CTA Case No. 2879 (Decision)

Q.l'UDUC OP 'HIE f'Hl'U'f'PINT't \'!OURT OF TAX ArPf..:Al-~ Q.l1E'ZON Cl!? CANTILAN LUMBER . COMPANY, C.T.A. CASE NO. 2879 Petit1oner, - versus - COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - X DEC I S I 0 N The qu~stion involved in this appeal is whether petitioner Cantilan Lumber Company, which is a domestic corporation duly organized under Philipp i ne laws with forest concession at Carrascal , Surigao del Sur, should pay to resporident Commissioner of Internal Revenue the amount of P257,691.04 representing 25% surcharges for , transporting forest products (logs) without auxiliary invoice and discharging the said p r oducts without permit. The facts, as well as the law and regulations involved, as stated by respondent in his letter-decision dated March 17, 1977 to petitioner's accountant, Messrs. Sycip, Gorres, Velayo & Co., who protested the original � assessment, are as follows: 9G

-- ' DECISION - CTA CASE NO. 287Y - 2- It appears that this Office {Bureau of Internal Revenue) .originally assessed against your client the amount of P47,7~6.74 under Letter of Demand BT-71-262 dated September 13, 1971 as 25% surcharges for trans- porting without auxiliary invoice and discharging without permit its logs for the period from November 13, 1964 to October l, 1966. This assessment was protested by you in your letter dated October 30, 1971. Thereafter, in a letter dated December 19, 1973, our Regiona~ Office at Butuan City issued another assess - ment againsi your client in the amount of Pl03,982 . 15 as 25% surcharge for transporting without invoice and another amount of Pl03,982 . 15 as 25% surcharge for dis- charging without permit for the period from September l, 1969 to June 30, 1973. Hence, the ' total assessment in- valved is P257,691.04 which includes the aforesaid assessment of P47,726.74 previously issued against your client. In your letter dated April 3, 1974, you have, likewise, protested against this latter assessment. It appears also that this Office invited the at- tention of your client to Letter of Instructions No. 308 which will enable your client to settle this case _)

DECISION - CTA CASE NO. 2879 - 3- by compromise. However, although in your letter of December 4, 1975, you informed this Office of your client's willingness to avail of LOI 308, in your letter of February 2, 1976, you informed this Office that your client decided to withdraw its offer of compromise and further requested that the protests filed by it "be now resolved". Sections ll and 13 of Regulations No. 85 are here- under quoted for ready reference: "SEC. 11. Payment of charges on products cut under ordinary license. - Before transporting from the public forests or forest reserves or using within th~ cutting area forest products cut or gathered under an ordinary li- cense �� issued by the Director of Forestry the licensee shall list such forest pro- ducts on blank forms of auxiliary invoices (BIR Form No. 14.04 in the case of timber or BIR Form No. 14.05 in the case of firewood or other minor products) which may be secured from the deputy provincial trea- surer of the municipality where the said forest products have been cut or gathered. XXX XXX XXX XXX. 11 XXX XXX XXX XXX. "SEC. 13. Payment of charges on forest products taken without license. - The pos- sessor of forest products cut or gathered without license on which charges are payable is required to present auxiliary invoices. The procedure outlined in Section ll of these regulations shall then be followed. Surcharges 98 J

- I DECISION - CTA CASE NO. 2879 - 4- shall be collected for. cu tt.J..!.!SL~J..,!:hol3.t li~;:.!1_?~, for cutting i~iolati~ of the t~~-of~ license.1-.transpor ting w~ th.~invoice, or dis- charging wi t .t!gut permit." (Underscoring ours) Sections l~ ( a) and 14 of Rev e nue Regulations No. 3-72 wh ich took effect on October 16, 1972 provides: . "SEC. 12. (a) Payment of ch9rge~....�!! Eroducts cut und~E_lic~~ - Upon felling and bucking the timber, and before yarding the logs, the license or his authorized agent/agents who shall be provided with special power of attorney, shall list such forest products on blank forms of auxiliary invoice (BIR Form No. 14 . 04); likewise holders of minor forest products licenses issued by the Bureau of Forestry; after cutting such products fro~ - th~ areas, shall list such products on blank form of auxiliary invoice (BIR Form No. 14.05) which may be secured from the office s of the lo- cal Collecition Agents. Said auxiliary in- voices when completed shall be sworn to be- fore the Collection Agent concerned by the licensee or his agent/agents aforementioned. "SEC. 14. Penalties in the form of surcharges. - The following penalties shall , be imposed in add i tion to the regular fo- rest charges due, as the case may require : "(a) 300% surcharge for cutting with- out license, or if cut under license, in violation of the terms and con- ditions thereof; or cutting under- sized timber or on damaged residuals; "(b) 25% surcharge for failure to list the forest products in an aux-iliary / invoice after cutting; "(c) 25% surcharge f or discharging with- out permit, if removed from the

