Вы находитесь на странице: 1из 3

Celestino Co vs CIR (G.R. No.

L-8506)

Facts: Celestino Co & Company is a duly registered general co-partnership doing business under the trade name of
Oriental Sash Factory. From 1946 to 1951 it paid percentage taxes of 7% on the gross receipts of its sash, door and
window factory, in accordance with sec. 186 of the National Internal Revenue Code which is a tax on the original
sales of articles by manufacturer, producer or importer.
However, in 1952 it began to claim only 3% tax under Sec. 191, which is a tax on sales of services. Petitioner claims
that it does not manufacture ready-made doors, sash and windows for the public, but only upon special orders from
the customers, hence, it is not engaged in manufacturing under sec 186, but only in sales of services covered by sec
191.

Having failed to convince BIR, petitioner went to the Court of Tax Appeal where it also failed. CTA, in its decision,
holds that the petitioner has chosen for its tradename and has offered itself to the public as a Factory, which means
it is out to do business, in its chosen lines on a big scale.

As a general rule, sash factories receive orders for doors and windows of special design only in particular cases but
the bulk of their sales is derived from a ready-made doors and windows of standard sizes for the average home..
Even if we were to believe petitioners claim that it does not manufacture ready-made sash, doors and windows for
the public and that it makes these articles only special order of its customers that does not make it a contractor within
the purview of section 191 of the national Internal Revenue Code. There are no less than fifty occupations
enumerated in the aforesaid section and after reading carefully each and every one of them, we cannot find under
which the business of manufacturing sash, doors and windows upon special order of customers fall under the
category mentioned under Sec 191.

Issue: Whether the petitioner company provides special services or is engaged in manufacturing.

Held: The important thing to remember is that Celestino Co & Company habitually makes sash, windows and doors,
as it has represented in its stationery and advertisements to the public. That it manufactures the same is practically
admitted by appellant itself. The fact that windows and doors are made by it only when customers place their orders,
does not alter the nature of the establishment, for it is obvious that it only accepted such orders as called for the
employment of such material-moulding, frames, panels-as it ordinarily manufactured or was in a position habitually to
manufacture. The Oriental Sash Factory does nothing more than sell the goods that it mass-produces or habitually
makes; sash, panels, mouldings, frames, cutting them to such sizes and combining them in such forms as its
customers may desire.

Appellant invokes Article 1467 of the New Civil Code to bolster its contention that in filing orders for windows and
doors according to specifications, it did not sell, but merely contracted for particular pieces of work or merely sold its
services.

Said article reads as follows:

Article 1467. A contract for the delivery at a certain price 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 of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and
not for the general market, it is contract for a piece of work.

In our opinion when this Factory accepts a job that requires the use of extraordinary or additional equipment, or
involves services not generally performed by it-it thereby contracts for a piece of work filing special orders within
the meaning of Article 1467. The orders herein exhibited were not shown to be special. They were merely orders for
work nothing is shown to call them special requiring extraordinary service of the factory. The thought occurs to us
that if, as alleged-all the work of appellant is only to fill orders previously made, such orders should not be called
special work, but regular work. The Supreme Court affirms the assailed decision by the CTA.

CIR vs Arnoldus Carpentry Shop


GR No. 71122
Facts: Arnoldus Carpentry Shop, Inc. is a domestic corporation which has been in existence since 1960 which has
for its purpose the preparing, processing, buying, selling, exporting, importing, manufacturing, trading and dealing in
cabinet shop products, wood and metal home and office furniture, cabinets, doors, windows, etc., including their
component parts and materials, of any and all nature and description. The company kept samples or models of its
woodwork on display from where its customers may refer to when placing their orders.

On March 1979, the examiners from BIR who conducted an investigation on the companys tax liabilities reported that
subject corporation should be considered a contractor and not a manufacturer since the corporation renders service
in the course of an independent occupation representing the will of his employer only as to the result of his work, and
not as to the means by which it is accomplished. Hence, in the computation of the percentage tax, the 3%
contractors tax should be imposed instead of the 7% manufacturers tax. However, responded company holds that
the carpentry shop is a manufacturer and therefore entitled to tax exemption on its gross export sales under Section
202 (e) of the National Internal Revenue Code. CIR rendered its decision classifying the respondent as contractor
which was in turn reversed by the CTA.
Issue: Whether or not the Court of Tax Appeals erred in holding that private respondent is a manufacturer and not a
contractor.
Held: No. The Supreme Court holds that the private respondent is a manufacturer as defined in the Tax Code and
not a contractor under Section 205(e) of the Tax Code.
Petitioner CIR wants to impress upon this Court that under Article 1467, the true test of whether or not the contract is
a piece of work (and thus classifying private respondent as a contractor) or a contract of sale (which would classify
private respondent as a manufacturer) is the mere existence of the product at the time of the perfection of the
contract such that if the thing already exists, the contract is of sale, if not, it is work. This is not the test followed in this
jurisdiction. Based on Art. 1467, what determines whether the contract is one of work or of sale is whether the thing
has been manufactured specially for the customer and upon his special order. Thus, if the thing is specially done at
the order of another, this is a contract for a piece of work. If, on the other hand, the thing is manufactured or procured
for the general market in the ordinary course of ones business, it is a contract of sale.

The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry whether the
thing transferred is one not in existence and which never would have existed but for the order of the party desiring to
acquire it, or a thing which would have existed and has been the subject of sale to some other persons even if the
order had not been given. The one who has ready for the sale to the general public finished furniture is a
manufacturer, and the mere fact that he did not have on hand a particular piece or pieces of furniture ordered does
not make him a contractor only.
A contract for the delivery at a certain price 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 of
sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the
general market, it is a contract for a piece of work. The facts show that the company had a ready stock of its shop
products for sale to its foreign and local buyers. As a matter of fact, the purchase orders from its foreign buyers
showed that they ordered by referring to the models designated by petitioner. Even purchases by local buyers for
television cabinets were by orders for existing models except only for some adjustments in sizes and accessories
utilized.
The Court finds itself in agreement with CTA and as the CTA did not err in holding that private respondent is a
manufacturer, then private respondent is entitled to the tax exemption under See. 202 (d) and (e) now Sec. 167 (d)
and (e)] of the Tax Code.

Вам также может понравиться