The Tobacco Products Regulations

September 29, 1954 REVENUE REGULATIONS NO. V-39 SUBJECT : The Tobacco Products Regulations TO : All Internal Revenue Officers and Others Concerned CHAPTER I Scope and Definition of Terms SECTION 1. Scope. Pursuant to the authority granted in section 338, in relation to section 4 (j), of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, the following regulations relative to the enforcement of the provisions of the Title IV of the National Internal Revenue Code in so far as they affect the manufacture or importation of, and the collection and payment of the specific tax on, manufactured tobacco or products of tobacco, are hereby promulgated for the information and guidance of all concerned and shall be known as Revenue Regulations No. V-39 or "The Tobacco Products Regulations." SECTION 2. Definition of Terms. When used in these regulations, the following terms shall be given the interpretations indicated in their respective definitions given below, except where the context indicates otherwise: (a) "Manufactured products of tobacco" shall include cigars, cigarettes, smoking tobacco, chewing tobacco, snuff, and all other forms of manufactured and partially manufactured tobacco, as defined in section 194 (m) of the National Internal Revenue Code. (b) "Manufacturer of tobacco products" shall include all persons engaged in the manufacture of any of the forms of tobacco mentioned in the next preceding paragraph. (c) "Cigars" shall be understood to mean all rolls of tobacco, or any substitute therefor, wrapped with tobacco. (d) "Cigarettes" shall be understood to mean all rolls of tobacco, or any substitute therefor, wrapped in paper or any substance other than tobacco. (e) "Waste of tobacco" shall be understood to mean the tobacco residue which is no longer fit for use in the manufacture of tobacco products or for consumption, that is, when such tobacco residue has not attained the form of a new tobacco product or material for manufacture thereof, or has lost its marketable quality as original article. TEDAHI CHAPTER II Payment of Tax, Handling of Taxable Articles, and Keeping of Records SECTION 3. Administrative Schedule and Paragraphs Used in the Collection of Specific Taxes on Products of Tobacco. The following administrative schedule and paragraphs will be used in the collection of the tax on manufactured products of tobacco. SCHEDULE A Paragraph 3 (A-3) Manufacture of smoking and chewing tobacco; Paragraph 4 (A-4) Manufacture of cigars; Paragraph 5 (A-5) Manufacture of cigarettes. SECTION 4. Assessment Numbers of Manufacturers; Assessment Rolls to be Kept by Provincial Revenue Agents or the Chief of the Tobacco Tax Section. Every manufacturer of tobacco products shall be given a permanent and official assessment number, distinct for each paragraph under which he operates, which will be stamped in the official register books to be issued him by the Collector of Internal Revenue. No two manufacturers under the same paragraph will be given the same assessment number. When a manufacturer retires from business his assessment number will be dropped. However, when there is merely a change in the ownership of the tobacco factory by reason of sale, transfer, or otherwise, the Collector of Internal Revenue may permit the new owner or transferee, if the latter so desires, to use the old assessment number of his vendor or transferor, if the right to use said assessment number has been included in the sale or transfer. Provincial Revenue Agents, if in the provinces, and the Chief of the Tobacco Tax Section, if in Manila, shall keep, by paragraph, a chronological assessment roll of the manufacturers of tobacco products in their respective territories. SECTION 5. Payment of Specific Tax. The payment of specific tax imposed by the National Internal Revenue Code upon products of tobacco manufactured or produced in the Philippines for sale or consumption therein shall be denoted and made by the purchase, affixture and cancellation of internal revenue stamps of the proper value and denomination to each and every original container of cigars, cigarettes, smoking tobacco, chewing tobacco, or other manufactured tobacco, immediately before removal from the place of manufacture or production. The actual time of payment of said tax shall be the time when the stamps are cancelled, if cancelled after affixture to the package; but if the stamps are cancelled before they are affixed to the package, the actual time of payment of the tax shall be the time when the stamps duly cancelled are affixed to the package. The specific tax on imported tobacco and imported tobacco products shall be paid by the owner or importer before the release of such articles from the customhouse. By authority of section 6 of the National Internal Revenue Code, the Commissioner of Customs and his subordinates are constituted agents of the Collector of Internal Revenue, for the collection of specific taxes on imported articles subject thereto. (a) Denominations and classes of stamps. Internal Revenue stamps of the following denominations will be sold by the Collector of Internal Revenue to manufacturers in lots of not less than one hundred stamps. (1) For affixture to boxes of cigars containing 10, 20, 25, 50, 100, 200, 250 and 500 cigars to the box of P2.30 class per thousand; (2) For affixture to boxes of cigars containing 5, 10, 20, 25, 50 or 100 cigars to the box of the P4.60 class per thousand; (3) For affixture to boxes of cigars containing 5, 10, 20, 25, 50, or 100 cigars to the box of the P7.00 class per thousand; (4) For affixture to packages (cajetillas) of cigarettes manufactured of Virginia type tobacco and/or flue-cured tobacco, not wrapped in tin foil or cellophane nor packed in cartons or in tin cans, 71 millimeters or less in length weighing 1-1/4 kilograms per thousand, containing 5, 10, or 20 cigarettes to the package or box, of the P6.00 per thousand class; (5) For affixture to packages (cajetillas) of cigarettes manufactured of Virginia type tobacco and/or flue-cured tobacco, not wrapped in tin foil or cellophane nor packed in cartons or in tin cans, over 71 millimeters in length or over 1-1/4 kilograms per thousand in weight, containing 5, 10, or 20 cigarettes to the package or box, of the P12.00 per thousand class; (6) For affixture to packages (cajetillas) or boxes of cigarettes manufactured of Virginia type tobacco and/or flue-cured tobacco, wrapped in tin foil or cellophane or packed in cartons covered with paraffin or wax paper or in tin cans, 71 millimeters or less in length weighing 1-1/4 kilograms or less per thousand, containing 5, 10, 20 or 50 cigarettes to the package or box, of the P10.00 per thousand class; (7) For affixture to packages (cajetillas) or boxes of cigarettes manufactured of Virginia type tobacco and/or flue-cured tobacco, wrapped in tin foil or cellophane or packed in cartons covered with paraffin or wax paper or in tin cans, over 71 millimeters in length or over 1-1/4 kilograms per thousand in weight containing 10 or 20 cigarettes to the package or box, of the P20.00 per thousand class; (8) For affixture to packages (cajetillas) or boxes of cigarettes manufactured of Virginia type tobacco and/or flue-cured tobacco, not wrapped in tin foil or cellophane nor packed in cartons or tin cans, 71 millimeters or less in length weighing 1-1/4 kilograms per thousand, mechanically wrapped or packed, containing 5, 10, or 20 cigarettes to the package or box, of the P13.20 per thousand class; IaEScC (9) For affixture to packages (cajetillas) or boxes of cigarettes manufactured of Virginia type tobacco and/or flue-cured tobacco, not wrapped in tin foil or cellophane nor packed in cartons covered with paraffin or wax paper or in tin cans, over 71 millimeters in length or over 1-1/4 kilograms per thousand in weight, mechanically wrapped or packed, containing 5, 10, or 20 cigarettes to the package or box, of the P26.40 per thousand class; (10) For affixture to packages (cajetillas) or boxes of cigarettes manufactured of Virginia type tobacco and/or flue-cured tobacco, wrapped in tin foil or cellophane or packed in cartons covered with paraffin or wax paper or in tin cans, 71 millimeters or less in length weighing 1-1/4 kilograms per thousand, mechanically wrapped or packed, containing 10 or 20 cigarettes to the package or box, of the P22.00 per thousand class; (11) For affixture to packages (cajetillas) or boxes of cigarettes manufactured of Virginia type tobacco and/or flue-cured tobacco, wrapped in tin foil or cellophane or packed in cartons covered with paraffin or wax paper or in tin cans over 71 millimeters in length or over 1-1/4 kilograms per thousand in weight, mechanically wrapped or packed, containing 10, 20, or 50 cigarettes to the package or box of the P44.00 per thousand class; (12) For affixture to packages (cajetillas) or boxes of cigarettes manufactured of leaf tobacco other than Virginia type tobacco and/or flue-cured tobacco, 81 millimeters or less in length weighing 1-3/4 kilograms or less per thousand, containing 5, 20, or 30 cigarettes to the package or box of the P2.50 per thousand class; (13) For affixture to packages (cajetillas) or boxes of cigarettes manufactured of leaf tobacco other than Virginia type tobacco and/or flue-cured tobacco, over 81 millimeters up to 121 millimeters in length or over 1-3/4 kilograms per thousand in weight, containing 5, 20, 30 or 100 cigarettes to the package or box of the P3.75 per thousand class; (14) For affixture to packages (cajetillas) or boxes of cigarettes manufactured of leaf tobacco other than Virginia type tobacco and/or flue-cured tobacco, over 121 millimeters in length, containing 20 or 30 cigarettes to the package or box of the P5.00 class per thousand; (15) For affixture to packages (cajetillas) or boxes of cigarettes manufactured of leaf tobacco other than Virginia type tobacco and/or flue-cured tobacco, 81 millimeters or less in length, weighing 1-3/4 kilograms or less per thousand, mechanically wrapped or packed, containing 20 or 30 cigarettes to the package or box of the P5.50 per thousand class; (16) For affixture to packages (cajetillas) or boxes of cigarettes manufactured of leaf tobacco other than Virginia type tobacco and/or flue-cured tobacco, over 81 millimeters to 121 millimeters in length or over 1-3/4 kilograms per thousand in weight, mechanically wrapped or packed, containing 20 or 30 cigarettes to the package or box of the P8.25 per thousand class. (17) For affixture to packages (cajetillas) or boxes of cigarettes manufactured of leaf tobacco other than Virginia type tobacco and/or flue-cured tobacco, over 121 millimeters in length, mechanically wrapped or packed, containing 20 or 30 cigarettes to the package or box of the P11.00 per thousand class; (18) For affixture to packages of smoking tobacco containing 50, 100, 125, 450 and 500 grams to the package; (19) For affixture to packages or tins of imported smoking tobacco containing ___ ___ ___ grams (from ounces to grams); (20) For affixture to packages of chewing tobacco containing 50, 100, 250, 500 and 750 grams to the package; (21) For affixture to packages of imported chewing tobacco containing ___ ___ ___ grams (from ounces to grams). (b) Mode of affixing internal revenue stamps or labels. Internal revenue strip stamps and labels shall be affixed to boxes, bundles and packages containing cigars, cigarettes, smoking tobacco, and chewing tobacco in serial order, beginning with the lowest serial number on hand in the following manner: (1) Cigars. Internal revenue strip stamps for cigars put up in boxes or in paper packages shall be firmly attached on the outside of the box on the right hand side, and not less than 2 centimeters from the end, or to the middle of the package running lengthwise, completely overlapping both ends in such a manner as effectually to seal the box or package and prevent removal of cigars without breaking the internal revenue strip stamp, leaving the blank space provided for the cancellation of the stamp entirely on the top cover of the box or package. (2) Cigarettes. Each package (cajetilla) or box for cigarettes of any class shall be closed at both ends. The internal revenue stamp for these cigarettes shall be firmly affixed to the middle of the upper end of the package or box running crosswise and overlapping both sides of it, before the packages or boxes are wrapped in bundles or packed in cases for removal from the factory. The stamps for cigarettes placed in round tin container shall be so firmly affixed across the upper end of the container with part of the stamps lying on the cover and part of the body of the container as effectually to seal the container and prevent the removal of the cigarettes without breaking the stamp. In other forms of tin containers, the stamps shall be firmly affixed across the center of the upper end of the container in such a manner as effectually to seal the container and prevent the removal of the cigarettes without breaking the stamps. (3) Imported mechanically packed cigarettes bearing the words "For Export to the Philippines" shall be affixed with Philippine internal revenue stamps in the country where it is manufactured upon express authority from the Philippine Government. (4) Smoking and chewing tobacco. Internal revenue strip stamps for smoking or chewing tobacco or the labels for imported smoking tobacco shall be firmly attached to the middle of the package running lengthwise, completely overlapping both ends in such a manner as effectually to seal the package and render it impossible to remove the contents thereof without breaking the internal revenue strip stamp or label, leaving the blank space for the cancellations, of the internal revenue strip stamp or label entirely on the top of the package. On the 100-gram packages of imported smoking tobacco, the strip labels shall be affixed lengthwise of the package in such a manner as to seal both ends. Imported chewing and smoking tobacco shall be affixed with Philippine internal revenue stamps in the country where it is manufactured upon express authority from the government of the Philippines. (c) Cancellation of internal revenue strip stamps and stickers affixed to manufactured products of tobacco. Immediately after the affixture of the internal revenue stamps of all kinds and denominations to the boxes, bundles, or packages containing cigars, cigarettes, smoking or chewing tobacco as well as of stickers to rolls or packages of cigarettes, said stamps or stickers shall be cancelled by means of a rubber stamp or any cancelling machine approved by the Collector of Internal Revenue which shall leave on the stickers or internal revenue stamps a legible impression in black ink of a quality likewise to be approved by the Collector of Internal Revenue, of the schedule, paragraph, and assessment numbers of the manufacturers, the date of the cancellation, and six distinct parallel waved lines extending at least 2 centimeters each side of the stamps cancelled. In lieu of the method just stated, the internal revenue stamps and/or stickers mentioned in this paragraph may also be cancelled by means of a perforating machine. Immediately prior to the affixture of the stamps and/or stickers to the boxes, bundles or packages containing cigars, cigarettes, smoking or chewing tobacco, there shall be printed thereon by perforation in two lines running lengthwise, the schedule, paragraph, and assessment number of the factory and the letters P.I. in the first line, and the date of the cancellation of the stamps in the second line indicated by numerals. Illustration: A - 4 - 5 P.I. 2 - 21 23 The several figures and letters of the cancellation thus prescribed shall be clearly and sharply outlined and suitably spaced for legibility and distinctness; and in cancelling stamps, especially those of small dimensions, the perforation must not be so large as to render it impossible to determine the genuineness, denomination, or the rate of the tax of stamps cancelled. Packages of native cigarettes (cajetillas) duly affixed with internal revenue strip stamps should be wrapped in bundles or rolls of 100, 200 and 750's to which the corresponding stickers should be firmly affixed and cancelled in the same manner hereinabove indicated. There shall be firmly affixed to every carton or package (rolls) of 200's and/or 750's an official sticker provided for this purpose by the Bureau of Internal Revenue to show that the packs of cigarettes contained therein are duly affixed with the corresponding internal revenue stamps. (d) Requisition for stamps. All internal revenue stamps