CTA Case No. 4106 (Decision)

REPUBLIC OF THE PHILIPINES COURT OF TAX APPEALS QUEZON CITV BOGD-MEDELLIN MILLING CO., C.T.A. CASE NO. 4106 INC., Petit i ontn", COMMISSIONER OF INTERNAL REVENUE, - )( - - - - - - - - - )( D E C Xs CJ N Thi� ease involves a claim for refund/tax e~edit of the amount of P64,648.00 which represe nts c:ompeneat i ng t H lleg edly paid by the petit ioner on its i 11portat �on of plant machinery, spare parts and equipment f or the ye~r 1985. Petitioner, e dome stic c orporation, is a sugar in m nt..tfact uri ng , milling, proce �� ing and refin ing sugar. While respondent is the dl.tly designated and qualified Commissioner of Internal Revenue. For the to May 1985, petitioner, for use of its sugar milling ope~ation�, imported one <1> case parts for English electrical diesel generator set, one <1> box parts fo~ w. s. sugarmill centri fugal, 3 cases cane ca~rie~ chain and paid the corresponding tax due on 10~

DECISION CTA CASE NO. 4106 - 2- said i 11port t ion in the a moLmt of P64, 648. 00 as � ho wn by B trea u of Customs Officia l Re c eipts No. 557651 dat eel Jan ti\ t'Y 4, 1985, 553497 date d Ja nuary 29, 1985, 582620 d ated Febr�.t ~~y 12, 1 9 8 5 , 58242 1 d&tetd Ap..-i l 9, 1985, 55800 d ted March 12, 1985, 6 13348 dat d M y 24, 1985 , 557652.dated January 4, 1985 a nd 553472 datedj nu ry !:)8, 1985 <E xhibits B, D, H, L.. , O, Q, T and V>. In a le tte r dated March 13, HH~G, petitioner filed a eL 111 f or refund <Annex "B") o f the amou nt of P64,64 S .OO allegedly on the ground that it was exempt fr o 11 paym n o f the c omp ensati ng tax under Fi�cal Incentiv es Rev i ew Bo a rd ( F' IRB> Re s olution No. 53-85 dated October 1, 1985, providing that the tax and duty exempt ion pri vileges of sugar millers granted under Presidential Decree No. 791' as a111ended, and withdrawn by Pt'es ident ial Dect'ee No . 1955, are restored: Prov i ded, that such privileges �hall extend only to imported articles which arrived in the Phi 1 ippin es on or before June 30, 1985. Without waiting for respondent's resolution on it � clai11 for tax refund abovestat ed, petitioner filed the pre�ent petition on September 25, 1986. 110

DECISION CTA CASE NO. 4106 - 3- The sole is sue is whether petitioner is exempt from pay111ent of compensati ng tax on the subject importation pur�uant to Presidential Decree No. 791 as amended by Presidential Decree No. 1710. Petitioner is subject to the compensating tax on its importation fot~ the perio.d January to May 1983 of 1 case parts for Engli sh electrical diesel generator set, 1 box parts of w.s. sugarmill centrifugal 3 cases cane carrier chain and 1 box part� for w.s. sugarmill centrifugal. There is no dispute that P~D. No. 791, effective September 3, 1975 exe111pted sugar mills from pay111ent of compensating tax, among others, in re�pect to i111portation of plant ma c hinet~y, spare part�, and other equipment. As stated in the decree, the exemption lasts June 30, 1980. Section 1 of the said decree reads a "Section 1. Any person, partnet~- �hip, company as corporation who or which now engaged or sha ll engage in the bu sine�s of ma nufacturing, milling, processing or refining of sugar shall be exempted f rom the pay men t of specia l iII port tax, compensating tax and customs and tariff duties in respect to importation of' plant machinery, spare part � and other eq1..ti pment effective upon approval of this Decree until June 30, 1980." Re�pondent, however, contends that the subject 1 j .1.

