Commissioner of Internal Revenue v. Court of Tax Appeals

FOURTH DIVISION [CA-G.R. SP No. 20491. May 25, 1990.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . HON. COURT OF TAX APPEALS and ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION , respondents . D E C I S I O N MENDOZA , J p : The question for decision is whether a mining company is entitled to the refund, authorized under Sec. 5 of Republic Act No. 1435, of 25% of the specific tax paid by it on gasoline and diesel fuel used for mining, even though such mining company has not paid any additional tax under a municipal or city ordinance. For reasons to be hereafter explained, we hold that it is. The facts necessary for an understanding of this case are: The private respondent Atlas Consolidated Mining and Development Corporation is a domestic corporation organized and existing under the laws of the Philippines and engaged in mining operations in Toledo City. On September 18, 1978, it filed a petition for review with the court of Tax Appeals, alleging: 3. THAT petitioner on various dates purchased from Petrophil Corporation extra gasoline and diesel fuel on which the specific taxes due thereon have been collected and paid, the particulars of which follows Specific Taxes Period Supplier Paid 25% Oct.-Dec. 1976 Petrophil P1,288.619.75 P322,154.94 Corp. Jan.-Dec. 1977 Petrophil 7,277.865.88 1,819.466.47 Corp. Jan.-April 1978 Petrophil 1,877.566.70 469.391.67 Corp. TOTAL P10,444,052.33 P2,611,013.08 =========== ========== 4. THAT the above purchases of extra gasoline and diesel fuel by petitioner were duly certified by the supplier. Petrophil Corporation, xerox copies of which are hereto attached as Annex "A" and "A-1" and which purchases were actually used and or/ consumed in its mining operations in Toledo City, as evidenced by hereto attached affidavit of an official of petitioner marked as Annex "B" and made integral part hereof; 5. THAT pursuant to the express provisions of Sec. 5 of Republic Act No. 1435 in relation to Secs. 142 and 145 of the Tax Code, petitioner is entitled to the refund of 25% of the specific taxes paid, or P2,611,013.08 on the above petroleum products actually used and/or consumed in its mining operations or incident thereto; 6. THAT petitioner has complied with all the requirements prescribed by law specially the conditions mentioned in Sec. 5 in relation to Sec. 1 of Rep. Act. No. 1435, thus entitling it to the refund of 25% of the specific taxes paid on the above-mentioned purchases of petroleum products; and 7. THAT petitioner filed with respondent on September 13, 1978 a claim for tax credit of the aforesaid sum of P2,611,013.08, xerox copy of which is hereto attached as Annex "C" and made integral part hereof." In his amended answer, the petitioner, the Commissioner of Internal Revenue, while admitting the facts alleged in the petition, nevertheless denied that the private respondent was entitled to a refund for the following reasons: 4. The privilege of a 25% refund of specific taxes granted under Section 5 of R.A. 1435 to mine and forest concession users of oil products mentioned in Sections 142 and 145 (now Sections 153 and 156) of the Tax Code expired on July 1, 1974, with the enactment of P.D. No. 231 (June 28,1973). otherwise known as the Local Tax Code and of P.D. No. 426 (March 30, 1974) amending P.D. No. 231 and with the issuance of Local Tax Regulations No. 1-74 (April 18, 1974) by the Ministry of Finance implementing the Local Tax Code as amended; 5. Even before the enactment of P.D. 231 and P.D. No. 426, the privilege of 25% refund of specific taxes granted under Section 5 of R.A. 1435 to mine and forest concession users of oil products mentioned in Sections 142 and 145 (now Sections 153 and 156) of the Tax Code may not be availed of in the absence of any showing or allegation that claimants paid the additional tax under a municipal or city ordinance. xxx xxx xxx 9. The partial tax refund under Sec. 5 of R.A. 1435 refers only to the specific tax paid by miners and forest concessionaires on fuel oil commercially known as diesel fuel oil and other similar oils having more or less the same generating power; 10. Herein petitioner is not entitled to a refund of 25% in the specific tax it paid on gasoline, kerosene or petroleum and lubricating oils. On March 31, 1986, the Court of Tax Appeals sustained the private respondent's claim and ordered the Commissioner of Internal Revenue to grant the private respondent tax credit for the amount of P2,611,013.08. Hence, this petition for review by the Commissioner of Internal Revenue. Originally filed with the Supreme Court, the petition was subsequently referred to this Court on the ground that it falls within our appellate jurisdiction. (BP Blg. 129, sec. 9) The Commissioner of Internal Revenue contends in support of his petition that (1) The 