Philex Mining Corp. v. Commissioner of Internal Revenue

THIRD DIVISION [CA-G.R. SP No. 34988. May 18, 1995.] (CTA Case No. 3547) PHILEX MINING CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS , respondent . D E C I S I O N GARCIA , J p : This is a petition for review of the decision, dated August 4, 1994, of the respondent Court of Tax Appeals in C.T.A. Case No. 3547, denying petitioner's claim for tax refund in the sum of P623,169.30, representing 25% of the specific taxes paid by the petitioner on its purchases of gasoline, oils and lubricants, diesel and fuel oils pursuant to Section 5 of Republic Act No. 1435 (An Act To Provide Means For Increasing the Highway Special Fund), in relation to then Sections 142 and 145 of the National Internal Revenue Code. The facts are as follows: During the period from July 1, 1980 to December 31, 1981, petitioner, a domestic corporation engaged in mining, purchased from several oil companies refined and manufactured mineral oils, motor fuels and diesel fuel oil. For those purchases, petitioner paid specific taxes amounting to P2,492,677.22. On October 22, 1982, believing that it is entitled to the 25% refund on the specific taxes paid by it, as mandated by Section 5 of Republic Act No. 1435, petitioner filed a claim for refund, dated October 18, 1982, with the Commissioner of Internal Revenue in the total amount of P623,169.30, representing 25% of its total specific tax payments of P2,492,677.22. To substantiate its claim, petitioner presented the affidavits of its president, purchasing manager and the representatives of two other licensed mining corporation, all attesting to the fact that for the period from July 1980 to December 1981, petitioner used in its mining operations refined and manufactured mineral oils, motor fuels and diesel fuel oil for which it paid the specific taxes subject of its claim. On November 16, 1982, without waiting for the Commissioner of Internal Revenue to resolve its claim but in order to toll the running of the 2-year prescriptive period under Section 230 (formerly Section 292) of the National Internal Revenue Code within which a claim for refund must be judicially made, petitioner filed a petition for review with the respondent court, allegedly because the Commissioner of Internal Revenue refused to act favorably on its claim. Therein, petitioner prayed for a judgment ordering the Commissioner of Internal Revenue to pay its claim for refund in the sum of P623,169.30, with 20% interest per annum, plus the costs of suit. On August 4, 1994, the respondent court rendered the challenged decision granting the petitioner's claim but only the extent of P16,747.36, thus: "WHEREFORE, the respondent, COMMISSIONER OF INTERNAL REVENUE is hereby ordered to REFUND in favor of petitioner, PHILEX MINING CORP., the sum of P16,747.36 without interest, equivalent to 25% partial refund of specific taxes paid on its purchases of gasoline, oils and lubricants, diesel and fuel oils pursuant to the provision of Section 5 of Republic ActNo.1435, in relation to Section 142 (b) and (c) of the National InternalRevenueCode and Section 145 as prescribed under Sections 1 and 2 of R.A.1435. No pronouncement as to costs. SO ORDERED". Obviously dissatisfied with the nominal amount ordered refunded by the respondent court of instead of its entire claim of P623,169.30, plus interest, petitioner has come to this Court via the present recourse, contending that (1) the respondent court failed to apply the Supreme Court decision in Insular Lumber Co. vs. Court of Tax Appeals, 104 SCRA 710 [1981], which granted the claim for partial refund of specific taxes paid by the therein claimant, without qualification or limitation as to amount; (2) the respondent court ignored the increase in rates of specific taxes imposed by succeeding amendatory laws, under, which covered by its claim; (3) the respondent court ruled contrary to established tenets of law when it lent itself to interpreting section 5 of R.A. No. 1435 which does not need any constructing; (4) Sections 1 and 2 of R.A. 1435 are not the operative provisions to be applied but rather, Sections 142 and 145 of the National Internal Revenue Code, as amended; and (5) it is unfair, erroneous, arbitrary, inequitable and oppressive to compute, as what the respondent court did, the amount of refundable specific taxes on the basis of Sections 1 and 2 of R.A. 1435 rather than Section 153 and 156 of the National Internal Revenue Code. There is no question