Title
Cebu Portland Cement Co. vs. Commissioner of Internal Revenue
Case
G.R. No. L-22605
Decision Date
Jan 17, 1968
Cebu Portland Cement contested a tax assessment, arguing cement isn’t a "mineral product." SC ruled ad valorem tax should be based on raw material value, granting a partial refund.

Case Digest (G.R. No. L-22605)
Expanded Legal Reasoning Model

Facts:

  • Background of the Case
    • Petitioner: Cebu Portland Cement Company, a government-owned and controlled corporation engaged in the manufacture of APO portland cement.
    • Operations: The company produces cement using raw materials (limestone, silica, and shale) quarried from its own mineral lands.
  • Financial Data and Tax Assessment
    • Sales Figures: For the period from July 1, 1959, to December 31, 1960, the petitioner realized gross sales amounting to P13,924,415.80.
    • Tax Computation by the Commissioner:
      • The Commissioner of Internal Revenue levied a 1-1/2% ad valorem tax under Section 243 of the Tax Code.
      • The tax base was computed by deducting the cost of cement bags (P1,188,248.56) from the gross sales, resulting in a taxable base from which a tax of P190,115.24 was extracted.
  • Protest and Subsequent Refund Claim
    • Protest: The petitioner paid the assessed tax under protest, objecting to the manner of computation.
    • Refund Claim:
      • On May 8, 1961, the petitioner sought a refund amounting to P174,032.85.
      • The petitioner’s theory: The ad valorem tax should be based on the cost of the raw materials (P1,072,159.28), not on the gross sales value minus the cost of cement bags.
  • Prior and Related Proceedings
    • Court of Tax Appeals: The petitioner sought redress by filing a petition with the Court of Tax Appeals on June 29, 1961.
    • Decision of the Court of Tax Appeals: On February 8, 1964, the refund claim was denied, prompting the present recourse to the higher court.
    • Related Jurisprudence:
      • Previous decision in Cebu Portland Cement Co. vs. Commissioner, L-18649, February 27, 1965, held that cement “qua cement” is not a mineral product as envisioned by the Tax Code.
      • The jurisprudence clarifies that while cement contains minerals, the finished product deviates from the “mineral product” concept under the tax provision.
  • The Controversial Issue on Tax Base
    • The State’s Position:
      • The State maintained that the proper basis for the ad valorem tax should be the gross selling price of cement as a finished product.
    • The Petitioner’s Positions:
      • Initially: The petitioner argued that the tax should be assessed based on the market value of the quarried raw materials, since these constitute the taxable minerals.
      • Later (Alternative Prayer): The petitioner alternatively contended that the tax should be based on the “bin cost” of cement, defined as the production cost less the cost of cement bags, thereby seeking a refund of P42,810.11.

Issues:

  • Determination of the Correct Tax Base
    • Whether the 1-1/2% ad valorem tax under Section 243 (in connection with Section 246) should be computed on the gross selling price of cement or on the market value of the quarried raw materials.
  • Application of Tax Provisions
    • Whether cement, as a finished product, qualifies as a “mineral product” under the Tax Code, or if only its constituent minerals (limestone, silica, and shale) are taxable.
    • The implications of redefining the taxable product from cement as a manufactured good to its raw mineral components.
  • Abandonment of the Original Stand
    • Whether the petitioner’s original assertion—that the tax base should be the market value of the raw materials—was abandoned in favor of the alternative prayer based on the “bin cost” of cement.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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