Trustworthy Pawnshop, Inc. v. Commissioner of Internal Revenue

[C.T.A. CASE NO. 6236. December 6, 2001.] TRUSTWORTHY PAWNSHOP, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N This is an appeal arising from an assessment issued by the Respondent against the Petitioner involving the latter's alleged liability for Value Added Tax in the amount of P8,859,791.27. The facts are briefly summarized as follows: Petitioner is a corporation duly organized and existing under and by virtue of the laws of the Philippines. The controversy arose when Petitioner received Assessment Notice No. 81-VAT-13-97-2000-6-122 on July 4, 2000 from the Chief of the Assessment Division of Revenue Region No. 13, Cebu City. Believing that the assessment has no basis in fact and in law, Petitioner filed its protest against the assessment on July 14, 2000 pursuant to Section 228 of the National Internal Revenue Code (Annex B of the Petition for Review, page 13, CTA records). Unable to obtain an affirmative response from the Respondent, Petitioner elevated its grievance to this Court on February 8, 2001 via Petition for Review. Petitioner asseverates that Section 102(a) of the NIRC, which serves as Respondent's basis in issuing the assailed assessment notice, does not state that pawnshop businesses are subject to VAT. And that since pawnshop business is not included among those expressly enumerated in the said section, thus, there is no legal basis to subject or assess it for deficiency Value Added Tax. Upon the other hand, Respondent defends the assessment and advanced the following by way of Special and Affirmative Defenses, to wit: "4. Petitioner, as a pawnshop operator, performs services for others for a fee, remuneration or consideration. Its services consist of lending money at interest on the security of personal property, and the interest is the fee, remuneration or consideration for such services. Hence, it is engaged in the sale of services subject to value-added tax (VAT) under Section 102(a) of the TaxCode, as amended by R.A.7716. HICSaD 5. Under Section 102(a) of the Tax Code, as amended by R.A.7716, the VAT is equivalent to 10% of the gross receipts derived from the sale or exchange of services. 6. Interest on pledge loans and past due loans and liquidated damages are part of petitioner's gross receipts subject to VAT. 7. The assessment was issued in accordance with law and regulations. 8. All presumptions are in favor of the correctness of tax assessments." Posed for Our resolution now are the following issues: 1. Whether or not the Pawnshop business is subject to Value Added Tax under Section 102 (a) of the Tax Code. 2. Whether interest income is income from service or from forbearance of money. 3. Whether liquidated damages are income from services or a simple item of indemnification. 4. Whether pawnshop business is similar or akin to the Lending Investor business. 5. Whether respondent is legally empowered to impose and charge Value Added Tax on the petitioner for the proceeds of the auction sale of pawned item. 6. Whether pawn ticket is subject to documentary stamp tax. 7. Whether the rate to compute VAT should be Base multiplied by 10% or 1/11. In its Memorandum, Petitioner reiterates its stance a quo and argues that nowhere is it provided in Section 102(a) of the Tax Code that a pawnshop business is subject to Value Added Tax. According to Petitioner, what is provided in the said Section is that lending investors, that used to be subject to the 5% percentage tax, are already subject to VAT under Section 102(a). Traversing Petitioner's arguments, Respondent posits the view that the enumeration of persons performing services for a fee in Section 102(a) of the Tax Code is merely intended to give examples of businesses subject to VAT on sale or exchange of services, hence, not exclusive. Respondent further submits that the legislative intent is not to limit the application of Section 102(a) to those enumerated therein because the law speaks of "all kinds of services". Another point asserted by the Respondent is that unless the sale or exchange of services is expressly mentioned in Section 103 of the Tax Code as exempt from VAT, such sale or exchange of services is subject to VAT under Section 102(a). To recapitulate and to arrest the similar nagging problem in the future, it must be stressed anew that pawnshops are not in the same class as lending investors. Seemingly, the vortex of the controversy lies on the principal activity of pawnshops. To this the following provisions of law are pertinent, thus: "Sec. 157. Words and Phrases defined . . . . (u) "Lending investor" includes all persons who make a practice of lending money for themselves or others at interest. Sec. 161. Fixed Taxes . . . . (3) Other fixed taxes . . . . (dd) Lending investors 1. In chartered cities and first class municipalities, one thousand pesos; 2. In second and third class municipalities, five hundred pesos; 3. In fourth and fifth class municipalities and municipal districts, two hundred fifty pesos: Provided , That