CTA Case No. 3574 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS YUEZON CITY DAVAO GULF LUnBER GURPUPURATION, C.T.A. CASE NO. 3574 Petit icmer, - ver sus - ~OMKlSSJ . ONER OF INTERNAL REVEKUE, Respondent. X- - - - - - - - - - - - - - - X DECISION Petitioner herein seeks for a partial refund of the specific taxes imposed on oils and fuels that were actually used in connection with the exploitation and operation of its forest concession. Petitioner is a duly licensed forest concessionaire with a timber license agreement with the then Ministry of National Resources. From July 1, 1980 to January 31, 1982, the petitioner purchased from various oil companies refined and manufactured oils and fuel on which said companies paid specific taxes pursuant Sec. 153 and 156 (formerly 142 and 145> of the 1977 National Internal Revenue Code <NIRC). Relying on the provisions of Republic Act 1435 <RA 1435> and the decision of the Supreme Court in the case of Insular Lumber Co. vs. Court of Tax Appeals, <G.R. No. 44 3

DEGISION - C.T.A. Case No. 3574 - 2- L-31057, May 29, 1981) the petitioner filed with the respondent a claim for refund of the amount of Pl20,82 5.11 representing 25X of the specific taxes imposed on the oils and fuel used by the petitioner in its business operations. However, without any response I from the respondent and in order to toll the running of the two year prescriptive period, the petitioner filed the instant petition. Sec. 4 and 5 of RA 1435 provide: "SECTION 4 . Municipal Boards or councils may, notwithstanding the provisions of sections one hundred and forty-two and one hundred and forty-five of the National Revenue Code, as hereinabove amended, levy an additional tax of not exceeding twenty-five per cent of the rates fixed in said sections, on manufactured oils sold or distributed within the limits of the city or municipality: Provided, That municipal taxes heretofore levied by cities through city ordinances on gasoline, airplane fuel, lubricating oil and other fuels, are hereby ratified and declared valid. The method of collecting said additional tax shall be prescribed by the municipal board or council concerned . SECTION 5. The proceeds of the additional tax on manufactured oils shall accrue to the road and bridge funds of the political subdivision for whose benefit the tax is collected: Provided, however, That wh~never any oils mentioned above are used by miners or fores t concessionaires in the operations, twenty -f ive per centum of the specific ta~~ paid thereon shall be refunded by the Collector of Inter nal Revenue upon submission of proof of actua l use of oils and under similar conditions enumerated in s ub-paragraphs one and two of sect ion one hereof, amending section one 444

DECISION - G.T.A. Case No. 3574 - 3- hundred forty-two of the Internal Revenue Code~ Provided, further, That no new road shall be constructed unless the routes or locations thereof shall have been approved by the Commissioner of Public Highways after a determination that such road can be made part of an integral and articulate route in the Philippines Highway System, as required in section twenty-six of the Philippine Highway Act of 19!:�:=t. " It is submitted by respondent that the subsequent enactment of various Presidential Decrees and Executive Orders increasing the rate of specific taxes impliedly repealed the partial refund privilege under Sec . 5 of RA 1435 considering that the legislative purpose of the said increases is to generate additional revenue for the construction and improvement of roads, bridges and other infrastructures. According to the respondent, the grant of the partial refund is inconsistent with amendatory laws. He likewise submits that Sec 4 of RA 14:=t5 in conjunction with Sec. 5 thereof requires that in order to be entitled to the partial refund of the specific taxes on oils, there must also be an additional imposition of tax by the local political unit concerned. We disagree with the respondent. Th e issues in the case ~t bar are not of first impression. The Court., in t .he case of Aras-Asan Timber 44

