CTA Case No. 4711 (Decision)

-- REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUE. ~ON CITY CALTEX (PHILIPPINES), INC., P e t i t i o n e I' , - ver s u s - C.T . A. CASE NO. 4711 COMMISSIONER OF INTERNAL REVENUE, Res p o nd e n t . X- - - - - - - ------ X DEc I sI 0 N Th i s i s a n a pp ea l fr o m th e de n ial b y t h e re s po n d e n t Com mi ss ion e r of Int e rnal Re venu e , of t h e prot est fil e d by p e titio n e r Calte x (P h i l s . ) , I n c. a g a in s t a � d e fi c ie n c y e x t 1� aordinary gain s tax assess me n t f o r t ax abl e y e ar 1987 in t h e total a mo un t o f P3 36 , 868 , 58 0.14 On Augu s t 14 , 1987, t h e En e rgy R e gul a t o ry Board ( E R B ) i s s u e d a n o I" d e I" i n E R B C a s e N'o. s . 8 7 -- 0 1 , 8 7 - 0 2 a nd 87 - 0 3 , e ntitl e d " In t h e r~ att e r o �f Applicatio n for In c r ease in t h e P r� i ces of Petrol e u m Product s , - Cal t e>< ( phi 1s . ) ' I n c ., Pet 1� o ph il Cor p o 1� atio n , Pilipin as S h e ll P e t l" ol e urn Co l" poratio n , F1pplicant s " , a u t hor iz ing th e pro v i s io n a l i n c r e a se a s follow s : 519 .'

DECISION CTA CASE NO. 4711 - 2- Who l e s a l e p o s ted p r ices - ave r a g e P0 . 487 Co n tributio n t o Oi l Pri ce P0. 3 11 P0 . 007 S t a b i l iza tion Fund - ave rag e - (.005) Ad va l o r�e m T ax Comp a ny n et b ac l~ On th e ba s i s o f t hi s price increa s e in the p et r ole um produ c t s , r es pond e nt i ss u e d on August 15, 19 9 0 a d e ma nd l e t t e r tog e th e r� with Ass e s sment No. FAN - 1 - 8 7 - 9 0 - 001769 for the payment of P 3 3 6 , 8 6 8 , 5 8 0 . 1 4 , a 11 e g e d 1 9 8 7 w i n d f .a 11 p r o f i t t a x . Th e sa me was r ece i ve d . by the petitioner on Augu s t 2 0 � 1 99 0 . Th e d e fi c i e n c y tax a ss e ss me nt was c ompu te d as f o llow s : Total In ve n t ory Gai n s .P.. ?..?.. ~.. ?..�.?.. ~. ?...?.�..?.. ~. ?...:..~. ~. S urt ax du e 6 5 % 168,419,8 9 0.07 Add: 25% of s ur c h a rg e 4 2 ,122 , 97 2 .5 2 2 0 % i nter e s t from 8 - 1 6 - 87 to 8 - 15 - 9 0 1 2 6, 325 ,717.55 Res pon de n t c omput ed t h e in ve ntory gain s ba s ed s ol e ly o n t h e inv e ntory li s t of fini s h e d products of p e t i t i on e r as of Au g u st 15, 1987 which wa s s ubmitted by p e t �i t i o n e r� ' s co un s e l t o Se n a tor Neptali A� Gon z al e s , th e n Chairman, Co mmittee on Finance, Se n ate of t h e Ph i lippin es , in a l e tt e r dated March 2 7, 1 9 90 , as fol l ow s : Je t A 2 4,865,88 2 .00 Pr e mium 49,58 6 , 2 97 . 00 He gul a r 13,458,65 2 .00 Ke r� o sene 18,714 , 060.00 Di es el 1 2 6,367,077.00 Fu e l Oil 82 ,004,511.00 520

DECISION CTA CASE NO. 4711 - 3- LPG 0 i f �f e r� e n c e ) 1,3 1 0,882 . 00 Thinner s 1,835,413 . 00 As phalt s .............~. . .!...~..?. ~..?....9.. !?...9.. .:. .9.. 9. ( Un 1 o c a t e d In lit e r s Base d on it s reading o f th e inventory li s t, the BIR c omput e d t h e in ve ntor� y ga in s r� ealized by p e titioner a s a r es ult of th e Augu s t 14, 1987 ERB price in c r ease ord e r by multiplying th e s aid inventory list by th e indi v idual c omponent s of the Augu s t 14, 1987 price in c r e a se , a s follow s : Direct Co. Ad Valorem .~.~.C..~.Y..~. r..Y. Tax OPSf Total Premiu11 p 991,725.94 917,346.49 P62, 553,113.67 p 64,462,186 . 10 Regular 134,686.52 123,819.60 17,466,638.57 17,725,044 . 69 Jet (A f) (1,790,343.50) 22,379,293 . 80 18,649 , 411.50 Kerosene (1,939,538.80) ( 769,147 .87) 19,614,206 . 29 Die sel (2,432,827.80) 3,197,087 .05 97,770,207 . 47 16 '412' 230.62 fuel Oil 10,109,366 . 16 31,571,736.74 111,076,660.68 l. p. Ga s 5,494,302.24 40,562.63 26,077,434.50 Asphalts 145,245.73 Thinners ( 128,478.91) ....... .. ....~..~. ~.2..!..~. ~.2. 2,366,030 . 90 2,196 , 989.86 Unlocated ( 157,305.84) 1,518,001.95 ...t..:.........~.....~.....2......�...-~...-.~....1......:....3.....}.. 1,820,552.92 Total ...J. .. .. .6...t.S..!..7...t.O..~J. .~. '-.~.0..~. '-~}}.:..~.! u .~. ~.-~.~L~. ?.a..?. ~. ~.. .!.!..0..!..6...!}.~..?...:..~.~ ..2......~.....9.......,......2....}....8.......!.....2......~.....2-....:.....~...-.~..- ..2......?.....6......!.....6......~....9..............3.....~.....3.......:...."1.''. ~. OOOOooOO OOOo 0"00 0 "00oO OOMoO . .OOO OOO H OOo OO OOOO ''' On August 22 ' 1990, petitioner filed its prot es t with the Commi ss ioner o �f I n ternal Revenue. In s�u p p o r� t o �f it s p rot e s t , petition e r a 11 e g e d that it did not re a li ze a ny e xtraordinary gain or profit a s a r�es ult o f t h e 198 7 pric e in c r� ea s e ; th a t the 521

DE CI SI ON CTA CASE NO. 47 11 - 4- previou s BIR regulation s , th e Augu s t 14, 1987 price increase ord e r of th e ERB would hav e resulted in an inv e ntory lo ss . On January 17, 1992, petitionet' received re s pond e nt' s l e tter dat e d December 13' 1991, d e nying its protest with finality. Hen ce, the instant Petition for Review. Th e issues by the parti es for res o lution are as follows: ( 1) l-Jhethet" p � 0 . 1889 authot" izes the impositio n s urta x or extraordinary gain s tax on pric e increases s ub s equent to it s promulg ati on; (2) Ass uming, i'.!t'gue ndo, that P.O. 1889 will apply to inct'e a s es s ub se quent to the date of its p t' o mu 1 g a t i o n , will the term "whol esale po ste d price" include the amo unt s required to be remitted to the Oil Price Sta bili zat ion Fund (OP S F) and the ad valore m tax; and ( 3 ) Wh e ther th e petitioner may be held liable for s urcharge and interest. Petitioner alleged that P.O. 1889 may not be ma d e to appl.y to oil price increa s es s ub s equent to the date of i t s promulgation on November 3, 1983 fo~ 522