for use in the payment of taxes by manufacturers must be purchased on a stamp requisition form (B.I.R. forms nos. 31.12, 31.21 or 31.30) made out in duplicate by the manufacturer. The deputy provincial treasurer or city treasurer, as the case may be, shall forward one copy of the said form, with serial numbers and denominative values of stamps and properly filled in, to the Collector of Internal Revenue with his report of stamps sold. The other copy shall remain on file in the office of the deputy or city treasurer. ICacDE The internal revenue strip labels to be affixed to packages of imported smoking tobacco may be purchased from the Commissioner of Customs at Manila, or from the Collector at the port of entry. At each port of entry an accurate and complete record of the receipt and issue of the strip labels is kept as prescribed by the Collector of Customs, which record shows the number of labels received, the date of issue, the number of labels issued, and the persons to whom issued. SECTION 6. Packing of Tobacco Products for Domestic Consumption; Original Containers. All cigars, cigarettes, smoking tobacco, and chewing tobacco intended to be removed for sale or consumption within the Philippines shall be packed in boxes or packages of specified quantities or weights as determined hereinafter and such boxes or packages shall be considered original containers. All cigars, cigarettes, smoking and chewing tobacco which are not yet packed and duly affixed with internal revenue stamps should not be placed in fiber boxes, cartons, wooden boxes or wrapped in any container except in the regular trays or in two side open wooden boxes commonly known as "Tariahan" or in topside open wooden boxes. (a) Cigars. Cigars shall be packed in boxes of wood containing 10, 20, 25, 50, 100, 200, 250, or 500 cigars of the P2.30 class, 5, 10, 25, 50, or 100 cigars of the P4.60 class; and 5, 10, 20, 25, 50 or 100 cigars of the P7.00 class; or in substantial cardboard of pasteboard boxes or wrapping of tough paper containing 10 and 50 cigars each of the P2.30 class and 5 or 10 cigars of any other class. Provided that in the case of desechos cigars the same may be wrapped in tough paper containing 25 or 50 cigars. Cigar boxes once used may be used again for packing cigars, but in such case, the marks and labels appearing thereon should first be completely obliterated before the boxes are returned to the factory premises. (b) Cigarettes. Cigarettes manufactured of Virginia type tobacco and/or flue-cured tobacco shall be packed in packages (cajetillas) or boxes containing 5, 10 or 20 cigarettes of the P6.00 per thousand class, P12.00 per thousand, P10.00 per thousand, P20.00 per thousand, P13.20 per thousand, P26.40 per thousand, P22.00 per thousand, and P44.00 per thousand, provided that cigarettes of P10.00 per thousand may be packed in tins of 50 cigarettes and cigarettes made of leaf tobacco other than Virginia type tobacco and/or flue-cured tobacco, in packages (cajetillas) or boxes containing 20 or 30 cigarettes of the P2.50 per thousand class, P3.75 per thousand, P5.00 per thousand, P5.50 per thousand, P8.25 per thousand, and P11.00 per thousand. Nevertheless, cigarettes of the P10.00 per thousand may be packed in tin cans containing 50 cigarettes, and cigarettes of P3.75 per thousand and up may be packed in boxes containing 100 cigarettes. (c) Smoking tobacco. Smoking tobacco shall be packed in boxes or packages containing 50, 100, 125, 250, 450, or 500 grams each and completely sealed. (d) Chewing tobacco. Chewing tobacco shall be packed in boxes or packages containing 50, 100, 250, 500, or 750 grams each and completely sealed. (e) Containers of tobacco products to be of strong materials. All boxes, bundles, packages, or packing cases intended to be used as original containers must be made of strong or tough materials approved by the Collector of Internal Revenue. (f) Destruction of internal revenue stamps. Any person who opens any package or box of cigarettes, cigars, smoking tobacco or chewing tobacco either for sale or consumption shall simultaneously destroy the internal revenue stamp affixed thereto in such a manner as effectively preventing its reuse. SECTION 7. (a) Marking of original containers of manufactured products of tobacco for domestic consumption. Before the removal from the factory of any original container of cigars, cigarettes, smoking tobacco, or chewing tobacco for domestic consumption there shall be affixed thereto the corresponding internal revenue stamps, and branded or otherwise permanently marked thereon, the municipality and province where manufactured, the schedule, paragraph, assessment number of the factory, the number of cigars or cigarettes, or the quantity of smoking or chewing tobacco therein contained and their brand. Said stamps and the marks herein required shall be affixed, marked, or branded directly to or on the box, bundle, package, or container indicated, and not to or any outer covering of the box, bundle, package, or other container. (b) Marking of containers of tobacco products for export. Cigars, cigarettes, smoking or chewing or partially manufactured tobacco intended for export may be packed in containers other than those specified in the preceding section. But before the removal of said containers of tobacco products from the place of manufacture for export, there shall be branded or otherwise permanently marked thereon, the municipality and province where manufactured, the schedule, paragraph, assessment number and commercial name of the manufacturer, the number of cigars or cigarettes or the quantity of smoking or chewing or partially manufactured tobacco contained therein, their brand, the date of removal, and the words, "For Export". Manufactured products of tobacco, intended for export to the United States shall be marked as provided in the United States Internal Revenue Law and Regulations governing the packing and branding of tobacco products removed for export to the United States. (c) Labels and individual packages for tobacco products, whether imported or locally manufactured, sold and delivered to the United States Armed Forces and/or the Armed Forces of the Philippines for actual use or issue by the said Armed Forces and purchased with funds furnished by the Government of the United States or the Republic of the Philippines shall be permanently printed with the words "Tax-Free for the Exclusive Use of the United States Armed Forces" or "Tax-Free for the Exclusive Use of the Armed Forces of the Philippines," as the case may be, each letter to be printed in heavy ink by the importer or manufacturer on each original package or container before the delivery of the said articles to the purchasers. SECTION 8. (a) Marking of packing cases. Packing cases or other containers of cigars, cigarettes, smoking tobacco or chewing tobacco intended for shipment by rail, boat, or otherwise, within the Philippines shall, before leaving the factory where packed, have legibly marked thereon the schedule, paragraph, assessment numbers, the words "Taxpaid Tobacco Products", the invoice number and the date. The markings shall be placed on one side of the case or package and shall be separated and distinct from all other markings. EXAMPLE: Tax Paid Tobacco Products A-4-515 Invoice No. _______ Date __________ Packing cases or other containers of tobacco products for export shall have the marks indicated above except that in place of the invoice number the word "For Export" shall be marked thereon. (b) Branding of cigarettes. All cigarettes manufactured for sale by registered cigarette manufacturers shall bear the name of the factory or brand registered and approved by the Collector of Internal Revenue. The branding shall be done by steel dies or by any metal device attached to the cigarette making machine. The branding of the registered name by rubber stamp or by any similar device on the cigarettes shall not be considered sufficient compliance with the requirement of these regulations. DCATHS (c) Manufacturers of tobacco products using motor vehicles in the transportation of said tobacco products shall mark prominently each side of the vehicles with the commercial name of the factory, its address, schedules, paragraphs, and assessment numbers. In the case of independent peddlers of tobacco products using motor vehicles such marks shall consist of their names, addresses and their privilege tax-receipts. SECTION 9. (a) Minimum sale by a tobacco factory. The minimum sale or removal that may be made by or from a tobacco factory shall be one original container of cigars, smoking or chewing tobacco, as defined in Sec. 6 hereof. In the case of cigarettes the minimum sale or removal shall be one standard carton or roll. (b) Sale by dealers of imported tobacco products; possession of unlabeled packages prohibited; opening of packages must break labels; labels of empty packages to be destroyed. No dealer shall receive or have in his possession any imported tobacco products which has not been properly labeled as provided in these regulations, nor shall have in his possession at any time more than one open package of said tobacco products. The sales of imported tobacco products shall be made in unbroken packages or from original containers only. Every person who opens a package of tobacco products shall do so in such a manner as to break the internal revenue label thereon so that the label may not again be used to indicate payment of internal revenue taxes. The whole of such internal revenue label shall remain on the box or package until the entire contents are sold, disposed of or consumed after which the owner of the package shall entirely destroy the internal revenue label. Any imported tobacco products not covered by the required label shall be liable to seizure. DAaEIc SECTION 10. (a) Register, auxiliary register, and stamp requisition books for manufacturers. The Collector of Internal Revenue shall from time to time supply provincial revenue agents or the chief of the Tobacco Tax Section with the necessary number of manufacturers' official register books and official auxiliary register books as may be required in each locality by manufacturers of tobacco products. Whenever any manufacturer shall have qualified himself as such by executing a proper bond, registering his factory, and paying the privilege tax and shall have complied with all the requirements for engaging in such business contained in the National Internal Revenue Code and in these regulations, the internal revenue agent within whose district the factory is located shall deliver to said manufacturer the necessary official register books and auxiliary register books. These books consist of the following: B.I.R. No. 31.09 - Official Register Book, A-3 for manufacturers of chewing and smoking tobacco. B.I.R. No. 31.10 - Manufactured tobacco (Transcript sheet of above). B.I.R. No. 31.27 - Official Register Book, A-5, for manufacturers of cigarettes. B.I.R. No. 31.28 - (Transcript sheet of above). B.I.R. No. 31.01 - Official Register Book, L-7, record of raw materials for manufacturers of any class of tobacco products. B.I.R. No. 31.02 - (Transcript sheet of above). B.I.R. No. 31.46 - Auxiliary Register Book, L-7-1/2, bale book, for manufacturers of any class of tobacco products. B.I.R. No. 31.47 - (Transcript sheet of above). B.I.R. No. 31.18 - Official Register Book, A-4, for manufacturers of cigars. B.I.R. No. 31.19 - (Transcript sheet of above). B.I.R. No. 31.12 - Stamp requisition book, for manufacturers of manufactured tobacco. B.I.R. No. 31.21 - Stamp requisition book, for manufacturers of cigars. B.I.R. No. 31.30 - Stamp requisition book, for manufacturers of cigarettes. B.I.R. No. 31.05 - L-7 Official Invoice Book, for use in connection with L-7 register book. B.I.R. No. 31.05 - L-7-1/2 Official Invoice Book, for use in connection with L-7-1/2 bale book. (b) General nature of official register and auxiliary register books. The L-7 official register book is the record of all raw materials used in the manufacture of tobacco products of all description in the factory. It is the primary record of the internal operations of the factory. It shows the raw materials used in the manufacture and the articles actually manufactured or produced. The Schedule A register books are the record of the articles actually manufactured or produced, and transferred from the credit side of the official register book, L-7. They show the amount of taxes paid and the name of the person to whom the finished products is consigned or sold when leaving the factory. The bale book, L-7-1/2, is an auxiliary to the L-7 official register book. All official register books and other official records herein required of manufacturers shall be kept on the factory premises, or in the factory warehouse, in the case of bale books, and open to inspection by any internal revenue officer at all times of the day or night. (c) Preliminary steps; entries to be made on fly leaf of official register, auxiliary register and other official books. There shall be entered on the fly leaf of each of the official register book or auxiliary register book at the time of delivery to the manufacturer the date of delivery of the book, the name of owner of the factory and the manager thereof, and a declaration or certificate signed by the owner or manager, attested by the internal revenue agent delivering the book, to the effect that all the provisions of the law and regulations governing the operations of his factory, the use of said official books, and the manner of stamping, marking, and shipping of goods from the factory have been fully explained to such manufacturer or manager; that he fully understands the same and knows the penalties and punishments imposed for the disregard thereof; and promising strict compliance therewith. One copy of this declaration or certificate shall be forwarded to the Collector of Internal Revenue, another transmitted to the provincial treasurer through the deputy provincial treasurer and a third one shall remain permanently in the register book. SECTION 11. Entries to be Made in the Official Register and Auxiliary Register Books; Monthly Transcripts. (a) Official bale book (L-7-1/2). All leaf tobacco received in any factory or factory warehouse shall be debited, and any removals of tobacco from the factory proper shall be credited in the official bale book; except cuttings, clippings, sweepings, and other partially manufactured tobacco, which shall be credited in the L-7 register book. The Collector of Internal Revenue may in his discretion waive the requirement of keeping an official bale book by small factories. (b) The Official register book (L-7). One L-7 book shall suffice for each manufacturer of tobacco products, regardless of the class of tobacco manufactured by him. All loose leaf tobacco received in the factory proper and all bales of leaf tobacco which are opened in the factory for use in the manufacture of tobacco products shall be entered in the L-7 official register book under the heading "Received from Dealers" at the net weights. In the column headed "Name" and "Address" shall be shown the words "Transferred from tobacco factory warehouse". All leaf tobacco received into a factory must be entered in the official bale book pertaining to the factory and bales of leaf tobacco shall not be taken up in the L-7 register book until said bales are transferred for use and credited in the official bale book. While leaf tobacco must be taken up in the official bale book, this is done for statistical purposes only. As soon as it enters the factory for use in manufacture it should be taken up in the L-7 register book and credited in the official bale book. All removals of waste of tobacco, whether transferred to other factories, removed for agricultural or industrial purposes, or destroyed on the premises or elsewhere, shall be entered in the official register book, L-7, under the heading "Raw Materials Removed", showing all information required therein. CSIDEc (c) Quantity of products; wholesale price. Immediately after operations have commenced in a new factory, the manager or owner, under the supervision of the internal revenue agent, shall proceed, in the manner hereinafter provided, to determine the number of each brand of cigars and cigarettes and quantity of each brand of smoking and chewing tobacco that can be produced from 1 kilo of leaf. After such figures have been ascertained and entered in their proper order in the manufacturer's declaration, they shall be entered in the column provided on the production sheet in the L-7 register. Under