CIR vs.

Isabela Cultural Corporation

Post under case digests, Taxation at Friday, March 02, 2012 Posted by Schizophrenic Mind
Facts: Isabela Cultural Corporation (ICC), a domestic corporation received an assessment
notice for deficiency income tax and expanded withholding tax from BIR. It arose from the
disallowance of ICCs claimed expense for professional and security services paid by ICC; as
well as the alleged understatement of interest income on the three promissory notes due from
Realty Investment Inc. The deficiency expanded withholding tax was allegedly due to the
failure of ICC to withhold 1% e-withholding tax on its claimed deduction for security services.

ICC sought a reconsideration of the assessments. Having received a final notice of

assessment, it brought the case to CTA, which held that it is unappealable, since the final
notice is not a decision. CTAs ruling was reversed by CA, which was sustained by SC, and case
was remanded to CTA. CTA rendered a decision in favor of ICC. It ruled that the deductions for
professional and security services were properly claimed, it said that even if services were
rendered in 1984 or 1985, the amount is not yet determined at that time. Hence it is a proper
deduction in 1986. It likewise found that it is the BIR which overstate the interest income,
when it applied compounding absent any stipulation.

Petitioner appealed to CA, which affirmed CTA, hence the petition.

Issue: Whether or not the expenses for professional and security services are deductible.

Held: No. One of the requisites for the deductibility of ordinary and necessary expenses is that
it must have been paid or incurred during the taxable year. This requisite is dependent on the
method of accounting of the taxpayer. In the case at bar, ICC is using the accrual method of
accounting. Hence, under this method, an expense is recognized when it is incurred. Under a
Revenue Audit Memorandum, when the method of accounting is accrual, expenses not being
claimed as deductions by a taxpayer in the current year when they are incurred cannot be
claimed in the succeeding year.

The accrual of income and expense is permitted when the all-events test has been met. This
test requires: 1) fixing of a right to income or liability to pay; and 2) the availability of the
reasonable accurate determination of such income or liability. The test does not demand that
the amount of income or liability be known absolutely, only that a taxpayer has at its disposal
the information necessary to compute the amount with reasonable accuracy.

From the nature of the claimed deductions and the span of time during which the firm was
retained, ICC can be expected to have reasonably known the retainer fees charged by the
firm. They cannot give as an excuse the delayed billing, since it could have inquired into the
amount of their obligation and reasonably determine the amount.

CIR V GENERAL FOODS

14
FEB
GR No. 143672| April 24, 2003 | J. Corona

Test of Reasonableness

Facts:
Respondent corporation General Foods (Phils), which is engaged in the manufacture of Tang,
Calumet and Kool-Aid, filed its income tax return for the fiscal year ending February 1985
and claimed as deduction, among other business expenses, P9,461,246 for media advertising
for Tang.

The Commissioner disallowed 50% of the deduction claimed and assessed deficiency income
taxes of P2,635,141.42 against General Foods, prompting the latter to file an MR which was
denied.

General Foods later on filed a petition for review at CA, which reversed and set aside an earlier
decision by CTA dismissing the companys appeal.

Issue:

W/N the subject media advertising expense for Tang was ordinary and necessary expense
fully deductible under the NIRC

Held:

No. Tax exemptions must be construed in stricissimi juris against the taxpayer and liberally in
favor of the taxing authority, and he who claims an exemption must be able to justify his claim
by the clearest grant of organic or statute law. Deductions for income taxes partake of the
nature of tax exemptions; hence, if tax exemptions are strictly construed, then deductions
must also be strictly construed.

To be deductible from gross income, the subject advertising expense must comply with the
following requisites: (a) the expense must be ordinary and necessary; (b) it must have been
paid or incurred during the taxable year; (c) it must have been paid or incurred in carrying on
the trade or business of the taxpayer; and (d) it must be supported by receipts, records or
other pertinent papers.

