Sol Oil, Inc. v. Court of Tax Appeals

SIXTEENTH DIVISION [CA-G.R. SP No. 35462. August 3, 2000.] SOL OIL, INCORPORATED , petitioner , vs . HON. COURT OF TAX APPEALS and THE COMMISSIONER OF CUSTOMS , respondents . D E C I S I O N VASQUEZ, JR. , J p : This is a Petition for Review of the Decision of the Court of Tax Appeals dated June 9, 1994, in C.T.A. Case No. 4407, together with the Resolution dated October 4, 1994 denying, for lack of merit, the Motion for Reconsideration. The facts of the case are ably stated in the Decision dated June 9, 1994. We quote: "The undisputed facts are as follows: Petitioner is a domestic corporation engaged in the manufacture of crude coconut oil and copra pellets for export. On various dates prior to October 7, 1985, petitioner entered into several contracts for the export sale of crude coconut oil to various buyers in the United States. These sales were evidenced by the correspondent Reports on Foreign Sales (RFS) duly approved by the Central Bank. Petitioner was issued six (6) Certificates of Export Duty Exemption (three of which were dated October 2, 1985 and the other three were dated November 19, 1985) by the Philippine Coconut Authority (PCA) pursuant to the provisions of Presidential Decree No. 1960 and PCA Administrative Order No. 01 and 01-A series of 1985. For reasons known only to the petitioner, the actual shipment of the contracted volumes under the abovementioned export sales contracts were effected only on October 7, and 28, 1985. The Collector of Customs of the Port of Tacloban assessed export duties on the shipments at the rate of 9% which was the prevailing rate at the time the contracts were entered into. Petitioner was then issued the corresponding Orders of Payment directing it to pay customs duties totaling P2,301,021.43. Instead of paying the assessed duties, petitioner presented the Certificates of Export Duty Exemption previously issued to it by the PCA. As a result, no payment was actually made by the petitioner. Meanwhile, on October 7, 1985, Executive Order No. 1056 became effective, reducing the export duty on crude coconut oil from 9% to 5%. Subsequently, in 1986 petitioner made other shipments of crude coconut oil for which the corresponding duties were assessed at the rate of 5% as mandated under E.O. 1056. On November 14, 1986, petitioner wrote respondent Commissioner requesting that the latter issue a Tax Credit Certificate or an "authority" directing the Collector of Customs of Tacloban City to recompute the export duties on the two shipments of crude coconut oil made by petitioner on October 7 and 28, 1985, and to apply the "excess" tax credit to the shipments made in 1986. Petitioner contended that the Collector of Customs of Tacloban City had erroneously assessed export duties on the 1985 shipments at the rate of 9% and not 5% as provided under Executive Order No. 1056. Petitioner based its letter on a "ruling" issued by Deputy Commissioner of Customs Vicenta A. Feria, Jr. on August 15, 1986, to the effect that the rate of export duty to be applied to the exportations of coconut oil should be the rate prevailing at the time of shipment pursuant to Section 514 of the Tariff and Customs Code. On October 16, 1989, respondent Commissioner denied petitioner's "request" for recomputation, on the ground that, under PCA Administrative Order Nos. 01 and 01-A, series of 1985 which were issued pursuant to the provisions of P.D. 1960, the computation of the correct export duty should be based on the rate prevailing on the date of the contract and not on the date of shipment. On November 17, 1989, petitioner wrote respondent Commissioner another letter requesting the latter to reconsider his earlier decision denying petitioner's request for recomputation. Subsequently, on December 1, 1989, without waiting for the resolution of its request for reconsideration, petitioner filed the instant petition." (C.T.A. Decision, pp. 1-4; Rollo, pp. 35-38) and based on which facts, the Court of Tax Appeals rendered its decision, dispositively ruling: "Wherefore, the instant petition is denied for lack of merit. SO ORDERED." (C.T.A. Decision, p. 10; Rollo , p. 44) Petitioner essayed a Motion for Reconsideration. It too was denied for lack of merit on October 4, 1994. Petitioner now challenges the said decision and implores Us to resolve the following issues: "A. Whether the applicable export duty rate should be determined at the time or date of the contract of sale or at the time of shipment or loading, which was 9% and 5% under E.O. 1056, respectively. B. Whether Respondent Commissioner of Customs' denial of the Petitioner's request for recomputation under his letter dated October 16, 1989 may be the subject of a petition of review before the Court of Tax Appeals. C. Whether Petitioner's request for recomputation is considered a protest against the assessment of export duty and a claim for refund taken into one. D. Whether the "protest" against