CTA Case No. 4866 (Decision)

.... --�-"""" ( ~l.�l( I REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY TAGANITO MINING CORPORATION . Petitioner .. - versus - C.T.A. CASE NO. 4866 .. ' COMMISSIONER OF Promulgated: � I INTERNAL REVENUE. APR 2019!fi ~ ! Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION This case originally involves petitioner's claim for refund of alleged overpaid 5% excise tax in the amount of P 1351495.18 on shipments of Beneficiated Nickel Silicate Ores and Chromite Ores ,..J to Japan from July to December 1990. However, with the Amended Petition for Review filed by petitioner on May 26~ 1993, the claim for refund was increased from P 135,495.18 to ~?9~~~21.69. P'titioner is a corporation duly organized and existing under tll~ la'WS _of the Republic of the Philippines with office located at the 4th Floor, Solid Mills Bldg., Dela Rosa Street, Legaspi Village, lvlak.ati. Metro Manila. It is primarily engaged in business 625 ��--� --� ------�----�----~---------- -~- __ ' - --~- ---- . - -~ ~ ---- )

\ �DJ!CISION- C.TA. CASE NO. 4866 - Page2- as a producer and exporter of Beneficiated Nickel Silicate Ores and Chromite Ores with fHR Permit No. 0057-MP-90 (Exh. B, as corrected per Our Resolution dated September 24, 1993) issued on June 22, 1990, by Deputy Commissioner Eufracio D. Santos. For the period starting July to December 1990, petitioner shipped a total of 157,32 3 Wet Metric Tons (Wt-tiT) of Beneficiated Nickel Silicate Ores to Nissbo Iwai Corporation and 12,131 WMT of Chromit.e Ores to Yonasho Corporation, itemiz~d as follovvs: Beneficiated Nickel Silicate Ores: July 3, 1990 34,584 WMT 26,273 WMT September 1o, 1990 41,059 WMT 29,249 WMT October 2, 1990 26.158 WMT November 1, 1990 De(~ember 12, 1990 Total 157,323 WMT Chromite Ores: July 3, 1990 6,767 WMT 5.364 WMT November 1, 1990 Total �12,131 WMT Petitioner paid tlle corresponding 5% excise tax on .tlle above shipments ~Nitllin twenty (20) days after the end of each cat~ndat. quarter pursuant to Sect{o~ � 15Hc) of tlle National Jn~rnat ~~v~nu~�Code, in tlle.sum ofP8,883,676.46, computed as ,. : . :~ .. .' . .. ... .. . ~ .' follows: (�xhs. C, C-l, C-2, D, D-1 and D: -2 ) ��' . .' . . :. � 626

DHCJSION- ~�� C.T.A. CASH NO. fil6 -Pagel- Date of Paym~nt BIR P.O.- Amount Paid October 22, 1990 C-80350 12 B-22591998 P3.235,864.79 january 18, 1991 C-8036428 B-21184729 5.648.01 L~Z. Total P8,883,876.46 i!Ml The excise tax \.va.s based on the foreign value appearing on the invoice and calculation sheets for each shipment conv~rted at the exchange rate of a US Dollar to Philippine Pesos at the time of receipt of payment as shown in the Credit Advice/Memo from the local banks. Petitioner used as basis for the computation of th& excise tax the exchange rate at the time of receipt of payment per Bank Credit Advice/Memo. Petitioner claims that the value at the time of payment m.s more than the actual market valut: of the gross output of minerals at the time of their removal or export. On May 20, 1992, petitioner filed with the respondent a claim for refund of alleged overpaid 5% excise tax for the year 1990 in the amount of P 135,495.18. The claim was anchored on the belief that t.l1e basis for the excise tax should be the value of tl1e minerals at the time of their removal or export pursuant to Section 151(a)(3) of tl1e National Internal Revenue Code. By and large, petitioner alleged that the exchange rate used at th~ time of remittance of. tll~ excise tax was higher than the exchange rate a~ tht ~n1~ of.�. ~etnoiat thus resulti~g to an overpayment. The ha~is for the ~xcise .tax payments were the amounts stat~d in the . . final invoice. for each shipment. The conversion rate used V\73.s 627

