Taggat Industries, Inc. v. Commissioner of Internal Revenue

ELEVENTH DIVISION [CA-G.R. SP No. 37605. March 31, 1998.] TAGGAT INDUSTRIES, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS , respondents . D E C I S I O N MARTIN, JR. , J p : This is an appeal by way of a petition for review of the Decision dated May 25, 1995 of the Court of Tax Appeals in CTA Case No. 3548 entitled "Taggat Industries, Inc., petitioner, versus Commissioner of Internal Revenue, respondent," a claim for tax refund, the decretal portion of which reads: "WHEREFORE, in all the foregoing, Respondent is hereby ORDERED to REFUND Petitioner the sum of P12,617.10 without interest representing 25% refund of specific taxes paid on its purchases of oils and fuels actually used by Petitioner in its operations as a duly licensed forest concessionaire pursuant to Sec. 5 of R.A. 1435. "SO ORDERED." (p. 18, CTA Decision p. 54, Rollo) The facts material to the instant petition are as follows: Petitioner Taggat Industries Incorporated, a domestic corporation, is a duly licensed forest concessionaire with a Timber License Agreement duly entered into with the then Ministry of Natural Resources. During the period from July 1, 1980 to December 31, 1981, petitioner purchased from Caltex (Philippines), Inc. and 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. The said oil companies paid and passed on to petitioner the specific taxes imposed on the above-mentioned oils under Sections 153 and 156, of the National Internal Revenue Code (NIRC) of 1977 which said companies sold to the latter. dctai On October 6, 1982, petitioner filed a written claim for refund with the Bureau of Internal Revenue (BIR) in the amount of P334,710.75 broken down as follows: Diesel, P142,372.25; Regular Gasoline, P110,925.00; Oils and Lubricants, P80,600.65; and Grease, P812.75. The amount represents twenty-five percent (25%) of the specific taxes collected on the refined and manufactured mineral oils, motor fuels and diesel fuel oils which petitioner utilized in its operations as forest concessionaire. Such claim for refund was not acted upon by the Commissioner. Before the two-year prescriptive period for tax refund could set in, petitioner filed on November 16, 1982 a petition for review with the respondent Court of Tax Appeals (CTA). On May 25, 1995, the CTA rendered its Decision granting a partial refund on petitioner's claim. Not satisfied with the decision of the tax court, Taggat Industries, Inc. filed the present petition for review on the ground that the CTA's basis in computing the refund on specific taxes paid by petitioner should be the amount of tax actually paid under Sections 153 and 156 of the 1977 NIRC, as amended, and not the amount of tax deemed paid under Sections 1 and 2 of Republic Act (RA) No. 1435. Petitioner posits the following arguments: "I "THE RESPONDENT COURT OF TAX APPEALS FAILED TO APPLY THE SUPREME COURT'S 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 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 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 OPERATIVE PROVISIONS TO BE APPLIED BUT RATHER, SECTIONS 153 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 IS UNFAIR, ERRONEOUS, ARBITRARY, INEQUITABLE AND OPPRESSIVE." We rule to deny the petition. Before discussing the issues raised by petitioner, a review of the laws involved in this petition would be necessary. Rep. Act No. 1435 entitled "An Act to Provide for Increasing the Highway Special Fund" was enacted, as its title states, to increase the highway special fund by raising the specific taxes levied on manufactured oil and other fuels, as well as diesel fuel and motor oil. Sections 1 and 2 of the law amended Sections 142 and 145 of the Old Tax Code (NIRC of 1939). Section 5 of the law, however, grants a partial refund of 25% on the specific taxes paid by miners or forest concessionaires on their purchase of said oils and fuels used in their concession considering that "these lumber and mining companies seldom use the national highways because they have their own roads, they have their own compounds." Hence, it would be "unfair to subject them to the increase rates and in effect make them subsidize the construction of highways from which they did not directly benefit." ( Commissioner of Internal Revenue vs . Rio Tuba Nickel Mining Corporation , 202 SCRA 137, 145) LLjur In later laws, including among others, Presidential Decree (PD) Nos. 1122 and the NIRC of 1977, as amended, the specific taxes levied on the purchase of said oils and fuels were further increased. However, the Tax Code which took effect in 1977 and its subsequent amendments did not provide for the refund of specific taxes on oils and fuels purchased and used in the operation of miners and forest concessionaires previously granted to them under Section 5 of RA 1435. The provision of law on the pertinent specific taxes can be found in Sections 153 and 156 of the 1977 Tax Code, as amended. In this appeal, petitioner seeks a refund on the specific taxes passed on to it by the oil companies on its purchases of oils and fuels from the latter for the period covering July 1980 to December 1981 at which time the new rates under the 1977 Tax Code were in effect. Petitioner claims that it is entitled