FACTS
From August 1963 to August 1965, Smith Bell & Co. imported 119 cases of "Chatteau Gay" wine, which it declared as “still wine” under Section 134(b)of the Tax Code and paid thereon the specific tax of P1.00 per liter of volume capacity. To determine the correct amount of the specific tax due on the petitioner's importation, the CIR ordered it tested by the BIR Lab Center. The analyst who conducted the laboratory test reported that Chatteau Gay should be classified as "sparkling wine," not “still wine."
On the basis of the analyst's report and recommendation, the CIR assessed Smith Bell a deficiency specific tax on the 119 cases of imported Chatteau Gay in the sum of P11,713.90 under Section 134(a) of the Tax Code, which imposes a specific tax of P12.00 per liter of volume capacity on sparkling wines. Smith Bell challenged the tax assessment, arguing that Section 134(a) of the Tax Code under which it was issued lays down an insufficient and hazy standard by which the policy and purpose of the law may be ascertained and as well gives the Commissioner blanket authority to decide what is or is not the meaning of “sparkling wines.”
RULING
The Supreme Court ruled in favor of the CIR.
In determining whether a particular kind of wine falls in one class or another, the internal revenue officers are demonstrably guided by the sound established practices and technology of the wine industry.
In the case at bar, the CIR had Smith Bell's wine examined and analyzed. Having chosen to engage in the wine trading business, Smith Bell is duty bound to know the kinds of wine it deals in, particularly insofar as such knowledge may be relevant to the proper appreciation of its tax liabilities, and cannot take comfort in its pretended ignorance of what sparkling wine is.
