CTA Case No. 3459 (Decision)

ltEPURLIC OF THE PHILIPPINE.S COURT OF TAX APP�ALS QUEZON CHY ~GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, - versus - C.T.A. CASE NO. 3459 COMMISSIONER OF INTERNAL REVENUE and COMMISSIONER OF CUSTOMS, Respondents. X- - - - - - - - - - - - X DE C I S I 0 N This is a claim of petitioner, Government Service. Insurance System , otherwise referred to as GSIS, for brev ity, for t~e refund of the amounts of ~1,147 , 059 .36 , ~1 ,7 15;515.25 and ~933,011.42, or a total of~3,795,586.03, representing 15% withholding final tax on the interest earned from savings deposit with the Philippine National Bank, hereinafter referred to as PNB for short, for the years 1979:, 1980 and 1981 , �respectively, which were allegedly remitted to the Bureau of Internal Re~ue by the said PNB, plus the amount of P34.5,329.85 paid for documentary stamp taxes for the year 1980, and customs duties and compensating taxes in the amount of ~42,658.00 and ~15,362,728.00 paid on Ju l y 31, 1981 and June to Novembe r 1982, respec tive ly, to the Commissioner ofCustoms.

DECISION - CTA CASE NO. 3459 - 2- Petitioner is a government corporation established and existing under its charter , Commonwealth Act No. 186, as amended by Presidential Decree No. 1146. It ha d savings deposit with the Philippine National Bank which was subjected to the 15% withholding tax prescribed under Presidential Decree No. 1156, as implemented by Reven u e Regulation No~ 8-77, in relation to Section 23 of Presi dent ial Dec r ee No . 1177, which requires that all government offices units as well as government owned or controlled corporations are subject to all taxes. On June 28 , 1979, the GSIS made an inquiry from the Bureau of Internal Revenue on the propriety of th~ tax imposition considering i ts tax exemption under the GSIS Charter, or Presidential Decree No. 1146 , which took effect on May 31, 1977. In his letter of July 30, 1979, the then Acting Commissioner of I nternal Revenue Efren I. Plana, ruled that the interest i ncome on the savings deposits of the GSIS with the PNB is not exempt from the 1 5% withholding tax . In 1979, 1980 and 1981 , the PNB allegedly withheld 15% withholding taxes on the interest earned by the GSIS , plus documentary stamp taxes in accordance with Section 53(d) (I ) .of the 1977 Tax Code, as amended , and Section 23 of Presidential Decree No . 1177 and Section 222 of

DECISION - / CTA CASE NO . 3459 - 3- the Tax Code, as amended, respectively , computed (Exhs. A, A-1 and A-2, pp . 64-66, CTA rec. ) as follows: Year Withholding Tax Dcx:.-umentarJ:: stamp Total 1979 ~1,147,059.36 . ~345,329.85 ~1,147 , 059.36 Tot a 1 1980 ' 1,715,515.25 2, 060,845.85 1981 933,011.42 933L01l.42 ~~:!:1~2:!:2M?,;,�J On March 9, 1981 , the GSIS, through the Government Corporate Counsel, requested the Commissioner of Internal Revenue for a reconsideration of the ruling on the ground that the GSIS is exempt from all taxes or fees in accord- ance with its charter , Presidential Decree No. 1146, specifically under Section 33 thereof. (Exh. C, pp. 68-72, CTA rec .) .Likewise, on July 10, 1981, the GSIS wrote respondent Commissioner o f Customs requesting confirmation of its tax exemption under Section 33 of Presidential Decree No. 1146 in relation to customs duties and compensating taxes the GSIS had to pa~ in importing mater ial s and equipment for the on-going construction of its riew head- quarters buildi ng in Roxas Boulevard, Metro Manila . (Exh. D, p . 73, CTA rec.) ~ In the meantime , on J uly 31 , 1981 and June to November 1982, the GSIS paid the sum of ~42,658.00 (Exh . B, p. 6 7 , CTA rec.) _and ~15,362,728 . 00 (Exhs. J, J-1 to J-10 , pp. 84-94 , CTA rec. ) _r espectively, as customs duties and compensating taxes.

