controversy involving the cigarettes in whose package they are affixed. cdt V. Oil Refineries and Producers of Miscellaneous Articles - 1. To check the deliveries to tax-exempt entities, Board of Investment Registered Enterprises and those granted tax suspension privilege like the distressed copper mining companies. 2. To verify from all importers of raw materials used in the production of cinematographic films and video tapes, the quantity or footage purchased by local film or video tapes procedures. This Order takes effect July 1, 1986. (SGD.) BIENVENIDO A. TAN, JR. Commissioner