Friday, January 9, 2009

Concrete Aggregates vs. CTA and CIR


Concrete Aggregates vs. CTA and CIR
185 SCRA 416
May 1990

FACTS:

Petitioner, a domestic corporation duly existing under the laws of the Philippines, has an aggregate plant at Montalban, Rizal which processes rock aggregates mined by it from private lands, and maintains and operates a plant at Longos, Quezon City for the production of ready-mixed concrete and plant-mixed hot asphalt. Sometime in 1968, the agents of respondent Commission on Internal Revenue (CIR) conducted an investigation of petitioner's tax liabilities, and assessed and demanded payment from petitioner the amount of P244,002.76 as sales and ad valorem taxes for the first semester of 1968, inclusive of surcharges.

Instead of paying, the petitioner appealed to respondent CTA. The said Court concluded that petitioner is a manufacturer subject to the 7% sales tax under the Section Section 186 of the 1968 National Internal Revenue Code, and ordered it to pay what the respondent CIR demands, plus interest at the rate of 14% per centum from January 1, 1973 up to the date of full payment thereof pursuant to Section 183 (now 193) of the same Code. Petitioner contends, however, that it is a contractor within the meaning of Section 191 under the same Code, that its business falls under "other construction work contractors" or "other independent contractors", and that it produced asphalt and concrete mix only upon previous orders.

ISSUE:

Is the petitioner a contractor subject to the 3% contractor's tax under Section 191 or a manufacturer subject to the 7% sales tax under Section 186?

COURT RULING:

The Supreme Court affirmed respondent CTA’s decision and declared that petitioner is a manufacturer as defined by Section 194(x), now Section 187(x), of the Tax Code. It reiterated the respondent CTA’s finding that petitioner was formed and organized primarily as a manufacturer; that it has an aggregate plant at Montalban, Rizal, which processes rock aggregates mined by it from private lands; it operates a concrete batching plant at Longos, Quezon City where the specified aggregates from its plant at Montalban are mixed with sand and cement, after which water is added and the concrete mixture is sold and delivered to customers; and at its plant site at Longos, Quezon City, petitioner has also an asphalt mixing machinery where bituminous asphalt mix is manufactured.