DECISION- C.TA. CASE NO. 486ft - Page4 - that prevailing at the time of receipt of payment from Japan as sho'W!l in the-Credit Advice/Memo received fromloca1 banks. On October 20, l992, petitioner filed a petition for review with this Court seeldng tl1e refund of P 135,495.18, computed as folloWs: TAGANITO MUHNG CORPORATION SALES SCHEDULE FOR THE YEAR, 1990 SHIPMENT VOLUME EXCHANGE PESO NO. DATE COMMODITY (WMT) $VALUE RATE (Exh.L} VALU~ 5 7-3-90 Beneficia.ted Nickel Ore "34,584 $1,238,281.44 P23J5 P28,913,871.62 7-3-90 Chromite Ot�e 6,767 394,415.86 2'3.35 9,209,610.33 6 9-10-90 Beneficiated Nickel Ore 26,273 1,021,389.83 25.00 25.534,745.75 7 10-2-90 Beneficiated Nickel Ore 41,059 1,652,191.52 25.75 42,54'3,931.64 8 11-1-90 Beneficiated Nickel O:t'e 29,249 1,149,657.77 28.00 * 32.190,417.56 9 11-1-90 Chromite Ore 5,364 295,022.36 28.00 * 8,260,626.08 12-12-90 Beneficiated 1Hcke1 Ot�e 26,1~8 1,011,229.28 28.00 28.]14,422.64 T0 TAL 169,454 6,762,188.16 174,967,625.62 TAGNITO MINUlG CORPORATIOH EXCISE TAX FOR THE YEAR, 1990 GROSS$A~ES p 174,967,62).62 T4\.X R.ATE EXCISE TAX DUt: 628

DHCISION- C.T.A. CASH NO. 4866 - Pa~f5- Less Payments: Octobet� 22, 1990 CR No. 22591998 P3,235..864.79 January 18, 1991 CR No. 21184729 5.648.011.67 8.883.876.16 EXCISE TAX OVERPAYMENT P 135,495.18 * The conversion rate of a Philippine Peso 1o a US Dollar 'WaS erroneously stated at P28.00 instead of P25.75 on November 1. 1990 per letter of the Depat�tment of Economic Statistics of the Central Batlk of the Philippines dated Apt'il26, 1993 {Exh. L-1). After tl1e filing of the Formal Offer of Evidence by petitioner, petitioner filed on May 26, 1993 a Motion to Admit Amended Petition For Review. The Amended Petition sought for the refund of tl1e amount of P29&,021.69 instead of its original claim for refund of P 135,495.18. The claim for refund was increased due to tlH~ overstatement of tlH~ conversion rate of a Philippine Peso to a US Dollar from P2 5. 75 to P2 8.00 on November 1, 1990. The correct conversion rate should l)e P25.75 on N(.)vember 1, 1990. Thus, petitioner stressed that the original claim for refund was understated by P 162,526.51. Respondent averred in her Amended Answer t11at the instant petition should be dismissed for failure on the part of petitioner to prove entitlement to the claim for refund. Claims for refund like tax exemptions are strictly construed against the taxpayer. The burden of proof lies witl1 petitioner to prove entitlei-n. en�t� to s:� .a, id. claim. Petitioner failed to prove that the � � > � amo�unfclainieq fof W-as a~tua.lly witllheld and remitted to tlte : '�. <' ~ureau of Internal Revenue. Assuming arguendo that petitioner is entitled � t(). � the claim for refut14 only the amount of 629

