Bogo Medellin Milling Co., Inc. v. Commissioner of Internal Revenue

[CA-G.R. SP No. 25954. March 18, 1994.] (C.T.A. Case No. 4106) BOGO MEDELLIN MILLING CO., INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS , respondents . D E C I S I O N MARTIN , JR ., J p : This is an appeal by way of a petition for review from the decision dated May 28, 1991 of the Court of Tax appeals in C.T.A. Case No. 4106 entitled Bogo-Medellin Milling Company, Incorporated, petitioner, versus, Commissioner of Internal Revenue, respondent, an action involving a claim for refund or tax credit, the decretal portion of which reads as follows: "WHEREFORE, the claim for refund/tax credit by petitioner Bogo-Medellin Company, Incorporated is hereby denied. With costs against petitioner. SO ORDERED." (p. 9, CTA Decision: p 33, Rollo) The factual and procedural antecedents, as disclosed by the pleadings and the record of the Court below, are as follows: Bogo-Medellin Milling Company, Incorporated (hereinafter referred to as BMMCI) is a domestic corporation duly licensed to engage in the business of manufacturing, milling, processing and refining sugar with principal office at Luy-a, Medellin, Cebu (p. 1, Petition; p. 2, Rollo; p. 1, CTA Decision; p. 25, Rollo). In the course of its sugar milling operations, particularly during the period from January to May 1985, BMMCI was able to import one (1) case parts for English electrical diesel generator set valued at $2,315.38 (Exhibit E, p. 51, Original Records), one (1) box parts for W.S sugarmill contrifugal supplied by the Western State Machine, U.S.A (Exhibits I & M and pp. 62, 67, and 78, id .), and three (3) cases cane carrier chain valued at $6,498.71 (Exhibit R, p. 72, id ) and, from their respective assessments made by the Bureau of Customs, BMMCI accordingly paid the taxes due thereon in the total amount of P64,648.90 as evidenced by Official Receipts Nos. 557651 dated January 4, 1985, 553497 dated January 28, 1985, 582620 dated February 12, 1985, 582421 dated April 9, 1985, 558000 dated March 12, 1985, 613548 dated May 24, 1985, 557652 dated January 4, 1985 and 553472 dated January 28, 1985 respectively (Exhibits B, D, H, L, O, Q, T, and V, pp. 53, 56, 61, 66, 71, 74, and 77, id .). On March 21, 1986, BMMCI thru its Tax Manager filed with the Bureau of Internal Revenue (BIR for brevity) a claim for refund of the amount of P64,648.00 representing the compensating tax erroneously paid by it, contending substantially that pursuant to Fiscal Incentives Review Board (FIRB) Resolution No. 53-85 dated October 1, 1985, it is exempt from the payment of compensating tax, BMMCI claimed that the tax and duty exemption privileges of sugar millers granted under Presidential Decree No. 791, as amended, although later withdrawn by Presidential Decree No. 1955 effective October 15, 1984, were restored by FIRB Resolution No. 53-85 dated Oct. 1, 1985 with respect to the imported articles which arrived in the Philippines on or before June 30, 1985 (Letter to BIR dated March 13, 1986, pp. 6-7, id .). While the claim for refund was still pending, BMMCI filed with the court a quo a petition for review on the same allegations contained in its earlier request for refund, considering that the BIR had no action yet on its aforesaid claim (pp. 1-4, Petition for Review; pp. 2-5, id .). In his answer, the Commissioner of Internal Revenue (CIR for short) admitted some of the material allegations of the position but denied the veracity of the alleged refundable amount as the same is still subject to the usual verification by the BIR. By way of special affirmative defenses, he averred among others that there was no showing the imported machinery and equipment were directly related to BMMCI's business as a miller of sugar; that BMMCI's claim for refund and/or tax credit is still under investigation, that the tax payment in the amount of P64,648.00 was collected in accordance with law; that it was incumbent upon petitioner BMMCI to show the taxes paid were erroneously collected and failure to sustain said burden is fatal on its action for refund since its claim is in the nature of a tax exemption; and that BMMCI has to prove it has complied with the provisions of Section 292 and 295 of the Tax Code of 1977, as amended. Accordingly, BMMCI prayed for the dismissal of the petition as well as for other reliefs and costs of the suit (pp. 1-3, Answer; pp. 19-21, id .). At the trial, the BMMCI formally offered its documentary and testimonial evidences to support its claim for tax refund and/or tax credit (pp. 38-50, id .). Thru the Office of the Solicitor General, the CIR in his current dated August 28, 1989 (pp. 107-108, id .) assailed the veracity of their contents as well as the individual purpose for which they were offered in evidence. It was further averred that the alleged payments made by the BMMCI were still subject to verification with the Accounting Division of the BIR (p. 107. id.). After the reply of the BMMCI, the court a quo admitted in evidence BMMCI's exhibits, and set the case for a hearing for respondent CIR's presentation of evidence (p. 113, id .). Considering the unavailability of the BIR's investigative reports on BMMCI's claim for