CTA Case No. 3481 (Decision)

t;;.'i.f'UfiL I �.� 0? 'J Hli i' I.HLI!'V'{'< �,. . CO�!Jwt . ~ Of TAX ru"'PEAt;~ �FRABELLE FI � HING CORPORATION, ---�' Petitioner, - versus - C.T.A. CASE NO. 3481 COt�1MISS IONER OF CUS 'rm.1S 1 Respondent. ----X DE C I S I 0 N Pe titio ner comes on an i s sue q ue s tioning the l e gal bas is of the responde nt's denial of its claim f or duty drawback under Section 106(a) of the Tariff and Cu s toms Cod e , as a mended, on the fuel used, quote d as follow s : "On Fuel Used for the Propul s ion of ve sse ls . - On all fuel imported into the Philippines used for propulsion of ves s els e ngaged in tra1e with foreign countries, or in c oastwi s e trade , a refund or tax c redit shall be a llowed not exceeding ninety-nine (99%) per cent of the duty imposed by law upcin such fuel, which ~hall be paid or credited under su c h rule s and regulations a s may be prescribed by the Commi 3 sioner o f Custom s with the app- roval of the Ministe r of F i nance." Pe titioner corporation is duly engag ed 1n deep- s ea fis h i ng bu s ine s s and uses diese l pe troleum oil in the p r opulsion of its vessels. During the period fr o m Oc to be r, 1980 to August, 198 1, it purchased 231

DECISION - CTA CASE NO. 34 8 1 - 2- from Petrop~il cor p oration, a subsidiary of th e Ph ilippine National Oil Company, a total of 60 , 701 barrels of locally refined or processed diesel oil and paid an aggregate of P3 , 40~863 . 74 , the imputed customs duties c orr esponding to the quan tity of import ed crude oil o r 2 , 808,945.8 4 lit e rs . On October 6, 1981, petitione r filed with the Col- lector of Customs a claim for duty drawback amount- ing to 99% of t h e s a id payment o r P3 , 3 76 ,755 . 1 0 pursuant to Section 106 (a ) ,_ S U��.~� The claim was denied by the Collector of Customs in a ruling dated Novembe r 26, 198 1, wh ich on a rec on sideration by the petitioner, the den ial was sustained by the res- pendent Commissione r of Customs o n March 19, 1982, stressing, a mong other things, that the pe t itioner corporation purchased domestically produced oil on which no du ties ma y be imposed a nd the word "refund" or "drawback" assu mes that t h e c l ai ma n t thereof is the person or e n tity obligat ed to pay and has actually paid the duties or tax under the law , which are circumstances no t o btaining in t he case. Hence this pe ti t ion . By and large pe tit ioner presents the proposition as reason of the appeal that the fuel con templated in Section 106(a) ~ s upra , for purposes of drawback 23~

DECISION - CTA CASE NO . 3481 - 3- may be in whatever form and ki nd and regardless of whosoever the importer provided the ultimate user qualifies. " 'rhus it is not necessary for a valid duty drawback claim that the owner or operator of qualified vessels be the direct importer as he could be a mere purchaser of the imported fuel used for the propulsion of such vessels." {Yangco v. Insular Collector of Customs, 51 Phil. 348) ~ Moreover, "there is no legal impediment to the implementation of Section 106 (u) _of the T<:~r iff and Customs Code of 1978 with respect to vessels and watercrafts engaged in commercial deep-se a fishing." (Minister of Justice Opinion No. 176 , s. of 1981) ~ The present case is one in which petitioner�s vessels qualify for duty drawback having come within the purview of the ruling that, "vessels engaged in deep-sea fishing and which carry their catch to a port for sale are engaged in coastwise trade" (Commissioner of Customs v. Borres , et al., 100 Phil. 625) _for purposes of Section 106(a) '� suora. But, equally determinative of the sense and extent of the coverage of the privilege which is implicit in the meaning and explicit in the terms of the afor e- said provision are the operative acts of i mportation, actual use a nd payment of the corresponding duties 233

