1

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.

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.

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