CTA Case No. 2964 (Decision)

~Eti!BUC 0 i' fHE P!HUPPiNF� ~OURT OF TAX AP1'�AU QUEZON Ctrf ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION , Petitione-r, - versus ... C.T.A. CASE NO . 2964 COMMISSIONER OF INTERNAL REVENUE, Respondent. X - ... - - - - - - ... � ... X DECI S I 0 N This is a claim for refund and/or � tax credit of the amount of ~910,394. 76, representin ~% of specific taxes paid on oil products used in mining operations pursuant to Section 5 of Republic Act No. 1435 for the period from July 1976 to Ma y 1978. It appears that petitioner mining corporation, organized and existing under and by virtue of the laws of the Philippines, operates a concession in Toledo City, Cebu. It a ctually used and/or consumed tax paid extra gasoline and diesel fuel for the mining operation purchased on various da tes from Mobil Oil Philippines, detailed as follow s : Period Spe c i f i c_ Ta x e s 2 5 ~6 July-December, 1976 ~1,008,648.15 ~252,162.04 January-December, 1977 January-May, 1978 1,834,357.27 458,589.32 798,573.60 199,643.40 -~~-.-t-�-~!-.-t-2-Z2-!-.-Q-� -~2-!-Q-.-t-~2-~-!-.-Z-� 29 2

DECISION - CTA CASE NO. 2964 - 2- On July 19 , 1978, (pp. 9-10, CTA rec.) peti- tioner filed with the respondent a written claim f or tax credit of the total amount of 8910,394.76 representing 25% of the specific taxes paid on said fuel oils pursuant to Section 5 of Republic Act No . 1435, infra, in relation to Sections 142 and 145 of the Tax Code. There being no action taken on its claim for refund, on July 21, 1978, petitioner filed the instant jud icial claim for refund. . The issue to be resolved is whether or not peti- tioner is entitled to the refund of the 25% specific taxes collected and paid on fuel oil consumption as a mining entity as provided in Section 5 of Republic Act 1435, otherwise known as An Act to Provide Means for Increasing Hig hway Special Fund. Sections 1 and 5 of Republic Act 1435 , applicable in this case provides as follows: Se ct ion 1. Secti on one hundred and forty- t w' o o f t h e �N a t i o na 1 I n t e r na 1 Re ve n ue Co d e , a s amended , is further amended to read as follows : "Sec. 142. Specific Tax on manu.. factured oils and other fuels . - x x x "Whenever any of the oils mentioned abo ve are, during the five years f rom June eighteen, nineteen hundred and fifty 29 3

DECISION - CTA CASE NO. 2964 - 3- two, used in agriculture and aviation, fifty per centum of the specific tax paid thereon shall be refunded by the Collector of Internal Revenue upon submission of the following: "(1) A sworn affidavit of the pro- ducer and two disinterested persons proving that the said oils were actually used in agriculture, or in lieu thereof. "(2) Should the producer belong to any producers! association or fede- ration, duly registered with the Securities and Exchange Commission, the affidavit of the President of the association or federation, aitesting to the fact that the oils were actually used in agriculture . X X x." Sec. 3. X X X Sec. 4. x x x Sec. 5. The proceeds of the additional tax on manufactured oils shall accrue to the road and bridge funds of the political subdi- vision for whose benefit the tax is collected: Provided, however, That whenever any oils men- tioned above are used by miners or forest con- cessionaires in their operations, twenty-five per centum of the specific tax paid thereon shall be refunded by the Collector of Internal Revenue upon submission of proof of actual use of oils and under similar conditions enumerated in subparagraphs one and two of section one hereof, amending section one hundred forty-two of the Internal Revenue Code. x x x. Respondent, in rejecting petitioner's claims for refund and/or tax credit, holds on to the view which 29 4

DECISION - CTA C/\SE NO, 2964 - 4- was earlier invoked in a similar case of Atlas Consolidated Mining and Development Corpor a tio n vs . Commis s ioner of Internal Revenue , CTA Case No. 2971 , promulgated on March 31, 1986, th a t "'The privilege of a partial refund granted by Section 5 of R.A . No . 1435 to tho se using oils in their mining operations, like the partial refund of. specific tax paid on oils used in agriculture and aviation granted by Secti on s 142 and 145 of the old Tax Code, as am~nded by Republic Act No, 1435 , is l imited to a period of five (5) years co unted from June 1~ , 1956, the date the said Repu bl ic Act No . 1435 took effect , or only until June 14, 1961'"� "~�lor e Dpeci fic a lly , 'th e peti- tioner is not e ntitled to a part ial refund of specific taxes because the f uel oils allegedly used by it in its mining operations were used after June 14 , 1961, or after the exemption under Re public Act No , 1435 had already e xpir ed'"� T~is issue is not one of first impression . In the case of Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue , CTA Ca s e No. 2971 , dated March 31, 1986, involving the same parties, this Co urt ruled: 29 5

