Facts:

The case involves Cebu Portland Cement Company (petitioner) and the Commissioner of Internal Revenue (respondent). The dispute arose from the interpretation of the ad valorem tax imposed under Section 246 of the Internal Revenue Code, as amended by Republic Act 1299, which took effect on June 16, 1955. The petitioner contended that the ad valorem tax should be based on the actual market value of the quarried minerals used in the production of cement. In contrast, the respondent maintained that cement, being composed of minerals, should be classified as a mineral product, and thus the tax should be based on its selling price. The case was initially decided in favor of Cebu Portland Cement Company, leading the Commissioner to file a motion for reconsideration, arguing that the court had misinterpreted the issues and had ruled on a matter not raised by the parties. The Commissioner sought a declaration that cement is a mineral product subject to a 1.5% ad valorem tax based on it...

Facts:

1. Parties Involved:

   • Petitioner: Cebu Portland Cement Company
   • Respondent: Commissioner of Internal Revenue

2. Legal Issue:

   • The case revolves around the proper basis for computing the ad valorem tax on cement under Section 246 of the Internal Revenue Code, as amended by Republic Act 1299.

3. Petitioner's Argument:

   • The petitioner, Cebu Portland Cement Company, argued that the ad valorem tax should be based on the actual market value of the quarried minerals used in the production of cement.

4. Respondent's Argument:

   • The respondent, Commissioner of Internal Revenue, contended that cement is a mineral product and, therefore, the ad valorem tax should be based on its selling price.

5. Key Factual Background:

   • Cement is composed of at least 80% minerals extracted from mineral lands.
   • The production of cement involves a manufacturing process, including crushing, grinding, mixing, calcining, cooling, and adding raw gypsum.
   • The ad valorem tax is a severance tax, imposed on the privilege of extracting minerals from the earth, and is due upon the removal of the mineral product from its bed or mine.

Issue:

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Ruling:

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Ratio:

1. Ad Valorem Tax as a Severance Tax:

   • The ad valorem tax is a severance tax, imposed on the privilege of extracting minerals from the earth. It is due and payable upon the removal of the mineral product from its bed or mine.
   • The tax should be computed based on the market value of the mineral in its condition at the time of removal, before undergoing substantial chemical or manufacturing processing.

2. Cement as a Processed Product:

   • While cement is composed of at least 80% minerals, it undergoes a manufacturing process that changes its original state. This process includes crushing, grinding, mixing, calcining, cooling, and adding raw gypsum.
   • The Court emphasized that the law intended to impose the ad valorem tax on mineral products in their original state, not on processed products like cement.

3. No Ruling on Sales Tax:

   • The Court clarified that it did not rule on whether cement is subject to a 7% sales tax, as this issue was not raised or litigated by the parties.