CTA Case No. 4107 (Decision)

REPUBLI C OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY BAN CARLOS MILLING CO., INC., Petitioner, - versus - C.T.A. CASE NO. 4107 COMMISSIONER OF INTERNAL REVENUE, Respondent. H - .- - - - - ------- H :0 E C I I 0 N This case involves a claim for refund/taH credit of the amount of P7,892.00 which represents the alleged compen<sating taH erroneously paid by the petitioner on its importation of sugar Mill spare parts for its Niigata Generator for the year 1984. Petitioner, domestic corporation duly organized and exi s tinq under and by virtue of Philippine laws, is a !Htgar central engaged in the business of 111anufact1.1ring, milling, processing and refining �ugar. Its affa\irs, including the procurement of g ,ood�, wares, 111erchandise material� and supplies, were and are being managed by Jardine Davies, Inc.

DECISION CTA CASE NO. 4107 - 2- \. pt..n~st..tant to a management cont t~act <Ex hibi t A, pp. 33-40, CTA rec.>. Sometime in November, 1'384, petitioner imported one case of stc spare parts for its Niigata diesel generator, used in its sugar milling / operations, and paid the correspo nding compensating tax due on the said imported parts i~ the amount of P7, 8'32. 00 as evidenced by Bt..treaLI of C�.tstoms Ufficial Receipt No. 558272 dated November 12, 1'384 (Exhibits B and B-1. p. '+1. CTA rec . >. The spare parts were released under Central Bank Release Ce'r"t if icat e No. 843624 dated November 12, 1'384 �Jpon payment of import duties, compensating tax and other fees <Exh. c, p. 42 , CTA t"ec. >. In a letter dated Mat~ch G, 1986, petitioner filed a claim for reft..md of alleged et"roneou5ly paid compensating tax amounting to P7,892.00 on the gro1..md that although its tax and d�Jty exemption privileges under Presidential Decree No. 791 was withdrawn by Presidential Dec'r"ee No. 1955, the tsame privileges were however restored by the Fiscal and Incentives Review Boat"d in a Re5olution No. 53-85 dated October 1, 1985 which We qt..totel

DECISION CTA CASE NO. 4107 - 3- REPUBLIKA NG P I L IP IN AB MINISTRI NG P ANA NAL API MAYNILA Oc tober 1, 1985 FISCAL INCENTIV ES REVIEW BOARD RE S OLUT I ON NO. 5 3- 8 ~ BE IT RE S OLVED AS IT IS HEREBY RESOLVED, That the tax and ' duty exemption privileges of sugar millers granted under PD 791, as amended, and withdrawn by PO No. 1955, are h e t~ eby restored: Pr.. 9.Y .!.Q_~.Q., That such privileQe s shall extend only to impot~ted articles which arrived in the Philippines on or b e fore 30 June 1985 . The p r� o v i si ons of Fi sc al Incentives Review Board Resolution No. 2-8 5 , insofar as they affect sugar millers, are hereby amended accordingly. <Sgd. > CESAR E. A. VIRATA Minister of Finance Chairman-FIRS Without waiting for respondent's decision, petitioner filed this present petition on September 25, 1986 well within � the two-year prescriptive period provided in Section 292 (now Section 230) of the National Internal Revenue Code. The sole issue presented is whether petitioner is exempt from the payment of com pen sating tax on the imported spare parts of its Niigata diesel generator to be used in its sugar milling operations pursuant to Presidential Decree No. 791 a� amended by Pr~tsidential Decr~te No. 1710.

DECISION CTA CASE NO. 4107 - 4- There i~ no dispute that P.O. No. 791 exempted sugar millers from the payment of compensating tax, among others, with respect to the importation of plant machinet~y, spe:n~ e pat~ ts, and other equipment. As stated in the decree, which took effect on Septembet~ 3, 1975, the compensati'ng tax exemption privilege is good until June 30, 1980. The pertinent provision reads as follows: "Section 1. Any person, partnership, company or corporation who or which now engaged or shall engage in the business of manufactut"ing, milling, processing or refininq of sugar shall bl! exempted from the payment of special impot"t tax, com pens~t in~ tax and customs and tariff duties in respect to import~tion of plant machinery, spare parts and other equipment effecti ve upon approval of this Dect"ee unt i 1 J�.tne 30 , 1980." P. D. No. 7'31 was later amended by P. D. No. 1710, promulgated on ~1ltgust 1 3, 1'3BO, extending the period of the exemption privilege up to June 30, 1985. Section 1 of P.O. No. 1710 provides� "Section 1. Section 1 of Presidential Decree No. 791 is hereby amended to re~d as follows� Section 1. Any person, partnership, company or corporation who or which now engaged or shall engage in the business of manufacturing, milling, proces s it1Q ot" t"efining of !Htgar, shall be exempted from the p~yment of speci~l import