lending investors who do business as such in more than one province shall pay a tax of one thousand pesos. xxx xxx xxx Sec. 175. Percentage tax on dealers in securities, lending investors . Dealers in securities shall pay a tax equivalent to six (6%) per cent of their gross income. Lending investors shall pay a tax equivalent to five (5%) per cent of their gross income. (Formerly Section 116.) PresidentialDecree114 (PawnshopRegulationAct) Sec. 3. Definitions . As used in this decree, unless the context otherwise requires, the following terms shall have the following meanings: "Pawnshop" shall refer to a person or entity engaged in the business of lending money on personal property delivered as security for loans and shall be synonymous and may be used interchangeably, with pawnbroker or pawnbrokerage. xxx xxx xxx Sec. 10. Rates of interest . No pawnshop shall directly or indirectly stipulate, charge, demand, take or receive any higher rate or greater sum or value for any loan or forbearance than the rate allowed by the Usury Law for such transactions. . . . " From the above, it may be inferred that Respondent's ground for the issuance of the assessment notice is meritorious that pawnshops may be in the same class as lending investors since its principal activity is lending money at interest. Thoroughly analyzing relevant historical background of cases of this nature, Respondent's assertion hinges mainly on RMO 15-91 and RMC 43-91, which We quote hereunder, thus: RMO No. 15-91, March 11, 1991 "A restudy of P.D.114 shows that the principal activity of pawnshops is lending money at interest and incidentally accepting a pawn of personal properties delivered by the pawner to the pawnee as security for the loan. Clearly, this makes pawnshop business akin to lending investor's business activity which is broad enough to encompass the business of lending money at interest by any person whether natural or juridical. Such being the case, pawnshops shall be subject to the 5% lending investor's tax based on their gross income pursuant to Section 116 of the TaxCode, as amended." RMC No. 43-91, May 27, 1991 "This Circular subjects to the 5% lending investor's tax the gross income of pawnshops pursuant to Section 116 of the TaxCode, and it thus revokes BIR RulingNos.6-90, and VAT RulingNos.22-90 and67-90. In order to have a uniform cut-off date, avoid unfairness on the part of taxpayers if they are required to pay the tax on past transactions, and so as to give meaning to the express provisions of Section 246 of the TaxCode, pawnshop owners or operators shall become liable to the lending investors tax on their gross income beginning January 1, 1991. Since the deadline for the filing of percentage tax return (BIR Form No. 2529A-O) and the payment of the tax on lending investors covering the first calendar quarter of 1991 has already lapsed taxpayers are given up to June 30, 1991 within which to pay the said tax without penalty. If the tax is paid after June 30, 1991, the corresponding penalties shall be assessed and computed from April 21, 1991. Since pawnshops are considered as lending investors effective January 1, 1991, they also become subject to documentary stamp taxes prescribed in title VII of the TaxCode. BIR RulingNo.325-88 dated July 13, 1988 is hereby revoked." Be that as it may, We do not subscribe to the Respondent's view that pawnshops are in the same class as lending investors, accordingly, this Court strikes down the assessment. The issue in this case is not novel. In Trustworthy Pawnshop, Inc. vs. Collector of Internal Revenue, CTA Case No. 5691, March 7, 2000 , and in other similar cases, this Court had the occasion to rule in this wise: "If we go by the contention that pawnshops are lending investors, then Congress would not have been mistaken in treating the two separately under paragraphs ( dd ) and ( ff ) of Section 161 of the TaxCode, as amended, supra . Logic simply dictates that if by prior definition under Section 157 (u) of said Code pawnshops and lending investors are of the same class, then there is no rational basis for differentiating them under one heading later, except for the fact that they are dissimilar as tax subjects. Further analyzing said Section 161, supra , it appears that lending investors were imposed a graduated type of fixed taxes depending on the class of the city or municipality involved while pawnshops were differently levied a flat amount of tax. This particular observation bolster Our position that pawnshops are not similarly situated as lending investors. Congress would not have intended otherwise, because the act of segregating and imposing upon them unequal amount of taxes would transgress the fundamental rule on taxation on uniformity or equality enshrined under par. 1, Section 28 of Article VI of our Co nstit ution. The rule requires that all subject or objects of taxation, similarly situated, are to be treated alike or put on equal footing both in privileges and liabilities ( Juan Luna Subdivision vs. Sarmiento, 91 Phil. 371 ). It has