FIFTH DIVISION [CA-G.R. SP No. 40773. July 22, 1996.] (CTA Case No.

4516) COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. LA CAMPANA FABRICA DE TABACOS, INC., respondent. DECISION CALLEJO, SR., J p: This is a Petition for Review of the Decision dated August 31, 1995 of the Court of Tax Appeals, in C.T.A. Case No. 4516, entitled "La Campana Fabrica de Tabacos, Inc. vs. Commissioner of Internal Revenue", cancelling the assessment for deficiency specific tax in the amount of P2,785,338.75 issued against herein Respondent La Campana Fabrica de Tabacos, Inc. on its purchase of stemmed leaf tobacco covering the period from January 1, 1986 to June 30, 1989; and from the Resolution dated May 7, 1996 denying Respondent's motion for reconsideration of the decision. The Petition stemmed from the following factual backdrop Respondent is a domestic corporation engaged in among others, the importation and local purchase of stemmed leaf tobacco which it uses as raw material in the production and manufacture of cigar and cigarettes. On January 4, 1990, Respondent received from Petitioner a letter, dated December 18, 1989, demanding payment of P2,785,338.75 representing deficiency excise tax, exclusive of surcharge and interest, on Respondent's purchases of stemmed leaf tobacco covering the period from January 1, 1986 to June 30, 1989. The demand letter was essentially based on Sec. 141 (b) of the National Internal Revenue Code of 1977 on the basis of the Bureau of Internal Revenue's interpretation that: "Sec. 141 of the Code provides that there should be collected a tax of P0.75 on each kilogram of the following products of tobacco: (b) Tobacco prepared or partially prepared with or without the use of any machine or instrument or without being pressed or sweetened Stemmed-leaf tobacco is partially-prepared tobacco as provided under Revenue Regulations No. 17-67. Further, under the penultimate paragraph of the same section, it provides that fine-cut shorts and refuse scraps clippings, stems and sweepings of tobacco resulting from handling and stripping of whole leaf tobacco may be transferred, disposed of, or otherwise sold without the prepayment of the specific tax when the same are to be used in the manufacture of other tobacco products on which the excise tax will eventually be paid on the finished product. It will be noted from the above enumeration, however, that stemmed leaf tobacco is not among the products exempted from the payment of tax." (Emphasis supplied) On January 12, 1990, Respondent wrote Petitioner a letter protesting the aforementioned deficiency assessment and requesting the reconsideration and withdrawal of said assessment. In the same letter Respondent stressed that the BIR assessment was based solely on Section 141 (b) of the NIRC without, however, applying Section 137 thereof, the more specific provision, which expressly allows the sale of stemmed leaf tobacco as raw material by one manufacturer directly to another without payment of the excise tax considering that Respondent purchased stemmed leaf tobacco from manufacturers. Additionally, Respondent made reference to a BIR Ruling dated December 12, 1972 wherein the BIR expressly ruled that under Section 137 of the NIRC, the sale of partially manufactured tobacco from a wholesale leaf tobacco dealer (L-3R) to a

manufacturer of tobacco products (L-7 1/2) "for use in the manufacture of cigar and cigarettes may also be allowed without prepayment of the tax." On November 26, 1990, Respondent received a letter from Petitioner dated August 31, 1990 denying Respondent's protest on the grounds, inter alia that: "In support of your contention, you cited BIR Ruling dated 12 December 1972 wherein it was held that '. . . The subsequent sale or transfer by the L-6, L-3R permittee of the redried or reprocessed product to another L-6 permittee for export or to an L-7 1/2 for use in the manufacture of cigars or cigarettes may also be allowed without the prepayment of the specific tax. Clearly, from the aforequoted ruling, the transfer or sale of partially manufactured tobacco, as a rule, is subject to specific tax unless there is an express grant of exemption from the payment of tax. The taxpayers up to this point in time have not presented any authority issued by the BIR granting exemption." (Emphasis supplied) On November 26, 1990, Respondent likewise received another letter from the Petitioner dated October 17, 1990 denying Respondent's protest with finality, and reiterating the demand to pay the amount of P2,785,338.75, representing deficiency specific tax exclusive of increments, computed, as follows to wit: STEMMED-LEAF TOBACCO RATE OF TAX SPECIFIC TAX Local 3,7133,785 kls. x P0.75 P2,785,338.75 On December 6, 1990, Respondent filed with the Court of Tax Appeals a "Petition for Review" seeking for the annulment of the deficiency assessment. On May 16. 