DECISION - C.T.A. Case No. 3574 -4- Co., Inc. vs. Commissioner o~ Internal Revenue, <C.T.A . Case No. 3524, December 17, 1993J , held. nAnent the first issue, respondent stressed that the subsequent enactment of various Presidential Decrees and Executive Orders, increasing the rate of specific taxes under the National Internal Revenue Code, impliedly revoked the partial refund privilege under Section 5 of Republic Act No. 1435. He stressed that the very purpose why the government increased the rates of specific taxes is to provide additional revenues to acce ler ate economic development in the country. The grant of partial reftind would therefore run counter to the very p~rpose for which the specific tax rates were increased. We disagree with respondent. In the case of Commissioner o~ Internal Revenue ve. Atlas Consolidated Mining and Development Corporation, et. al., G.R. No. 93631, Novemb~r 1 2 , 1990, the Supreme Court, in a Resolution by the Third Division, had the occasion to rule that 'the purpose for the increase in the specific tax rates and the retention of the refund privilege. In fact, with the increased specific tax rates, the grant of partial refund to mining and lumber concessiona ires is made more imperative consi d erin g t .hat. they seldom use the highways, the construction of which are financed by specific t .a:-ces. We find f i t .tin�1 t .he following comments of t .he Supreme Court. in the case of Co��ti ssi oner o:f Internal Revenue VB. Atlas Consolidated Jtining and Development Corp. et. al., (supr:a. ) : 'A reading of the le~islative proceedings leading to the enactment of RA 1435 shows that mining and lu m b~r con ces sionaires were granted partial refund of specific taxes bec ause the gasoline and fuel they c onsume is mostly used within their 446

DECISION - C.T.A. Case No. 3574 -5- own compounds and roads. RA 1435 gave these concessionary relief, in the form of tax refund, since their trucks and vehicles seldom ply the national highways, the construction of which is funded by the specific tax collected by the national government. There is therefore no rationale in conditioning the grant of refund on the payment of these mining or lumber concessionaires of any additional local tax. Moreover, Section 5 states 'that the 25% specific tax shall be refunded by the Collector of Internal Revenue. ' Since it is the latter vho collects the specific taxes due to the national government, then it follows that the refund refers to a refund of the specific taxes due to the national government, not the specific taxes paid to the local government. � And in the more recent case of Commissioner of Internal Revenue vs~ Rio Tuba Nickel ~ining Corporation and Court of Tax Appeals, G.R. Nos. 83583-84, September 30, 1991 <202 SCRA 137>, the Supreme Court Third Division held: "CtJo our mind, the provision in Section 5 standing alone is enough basis for the grant of refund. x x x. In fact, the entire proviso of Section 5 does not even make any reference to Section 4 which empowers municipalities and cities to impose the addi tional tax on oils sol d or distributed within their territorial jurisdiction. What is clear therein is that the Revenue Commissioner shall refund 25% of the specific tax whether 'any oils mentioned above are used by miners or fo rest concessionaires in their operations and the procedure for refund is complied with� Finally , the res pondent claims that assuming arguendo th at the pri vilege of the partial tax refund under RA 1435 stil su bsists, the right to file a 447

DECISION - C.T.A. Case No. 3574 -� - judicial action for refund of specific taxes paid before January 20, 1981 or 2 years prior to the filing of the instant petition has already prescribed. In this connection Sec. 135 of the NIRC provi~es "that specific taxes on locally manufactured petroleum products levied under Section 153, 155 and 156 of the title, except lubricating oil and grease, shall be paid within fifteen<15> days from the date of removal thereof from the place of production. ft Clearly therefore, manufacturers are given 15 days from the date of the removal of their petroleum products to pay the s pecific taxes due thereon, except lubricating oils and g r ease whose specific taxes are to be paid on the very date of their removal from their place of production. Thus , with respect to lubricating oils and grease whose s peci fic taxes were deemed paid on the date of thei r remova l, the petitioner's claim for partial refund on oils and lubricants purchased delivered prior to Januar y 20, 1981 had indeed prescribed. However, With r espect to the other purchases of petroleum prod ucts whose, specific taxes were deemed paid on the 15th day following their removal, only those which were purcha s ed from Janua ry 5, 1981 or 15 days prior to 448