DECI S ION CTA CASE NO . 4711 .- 5 - to do so would create an irreconciliable incon s i ste n c y betwe e n Sectio n s 1 and 3 of the same law. It will also run c ounter to the previous a ppli catio n of P.O.'s 1709 and 1867 wh ich the BIR itself applied the windfall profit ta x to price increases prior or contempot�aneous to their pt�o mulg atio n in co n so nanc e with Sect ion 3 of the sa id laws. On the sec ond i ss ue, petitio n er alleged t h at the term "whole sa le po ste d price " means authorized pric e net of taxes and OPSF consistent with the previou s interpretations and with the nature of P.O. 1889. Considering that the authorized price incr ease of eighty (80) centavos per the August 14, 1987 order of th e ERB wa s a llocated as follows: (a) Reduction in company net back (.005) (b) Increase in paym e nt to OPSF .798 (c) Incr ease in ad valorem tax .007 Total P.800 No part of the pri ce increase went to the petitioner and therefot� e there is no basis to impose the windfall profit t ax . Pet i t i o n er fur t h e rm o r e st at es that th e r e c an b e n o ' � 11 r c h d I" g e ail d ' n 1- e e �~ t-: r_ ha t rr a j b e ; rn p ose d n t he 523 �

DECISI ON CT A CASE NO . 4 711 - 6- absence of any legal pro visio n which will determine the du e date for payment of the s urtax which was complicated mor e by the f a ilure of the respondent to issue a n y implementing 1Aegulation applicable to the 14 Augu st 1987 price increase. On the other h a nd, res pondent for his part, in s i ste d t hat p � 0 . 1889 s hould apply on the computation of windfall pro �fit r� ealized by oil companie s by r�eas on of the August 14, 1987 price in crease. Moreo ver, Sect ion 2 of the sa id law c le a tAly define s what co n s t i t ut es ~xtraordinary gain a nd considering that undetA Sec tion 8 of P.O . 1956 extraordinary gain reali ze d by oil companies is not the s our ce nor one of the s ource s of price sta bili zatio n fund, there is no legal basi s for the ERB to secure the fund from the extraordinary gain. An impl e menti ng r e gul ati on is nece ss ary only if the law is a mbiguou s and s u sce ptible to different int e rpret a tion and this is n ot s o in thi s case. As it i s the law c l ear ly d ef ine s what constitutes extraordinary gain. On t h e issu e of s ur c harge and interest, respondent b e l ieve s that Se ctio n 2 48(3) a nd Sec tion 524

DECISI ON CTA CA SE NO . 4 7 1 1 - 7- 249 of t h e Tax Code ap ply in the impo s ition of these p e nal ties. For failu re of p e tit i on er to pay the s urt ax within 30 d ays from t h e promulgation of t~1e pri ce i n crease the sai d p e n a ltie s s hould b e imposed a utom atically. It i s n ecessary for the resolution of the first i ss u e to exa mi n e caref ully the applicable law s involved. As co ,- r�ec tly c i te .d by the r es pondent, the ap pli cable law i s Preside nti a l De c ree No. 1889 and it s impl e menti ng regulation. How eve r, for a bett er und ersta ndin g of the sa id l aw , we find it a dvi s able to look into t h e perti n e n t pro visio ns of prior s imilar l aws. Th e fir s t s urt ax l aw was Presidential Decree No. 170 9 i ss u e d on August 13, 1980. Thi s law impo se d a 2 0 % s urt ax on extrao rdin ar y gain rea li ze d by oil com p a ni es as res ult o �f pri ce a nd s p ec ific taxe s increase a uthori ze d for petrol e um produ c t s . Extraordin a r�y g ai n wa s meas u red b y the dif fere n ce betw ee n t h e a ppro ve d whole sa l e po ste d prices of refin e d p etr ol e um pr od u c t s i mm ediatel y before the a u thorized pr ic e in c r eas e a nd the n ew po sted prices mul tip li ed by t: h e i ' t.1 m b 8 r� of uni ts of. pet l' o l eum 525

DECI SI ON CTA CA SE NO. 47 11 - 8- product s existing as of the day of effect ivity of th e pri ce inc t' eases. Th e s urtax was not an allowable deduction for income tax purpo ses . The s urta x s h a ll be paid within thirty (30) day s from t h e p r om u 1 g a t i o n o f t h e d e c t' e e a n d .s h a 11 a p p 1 y to ex tr aor dinary gain s t' ealized beginning Augu s t 1, 1979. Th e BIR i ss u ed Revenue Regulation No. 7 - 80 to implement the sai d d ecree . Thi s regulation defines whol esa l e po s t e d pr� ice as t h e wholesale pric es, ex refinery, o �f all p e troleum product s a s set by the Board of Energy exclusive of s pecific taxes, s pecial fund le v y a nd consumer cost e quali zation fund co mpon ent s. Thi s law was a ppl ie d to aut horized pri ce increa ses of Augu s t 1, 1979, February 9, 1980, June 1 , 1980 and Augu s t 3, 1980. 0 n J u 1 y 1 , 1 9 8 3 , P r� e s i d e n.t i a 1 0 e c r e e No . 1 8 6 7 was i ss u e d . Thi s l aw likewi se imposed a s urtax on extraordinary gain s on the s ame basi s but t he rate wa s incr ease d to 65% . Computation of extraordinary gain and the provi s ion on the time, manner and place of payment we t- e si mil ar t o the first decree. T h e s urta x was not a l s o deductible for income tax put- po ses. Howev e r, the decre e was mad e to take eff ect imm ediately a nd did not spec ify any 526

DECISION CTA CASE NO. 4711 - 9- par" ti c ul a r pri ce increa se . Hevenue Hegulation No. 7 - 83 wa s i ss ued in implementation of this decree to cover the a u t hori ze d price increase of July 1, 1983. Extraor dinar"y gain wa s c omputed ba sed on the increa se in industry net back. Industry net back mea n s reve nu e f I" om sa le of petr"ole um products ex cluding specific ta xes and s pecial fund imposts. How e~er , unbonded s tock s (tax paid) is d eter mined by the increase in the indu stry net b ack plus or minu s the c h ange on s pecific tax as the case may be. Finally, on No vembe r" . 3, 1983, Presidential Decr ee No. 1889 wa s i ss u ed in the s ame manner as p � D. 1867, th e s ur tax on extraor dinary gain was (increas e d to) also 65% but unlike the two previou s decr ees the sai d " s ur tax s hall be allowed as part of the cost of p etro l e um product so ld on or after No ve mb er 3, 1983. Th e co mput atio n of extraordinary gain i s lik e wi se ba se d on the difference between t h e wh ol esa l e po s ted pr-- i ces before and after the price increases mul tiplied by t: h e number of units of p et r� o J. e u m p I" o duct s ox i s tin g a 's o f th e d ay of the The aarne i.s 1 i 1 ~, � S E' +-:.) '';;.,.:ing t:he p :" r ;1, u 1 g d ;_ 1 on ; n e J. ,) ' l 1:a k e 527