1991, Petitioner filed an Answer to the Petition. On August 31, 1995, the Tax Court a quo rendered its Decision, the decretal portion of which reads, to wit: WHEREFORE, in all the foregoing the assessment of alleged deficiency specific tax in the amount of P2,785,338.75 issued by the Respondent is hereby CANCELLED for lack of merit. SO ORDERED." (pages 83, Rollo) On September 22, 1995, Respondent filed a Motion for Reconsideration of the aforesaid Decision but the same was denied in a Resolution of the Tax Court a quo dated May 7, 1996. Hence, the Petition at bench, Petitioner as grounds of its Petition, avers that: "I. THE ASSESSMENT COVERS ONLY LOCAL PURCHASE OF STEMMED LEAF TOBACCO. II. UNDER SECTION 141(b) OF THE TAX CODE STEMMED LEAF TOBACCO BEING PARTIALLY PREPARED OR MANUFACTURED TOBACCO, IS SUBJECT TO SPECIFIC TAX. III. THE STEMMED LEAF TOBACCO PURCHASED BY RESPONDENT IS NOT EXEMPT FROM SPECIFIC TAX SINCE THE SALE THEREOF WAS NOT MADE UNDER THE CONDITIONS PRESCRIBED IN THE REGULATIONS OF THE DEPARTMENT OF FINANCE. IV. CONSTRUING TOGETHER SECTIONS 141 AND 137 OF THE TAX CODE, STEMMED LEAF TOBACCO IS SUBJECT TO SPECIFIC TAX EXCEPT WHEN SOLD IN BULK AS RAW MATERIAL FROM L-7 DIRECTLY TO ANOTHER L-7. V. UNDER SECTION 43 OF REVENUE REGULATIONS NO. 17-67, THE EXEMPTION FROM SPECIFIC TAX OF PARTIALLY MANUFACTURED TOBACCO APPLIES ONLY TO PARTIALLY MANUFACTURED TOBACCO FOR EXPORT.

VI. TAX EXEMPTIONS ARE CONSTRUED STRICTLY AGAINST THE TAXPAYER AND LIBERALLY IN FAVOR OF THE GOVERNMENT. VII. UNDER SECTION 127 OF THE TAX CODE IF DOMESTIC PRODUCTS ARE REMOVED FROM THE PLACE OF PRODUCTION WITHOUT THE PAYMENT OF EXCISE TAX. IT IS NOT REQUIRED THAT THE TAX BE COLLECTED FIRST FROM THE MANUFACTURER OR PRODUCER BEFORE THE POSSESSOR THEREOF SHALL BE LIABLE. VIII. THE GOVERNMENT IS NOT ESTOPPED FROM COLLECTING LEGITIMATE TAXES DUE TO THE MISTAKE OF ITS AGENTS." ( pages 16-17, Rollo) The decisive issue that comes to fore for Our resolution is: Whether or not Respondent is liable for the amount of P2,785,338.75 as deficiency specific tax on its locally purchased stemmed-leaf tobacco used as raw materials in the production and manufacture of cigar and cigarettes. This is not the first time that this Court has been confronted with such an issue at hand. This Court had been confronted with and did resolve the same issue in Commissioner of Internal Revenue vs. La Suerte Cigar and Cigarette Factory, CA-G.R. SP No. 38107, Promulgated December 29, 1995, anchored on factual circumstances on all fours with the instant Petition. We find no cogent justification for Us to deviate from Our Decision in said case. The first four grounds and the sixth ground of the Petition being interrelated, a joint discussion will prove facile. The fundamental basis on which the questioned deficiency assessment was made is Section 141(b) of the National Internal Revenue Code (NIRC), to wit: "SEC. 141. Tobacco Products There shall be collected a tax of seventy-five centavos on each kilogram of the following products of tobacco; (a) . . . (b) Tobacco prepared or partially prepared with or without the use of any machine or instruments or without being pressed or sweetened; and (c) . . . Respondent, on the other hand, insists that the applicable provision of law is Section 137 of the Tax Code, and not Section 141 (b), to wit: "SEC. 137. Removal of tobacco products without prepayment of tax. Products of tobacco entirely unfit for chewing or smoking may be removed free of tax for agricultural or industrial use, under such conditions as may be prescribed in the regulations of the Department of Finance. Stemmed Leaf tobacco, fine-cut shorts, the refuse of fine-cut chewing tobacco scraps, cuttings, clippings, stems or midribs, and sweepings of tobacco may be sold in bulk as raw material by one manufacturer directly to another, without payment of the tax under such conditions as may be prescribed in the regulations of the Department of Finance. 'Stemmed leaf tobacco' as herein used means leaf tobacco which has had the stem or midrib removed. The term does not include broken leaf tobacco. (Emphasis ours)." A minutiose scrutiny of the aforecited provisions yields no repugnance between the two provisions. Indeed, the same may be harmoniously interpreted in the light of the contending allegations of the respective parties in the present recourse. After all, as had been repeatedly held by the Supreme Court: "It is a principle of legal hermeneutics that in interpreting a statute . . ., care should be taken that every part thereof be given effect, on the theory that it was enacted as an integrated measure and not as a hodge-podge of conflicting provisions. Ut res magis valeat quam pareat. . . . The rule is that a construction that would render a provision inoperative should be avoided; instead