DECISION - C.T.A. Case No. 3574 -7- January 20, 1981, may be considered in the petitioner's claim for partial refund . Furthermore, only those item which were included as claims in the administrative level may be given due course by this Court. Those purchases which were never brought to the attention of the respondent and are being claimed fo r the first time in this appeal may not be considered in the present claim for refund. Prescinding from the foregoing discussion, this Court finds the herein petitioner entitled to a partial refund of specific taxes only in the amount of P2,923.15 computed as follows~ RECKONING PERIODS: Original period of July 1, 1980 to January 31, 1982 claim for refund January 20, 1983 Case filed with C.T.A: January 1, 1980 to June 30, 1982 Period claim by Pet. in Memorandum RECOMMENDATION: 1. Period to be considered are~ a. In case of lubricating oils January 20, 1981 to January 31, 1982 b. Manufactured oils other than lubricants January 5, 1981 to January 31, 1982 2. Period prescribed a. Lubricating oils purchases from July 1, 1980 to January 19, 1981 44 9

DECISION - C.T.A. Case No. 3574 -8 - b. Manufactured oils other than lube purchases from July 1, 1980 to January 4, 1981 <Exhs. 1-1 to 1- 8, J -2 to J-9, L-1 to L-18, M-4 to H-12, M-14 to M-25 and RR-1> 3. Purchases of manufactured oils not on the original period of claim for refund should not be included in the computation. These are purchases of manufactured oils from January 1, 1980 to June 30, 1980 <Exhs. J~1, K-1 to K-19, H-1 to M-3, M-13, & N-1 to N- 29) and from Febn1ary 1, 1982 to June 30, 1982 <Exhs. AB - 1 to AB - 7, AC - 1 to AC - 12, AD-1 to AD- 13, AE-1, AF-1 to AF- 11, & AG-1 to AG-11>. SUPPLIER PETROPHIL CORPORATION (Exh. �p�) QUANTITY IN LITERS Invoice Date Oil and Regular Ho. Shipped Ex h. Diesel Lubricants Gasoline 9502'7 01 - 08-81 P-1 8,000 4,000 12700 02 - 11 -8 1 P- 2 12,000 27827 02-26-81 12,000 840 27828 02-26-81 P-3 12,000 28515 04 -20-81 12,000 ~ 55135 06-1':;1-81 P- 4 12,000 72384 07-09-81 P-5 12,000 l, 050 34222 01-28-81 P-6 34522 03-10-81 P-7 801000 T0TA P-8 P-9 L NOTE: In the computation made by petitioner in its Memorandum, purchases of manufactured oils in pails and in cans are not considered. Thus, the same are excluded in my computation for failure of petitioner to give proper conversion rate. a. Petrophil - Exhs P-10 to P-12, and XX b. Pilipinas - Exhs S-13, T-1, AA-3, BB-1, BB-5, HM- 1, PP-1, VV-1, VV-3, and ZZ-1 45 0