DECISI ON CTA CAS E NO . 4711 - 10 - e ffe c t imm e di a t e ly . In implem e nt a tion of this d ec r ef:l, t h e BIR i ss ued thr ee Revenue Regulations namely: Re v e nu e Re gul a tion No. 1 2- 84 to implement June 7, 19 8 4 price in c r e a s e; Revenue Regulation No. 1 3-- 84 to impl e ment pi- i c e increa s e of May 18, 1984 and Re ve nu e Re gul a tion No. 2 2 - 84 to implement Octob e r 2 0 , 1984 pric e increa s e The computation of e x traordinary gain a I" i s ing fl- om the incr e a s e in indu s try net back s hall be determined on the average . by multiplying the in v entory of p e troleum products a s of t h e d ate of the i n c l"eas e by the a uthol" ized pri ce in c r ease p e r lit e r while gain s du e to in c r e a s e in ad va l o r e m tax s hall b e d e t e rmined by multiplying th e inv e ntOI"Y of unbond e d (t ax paid) s to c k s a s o �f th e d a t e of th e authori ze d pric e increa se by the in c l-e a se in a d v al o r e m a nd/or s pecif ic tax in c r e a ses . Th e s urt ax wa s made -pay a ble within 30 day s a ft er t h e dat e of th e e ffecti v ity of th e price i n c r ease. With th e for e going l a ws and implementing regulation s as our background, we are now ready to r es ol v e th e fir s t i ss ue whether or not Pr es id e n tia l Dec r ee No. 1889 authorize s � the impo s ition of ~; urt ax o r e x tr ao rd i nary g a in tax on pri c e in cre a ses s ub se q u e nt t o it s promulga t ion. 528

DECISION CTA CASE NO . 4711 - 11 - We agree with t h e p e titioner that with res p ect to P.O.' s 1 7 09 and 1867 the sa me were designed to go v ern pri ce incr eases prior to or contemporaneo u s to th e ir pt"o mulg atio n . In the case of the first decre e , the l aw it se lf s tate s that the law shall apply to extra ordin ary gains realized beginning Augu st 1, 1979. P . O. 1709 was promulgated on August ' 13, 1980. The pro v i s ion of law it se lf made it retroacti ve on e y ea r before it s pro mu lgation. Wit h re s p ect to P . O. 186 7 promulgated on July 19, 1983 it wa s made to apply to pri ce increases a u thorized o n July 1, 1983 . Unl i k e the fir s t decree, t h is law was pro s p ective in e ffe c t but the intention mu s t have b ee n to a pply it to the recent July 1983 p rice increase s with the i ss uance of Revenue Regulation No. 7- 83 which petitioner did not question but a b ide by it s implementation. Ho wever, this i s not s o in t h e ca s e of P.O t 1889. Wh e n the s ame wa s promulgated on November 3, 1983 there were no price increases prior to its promulgati o n nor wa s t h e r e a recent price increase. Th e law sta te s that it s h a ll tak e e ffect immediately or pro s p ect iv el y. (.1 c c o t" '�' i n q 1 y , i t w a s ma d e t o a p p 1 y to s u b s ea~ n l price L.he f :. : c ing ye;lt� 529

DECISIO N CTA CA SE NO . 47 1 1 - 12 - 1984 and as me n ti o,n e d a bove three revenue r eg ulation s wer- e issued in implementation of these price increases that year. The application of sai d decr ee to the 1984 pri ce increases is correct by the rules on stat utory co nstruct ion that laws unless otherwise provided s hall ha ve prospective effect. Thi s time we cannot agree with the petitioner that P.O. 1889 s hould ha ve been a pplied only to prior or contemporaneous pri ce increases si milar to the first two decrees becau se at the time of its promulgation there was not even one prior or c ontemporaneous price increase. Th e last price increase being that on July 1, 1983 t,.J hi c h was covered by P . O. 1867 as di scu s sed above. To apply the interpretation of the p et ition er that P.O. 1889 s hould apply only to prior or co nt e mpor-aneous price incr-ease is to r-e nder it u seless or without e ff ect. Thi s is against the prin ciple in stat utory co nstr uction that "it shall be pr es um e d that the legislature intended to e nact a valid and permanent stat ute which would have the mo st b e n eficial ef �fect that its language per- mits" . Thi s r- u 1 e is in conso n anc e also 1.-Ji th the p1�esu mp tf. o n s again.--:;t. i mpractical r 'TI"' .:J n i n g 1 e s s 1 8 q i. s l .~~ t l 0 f) '.,J h "ch is �mpossibLe r 530

DECI S ION CTA CASE NO. 4711 - 13 - incapabl e of execution or p e rformance. ( Handbook on Statutor�y Con s trAu c tion by Huperto G. Martin, 1 972 ed., pp. 126 - 127). fvl orAeove r, as the fact will show P. O . 1889 was implemented the following y ear by t h e BIR. I n ot h er word s , th e sa id de c re e wa s applied already to price increase s ub se quent to it s promulgation and pe t ition e r did not que s tion it s implem e ntation . lrJe now c o me to t h e next q u estion of the petitioner� wh e therA the application of P . O. 1889 to oil plAic e inc1Aease s ub se quent to the date of its promulg atio n on Nov e mber 3 , 1983 would create a n irr eco nciliabl e incon s i s tency b e tween Sections 1 a nd 3 of the sa id law. For ready reference, quoted hereunder are th e provi s ion s of the law involved: Sec t i on 1 . t'J. .. .?.. ':J....r.:..,t;,..~..~...........9..D...........~. ~.-~...C. ~. 9..!::'....~... ~ ~~.Y.. .9.. 9.. ~. 1J..~..L.........R. ~. ,1;,..~...........9...f.......?..':l....C..,l;,. ~. ~. � I n a d d'i t i o n t o the incom e ta x impo se d under Title II o �f t h e National Int e rnal Hevenue Code, t h ere is hereby i mpo se d a s urtax of sixt y -five (65 %) per cent on extra - or d i n a r y gai n s r ea li ze d by oil co mpanies a s a result of pri ce inc rAe a ses aut h ori z ed for p etroleu m P.r o d u c t s , w h i c h s u r t a x .~..h. ~. ~. ~. . . . .~. .�3..........9...!.. ~. 9..~. ~. 9.. ....~..�. .P.. ~..1~...!:':.......9.. f.....!:.tr..~..... ~. 9.. ~...~.........9...:f.........P.. ~.-~. !:..9....~. ~..':1..En........P...r.. .<?...9....~..g._!:.... ~.9.J. 9.. .9..!::'.......................9....C.......................9...f.. ~.~.E...... ........... -~'...9.. Y..~. ~.~..~.E.........................~...!..........................~...~..~..~. � (Und erscoring s upplied.) 'i e c l ir"' :.:. it a 11n c i an d P �. a c. e o f ~.'a Y.r.r.1g n.,t;,.� ~ r ein imo os ed shall L'P pt::1" d t..J~,.i-Lr~ tiJiriy (3 0 ) days follot.-Ji. g 1 iH" "' 'A o rn u l a I ;_ o n ') �f '. h is Decr� e e . Tr1e r� u 1 e s a n c! ' o q u l_ ,, �� i (; n o; a 1' �- f� o r i z e o 53 1

