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Song Kiat Chocolate Factory v.

Central Bank of the Philippines

Full Text: http://www.lawphil.net/judjuris/juri1957/nov1957/gr_l-8888_1957.html

Facts:
During the period from January 8, 1953 to October 9, 1953, the plaintiff appellant imported sun dried
cocoa beans for which it paid the foreign exchange tax of 17 per cent totaling P74,671.04. Claiming
exemption from said tax under section 2 of same Act, it sued the Central Bank that had exacted
payment; and in its amended complaint it included the Treasurer of the Philippines. CFI Manila
dismissed the case on the ground that the term "chocolate" does not include sun-dried cocoa beans.

Issue:
Whether or not cocoa beans may be considered as "chocolate" for the purposes of exemption from the
foreign exchange tax imposed by Republic Act No. 601 as amended.

Held:
No, exemption from Section 2 of chocolate does not include cocoa beans. Having in mind the principle
of strict construction of statutes exempting from taxation,3 we are of the opinion and so hold, that the
exemption for "chocolate" in the above section 2 does not include "cocoa beans". The one is raw
material, the other manufactured consumer product; the latter is ready for human consumption; the
former is not.
On the other hand, the congress approved Republic Act 1197 amending section 2 by substituting "cocoa
beans" for "chocolate.". However, since statutes operate prospectively, the amendments cannot be
applied in the case at bar. The appellant's cocoa beans had been imported during January - October
1953, i.e. before the exemption decree which is after September 3, 1954 pursuant to Proclamation No.
62.
Song Kiat Chocolate Factory vs. Central Bank of the Philippines G.R. L-8888 (1957)

Facts of the Case:

On January 1953 to October 1953, Song Kiat Chocolate Factory imported sun dried cocoa beans for
which it paid the foreign exchange tax of 17% totalling P74,671.04. Claiming exemption from the said
tax under section 2 of the R.A. No. 601, it sued Central Bank that had enacted payment, and in its
amended complaint it included the Treasurer of the Philippines.

Sec. 2 of the aforesaid Act provides that the tax collected or foreign exchange used for the payment of
costs transportation and/or other charges incident to the importation into the Philippines of rice, flour,
soya beans, butterfat, chocolate, malt syrup... shall be refunded to any importer making application
therefor, upon satisfactory proof of actual importation...

In support of contention, appellant quotes from dictionaries and encyclopedias interchangeably using
the words chocolate, cacao, and cocoa; however the legal exemption refers to chocolate... not
the bean, nor the nut nor the tree. Cocoa beans however, do not become chocolate unless and until they
have undergone the manufacturing processes above described.

Issue:

Can cocoa beans be considered as chocolate for the purposes of exemption from foreign exchange tax?

Court Ruling:

Strict construction of statutes apply in exemption on taxations.

Principles of strict construction of statutes apply in exemption on taxations. Hence, the exemption for
chocolate in the above section 2 does not include cocoa beans. The one is raw material, the other
manufactured consumer product; the latter is ready for human consumption, the former is not.

Enrolled bill vs. Journal, Committee Hearings. Enrolled bill prevails.

Despite the committee hearing regarding Republic Act 1197 amending sec. 2 substituting cocoa beans
for chocolate; Courts, however do not give decisive weight to one legislators opinion expressed in
Congressional debates concerning application of existing laws. Moreover, in approving Republic Act
1197, Congress agreed to exempt cocoa beans instead of chocolate.

Prospectivity of laws.

Despite the proclamation no. 62 on September 1954 specifying that exemption of cocoa beans from
foreign exchange tax shall operate from and after the date only, it is also a general rule that statutes
operate prospectively