CTA Case No. 2153 (Decision)

liill'1.1~<~UC OF TUH. I'IUUI'PlNl>.:. _,llli��~~ OF TAX A.PP�.A.Ls U17.0N CITY / cANTILAN LUMBER COMPANY, Pe.ti tioner , - versus - C .T .A. CASE NO. 2153 THE COMMISSIONER OF INTERNAL REVENUE, Respondent. X - .- - - .X DE C I S I 0 N '� Disputed by petitioner Cantilan Lumber Company is the right of respondent Commissioner of Internal Revenue to impose the fifty per cent (50%) surcharge in the total amount of Pll,805 . 22 on forest charges paid by it during the period from July to December, 1965, as well as the deficiency sales and privilege taxes as exporter and manufac~urer of logs during the years 1965- 1966. Petitioner is a corporation organized and existing under and by virtue of the laws of the Philippines, with principal office at 1000 Marques de Comillas Street, Etrnita, Manila. It has a concession area, and ~s engaged in the cutting and removal of forest products from public forests or forest reserves in the Municipality of, among others, Carrascal, Province of Surigao del Sur.

DECISION - CTA CASE NO. 2153 - 2- The Poblacion of Carrascal, Sitio Gango, Gango Point, Barrio Adlay of the Muni~ipality of Carrascal, and the shoreline along Carrascal Bay are all within the Surigao Mineral Reservation . Petitioner's log pond is located at Sitio Gango, Gango Point, Barrio Adlay of the Municipal- ity of Carrascal which is about 20 to 25 kilo- meters from its forest cutting area. The forest products were transported to petitioner's log pond thru its logging road connected to the Paniguian feeder road which in turn connects the national highway that leads to the said log pond. It appears that all logs cut and hauled by petitioner from its cutting area at Carrascal, Surigao del Sur, to its log pond were properly scaled by the personnel of the district forester. The records show that petitioner has taken and maintained a forestry bond in the amount of Pl5,525.00 (MICO Bond No. 14024 issue d by the Malayan Insurance Co. , Inc. as surety) ftated September 26, 1957, effective from that date, during the years 1965 and 1966, conditioned ~pon petitioner's faithful compliance with all the provisions of the Forestry Laws, the National Internal Revenue Code, and the regulations issued l' '} ( _:t �'"'c' I

DECISION - C'I'A CASE NO. 2153 - 3- pursuant thereto. Sometime in the early part ~f 19 66 , respon- dent caused the investigation of the business tax liability of petitioner for t.e period from July to December, 1965 and its sales and percentage tax liabilities as exporter and manufacturer during the year~ 1965 and 1966. As a result thereof, respondent, through the chief, business tax division, addressed a letter to petitioner dated March 21 1 1969, propo~;ing to assess peti- tio;:ler 1 as a log producer and exporter 1 the amounts of Pll 1 71 6.54, PB O.OO and P8.70, repre- senting 50% forest surcharge for transporting timber without aux iliary invoice and discharging the same without permit, fixed tax and deficiency sales ~ax and surcharge for the years 1965 and 1966; and inviting petitioner to an informal conference to present its side of the case, bringing all the necessary documents and other pertinent papers in support thereof. By its letter of April 29, 1969 1 petitioner, through its external emdi tors, disputed and pro- tested the proposed assessment. However, in response thereto, respondent wrote a letter dated May 6, 19691 assessing and demanding from peti- .

DECISION - CTA CASE NO. 2153 - 4- tioner the payment of the total anount of ~11,805.22 2s surcharge on forest charges, fix8d and deficiency sales taxes and surcharge during the years 1965 and 1966, computed as follows: 1. Forest charges paid durir.g the period (July-December 31, 1965) ���������������. ~23,433.06 25% surcharge trans- porting wjo invoice ������ " . . . . ~5~858.26 25% surcharge for dis- charging w/o permit �..�..��.�� 5,858.26 2. C-14 PTR for 1965 & 1966 As producer .��.����.� 40.00 As exporter ���������. 40.00 80.00 3. Deficiency sales tax - Sales ...��� ��.� ~.1,521.89 7% tax thereon 106.53 Amount paid ..�. 99.57 Deficie1.cy sales tax ....... . 6.96 25% surcharge for late payment � 1.74 8.70 TOTAL AMOUNT DUE ���������������� ~~~~gQ~~~~ By its .letter of June 19, 1969, petitioner disputed the 50% surcharge on forest charges paid by it during the period from July to December, 1965 but did not protest the a~sessment of the deficiency sales and privilege taxes. In his letter dated April 23, 1970, respondent however reiterated his assessment of Pll,B05.Z2 and requested petitioner to pay said tax l.iabili ty, othen'lise, the collection thereof would be enforced by means of the summary remedies provided for by law. Hence, this appeal.

DECISION - CTA CASE NO. 2153 - 5- The issue proposed to be taken up on appeal is whether petitioner violated s~ction 11 of Finance Regulations No. 85 (Revised Internal Revenue Forest Products Regulations No. 85 dated December 28, 1934) .and, hence, is liable under Section 267 of the then in force National Internal Revenue Code for 25% surcharg~ for removing and transporting forest products from its cutting area to its log pond without auxiliary invoice and another 25% for discharging said forest products without securing discharge permit from the Com- missioner of Internal Revenue. In assailing respondent's right to impose the 50% surchurge on forest charges paid by it during the period from July to December, 1965, . petitioner alleges that no auxiliary invoice was necessary since the transportation of logs from its cutting area to its log pond located in the same municipality does not constitute a removal for purposes of Section 11 of Finance Regulations No. 85. The requirement of listing forest products on blank forms of auxi�iary invoices under Section 11 is intended, according to petitioner, to prevent the cutting of logs from the area outside of the licensed area. Considering that the log pond of L' j C~~) "' ' I