DECISION CTR CASE NO. 4106 - 4- importation was ma de in 1 9 8 5 be y on d the original period of the tax- free importation privilege of P. D. 791. On the othet~ h a nd, p e t i t i onet~ argues that P.O. 1710, pt~ omulg a ted on August 13, 1980, which amended P.D. 791, t~ estot~ ed the tax exemption privilege accorded to impot~ tations of sugar mills lllllChinery, spare part s a nd e quipment. Reproduced below is the pertinent provis ion o f ~-~jQ a "Sec. 1. Any pe t~ so n, pa t~ tn ers h i p, company o r cot~ p or a t io n who ot~ whi c h no w engages or shall engage in the business of 111anufacturing, milling, pt~ ocessing or refining of sugar , sh a ll be exempted from the payment of special import tax, compensating tax and custo111s and tariff d�.tties in respect to the importation of plant machinery, s pare parts and other equipment effe c tive upon appt~oval of this Qec;_r~_g__.~mt i__l June 30, 1985. " (UndtH' l ining 01..\t' S o) Respondent insists that reliance upon P.D. 1710 is misplaced. It points out that subsequent to the promulgation of P.D. 1710 on August 13, 1980, P.D. 1955 was promulgated~,~~w~i~t~h~d~r~a~w=:i~n~g~,~ subJect to certain conditions, the duty and tax priyiltgts granted to private business enterprises �nd/or persons engaged in any econo�ic activity, and for other purposes. <Underlining ours.> Thus, Section 1, P.O. 1955 statesa . 11?

DECISION CTA CASE NO. 4106 -~ - "Section 1. The provisions of any special or genera l l aw to the contrar y notwith15tandin g , all e x emptions from ot~ any praf renti ~ l t rea tment in the payment of dutiea, taxes, fees, imports and other ch�rgea therefore granted to private busin��� enterprises and/or persons engag d in any economic activity are hereby withdrawn, except thos e enjoyed by the following� " (a) Tho se t~ e g i s t ere d by the Board o f I n Yes tm nts Ltnder Presid e nt i 1 De cr e e No . 1789, as aa nded by Batas Pambansa Blg. 3 91, and those registered by the Export Processing Zone Authority under Presidentia l DttCt"ltlt Nos . 1449, 1776, 1776-A and 1786 ' "(b) The copp er mining inau�t~y i n acc ord ance with the p~~ Y i l ons o f LOA2416' 11 (c) Those covet~ ed by international agree ment s to which the Philippines is a signatot"yf 11 (d) Tho s e c ovet~ ed by the non-impairment clause of the con�titution, " ( �) Those that will be approyed by the President of the Philippines upon the recommendation of the Minister of Finance. " Re�pondent inYite s attention to the exe111pting provi�iona of Section 1 P.D. 1955. He notes that banafici�ria� of the tax exemption priYilege under P. D. 791 and P. D. 1710 are not a111ong those 11~

DEC IS I ON CTA CASE NO. 41 06 - 6- enumerated in said Section 1 of P.O . 1955. He : contf_ruj.J that pqrst,.tant to P. D. 1955, the tax-free importation privilege granted ~md e r P. O. 791 and p, p, 1710 was withdrawn, as early a s 15 Oc tober 19841 when P.O. 19q_~as promulgat e d an_d whi c h <Undet-~. 1 ining ours.) On the other hand, petitioner places he avy str ss on Fisca l In c enti ves Review Board <F I RB > Resolution No. 53-83 dated October 1, 1985, pro v i d i n g for the r e s t or at i on o f pet i t i on e r ' s t ax and duty exemption pt'ivileges Lmd e r P . O. 7 9 1 a nd that such privileges shall extend only to im p ort ed ar-ticles which at't'i ve d i n the Philippines on or before 30 June 1985. Petitioner points to the fact that the records of the ca s e show that during t he per-iod January to Ma y 1985, petitioner imp o r te d plant �achinery, spare parts and equipme nt s and paid coapen sat ing tax tota ll ing P64,648.00. The details of said i mp ortation are as follows� Description Official J2AU. AMount of Goods R.c;:ti gt No. p 7,600.00 1 c��� par-ts for- 553497 01/29/85 557651 01/04/85 9, 121.00 English electr-ieal diesel gener-ator- 582620 02/12/85 set 1 boM par-ts for- w. s. s~\gar 11 i 11 e entr-ifugal 114

