Benguet Corp. v. Commissioner of Internal Revenue

Case History [C.T.A. CASE NO. 5007. February 14, 1996.] BENGUET CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N This is a judicial claim for refund of value-added input taxes allegedly paid by petitioner during the periods August 1 to October 30, 1991 and November 1, 1991 to January 31, 1992 in the total amount of P83,881,627.04. Petitioner is a corporation duly organized and existing under the laws of the Philippines. It is engaged in the mining business which includes the exploration, development and operation of mining properties for purposes of commercial production and the marketing of marketable mine products by it. It is a VAT-registered entity with VAT Registration No. 31-9-000027 (see Annex A, p. 6, CTA records) and pursuant to Section 100 of the Tax Code, petitioner applied for zero-rating on its sales of mine products (Annex B, p. 7, CTA records) which was approved on May 4, 1988. On November 20, 1991, petitioner filed its VAT return for the third quarter of the taxable year 1991 covering the period August 1 to October 30, 1991. This VAT return reflected the amount of P41,818,520.36 corresponding to the input tax payments made by petitioner during the third VAT taxable quarter of the year 1991. The same return also indicated that after applying these input tax payments to the output tax in the sum of P793,222.98 there resulted an excess and refundable amount of P41,025,297.38. Subsequently, petitioner filed its VAT return on February 20, 1992 (Annex D, p. 10, CTA records) corresponding to the fourth VAT taxable quarter of the taxable year 1991 and indicated the amount of P43,880,467.09 as input tax payments on its local purchases of materials and supplies and capital goods and after applying this amount against the output tax of P729,239.54, resulted in a creditable input tax of P43,151,227.55. On two separate occasions, petitioner filed claims for tax credit dated July 27, 1992 and September 30, 1992 accompanied by BIR Form No. 2552 (application for tax credit) but respondent did not act on these two claims, thus a petition for review was filed with this Court on July 15, 1993. The claims for tax credit may be summarized as follows: Period Amount Date Covered Applied For Filed Aug. 1 to Oct. 30, 1991 P41,025,297.38 July 28, 1992 Nov. 1, 1991 to Jan. 31, 1992 42,856,323.66 October 8, 1992 P83,881,621.04 =========== During the hearings on the case, respondent partially granted the claim for refund in the amount of P27,331,445.38, and as a consequence, a tax credit certificate was issued in favor of petitioner in the said amount by the respondent (Annex B, p. 122 CTA records). The refundable amount was based on the results of the investigation conducted by the BIR examiners summarizing their findings as follows: AMOUNT APPLIED FOR TAX REFUND (Benguet Corporation) 3rd Quarter P41,025,297.38 4th Quarter 42,856,323.66 P83,881,621.04 ADD/DEDUCT ADJUSTMENTS a) Claims of input taxes without supporting documents (163,170.11) b) Input tax adjustments per BC's computation already taken up by examiner in adjustment (a) 38,160.17 c) Claims of input taxes on purchases of services from various contractors without the required VAT invoices representing cash advances and materials and supplies (gasoline, etc.) issued to contractors (9,741,234.52) d) Output tax on sale of gold to Central Bank (P512,603,377.20 x 1/11) (46,600,307.02) e) Unapplied/excess input taxes from purchases in 1st and 2nd quarters of 1991 directly identified with gold operations (see attached report of investigation 1st Semester) 3,674,681.50 AMOUNT RECOMMENDED FOR TAX REFUND/CREDIT P31,089,751.06 ============ Accounted for as follows: To be refunded by: BIR P27,331,445.38 BOC 3,758,305.68 Total Accounted for: P31,089,751.06 ============ Of the disallowances above-cited, petitioner takes exception mainly on the amount of P46,600,307.02 corresponding to the output tax on petitioner's sales of gold to the Central Bank. The objection of the petitioner stems from its reliance on VAT Ruling No. 373-88 which declared that sales of gold to the Central Bank are considered as export sales subject to zero-rate and RMC No. 59-88 which provides that sale of gold to the Central Bank by a VAT registered firm is zero-rated. Moreover, petitioner invokes the Central Bank charter which considers sales of gold to the Central Bank as constructive exports. Petitioner also takes issue on the issuance of VAT Ruling No. 8-92 which contains the change in the treatment of such sales to the Central Bank from export sales to domestic sales therefore subject to Value-added Tax and VAT Ruling No. 59-92 which orders the retroactive application of VAT Ruling No. 8-92 to sales of gold made in 1988 onwards. Petitioner contends that the retroactivity of rulings that are prejudicial to the taxpayer is not in accord with Section 246 of the Tax Code which provides as follows: "Sec. 246. Non-retroactivity of rulings . Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification, or reversal will be prejudicial to the taxpayers except in the following cases: (a) where the taxpayer deliberately misstates or omits the material facts from his return or in any document required of him by the Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are materials different from the facts on which the ruling is based; or (c) where the taxpayer acted in bad faith." The issue presented to this Court for resolution is whether or not VAT Ruling No. 8-92 dated January 23, 1992, which considers sales of gold to the Central Bank as domestic sales, can be retroactively applied to petitioner's sales of gold to Central Bank made in August 1991 to January 1992. This particular issue has already been soundly disposed of in a number of cases decided by this Court (Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4794 in a Resolution, dated April 5, 1994; Itogon-Suyoc Mines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 4852, July 10, 1995; Manila Mining Company vs. Commissioner of Internal Revenue, CTA Case No. 4860, February 20, 1995; Benguet Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4429, 4495, 4575, March 23, 1995; Benguet Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4945, January 26, 1995) and we have been consistent in ruling that the retroactive application of VAT Ruling No. 8-92 will not be prejudicial to the taxpayer, hence not allowed under Section 246 of the Tax Code because it is clear from this provision (supra) that revocations, modifications and/or reversals of any rules and regulations promulgated by the Commissioner may be given retroactive application. It is only prohibited when the retroactive application will result in prejudice on the part of the taxpayer. In a similar consolidated case involving the same petitioner, entitled Benguet Mining Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4429, 4495, 4575, dated March 23, 1995, this Court subscribed to the view of the respondent embodied in Ruling No. 59-92 when we ruled, thus: In Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue (CTA Case No. 4794, April 5, 1994), We held that the retroactive application of VAT Rulings Nos. 8-92 and 59-92 may not necessarily be prescribed by Section 246 of the Tax Code, especially so where there is no showing of actual and imminent prejudice to the taxpayer as a result thereof. Thus: "We hold that respondent Commissioner is correct in contending that petitioner will not suffer any undue prejudice from a retroactive application of VAT Rulings No. 008-92 and 59-92. As pointed out by respondent in his Ruling No. 59-92, When the same mining companies, relying upon the aforementioned earlier BIR Rulings, sold their gold to the CB at zero rate VAT, they did not fully pass on to the CB the cost of their respective input taxes. Said input taxes remained in their possessions (sic). The only repercussion of the revocation of the said earlier rulings is they will be prevented the option of claiming the said input taxes as refund. But, they remain entitled to use the same in paying their output taxes in connection with their other sales transaction which are subject to the 10% VAT. It follows, there is no prejudice that may ensue from the retroactive application of the said revocation because what they only lose is the right to have their input taxes refunded which, in the first place and under the law, they are any way, clearly not entitled to. Granting for the sake of argument, that they have no other sales transactions subject to 10% VAT against which their input taxes may be used in payment, then, it follows, they are constituted as the final persons against which the costs of the tax passed-on shall legally stop and rest, hence, in this connection, said input taxes may already be legally converted as cost as available as deduction for income tax purposes. On this score, they are also not prejudiced by the retroactive application of the said ruling. Petitioner's reliance on the ruling in the ABS-CBN case is clearly misplaced. In the first place, there is nothing in said decision which absolutely prohibits a retroactive application of the rules, regulations, rulings or decisions promulgated or rendered by respondent Commissioner pursuant to rule-making authority. On the contrary, the decision clearly supports what We have stated here. Moreover, the factual situation obtaining in the ABS-CBN case is clearly not on all fours with the instant case." We find the foregoing ruling applicable to the instant cases. The admitted evidence on record does not show that petitioner will be unduly prejudiced by the retroactive application of the questioned BIR rulings. The mere fact the petitioner may now be precluded from passing on the 10% VAT on its sales to the Central Bank and may thus no longer have such input taxes refunded in