While the subject advertising expense was paid or incurred within the corresponding taxable
year and was incurred in carrying on a trade or business, hence necessary, the parties views
conflict as to whether or not it was ordinary. To be deductible, an advertising expense should
not only be necessary but also ordinary.

The Commissioner maintains that the subject advertising expense was not ordinary on the
ground that it failed the two conditions set by U.S. jurisprudence: first, reasonableness of
the amount incurred and second, the amount incurred must not be a capital outlay to create
goodwill for the product and/or private respondents business. Otherwise, the expense must
be considered a capital expenditure to be spread out over a reasonable time.

There is yet to be a clear-cut criteria or fixed test for determining the reasonableness of an
advertising expense. There being no hard and fast rule on the matter, the right to a deduction
depends on a number of factors such as but not limited to: the type and size of business in
which the taxpayer is engaged; the volume and amount of its net earnings; the nature of the
expenditure itself; the intention of the taxpayer and the general economic conditions. It is the
interplay of these, among other factors and properly weighed, that will yield a proper
evaluation.
The Court finds the subject expense for the advertisement of a single product to be
inordinately large. Therefore, even if it is necessary, it cannot be considered an ordinary
expense deductible under then Section 29 (a) (1) (A) of the NIRC.

Advertising is generally of two kinds: (1) advertising to stimulate the current sale of
merchandise or use of services and (2) advertising designed to stimulate the future sale of
merchandise or use of services. The second type involves expenditures incurred, in whole or in
part, to create or maintain some form of goodwill for the taxpayers trade or business or for
the industry or profession of which the taxpayer is a member. If the expenditures are for the
advertising of the first kind, then, except as to the question of the reasonableness of amount,
there is no doubt such expenditures are deductible as business expenses. If, however, the
expenditures are for advertising of the second kind, then normally they should be spread out
over a reasonable period of time.

The companys media advertising expense for the promotion of a single product is doubtlessly
unreasonable considering it comprises almost one-half of the companys entire claim for
marketing expenses for that year under review. Petition granted, judgment reversed and set
aside.

Aguinaldo Industries Co. vs. CIR

Post under case digests, Taxation at Sunday, February 19, 2012 Posted by Schizophrenic Mind
Facts: Aguinaldo Industries is engaged in the manufacture of fishing nets (a tax exempt
industry), which is handled by its Fish Nets Division. It is also engaged in the manufacture of
furniture which is operated by its Furniture Division. Each division is provided with separate
books of accounts. The income from the Fish Nets Division, miscellaneous income of the Fish
Nets Division, and and the income from the Furniture Division are computed individually.

Petitioner acquired a parcel of land in Muntinlupa Rizal as site for its fishing net factory. The
transaction was entered in the books of the Fish Nets Division. The company then found
another parcel of land in Marikina Heights, which was more suitable. They then sold the
Muntinlupa property and the profit derived from the sale was entered in the books of the Fish
Nets Division as miscellaneous income to separate it from its tax exempt income.

For 1957, petitioner filed 2 separate ITRs (one for Fish Nets and one for Furniture). After
investigation, BIR examiners found that the Fish Nets Div deducted from its gross income PhP
61k as additional remuneration paid to the companys officers. Such amount was taken from
the sale of the land and was reported as part of the selling expenses. The examiners
recommended that such deduction be disallowed. Petitioner then asserted in its letter that it
should be allowed because it was paid as bonus to its officers pursuant to Sec.3 of its by-laws:
From the net profits shall be deducted for allowance of the Pres. - 3%, VP - 1%, members of
the Board - 10%.

CTA imposed a 5% surcharge and 1% monthly interest for the deficiency assessment.
Petitioner then stressed that the profit derived from the sale of the land is not taxable because
the Fish Nets Div enjoys tax exemption under RA 901.

Issues:
(1) Whether the bonus given to the officers of the petitioner upon the sale of its Muntinlupa
land is an ordinary and necessary business expense deductible for income tax purposes; and
(2) Whether petitioner is liable for surcharge and interest for late payment.