DHCISION- C.T.A. CASE NO. 4.86& - Page6- p 135,495.1 aas claitiled for in the administrative level should be granted instead of the amount of P298,021.69 as requested in the Amended Petition For Review. After filing her Amended Answer, respondent "...vaived her right to present evidence instead sh~ submits this case for decision based on the pleadings, the CTA records and U1e evidence presented by petitioner. The issue presented for resolution is whether or not petitioner is entitled to U1e refund of P298,021.69, representing alleged overpaid excise tax from July to December 1990 on shipments of Beneficiated Nickel Silicate Ores and Chromite Ores to Japan. Petitioner contended that the basis for computing the excise tax should be U1e actual market value of the shipments at tlle time of removal pursuant to Section 151 (a)(3) of the National Internal Revenue Code, pertinent portion of which reads as follows: �sHe. 15 L Mi.11eral Products. - (a) Rates of Tax - There shall be levied, assessed and collected on mineral, mineral products and quarry resources, excise tax as follo\ovs: XXX XXX XXX. (3) On all metallic minerals, a tax of five percent (5%) based on the actual market value of tlle ~ross outp~rtt"J@HK>f at the time of removal. in the f!as~ of thos~ 1oca11y -~xu-aet_e.d or produced; x x x... (~~p~as~s 0\.lts.) -~ . .,,.,, Sec~Otl l51 (c) of the same Code lil,<.ewise provides that the � . '. excise tax above-mentioned can be paiq on a quarterly basis 630

DECJSION- C.TA. CASH NO. 48l!6 - Pa1f7- upon filing of a bond as surety for the payment of the excise taxes. Section 151{c) provides as follo'Vv'S: �(c) Tim~ .maaaer aad plac.":t! of pay.meat of excise tax oa .miaeral aad .miaeral products:. - Unless otherwise provided, the excise tax on minerals and mineral products shall be due and payable upon removal of the minerals and mineral products or quarry resources from U1e locality where mined or upon removal from customs custody in the case of importations. Any person liable to pay the excise tax on locally produced or extracted mineral, mineral products or quarry resources shall, before removal of such products file, in duplicate, a return setting forth the quantity and the actual market value of tlle mineral or mineral products to be removed and pay the excise taxes due thereon to the Collection Agent, or the Treasurer of tile city or municipality of the place -v\1here the mine is located except as herein below provided. However, the output of the mine may be removed from such locality without the prepayment of such excise taxes if the lessee, owner, or operator of the mining claim shall file a bond in the form and amount and with such sureties as the Commissioner may require, conditioned upon the payment of such excise taxes. It shall be tile duty of every lessee, owner or operator to make .a true and complete return in duplicate setting forth the quantity and the actual market value of tJ1e minerals or mineral products or quarry resources removed during such calendar quarter, of t11e balance, if any, in cases vvhere payments are made upon removal, and Q�.Y. flW excise ~xes due .thereon wit11in 2o days after th tn~t Qf. ~U&ll quarter to tl1e Collection Agent, or tt{e .treas#t~fot the ci~.y Qr tnunicipality of the place Wil~re the miile is l~wct ,�. 631

DECISION- C.T.A. CASH NO. 48tJ6 - Page8 - In tlH? case of indigenous petroleum, the tax due thereon shall be paid by the buyer or purchaser within 15 days from tlie date of actual or constructive delivery to the said buyer or purchaser. 6:Js L!lmff!lndff!ld .b...V EO Nt'. 2 J..;} � (Underscoring supplied.) � Petitioner was au.t11orized by tile respondent to pay the ~xdse taxes on a quarterly basis (Exh. B-1, as corrected per Court's Resolution dated September 24, 1993) upon the approval of tt1e bond filed covered by Provident Insurance Corporation Surety Bond No. PIC/G (25) 01285-4656 (Exh. B-2, as corrected), dated June 22, 1990, in the amount of P500,000.00. In fine, Section 15 1(a)(3) of the Tax Code and all the evidence presented by petitioner bolster its claim for refund in the amount of P 135,495.18. The excise taxes are paid on goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported (Sec. 126, NIRC). The excise taxes can be classified into two: the specific tax and the ad valorem tax. The specific tax is an excise tax based on weight or volume capacity or any otl1er physical unit of measurement. While an ad valorem tax is an excise tax based on selling price or otl1er specified value of the goods. The excise tax is basir~ally a severance tax, that is, a tax on th~ .Privilege or severing or extracting minerals from the earth, ~ ' - �� .. ' �' ; � J. � and 'is. due and payable upon renioval of the mineral product from its bed� or mines. (Republic Cement Corporation v _ Commissioner of Internal Revenue, 23 SCRA 967) The 632-

