CTA Case No. 4108 (Decision)

Republi c of th e Philippines COURT OF TAX APPEALS Quezo n City .) Hawaiian-Philippine Co�pany, Petitioner, versus - C.T.A. CASE N0.4108 Co��issioner of Internal Revenue, Respondent. X ------------------------- X D E C::: I I DN This is a claim for refund of the amount of P283,352.00 representing petitioner's erroneously paid compensating tax for the period from Nove11ber 1984 to May 1985 pursuant to Section 1 of Presidential Decree No. 791, as amended by Presidential No. 1710. Petitioner is a corporation duly organized and existing under and by virtue of Philippine laws, with principal place of business located at Silay City, Negros Occidental. It is a sugar central principally engaged in the business of manufacturing, milling, processing or refining of sugar. For its milling operations, petitioner imported, for its own use, plant machinery, spare p a r t s and equipa~ents. P e t i t i o n e r imported the . ship�ent of the following 18 6

C.T.~. C~SE NO. 4108 - DE C I S I 0 N - - 2- Description of Goods Official Receipt No. Date 1 box parts for sugar 558352 11114184 P 22, 759. 00 "B" �ill centrifugal 1 ctn steal turbine 580222 02/01185 p 7, 780.00 "E" parts for Worthington 573340 turbine 1 case parts for Man 597397 03115185 p 95,003.00 "I" diesel engine 1 box parts for 582861 03125185 p 37,412.00 "L H steal turbine 1 box parts for 597683 03/25/85 p 63,168.00 �a� stea� turbine 1 ctn parts for 582922 04/09185 p 2,893.00 "R" stea� turbine 1 case parts for 617760 05103185 p 29,749.00 "U" electric diesel engine 1 box parts for 617664 04130185 p 2,928.00 "X" sugar�ill centrifugal 580256 parts of W.S. sugar1ill centrifugal 609755 04/09185 p 10,900.00 "R/1" 1 ctn parts gear 558650 11126/84 "CC" reducer 573424 01103185 p 5,920.00 "DD" .) 1579380 05130/85 p 41840.00 IQI B~ p 283,352.00 The said compensa~ing tax oF P283,352.0G was collected on the alleged revocation oF the tax and duty exemptions oF sugar millers by Presidential Decree No.1955 eFFective October 15, 1984 and Fiscal ,, Incentives Review Board CFIRB) Resolution No. 2-85. Under FIRB Resolution No. 53-85 dated October 1, 1985, the tax and duty exelffption

C.T.A. CASE NO. 4 1 08 - DEC I S I 0 N- - 3- priveleges oF sugar millers granted under Presidential Decr ee No. 791, as amended, and withdrawn by Presidential Decree No. 1955, were restored with respect; f;o imported articles which arrived in the Philippine s on or beFore June 30, 1985. Pef; it i oner, claims thaf; as a sugar central engaged in f;he business oF manuFacturing, mi lling, processing and reFining oF sugar if; continued to enjoy the tax and duf;y exemptions pursuant f;o Presidential Decree No.791, as amended by Presidential Decree No. 1710. And that, its payment; oF compensating tax f;of;alling P283,352.00 during f;he period November 1984 to May 1985 which if; erroneously paid is reFundable. I On March 21 , 1986, petitioner, through its a�genf;, Filed with Respondent's Bureau Appe 1, 1 af; e Division a claim For reFund oF y ert~ oneousl paid .J compensating f;ax in f;he f;of;al amount . oF P283,352. 00. Respondent has nof; yet granted petitioner's request For reFund, hence this appeal. This appeal, as well as t"he claim For reFund, was Filed within two years From the date oF payment oF f;he tax sought to be reFunded in 1(5

C.T.R. CRSE NO. 4108 - DE C I S I 0 N - - 4- accordance wi~h Sec ~ion 292 and 295 (now Sec~ ion 24 3 and 246 ) oF ~he Tax Code. The sole issue ~o be resolved in ~his cas e is whe~he,.~ o r no~ pe~i~ioner's impor~a~ion oF plan~ machinery, spare par~s and equipm e n~s For use in i~s milling opera~ ions i s exemp~ under Presiden~ial Decree 791, as amended by Presiden~ial Decree 1710 From paymen~ oF compensa~ing ~ax. Presiden~ial Decree No. 791 as amended by . Presiden~ial Dec ree No. 1710 provides as Follows "Sec~ion 1. Rny person, par~nership, co mpany or Corpora~ion who or which i s now engaged or shall engage in ~he business oF ma nu Fac~uring , mill!ng, processing or reFin ing sugar shall be exemp~ed From ~he paymen~ oF special impor~ ~ax, a n d compensa~ing ~ax, cus~ oms and ~ariFF du~ies ~n respec~ ~o ~he impor~a~ion oF plan~ ma c h i n e r y , s p a r e par~s and o~her equipmen~ eFFec~ive upon ~he approval oF ~his Decree un~il June 30,1985. Sec~ ion 2. The exemp~ ion under ~h is Decree shall co~er only ~he impor~a~ion oF plan~ '.J machinery, spare par~s and o~her eguipmen~. including road building equipmen~, sugarcane ~ranspor~, a,gricu1~ura1 ~rac~ors and implemen~s ~hereoF, direc~ly and ac~ually needed and c ~o be used e x c l u s i v e l y in ~he developmen~ oF ~he Fac~ory si~e and i n ~he produc~ion, manuFac~ure, milling, processing and reFining oF sugar by ~he gran~ee oF ~he exemp~ion under ~his Decree, iF ~he shippin~ 18~ I