cash cannot necessarily be equated with undue prejudice since VAT Rulings No. 8-92 and 59-92 still provide petitioner avenues for relief, that is by converting said input taxes as cost deductions for income tax purposes. Petitioner has not shown by means of competent evidence that such alternative relief notwithstanding, it still stands to suffer undue economic prejudice in the sense that the amount which it would be entitled to deduct as costs for income tax purposes is substantially less than the amount of input taxes to which it could have been entitled to a refund if the questioned rulings were not applied retroactively. In other words, absent any showing that the alternatives available to petitioner under the questioned rulings are clearly inadequate, any claimed prejudice on petitioner's part would at best be speculative. WHEREFORE, in view of all the foregoing, the petition is hereby DENIED for lack of merit. SO ORDERED. RAMON O. DE VEYRA Associate Judge W CONCUR: (Dissenting) ERNESTO D. ACOSTA Associate Judge MANUEL K. GRUBA Associate Judge Separate Opinions Dissenting Opinion With due respect to the opinion rendered by the majority member of the Court, let me discuss hereunder the various issues raised in this case in the order of their importance: (1) Whether or not the sale of gold by the petitioner to the Central Bank is considered zero-rated in accordance with Section 100(a)(2) of the Tax Code in the light of the new ruling of the respondent under VAT Ruling No. 008-92 which considers sale of gold to the Central Bank as a local sale thus subject to 10% VAT; (2) Whether or not VAT Ruling No. 059-92 which applies the VAT Ruling No. 008-92 retroactively to the year is valid. The issues raised herein are not new. The same were exhaustively discussed by this Court in Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, C.T.A. Case No. 4794. Inasmuch as the majority adopted the same opinion, I have decided likewise to adopt the same dissenting opinion on the issues raised. Let me reiterate the same discussions in the Atlas case which appear to be relevant and pertinent to the instant case. On the first issue, I believe Section 100(a)(2) of the Tax Code allows the zero-rated sale of gold to the Central Bank of the Philippines and therefore VAT Ruling No. 008-92 in imposing 10% VAT on sale to CB lacks legal basis. Quoted hereunder is Section 100 of the Tax Code: "SEC. 100. Value-added tax on sale of goods . (a) Rate and base of tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods, a value-added tax equivalent to 10% of the gross selling price or gross value in money of the goods sold, bartered or exchanged, such tax to be paid by the seller or transferor: Provided, that the following sales by VAT-registered persons shall be subject to 0% : (1) Export sales , and (2) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate . (Emphasis supplied.) "Export Sales" means the sale and shipment or exportation of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported, or foreign currency denominated sales. "Foreign currency denominated sales" means sales to non-residents of goods assembled or manufactured in the Philippines, for delivery to residents in the Philippines and paid for in convertible foreign currency remitted through the banking system in the Philippines. xxx xxx xxx Evidently, there appears to be two (2) general classes of transactions which are zero-rated, one being "export sales" meaning direct exports and foreign currency denominated sales and two, "effectively zero-rated sales" as provided under special laws and international agreements. While the majority concur with the above interpretation, they still find nothing in VAT Ruling No. 008-92 which purports to limit the scope of Section 100(a) of the Tax Code only to "export sales" as this term is defined in said section or which abolished the second category of zero-rated transactions, i.e. those which are "effectively zero-rated" under special laws. In the next turn, they then proceeded to state that "Any other kind of "export sales," including those considered as "constructive exports" under certain special laws, are not considered as zero-rated sales since these neither involve actual exportation or shipment of goods nor can they be considered foreign currency denominated sales." There is neither rhyme nor reason in these assertions which I find misleading and succeed only in further confusing the issues. There is a mistaken notion equating zero-rated sales to actual exports and foreign currency denominated sales only when the truth of the matter is that they also include those which are effectively zero-rated under special laws and international agreements. Various provisions of the National Internal Revenue Code (NIRC)as well as official issuances of the BIR (i.e. Section 8, Revenue Regulations No. 5-87; Section 16, Revenue Regulations No. 2-88) were very clear on these two classes of zero-rated sales. The next question that comes to mind is what comprise sales whose exemption under special laws or international agreements effectively subject such sales to zero rate? The concrete examples of effectively zero-rated sales were illustrated by Section 8(b)(2) of Revenue Regulations No. 5-87, namely: (i) sales covered by R.P.