Luzon Brokerage Co. v. Posadas
REITERATIONFacts
The Antecedents: Luzon Brokerage Co., Inc. (plaintiff-appellant) imported playing cards which arrived in the port of Manila on November 20, 1925. The Collector of Internal Revenue imposed an internal-revenue tax on these playing cards under Act No. 3246. Procedural History: The plaintiff-appellant paid the tax under protest and filed a complaint seeking its recovery, arguing that the tax rate in force on November 20, 1925 (the date of arrival) should apply. The Court of First Instance of Manila affirmed the decision of the Collector of Internal Revenue and dismissed the complaint. The Petition: The plaintiff-appellant appealed to the Supreme Court, assigning errors related to the legality of the tax, the determination of the applicable tax rate based on the date of withdrawal, and the dismissal of its complaint.
Issue(s)
Whether the internal-revenue tax levied and collected on the playing cards was lawful. Whether the date of withdrawal of the playing cards from the customhouse determined the rate of internal-revenue tax to be paid. Whether the internal-revenue tax rate applicable was the one in force on November 20, 1925, the date of the importing vessel's arrival.
Ruling
The Supreme Court affirmed the decision of the Court of First Instance, upholding the legality of the tax imposed and dismissing the plaintiff's complaint. The costs were against the appellant.
Ratio Decidendi
On the legality of the tax and the applicable rate: The Court held that internal-revenue taxes on imported articles are governed by Section 1480 of the Revised Administrative Code, which mandates payment by the owner or importer to customs officers before the release of such articles from the customhouse. The Court, citing Asiatic Petroleum Company vs. Rafferty, reiterated the principle that the internal-revenue tax is not due and payable until the merchandise is about to be put into the commerce or trade of the country. This means the tax is levied at the time of withdrawal from the customhouse, not upon arrival. Therefore, the tax rate in force at the time of withdrawal, which was Act No. 3246, is the one that applies, not the rate in force on the date of arrival. On the timing of payment and applicable law: The Court clarified that importation is not completed until duties are paid and a permit for withdrawal is granted, or until the merchandise legally leaves the jurisdiction of the customs if duty-free. Section 1480 explicitly states that internal-revenue taxes on imported articles must be paid before their release from the customhouse. The Court emphasized that the importer or owner has the option to delay payment until just before withdrawal, making the law in force at the time of payment the controlling one, as voluntary acts are governed by the laws in effect when they are performed. On the plaintiff's claim for recovery: Since the playing cards arrived on November 20, 1925, and the declaration for payment and withdrawal permission were made on December 1st and 2nd, 1925, respectively, the plaintiff did not take advantage of the provisions of the law in force on November 20, 1925 (Section 7, Act No. 2835). Instead, payment was made after Act No. 3246 became effective on December 1, 1925. Consequently, the plaintiff could not claim a refund of taxes paid under the law that was in effect at the time of payment.
Main Doctrine
The internal-revenue tax on imported merchandise is payable at the time of withdrawal from the customhouse, and the rate of tax applicable is that in force at the time of payment, not at the time of arrival, as the importer has the option to defer payment until withdrawal.