apparently inconsistent provisions should be reconciled whenever possible as parts of a coordinated and harmonious whole. (JMM Promotions & Management, Inc. vs. NLRC, G.R. No. 109835, November 22, 1993, 228 SCRA 129). It is the duty of the Court to harmonize conflicting provisions to give effect to the whole law. Furthermore, this Court has the duty to give a statute its logical construction as to effectuate the intention of the legislature. The Court should harmonize conflicting provisions to give effect to the whole law. This is to avoid an absurd conclusion with regard to the meaning of the statute. People vs. Reyes, G.R. No. 103394, September 2, 1994, 236 SCRA 264." Corollarily, We can consider Section 141(b) as the general rule and Section 137 as containing the exception to the general rule. Thus, while the purchase of stemmed leaf tobacco, which is considered as partially manufactured tobacco pursuant to Section 2(m) (1) of Revenue Regulations No. 17-67 may be subject to the P0.75 per kilogram specific tax outlined under Section 141 (b), under Section 137 it is provided that "stemmed leaf tobacco . . . may be sold in bulk as raw material by the manufacturer directly to another, without payment of the tax . . . It was in view of this exemptive proviso that the Tax Court a quo, in its questioned Decision, declared that: "Since petitioner's purchase of local stemmed-leaf tobacco (were acquired from various) manufacturers and the same were used as raw materials in the production of cigars and cigarettes it is therefore clear that it is covered by Section 137 of the Tax Code. Thus, petitioner's purchases of local stemmed-leaf tobacco from various tobacco manufacturers are exempt from the payment of the specific tax." (underlining supplied for emphasis) The Tax Court a quo, however, failed to consider the qualificative phrase following the exemptive proviso in Section 137 of the Tax Code which may be considered as the 'exemption to the exemption'. Hence, such an exempted transfer may be effected only "under such conditions as may be prescribed in the regulations of the Department of Finance" And this aforecited qualificative phrase even finds ramification in Section 20(a) of Revenue Regulations No. V-39 which militate against Respondent's cause instead of bolstering the same as the Tax Court held in its Decision, to wit: Furthermore, Section 20(a) of Revenue Regulations No. V-39 (The Tobacco Products Regulations), as amended even bolsters the provision of Section 137 of the Tax Code considering that stemmed-leaf tobacco was specifically mentioned as an exemption from the payment of the specific tax. Section 20 (a) of said regulation provides: 'Section 20. Exemption from tax of tobacco products intended for agricultural or industrial purposes. (a) Sale of stemmed leaf tobacco, etc. by one factory to another. Subject to the limitations herein established products of tobacco entirely unfit for chewing or smoking may be removed free of tax for agricultural or industrial use'; and stemmed leaf tobacco, fine-cut shorts, the refuse of fine-cut, chewing tobacco, refuse scraps, cuttings, clippings, and sweeping of tobacco may be sold in bulk as raw materials by one manufacturer directly to another without prepayment of the specific tax. Stemmed leaf tobacco, fine-cut shorts, the refuse of fine-cut chewing tobacco, scraps, cutting, clippings, and sweeping of leaf tobacco or partially manufactured tobacco or other refuse of tobacco may be transferred from one factory to another under an official L-7 invoice on which shall be entered the exact weight of the tobacco at the time of its removal, and entry shall be made in the L-7 register in the place provided on the page for removals. Correspondingly debit entry will be made in the L-7 register book of the factory receiving the tobacco under heading 'Refuse, etc. received from other factory showing date of receipt assessment and invoice

