CTA Case No. 1874 (Decision)

/ REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY CMS LOGGING, INC., Petitioner-, ver-sus �- C.T.A. CASES NOS. 1874 and 1895 COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - ---- - -~�~ D E c: I I0N CMS Logging, Inc., petitioner- in these two cases, is a domestic cor-por-ation duly or-ganized a nd existing under- Ph i lippine l aws and licensed to oper-ate for-e st concession of a bout 13,000 hectar-es beginning 1957. On two oc: c: .:1s ions petitio ner- wr-ote � the Commissioner- of Inter�nal Revenue, r-espondent her�ein, seeking fo r� the r-e �fund or� ta:{ c r-e dit the a mounts of P3 ,358.20 and P14,876.56 or an aggr-egate amount of P18,234.76, r-epr-esenting 25'1. of the ~ ci f ic taHes paid on petr-oleum pr�oduc ts pur-chased by petitioner- fr-om Calte :�: (Philippin es ), Inc. an d 158

DECISION - CTA CASES NOS . 1874 and 1.895 -2 used in its logging operation s f or the period covering September 1, 1965 t o December 31, 1965 and January 1, 1966 to May 3 1, 1967, respec tively, which are now the subject matter- of C.T.A. Cases Nos. 1874 and 1895 , in the order given .� However, a 11 these claims for . refund are expected to be denied by the respondent in vi ew of his prev ious decis i on denying s im i lar claims of petitioner� i n C. T .f~. Case s No s . .1569, 1 674 and 1804 which were decided by this Court on AL1gust 30, 1969, now pending in the Supreme Court in G.R. No. L-31140-42. Hence, these i nsta nt pe titions for review. The only question posed i s whethe r or not the 25/. specific ta :-: e :.:emption on petroleum products used by forest concessionaires in their logging operations is 1 im:L ted to a period of five years from the ef �fee: ti vi ty of Republic Act No. 1435 on June 14, 195( , or un ti 1 June 14, 1961.. Petitioner alleged in its petitions for review that the claims for refund or ' t ax credits ar� premised on the gr.. a n t accorded to it by l a w under Section 5 of Repub l ic Act No. 1435. 159

--- - DECISION - CTA CASES NOS. 1874 and 1895 - 3- Respondent on the other ha nd, contends that the privilege of partial tax refund granted by Republic Act No. 1435, Section 5 thereof , to those using oils in their� logging operations, 1 ike th e partial ta:�: refund o �f spec: if ic ta:<es paid on oi 1s used in agriculture and aviation, is 1imi ted to a period o"f five year��s , the same to be counted f r�om June 14, 1956, the date the a �for�� esaid Act took effect. Consequently, fuel oils used in such concessions after June 14, 1961 are subject to the full specific tax prescribed in Section 142 of the Ta~�~ Code. Sinc:e petitioners' pur�chases and consumption of petroleum products we r�e made from September 1 to December 31, 1965 ( CTA Case No. 1874) and fr�om January 1, 1966 to May 31, 1967 (CTA Case No. 1895) th(?n they ar� e not co vered by the privilege granted under Section ~::. o �f Republic Act No. 1435. On the basis of the pleading s and the CTA records the par� ties agreed to s ubmit these cases for decision. � The law made to be applicable in these cases 160