-U.S. Military Bases Agreement and (ii) sales to Asian Development Bank as provided by Executive Order No. 161. In addition, petitioner invokes the Central Bank Act, Republic Act No. 265, as amended as a "special law"; more specifically for sales of gold to Central Bank the following Central Bank Circulars are applicable: Circular No . 960 dated January 30, 1984 "Sec. 169. Privilege of export oriented firms. Gold producers shall qualify as export-oriented firms even if their entire output is sold to the Central Bank ." "CIRCULAR No. 1301 Series of 1991 dated August 7, 1991 With reference to Section 169 of Central Bank Circular No. 960 dated October 21, 1983, it is hereby stated, for clarification purposes, that all sales of gold to the Central Bank are considered constructive exports ". (Emphasis supplied.) SECTION 107(c), C.B. Circular No. 1318 dated January 3, 1992 " All gold sold to Central Bank by primary and secondary gold producers and small scale miners are considered constructive exports and are entitled to rediscounting when appropriate." (Emphasis supplied.) The powers and functions of the Central Bank are exercised by the Monetary Board and it issue rules and regulations in the exercise of said authority. Quoted below is Section 14, Article II, Chapter I of R.A. No. 265: (Central Bank Act): "Sec. 14. Exercise of authority. In order to exercise the authority granted to it under this Act, the Monetary Board shall: (a) Prepare and issue rules and regulations as it considers necessary for the effective discharge of the responsibilities and exercise of the powers assigned to the Monetary Board and to the Central Bank under this Act, and the rules and regulations issued shall be reported to the President and the Batasang Pambansa within fifteen days from the date of their issuances." (Emphasis supplied.) xxx xxx xxx In relation to the above, the aforementioned CB circulars were issued based on Section 72, Article II, Chapter IV of Republic Act. No. 265 reproduced below: "SEC. 72. Purchases and sales of gold . The Central Bank may buy and sell gold in any form, subject to such regulations as the Monetary Board may issue . The Monetary Board may at any time require that any gold held by any person or entity under the jurisdiction of the Philippines be delivered to the Central Bank or to any banks or other agents contracted or engaged buy the Central Bank for the purpose. The Monetary Board may also impose conditions under which gold in any shape or form may be acquired and held, transported, melted or treated, imported, exported, earmarked or held in custody for foreign or domestic accounts ." (Emphasis supplied.) xxx xxx xxx The policy of the Central Bank is to conserve this metal (gold) through purchases at competitive prices, giving incentives to producers and its prudent use through regulations (Section 162, CB Circular No. 960). Towards this end, certain gold producers are required to sell their entire production of gold to the Central Bank (Section 171, CB Circular No. 960) and no person shall export or bring out, or attempt to export or bring out of the Philippines, gold and/or gold-bearing materials, in any shape, form and quantity without prior approval from the CB Export Department. (Section 107, CB Circular No. 1318). It is also in line with aforementioned policy that gold producers are given incentives such as considering their sales to CB as exports. It is relevant to state that under settled jurisprudence circulars duly issued by the Central Bank, although these are not statute or law, assume the force and effect of law (People vs. Que Po Lay, 94 Phil. 640). So that in the case of Demetrios Roumeliotes vs. Court of Appeals, et al., G.R. No. L-110336, May 18, 1994, the Supreme Court affirmed the decisions of the Court of Appeals in CA-GR Sp. 28207, February 5, 1992 and the Court of Tax Appeals in CTA Case No. 4387, forfeiting jewelry for violation of CB Circular Nos. 808, 849 and 960 in relation to Section 2630(9f) of the Tariff and Customs Code. Such regulations have uniformly been held to have the force of law, whenever they are found to be in consonance and in harmony with the general purposes and objects of the law . Such regulations once established and found to be in conformity with the general purposes of the law, are just as binding upon all the parties, as if the regulation had been written in the original law itself . (U.S. vs. Tupasi Moling, 29 Phil. 119). Citing the aforementioned Demetrios Roumeliotes case, we do not see any reason why CB Circulars Nos. 960, 1301 and 1318 issued by the same body under the same authority will have a different binding effect just because this time it will favor the petitioner. The Department of Justice in Opinion No. 7, S. 1992 dated April 14, 1992 has expressed that: xxx xxx xxx With regard to sales of gold to the Central Bank, existing jurisprudence recognizes that Central Bank Circulars issued for the implementation of the law authorizing its issuance . . . (have) the force and effect of law "(People vs. Que Po Lay, 94 Phil. 640), and therefore C.B. Circular Nos . 