Court Opinion

ID: 8537193
Source: CourtListenerOpinion
Date Created: 2022-11-23 11:07:38.861609+00
Date Added: 2024-06-11T16:52:05.175619
License: Public Domain

Separate opinion delivered by
Mr. Justice Pérez Pi-mentel.
I dissent on the question of jurisdiction for the following-reasons :
This is an appeal from a judgment of the Superior Court holding that some eight productimeters which were imported by Cervecería India, Inc. and installed in its beer factory for the purpose of counting the number of bottles as they are-filled with beer and the beer bottles finally packed in boxes, were exempt from the payment of excise taxes under the provisions of § 16-B of the Internal Revenue Act and § 4 (a) of Excise Tax Regulation No. 69.
In the second error the Secretary of the Treasury, defendant-appellant herein, attacks the jurisdiction of the trial court to take cognizance of this case. He argues that the-taxpayer did not comply with the jurisdiction requirement to pay the' excise tax first and then litigate.1
*272He is wrong. The Judiciary Act in force (4 L.P.R.A. §121), in defining the competency of the Superior Court, vested the same with power to take cognizance, among other matters, of “all cases, actions, proceedings or extraordinary legal remedies in connection with or affecting the levy, collection and payment of all kinds of taxes, including . . . excises . . . taxes and any other taxes or imposts as well as of claims for taxes collected by unlawful procedure or which voluntarily or without notice from the Secretary of the Treasury were paid unduly or in excess, the reimbursement of which is authorized by law and is refused by the Secretary of the Treasury.” Therefore, in addition to vesting that court with jurisdiction to take cognizance of all cases, actions, proceedings, or extraordinary remedies in connection with or affecting the levy, collection, and payment of excise taxes, the Act conferred jurisdiction on the Superior Court, separately, to take cognizance of claims for refund denied by the Secretary of the Treasury.2 This jurisdiction is exercised by the Superior Court subject to the established procedures at the time of the approval of the Judiciary Act, which continued in force by virtue of the saving clause contained in § 2, Art. I of the said Act.3 Act No. 235 of May 10, 1949 (Sess. *273Laws, p. 732) established the procedure for taking appeals to the former Tax Court from the determinations of the Treasurer of Puerto Rico on matters involving income tax, tax on unfair profiteering, property tax, inheritance and gift tax, social security tax, and reimbursement of taxes, providing for compliance with certain requirements to enable the court to assume jurisdiction in the matter. However, by express provision of that Act, the same “shall not be construed in the sense of extending or limiting the jurisdiction or competence of the Tax Court of Puerto Rico, nor the rights granted to or the obligations imposed by law on the taxpayers, The People of Puerto Rico, or the officials of The People of Puerto Rico.” And by Act No. 328, approved May 13, 1949 (Sess. Laws, p. 996), the Tax Court of Puerto Rico was vested with jurisdiction similar to that of the present Superior Court in tax matters. The said Tax Court was expressly vested with exclusive jurisdiction to take cognizance of all cases, actions, proceedings, or special or extraordinary remedies in connection with or affecting the levy, collection, and payment of all kinds of taxes, including excises. Section 2, Act No. 328 of 1949. This Act also provided that this jurisdiction could not be pleaded before the court by any person until there had been a proper administrative decision on the issue in question on the part of the Treasurer, in accordance with law. And regarding refund of taxes and excises, it provided that only the person bearing the burden of the tax or excise at issue could take an appeal to the court, and that an allegation in this sense and the evidence thereof shall be considered as requirements for jurisdiction.
None of the laws which we have examined establishes as jurisdiction requirement the previous payment of the excise tax where the taxpayer, as here, alleges that the machinery on which the excise tax is collected is exempt from payment by provision of law.4 Appellant points out the danger that *274if a taxpayer were permitted to litigate an alleged tax exemption without first making payment, such action would create great uncertainty on the public treasury. He admits, however, that there are cases in which litigation is permitted without first paying the tax assessed; but he argues that in such cases the lawmaker has imposed, or there actually exist, conditions which guarantee the payment of the tax. Thus, for example, in the case of income tax the posting of a bond has been required; in the case of property tax the property itself constitutes a guaranty, since there exists a preferred lien in favor of the State; and in the case of inheritance tax there exist a preferred lien and also the prohibition to alienate the inherited property without first accrediting the payment of the tax. He maintains, further, that in excise-tax cases there is no guaranty whatever if the tax is not paid first and then litigated. On this last point we do not agree. We believe that the provisions of § 3 of Act No. 328 of 1949 are procedural in character and that they are still in force by virtue of the saving clause of the Judiciary Act to which reference has been made. The said Section provided that: “.. . the filing of the complaint in the Tax Court shall not affect or impair the right of the Treasurer of Puerto Rico to collect the taxes by the procedure authorized by law, unless the Tax Court, upon motion of the taxpayer and after summoning the Treasurer of Puerto Rico, stays the collection of the tax at issue, upon the bonding, to its entire satisfaction, of the tax in controversy, including interest and penalties.” The said Section also provided that “The authorization to file this bond, as well as the fixing of the amount thereof, shall be a discretional and exclusive faculty of the court, having in mind in each case the facts and circumstances in its judgment concurring and affecting the interest both of the taxpayer and The People of Puerto Rico.”