DECISI ON CTA CASE NO . 4711 - 14 - Sectio n 5 h e r eof rnay provide for in sta llment payment s . A r�eturn s h all be filed at the time of paym e nt with t h e Co mrni ss i one r of Internal Reve nue. The first pr ovis ion pr ovides the a utho riza tion for t h e i mp osition of 65% s urtax on ext r aor din ar y gain s rea li ze d by oil co mp a ni es as a r es ult of price increa ses. Th e only qualification is that the sai d " s urt ax shall b e allowed as part of the costs of petroleum product so ld on or after No ve mb er 3 ' 1983". The sai d qu a lifi cat ion to our mind ha s two s ignificance insofar as t h e s urt ax imposition is concet'ned. One, the s urta x i s now d e du cti ble from the gross i n co me or t'ece ipts of t h e oil companies c on s id e ring t h at cost of produ ctio n i s a d e ductible item to a t' rive at th e taxab l e income and sec ond, this manner of treati ng a s urt ax s h a ll b e a pplied to sale of petroleum pr oducts on or afte r' Nove mb e r 3, 1983. F I' o rn t h is provision, we can i nf er the inte n tion o�f the lawmaker to ap ply the l aw to all future price increases which will generate extrao r� dinary gain. This is a logical int erpretation for ho w could we allow the d e duction o �f th e s ur�tax as part of cos t production if in tt1e 532

DECISION CTA CASE NO . 4711 - 15 - first place we will not allow it to be impo se d on s ub seq u ent price increases that generate ext raordinary gain s. The sec ond provi si on mere ly states the time, mann er and place of payment. What con fu ses the petition e r is the requirement that the s aid s urtax s hall b e paid wit hin t hi rty day s following the promulgati o n of this decree. Thi s ma de the p et ition e r conc lud es that as in t h e case of t he pre v iou s la ws this latter law s hall apply only to ext r ao r- dinar- y gains a r� i si ng out of pr ior increases a lr ea dy a uthori ze d and ca nnot a pply to extraordinar y gain s a ri s ing out o �f pri ce increase s t hat a c cru e d s ub se qu e nt to its promulg at ion. If we will const rue Sec tion 3 in th e sa me wa y petitioner doe s it, thi s will render t h e l aw in e ffective for as point e d abo ve, there was no oil price increa ses that occurr e d prior to th e promulgation of P.O. 1889 that had not b ee n covere d by the prior law s .. Thi s will run co un ter to a n ot h e r esta bli s h e d juri s prudenc e in <:::t<'ii.::UL O t'V c o ns -�-�..<c.tirJt� " wh e r-e t he 1 a r' a u c1 g 8 ' f �- ~; ~ 1 e 1.-J j -:: s � � s c; e p l i b l e o f t wo o r mo r e c 0 .~ c� �� t u c; ' j 0 n s . i. n e f f e c t i. '� � o � a n cl r; n o t h f' 1 which ~.,..,tll 533

DECI S ION CTA CASE NO . 4 7 11 I - 16 - tend to giv e e ffect to the e vident intent of the l e gi s latur e , th e latter c on s truction mu s t be made, there being a pr es umption against ineffectivene ss of s tatute s " (U S v . Toribio, 15 Phil 85). As already m e ntion f~ d abov e , th e law wa s applied in th e 1984 pri ce in c r eases and p e titioner did not que s tion such appli c ation . The intention mu s t have been to really give th e l a w pro s pe c tive application. This conclu s ion i s further s uppot" ted by the fact t h at P . O. 1889 und e r Section 7 provides that the law " s hall tal< e eff e ct imm e diately" - a pht" ase generally construed a s pro s pective application of a law. Note that re s pondent is s ued implementing regulations to cover the 1984 oil price increase. Under t h ese regulation s th e s urta x was made payable thirty ( 30) days aft e r the date of the effectivity of the re s olution of the Board of Energy authorizing the pt"ice incr e a s e. Had the s ame procedure been done in the 1987 price increa s e perhap s no such confusion as to it s eff e cti v ity may have o c curred. Thi s bring s us to the question whethet" or not the failur e of th e t"e s pondent to i s sue an impl e menting r e gul a ti o n to cover the 1987 price incre ase in va lidat es the application of P.O. 1889 to the 1987 p r i ce in crease . 534

DECISION CTA CASE NO . 4711 - 17 - We believe that i t h as neve t" been a rule that the i ss uance of an implementing t" egulation is an indi s pen s able requirem e nt before a ny law could take effect. On the contrary the effectivity of a law is govet" ned by th e dat e of effectivity provision which is an e ss ential and s tandard part of a statute. It determin es the time when t h e law s hall take e ffect. ,, (M a t- tin, op c.ft�., p. 27). On the other h a nd, t h e provi s ion c oncerning the grant of aut hot"ity to t h e co n cerned agency to i ss ue t" ules and t" egulations is primarily de s igned to facilitate the s mooth impl e mentation of th e law. It supplies the neces s a t"Y detail s whi ch rn ay not b e pr esent in t h e law to ca rry out it s objective or to clarify ce rtain a mbigu ou s provision s or provisions which are s u sceptible to diffet" ent interpretation. It does not control the life of the stat ute s. It s non issuance does not invalidate the existe n ce of the law unl e ss the pro vi s ion of t h e law itself s tates in a cl e ar manner th at th e c oncern e d age n cy has to i ss u e fi rs t a n impl e me n t ing reg ulation b e fore it C 0 U 1 rj o; a') c1 to i ~.. s i m ~ � l P me '1 .- �� i on T ,., i. s ' J �~ 'J G i n t h e 1": 2- '2 e u f P � f' � 535

DECISION CTA CASE NO. 4711 - 18 - 1889. Section 5 of the said d ec r ee mere ly requires th e Mini ste r of Finance upon recommendation of the Co mmi ssio ner of Internal Revenue and in consultation with the Mini ster of Energy to promulg ate rul es and regulation s. ~1ot- eove r , the facts of the case will s how that respondent issued no t only one implementing r egu l at ion but three l'�eve nue t"e gulations to impl e ment P. D. 1889 . Exce pt for a s light c h ange the r e gul atio n s are ba sically the sa me. Among other pro v i s ion s it c l ar ifi es the ambig uity i n the pro v i s ion of Sec tion 3 t h e sa id decree by pro v iding s p ecifica lly that the surtax s hall be p ai d wit h in t hirty (30) day s afte r t he effectivity of the pri ce increase. This pro vis ion was uniformly a dop te d in the three price increases i n 1984 an d we see n o legal ob stacle to it s app li catio n to t h e 1987 p rice increase. In fact, as in the � case of other law s, one implementing l''e gul atio n is s uffi cie nt to provide guidelines to bot h t h e government age ncy co n cerned a nd t h e pri vate p e rsons a ffecte d . In vie w of al l t he fo t-e going, we beli eve P . O . 1 8 8 9 i s a p p 1 i c a b 1 e a n ' r�1 a y _ e ,- v e a s 1 e g a 1 b a 5 i 5 i; o a u t h �) r� i z e t h e i r;1 pus i t l 0 -, C' f s u �� c a >� r 1'..1 c <t �- t1 o r d i n a ~ ~ . 536