DECISION - CTA CASE NO. 3459 - 4- About the time that the GSIS wrote the Comm i s - sioner of Customs on July 10, 1981, the GSIS , on the same date, a lso requested the Minister of Justice for a legal opinion on whether it still enjoys exemption from all tax assessments , fe es , charges or duties of all kinds, as provided for in Sect i on 33 o f Presidential Decr ee No . 114-6. (Exh. E, p. 7 4, CTA rec .) On August 13, 1981, the Commissioner of Cu stoms replied that "whi l e the system continues to enjoy its tax exemption status under i ts revised char ter, it is, however, bound to comply vith the requirements of S(;c- tion 23 of President i a l Decree No. 1177, 11 invoking Opinion No. 98, s. 1979 of the Ministry of Justice. (Exh ~ F, p. 75, CTA r ec .) On September 8, 1981, the Minister of Justice rendered his Opinion No. 126, s. 1981, that the tax exemptions granted to the GSIS under Section 33 of Presidential Decree No . 1146 are retained by i t, despite Presidential Decree No. 1177, which latter law fai l s to provide any explicit revocation of such " exemp ti on. (Exh. G, pp . 76- 79 , CTA rec .) Consequently , on September 30 , 1981 , the GSIS repeated its request for recon siderati on with respondent Commissioner of Internal Revenue, furnishing him with a copy of Opinion No. 126 , Series of 1981, of the

DECI SION - CTA CASE NO . 3459 - 5- Min istr y of Justice , stating that there is no necessity for it to secure a subs i dy under Section 23 of Presi- dential Decree No. 11 77 since those who are required are only those t ax exempt entities whose tax exemption have been removed under Section 23 of the decree. (Exh. H , pp. 80-81, CTA ~ec . ) On October 7, 1981, the GSIS again r e quested res- .. pendent Commissione r o f Customs for recbnsideration of h is .stand, stated in his letter of August 13, 1981, a nd stressed t hat there was no necessi t y in the circum- stances to secure the subsidy mentioned in Section 23 of Pres iden tial Decree No. 1177, as implemented by joint F i nance/ Budget Circular No. 2-78/ 79 nor to comply with .- P . D. 776 or P.D . 882 (Exh . 1 , pp . 82-83 , C~A rec . ) , ' wh ich r equest was n ot a cted upon by the Commissioner of Customs. On May 4, 1982, petitioner GS IS filed its petiti on for review with th i s Court and respondents filed their joint answe r on August 24, 198 2. Du ring fue pen dency of this case with this Court, or on November 10 , 1982 , in BIR Ruling No. 280-82, respondent Commissioner of Internal Revenue, in reply to the GSIS letter of March 9 and September 30, 1981 , granted the GSIS request fo r reconside ration declaring that the "xxx interest i ncome of the ba nk deposi t s of

DECISION - CTA CASE NO . 3459 - 6- the GSIS is exempt from the 15% final withholding tax in t he case of savin g depos i ts and th e 20% final with- holding tax i n the case o f time deposits xxx" (under- lini ng ours ) .and stating further that its letter "xxx ser ves a s a uthor i ty of the depository banks to forego wi t hholding of the tax on the i nterest earn in gs of the depos i ts mainta ined by the GSI S V' ith them, xxx" with respect to the taxes withheld , the Comm ission er sta t ed in said letter-ruling that "xxx appropriate action will be taken t hereon in accordance with Section 29 5 of the . Tax Code , as amen de d . " (Exh. K, pp. 95-9 6, CTA rec.) . Subsequently, on Ju ly 27, 1983, the Bureau of Internal Revenue refunded to the GSIS the a mount of ~93 3 ,011 . 42 for the y ear 1981 , a cknowledg ed under GSIS Off i cial Receipt No . 3 3 4065 dated July 27 , 1983, but the taxes paid for the years 1979 and 1980 were not refunded on the ground that they are no longer within the two year prescrip tive period. The issues to be resolved are, t o wit : 1. Whether or not we have jurisdiction to entertain the present petition for review wi th respect to the Customs d u ties and compen- sating taxes ; 2. Whe ther or not the GSIS is subject to the 15 % withholding ~x on the interest earnings of i t s savings depos i t ; 3 . Whether o r not petitioner is entitled to the refund claimed; a nd �

DECISION - CTA CASE NO. 3459 - 7- 4 . Whether or not prescr i ption could be a bar to the cla i m for refund of the Government Service Insurance System. From the facts and records of this case we cou ld read ily glean that this Cour t has no jurisdicti on to entertain the present pe ti tion for review with respect to the customs duties a nd compensating taxes since there is no decision of the Commissioner of Customs which is appealable to this Court . Th e Aug ust 13 , 1981 reply of the Comm i ssioner of Custom s to p e titi oner ' s request for confirma tion of its t ax exemption under Section 33 of Pres ident i al Decree No. 1146 cannot be said to be a decision but a mere opinion since it was not rendered by virtue of his .. appellate power under Sec t ion 2313 of the Tariff and Customs Code. I t i s no t eworthy that at the t i me the request was made there was no payment yet of c ustoms duties and compensating taxes which could be the basis fo r the decision of the Commissioner of Customs. The requ es t was in relation to the customs du t ies and compen- sating taxes the GSIS had to pay i n i mporting materials for its ongoing constr uction. This Cou rt has a limi ted jurisdiction and is conf i ned only to those matters provided under Section 7 of Republic Ac t No. 1 125 creat ing the Court of Tax Appeal s . I n prescribing that only deci sions of the Commissioner of Customs maybe appealed '

DECISION - CTA CASE NOe 3459 - 8- to this Court, Congress intended that all administrative remedies must first be exhausted, which means that a person aggrieved by the decision or action of the Col- lector of Customs where in liability for customs duties , fees or other money charges is determined, in which case, the party adversely affected by such ru ling after paying the amount of assessment, may make a protest and the Collector shall re-examine the matter, and should he overrule the protest and sustain his pre- vious ruling, the party aggrieved is required to appeal said ruling to the Commissioner of Customs within fifteen days after notification. Thereupon the Col- lector shall forthwith transmit all the records of the proc~edings to the Commissioner, who shall.a pprove , modify or reverse the action or decision of the �col- lector. In the instant case, there being no appeal by peti- - tioner from the Collector of Customs to the Commissioner of Customs, the latter could not have rendered a deci- sion pursuant to Section 2313 of the Tariff and Customs Code which is appealable to this Court. Under Section 7 of Republic Act No . 1125, supra, only decisions of the Comm issi oner of Customs involving the Customs laws, may be brought on appeal to this Court. There being no such decision, we have no jurisdiction to entertain 8

DECISION - CTA CASE NO. 3459 - 9- the present petition for review with respect to the customs duties and compensating taxes. With respect to the second and third issue, res- pondents maintain that the GSIS is subject to the 15% withholding tax on interest earnings of its savings deposit with the PNB, as well as documentary stamps taxes , s i nce the exemption of petitioner under its charter was withdrawn by Section 23 of Presidential Decree No . 1177 which was approved on July 30 , 1977 and , therefore i s not entitled to refund . (Hemo. of Respondent , pp . 198-199, CTA rec. ) . Petitioner, on the other hand , maintains the oppo- s ite view. It alleges that the GSIS still continue - .' to enjoy the tax exemption granted under Section 33 of Presidential Decree No. 1146, not\vithstanding the provisions of Sect i on 23 of Presidential Decree No. 1177 wh i ch hav e wi thdrawn the tax exemptions in general and which requires tax exemp~ entities to secure subsidies. We adhere to the stand of p etitioner. The law involved her 2 is Section 33 of Presidential Decree NQ. 1146 which took effect on May 31, 1977, and Section 23 of Presidential Decree No . 1177, which took effect on July 30, 1977, stated hereunder for ready reference: " SEC. 33. Exernptio~ from Tax , Legal !:f2cess and Lien . - It is hereby declared to be the policy of the State that the act- uarial solvency of the funds of the Sys t em