to a refund of 25% on the specific taxes it actually paid on its purchases of oils and fuels during said period. The CTA granted partial refund to petitioner, holding that the claim for tax refund for the period covering July to November 15, 1980 could no longer be considered as the same had prescribed, petitioner having filed its appeal with the Tax Court only on November 16, 1982 at which time the prescriptive period of two (2) years had set in for these accounts. As to the remaining accounts, the court a quo granted a refund of the specific taxes based on the taxes deemed paid under Sections 1 and 2 of RA 1435, and not on that actually paid by petitioner under Sections 153 and 156 of the Tax Code. In this forum, petitioner's principal contention is that respondent court failed to apply the Supreme Court's en banc decision in Insular Lumber Co . vs . Court of Tax Appeals (104 SCRA 710) which was affirmed in Commissioner of Internal Revenue vs . Atlas Consolidated Mining and Development Corporation (G.R. No. 96361, Resolution of the Third Division dated November 12, 1990). It argues that these cases, particularly the Insular Lumber case which was an en banc decision, laid down the rule that the grant of partial refund on specific taxes was without qualification or limitation. We do not agree. The Insular Lumber case, notwithstanding that it was an en banc decision, cannot be said to have laid down a doctrine or principle of law wholly applicable to the case at bar. In the first place, the question of which tax base (i.e., whether actual or deemed paid) would be used for purposes of computing the partial refund on specific taxes was never put to issue. Instead what were raised by the parties and ruled upon by the Supreme Court were (1) the constitutionality of the first proviso of Section 5, RA 1435; (2) the non-application of the five-(5)-year period of limitation of the partial tax refund on oils and fuels used in agriculture and aviation under Section 1 of RA 1435 to the refund granted to miners and forest concessionaires under Section 5 of the same law; (3) the exclusion from the tax relief on specific taxes paid on oils and fuels used in the sawmill operation of a forest concessionaire; and (4) the reckoning date of the two-(2)-year prescriptive period for claiming a tax refund is from the date the tax was paid or when the tax is legally collected, from the date of occurrence of the supervening cause which gave rise to the right of refund, i.e., the date of use of manufactured oils and fuels. Secondly, it is important to stress that the period covered by Insular's claim for specific tax refund was for the year 1963 at which time the unamended version of RA 1435 was still the governing law. Therefore, the Insular Lumber case cannot be invoked by petitioner in asserting that it is entitled to a partial refund based on the actual specific taxes paid on oils and fuels during the period covered by its claim. Neither can the 1990 Atlas case lend support to petitioner's claim as there is likewise no identity of issues in that case to the present suit. The only issue raised therein was whether or not Atlas was entitled to the 25% partial tax refund under RA 1435 on the specific taxes it paid for extra gasoline and diesel fuel purchased during the years 1976 and 1978. It is worthy to note that during the period for which Atlas was claiming for a partial specific tax refund, PD 1122 amending Sections 142 and 145 of the Old Tax Code by increasing the rates on specific taxes, was in effect. Nonetheless, the Resolution of the Supreme Court's Third Division dated November 12, 1990 did not make any pronouncement qualifying the basis of the partial refund on specific taxes. The High Court merely stressed the availability of said partial refund to miners and forest concessionaires under Section 5 of RA 1435 despite the increase in specific tax rates on oils and fuels brought about by subsequent legislations. Accordingly, the Supreme Court's ruling in the Insular Lumber case which was reiterated in the 1990 Atlas case, cannot be made to apply to the present suit since despite the similarity in the facts of the cases, the issues raised by the parties are not the same. Thus, this Court cannot rely on the pronouncements of the High Court in the earlier cases and apply the same herein. After a review of the applicable jurisprudence, We found that it was only in the case of Commissioner of Internal Revenue vs . Rio Tuba Nickel Mining Corporation , 202 SCRA 137, September 30, 1991; Resolution dated March 25, 1992, 207 SCRA 549; and Resolution dated June 15, 1992) where the Supreme Court categorically ruled on the issue of the basis of computing the 25% refund on specific taxes paid on oils and fuels used by miners and forest concessionaires under Section 5 of RA 1435. In the Rio Tuba Nickel Mining Corporation case, said domestic corporation, which is engaged in the business of mining with several mining lease contracts entered into with the Republic of the Philippines, filed two (2) separate written claims for refund on the specific taxes collected on the refined and manufactured mineral oils, motor fuel and diesel fuel oils that it had utilized in its operations as a mining concessionaire. The Commissioner of