numbers, name and address of the consignor, form in which received, and the net weight of the tobacco. This paragraph should not, however, be construed to permit the transfer of materials unsuitable for the manufacture of tobacco products from one factory to another. (Emphasis Ours)" Far from supporting the cause of Respondents this cited provision sets out in precise terms the requirements or conditions under which transfers involving stemmed leaf tobacco, to be used as raw material in the production and manufacture of cigar and cigarettes may be affected. Thus, as outlined under Section 20(a) of Revenue Regulation No. V-39 the conditions under which stemmed leaf tobacco among other, may be transferred from one factory to another without prepayment of specific tax are as follows: a) The transfer shall be under an official L-7 invoice on which shall be entered the exact weight of the tobacco at the time of its removal. b) Entry shall be made in the L-7 register in the place provided on the page of removals. c) Corresponding debit entry shall be made in the L-7 register book of the factory receiving the tobacco under the heading "Refuse, etc. received from other factory", showing the date of receipt assessment and invoice members, name and address of the 'consignor form to which received, and the weight of the tobacco. On this point, We reiterate our holding in the case of Commissioner of Internal Revenue vs. La Suerte Cigar and Cigarette Factory, CA-G.R. SP No. 38107, December 29, 1995, which states in part to wit: "Hence, while the term "manufacturer" in Section 137 is broad enough to embrace all manufacturers of tobacco and tobacco products, Revenue Regulation No. V-39 pursuant to the qualificative phrase found in both Sections 141 and 137 limits such tax exemption transfers to transactions between two L-7's which refers to manufacturers of tobacco products. As correctly pointed out by petitioner in its Petition: What is the significance of the conditions prescribed in Section 20(a) of Revenue Regulations No. V-39 that the transfer of stemmed leaf tobacco from one factory to another shall be 'under an official L-7 invoice' and that 'entry shall be made in L-7 register'? It simply means, we submit that the transferor of the stemmed leaf tobacco must be L-7. This is so because obviously only L7 has an official L-7 invoice and an L-7 register. Furthermore what is the significance of the condition that the 'corresponding debit entry shall be made in the L-7 register book of the factory receiving the tobacco. Again, it simply means, we submit, that the transferee of the stemmed leaf tobacco must also be L-7 because, to repeat, only L-7 has an L-7 register book. In conclusion, the conditions prescribed in the regulations of the Department of Finance under which stemmed leaf tobacco may be sold in bulk as raw material by one manufacturer directly to another without prepayment of the specific tax is that the sale thereof must be from one L-7 directly to another L-7. xxx xxx xxx The rationale of the exemption from specific tax of the sale stemmed leaf tobacco as raw material by one L-7 directly to another L-7 is because such stemmed leaf tobacco has already been subjected to the specific tax when L-7 purchased the same from L-3R or L-6 suppliers. As earlier pointed out, L-3R is a wholesale leaf tobacco dealer, while L-6 is not only a wholesale leaf tobacco dealer but also a stripper of leaf tobacco. They are source of stemmed leaf tobacco to be used as raw materials by L-7 who does not produce stemmed leaf tobacco. When L-7 sells the stemmed leaf tobacco purchased from L-3R or L-6 suppliers to another L-7 as raw material, such sale is not subject to specific tax'." ( pages 29-35, Rollo)

In the petition at bench, the records show, and it is not disputed, that the stemmed leaf tobacco purchased by Respondent came from Tobacco Industries of the Philippines, NGC Trading and Philippine Tobacco Fluecuring Corporation, which are all L-6 permittees (Emphasis supplied.) In view of the foregoing considerations, We are led to the ineluctable conclusion that the questioned sales involving Respondent were not made under the conditions prescribed in the Regulations of the Department of Finance. As held by the Supreme Court in the case of Eslao vs. Commission on Audit, G.R. No. 108310, September 1, 1994, 236 SCRA 161: "Administrative regulations and policies enacted by administrative bodies to interpret the law have the force of law and are entitled to great respect." The Tax Court, in selling to exculpate Respondent from its liabilities, also held, in part in its Decision to wit: In case of this conflict, the rule in statutory construction is very clear that said provision of the implementing regulation which is contrary to law is considered null and void and of no effect. This construction is specifically true in the case of tax statutes because statutes imposing tax are strictly construed against the