DECISION - CTA CASE NO. ~879 - 5- geographical limits of the conces- sion; "( d) � 25% surcharge for late payment as the case may be." You contended that the auxiliary invoices and dis- charge permits prescribed by Sections 11 and 13 of Re- gulations No. 85 respectively, are not requi red in the case of your client for the reason that neither was there transportation nor removal of logs from the pub- lie forest or reserve or was there utilization of logs . within the cutting area of the forest products cut or gathered; and that the log pond of your client is si- tuated within its concession area. You also contended that you did not violate the above-quoted provisions of Revenue Regulations No. 3-72 requiring the listing of forest products in auxiliary invoices and securing discharge permits before removal of said products. However, investigation conducted by this Office disclosed that the log pond of you r client is actually outside its concession or cutting area as admitted in your letter dated ~ugust 1, 1975. There is , therefore, transportation or removal of logs from t~e public fo- rest or reserves which require presentation of auxiliary invoice and discharge permits. 100

DECISION - CTA CASE NO . 2819 - 6- Furthermore, it is an admitted fact that your client did nob accomplish any auxiliary invoice nor did it secure any discharge permit covering the remo- val of the logs from its forest concession. These were done by your client on the strength of the certi- fication issued by t he forestry officer concerned to the effect that it could remove said logs from the forest concession without auxiliary invoices and dis- charge permits, provided that your client maintains forestry boqd. This certification is void, the same not being sanctioned by any internal revenue law or r e gulation . On the contrary, forest products may be / shipped from the forest concession to their destina- / tion under bond provided that the same are accompa- nied by aux il iary invoices and discharge permits. (Sec- tion 12(3), Revenue Regulations No. 3-72) ~ , In the light of the foregoing, this Office finds no legal and factual bases to warrant the cancellation of the abovementioned assessment representing surcharges for transporting without auxiliary invoices and dis- charging without permit against your client . In view of all the foregoing, it is requested that you urge your client, Cantilan Lumber Company, to pay 101

- - - --==-"-- ..- - - -- ..-~ DECISION - CTA CASE NO. 2879 - 7- the aforesaid assessment in the total amount of P257,691.04 as' surcharges for transporting without auxiliary invoice and discharging wi thout permit immed iately upon receipt hereof; otherwise, the collection thereof will be enforced by means of the remedies prescribed by law. This constitutes our final decision on the mat- ter, If you are not agreeable, you may appeal to the Court of Tax Appeals within thirty (30) days from receipt of this letter. Hence, the present recourse . As specia~ and affirmative defenses, respondent thus alleges in his answer, among others, that: For t he period from November 13, 1964 to October 1 , .1966, and September 1, 1969 to June 30, 1973, peti- tioner cut logs from its cutting area and removed and transported said logs to its log pond located out- side its concession without the accompanying auxiliary invoices and discharge permits as required under Sections 11 and l3 of Revenue Regulations No. 85 and Sections 12(a) and 14 of Revenue Regulations No. 3-72, respectively. 10 ~

DECISION - CTA CASE NO. 2879 - 8- The certification issued in favor of the peti- tioner by the �forestry officer to the effect that peti- tione r cou ld remove said logs from the concession area without auxiliary invoices and discharge permits is void , the same being contrary to Revenue Regulations No. 85 and 3-72. And poses the issues of: a) Whether or not petitione r violated Section 11 of the Revised Internal Revenue Forest . Products Regulations No . 85 when petitioner transported logs from the cutting area to the log pond without auxiliary invoices and discharge permits; and b) Whether or not it is liable for 25% for transpor ting logs without auxiliary invoices and 25% for unloading said logs without discharge permits. Four square with the case at bar on these points, by reason of the identity of the parties; exact simi- lar ity of the factua l settings, the laws and regulations involved ; and the issues litigated, is Cantilan Lumber Company vs. The Commissioner of Internal Revenue, CTA 103