DECISION - CTA CASE NO. 2153 - 6- petitioner is situated within the municipality where its concession ~rea is loc~ted and that there is only one logging road as an outlet of all logs hauled to its log pond, petitioner argues that there was no removal of the logs within the contemplation of Section 11. Hence, there was no necessity to comply with the require- ment of auxiliary invoices for purposes of trans- porting the logs from the cutting area to the log pond, as well as the permit for disclarging the same. As basis further for claiming that no auxiliary invoice was necessary, petitioner would invoke the certification dated July 21, 1966 issued by Mr. Donato R. Arenas, officer~in- charge of the Carrascal Forest Station, authorizing removal of logs from i.ts forest concession wi�thout the auxiliary invoice and discharge permit, as well as the certification dated July 26, 1966 issued by the District. Forester to the effect that there is no necessity of preparing auxiliary invoice cover :i..ng the legs cut at petitioner's cutting area before said loJS are brought down to its log pond. In its textual completeness, Section 267 of

DECISION - CTA CASE NO. 2153 - 7 -� the then in force Tax Code provides as follows: Section 267. Surcharges for illegal cutting and removal of forest products or for delinquency. - Where forest products are unlawfully cut or gathered in any public f orest without license or, if under license, in violation of the terms thereof, the charges on such products shall be increased by three hundred per centum. If forest products shall be removed wit~out invoice, or upon removal, shall be discharged without permit from boat, car, cart, or other means of transportation, the charges shall be increased by twenty-five per centum, and if , in any case, the proper charges upon forest products are not paid within sixty days after the same shall be due and payable, such charges shall be increased by twenty-five per centum: Provided, however, 'l'hat the Commissioner of Internal Revenue may, in meritorious cases, waive the surcharge of twenty-five per centum for discharging without permit or grant an extension of time not exceed- ing thirty days for the payment of the forest charges without surcharge. Section 11 of the Revised Internal Forestry Regulationspo. 85 specifically points o~t in detail the procedure t o be followed by licensees of timber from the time of cutting timber, during the transporta tion of the same to its destination, and the discharge thereof at the said destination. As reduced by the Supreme Court into simple terms in Collector of Internal Revenue vs. Pio Barretto Sons, Inc., L-11805, May 31, 1960, 108 Phil. 542, thP regulations praide that upon cutting timber the licensee must submit to the nearest Internal

DECISION - CTA CASE NO. 2153 - 8- Revenue officer, or the deputy provincial treasure~ of the province where the timbei is cut, an auxi- liary invoice in quintuplicate of the timber cut, containing the serial number of the logs, their species, thei lenghts , radius, if round, thickness and width if squared, and their volume in cubic meters. These auxiliary invoices are then sworn to before the deputy provincial treasurer (now collection agent) ~ who shall prepare an official invoice together with its stub and coupons and collect from the l i censee or his agent the amount of charges due on the product so invoiced. The official invoice or receipt of payment is then detached and together wi t h two copies of the auxiliary invoice is delivered to the licensee, to be carried along with the logs to the point of destination. Upon arrival at the point of destination, the licensee or his agent shall present the off i cial invoice and the auxiliary invoice to the deputy provincial treasurer (now collection agent) .thereat and apply for a dis- charge permit. Note that at this time the deputy provincial treasurer (now collection agent) .is supposed to check if the timber described in the auxiliary invoice tallies with the timber actuaLly / discharged . 1he deputy p!ovincial treasurer (now

DECISION - CTA CASE NO. 2153 - 9- collection agent} .then grants a permit to dis- charge the timber and returns the official invoice to the consignee, together with the auxiliary We find no merit in petitioner's cause. Peti tioner's submission that there was no removal of the logs within the contemplation of Section 11 of the Revised Internal Revenue Forestry Regulations No. 85 and, hence, there was no neces- sity to comply with the requirement of auxiliary invoices for purposes of transporting the logs from the cutting area to t he log pond since the log pond is situated within the same municipality where the concession is located and there is only one logging road as an outlet of all logs hauled to the log pond is positively without me~it. 1. Referring to the terms of the law, it is quite clear that the right of the Government to impose surcharges for removal and transportation without invoice of forest products and for discharge of the same \'lithout permit is not planted upon the condition that the.cutting area and the log pond of the licensee should be situated in the different municipalities where the licensee's concession area is located. The law speaks of

DECISION CTA CASE NO. 2153 - 10 - "If forest products shall be removed without invoice, or upon removal, shall be discharged without permit from boat, car, cart, or other means of transportation, the charges shall be increased by twenty-five~ centum," - .without more. Nothing in the law is said of removal of the forest products from the cutting area and transportation of the same to a log pond situated in a different municipality where the concession area is located. Where the law does not exact t.he separate location in di fferent municipalities of the cutting area and the log pond where the concession is situated, or there is only one logging road as outlet of the logs, as a condition for the issuance of auxiliary invoices and discharge permits, that condition should not be read into the law. The law is clear and free from ambiguity. It should therefore be enforced as written, devoid of judicial addition and subtraction. We are not to indulge in statutory construction. 2. Forest charges, like mining taxes, are regarded as excise taxes. Th~y are directed against the production, or severance from the soil, of forest products, and are m~asured according to quantity and value of the forest products pro- " l ~t '�~ " (

- D ECISIO~ CTP. C- 83 NO . 2153 - 11 - duc cd or severed. (51 Am. JuJ.:. 1072) . Since fo~: at charges are severance ta~es, i.e., charges upon the privilege of severing or producing from the soil of forest products, and are due and payable UP,on remo\Jal of the forest products from the forest, proper documentation or invoicing must be made in the cutting, gathering, production or severance area, and not after they have been transported to another place. It is only by invoicing logs or other forest products at the cutting, gathering, production or severance area that the Government can find out whether logs or timber have been illegally cut or forest products have been gathe r ed without permit, and the collec- tion of all forestry charges insured. 3. To protect our forests against denudement, waste and spoliation by licensees, trespassers and kaingineros, public policy requires that proper documentation of logs and other forest products must be made (1) _upon severance or pro- duction from the soil and before removal from the cutting ar ea; (2) _duri ng transportat i on; and, (3) at the time of discharge. Thu s, Section 267, supra, explicitly provides for the imposition of surcharges if forest products shall be removed L1' ',,_,J (�\r