Held:
(1) YES. These extraordinary and unusual amounts paid by petitioner to these directors in the
guise and form of compensation for their supposed services as such, without any relation to
the measure of their actual services, cannot be regarded as ordinary and necessary expenses
within the meaning of the law. This posture is in line with the doctrine in the law of taxation
that the taxpayer must show that its claimed deductions clearly come within the language of
the law since allowances, like exemptions, are matters of legislative grace.

Moreover, petitioner cannot now claim that the profit from the sale is tax exempt. At the
administrative level, the petitioner implicitly admitted that the profit it derived from the sale of
its Muntinlupa land, a capital asset, was a taxable gain which was precisely the reason why
for tax purposes the petitioner deducted therefrom the questioned bonus to its corporate
officers as a supposed item of expense incurred for the sale of the said land, apart from the
P51,723.72 commission paid by the petitioner to the real estate agent who indeed effected
the sale. The BIR therefore had no occasion to pass upon the issue.

To allow a litigant to assume a different posture when he comes before the court and
challenge the position he had accepted at the administrative level, would be to sanction a
procedure whereby the court which is supposed to review administrative determinations
would not review, but determine and decide for the first time, a question not raised at the
administrative forum. The requirement of prior exhaustion of administrative remedies gives
administrative authorities the prior opportunity to decide controversies within its competence,
and in much the same way that, on the judicial level, issues not raised in the lower court
cannot be raised for the first time on appeal. Up to the time the questioned decision of the
respondent Court was rendered, the petitioner had always implicitly admitted that the
disputed capital gain was taxable, although subject to the deduction of the bonus paid to its
corporate officers. It was only after the said decision had been rendered and on a motion for
reconsideration thereof, that the issue of tax exemption was raised by the petitioner for the
first time. It was thus not one of the issues raised by petitioner in his petition and supporting
memorandum in the CTA.

(2) YES. Interest and surcharges on deficiency taxes are imposable upon failure of the
taxpayer to pay the tax on the date fixed in the law for the payment thereof, which was, under
the unamended Section 51 of the Tax Code, the 15th day of the 5th month following the close
of the fiscal year in the case of taxpayers whose tax returns were made on the basis of fiscal
years. A deficiency tax indicates non-payment of the correct tax, and such deficiency exists
not only from the assessment thereof but from the very time the taxpayer failed to pay the
correct amount of tax when it should have been paid and the imposition thereof is mandatory
even in the absence of fraud or willful failure to pay the tax is full.

ATLAS CONSOLIDATED MINING DEVT CORP vs. CIR

524 SCRA 73, 103
GR Nos. 141104 & 148763, June 8, 2007

"The taxpayer must justify his claim for tax exemption or refund by the clearest grant of
organic or statute law and should not be permitted to stand on vague implications."

"Export processing zones (EPZA) are effectively considered as foreign territory for tax
purposes."

FACTS: Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, and

sale of various mineral products, filed claims with the BIR for refund/credit of input VAT on its
purchases of capital goods and on its zero-rated sales in the taxable quarters of the years
1990 and 1992. BIR did not immediately act on the matter prompting the petitioner to file a
petition for review before the CTA. The latter denied the claims on the grounds that for zero-
rating to apply, 70% of the company's sales must consists of exports, that the same were not
filed within the 2-year prescriptive period (the claim for 1992 quarterly returns were judicially
filed only on April 20, 1994), and that petitioner failed to submit substantial evidence to
support its claim for refund/credit.
 The petitioner, on the other hand, contends that CTA failed to consider the following: sales
to PASAR and PHILPOS within the EPZA as zero-rated export sales; the 2-year prescriptive
period should be counted from the date of filing of the last adjustment return which was April
15, 1993, and not on every end of the applicable quarters; and that the certification of the
independent CPA attesting to the correctness of the contents of the summary of suppliers
invoices or receipts examined, evaluated and audited by said CPA should substantiate its
claims.

