Lepanto Consolidated Mining Corp. v. Commissioner of Internal Revenue

FIFTEENTH DIVISION [CA-G.R. SP No. 35342. October 20, 1999.] LEPANTO CONSOLIDATED MINING CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE AND THE COURT OF TAX APPEALS , respondents . D E C I S I O N SABIO, J.L. JR. , J p : This Petition for Review assails the 1 September 1994 Decision of the Court of Tax Appeals (CTA for brevity) in C.T.A. Case No. 4172, granting a partial refund of specific taxes passed on to the petitioner for various manufactured oils and fuels purchased, the dispositive portion of the subject decision reads: "WHEREFORE, the petition for review is hereby GRANTED. Respondent is hereby ordered to REFUND in favor of the petitioner the amount of P3,592.81 representing 25% specific taxes paid on locally purchased gasoline, oils and lubricants, bunker fuel oils and aviation gasoline pursuant to the provision of Section 5 of Republic Act No. 1435. No pronouncement as to costs. SO ORDERED." 1 The undisputed facts of the case as found by the CTA are as follows: Petitioner, a domestic corporation, is a licensed mining firm with Mining Lease Contract Nos. MRD-353, 354, and 355 entered into with the then Ministry of Natural Resources (now Department of Environment and Natural Resources). For its mining business, petitioner purchased petroleum products from various oil companies. These products were subjected to specific tax under Sections 153 and 156 (formerly Secs. 142 and 145) of the National Internal Revenue Code (NIRC), which taxes were paid by the oil companies and passed on to the petitioner. 2 On 15 June 1987, pursuant to Section 5 of Republic Act No. 1435 and the Decision of the Supreme Court in the case of Insular Lumber Co. vs. Court of Tax Appeals, G.R. No. L-31057, 29 May 1981, (104 SCRA 710), petitioner filed a claim for refund with the Bureau of Internal Revenue, seeking the recovery of twenty five percent (25%) of the specific taxes paid for the petroleum products or the period March 1985 to February 1987 amounting to P1,056,316.90. The claim was supported by the affidavits of its senior vice-president, and four disinterested persons, attesting to the actual and exclusive use of the various oils purchased for the exploitation and operations of its mining claims. 3 In order to toll the two year prescriptive period under Section 230 (formerly Sec. 292) of the NIRC, on 1 July 1987, petitioner filed a case for tax refund with the CTA (C.T.A Case No. 4172), praying for the refund of P1,056,316.90, with twenty percent (20%) interest per annum, and the cost of suit. 4 On 1 September 1994, applying the pronouncements of the Supreme Court in Commissioner of Internal Revenue v. Atlas Consolidated Mining and Development Corp., et al., G.R. No. 93601, 12 November 1990, and Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corporation and Court of Tax Appeals, G.R. No. 83583-84, 30 September 1991, 202 SCRA 137, the CTA held the questioned decision which granted petitioner a refund but only in the reduced amount of P3,592.81. 5 On 10 October 1994, petitioner filed before Us the instant petition for review with a sole assignment of error of the CTA, ie., the CTA erred in basing its computation of the tax refund on the amounts deemed paid as specified in Sections 1 and 2 of RA. 1435 instead of the increased rates under Sections 153 and 156 of the National Internal Revenue Code of 1977, advancing the following arguments: "I. THE RESPONDENT COURT OF TAX APPEALS FAILED TO APPLY THE SUPREME COURTS 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 INCREASED RATES IMPOSED BY SUCCEEDING AMENDATORY LAWS, UNDER WHICH THE PETITIONER PAID SPECIFIC TAXES ON MANUFACTURES 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 135 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 INTERNAL REVENUE CODE, AS AMENDED. * "IV ON THE BASIS OF THE PETITION FOR REVIEW FILED BEFORE THE COURT A QUO, PETITIONER NEED NOT PRESENT EVIDENCE SHOWING THE FORMULA FOR CONVERTING POUNDS OF LPG INTO LITERS." 6 The issues raised before Us may be summed up as follows: 1) Whether the respondent court erred in basing its computation of the tax refund on the rates specified in Sections 1 and 2 of R.A. 1435, instead of the increased rates under Sections 153 and 156 (then Secs. 142 and 145) of the NIRC of 1977. 2) Whether the respondent court erred in failing to apply the Supreme Court Decision in Insular Lumber Co v. Court of Tax Appeals (en banc), supra , which allegedly granted the claim for partial refund of specific taxes paid without qualification or limitation and is allegedly at odds with the Rio Tuba Case (Division), supra. 