CTA Case No. 3581 (Decision)

'l Republic of the Philippines COURT OF TAX APPEALS Quezon City WEST BASILAN TIMBER, INC., Petitioner, - versus - C.T.A. CASE NO. 3581 COMMISSIONER OF INTERNAL REVENUE, Respondent. X ------------------------- X DEC I I0N Petitioner seeks refund from respondent of the amount of ~138,517.70 allegedly representing 25X of the specific taxes collected on various oils and fuels which it purchased from Caltex <Philippines> during the period from November 1980 to September 1982 and which it actually and exclusively used in connection with the exploitation and operation of its forest concession. Petitioner is a domestic corporation duly > licensed to operate a forest concession with a Timber License Agreement duly entered into with the Ministry of Natural Resources. It has authority to cut, collect, remove and utilize timber of all groups, except prohibited species in the public forest of Siocon, Bungiao and Tictapul Zamboanga

- DEC I S I 0 N- C.T.A. Case No. 3581 - 2- City an�d Sibuco, province o� Zamboanga del Norte by virtue o� its Timber License Agreement No. 154- A [Exhibit A & A- 1] Inorder to ably operate a forest concession, petitioner uses refined and manufactured mineral oils, motor fuels and diesel fuel oils in its forest operations. From November 1980 to September 1982 , petitioner paid the corresponding specific taxes on its purchases o� refined and manufactured mineral oils, motor fuels and diesel fuel oils from oil companies. By virtue a� the provision o� Section 5 o� Republic Act No. 1435 [An Act to Provide Means For Increasing The Highway Special Fund] and the decision o� the Supreme Court in the case a� Insu1ar Lumber Co. v. Court of Tax Appea1s, G. R. No. L-31057, May 29, 1981 <104 SCRA 710), petitioner invoked entitlement to the 25% partial refund on the specific taxes paid on manufactured mineral oils and fuels actually used in its forest operations. A claim for refund [Exh. D J, dated January 14, 1983, was filed on January 19, 1983 with the respondent's office in the total amount o� P138,517.70, computed as follows: [Exhs. D- 1 - a, D- 3 - a, D- 5 - al 22

- DE C I S I 0 N- C.T.A. Case No. 3581 -3- WEST BASILAN TIMBER November 1980 - September 1982 Volute Product Specific 25X Liters l Kilos Cost Tax Refund Diesel 815,600 p 2,388,818.46 p 142,730.00 p 35,682.00 Reg. Gasoline 380,800 1, 838, 191.78 342,720.00 85,680.00 Oil &Lubricants 85,506 866,207.43 68,404.80 17,101.00 Grease (Kilos) 1,227 10,992.94 613.50 153.37 TOTAL: p 5,104,210.61 p 554, 468. 30 , 138,617.07 --------------- ------------ ------------ Without waiting for respondent's decision on the matter, petitioner filed a petition for review on October 8, 1982, in order to toll the running of the two-year prescriptive period within which to judicially claim a refund under Section 230 (formerly 292> of the National Internal Revenue Code. Petitioner prayed for an order requiring respondent to pay 20Y. interest per annum, in addition to its claim for refund, for his alleged arbitrary refusal to refund the instant claim. Petitioner likewise prayed for the costs of suit. To support its claim for refund, petitioner presented the affidavits of its Vice-President [Exh. D- 1 J, Accountant [ D-3 J, and two other

- DEC I S I 0 N- C.T.A. Case No. 3581 4- disinterested persons: [Exh. D-2, D- 5J all attesting that �or the period November 1980 to September 1982 petitioner used in its �orest operations re�ined and manu�actured mineral oils, motor �uels and diesel �uel oil costing P5, 104, 210. 61. Respondent admits that petitioner �iled a written claim �or re�und o� the amount o� P138,617.70 on January 19, 1983 and the af�idavits in support of the claim but denied the contents thereof as well as the competence of the persons who executed the af�idavits. As special and affirmative de�enses, respondents contends that petitioner is not entitled to the re�und of 251. of specific tax paid on manufactured oils used in forest concessions previously available under Republic Act No. 1435 because Section 5 of said Act was repealed upon promulgation of Presidential Decrees 1158 and 1158-A, approved on June 5, 1977; even assuming that Section 5 of Republic Act No. 1435 is still in effect, partial tax refund thereunder re�ers to speci�ic taxes paid by miners and forest concessionaires on fuel oil, and other similar oils having more or less the same generating power but not on gasoline, kerosene, gas

