Marsman v. Central Bank
REITERATIONFacts
The Antecedents: Marsman & Company, Inc. (Marsman) imported goods from the United States, utilizing foreign exchange for which the Central Bank of the Philippines (CBP) collected P239,635.62 as special excise tax under Republic Act 601, as amended. Marsman paid these taxes under protest. The importations were facilitated through letters of credit opened between February 24 and November 15, 1955. Drafts drawn on these letters of credit were accepted between June 1, 1955, and December 28, 1955, with two exceptions where drafts were accepted on January 4 and 19, 1956. The corresponding peso obligations for these drafts were paid and liquidated between January 16 and April 6, 1956. Republic Act 601 was repealed effective December 31, 1955. Procedural History: Marsman demanded a refund of the excise tax paid on amounts covered by drafts accepted after the repeal of Republic Act 601. When the demand was not heeded, Marsman filed an action in the Court of First Instance of Manila against the CBP, the Secretary of Finance, and the National Treasurer. The lower court dismissed the complaint, sustaining the defendants' contention that the amended complaint stated no cause of action, concluding that under Marsman's averments, it was obligated to pay the 17% excise tax. The Petition: Marsman appealed the dismissal, questioning whether the CBP could still impose and collect the 17% excise tax on amounts covered by drafts accepted after the repeal of Republic Act 601.
Issue(s)
Whether the 17% excise tax under Republic Act No. 601 applies to foreign exchange transactions where the drafts were accepted during the law's effectivity but liquidated after its repeal.
Ruling
The Supreme Court affirmed the order of the lower court, with a modification regarding the refund for specific letters of credit. The Court held that the excise tax was properly imposed on most of the importations.
Ratio Decidendi
On Issue 1: The Supreme Court ruled that the applicability of the 17% excise tax depends on when the sale of foreign exchange is consummated. According to established Philippine jurisprudence, the sale of foreign exchange is effected when the foreign currency is delivered to the creditor or when the agent bank becomes obligated through the acceptance of a draft. The Court emphasized that the determinative factor is the date the foreign currency is committed, not the date the importer pays the local bank in pesos to liquidate the debt. In the present case, most of the drafts were accepted during the period of June 1, 1955, to December 28, 1955, which was during the effectivity of Republic Act No. 601. Consequently, these transactions were subject to the tax regardless of the fact that the importer liquidated them in 1956 after the law was repealed. However, for Letters of Credit No. 23689 and No. 6998-55, the drafts were accepted on January 4 and 19, 1956, respectively. Since these acceptances occurred after the repeal of the tax law on December 31, 1955, the collection of the excise tax on these specific transactions was improper and must be refunded.
Main Doctrine
The 17% excise tax under Republic Act 601, as amended, is imposed on the foreign exchange sold or authorized to be sold by the Central Bank during the law's effectivity. The determinative factor for imposition is the date of acceptance of the draft or the date the foreign currency is delivered to the drawee, not the date of maturity of the obligation to pay for the foreign currency.