VAT Ruling No. 096-91

December 26, 1991 VAT RULING NO. 096-91 Torres Law Office 209 Carriedo Street San Juan, Metro Manila Attention: Mr . Jose I . Torres Gentlemen : This refers to your letter dated April 29, 1991, in behalf of your client, YTM Components, Inc. a BOI and VAT-registered entity engaged in the production/manufacture of automotive low tension wires for export. It is represented that your client manufactures/produces one kind of product automotive low tension wire for the use and according to the specification only of one customer: Yazaki-Torres Manufacturing, Inc.; and that all of your client's production are used by the latter as raw material in the production of wiring harness, 70% of which are exported. cdpr In reply, please be informed that the sale by your client of low tension wire, upon specifications of buyer, is not a "contract for a piece of work", as discussed by the Supreme Court, thus: "In our opinion when this factory accepts a job that requires the use of extraordinary or additional equipment, or involves services not generally performed by it it thereby contracts for a piece of work filling special orders within the meaning of Article 1467. The orders herein exhibited were not shown to be special. They were merely orders for work nothing is shown to call them special requiring extraordinary service of the factory. "The thought occurs to us that if, as alleged all the work of appellant is only to fill orders previously made, such orders should not be called special work, but regular work. Would a factory do business performing only special, extraordinary or peculiar merchandize ?" (Emphasis supplied, Celestino Co. and Co. vs. Collector of Internal Revenue, 99 Phil. 841). As in the foregoing quotation, your client entered into a contract of sale and did not merely contracted for particular pieces of work or merely sold its services. In fact, the BOI requires that your client should also sell its manufactured products to motor vehicle assemblers who are members of the Progressive Car Manufacturing Program (PCMP). Besides, section 103 of the Tax Code enumerated the exempt services (pars. j to t and w) and the kind of alleged services of your client is not among the enumerations; and, obviously, the enumeration is one of "inclusio unius est exclusio alterius". Therefore, the provisions of Article 39(e) of the Omnibus Investment Code providing for contractor's tax exemption, in relation to section 103(u) of Tax Code, find no relevance in this case. We follow the rule of "strictissimi juris" in the determination of tax exemptions; hence, the sale of low-tension wires of YTM Components, Inc., your client, to Yazaki Torres Mfg., Inc. is subject to VAT under Sec. 100 of the Tax Code. cdt Very truly yours, JOSE U. ONG Commissioner of Internal Revenue