DECIS I ON - CTA CASE NO. 3481 - 4- on the impoFted fuel upon which the right to a re- fund may be held or exercised. Basically pres- . cribed in the implementing regulations, inter al ia , is that claimant must show evidence of the "import- ation and payment of duty and such other particulars about the vessel and the loading a nd use of the fuel as they may deem necessary." (P ar. V, Customs Administrative Order No. 235, dated February 10, 1959) �. Restated, "Drawback privilege under Section 106 (a) is quite clear and needs no interpretation . The same may be a vailed of only if the fuel is im- ported and used in the propulsion of vessels. The identity and quantity must be established, duties thereon must be paid , and subsequent use of the s~me in the propulsion of vessels must be shown before the privilege of drawback under the section could be availed of." (2nd Indorsement dated March 3 , 1981, Commissione r of Customs to the Minister of Finance)~ All that n eed be stated is any s uch claim for entitlement must prove compliance with the terms and conditions peremptorily required by law and rules lest the integrity of colle ction of lawful dues be placed in t he quicksand of self-interest, so to speak. The circumstances of the petitioner in the case at bar appear remote and removed from the activities 234

DECISION - CTA CASE NO. 3481 - 5- normall y involved or nec ess ar i ly conn ected \v :_ th the undc rtQking contemplated in Section 106(a) of the Tariff and Customs Code, su p~. Thus: First, petitioner is neither the importer nor the actual use~ of the imported crude oil a nd in no way obligated to pay the customs dutie s nor any other import liabilities on the importation there - upon a duty drawback is addressed and brought to bear. As disclosed in the recor ds, the fuel needs of petitioner's vessels were of the locally pro- cessed diesel oil purchased from Petrophil corpo- r a tion and/or Pilipinas Shell Petroleum corporation. For the period in question, petitioner allege dly consumed 60,701 barrels or 9,650,520 liters of diesel oil with a total billing of P3, 410 ,863.74 purportedly represent i ng due payments for customs duties on the equivalen t qu a ntity of crude oil o r 2,809,945.84 lite rs. Be that as it may, a d 0 arth of competent information, however , cast a pall of uncertainty over the specific purpose a nd natur e of the said payment upon which proffered to be tacked petitio n e r Frabelle Fishing Corporation�~ refund claim to the extent of 99% thereof pursuant to the drawba c k provision of Section 106(a) ~supra. It is too much of a stretch to hold petitioner 23b /

DECISION - CTA CASE NO . 3481 - 6- a ccoun tab l e mu ch l ess answerable for th e import liabi- lities on an� importation it wa s no t privy. It ' s p ay- me nt f o r the loc a ll y purchas e d d i e sel oil doe s not operate automatically to prove its e ntitlement to a r e f und of cus tom s duty. The rule see ms se ttl ed that a 'tefund undoub tedly partakes of a nature of a n exempt- ion, it can n ot be allowed unl ess g rant ed in the mo st exp licit and ca tegt i ca l lan guage " (Ties in s , In c. v. Auditor General, L- 1 7888 , October 29, 1968 ; Comm is s i oner of Int e rn a l Reven u e , v. Guerrero , 21 SCRA 180; Uni on Garments Co. , I nc., v . Cour t of Tax Appe als, 4 5 SCRA 304 ; Re public Flour Mills , Inc., v. Commi ss ion er of Interna l Re v e n u e , 31 SCRA 520) '� be cause the "law does not look with favor a t a x exemption and that he who would seek to be thus privileg e d must j ustify it by words too plain to be mista ken and too ca t egorical to be mi sinte r preted ." (Reagan v. Commissione r of Internal Reve nu e , 30 SCRA 968; Ohio Life Insurance & Tru st Co., v. Debolt, 60 Howa rd 416; Commissioner of I nt e rnal Revenue, v. P.J. Keiner Co. , Ltd., 65 SC RA 153) ~ We are not prepared to lend c redence t o a claim based u pon vagu e imp li c ations (A s iatic Pet roleum v . Uan es , Jockey Club , In c. , 98 Phil. 676; Wo n der Me ch a nical Engineering Co rpo rati on v. Court of Tax Appe als, 64 SCRA 23ti

DECISION - CTA CASE NO . 3481 - 7- 563) ~ nor to confu se about what seems fea si ble wit h abo ut what� is legally t e nabl e . (Marinduque "Mining & Indus trial Corporation v. Commissioner of Internal Revenue, CTA Ca se No. 3019 , March 27, 1981) ~ The subject payment conveys nothing more t han an i ndica- tion that the same could have the merit of being easily understood and readily applied sufficient to meet the effec t ive price of the fuel sold. As characterized in an analoguous case, "It may indeed be that economic burden of the tax finally fa lls on the purchaser: when it does the t a x becomes a part of the price which the purchaser mu st pay. It does not matter that an additional amoun t is billed as tax to the p urcha ser . The effec t is s till the same , namely, that the purchaser does not pay the tax . He pays or may pay the seller mo re for the goods because of the seller's obligation , but this is all and the amount added because of the t ax is paid to get the goods and for noth i ng else ." (Philippine Acetyle ne Co . Inc. , v. Commis s ioner of Internal Revenue, 20 SCRA 1 05 6) ._ Just so and aptly enoug h. Second a nd connected with the q uestion just discussed is that the domestic sa l e of the locally processed d i esel petroleum product does not in it- self create liabilities for customs duties or other 23'7