refund and after having postponed the hearing several times, respondent CIR was constrained to submit the case for decision based on the pleadings, the court records, as well as petitioner's evidence (p. 118, ibid .). The parties were allowed to file their respective memoranda. In time, the court a quo handed down its decision as earlier adverted to. Hence, the instant appeal by BMMCI alleging that the court a quo erred in not holding that petitioner is exempt from payment of compensating tax on its importations subject of this case in accordance with P.D. No. 791, as amended by P.D. No. 1710, as well as under P.D. No. 1955, and the interpretation given by the Department of Finance as confirmed by the Fiscal Incentives Review Board. After a careful study of the records of the instant case, the provisions of law in point and the applicable jurisprudence. We find the petition devoid of merit. The main thrust of the instant petition is on the crucial issue of whether or not petitioner BMMCI is exempted from the payment of compensation tax on its importation of plant machinery, spare parts and equipment in accordance with FIRB Resolution No. 53-85 dated October 1, 1985 notwithstanding the promulgation of Presidential Decree No. 1955 effective October 13, 1984 withdrawing, subject to certain conditions, the duty and tax exemption privileges previously granted to those engaged in the business of manufacturing, milling, processing or refining of sugar, such as petitioner herein, under Presidential Decree no. 791, as amended by Presidential Decree No. 1710. The pertinent provisions of Presidential Decree No. 791, as amended by Pres. Decree No. 1710, read as follows: "Section 1. Any person, partnership company or corporation who or which is now engaged or shall engage in the business of manufacturing, milling, processing or refining of sugar shall be exempted from the 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 the approval of this Decree until June 30, 1985. Section 2. The exemption under this Decree shall cover only the importation of plant machinery, spare parts and other equipment, including read building equipment, sugarcane transport, agricultural tractors and implements thereof, directly and actually needed and to be used exclusively in the development of the factory site and in the production, manufacture, milling, processing or refining of sugar by the grantee of the exemption under this Decree, if the shipping documents covering the importation are in the name of tax-exempt firms to whom the goods shall be delivered by the customs authorities." Under the afore-quoted provisions, importations of plant machinery, spare parts and other equipment needed in the manufacture, milling, processing or refining of sugar, are exempted from the payment of compensating tax, among others. Subsequently, however, Presidential Decree No. 1955, effective October 18, 1984, was promulgated, withdrawing, subject to certain conditions, the duty and tax privileges granted to private business enterprises and/or persons engaged in any economic activity. The pertinent provisions of Presidential Decree No. 1955 are quoted, to wit: "Section 1. The provisions of any special or general law to the contrary notwithstanding, all exemptions from/or any preferential treatment in the payment of duties, taxes, fees, imposts and other charges theretofore granted to private business enterprises and/or persons engaged in any economic activity are hereby withdrawn, except those enjoyed by the following: (a) Those registered by the Board of Investments under Presidential Decree No. 1789, as amended by Batas Pambansa Blg. 391, and those registered by the Export Processing Zone Authority under Presidential Decree No. 66, as amended by Presidential Decree Nos. 1449, 1776, 1776-A and 1786; (b) The copper mining industry in accordance with the provisions of LOI No. 1416; (c) Those covered by international agreement to which the Philippines is a signatory; (d) Those covered by the non-impairment clause of the Constitution; and (e) Those that will be approved by the President of the Philippines upon the recommendation of the Minister of Finance." It is the position of petitioner BMMCI that Presidential Decree No. 791, as amended by Presidential Decree No. 1710, being a special law, could not have been impliedly repealed by Presidential Decree No. 1955, a general law. We do not agree. The premise of a repeal by implication is not correct. Presidential Decree No. 1955 expressly withdraw, subject to certain conditions, the duty and tax privileges granted to private business enterprises, as well as to persons engaged in any economic activity, except as to those enumerated therein as beneficiaries. Moreover, Presidential Decree No. 1955 enumerated specifically the private business enterprises and/or person engaged in economic activity whose exemption from the payment of taxes or whose preferential treatment in the payment of taxes, duties, fees imports and other charges are retained. It is clear from a perusal of the aforesaid enumeration that beneficiaries of the tax exemption privileges under Presidential Decree No. 791, as amended by Presidential Decree No. 1710, are not included. There