Commissioner of Internal Revenue v. San Carlos Milling Co.

ELEVENTH DIVISION [CA-G.R. SP No. 20815. March 13, 1991.] (C.T.A. Case No. 3810) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . SAN CARLOS MILLING CO , respondents . D E C I S I O N CACDAC , JR . , J p : This is an appeal from the Decision of the Court of Tax Appeals dated January 30, 1990, in CTA Case No. 3810 entitled "San Carlos Milling Co., Inc. vs. Commissioner of Internal Revenue" which granted the tax refund/credit to San Carlos Milling Co., Inc. in the amount of P204,659.00 representing alleged 5% compensating tax paid on its importation of sugar mill machinery and spare parts in 1982. THE PARTIES Petitioner is the official of the Republic of the Philippines charged with the duty of granting tax refunds or issue tax credits for erroneously or illegally collected as well as overpaid internal revenue taxes and may be served with notices and other legal processes through the office of the Solicitor General, 134 Amorsolo St., Legaspi Village, Makati, Metro Manila. Private respondent San Carlos Milling Co., Inc. is a domestic corporation, engaged in manufacturing milling, processing and refining sugar. It may be served with notices and other legal processes through its counsel. Atty. Felipe Dumpit, c/o Jardine Davies, Inc. 222 Sen. Gil. J. Puyat Avenue, Makati, Metro Manila. Public respondent, Court of Tax Appeals, hereinafter referred to as Tax Court is a court of special appellate jurisdiction, created under Republic Act No. 1125 and may be served with notices and other legal processes at 4th Floor, Hizon Bldg., 29 Quezon Avenue, Quezon City, Metro Manila. THE ANTECEDENT FACTS For use in its sugar milling operations private respondent imported one (1) set 1200KW Niigata stationary diesel generator set and one (1) lot of additional parts covered by Everette Orient Line Bill of Lading No. Y-35-M December 24, 1982, a commercial invoice No. D 222021-1, D222021-2 issued by Niigata Engineering Co. Ltd. dated December 24, 1982 and Central Bank release certificate No. 122677. The import machinery and additional parts arrived at the port of Manila on January 4, 1983. As a result of the importation, private respondent allegedly paid a total of P507,539.00 representing both the 5% compensating tax and customs duty evidenced by Customs Official Receipt No. 122677. Of the payment of P507,539, P302,640.00 represents the customs duty and P204,649.00 represents the 5% compensating tax, subject of this appeal. In a letter of June 24, 1983, received by petitioner on June 28, 1983, private respondent filed a claim for refund, tax credit for the amount of P204,649.00, on the ground that it was allegedly exempt from payment of 5% compensating tax until June 30, 1985 by virtue of Presidential Decree No. 791, as amended on August 30, 1980 by Presidential Decree No. 1710. Private respondent asserts as additional ground for exemption from payment of said tax, the marginal note by the then President Ferdinand E. Marcos on January 22, 1983 on a letter dated January 11, 1983 of Manuel H. Nieto. Jr., President of Bukidnon Sugar Milling Co., Inc. approving the latter's proposition to interpret PD 1710 as granting full exemption until June 30, 1985 from special import tax, customs and tariff duties and compensating tax to all importation of plant machinery, spare parts and equipment directly and actually needed and to be used exclusively in the manufacture, milling, processing or refining of sugar. On July 18, 1984, private respondent, conscious of the rule on the prescriptive period of two years for judicial recovery of tax alleged to have been erroneously or illegally collected as provided in Sections 292 and 295 (now Sec. 204 and 230) of the National Internal Revenue Code filed a Petition for Review with the Court of Tax Appeals, docketed as CTA Case No. 3810 seeking tax credit of the sum of P204,649.00 of which the said Tax Court rendered its decision on January 30, 1990, the dispositive portion of which reads: "WHEREFORE, the claim for refund, tax credit by petitioner San Carlos Milling Co., Inc., is hereby granted. SO ORDERED." Hence, this appeal. LONE ISSUE Whether or not private respondent is exempt from payment of five (5) per cent compensating tax on its importation pursuant to Presidential Decree No. 791, as amended by Presidential Decree No. 1710. The appeal is not meritorious. It is not disputed that P.D. No. 791, effective September 3, 1975 granted exemption to sugar mills from compensating tax, among others in respect to importation of plant machinery, spare parts and other equipment. As stated in the decree, the exemption is until June 30, 1980. Section 1 of the decree reads: "SEC. 1. Any person, partnership, company or corporation who or which now engaged or shall engage in the business or manufacturing, milling, processing or refining of sugar shall be exempted from the payment of special import tax, compensating tax and tariff duties in respect to importance of plant machinery, spare parts and other equipment effective upon approval of this Decree until June 30, 1980." The petitioner contends that the subject importation was made in 1982, which is clearly outside the original period of the tax-free importation privilege granted under PD 791. This was however argued by the private respondent on the ground that P.D. 1710, promulgated on August 13, 1980 which amended P.D. 791 restored the tax exemption privilege accorded to importation of sugar mills, machinery, spar parts and equipment. We quote the pertinent portions of PD 1710. "SEC 1. Any