Commissioner of Internal Revenue v. Court of Tax Appeals

[CA-G.R. SP No. 22334. January 13, 1993.] (C.T.A. Case No. 3 52 2) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . HON. C OURT OF TAX APPE ALS and ZAMBOANGA WOOD PRODUCTS, INC. , respondent . D E C I S I O N BENIPAYO , J p : This is an appeal from the decision of the Court of Tax Appeals in C.T.A. Case No. 3522 granting the claim for refund by Zamboanga Wood Products, Inc. in the amount of P832,900.10, representing 25% of all specific tax it paid on refined and manufacturing mineral oils, motor fuels and diesel fuel oils it actually used for the period July 1, 1980 to may 31, 1982. Private respondent Zamboanga Wood Products, Inc. is a corporation organized and existing under Philippine laws and a duly licensed forest concessionaire with a timber license agreement with the then Ministry of Natural Resources covering an area of 47,350 hectares of public forest in the Municipality of Ipil, Zamboanga del Sur. On September 20, 1982, private respondent filed with the Bureau of Internal Revenue its application for refund on specific taxes paid on refined and manufactured mineral oils, motor fuels and diesel fuel oil it had purchased from Mobil Oil Phils., Inc. from July 1980 to May 1982. Private respondent's claim for refund was premised on Section 5 of Republic Act No. 1435 and the decision of the Supreme Court in Insular Lumber Co. vs. Court of Tax Appeals, (L-31057, 29 May 1981, 104 SCRA 710). In support of its claim, private respondent submitted a summary of its total purchases from Mobil Oil Phils. Inc., and the affidavits of its president and four (4) disinterested persons attesting to the fact that the petroleum products were actually utilized in its operations. In his letter dated 30 January 1984, the then Acting Commissioner of Internal Revenue rejected with finality private respondent's claim for refund on the following reasons: "It is our view that in order to avail of the benefits of partial tax refund mentioned in said Act, there must also be a municipal or city ordinance which imposes an additional tax of not exceeding 25% of the regular specific tax levied under Section 142 and 145 of the Tax Code, in the place of your operations. In other words, refund will arise only after the enactment of the municipal or city ordinance levying on the additional tax and the subsequent payment of the tax in question. In fine, it is no longer the national tax that is being refunded but only the 25% local additional tax. "With the issuance however of Presidential Decree Nos. 231 and 426 dated June 28, 1973 and March 30, 1974, respectively, cities and municipalities can no longer levy any additional tax on articles subject to the specific tax. Consequently, and as the refund sought entirely depends on the exercise of such powers, partial refund of specific tax payments on the fuel oils used in logging and mining can no longer be authorized. The enactment of Presidential Decree No. 711 which took effect on July 1, 1975 further bolstered our stand on the matter because that Decree abolished all special and fiduciary funds. Since R.A. No. 1435 was precisely passed by Congress to provide the means of increasing the Highway Special Fund, said Decree has in effect repealed said R.A. No. 1435 hence, the same can no longer be invoked as the basis for instituting claims for refund of alleged overpaid specific tax." (Records, p. 232) Disagreeing with petitioner Commissioner of Internal Revenue, respondent Court of Tax Appeals in its decision dated 15 May 1987 granted private respondent's claim for refund even as it concluded that Section 5 of R.A. No. 1435 has not been repealed or abrogated. A Petition to review the decision of the Tax Court was originally filed with the Supreme Court. However, in its resolutions dated 25 April and 09 July 1990, the First Division of said Court referred the matter to us for consideration and adjudication on the merits in accordance with the doctrine laid down in Development Bank of the Philippines v. Court of Appeals, G.R. No. 86625, 22 December 1989, upholding the jurisdiction of this Court to review decisions of respondent Court of Tax Appeals. Hence this appeal where we are asked to resolve the following issues: 1. Whether the privilege of a partial refund of specific tax paid on oils used in mining operation/forest concessions as provided under Section 3 of R.A. 1435 presently subsists. 