THIRD DIVISION
[G.R. No. 81179. October 26, 1988.]
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ORO ENTERPRISES, INC., respondent.
NOTICE
Gentlemen:
Quoted hereunder, for your information, is a resolution of the Third Division of this Court dated October 26, 1988:
This is a petition for review on certiorari of the Court of Appeals' decision which affirmed in toto the decision of the Court of Tax Appeals holding that private respondent's product "Citrobelle Skin Lotion" is a medical preparation not subject to percentage and advance sales taxes. The petitioner was ordered to refund the amount of P501,626.70 representing erroneous and illegally imposed percentage sales tax and advance sales tax paid by the latter. casia
Respondent Oro Enterprises, Inc., on the sale of its "Citrobelle Skin Lotion" sometime during January, 1977 to December, 1978 paid: 1) P440,616.70 as percentage sales taxes at the rate prescribed for cosmetic preparation; and 2) P61,010.00 as the 50% advance sales tax on its imported oils to be used as raw materials in the manufacture of said product.
The respondent corporation then filed with petitioner Commissioner of Internal Revenue a written claim for refund of P501,626.70. The refund having been denied, it then instituted a petition for review on April 20, 1979 before the Court of tax Appeals (CTA).
The CTA ruled in favor of the respondent Corporation, ordering the Commissioner to refund the former for the amount paid by it.
The Commissioner then filed with the Supreme Court a petition for review of the CTA decision. This petition was referred to the Court of Appeals.
The Court of Appeals dismissed the appeal for lack of merit and affirmed the CTA decision in toto.
The issue in this petition is whether or not the "Citrobelle Skin Lotion" is a medicinal preparation or a cosmetic/toilet product within the contemplation of the Tax Code.
Section 194 of the Tax Code imposes a percentage tax of fifty percent (50%) of gross value on non-essential items. "Cosmetics" are included in the listing of said items.
On the other hand, Sections 138 and 145 of the same Tax Code provides:
"Sec. 138. Tax on preparations containing distilled spirits as chief ingredient. — Medicinal preparations, flavoring extracts, and all other preparations, except toilet preparations, of which, excluding water, distilled spirits form the chief ingredient, shall be subject to the same tax as such ingredient. . . .
Sec. 145. Specific tax on distilled spirits. — On distilled spirits there shall be collected subject to the provisions of Section one hundred thirty-nine of this Code; except as hereinafter provided, specific taxes as follows:
xxx xxx xxx
"'Spirits or distilled spirits' is the substance known as ethyl alcohol, ethanol or spirits or wine, including all dilutions and mixtures thereof, from whatever source by whatever process produced, and shall include whisky, brandy, rum, gin and vodka, and other similar products or mixtures except compounded liquors taxed under Section 145 of this Code. . . ."
The lengthy discussions in the decisions of the Court of Tax Appeals and the Court of Appeals indicate why this petition should be denied for lack of merit. The Citrobelle product contains 90% more or less ethyl alcohol by volume excluding water. More than 50% alcohol is sufficient to qualify it as the principal ingredient. It also contains salicylic acid, a keratolytic agent. The Food and Drug Administration has analyzed the product and certified it as an anti-bacterial and anti-pruritic preparation with a normalizing effect on dermal osmotic pressures. It is registered as a drug for skin disorders, a medicinal and not cosmetic preparation for pimples, acne, ringworm, anan, athlete's foot, exzematoiditis, itchiness from insect bites, etc. The courts below also pointed to various other products including rubbing alcohol and astringosol which the Bureau of Internal Revenue treats as medicinal and not cosmetic preparations.
The definition used by the petitioner or "medicinal preparation" does not jibe with the Tax Code and is intended for medicines in general. The issue here is the meaning of particular provisions of the Tax Code and not the dictionary or generally understood meaning of the word "medicine." The fact that in some advertisements, the private respondent adds or emphasizes the products' cosmetic value does not change the meaning of the tax law. The petitioner has failed to discharge its burden of showing reversible error in the findings and conclusions of the respondent Court.
The petition is DENIED considering that the petitioner has failed to show that the findings of facts made by the respondent Court of Appeals are not supported by substantial evidence and that its legal conclusions are not in accord with the law and jurisprudence on the matter. cdt
Very truly yours,
JULIETA Y. CARREONClerk of Court