C. Alcantara & Sons, Inc. v. Commissioner of Internal Revenue

FORMER FOURTH DIVISION [CA-G.R. SP No. 35587. June 30, 1995.] (CTA Case No. 3546) C. ALCANTARA & SONS, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS , respondents . D E C I S I O N MONTOYA , J p : This is a petition for review of the decision dated October 10, 1994 of the Court of Tax Appeals (CTA Case No. 3546) granting the claim for partial tax refund of petitioner C. Alcantara & Sons, Inc. under the provisions of Section 5 of Republic Act No. 1435 but reducing the amount of specific taxes to be refunded by respondent Commissioner of Internal Revenue from One Million One Hundred Seventy Nine Thousand Six Hundred Seventeen and 40/100 Pesos (P1,179,617.40) to Twenty Thousand Nine Hundred Seventy Four and 15/100 Pesos (P20,974.15), without interest. The petitioner alleges that it is a duly licensed forest concessionaire with a Timber License Agreement duly entered into with the then Ministry of Natural Resources; that during the period beginning July 14, 1980 to June 28, 1982, petitioner purchased from Pilipinas Shell Petroleum Corporation, 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; that Pilipinas Shell Petroleum Corporation paid and passed on to herein petitioner the specific taxes imposed under Section 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 fuel oils which petitioner actually and exclusively used in connection with the exploitation and operation of its forest concession. Pursuant to the provisions of Republic Act No. 1435 and the decision of the Supreme Court in Insular Lumber Co. vs. Court of Tax Appeals, 104 SCRA 710 the petitioner filed with the respondent Commissioner of Internal Revenue on August 4, 1982 a claim for refund in the amount of One Million One Hundred Seventy Nine Thousand Six Hundred Seventeen and 40/100 Pesos (P1,179,617.40). In support of said claim for refund, the petitioner submitted to respondent C.I.R. the affidavits of its Senior Vice-President and of three disinterested persons attesting to the fact that the refined and manufactured mineral oils, motor fuels and diesel fuel oils that petitioner purchased from Pilipinas Shell Petroleum Corporation were actually used by the petitioner in the exploitation and operation of its forest concession. On November 16, 1982, without waiting for respondent C.I.R.'s decision, petitioner filed with the respondent Court of Tax Appeals a petition for review in the case entitled "C. Alcantara & Sons, Inc. vs. Commissioner of Internal Revenue" docketed as C.T.A. Case No. 3546, to prevent the lapse of the two (2) year prescriptive period for filing a claim for refund. During the hearing held on May 8, 1985, the petitioner presented as evidence invoices and receipts covering the purchases of the petitioner from July 1980 through June 1982 of various refined and manufactured mineral oils, motor fuels and diesel fuel oils which were identified by its witness Efren Abril, the Finance Services Manager of the petitioner. It also presented as evidence a summary of consumption of various refined and manufactured mineral oils, motor fuels and diesel fuel oils it actually used from July 14, 1980 to June 28, 1982, which were identified by its witness, Mr. Tyrone Odilao. All the documents were marked before a Commissioner appointed by the respondent Court of Tax Appeals. On October 10, 1994, the Court of Tax Appeals rendered a decision, the dispositive portion of which reads as follows: "WHEREFORE, the petition for review is hereby GRANTED. Respondent is hereby ordered to refund in favor of petitioner the amount of P20,974.15, representing 25% specific taxes paid on locally purchased gasoline, oils and lubricants and diesel fuel oils pursuant to the provision of Section 5 of Republic ActNo.1435.No costs of suit." The petitioner contends 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 rates specified by Sections 1 and 2 of R.A.No.1435 and not the increased rates mandated by Sections 153 and 156 of the NationalInternal RevenueCode of1977. In support of its contention petitioner argued that: I THE COMPUTATION OF THE TAX REFUND BASED ON SECTIONS 1 AND 2 OF R.A.1435 RATHER THAN SECTIONS 153 AND 156 OF THE NATIONALINTERNALREVENUECODE IS CONTRARY TO LAW AND EXISTING JURISPRUDENCE, PARTICULARLY THE DECISION OF THE SUPREME COURT IN THE CASE OF INSULARLUMBER 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 RESPONDENT CTA 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 CTA RULED CONTRARY TO ESTABLISHED TENETS OF LAW WHEN