that petitioner is entitled to a 25% tax refund on the amount of specific taxes paid by it on oil products used in its mining operations during the period covered by its claim. This is so provided in Section 5 of Republic Act No. 1435 which reads: "SEC. 5. The proceeds of the additional tax on manufactures 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 InternalRevenueCode . . ." In fact, petitioner's entitlement to the refund finds judicial supports in the cases of Insular Lumber Company vs . Court of Tax Appeals and Commissioner of Internal Revenue , 104 SCRA 710 [1981], and Commissioner of Internal Revenue vs . Atlas Consolidated Mining & Development Corp., et al., G.R. No. 93631, Nov. 12, 1990. The question, however, lies on the amount of specific taxes refundable to the petitioner, the resolution of which actually hinges on the determination of the more decisive question of where to base the 25% tax refund allowed by the statute. The respondent tax court ruled that the 25% refund should be based on the rates of specific taxes specified in Sections 1 and 2 of Republic Act No. 1435. Hence, the reduced amount ordered refunded to the petitioner. On the other hand, petitioner maintains that said percentage of refund should be computed on the basis of the increased rates of specific taxes mandated in Sections 153 and 156 of the Internal Revenue Code of 1977, as amended; hence, its insistence for the entirety of its claim. We sustain the respondent court. The issue of which rate of specific taxes those specified in Sections 1 and 2 of Rep. Act. No. 1435 or the increased rates under Sections 153 and 156 of the Revenue Code of 1977, as amended should be made the basis for computing the 25% tax refund allowed under Section 5 Rep. Act. No. 1435 is not one of first impression. Said issue has been resolved by the Supreme Court in its Resolution of March25,1992 in the case of Commissioner of Internal Revenue vs . Rio Tuba Nickel Mining Corporation and the Court of Tax Appeals , 207 SCRA 549. In said Resolution which granted RioTuba's motion for reconsideration of the Court's earlier decision denying RioTuba's claim for refund under Section 5 of Rep. Act. No. 1435 (202 SCRA 137), the High Court categorically ruled that "the basis for the refund shall be the amounts deemed paid under Sections 1 and 2 of R.A. No. 1435", even as the same Court found that the specific taxes paid by Rio Tuba on oils used in its operation were based, as in the instant case, on the increased rates mandated under Sections 153 and 156 of Internal Revenue Code of 1977. This is so because, according to the High Court, the Internal Revenue Code of 1977, particularly Sections 153 and 156 thereof, "does not specifically provide for a refund to these mining and lumber companies of specific taxes paid on manufactured and diesel fuel oils." Consequently, and consistent with its pronouncement in the earlier case of Insular Lumber Co. vs . Court of Tax Appeals, et al., 104 SCRA 710, that "the authorized partial refund under Section 5 of R.A. 1435 partakes of the nature of a tax exemption and therefore cannot be allowed unless granted in the most categorical language", the High Court, in its said Resolution of March 25, 1992 in RioTuba , held that the refund privilege "must be strictly construed against the taxpayer" and accordingly ruled that the "basis for the refund shall be the amount deemed paid under Sections 1 and 2 of R.A. 1435". The foregoing was even made clearer by the same Court in its subsequently Resolution of June 15, 1992 in connection with the motion for clarification filed by RioTuba Nickel Mining Corporation relative to the Court's Resolution of March25,1992. Says the High Court in its Resolution of June 25, 1992: "A careful consideration of RioTuba'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 same 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 was without merit . Section 1 of RA1435 amended Section 142 of the National InternalRevenueCode 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 RA1435 provided for a refund privilege on specific taxes on manufactured oils paid by miners and 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 142, then upon any amendment of Section 142 increasing the tax rates, the basis of 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 legislative to use the specific tax rates provided notwithstanding future rate increase . All the Sections of RA1435 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 