DECISION - CTA CASE NO. 2153 - 12 - without invoice, and upon removal, di s ~ha~ged without permit from their transp'ortation. The peremptory requirements of public policy t.vould seem to stress therefore the necessity for full and unconditional compliance with the language of the statute and the regulations. It is only by such practical application of the law and the regulations, and by the strict implementation of such a public policy, that the national pa tri- mony can be properly conserved and wisely exploited. The unregulated and uncontrolled production and severance of timber and other forest products from the soil have already meant spoliation and ruin of our fo~est resources, resulting in re- current floods, erosion of the soil and increasing expenditures for raorestation. 4. And on the point that no auxiliary invoice was necessary on the ground that petitioner was author.ized by local forestry employees to trans- port logs from the cutting area to the log pond without need of accompanying invoices, as well as to discharge the same without permit, no law or regulation has been pointed out to us which authorizes forestry employees to dispense with such requirements. While petitioner attempt s to

DECISION - CTA CASE NO. 2153 - 13 - draw support from Section 262 of the then in fo~ce National Internal Revenue 'code which simply states, insofar as pertinent hereto, that "Employees of the Bureau of Forestry may be deputized by the Commissioner of Internal Revenue for the perform- ance of duties incident to the measuring and invoicing of forest products x x x", nothing there may be cons i dered as empowering forestry employees to dispense with the requirements of auxiliary invoices or discharge permits upon the removal or transportation of logs. Performance of duties incident to the measuring and invoicing of forest products cannot by any stretch of the imagination include the authority to grant dis- pensation from the requirements of auxiliary. invoices and discharge permits. There is patently an absence of analogy or similarity between in- voicing and dispensing \vi th the invoice. And the absurdity is at once brought into bold relief when it is considered that under Section 262, as clearly and explicitly specified therein, it is only upon authority of the Commissioner of Internal Revenue that employees of the Bureau of Forestry may be deputized for the performance of duties incident to invoicing of forest products. It is therefore

DECISION - CTA CASE NO. 2153 - 14 - self-evident that the local forestry employees acted without any au thor i ty \'lhen' they issued a certification authorizing the removal of logs from petitioner's forest concession without auxiliary invoices and discharge permits, as well as a certification that there is no neces- sity of preparing auxiliary invoices covering logs cut at the cutting area before said logs are bro ught down to the log pond. The fixed taxes as producer and exporter for l965 and 1966 in the amount of P 80.00 and defi- ciency sales tax and surcharge in the sum of �18.70 sought also to be collected by respondent in his demand-letter dated May 6, 1969 and reite- rated in his decision-letter dated April 23, .1970 have not been controverted by petitioner. Hence, may be considered as admitted to be due and collectible. We, accordingly, sustain the decision under ,review. Petitioner Cantilan Lumber Company is therefore ordered to pay to respondent Commis- sioner of Internal Revenue the amount of Pll,805.22 representing 50% surcharge on forest charges paid by it during the period from July to December, 1965 and the deficiency sales and

DECISION - CTA CASE NO. 21 5 3 - 15 - privilege t a xe d a s c~port er a~d manufacturer of logs during the years 1965-1966 plus the incre- ments incident to lat e payment. WHEREFORE, the judgment appealed from is hereby affirmed at petitioner's costs. SO ORDERED. Quezon City, Metro Manila, September 30, 1981 . <Ctn/1/~~- AMANTE ILL,E Presidi g Judge \'V'E CONCUR: CONSTANTE C. ROAQUIN Associate Judge- Dissent in a separate opinion. ~ r'l-b,R }E 'Y ~E S ~ V Associate Judge

l!.ltPUDLiC OF THl~ PHILJPI'P�o.. � OOU!tT OF TAX APPEALS ftt:!tf.ON CiT7 /C PFTIIJLAN LUt'1BS..tt CONPANY, Petitioner, - versus - C.T.Au CASE NO. 2153 COHHISS IONEH. o:F' TI~TERNAL REVENUE, Respo"i1dent. X- - - - - - - - - - - - X DISSENTING OPINION It is my considered opinion that with the exc~ptian of the F8o.oo fixed taxes and P8.70 deficiency sales tax and surcharge for 1965 and 1966, petitioner Cantillan Lumber Company is not liable for the slun of ?11,716.5'4-, representing 25% forest surcharges for transporting its cut logs vrithout auxiliary invoices and 25% surcharges for unloading the logs without discharge perm1ts contrary to what was reached by my majority colleagues. And inasmuch as I believe the factual account or this case by the rnajority decision is not complete, it is my singular purpose to give an aceount of thd facts as complete as possible and to the exten t chat it may be material to the is :.:'.le or issues in this case. Peti ti.oner is a forest concessio~1aire and is engaged under the Forestry Law and the ?~ational Internal Re-venue Code in cutting and extracting forest products fro!ll the public forests and forest reser-ves, among others, in the Hunicipality of Carrascal, Surigao del Sur. The poblacion, Sitio Gango, Gango Point, Barrio Adlay of the Iv:l.U1Lcipality of Car rascal, and the shoreline of Carrascal Bay, where it extracted its logs are all 1,-Jiti1in the 8-;n�Cg:i.o H.i.ne ral l1eserva tion. (Exh. A, p. 54 CTA rec.) The logs cut, extracted and. removed or haulecl by petitioner fro~ its concession area, that is from . ") 1 . '.1!. �-~ ' !

DISSI!~NTING OPINION - CTA CASE NO. 2153 ... 2 - the cutting area to its log pond. u1ere sca1ed by the personnel of the �Bureau of Forestry. Trip tickets were issued for the logs loade d from the cutting area and hauled by petitioner's trucks and surrendered to the person in charge of the log pong upon delivery of the logs. The auxiliary invoices covering all the logs scaled at the cutting area and delivered at petitioner's log pond were prepared by the Bureau of Forestry sta- .c tion at the said Municipality of Carrasca,l and submit... ted at the end of each month to the Collection Agen�t.. Bureau of Internal Revenue. also stationed at carrascal. (t.s . n �� PP� 9��10; 27-31; Exh. B� Po 55� CTA rec.) Petitioner was authorized on JulY 21�' 1966 by Donato R. Ara~as. Officer-in-charge of the Carrascal Forest Station,. at Carrascal.- Suriga.o del sur, to remove logs from its Forest concession "xxx Hithout Auxiliary Iflvoices and Discharge Permit XXlt" provided petitioner maintains an Internal Revenue Forestry Bond. From September 26� 1957. petitioner maintained a bond � ..;. (Malayan Insurance Co. Bond N0 � 14024) in the ~noumt .,_.., of Pl5.525o00� 1hich subsisted through the years 1965 and 1966 which guarar1teed the faithful compliance�of the Forestry Laws�. the National Internal Revenue Code� and regulations. (Exhs. D, D-1 to D-2. PP� 57-60., CTA rec.) In a certification issued by District Forester JustiAiano ~abiles of the Bureau of Forestry dated July 26� 1966~ he stated thus:

DISSENTING OPINION - C'rA CASE NO. 2153 - 3- July 26" 1966 D-47, Licences Supervision TO 1,ffiQM IT MJ."\Y CONCERN: This is to certify that all logs cut and hauled by the Cantllan Lumber Company located at Carrascal� Surigao del Sur. from their cut~ ting area to their logpond are properly scaled by the personnel of this OfficeQ That logs loaded and hauled by the Company trucks are issued the cor- responding trip tickets which are handed to the logpond incharge upon delivery thereat~ I further certify that the above mentioned Company has its logpond si�tuated �within the Mu- nicipality where the concession area is located a.nd that there is only one logging road as an outlet of all logs hauled to their logpond, hence. there is no necessity of preparing auxillary im-,. voices covering the logs cut at their cutting area before said logs are bfought down to their log~ pond. The auxillary invoices cove ring all logs scaled at their cutting area and at their log- pond are prepared by the Bureau of For e st.ry sta- tion at Carrascal�� Surigao del Sur and subm.tted always at the end of each month to the Collect- ion ~.gent0 Bureau of Internal Revenue:.t: Carrascal. Surigao del Sur. This certificate is issued upon the request: of Cantilan Lumber Company in connection with their operation. (SGD) JUSTINIANO CABILES District f:orester No�t.e: This certificate is issued having knowledge and being the District F'orester of Surigao del Sur until I was �transferred to the Off i ce of the Director of Forestry. Manila. (SGD} J-uSTINIANO CJ!.BILES District Forester Copy E'urnished : Direc-cc,r o f Forestry.;: Manila .. ...

DISSENTING O?lNlON - CTA C~S~ NG . 21 53 - 4- - Pctiti~ncr h~f 00id forest chargrs and taxes in the a~ount of P2) , 4-J ) .06 fro~ July to Le c ernber , 1965 and t !13 sum of 1"99 . 56 as s<"lles tax on its sal c;s o.f logs. of ~.21 , 52 1. 89. ( t.s. n., p. 19 .) On Harch 3 1, 1969 , res0on(~ent , through 11oises ~ . Pilar , ChiEf , Tax Div ision of the Bureau of Inter- n al Revenue , a(c1 rcssed a l et t er to neti ti ��~ncr ..2.�.Q:>Osi.ng t o assess the J.c:.ttcr the sum of i' 11 , 7 16.5it , i-'8.0 . 00 and �8 . 70, re8resenU.n g 25/b surcharge fo r trcJnsoor t i ng wi'tih- out auxiliary invoices 2nd 25;~ s urcb <. r ge fo r cis crwr g- i ng l ogs without �) err:'!it, fixer tax (C -14� .iYJ.'Hs) f or 1965 o.ncJ 1966 , c::nc1 deficien c y ~38lGs tax one ~~urciwrgr: for t he s&me years 1965 .:me: 1966 ( r:xh. r; , ) . 6 1, CTb. r ec .) , 1';-s� t r es~ec l.Ve 1 y , t ~ursuan � t_o ~-c~- ct1'c� rJs 2o~7 , c�:~ncq� 18~~ , and i83 an~ 186 of the To.x Goae . On l';.,pril ~9 , 1969, .Je t iU. on0. r (iisnt:;tul t=md pro- t estsd the ~ro~osc~ assessment claiming th it the trans- p ort i ng of itc, logs from tho cu t tine: arc,, to its log pond without ~ UXiliary in v oiC~ ~Dd aischurgc 1Prmits is not in vi.olc.tion of J.;q;ulotion No . 85; t:J it under Section 11 of sc.::id ReguJ.Gtion , th(~ rrquirc:ncnt ss to tlJ.e accom 1lishmcnt of &uxi�li<Jry invo i. ccs y:rtc:,j r;s to the tr<ms ';ortin [; of logs fro :: the 1ublic forest or f or est reser v es . (Exh . F , ), . 62- 63 , CTh r~ c.) ., ,......, L1_ . ; I

DISSP.NTING OPINION CTA CASE NO. 2153 - 5- Respondent.-in a letter dated May 6� � 1969 (Exh. G� pp. 64-65,. CTA rec.) stated that tt ~ let'.t.er of Dona.to R. Ararias of the Carrascal Forest Station. dated JulY 21� 1966� and the certification of Justiniano Cabiles� District Forester� dated July 26� 1966� stating and confirming that petitioner was authorized to remove the logs ou.t from the cutting area to the log pond is illega.~. on the ground that th 2 Bureau of Fdlrestry .. was not given the power to authoriz~ the removal of t he logs cut without auxiliary invoices and fouad petitioner liable to p~y the amount of Pll 1805o 22 as forest charges, fixed and deficiency sales taxes and surcharge for the years 1965 and 1966 computed as follows: l. Forest charges paid duriag the period (July-December 31,. 1965). � � � � � P23.433.06 25% sur. for transporting w/o invoice � � � � � � � � � ?5~858.26 25% sur. for discharging w/o permit � � � � � � � � � 5~858.26 2. C-14 PTR for 1965 & ao.oo 1966 As producer � � � 40.00 As exporter � � � 40.00 3. Deficiency sales tax - Sales � � � � .~1~?2lo89 7"/o tax .there- on � � � � � 106.53 I ~, ,. 'J. d i