DECISION CTA CASE NO. 4107 - 5- ta><, compensating ta>< and customs ~nd tariff duties in respect to the importation of plant m e.chinen~y, spare parts and o t h e r e q u i p men t ~ .t:.f -~ . -~.t .i .v..~___t,!p _QJJ ~ppr_Q_V,J ..____R..f ....._t h i _ s_____p~_G.r:.~. f?. .........J.t.n.t . ~ 1 J.t,m. .I\'L .______~Q_, _________J-~.!2-~!!.- " <Em ph as is Ours.> Howeven~ , on October~ 10, 1984, P. D. No. 1955 was promulgated withdrawing, subject to certain conditions, the duty and tax exemption privileges granted to private business enterprises and/or persons engaged in any economic activity, effective on October 15, 1984, e><cept those enjoyed by the following� "<a> Those reqister~ ed by the Boar~d of Inve!!ltmenta under~ Pre5idential Decree No. 1789, as amended by Batas Pambansa Blg. 391, and those registered by the Export Proces sin g Zo ne Authority under Presidential Decree No. 66, as amended by Presidential Decr~ee Nos. 144'3, 1776 , 1T76-A and 1786 = (b) Tt1e coppet~ mininq industt~y in accor~d ance with the pr~ ovisions of LOI 1416; (c) Tho5e cover~ed by international aqreements to which the Philippines is a signet ot~y; (d) Those cover~ed by the non- impairment clause of the Co nstitution; and (e) Those that will be approved by the President of t he Philippines upon the recommendation of the Mini5ter of F inance." <Sec. 1, P.O. No. 1955)

DECISION CTA CASE NO. 4107 - 6- Petitioner admit s t h a t it s tax and duty exemption privileg e s q t'a nte d 1..1nd er P .O. No. 7 91, as amended, has been withdrawn by P.O. No. 1955 <Petitioner's Memorandum, p. 71, CTA rec.>. In fact, F IRB Resol1..1tion No. 53-85 clearly states that: "the tax and duty exemption privileges of s1..1gar millers granted 1..1nd e r P. O. No. 791' as am ended, and ~~..:tttQ.r~~.D.. __p_y____~-~- P.~---~.fh _. L~_;;_q_, are here by x. X X II <Underlining Ours, supra.> There is no question therefore that P. D. No. 1955 has indeed revoked the tax exemption privileges of petitioner. Petitioner, howeve r , claims that its exemption from the payment of compensating tax on the impo~~tation of spare pat~ ts under P. D. No. 791, as amended, was restored by vh~ tt..le of FIRB Resolution No. 53-85 dated October 1, 1985, provided, the imported articles arrived in the Philippines on or befot~e June 30, 1985. In this case petitioner's imported spare part s arrived in the Philippines priot~ to June 30, 1 ':385 and in fact were released on November 12, 1984. Respondent contends that petitioner's tax exemption under P.D. No. "791' as amended, was withdrawn by P.O. No. 195 5 it app e aring that it is 1 ~ -~ -

DECISION CTA CASE NO. 4107 - 7- not one of those enumet~ated Linder the exception clause therein provided. There is no questi on that P.O. No. 1'355 has withdrawn the tax exemption privilege5 of petitioner undet~ P.O. No. 7'31, as amended by P.O. 1710. But petitionet~ places heavy stress on the FIRB Resolution No. 53-8 3 , dated October 1, 1'385, which restored its previous tax exemption until June 30, 1'385. In the recent case of National Power Corporation vs. Provin c e of Albay, et al., 186 SCRA 198, the Supreme Court ruled on the . power or authority of the Fiscel Incentives Review Board, Linder P.O. 776, to grant or extend tax and duty exemption privileges of the grantee. The power of the FIRB was merely to r e co mmend to the President of the Philippines what subsidies or tax exemption qrants should be withdrawn, modified, revoked or suspended. The Supt~eme Court added that "the FIRB ha5 no authority to impose taxe� or revoke existing ones, which, after all, under the Constitution, only the legislatt..tre may accomplish." In this connection, suffice it to state, the FIRB Resolution No. 53-85 could not have validly �restored the tax exemption privileqe of petitioner 1~ ?

DECISION CTA CASE NO. 4107 - 8- when that same privilege has already been withdrawn by P.D. No. 1955 as early as October 15, 1984 <effectivity date>. By itself, it co�..tld not have validly prescribed exemption!! or taxability. <NAPOCOR v. Province of Albay, et al., t1 �..tpra. > By and large, exemption statutes are construed t~trictly against persons claiMing exemption and liberally in favor of the Government. Thus, claims for refund are strictly construed against the claimant since a claim for refund is in the nature of an exempt i on from tax at i on. <CoMIIIissioner of Internal Revenue v . Guerrero, 21 SCRA 180.) The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. <Government of the Phi 1 ippines v. Monte de Piedad, P. J. Kiener Company, Ltd., 65 . SCRA 142J Western Minolco Corporation v. Co mmissioner of Internal Revenue, 124 SCRA 121. > Petitioner failed in this respect.

DECISION - CTA CASE NO. 4107 - '3 - DISMISSED without pronounce�ent as to costs. SO ORDERED. � Gh.1ezon City, Metro Manila, June 8, 1991. WE CONCURa ~(2,_~ ERNESTO D. ACOSTA Atuoeiat Judge CE RT I F I CAT I 0 N I hereby certify th at this decision was reaehed after due consultation between the meMbers of � the Col.lrt of Tax AppeC\l s in accordance with Section 13, Article VIII of t h e Consti tution. ~~~ Presi din g Judgtt Court of Tax Appttals