Acting Commissioner of Customs vs.

Manila Electronic Company

G.R. No. L-23623 June 30, 1977

Ponente: Fernando, J

Facts:

Manila Electric Co. (MERALCO) filed an appeal from then Acting Commissioner of
Customs, Norberto Romualdez for the determination in which Meralco claimed that they
are exempted from the special imort tax not only by virtue of Sec. 6 of RA 1394, which
exempts from tax equipment and spare parts for use in the industries, but also Par. 9,
Part Two, of its franchise, which expressly exempts its insulators from all taxes of
whatever kind of nature, to wit: The grantee shall be liable to the same taxes upon its
real estate, buildings, plant ( not including poles, wires, transformers, and insulators),
machinery and personal property as other persons are or may be hereafter required by
law to pay.

Meralco was granted of its franchise, They had the right to build and maintain in Manila
of their power plant, and to charge for them. Meralco will be paying 2.5 percent of their
gross earnings in Manila and shall be in lieu of all taxes and assessments of
whatsoever nature and authority upon the priveleges, earnings, income, franchise,
poles, wires, transformers and insulators of the grantee, from which taxes and
assessments the grantee is expressly exempted. Moreover, Meralco is exempted from
all taxes of whatever nature and by whatever authority, with respect in consideration for
the payment of percentage tax on its gross earnings.

The Court of Tax Appeals questioned on the definition of insulating oil which was
discussed in detail. According to the Acting Commissioner, the decision must be must
be reversed and it was clear that this court was not liable for the payment of the special
import tax (RA 1394)

Issue:

Whether Meralco is exempted from RA 1394

Held:

Yes. The SC dismissed the review.

The SC adhered to the principle that an exemption from taxation must be justified by
words too clear to misread. The law frowns on exemption from taxation, hence the said
provision should be construed strictissimi juris. It was ruled in Rep. Flour Mills v.
Commissioner of Internal Revenue, It is true that in construction of tax statutes, tax
exemptions are not favoured in law and are construed against the tax payer.
 In this case, SC referred to the provision of Section 186-A (whenever a tax free product
is utilized,.. all encompassing to comprehend tax-free raw materials, even if imported.

Where the law provided no qualification for the granting of the privilege, the court is not
at liberty to supply any. 14 That is what was done by respondent Court of Tax Appeals. It
showed fealty to this equally well. settled doctrine. It construed the statutory provision
as it is written. It is precluded, in the language of ;the Republic Flour Mills opinion,
considering that the law is clear and ambiguous, to look further for any legislative intent,
as "the law must be taken as it is, devoid of judicial addition or subtraction." 15 If there is
an extended discussion of this point, it is due solely to the emphasis placed on the
matter by petitioner.