the export duty assessment is covered by Sections 2213 and 2402 of the Tariff and Customs Code. E. Whether there were indeed "excess payments" of export duties made by Petitioner which may appropriately be considered and would result in the refund of the excess duties assessed against petitioner." (Petition for Review, pp. 5-6; Rollo, pp. 12-13) The judicious resolution of this petition importunes a simplification of the issues, viz : 1. May the Court of Tax Appeals exercise its appellate jurisdiction over the instant case? and 2. Is petitioner entitled to the tax credit prayed for in its petition? The petition is unmeritorious. Fundamental is the view that taxes are the lifeblood of the nation through which the government agencies continue to operate and with which the State effects its function for the welfare of its constituents (Commissioner of Internal Revenue vs. Court of Tax Appeals, 234 SCRA 348 [1994]) and so should be collected without unnecessary hindrance (Philex Mining Corporation vs. Commissioner of Internal Revenue, 294 SCRA 687 [1998]) . This is verily the rationale behind 2308 of the Tariff and Customs Code ( R.A. 1937, as amended ) which provides: "When a ruling or decision of the Collector is made whereby liability for duties , taxes, fees, or other charges are determined, except the fixing of fines in seizure cases, the party adversely affected may protest such ruling or decision by presenting to the collector at the time when payment of the amount claimed to be due the government is made , or within 15 days thereafter , a written protest setting forth his objection to the ruling or decision in question, together with the reasons therefor. No protest shall be considered unless payment of the amount due after final liquidation has first been made .(Emphasis Ours) The urgency of making a protest within the specified period is manifested even more by Section 2309 of the said Code, to wit: "In all cases subject to protest, the interested party who desires to have the action of the Collector reviewed, shall make a protest, otherwise, the action of the Collector shall be final and conclusive against him, except as to matters correctible for manifest error in the manner prescribed in section one thousand seven hundred and seven hereof." (Emphasis ours) The protest contemplated under these provisions is needed where there is a question as to the reasonableness of the amount assessed by the collector, as in this case, where Sol Oil disputes the customs duties assessed at the rate of 9% when the amount should have been computed at 5% only. The Commissioner of Customs may then review the Collector's decision or action upon the appeal of any aggrieved party ( Section 2313 , Tariffs and Customs Code ) whose decision may, in turn, be the subject to the exclusive appellate jurisdiction of the Court of tax Appeals ( Chia vs. Acting Collector of Customs, 177 SCRA 755 [1989] ; Jao vs. Court of Appeals, 249 SCRA 35 [1995] ). Petitioner nevertheless contends that it did file a protest with the Collector of Customs of Tacloban City. Barring its bare allegations which We dismiss as insufficient, nowhere in the proffered evidence it is categorically shown that a protest was actually filed. It would have been easier for Sol Oil to produce a copy of its protest. Howbeit, petitioner chose to remain impassive. Under the law, the burden of proof is on the petitioner to establish its case by preponderance of evidence. If it claims a right granted or created by law, as in this case, it must prove its claim by competent evidence, relying on the strength of its own evidence and not upon the weakness of that of its opponent ( Javier vs. Court of Appeals , 231 SCRA 498 [ 1994 ]). Consequently, credence is owing to the finding of the Court of Tax Appeals that petitioner indeed failed to make the prescribed protest ( CTA Decision, p . 6 ) and We are bound by the court a quo's findings on this particular question of fact ( Commissioner of Internal Revenue vs. Philippine American Life Insurance Co ., 244 SCRA 446 [ 1995 ]). Without a doubt, petitioner opted to go directly to the Commissioner of Customs to seek the issuance of a tax credit certificate or in the alternative, a recomputation of the said duties. Worser still, the request was even filed way beyond the reglementary period specified by the law. The Court of Tax Appeals aptly deemed these lapses fatally detrimental to petitioner's cause, declaring thus: "It is elementary that this Court's appellate jurisdiction is to review the decisions of respondent Commissioner in any matter brought before the latter upon protest" as well as in cases involving claims for refund. In this regard, it should be noted that petitioner never disputed nor protested the assessment of the Collector of Customs of Tacloban City , assessing the export duties on its coconut oil shipments at the rate of 9%. There is, strictly speaking, no protest as required under Sections 2313 and 2402 of the Tariff and Customs Code, and therefore no decision or ruling by respondent Commissioner in a "protest" action which would require the exercise by this Court of its appellate jurisdiction ." ( CTA Decision, pp . 