DECISION CT A CASE NO. 4711 - 19 - We come now to the sec ond issue, whether or not the term "whole sale .po ste d price" includes the amounts t�e quit�e d to be r�e mitted to the Oil Price Stabilization Fund (OP S F) and the ad valorem tax. For our purpose _ we quote her eunder the p e rtin e n t provi s ion s of P . O. 1889. Sec t i on 2. .~..9...':!.!..1?.. ':J...:f::..9...:t::.~.5?...!J......................?.. :f. ..~. ~. :t::...r.:..9.. ?...r.:..9.. ~.'::1..9....'::..Y.. . .....~..C!l...~.D. .5.'. � T h e e x t r a o t' d i n a r y gain s s hall be mea s ured by the difference between the approved r,.,Jholesale posted pri ces of refined petroleum products immediately be for e the authorized price inc t- eases a nd the n ew po s ted prices multipli e d by the number of units of pet roleum product s ex i st ing as of the day of effectivity of the pri ce increa ses . Extraordinary gains s hall also refer to the aggre gate in c rea ses in the value of cr ud e oil a nd ba se stocks. By r,Jholesale po ste d p r i c�e " s hall mea n the whole sa l e prices, ex refinery, of all petroleum produ c t s as set by th e Board of Energy exc lu s ive of ( i ) Specif ic taxes (ii) S pecial Fund Levies (iii) Consumer Cost Equalization Fund Components" pur s u a nt to Sec tion 3(c) Reve nue Regulation No. 7 - 80 issued in implementation of P.O. 1709. In v iew of this d efinitio n, p etitioner arg ues that in the computation of the e x tt� ao t� dinat� y gain the i n crease in ad valorem t ax a nd t h e po rt .i..on co rr_es ponding to 537

DECI SI ON CTA CA SE NO . 471 1 - 20 - the Oil Pri ce Sta bili zation Fund s hould be excluded a nd o nly the oil industry net bach s hould be included. The arg um ent is not a b s olut e ly c orrect. The Oil Price Stabilization Fund or it s pr e dece ss or the Con s umer Price Equ a li zat ion Fund is a s pecial fund establis h ed by t h e Board of Energy to reimbur se the oil co mp anies for costs incurred in the purcha se of crude oil at pri ces in excess of the re �ference pric e. Reference price of cr ude oil mean s the price . .. of cru d e oi l including the corresponding c u s toms dutie s, insurance a nd Bo ard of En e rgy fee as esta bli s h ed by the Board of Energy (now Energy Re gul ato r- y Board) for pur- po ses of com p uting t h e a moun t of r- ei mbur se me nt that may be claimed by an oil co mp any from the Co n s umer Cost Equalization Fund now Oil Price Stabilizatio n Fund. While it is true t hat t h e amount collected by the oil c ompanies for the fund is remitted to t h e Office of Energy Affairs that ma n ages the fund as a trust account in the g e n eral fund per Pre side nti a l De cree No . 1956 and Executive Order No . 137' n evert hel ess, the oil companies later� on are r- eimbursed from this ' fund to allow t h e m to recover� their increased cost of 538

DECI SI ON CTA CA SE NO. 4711 - 21 - ac qui ring c rud e oi l . P e titioner concentrated to argu e on t he a s p ect that the OPSF c ollection s are remitt e d to t h e go ve rnm ent an d n eve r dwelt on the r e imbur se me nt as pe c t which redound to i t s b e~efit as in this parti c ular case. We quot e h e r e und e r the pertinent di s po s itive p ortio n of th e Or der dated August 14, 1987 of the En er gy Reg ulator- y Board aut hori z ing the s ubject pri ce incr eas e on Augu s t 15 , 1987: WHEREFORE, the h erein applicants are h ereby directed to REDUCE their netback by POINT FIVE (P.005) CENTAVOS ave rage per lit e r, an d a uthoriz e d to provi s ionally I NCREA S E the wholesal e po s t e d price s of t h e ir p etro l e um product s by an average of FORTY -- EIGHT POINT SE VEN (P0.487 ) CENTAVOS p er liter, plu s THIRTY - ONE POINT ONE (P0.311) CE NTA VOS p er liter which a ppli ca n ts are h e reby dir ec ted to pay . to the OPSF. To t h is total amount of S EVENTY - NI NE POINT THR E E (PO �. 793) CENTAVOS s h all b e a dd e d t h e r� e s ult a nt increase of P . 00 7 p er l i t er average on th e Ad Valorem ta x adverte d to above. '~ of this total inc r-e ase of EIGHTY (P0 . 80) CENTAVO S per lit er which s hall be refle c ted in th e r- etail price s , 48.7 ce nt avos h ave pr- ev iou s ly . b ee n allocated a mong the vario u s p etrole um produ cts under 8�0 E He s o 1 u t i o n s No s � 8 7 -- 0 2 an d 8 7 - 0 3 f o r pur po s es of r ~imb ur se m e nt from the OP S F althou gh n ot r e f l e ct e d in the r eta il pr- i c e s . Thi s Orde r, t her efore, allo cates only T HI RT Y- ON P T~ T ONE (P .3 1 1) CE TA S per l i. t e r" �'l n d P 0 I !,1�( J. V E ( P J 0 5 ) CF N.,. AV 0 S per ' i t er ratb2c~ reduc�ion am ong ?ll p e t �� o 1 u rn ' r 1 rJ c 1- s rna o l� e ted .:_ e; c a 11 y i r. t he follo�, i n g ��a�1ner: 538

DECI S ION CTA CASE NO . 4 71 1 �' - 22 - NET BACK OIL PRI CE ST ABI LIZ ATI ON FUND P 1�e mium Gas o l in e .0 2 . 4 373 Heg u la r� Ga s oli n e . 01 .8366 Av turb o ( . 078) l< e 1� o se n e ( . 1 3) .53 4 3 Di ese l Oil . 08 .5 4 99 Fu e l Oil (.067) Fee d s t oc k ( . 067) . 6 01 8 LPG . 06 .5296 As ph alt ( . 07) .3 11 Ave rag e (.005) T h e a mo un t of P. 0 07 r� e p r es e n ti ng t h e a d va lor e m t ax e ff ec t " a ll o c at e it se lf " a mo n g t h e p e t l"ol e urn prod u ct s up o n t h e a p p li ca ti o n of t h e a d va l ore m ta x rat es. Th e a mo un t o f in c r e a se as a b ove a llo c at e d s hal l be corr es po ndin g l y 1�e f l ec t e d a s a n upt,.Jard ad ju s t me n t i n t h e r e ta i l pri c e of eac h p ro du c t s o ld a ny wh e r e i n t h e c ou n try, �.,.Jit h out p r e jud ice t o th e i ss u a n ce by t hi s Boa r d o f a r e s o lution fi x ing /l� at i o n a l i z i n g t h e r� eta il p rice s t h roug h o u t t he Ph i l ip p i n es of a ll p e tr o l e um p ro du c t s c o ve r e d by th e s e a pp l i ca tio n s. Cl e a rly pU I"S Ua n t to sa id order of t h e ERB i t a u t h o 1� i ze d t h e p 1�ov i s io n a l i n c r e a se o f t h e wh o l esa l e p o s t e d p1� i c e t h e oi l c o mp a n ie s ' p et r o l e um p rod u c t s by a n a ve nJg e of fort y - eig h t po i nt s eve n (P0 . 4 87 ) ce n ta v os p e r� l it e 1�. T h e p u rpose of whi c h i s to a l low th e oil co mpa n i es r e i mbur se me n t fr o m th e OP S F . I n o t l1e r t,.Jo r d s , co nt1" a 1�y t o th e r e p r�ese n tntio n rn ad e b y t h e p e titio n er, t h i s a mo un t 54 0