:I:Ii, ;. . \:. - DE C I S I 0 N- C.T. A. Case ~o. 358 l - 5 -i ., ': r petroleum and .l-ubricating oi ls; that petitioner's right t o file a judicial action for r efund of taxes paid before ~ February ~ has a lready prescribed; . tax ~s are presumed to h av e been p aid in accordance witp law and regulation � J claims f or refund are construed strictly; the g overnment c annot be made to pay interest; and costs of suit ~ a p not be imposed on th e govern~ent. �' I �� l �\ ; .i ' The issues brought before this Court a r e: 1. > Whe t~er or not the privi lege under Section 5 of Republic Act . No, l~ 35 had been repe~ leQ � by Presidential pecr ee Np.: � 231 ( Enaettn.nt of t he Local Tax Code>, as amen~ed by Presidential De ~re e Nds. 1158� and l~~ 8 - A <Consolidating � ~n d Codifying A~l ' t nternal Revenue La ws > pa r ticularly S ~oti on 342 of the Natio na l In \ ernal Revenu ~ ~ ode of ~977; and ' 2. > Whe ther or not petition~r i s entitled to the ' r efund claimed, 3. ) Wheth ~r the claim prescribed . . �, Sectio n 5o~ Repu blic Act � No. 1435 p ro vides : .: t.t ,\ "SEC. 5;~ The proceeds of t he , , a dditional ta ~ on manufactured oi ls ,� sp~ll accrue ' t o the r oad and br idg e fu ~ ds of the p ol itical sub?ivis i on . ~ or w~ p se benef i t t he tax i ~ col-lected: l':royided, how trv ~r, T.hat � wheneve r an y oils mentioned � ~ ~ave are used by miner s or forest c ~ np essi b nai~e~ in ~ heir ' oper ati6ne, tw~n~ y -fi ve per centum � Of the specific t ~>i ;� pa'id thereon spal l . t;l e re-f un d ed by th �. t:o l *l. ector of int'tPrnal Rev~~~e up on~l s u~ m i~ ~ i 6n of p ro of o f

P EC I S I 0 N- C. T.A . Case No. 3 581 -6- actual use of oi l s and under simi la r conditions e n um e r a t e d i n sub - pa i ~gr aphs one a nd tw o of s ection one hereof, amendi n g secti on o ne hun d re d forty - t wo of the I nter ns ~ Reven u e Co d e : Pro v ided, fu r ther , Tha t : ~ o new t oad shall be constructed u nl e ss .the routes o r l ocation t herepf shall have been a p pro v ed b y t h e . Commissioner of Pub ~ic Highwa y s after ~ deter m ip~tion that s~ c h road ca n be made part of a n integral ard artic ula ted ro ut e i n t h e Ph t li p p ~ pe H ~gh w a y Syst em s , as re qui re d in sectio n twenty - six of t he Phili ppi ne Highway Ac t of 1953. " ! I n t he c ases ot Ipsular Lumber Compapy v. Co ur t o f Tax Appeal ~ ~nd Co��issioner o f In ternal Re v e nr:re. G. R. N o ~ L - :3lf>57, ' lf� y 4 9, 198.! ( supr a) and . .�~ Commissione r o:t In tern al Revenue v . Coflr t of Tax Appe als and I m:;ul a.r ,f..umber Company, G. R. (� the No. '- - 311 ~ 7, I' ~ay 29, .1 981 (l.Q4 S CflA 710 ) , '). S up reme Cour t he ld t h t the proviso of Sec ti o n 5 of � ' I Re p ubl i c Act No . 1 4 ~ 5 i s in effe c t a .par t i al e xe~ptio n from ' t he im p ose d i ncreased ~ peci ft c t ax o n ma n u f a c ture d o i l . . Fu rt h ~ rmore, Se c t i on ~ does not dev i ate fr o m th ~ . gene f a l s ub' j e c t o f said law, t ha t '' ~ ~ ~ to in cr ease t~e H i ~ h way S pec ial Fund. i n the case of Q:L Interna l Reve nue v s. � At.las I Cor s o.l i d a t e d Ni ning epd De ve.lo p ment Cor p or a ti on et. �I ~.1. ( G. R. No. 93631, ~pv. ~2 , 1 9901 al so held t h at : '-�� .. , '' ' '