DISSENTING O.?INICN - CTA C~S~ NO . 2153 - 6- Amount 'la i.o � � 99.~2. Def iciency sales t ax � � � � 6.96 25% sur. for l &te qaymcnt � � . � � �1.71+ �� � !:! 8 . 70 TOTi.L AM01JNT D DE. � � � � � � � � , , . _ ~ 1<. 1s 1 -: Q0~22 exclusive of ?310 as com ~ romis e aena l ties � .Pet itioner i n .:;; l f:t t c: r c1ateo June 19 , 1969 , formally Drot cs t ec1 the e:sse~slaent of lv1e:y 6, �1969, \�Jhich \vas <:c:.niec' on i\.'Jr il 23 , 19 69 (l:J~xh. I , <n . 69-7 1 CTA rec. ), hence Jetitioner a'J~ealed . ?etiti oner did not b)P& r cntly question the assess- ment of f':Lxcr! <Jnc~ r� c: ficiency f:<,les tDxcs <md s urch<.lr"gE: s in the amounts of ~BO . GO and ~8 .70, resp e ctively. The iss ues , th er efor ~ , that remain sre - (1) �,;ne the r or not 'Jctitione r vi olBted Se c tion 11 of the Rev is ed Int er nal Rev enue Fo r est ~ro(ucts Reg ul a ti ons No. 85 when oet i- l o r"" .l.r�ro >Y. "OI't E:C~ 1""': L .1. ....t .J , ;>. .1 CU~l-tl'�n r:c� t!�tr� 1 �t .l'one,�r ~.. :a-J """'�I' CC'J'. ... ~'� ....... (J 10.\ � �� �� J "' to t he lo g :; one~ ,dtho ut GUXilic.;ry invoicr::s c:nd ... d~sch&~ge De rmit s ; and ( 2) ~hcthe r or no t it is liable for 25% for tr &nsoorting logs wit hout a uxili ar y i~voices and 25~ far u nlo~ding said logs without discharge uer mi ts. Section 11 of ti1s Rsvisc~ lnt c:rn<i l Hevcnuc Forsst 5nd Section 267 of the N~tionbl I nternal Revenue Code, th e l<::ws involvEr! in this cf~E>:: , rcsoectivE-ly , ;rovidc as follo\vS : 11 Sc:cti.on t 1. ~~.L.Y.I.'!1.0nt oi~'._shr;rs ~.;c; on __J2�.Q�~ ;': u c !.�.._.S:J.l..'L.11 ~~ r1 C' r:.._g�_r: 5.rJi!:..r..Y....J , j:.fJ"::..Dll� D.:.:J oLS. � t rcns Jo.rti.&~-- :Cro :rl tiH: }u b:j.J_g_ :f.'c.r!'.:l~. j~:;~~L...fs;_t�J..:t 4:e ser ves o.r �using_ witb,in � the cutting ~ f or:-;s t n� o :�' uc t s___c 11t.. or .:-: <Jtl_;.; r r:;0_Jdf2L�.L...t.fl__5)r (�in ;;,r y licr-:nsc is sued by__j: il..,c t j 0J:QCtor of E,O?.'C:'stry_tne sha lJ sfos.-r�_,-.(o-.sQ-t.-J.-.�.-;Rr-o.!-,C.-..iJ-uS-0cr-t�s:-r.,_-_Ho-no- c:;ux il l:lst st:~ell :l�l.�.Yinvoic - - - - - - - - - - - - - - - li.CPDS<SE -. �;-)l,1c=.'+�.-;n.-:O-k!� f.Q.D..Qg; cf L I~ f. ,."lI_,, � "1

- 7- in the ca sf of timb er or B.I.R. Form No. 1ll.CIS :Ln the C<lSP of fir r::~.1ood or otnr:.r minor forf'St ,Qr o:i uct�r whicl1_may be sc:cure(...from tl.lr: ce mty nrov inci<:Jl. tre<:~s~�-r c r of tl1 r:: rpunicj_ l<Al:Lty wlH::.�..�. th e s<'>i ci fore s t ''"Jroc2..lJ.rt.c; t1c.ye bE en cut ..Q�_gr.thcreC1. Said ~uxiliary i nvoices, when completea shall be sworn to before th e ac~uty nrovincinl tr cGsu r er concnrnerJ by the lic cnSN! or his ogc;n t cJuly au- thorized in writing. These auxiljary invoices shall, in the caso of timb~r, be made in quintu~ licate ana in the case of fir ewood and minor for r;; st Dro c:_uc t s, i n quac1r U 1liCclte. .i.ft er they arci�duly S\vorn to, ths de ;uty �.Jrovinci<:l treasu- r er shall comnar c the bArrios or sitios shown th~rcon with those d e scribed in th e copy of the license furnished by th e Bu r eau of For es try, and she:�ll �1r'e 1J8re an officiel invoic e togc:th er \vitL its stub Bn(! cou rJons end collc.=;ct fror.1 th e.=; licensee or his agent thn CJmount of charges dt~c: on the 1Jro- ducts so invoiced. He shall then affix to the official invoice in the sna ce ~rov i ded for that purpose int Errwl rcovsnue stc<Ln�Js in on amount equal to the charges coll 0Ct0d , end cancel thorn. He shall also cnts r the ~ssessm8nt an6 seri&l numb e rs of th ~ official invoice on each copy of th~ bUXili ~ r y invoicE.. The� of fie ic) l invoice shall th en b P det~che~ Gnd together ~ith two co- oi es of th e <;uxil:i<.ry invoice in th e cr:.sc of ti ~ ber, or one co1y in th c ase of firewood or minor for Es t oroducts; sh&ll be delivered to th e licensee, to be sent ulong with the nro~tds until th ey arrive c:1t their destimt i on. If the barrios or sitios shown on the auxi li ~ry invoice differ fro~ tho3 e shown on the coJy of the licf_mse , such di scrEO JErlCY shall be consi- dered nrimc fa cie evidence that the oroducts were not cut-on the licensed ~re& ~nd the a ~f i tional ch Drgss of on -:? htm '~rE::d 'Er cr:n tum si1all be coll ected unless the licensee �Jr':'scnts s~3tj_s f s ctory proof th<;t the 'Jrc;rlucts 1,ver~ cut in the license~ area. ThP couJon ana two coryi es of the auxiliary invoice shall be forwarded to the Collector of I1;1t r: rn< :l Hevcnue ,,;j_th ths rc- ~ort of stG~1s sol.. Ths Collector of Int erna l ~evenue will tr6nsmi t "onc cony of th u ~ uxiliary invoice to th( rirector of Forestry. Thr: r e- .illf,j.ni.Gg one- coQ.Y.:._ of tflJLt-.i UXi J iDrv j_nvoic--;sh.all be sent by th e deauty ~ro vinci ~l tr~~sGrer to .'._! :~ )