DECISION - CTA CASES NOS. 1874 and 1895 - 4- is Republic Act No . 1435 involving Sections 1 and 5 of the said Act which We quote he reunder: SECTION .l. Section one hundred and forty -t wo of the National Internal Revenue Code, as amended, is fur-ther amended to read as follm'ls: 11 SEC. .142. Spec i �f ic T a:< on m<:m ufa c tur ed oils and other� fuels. On refined and manufac tured mi n era l oils and motor fuels, t here shall be col l ec ted the fo I lowing ta:<es: " (a) Kerosene or petrd 1 eurn, per liter of volume capacity , two and one- half centavos; 11 (b) Lubr-icating oils, per lite r ' of volume capacity, seven centavos; "(c) Na p i:ha, gasoline, and al l other si mi lar products of distillation, per l iter of volume capacity, eig h t centavos ; and "(d) On denatured alcohol to be used for motive power, per liter of volume capacity, one cen t.avo: Pr�ov id ed, That �i f the denatured alco hol is mixed wi th gaso 1 i ne, the s pecific ta:�: on whi ch ha s already been paid, only t he alcohol conte nt s ha l l be subject to the tax herein presc r .i bed. For the pur-pose ' of this su bsection, the removal of denature d alco hol of not l ess than one hundred eighty degree s proof (nim~ty per centum absolute a l c ohol) shall be deemed to have been removed for mot ive power, � unless shown to the contrary. "Whr-::>nevet- any of the oi 1 s mentioned above are, d uring the five years from June 18, nineteen hundred a nd fifty two, used in agric:ultl.tr�e and a viation, fifty 161

--- -- DECISION - CTA CASES NOS. 1874 and 1895 - 5- per centum of the specific � ta){ paid thereon shall be refunded by the Collector of Inter�nal Revenue Ltpon the submission of the following: "(1) A sworn .:dfidavit of the producer and two disinterested persons proving that the s aid oils were a ctually used in agriculture~ or in lieu thereof. "(2) Should the producer belong to any producers' association or federation, du 1 y r�eg is tered with the SP.c:ur i ties and Exchange Commission, the affidavit of the president of the association or �federation~ atte s ting to the f ac t that the oils were actually used in agriculture. "(3) In t he case of aviation oils, a sworn certificate satisfactory to the Collector proving that the sa id oi ls were actually used in aviation: Provi ded, That no such refund s shall be granted i n respect to the oi 1s used in aviation by citizens and corporations of foreign countries wt1i c h do not grant e qui vc:t lerit refunds or exemptions in r espect to similar oils used in a viati on by c itize ns and corpor~:~ticms of the Phi l.i.p pines." SEC. 5. The p r� oceeds of � the additional tax on manufactured oils s hall accrue to thE! road .:md br�idge �funds of the po 1 i tic a 1 s ubdivision for whos e benefit the~ ta:�: is collected: Provided~ however, That whenever any oils mentioned above are used by miners and fores t concessionaires in their operations, twenty-five per� cen turn of the specific tax paid thereon shall be refunded by the Collector of Internal Revenue upon s ubmission of proof of actual use of oils and und :"r si mi 1 ar c ond i ticms r-mumer~ ated in sub�- I-� lr�a g raph s one and two o f section 162

------~~~-~ -� -~ - DECISION -� CTA CASES NOS. 1874 and 1895 - 6 -- one her-eo�f, a!Tlending section one hundt'�r?d forty- two of the Internal Revenue Code: Provided, further, That no new road shall be constructed unless the routes or location the reof s hall ha ve been a pprove d by the Cornmi ~;sione r� of Public Highways after a d -?terrnin ation that such road can be made part of an integra l a nd ar� ticu 1 a ted rc1u te in the Phi 1 ippin e Highway System, as r-equired in section twenty-six of th e Phil ip pine Highway Act of 1953 . (emphasis ours) We reiterate our prev io u s ruling in the cases of Atla s Consolidate d Minin g an d De velopm e nt Corpor�ation vs. Commissioner of Int ernal Revenue, C.T.A. Case s No s. 1638 and 1708, d ecide d on August 15, 1968 and t: I'1S L ogging~ Inc. vs. Commissioner of Internal Revenu e~ C.T.A. Ca ses Nos. � 1569, 1674 and 1804, deci d e d on Augu st 30, 1969, where We said : v" The par-t.i a 1 re �fund of speci fic: ta:-:es paid for oi 1s used in ag r icu 1 tur-e and aviation, during a limited period, appears in Section 142 of the Revenue Code while t he partial refund of s peci fic tax paid for oils u sed by mi n e r s and fores t concessionaires, without limitation as to ti me. is in Section 5 of the Act. (To judg irom their� placement and their tenor, . they are c learly disparate provisions.~ We ca nnot find a ny pl a us ible reason for reading the limitation of the operative peri od provided fo r oils used in agr i cultu re and aviation into t he provision on the refund to miners a nd forest concess ionaires. Note that Section 5 of the Act has t o prov i de expre5s ly that the procedure for 16 3

