G.R. No. L-18649 - Cebu Portland Cement Co. vs. Commissioner of Internal Revenue

The ad valorem tax on cement is based on the actual market value of the quarried minerals used in its production.
Cement, while a mineral product, is not in the original state contemplated by the law for taxation purposes.
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 source.
The tax should be computed based on the market value of the minerals at the time of removal, prior to any substantial chemical or manufacturing processing.

The Commissioner of Internal Revenue sought reconsideration, claiming the Court misconstrued the issues, particularly regarding the classification of cement.
The Commissioner argued that cement should be classified as a mineral product subject to a 1.5% ad valorem tax based on its selling price or, alternatively, subject to a 7% sales tax.
The Court clarified that the issue was whether the ad valorem tax should be based on the market value of the quarried minerals or the selling price of cement.

The Court upheld the position of the Cebu Portland Cement Company, stating that the ad valorem tax should be based on the market value of the quarried minerals.
It emphasized that cement is the result of a manufacturing process, which alters the original state of the minerals.
The law does not impose a tax on cement as a manufactured product but rather on the mineral products in their original state before processing.

The Court did not rule that cement is a manufactured product subject to sales tax, as that issue was not litigated.
It reiterated that while cement is composed of over 80% minerals, it has undergone significant chemi...continue reading