DECISION - CTA CASE NO. 3481 - 8- i mpor t c harg e~. For tax purpos es , the trans actio n is governed by the provisions of the National Inter nal Re v enue Code , among which, viz.: "Spe ci fic in tern al revenue taxes o.pply to thing s manufactur e d or pr oduced in the Philippines for domestic sale or c onsumption (Sec . 134) ". which "Specific taxes on domestic prod uct s s h all be paid by th e manufac t u re r, producer, o wner or per sons ho.v in g poss ess ion or the so.me (Sec. 135) ". and "On fuel oil, commercially known as di ese l f uel oil, and all similar fue l oils x x x s hall at t ach to this f ue l oil a s s o on as it is in existence as s uc h (S e c. 156 ) �." The privil ege petitioner seeks to enjoy comes as a random quirk a nd sharply at odds with the levie s normally attributed to the instant tr a nsaction. Third and even more disturbing is the f act tha t pet it ione r would prove its claim by simply drawing an inference over the circumstantial clout of "r eceipts and i nvo i ce s" as thus encapsulatffi a ll the due payments of customs dutie s on its local purchases of diesel oil as ascertained and determined, by Fetrophil andPilipinas corporations. Such could be a maudlin rendition of a self-serving denouement which ne ither i mparts pla us- ibility nor ser ves muc h of a justification for peti- tioner'g cause . The action denegates a responsibil ity primarily charge the Bureau of Customs, i.e. , "The .

DELISlON - CTrt CA uE Nv . 3481 - 9- ~ssess me nt and colle ction of the lawful revenues from impo rted a~ticles and a l l other du es , fees, ~harges, fines and penalties a cc rui ng under the tariff a nd cus tom ~> lavlG ." (Section 602(a) ~Tariff and Cu stoms Code)~ And, is "tantamo unt to usurpation of an exe- cu t i ve function." {MERALCO Securities Co rpora tion v . Sa vell ano, 117 SCRA 812) ~ We cannot validly infus e cognizance on a n "assessment and collection" effected thru a n inof f icuous panache, much less substitute and i ndulge in a n a morph ous and unworkable r ul e l est we suffer the corner stone of effective collection to petrify at the cost of animating principles tinged with strong is s ue s of public policy that taxe s are the lifeblood of the gove r nment and their prompt and certa in availability are an imperious ne e d." (Com- missioner of Internal Revenue v. Goodrich Interna- tional Rub be r Co. 22 SCRA 1256; Commi ssi oner of Internal Reve nue v. Pin e d a , 21 SCRA 105; Coll ecto r of Internal Re venu e v. Yuseco , 2 SCRA 313; c i ted in Manila Bank ing Corporation v. Commissioner of In- ternal Revenu e , CTA Case No . 2993, October 30, 1981) ~ 'l,he cited decision in the Yangco c ase (51 Phil. 348) ~ offers neither a controlling nor an illu- minating precedert. What petitioner Yangco pur chased from the Asiatic Petroleum Co . was the imported 23 9

DECIS ION - CTA CASE NO. 3481 - 1. 0 - liquid fu el itself for which i t paid the customs dut i es s u bject of the claim for drawback. We do not reach the same situation in the case a t bar. Petitioner Frabelle Fishing Corporat ion bought the diesel oil from the local refineries upon which no duties may be imposed and logically, no assessment, much less collection, can be made upon which a refund can validly apply and effective ly operate. Accordingly, petition must have to focus on a different expectation, not what it expects by way of entitlement but what it is entitled to expect from a claim in gross error without factual and legal basis. WHEREFORE, finding the petition to be without merit, the same is hereby dismissed and the refund sought denied, with costs. SO ORDERED. Quezon City , Metro Manila, August 15, 1983. WE CONCUR : au~-li _�;:)_ / AMANTE~ Pr e si~~ J udge CON -� ROAQUIN 'e Judge 240