ISSUE: Did the petitioner corporation sufficiently establish the factual bases for its applications
for refund/credit of input VAT?

HELD: No. Although the Court agreed with the petitioner corporation that the two-year
prescriptive period for the filing of claims for refund/credit of input VAT must be counted from
the date of filing of the quarterly VAT return, and that sales to PASAR and PHILPOS inside the
EPZA are taxed as exports because these export processing zones are to be managed as a
separate customs territory from the rest of the Philippines, and thus, for tax purposes, are
effectively considered as foreign territory, it still denies the claims of petitioner corporation for
refund of its input VAT on its purchases of capital goods and effectively zero-rated sales during
the period claimed for not being established and substantiated by appropriate and sufficient
evidence.
Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the
sovereign authority, and should be construed in strictissimi juris against the person or entity
claiming the exemption. The taxpayer who claims for exemption must justify his claim by the
clearest grant of organic or statute law and should not be permitted to stand on vague
implications.

ATLAS CONSOLIDATED MINING v. CIR

FACTS: Petitioner corporation is engaged in the business of mining, production, and sale of
various mineral products, such as gold, pyrite, and copper concentrates. It is a VAT-registered
taxpayer.
Petitioner corporation filed with the BIR the application for the refund/credit of its input VAT on
its purchases of capital goods and on its zero-rated sales. When its application for
refund/credit remained unresolved by the BIR, petitioner filed a Petition for Review with the
CTA. The CTA denied the claims on the grounds that for zero-rating to apply, 70% of the
company's sales must consists of exports, that the same were not filed within the 2-year
prescriptive period (the claim for 1992 quarterly returns were judicially filed only on April 20,
1994), and that petitioner failed to submit substantial evidence to support its claim for
refund/credit.
The petitioner, on the other hand, contends that CTA failed to consider the following: sales to
PASAR and PHILPOS within the Export Processing Zone Authority (EPZA) as zero-rated export
sales; the 2-year prescriptive period should be counted from the date of filing of the last
adjustment return which was April 15, 1993, and not on every end of the applicable quarters;
and that the certification of the independent CPA attesting to the correctness of the contents
of the summary of suppliers invoices or receipts examined, evaluated and audited by said
CPA should substantiate its claims.
ISSUES:
1. Whether or not the claims were filed within the 2-year prescriptive period
2. Whether or not the claims for refund/credit of input VAT of petitioner corporation have
sufficient legal bases
3. Whether or not petitioner sufficiently established the factual bases for its applications
for refund/credit of input VAT
HELD:
1. YES. The filing of a quarterly income tax returns required in Section 85 (now Section 68) and
implemented per BIR Form 1702-Q and payment of quarterly income tax should only be
considered mere installments of the annual tax due. These quarterly tax payments which are
computed based on the cumulative figures of gross receipts and deductions in order to arrive
at a net taxable income, should be treated as advances or portions of the annual income tax
due, to be adjusted at the end of the calendar or fiscal year. This is reinforced by Section 87
(now Section 69) which provides for the filing of adjustment returns and final payment of
income tax. Consequently, the two-year prescriptive period provided in Section 292 (now
Section 230) of the Tax Code should be computed from the time of filing the Adjustment
Return or Annual Income Tax Return and final payment of income tax.
2. YES. Section 106(b)(2), in relation to Section 100(a)(2) of the Tax Code of 1977, as
amended, allowed the refund/credit of input VAT on export sales to enterprises operating
within export processing zones and registered with the EPZA, since such export sales were
deemed to be effectively zero-rated sales.
Tax treatment of goods brought into the export processing zones is only consistent with
the Destination Principle and Cross Border Doctrine to which the Philippine VAT system
adheres. According to the Destination Principle, goods and services are taxed only in the
country where these are consumed. In connection with the said principle, the Cross Border
Doctrine mandates that no VAT shall be imposed to form part of the cost of the goods destined
for consumption outside the territorial border of the taxing authority. Hence, actual export of
goods and services from the Philippines to a foreign country must be free of VAT, while those
destined for use or consumption within the Philippines shall be imposed with 10% VAT. Export
processing zones are to be managed as a separate customs territory from the rest of the
Philippines and, thus, for tax purposes, are effectively considered as foreign territory. For this
reason, sales by persons from the Philippine customs territory to those inside the export
processing zones are already taxed as exports.
3. NO. For a judicial claim for refund to prosper, however, respondent must not only prove that
it is a VAT registered entity and that it filed its claims within the prescriptive period. It must
substantiate the input VAT paid by purchase invoices or official receipts. This respondent failed
to do. Petitioner corporation failed to present together with its application the required
supporting documents, whether before the BIR or the CTA.
Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the
sovereign authority, and should be construed in strictissimi juris against the person or entity
claiming the exemption. The taxpayer who claims for exemption must justify his claim by the
clearest grant of organic or statute law and should not be permitted to stand on vague
implications.