6-7 ; Rollo, pp . 40-41 ; Emphasis ours ) Sol Oil nonetheless insists that the foregoing provisions of law do not apply to assessments of export duties since such taxes are covered by a separate title of the Tariffs and Customs Code . Apparently, petitioner is of the notion that the word "customs" pertains to imported articles while "tariffs" relate to exported articles in effect suggesting that a distinction be drawn between the two insofar as the application of the administrative and judicial procedures provided in the Code is concerned. But the law does not make such a distinction and neither can We. In Garcia vs. Executive Secretary ( 211 SCRA 219 [ 1992 ]), the High Court even used the words interchangeably in defining "customs duties" as taxes on the importation and exportation of commodities or the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country. According to the pertinent rule of statutory construction, inasmuch as the law does not make any distinction in this regard, no such distinction can be made by means of interpretation or application. ( Cruz vs. Court of Appeals , 233 SCRA 301 [ 1994 ]; People vs. Evangelista , 253 SCRA 714 [ 1996 ]). Besides Sections 2308, 2309 and 2313 all fall under Title VI of the Tariffs and Customs Code pertaining to Administrative and Judicial Proceedings and separate from the titles relative to importation as petitioner would have Us believe. That being the case, the foregoing sections should not be construed to apply solely on importation but to exportation as well. Accordingly, petitioner had the burden of filing a protest with the Collector of Customs first before proceeding to the Commissioner of Customs for relief. If Sol Oil believed that the assessment was unreasonably high, it should have raised the same as a defense with the Collector of Customs and if not satisfied, follow the correct procedure. Failing thus in that regard, the Collector's action becomes final and conclusive against him ( Section 2309 Tariffs and Customs Code ). Moreover, basic is the rule that before a party is allowed to seek the intervention of the court, it is a pre-condition that he should have availed of all means of administrative process afforded him. Where the law indicates a procedure for administrative review and provides a system of administrative appeal or reconsideration, the courts for reasons of law, comity and convenience will not entertain the case unless the available administrative remedies have been resorted to and the appropriate authorities have been given opportunity to correct the errors committed in the administrative forum. ( Union Bank of the Philippines vs. Court of Appeals, 290 SCRA 198 [ 1998 ]) Since petitioner did not exhaust its administrative remedies, its recourse to the Court of Tax Appeals was verily premature ( Chia vs. Acting Collector of Customs, supra ) and downright virulent to its cause of action ( Union Bank of the Philippines vs. Court of Appeals, supra ) on the basis of which, this petition should consequently be dismissed. Our disquisition could have ended there. We find it necessary to explicate the issue of whether Sol Oil is entitled to its entreated tax credit if only to finally resolve this case which has languished in litigation for far too long. In our View, the protracted trial of the instant case could have been avoided if petitioner only heeded certain basic concepts of taxation. Well entrenched in this jurisdiction is that a tax cannot be imposed unless it is supported by the clear and express language of a statute; on the other hand, once a tax is unquestionably imposed, a claim for exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken ( Davao Gulf Lumber Corporation vs. Commissioner of Internal Revenue, 293 SCRA 76 [ 1998 ]). Moreover, tax credits or refunds, like tax exemptions, are construed strictly against the taxpayer. A claimant has the burden of proof to establish the factual basis of its claim for tax credit or refund ( Citibank, N.A. vs. Court of Appeals , 280 SCRA 459 [ 1997 ]). We agree to a certain extent with petitioner's argument that the Philippine Coconut Authority (PCA, for brevity) is not empowered to grant tax exemptions as it did when it promulgated Administrative Order Nos . 