states and liberally in favor of the taxpayer. This is because tax laws operate to impose tax burdens on the public or to restrict them in the enjoyment of their property and the pursuit of their occupation. Thus, in the interpretation of such statutes it is the established rule not to extend their provisions by implication beyond the clear import of the language employed, or to enlarge their scope as to include matters not specifically pointed out. In case of doubt, they are construed most strongly against the government. (Gould vs. Gould 62 L. ed. p. 211, cited in the Handbook on Statutory Construction by Ruperto Martin 1972 ed. p. 193). This strict interpretation is especially true in the case of specific taxes because these taxes are those imposed on specified articles much as the taxes on articles mentioned in Sections 123 to 148 of the National Internal Revenue Code (now Sections 126 to 151) (Shell Co. vs. Vano. 94 Phil. 389)." ( p. 16, CTA Decision) As earlier adverted to, the statutes and the applicable Revenue Regulations have already outlined in express terms, the conditions for the appropriate exemption. Absent, the confluence of the requisite conditions, invocation of the principle "tax burdens should be strictly against the government and liberally in favor of the taxpayer" is inappropriate. En contrario, it behooves Us to apply the principle of strict construction of tax exemptions against the taxpayers. Thus, "It has always been the rule that 'exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority' primarily because 'taxes are the lifeblood of government and their prompt and certain availability is an imperious need. Thus, to be exempted from payment of taxes, it is the taxpayer's duty to justify the exemption 'by words too plain to be mistaken and too categorical to be misinterpreted'. Private respondent has utterly failed to discharge this duty. Province of Tarlac vs. Alcantara, G.R. No. 65230, December 23, 1992, 216 SCRA 790. Any person claiming the benefit of the exemption must prove that he falls under the protective mantle of the exemption. People vs. De los Reyes, G.R. No. 106874, January 21, 1994, 229 SCRA 439." Anent the fifth ground relied upon by Petitioner in the Petition at bench, the Tax Court a quo found and declared: "While it is true that stemmed-leaf tobacco are classified as 'partially manufactured tobacco' under Section 2 (m) of Revenue Regulations No. 17-67, as amended still it will be observed that in Section 43 of the same Revenue Regulation falling under Chapter XI entitled 'Partially manufactured tobacco products for export' it provides:

Section 43. Tobacco exempted from specific tax. No specific tax shall be collected on the following: (a) Leaf tobacco and partially manufactured tobacco, except imported leaf tobacco, unless entered in the L-7 official register book. (b) Manufactured products of tobacco for export and/or use by the Armed Forces of the Philippines or the United States Armed Forces, and other entities specifically exempted by law. (Emphasis Ours) It is clear from the above-quoted provision that no specific tax shall be collected on partially manufactured tobacco including stemmed-leaf tobacco. Thus, even assuming arguendo that stemmed-leaf tobacco falls under the category of partially manufactured tobacco still the same is exempted from the payment of the specific tax under Sec. 43(a) of Revenue Regulations No. 17-67 as amended. There is no showing that the provision of Section 43(a) has been repealed or superseded by another regulation. The respondent has no right to rule otherwise because a revenue regulation issued pursuant to law has the force and effect of law unless found to be contrary to law." (Emphasis supplied) (p. 13, CTA Decision) The preceding ratiocination by the Tax Court a quo is untenable. It will be noted that Section 43 of Revenue Regulations No. 17-67 falls under Chapter XI thereof which is entitled "Partially Manufactured Tobacco and Tobacco Products for Export" (emphasis supplied) wherein all the other Sections thereunder (Sections 38-44) deal with the exportation of partially manufactured tobacco and tobacco products. Thus: a) Section 38 enumerates the manufactured tobacco products for export, i.e., cigars and cigarettes, smoking tobacco, chewing tobacco, snuff tobacco and partially manufactured tobacco products; b) Section 39 lays down the requirements for packing of partially manufactured tobacco and tobacco products for export and marking of the containers; c) Section 40 prescribes the Official Inspection label and Export strip stamp or seals; d) Section 41 deals with the inspection of partially