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CIR vs. CA, CENTRAL VEGETABLE MANUFACTURING CO.

(CENVOCO) & CTA The raw materials used by Cenvoco in manufacturing edible oil are
G.R. No. 107135 February 23, 1999 copra and/or coconut oil. In other words, the term "used" in the final proviso of
Section 168 of the NIRC refers or is strictly confined to "raw materials" or supplies
fed, supplied or put into the apparatus, equipment, machinery or its adjuncts
Petitioner/s : COMMISSIONER OF INTERNAL that cause or execute the milling process. On the other hand, the containers,
Respondent/s : COURT OF APPEALS, CENTRAL VEGETABLE MANUFACTURING CO such as tin cans, and/or packages are not used or fed into the milling
INC and THE COURT OF TAX APPEALS machinery nor were ever intended for conversion to form part of the finished
Ponente: Purisima, product. Consequently, it would be absurd to say that said containers and
packages are "used in the milling process", for the process. involves "grinding,
DOCTRINE: crushing, stamping, cutting, shaping or polishing.
Under the rules of statutory construction, exceptions, as a general rule, Petitioner's interpretation of the term raw materials is contrary to law
should be strictly but reasonably construed. They extend only so far as their and jurisprudence. Thus, raw materials as used in the definition of "
language fairly warrants, and all doubts should be resolved in favor of the manufacture", denotes materials from which final product is made (
general provisions rather than the exception. Where a general rule is And consistent with said definition, Revenue Regulations Nos. 2-86 and
established by statute with exceptions, the court will not curtail the former nor 11-86 define raw materials “any article which when used in the MANUFACTURE
add to the latter by implication. of another article becomes a homogenous part thereof, such that it can no
longer be identified in its original state nor may be removed therefrom without
FACTS : destroying or rendering useless the finished article to which it has been merged,
CENVOCO is a manufacturer of edible and coconut cake and such mixed or dissolved.”
other coconut related oil subject to the miller's tax of 3%. Petitioner also Containers and packaging materials are certainly not raw materials.
manufactures lard, detergent and laundry soap subject to the sales tax of 10%. Cans and tetrakpaks are not used in the manufacture of Cenvoco's finished
CENVOCO purchased a specified number of containers and products which are coconut, edible oil or coprameal cake. Such finished
packaging materials for its edible oil from its suppliers and paid the sales tax due products are packed in cans and tetrapaks.
thereon. It is evident that containers and packages used by Cenvoco are not
After an investigation conducted by the Revenue Examiner, "raw materials" and do not fall within the purview of the final proviso of Section
Assessment Notice was issued against petitioner for deficiency miller's tax in the 168 of the NIRC
total amount of P1,575,514.70 More, SC finds no error in allowing the sales taxes paid by CENVOCO
CENVOCO requested for reconsideration contending that the final on the containers and packages of its milled products, to be credited against
provision of Section 168 of the Tax Code does not apply to sales tax paid on the deficiency miller's tax due thereon, for a proper application of the law.
containers and packaging materials It bears stressing that tax burdens are not to be imposed, nor presumed
CIR contended that Sec. 188 of the Tax Code provides that sales, to be imposed beyond what the statute expressly and clearly imports, tax
miller's or excise taxes paid on raw materials or supplies used in the milling statutes being construed strictissimi juris against the government.
process shall not be allowed against the miller's tax due.
CENVOCO filed a petition for review with the Court of Tax Appeals. CONCLUSION: Petition DISMISSED and the decision of the Court of Appeals
AFFIRMED.
RULING OF THE LOWER COURTS:
 CTA – ruled in favor of CENVOCO
 CA- affirmed CTA’s decision

ISSUE:
Whether or not containers and packaging materials are raw materials
used in the milling process within the contemplation of the final proviso of
Section 168 of the National Internal Revenue Code

RULING + RATIO:
SC agrees with respondent Courts that containers and packages
cannot be considered "raw materials" utilized in the milling process.