2. Assuming arguendo, that the privilege of partial refund of specific tax subsists, the tax court erred in computing and granting the 25% of the total specific tax due to private respondent. We resolve the first issue in the affirmative. Section 5 of R.A. No. 1435 reads: "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 sub-paragraphs 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." Petitioner argues that no refund could be availed of under the cited provision unless there had been a concomitant levy of additional tax on manufactured oils imposed by municipal boards and city councils within their territorial boundaries. Reference is made to the provision of Section 4 of the same act which, mandates that, "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 an additional tax of not exceeding twenty-five percent 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". In the absence therefore of any municipal or city ordinance imposing an additional tax on herein private respondent, petitioner maintains that the refund privilege granted by R.A. No. 1435 could not be availed of. We disagree. A careful reading of the sections cited plainly shows that the refund privilege was not conditioned on the prior impositions or payment by the taxpayer of any additional local tax. This was precisely the holding of the Supreme Court in Commissioner of Internal Revenue vs. Atlas Consolidated Mining and Development Corp., et al., G.R. No. 93631: "A reading of the legislative proceedings leading to the enactment of R.A. 1435 shows that mining and lumber concessionaires were granted partial refund of specific taxes because the gasoline and fuel they consume is mostly used in their own compounds and roads. RA 1435 gave these concessionaires relief, in the form of a tax refund, since their trucks and vehicles seldom ply the national highways, the construction of which is funded by the specific tax collected by the national government. There is therefore no rationale in conditioning the grant of refund on the payment of these mining or lumber concessionaires of any additional local tax. "Moreover, Section 5 states 'that the 25% specific tax shall be refunded by the Collector of Internal Revenue.' Since it is the latter who collects the specific taxes due to the national government, then it follows that the refund refers to a refund of the specific taxes paid to the national government, not the specific taxes paid to the local government." (Resolution dated 12 November 1990) Petitioner next posits the view that presidential issuances (Presidential Decree Nos. 314, 392, 436, 874, 1122, 550 and 1672, and Executive Order Nos. 900. 672 and 919) promulgated subsequent to RA 1435 and which provided for the corresponding increases in the rates of specific tax to generate adequate revenue for the construction and improvement of roads, bridges and other infrastructures impliedly revoked the grant of partial refund under the former law. Petitioner labors under the misimpression that the grant under Section 5 of RA 1435 defeats the very purpose of the rate increases and runs counter to the declared policy to accelerate the economic and social development of the country. Again we disagree. As a rule, courts frown upon repeal by implication unless there is a showing of repugnancy clear and convincing in character, and that the intent of the legislators is manifest. (Velunta vs. Chief, Philippine Constabulary, 157 SCRA 147 [1988]) In the instant case, there is nothing in the quoted presidential issuances which warrants the application of the cited exception. Verily, "the purpose for the increase in the rate of the tax cannot in anyway negate the policy behind that grant of partial refund. The Court sees no inconsistency between the increase in specific tax rates and the retention of the refund privilege. In fact, with the increased specific tax rates, the grant of partial refund to mining and lumber concessionaires is made more imperative considering that they seldom use the highways, the construction of which are financed by specific taxes". (Commissioner of Internal Revenue vs. Atlas Consolidated Mining and Development Corp., et al., supra.) Petitioner's other contention that the abrogation of the power of local government units to levy and collect additional specific taxes on petroleum products under the Local Tax Code, as amended by the National Internal Revenue Code (NIRC) of 1977, also amounted to an implied repeal of Section 5 of RA 1435 is not valid. Since there is no manifest showing of inconsistency between these statutes, and since the refund privilege is not premised on the taxing power of the local government until concerned, we sense no cogent reason why petitioner's argument should be regarded differently. Even so, petitioner urges that Presidential Decree No. 711 which abolished all special and fiduciary funds repealed RA 1435 and revoked the refund privilege. This point has been settled by the Supreme Court in Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corporation and the Court of Tax Appeals, G.R. Nos. 83583-84 when it held thus: "Despite the mandate of P.D. No. 711, however, several special funds were still