also been interpreted to mean that all taxable articles or kinds of property of the same class shall be taxed at the same rate (City of Baguio vs. de Leon, 25 SCRA 938 ). Verily, Congress is presumed to have acted in full knowledge of this particular constitutional limitation when it classified pawnshops apart from lending investors." In the case of CIR vs. Hon. Andres Reyes, Jr. et al., CA-G.R. No. 28824, December 23, 1993 , the Court of Appeals made a pronouncement striking down RMO 15-91, the memorandum order which declared pawnshops akin to lending investors, as unconstitutional the power to tax being vested solely with Congress. And We quote, thus: ". . . Revenue CircularNos.15-91 and43-91 are not implementing rules but are new and additional measures which only congress is empowered to impose. Section 245 of the TaxCode has limited or confined petitioner's power to issuing rules and regulations to implement or carry into effect the provision of the Code in the enforcement of taxes therein, and petitioner cannot impose additional taxes not provided therein. Under the Co nstit ution, the power to tax is solely vested in Congress. In issuing subject Revenue Circulars imposing new taxes against pawnshops, petitioner arrogated unto himself legislative powers, with grave abuse of discretion and in excess of jurisdiction." As regards the jointly stipulated issue of whether or not the pawn ticket is subject to documentary stamp tax, the aforequoted Court of Appeals decision in the Andres Reyes case had this to say: "Likewise, pawnshop ticket is not subject to documentary stamp tax. The pawn ticket is a pawn broker's receipt for a pawn. It is neither a security nor a printed evidence of indebtedness (Section 3, P.D. 114 or Pawnshop Regulatory Act). Consequently, it is not subject to documentary stamp tax imposed by Section 195 of the TaxCode" Prescinding from the above, this Court finds, as amply supported by jurisprudential precepts, that the assessment notice issued by the Respondent lacks legal basis. Accordingly, other issues raised are deemed moot and academic. WHEREFORE, in view of all the foregoing, the instant Petition for Review is hereby GRANTED. Accordingly, Assessment Notice No. 81-VAT-13-97-2000-6-22 is hereby CANCELLED and SET ASIDE. SO ORDERED. (SGD.) AMANCIO Q. SAGA Associate Judge WE CONCUR: (SGD.) ERNESTO D. ACOSTA Presiding Judge Separate Opinions The issue before us is whether or not pawnshop operators may be classified as lending investors thus subject to the value-added tax (VAT) under the TaxCode. The majority opinion, relying heavily on the Court of Appeals' decision in Commissionerof Internal Revenue vs.Andres Reyes, CA-G.R. S.P. No. 28824 promulgated on December 23, 1993, struck down RMO No.15-91 and RMC No.43-91 and consequently cancelled the assessment issued against herein Petitioner. With due respect, I dissent from the majority opinion for the following reasons: 1. Then Section 102(a) [now renumbered as Section 108(A)] of the TaxCode subjects to VAT the sale of all kinds of services in the Philippines for a fee, remuneration or consideration, including lending investors, services of banks, non-bank financial intermediaries and finance companies, and similar services. [Note: In the case of banks, non-bank financial intermediaries and finance companies, VAT imposition has been deferred to January 1, 2003 under Section 5 of RA8424, as amended by RA8761 and RA9010.] Section 102(a) provides in pertinent part: "SEC. 102. Value-added Tax on Sale of Services and Use or Lease of Properties . "(a) Rate and Base of Tax . There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services , including the use or lease of properties. "The phrase ' sale or exchange of services' means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors: stock, real estate, commercial, customs and immigration brokers; lessors or property, whether personal or real; warehousing services; lessors or distributors of cinematographic films; persons engaged in milling, processing, manufacturing or repacking goods for others; proprietors, operators or keepers of hotels, motels, resthouses, pension house, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes, and other eating places, including clubs and caterers, dealers in securities; lending investors ; transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land, air and water relative to their transport of goods or cargoes; services of franchise grantees except those under Section 119 of this Code: services of banks, non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties . . . . xxx xxx xxx The term ' gross receipts ' means the total amount of money or its equivalent representing the contract price, compensation, service fee , rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding the value-added tax." [Emphasis ours] From the foregoing, the sale or exchange of services is subject to VAT. The phrase "sale or exchange of services" encompasses the performance of all kinds or services for a fee, remuneration or consideration. The