each brand shall also be shown the manufacturer's wholesale price of the brand in the case of cigars. If a new brand is added the name of such brand shall be written in red ink during the first month. The above requirements should be stated on BIR Form No. 31.03, BIR Form No. 31.03 D, BIR Form No. 31.03 B, BIR Form No. 31.03 BB and BIR Form No. 31.03 C, Manufacturer's and Importer's Declarations. (d) Schedule A register books. At the time of the original assessment of each and every factory there shall be entered on the "Debit" side of each official register book, as the first item therein and in the proper columns, a description of all stocks of goods subject to the tax on hand on the date of said assessment. Every manufacturer shall also, at the close of the day's business, on such days as his factory is in operation, enter in said register on the "Debit" side and in the proper columns thereof the day and number of hours worked, the kind and quantity or amount of articles produced and a statement of the denominative values, serial numbers, quantity and total value of internal revenue stamps purchased on that day. At the time of any removal of goods, he shall immediately enter in his register books on the "Credit" side thereof and in the proper columns a full description of said goods, including the day or hour of removal, the denominative value, serial numbers, and quantity of internal revenue stamps affixed to every container, the contents thereof by the count, or measurement or quantity used, the total value of the stamps affixed to the containers, and the name and address of the consignee or purchaser. All tobacco products manufactured shall be shown daily in the corresponding actual production sheet, and in case a factory has been closed for one or more days, entry shall be made in register books, "Factory closed from ____________, 19___ to __________, 19___". This entry shall be made immediately upon reopening the factory for business. He shall entirely sign or initial each entry made, whether on the "Debit" or "Credit" side as aforesaid of said register book, at the close of day's business, and shall at the foot of each page certify to the truth and completeness of all entries made thereon. (e) Monthly transcript sheets to be rendered. Every manufacturer shall promptly at the end of each month and not later than the eighth day of the next succeeding month make and present to the deputy provincial treasurer of the municipality within which his factory is situated, a true and exact transcript of all entries made on both the "Credit" and "Debit" sides of his register books and auxiliary register books during the month last past, and shall strike a balance in each such book and on said transcript sheets showing the balance of stock in hand, if any, and said balance of stock shall be carried over as the first entry for the next succeeding month on the "Debit" side of the said register book. Each manufacturer shall at the foot of each transcript sheet certify to the truth and completeness of all the entries therein, and that they are exact copies of the original entries contained in his official register book. When any internal revenue officer is required to make entries of any kind in an official register book, or other class of books for which transcript sheets are required to be rendered such entries shall be made in a legible manner and the manufacturer or dealer shall make a correct copy of the same on his transcript sheets before sending them in at the end of the month. The transcript forms provided for above shall be identical in form with the debit and credit pages of the manufacturers' official register books and will be supplied by the Collector of Internal Revenue to manufacturers through the respective deputy provincial treasurers to whom said transcript sheets shall be presented not later than the eighth day of the next succeeding month. Before signing them, the local deputy provincial treasurers shall insert or stamp thereon the date of presentation of the transcript sheets, after which the manufacturers shall forward them direct to the Collector of Internal Revenue. HAaDTE SECTION 12. (a) Invoice books and stubs. Each manufacturer of tobacco products shall keep an official invoice book (B.I.R. Form No. 31.05) to correspond with each bale book (L-7-1/2) and his official register book (L-7) from which he shall issue an invoice containing all the data specified thereon to cover each removal or sale of tobacco made by him. Such invoice or guia shall at all times accompany the goods which it covers and shall be attached to the bill of lading if the goods are shipped by rail or boat. Whenever untaxpaid domestic tobacco in any form is found unaccompanied by such invoice or guia, the fact that it is so unaccompanied shall be prima facie evidence that such tobacco is unlawfully in the possession of its holder, and the tobacco shall be seized or embargoed by any internal revenue agent or officer who finds it so unaccompanied. A record of each schedule L invoice issue shall be made on the corresponding notification and record stub before the invoice shall be detached, and the notification stubs of all invoices issued shall be delivered not later than the day following the day of their issue (Sundays and holidays excepted) to the Collector of Internal Revenue, if in Manila or to the deputy provincial treasurer of the municipality in which the factory is situated. (b) Manufacturers must give sufficient address on L-7 invoice and notification stubs. Manufacturers shall not issue L-7 or L-7-1/2 invoice with an insufficient or indefinite address. When by reason of its insufficiency or indefiniteness an internal revenue officer is unable to locate the person to whom issued, he shall require the manufacturer to make out a substitute invoice (B.I.R. Form No. 25.09) which shall be sworn to by said manufacturer and shall have affixed thereto a 30-centavo documentary stamp. SECTION 13. Treatment of Fractions of a Kilo. Except as otherwise provided in these regulations, in recording transactions in the official register book, L-7, the manufacturer shall, when the net weight is not in even number of kilos, eliminate the fractions; if such fraction amounts to 500 grams or more, he shall treat it as 1 kilo; and if such fraction is less than 500 grams, he may drop it altogether. EXAMPLE: 1,742.500 kilos should be expressed as 1,743 kilos; 1,742.497 kilos should be expressed as 1,742 kilos. But in the "Production sheet for manufactured tobacco," the fractions shall be entered for the production of packages daily, eliminating the fractions as above provided when carrying the total forward to the resume at the end of each month, or at any time when account of stock is taken. SECTION 14. Manner of Determining the Number of Cigars or Cigarettes, and the Quantity of Smoking or Chewing Tobacco that may be Produced from a Kilo of Leaf. Before the first entry in the production sheets of the L-7 register book is made, all cigars, cigarettes, smoking tobacco, and chewing tobacco must be accurately weighted, due allowance being given for moisture in tobacco, weight of cigarette paper, etc., as follows: (a) Condition of tobacco when it enters the factory. Leaf tobacco which enters a factory for manufacture is almost without exception well seasoned and dry. Therefore, to determine the number of cigars or cigarettes which may be produced from 1 kilo of leaf, they should be reduced to approximately the same degree of dryness as that of the leaf from which they were manufactured. (b) Cigarette paper to be considered. In determining the number of cigarettes that can be manufactured from 1 kilo of tobacco, the weight of the paper must be accurately ascertained and considered. A simple way of doing this which is sufficiently accurate, is to balance the same number of cigarette paper as the number of cigarettes being weighed, viz., if the cigarettes weigh 650 to the kilo, balance 650 of the papers against cigarettes, and add the number of cigarettes thus balanced to 650; if, for instance, seven cigarettes balance 650 papers then the number of cigarettes that may be produced from 1 kilo of leaf would be 657. (c) Accounting for moisture in chewing tobacco. The tax on chewing tobacco must be paid on its weight when it leaves the factory, without any deduction or allowance for the moisture it contains. As the amount of moisture varies from 15 to 40 per cent with the different manufacturers the same must be determined by the manufacturer under the supervision of the agent-in-charge of the factory, by the drying basis for cigars and cigarettes as given in paragraph (a) hereof, and will be entered in the official register book, L-7, under "Debit" items in the resume when he takes account of stock in the factory or at any other convenient time, calculating the same by taking the proper percentage of all leaf tobacco used in the factory in the manufacture of chewing tobacco since the last previous stocktaking. For instance, if the packages of mascada as they leave the factory weigh 250 grams each, the allowance for moisture being 20 per cent, the amount of tobacco in each package would be 200 grams, the balance of 50 grams being water; nevertheless, the tax must be collected on 250 grams. The percentage of moisture shall be entered in the delinquency index and signed by the owner or manager of the factory and the agent under whose supervision the tests to determine the amount of moisture were made. SECTION 15. Cigars Returned from Export. Whenever cigars exported from the Philippines without the payment of the internal revenue taxes thereon are subsequently returned to the Philippines for domestic consumption they shall be taken up by the internal revenue agent inspecting the shipment on the debit side of the official A register book in red ink in the proper class or classes with the following notation: "Returned from export; removed on ______________, 19___" This entry will be signed by the internal revenue agent who shall report the action taken thereon to the Collector of Internal Revenue. SECTION 16. Cigars Consumed on Premises. Two (2) cigars and four (4) cigarettes actually consumed by laborers or employees on the premises of a manufacturer for every working day will not be considered subject to internal revenue tax; but a record shall be kept of the number of cigars consumed every day. If such cigars have been taken up in the schedule A register book, as cigars manufactured, the manufacturer shall take credit for the same. This shall be done by means of a credit entry in red ink after the last entry, at the end of the month in the Schedule A register book. SECTION 17. Alteration of Weights or Introduction of New Brands. Manufacturers shall notify the Collector of Internal Revenue of any contemplated changes in weights or brands; and the articles to be changed will then be weighed by an internal revenue agent and entered in an additional declaration on B.I.R. Form No. 31.04, the same to be executed and filled in the same manner as B.I.R. Form No. 31.03. In the production transcript sheets furnished by the manufacturer the name of the brand altered or introduced will be written in a new column. Red ink will be used for this entry the first month only. SECTION 18. Remanufacture of Damaged Goods. When any manufactured product within the factory premises becomes worm-eaten or otherwise damaged, and the manufacturer desires to have the same broken up for remanufacture, he will make application to the Collector of Internal Revenue. An internal revenue agent will make the necessary credit entry, in red ink, in the official A register book, stating the reason for the transfer, weigh the cigars, cigarettes, etc., and enter them, in red ink, as raw materials in the factory's official register book, L-7, in the debit column of the manufacturer's resume, personally witness their breaking up, and report his action to the Collector of Internal Revenue. If the damaged manufactured products of tobacco still in the factory premises mentioned above are already packed and with the corresponding internal revenue strip stamps affixed thereto, such packages of damaged tobacco with internal revenue strip stamps shall not be used again and the corresponding strip stamps shall be promptly destroyed before the damaged products of tobacco are removed from said packages. LibLex SECTION 19. (a) Classification of cigars and reclassification due to increase, or decrease in price. The tax on cigars is assessed on the manufacturer's wholesale price. Manufacturers shall file sworn statements with the Collector of Internal Revenue showing the maximum prices without adding the internal revenue tax of the different brands of cigars manufactured by them and the tax must be paid on the basis of the prices submitted. Manufacturers desiring to reclassify cigars on account of an increase or decrease in prices shall request permission in writing giving the reason for the change. If the Collector of Internal Revenue grants authority for a reclassification of any lot or brand of cigars, the internal revenue agent will make the proper entries in the corresponding register book A. If, for instance, cigars are to be changed from the P2.30 to the P4.60 class, the two columns affected will be totalled and deductions or additions made therein accordingly after which they will again be totalled and the manufacturer will continue his entries immediately under the new totals. (b) Classification of cigarettes and their reclassification due to changes in manufacture. The tax on cigarettes is assessed on the type of leaf tobacco they contain, whether or not they are wrapped in tinfoil or cellophane or packed in cartons covered with paraffin or waxpaper or in tin cans, their length, their weight per thousand cigarettes, and whether or not they are mechanically wrapped or packed. Manufacturers shall file sworn statements showing all brands of cigarettes manufactured by them, their length in millimeters, their weight per thousand cigarettes, the kind of leaf tobacco used in their manufacture, the quality of the wrapper used, and the way the cigarettes are wrapped or packed, and the tax must be paid on the basis of the information given. Manufacturers desiring to reclassify cigarettes on account of changes in the kind of leaf tobacco and wrapper used in the manner of wrapping and packing, and in the length and weight of the cigarettes shall request permission in writing giving the reason for the change. If the Collector of Internal Revenue grants authority for a reclassification of any lot or brand of cigarettes, the internal revenue agent will make the proper entries in the corresponding register book A in the same manner as that followed in the reclassification of cigars. (c) Balance at the end of the month. From the total of each columns of brands of cigars and cigarettes at the foot of the pages of the daily production sheets of the L-7 register book the quantity of leaf tobacco used in their manufacture shall be determined, and the total found by adding these sums shall be entered at the foot of the right hand column. The quantity of tobacco used in a factory during a month in the manufacture of cigars and cigarettes shall be determined by dividing the number of cigars and cigarettes of each brand manufactured during the month by the number of that brand that is produced from 1 kilo of leaf, avoiding fractions by treating them in the manner prescribed in section 13 hereof. The result of these divisions will be the total amount of leaf tobacco used in the manufacture of cigars and cigarettes during the month. The monthly balance of raw materials will be struck in the manufacturer's resume by bringing forward the totals from all of the different pages showing receipts and removals, and from the production sheet. The balance of raw materials on hand will be carried forward and entered in the manufacturer's resume for the next succeeding month as one single entry. TAIcaD SECTION 20. Exemption from Tax of Tobacco Products Intended for Agricultural or Industrial Purposes. (a) Sale of stemmed leaf tobacco, etc., by one factory to another. Subject to the limitations herein established, products of tobacco entirely unfit for chewing or smoking may be removed free of tax for agricultural or industrial use; and stemmed leaf tobacco, fine-cut shorts, the refuse of fine-cut chewing tobacco, refuse, scraps, cuttings, clippings, and sweeping of tobacco may be sold in bulk as raw materials by one manufacturer directly to another without the prepayment of the specific tax. Stemmed leaf tobacco, fine-cut