Concrete Aggregates, Inc. v. Court of Tax Appeals

G.R. No. 55793, May 18, 1990; Regalado, J.

nikko ✨
nikko ✨
Jul 24, 2017 · 3 min read

Facts: Petitioner Concrete Aggregates, Inc. is a domestic corporation which maintains and operates a plant at Longos, Quezon City for the production of ready-mixed concrete and plant-mixed hot asphalt and an aggregate plant at Montalban, Rizal which processes rock aggregates mined by it from private lands. An investigation of petitioner’s tax liabilities was conducted by agents of respondent commissioner who demanded payment from petitioner P 244,002.76 as sales and ad valorem taxes inclusive of surcharges. Petitioner disputed the assessment in its letter sent to respondent commissioner to which another demand letter was sent by the latter. Instead of paying, petitioner appealed to respondent court which handed an adverse judgment hence, this petition for review which was granted by the Court after a second motion for reconsideration.

Issue: WON petitioner is a contractor subject to the 3% contractor’s tax under Section 191 of the 1968 National Internal Revenue Code or manufacturer subject to the 7% sales tax under Section 186 of the same Code.

Held: Petitioner is a manufacturer as defined by Section 194(x), now Section 187(x) of the Tax Code. Petitioner’s raw materials are processed under a prescribed formula and thereby changed by means of machinery into a finished product, altering their quality, transforming them into marketable state or preparing them for any of the specific uses of industry. Thus, the raw materials become a distinct class of merchandise or “finished products for the purpose of their sales or distribution to others and not for his own use or consumption.”

In a case involving the making of ready-mixed concrete, it was held that concrete is a product resulting from a combination of sand or gravel or broken bits of limestones with water and cement: a combination which requires the use of skill and most generally of machinery. Concrete in forms designed for use and supplied to others for buildings, bridges and other structures is a distinct article of commerce and the making of them would be manufacturing by the corporation doing so.

Selling or distribution is an essential ingredient of manufacturing. The sale of a manufactured product is properly incident to manufacture. The power to sell is an indispensable adjunct to a manufacturing business. Petitioner, as a manufacturer, not only manufactures the finished articles but also sells or distributes them to others. This is inferable from the testimonial evidence of petitioner’s witness that, in the marketing of its products, the company has marketing personnel who visit the client, whether he is a regular or a prospective customer, and that it is the customer who specifies the requirement according to his needs by filling up a purchase order, after which a job order is issued. This is followed by the delivery of the finished product to the job site.

A contract to make is a contract of sale if the article is already substantially in existence at the time of the order and merely requires some alteration, modification or adaptation to the buyer’s wishes or purposes. A contract for the sale of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not is a contract for the sale of goods.

nikko ✨

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there are things that you can and cannot hold back. this profile contains most of the things i want to hold back but can't.

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