Therefore, in the light of these procedural provisions the danger pointed out by appellant is dispelled, since (1) the filing of the complaint in this case did not prevent the Sec*275retary of the Treasury from collecting the excise tax through the procedures authorized by law, and (2) the lower court had discretion to stay the collection of those excises if in its opinion such action would not affect the interest of the Commonwealth, and to require a bond, thereby eliminating the danger of the lack of guaranty.
On the other hand, it would not be entirely correct to affirm that the collection of excise taxes is devoid of the guarantees provided by law for the collection of other kinds of taxes. The manufacturers of taxable articles are bound to give a bond in favor of the Commonwealth of Puerto Rico to secure the payment of the tax and penalties. The dealers who have in their possession taxable articles on which the taxes have not been paid are also bound to give a similar bond. 13 L.P.R.A. § 4070. In the case of articles introduced in Puerto Rico other than by mail or personal arrival, the tax must be paid before the taxpayer takes possession of the article. 13 L.P.R.A. § 4060. To this end, the Secretary of the Treasury is empowered to authorize and regulate the establishment of bonded warehouses, public or private, to be used exclusively for storing those articles which are taxed by law and on which the tax has not been paid. 13 L.P.R.A. § § 4071 and 4077 (i). Furthermore, no maritime, aerial, or terrestrial carrier, nor any warehouseman or depositary having custody of taxable articles may deliver the same to the consignee or person properly claiming the same, unless a certificate is presented to him from the Secretary of the Treasury authorizing the delivery of such merchandise. Anyone of them who violates this provision commits an offense and is also bound to pay the tax on such merchandise, including surcharges, interest, administrative fines, etc. 13 L.P.R.A. § 4071. As to automobiles which are introduced in Puerto Rico, there is the additional guaranty of nonissuance of a license or plate until proof of tax payment is presented. 13 L.P.R.A. §4075(6). Regarding taxable operations such as public shows, winnings in Pools, Pari-Mutuels, etc., and *276any other gaming in racing places, the law provides withholding agents to insure the payment of the tax. 13 L.P.R.A. § 4061. As to occupations subject to license, it is obvious that if the tax is not paid in advance such licenses are not issued. There remain the articles introduced by mail or personally. In these cases there does not exist a guaranty as in the other cases mentioned above. However, if the taxpayer refuses to pay the tax thereon, the Secretary of the Treasury has no remedy but to enforce its collection, through the procedures provided by law, by attaching summarily or otherwise property of the taxpayer. However, the Secretary of the Treasury is not prevented from taking such action because of the fact that the taxpayer has filed in court a proceeding attacking the validity of the collection of the excise tax. Furthermore, it is not a majority, not even a substantial number, of the taxpayers who resort to the courts to litigate the validity or legality of the taxes collected by the Secretary of the Treasury.
The opinion of the majority maintains that Act No. 235 of May 10, 1949 established a uniform procedure for resorting to the Tax Court (now Superior Court), and that the purpose of that Act was to regulate exhaustively and coherently the different proceedings which the taxpayers may file in that court. It concludes that since that Act made no provision for excise-tax cases, the only procedure to litigate such taxes is to pay them and to request a refund and resort to the court in the event of denial. By judicial fiat the majority opinion limits the proceedings and remedies available to the taxpayers to those expressly provided by Act No. 235 supra. In this manner it limits the jurisdiction or competency of the Tax Court (now Superior Court) in utter disregard of the provisions of Act No. 235, to the effect that said Act “shall not be construed in the sense of extending or limiting the jurisdiction or competence of the Tax Court of Puerto Rico . . . .” And, as we have already seen, by Act No. 328 of May 13, 1949 this Court was vested with jurisdic*277tion to take cognizance of all cases, actions, proceedings, or special or extraordinary remedies in connection with or affecting the levy, collection, and payment of all kinds of taxes, including excises. Thus, the jurisdiction or competency of the Tax Court (now Superior Court) is not limited, as maintained by the majority, to the proceedings or remedies mentioned in Act No. 235, which truly are not as exhaustive as they allege. If the situation were such as maintained by the majority, it would be proper to ask, as one of many examples, what remedy does the taxpayer have, and what procedure does the law provide for resorting to the court whenever the Secretary of the Treasury unjustifiably refuses to recognize the establishment of a replacement fund? In settling precisely a controversy on a replacement fund, in Descartes, Treasurer v. Tax Court; Cerra, Int., 74 P.R.R. 531, we rejected the doctrine which the majority now adopts.