shorts, the refuse of fine-cut chewing tobacco, scraps, cuttings, clippings, and sweeping of leaf tobacco or partially manufactured tobacco or other refuse of tobacco may be transferred from one factory to another under an official L-7 invoice on which shall be entered the exact weight of the tobacco at the time of its removal, and entry shall be made in the L-7 register in the place provided on the page for removals. Corresponding debit entry will be made in the L-7 register book of the factory receiving the tobacco under heading "Refuse, etc., received from other factory", showing date of receipt, assessment and invoice numbers, name and address of the consignor, form in which received, and the net weight of the tobacco. This paragraph should not, however, be construed to permit the transfer of materials unsuitable for the manufacture of tobacco products from one factory to another. (b) Application necessary for removal of waste tobacco for agricultural or industrial purposes. Before any waste of tobacco may be removed from a factory for agricultural or industrial purposes, the person desiring to obtain such waste of tobacco shall make an application on Office Form No. 31.16 for a permit for each removal. In case the tobacco is desired for agricultural use, the application shall be accompanied by a certificate from the deputy provincial treasurer or any other internal revenue officer stating that the applicant is a bona-fide agriculturist. Upon approval by the Collector of Internal Revenue, a permit will be issued in duplicate on Office Form No. 31. One copy of the permit will be surrendered to the manufacturer who will forward it as voucher to his L-7 transcript sheet, and the other copy will be returned to the Collector of Internal Revenue with notation by the internal revenue officer of the amount of tobacco removed, the invoice number, and the advice that the proper credit entry has been made on the L-7 register book. In special cases the Collector of Internal Revenue may issue continuous permits for a period not exceeding six months for the removal of tobacco stems or waste. These permits will be in the form of a letter of authorization signed by the Collector of Internal Revenue. (c) Waste of tobacco removed for agricultural or industrial purposes to be inspected, weighed, denatured and invoiced; final disposition of waste of tobacco. Only two forms of tobacco may be removed from a factory either for agricultural or industrial purposes without the payment of the specific tax, viz., tobacco stems and tobacco powder. But before their removal from the factory premises, all waste of tobacco must be inspected and weighed by an internal revenue officer and removed immediately after such inspection. In case the tobacco powder contains an excessive amount of moisture, the moisture shall be discounted by the officer supervising the weighing of the tobacco. Tobacco stems before removal must be thoroughly stripped of all leaf tobacco and rotted or denatured by sprinkling kerosene oil. Tobacco powder, before being removed, must be finely pulverized and should freely pass through a wire screen of No. 50 mesh, as per sample on file with the Collector of Internal Revenue. All such tobacco powder may further be required to be rotted or denatured by thorough fixing with lime, ashes, sulphur, fine soil, sand, or manure, to render it unfit for human consumption, the mixture to be in the following proportion: Tobacco powder and lime tobacco powder, 95 per cent, lime 5 per cent; tobacco powder and sulphur, fine soil, sand or manure tobacco powder, 85 per cent, sulphur, sand or manure, fine soil, 15 per cent. After the waste of tobacco has been inspected, weighed and denatured, the internal revenue officer will see that an L-7 invoice is duly prepared to be verified and signed by him. This invoice must accompany the shipment. The internal revenue officer will also see to it that the proper entries are made in the official register (L-7) of the factory. If the waste of tobacco is for use on land situated at a considerable distance from the factory from which the tobacco was removed, it shall be shipped and consigned to the deputy provincial treasurer of the municipality where it is to be used, and the official invoice shall be attached to the bill of lading accompanying the tobacco. Upon receipt of the tobacco by the deputy provincial treasurer, the bill of lading shall be delivered to him and he will see that within three months from the time the tobacco is received, it is used as a fertilizer for which the permit shows it was intended, or destroyed, or denatured in his presence. (In any case the certificate shall be made on Office Form No. 31.38 by the internal revenue officer witnessing the disposition of the tobacco waste removed for industrial or agricultural purposes and forwarded, when accomplished, to the Collector of Internal Revenue.) When the waste of tobacco removed for agricultural purposes is delivered to a bona fide agriculturist in the presence of an internal revenue officer, said waste of tobacco need not be accompanied by the internal revenue officer and may be utilized for the purpose for which it was intended at the convenience of the agriculturist who shall keep the L-7 invoice until he has disposed of the tobacco powder, or other waste of tobacco, and then forward the invoice to the Collector of Internal Revenue with the following notation thereof: "____________, 19___ "All of the tobacco powder and waste of tobacco covered by this invoice has been scattered on my agricultural land in the barrio of _____________, municipality of _____________, province of _____________." _________________________" (Signature of agriculturist) In case the agriculturist shall dispose of the waste of tobacco to another person, and fail to forward the invoice to the Collector of Internal Revenue properly annotated within three months after removal from the factory of said product, said agriculturist shall be subject to the payment of the corresponding tax on the tobacco powder, waste, or other refuse of tobacco removed. Any Office Form No. 31.38 that may have been prepared for such waste of tobacco shall be returned to the Collector of Internal Revenue with an indorsement signed by the internal revenue officer, and bearing his title, to the effect that said waste products were given into the possession of the bona fide agriculturist named. (d) Waste of tobacco for destruction. Any manufacturer who so desires may, under the supervision of an internal revenue officer, have tobacco in any form destroyed on the premises of the factory or in any other suitable place. The internal revenue officer, after witnessing its destruction, will see that proper entry under his signature or initials is made in the official register book, L-7. He will make a report of the destruction to the Collector of Internal Revenue, stating the quantity in kilos, the class of tobacco destroyed, and the manner of its destruction. Should the tobacco contain an excessive amount of moisture, the same will be discounted as is done in stocktaking. With the consent of the manager of the factory, the internal revenue officer shall indicate in the official register book L-7, and in his report to the Collector of Internal Revenue, the amount deducted on account of such excessive moisture. (e) Waste or refuse of tobacco for export. Tobacco clippings, cuttings, scraps, waste or refuse of tobacco for export shall be removed under an official L-7 invoice on which shall be entered in red ink the exact weight at the time of removal and an entry also in red ink shall furthermore be made in the uppermost division of the "Raw materials Removed" accounts of the L-7 register. Under the heading "In What Form" shall be designated whether the tobacco exported consists in "Leaf tobacco" or "partially manufactured tobacco" or whether the shipment consists of clippings, scraps, or other waste or refuse of tobacco. The total amount of such shipments in any month shall be similarly shown in red ink together with the words "For Export" on a separate line, under the heading "Cr. Items" in the Manufacturer's Resume. Proof of exportation will be furnished in the same manner, as for cigars, cigarettes, smoking tobacco and chewing tobacco exported, and on the back of the bill of lading furnished the Collector of Internal Revenue as proof of exportation will be entered the date the tobacco was removed, the schedule, paragraph, and assessment numbers of the factory, and a brief description of the tobacco and its weight in kilos. EXAMPLE: Mar. 15, 1921. L-7, cigar clippings, 500 kilos. (f) Storage of waste tobacco and tobacco powder on factory premises. Manufacturers desiring to avail themselves of the privilege of removing waste tobacco and tobacco powder without the payment of the specific tax shall provide a separate location for the storage of such tobacco. (g) Sifting and packing of waste tobacco and tobacco powder for agricultural purposes. The manufacturer shall provide himself with a screen of the mesh hereinbefore prescribed which shall be presented to the internal revenue officer for comparison with the standard kept at the Bureau of Internal Revenue. If it conforms with the standard, the internal revenue officer shall attach an official seal thereto. Before being packed all tobacco powder to be removed for agricultural purposes must be actually sifted and pass freely through the screen prescribed. If upon examination the internal revenue officer or other inspecting officer discovers that the tobacco powder presented for a tax-free invoice does not pass freely through the screen, the manufacturer will be proceeded against for violation of these regulations. Tobacco powder shall be packed in sacks or other suitable containers. (h) Written permit to be secured before storing tobacco products in cold storage. Tobacco manufacturers desiring to send cigars, cigarettes, and other tobacco products to a cold storage must first secure a written permit from the Collector of Internal Revenue or the provincial revenue agent in charge of their respective factories under the following conditions. The permit should be made in triplicate, the original to be kept by the manufacturer, the duplicate by the provincial revenue agent of the province where the factory is located, and the triplicate to be sent by the provincial revenue agent to the Collector of Internal Revenue. (1) Each storage permit shall not be granted for more than thirty days to be counted from the date of the issue of the permit. Said permit may, however, be extended if the conditions and circumstances warrant the extension; (2) Proper description of the number, classification, and other material particulars regarding the cigars or other tobacco products desired to be sent to the cold storage should be made to appear on the storage permit itself and the internal revenue agent concerned shall verify the count of cigars or other tobacco products covered by said storage permit; (3) The cigars or other tobacco products shall be packed up in secured or substantial containers; (4) Each container shall, before its removal from the factory, be securely sealed by an internal revenue officer; (5) Each container, upon its return to the factory shall be held for inspection by an internal revenue officer who will, if containers and seals are found intact, again verify the count of cigars or other tobacco products, and turn them over to the manager of the factory for completion of process required to put the same on the market; (6) The internal revenue officer concerned shall make notation of the transaction in the official register book of the factory, quoting the number and date of the permit issued as authority, and when the tobacco products so stored were removed definitely from the factory for export or sale, the proper credit entries should be made. The action taken should be reported to the Collector of Internal Revenue; (7) The manager of the factory will note the transaction only on the monthly transcript sheets furnished the Collector of Internal Revenue, but if the tobacco products so stored were removed definitely for export or sale, the proper entries should be made; (8) All finished products of tobacco shall be stored separately in a storeroom of the factory duly padlocked by the factory agent or other internal revenue officer assigned thereto by the Collector of Internal Revenue. Two locks shall be provided for the door of this storeroom; the key to one of them being kept by the factory owner, and the key to the other by the internal revenue officer. SECTION 21. Disposition of Rejected Leaf Tobacco in a Factory or Its Warehouse. All rejected leaf tobacco in a factory or its warehouses, whether the same be in hogsheads, bales, manos, pinongos, or loose leaves, shall be handled as follows: (a) From factory to warehouse and thence to wholesale dealer, or factory wholesale dealer. Any leaf tobacco in a factory before being transferred or sold to a wholesale dealer shall first be transferred to the factory warehouse under an official L-7 invoice. An internal revenue officer shall supervise the weighing and transfer to the factory warehouse. The corresponding entry in the auxiliary register book L-7-1/2 will be made in red ink. On the page for removals in the official register L-7, under the heading "Waste or other classes sold or transferred, to other factories" will be shown the date of transfer, number of invoice upon which transferred, and the gross weight in kilos, with the following notation in the other vacant column: "Rejected tobacco transferred to warehouse." Tobacco so transferred shall be removed from the factory warehouse to wholesale dealers in standard bales under an official L-7-1/2 warehouse invoice, provided that the factories not required to keep an auxiliary register book L-7-1/2 in accordance with section 11 of these regulations may transfer or sell rejected leaf tobacco on standard bales under an official L-7 invoice to another bona fide manufacturer or dealer. (b) From factory to factory. Should such rejected leaf tobacco be intended for transfer to some other factory they shall be transferred directly under an official L-7, invoice and entry shall be made in the L-7 register in the place provided in the page for removals. (c) Transfers of leaf tobacco from one place to another. All transfers of leaf tobacco from one place to another shall be accompanied with official invoice as indicated in sub-section (b) hereof. If the article to be transferred or transported are partially manufactured tobacco, the transfer shall also be made under the corresponding official invoice and under the direct supervision of an internal revenue officer. (d) Receipt of rejected tobacco in warehouses. If rejected tobacco is received in a factory warehouse in bales it shall be taken up on the debit page of the official bale book at both standard and not weights. If it be in manos, pinongos, or loose leaves, the same shall be taken up in the loose tobacco column, shall be arranged in manos or pinongos, and together with the balance of the manos or pinongos, the manner prescribed for wholesale dealers in leaf tobacco. (e) Transfer of imported leaf tobacco by manufacturers to other factories. Manufacturers who desire to transfer imported leaf tobacco to other factories shall first make an application for a permit from the Collector of Internal Revenue stating therein the number of hogsheads, the exporter from whom purchased, the quantity in kilos, and marks, if any. Upon issuance of the permit by the Collector of Internal Revenue, the transfer shall be made in the presence of an internal revenue officer who will check the lot of hogsheads to be transferred. SECTION 22. Delinquency and Stock Taking Records in Register Books. There shall be pasted securely in the center of the inside back cover of each official register book, L-7, a stout paper envelope, with ungummed flap turned outward, in which shall be kept a form (B.I.R. Form No. 3.05), prepared for use as a record of delinquency cases and instructions or warnings given the tobacco manufacturer. The form will show the L-7 number of the manufacturer and the paragraph and assessment numbers of the official register books A held by him, and entries therein shall be made by an internal revenue officer, and every such entry shall be dated and signed both by the officer making it and by the owner or manager of the tobacco factory. Each such entry shall contain the following information: If a delinquency case, the number of the case with a brief statement of the offense