Davao Gulf Lumber Corp. v. Commissioner of Internal Revenue

THIRTEENTH DIVISION [CA-G.R. SP No. 34581. September 26, 1994.] DAVAO GULF LUMBER CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS , respondents . D E C I S I O N GONZAGA-REYES , J p : Petitioner has appealed from the decision of the respondent Court of Tax Appeals dated 21 June 1994, granting the claim for partial tax refund of petitioner under the provisions of Republic Act No. 1435 but reducing the amount of specific taxes to be refunded from one hundred twenty thousand eight hundred twenty-five and 11/100 pesos (P120,825.11) to two thousand nine hundred twenty-three and 15/100 pesos (P2,923.15). The antecedents as stated in the petition are as follows: "1. Petitioner is a duly licensed forest concessionaire with a Timber License Agreement duly entered into with then the Ministry of Natural Resources. During the period from 01 July 1980 through 31 January 1982, petitioner purchased from various oil companies/stations refined and manufactured mineral oils, motor fuels and diesel fuel oils which petitioner actually and exclusively used in connection with the exploitation and operation of its forest concession. 2. The various oil companies/stations paid and passed on to petitioner the specific taxes imposed under 153 and 156 (formerly Sections 142 and 145) of the 1977 National Internal Revenue Code ("NIRC), on refined and manufactured mineral oils, motor fuels and diesel fuels oils that said oil companies/stations sold to petitioner. 3. In accordance with the provisions of Republic Act No. 1435 and the decision of the Supreme Court in Insular Lumber Co. v. Court of Tax Appeals (G.R. No. L-31057, 29 May 1981), petitioner filed with the respondent CTA, on 03 December 1983, a claim for refund in the amount of One Hundred Twenty Thousand Eight Hundred Twenty-Five and 11/100 Pesos (P120,825.11), representing twenty-five percent (25%) of the specific taxes collected on refined and manufactured mineral oils, motor fuels, and diesel fuel oils that petitioner utilized in its operations as forest concessionaire, and computed as follows: DAVAO GOLF LUMBER CORPORATION July 1980 January 1982 Volume Product Specific 25% (liters) Cost Tax Refund Regular Gasoline 249,060.63 P1,211,822.23 P224,127,57 P56,031.89 Oil & Lubricants 114,328.56 1,038.048.00 91,462.85 22,865.71 Diesel 958,343.00 2,740,555.00 167,710.03 41,927.51 P4,990,425.23 P483,300.45 P120,825.11 4. In support of said claim for refund, petitioner submitted to respondent CIR the affidavits of its General Manager and three (3) disinterested persons, as well as that of the President of the Philippine Wood Products Association, attesting to the fact that the refined and manufactured mineral oils, motor fuels and diesel fuel oils that petitioner purchased from various oil companies/stations were actually used by petitioner in its exploitation and operation of its forest concession. 5. On 20 January 1983, petitioner seasonably filed with the respondent CTA a Petition for Review, entitled Davao Gulf Lumber Corporation v. Commissioner of Internal Revenue, docketed as CTA Case No. 3574, to prevent the lapse of the two-year prescriptive period for filing a claim for refund." (at pp. 4-6, Rollo) The respondent court granted the claim for partial tax refund but reduced the amount refundable to P2,923.15, ruling as follows: "Thus, with respect to lubricating oils and grease whose specific taxes were deemed paid on the date of their removal, the petitioner's claim for partial refund on oils and lubricants purchased delivered prior to January 20, 1981 had indeed prescribed. However, with respect to the other purchases of petroleum products whose specific taxes were deemed paid on the 15th day following their removal, only those which were purchased from January 5, 1981 or 15 days prior to January 20, 1981, may be considered in the petitioner's claim for partial refund. Furthermore, only those item which were included as claims in the administrative level may be given due course by this Court. Those purchases which were never brought to the attention of the respondent and are being claimed for the first time in this appeal may not be considered in the present claim for refund. (at pp. 36-37, Rollo) Petitioner claims that the respondent Court of Tax Appeals has decided a question of substance in a way not in accord with the provisions of applicable law and jurisprudence in that the respondent Court of Tax Appeals ruled that the basis for the computation of the refund of the specific taxes paid by the petitioner on its purchases of manufactured and diesel fuel oils should be the rates specified in Sections 1 and 2 of Republic Act 1435 and not the increased rates mandated by Sections 153 and 156 of the National Internal Revenue Code of 1977, and raises the following arguments: "I. THE RESPONDENT COURT OF TAX APPEALS FAILED TO APPLY THE SUPREME COURT'S DECISION IN INSULAR LUMBER CO. VS. COURT OF TAX APPEALS WHICH GRANTED THE CLAIM FOR PARTIAL REFUND OF SPECIFIC TAXES PAID BY THE CLAIMANT, WITHOUT QUALIFICATION OR LIMITATION. II. THE RESPONDENT COURT OF TAX APPEALS IGNORED THE INCREASE IN RATES IMPOSED BY SUCCEEDING AMENDATORY LAWS, UNDER WHICH THE PETITIONER PAID THE SPECIFIC TAXES ON MANUFACTURED AND DIESEL FUELS. III. IN ITS DECISION, THE RESPONDENT COURT OF TAX APPEALS RULED CONTRARY TO ESTABLISHED TENETS OF LAW WHEN IT LENT ITSELF TO INTERPRETING SECTION 5 OF R.A. 1435, WHEN THE CONSTRUCTION OF SAID LAW IS NOT NECESSARY. IV. SECTIONS 1 AND 2 OF R.A. 1435 ARE NOT THE OPERATIVE PROVISIONS TO BE APPLIED BUT RATHER, SECTIONS 153 AND 156 OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED. V. TO RULE THAT THE BASIS FOR COMPUTATION OF THE REFUNDED TAXES SHOULD BE SECTIONS 1 AND 2 OF R.A. 1435 RATHER THAN SECTIONS 153 AND 156 OF THE NATIONAL INT ERN AL REVENUE CODE IS UNFAIR, ERRONEOUS, ARBITRARY, INEQUITABLE AND OPPRESSIVE." (at pp. 8-9, Rollo) In essence, it is the position of the petitioner that the respondent court should have applied the rulings of the Supreme Court en banc in the cases of Insular Lumber Co. vs. Court of Tax Appeals (104 SCRA 710) and Commissioner of Internal Revenue vs. Atlas Consolidated Mining and Development Corp. (G.R. 93631, 12 Nov. 1990, Resolution of