enumeration of persons performing services for a fee, such as, construction and service contractors, stock, real estate, commercial, customs and immigration brokers, etc., is merely intended to give examples of businesses performing services for a fee that are subject to VAT. The enumeration is not exclusive, which means that other persons performing services for a fee, who are not expressly mentioned in the enumeration, are also subject to VAT. As held in Gomezvs.Ventura , (54 Phil. 726): ". . . The maxim expressio unius est exclusio alterius should be applied only as a means of discovering legislative intent and should not be permitted to defeat the plain indicated purpose of the legislature. It does not apply when words are mentioned by way of example, or to remove doubts . (See Cyc., 1122) . . . " [Emphasis ours] Section 102(a) [now 108(A)] does not limit its application to those enumerated therein because the law speaks of "all kinds of services." To limit its application to the enumeration would contradict the very clear meaning of the phrase "all kinds of services". The phrase "including" should be construed merely as an enlargement and not of limitation. "The intention of an act will prevail over the literal sense of its terms. Thus, limited words in one part of an act may be expanded by general words in another part, if the general words more nearly express the legislative intent. A term whose statutory definition declares what it "includes" is more susceptible to extension of meaning by construction than where the definition declares what a term "means". Thus, it has been said that " the word 'includes' is usually a term of enlargement and not of limitation . . . It, therefore, conveys the conclusion that there are other items includable, though not specifically enumerated . . ." Sutherland, Statutory Construction , 4th ed. Vol. 24, p. 82, Sec. 47.08, citing United States. Argosy Ltd. v. Hannigan, 404 F2d 14 (CA 5th, 1968); See United States v. Gertz, 249 F2d 662 (CA 9th, 1957); Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 US 95, 86 L Ed 65, 62 S Ct 1 (1941). [Emphasis ours] Hence, the terms "includes" and "including" does not exclude items otherwise within the scope of the defined term. "Includes" and "Including" The terms "includes" and "including" when used in the Code are not deemed to exclude items otherwise within the meaning of the term defined. Thus, where Section 1(e) applies to the taxable income of estates including" and thereafter lists four types of income from trusts or estates that are taxable, other types of estates may also be subject to taxation under Section 1(e). To hold differently would, in effect, substitute the term "limited to" for "including". Mertens, Law on Federal Income Taxation , 1995 ed., Section 3.37, Chap. 3, pp. 55-56, citing In re Joplin , Jr ., 882 F2d 1507 (CA10 1989) applying IRC & 7701(c). Hence, in the cases of Genato CommercialCorporation vs.The Court of Tax Appeals, 104 Phil. 615, and Philippine AmericanDrug Co. vs.Collector of Internal Revenue, 106 Phil. 163 , general words were harmonized with specific words found in the statute in question so as not to limit coverage of the taxing statute. In determining that the bank charge in question formed part of the charges enumerated in Art. 183-(B) of the then TaxCode, the Supreme Court in the Genato case (cited in the PhilippineAmericanDrug Co. case) held: As may be seen, an importer is required to pay in advance the necessary percentage tax on the articles imported "based on the import invoice value thereof, certified to as correct by the Philippine Consul at the port of origin if there is any, including freight, postage, insurance, commission, customs duty, and all similar charges ." In other words, the law requires that it be included in the assessment not only the import invoice value of the merchandise, which includes freight, postage, insurance, commission and customs duty, but all other similar charges which would necessarily increase the landed cost of the merchandise imported, which, in our opinion, should include the difference of Php 0.015 paid by petitioner to a local bank in the purchase of foreign exchange to carry out the importation. Indeed, the intention of Congress in enacting the above-quoted provision is to include in the assessment all charges, whether specified or otherwise, which an importer has to pay to complete his importation . Invoking the rule of ejusdem generis which provides that "where, in a statute, general words follow a designation of a particular subjects or classes of persons, the meaning of the general words will ordinarily be presumed to be restricted by the particular designation, class or nature as those specifically enumerated," petitioner contends that the difference of Php 0.015 which it paid to a local bank in the purchase of foreign exchange to cover the importations in question cannot be included in the assessment for the purpose of determining the advance sales tax because they are not similar to the charges specifically