Colgate - Palmolive Philippines, Inc. Vs. Hon. Pedro M. Gimenez

Colgate - Palmolive Philippines, Inc., Petitioner


Vs.


Honorable Pedro M. Gimenez as Auditor General and Ismael Mathay as Auditor of the Central Bank of the Philippines, Respondents.


G.R. No. L-14787, January 28, 1901


Facts:

The Petitioner Colgate - Palmolive, Inc. is a corporation duly organized and existing under the Philippine law for the manufacture of toilet preparations and household remedies. The company imported various materials such as Irish moss extracts, sodium benzoate, sodium saccharin ate, precipitated calcium and dicalcium phosphate, for use as stabilizers and dental cream flavor of the dental cream they manufacture. For every importation of these materials, the petitioner paid to the Central Bank 17% special excise tax on the foreign exchange used for the payment of the cost, transportation and other incidental charges, in accordance with R.A. 601 (Exchange Tax Law).

On March 14, 1956, Petitioner filed with the Central Bank 3 applications for refund of the 17% special excise tax in the total amount of ₱ 113,343.99, based on section 2 of R.A. 601 which provides that foreign exchange used for the payment of cost, transportation and incidental charges to the importation of stabilizers and flavors shall be refunded to any importer upon satisfactory proof of actual importations.

OIC of the Exchange Tax Administration of Central Bank advised the petitioner that they can claim for refund the amount of ₱ 23,958.13 of the total sum of ₱ 113,343.99, representing the 17% special excise tax on foriegn echange used to import Irish moss extract and sodium benzoate and precipitated calcium carbonate. However, the auditor of the Central Bank refused to pass in audit its claim for refund on the theory that toothpaste stabilizers and flavors are not exempt under sec. 2 of the Exchange Tax Law.

The Petitioner appealed to the Auditor General but the latter affirmed the ruling of the auditor of the Central Bank on the same ground that stabilizers and flavors in sec. 2 of Exchange Tax Law refers only to food products.

Petitioner elevated the issue to the Supreme Court.

Issue:

Whether or Not the Foreign Exchange used by the petitioner in the importation of Dental Cream Stabilizers and Flavors is exempt from the 17% special excise tax imposed by the Exchange Tax Law, so as to entitle it to a refund.

Held:

Yes. The Court ruled in favor of the Petitioner Company.

Section 2 of the Exchange Tax Law provides: The Tax collected under the preceding section on the foreign exchange used for the payment of the cost, transportation and/or charges incident to importation into the Philippines of rice, flour, canned milk, cattle and beef, canned fish, soya beans, butter, fat, chocolate, malt syrup, tapioca, stabilizers and flavors, vitamin concentrate, fertilizers poultry feed, textbooks, reference books, and supplementary readers approved by the Board on Textbooks and/or established public/private educational institutions; newsprint imported by paper, book cloth, chip board imported for the printing of supplementary readers (approved by the Board of Textbooks) ..., anesthetics, antibiotics, vitamins, hormones, X-rays films, Laboratory Reagents, biological, dental supplies and pharmaceutical drugs necessary for compounding medicines: medical and hospital supplies listed in the appendix to this act, in quantities to be certified by the Director of Hospitals as actually needed by the hospitals, and such other drugs and medicines as may be certified by the Secretary of Health from time to time to making application therefor, upon satisfactory proof of actual importation under the rules and regulations to be promulgated pursuant to sec. 7 thereof.

The ruling of the Auditor General is wrong because he applied the principle of statutory construction that "general terms may be restricted by specific words" The rule should be used if all the items in the enumeration pertain only to one specific class. In this case, fertilizers and poultry feed do not belong to the category of food products.

Court ruled that although "Stabilizers and Flavors" are preceded by items that might fall under food products, the following can hardly be included: fertilizers, poultry feed, and more.

Therefore, the law must be seen in its entirety. The rule of construction that general and unlimited terms are restrained and limited by a particular recital does not require the rejection of general terms entirely. Since the law does not distinguish between "Stabilizers and Flavors", the court is not authorized to make any distinction when the law does not distinguish, neither do we distinguish.

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