committed; and in the case of instructions or warnings, a brief statement of the subject and substance thereof. A brief statement of the results of all stocktakings shall also be entered in this record. AIaHES SECTION 23. Completion of Register Books. When all pages of the official register books have been filled, the balance in the completed register shall be carried forward to the new register. The delinquency record will also be removed from the completed register by an internal revenue agent or assistant agent and transferred to one newly installed, and the following note made in the old register: "Delinquency record transferred to second (third, fourth, etc.) book ____________________________ 19______ "________________________" (Internal revenue officer) Every person required to pay specific tax will be held responsible for the proper preservation of all completed registers and auxiliary register books and of all delinquency indexes and shall hold the same subject to the call of any internal revenue officer. When a tobacco manufacturer retires from business he shall secure a certificate, to be executed by an internal revenue officer on the last used page of his register, to the effect that all transcript sheets have been duly rendered and the register book properly closed. SECTION 24. Stocktaking. Every tobacco manufacturer shall at least once a year at such date as may be fixed by the Collector of Internal Revenue make an inventory of the quantity of leaf tobacco, stems, scraps, clippings, and waste, and the number or quantity of cigars, cigarettes, smoking tobacco, or chewing tobacco then on hand. An internal revenue officer must be present at any such inventory for the purpose of verifying the figures obtained and he shall immediately take up or drop any overage or shortage found in the official registers, Schedule A or L and make full reports to the Collector of Internal Revenue with recommendations. In addition to this inventory internal revenue officers may take an account of manufactured tobacco products or raw materials and stamps on hand at any time it is believed necessary. Manufacturers and importers of leaf tobacco shall see to it that all leaf tobacco in hogsheads and in bales are arranged in such a way as to provide enough space between the piles of hogsheads and bales to facilitate physical counting. (a) Allowance for unaccountable loss. A loss of 2 per cent of the total amount of leaf tobacco handled since the last previous stocktaking when not caused by the negligence or carelessness of the manufacturers, may be authorized as natural loss sustained in the process of manufacture, and when allowed will be entered in the "Credit Items" in both manufacturer's and internal revenue agent's resumes. Manufacturers are responsible for any change in the weights of their manufactured products or in the percentage of moisture contained in chewing or smoking tobacco and no claim for any allowance on account of any unauthorized change will be considered when inventory is taken. (b) Manner of collecting taxes on shortages in official registers, Schedules A or L. In the event of a shortage of leaf tobacco in the official register L-7 in excess of that allowed, an assessment for deficiency shall be made, and the amount of the specific tax estimated to be due determined by the method prescribed in section 25 hereof. An explanation will be given in the agent's report, and he will await the action of the Collector of Internal Revenue upon his recommendation as well as upon the recommendation made with reference to the stocktaking corresponding to the official register, Schedule A, before proceeding further. The collection of the tax on deficiencies in the official register L, will be made by the affixture of internal revenue stamps to a miscellaneous Schedule A-3, A-4, or A-5 official invoice, entry being made on the credit side of the official register book A showing the date and number of the invoice issued, together with the statement that same is "For shortage in raw material equivalent to ______________ and _____________ cigars of P2.30, P4.60 and P7.00 classes, respectively, or ______________ and ____________ cigarettes of P2.50, P3.75, P6.00, etc., classes respectively, or ________________ kilos of smoking or chewing tobacco, as per stocktaking on _______________, 19____". In the proper column will be shown the sum collected, quoting the letter of authority by date and number; and the invoice and notification stub will be forwarded, together with the papers in the case, to the Collector of Internal Revenue. The agent will likewise make entry in the resume of the official register book, L-7, of the stocktaking in which the shortage was found, showing that the specific tax on the shortage has been duly paid, stating date and number or numbers of the invoice or invoices on which the specific tax was accounted for, and quoting the letter of authority for its collection by date and number. The collection on account of a shortage in the official register A, when approved, will be accounted for by the issue of a miscellaneous invoice with stamps affixed in the same manner as above, and a credit entry will be made in the A-3, A-4, or A-5 register book, with this notation: "For shortage in raw material equivalent to _______________ and _______________ cigars of P2.30, P4.60 and P7.00 classes, respectively, or _______________ and _______________ cigarettes of P2.50, P3.75, P6.00, etc. classes, respectively, or ________ kilos of smoking or chewing tobacco, as per stocktaking __________________, 19_____." SECTION 25. Manner of Making Assessments for Deficiencies in Raw Materials. The record of raw materials contained in the official register book, L-7, kept by a manufacturer in accordance with the provisions of these regulations will be used as a basis for ascertaining the amount of the specific tax due from him, and whenever at any time the quantity of raw materials received by a manufacturer is less than the amount of the raw materials and the manufactured or partially manufactured products on hand those lawfully removed from the factory, plus waste removed or destroyed by an internal revenue officer and the allowance provided in section 24 (a) hereof, such shortage of raw material will be presumed to have been turned into manufactured products of tobacco and removed from the factory for domestic consumption without the payment of tax, and the Collector of Internal Revenue will estimate the amount of tax due, make assessment thereon, and certify same to the proper internal revenue officer for collection. The provisions of this section shall not prejudice the right of the Government to bring suits in the courts for the recovery of fines, penalties, or forfeiture in proper cases. CAaEDH (a) Method of estimating the tax on deficiencies. The following explanation of the method of arriving at the amount of specific taxes to be collected on cigars, cigarettes, smoking tobacco and chewing tobacco and agent's resumes of the official register book, Schedule L, of a manufacturer will serve as an example of the method of estimating the tax on deficiencies: EXPLANATION (1) To find the percentage of leaf tobacco used in the manufacture of cigars, cigarettes, smoking tobacco, and chewing tobacco from last previous stocktaking to date: On January 1, account of stock was last taken: on March 15, following account of stock was again taken and books checked. Between these dates there was used in manufacture the number of kilos of leaf tobacco shown below, which amount is the basis for computing the percentage of shortage in leaf tobacco assumed to have been used for the manufacture of cigars, cigarettes, smoking tobacco, and chewing tobacco, respectively. Cigars Cigarettes Smoking Chewing Kilos leaf Kilos leaf Kilos leaf Kilos leaf used used used used January 200 240 68 52 February 265 307 187 50 March 1 to 15 35 53 25 18 Total 500 600 280 120 ==== ==== ==== === (2) Amount of chewing tobacco manufactured and removed from January 1 to March 15, plus 20 per cent for moisture; 20 per cent of 120 equals 24 kilos. (See entries in "Debit Items" in resume.) (3) Leaf tobacco shortage found 235 kilos. Kilos Used in manufacture of cigars from January 1 to March 15 500 Used in manufacture of cigarettes from January 1 to March 15 600 Used in manufacture of smoking tobacco from January 1 to March 15 280 Used in manufacture of chewing tobacco from January 1 to March 15 120 1,500 ===== 500/1500 equals 33-1/3 or 33 per cent for cigars. 600/1500 equals 40 per cent for cigarettes. 280/1500 equals 18-2/3 or 19 per cent for smoking tobacco. 120/1500 equals 8 per cent for chewing tobacco. Cigars. Thirty-three per cent of 235 kilos equals 78 kilos; 78 kilos x 140 cigars (average number of cigars to the kilo, taken from the eight brands manufactured) equals 10,920 cigars. Cigars manufactured from January 1 to March 15: P2.30 class 29,000 or 45 per cent. P4.60 class 38,000 or 35 per cent. P7.00 class 23,000 or 20 per cent. Total 110,000 or 100 per cent. ================== The total number of cigars manufactured divided into the number of cigars manufactured at each rate will give the per cent to be used in ascertaining the proportionate part of the total deficiency at the respective rate. 45 per cent of 10,920 cigars at P2.30 class equals 4,914 cigars; 4914 cigars at P2.30 per M P11.30 35 per cent of 10,920 cigars at P4.60 class equals 3,822 cigars; 3,822 cigars at P4.60 per M 17.58 20 per cent of 10,920 cigars at P7.00 class equals 2,184 cigars; 2,184 cigars at P7.00 per M 15.29 Total taxes due P44.17 ====== Cigars and cigarettes. Deficiencies in accounts of cigars and cigarettes will be ascertained as above. Smoking tobacco. Nineteen per cent of 235 kilos equals 44 kilos; 44 kilos x P0.75 (rate of tax on smoking tobacco) equals P33.00, amount of tax to be collected on smoking tobacco. Chewing tobacco. Eight per cent of 235 kilos equals 19 kilos x P0.60 rate of tax on chewing tobacco) equals P11.40, amount of tax to be collected on chewing tobacco. SECTION 26. Retail Establishment and Storage of Taxpaid Articles Prohibited in Factory Premises. No manufacturer of tobacco products shall maintain in the factory premises an establishment where retail sales of tobacco products are made, or in any building having a door or opening of any kind affording direct communication with his factory, or so situated that communication between it and the factory is possible in any other way than through the public streets; nor shall said manufacturer store in the factory premises articles, the specific taxes on which have been paid. aTcSID SECTION 27. Manufacturers to Assist Officers in Examination of Buildings and Stock Therein. Manufacturers of tobacco products shall furnish assistance to internal revenue officers upon demand for the purpose of examining any part of the factory premises, or taking account of stock. Ladders will be furnished, packages moved and opened, doors and windows opened, and inspection facilitated in every possible manner. SECTION 28. Sealing, Dismantling, and Crating of the Cigarette Making Machine. The Collector of Internal Revenue may order the sealing or padlocking of the cigarette making machines as well as the doors of any factory after each daily operation. He may also order the temporary suspension of the activities of any factory and the dismantling and crating of the machineries installed therein, and the deposit and storage of the same in a place designated by him upon a satisfactory showing that the factory owner and/or operator is causing the removal of the tobacco products from the place of production without paying the corresponding specific tax due thereon in the manner prescribed by this regulation and existing laws. A retiring manufacturer of tobacco products, specially cigarettes, shall also dismantle and crate all his machineries in the manner approved by the Collector of Internal Revenue and deposit the same as herein provided, before the cancellation of the corresponding manufacturer's bond. SECTION 29. Transfer of a Manufacturing Business. The transfer of a manufacturing business will be made in all cases by an internal revenue officer, who will balance the official register book of the retiring manufacturer, verify the stock on hand, transfer such balance to the official register book of the new manufacturer, and properly cross reference this balance in the old and new registers. All of the official books of the retiring manufacturer will be forwarded to the Collector of Internal Revenue for file. SECTION 30. Closing of a Factory and Disposition of Stamps in the Hands of a Retiring Manufacturer. In closing a factory, all losses must first be adjusted, and the specific tax paid on hand, which shall thereupon be removed from the factory premises. Stamps on hand should, if possible, be transferred to another factory upon a regular requisition. Copy of the requisition, showing details of the transfer, should be forwarded to the Collector of Internal Revenue; but such stamps will not be counted as sold nor taken up in the treasurer's monthly report of stamp sales. A factory will be permitted to use the labels, boxes, etc., of another factory which has discontinued business; provided that the bona fide sale of the articles can be established; and provided that the manufacturer purchasing such articles stamps or marks thereon, the schedule, paragraph, and assessment number of the factory, and obliterates the official marks of the discontinued factory. SECTION 31. Return of Damaged Tobacco Products or Used Containers in Factory. No manufacturer shall receive or permit to remain in the factory premises any box, bundle, or package which has once been used as a container of taxpaid tobacco products until all marks and labels appearing thereon shall have been completely obliterated to avoid reuse. Neither shall any manufactured products of tobacco on which the specific tax has been paid be returned to a factory, except that spoiled or damaged tobacco products may be returned to a factory for manufacture when written permission in each case has first been obtained from the Collector of Internal Revenue. On such products no refund or rebate of taxes shall be allowed. Tobacco products which have once left the place of production taxpaid may be returned to the factory in accordance with the following procedure: An internal revenue officer must be present upon the return of tobacco products to the factory where produced who will supervise the destruction of all evidence that the specific tax on the tobacco products has once been paid. If it is the intention of the manufacturer to remanufacture the tobacco products, the actual net weight of the tobacco products will be entered in the L-7 official register and the tobacco products will be broken up and mixed with raw material in the factory. Should it be the intention merely to repack the tobacco products, the same will be taken up in the proper official register, Schedule A. The manufacturer may then repack the products, and remove same after paying the tax and affixing the internal revenue stamp, labels, marks, or other brands required by law and these regulations. A report of each case shall be rendered to the Collector of Internal Revenue by the internal revenue officer supervising the transactions. This section shall not be construed, however, to deny to the Collector of Internal Revenue the authority to permit, in special meritorious cases individually to be determined by him, the return to the factory, for storage of manufactured products of tobacco on which the specific tax has been paid, but in every case, written permission shall be secured from the Collector of Internal Revenue and the tobacco products so returned shall be placed in the special custody of the internal revenue storekeeper. SECTION 32. Possession of Tobacco and Products of Tobacco which have not been Properly Stamped. No wholesale dealer shall receive or have in his possession any cigars, cigarettes, or manufactured tobacco which have not been properly stamped, and no wholesale dealer shall receive or have in his possession any broken or open box, bundle, or package of cigars, cigarettes or manufactured tobacco. No retail dealer shall have in his possession more than one open box of the same color and shape of cigars of the same brand, or one open package of the same mark of cigarettes or manufactured tobacco of the same brand at one time: Provided, however, That a retail dealer may open not to exceed three boxes or packages of cigars, cigarettes, or manufactured tobacco for display purposes only in a closed