C.T.R. CASE NO. 4108 - DE C I S I 0 N - - 5- documents covering the impo rtati o n are in the name oF tax - e x em p t Firms to whom the goods shall be delivered by the customs authorities" (underlining ours). This case does not come as new, For we have already settled and ruled the issue in this case involving the same petitioner in Hawaiian Philippine Company vs. Commissioner oF Internal Revenue, CTR Case No. 3650, June 31, 1989. Considering that the petitioner is a sugar central engaged in the business oF manuFacturing, milling, processing or reFining oF sugar; and 1 i l<e.wi se petitioner imported the machinery and spare parts within the prescribed period, that is, prior June 30, 1985; and that the importation ' consisted oF plant machinery, spare parts and other equipment directly and actually needed and to be used exclusively in the development oF the Factory site and in the production, manuFacture, processing or reFining oF sugar; and that the shipping documents covering the importation are in the name oF the tax exempt .J Firm, thus we hold that petitioner is exempt From �. paying compensating tax under Presidential Decree No.791, as amended by Presidential Decree No. 1710. Moreover, the exemption under said Decrees 18 J

C.T.A. CASE NO. 4108 - DE C I S I 0 N - - 6- was restored by FIRB Res olution No. 53-85 dated October 1, 1985 pertinent portion oF which reads : "Be It Resolved as It Is Hereby Resolved, That the tax and duty exemption priveleges oF sugar millers granted under PD. No. 791, as amended, and withdrawn by P D. No. 1955, are ' hereby restored : Provided, That such priveleges shall extend only to import e d articles which arrived in the Philippines on or beFore 30 June 1985." (Emphasis ours). In the case at bar, there is substantial compliance with the requirements provided For by law. It has clearly established its right to the exemption sought For by way oF material and document ar y ~xhibits, not to . say the clear and unequivocal intent oF the provision in question. It should be noted however that with this decision granting the claim For reFund, there is a com pl ete reversal, not to say, an a bandonment in the Findings oF the Court in San Carlos Milling Co. Inc. vs. Commissioner oF Internal Revenue, CTA. Case No. 4107. In that case oF 'San Carlos Milling Co. Inc. which invoked the decision .. in National Power Corporation vs. Province oF Albay. et. al., 186 SCRA 198, the Supreme Court ruled on the power or 1 9 L1

C.T.R. CRSE NO . 4 108 - DEC I S I 0 N- - 7- a uthority oF the Fiscal Incentives Review Board., under P.D. 7767 to grant or extend tax and duty exemption privileges oF the grantee. The power oF the FIRB was merely to recommend to the President oF the Philippines what subsidies or tax exemption grants should be withrawn 7 modiFied., revol<ed or suspended. The Supreme Court added that "The FIRB has no authority to impose taxes or revol<e exi~ting .) ones., which., aFter all., under the Constitution., only the legislative may accomplish." By itselF, it could not have validly prescribed exemptions or restore taxabi 1 it y. (Napocor v. Prov. oF Al bay., et. al. 7 supra) t,he To Further substantiate the reversal oF decision in the case oF San Carlos Miling Co �. Inc., it has been enunciated in Maceda vs . Maca r aig, Jr., 197 SCRR 771, that, the FIRB Resolutions then in i s sue which restored NPC's tax exempt i on p r i"v' ileges included the restoration oF the indirect tax exemption oF the NPC on petroleum product it used. In this connection., suFFice it to state., the FIRB Resolution No. 53-85 could have validly restored the tax exemption privilege oF petitioner when that sam~ privilege has already been withdrawn by P.D. No. ,., 1955 eFFective October 15, 1984. True it 19i /~ I

C.T.R. CRSE NO. 4108 - DECI S I 0N- - 8- is t:hat: f:he t:hen Secret:ary oF Just: ice in Opinion No. 77 daf:ed Rugusf; 6, 1 977 oF f:he view t:hat: f:he powers conFerred upon f:he FIRB by Sect: ions 2 CaJ, CbJ, CcJ, and (d) oF Execut:ive Order No. 93 consf:if;uf;e undue delegat:ion oF legislaf:ive power and, is t:hereFore unconsf:if;uf;ional. However, he was overruled by t:he t~e s pondenf; Execuf:ive Secret:ary in a lef:f:er f:o t:he Secret:ary oF Finance daf:ed March 30, 1989. The Supreme Court; ruled t:hat; "f:he Execuf:ive Sect~et:ary, by auf:horif:y oF t:he President:, has f:he power t;o modiFy, alf:er ot~ reverse f:he consf:rucf:ion oF a sf;af;uf;e given �by a deparf:menf: sect' ef:ary. " Wif:h f:his lat:esf: precedent: granf:ing f:he claim For reFund, f:he law does look wif:h Favor on t:ax exempt: ions f:o f:hose who would seel< t; o be f:hus privileged and could jusf:iFy if: by words f:oo plain f;o be misf:aken and f:oo caf:egorica l f:o � be misint:e rpref:ed. WHEREFORE, t:he claim For reFund oF pet:it:ioner in t:he amounf: . oF P283,352.00 represenf:ing payment; oF compensaf:ing t;ax For imporf:af:ion during f:he period November 1984 f:o May 1985 is hereby granf:ed. No pronouncement as f:o cosf;s. 192 !

C.T.R. CRSE NO. 4108 - DE C I S I 0 N- - 9- SO ORDERED. Quezon Ci~y, Me~ro Manila, March 11, 1993. .) WE CONCUR : - Q.. ~ t:lCDSTt:l ~ esiding Judge ~ ~~~~ RRMDN D. DE V Rt:l J t:lssocia~e ge I cer~iFy ~ha~ ~his decision was reache d aF~ et~ due consul~a~ion among ~he members oF ~he Cour~ oF Tax Rppeals in accordance wi~h Sec~ion 13, Rr~icle VIII oF � ~he Constitution. ~\QQ~ ERNESTD D. t:lCOSTA Presiding Judge Court oF Tax t:lppeals