manufactured tobacco or tobacco products for export; e) Section 42 requires notice of export shipment and proof of exportation to be submitted to the Commissioner of Internal Revenue; and f) Section 44 treats of the return of rejected partially manufactured tobacco or manufactured products of tobacco by foreign buyers. Hence, Section 43, which provides for exemption from specific tax, must be read in the context of Chapter XI as a whole. In fine, the exemption from specific tax of partially manufactured tobacco, under Section 43(a), applies only to partially manufactured tobacco for export (underlining supplied) in the same manner that the exemption applies to manufactured products of tobacco for export under Section 43(b): "The familiar grammatical rule is that a proviso is to be construed with reference to the immediately preceding part of the provision to which it is attached and not to other sections thereof, unless the clear legislative intent is to restrict or qualify not only the phrase immediately preceding the proviso but also earlier provisions of the statute or even the statute itself as a whole." ALU-TUCP vs. National Labor Relations Commission, G.R. No. 109902, August 2, 1994, 234 SCRA 678. Section 127, vis-a-vis the seventh ground partly provides: "SEC. 127. Payment of excise taxes on domestic products. (a) Persons liable time for payment. Unless otherwise especially allowed, excise taxes on domestic products shall be

paid by the manufacturer or producer before removal from the place of production: Provided, That the excise tax on locally manufactured petroleum products and indigenous petroleum levied under Sections 145 and 151 (a) (4), respectively, of this Title shall be paid within 15 days from the date of removal thereof from the place of production. Should domestic products be removed from the place of production without the payment of the tax, the owner or person having possession thereof shall be liable for the tax due thereon." (Emphasis supplied) Under the law, excise taxes on domestic products shall be paid the manufacturer or producer before removal from the place of production. However, should domestic be removed from the place of production without the payment of the tax, the owner or person having possession thereof shall be liable for the tax due thereon. The Tax Court a quo, however, in interpreting the aforecited provision, ruled that: "While it is true that the respondent may collect excise taxes even against a mere possessor, she is first required to collect the same from the manufacturer or producer, as the entity primarily liable to the said tax. To interpret otherwise would render the first portion of Section 127 a mere surplusage which could not have been the intention of the lawmaker. It is only after there is a clear showing that the manufacturer or producer could not pay or failed to pay the excise tax for some valid or justifiable reasons could the respondent run after the possessor. The way respondent enforces the law may not have been the intention of the lawmaker." (pp. 12-13, CTA Decision) We find, and so declare that if domestic products are removed from the place of production without the payment of the excise tax, it is not required that the tax first be collected from the manufacturer or producer before the owner or possessor thereof shall be liable for the tax. What the law merely provides is that if the products are removed without the payment of the tax, the owner or possessor thereof shall be liable. The obvious purpose of the law is to ensure that the excise tax on the product is paid. Thus, "Under the principles of statutory construction, if a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. This plain meaning rule or verba legis derived from the maxim index animi sermo est (speech is the index of intention) rest on the valid presumption that the words employed by the legislature in a statute correctly express its intent or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of the words, to have used words advisedly and to have expressed its intent by the use of such words as are found in the statute Verba legis non est recedendum or from the words of a statute should be no departure. Globe-Mackay Cable and Radio Corporation vs. NLRC, G.R. No. 82511, March 3, 1992, 206 SCRA 701. When the statute is clear and explicit, there is hardly room for any extended court ratiocination or rationalization of the law." Libanan vs. Sandiganbayan, G.R. No. 112386, June 14, 1994, 233 SCRA 163. In the case at bar, since the stemmed leaf tobacco purchased by Respondent from L-6 suppliers were removed from the latter's place of