IT LENT ITSELF TO INTERPRETING SECTION 5 OF R.A.NO.1435. WHEN THE CONSTRUCTION OF SAID LAW IS NOT NECESSARY. IV 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 NATIONALINTERNALREVENUECODE, AS AMENDED. V 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 INTERNALREVENUECODE IS UNFAIR, ERRONEOUS, ARBITRARY, INEQUITABLE AND OPPRESSIVE." The petitioner submits that the decision of the Supreme Court in CIR vs. Rio Tuba Nickel Mining Corporation, 202 SCRA 137 which was decided by a division, did not effectively modify the earlier rulings of the same court in the manner provided by Section 4 (3) Art. VIII of the Constitution which provides: "(3) Cases or matters heard by a division shall be decided or resolved with the concurrence of a majority of the members who actually took part in the deliberations on the issues in the case and voted thereon, and in no case, without the concurrence of at least three of such members. When the required number is not obtained, the case shall be decided en banc ; provided, 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 ." (Emphasis supplied) Hence, according to the petitioner, the decision of the Honorable Supreme Court may be reopened at any time. The petitioner further argued that the questioned decision of the respondent Court of Tax Appeals ignored the increase in rates mandated by the provision of Sections 153 and 156 of NIRC as amended, under which the petitioner paid the specific taxes on manufactured and diesel fuel oils. Under the questioned decision, the amount to be refunded was based instead on the taxes deemed paid under Sections 1 and 2 of R.A. 1435. We find petitioner's arguments without merit. In the recent decision of the Supreme Court in the case of Commissioner of Internal Revenue vs. Hon. Court of Appeals and Atlas Consolidated Mining and Development Corporation, G.R. No. 106913, 232 SCRA 321, the court held that the claim for refund of specific taxes paid should be granted based on the ratio specified by Sections 1 and 2 of R.A. No. 1435, and not on the increased rates under Section 153 and 156 of the Tax Code of 1977, provided the claims are not barred by prescription. A reading of the provisions of Secs. 153 and 156 of the National Internal Revenue Code shows that the same never contemplated a refund. If at all, they only provided for the new specific tax rates. Consequently, Section 5 of Republic Act No. 1435 subsisted until 1985. The grant of refund privileges must be strictly construed against the taxpayer and liberally in favor of the taxing authority. Thus, in the case of Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corporation 202 SCRA 137, the Supreme Court held that ". . . all doubts must be resolved in favor of the taxing authority and that tax exemptions (or tax refunds for that matter) must be strictly construed and can only be given force when the grant is clear and categorical." In the answer filed by the public respondents through the Office of the Solicitor General, it pointed out that petitioner's contention that the decision of the Supreme Court in the Insular Lumber Co. vs. Court of Tax Appeals and Commissioner of Internal Revenue, G.R. No. L-31057 (1981), 104 SCRA 710 and Commissioner of Internal Revenue vs. Hon. Court of Appeals and Atlas Consolidated Mining and Development Corporation, G.R. No. 106913, 232 SCRA 321 which were issued en banc may not be modified by the decision and resolution in the Rio Tuba case promulgated by a Division of the Supreme Court, is without merit as said contention is being raised for the first time in this appeal. Furthermore, a reading of the decision of the Supreme Court in the case of Rio Tuba will readily reveal that the doctrine in the Insular Lumber case that mining and forest concessionaires are entitled to the refund of 25% of specific taxes paid on oil products used in their mining or forest operations, was never reversed or modified. What was modified relates to the refundable amount of specific taxes which the Supreme Court ruled should be based on the specific tax rate prescribed in Sections 1 and 2, R.A. No. 1435 and not on the increased rates prescribed under Section 153 and 156 of the Tax Code as amended, as the latter law does not specifically provide for a refund to the mining and lumber companies of specific taxes paid on manufactured and diesel fuel oils. WHEREFORE, premises considered, the petition for review is hereby DENIED for lack of merit, without pronouncement as to costs. SO ORDERED. Paras and Hofilea , JJ ., concur.