25% tax refund under Section 5 of R.A.1435 operates only when by virtue of Sec. 4, a municipal or city ordinance imposes an additional tax not exceeding 25%. Absent such ordinance, a tax refund under Sec. 5 is not available; (2) The refund privilege has been revoked by laws increasing rates of specific tax on oils; (3) The refund privilege expired with the issuance of P.D. 231 and P.D. 426 and Local Tax Regulations No. 1-74 which increased the share of local governments in the specific tax. (4) Sec. of R.A. 1435 was repealed upon the promulgation of Tax Code of 1977. The petitioner's contention has no merit. Neither the text nor the history of Republic Act No. 1435 supports the theory of the petitioner that the 25% refund authorized under Sec. 5 of the law may be granted only if the taxpayer has paid the additional tax which local governments are authorized to levy by Sec. 4. The Text The full text of Republic Act No. 1435 reads: [REPUBLIC ACT NO. 1435] AN ACT TO PROVIDE MEANS FOR INCREASING THE HIGHWAY SPECIAL FUND Be it enacted by the senate and House of Representatives of the Philippines in Congress assembled: SEC. 1. Section one hundred and forty two of the National Internal Revenue Code, as amended, is further amended to read as follows: SEC. 142. Specific Tax on manufactured oils and other fuels . On refined and manufactured mineral oils and motor fuels, there shall be collected the following taxes: (a) Kerosene or petroleum, per liter of volume capacity, two and one-half centavos; (b) Lubricating oils, per liter of volume capacity, seven centavos; (c) Naphtha, gasoline, and all other similar products of distillation, per liter of volume capacity, eight centavos; and (d) On denatured alcohol to be used for motive power, per liter of volume capacity, one centavo: Provided, That if the denatured alcohol is mixed with gasoline, the specific tax on which has already been paid, only the alcohol content shall be subject to the tax herein prescribed. For the purpose of this subsection, the removal of denatured alcohol of not less than one hundred eighty degrees proof (ninety per centum absolute alcohol) shall be deemed to have been removed for motive power, unless shown to the contrary. Whenever any of the oils mentioned above are during the five years from June eighteen, nineteen hundred and fifty two, used in agriculture and aviation, fifty per centum of the specific tax paid thereon shall be refunded by the Collector of Internal Revenue upon the submission of the following: (1) A sworn affidavit of the producer and two disinterested persons proving that the said oils were actually used in agriculture, or in lieu thereof. (2) Should the producer belong to any producer's association or federation, duly registered with the Securities and Exchange Commission, the affidavit of the president of the association or federation, attesting to the fact that the oils were actually used in agriculture. (3) In the case of aviation oils, a sworn certificate satisfactory to the Collector proving that the said oils were actually used in aviation: Provided, That no such refunds shall be granted in respect to the oils used in aviation by citizens and corporations of foreign countries which do not grant equivalent refunds or exemptions in respect to similar oils used in aviation by citizens and corporations of the Philippines. SEC. 2. Section one hundred and forty five of the National Internal Revenue Code, as amended, is further amended to read as follows: SEC. 145. Specific Tax on Diesel fuel oil . On fuel oil, commercially known as diesel fuel oil, and on all similar fuel oils, having more or less the same generating power, there shall be collected, per metric ton, one peso. SEC. 3. The proceeds of the increased taxes accruing to the Highway Special Fund, as a result of the amendment of sections one hundred and forty-two and one hundred and forty-five of the National Internal Revenue Code as above provided, shall be set aside exclusively for amortizing loans or bonds that may have been authorized for the construction, reconstruction or improvement of highways including bridges constructed from revolving funds authorized under Act Number Thirty-five hundred, as amended, whenever such liquidation is recommended by the Secretary of Public Works and Communications and approved by the President. SEC. 4. Municipal boards or councils may, notwithstanding the provisions of sections one hundred and forty-two and one hundred and forty-five of the National Internal Revenue Code, as hereinabove amended, levy on additional tax of not exceeding twenty-five per cent of the rates fixed in said sections, on manufactured oils sold or distributed within the limits of the city or municipality: Provided, That municipal taxes heretofore levied by cities through city ordinances on gasoline, airplane fuel, lubricating oil and other