ZAMORA v. COLLECTOR [G.R. No. L-15290. May 31, 1963.]

FACTS: Mariano Zamora, owner of the Bay View Hotel and Farmacia Zamora, Manila, filed his
income tax returns. The Collector of Internal Revenue found that the promotion expenses
incurred by his wife for the promotion of the Bay View Hotel and Farmacia Zamora were not
allowable deductions. Mariano Zamora contends that the whole amount of the promotion
expenses in his income tax returns, should be allowed and not merely one-half of it, on the
ground that, while not all the itemized expenses are supported by receipts, the absence of
some supporting receipts has been sufficiently and satisfactorily established.

ISSUE: In the absence of receipts, WON to allow as deduction all or merely one-half of the
promotion expenses of Mrs. Zamora claimed in Mariano Zamora's income tax returns

HELD: One-half only. Claims for the deduction of promotion expenses r entertainment
expenses must also be substantiated or supported by record showing in detail the amount and
nature of the expense incurred. Considering that the application of Mrs. Zamora for dollar
allocation shows that she went abroad on a combined medical and business trip, not all of her
expenses came under the category of ordinary and necessary expenses; part thereof
constituted her personal expenses. There having been no means by which to ascertain which
expense was incurred by her in connection with the business of Mariano Zamora and which
was incurred for her personal benefit, the Collector and the CTA in their decisions, considered
50% of the said amount as business expense and the other 50%, as her personal expenses.
While in situations like the present, absolute certainty is usually not possible, the CTA should
make as close an approximate as it can, bearing heavily, if it chooses, upon the taxpayer
whose inexactness is of his own making.

C. M. Hoskins & Co. Inc. v Commissioner of Internal Revenue

Facts:
Hoskins, a domestic corporation engaged in the real estate business as broker, managing
agents and administrators, filed its income tax return (ITR) showing a net income of
P92,540.25 and a tax liability of P18,508 which it paid.

CIR disallowed 4 items of deductions in the ITR. Court of Tax Appeals upheld the disallowance
of an item which was paid to Mr. C. Hoskins representing 50% of supervision fees earned and
set aside the disallowance of the other 3 items.

Issue:
Whether or not the disallowance of the 4 items were proper.

Held:
NOT deductible. It did not pass the test of reasonableness which is:
General rule, bonuses to employees made in good faith and as additional compensation for
services actually rendered by the employees are deductible, provided such payments, when
added to the salaries do not exceed the compensation for services rendered.

The conditions precedent to the deduction of bonuses to employees are:

Payment of bonuses is in fact compensation
Must be for personal services actually rendered
Bonuses when added to salaries are reasonable when measured by the amount and
quality of services performed with relation to the business of the particular taxpayer.
There is no fixed test for determining the reasonableness of a given bonus as compensation.
This depends upon many factors.