3) Whether the respondent court erred in denying the partial refund of specific taxes paid on liquefied petroleum gas (LPG) for failure of the petitioner to provide for the proper conversion rate of LPG from pounds to liters. We find no cogent reason to depart from the findings of the court a quo . The first two issues were squarely addressed by the Supreme Court in Davao Gulf Lumber Corporation v Commissioner of Internal Revenue and Court of Appeals (en banc) , G.R. No. 117359, 23 July 1998, 293 SCRA 76, Commissioner of Internal Revenue v. Court of Appeals and CDCP Mining Corp ., and Sirawai Plywood and Lumber Co, Inc. v. CA and CIR , G.R. Nos. 122161 & 120991, 1 February 1999, and recently in Philex Mining Corporation v. Commissioner of Internal Revenue, and the Court of Appeals , G.R. No. 120324, 21 April 1999, a case involving similar facts and issues to the instant petition. The Supreme Court resolved the issues in Philex Mining Case, supra, as follows: "R.A. 1435, 'An Act to Provide Means for Increasing the Highway Special Fund, states that the specific taxes collected on gasoline and fuel which accrue to the Fund shall be used for the construction and maintenance of the highway system. Mining and lumber companies seldom use national highways. Since gasoline and fuel purchased by mining and lumber companies are used to the their own compounds and roads, and they do not benefit directly from the Fund, the government granted to these companies a 25% partial refund of specific taxes paid on the purchases of manufactured diesel and fuel oils. This tax relief was embodied in Section 5 of R.A. No. 1435. which states: 'Sec. 5 of RA 1435 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 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 System 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.' In 1977, P.D. 1158 codified all existing laws. Sections 142 and 145 of the Tax Code, as amended by Sections 1 and 2 of R.A. 1435 were renumbered to Sections 153 and 156. Later, these sections were amended by P.D. No. 1672 and subsequently by E.O. 672 increasing the tax rates for certain oil and fuel products. When the Highway Special Fund was abolished in 1985, the reason for the refund ceased to exist. This Court, in a string of decisions, repeatedly held that the tax refund under R.A. 1435 is computed on the basis of the specific tax deemed paid under Sections 1 and 2, and not on the increased rates actually paid under the 1997 NIRC. Among these cases, are CIR vs. Rio Tuba Nickel Mining Corporation [202 SCRA 137 (1991); 207 SCRA 549 (1992) Resolution modifying the earlier decision], CIR vs. CA and Atlas Consolidated Mining and Development Corp . [232 SCRA 321 (1994)], en banc's ruling in Davao Gulf Lumber Corporation vs. CIR and CA (G.R. No. 117359, July 23, 1998), Atlas Consolidated Mining and Development Corp. vs. CIR, et al . (G.R. No. 119786, September 22, 1998) and the recently decided consolidated cases of CIR vs. C.A. and CDCP Mining Corporation and Sirawai Plywood & Lumber Co., Inc. vs. CA and CIR (G.R. Nos. 122161 & 120991, February 1, 1999). The fundamental issues raised herein appear to be the very issues settled in the case of Davao Gulf Lumber Corporation vs. CIR and CA. We are guided and constrained by this precedent in now reaching a similar resolution of the issues, adverse to herein petitioner. In Davao Gulf, the court en banc held: '. . . Since the partial refund authorized under Section 5, R.A. 1435, is in the nature of a tax exemption, it must be construed strictissimi juris against the grantee. Hence, petitioner's claim of refund on the basis of the specific taxes it actually paid must expressly be granted in a statute stated in a language too clear to be mistaken. We have carefully scrutinized R.A. 1435 and the subsequent pertinent statutes and found no expression of a legislative will authorizing a refund based on the higher rates claimed by petitioner. . . . When the law itself does not explicitly provide that a refund under R.A. 1435 may be based on higher rates which were non existent at the time of its enactment, this Court cannot presume otherwise. A legislative lacuna cannot be filed by Judicial fiat.' (citations omitted) LLphil In Davao Gulf, the Court also laid to rest the alleged conflict between the Insular Lumber and the Rio Tuba decisions, in this manner: 'Insular Lumber Co. decided a claim for refund on specific tax paid on petroleum products purchased in the year 1963, when the increased rates under the NIRC of 1977 were not yet in effect. Thus, the issue now before us did not exist at the time, since the applicable rates were still those prescribed under Sections 1 and 2 of R.A. 1435. xxx xxx xxx Clearly it is impossible for these two decisions to clash with our pronouncements in Rio Tuba and second Atlas case, in which we ruled that the refund granted be computed on the basis of the amounts deemed paid under Sections 1 and 2 of R.A. 1435. In the light, we find no basis for petitioner's invocation of the constitutional proscription that 'no doctrine or principle of law laid down by the Court in a decision rendered en banc or in division may be modified or reversed except by the Court sitting en banc.' Finally, petitioner asserts that equity and justice demand that the computation of the tax refunds be based on actual amounts paid under Sections 