fuels, are hereby ratified and declared valid. The method of collecting said additional tax shall be prescribed by the municipal board or council concerned. SEC. 5. The proceeds of the additional tax on manufactured oils shall accrue to the road and bridge funds of the political subdivision for whose benefit the tax is collected: Provided, however, That whenever any oils mentioned above are used by miners or forest concessionaires in their operations, twenty-five per centum of the specific tax paid thereon shall be refunded by the Collector of Internal Revenue upon submission of proof of actual use of oils and under similar conditions enumerated in subparagraphs one and two of section one hereof, amending section one hundred forty-two of the Internal Revenue Code: Provided, further, That no new road shall be constructed unless the routes or location thereof shall have been approved by the Commissioner of Public Highways after a determination that such road can be made part of an integral and articulated route in the Philippine Highway System, as required in section twenty-six of the Philippine Highway Act of 1953. SEC. 6. This Act shall take effect upon its approval. Approved, June 14, 1956. Thus, in addition to the specific tax on manufactured oil and other fuels authorized to be collected by the national government (Sec. 1), the statute authorizes local governments to collect an additional tax of not more than 25% of specific tax. (Sec. 4) This additional tax collected goes to the road and bridge funds of the local government concerned. (Sec. 5) On the other hand, the specific tax collected by the national government goes to its Highway Special Funds set up under Republic Act No. 917. It is with respect to this tax that Republic Act No. 1435 grants a refund of 25% of the amount paid by miners and lumber concessionaires on oils actually used by them in their operations. Whether or not a taxpayer has paid the additional tax imposed by a local ordinance, he is entitled to the refund. Sec. 5 specifically authorizes a refund of "twenty-five per centum of the specific tax", as distinguished from the additional tax the proceeds of which all accrue to the road and bridge funds of the local government concerned. What is more, the officer authorized to grant a refund is the Commissioner of Internal Revenue since national taxes (including the specific tax under Sec. 142 of the Tax Code) are under his administration. Indeed, the statute is so clear that there is no room for construction. If there is any ambiguity at all, it is only due to the fact that the proviso authorizing refund was added by amendment and inserted in sec. 5, when the logical place for it is in sec. 1, more particularly, the second paragraph of Sec. 142 of the Internal Revenue Code. It is evident that the refund provided for is actually an amendment of Sec. 142, second paragraph, which deals with the refund of 50% of the specific tax on oil used for agriculture and aviation. Legislative History Republic Act No. 1435 was originally House Bill No. 5288 Sec. 4 of the Bill, which is now Sec. 5 of Republic Act No. 1435, read: SEC. 4. The proceeds of the additional tax on manufactured oils shall accrue to the road and bridge funds of the political subdivision for whose benefit the tax is collected: Provided, however, That no new road shall be constructed unless the routes or location thereof shall have been approved by the Commissioner of Public Highways after a determination that such road can be made part of an integral and articulated route in the Philippine Highway System, as required in Section twenty-six of the Philippine Highway Act of 1953. However, upon motion of Congressman Tible, the following amendment was inserted: PROVIDED, HOWEVER, THAT WHENEVER ANY OILS MENTIONED ABOVE ARE USED BY MINERS OR FOREST CONCESSIONAIRES IN THEIR OPERATIONS, TWENTY-FIVE (25%) PER CENTUM OF THE SPECIFIC TAX PAID THEREON SHALL BE REFUNDED BY THE COLLECTOR OF INTERNAL REVENUE UPON SUBMISSION OF PROOF OF ACTUAL USE OF OILS AND UNDER SIMILAR CONDITIONS ENUMERATED IN SUB-PARAGRAPHS ONE AND TWO OF SECTION ONE HEREOF. AMENDING SECTION ONE HUNDRED FORTY TWO OF THE INTERNAL REVENUE CODE. As finally passed by both house of Congress, the text of section, renumbered Sec. 5 in the statute, read: SEC. 5. The proceeds of the additional tax on manufactured oils shall accrue to the road and bridge funds of the political sub-division for whose benefit the tax is collected: Provided, however, That whenever any oils mentioned above are used by miners or forest concessionaires in their operations, twenty-five per centum of the specific tax paid therein shall be refunded by the Collector of Internal Revenue upon submission of proof of actual use of oils and under similar conditions enumerated in subparagraphs one and two of section one hereof, amending section one