retained and the Highway Special fund was one of them. "Proof that some of these special and fiduciary funds were retained may be extracted from the provisions of P.D. No. 1741 dated October 31, 1980 which governs the computation of national internal revenue allotments to local government units. Section 2 of said decree provides: 'Sec. 2. Magnitude of Assistance A maximum of twenty per cent (20%) of national internal revenue taxes shall be available for national assistance to local government units. Provided, That the national revenue used a basis in computation shall exclude receipts accruing to Special or Fiduciary funds and to Special Accounts in the General Fund, amounts authorized by law to be used by the collecting agency, and amounts recorded as income of the General Fund but which are charged to appropriations in the General or other Appropriations Laws.' "The Internal Revenue Allotments annually prepared by the Bureau of Internal Revenue in accordance with the foregoing decree showed that the Highways Special Fund continued its existence up to 1985 and was channeled to the General Fund only in 1986. "It is not clear why the Highway Special Fund was maintained for 10 years after the effectivity of P.D. No. 711 or why it was abolished in 1986. The stark fact remains that it retained its status as a special fund up to 1985. "With the foregoing consideration, we cannot therefore state with definiteness that it was P.D. No. 711 which impliedly repealed Section 5 of R.A. No. 1435. We can however safely conclude that Section 5 of R.A. No. 1435 is now an anachronism because the Highway Special Fund, after 1985 no longer exists." (Resolution dated 25 March 1992) The claim for refund in the instant case covers specific taxes paid from July 1980 to May 1982 and while the Highway Special Fund was still in force. Consequently, private respondent taxpayer is entitled to a refund. Anent the total amount recoverable by private respondent, the evidence shows total purchases of diesel, gasoline and lubricating oils within the above mentioned period in the aggregate volumes equivalent to 11,270,000 liters, 174,310 liters and 751,648 liters, respectively (Exhibit GB). Private respondent thus paid the corresponding specific taxes on these petroleum products based on the tax rates specified under Sections 153 and 156 of the 1977 NIRC. Petitioner here argues that since the total specific tax paid based on these rates amounted to P1,567,528.40, 25% thereof or P391,882.10 is the proper amount to be refunded and not P832, 900.10 as ordered by respondent Court of Tax Appeals. In order to determine the amount of refund mandated by Section 5 of RA 1435, the Supreme Court has ruled that the tax paid must be based on the rates enumerated under Sections 1 and 2 of RA 1435, and not on the increased rates defined under Sections 153 and 156 of the 1977 NIRC as urged by private respondent. Confronted with substantially the same issue in the Rio Tuba case, the Supreme Court reasoned thus: "Rio Tuba's contention that the refund should be based on the rates effective at the time the specific tax was paid is without merit. Section 1 of RA 1435 amended Section 142 of the National Internal Revenue Code providing for increased rates on specific taxes. Section 142 of the NIRC incorporated the refund privilege on specific taxes paid on manufactured oils which are used in agriculture and aviation. Section 5 of RA 1435 provided for a refund privilege on specific taxes on manufacturing oils paid by miners or forest concessionaires. There is a difference in the refund privileges of those engaged in agriculture and aviation on one hand, and miners or forest concessionaires on the other. Since the refund privilege of the former is incorporated in Section 142, then upon any amendment of Section 142 increasing the tax rates, the basis for the refund will accordingly be adjusted. "Significantly, the refund privilege granted to miners and forest concessionaires is not incorporated in Section 142 but is found in Section 5 of RA 1435. There is thus an intent on the part of the legislature to use the specific tax rates provided in Section 1 as the sole basis for refund, notwithstanding future rate increases. "All sections of RA 1435 must be read as a whole. In the absence of any express provision of law, the refund privilege granted to miners and forest concessionaires in Section 5 must be construed as based on the specific tax rates provided in Section 1." (Second Resolution dated 15 June 1992) WHEREFORE, judgment is hereby rendered modifying the appealed decision. Private respondent's claim for refund should be computed on the basis of the amounts deemed paid using the rates under Sections 1 and 2 of Republic Act No. 1435, without interest. SO ORDERED. Camilon and Martin, Jr ., JJ ., concur.