DECISION - C. T. A. Case N.o . 35'7'1 -9- SUPPLIER PILIPIHAS SHELL PETROLEUn CORP. CExhs. u, U, cc, RR & WW> UUAHTITY IH LITERS Invoice Date Oil and Regular Ho. Shipped Ex h. Diesel Lubricants Gasoline 83355 10- 16- 81 Q-2 9,000 420 3,000 8 3 332 10- 09-81 Q-3 6,000 1,680 2,000 83269 10- 03 - 81 Q- 4 6,000 3,000 83254 10 - 02 -81 Q- 5 10,000 420 2,000 8 3 255 10- 0 2 -81 Q-6 10,000 1, 260 3,000 83457 10 -22- 81 8,000 3,000 83496 10-27 - 81 ~-7 8,000 420 2,000 87068 11 - 03-81 9,000 420 3,000 87102 11 - 05-81 Q- 8 8,000 1,470 87166 11 - 09 - 81 R-1 6,000 1,050 3,000 87251 11 - 15-81 R- 2 6,000 1, 260 8 73 21 11 -23-81 R- 3 10,000 1,680 3,000 87518 12- 08- 81 R- 4 9,000 1,680 2,000 0 3 711 12- 10-81 R-5 10,000 2,000 87519 12-09 - 81 S-1 10,000 87403 12- 01 - 81 S -2 9,000 87620 12 -14-81 S -3 8,000 8 7691 12 -18-81 S-4 9,000 87692 12- 18-81 S-5 87693 12- 18- 81 S-6 10,000 9 2 573 12- 28 - 81 S-7 10,000 9 2574 12 - 28 :. 81 S-8 10,000 00764 10- 03 - 81 S-9 00765 10- 03- 81 S- 10 6,000 01455 10-27 -81 S - 11 9,000 017 16 11-23 -81 S - 12 9,000 01718 11 -23-81 S -14 10,000 01 71 9 11 -23-81 S- 15 10,000 0 1555 11 - 04-81 S- 16 6,000 01566 11 - 04-81 S- 17 9,000 02642 12- 11 - 81 S- 18 8,000 02643 12- 11 - 81 S -19 8,000 02644 12- 11 - 81 T- 2 74604 0 7-06-8 1 T-3 7 4684 07- 14- 81 T- 4 74796 0 7-28- 81 U-2 74711 07 - 18- 81 V- 1 74729 07 -20-81 W- 1 747'71 07 -24- 81 W-2 74839 08 -03-81 W-3 74878 08 - 05 -81 W-4 74892 0 8-06- 81 X-1 - a X- 1 X-2 451

DECISION - C. T. A. Case No. 3574 - 10 - QUAHTITY IN LITERS Invoice Date Oil and Regular No. Shipped Exh. Diesel Lubricants Gasoline 7 4977 08- 14-81 X- 3 6, 000 840 3,000 77258 08-19-81 X- 4 8,000 1,680 2,000 77259 08 - 19-81 X-5 10,000 1,260 3,000 77287 08 -24-81 X-6 6,000 3,000 81518 09 - 17- 81 Y- 1 6 ,000 420 2,000 03708 0'3-24-81 Y- 2 3,000 1,680 3,000 81580 0'3-24-81 3 ,000 1,680 81578 0'3-24-81 Y-3 8 ,000 3,000 81519 0'3- 17 -81 6 ,000 1, 260 2,000 77397 09-04-81 Z-1 10,000 1, 680 3,000 77396 09 - 04-81 Z-2 10,000 1,680 77 4 24 09-07-81 Z-3 9,000 6,000 96217 06 -30-81 Z- 4 840 3,000 96218 06 - 30-81 Z-5 6 ,000 1,680 2,000 96753 08 -26-81 AA-1 10,000 1,260 96931 0'3-23-81 AA -2 10,000 1,260 96828 09-07-81 AA -4 96829 09 - 07-81 BB-2 8,000 62:3'70 04- 02-81 BB-3 6 ,000 62426 04-08-81 BB-4 10,000 62427 04-08-81 10,000 62578 04 -28-81 ~C-2 10 ,000 62477 04- 15- 81 6 ,000 62550 04 - 24-81 DD-1 4,000 62678 05-11-81 DD-2 10,000 6 2679 05-11-81 10,000 62689 05- 12-81 EE-l b,OOO 62694 05-12-81 4,000 6G745 05- 18-81 FF - 1 8,000 62746 05- 18-81 GG- 1 9,000 68018 05-21-81 HH - 1 9,000 7 3606 06-05-81 HH-2 73629 06- 19-81 HH -3 73696 06-l'l-8 1 HH-4 73733 06-22-81 II-1 92214 04-09-81 II-2 92240 04- 22-81 II-3 92269 04 - 15-81 JJ-1 92 432 05-18- 81 KKK-1 9 4720 05 - 11 - 81 LL-1 92486 06 - 01 - 81 LL -2 94719 06- 11 - 81 NN-1 00- 1 00- 2 00-3 00- 4 00 -5 00-6 452