enumerated in the law. With this we disagree, for it cannot be denied that the intention of the law is to include all charges, that may be paid by the importer to bring the importation into the country . In other words, all items of expense that may be incurred by the importer in bringing the importation into the country and which would necessarily increase the landed cost must be deemed included in the phrase "all similar charges" mentioned in the law. The doctrine of ejusdem generis is but a rule of construction adopted as an aid to ascertain and give effect to legislative intent when that intent is uncertain or ambiguous, but the same should not be given such wide application that would operate to defeat the purpose of the law. In other words, the doctrine is not of universal application. Its application must yield to the manifest intent of Congress ( State vs. Prather , 21 L.R.A. 23, 25). [Emphasis ours] In this particular case, the law is not only clear in its intent but also in its wording that "all kinds of services" should be subject to VAT. Hence, pawnshop services should a fortiori be subject to VAT. 2. Since pawnshops are engaged in the sale of services, they are subject to VAT under Section 108 of the TaxCode. Section 3 of PresidentialDecree No.114, otherwise known as the "PawnshopRegulationAct" defines a pawnshop thus: "Pawnshop shall refer to a person or entity engaged in the business of lending money on personal property delivered as security for loans and shall be synonymous, and may be used interchangeably with, pawnbroker or pawnbrokerage." Judicial notice may be taken of the fact that the principal activity of pawnshops is lending money at interest on the security of personal property. The act of lending money at interest constitutes the performance of a service for a fee, remuneration or consideration for such service. Hence, pawnshops are engaged in the sale of services subject to VAT under Section 108 of the TaxCode. 3. Moreover, the term "lending investor" as well as "similar services" in Section 108 of the TaxCode sufficiently encompasses pawnshop activities. Section 116 of the TaxCode (before amendment by Executive OrderNo.273) defined "lending investor" in this manner: "(u) Lending investors include all persons who make a practice of lending money for themselves or others at interest." The definition of the term "pawnshop" under Section 3 of P.D.No.114 is broad enough to fall within the coverage of "lending investors" and "similar services" even if one were to restrict the meaning of "all kinds of services" under Section 108 of the TaxCode. After all, the principal business activity of pawnshops is actually lending money at interest. In the case of Commissioner of InternalRevenue vs.AgenciaExquisite of Bohol, Inc., CA -G.R. SP. No. 59282, March 23, 2000 , the Court of Appeals ruled that pawnshops are subject to the then five percent (5%) lending investors' tax since they are considered to be lending investors. In determining that pawnshops are lending investors, the Court of Appeals reasoned as follows: "In support of its thesis that the Tax Court erred in holding that pawnshops are not subject to the lending investor's tax, the petitioner adverts to then Section 116 of the TaxCode, which provides that: "SECTION 116. Percentage tax on dealers in securities; lending investors . Dealers in securities shall pay a tax equivalent to six (6%) per cent of their gross income. Lending investors shall pay a tax equivalent to five (5%) per cent of their gross income." vis-a-vis then Section 157(u) of the TaxCode (before amendment by Executive OrderNo.273) which defined "lending investors" in this manner: "(u) Lending investors include all persons who make a practice of lending money for themselves or others at interest." Hence, the definition of the term "pawnshop" under Section 3 of Presidential DecreeNo.114, (otherwise known as the "PawnshopRegulationAct" issued by President R. E. Marcos on 29 January 1973), thusly "Pawnshop shall refer to a person or entity engaged in the business of lending money on personal property delivered as security for loans and shall be synonymous, and may be used interchangeably, with pawnbroker or pawnbrokerage." is broad enough to encompass lending investors. Reason: Its principal business activity is actually lending money at interest: its accepting of pawned personal property as security for the loan is merely incidental to its main business activity. So much, in fact, is embodied in Revenue MemorandumOrder No.15-91, dated March 11, 1991, to wit: "A restudy of P.D.114 shows that the principal activity of pawnshops is lending money at interest and incidentally accepting a 'pawn of personal delivered by the pawner to the pawnee as security for the loan. Clearly, this makes pawnshop business akin to lending investor's business activity which is broad enough to encompass the business of lending money at interest by any person whether natural or juridical. Such being the case, pawnshops shall be subject to the 5% lending investor's tax