COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.

CEBU PORTLAND CEMENT

COMPANY and COURT OF TAX APPEALS, respondents.
G.R. No. L-29059 December 15, 1987

FACTS: By virtue of a decision of the CTA, as modified on appeal by the Supreme Court, the CIR was
ordered to refund to Cebu Portland Cement Company the amount of P 359,408.98, representing
overpayments of ad valorem taxes on cement produced and sold by it. When respondent moved for a writ
of execution, petitioner opposed on the ground that the private respondent had an outstanding sales tax
liability to which the judgment debt had already been credited. In fact, it was stressed, there was still a
balance owing on the sales taxes in the amount of P 4,789,279.85 plus 28% surcharge. The CTA granted the
CIRs motion.
The CIR claims that the refund should be charged against the tax deficiency of the private respondent on
the sales of cement under Section 186 of the Tax Code. His position is that cement is a manufactured and
not a mineral product and therefore not exempt from sales taxes. The petitioner also denies that the sales
tax assessments have already prescribed because the prescriptive period should be counted from the filing
of the sales tax returns, which had not yet been done by the private respondent.
Meanwhile, the private respondent disclaims liability for the sales taxes, on the ground that cement is not a
manufactured product but a mineral product. As such, it was exempted from sales taxes. Also, the alleged
sales tax deficiency could not as yet be enforced against it because the tax assessment was not yet final, the
same being still under protest and still to be definitely resolved on the merits. Besides, the assessment had
already prescribed, not having been made within the reglementary five-year period from the filing of the tax
returns.

ISSUE: Whether or not sales tax was properly imposed upon private respondent.

HELD: Yes, because cement has always been considered a manufactured product and not a mineral
product. This matter was extensively discussed and categorically resolved in Commissioner of Internal
Revenue v. Republic Cement Corporation, decided on August 10, 1983, stating that cement qua cement was
never considered as a mineral product within the meaning of Section 246 of the Tax Code, notwithstanding
that at least 80% of its components are minerals, for the simple reason that cement is the product of
a manufacturing process and is no longer the mineral product contemplated in the Tax Code (i.e.; minerals
subjected to simple treatments) for the purpose of imposing the ad valorem tax.
The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of
the urgency of the need to collect taxes as "the lifeblood of the government." If the payment of taxes could
be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all
government functions would be paralyzed.

CIR v Algue, Inc., & CTA

G.R. No. L-28896 February 17, 1988

FACTS: Algue, Inc., a domestic corporation engaged in engineering, construction and other allied
activities. Philippine Sugar Estate Development Company had earlier appointed Algue as its agent,
authorizing it to sell its land, factories and oil manufacturing process. [There was a sale for which] Algue
received as agent a commission of P126,000.00, and it was from this commission that the P75,000.00
promotional fees were paid to the aforenamed individuals. The payees duly reported their respective shares
of the fees in their income tax returns and paid the corresponding taxes thereon, and there was no
distribution of dividends was involved.

[Algue claimed the 75,000 to be deductible from their tax, to which the CIR disallowed.]

ISSUE: Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction
claimed by private respondent Algue as legitimate business expenses in its income tax returns.

HELD: NO CIR is not correct. The burden is on the taxpayer to prove the validity of the claimed
deduction. In the present case, however, we find that the onus has been discharged satisfactorily. The
private respondent has proved that the payment of the fees was necessary and reasonable in the light of the
efforts exerted by the payees in inducing investors and prominent businessmen to venture in an
experimental enterprise and involve themselves in a new business requiring millions of pesos. This was no
mean feat and should be, as it was, sufficiently recompensed.

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. On
the other hand, such collection should be made in accordance with law as any arbitrariness will negate the
very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests
of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the
common good, may be achieved.

It is said that taxes are what we pay for civilization society. Without taxes, the government would be
paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to
surrender part of one's hard earned income to the taxing authorities, every person who is able to must
contribute his share in the running of the government. The government for its part, is expected to respond
in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their
moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the
erroneous notion that it is an arbitrary method of exaction by those in the seat of power.

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is
not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the
awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as
it has here, that the law has not been observed.

Hodges v Municipal Board of Iloilo (1963)

Hodges v Municipal Board of Iloilo GR No L-18129, January 31, 1963

FACTS:
In 1960, the Municipal Board of Iloilo enacted Ordinance 33 requiring the payment of a sales tax of 12 of 1% of the
selling price of any motor vehicle and prohibiting the registration of the sale involving said vehicle in the Motors
Vehicle Office of Iloilo unless the tax has been paid. Hodges, engaged in buying-and-selling of secondhand motor
vehicles in the city, assailed the ordinance as invalid for being passed in excess of the authority conferred by law upon
the municipal board.

ISSUE:
Is the City of Iloilo empowered to impose the tax?

RULING:
Yes. The City of Iloilo, through its municipal board, is empowered:

1. (a) to impose municipal licenses, taxes or fees upon any person engaged in any occupation or business, or
exercising any privilege, in the city;
2. (b) to regulate and impose reasonable fees for services rendered in connection with any business, profession
or occupation conducted within the city; and
3. (c) to levy for public purposes just and uniform taxes, licenses or fees.

The tax in question is in the form of percentage tax on the proceeds of the sale of a motor vehicle. The prohibition
against such tax refers only to municipalities and municipal district and does not comprehend chartered cities as the
City of Iloilo.