DHCISION- C.TA. CASE NO. 48l!6 - Page9- mineral products extracted by petitioner falls under the ad valoreni tax at the raw of 5% based on the actual market value of the gross output of the all metallic minerals locally extracted or produced at the time of removal [Sec. 151(3). NIRC]. In the cases of CEPOC v. Commissioner of Internal Revenue~ L-18649.. February 27, 1965 and Commissioner of Internal Revenue v. Court of Appeals and Atlas Consolidated Mining and Development Corporation. G.R. No. 86785, November 21. 1991. 204 SCRA 162, the Supreme Court held tl1at: "Ad valorem tax is a tax not on the minerals, but upon tl1e privilege of severing or extracting the same from t11e earth, the government's right to exact the said impost springing from the Regalian theory of State ownership of its natural resources... In the case of Republic Cement Corporation vs. Commissioner of Internal Revenue, G.R. No. L-20660, June 13, 1968, 23 SCRA 967, tl1e Supreme Court had the J!l. occasion to rule that: �x x x. tl1e Lqd RffAu~m t..qJy is computed on tl1e �Lqt-:tuLqJ DNirket v..qJue of tl1e minerals or mineral products extracted or produced from all mineral lands�: The law [Sec. 151(a)(3), NIRC] and the above-cited jurisprudence are clear. The excise tax is based on the actual market value of tl1e gross output of minerals at the time of removal. This �was .reiterated in t11e latest ruling of the Supreme Court in the case of Commissioner of Internal Revenue v. 633

IJECJSION- C.TA. CASE NO. 4866 - PaW!10- Court of Appeals and Atlas Consolidated Mining and I Development Corportion. supra., �under the aforementioned provisions, although all minerals and mineral products extracted from the mineral lands are subject to L!?d 'VL!~k>rem tax, however, the said tax becomes due and payable only upon removal of the same from the locality where mitied. x x x. Moreover, it should be noted that said tax is imposed only on the actual market value of mineral products extracted or produced. This is confirmed by the second paragraph of said Section 243 which requires prior notification to the Commissioner of -Internal Revenue or his representative before t11e minerals or mineral products are removed from the mines. Such requirement is obviously intend~d to enable him t<) assess and collect the proper L~{t R~f()fem taxes. which necessarily presupposes tl1at such minerals or mineral products have an actual market value: In t11is case, since the conversion rate of a US Dollar to a Philippine Peso is lower at the time of removal from the mines as compared to the conversion rate at the time of payment based on . the Credit Advice/Memo from t11e local banks there was indeed �an overpayment of excise tax. The correct basis t11erefore being the actual martet value at the time of renioval. As a rule, any claim for exemption from ta.x st-1.tute is strictly construed against the t-1.xpayer. Ho"'\lever, where the law is clear and unambiguous, the law must be tal{en as it is devoid of judicial addition or subtraction. (Acting Commissioner of CUstoms vs. Manila Electric Company. 77 SCRA 469.) Hence, Section 151 (a)(3) and (c) of the NIRC as plainly worded 634