153 and 156 of the NIRC. We disagree. According to an eminent authority on taxation, 'there is no exemption solely on the ground of equity.' (citations omitted) The subsequent codification of tax laws under the 1997 NIRC, Sections 153 and 156, mandated the increased rates of specific taxes levied on manufactured oils, other fuels and diesel fuel oils. Although Philex Mining Corporation paid the taxes on their oil and fuel purchases based on the increased rates, the latter law did not specifically provide for a refund based on the increased rates. Since the grant of refund privileges must be strictly construed against the taxpayer, the basis for the refund privileges remains to be the amounts deemed paid under Sections 1 and 2 of R.A. 1435 ..." 7 (Emphasis supplied) We see no need to elaborate further on the discussion of the Supreme Court. Anent the third issue, Section 5 of R.A. 1435 allows miners or forest concessionaires a refund of 25% of the specific tax paid by them on any oils mentioned in Sections 1 and 2 of the said Act. Unfortunately for the petitioner, liquefied petroleum gas (LPG) is not one of those mentioned or embraced in Sections 1 and 2 of R.A. 1435, 8 The said sections cover only (1) kerosene or petroleum, (2) lubricating oils, (3) naphtha, gasoline and all other similar products of distillation, (4) denatured alcohol, (5) diesel fuel oil, and on similar fuel oils. Here is a peculiar situation where no particular provision of law allows a tax refund for the specific taxes paid on LPG under Section 153 of the NIRC of 1977 which accrued to the Highway Special Fund. We are left with no choice except to deny any claim for partial tax refund for specific tax on LPG paid under Section 153 of the NIRC of 1977, as amended by P.D. 1672 and E.O. 672, in relation to Sections 1, 2, and 5 of R.A. 1435. To do otherwise would amount to supplying by judicial fiat what is lacking in legislation. Hence, a further discussion of the third issue is no longer necessary. WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision of the Court of Tax Appeals is AFFIRMED. No costs. SO ORDERED. Hofilea and Amin , JJ ., concur. Footnotes 1. Rollo, page 55. 2. C.T.A. Decision, pp. 1-2; Rollo, pp. 41-42 3. Rollo, pp. 42-43. 4. Id ., p. 44. 5. Id ., pp. 45-55. 6. Id ., pp. 15-16. 7. G.R. No. 120324, Advance copy of the Decision of the Supreme Court in Philex Mining Case at pp. 4-6. 8. R.A. 1435: Section 1. Section one hundred and forty-two of the National Internal Revenue Code, as amended, is further amended as follows: Sec. 142: Specific Tax on manufactured oils and other fuels. On refined and manufactured mineral oils and motor fuels, there shall be collected the following taxes: (a) Kerosene or petroleum, per liter of volume capacity, two and one-half centavos; (b) Lubricating oils, per liter of volume capacity, seven centavos; (c) Naphtha, gasoline and all other similar products of distillation, per liter of volume capacity, eight centavos; and (d) On denatured alcohol to be used for motive power, per liter of volume capacity, one centavo: Provided, That if the denatured alcohol is mixed with gasoline, the specific tax on which has already been paid, only the alcohol content shall be subject to the tax herein prescribed. For the purpose of this subsection, the removal of denatured alcohol of not less than one hundred eighty degrees proof (ninety per centum absolute alcohol) shall be deemed to have been removed for motive power, unless shown to the contrary. Whenever any of the oils mentioned above are, during the five years from June eighteen nineteen hundred and fifty-two, used in agriculture and aviation, fifty per centum of the specific tax paid thereon shall be refunded by the Collector of Internal Revenue upon the submission of the following: (1) A sworn affidavit of the producer and two disinterested persons proving that the said oils were actually used in agriculture, or in lieu thereof (2) Should the producer belong to any producer's association or federation, duly registered with the Securities and Exchange Commission, the affidavit of the president of the association or federation, attesting to the fact that the oils were actually used in agriculture. (3) In the case of aviation oils, a sworn certificate satisfactory to the Collector proving that the said oils were actually used in aviation: Provided, That no such refunds shall be granted in respect to the oils used in aviation by citizens and corporations of foreign countries which do not grant equivalent refunds or exemptions in respect to similar oils used in aviation by citizens and corporations of the Philippines. Section 2. Section one hundred and forty-five of the National Internal Revenue Code, as amended, is further amended to read as follows: Sec. 145. Specific Tax on Diesel fuel oil. On fuel oil, commercially known as diesel fuel oil, and on all similar fuel oils, having more or less the same generating power, there shall be collected, per metric ton, one peso. . .