- PECI S I 0 H- C. T. A. Case No. �3581 -7- "A readi n g of the legisl ~ti v e proceedings leaqing to the enactment of R.A. 1435 shows that mining and lumber concessionaires were granted p~ rti al refund of sp oific taxes because the gasoline and fuel they consume is mostl Y used within their own compounds epd roads. R. A. �� 1435 gave t~e~e concessionaires r elief, in the form of a tax refund, since their trucks � and vehicles selq om ply the � nat ion al highways, � the ponstruo tion of which ��t is funded by t he specific tax colleQted by the nati onal . government. There is therefore no r~\ ionale in conditioning or the gran t of . r~fUnd on the payment pf these mining lumber concessionaires of any additio n~! local t~x. Moreo yer , Sec' tion ~ provides tha t in any oils � used by ~iners and fo rest concessionaires in their operations 2 5X of the specific tax paid in the purchase th~reof � � ahel~ be refunded by t he Collector of lnterp 1 ~~venue. Since it is the l atter who collects the speci~ic . taxeQ due to the national government, . t~en it fol+ows ' that th e refund re fer ~ to a .refund of the specific taxes paid to � the nati on~ ! government, no t the specific taxes p~id to the local government. " �' Section 5 of the s aid Act was repealed upon '.� promulgation of. Presidential Decrees 1158 and 1 158 - A, approved on J4 ~e 5, l977. Sections ~ 42 and Internal Revenue Code \ Na tio nal 156 of the ~ a tional 1 45 of ~ the Old r ' b ecame Se ction~ .1:' ~5 3 - ~nd J � Int ernal Revenue . Cod e .. of 1977. fu rthe rmore, ' . .,, .. Se ction 5 of Re publ ic . Ac t 1435 was not re~ e nacted

- DEC I S I 0 N- C.T.A. Case No. 3581 -8 - in the 1977 Tax Code and its repealing clause, Section 346 provides: SEC. 346.In general. All acts, laws, decrees, executive orders, rules anp regulations, or part thereo�, which are contrary to or inconsistent with this code are hereby repealed, amended or modi�ied accordingly. " In the case o� Rio Tuba Nickel Mining Corporation vs. Commissioner o� Internal Revenue ; G.R. Nos. 83583-84, March 25, 1992, the Court held that miners and lumbermen were accorded re�und priveleges under R.A. No. 1435 but with the passage o� P.O. No. 711 the special treatment accorded to them were withheld. In e��ect the re�und privelege granted to miners and loggers under R.A. 1435 was impliedly repealed by P.O. No. 711. Mainly the reason was that, the Highway Special Fund had been abolished and trans�erred to the General Fund by P.O. No. 711 which took e��ect on July 1, 1975. Inspite o� the issuance o� P.O. No. 711, the Highway Special Fund was retained, its existence continued up to 1985 and was channeled to the General Fund only in 1986. Thus in Rio Tuba case, the High Court modi�ied its decision and ruled that mining and logging companies are entitled to the re�und

- DECI S I 0 N - C.T.A. Case No. 3581 - 9- privelege granted by R.A. No. 1435 on specific taxes paid up to 1985 on manufactured and diesel fuel oils, the same to be computed on the basis of the rates specified by Sections 1 and 2 of R.A. No. 1435. -t; for specific Rea~d~nt ~s claim for refund taxes paid from 1980 to July 1983 then falls within the period set by the High Court. However, the Court notes that Exhibits E, E - 1 to E - 15, F, F - 1 to F - 680, G and G- 1 to G-5 were not admitted per Resolution dated April 14, 1993, because the same were not forwarded nor brought before the Court at the time petitioner filed its form~ offer of exhibits on January 28, 1993. In the absence of these vital documents which are material to the determination of the exact quantities of the various refined and manufactured mineral oils, motor fuels and diesel fuel oils actually used by the petitioner in its logging operations; this Court has no basis of verifying and computing the exact amount due if any, to the petitioner. ')

- DEC I S I 0 N- ~ . T .A. Case No . 3 58 l - 10 - Ru le is s e ttl e d t hat laws gran ting exem p tions f r om t a x a r e const r ued strictissi mi juri a gai n st t he t a x payer and li berally construe d in f avor of t h e t a >ci ng po we r ( /lj tsubishi Jlotor Co r p . vs. CIR, 181 SC RA 2l 4) . WH EREFORE, in vie w o� all the f ore g o i n g , t he Co u r t resolv e s to d en y t h e petition fo r lac k of me rit. pO ORDERED . Quezon Ci t y , p ~UBA J u dge WE Q \0- av...~ E NESTO D. ACOaTA Presid i ng Judge RA~/),~J Ass o c i a te J ~~"' CE;R I J= F I C A ~r I ON I j her eby certi f y that thi s was r eached afte r due cons ultat i on t he me mber of t he Co ur t� o f Ta x Ap peal s i n a cco rdanc e wi t h Sect ion 13 , A r t ~c le VI I I , of th e Consti tution. c;~Q,~ ERNESTO D. ACOSTA Pr e siding , J ud ge Cou rt of Tax Ap pe a l s