960 and 1301 can be recognized as special laws within the ambit of Section 100(a)(2) of the Tax Code ." (Emphasis supplied.) xxx xxx xxx "Finally, the Supreme Court has held that the rule on strict construction of tax statutes does not apply in case of tax exemptions in favor of a government political subdivision or instrumentality because the basis for applying the rule of strict construction to statutory provisions granting tax exemptions or deductions which is to minimize differential treatment and foster impartiality, fairness, and equality of treatment among taxpayers does not apply in the case of exemptions running to the benefit of the government itself or its agencies. "Provisions granting exemptions to government agencies may be construed liberally in favor of non-taxability of such agencies" (Maceda vs. Macaraig, Jr., 197 SCRA 771, citing Cooley on the Law of Taxation, 4th Edition, 1414 [1927]). Thus, in line with this ruling, Section 100(a)(2) should be "liberally construed in favor of non-taxability of the Central Bank, which is a government instrumentality." xxx xxx xxx It is my view that the qualifications made by the Central Bank that gold producers are export-oriented firms even if their entire output is sold to the CB and that said sales are considered constructive exports (CB Circular No. 1301 clarifying Section 169 of CB Circular 960; Section 107. C, CB Circular No. 1318) are within the purview of the authority granted the Central Bank under Section 22, Art. 11, Chapter IV of RA No. 625. Being consistent with the law, they form part and parcel of it. In the context of Section 100(a)(2) of the Tax Code as amended by E.O. No. 273, they are "special laws" which effectively subject sales of gold to CB to zero-rate. Based on the foregoing, the conclusion is inevitable that VAT Ruling No. 008-92 dated January 23, 1992 is devoid of legal basis in imposing 10% VAT on petitioner's sales of gold to Central Bank. On the second issue, I believe VAT Ruling No. 008-92 in relation to VAT Ruling No. 059-92 dated April 20, 1992 which made the former ruling retroactive to January 1, 1988 (effective date of the VAT Law) is likewise not valid. The companion issuance of VAT Ruling No. 008-92 is VAT Ruling No. 059-92 dated April 20, 1992 which made retroactive to January 1, 1988 (effectivity date of the VAT law) the revocation of hitherto established precedents and the application of its new position that: a. Sales to BOI registered firms shall be zero-rated provided that there is proof of actual exportation and payment in foreign currency; and b. Sales of gold to the CB shall be considered as local sales and therefore subject to 10% VAT. VAT Ruling No. 378-88 dated August 23, 1988 provides that sale of gold to CB is considered export sale subject to zero-rate. Revenue Memorandum Circular No. 59-88 dated December 14, 1988 consider sale of gold by a VAT registered firm as export sale subject to zero-rate pursuant to E.O. 581 and Section 169 of the CB Circular No. 960. The pertinent provision of the NIRC on revocation of BIR ruling is quoted hereunder: "SEC. 246. Non-retroactivity of rulings . Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification, or reversal will be prejudicial to the taxpayers except in the following cases: (a) where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or (c) where the taxpayer acted in bad faith." Respondent contends that aforecited law does not prohibit revocation of any BIR ruling. On the contrary, said law provides that BIR rulings, if later determined to have been erroneously issued, may be revoked, amended or modified accordingly. What the law prohibits is the retroactive application of the revocation, if it will be prejudicial to the taxpayer concerned. The position maintained by respondent is that the government is not estopped to collect taxes unpaid on account of errors or mistakes of its agents and/or officials and that there could be no vested right arising from an erroneous interpretation of the law (Hilado vs. Collector of Internal Revenue, 100 Phil. 288). It was emphasized that VAT Ruling No. 008-92 is being applied retroactively such that previous VAT rulings on the matter which are allegedly erroneous and inconsistent rulings are considered superseded. For its part, petitioner avers that respondent cannot apply retroactively the ruling revoking the grant of zero-rating status to the sales of gold