based on their gross income pursuant to Section 116 of the TaxCode, as amended." It will be recalled that in the implementation of then Section 116 and Section 157(u) of the TaxCode, the Bureau of Internal Revenue had issued several rulings relative to the coverage of the pawnshops under the lending investor's tax. The first of these rulings was an unnumbered BIR Ruling bearing the date 2 March 1968, wherein it was held that "lending investors," as contemplated under then Section 194(u) of the TaxCode, do not comprehend persons engaged in pawnshop business. This rule was reiterated in, amongst other, BIR RulingNo.135-82, dated 22 April 1982; BIR RulingNo.001, dated 3 January 1983; and BIR RulingNo.06-90 dated 23 January 1990. Complementary to the above, March 11, 1991, herein petitioner issued RMONo.15-91. This RMONo.15-91 stated that, according to BIR RulingNo.06-90, as well as VAT Ruling Nos.067-90,022-90, and226-90, pawnshops are not subject to any business tax, that is, the value added tax, the lending investor's tax, or the percentage tax imposed on non-banking financial intermediary for the reasons therein set forth, amongst which, is that "Pawnshop are not subject to the 5% lending investor's tax under 116 of the TaxCode because, citing BIR Ruling dated March 2, 1968 and135-82 dated April 22, 1982, lending investors, as contemplated under then Section 194(u) of the TaxCode, do not include persons engaged in pawnshop business." Later, however, on May 27, 1991, the petitioner issued RMCNo.43-91 clarifying, amongst other, RMONo.15-91, in this tenor: "This Circular subjects to the 5% lending investor's tax the gross income of pawnshops pursuant to Section 116 of the TaxCode, and it thus revokes BIR RulingNos.6-90, and VAT Ruling Nos.22-90 and67-90. In order to have a uniform cut-off date, avoid unfairness on the part of taxpayers if they are required to pay the tax on past transactions, and so as to give meaning to the express provisions of Section 246 of the TaxCode, pawnshops owners or operators shall became liable to the lending investor's tax on their gross income beginning January 1, 1991. Since the deadline for the filing of percentage tax return (BIR Form No. 2529A-O) and the payment of the tax on lending investors covering the first calendar quarter of 1991 has already lapsed, taxpayers are given up to June 30, 1991 within which to pay the said tax without penalty. If the tax is paid after June 30, 1991, the corresponding penalties shall be assessed and computed from April 21, 1991. "Since pawnshops are considered as lending investors effective January 1, 1991, they also become subject to documentary stamp taxes prescribed in title VII of the TaxCode. BIR RulingNo.325-88 dated July 13, 1988 is hereby revoked." In other words, RMONo.15-91 and RMCNo.43-91, both expressly revoked previous BIR rulings to the effect that pawnshops are not subject to the five percent lending investor's tax. More importantly, RMCNo.43-91 revoked BIR RulingNo.325-88, dated July 13, 1988, which held that a pawnshop ticket is not subject to the documentary stamp tax. And, this revocation of prior or previous, rulings is allowed under Section 246 of the TaxCode, to wit: "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 . . . " Undoubtedly, petitioner's later/subsequent stance finds support in Hiladov.Collector of Internal Revenue, 100 Phil. 288 , which effectively held that the incumbent is not bound by the previous ruling or opinion of his predecessor, if he is satisfied that a different construction of the statute should be adopted. With such course of action, we are in full accord. For, as the Supreme Court itself held in Quev. IntermediateAppellants Court, 169 SCRA 137 , even judicial decisions are by no means immutable or infallible. Which is as it should be. For time works changes and brings into existence new conditions and purposes. And the law as an expression of social needs, whilst it is desirable that it should be stable, yet it cannot and must not stand still. It should ever be borne in mind that taxes are what we pay for civilized society: taxes, indeed, are the lifeblood of the nation. Not much unlike an army, which, to borrow the picturesque prose of Napoleon, marches on its stomach, the prosperity and economic well-being of the country rises or falls on the effectiveness or lack of its of the tax collection efforts of the Government. Which explains why, as a matter of policy, the law frowns against exemptions in taxes. So much so that, statutes granting tax exemptions have been held to be strictissimi juris against taxpayer, and liberally in favor of the taxing authority, viz., the State, or its instrumentality or agencies. About the only exemption to this rule (that the tax exemption may be withdrawn at the pleasure of the taxing authority) is where the exemption was granted to private parties based on material considerations of a mutual nature, in which event it become contractual, and is thus protected by the non-impairment clause of the Co nstit ution. Indeed it is the