the Third Division) where the claims for refund of 25% of the specific tax paid by the two companies on gasoline and diesel fuel used for its mining operation were allowed by the Supreme Court, and without qualifying that the refund should not be based on the increased rates of taxes paid. The respondent court thus ignored the increase in specific tax rates mandated by subsequent mandatory laws, which amounts were actually paid by petitioner. Petitioner submits that the decision of the Supreme Court in the case of Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corp. (202 SCRA 157) was decided by a division and did not effectively modify the earlier rulings enunciated in the Insular and Atlas cases, which should still be the controlling doctrine and which expresses the better view being "logical, consistent and expressive of legislative intent". In view of the clear and unqualified provision that "twenty-five per centum of the specific tax paid thereon shall be refunded", it is erroneous, arbitrary and inequitable not to compute the tax refund on the basis of the amounts paid under Sections 153 and 156 of the National Internal Revenue Code, these being the effective provisions at the time petitioner paid the specific taxes on its purchases of manufactured and diesel fuel oils. We find no merit in the petition for review. We agree with the Solicitor General that the decision sought to be reviewed is in accordance with law and jurisprudence. The issue presented here is the same issue raised in the case of Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corp. and Court of Tax Appeals (202 SCRA 137) as modified in the Resolution of the Third Division dated March 25, 1992. In said case, the Supreme Court ruled that mining and logging companies are entitled to the refund privilege granted by Republic Act No. 1435 on specific taxes on manufactured and diesel fuel oils paid up to 1985, before the Highway Special Fund was abolished, but held that Rio Tuba's claim for refund should be computed "on the basis of the amounts deemed paid under Sections 1 and 2 of R.A. No. 1435, without interest". It stated: "Since the private respondent's claim for refund covers specific taxes paid from 1980 to July 1983 then we find that the private respondent is entitled to a refund. It should be made clear, however, that Rio Tuba is not entitled to the whole amount it claims as refund. The specific taxes on oils which Rio Tuba paid for the aforesaid period were no longer based on the rates specified by Sections 1 and 2 of R.A. No. 1435 but on the increased rates mandated under Sections 153 and 156 of the National Inter na l Revenue Code of 1977. We note however, that the latter law does not specifically provide for a refund to these mining and lumber companies of specific taxes paid on manufactured and diesel fuel oils. In Insular Lumber Co. v. Court of Tax Appeals, (104 SCRA 710 [1981]), the Court held that the authorized partial refund under section 5 of R.A. No. 1435 partakes of the nature of a tax exemption and therefore cannot be allowed unless granted in the most explicit and categorical language. Since the grant of refund privileges must be strictly construed against the taxpayer, the basis for the refund shall be the amounts deemed paid under Sections 1 and 2 of R.A. No. 1435." (at pp. 552-553, 207 SCRA) The above resolution was clarified in a subsequent resolution dated June 15, 1992, * in this manner: "A careful consideration of Rio Tuba's motion for clarification shows that it prays for a 'clarification' favorable to it or a modification of our resolution granting the claim for refund but only on the amounts deemed paid under Sections 1 and 2 of Republic Act (RA) No. 1435. The motion for clarification is actually a motion for reconsideration. 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 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 manufactured oils paid by miners or forest concessionaires. There is a difference in the refund privilege 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 42 increasing the tax rates, the basis for the refund will accordingly be adjusted. "Significantly, the refund privilege granted to miners or 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 on the specific tax rates provided notwithstanding future rate increase. All the 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." (at pp. 57-58, Rollo) Since the issue presented here was squarely raised resolved in the Rio Tuba case, the respondent court committed no error in applying the doctrine therein laid down. As to whether the decisions of the Supreme Court in the Insular Lumber and Atlas cases, which were rendered by the Supreme Court en banc may be modified by the decision and resolution in the Rio Tuba case, which was promulgated by the Third Division of the Supreme Court, the petitioner's Reply does not dispute the Solicitor General's Comment that this is being raised for the first time in this appeal, and the decision under review bears this out. Accordingly, this matter is not proper for resolution in this petition for review. Moreover, the suggestion in the petition that a decision rendered by a Division of the Supreme Court may be "reopened anytime" because it cannot modify or reverse a decision of the said Court rendered en banc, may not properly be taken up by this Court in this petition. This matter is not cognizable by this Court in this petition. The court further notes from a reading of the decision of the respondent court that the primary basis for the reduction in the amount claimed as partial refund is prescription (with respect to the refund on oils and lubricants purchased prior to January 20, 1981) and the fact that some items claimed were never brought to the attention of the Commissioner of Internal Revenue (in the administrative level) and are being claimed for the first time on appeal. These bases are not disputed in the present petition for review where the principal legal question raised concerns the applicability/validity of the Rio Tuba ruling. WHEREFORE, finding no error in the judgment appealed from, the same is AFFIRMED. SO ORDERED. Montenegro and Magtolis , JJ ., concur. Footnotes * Quoted in Petition for Review and Comment filed by Respondents.