DECJSION- C.T.A. CASE NO. 4866 -Pagett - should be applied as it needs no further judicial interpretation from this Court. Now, '\Rlith respect to respondent's averment that only the amount of P1.35,49S.ta should be granted instead of P298,021.69, We find tl1e contention of respondent to be tenable. The claim for refund should first be filed with the Commissioner of Internal Revenue, and the subsequent appeal to the Court of Tax Appeals must be instituted '\Rlithin tl1e two-year period. If, however, the Commissioner takes time in deciding the claim, and tl1e period of two years is about to end, the suit or proceeding must be started in the_ Court of Tax Appeals before tl1e end of tl1e two-year period without awaiting the decision of the Commissioner. (Insular Lumber Company vs. Court of Tax Appeals. 104 SCRA 710) Since the petition for review is on the appeal level, tl1e Court can only take cognizance of the amount claiined for refund in the administrative level. In this case, petitioner filed a claim for refund witl1 tl1e respondent in tl1e amount of P135,495.18. The claim for refund vvas not amended in the administrative level. It was only after petitioner had formally offered its evidence did it file a motion to admit its ,amended petition for review - tl1is time increasing its claim from P 135,495.18 to P298,02 1.69. The rule is that, a �written claim for refund filed by the taxpayer with the Commissioner is a condition precedent to the filing of a petition for review witl1 tl1e Court of Tax Appeals. Section 204(3) in relation to Section 230 of the National Internal Revenue Code is clear on this point_. to wit: 635

DECJSION- C.T.A. CASE NO. 48lJ6 - Page 12- �sEC. 204. Authority of the c,,mmissioner to compromise.,. aba~ and refund/credit taxes. - The Commissioner may - XXX XXX XXX. (3) Credit or refund taxes erroneously or illegally received, penalties imposed witllout authority, refund the value of internal revenue stamps \\1l1en they are returned in good condition by the purchaser, anct in his discretion, redeem or change unused stamps tllat have been rendered unfit for use and refund tlleir value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing �with tl1e Commissioner a claim for credit or refund Vvithin two years after tlle payment of tile tax or penalty." (Underlining supplied.) �sEC. 230. .Recovery of t.a.x erronet?usly or illegally t--"''llected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected ~..,ithout autl10rity, 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 tl1e 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 proceeding shall be begun after the expiration of two years from the date of payTment of the tax or penalty regardless of any supervening cause that may arise after pa;rment: P.rovidf.'(f, bo~Vf.'.(. That the Commissioner may, even without a written claim tl1erefor, refund or credit any tax, where on the face 636

JJHCISION- C.T.A. CASE NO. 4866 - Page13- of the return upon which payment was made, such payment appears clearly to have been erroneously paid. R:>rf~ituJ-e t)f r~Jl.wd - A refund check or warrant issued in accordance with the pertinent provisions of tl1is Code which shall remain unclaimed or uncashed within five (5) years from the date t11e said warrant or check ms mailed or delivered shall be forefeited in favor of the government and the amount thereof shall revert to the General Fund.,; (Emphasis ours.) As such onl)T the amount claimed in the administrative level can be the subject matter of an appeal with this Court. Hence, the Court can only award the amount of P135,49).181 as claimed for with the BIR, after having been convinced by the evidence presented by petitioner. WHEREFORE, in view of the foregoing, the petition for review is found to be meritorious and the same is hereby GRANTED only with respect to the amount of P 135,495.18. Respondent is hereby ordered to refund in favor of petitioner the amount of P 135,495.18, representing overpaid excise taxes for its shipments of Beneficiated Nickel Silicate Ores and Chromit.e Ores from July to December 1990. No cost of suit�. SO ORDERED. _,l~r RAMON 0. DE V~frA Associate Judge 637

JJHCISION- C.TA. CASH NO. 48IJ6 - Pagett- WH CONCUR: Q~cz...~ ERNHSTO D. ACOSTA Presiding Judge (On leave) MANUEL lL GRUBA Associate Judge CERTIFICATION I hereby certify that this decision was reached after due consultation betvvTeen tl1e members of tl1e Court of Tax Appeals in accordance with Section 13, Article VIII of tl1e Constitution. ~-u<.'-Q~ HRNHSTO D. ACOSTA Court of Tax Appeals Presiding Judge 638