In the case, Hoskins fails to pass the test. CTA was correct in holding that the payment of the
company to Mr. Hoskins of the sum P99,977.91 as 50% share of supervision fees received by
the company was inordinately large and could not be treated as an ordinary and necessary
expenses allowed for deduction.

CF CALANOC vs CIR
(29 Nov 1961)

Kind of tax involved: AMUSEMENT TAX Sec 125 of the Tax Code provides that amusement tax
is collected from the proprietor, lessee or operator of cockpits, cabarets, night or day clubs,
boxing exhibitions, professional basketball games, Jai-Alai, and racetracks.

DOCTRINE: Payment for police protection given by Calanoc to the police is ILLEGAL since it is a
consideration given by the petitioner to the police for the performance by the latter of
functions required of them to be rendered by law.

The expenditures were rather EXCESSIVE, considering that the purpose of the law was for a
charitable cause.

FACTS:
 This case is a petition to review CTA decision which affirmed the assessment of CIR of
amusement tax and surcharge against a boxing and wrestling exhibition held by petitioner
Calanoc on 03 Dec 1949 at the Rizal Memorial Stadium.
24 Nov 1949 Social Welfare Commission (SCW) issued a solicitation permit,
authorizing Calanoc (petitioner) to solicit and receive contributions for the orphans and
destitute children of the Child Welfare Workers Club of the SCW.
Such solicitation will be done through a boxing and wrestling exhibition at the Rizal
Memorial Stadium. Calanoc financed and promoted the exhibition.
BEFORE the exhibition took place, Calanoc applied with the Collector of Internal
Revenue (CIR) for exemption from the payment of the amusement tax, based on Sec 260 of
the NIRC. CIR says that such exemption will only be granted if Calanoc complies with the
requirements of the law.
AFTER the exhibition, CIR investigated the tax case of Calanoc. It was shown that the
gross sales amounted to ~26K, expenditures was ~25K, net profit was only ~1K. Other items
of expenditure included:
o Police protection
o Gifts
o Parties
o Items for representation
Only the said net profit was remitted to the SCW for the said charitable purpose for
which the permit was issued.
CIR assessed amount against Calanoc. (around~7K)
Sec of Finance authorized the denial of the application for exemption from payment of
amusement tax where a) the net proceeds are not substantial OR b) where the expenses are
exorbitant.

ISSUE/S: Petitioner Calanoc questions the VALIDITY of the assessment of AMUSEMENT tax
against him (as financer of the exhibition)

Petitioners argument:
Denied having received 1K as stadium fee. Such amount was not included in the
receipts; says he cannot be made to pay almost 7 times the amount as amusement tax

HELD +RATIO:

AMUSEMENT TAX IS VALID. You cannot pay for services that are required by law to be
performed by government officers. Also, the expenditures are excessive!
Evidence showed that while Calanoc did not pay for the stadium fee, said amount was
paid by the O-SO Beverages directly to the stadium for advertisement privileges during the
exhibition.
Since the stadium fee was paid by the concessionaire, Calanoc had no right to include
the stadium fee among the items of his expenses. Such amount was unaccounted, and it went
into the petitioners pocket.
Also, Calanoc cannot justify the other expenses, such as police protection and gifts.
SC says that most of the items of expenditures are either EXORBITANT or were NOT
SUPPORTED by receipts.
Payment for police protection given by Calanoc to the police is ILLEGAL since it is a
consideration given by the petitioner to the police for the performance by the latter of
functions required of them to be rendered by law.
The expenditures were rather EXCESSIVE, considering that the purpose of the law was
for a charitable cause.

Dispositive: We have examined the records of the case and we agree with the lower court that
most of the items of expenditures contained in the statement submitted to the agent are
either exorbitant or not supported by receipts. We agree with the tax court that the payment
of P461.65 for police protection is illegal as it is a consideration given by the petitioner to the
police for the performance by the latter of the functions required of them to be rendered by
law. The expenditures of P460.00 for gifts, P1,880.05 for parties and other items for
representation are rather excessive, considering that the purpose of the exhibition was for a
charitable cause.
WHEREFORE, the decision sought herein to be reviewed is hereby affirmed, with costs against
the petitioner.