to the Central Bank for it merely relied in no less than the BIR's assurance in the earlier rulings that subject sales were zero-rated. To hold otherwise is a clear betrayal of good faith, inconsistent with justice and fair play. Petitioner cries for the application of the established doctrine that "a taxpayer cannot be convicted for taking the tax authorities at their word." (International Business Machines Corporation vs. U.S., 343 F 2d (1965) p. 923). xxx xxx xxx "There is all the more reason then to yield assent to the now prevailing principle that the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached." (Francisca Serrano de Agbayani vs. Philippine National Bank, 38 SCRA 429). xxx xxx xxx "It would be to deprive the law of its quality of fairness and justice then if there be no recognition of what had transpired prior to such adjudication." (Tan-Beng vs. The City Sheriff of Manila, et al., 83 SCRA 229, 234). xxx xxx xxx Equally supportive of petitioner's stand is the Department of Justice Opinion No. 47 S 92 which stated: xxx xxx xxx "With due reference to the BIR, which appears inclined now to overrule previous revenue regulations and VAT rulings interpreting the aforestated provisions of the VAT law, it is settled that the administrative interpretation of agencies charged with the enforcement of the law deserve respect and should be accorded great weight (In re Allen, 2 Phil 640; Verdera vs. Hernandez, 10 SCRA 4; Warren Manufacturing Workers Union vs. Bureau of Labor Relations, 159 SCRA 387). While administrative agencies are not bound by precedents and may overrule or abandon their own rulings or interpretations of the law or those of their predecessors in favor of new ones which are deemed more consonant with the letter and spirit of the law, the court ' s in certain cases would refuse to acknowledge the legal propriety of a turn-about position where to do so would be prejudicial to private parties who may have relied in good faith upon the previous interpretation given by the administrative agency concerned (see Tuazon vs. Lingad, 58 SCRA 170; Connel Bros. Co. (Phil.) vs. Collector of Internal Revenue, 40 SCRA 469). It has been held that the Commissioner or Collector of Customs is precluded from adopting a position inconsistent with one previously taken where injustice would result therefrom or where there has been a misrepresentation to the taxpayer (ABS-CBN Broadcasting Corporation vs. C.T.A., 108 SCRA 142)." (Emphasis Supplied.) xxx xxx xxx This Court in the case of Philippine Long Distance and Telephone Company vs. Commissioner of Internal Revenue (C.T.A. Case No. 4056, decision promulgated on December 28, 1988) has laid to rest the issue of non-retroactively of revocations of BIR rulings pursuant to Section 246 (formerly 338-A) of the Tax Code. The Court stated that: xxx xxx xxx "Petitioner maintains that the authorities relied on by respondent in support of the principle that the government is not barred from effecting collection of the proper taxes due and collectible from taxpayers, were decided by courts on issues of fact and law obtaining prior to the enactment of Section 338-A of the National Internal Revenue Code on August 9, 1969 and are therefore immaterial and irrelevant to the determination of the effect of said Section 338-A to this case. And the efficacy of the doctrine in the Hilado case has already been negated by the dicta of the Supreme Court in the cases of ABS-CBN Broadcasting Corporation vs. Court of Tax Appeals and the Commissioner on Internal Revenue, L-52306 October 12, 1981, 108 SCRA 142, and the Commissioner of Internal Revenue vs. Burroughs, Ltd. and the Court of Tax Appeals, L-66653, June 19, 1956 142 SCRA 324 which are now controlling. The position taken by petitioner, to our mind, is meritorious. The doctrine that the government is never estopped from collecting a tax that is legally due it, now stands qualified by Section 338-A (now Section 246) of the National Internal Revenue Code, in the sense that under that section, rulings and circulars, rules and regulations, promulgated by the Commissioner of Internal Revenue would have no retroactive application if to so apply them would be prejudicial to taxpayers, except in the three instances enumerated therein . The ABS-CBN case and the Burroughs case above-cited by petitioner are in point. In both cases, the Supreme Court applied Section 338-A, having found that the prejudice to petitioner therein of the retroactive application of the revocation of the rulings involved, 'is beyond question' and 'in so far as the enumerated exceptions are concerned, admittedly petitioner does not fall under any of them.' Thus, in the ABS-CBN case, the Supreme Court observed, in closing: "This Court is not unaware of the well entrenched principle that the Government is never estopped from collecting taxes because of mistakes or errors on the part of its agents. In fact, utmost