Digested by: Miguel Alleandro Alag
CELESTINO CO. v. COLLECTOR OF INTERNAL REVENUE The Oriental Sash Factory does nothing more than SELL the
G.R. No. L-8506 | August 31, 1956 goods that it mass-produces or habitually makes; sash,
FACTS: panels, mouldings, frames, cutting them to such sizes and
combining them in such forms as its customers may desire.
Celestino Co & Company is a duly registered general
copartnership doing business under the trade name of Petitioner's idea of being a contractor doing construction
"Oriental Sash Factory". jobs is untenable
Nobody would regard the doing of two window panels a
From 1946 to 1951 it paid percentage taxes of 7% on the gross construction work in common parlance.
receipts of its sash, door and window factory, in accordance
with section 186 of the National Revenue Code imposing taxes Appellant invokes Article 1467 of the New Civil Code to bolster
on SALE of manufactured articles. its contention that in filing orders for windows and doors
according to specifications, it did not sell, but merely
However in 1952 it began to claim liability only to the contracted for particular pieces of work or "merely sold its
contractor's 3% tax (instead of 7%) under section 191 of the services".
same Code.
It is at once apparent that the Oriental Sash Factory did not
The company averred and adduced evidence to show that merely sell its services to Don Toribio Teodoro & Co. (To take
since it manufactured sash, windows and doors only for one instance) because it also sold the materials. The truth of
special customers and upon their special orders and in the matter is that it sold materials ordinarily manufactured by
accordance with their desired specifications and not for the it — sash, panels, mouldings — to Teodoro & Co., although in
general public, its contractual relations with its customers are such form or combination as suited the fancy of the purchaser.
of a contract for piece of work, or since petitioner is engaged Such new form does not divest the Oriental Sash Factory of its
in the sale of services, it follows that the petitioner should be character as manufacturer. Neither does it take the
taxed under section 191 of the Tax Code (3% tax) and NOT transaction out of the category of sales under Article 1467
under section 186 (7% tax) of the same Code. above quoted, because although the Factory does not, in the
ordinary course of its business, manufacture and keep on
stock doors of the kind sold to Teodoro, it could stock and/or
ISSUE: probably had in stock the sash, mouldings and panels it used
WON petitioner is consider as SELLER of its manufactured therefor (some of them at least).
articles, thus subject to the higher sales tax.
The Court opined that when this Factory accepts a job that
RULING: Yes. Petitioner was really a manufacturer with its requires the use of extraordinary or additional equipment, or
sales subject to the higher sales tax. involves services not generally performed by it-it thereby
contracts for a piece of work — filing special orders within the
The important thing to remember is that Celestino Co & meaning of Article 1467. The orders herein exhibited were
Company habitually makes sash, windows and doors, as it has not shown to be special. They were merely orders for work
represented in its stationery and advertisements to the public. — nothing is shown to call them special requiring
That it "manufactures" the same is practically admitted by extraordinary service of the factory.
appellant itself. The fact that windows and doors are made by
it only when customers place their orders, does not alter the The thought occurs to us that if, as alleged-all the work of
nature of the establishment, for it is obvious that it only appellant is only to fill orders previously made, such orders
accepted such orders as called for the employment of such should not be called special work, but regular work. Would a
material-moulding, frames, panels-as it ordinarily factory do business performing only special, extraordinary or
manufactured or was in a position habitually to manufacture. peculiar merchandise?
Any builder or homeowner, with sufficient money, may order Anyway, supposing for the moment that the transactions were
windows or doors of the kind manufactured by this appellant. not sales, they were neither lease of services nor contract jobs
Therefore it is not true that it serves special customers only or by a contractor. But as the doors and windows had been
confines its services to them alone. And anyone who sees, and admittedly "manufactured" by the Oriental Sash Factory, such
likes, the doors ordered by Don Toribio Teodoro & Sons Inc. transactions could be, and should be taxed as "transfers"
may purchase from appellant doors of the same kind, provided thereof under section 186 of the National Revenue Code.
he pays the price. Surely, the appellant will not refuse, for it
can easily duplicate or even mass-produce the same doors-it is
mechanically equipped to do so.
That the doors and windows must meet desired specifications
is neither here nor there. If these specifications do not happen
to be of the kind habitually manufactured by appellant —
special forms for sash, mouldings of panels — it would not
accept the order — and no sale is made. If they do, the
transaction would be no different from a purchasers of
manufactured goods held is stock for sale; they are bought
because they meet the specifications desired by the
purchaser.