Internal Revenue (CIR) denied Rio Tuba's claims while the Tax Court reversed the CIR's decision and granted refund. On appeal to the Supreme Court by way of a petition for review on certiorari filed by the Commissioner, the Court in its original decision reversed the CTA findings and denied Rio Tuba's claim since, as the Court opined, the disputed refund privilege or exemption laid down in RA 1435 has been repealed by subsequent laws, the most important of which is PD 711 which took effect on July 1, 1975. According to the Court, the proviso in Section 5 of RA 1435 has become an anachronism when PD 711 was enacted channeling the funds that have accrued from the various special funds, such as the highway special fund, to the so-called General Fund. Thus, by virtue of PD 711 the raison d'etre for the grant of partial tax exemption under RA 1435 has ceased to exist since any government project can be the beneficiary of such funds as long as it is for the general welfare of the masses (202 SCRA 137, 145-146). cdpr In its Resolution on the Motion for Reconsideration filed by Rio Tuba, however, the Supreme Court modified its decision, this time finding that despite the mandate of PD 711, the Highway Special Fund continued to exist up to 1985 and was channelled to the General Fund only in 1986. Since Rio Tuba's claim for refund covers specific taxes paid from 1980 to July 1983, the Court ruled that Rio Tuba was entitled to a refund but not to the whole amount it was claiming. The Court explained thus: "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 Sections 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 549, 552-553). In another Resolution dated June 15, 1992 on Rio Tuba's motion for clarification of the High Tribunal's earlier resolution granting a partial tax refund on the corporation's claim, the Supreme Court stated: "Rio Tuba's contention that the refund should be based on the rates effective at the time the specific tax was paid is without merit. Section 1 of RA 1435 amended Section 142 of the National Internal Revenue Code 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 RA 1435 provided for a refund privilege on specific taxes on manufactured oils paid by miners or forest concessionaires . There is a difference in the refund privileges 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 for 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 legislature to use the specific tax rates provided in Section 1 as the sole basis for refund, notwithstanding future rate increases. "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." (at pp. 1-2) Thus, in Rio Tuba , the Supreme Court categorically ruled that the basis for the 25% specific tax refund on manufactured and diesel oils and fuels used by miners and forest concessionaires in their operation is the taxes deemed paid under Sections 1 and 2 of RA 1435 and not those actually paid under subsequent laws. The Rio Tuba case was affirmed in, Commissioner of Internal Revenue vs . Court of Appeals (232 SCRA 321) which involved a claim for specific tax refund by Atlas Consolidated Mining and Development Corporation. With the Supreme Court's pronouncement in Rio Tuba and CIR vs . CTA (supra) , this Court needs only to apply the aforesaid doctrine to the case at bar where the facts and issues raised are substantially the same. This same ruling was even applied by other divisions of this Court in Curuan Timber Corporation vs. Commissioner of Internal Revenue and the Court of Tax Appeals (CA-G.R. SP No. 35522, promulgated April 4, 1995), as well as in C. Alcantara & Sons, Inc. vs. Commissioner of Internal Revenue and the Court of Tax Appeals (CA- G.R. SP No. 35597, promulgated June 30, 1995). Both corporations' petition for review on certiorari to the Supreme Court, as well as their motions for reconsideration, were all denied in the High Court's Resolutions dated June 21 and August 28, 1995, respectively, for Curuan (G.R. No. 119793) and on August 21 and November 13, 1995, respectively, for C. Alcantara (G.R. No. 120992). We are likewise aware that several cases, including Davao Gulf Lumber vs. Commissioner of Internal Revenue and the Court of Tax Appeals (G.R. No. 117359, Third Division) and CDCP Mining vs. Commissioner of Internal Revenue (G.R. No. 122161, Second Division), involving this same issue are still pending before the Supreme Court. At present, however, the jurisprudence applicable to the case at bar is that of Rio Tuba and We can do no less than to apply the same herein where a similar issue has been brought to Us for consideration. Considering the foregoing disquisition, We do not find it necessary to discuss the other arguments advanced by petitioner. We are of the view, therefore, that respondent tax court committed no reversible error in granting a partial refund on the specific taxes collected on manufactured oils and other fuels purchased by petitioner Taggat Industries, Inc. for the period November 16, 1980 to December 1981 based on the taxes deemed paid under Sections 1 and 2 of RA 1435. WHEREFORE, PREMISES CONSIDERED, this petition is hereby DENIED and the Decision of respondent Court of Tax Appeals dated May 25, 1995 is AFFIRMED in toto . Costs against petitioner. SO ORDERED. Vasquez , Jr . and Tuquero , JJ ., concur.