Go Cheng Tee v. Meer
REITERATIONFacts
The Antecedents: Go Cheng Tee, a Chinese merchant, purchased various goods such as tobacco, cigarettes, matches, parachutes, towels, batteries, and candies from the "Foreign Liquidation Commission," a United States government agency tasked with liquidating surplus war materials. After paying the purchase price, Go Cheng Tee took possession of these goods and subsequently sold them to the public in the Philippines. Procedural History: The Collector of Internal Revenue assessed and collected from Go Cheng Tee a specific tax of P30,313.77 and a sales tax of P12,441.40, totaling P42,755.17. Go Cheng Tee paid this amount but later filed a petition for its refund, alleging the collection was illegal. The Court of First Instance of Manila dismissed his petition. Go Cheng Tee appealed this decision to the Supreme Court. The Appeal: Go Cheng Tee appealed the decision of the Court of First Instance, arguing that the lower court erred in declaring him an importer and in holding that he conducted the original sale of the goods. He contended that the US Army, having brought the goods into the Philippines, was the importer, and thus the sale by the "Foreign Liquidation Commission" to him was not the 'original sale' subject to tax under Articles 184, 185, and 186 of the National Internal Revenue Code. He also argued that the goods were no longer under customs jurisdiction when he acquired them.
Issue(s)
Whether Go Cheng Tee should be considered an 'importer' for tax purposes under the Revised Administrative Code. Whether the sale of goods by Go Cheng Tee to the public constituted the 'original sale' subject to specific and sales taxes under Commonwealth Act No. 503 and the National Internal Revenue Code.
Ruling
The Supreme Court affirmed the decision of the Court of First Instance, ruling that Go Cheng Tee was indeed an importer and that his sale of the goods to the public was the original sale subject to taxation. The Court ordered the payment of costs.
Ratio Decidendi
On the Issue of Importation: The Court held that under Article 1248 of the Revised Administrative Code, importation is not considered terminated until the taxes due on the goods have been paid or secured. While the US Army brought the goods into the Philippines as military supplies and was exempt from taxes, the importation process, in the context of taxation, continued until Go Cheng Tee acquired the goods for commercial purposes and became liable for the taxes. Therefore, Go Cheng Tee, by engaging in commerce with these goods, became the importer for tax purposes. The Court emphasized that the legal definition of 'importation' in tax law, not its ordinary meaning, should prevail, and the intention of the legislature is paramount. On the Issue of Original Sale: The Court ruled that the sale made by Go Cheng Tee to the public constituted the 'original sale' as contemplated by Article 5 of Commonwealth Act No. 503. The US Army was not engaged in commerce when it brought the goods, thus its transaction with the "Foreign Liquidation Commission" was not an 'original sale' subject to tax. It was only when Go Cheng Tee purchased the goods for commercial resale that they became subject to taxation. The Court clarified that the tax is levied on the sale, not the purchase, and Go Cheng Tee's transaction with the "Foreign Liquidation Commission" was a purchase, while his subsequent sale to the public was the taxable 'original sale' for commercial purposes.
Main Doctrine
The Court held that the petitioner, Go Cheng Tee, was considered an 'importer' under the Revised Administrative Code because the importation process, for tax purposes, is not completed until the corresponding taxes are paid or secured. Therefore, the sale made by Go Cheng Tee to the public was deemed the 'original sale' subject to specific and sales taxes under Commonwealth Act No. 503 and the National Internal Revenue Code, as the US Army, who initially brought the goods, was not liable for taxes as they were for military use and not for commerce. Consequently, Go Cheng Tee was obligated to pay the taxes demanded by the Collector of Internal Revenue.