person, partnership, company or corporation who or which now engages or shall engage in the business of manufacturing, milling, processing or refining of sugar, shall be exempted from payment of special import tax, compensating tax and customs and tariff duties in respect to the importation of plant machinery, spare parts and other equipment effective upon approval of this Decree until June 30, 1985." A reading of the provisions of the above-quoted laws will show that PD 1710 amended PD 791 by extending the period during which the exemption privilege granted under PD 791 may be available to those in the business of manufacturing, milling, processing or refining of sugar such as private respondent in this case. The effectivity of the exemption which was originally only up to June 30, 1980 under PD 791 was thus extended up to June 30, 1985 by PD 1710. Such exemption privilege is clearly manifested in the Second WHEREAS clause of the said amending law which states: " Whereas, there is need to extend the exemption period for another five years ." (emphasis supplied) The petitioner points out that subsequent to P.D. No. 791. PD 1352 was promulgated on April 21, 1978 imposing 5% customs duty and 5% internal revenue taxes on all importations presently exempt from customs duties/and or internal revenue taxes under the provisions of only general or special law. Section 1 and Section 2 of PD No. 1352 are hereunder quoted as follows: SEC. 1 All importations which are presently exempt from customs duties and/or internal revenue taxes under the provisions of any general or special law shall be subject to a 5% customs duty and 5% internal revenue taxes subject to the same limitations and conditions prescribed under such law, if any. The duty and tax imposed herein shall be computed in accordance with the applicable provisions of the Tariff and Customs Code, as amended, and the National Internal Revenue Code of 1977, respectively." "The customs duty and internal revenue taxes imposed under this section shall not apply to the following importations: "1. Those which are exempt in pursuance of or in compliance with international treaties or commitments such as the ADB-RP Agreement (1966); the 1947 Convention on Privileges and Immunities of the United Nations and its specialized agencies;' the United States Agency for International Development-RP Agreement;' the 1947 Military Bases Agreement; and other similar treaties or commitments; "2. Those which are exempt under Section 17 of Presidential Decree No. 66; "3. Those which are exempt under Section 12 of Presidential Decree No. 87; "4. Those which are exempt under Section 12 of Presidential Decree No. 215; "5. Those which are exempt under Section 1 of the Presidential Decree No. 291; "6. Those which are exempt under Section 1 of Presidential Decree No. 529; "7. Those which are exempt under Section 15 of Presidential Decree No. 572; "8. Those which are exempt under Section 15 of Presidential Decree No. 604; "9. Those which are exempt under Section 15 of Presidential Decree No. 666; "10. Those which are exempt under Section 76 of Presidential Decree No. 768; "11. Those which are exempt under Section 76 of Presidential Decree No. 783; "12. Those which are exempt under Section 76 of Presidential Decree 972; "13. Those which are exempt under Section 18 of Republic Act No. 6234. "SEC. 2. The pertinent provisions of Presidential Decree No. 218, Presidential Decree No. 269, Presidential Decree No. 348, Presidential Decree No. 413, Presidential Decree No. 440, Presidential Decree No. 535, Presidential Decree No. 634, Presidential Decree No. 681, Presidential Decree No. 690, Presidential Decree No. 926, Presidential Decree No. 990, Presidential Decree No. 1159, Republic Act No. 720, Republic Act. No. 3470, Republic Act No. 4156, Republic Act. No. 5186, Republic Act. 6135, Republic Act No. 1161, Republic Act. No. 1370, Republic Act. No. 2640, Republic Act. 1370, Republic Act. No. 2640, Republic Act No. 3054, Republic Act No. 4690, Republic Act No. 4850, Republic Act. No. 6012 are hereby repealed or amended accordingly." Otherwise stated, the petitioner-appellant's contention is that private respondent is subject to the 5% compensating tax arguing that the beneficial effect of PD 1710 could not have extended the tax-exemption privilege since there was nothing extend. It is important to note that the above cited provisions of PD 1352 refers generally to all importations which are totally or partially exempt from customs duties and/or internal revenue taxes. On the other hand, the earlier quoted provisions of PD 791 and PD 1710 dealt only with the exemption from customs and tariff duties of the sugar industry and more specifically only with respect to their importations of machineries and spare parts, in other words the exemption covered by PD 791 refers to the importation of plant machinery, spare parts and other equipment directly and actually needed to be used in the development and operation of the sugar mill. It would seem therefore that a conflict arises between the aforementioned laws. It would thus appear that PD 1352 as amended by PD 1395 embraces a particular subject dealt upon in PD 791 and PD 1710, hence petitioner-appellant's assertion that PD 791 was repealed. However, petitioner seems to have overlooked the cardinal rule in statutory construction that a general law does not repeal a special law. As laid down in the case of Villegas vs. Subido, 41 SCRA 174: "More specially, a subsequent statute, general in character as to its terms and application, is not to be construed as repealing a special