constant teaching of unrelenting case law that rules for the allowance of tax creditors, as well as claims for tax exemptions, must be expressly granted in a statute , and couched or stated in language too plain to be misunderstood or mistaken. Here, respondent pawnshop cannot point to any specific provision in P.D.114, from which it draws its breath of life, that explicitly exempts it from the coverage of RMONo.15-91 and RMCNo.43-91. In sum, since the respondent in the case at bench is a pawnshop operator, it must follow, as night follows day, in the elegant poetry of Shakespeare that it is subject to the five percent lending investor's tax hence, liable for the amount of Pesos: One Hundred Six Thousand Five Hundred Thirty Eight and Fifty-nine Centavos (P106,538.59), by way of deficiency percentage tax for the year 1995." 4. As previously cited, then Section 102(A) [now Section 108(A)] of the TaxCode provides: "The term 'gross receipts' means the total amount of money or its equivalent representing the contract price, compensation, service fee , rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding the value-added tax." All interest income, liquidated damages and gains from auction sale of pawned items actually or constructively received by petitioner, having been derived as an intrinsic part of the pawnshop business , form part of the gross receipts of pawnshops subject to VAT. In this regard, the BIR subjected to VAT the "gain on auction sale," not the proceeds thereof. [Please see "Details of Discrepancy" attached to BIR Formal Letter of Demand, Annex A2/3, Petition for Review] 5. Section 103 [now Section 109] of the TaxCode, as amended by RA7716, enumerates the transactions that are exempt from VAT. Pawnshop transactions are not among the exempt transactions. Neither are there any express provisions of law exempting pawnshops from VAT. Since the transactions of pawnshops are not among those enumerated in Section 103 [now 109] of the TaxCode or any other express provision of law as VAT exempt, the same are subject to VAT under Section 102(A). In this regard, tax exemptions are strictly construed against the taxpayer. In the absence of any clear provision of law exempting pawnshops from VAT, our conclusion is that pawnshops are subject to VAT on their gross receipts since they are clearly engaged in the performance of services. In the recent case of Commissioner of InternalRevenue vs.Court of Appeals and CommonwealthManagement and Services Corporation, G.R. No. 125355, promulgated on March 30, 2001 , the Supreme Court ruled that the taxpayer, not falling within the exemptions mentioned under Section 109 [formerly 103] of the TaxCode, is subject to VAT. The high tribunal held: Section 108 of the NationalInternal RevenueCode of 1997 defines the phrase "sale of services" as the "performance of all kinds of services for others for a fee, remuneration or consideration." . . . xxx xxx xxx Hence, it is immaterial whether the primary purpose of a corporation indicates that it receives payments for services rendered to its affiliates on a reimbursement-on-cost basis only, without realizing profit, for purposes of determining liability for VAT on services rendered. As long as the entity provides service for a fee, remuneration or consideration, then the service rendered is subject to VAT . At any rate, it is a rule that because taxes are the lifeblood of the nation, statutes that allow exemptions are construed strictly against the grantee and liberally in favor of the government. Otherwise stated, any exemption from the payment of a tax must be clearly stated in the language of the law; it cannot be merely implied therefrom. In the case of VAT, Section 109, RepublicAct8424 clearly enumerates the transactions exempted from VAT. Commissioner of InternalRevenue vs.Court of Appeals and Commonwealth Management and Services Corporation, G.R. No. 125355, March 30, 2001 . [Emphasis ours] At this point and for purposes of clarity, I would like to stress that as to the issue of VAT computation, my conclusion is that the VAT shall be computed by multiplying the total amount indicated in the official receipt by one-eleventh (1/11) pursuant to then Section 102(c) (now 108(c)) of the TaxCode. Consequently, there should be a recomputation of the tax since the BIR multiplied the total amount indicated in the official receipt by ten percent (10%). WHEREFORE, I register my dissent to the majority opinion and vote to ORDER the Petitioner to pay the assessed deficiency VAT in the amount of P4,845,468.37 computed as follows: Total Gross Receipts Tax VAT P55,892,148.66 ============ Output Tax Due: (P55,892,148.66 x 1/11) 5,081,104.42 Less: Input Tax Claimed 216,732.82 VAT due P4,864,371.60 Less: Vat payments per return and per audit 18,903.23 Basic Deficiency Value Added Tax P4,845,468.37 ============ plus 20% deficiency interest per annum from the date prescribed for payment (quarterly) until fully paid pursuant to Sections 248 and 249 (B) of the TaxCode. (SGD.) JUANITO C. CASTAEDA, JR. Associate Judge