DECIS IO N - CTA CASE NO . 4711 - 23 - goes to the oil c omp a ni e s to e nable t h e m to recov e r incr ease in cos t of produ c tion whi c h th e y c ould not dire ct l y r ecove r from t h e OP S F. As the �fund was al r-ea d y d e pl ete d i n 1987 (ERB Ord e r, p . 2 1) Only th e ave r- age a mount of t h i r ty -- one point on e (P .3 11) c e n t avo s p e r� 1 i t e r� we r� f~ d i r� e c t e d t o b e p a i d to t h e OP S F. Petitio n e r� ' s co un se l rn ay not h ave fully ap pr� eciatEl d t h e fact s by r�e pr� e s enting to thi s c ourt that th e e n tire a mount o f P . 798 goe s to th e OPSF. Thi s is giving t h e p etitio n er ' s co un se l th e b e n efit o f t h e d o u b t t h a t t 11 e r� e h a s b e e n n o i n t e n t i o n o n th e i r part to make a ny mi s r ep r e s e n tatio n of f ac t. Th e r�e fo r� e , t h e i n c r�ease in whol es a l e po s ted p r�ice i s P0.4 87. We now co me to the is s u e of wh e th e r or not th e average incr� ease in ad va l o r�e rn t ax in th e a mount of P .007 p e r 1 ite r� s h oul d be incl ud e d in the co mput a tion of ex traordinary gai n . Whil e in general as d e fined under� pre v iou s Re ve nu e He gulation 7 �-- 80, t h e t,..rhol esa l e po s ted p r� i ce exc lud e d s p eci fi c t ax or f or that matter, now ad va l o r�e rn tax, t h i s t r- e a t 111 e 11 t h a s b e e n c h a n g e d b y sub s eq u e n t r� e g u l a 1: i o n s p a r tic u 1 a r� 1 y t ha t implement in g p � 0 . r he j rn p 1 e 1n e '1 t i n g 541

DECI S ION CTA CA SE NO. 4 7 11 - 24 - reg ul at i ons n a me ly, Hf~ve nu e Heg ul at ion Nos. 1 2-8 4, 13 - 84 a nd 22 - 84 co mpu t e d the impo s i tio n of t h e s i x ty -� fi ve (65 %) p e I" ce nt s urt ax on th e tota l ex t l- aO I' dinai"Y gains d ee me d r� ea li ze d as a l' es ult of p i- i ce a nd int e l- nal 1-e ven u e tax increa ses a u t hori ze d for p etrole um product s ( Sec. 5 ) . Gain s du e to i n c r ease i n s p eci fic ta x a nd ad valo r e m tax are made to apply on ly to i n vento i' Y of unbonded (tax p ai d) p et l' oleu m pr� oduct as o �f the date of t h e a ut h orized pri ce in c r� ease ( Secti on 4 ) . The inclusion of inc l-eas e i n inte l- n al I"eve n u e tax as b as i s in co mputin g for extraordinary gain of unbond e d s tocks i s ve ry logical in as mu c h i nt er n a~ revenue ta xes on thi s in ve nt ory o f unb o nd ed p et l- ol e u rn produ c t s h ave already b ee n paid : Ad valo r e m or s p ecific taxes on p e trol e um produ cts are paid wit h in 15 days from the dat e l" e moval t h e l"e of �f I' O ITI the pl ace of production. ( Sec tion 1 27 ( a ) NIRC). Wh e n the se pr od u c t r:; are i.,.Jit hd l- at..Jn frorn th e r�e finery, they are tran s ferred and s tored by t h e oi l co mpanie s in their vario u s unbond Gd i n s tallatio n a nd d epo t s a ll ove l- th e co un try re a dy f o r d e li ve ri es to their res pe ct i ve d eale 1�s. Un b o r1 d e d 5 �1s t a I j a t: i o n s o 1� d e p o t s rn e a n s t 1�1e 542

DECI S I ON CTA CASE NO . 4711 - 25 - f avo r� o�f the BIFl to guarantee p ay me nt o�f i n te t-nal t" eve nu e tax b eca u se t h e sai d taxes d u e on t h e produ c t s st o r�e d t h e r�e in a t"e p ai d al r�eady. So t h at wh e ne ve r t h ere are pric e increases wh ic h include a n inct" ease in the ta>< es due, the oil compa n ies are b e n efited by th e in c t- ease in taxes insofa t" a s the se unb o n d ed stoc k s ar�e co n ce t" n e d because when t h e oil co rnp a 11 ies se ll th ese unbonded s tocks to t h ei t" d e ale r s t h e sa l e i s b ase d on the n ew price inc r ease whic h i n c lude s t h e n ew tax rat e. T h i s n.e w t a x r a t e is no t paid any rn o t" e to the BIR co n s i dering t h at excise taxes a r�e paid o nly once and t h i s is u pon r e mova l of th e product s from t h e place of productio n o t� within fift ee n (15) day s t h e t�ea fter i n t h e case of p etr ol e um produ cts. How eve r, with r es p ec t to bond e d stoc k s an d t h o se which are s till in t h e ir pla ce of productio n , we b e li eve t h e incr ease in th e ta x rate s h o u ld n ot be i n c l u d e d in t h e co mp u tatio n of extraor d i n ary gai n b eca u se t h e oi l cornp a n y i s n ot be n efited by s ai d Th (! payrner � L ( r PX ci se t ax 01'1 th e P I" Od u cts 1.c; b~�' ~..,.,_; ' d l''c)'J�r s:1a�1 ~ be � ,'l~�;e~�! a're a d> o � 1 ~-~�l .". l ne1.,.; ta>' rat~? !�o be ''JrJJ:'l�tud ,.. ,�-J.,�e'y to the Bli< i)rJ t!:e t'~A~i~ri Jss'.~t? :...,t'lu t lir:.!' O t"" r!ot~ ~\('~t.i.;.. iorln:.. 543

