Thursday, March 29, 2012

Misamis Oriental Association of Coco Traders, Inc. vs. Department of Finance Secretary [G.R. No. 108524. November 10, 1994]

Facts: Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic corporation whose members, individually or collectively, are engaged in the buying and selling of copra in Misamis Oriental. The petitioner alleges that prior to the issuance of Revenue Memorandum Circular 47-91 on June 11, 1991, which implemented VAT Ruling 190-90, copra was classified as agricultural food product under $ 103(b) of the National Internal Revenue Code and, therefore, exempt from VAT at all stages of production or distribution. Under Sec. 103(b) of the NIRC, the sale of agricultural food products in their original state is exempt from VAT at all stages of production or distribution. The reclassification had the effect of denying to the petitioner the exemption it previously enjoyed when copra was classified as an agricultural food product under §103(b) of the NIRC. Petitioner challenges RMC No. 47-91 on various grounds. 

Issues
(1) Whether the BIR is the proper the competent government agency to determine the proper classification of food products. 

(2) Whether RMC No. 47-91 is discriminatory and violative of the equal protection clause of the Constitution. 

Held: The court, as to the first issue, ruled in the affirmative. The BIR, as the government agency charged with the implementation and interpretation of the tax laws, is entitled to great respect. In interpreting Section 103 of the NIRC, the Commissioner of Internal Revenue correctly gave it a strict construction consistent with the rule that tax exemptions must be strictly construed against the taxpayer and liberally in favor of the state. The ruling was made by the Commissioner of Internal Revenue in the exercise of his power under § 245 of the NIRC to "make rulings or opinions in connection with the implementation of the provisions of internal revenue laws, including rulings on the classification of articles for sales tax and similar purposes.” With regard to the second issue, the court ruled in the negative. Petitioner likewise claims that RMC No. 47-91 is violative of the equal protection clause because while coconut farmers and copra producers are exempt, traders and dealers are not, although both sell copra in its original state. Petitioners add that oil millers do not enjoy tax credit out of the VAT payment of traders and dealers. The argument has no merit. There is a material or substantial difference between coconut farmers and copra producers, on the one hand, and copra traders and dealers, on the other. The former produce and sell copra, the latter merely sell copra. The Constitution does not forbid the differential treatment of persons so long as there is a reasonable basis for classifying them differently. It is not true that oil millers are exempt from VAT. Pursuant to § 102 of the NIRC, they are subject to 10% VAT on the sale of services. 






Digg Google Bookmarks reddit Mixx StumbleUpon Technorati Yahoo! Buzz DesignFloat Delicious BlinkList Furl

0 comments: on "Misamis Oriental Association of Coco Traders, Inc. vs. Department of Finance Secretary [G.R. No. 108524. November 10, 1994]"

Post a Comment