DEC IS ION - CTA CASE NO. 2964 - 5- Resolving the question square ly in the Insul ar Lumber Case involving as it does SecU.oils-or-rnfNO":"" 14 35 , the Supreme Co ur t held : "Based on the aforeq uoted pro- vision s , it is very a ppare nt that the partial r ef und of spec ifi c t ax paid for oil s us ed in ag ricul ture and aviati on is limi ted to five years while there is� no time limit for t he partial refund of spec ifi c tax paid� for oils used by miners and forest concess i onaires . We f ind no basi s in ap plying the limit- ation of the operative perio~ pro- vided for oil s used in agriculture and avi~tion to the provision on th e r ef und to miners and fores t conces- sio naires . It s hould be.noted that Secti ~ n 5 makes reference to sub- parag raphs 1 a nd 2 only for the pur- pose of prescribing the procedure for refund. This express r efere nce cannot be expanded in sc op e to include t he limitation of the period of re fund . If th e limitation of the period of refund of specific taxes paid on oils used in aviation and agriculture is intended to cover similar taxes paid o n oil used by miners a nd forest concessionaires , there would have been no need of dea l - ing wit h oil used by miners and forest co ncessions separately and Section 5 s hould very well have been includ ed in Section 1 of Rep ublic Act No. 1435 , notwilh standi ng the differ- ent rate of exempt i on." (Commissio ner of Internal Re v enue v . Court of Tax Appeal s and Insu l ar Lumber Co . No . L-31137, tvJay 29 , 1981; 104 sc~~A 718). Ju st so a nd a ptly eno ugh the ruling le nds settling eloquence to the precise iss ue raised 29o

DECISION - CTA CASE NO. 2964 - 6- in the instant case. The apparent patina of cogency impressed nonetheless, the respondent Comm issi oner of Internal Revenue's amended answer urged new. fillips towards faulting the pet i tioner's right to the claim by alleg- ing that the partial tax refund privilege ceased upon the issuance of either any of the decrees, to wit: 1. PD 314 - Increa sing the rates of specific taxes on fuel oils on Octob er 20, 1973; or 2. PD 231 as amended - Enactment of the Local Tax Code on June 28, 1973; o.r 3. PD 711 - Abolishing the special and fiduciary funds on July 1, 1975; or 4. PD 1158 and PD 11 58 -A ~ Consolidating and codifying al l internal revenue laws on June 3, 1977. Again we are unable to give due as se nt to such riposte. Respondent would h a ~e substi- tuted a quirk of alternative expediencie s falling sharply at odds with the compelling rationale of the grant, "That these lumber and mining companies seldom us e the national highways because they have their own roads, they have their own compounds. xxx So that if they are not entitled to the benefit of this law it will be unfair if they will be required to pay." (Congressional Records , 3d,Congress, 3d Regular Session, May 7, 1967 , Vol. 111 , Nb. 67 pp. 2093-2107). Far be it from a theoretical gobbledygook, the tax privilege extended the miners/forest conces- sionaties (Sec . 5, RA 1435) vis-a-vis agri- culture and aviation (Sec. 1 ibid) could not have been intended for a ve ry limj_ted contin- gency an d application . 29 7

DECISION - CTA CASE NO. 2964 - 7- Nowhere here nor there are s uch leg al constraints of an express rep eal much less effective curtailment of the operative effects of the provi so of Section 5 . It certainly did not appear to matter whether the above-mentioned decrees , e i ther, in- creased the rates of specific ta xes ; or withdrew the local governments' power to levy and collect additional specific taxes; or abolished the special and fiduciary funds; or consolidated and codified all the i ntern al revenue laws. It does not make us wonder therefore that � the import. and force of Section 5 had bee n left precisely as wa~ then contemplated to the extent that the partial tax refund accorded the miners and torest concessionaires remained o6taining. Neither was there an attempt to undo with the terms and conditions.of the tax concession-upon which a claim for entitle- ment ma y be exercised sub j ect to the com- pliance the statutory requisites , i.e ., "submis s ion of proof of actual use of oils and under si milar co nd itions enumerated in subparagraphs one an d two of Section one hereof." As had happened in the case at bar, the records make it clea r that insofar as the sa me is brought to bear upon the circumstances, the evidence adduced justi- fiably asserts compliance therefor, viz.: 1) Sworn certific ati on of supplier Petrophil Corporation as to the quantit y of extra gasoline and dies e l fu el pu rchased (Exhs. "A" and 11 A-l") upqn whi ch t acked the receipts of payment of Bpec .ific taxe s (Exhs . "0", " E," ' " F " ' II F... 1 II t 0 " F - 2 8 " ' " G" ' II G- 1 II t 0 " G-93", "H" �, " I" and "Bulk Invoices") and 2) Affidavits of the petitioner's Vice Pre sident duly Eonfirmed by two disinterested persons (Exh. "C") a nd the Chamber of Mines of the Philippines ' Pre sident (Ex h. "B") attesting to the actual use of the fuel oils in the mining operation for the period from October, 1976 to April, 1978. So it appears 29 8