rates provided in Section 1" (Emphasis supplied). Petitioner contends, however, that RioTuba was decided merely by a division of the Supreme Court, such that whatever pronouncement made therein could not effectively modify the earlier ruling of the same Court in the manner provided for in Section 4(3) Article VIII of the Constitution. Petitioner thus submits that instead of relying on RioTuba , the respondent tax court should have applied instead the en banc decision in earlier case of Insular Lumber Co. vs . Court of Tax Appeals and Commissioner of Internal Revenue , 104 SCRA 710, wherein the Supreme Court allegedly allowed the refund without any qualification or limitation as to amount. The contention is devoid of merit. To begin with, in its decision of September 30, 1991 in RioTuba , 202 SCRA 137, the Supreme Court made it clear that "The cases of Commissioner of InternalRevenue vs.InsularLumber Co., . . . 21 SCRA 1237, and InsularLumber Co.vs.Court of Tax Appeals . . . 104 SCRA 710, cited by RioTuba are not on all fours with the instant petition . For one thing, the factual milieu in the earlier cases occurred between 1958 and 1963. Since then, much has taken place, including the imposition of martial law which saw the seemingly endless enactment of tax decrees transforming manufactured oils into a major source of revenue for the government . . ." (Emphasis supplied). The foregoing equally applies to the present case considering that the period covered by RioTuba's claim for refund encompassed the period covered by petitioner's claim. For another, a perusal of the Supreme Court's Resolution of March 25, 1992 in RioTuba , 207 SCRA 549, will show that it never modified the doctrine laid down in InsularLumber . In fact, RioTuba , as reconsidered by the High Court in its Resolution of March 25, 1992, even reechoed the ruling in Insular Lumber to the effect that mining and forest concessionaires are entitled to the 25% tax refund on oil products used in their mining or forest operations. And if there was any modification at all, the same merely refers to the refundable amount of specific taxes which, according to RioTuba , must be based on the specific tax rates prescribed in Sections 1 and 2 of RA 1435 and not on the increased rates under Section 153 and 156 of the Revenue Code, as amended, precisely because, as herein pointed for a refund to mining and forest concessionaires of specific taxes paid on oils and lubricants used in their operations for sure, it may not even be said that such was a modification of the ruling in Insular Lumber because of where to base the 25% tax refund provided for in Section 5 of RA 1435 for the reason that the main question raised and addressed therein was whether mining and forest concessionaires were, in the first place, entitled to such refund. We cannot, therefore, perceive the relevancy to the instant case of the Constitutional provision cited by the petitioner relative to the modification of an en banc decision of the Supreme Court by a subsequent decision rendered by a mere division thereof. In any event, whatever doubt there may be on the issued herein presented must now be deemed definitely settled and put to rest by the High Court's decision in the very recent case of Commissioner of Internal Revenue vs . Honorable Court of Appeals , 232 SCRA 321, decided May 10, 1994. There, the Supreme Court categorically announced that its Resolution of March 25, 1992, which reconsidered its September 30, 1991 decision in RioTuba , "sets forth the controlling doctrine", which means that claims for refund of specific taxes under Section 5 of RA 1435 must be "based on the rates specified by Sections 1 and 2 of RA 1435 and not on the increased rates under Section 153 and 156 of the Tax Code of 1977, provided the claims are not yet barred by prescription. From the foregoing, it can thus be seen that far from having decided a question of substance "in a way not in accord with the provisions of applicable law and jurisprudence", as claimed by the petitioner (Petition, p, 6), the respondent tax court precisely acted conformably with law and jurisprudence when it denied the entirety of petitioner's claim and allowed it only to the extent of P16,747.36 equivalent to 25% of the specific taxes paid by it "as prescribed under Sections 1 and 2 of R.A. 1435". WHEREFORE, the instant petition for review is DENIED and is accordingly DISMISSED. With costs against the petitioner. SO ORDERED. Buena and Labitoria , JJ ., concur.