DECI SI ON CTA CASE NO. 4711 - 26 - ma y b e h e 1 d 1 i a b 1 e f o I' s u I" c h a I' g e a n d i n t e r e s t , t h i s co urt c ould not agree with th e petitioner that there i s no l ega l p1�ov i s ion whi c h will d e tennine the due date for paym e nt of th e s urta x. As di sc ussed above, th e provi s ion of P . O . 1889 and it s implementing 1�eve nu e 1� e gulation s s h all apply. It is to be noti ce d that s in ce th e e na ct me nt of the first s urtax d ec 1�ee, na me ly�, P.O . 1709, followed by P . O . 1867 a nd finally by P.O . 1889 as well as the issuance of the corresponding implementing r e gulation s , the ti me for payment of the surtax has always been wit h in 30 day s afte 1� th e effectivity of the n e~.oJ p 1� ic e increase on p etroleum product s. The se a1�e th e s ame regulations b e ing cite d by th e petitioner in it s va riou s pl ea ding s to ju s tify th e n on-i mp osition of s urta x on co ntribution to OP S F and increa se in ad valore m tax. P etitio n e l" i s h oweve 1� r�e pudiating Ol' ignoring the sa me r�egulation if th e sa me �..Jill work against its int e r es t . ~~ e do not see any r�ea s on ~.oJhy the sa me l"e gul atio n a nd p 1�ac tice of p a ying s urta x l,.Ji.thin 30 day s after th e e ffe c tivity o f th e n ew pric e increase wo u ld not a p pl y ln t:l1e instt111 t c.::.se. T fi e s c rn e r"J :-� o b :efT' a :�-- o s E' i n t l; e rn o s t. r� e c e i 1 .. c� as e ..... of :~.s:.f11.rn.~:; �;io n e ,.... ().f . J..r: .!: E� .�~r.:.0. ~ He v.�3...r.! u. E;l...?.... F. ~. t t~ ion e I" �.; s . 544

DECI S ION - CTA CA S E NO. 4711 - 27 - No. 1 2 49 20, April 28 , 1 99 4 . In t h i s case , Mobil P !1 i 1 i p p i. n e s a I" Sl u e d t h a t t h e I" e wa s n o p r e s c r i b e d t i me fo1� p ay me nt of t h e a ddition a l a d valol"e rn tax es wh ic h b e ca rn e due by 1�� eas on o f the increases i n cost r e cov e I' y of p et 1�� o 1 e urn p I" o d u c t s . If t h er�e I.,_Ja s n o Pl"eSC I"ibed ti me fol' p ay me nt, i t �fol low s as a matte l" of st ri ct log ic t h at no li a bility for d e lay i n p ay rn e nt of s u c h 1 a ddi t io n a l a d va lo l"e nt ta xes c o ul d ar� ise'. 0 n t h i s k i n d o f a I' g u rn e n t , t h e S u p r e rne Co u r t s tate s: Th e ............P.I.:. ~ .r'..<?.L.P~?...~..............c:J..~ .f:.f..~.<? ~} . ~Y.. wit h t he it b a~dc co nt e nti o n of too mu c h . If we l"e 1;. ?.. '.~--~.r.:t.... ...... }:.:~ .~.f:l..~.:...i:l...L.~. .Y.. ..............i:~ ~.:'..'L L.9.. . h. ..?.. ~..1~.. ~ :5.. .. ~.Y ?.......................~.� ~. a dditio n a l ad va lor e m ta xes on t h e .P..~..~.Yt~J...~.~-~.LY.........':'!..~~ .h. 9.. !~. 9..':'!.t::!............P. ~. ~.~9) .~.'::1.!!1..............P.. t . ~..9.. '::l. ~..:t=...:5. ~9 ~ ~ 9.......1?..~ . P.i:l Y.i:l.~ .~. f:l . ?..'::l.~.Y... ~.t1.~.t:1.........~ ..1::.... .'~..9...~..-~..<:J.........P...~ ~.9..:5.. ~ t.~.~ 1?. ~ .b.... ~~::.?. . JJ...i:l.Y .. ~ L.L.<? t1. ....1::.9. ~ .f:l.?...~ ... .. 1~l..~... ..<?...?..D.~. ~- .<:J...fi!E .... ~ .~ <? .t1 .<;~...........~~...fi!...!"....L.J...L.~...... ~.9...........9.e a b s u ~- 9..:........ ....~..1::. ������-~---~����������g_.f:!...~~..~..i:l.. ~.Ll..~..Y.. . ~. ~~. P. l:J...9.El..9..D..'~.................:~.9..............P. t~.I?..~J..~ ..............P.9)J. S:..Y.., for t h e a d d itio n al ad va lol"e rn taxes we l"e clea l" ly du e on t h e a dditional val u e u nd eniably accruing to Mo b i l ' s b e nefit i n re s pe c t of p l"ev iousl.y ~...Jithcl l �aw n Pl" odu ct b u t not yet .,di s po se d of by t il e tirne t h e in c l" ease in cost d e l:t'{ery cl'f oil. co mpani es was u u t h o r i z (>. d b y t .h o no E' I" e s o 1 u t i o n s . i' )t )' ( > '( X x >' ,. i ; t e I /('- �. 8 h8 I n a c~ I II u "� , '� i () ( ( I ~) f 1 J. l 0 it.e l' l ' j� I .. t� 0 f , .. ~. I �) ,. d 1.1 i r-1 S t�r t e r� o u I L h c 11 ' {\ p 1, '� il 1. b ! , ; ' 1 c1 IIi (' l.l i I t i l (> ! (1\/f.�' it ' !,.)() !{ J�. c�.I I 545