DECISION CTA CASE NO. 4106 - 7- 1 baH part� far 582921 04/09/85 18, 241. 00 613548 22, 068 . 00 w. �� sugerm ill 05/24/85 c:entl"'ifugal _]_, 61 8.00 3 eases c:ane 01/28/85 P64, 648.00 c:al"'rier- ehain 01/04/85 1 bow p l"'ts far w. S. SUQAl"lll i 11 c:e nt l"'ifugal T0 T~L (EHhi b:!.ts A, B, B-1, c, C-1, c-2,. O, 0 - 1, 0 - 2, E, F, G, G- 1, G- 2, H, H- 1 , H-2 , I, J , K, K- 1, K- 2, L, L- 1, L-2, M. N, o, 0- 1 ' P, Q, Q- 1, Q-2 , R, s , T, T- 1, u, U- 1, v, V- 1, w, Y, z, AA , BB, cc , DD, EE, FF, GG, HH, I I, and J J, pp. 5 1 - 1 0 2, CTA ) t~ ecs. Petitioner' � theory is that since the i111portation was �ade well within the period provided for by P.O. 791 as amended by P.O. 1710 in relation to FIRB Resolution No . 53-85 . It does appear th at Fi s cal I nc entives Review Board Resolution No. 53- 85 restores the benefic i al effects of P.O. 791 whi c h were withdra wn by P.O. 1710. Recent 1y, however, in the cas e of National Power> Corp01""' ti@fl vs. P rovinc e o f Albay, e t . al., G.R, No. 87~79 d�c ided on 0 4 Ju n e, 1 99 0 , t he SupreMe Cou~t hgd occ a s ion to r ule o n the power o r aut n o r it y ef thfi Fiscal Incent i v e~ Re v ie w Board, throu gh 'F"efHl l iJ1d ~H1 t n grant or ewtend p ur s uant to P.O. 716 t~~ and d t'!/ tu<e lllpt �on ,::wi vil eges of the 115

DECISION CTA CASE NO. 4106 - 8- grant ��� The Supreme Court speaking through Justice Sarmiento had this to saya "It is to be pointed out that Ltnder P.O. 776, the power of the FIRB was 111erely to "recommend to the Pt~esident of the Phi 1 ippines and for t~easons of co111patibility with the declared economic policy, the withdrawal, modification, revocation or suspension of the enforceability of any of the above-cited statutory subsidies or the tax exemption grants, except those granted by the Constitution. "It has no authority to impo~e taxes or revoke existing ones, which after all, under the Constitution, only the legislature may accomplish. The question therefore is whether or not the various tax exemptions granted by virtue of FIRB Resolutions Nos. 10-86 , and 17- 87 are valid and constitutional." "We shall deal with FIRB No. 17-87 later, but with respect to FIRB Resolutions Nos. 10-85 and 1-86 , we ��J�tain the pt~ ovincial govern111ent of Albay." In the above cited cas e, the Fiscal Incentive Review Board, und et~ its Pt' esidential Decr ee Nb. 776, had been empowered mer ely to "recommend" tax exempt ions. By itse lf, it could not have valid 1y presct'i bed exemptions or restore ta)Cability. Applying the above-quoted ruling to the case at bar, it would see11 as it is fact, that as of October 15, 1984, when P. D. 1955 was pro111ulgated, petitioner Bogo - Medellin Milling Co., Inc. had 11R

DECISION CTA CASE NO. 4 106 - 9- ceased to en joy tax e xempti on pri vi leges. In other wo r d s P. D. 1955 h ad the effect of c:ut t :l. ng short the effectivity of P. D. 791, as am e n ded b y P. D. 1710. Petitioner h s thL\S failed to s how t ha t it is ntitl d to th refund for which it had prayed. Most e11phat icall y , it has been co ns is tently st~e11ed th�t cl a ims for refund being i n t h e n a tu r e of tex exemj::)tio n s "m1..1st b e str ictly co n s trued a gain~t the on e clai ming the exemptio n be c a use the law d oes not lo ok with favo r on tax exemptions and th � t he wh o would s eek t o be thu s privileged must Ju ttify i t by words too p lain to be mist a ken an d too cat egorical to be mis i nt erpt"et ed" � CCommistt ione l"' o f I n ternal R v e nue vs. P. J . Kiener Company, Lt d . , 65 SC RA 143). WHEREFORE, th e claim for r e f un d /t ax credit by p e t it:l.o ne ~ Bo go - Midell in Mi ll in g Co . , Inc. is ht reby DEN I ED. SO ORDERED. � l'"C M~nil a, May 2S , 1991. r---_ ROAQUIN Judg� 117

DECISION CTA CASE NO. 4106 - 10 - WE CONCUR1 -~ ing Judge ~v~Q~ ERNESTD D. ACOSTA A&scH: i ate Jud ge CE RT IF I CATION 1 he r b y c� r t ify that t hi s d e cision wa s re4oh�d �ftl~ duo consult a t i on among the me mb er s of t h e Court of Tax Ap peals i n a c co rda n ce with Seetion 13, Artie le VI I I of t he Con s t i tution . '� 11R