DECISION - CTA CASE NO. 3459 - 10 - shall be preserved and maintained at all times and that the contribution rates neces- sary to sustain the benefits under this Act shall be kept as low as possible in order not to burden the members of the System and/or their employees . Taxes imposed on the System tend to impair t he actu.9.r ial solvency of its funds and increase the contribution rate neces- sary to sustain the benefits under this Act. Accordingly, notwithstanding any laws to the contrary,� the System, its assas, revenues, including all accruals thereto, and benefits paid, shall be exempt from a1} taxes, assess- ments, fees, charges or du t i e s of all kinds . These exempti ons shall continue unless expressly and specifically revoked and any assessment against the System as of the approval of this Act are hereby considered paid." (Underscoring supplied.) "SEC . 23. Tax and Duty Exemptions. - All units of government, including government- owned or controlled corporations, shall pay income taxes, customs duties and other taxes and fees as are i mposed under revenue laws: .Provided , that organizations otherwise exempted by law from the payment of such taxes/duties may ask for a subsidy from the General Fun6 in the exact amount of taxes/d lties due: Pro- vided , further , that a procedure shall be estab- lished by the Secretary of Finance and the Com- missioner of the Budget, whereby such subs idies shall automatical ly be considered as bo th re- venue and expenditure of the General Fund. " (Underscoring supplied .). From the above-quoted provisions of law, we are of the opinion that the tax exemption of the GSIS was not withdrawn by the enactment of Section 23 of Presidential Decree No. 1177. It bears emphasis that Section 33 of Presidential Decree No . 11 46, the GSIS charter , in a clear and pre- emptory tone, required that the exemption (from taxes, 1U

DECISION - CTA CASE NO . 3459 - 11 - assessments , fees , charges or duties) _granted there- under to the GSIS " xxx shall continue unless expressly and specifically revoked xxx;� Section 33 i tself is categorical in stating that the intention behind such requirement of express and specific revocation is to promote the d~clared state policy of preserving and maintaining at all times the actuarial solvency of the funds of System a nd keeping as low as possible the contr ibution rates necessary to sustain the benefits g r anted under the GSIS Act, which objectives cannot be atta ined if taxes are imposed upon the petitioner GSIS. I n Presidential Decree No. 1177, especially its repea l ing clause therein, we are unable to find a pro- vi s ion which can reasonably be interpreted as having expressly revoked , or even modified, the tax exemptions g r anted to the GSIS under Section 33 of its charter , supra . Therefore, the correct interpretation of Sect i o n 23 of Presidential Decree No . 1 1 77, taken in the l i ght of Section 33 of Presidential Decree No.ll46, should be that the legislative authority provided in Presidential De c ree No. 1177 withdrawing tax- exemption pr i v i leges from all government agencies and i nstru- mentalities does not include the GSIS and which exemp- tion was conferred upon it under said Section 33 of

DECISION - CTA CASE NO . 3459 - 12 - Presidential Decree No. 1146. It i s presumed that when Presidential Decree No. 1177 was in the process of formulation, the President was aware of the exemption prov isi on _of Section 33 of Presidential Decree No . 1146 of the GSIS; and that this tax exemption of the GSIS was still effective and enforced, anq therefore, it would continue unless expressl ~ o r impliedly revoked. "xxx. Law s are presumed to be passed with deliberation and with fu l l knowledge of all existing ones on the subject , i t is bu t reasonable to conclude that in pass- ing a statute it was not intended to interfere with. or abrogate any former law relating to the same matter, unless the repugnancy between the two i s not only irreconcilable, but also clear and convinclng, xxx t he l ater will not operate as a repeal o f the earlier." (U.S. vs . Palac i o , 33 Phi l. 208 ) ~ The failure of the President in providing such explicit and clear revo- cation in his Presidential Decr ee No. 1177 , promulgated o n ly two ( 2 ) ~onths after Presidential Decree No. 1146 , i s ind i cative of the intent to retain the tax exemptbn priv ilege in question. Moreover, the Minister of J ustic e, in Opinion No. 1 26 , Series of 1981, has formulated the opinion that the GSIS retained its tax exemption under the provision of Section 33 of Presidential Decree No. 1146, notwith- standing the general provision s of Section 23 of

