COMMISSIONER vs. ABAD (Tax 2)

G.R. No. L-19627           June 27, 1968

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.

ARMANDO L. ABAD, doing business under the trade name of Republic Alcohol Distillery, and the COURT OF TAX APPEALS, respondents.

Office of the Solicitor General for petitioner.

Latorre, Blanco, Gadioma and Josue for respondents.

FACTS:

Abad, doing business under the name Republic Alcohol Distillery, is a manufacturer and seller of denatured alcohol. 

In a surprise inspection made of the respondent's establishment on August 25, 1958, however, a team of BIR inspectors found that the alcohol had not been completely denatured and that it could still be used for compounding liquors. The team also discovered that 22,580 gauge liters had been removed from the respondent's warehouse and sold, and only 10,480 gauge liters were left.

The Commissioner of Internal Revenue demanded from the respondent the payment of P19,204.20 as specific tax on 22,580 gauge liters of alcohol plus P10,000 as compromise penalty.

ISSUE:

Whether Abad is liable to pay for specific tax.

RULING:

Yes, In Central Azucarera de Tarlac v. Collector of Internal Revenue, alcohol which a BIR denaturing committee had certified as duly denatured was subsequently found to be in fact rectified alcohol and so its owner was held liable for the specific tax.

As a licensed manufacturer of rectified and denatured alcohol, the petitioner is responsible for the quality of its products. It cannot escape responsibility by passing it over to the Denaturing Committee concerned primarily with the prevention of frauds on the revenue. The petitioner should have complied with the law and regulations bearing on the denaturation of alcohol.

[T]he fact that the alcohol in the instant case had been passed upon and certified to by the Denaturing Committee as duly denatured, does not exempt the petitioner from paying the specific tax. It is a cardinal principle of law and well settled in jurisprudence that the government is not estopped by the neglect or omission of its officers or agents.

We therefore hold that the respondent Abad is liable for specific tax in the amount of P19,204.20. This liability is unaffected by the probability that the alcohol might have been used for industrial purposes rather than for consumption, because the law specifically provides that specific taxes shall be paid "immediately before removal from the place of production."12 It does not matter to what use the article subject to tax is put; the tax attaches from the time the article is removed from the place of production "to be put into the commerce or trade of the country."