window or show case from which no sales are made. No retail dealer shall receive or have in his possession, any box or package of cigars, cigarettes, or manufactured tobacco without the internal revenue stamps provided for herein, or without the marks of the manufacturer as required herein, nor shall he receive any open or broken box, or package of cigars, cigarettes, or manufactured tobacco. When through extraordinary and unavoidable circumstances such as a customer returning damaged or worm-eaten or unsatisfactory tobacco products, or a package of tobacco products becoming broken through an unforeseen accident a dealer finds himself violating the provisions of either one of the above two sections, he should notify an internal revenue officer. The officer will inspect the tobacco products in question and if satisfactory proof is submitted to show that the tax required by law has been paid, the internal revenue officer will cause the package to be sealed with a strip of paper and the size and shape of an internal revenue stamp, and will sign and date said seal. Said tobacco products may then be retained by the dealer, offer for sale, or sold. If damaged or worm-eaten the tobacco products may be returned to the factory as provided herein. The facts in each case should be reported to the Collector of Internal Revenue. SECTION 33. Exportation of Articles Subject to Specific Tax. Goods removed from the factories in the Philippines for export to foreign countries which, under the National Internal Revenue Code, are except from the payment of the specific taxes shall be entered by the manufacturer or his manager in the factory register book in red ink, designed * by the words "For export". (a) Export stamp to be affixed. There shall be affixed to every original container of manufactured products of tobacco removed for export to any country an export strip stamp. These stamps serially numbered shall be furnished upon requisition and shall be accounted for in the register book. Said stamps shall be cancelled immediately after affixture to the boxes, bundles, packages, or other containers by means of the same rubber stamp provided for cancelling taxpaid stamps, or by the perforating machine indicated in section 5 (c) of these regulations. The term, "original container" as used in this paragraph shall be deemed to include the shipping case of package prepared and ready to export to any country. (b) Notice of export shipments. Except in the case of manufactured products of tobacco shipped to the United States, which bear the United States internal revenue stamps required by law, every manufacturer who removes manufactured products of tobacco for export shall, immediately prior to said removal, notify the Collector of Internal Revenue of the intended removal, giving the serial numbers of the export stamps to be used in the consignment. The discovery of any such articles in transit in regard to which no notification has been received shall be deemed prima facie evidence of the illegal removal of same, and shall subject them to forfeiture. (c) Delivery direct to ship side or authorized exporter's warehouse. All manufactured products of tobacco removed non-taxpaid for export shall be sent direct from the factory, without being mixed with containers of similar articles for domestic consumption, to ship side, or to warehouse of the exporter which has been previously registered with and authorized by the Collector of Internal Revenue in writing upon the filing of the necessary bond by said exporters as prescribed in section 155 of the National Internal Revenue Code. (d) Proof of exportation. Exporters of articles that would be subject to a specific tax if sold or removed for consumption in the Philippines are required by law to submit proof of exportation satisfactory to the Collector of Internal Revenue. Proof of exportation will not be deemed satisfactory unless submitted within thirty days from the date the goods are removed from the factory, except when the manufacturer submits proof that the articles are still being held for exportation. In the case of goods shipped by freight this proof shall consist of a certified copy of the bill of lading on the back of which the exporter shall execute a certificate in the following form: "______________________ Philippines "______________________ 19_______ "I hereby certify that this shipment is composed of _____________________ of Factory A ______________ removed __________________, 19_____, serial numbers _______________ to _______________." "______________________" (Signature of exporter) If goods are from different factories, the certificate shall show the amount removed from each factory together with the date of removal. In case goods are exported aboard warships stationed in Philippine waters, a certificate giving the above required data and stating that the ship was under sailing orders and that the tobacco products were part of the stores intended for consumption on the high seas or in foreign ports, and that none of the said articles were intended for consumption in the Philippines, nor in Philippine waters, and signed by the proper ship's officer, will be accepted by the Collector of Internal Revenue. In all cases where the proof of the exportation is not submitted to the Collector of Internal Revenue within thirty days after the removal of the tobacco products from the factory, the manufacturer or exporter shall be required to pay the specific tax. All such payments shall be accounted for by the affixture of internal revenue stamps to a miscellaneous invoice in the manner provided in section 24 (b) hereof, for collection of the taxes on shortages, and a credit entry shall be made in the official register book by the internal revenue officer making the collection in the following form: "Tax on _________ cigars, cigarettes, etc. removed for export on ____________, 19 ____ collected on Miscellaneous Invoice No. ________________ on account of failure to present proof of exportation." SECTION 34. Proof of Exportation When Exported Aboard Ocean Going Vessels or by Mail. An exporter who sells directly to ships' officers, members of the crew, or to passengers, shall certify on B.I.R. Form No. 3.17 that to the best of his knowledge and belief the articles are not to be consumed while the vessel is in Philippine waters. The certificate shall likewise show the descriptive data required in the previous section and shall be delivered by the exporter to the customs inspector on board the vessel, who will certify thereon that the articles described have been received aboard the foreign-bound vessel. Said articles shall remain under the custody of the customs inspectors until the departure of the vessel, and shall not thereafter be returned to the Philippines. This form will also be used in case of shipments by mail, and the customs examiner at the post office will certify thereon that the articles described were received for mailing and were actually mailed to a foreign country. SECTION 35. Exemption from the Tax. No specific tax shall be collected on the following: (a) Tobacco or products of tobacco locally produced which shall be removed for exportation and is actually exported without returning to the Philippines, whether so exported in its original state or as an ingredient or part of any manufactured article or product. (b) Tobacco or products of tobacco sold and delivered directly to the United States Armed Forces in the Philippines purchased with funds furnished by the Government of the United States. Any manufacturer exporting tobacco or products of tobacco, before claiming exemption shall, within 30 days after removal from the place of production, furnish the Bureau of Internal Revenue with a copy of the export bill of lading on the back of which the exporter shall certify to the nature and description of the articles exported, the port to which exported, and the date of shipment, as illustrated in section 33 (d) hereof. In the case of sale to the United States Armed Forces, the manufacturer claiming exemption shall furnish the Bureau of Internal Revenue with a statement signed by the Government Official in charge of the purchase, setting forth that the article is purchased for actual use or issue by the United States Armed Forces. Said certificate shall be in the following form: "____________ 19 ___ "I hereby certify that I have received the articles enumerated herein and that same are for actual use or issue by the United States Armed Forces and were purchased with funds of the U.S. Government. "__________________________" (Signature and title of receiving officer) SECTION 36. Refund of Specific Taxes Paid. If for any reason whatever, the specific tax is paid on any of the transaction mentioned in Section 35 hereof, the manufacturer or exporter, or any other person who might have paid the tax thereon may request for the refund of the same by making proper application to the Collector of Internal Revenue. SECTION 37. Bonds and Sureties. Any tobacco manufacturer, upon approval of the permit required under Section 40 hereof, shall give bond in an amount equal, as nearly as can be estimated, to twenty per centum of the specific taxes payable by him during an average year. Such bond, which in no case shall be less than P1,000 nor more than P50,000, shall be conditioned upon the faithful compliance, during the time such business is followed, with the laws and regulations relating to such business and for the satisfaction of all fines and penalties imposed by the National Internal Revenue Code: Provided, however, That no tobacco manufacturer shall actually commence business without first paying the internal revenue privilege tax required by law to be paid on the business in which he is to engage. The following rules will be observed in reference to the bonds required by the National Internal Revenue Code to be given by manufacturers and exporters of articles subject to specific taxes: (a) Liability. There shall be not less than two personal sureties. Bonds will not be cancelled, but will be of force and effect for an indefinite period to cover any delinquencies, or taxes accrued or penalties incurred or wrongdoing committed during the period when the business covered by said bonds was in operation, but which were not discovered until after said business was abandoned. (b) New bonds required when. A new bond may be given at any time, or may be required in the discretion of the Collector of Internal Revenue. A new bond shall be required immediately in case of the death, removal, or insolvency of a personal surety on any bond. Executors, administrators, and assignees continuing business must execute a new bond immediately. Proper references and notations concerning the sureties should be made on the face of each bond, old and new. When, in the opinion of the Collector of Internal Revenue, the interest of the Government demand it, he may be and shall require the amount of a manufacturer's or exporter's bond to be increased from time to time and additional sureties furnished thereon (by giving a new bond) and may also require that personal sureties shall be residents of the province where the factory is located. In the case of a change of ownership of manufacturing business, the new manufacturer must furnish a new bond before commencing or continuing the business. (c) Form of bond. All bonds must be executed in triplicate (B.I.R. Form No. 3.01), one copy to be retained by the principal, and the original to be filed in the office of the Collector of Internal Revenue; and the signatures of the principal and sureties must be acknowledged before an internal revenue officer or other officer authorized to take acknowledgments. There shall be attached to each bond the affidavit of sufficiency of individual surety. cAHITS (d) Manner of signing. When persons who sign bond, either as principals or sureties, are unable to write their names in the script of the English language, their signatures may be accepted in the script of any language they may use in signing their names and their right thumb mark affixed after the signature, provided such signatures and thumb mark are properly attested by an internal revenue officer of other officer authorized to take acknowledgments. (e) Changes and erasures. Special attention shall be given all bonds, to the end that they shall be in as perfect form as possible, in order that no question may arise concerning them should they be placed in suit. All bonds accepted in which alterations and erasures occur, should have placed upon them statements by the affidavit of an authorized officer of a surety company, or of the personal sureties, thereto, that such alterations or erasures were made prior to the signing of the bond. No alterations may be made after the bond is signed. If changes are desired in a bond a new bond must be executed. Sureties must agree in writing to all changes of location of a factory. (f) Persons not acceptable as sureties. The wife of a manufacturer, a partner or member of a firm operating the factory, or a stockholder in a corporation owning or operating the factory, will not be accepted as surety to a bond. (g) Separate bonds for each business; exception. Separate bonds must be furnished for each business which a manufacturer conducts, except when the aggregate amount of the bond required under each business he conducts is less than P50,000, in which case one bond may be executed to cover the several businesses. (h) Exporter's bond. Exporter's bonds shall be in an amount equal as nearly as can be estimated, to 25% of the specific taxes that will be payable on the goods during the average year if same were used for domestic consumption. (i) Return of cash bonds. A cash bond deposited by a manufacturer or exporter may be returned to him after a reasonable period has elapsed since his retirement from business, if his official accounts are apparently correct and the provincial treasurer has no suspicion that a claim for indemnification will arise. But the approval of the Collector of Internal Revenue must first be had. (j) Documentary stamps. All bonds must have affixed thereto the documentary stamps provided in Section 222 or Section 224 of the National Internal Revenue Code. (k) Annual Examination of bonds. The Collector of Internal Revenue will once a year re-examine all bonds to be assured of the continued responsibility of the sureties and will indorse the date of examination on the back of each bond. CHAPTER III Conditions Precedent to Engaging in the Manufacture of Tobacco Products SECTION 38. Prior Approval of the Collector of Internal Revenue Necessary. No manufacturer of tobacco products will be permitted to engage in business until his plant and bond have been approved by the Collector of Internal Revenue. Therefore, no payment of the privilege tax receipt will be accepted until the approval of the Collector of Internal Revenue is first had. (For rules as to bonds and sureties, see Section 37, supra. ) SECTION 39. Manufacturing Districts. For the purpose of identifying the origin of cigars there are hereby created three manufacturing districts as follows: District No. 1 to comprise the City of Manila; District No. 2, Quezon City, Pasay City and the Province of Rizal; and District No. 3, all other provinces in the Philippines. The containers of cigars must bear the schedule, paragraph, and assessment number of the factory that produce the same, and the number of the district where manufactured, as for example: LA FLOR DE MANILA A-4-1000, District No. 1 SECTION 40. (a) Application for permission. Any person who intends to engage in the business of a tobacco manufacturer shall make application in writing (preferably through the internal revenue agent) to the Collector of Internal Revenue for permission to engage in such business, briefly describing the location and attach to his application a plan of the building or buildings and equipment it is proposed to use for factory purposes, or its branches, showing in detail each room and its intended use. The application will be referred to an internal revenue officer for thorough investigation, report, and recommendation. The internal revenue officer's report should preferably be forwarded through the provincial revenue agent, but when prompt action is demanded, it may be forwarded direct to the Collector of Internal Revenue and a copy of the report furnished the provincial revenue agent. HCEISc (b) Names of authorized managers to be furnished. Manufacturers authorizing one or more persons to act as manager or managers of their business shall file with the deputy provincial treasurer