ww ---�-- � - .,.. , DECISIOf\1 - CTA CASES NOS. 1874 and 189 ~5 - 7- r-efund pr-ov ide~d in subpar-agr-aphs 1 and 2 of Section 142 of the Revenue Code ar-e app 1icab 1e to refunds to mine r-s and for-est concessionair-es otherwise it would be deficient on this point since the pr-ovisions in Section 142 of the Revenue 1 Code ar-e not supposed to supp 1ernent the d e ficiencies in the provision gr-anting par-tial refund to miner-s and for-est concessi Lnai tres . Need 1ess to sa y this e:-:pr-ess r-efer-ence to Section 142 of the Revenue Cod~? cannot be e:<panded in tenc>r- and scope to include things no t stated ther-ein~ like the 1 imi ta ticm .~s to the oper-ative pe r-iod of the refund. The debates in Congr-ess in conrH�?C tir.m with Republic Act 1435, t he per-tinent excerpt of which we are quoting hereunder-, ar-e elucidating: Thu s , we see from the for-e going excerpt that 4 he reason for the re fund of specific taxes paid when oil for fuel a nd lubr-ication is usecf in agr-icul tur-�e and a - viation is differ-ent fr-om that advan c ed for- the gr-ant of similar t=wivileg~~s to miner-s and fot-� est c onc essionaires . With r-espect to the first the pur-pose is to foster agricultur-e and aviation for a l.im.i ted p~? r.iod. As for the sr:~co nd the r-eason adv ~�nc~:!d i s that the miner-s and for-es t concessionair-es , from the very na tLwe of t heir� .inclust r .ies, whi c h, � par-enthetically, is of per-manent char-acter-, do not use public r-oads as often as other user-s and to place on them equal burden in the maintenance of road s and bridges transgresses on the sense of fairness of Congr-ess. Based on fundamentally differ-ent r- easons as they 164

-� - ,, DECISION -� CTA CASES NOS. 1874 and 189~; - 8 �- at-e~ i t is not at all s u r pri s i ng that the privil e ges of one has different conditions from those of the other." ~ In view of the foregoing~ We therefore see no va 1 id and compe 11 i n~J reason to deviate fro m s aid ruling . t WHEREFORE, thE~ instant petitions for r ev .iew filed by petitioner are he re by GRANTED. Respondent i s her�eby or�der�ed to refund or g n:m t a ta}: cr�e dit in favor of peti ti oner the s um s of P3~358.20, corre s pond i ng to the period fro m September 1~ 1965 to Decemb er 31, 1965 in C.T.A. Ca se No. 1874; and P14,876.56, corr�espond i.ng to the period from January 1~ 1966 to May 3 1, 1967 iM C. T . A. Case No . 1895, representing s pecifi c t. a:-:es paid o n th e purchases of petroleum prod ucts used in its for e st operation s. Without pronounce ment as to costs . SO ORDERED . Quezon City~ Metro Manil a~ Ma y 1 2~ 9. 166

.. DECISION - CTA CASES NOS. 1874 and 1895 -� 9 - WE CONCUR: Assoc i <:\ te ,Judge � C E R T I F I C A T .I 0 ~ I hereby certify that this dec i sion wa s reached after due consu ltation a mong the members of the Court of Ta x Appeals in � acc ordance with Section 13. Artic l e VIII of the Constitution. F'residi g ,Jud g e Cou rt of Tax Appea ls 166 .