DECISION - CTA CASE NO. 2879 - 9- Case No. 2153, September 30, 1981, cert i orari denied in G.R. No. 60769, September 21, 1982 . ) This Cour~ unequivocably sustained the right of respondent Commissioner of Internal Revenue to impose and collect from petitioner therein Cantilan Lumber Company, which is the same petitioner herein Cantilan Lumber Company, 25% surcharge for removing and trans- porting forest products (logs) without auxiliary in- voice and another 25% for discharging said forest products without securing d i scharge permit from the Commissioner of Internal Revenue . Because of its controlling an? decisive effects on the present case, we will quote at length from the decision. "We find no merit in petitioner's cause. "Petitioner's submission that there was no removal of the logs within the con- templation of Section 11 of the Revised Internal Revenue Forestry Regulations No. 85 and, hence, there was no necessity to comply with the requirement of auxiliary invoices for purposes of transporting the logs from the cutting area to the log pond since the log pond is situated within the same municip?lity 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 merit. 10 4

DECIS I ON - CTA CASE NO. 287~ - lu - "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 a nd for discharge of the same with- out permi t is not planted upon the condition that the c u tting area and the log pond of the licensee should be situated in the different munici palitie s where the licensee's concession area is l oca t ed. The law speaks of 'If forest products s h a ll De removed without invoice, or upon remova l, shall be discharged without per- mit from boa t, car, cart, or other means of transportation, t ne charges shall be increased by twenty- fi ve ~ centum, � - without more . Nothing i n the law is said of removal of the forest products from the cu t ting area and trans- porting of the same to a log pond situated in a differen t mu nicipality where the concession area is located. Where the law does not exact the separa t e location in different municipalities of the cutt ing area and the log pond where the concession.is situated, or there is only one logging r o ad a s outlet of the logs, as a condition for the issuance of auxiliary invoices and dis- charge permi t s, t hat condition should not be read into the law. The law is clear and free from ambig u ity . I t should therefore be enforced as written , de vo1d o t j udicial addition and sub- t raction. We a re not to indulge in statutory c onstructio n. "4. And on the point that no auxiliary 1nvoice was necessary on the ground that peti- tioner was au t horized by local forestry employees to transport logs from the cutting area to the l og pond withqut need of accompanying invoices , � a s�well as to d 1scharge tne same with6ut permit, no law or regulatio n has been pointed to us wh ich authorizes forestry employees to dispense with such require ments. While petitioner atte mpts to dr aw support from Section L62 10 0

DECISION - CTA CASE NO. 28t9 - ll - of the tnen in force National Internal Revenue Code which simply states, insofar as pertinent hereto, that 'Employees of the Bureau of Forestry may be deputized by tne Commissioner of Internal Revenue for the performance of duties incident to the measur- ing and invoicing of forest products x x x', nothing there may be considered as empowering forestry employees to dispense with the require- ments 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 d1spensation from the requirements of auxiliary invoices and discharge permits. There is patently an absence of analogy or similarity oetween invoicing and dispensing with 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 there1n, 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 self-evident that the local teres- try employees acted without any authority when they issued a certification authorizing the remo- val of logs from petitioner's torest 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 brought down to the log pond." We find no cogent and valid reason to modify, much less depart from the conclusion reached in the above- mentioned decision, as expressed in the afore-quoted opinion of the Court there, and the same should resolve the identical problem presented in this appeal. Accord- lO G

DECISION - CTA CASE NO. 2879 - 12 - ingly, petitioner herein Cantilan Lumber Company is ordered to pay ,to respondent Co mmissione .r of Internal Reve n ue the amoun t of ~257,69l.U4 representing 25 % sur- charges for transporting forest products (logs) without auxiliary invoice and discharging the said products with- out pe rmit, plus surcharge and interest incident to delinquency as provided for by law. WHEREFORE, the decision appealed from is hereby affirmed at peti tioner's costs. SO ORDERED. Quezon City, Metro Manila, March 27, 1987. ~8/ Presiding Judge -------