of the municipality in which the factory is situated a power of attorney in favor of the person or persons authorized to sign, in their names, the requisitions for internal revenue stamps, the entries in the official register and auxiliary register books, the entries in the transcript sheets, and other papers pertaining to internal revenue matters. This instrument shall be forwarded to the Collector of Internal Revenue by the deputy provincial treasurer. SECTION 41. The Factory Building. The proposed factory building or buildings must be substantially built of strong materials, located on or adjacent to a main street or thoroughfare, permitting a ready inspection and supervision by internal revenue officers, and shall be used exclusively for the manufacture of tobacco products. Factory buildings must have all windows and other openings, except the main entrance, securely covered by wire screens of 18-gauge wire, of not more than 1.2 centimeters (1/2 inch) mesh, to prevent the removal of taxable articles from the factory building except by way of the main entrance; and all openings, except the main entrance, must be furnished with substantial shutters that may securely be locked or bolted on the inside when the factory is not in operation. The main entrance must be supplied with a substantial door, equipped for locking from the outside with a rotary lock. The Collector of Internal Revenue may require that the main entrance of any tobacco factory or factories or their branches should each be provided with two locks; the key to the one to be held by the manufacturer, the key to the other to be held by the internal revenue officer. The main entrance shall be kept unlocked at all times while the factory is in operation or while any persons, excepting only the night watchman, are inside the factory building. This section shall not, however, be construed as prohibiting the Collector of Internal Revenue from dispensing with the use of wire screens upon the windows and openings of the factories in cases when the factory buildings are isolated from other buildings and surrounded by walls and it is not likely that untaxpaid articles therein produced or manufactured may be removed; provided that any permit or privilege which may be given under this paragraph may be withdrawn or revoked at any time by the Collector of Internal Revenue to safeguard the revenue. SECTION 42. The Branch Factory. In addition to the requirements indicated in the preceding sections for the construction and equipment of a factory intended for the manufacture of tobacco products, the following conditions must be observed in regard to the operation of a branch factory. (a) That no branch factory shall be established outside the district where the main or principal factory is located, and that no branch factory or factories will be permitted to be established that are not owned or operated exclusively by the owner or owners of the main or principal factory. By branch factory shall be understood a factory which is non-contiguous and subordinate to another located in the same district and belonging to the same owner, an arm of a principal factory located in the same district where tobacco products are manufactured but not sold. Branch factories already established and not located in the same district as their principal factory should apply for permits to operate as principal factories so that they may be allowed to continue their operations on the effective date of these regulations. (b) Bond required for operation of branch factory. A manufacturer of tobacco products owning or operating a branch factory separate from his principal factory may remove cigars from the branch factory to the principal factory for export without the prepayment of the specific internal revenue tax, but in all such cases the manufacturer removing such cigars shall first file with the Collector of Internal Revenue a bond in such form and in such amount as the Collector of Internal Revenue may prescribe. The bond will be prepared in triplicate B.I.R. Form No. 3.01. The original will be delivered to the Collector of Internal Revenue, the duplicate to the owner of the principal factory. This bond will continue in force until withdrawn by the principal or cancelled by the Collector of Internal Revenue. IEHTaA (c) Removals. All removals of cigars for export from a branch factory to the principal factory will be made on official invoice, B.I.R. Form No. 31.20. The invoice and its stubs will be signed by the authorized manager of the branch factory and verified, signed, and corrected, if erroneous, by the internal revenue officer, and should contain the following data: Date and hour of removal; name of main factory; its barrio address, street number, town and province; permanent number or number of shipping containers; number, branch, and class of cigars; and the amount of tax payable. Each such removal shall at the same time be entered on the current credit page of the branch factory Schedule A, Paragraph 4, Official Register, in the manner indicated by the headings of the several columns, and shall be explained under the column "Remarks" by the statement "Removed to principal factory." (d) Invoice to accompany cigars. A separate invoice and its stubs shall be prepared for every vehicle or other carrier in which the tobacco products are transported, and said invoice should accompany at all times the tobacco products and should be delivered with the cigars to the manager of the principal factory. (e) Stubs. The record stub shall be kept in the branch factory and the notification stub mailed or delivered to the Collector of Internal Revenue on the same day that the removal is made. (f) Removals under supervision of internal revenue officer; differences not allowed. All removals of cigars under this section shall be made under the direct supervision of an internal revenue officer. All cigars and all partially manufactured tobacco removed from a branch factory to the principal factory shall be transported in substantial containers approved by the Collector of Internal Revenue, which shall be securely locked with high grade locks of which there shall be two keys, one in the possession of the internal revenue officer and the other in the possession of the manager of the principal factory. Said containers must be marked by painting or branding clearly upon the front side the following permanent marks: Assessment number of the branch factory, assessment number of the principal factory and serial number of the container. In addition to the permanent marks, every container upon each removal shall bear a label showing the exact contents by numerical count or weight. No such container may be transferred from one factory to another without the written permission of the Collector of Internal Revenue. Upon receipt in a principal factory of cigars and other tobacco products from a branch factory, the manager of the principal factory will immediately check the cigars and other tobacco products received against the invoice in the presence of the internal revenue officer and, if found correct, the manager shall debit or cause to be debitted with red ink on the current debit page of the principal factory's Schedule A, Paragraph 4, Official Register, the actual number of quantity of cigars or other tobacco products received. In the column headed "Numbers of hours worked" shall be shown the assessment and serial number of the invoice accompanying the tobacco products received. The invoice will be delivered by the manager to the internal revenue officer in charge of the factory. If any difference are found, the internal revenue officer will lock all cigars and other tobacco products in the original containers, immediately reporting such fact to the senior internal revenue agent for further action. No difference between the official invoice and the actual number of quantity of cigars or other tobacco products received will be allowed. (g) Transfer of raw materials from principal to branch factory. All raw materials removed from a principal to a branch factory must be removed in substantial containers under official invoice corresponding to the register book in which it is a debit, or in well wrapped bundles of convenient size accompanied by an official L-7 invoice showing the net weight of each bundle, the number of bundles, and the total net weight, provided that raw materials may be removed or transferred from the main factory to the branch factory in bales or in closed cases at the discretion of the Collector of Internal Revenue. Said raw materials shall be sorted, dried, cleaned, sterilized, or otherwise prepared in the main factory before its removal to the branch factory and that the amount to be supplied to the branch factory shall not be more than what will be required for three days work in said branch factory. (h) Penalties. A violation of any of the provisions of this section shall be sufficient cause for the immediate cancellation of any bond filed under this section and the consequent closing up of the branch factory. Where differences occur between the actual number of quantity of cigars or other tobacco products received and that stated on the invoice, forfeiture proceedings will be instituted, and action for taxes due will be taken, without prejudice to the institution of any other legal action for the violation of these regulations or other provision of the National Internal Revenue Code. SECTION 43. Warehouse for the Storage of Raw Materials: When Required. When the space within the factory building is insufficient, with due regard to proper sanitation, for the storage of all raw materials required, a warehouse or warehouses must be provided. Factory warehouses, like the factory building, must be substantially built of strong material and located or adjacent to a main street or thoroughfare. Windows and openings other than main entrances must be securely covered by wire screens and furnished with substantial shutters or doors that may be locked or bolted on the inside, as prescribed above for factory buildings. The main entrance must be furnished with substantial doors capable of being securely locked on the outside. Leaf tobacco shall be stored by manufacturers in their warehouses and factories in such a manner that an inventory of the number and kind of bales on hand can be readily made, bales of different standard weights being kept segregated. The manner in which bales of tobacco are stored shall be subject to the approval of the Collector of Internal Revenue or his representative and manufacturers may be required to rearrange same when necessary. TEDaAc SECTION 44. Signs on Outside of Factory and Warehouses. A sign in letters not less than 6 centimeters high shall be placed and kept in a conspicuous position on the outside of every building used as a tobacco factory or warehouse, showing the name of the factory (commercial name), its schedule, paragraph, and assessment numbers, and the class or classes of business. Name of Factory A-5-98 Cigarette Factory SECTION 45. Factory Equipment; Scales; Rubber Stamps; Perforating Machine. Before commencing operations, a manufacturer must provide himself with the necessary number of duly licensed platform scales graduated in kilos and capable of weighing one or more packages of leaf tobacco of not exceeding 115 kilos each; a small balance scale with a set of weights varying from 1 decigram to 1 kilo for the purpose of accurately determining the unit weight of the manufactured products; and a rubber stamp or perforating machine of suitable size for use in the cancellation of internal revenue stamps. CHAPTER IV Sanitary Requirements and Regulations SECTION 46. General Sanitary Provision. It shall be the duty of every manufacturer of tobacco products or his manager to keep the building or buildings in which such business is carried on in a clean and sanitary condition. To comply properly with this requirement, he shall, among other things, keep the floors swept and scrubbed, rubbish removed, and walls and ceilings cleaned. SECTION 47. Air Space. Manufacturers of tobacco products shall maintain at least 6 cubic meters of air space for every employee in rooms having a window area from one-tenth to one fifth of the floor area, and at least 3 cubic meters of air space for window area equal to or greater than one-fifth of the floor area. Rooms having a window area of less than one-tenth of the floor area shall not be used as workrooms. SECTION 48. Closets. Every manufacturer of tobacco products shall maintain separate closet accommodations for men and women, and shall equip the factory with one or more properly constructed, installed, and vented sanitary closets for each fifty employees of the sex using such accommodations. In addition to the required number of sanitary closets there shall be one properly constructed and installed urinal for every sixty male employees of such factory. In municipalities where there is no sewer system, the requirement for "vented" closets shall be waived, but all the other requirements of this section must be complied with. SECTION 49. Wash Rooms. In every tobacco factory there shall be provided in connection with, or easily accessible from, the toilet rooms for each sex, a properly equipped lavatory with an adequate supply of water, soap, and sanitary towels, and one or more wash basins for each fifty employees of the sex using such accommodations. The management of the tobacco factory may require the employees to supply themselves with the necessary towels, but shall be responsible for seeing that the employees do so in such case. It shall be obligatory upon the management of the tobacco factory to maintain said toilet rooms and lavatories in a sanitary condition satisfactory to the Director of Health. The drainage of the factory premises must be such that no stagnant water will remain in the building and its immediate surroundings. SECTION 50. Washing of Hands. Every laborer, workman, operator, or other employee of a tobacco factory who is engaged in the handling, cleaning, preparation, manufacture, or packing of cigars, cigarettes, or other products of tobacco manufactured for human consumption upon each arrival at the factory, before beginning work, and after visit to a closet or urinal and before resuming work, shall wash his or her hands thoroughly with soap and water and shall dry them with a clean towel. When required by the regulations of the Bureau of Health, the hands shall also be washed with a suitable disinfecting solution. The owner or manager of a tobacco factory shall detail a sufficient number of employees for the purpose of enforcing the requirement with reference to the washing of hands of employees. SECTION 51. Cuspidors. There shall be provided in every room of a tobacco factory at least one cuspidor for eight persons. No person shall expectorate or deposit any mucus phlegm on the floor or walls in or about such factories. The cuspidors herein required shall be of an impervious material with smooth or polished surfaces, so as to be easily cleaned, and shall be emptied, cleaned with water, and partly filled with disinfecting fluid every day, or oftener when so required by the Collector of Internal Revenue. An employee of the factory shall be detailed for this work by the owner or manager to see that the provisions of this section and the preceding one are carried out. CHDAEc SECTION 52. Wearing Apparel, Handkerchiefs, etc. No employee of any tobacco factory shall use any wearing apparel such as handkerchiefs, tapis, or similar article for the purpose of holding, wrapping, or conveying from one place to another, any tobacco or tobacco products. SECTION 53. Restaurants, Living Rooms, Peddlers. No restaurant, canteen, dining room, or carinderia, shall be permitted or allowed in the interior of any cigar, cigarette, or tobacco factory, nor shall any part of the building in which the manufacture of tobacco is carried on be used for living or sleeping quarters, unless the part so used is entirely separated from that part of the building used as factory and has no interior connection therewith. No peddler shall be allowed to enter the factory premises for the purpose of selling fruits, sweets, aerated waters, or any other articles of food or drink. All tobacco factories shall provide their laborers with a suitable dining room with proper sanitary equipments, such as dining tables, benches, drinking facilities, wash tubs, soaps, clean towels and covered thrash cans. The dining tables shall be painted white, and all openings to the dining room shall be screened against flies with fine wire screen. This