Regarding the cases cited in the majority opinion to show that the refund procedure has always been used in Puerto Rico whenever the taxpayer alleges a tax exemption, it will suffice to say that the election of that procedure by the taxpayer does not lay down the law, and, furthermore, that the taxpayer ought to know that the refusal to pay the excises and the filing of a complaint claiming exemption do not prevent the Secretary of the Treasury from enforcing the collection of the excises through the procedures established by law. Perhaps, for this reason, the litigants in those cases elected to pay and thereafter request the refund.
We therefore believe that the Superior Court had competency and jurisdiction to take cognizance of this case. However, after an examination of the case on the merits we believe that the judgment appealed from should be reversed. Let us see.
The appellant maintains that the trial court erred in holding that the machinery introduced in Puerto Rico by the plaintiff-appellee is covered by the tax exemption established by § 16-B of the Internal Revenue Act, and in holding that *278§ 4 (a) of Excise Tax Regulation No. 69 was applicable to such machinery.
Appellant is right. Section 16-B of the Internal Revenue Act (13 L.P.R.A. § 1070) provided, on the date in which the machinery or equipment was introduced in Puerto Rico, the following:
“There shall be exempt from the payment of the excises imposed by this subtitle all apparatus, machinery, or equipment that may be essential for the establishment and operation of industrial plants . . . Provided, iikeivise, That this being an exemption which covers the essential machinery for the establishment of industrial plant, it shall be construed as applicable only to the machinery of the factory stage of production of the industrial process, having to do with the raw material from the beginning of the manufacturing process until the completion thereof, but also including the machinery, trucks, or hoisting units exclusively and permanently used in the transportation of raw material and semiprocessed articles on the premises of the industrial plant, as well as the equipment used in the packing and labeling of the product and in the preservation of the latter or of the raw material in the case of perishable articles; but it shall not cover the machinery, apparatuses, equipment, or vehicles used in the administrative, distributional or commercial stage of the industry . . . .”
In implementing the foregoing provision, § 4 (a) of Excise Tax Regulation No. 69 provided:
“Section 4. There shall be considered as covered by the exemption :
“a. Mechanical precision instruments devoted to the physical control of manufacturing production, including platform scales, steelyards, weights, gages, and any other devices used to grade the proportions of the raw materials to be processed as well as to otherwise weigh, count or measure the finished product at the time of sacking or packing it.”
The question to be determined is whether the producti-meters introduced in Puerto Rico and installed by the plaintiff-appellee in its beer factory is equipment “used in the packing and labeling of the product and in the preservation *279of the latter in the case of perishable articles,” in which case it would be exempt from the payment of excises.
The text of § 16-B of the Internal Revenue Act is clear in the sense that the machinery and equipment exempted is that which is essential for the establishment and operation of industrial plants, and that the exemption is applicable only to machinery of the factory stage of production of the industrial process having to do with the raw material from the beginning of the manufacturing process until the completion thereof. By express provision of that Section, also included in the exemption are the machinery, trucks, or hoisting units which are exclusively and permanently used in the transportation of raw material and semiproeessed articles on the premises of the industrial plant, as well as the equipment used in the packing and labeling of the product and in the preservation of the latter or of the raw material in the case of perishable articles; “but it shall not cover” — says the law — “the machinery, apparatuses, equipment, or vehicles used in the administrative, distributional or commercial stage of the industry.” (Italics ours.)
The function of the productimeters in question is “to count the number of bottles which are filled with beer and the number of bottles which are finally packed.” It is clear that such equipment is not used in the packing of the product, for its purpose is precisely to count the bottles which are filled, that is, the equipment has nothing to do with the actual bot-ling of the product (beer), but it is an independent equipment which is used to count the bottles which are filled with the product. As to the labeling of the product, the equipment (productimeters) plays no part and has no relation whatever.