01 and 01-A , Series of 1985 ( Rules and Regulations Implementing P.D. 1960 ). Under Section 17, paragraph 4 of the 1973 Constitution , which was still in force at the time of the subject exportations, no law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Batasang Pambansa. The clear connotation of this proviso is that statutory exemptions are granted in the discretion of the legislature. This is because tax exemptions should not be lightly extended since they will represent a loss of revenue to the government stressing even more the lifeblood doctrine expounded earlier. A thorough examination of Presidential Decree No. 1960 reveals no clear mandate for the PCA to grant any exemption from the payment of export duties imposed by Executive Order No. 920-A on crude coconut oil, cochin oil, edible oil and other forms of coconut oil to the United States of America. What the law vests in the PCA is the authority to prescribe rules and regulations to ensure that coconut products are sold at competitive prices in relation to other fats and oils ( Section 1, P.D. 1960 ). By no stretch of the imagination could this authority be interpreted to include the power to grant tax exemptions. There is even no proof in the records that the Batasang Pambansa sanctioned the said tax exemption. The PCA thus exceeded its authority when it enforced tax exemptions in the foregoing Administrative Orders. Our concurrence with petitioner must resultantly end here. Since the grant of tax exemptions was invalid, petitioner had no right to avail of the tax exemptions for its exported coconut oil and for that matter, is still liable to pay the export duties imposed by Executive Order No. 920-A . Petitioner insists, however, that the tax exemptions are actually tax credits deducted in advance from the exporter's future export shipments of copra products. Yet, Sol Oil readily admits that it utilized the tax exemption certificates issued by the PCA against the export duties assessed by the Bureau of Customs ( Rollo , p . 20 ). Such duplicitous play in semantics only serves to expose the absurdity in petitioner's thesis. Exemption from taxation is the grant of immunity to particular persons or corporations, or to persons or corporations of a particular class, from a tax which persons and corporations generally within the same state or taxing district are obliged to pay ( 51 Am . Jur . 503 ). It is an immunity or privilege; it is freedom from a financial charge or burden to which others are subjected ( Greenfield vs. Meer 27 Phil 394 [ 1946 ]). Here, petitioner's coconut oil was subject to export duty under Executive Order No. 920-A . Sol Oil was able to avoid the payment of the tax, though, by using the tax exemption certificates issued by the PCA. There is no clearer example of a tax exemption than this. Digressing, the grant of tax credit is not provided as a remedy under the Tariffs and Customs Code . This is precisely why the petitioner could not cite a specific provision in the Code sanctioning the grant of tax credit in its favor. At any rate, the principles laid down in the National Internal Revenue Code (which was in effect at the time the subject exportation was effected) may corollarily be brought to bear in the instant case. A tax credit or refund may be granted only in cases where a tax, penalty, or any sum was erroneously or illegally paid or collected ( Section 230, NIRC ). Remarkably, Sol Oil even acknowledged this very concept in its petition ( Rollo, p . 26 ). Simply put, a tax credit may be availed of only when the claimant actually paid a tax, penalty or any sum of money later found to be erroneously or illegally paid or collected, which is precisely Our point. That petitioner failed to pay the export duty is verily an established fact. To award the tax credit despite the lack of actual payment on the part of Sol Oil is ludicrous and a polarity in conceptual effects. Correspondingly, petitioner's polemic that the export duties were "constructively paid" when it availed of the tax exemptions hardly inspires certitude. Such reasoning, even if hypothetically accepted, is too fanciful to come within the established principles underlying the grant of tax credits and exemptions. That the Collector of Customs assessed a 9% custom duty on its exports notwithstanding that Executive Order No. 1056 lowered the tax rate to 5% is beside the point. Contrary to petitioner's avowal, E.O. 1056 became effective on October 4, 1985, three days prior to its first shipment of coconut oil. Hence, the prevailing tax rate was already 5% at the time Sol Oil exported its products. The over-assessment, therefore, was virtually caused by the Collector's lack of information and not by the State. It is a settled rule that in the performance of governmental function, the State is not bound by the neglect of its agents and officers. Nowhere is this more true than in the field of taxation ( Philex Mining Corporation vs. Commissioner of Internal Revenue, supra ) Axiomatic still is that the Government cannot be estopped particularly in matters involving taxes. The errors of certain administrative officers should never be allowed to jeopardize the Government's financial position ( Commissioner of Internal Revenue vs. Court of Appeals, et al ., 234 SCRA 348 [ 1994 ]). IN VIEW OF ALL THE FOREGOING, the instant petition is ordered DISMISSED. No pronouncement as to costs. SO ORDERED. Umali and Rosario, Jr . , JJ . , concur.