DECISION - CTA CASE NO. 3459 - 13 - Presidential Decree No. 1177, which alludedly fa i led to have provided for the specific revocation of the GSIS tax exemption. This opinion has a very high per- suasive effect on this case. Finally, no less than the Commissioner of Internal Revenue, in its BIR Ruling No. 280-82 dated November 10, 1982, has deciared that the interest income of the bank deposits of the GSIS is exempt from the 15% final withhol ding t ax and refunded to the GSIS the amount of ~933 , 011 . 42 for the year 1981, acknowledged under Official Receipt No . 334065 dated July 27, 1983. With respect to the fourth issue, respondent main- � tains that assuming for the sake of argument, but with- out adm i tting , that petitioner is exempted from the pay- ment of taxes, including the questioned wtthhold i ng tax and documentary stamp taxes, the claim for refund insofar as the 15% taxes withheld for the year 1979 in the amo u nt of ~1 , 147 , 059.36 and unspecified payments from January to May 3, L980, has already prescribed since the i nstant petition for review was filed on May 4 , 1 982, beyond the two-year reglementary period prescribed under Section 292 of the Tax Code of 1977 as amended . (Memo. of Respondent, p. 205 , CTA rec.) Petitioner, however, contends that the two-year prescriptive period provided under Section 292 of the

DECISION - CTA CASE NO. 3459 - 14 - Tax Code for the recovery of taxes erroneously or ille- gally collected, cannot be a bar to its claim for refund. Petitioner insists that the GSIS Charter, specifically its Section 33 thereof, exempts the GSIS, notwithstand- ing any laws to the contrary, from all taxes, assess- ments, fees, charges, or duties of all kinds . Section 292 of the Tax Code, therefore, must give way to Secti on 33 of Presidential Decree No. 1146. Besides , its exemption from taxes, legal processes and lien, has been statu- tor i ly elevated as a declared policy of the State. (Memo. of Pet . , pp. 169-170, CTA rec.) We go with the view of respondent that the claim for refund of the 15% taxes withheld for the year 1979 in the amoun t of ~1,147,059 . 36 and unspecif i ed payments from .J a n uary to May 3 , 1980, has already prescribed. We note that the instant peti~ion for review was filed on May 4, 1982 , which i s beyond the two year reglamentary period prescribed under Section 292 (formerly 306 of the Tax Code ) .of 1977, �as am.ended. It is also provided under Section 292 of the 1977 Tax Code as amended, quoted hereunder for ready reference, to wit: Sec. 292 Recovery of tax erroneously or illegally collected. - No suit or proceed- ing shall be maintained i n any court for the recovery of any national internal revenue tax hereafter alleged to have been er roneously or i l legally assessed or collected , or o f any penalty claimed to have been collected without

DECISION - CTA CASE NO. 3459 - 15 - authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress . In any case, no such suit or proceed i ng shall be begun after the expiration of two years from the date of paym._~nt of the tax or Eenalty regardless of any supervening cause that may arise after payment: xxx xxx xxx. (Underlining supplied.) . that where a tax has been erron c o~ s ly paid or illegally collected, the one seeking to recover the tax must file a claim for refund with the Commissioner of Internal Revenue within two years after payment thereof, and the action for recovery must also be filed within the said two-year period (C oll. of Int. Rev. vs. CTA and Hume Pipe & Asbestos, Co., Inc., G.R. No. L-11497, Jan. 28, 1961, 1 SCRA 87-9~; Guagua Electric Light Plant Co., Inc., vs. The Coll. of Int. Rev. and The Honorable Court of Tax Appeals , G.R. No. L-14421, April 29, 1961, 1 SCRA, 1221-1226.) . Since petitioner Government Service Insurance System failed to file a claim for refund within the two year period after payment, we therefore rule that the same is barr e d from recovering the 15% taxes withheld for the year 1979 and from January to May 3 , 1980. WHEREFORE, the claim for refund of petitioner for the year 1979 and 1980 is hereby DENIED , without pronouncement as to costs.

> DEC ISION - CTA CASE NO. 3459 - 16 - SO ORDERED. Quezon City , Metro Man ila, January 9 1985. WE CONCUR: AMANTE Presid i n