506 Phil. 324
SANDOVAL-GUTIERREZ, J.
"It is the contention of the petitioner that stemmed-leaf tobacco is partially processed tobacco pursuant to the provisions of Section 1 (L) of the Revenue Regulation No. 17-67, and thus embraced within the scope of Section 141 (b). The respondent, however, failed to consider Section 137 of the Tax Code, which is the applicable provision. Section 137 states:Hence, this petition for review on certiorari."Stemmed-leaf tobacco, fine cut shorts, the refuse of fine cut chewing tobacco, scraps, cuttings, clippings, stems or midribs, and sweeping of tobacco may be sold in bulk as raw material by one manufacturer directly to another, without payment of the tax.'Section 1 (h) of Revenue Regulations No. 17-67, known as 'The Revenue Tobacco Regulations,' defined 'manufacturer of tobacco' as including 'every person whose business is to manufacture tobacco or snuff or who employs others to manufacture tobacco or snuff, whether such manufacturing is by cutting, pressing (not balancing), grinding, or rubbing (grating) any raw or leaf tobacco, or partially manufactured tobacco and snuff or putting up for consumption scraps, refuse, or stems of tobacco resulting from any process of handling tobacco stems, scraps, clippings, or waste sifting, twisting, screening or by any other process.'
La Suerte is engaged in manufacturing cigarettes. La Suerte utilizes the stemmed-leaf tobacco to manufacture cigarettes. It is thus a manufacturer of tobacco.
When the law and regulations enumerate and define various categories of manufacturers subject to excise tax and thereafter, exempt from excise tax the sale of stemmed- leaf tobacco 'by one manufacturer directly to another,' this broad and unqualified provision manifestly covers the sale of stemmed-leaf tobacco by any manufacturer to another. Since Section 137 broadly grants excise tax exemption for tobacco products sold as raw materials 'by one manufacturer directly to another,' without distinction, it must be deemed to refer to all 'manufacturers of tobacco products,' whether they be manufacturers of cigars, manufacturers of cigarettes or manufacturers of tobacco, and whether or not they are located abroad or in the Philippines. Where the law uses a general term without qualification, it must be so understood. This means that Section 137 covers all 'manufacturers,' without distinction. x x x.
Thus, La Suerte, a manufacturer of tobacco, cannot be held liable for the payment of any excise tax, since it purchased stemmed-leaf tobacco in bulk from other tobacco manufacturers, and thus fell within the clear terms of Section 137 of the Tax Code.
Any administrative attempt to restrict the application of Section 137 would amount to legislation which is manifestly beyond the powers of the petitioner."
"SECTION 137. Removal of Tobacco products without prepayment of tax. – Products of tobacco entirely unfit for chewing or smoking may be removed free of tax for agricultural or industrial use, under such conditions as may be prescribed in the regulations of the Department of Finance. Stemmed-leaf tobacco, fine-cut shorts, the refuse of fine-cut chewing tobacco, scraps, cuttings, clippings, stems or midribs, and sweeping of tobacco may be sold in bulk as raw material by one manufacturer directly to another, without payment of the tax under such conditions as may be prescribed in the regulations of the Department of Finance.The above provision allows the sale of stemmed-leaf tobacco without any payment of tax. However, a careful reading of the same provision shows that the sale is subject to "such conditions as may be prescribed in the regulations of the Department of Finance." These conditions are provided by Revenue Regulations Nos. V-39 and 17-67 issued to clarify and implement Section 137. Thus, its provisions must be read and interpreted in accordance with the said regulations.
'Stemmed-leaf tobacco,' as herein used means leaf tobacco which has had the stem or midrib removed. The term does not include broken leaf tobacco."
"Section 20. Exemption from tax of tobacco products intended for agricultural or industrial purposes. –Section 20 must be construed in relation to Section 2 (m)(1) of Revenue Regulation No. 17-67 which classifies stemmed-leaf tobacco as "partially manufactured tobacco," and Section 3 thereof providing for the different designations for persons dealing with tobacco, such as: L-3,[5] L-4,[6] L-5,[7] L-6,[8] etc. Section 3 (h) of Revenue Regulation No. 17-67 describes an L-7 as a "manufacturer of tobacco products."
(a) Sale of stemmed-leaf tobacco, etc., by one factory or another. – Subject to the limitations herein established, products of tobacco entirely unfit for chewing or smoking may be removed free of tax for agricultural or industrial use; and stemmed-leaf tobacco, fine-cut shorts, the refuse of fine-cut chewing tobacco, scraps, cuttings, clippings, and sweepings of tobacco may be sold in bulk as raw material by one manufacturer directly to another, without the prepayment of specific tax.
Stemmed-leaf tobacco, fine-cut shorts, the refuse of fine-cut chewing tobacco, scraps, cuttings, clippings, and sweepings of leaf tobacco or partially manufactured or other refuse of tobacco may be transferred from one factory to another under an official L-7 invoice on which shall be entered the exact weight of the tobacco at the time of its removal, and entry shall be made in the L-7 register in the place provided on the page of removals. Corresponding debit entry will be made in the L-7 register book of the factory receiving the tobacco under the heading 'Refuse, etc., received from the other factory' showing the date of receipts, assessment and invoice numbers, name and address of the consignor, form in which received, and the weight of the tobacco."
"From the foregoing, it is clear that an entity claiming exemption from specific tax under Section 137, must prove that both the entity and the transferee are categorized as L-7 manufacturers since only an L-7 tobacco manufacturer has an L- invoice and an L- registry book. Here petitioner is engaged in the export, domestic sale and re-drying of tobacco leaves, activities which are designated as falling either under L-3R[11] or L-6 under Revenue Regulation No. 17-67. Thus, not being designated as L-7 tobacco manufacturer, petitioner cannot claim any exemption from payment of the specific tax on its stemmed-leaf tobacco. In other words, petitioner, as a non-L-7 tobacco dealer of stemmed-leaf tobacco is liable to pay the specific tax thereon. Hence, petitioner is not entitled to any refund of the specific taxes paid."In the present case, there is no showing that respondent has been categorized as L-7 tobacco manufacturer. It bears stressing that apparent from Section 20 of Revenue Regulation No. V-39 is the fact that the sale of stemmed-leaf tobacco in bulk as raw material is from one L-7 directly to another L-7. This is not obtaining here.