or specific enactment, unless the legislative purpose to do so manifest. This is so even if the provisions of the latter are sufficiently comprehensive to include what was set forth in the special act." And in the case of People vs. Palma (67 SCRA 243) the Court held: "A general law cannot repeal a special law by mere implication. The repeal must be express and specific. . . As correctly held by the Tax Court in its appealed decision: "The legislature is presumed to have known of the existence of prior statutes and where the later general statute does not present an irreconcilable conflict the prior special statute will be construed as remaining in effect as a qualification to the general law (U.S. v. Palacio, 33 Phil. 208, 1916). Nevertheless, even if the two acts are irreconcilable, it has been the rule that the special law controls the general law. Generalia specialibus non derogant. This rule is true even if the terms of the general law may be broad enough to include the matter in the special law. (Villegas vs. Subido, supra). Furthermore, it is now the settled rule in this jurisdiction that: ". . . a special status, providing for a particular case or class of cases, is not repealed by a subsequent statute, general in its terms, provisions and applications, unless the intent to repeal or alter is manifested, although the terms of the general law are broad enough to include the cases embraced in the special law" (Manila Railroad Co. vs. Rafferty. 40 Phil. 225). We disagree with the assertion of petitioner that P.D. No. 1352 as amended repealed P.D. 791. A closer look at the provisions of P.D. 1352 particularly Section 2 contains an express provision to repeal the different laws enumerated therein. It is significant to note that P.D. 791 was not among those mentioned under the said section. Likewise Sec. 4 of P.D. 1395 provides for the repeal of the different laws listed thereunder. The list is actually an amendment of Section 2 of P.D. 1352 in that it deleted other laws therefrom. No mention of P.D. No. 791 can be traced on these decrees in their enumerations of repealed on amended acts on those to which they would not apply. As correctly observed by the Tax Court it said: ". . . The lack of allusion to PD No. 791 in the repealing clause of PD No. 1352 as amended reveals the intent to save the decree from repeal. (Smith Bell & Co. vs. Mun. of Zamboanga, 55 Phil. 466, 1930). The fact that there was enumerated repeal of certain sections of several evidences an intent not to repeal by implication prior special laws. (Sutherland, Statutory Construction, vol. 1A PP 245-249, citing Banny vs. Knight, 296 III App. 277, 15 NE 2d 999, 1938)." (Decision p. 9). On the other hand, it is our opinion that repeal by implications does not exist. As held in the case of Villegas vs. Subido and Larga vs. Ranada: "It has been the constant holding in law that repeals by implication are not favored unless a manifest indication of this legislative purpose is expressed or actually contemplated (Villegas vs. Subido, L-31711, September 30, 1971, 41 SCRA 174). Recently, the Supreme Court reminded that implied repeals are not casually to be assumed (Larga v. Ranada, G.R. No. 79576, August 3, 1988). Finally, PD 791 continued existence is evident in PD 1710, despite the enactment of PD No. 1352 as amended. PD 1710 was enacted precisely for the purpose of amending PD 791. This is a clear acknowledgment by the Legislative that PD 791 has never been repealed for why will it go into amending a law if it has already been repealed. This can be gleaned from and a reiteration of the whereas clause of PD 1710 which was clearly and plainly expressed, the purpose of the decree was to extend the exemption period for another five years. Such decree (PD 1710) was motivated therefore as the tax court aptly stated in its decision by the state policy to give impetus to the continued growth and development of the sugar industry. With regards to the 1983 letter of Manuel H. Nieto, Jr. to the then President of Philippines through a marginal note, the tax court was correct in holding that the letter has important relevance in the instant case, as said letter in effect affirmed the intent of PD 1710 to grant tax exemption to particular importation of sugar mills by the President approving the request for exemption of Bukidnon Sugar Milling Co., Inc. As to petitioner's argument on retroactivity, their contention is untenable. As the Tax Court's decision correctly ruled, it said: "What is apropos here and should finally seal this controversy is the certification by the Ministry of Finance that petitioner is tax exempt from the payment of the 5% compensation tax imposed under PD. No. 1352 as amended (Exhibit "J"). This opinion rests on Memorandum No. 10-83 dated January 28, 1983 by the Presidential Executive Assistant Office of a rightful compression of the essence of the aforesaid letter and marginal note. Surely, this is another instance where the opinion of an official in government charged with the duty of administering and enforcing the law. (Pagbilao, Quezon, L-142 64, April 30, 1963, 7 SCRA 887)", (Decision p. 12). All told, WE sustain the view that the private respondent San Carlos Milling Corp. is exempted from payment of five (5) % compensating tax on its importation pursuant to said Decree PD 791 amended by PD 1710 and found to be entitled to claim for refund/tax credit. WHEREFORE, there being no cogent reason to reverse the decision appealed from, the same should, as it is hereby AFFIRMED. No costs. SO ORDERED. De Pano , Jr . and Vailoces, JJ., concur.