can be no doubt therefore that the tax-exempt importation privileges granted under Presidential Decree No. 791, as amended, were withdrawn under clear and unequivocal terms. It must be noted that the language of the first paragraph of Section 1 of Presidential Decree No. 1955 covers any special or general law whose provision may run counter to said decree. The intention to repeal or alter is plain and manifest. As respondent Tax Court aptly said and We quote: "Applying the above-quoted ruling to the case at bar, it would seem as it is fact, that as of October 15, 1984, when P.D. 1955 was promulgated, petitioner Bogo-Medellin Milling Co., Inc. had ceased to enjoy tax exemption privileges. In other words P.D. 1955 had the effect of cutting short the effectivity of P.D. 791, as amended by P.D. 1710." (CTA Decision, pp. 8-9) Petitioner next argues that even under Presidential Decree No. 1955, it enjoys exemption from the payment of duties, taxes, fees, imports and other charges, since it is a private business enterprise with a tax exemption confirmed by FIRB Resolution No. 53-85 whose chairman was the then Minister of Finance, an alter ego of the President of the Philippines. The argument is without merit. The tax exemption claimed by petitioner BMMCI has never been approved by the President of the Philippines. The fact that it was approved by the Fiscal Incentives Review Board (FIRB) under its Resolution No. 53-85 does not make it a tax exemption approved by the President of the Philippines upon recommendation of the Minister of Finance. It must be remembered that tax exemptions are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority (Philippine Petroleum Corporation vs. Municipality of Pililia, 198 SCRA 82, 90). Tax exemptions are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 121). Accordingly, in the absence of a clear and express exemption, petitioner's claim must be denied. Petitioner finally contends that respondent tax court erred in not giving credence to the interpretation by the Department of Finance on petitioner's tax exemption as confirmed by FIRB Resolution no. 53-85. There can be no disagreement on the proposition that he power to tax, which includes the power to exempt therefrom, is essentially a legislative prerogative. It is the law-making body which can grant an exemption (Philippine Petroleum Corp. vs. Mun. of Pililia, Rizal, 198 SCRA 82, 90). In this regard, it has been held that the Fiscal incentives Review Board (FIRB) has no authority to impose taxes or revoke existing once. Under its charter, P.D. No. 776, the FIRB is empowered merely to recommend tax exemptions but by itself cannot grant such exemptions (National Power Corporation vs. Province of Albay, et al., 186 SCRA 198, 203) * At any rate, Presidential Decree No. 1955 did not empower either the Minister of Finance or the Fiscal Incentives Review Board (FIRB) to restore, partially or totally, the tax exemption privileges withdrawn expressly under its Section One. It appears that it was only on December 17, 1986 when Executive Order No. 93, Series of 1986, that the FIRB was authorized to restore tax and/or duty exemptions withdrawn (Resolution of the Supreme Court dated June 8, 1993 in Ernesto N. Maceda vs. Hon. C. V. Macaraig, Jr., et al., G.R. No. 68291, pp. 17-19). A construction given to a statute by an administrative agency or official charged with the application of that statute is entitled to respect and is accorded weight by the courts unless such interpretation is in sharp conflict with the governing statute (Nestle Philippines, Inc. vs. Court of Appeals, 203 SCRA 504, 510).Thus, even if FIRB Resolution No. 53-85 were considered as an interpretation placed by the then Minister of Finance, the same cannot bind the courts in the face of the clear language of Section 1 of Presidential Decree No. 1955, which provided for the withdrawal of tax exemptions of private business enterprises and/or persons engaged in any economic activity. In view of the preceding disquisition, We find no cogent reason to deviate from the well-entrenched rule that the findings of fact and conclusions of the tax court are entitled to respect in the absence of showing of gross error or an improvident exercise of its authority (Nasiad and Lozada vs. Court of Tax Appeals, 61 SCRA 238, 244) and can only be disturbed on appeal if not supported by substantial evidence (Sy Po vs. Court of Appeals, 164 SCRA 524, Parag. No. 8, Supreme Court Circular no. 1-91; CIR vs. Cadwallader Pacific Company, 73 SCRA 59, 75). WHEREFORE, finding no error of fact of law committed by the respondent court that will warrant a reversal or modification of the decision sought to be reviewed, the petition for review is DENIED DUE COURSE and is DISMISSED for lack of merit. No pronouncement as to costs. SO ORDERED. Elbinias and Guerrero, JJ., concur. Footnotes * In Maceda vs. hon. C. V. Macaraig, Jr., et al., 197 SCRA 771, 749, the Supreme Court held that FIRB Resolutions Nos. 10-85 and 1-86, having been approved by the Minister of Finance, pursuant to Section 2, Presidential Decree No. 1931, are valid and binding. To this extent, the decision in NPC vs. Province of Albay et al., was superseded or modified.