production without the payment of the specific tax thereon. Respondent as the owner or possessor of said stemmed leaf tobacco is liable for the specific tax. Its liability is not conditioned on the tax having been collected first from its L-6 suppliers and the latter's failure to pay the same. This is but logical and reasonable even if We were to view it from the viewpoint of practicality, considering the extant factual milieu. As correctly deduced by petitioner in her letter, dated August 31, 1990 addressed to respondent: "2. Stemmed-leaf tobacco locally purchased by LA CAMPANA as far back as 1986 and up to June 30, 1989 are no longer owned by LA CAMPANA; nor are they still in the possession of LA

CAMPANA. They had already been converted into cigarettes and sold to the consuming public. It implies that the taxpayers are no longer liable to pay the tax considering that there is no longer evidence by which to impose the tax. However, under revenue regulations manufacturers of tobacco products are required to maintain or keep records of raw materials received in the factory which may be used as evidence by which to determine the amount of specific tax due from them. These records are the Official Register Books, the transcripts of which are filed with the BIR and serve as their returns." (p. 115, Rollo) Anent the last ground, on the issue of estoppel the Tax Court ruled, thus, "Furthermore, when a particular construction has been operative for a long period and has acquired the sanction of usage it is entitled to as respectful consideration especially its rights have been adjusted and determined by it for many years, as a change may result in inequitable treatment of similarly situated taxpayers and may occur after many persons have acted upon the faith of the Regulation. The rule is also, perhaps, particularly applicable where a change in the administrative construction would produce great administrative inconvenience or inequality. (Law of Federal Income Taxation, Mertens Vol. I, 1978, Sec. 3.20 p. 40) Long and continuous construction given by government officials entitled to consideration (Phil. Sugar Central vs. Collector, 51 Phil. 131). This provision in the regulation may have been the reason why for a long time the BIR has not been collecting specific tax on stemmed leaf tobacco if these articles will be utilized in the manufacture of other tobacco products on which the corresponding specific tax will eventually be paid." ( pp. 19-20, CTA Decision) The aforequoted rationalization by the Tax Court loses lustre and cogency in the light of the following pronouncements of the Supreme Court, to wit: "The appellant argues that the Collector of Internal Revenue, previous to the transactions herein involved, had never collected the franchise tax on items of the same nature as those herein in question and this is strong evidence that such transactions are not subject to tax on the principle that a prolonged practice on the part of an executive or administrative officer in charge of executing a certain statute is an authoritative construction of great weight. This contention may be granted, but the principle is not absolute and may be overcome by strong reasons to the contrary. If through a misapprehension of law an officer has erroneously executed it for a long time, the error may be corrected when the true construction is ascertained. Such we deem to be the situation in the present case. Incidentally, the doctrine of estoppel does not apply here. (emphasis supplied) Philippine Long Distance Telephone Co., vs. Collector of Internal Revenue, No. L-3222 January 21, 1952, 90 Phil., 674 Errors of tax officers or officials of the government do not bind the government or prejudice its right to collect the taxes legally due from taxpayers. Collector of Internal Revenue vs. McGrath, No. L-12710, February 28, 1961, 1 SCRA 638. It is axiomatic that the government can never be in estoppel, particularly in matters involving taxes." Commissioner of Internal Revenue vs. Procter & Gamble Philippine Manufacturing Corporation, G.R. No. 66838, December 2, 1991, 204 SCRA 377. IN THE LIGHT OF ALL THE FOREGOING, The Decision appealed from is hereby REVERSED and SET ASIDE. Respondent is ordered to pay the Petitioner Commissioner of Internal Revenue the amount of P2,785,338.75 as deficiency specific tax on its purchase of stemmed leaf tobacco covering the period from January 1, 1986 to June 30, 1989, plus 25% surcharge for late payment and 20% interest per annum from December 18, 1989 until fully paid pursuant to Sections 248 and 249 of the Tax Code. SO ORDERED.

Caizarez-Nye and Ramirez, JJ ., concur.