requirement shall have a retroactive effect. SECTION 54. Children. No employee of any cigar, cigarette, or tobacco factory during the hours of employment therein shall be accompanied by or receive visits from any child who is not employed for pay in the same factory. SECTION 55. Domestic Animals Not Allowed in Factory Premises. No domestic animals shall be permitted to enter or remain in the factory. SECTION 56. Sanitary Preparation and Manufacture of Tobacco Products. All manual operations pertaining to the selection and classification of leaves, the preparation for, and the manufacture of tobacco products shall be carried on in a sanitary manner in properly ventilated and lighted rooms upon dry clean tables or upon dry clean mats spread upon floors or tables, and so protected by troughs, flanges, or other satisfactory devices that the material employed may be kept from falling on the floor and from contamination from any other source. This section shall not be construed as prohibiting the use of dry, clean, smooth impervious pavements, which have aisles or walks so arranged that the tobacco will not be stepped upon. SECTION 57. Insanitary Acts. No person engaged in the handling, preparation, processing, manufacture or packing of tobacco or any tobacco product or supervising such employment, shall perform, cause, permit, or suffer to be permitted any insanitary act during such employment, nor shall any such person touch or contaminate any tobacco or tobacco products with filthy hands or permit the same to be brought into contact with the tongue or lips, or use saliva, impure water, or other unwholesome substance as a moistening agent, nor shall any such person trample, walk, or stand upon such tobacco or tobacco products or permit or suffer the same to be done. Care should also be taken, especially by women employed in the factory, that no loose hair should be allowed to fall and be mixed with the tobacco under process of manufacture. Containers of paste used in the manufacture and packing of cigars and cigarettes shall be washed every morning; and the paste for each day shall be cooked every morning. The use of paste left over from previous days is prohibited. SECTION 58. Dangerous or Communicable Diseases; Medical Inspections and Certificates. No person suffering from a dangerous, communicable disease shall be employed in any tobacco factory. For the purpose of making this provision effective every employee of a tobacco factory shall be inspected by a duly qualified physician within twenty-four hours of original entrance upon and every two weeks thereafter during such employment. The fact that such inspections have been made shall be evidenced by the initials of the physicians placed on individual report cards after each inspection, such cards to be returned by the employers. These cards shall show the name, age, factory, sex, character of work and residence of the employee, and in the case of employees under 16 years of age, the name of the mother. These cards shall be furnished by the factory to the employees free. The physician shall keep a record of the inspection of each case of dangerous communicable disease, showing date, name, age, address, and finding, which record shall be subject to examination by the proper representative of the Collector of Internal Revenue or Director of Health at any time. There shall be on file in the factory a card for each employee. It shall be the duty of new employees to appear before the health officer of the district or town in which the factory may be located for the checking of their cards, and to be vaccinated or inoculated in case of necessity. In factories where there are no physicians, the employees should submit themselves for inspection to the local health officer on the 1st and 16th of every month. SECTION 59. Inspection of Factory for Sanitary Purposes. All tobacco factories shall be subject to inspection by the duly authorized agents of the Collector of Internal Revenue without previous notice, upon reporting to the owner, representative, or person in charge of same if he is on the premises, before making such inspection, which may be made at any hour of the day or night when work is being performed, for the purpose of ascertaining whether these regulations are properly observed and enforced. SECTION 60. Reports of Violations of This Chapter by Factory Employees. It shall be the duty of every owner or manager of a tobacco factory when any of his employees violates any provision of the sections dealing on sanitary requirements to report same forthwith to the Collector of Internal Revenue. CHAPTER V Payment of Specific Taxes on Imported Cigars, Cigarettes, Smoking and Chewing Tobacco SECTION 61. Taxes Due and Payable Before Release from Customhouse. With respect to the specific taxes on cigars and cigarettes, smoking and chewing tobacco imported into the Philippines, the same shall become due from and payable by the owner or importer to the customs officers immediately before the release of such articles from the customhouse in such manner and under such conditions as prescribed or may be prescribed by the Commissioner of Customs. Philippine stamps are now affixed to imported cigarettes during the process of manufacture in the country of origin under the procedure outlined in Revenue Regulations No. V-11, as amended by Revenue Regulations No. V-17. CHAPTER VI Administrative and Penal Provisions SECTION 62. Supervision over Establishment Where Tobacco and Products of Tobacco are Manufactured or Kept and Carriers Where Conveyed. The Bureau of Internal Revenue shall have authority to supervise establishments where tobacco and products of tobacco are manufactured or kept. Any internal revenue officer may in the discharge of his official duties enter any house, building, or place where tobacco and products of tobacco subject to specific tax are produced or kept, or are believed by him upon reasonable grounds to be produced or kept, so far as may be necessary to examine, discover, or seize the same. He may also stop and search any vehicle or other means of transportation when upon reasonable grounds he believes that the same carries any manufactured tobacco or products of tobacco on which the specific tax has not been paid. Any internal revenue officer may detain any package containing or supposed to contain manufactured tobacco or tobacco products when he has good reason to believe that the lawful tax has not been paid or that the package has been or is being removed in violation of law, and every such package shall be held by such officer in a safe place until it shall be determined whether the property so detained is liable by law to be proceeded against for forfeiture; but such summary detention shall not continue in any case longer than seven days without process of law or intervention of the officer to whom such detention is to be reported. Any internal revenue officer may destroy any emptied container upon which an internal revenue stamp or official taxpaid label is found still undestroyed. SECTION 63. Books and Records to be Opened to Inspection. All the books and records required by these regulations to be kept by manufacturers of tobacco or products of tobacco shall be kept at all times in the place of business of such manufacturers, subject to inspection by any internal revenue officer and, upon demand, shall immediately be produced and submitted to such inspection. All entries in said books and records shall be made in ink in a neat and legible manner. The manufacturer, importer or dealer shall give the necessary explanation regarding the entries contained in the books and records inspected, when so required by the internal revenue officer making the inspection. Any manufacturer of tobacco or products of tobacco shall allow any internal revenue officer making the inspection to enter any place where said articles are manufactured or kept and shall, upon demand, produce said articles for inspection for purposes of these regulations. SECTION 64. Internal Revenue Officers. Whenever in the opinion of the Collector of Internal Revenue it should be necessary to assign one or more internal revenue officers in an establishment producing manufactured tobacco or products of tobacco, for the purpose of protecting the interests of the Government, the owner or manager of the establishment shall provide the said internal revenue officers with suitable space and such equipment as may be necessary in the performance of their duties. The owners or managers of the said establishments shall regard such internal revenue officers as the personal representatives of the Collector of Internal Revenue in the premises, and any and all controversy between said owners or managers of the establishments and the internal revenue officers with respect to the manner in which the business should be conducted, in so far as it affects the collection of the internal revenue taxes, shall, in the first instance, be decided by, and according to the instructions of, the said internal revenue officers, subject, however, to an immediate appeal by the said owners or managers to the Collector of Internal Revenue for decision. SECTION 65. Penalty for Violation of These Regulations. In accordance with section 352 of the National Internal Revenue Code, any person who violates any provision of these regulations for which delinquency no specific penalty is provided by law, shall upon conviction by a competent court be punished by a fine of not more than three hundred pesos or by imprisonment for not more than six months, or both. RULINGS (1) Cigars defined. Rolls of tobacco or any substitutes therefor, wrapped with tobacco, shall be classed as cigars. (U.S. Revised Statues, section 3394) In the case entitled D'Estrinoz vs. Gerkar (U.S. re Fed., 285), it was held that a cigar is a bunch of tobacco rolled together and put into shape for smoking and intended for that use. In accordance with the authorities thus cited, it clearly appears that a cigar becomes such the moment it is rolled, irrespective of whether the ends are cut off, whether it is dried or pressed, or whether it is ready for sale. The test would appear to be whether the tobacco is suitable for smoking, and it is suitable the moment the tobacco is rolled. (Ruling, April 21, 1917.) (2) Chewing tobacco put up in the form of cigar. The tax provided in section 136 of the National Internal Revenue Code should be paid on all chewing tobacco manufactured no matter in what form chewing tobacco is put up. (Pr. 5048.) (3) Substitutes for chewing tobacco containing tobacco in any quantity. Substitutes for chewing tobacco containing tobacco in any quantity are subject to the tax of 60 centavos per kilo provided by section 136 of the National Internal Revenue Code on the gross weight of the finished product, including the tobacco and all other materials that enter into such preparations, upon removal from the factory. (Pr. 39125.) (4) Consumption of cigars and cigarettes on premises where made. (a) Cigars or cigarettes made exclusively for consumption on the premises where made are exempt from taxation only when consumed by the person making them; (b) cigars and cigarettes consumed on the factory premises by the owners or workmen are exempt from the payment of the specific tax, but such cigars and cigarettes must be smoked on the premises; all such articles removed for consumption by owners or operatives outside of the manufactory premises are subject to these taxes; (c) cigars and cigarettes made and smoked on the premises where made by the smoker thereof are exempt from the payment of the tax, but such cigars and cigarettes removed from the premises where made for consumption by a member of the family in another locality are subject to these taxes. (Pr. 372, 4383, 12448, 26788.) (5) "Wholesale price" defined: what expenses included. The following definition of the "manufacturer's or importer's wholesale price" will govern: The maximum price at which the various classes of cigars are sold at wholesale in the factory or in the establishment of the importer to any member of the public shall determine the rate of the tax applicable to such cigars and if the manufacturer or importer also sells, or allows to be sold, his cigars at wholesale in another establishment of which he is the owner or in the profits of which he has an interest, the maximum wholesale price in such establishment shall determine the rate of the tax applicable to the cigars and cigarettes therein sold. Under this definition, such prices as are the result of oral or written agreements or contracts or understandings with any one or more persons or firms exclusively, will not be accepted. Special discounts cannot be considered in fixing the manufacturer's or importer's wholesale price. In arriving at this price, all expenses and charges (excepting the value of internal revenue stamps) incurred by a manufacturer in preparing his cigars for delivery from his factory, in accordance with the National Internal Revenue Code and duly promulgated regulations thereunder, must enter into the wholesale price. Those expenses and charges include the packing and preparation of tobacco products (in original containers), as set forth in these regulations. In other words, all expenses and charges incurred in preparing and original package for its legal removal from the factory must be included. Under this ruling, the actual cost of large cases (not original containers) and reasonable transportation charges actually paid to other persons (including postage) would be excluded as well as the charges for special packings of original containers. (Ruling, March 27, 1918.) (6) Loss of goods after removal from factory. The refund of internal revenue specific taxes paid on cigars and cigarettes lost in a wreck or in any other manner after removal from the place of manufacture, upon the ground that they had never reached the hands of the consumer, cannot be allowed. The National Internal Revenue Code provides that the specific tax on cigars, cigarettes, and other tobacco products is due and becomes immediately payable before removal from the place of production (or a bonded warehouse) for sale or consumption in the Philippines. The subsequent fate of the goods cannot affect the legality of the collection of a tax which has previously been collected and was legal and proper at the time of collection. (B.I.R. Circular Letter No. 105; Internal Revenue Manual, pp. 81, 90.) (7) Authority of the Collector of Internal Revenue to Revoke License to Operate a Factory. Section 151 of the National Internal Revenue Code provides that "no person shall engage in business as a manufacturer of articles subject to a specific tax unless the premises upon which the business is to be conducted shall have been approved by the Collector of Internal Revenue." The permit to utilize the premises referred to in this section, granted by the Collector of Internal Revenue, is always revocable, the correlative power to revoke the said permit being a necessary consequence of the main power to grant it. (Opinion of the Attorney-General, Oct. 20, 1919.) (8) Confiscation of Manufactured Products Before Payment of Taxes. A person found guilty of a second offense under section 57 of the Internal Revenue Law of 1904 (now section 175 of the National Internal Revenue Code), is liable to have confiscated not only the articles which he uses in violating the * but also the factory, its machinery and contents, and the ground upon which the building stands. The property so forfeited and confiscated, as well as the proceeds derived from the sale thereof, belong to the National Government, and a confiscation so made is constitutional. ( E.U. contra Surla, Off. Gaz., 1621.) (9) Assessment and Collection of Specific Tax by the Collector of Internal Revenue. By virtue of the provisions of paragraph 2 of Section 106 of Act No. 2339 (now Section 150 of the National Internal Revenue Code), the Collector of Internal Revenue, in any case when the amount of raw materials received into any factory exceeds the amount of manufactured or partly manufactured tobacco on hand and lawfully removed from the factory plus waste, etc., and a reasonable allowance for unavoidable loss in manufacture, may assess and collect the tax due on the products which should have been produced from the excess. ( Roque vs. Rafferty, 36 Phil. Rep. 864.) SECTION 66. Effective Date. These regulations shall take effect upon publication in the Official Gazette. TESDcA (SGD.) JAIME HERNANDEZ Secretary of Finance Recommended by: (SGD.) J. ANTONIO ARANETA Acting Collector of Internal Revenue