- .... - ---._ DECI S ION CTA CA SE NO . 4711 - 28 - t h e BIR would h ave quit e justified in co mputing the p e r�iod of delay or� default fr� om the ti me of actua l physical remo va l of th e product in vo lv e d , upon the theor� y t h at t h e liquidation of the a mount of ad va lor e m ta xes du e retroact s to the tim e of phy s i ca l re mo va l of the pr- oduct from the r�efinery. But the BIR did not do s o: r.. . . . . . i n s t e a d , .J.:..~ 9.. g..9...~r..�..b. (0;l...~..(O;l..9...?.............9.. �...........9...b. E.?...9...9..Y.. . . :. g..E,?...~.D..?... .1:: h. ~ ......Pt. .<:J...<=!...~ ..~...1::..........~.�..........tr. ~.Y.JD. 9..........i?.. ~. ~..t.:J..........9...~..!J .!?. ~..r.. I::'. 9...~J.Y.. (O;l.J.Y.. . . n. . . . . . . . ..r:: .f:1..r.f.l..c:>.Y~. c:i..............:f..r.:. 1::J: .<:J..r.r.1.............. 1..~ .. .........r~...fil...L~.n fil. .r.:. Y.. .............<:J.n..tY..............9.1::. h. ~. .9. 9....1::. ~:l..?...........~. f. . . . . . P...t.:...<:l..r.T.'..~J .9.~...1::.L.c:>.E'...........c:l...f...... ~. t!. (O;l...........1::..~.9.. . .......C?.J.. ....~. 9.. ~. .'3. ~. ?..~. ~. 1:'. 1::. :~. ~..':'. ?.................~D..9.. . . . . . . .'?..c:l...~..t.]...1::.fil. c:i.................~..~..~................?.. ~..~. !:.. l::'..!:.. ~. r:...Y.. f ..~..f. :~. (O;l...l:l. !J............ U .?.J .......~t.~Y. ::.9r~..~.~..fil...........P.fil. .r.:...~...c:>...c:i............:E...~. ~.fl]...........?.. I::'.S..h. d ates. Thu s , t he BIR co n s idered the impr act icability o �f c omputing the full or ad ju ste d ad va lor e m taxe s in this case a s co n s tituting a ju s tifi ca tion or excu se for d e f e rring p ay me nt of s u c h a dditional ad va lor-e m taxe s . Tha t iu st ification di sa pp eared as s oon as t h e BOE Resol ution s we r e is s u e d a nd th e increa se d whol esa le p o s t e d p r� i c e s �.,J e r e d e t e r mi n e d . .~. ~.............9...!::. .~ I::'.D.9.. 9.J .~. . . . :t=..9........g. h.9....~. ~.9.. 1::. ~...~.~. ~. ~ ........1::.~.~........1?...~..?.J . 1::.b.?..D.......<?...f........1::..t'..(O;l. .~ .~.'3...... ~. ?.............r.1Lfil..t.:...E:!..:l.:. Y...........~...~. P. .r.:..~s...~...<:J..~...�.............9...t.:..... ......~.l?.. l?...r..~. .S>...?.. LY.. ~..:. .~:.9..........:t=..b...E:!..........9. .9...!J..1::...r:. 9. .r..Y..?.. .......!:>,..!::'..9...~.........P.. ~..?.. b. ~J. ~..!J..........9...P. P...fil...9....t.:...�..........1::. ~. this Co ur t as rea s onabl e a nd mod erate and ""''''''''''''''"''''''''' '""''''''"'''''''""'"'"'""''"''''"""'' "'''''"''''"''""""'""'"'"'"''''""'""""''"''"'""'""'"'''""'''""'"'"'"'''' "''"'''''NOo"O'"''''"""''''"''''''"'''''""""'''""'"'" as c lo se to t h e int e nt of Sect ions 110 and '''''''"'"""" """"''""""'"'N"""""''" '"'''""''''"''''''"'''""'''''""""'"" "'''"""""'"""'"" ""'"'"""'"'"''""""'"""'"'"'''''""""'''"'''""''""'""'"'""'""""'"'"""""""'"'' "" .~. ?.. ~..?......... ~..~..?...?. . . . .T.~.>.<..........~...c.>..<=!...fil...1............~..?..........b. 1::.........~...~...~.........1?...9...?...~..f.. 9.. L(O;l........1::. ?.. .9..~. !:......1::'.D. 9.. ~. r.... .... !=...~..~............~...~...~..~...~...:t=..~. .9..D. � s uppli e d . ) L--J e fi nd the sa me pronouncement by the S upreme Court'' a s applicabl e i.n the instant ca se. The imp osition by t h e BlR o f s urch arge a nd interest for failu r� e ''Jn t he pat� c�f tf �te p etit io n e r� to pay the surtax ~!ith i n "lO days a+tor t�f-�e eff ec tivi::-y oF the 548

------ DECISI ON CTA CASE NO . 4 711 - 29 - a utho rized price increase on Augu st 15, 1987 is lik ewise ju s tified under th e ci rcum sta nces. In view of a ll the foregoing, the ext r-a- '' ordinary gain due petitioner s h ould be co mput e d �I pur s u ant to p � 0 . 1889 an d its i mp le menti ng r e gulations as follows: (1) Gains a r- i s ing from the i n c r ease in oil industry ne t back or t he wholes a l e posted pr-ice s h all be dete rmin e d on the averag-e by mul tiplying th e i nve ntory of petroleum product s as of August 15 , 19 87 by P . 487; (2) Gains due to i n crease in ad valorem tax s hall be determined by mul tiplyin g the inventory of unbond e d (tax paid ) petroleum product s as of Augu st 15, 1987 by P . 007; (3) Twenty - five ( 25% ) per cent:um s urcharge pur s uan ,t to Secti on 2 4 8(1 ) & ( 3 ) a nd twenty ( 2 0 %) per ce nt:um interest pur-s uant to Sectio n 249 o f the Ta x Code s hould also be added to t h e s urtax. Accor dingly, co mput a tion of s urta x li a bility on the r- x t t a ' r � i 'l 3 t" y o s 5. n s :� 8 a 1 i z e d by p e t L t i o n e r -3 s defined l.lnde'" t=.8. 1889 is.s'�rowP, as fo ::.lo�"Js: 547

- - ,.,.. �-- -....._., DECI SI ON CTA CA SE NO . 4711 - 30 - In ve ntor� y gains: a) Du e to incr ease in oil indu s try n et back or increase in whol~sale po s ted pribe Item .f..D.Y. E!.?.D. ~.9. r.Y... Jet A 24,865,882 Pr e mium 49,586, 297 Regular 13,458,652 Kerosene 18 , 714,060 Di ese l 1 26 ,367,007 Fuel oil 82,004,511 LPG Thinn e r�s 1 ,3 1.0,88 2 As phalts 1.,835,413 Unlo cated difference ~ ?... ?.. ?. . . . ?.. .9.. ............} :...?.... �. <" To t a 1 319,518,191 l"lultiply by P0.487 P155,605,359.02 b ) Du e to increase i n a d va lorem tax I t em Unbond e d ...................~...?....?.. ~. 5!..?....?.. ?.. 9...:. .�..9.. ...~.....}.......?..........?..........~.......~......?..........~.........?.........?.......9........~.........~.......?......?....... ,Jet A .~.D..Y.~..~...!=.9...~. Y.. Premium P101,955,496. 2 5 Reg ul ar 5 ,844,114 Kerosene 14,083,137 .......?.. ?... ?.. ?....~..~.. .?....?..! . ~..:. .9..�. Di esel .~. ~. ?..!....?...~..-~..~ ?.. ...?.... ?.. 9...:..?.. ~. * Fuel oil 3, 1 69, 066 LPG 15,301,295 Th i nn e r s 80,283,490 As ph a lt s 5 4,760,9 21 Tot a 1 4,877,0 2 9 f'ilul ti ply by 68,5 20 . . . . . . . . . . . .?. .?.. .?....~..9...9.. 178,464,372 P0.007 T0TAL S urt ax due (156,85 4,60 9.62 x 65%) Add : 25% s urch a rg e (101,955,496.25 X 25%) Amoun t due a nd collectible * Pl~ s 20% i n terest from the dat e pre sc ribed for p ay me nt wh ic h i s within t hirty ( 30 ) d ays after Augu st 15, 1987 the effectivity d ate of t h e price increa se un til t h e amou n t is fully p ai d pur s u a nt to Sec. 2 4 9 of t h e T ax Co d e, as amende d . 548

DECISION - CTA CASE NO. 4711 - 31 - WHEREFORE. the Court hereby orders the petitioner to pay the total amount of P127.444.370.31 plus 20% interest from September 15. 1987 until it is fully paid. The assessment issued by the re s pondent is accordingly modified. SO ORDERED. Quezon City, Metro Manila, July 5, 1994. ~Q,~ ERNESTO D. ACOSTA � P resi d ing Judge WE CO NCUR: GRUBA J u dg~ ... RA:do~~E~~ I Associate Ju ~;:l" I 'I I 549

DECI S ION CTA CASE NO . 4711 - 32 CERTIFICATION I h ereby certify t h at t h is decision wa s reac h e d �'I afte r d u e co n s u ltatio n a mong t h e me mb e r s o f t h e Court of Ta x Appea l s in accordance wit h Sectio n 13, Arti c l e VIII of t h e Co n s tit u tio n . c...~~'~ ERNE~TO D , ACOSTA P l"es id i ng J ud ge Co u rt of T ax App ea l s 550