hundred forty-two of the Internal Revenue Code. The reason for the amendment is to be found in the remarks of Congressman Pajarillo that, like those engaged in agriculture and aviation, miners and lumber concessionaires should be granted a partial refund of specific taxes paid by them because the gasoline that they use is used almost entirely within their compounds and not on the highways and roads. The following exchange between him and one of the sponsors of the Bill, Congressman Fortich, sheds light on the purpose of the refund and belies the Solicitor General's theory that the refund is authorized only where there has been paid an additional local tax: MR. PAJARILLO. Inasmuch as the lumber and mining companies are the greatest consumers of gasoline and oil in the Philippines, we have to consider the fact that these lumber and mining companies seldom use the national highways because they have their own roads, they have their own compounds. Like our mining companies, they use their own trucks within their compound in the hauling of the ores from the shops to the places around the compound, and in most cases their trucks are not even registered because under the law they are not required to pay. So that if they are not entitled to the benefits of this law it will be unfair if they will be required to pay. Will the gentleman accept an amendment excluding them? Mr. FORTICH. For the information of the gentleman, there is a separate bill which treats of that. Mr. FAJARILLO. No, but we may just as well discuss that here. Mr. FORTICH. That is not included in this bill. Mr. FAJARILLO. Why is agriculture included here? Mr. FORTICH. Because the policy of the Government is to encourage farming Mr. PAJARILLO. But we should be reasonable, gentleman from Bukidnon, because these mining operators and lumbers operators are using the gasoline right in their own compounds. They are even building their own roads. Why impose on them additional taxes when they are not using the highway? Mr. FORTICH. Is the gentleman sure they are not using the highways? Mr. PAJARILLO. Yes, most of the gasoline they purchase are consumed within their compounds. xxx xxx xxx Mr. PAJARILLO. I do not think that the business of those mining people should enter into the consideration of this bill; whether they waste the subsidy fund for other purposes, I believe is immaterial. The thing is we should like to ask the gentleman if he will accept an amendment to include in this fifty per centum refund the mining and lumber industries. Mr. FORTICH. The committee will consider that during the period of amendments. Mr. PAJARILLO. Thank you. (3 Cong. Rec., p. 2102 (May 7, 1956)) If the basis of the 25% refund is the fact that miners and lumber concessionaires use the gasoline or other fuels they buy mainly within their areas of operations rather than on the highways, there is no reason to condition the grant of refund on the payment by them of any additional local tax. Nor is there any warrant for the claim that, by subsequently increasing the rate of specific tax through successive legislation, the lawmaking authority thereby intended to repeal the proviso granting a refund. For that matter the rate of income tax has been increased more times since the enactment of the Internal Revenue Code, but it has never been suggested that the personal exemption granted in the Code has thereby been impliedly withdrawn because it defeats the congressional purpose to increase government revenue. The purpose for the increase in the rate of tax can not in any way negate the policy behind the grant of partial refund. Indeed, if that policy is grounded on reason (i.e., in their operations, miners and lumber concessionaires, unlike other taxpayers, hardly use highways for the construction of which the tax goes), it stands to reason that no intent to increase the Highway Special Fund can justify the repeal of the partial refund on specific tax paid. Finally, it is pointed out that the share of local governments in the specific tax has been increased to compensate for the abrogation of their power under Sec. 4 to impose additional taxes. From this the petitioner concludes that there is no longer any basis for granting a partial refund on the payment of specific tax on oil used for mining and lumber concession. The trouble with this argument is that it begs the very question in this case: Whether the partial refund authorized under Sec. 5 is conditioned on the payment of additional tax to local government. Moreover, repeals by implication are disfavored, unless the conflict between the former law and a subsequent is so patent and irreconcilable as to leave no doubt that the purpose of Congress was to repeal or amend the former law. WHEREFORE, the petition for review is DISMISSED and the decision appealed from is AFFIRMED. SO ORDERED. Chua and Francisco, JJ., concur.