DECISION .... CTA CASE NO . 2964 - 8- and we so ho l d ~hat the petitioner has fared consisterit with the mandate of the law. Respondent argues also that the right to claim for refund of petitioner with respect to t axe s paid prior to July 21 , 19 76 has . prescribed because when ' the petition for review was fil ed with this Court on July ' 21 , 1978, more than two (2) years have elapsed from the date of ~ ayme nt of the aforesaid ta xes in acc ord a nce with Sect ion 292 of the Tax Code. In other words, it is his stand that, with respect to 0 f f i c i a l R.e c e i p t No � 2 9 50 3 8 4 ( Ex h � E- 1 11 11 ), dated June 25 , 1976, for the amount of e77 9 , 283 . 89 which is outside the July-De ce mber 197 6 period , petitioner could no longer file a claim for its refund . Petitioner , on the other ha nd, majntains the oppo site view. Pe titioner pointed out the fact that fuels/oil s impo rt ed by the s uppl ier on a certain date, say June 25 , 19 76 , are not so ld im mediately on that precise date . The importation still ha s to be store d by the supplie r so that a buye r on that date gets 29 8

DECISION - CTA CASE NO. 2964 - 9- supplies not from the day's importation but from supplies that arrived earlier and are already in storage. Petitioner furth e r stat e s that s ince the questioned importation was paid on June 25, 1976, it is re a sonable to believe that it was sold thereafter , well within the period of use by the purcha s er considering that ohly five� days intervened before the period such use began. In other words, petitioner argues that the right to refund dep e nds on the date of use by the pu r chaser, not on the date of payment by the importer"(supplier), the Mobil Oil Philippine s , Indeed, this position finds conformity in the Supreme Court's observation in the case of Commissioner of Int~rnal Revenue vs. Court of Tax Appeals and Insular Lumber Co., G.R. No. L-31137, Ma y 29, 1981; 104 SCRA 718, that there is no time limit for the partial refund of specific tax paid for oil s used by miners and forest concessionaires. We.agree with the view of petitioner , althou9h in the case of imported articles, such as fuels/oils used in the instant case , the tax accrues at the time of removal from customs custody (Sec. 134, Tax Code), and the importer (supplier) pays the specific tax upon 300

DECISION - CTA CASE NO. 2964 - 10 - removal of the sam e, the right to the refund of the 25% specific ta x under Section 5 of Republic Act No . 1435, granted to miner s and concessionaires, hinges on the date of "actual U$e of oils" by the purchaser 1 and not on the date of payment made by the su pplier (importer) of the specific tax. Thus, it is clearly stated in the law,- Section � 5 of Republic Act 143.5 , in its proviso, "That whenever a ny oils mentioned above are used by miners or forest concessionaires in their o p e r a t i o n s , ~~-r:u_y- f i v e p e r c e 12 t u m o f t h B___�_P. e c i f i c tax paid t he r eon shall be ref~nded by the Collector (now Commissioner) of Internal Revenue upon submission Ef proof of actu~l use of oils a nd und e r conditions enu~er a ted in subparagraphs on e a nd two of secti on one hereof, amending section one hundred forty-two of the internal revenue code. xxx . " (underlining ours.) This is so, beca us e it is only from the time of use of the purchaser-miner, petition er her ei n, of the oils on whic~ the spe~ific ta x has been paid that petitioner- pu r chaser h as clearly shown by proof that it had bought from the importer (suppl ie r) oil products and that only then does the right to refund the 25% spe- cific tax under Section 5 of Republic Act No. 1435 301

DECISION - CTA CASE NO. 2964 - 11 - arises. The claim for refund by petitioner of the amount of B779,283 . 89 covered by Official Receipt No. 29 50384 dated June 25 , 1976 s hould be based on t he date of the act ual use of the ojl purchases pur suant to Sect io n 5 of Republic Act No . 1435 , and , hen ce , has not prescribed . WHEREFORE , f inding t he judi cia l claim f or ref und by petition e r we ll -taken , it is h e reby GRANTED . The Commiss ion er of Internal Revenue is hereby ordered to refund and/or credit petiti oner in the amount of 8910 , 394.76 . No pronouncement as to costs. SO ORDERED. Quezon City , Metro Manila , Jud!JC WE CONCUf\: ) Presidi ~\~ A:~~!"te J udge 30 2