SAN PABLO MANUFACTURING CORPORATION VS.

CIR
FACTS:
SPMC is a domestic corporation engaged in the business of milling, manufacturing and
exporting of coconut oil and other allied products. It was assessed and ordered to pay by the
Commissioner of Internal Revenue the total amount of P8,182,182.852 representing deficiency
millers tax and manufacturers sales tax, among other deficiency taxes, for taxable year 1987. The
deficiency millers tax was imposed on SPMCs sales of crude oil to United Coconut Chemicals, Inc.
(UNICHEM) while the deficiency sales tax was applied on its sales of corn and edible oil as
manufactured products.
SPMC opposed the assessments but the Commissioner denied its protest. The CTA upheld
the decision of the Commissioner, save for the tax on the sales of corn and edible oils which it
canceled out.
SPMC contended that that it should not be liable for 3% millers tax. It maintains that the
crude oil which it sold to UNICHEM was actually exported by UNICHEM hence, not subject to millers
tax pursuant to section 168 of the Tax Code. For SPMC, section 168 contemplates 2 exemptions
from the millers tax: a.) the milled products in their original state were actually exported by the
miller himself or by another person and b.) the milled products sold by the miller were actually
exported as an ingredient of any manufactured article. The exportation may be effected by the
miller himself or by the buyer or manufacturer of the milled products. Since UNICHEM, the buyer of
SPMCs milled products, subsequently exported said products, SPMC should be exempted from the
millers tax.
ISSUE:
Whether SPMCs sale of crude oil to UNICHEM should be subject to 3% miller tax
RULING:
YES, SPMC is still subject to 3% millers tax.
Section 168. Percentage tax upon proprietors or operators of rope factories, sugar central mills, coconut oil mills,
palm oil mills, cassava mills, and dessicated coconut factories. Xxx Provided, however, that this tax shall not apply to rope,
coconut oil, palm oil, copra by-products and dessicated coconut, if such rope, coconut oil, palm oil, copra by-products and
dessicated coconut shall be removed for exportation by the proprietor or operator of the factory or the miller himself, and
are actually exported without returning to the Philippines, whether in their original state or as an ingredient or part of any
manufactured article or products. xxxx

The language of the exempting clause of Section 168 of the 1987 Tax Code was clear. The
language of the exemption proviso did not warrant the interpretation advanced by SPMC. Nowhere
did it provide that the exportation made by the purchaser of the materials enumerated in the
exempting clause or the manufacturer of products utilizing the said materials was covered by the
exemption.
Since SPMCs situation was not within the ambit of the exemption, it was subject to the 3%
millers tax imposed under Section 168 of the 1987 Tax Code. SPMCs proposed interpretation
unduly enlarged the scope of the exemption clause. The rule is that the exemption must not be so
enlarged by construction since the reasonable presumption is that the State has granted in express
terms all it intended to grant and that, unless the privilege is limited to the very terms of the
statute, the favor would be intended beyond what was meant.

Where the law enumerates the subject or condition upon which it applies, it is to be
construed as excluding from its effects all those not expressly mentioned . Expressio unius est
exclusio alterius. Anything that is not included in the enumeration is excluded therefrom and a
meaning that does not appear nor is intended or reflected in the very language of the statute
cannot be placed therein.
The rule proceeds from the premise that the legislature would not have made specific
enumerations in a statute if it had the intention not to restrict its meaning and confine its terms to
those expressly mentioned. The rule of expressio unius est exclusio alterius is a canon of restrictive
interpretation. Its application in this case is consistent with the construction of tax exemptions in
strictissimi juris against the taxpayer. To allow SPMCs claim for tax exemption will violate these
established principles and unduly derogate sovereign authority.