DISSENTI~G 02INION - e 5'3 ' r':nL�h C1-.'l"J'J"''. h1'1 � '�._,. . 2- 1 - 8- 11 lf Ute lic ensee or his author i zec3 agent prefers to 0~y th e forest c~~ r g~s and secu r e the of ficic-1l i nvoice i n a mu.n ici2} <; 1it y oth e r than thc..t vJherc:: the fo r c:s t ')rO �u c t~: iloVC been cut or gutherc~ , b~forc the r cmov~ l of tnc nro~ucts froo the cutting a rra, b written ncrmission of thf: Coll rctor of In tr-Trwl Hr::vrnw=� to that c:ffc ct shoul d b e nrcvious ly secure~ . 11 9ersons r(.:o quire d by th e r r:gulc;:tions to execute nncl orcsent schec"ule 11 1 11 , nar<,p;r&0hs 1 to 4 auxilinry invoicGs ( E. I.R. For~ No . 1~� . G4) t:J.us t Drf ::JLrc this fo r ui i n D manner as to �mt together c.ll t i!nhcr o r lumbEr of th�: sc-:;me form , t .hc ::<;:nc s��ecit::s i:-cC: the s<jmc~ gro up. 11 ( Cnc! crl ird n g s u ,.) ~;liF:cl) Sec. 26'7. Surchc,r .r;.cs for ill nr:al cutting 8110 r emOVE; }_ of forest nror5ucts ;r� lQLClcJ.in-' quency.'- dhen fores-t �1ro(1ucts e1rc unlo ,,vfu lly cut or g&thcr(:d i n <my ::mblic for"s t �~1itllout licPnsf:: or , i f un <'"e r licens e , in viol ~-t ion of the t erms thci8of , t h e chnr gcs on such oro0 ucts shall be incr cbsed by three hunCrc~. ac r centum . If for es t 0ro'ucts sllall b~.o rc~movec'1 ':Jithou t in- voice, or u 0on r emov~. l sh<-,J.l be Ci iscn~. rg~:c 1 vJith- out pcrrr;:; t fr om bo c:: t, CEJr , cu�t, or oti: cr rncr. ns of tr::-nsoortc~tioc, the ch::rg ::s sllc:~11 b (o ir:cr e<~sed by twenty- fiv0 9cr CGntum , &n~ if, in nny c Gse, the oro0 e r ch<u�g(~S U:)On forc!::t ')roducts ere not o<:dc �wit ni.n sixty 0sys ~~ftcr the. s<A11 s she-ll be due an'~ �1uy;-;'o] c , such ci1e..rgcs slial.J bc i r. cr e <JsE:d by "'ti,.;cr2ty-f.ivc ')C.t' ccr1tu ;n ; .?rcvic cd , hc\�Jcvcr, .{�1h~t the Cor:-!:n issior.Jc-r of Int ernal Levf r:u c ~n;:;y, �t t ' c � ' � '" : l� D H� l�,.. 1r. .�l .0 -1��l�ul"';~- ,c c,,-�,,c, l- ~c:, .,, . J.. 'I! r_�. flC .c> �L'.r-� L1c"��.r. co� -~ Q..f_' hJ rnty-fiv c cer centt:ir:l .for di.scn~1rgc �..1ithout xrmit or r;r<.nt bn e::,.::t':r~s i on of tirr::r~ not ex- ceeding thirty da ys for the payment of the forest chcrg,~s vJ i thout surc h<; r ge . L_~ � -- J

DISS~~TihG O?INICN - CT~ ChSE N0 . 21 ~3 - 9- ~s I see it a n~ as can r eason~bly b e infsrr ed from its own evi6sn c e , petitioner h~d a~mitte~ that it did not secur e , TJr C 1ars or c:.cc om oli sh jnvoJccs . bef ore r cmov i nE its cut l ogs , an d d i d not ~~ 0 ly for the rcquir r d disc h arg e 8crmit s . Howcv~r , it cont Ende d that i t d i d not violat e the bf orcs aid 9r ovi s ion~ of l aw and r egulation i n that the oroce0ure, with r esoect t o the tr ansoort a ti on of the logs from the cutting a re~ to th e log ~and , wos subs tan t ially complied with . It ~ssertca th at a uxiliary invoic e s were only n eeded in orc1cr to fino out 1:/hcth er th(:: timb er prcxlucts v1 ere a ctual ly cut in th e li. c ,~nsec <:r nt ( e:: t Sitio G<mg o in the l<un1ci 'J<:l i ty of Cc-Jrr<::s c <.J. ) , <� net trl<,t j_t :-: log 1on be i ng loc bt ed in the licen se6 ~ r c8 , th e 1r~ct i ce of coGcess ion~ i rr s in cutting logs i n ar e as not r:scrved coul( not h <v e been committe :-'": ; t i1<cit c-.t any ra.te, the ]Jersocnel in the cutti.n t; el i' ~' < " or i n tn e �,wad ::: ; tll <.-t the Durec.. u of F or str-y we:s cl uly c~cmt i ;;r, pc~ 1 y the Com- missioner of Int c: rr.<: l ;::{CV �'11LJ P- , un der S c::ct i on 262 of j_nv oicin g of far ~::: t H'O .ur: ts ; ti.u:. t tnr� ;"ccom Jli shm::on t of <:uxili t.. r y in vo:i.c ~:.: i s U1�: o:l' tih:: duties '. vhich the-::