We have said time and again that the laws granting tax exemption must be construed restrictively. Emmanuelli v. Sec. of the Treasury, 76 P.R.R. 889; Flax v. Treasurer, 76 P.R.R. 365; School of Commerce v. Tax Court; Treas. of P. R., Int., 77 P.R.R. 830; Bacardi Corp. v. Tax Court; Sec. of Treas., Int., 75 P.R.R. 123; Descartes, Treasurer v. Tax *280Court, 73 P.R.R. 830; Wood v. Tax Court, 71 P.R.R. 216. When there is doubt as to whether or not the law grants an exemption, the doubt must be resolved against the exemption. Francis v. Tax Court, 74 P.R.R. 18. This doctrine was applied specifically to § 16-B of the Internal Revenue Act, as amended by Act No. 436 of 1947 (Sess. Laws, p. 908), in Sucn. Serrallés v. Tax Court, 73 P.R.R. 33. We also placed a restrictive interpretation on that section in holding that the equipment used for piling sugar already processed was not covered by the exemption granted by § 16-B. Fajardo Sugar Co. v. Secretary of the Treasury, 76 P.R.R. 802.
The equipment involved in the case at bar is used or employed in the administrative stage of the industry of the appellant. Therefore, § 16-B of the Internal Revenue Act does not exempt the same from the payment of excises. Nor is it exempted by Excise Tax Regulation No. 69. According to § 4 of that Regulation, the exemption is deemed to cover those “mechanical precision instruments devoted to the physical control of manufacturing production, including platform scales . . . and any other devices used to grade the proportions of the raw materials to be processed as well to otherwise weigh, count or measure the finished product at the time of sacking or packing it.” (Italics ours.)
The productimeters are not used for counting the finished product (beer) at the time of bottling. The bottles themselves constitute the accurate physical measure used by the plaintiff-appellee for bottling its product. The producti-meters count the bottles which are filled, but they do not control the amount of beer bottled. If the Regulation were interpreted to include in the exemption the equipment used for counting the bottles which are filled, we would have to conclude that that Regulation grants an exemption which is not established by the Act, according to which the exemption covers the equipment used in the packing and labeling of the product and in the preservation of the latter or of the raw material in the case of perishable articles. We have already *281said that the productimeters are not used in the packing or in the labeling of the product. And we know that a regulation to be valid can not be in conflict with the norms established in the Act. If so, it is null. Descartes, Treas. v. Tax Court, 71 P.R.R. 440; Chabrán v. Bull Insular Line, 69 P.R.R. 250; Buscaglia, Treas. v. Tax Court, 67 P.R.R. 53; Ex parte Irizarry, 66 P.R.R. 634; Villa v. Industrial Commission, 65 P.R.R. 527; Alemañy v. Industrial Commission, 64 P.R.R. 845; People v. Bou, 64 P.R.R. 445; Colón v. Tug-well, Governor, 65 P.R.R. 869.
For the reasons stated, the judgment appealed from should be reversed and another rendered instead dismissing the complaint.

 The appellant relies mainly on the cases of Descartes, Treasurer v. Tax Court; Trigo Hnos., Inc., Int., 73 P.R.R. 282, and Cafeteros de P. B. v. Treasurer, 74 P.R.R. 704. In the latter case we held that in tax matter a remedy in equity, especially the remedy of injunction, does not lie if the alleged taxpayer has an adequate remedy in the ordinary course of the law, such as the payment of the tax followed by a claim for refund formulated in the former Tax Court. In that case the complaint was filed in the ordinary courts, which might well be considered as an action of injunction or one of declaratory judgment. The complaint was dismissed because the taxpayer had an adequate remedy in the ordinary course of the law. However, the facts in the present case are different and, for obvious reasons, the question which is now before us was not discussed either in the Cafeteros de P. R. case or in the Trigo Hnos. case. For the reasons stated in the course of this opinion, the cases supra are inapplicable to the case at bar.

 Art. IV, § 13, of the Judiciary Act provides in its pertinent part:
“The Superior Court shall have cognizance of the following matters:
“(a.) Civil:
“2. Of all cases, actions, proceedings or extraordinary legal remedies in connection with or affecting the levy, collection and payment of all kinds of taxes, including property taxes, inheritance and gift taxes, income taxes, unfair profiteering taxes, social insurance taxes, excises, license taxes and any other taxes or imposts, as well as of claims for taxes collected by unlawful procedure or which voluntarily or without notice from the Secretary of the Treasury were paid unduly or in excess, the reimbursement of which is authorized by law and is refused by the Secretary of the Treasury.”

 The said clause reads as follows:
“. . . All existing provisions by statute or rules governing civil and criminal procedure and of evidence shall remain in effect until modified, supplemented, or amended by the Supreme Court in accordance with the Constitution of the Commonwealth of Puerto Rico.” (4 L.P.R.A. § 2.)

 See Descartes, Treasurer v. Tax Court; Cerra, Int., 74 P.R.R. 581.