Luzon Stevedoring v. CTA Paras, J.

Petitioner: Luzon Stevedoring Corp.

Respondent: Court of Tax Appeals and Commissioner of
Internal Revenue
Concept: Construction of Tax Exemptions
Brief Facts: Luzon Stevedoring imported engines for the
repair of its tugboats. It claimed a refund from the
compensating tax it paid for the engines, based on Sec.
190 of the Tax code which provides that when articles to
be used by the importer himself as passenger and/or
cargo vessel, whether coastwise or oceangoing,
including engines and spare parts of said vessel, the
importer is exempt from compensating tax. The CIR
disagreed, arguing that Luzon Stevedoring is neither
engaged in coastwise or oceangoing shipping, nor can
tugboats be considered as cargo or passenger vessel.
Doctrine: Any claim for exemption from the tax statute
should be strictly construed against the taxpayer. Where
a provision of law speaks categorically, the need for
interpretation is obviated, no plausible pretense being
entertained to justify non-compliance. All that has to be
done is to apply it in every case that falls within its terms.
Statutes are to be construed in the light of purposes to be
achieved and the evils sought to be remedied.
FACTS:
1. Luzon Stevedoring Corporation imported various
engine parts and other equipment for the repair
and maintenance of its tugboats in 1961 and
1962.
2. It was assessed compensating tax of Php
33,442.13, which it paid, under protest.
3. Unable to secure a tax refund from the CIR,
Luzon Stevedoring filed at the CTA on January 2,
1964.
4. Luzon Stevedoring: Tugboats are included in the
term cargo vessel under the tax exemption
provisions of Sec. 190.
o The law treats a tugboat towing a barge
loaded with cargoes for loading and
unloading to constitute a single vessel.
o Thus, the engines, spare parts and
equipment imported by it to repair and
maintain its tugboats are exempt from
compensating tax.
5. The CTA denied the various claims for tax refund
in 1969.
6. The Motion for Reconsideration of Luzon
Stevedoring was also denied.
7. Hence this SC petition.

The amendatory provisions of RA 3176 limits tax

exemption from the compensating tax to
imported items to be used by the importer himself
as operator of passenger or cargo vessel or both,
whether coastwise or oceangoing, including
engines and spare parts of said vessel.
o Luzon Stevedorings "tugboats" are not
"cargo vessels" because they are mainly
employed for towing and pulling
purposes, not in carrying or transporting
passengers or cargoes.
o In fact, a tugboat is defined as a strongly
built, powerful steam or power vessel,
used for towing and, now, also used for
attendance on vessel.
Also the amendment of Sec. 190 was intended to
provide incentives and inducements to bolster
the shipping industry and not in the business of
stevedoring, in which the corporation is engaged
in.
The power of taxation is a high prerogative of
sovereignty,
the
relinquishment
is
never
presumed and any reduction or dimunition
thereof with respect to its mode or its rate, must
be strictly construed, and the same must be
coached in clear and unmistakable terms in
order that it may be applied.
o More specifically stated, the general rule
is that any claim for exemption from the
tax statute should be strictly construed
against the taxpayer.
DISPOSITIVE: Petition DISMISSED. The CTA decision is
AFFIRMED.
Digested by: Andr

ISSUES:
1. WON Luzon Stevedorings tugboats can be interpreted
to be included in the term cargo vessels for purposes of
the tax exemption provided for in Sec. 190 of the Tax
Code. (NO)
RATIO:
1. NO. Luzon Stevedoring Corp is not exempt from
compensation tax under Sec. 190, and is thus not entitled
for refund.
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