Curuan Timber Corp. v. Commissioner of Internal Revenue

SIXTH DIVISION [CA-G.R. SP No. 35522. April 4, 1995.] (CTA Case No. 3582) CURUAN TIMBER CORPORATION , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE AND COURT OF TAX APPEALS , respondents . D E C I S I O N MARTINEZ , J p : Curuan Timber Corporation appeals, through this petition for review, from the decision of the Court of Tax Appeals dated 20 September 1994 granting its claim for partial tax refund under the provisions of Republic Act No. 1435. The petitioner argues that it is entitled to a bigger amount than that adjudicated by the respondent court. The antecedent facts as shown in the pleadings are as follows: The petitioner is a domestic corporation duly licensed to operate a forest concession. With such license, it is authorized to cut, collect and remove timber from its forest concession area located in Zamboanga del Norte and Zamboanga City. From November 1980 to September 1982, the petitioner purchased from Caltex (Philippines), Inc., various quantities of refined and manufactured mineral oils, motor fuel, and diesel fuel oils. These were actually and exclusively used by the petitioner in the exploitation and operation of its forest concession. For these purchases, Caltex paid and passed on to the petitioner the appropriate specific taxes imposed under Section 153 and 154 of the National Internal Revenue Code of 1977. On 19 January 1983, the petitioner filed with the Commissioner of Internal Revenue a claim for refund of 25% of the total amount of specific taxes it paid on the above purchases. The total amount claimed is P355,436.40 broken down as follows: VOLUME PRODUCT SPECIFIC 25% (Liters/ COST TAX REFUND Kilos) (Pesos) (Pesos) (Pesos) DIESEL 1,844,600 5,406,360 322,805.00 80,701.25 REG. GASOLINE 924,920 4,434,923 832,428.00 208,107.00 OIL and LUBRICANTS 247,477 2,289.040 197,981.60 49,495.40 EXTRA GASOLINE 62,000 308,495 62,000.00 15,500.00 GREASE (Kilos) 3,262 34,467 1,631.00 407.75 KEROSENE 70,000 204,781 4,900.00 1,225.00 TOTAL 12,678,066 1,421,745.60 355,436.40 Without waiting for the Commissioner's decision, the petitioner instituted a petition for review before the Court of Tax Appeals on 8 February 1983. In addition to the refund claimed, the petitioner prayed for the payment of 20% annual interest for the alleged arbitrary refusal to grant its claim for refund. In resolving the case, the Court of Tax Appeals focused on two issued, which are as follows: 1) whether or not the privilege of a 25% refund of specific taxes paid on manufactured oils used in petitioner's forest concession as provided for in Section 5 of Republic Act 1435 still subsists; and 2) in the affirmative, whether or not petitioner is entitled to the total amount sought for. On 20 September 1994, the respondent court rendered its decision, the dispositive portion of which reads: WHEREFORE, the respondent Commissioner of Internal Revenue is hereby ordered to REFUND to Petitioner CURUAN TIMBER CORPORATION the sum of P21,997.17, without interest, equivalent to 25% partial refund of specific taxes paid on its purchases of Diesel fuel, oil, and lubricants, Regular gasoline, extra gasoline and kerosene pursuant to the provision of Section 5 of Republic Act No. 1435 in relation to Section 142 (b) and (c) of the NIRC as prescribed under Section 1, 2 of R.A. No. 1435. (Rollo, pp. 77-78). The breakdown of the tax refund adjudged to be due the petitioner is as follows: SPECIFIC TAX RATE AMOUNT MANUFACTURED OIL QUANTITY (Pesos) (Pesos) Diesel 1,385 MT* 1.00/MT 1,385.00 Lubricating Oils 211,458 L 0.07/L 14,802.06 Reg. Gasoline 826,020 L 0.08/L 66,081.60 Extra Gasoline 54,000 L 0.08/L 4,320.00 Kerosene 56,000 L 0.025/L 1,400.00 Total Specific Taxes Paid 87,988.66 Multiply by specific tax refund rate x 25% Total Specific Tax to be Refunded P21,997.17 ========= * (1,643,200 x 0.8429) + 1,000 = 1,385.0533 (CTA Decision, p. 38; Rollo, p. 76). This judgment is premised on two conclusions. First, the petitioner is entitled only to a partial refund of specific taxes paid on diesel and regular gasoline from 24 February 1981 to 30 September 1985 and specific taxes paid on oils and lubricant from 8 February 1981 to September 1982. Taxes paid prior to these dates have already prescribed as the claim was made beyond the two-year prescriptive period. Secondly, the basis for computing the partial tax refund should be the amount of specific taxes deemed paid under Sections 1 and 2 of RA 1435 and not the amount actually assessed and paid under the present tax law. Not satisfied with this judgment and claiming that it is entitled to a higher amount, the petitioner instituted this petition for review. Essentially, it questions the conclusion of the respondent court that the tax refund is based on the amount deemed paid under RA 1435 and argues that: 1) The computation of the tax refund based on Sections 1 and 2 of R.A. 1435 rather than Sections 153 and 156 of the National Internal Revenue Code is contrary to law and existing jurisprudence, particularly the decision of the Supreme Court in the case of 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. 2) 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. 3) In its decision, the Court of Tax Appeals ruled contrary to established tenets of law when it lent itself to interpreting Section 5 of RA No. 1435, when construction of said law is not necessary. 4) Sections 1 and 2 of R.A. No. 1435 are not the operative provisions to be applied but rather, Sections 142 and 145 of the National Internal Revenue Code, as amended. 