caution should be taken in this regard. But, like other principles of law, this also admits of exemptions in the interest of justice and fair play. The insertion of Section 338-A into the National Internal Revenue Code, as held in the case of Tuason, Jr. vs. Lingad is indicative of legislative intention to support the principle of good faith. In fact, in the United States, from where Section 24(b) was patterned, it has been held that the Commissioner or Collector is precluded from adopting a position inconsistent with one previously taken where injustice would result these from, or where there has been a misrepresentation to the taxpayer." (Underscoring for emphasis.) xxx xxx xxx There are no quibbles with regards to the prohibition on the retroactive application of revocation of previously established BIR rulings when the taxpayer's interest would be prejudiced thereby except in the cases enumerated therein. The focal question is whether or not the taxpayer would be prejudiced thereby. As aptly put by petitioner, what is crucial concerning the matter on hand are as follows: a. Will the concerned mining companies be unduly prejudiced by the revocation of the said rulings if the BIR refuses to grant their claims for input tax refunds pertaining to their sales of gold to the CB during the period prior to revocation of the aforesaid rulings? b. Will the said mining Companies be unduly prejudiced if the BIR assess them for deficiency 10% VAT on their sales of gold to the CB during the period prior to revocation of the aforementioned rulings? From respondent's view, the mining companies will not allegedly be prejudiced if it denies their claimed input tax refunds for sales of gold to CB made during the period prior to revocation of the aforesaid rulings. The claims for refund of input taxes are not lost, according to respondent, because said taxes will still be all allowed in the following cases: a. On their output tax on sales of gold to the Central Bank. b. on their output taxes on sales other than (a) above; and c. as deductions to income tax under Section 29 of the Tax Code. On the other hand, petitioner respectfully submits that the prejudice it shall suffer from the retroactive application is patently evident. Petitioner was led to believe that it should not charge the said buyers any output tax. Resultantly, petitioner did not collect the 10% output VAT from these buyers nor did it pay the 10% VAT on the sales. In effect, petitioner's selling price was reduced by 1/11 by the respondent with regard to CB sales and it is to this extent that damage was suffered. There is no way for petitioner to recover such loss because the transactions have long been consummated and petitioner is left to shoulder this loss by itself as respondent deducted them from the refund/tax credit claimed. The relevant portion of DOJ Opinion No. 47 S. 92 is again noted viz: xxx xxx xxx "Evidently, the inconsistent position which the BIR would want to adopt now would work to the prejudice of the mining firms which had relied on the favorable interpretation of the VAT law heretofore given by the Department of Finance (DOF) and the BIR . . ." xxx xxx xxx The conclusion is irresistible that prejudice will be suffered by petitioner with the retroactive application of VAT Ruling No. 008-92. One has only to consider petitioner's total original claim for refund/tax credit amounting to P83,881,621.04 against the approved refund/tax credit of P27,331,445.38 to get a clear picture of the damage which petitioner will suffer as a consequence of the retroactive application of the revocation. Considered in the context of the deductions totalling P46,600,307.02, corresponding to the output tax on petitioner's sales of gold to the Central Bank, there is a hollow ring to respondent's assertion that there is no prejudice to petitioner's interest. There is therefore utter dearth of merit in respondent's insistence that retroactive application of the revocation will not be prejudicial to petitioner in the face of the obvious implications of said ruling. In view thereof, I find VAT Ruling No. 059-92 dated April 20, 1992 insofar as it applies retroactive to January 1, 1988 VAT Ruling No. 008-92 dated January 23, 1992 to be seriously flawed legally and untenable. Even assuming for the sake of argument that VAT Ruling No. 008-92 is valid, it cannot be given retroactive effect due to non-retroactivity of rulings prejudicial to taxpayer's interest which is contrary to Section 246 of the Tax Code. It may only be applied prospectively. To do otherwise would be to sanction injustice by the very government which should blaze the trail demonstrating even-handedness. In view of all the foregoing, the amount of P46,600,307.02 corresponding to the balance of the output tax on petitioner's sales of gold to the Central Bank should be refunded to the petitioner. Quezon City, Metro Manila. ERNESTO D. ACOSTA Presiding Judge