Kuenzle and Streiff v. Collector of Customs

Full Text: http://www.lawphil.net/judjuris/juri1915/dec1915/gr_l-10710_1915.html

Facts:
From the record it appears that the plaintiff and appellant imported into Philippine Islands a
quantity of merchandise, which was invoiced as "cases roast coffee, chicory, cereals." Said
merchandise was classified by the department of customs as "Bonanza mixture." Against that
classification the plaintiff, through its attorney, protested, alleging "that the mixture is a
product and manufacture of the United States, in chief value of the growth of the United
States; the shipment came direct, was accompanied by the proper certificate of origin; the
goods should have been passed free of duty as American products, under section 5 of
American Tariff of 1909."
Said protest was duly considered by the Insular Collector of Customs, who decided that: "This
claim for the free entry of certain `bonanza mixture' as a manufacture of the United States
under section 12 of the Philippine Tariff Law of 1909, is overruled and denied, for the reasons
stated in the decision of this office, on protest 7298 of the same importers (copy attached),
which decision has been affirmed by the Court of First Instance of Manila.
As stipulated by the parties, the "bonanza mixture" is a mixture of coffee, cereals and chicory;
that the coffee it contains was originally imported coffee it contains was originally imported
into the United States in the bean, and was there roasted, ground and finally mixed with the
chicory and cereals which are, nevertheless, products of the United States. According to the
report of the Bureau of Science, the proportion of the mixture is about 50 per cent of real
coffee and the rest is chicory and cereals.

Issue:
Whether or not the roasting, grinding and mixing of coffee with chicory and cerals constitutes
a manufacture

Held:
The bonanza mixture is not a manifacture article. The Philippine Tariff Law of August 5th, 1909
in paragraph 242 provides for a duty upon coffee. said duty depends upon the condition of the
coffee or the manner of its packing. Paragraph 243 provides for a duty on chicory. Paragraph
215 218 provide for duty upon various classes of cereals. There is no express provisions in
the law of a duty upon a mixture of said articles.

In order to ascertain the ordinary meaning of these words, resort may be had to the definitions
given by well-recognized lexicographers. Webster, in his valuable International Dictionary,
defines manufacture as "The operation of making wares or any product by hand, by
machinery, or by other agencies; anything made from raw material, by the hands, by
machinery, or by art, as clothes, iron utensils, shoes, machinery, saddlery, etc." Black, in his
valuable Law Dictionary, defines manufacture as "Any useful product made directly by
human labor, or by the aid of machinery directed or controlled by human power, and either
from raw materials or from materials worked up into a new form. Also the process by which
such products are made or fashioned." Bouvier, in his Law Dictionary, defines manufacture
"To make or fabricate raw materials by hand or by machinery, worked into forms convenient
for use;" and, when used as a noun, "anything made from raw materials by hand or by
machinery or by art.
The application of labor to an article, either by hand or by mechanism, does not make the
article necessarily a manufactured article within the meaning of that term as used in the tariff
laws, unless the application of such labor is carried to such an extend that the article suffers a
species of transformation and is changed into a new and different article, having a distinctive
name, character or use.

If the mixing of the different kinds of ground coffee or different grades of tea does not
constitute manufacture, then it would seem to be reasonable to say that the mixture simply of
ground coffee with other ground materials or articles such as chicory and cereals, would not
constitute a manufacture.

The courts have been obliged to formulate their definitions in order to give effect to the
purpose of legislative enactments, while lexicographers have been free to define said term
upon the pure etymology of the word. Courts have been obliged to define the terms in order to
make it applicable to practical affairs. It is the duty of the court to give the Tariff Law a strict
interpretation, which will give force and effect to such law. The primary purpose of the law is
to produce revenue.