Luzon Stevedoring Corp. vs. Court of Tax Appeals, GR No. L-30232 July 29, 1988

GR No. L-30232 July 29, 1988
Luzon Stevedoring Corp. vs. Court of Tax Appeals 

Facts: Petitioner, for the repair and maintenance of their tugboats, imported various engine parts and other equipment for which it paid, under protest, the assessed compensating tax. Unable to secure a tax refund with the Commissioner of Internal Revenue, it file a petition for review with the Court of Tax Appeals (CTA). It prayed for the refund, amounting to P33,442.13. The CTA however, denied such petition for lacking sufficient legal justification.

Issue: W/N the petitioner’s “tugboats” can be interpreted to be included in the term “cargo vessels” for purposes of the tax exemption under section 190 of the National Internal Revenue Code

Ruling: No, the petitioner’s “tugboats” cannot be interpreted as included in the term “cargo vessels” as mentioned in section 190 of the National Internal Revenue Code.

Petitioner contends that tugboats are embraced and included in the term cargo vessels. In legal contemplation, the tugboat, together with the barge carrying cargoes with the former towing the latter for loading and unloading of a vessel in part, constitute a single vessel.

On the other hand, respondent counters that, since tugboats are neither designed to carry and transport goods and persons, they do not fall in the meaning of “cargo vessels” under section 190 of Internal Revenue Code, and that they are mainly used for towing and pulling purposes.

The court laid the rule that the power of taxation is a high prerogative of sovereignty, therefore its relinquishment is never presumed. Any reduction of diminution thereof, with respect to its rate, must be strictly construed. In short, any claim for exemption must be strictly construed against the taxpayer.

Other info:

This Court has laid down the rule that "as the power of taxation is a high prerogative of sovereignty, the relinquishment is never presumed and any reduction or dimunition thereof with respect to its mode or its rate, must be strictly construed, and the same must be coached in clear and unmistakable terms in order that it may be applied." More specifically stated, the general rule is that any claim for exemption from the tax statute should be strictly construed against the taxpayer.

As correctly analyzed by the Court of Tax Appeals, in order that the importations in question may be declared exempt from the compensating tax, it is indispensable that the requirements of the amendatory law be complied with, namely: (1) the engines and spare parts must be used by the importer himself as a passenger and/or cargo, vessel; and (2) the said passenger and/or cargo vessel must be used in coastwise or oceangoing navigation.

As pointed out by the CTA, the amendatory provisions of RA No. 3176 limit tax exemption from the compensating tax to imported items to be used by the importer himself as operator of passenger and/or cargo vessel.

As quoted in the decision of the Court of Tax Appeals, a tugboat is defined as follows:

              A tugboat is a strongly built, powerful steam or power vessel, used for towing and, now, also used for attendance on vessel.

              A tugboat is a diesel or steam power vessel designed primarily for moving large ships to and from piers for towing barges and lighters in harbors, rivers and canals.

              A tug is a steam vessel built for towing, synonymous with tugboat.

Under the foregoing definitions, petitioner's tugboats clearly do not fall under the categories of passenger and/or cargo vessels. Thus, it is a cardinal principle of statutory construction that where a provision of law speaks categorically, the need for interpretation is obviated, no plausible pretense being entertained to justify non-compliance. All that has to be done is to apply it in every case that falls within its terms