5) To rule that the basis for computation of the refunded taxes should be Sections 1 and 2 of R.A. No. 1435 rather than Sections 153 and 156 of the National Internal Revenue Code is unfair, erroneous, arbitrary, inequitable and oppressive. The basic question raised in this petition is which rate should be used in determining the amount of partial tax refund due to the petitioner. While the respondent court 'has ruled that it should be based on the amount deemed paid under RA 1435, the petitioner argues that it should be based on the amount it has actually paid under the present tax law. We resolved to deny this petition. A review of the law and the jurisprudence cited by the petitioner does not support its arguments that it is entitled to a refund based on the amounts it has paid under existing tax law and not that deemed paid under R.A. 1435. Before ruling on this issue, we shall briefly summarize the provisions of and the developments in the law relevant to this case. RA 1435 increased the specific tax rates imposed on manufactured oils as a means to increase the Special Highway Fund. However, Section 5 of this Act granted to miners and forest concessionaires a refund privilege equivalent to 25 percent of the specific tax paid on manufactured oils used by them in the operations. This relief was allowed because the trucks and vehicles of these concessionaires seldom use the highways in their operations. P.D. 711 abolished all special and fiduciary funds and provided that all the funds that accrued to these special funds shall be channeled to the General Fund. Notwithstanding this abolition, the Highway Special Fund to which the subject specific taxes paid accrue, existed for ten more years or up to 1985. It was only 1986 that the taxes were channeled to the General Fund. The partial tax refund privilege enjoyed by miners and forest concessionaires, thus, continued up to 1985. Meanwhile, the amount of specific tax imposed were later increased under Section 153 and 156 of the National Internal Revenue Code of 1977. Notwithstanding the increased rates, the Supreme Court has ruled that the amount of the refund due is to be computed based on the amount of taxes deemed paid under RA 1435. This is because the subsequent law does not specifically provide for refund to mining and lumber companies of specific taxes paid on manufactured oils (Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corporation, 207 SCRA 549 and Resolution, 15 June 1992; Commissioner of Internal Revenue vs. Atlas Mining and Development Corporation, 232 SCRA 321). It was this ruling by the Supreme Court which the respondent court applied in arriving at the decision assailed in this petition. On the other hand, the petitioner argues that the applicable ruling is that pronounced by the Supreme Court en banc in the case of Insular Lumber Company vs. Court of Tax Appeals (104 SCRA 710). It maintains that this case laid down the rule that the amount of the refund due is without limitations or qualifications. The petitioner also relies on the ruling in Commissioner of Internal Revenue vs. Atlas Consolidated Mining and Development Corporation, et al. (G.R. 93631, Resolution, 12 November 1990) where the Supreme Court allowed the refund claimed without any limitation. (The latter shall be referred to as the 1990 Atlas case). A review of these cases, however, shows that the reliance in them by the petitioner is misplaced. Its interpretation of the ruling in these two cited cases is not entirely accurate. In the Insular case, what the Supreme Court ruled is that the partial refund to which forest concessionaires and miners are entitled is not subject to the five-year limitation set on the partial refund privilege granted to the agriculture and aviation sectors. The limitation (or absence of it) referred to, therefore, is the limitation as to the period covered by the tax refund privilege. It does not refer to the rate or basis on which the tax refund is to be computed (104 SCRA 710, 718-719). It is important to note that the refund claimed in the Insular case is for specific taxes paid for the year 1963. RA 1435 was then the prevailing law. Thus, the issue of whether increases in tax rates shall be considered in determining the amount of the tax refund or whether the rates should continue to be that set in RA 1435 did not arise in that case at all. The Supreme Court then could not have passed upon this issue, and corollary to that, its decision could not be interpreted as a pronouncement that the computation of the tax refund should take into consideration increases in the amount of tax set by subsequent legislations. Neither does the 1990 Atlas case support the argument of the petitioner . The only issue in that case is whether or not Atlas is entitled to the 25% partial tax refund under RA 1435 of the specific taxes it paid for its extra gasoline and diesel fuel purchases for the years 1976 to 1978. It will be noted that Atlas specifically invoked the provisions of RA 1435 in claiming for the refund. Although the Supreme Court did not set any limitation or qualification as to the amount of the refund adjudged to be due to Atlas in that case, it also did not make any pronouncement that the computation of the tax refund should take into consideration increases in tax rates in subsequent legislations. A reading of the resolution shows that this issue was not one of those discussed and taken into consideration by the Supreme Court in arriving at its decision. The following statements by the Supreme Court in the 1990 Atlas case which is relied upon by the petitioner to support its argument on the meaning of the ruling in this case should be taken in its proper context: The Court sees no inconsistency between the increase in specific tax rates and the retention of the refund privilege. In fact, with the increased specific tax rates, the