DECISION - t.;. T. A. Case No. 3574 - 11 - QUANTITY IN LITERS Invoice Date Oil and Regular No . Shipped Ex h. Diesel Lubricants Gasoline 96146 06-22-81 00- 7 840 1,260 96145 06-22-81 00-8 1,680 96112 06-17-81 00-9 420 210 96113 06-17-81 00- 10 210 96114 06-17-81 QQ-1 1, 050 1,050 9215 01-06-81. RR-2 8,000 1,890 10,000 9244 01-08-81 RR - 3 630 6,000 1,470 9323 01-14-81 RR-4 6,000 1, 470 3,000 8,000 3,000 9446 01-26-131 RR-5 6,000 420 4,000 6,000 840 3,000 9485 01-28-81 RR-6 6,000 630 4,000 6,000 420 3,000 5818 02-02 ~ 81 RR -7 6,000 2, 000 6,000 1,470 5924 02 - 11 - 81 RR-8 6,000 630 3, 000 6,000 3,000 5'329 02-12- 81 RR-9 10,000 45,570 8,000 461620 94,000 5980 02-17-81 RR - 10 6,000 981000 6,000 6077 02 -23- 81 RR - 11 9,000 6170 03-02-81 RR-12 7,000 10,000 59169 03-06-81 SS-1 - - -- 6152 02-28-81 SS-2 619e000 62270 03-19-81 TT-l 699e000 62271 03- 19-81 TT-2 62261 03 - 18 - 81 TT -3 62323 03 -25-81 UU -1 0366 01-15-81 UU-2 0359 01 - 15- 81 UU-3 0416 02-03 - 81 UU-4 0412 02-02-81 UU -5 0421 02-04-81 VV-2 2705 02 - 2 4 - 81 VV - 4 2733 03-03-81 VV-5 91425 03-10-81 VV -6 91418 03-10-81 VV -7 92043 03 - 19-81 VV - 8 92088 03-23-81 VV - 9 92627 01 -0 4 - 82 YY-1 83'742 01 - 18-82 YY- 2 86502 01 - 19-82 YY -3 02942 01-18-82 YY-4 02943 01 - 18 - 82 YY - 5 T 0 T AL GR AND T 0 T AL 453

DEGISlUN - C.T.A. Case No. 3574 - 12 - COMPUTATION OF 25X SPECIFIC TAX REFUND UNDER RA 1435 Manufactured Oils Quantity Specific Sp~cific Tax Rate Diesel Tax Pl. 00/PIT C699,000 x .8429; lUUOJ 589.19 MT p 589.19 0.07/L 3,263.40 Oils and lubricants 46,620 L 0.08/L 7,840.00 Regular gasoline 98,000 L Pll, 692.59 25X Total specific tax paid under RA 1435 p 2,923.15 Multiply by refundable percentage Refundable specific tax under RA 1435 WHEREFORE, judgment is hereby rendered ordering the respondent to refund to the petitioner the amount of P2,923.15 representing the partial refund of speciific taxes paid on manufactured oils and fuels. SO ORDERED Quezon City, Metro Manila, June 21, 1994. Q.,:;;;-~ ~ ERHESTO D. ACOSTA Presiding Judge I 45

DEGISIUN - G.T.A. Gase No. 3574 - 13 - CERTIFICATION I hereby certi�y that this decision was reached a f ter due con s ultation among the members of the Court of Tax Appeals in accordance with Section 13t Article VIII of the Constitution. Q... �7Q. ~ ERHESTO D. ACOSTA Presiding Judge Court of Tax Appeals 455