DISSENTING -OPINION CTA CASE NO. 2153 - lo - the Bureau of. Forestry 'is in a position to determine whether a certain concessionaire would be required to GCCO plish auxiliary invoices with respect to the transportation of logs; and that based upon that au- thority. petitioner was authorized by the Officer-.In- Charge, . Mr. Donato R. Ara11as, of Carrascal Fo rest Sta- tion. on July 21. 1966, to remove the logs from its fo- rest concession without a.uxiliary invoices and dis- � charge ~ permits. provided i t executes a forestry bondr and that the logs cut were properly scaled b y the Bu- reau of Fore stry personnel� and the auxiliary invoices were prepared by the Bureau of Forestry station at Carrascal� and submitted at the end of each month to its Collection Agent~ Bureau of Intern a l Revenue at Carrascal� as certified to by District Forester Jus~i niano Cabiles. Finally. it contended that it has paid all for.est charges. On th e other hand. respondent contended ana in� sisted that petitioner had violated said Section 11 of Revised Regulation N,:>o 65 and is liable under Section 267 of the Tax Code for 25% for r emov ing forest pro- ducts without auxiliary invoices and 25% for unloading forest products without discharge permitso Respondent� strongly. arcued that the requirements of an auxilia.ty i nvoice and discharge !.)e rmit are man- datory and admits of no exception ~ i1 I<) 'i. ')

- DIS S ~NTI~G O?INION - CTl;, C.LSE NU . 21 5.3 - 11 - I agree with the cont en ti on of r esDondent , Com- missioner of Int crn~ l Re v enue that un~er the law and regulations, the requirements of Dre~&ring ~ux ili ary invoices and the oroc ur cmen t of (iscrwr ge oermit s fro1.1 t he Forestry or BIR authorit i es E1re mc:-;nc1<Jtcri l y rFquir~~ before thr lo gs cut are remov ed ~nd trans- no rt cd . 0hen the ~or Gstry off icer 3, )artic ul G~r ly t he Offic cr-in- chc..r gc , Done:.t o R. F....rano s of the Carras- c a l Forest stc.tioc c.:nci the ristri. c t Forr::ster Justiniano Cab il es certified that the logs cut may be r~mov ~d or trbns0ortef without the nece~sa ry auxili ar y in- voi.c cs e:ncJ rHscl t1rge �)errnits , they Here c..ctin;:; i.n ooen v iol ~tion of Sect ion 11 of Regulation No . 85 , as thcy, the oetit i nner herein, and net the obligHtion or duty of the Burebu of Forestry nerson~el GS asserted by octi- tioner , f r om nren2r i ng ~uxi li ~ry i nvoices in BIR For~ No. 14.04 as r equi r ed un~er Se ction 11 of Begulation No . 8 [:;' .J� th emselv es higher the:.n the a uthority of th e l &\AI Gnd r cgul6t ion. The lllegcl act of the forestry officers in not requirin g fror.n net:Lt ionc r thE co:n'll hr. c e of S ection 11 of Rrcul~ti8n 85 with rcs1cct to auxil j ~ry i11egLlity. Lut co~~;ir~�:"r.iJ."}g th e cior�ccunst:~nccs thct

DISSSNTING OPINI5C'3N C . (u'iT.ol.A� _h.Q,_,rL, h� -l-. o C,..:.:,. ..I. _ - 12 - to Detitioner , thro ~gh the c ertif ications is sued by them thc.t th e cutting ancl r er.'lov <:, l by 'J e tJ. ti on~: r of its l ogs fro ~ its concession area were l eg~ l and V[li~ ev en without th e auxili&ry i nvoices and (i s- chargG Je rmits ~nd , ~etitione r, h~vin~ ~cted mist sken - ly or erron eous ly on thGt bE: s is, I f ind no l eg<:1 l just if ication to im~ose 25% surch arge fo r f ~ ilure to exectite ~uxili2ry invoices ~nd 25% surch arge for not securing r, i s c h~r ge per.:ni t s u~(: er Stoct i or:; 26( of the Tax Code . '.i.'ile non- i mtJosit ion of the sfor(' SC.icl surch <. r . ~e s, which, Gs one CLD Rlr 2ad y see, w ~ s due to good fsith of petitioner, i s strengthened by the f vct that & bon d was exec~t~d by it to puarbntee the non - oaymen t of <my fo r r.:!:' t cll: :r ges to b.-:; ''i.Lie the .ceon conformc:,bly to the ,,uthority ~I'l.dl t cd b y I on<~to R � .nranr-,s , Officr�.r- in-c ha r ge of the Cs rr as c&~ Fornst Stt.tion . T~~ r~ was , t hrrrfor r , no scin til la of ~ vi~ ence Mh ich would cle&rly show any crim i n~ l i n t ent to viol ate or infringe u0on t he 1<1':1 ;. n (l r p~:;ul.r.t:inn �"'Jh.Lch �..voul<1 justify t he i rrDo -- sition of the .'::.). ~/ ~:'(t) "C''l�-'1l'C''1~l c'.�, r 6���(-�'0" ?h i s hole iDg is comnletely i~~ ;. ccord �w:Lth thr 'Jrinc i l l r lc-,ic down in two (2) nrcvious cas e s decided by this Court to the effEa.t t i1ut goC1d fr"' i th an<~ hone:cst miEJtal<.c arc defenses agc::Lrst the l.r:J._Jos 1. t :.:.on surch~rges or Jcnnlties. L Li anga l3ay Logeing Co . ~ nc. v. Comn . of In t. Rev ., CTJ.. Cas e No. 1878, June 30, 1969, citing :?aoer Inr~u stri c: s Cor8 or:....tion of t:1c :)!lili �o �: )in~:s v. Com.missionrr of Int ro rn a l I ,.. '1: '~ ..

DISS~NTING OPINION - CTA CASE NO. 2153 - 13 - Revenue (CTA Case No. 1680, July 22, 1966), which cited in turn Connel Bros. Co. LPhil~ v. Collector of Internal Revenue, G.R. No. L-15470, December 26, 1963; see Amado Ao Colon, Court of Tax AnQeals, D:i.gest of l.n.t..�.rna.l Reven;y& Tax Qn.ses_, Vol. I (Quezon City; Central Lawbook Publishing Co. Inc.), pp. 5'03- 504~ Said this Court: With respect to p titionet's liability to �. the surcharge, it appears, as adverted to further above, that petitioner paid on time the charges stated in the scale recort of the forest officers and it also paid the deficiency forPst charges after a recomputation on the basis of the revised recla... $ification of trees which was overlooked by the Forest Officer. Petitioner only questions the im- position of the 25% surcharge against it. The fact;s and issues of this case are the same as the case of Paper Industries Corporation of the Philip- pines (formerly Bislig Industries, Incs) vs. Com� mis sioner of Internal Revenue (CTA Case No. 1680, July 22, 1966) which this Court decided adversely against the Commissioner of Internal Revenue, and hereunder we reiterate \'That ,.,e said there: "The only question posed before this Court is the validity of the 25% surcharge imposed by .respondent on petitioner. This question brings to mind Regulation No. 85 of the De� partment of !:1 inance that, among other things, regulates the manner of paying forest charges, the pertinent provision of which being Section 28 thereof, which reads as follows: '(b) At the end of each month and without the necessity of waiting for the result of the revision to be made in the Bureau of Forestry, the forest officers .stationed at the sawmill ha.ve been instructed by the Director of Forestry to forward the original of the Monthly Scale Report (Bor'. F'orm No. 24.33) to the deputy provincial treasurer concerned for collection. Said forest officer shall deliver the triplicate of the Monthly Scale