grant of partial refund to mining and lumber concessionaires is made more imperative considering that they seldom use the highways, the construction of which are financed by specific taxes (G.R. 93631, Resolution, 12 November 1990, p. 4, emphasis supplied). Such statement were meant only to emphasize that Atlas was entitled to a refund and to refute the argument of the Commissioner of Internal Revenue that the provision in RA 1435 granting the refund has already been repealed as evidenced by the increased in tax rates. It did not however say that the new increased rates are the bases for computing the amount of tax refund. A more careful reading of the decision in the Insular case and the resolution in the 1990 Atlas case should have made these things quite clear. There should not have been any cause for confusion as to the meaning of these rulings of the Supreme Court. A review of the applicable jurisprudence shows that it was only in the case of Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corporation (207 SCRA 549) that the Supreme Court first squarely addressed the issue of what rate should be applied in computing the tax refund. It is not correct, therefore, for the petitioner to argue that the then Third Division of the Supreme Court which handed the ruling in Rio Tuba overturned a doctrine laid down by the Court en banc in the Insular case. The Supreme Court, whether en banc or acting through a division or whether in the Insular case or in any other case, has not ruled that the computation of the tax refund should take into account increases in specific tax rates mandated in subsequent laws. it has consistently held that the rate should be that deemed paid under RA 1435 regardless of the actual amount paid by the taxpayer under current law. In fact, in 1994 the Supreme Court handed the same ruling in Commissioner of Internal Revenue vs. Atlas Mining and Development Corporation (232 SCRA 321). (The latter shall be referred to as the 1994 Atlas case). The petitioner further argues that the law (i.e. Section 5, RA 1435) expressly state that the basis for the computation of the refund shall be 25% of the specific tax paid thereon . According to the petitioner, "(t)he language of the law is simple, plain and clear, No qualification or interpretation by the respondent Court of Tax Appeals or by the Supreme Court is necessary to give effect thereto (Petition, p. 24; Rollo, p. 30)." The petitioner also argues that the it is inequitable, arbitrary and oppressive to use the rates deemed paid in RA 1435 as basis for computing the tax refund when the rates actually paid by it are the increased rates set in the current tax law. The Supreme Court has spoken, however, when it categorically ruled in the Rio Tuba case and in the 1994 Atlas case that the basis of the refund is the amount deemed paid under RA 1435. The following ruling of the Supreme Court in the Rio Tuba case is clear. 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 Section 153 and 156 of the National Internal 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 (207 SCRA 552-553, emphasis supplied). It is not for this court to review the accuracy or wisdom of this interpretation of the law by the Supreme Court. We can do no less than to apply such interpretation in resolving similar issues brought to us for consideration. Thus, in Davao Gulf Lumber Corporation vs. Commissioner of Internal Revenue and the Court of Tax Appeals, this court, through the Thirteenth Division and in a decision penned by Justice Gonzaga-Reyes, handed the same ruling and upheld the decision of the Court of Tax Appeals to base the refund claimed on the rates deemed paid in RA 1435 (CA-G.R. SP No. 34581, 26 September 1994). It is true, as the petitioner points out, that Section 5, RA 1435 provided that the refund is 25% of the specific tax paid thereon without specifying the applicable rate. But, contrary to the argument of the petitioner, this provision should be understood to refer to the tax paid in accordance with the provisions of the same law. Had the legislators intended that some other rate apply or that increases set by subsequent legislations be taken into account, a proviso or qualification to that effect, either in RA 1435 or in other laws, should have been legislated. It will be stressed that the only legal bases for the tax refund privilege of the petitioner is Section 5, RA 1435. No similar privilege is granted in other laws. Necessarily, therefore, the terms and conditions attending the privilege, including the basis for computing the refund, should be that established in the same law. As the Supreme Court explained in its 15 June 1992 Resolution on the motion for clarification in the Rio Tuba case: 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. It bears repeating that, in the interpretation of tax laws, exemptions are not favored and are construed strictly against the taxpayer. The grant of exemption must be expressed in terms "too plain to be mistaken and too categorical to be misinterpreted" (Commissioner of Internal Revenue vs. P.J. Kiener Co. Ltd., 65 SCRA 142, 152-153). If not expressly mentioned in the law, it must be at lease within its purview by clear legislative intent (Commissioner of Customs vs. Phil. Acetylene Company, 39 SCRA 70, 74). In view of the foregoing, we find that the decision of the respondent court is in accordance with the existing laws and jurisprudence. We therefore rule to affirm the decision without any modifications. WHEREFORE, this petition is DENIED and the decision of the Court of Tax Appeals promulgated on 20 September 1994 in CTA Case No. 3582 is hereby AFFIRMED without modifications. SO ORDERED. Ynares-Santiago and Reyes , JJ ., concur.