1.
CIR v American Rubber Company GR No L-19667,
November 29, 1966
FACTS: American Rubber Company sold its rubber
products locally and as prescribed by the
Commissioner’s regulation, the company declared the
same for tax purposes in which the Commissioner
accordingly assessed. The company paid under
protest the corresponding sales taxes thereon,
claiming exemption under Section 188b of the Tax
Code, and subsequently claimed refund. With the
Commissioner refusing to do so, the case was brought
before the Court of Tax Appeals, which upheld the
Commissioner’s stand that the company is not
entitled to recover the sales tax that had been
separately billed to its customers, and paid by the
latter.
ISSUE: Whether plaintiff is or is not entitled to recover
the sales tax paid by it, but passed on to and paid by
the buyers of its products
RULING: Refund is proper. The sales tax is by law
imposed directly, not on the thing sold, but on the act
(sale) of the manufacturer, producer or importer who
is exclusively made liable for its time payment. There
is no proof that the tax paid by plaintiff is the very
money paid by its customers. Where the tax money
paid by the plaintiff came from is really no concern of
the Government. Anyway, once recovered, the
plaintiff must hold the refund taxes in trust for the
individual purchasers who advanced payment
thereof, and whose names must appear in plaintiff’s sales, receipts or earnings or gross value of output
records. actually removed from the factory or mill, warehouse
and to pay the tax due thereon. The tax imposed by
It would need to tend to perpetuate illegal taxation;
Section 186 of the Tax Code is a tax on the
for the individual customers to whom the tax is
manufacturer or producer and not a tax on the
ultimately shifted will ordinarily not care to sue for its
purchaser except probably in a very remote and
recovery, in view of the small amount paid by each
inconsequential sense. Accordingly, its levy on the
and the high cost of litigation for the reclaiming of an
sales made to tax- exempt entities like the Napocor is
illegal tax. Insofar, therefore, as it favors the
permissible.
imposition, collection and retention of illegal taxes,
and encourages a multiplicity of suits, the tax court’s On the other hand, there is nothing in the language of
ruling under appeal violates morals and public policy. the Military Bases Agreement to warrant the general
exemption granted by General Circular V-41 (1947).
2. Philippine Acetylene Co. Inc. v CIR GR No L-19707,
Thus, the expansive construction of the tax exemption
August 17, 1967
is void; and the sales to the VOA are subject to the
FACTS: Philippine Acetylene Co. Inc. is engaged in the payment of percentage taxes under Section 186 of the
manufacture and sale of oxygen and acetylene gases. Tax Code. Therefore, tax exemption is strictly
It sold its products to the National Power Corporation construed and exemption will not be held to conferred
(Napocor), an agency of the Philippine Government, unless the terms under which it is granted clearly and
and the Voice of America (VOA), an agency of the distinctly show that such was the intention.
United States Government. When the commissioner
assessed deficiency sales tax and surcharges against
the company, the company denied liability for the
payment of tax on the ground that both Napocor and
VOA are exempt from taxes.
ISSUE: Is Philippine Acetylene Co. liable for tax?
RULING: Yes. Sales tax are paid by the manufacturer
or producer who must make a true and complete
return of the amount of his, her or its gross monthly