DISSENTING O?INION ~ CTA CASE NO. 2153 - 14 - Repo~t to the operator or manager of the sawmill \,rho shall present i t to the deputy provincial treasurer on or before the last date. on which the amou~t due thereon and indicated in the scale report may be paid without surcharge. which date shall not be later than the 45th day from the last day of the month in '>-lhich the timber \>las scaled by t.he forest charges without awaiting any de- mand for the payment thereof. If upon the revision made in the Bureau of Forest:rye there should be found any short charge s cr overcharges, the nesessary adjustment shall be made on the M0 nthly Scale Report 1-Slfor the subsequent (B.P. Form No~ month. 1 "It will be noted from the foregoing regula- tion that petitione~'s forest charges are required to be paid after receipt of the monthly scale re- port of the forest officer or forester~. on which the amount payable is based. Payments are even subject to correction for if upon revision made in the Bureau of Forestry. there should be found any short charges or overcharges~ the necessary � adjustments are made on the monthly scale report for the subsequent month \oJhich is the basis of t.he next par!mentt~ From this very manner of pay- ment it would seem that surcharges are not con- templated in case of short charges because in that event the necessary correction is made in ~he next monthly scale report as the regulation itself provides. Of course surcharges are due when the'taxpayer fails to pay on time the forest charges collectible on the basis of the monthly scale report of the forest officers. "In the present case, it is controverted that petitioner paid on time the fo r est charges for the month of July, 1961 collectible under the monthly scale report of the forest officers~ If the cor- rect tax v..'as not paicl .i t was because the scale report 1 Now 75 days. pursuant to Seco 267� Natg Int. RevQ Code.- in relatJon to Sec. 28(b), Regs. No. 85 of the Dept. of Finance; B.I.R. Ruling No. l2lr Febo 20� 1959o

DISSENTl ~ G OPINION - CTA CASE NO. 2153 - 15 - did not reflect the new re-classification* the f~� rest officers having overlooked same. If petitioner did not pay the shortage earlier than the preli- minary 5-day �letter of June 18� 1962., it '"as obviously because the necessary adjustment was not made by the Bureau of Fores try in the monthly scale report of the succeeding month as provided by the regulation. Under these circumstances we cannot find j~stification for penalizing petitioner solely for the errors of the forestry officers act- ing as deputies of respondent. Petitioner had no part in the making of the scale reports and all it did wa.s to pay the forest. ch a rges on the basis of the scale reports. Said this Court in the cas e of Philippine Power and Development Co �� Inco vs. Com- missioner 6f Internal Revenue (C.T.Ao Case No. 1152~ Oct. 31,. 1965): 'On the third issue;.; :[betitioner c on- tends that he is not liabl e for the sum of P28.293.88� representing the 25% surcharge~ for the reason th.:~.t the failure to pay the 5% franchise tax was due to responde nt's letters dated June 15-., 1955,. and July 13~� 1955~ respectively~ which led him to be~ lieve t hat the correct rate of percentage tax d u e \"'as only 2%~ and in consequence of which it was granted a tax credit of ~39 1 830.76� or the difference between the 5% prescribed in Sece 259 of the Tax. Code a nd the 2% provided in its franchiseo ''l'his con tention is ~1ell taken. Ha.... ving acted in good faith and havin9 been misled by the respondent� it would no�t be fair and equitable to impose upon the peti- ti o ner the 25% surchargeo In the cas e of Ilagan Electric & Ice Plant� . Inc. vs. The Comm. of Internal Revenu e. C.T.Ao Case N0 � 1178~ May 18~ 1964, this Court held: "It is undisputed that petitioner paid the 2% franchise tax in accordanc~ with the view of respondent.� s deputy that the former was li a ble only for the 2% fr a nchise ta.x. It may, therefore, be said that the fai lure to pay the correct amount of tax is clearly and directly attributable to the mistaken L.C1. � i 'Q)

IISS~KTI~G O?I~lON - .J CTA C.LSE 1';0 . 2153 - 16 �- view of rcsJondent's ~ c p uty regar~ing the ra te of tsx noolich ble to 8etiticner's gross receiDts. In oayine 2% -tranchise tsx, oetition er was <,ct in g in g ooo f<::ith. H&ving thu s ~ cted it w a ul ~ not be just to pena1iz G octt tion (or v1.i th 25;t surcb::.:rge for falling into the error to vhich it has been ls ~ by resnondsnt's deouty . (-Sec Connell t3ros. Co . (.:-'hil.) vs. Col- lector oi' Internal Re v enue, G.T1. . ;1o . 1-151+70, :cc. 26, 1963 .) '1 Bsse6 uoon the above , 0etiti~ner, to my rni~d, is not ljable for pen ~lty for not executing surc!H~rgc <~ncJ penalty for not securing fro;:, the BI~ ut<thorities c 1scrlbrge �Jermits for the removal of its logs . I vote , therefore, against th e i m1osition of SGid surch~rges. But oetiti :�ncr not h~vi~g qucstionc~ the legality t '70 ,...,., ;"..)' ~f' ...:1.. X\.C� r'�, a~"v' of the amour: t of 00 ~~ so . u� �~y... '"."," f'.C. �.� .~... \P,...,. � aeficicncy sales tLx and ~urchcrge, I vote to hold it l iable therefor. Quezon City, Febru.<.ry 24 , �1982. -}.}Ob.QUIN JucJge