The defendant, Philippine Surety & Insurance Co., Inc. appeals from a decision of the Court of First Instance of Manila, the dispositive portion of which reads:

"WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendant, ordering the latter to pay to the  plaintiff the sum of seventy-six thousand eight hundred thirty-two pesos and fifty-five  centavos (P76,832.55)  as  of November 18,  1955,  which includes the sum of P8,392.48  representing the  17%  excise tax. The defendant  is also ordered to pay daily interest of P6.76 from and after November  18, 1955 until  the full amount is paid.  With costs against the defendant."   (Case No. 19677)

The appeal was originally interposed to the Court  of Appeals;  but  in view of the amount involved in the case, which is more than P50,000, the same was elevated to this Court.

The records show that the  Union Garment Co.,  Inc., represented by its President, Celso Icasiano, imported for the Armed Forces of the Philippines (hereinafter referred to as the AFP)  textile  goods to be  manufactured into soldiers' uniforms.  The importation was made under  an irrevocable letter of credit opened in favor of the importer by the appellee Philippine National Bank for the total sum of  $147,000,  U. S.  currency.   The drafts  authorized  by this letter of  credit were  required, under the terms  of the instrument, to be drawn and presented  not later than the  31st  of  December 1950.   Said  letter of  credit was negotiated on November 21, 1950, and four "sight" drafts were drawn against it by  the  Wingsan Textile Co., Ltd. for  the  amounts  of  $31,500,  $24,500,   $31,000  and $60,000  covering  the aggregate sum  of $147,000 which drafts were later  accepted by the AFP.  Upon the execution of a 90-day  Trust Receipt Agreement, subject to a joint and several guaranty  of the importer and defendant-appellant Philippine Surety &  Insurance Co.,  Inc. to the extent of P73,400,  the imported items  were  released  to the AFP (Armed Forces of the Philippines).

On March  12,  1951, the appellee  sent  to the AFP a statement of account for  P301,638.50  covering  the four drafts,  and  on August 22, 1951, the  AFP sent to the appellee a check, Treasury Warrant No. V-421774, in the amount  of P301,638.  While   the  payment was awaited by the  Philippine National Bank,  Republic Act No. 601 imposing a 17%  special excise tax on foreign exchanges was approved and took effect  on March  28,  1951.  The bank,  maintaining that no sale of foreign exchange was deemed to have been consummated until payment is received by  it  from the AFP, made  adjustments  with additional interest and  bank charges occasioned  by the imposition of the  new tax, and  applied the payment represented by the said Treasury Warrant to  only three  drafts  covering the amounts  of $31,500, $31,000 and  $60,000 leaving  a balance of P557.68 which was  credited to the remaining account of $24,500 (fourth bank draft).  A demand was accordingly made, but was refused by the defendant.

The whole issue in the case, and in this appeal, ultimately centers on whether or not the  17 per  cent  special excise tax could properly be imposed upon the drafts  in question, admittedly  executed  and  accepted before the effectivity of Republic  Act No.  601  as later amended  (see Rep. Act Nos.  814, 871, 1175  and  1375).

"SEC. 1. Except as herein  otherwise provided,  there  shall  be assessed, collected and paid a special excise tax of seventeen per centum  (17%)  on the value in Philippine peso of foreign exchange sold and/or authorized  to be  sold  by the  Central  Bank of the Philippines or  any  of its agents during  the  period  of  two years counted from  the date of the approval of this Act."   (Rep.  Act 601).

This question is not new and has been squarely resolved in  the recent case of Belman  Compania  Incorporada vs. Central Bank of the Philippines, 104 Phil., 877, wherein this Court in holding that they could not  be so subjected, said:

"An irrevocable letter  of credit granted by a bank, which authorizes a creditor in a foreign  country to draw  upon a  debtor of another and to negotiate the draft through the agent or correspondent bank or any bank in the country of the creditor is  a consummated contract, when the agent or correspondent bank or any bank in the country of the creditor pays or delivers to the  latter the amount in foreign  currency,  as authorized by the  bank in the country of the debtor in compliance with the letter of credit granted by it.  It is the date of the payment  of  the  amount  in foreign currency to  the creditor in his country by the agent or correspondent bank of the bank in the country of the debtor that turns from executory to executed or consummated contract.   It is not the date of payment  by  the  debtor to  the bank  in his  country of  the amount of foreign exchange sold that makes the  contract executed or consummated, because the bank  may  grant the debtor extension of time  to  pay  such debt. The contention of the  appellee  that as there was a  meeting  of the minds  of  the  contracting parties as to price  and object of the contract upon the approval  or  grant of an application for  a  letter of credit for  an amount  payable in foreign currency,  the contract was a valid and executed contract in the  sense that one party  who has  performed his part  may compel the  other to perform his.  Still  until payment be made in foreign currency of  the amount applied for in  the letter  of  credit and  approved and granted by the bank, the  same is not an executed or consummated  contract.   The payment of the amount in foreign currency to the creditor by the bank or its agent or corespondent is necessary to consummate the contract.  Hence, the date of such payment or delivery of  the amount  in foreign  currency to the creditor  determines  whether such  amount  of  foreign currency is subject to  the  tax  imposed  by the  Government of the  country where such letter of credit  was granted.

It appearing  that the draft authorized  by the letter of  credit applied for  by the  appellee  and  granted  by  the appellant must be drawn and presented or  negotiated in San Francisco, California, U.  S. A.,  not later than  19 October  1950 (Exhibit H), it may be presumed that the payment of $4,300 in favor of Getz  Bros., Inc.  in San Francisco,  California,  U. S. A.,  for the  account of the  appellee was paid by  the  Crocker  First  National  Bank,  as agent  or correspondent of  the  Philippine National  Bank, on  or before  19   October  1950.   Such being  the case, the  excise  tax at the  rate of  17  per cent on the amount   to  be  paid by  the appellant in Philippine currency for the foreign exchange sold is not  subject  to  such tax because Republic Act No.  601  imposing such  tax  took effect only on 28 March 1951."   (See also Philippine  National  Bank vs.  Zulueta, 101  Phil., 1071;  and Philippine National Bank, et al., vs.  Union  Books, Incorporated,  101  Phil., 1084).

It will be noted in the  instant  case that the letter  of credit  specifies that drafts  must be drawn and presented or negotiated  before December  31,  1950, and that  the statement of account was sent on  March 12,  1951.   It follows  that the  drafts  were executed,  presented  and became  payable before the  effectivity  of Rep.  Act 601 (see  PNB vs. Arrozal, 103 Phil.,  213;  54 Off. Gaz., [2] 5698).

Wherefore,  the judgment appealed  from  is  reversed and complaint ordered dismissed,  without  pronouncement as to costs.   So ordered.

Paras, C.  J., Bengzon, Padilla,  Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion,  and Endencia, JJ., concur.