Commissioner of Internal Revenue v. Semirara Mining Corporation

A special law granting tax exemptions to coal operators is not repealed by a subsequently enacted general revenue law absent an express repealing provision, and transactions exempt under such special law remain VAT-exempt under Section 109(K) of RA 9337.

Semirara Mining Corporation (SMC) is a domestic corporation engaged in the exploration, extraction, and sale of coal and other coal products, operating a coal mine in Semirara, Caluya, Antique. On July 11, 1977, SMC's predecessors-in-interest entered into a Coal Operating Contract (COC) with the Philippine Government through the Energy Development Board pursuant to Presidential Decree No. 972, which was enacted to accelerate the exploration, development, and utilization of the country's coal resources. PD 972 granted various incentives to COC operators, including exemption from all taxes except income tax, a provision incorporated into Section 5.2 of the COC itself. SMC sells its coal production to the National Power Corporation (NPC), a government-owned and controlled corporation, under a Coal Supply Agreement. After RA 9337 amended the NIRC, NPC began withholding 5% final VAT on SMC's coal billings, prompting the dispute over whether SMC's VAT exemption survived the amendment.

Semirara Mining Corporation (SMC) is a domestic corporation engaged in the exploration, extraction, and sale of coal and other coal products, operating a coal mine in Semirara, Caluya, Antique. Its predecessors-in-interest entered into a Coal Operating Contract (COC) with the Philippine Government on July 11, 1977, through the Energy Development Board of the then Ministry of Energy, pursuant to Presidential Decree No. 972. PD 972 was enacted to accelerate the exploration, development, exploitation, production, and utilization of the country's coal resources, and Section 16 thereof granted COC operators exemption from all taxes except income tax. This exemption was incorporated into Section 5.2 of the COC, expressly providing that the operator shall have the right to exemption from all taxes, national and local, except income tax.

SMC sells its coal production to the National Power Corporation (NPC), a government-owned and controlled corporation, pursuant to a Coal Supply Agreement between them. SMC also claimed that Section 109 of Republic Act No. 8424, the National Internal Revenue Code of 1997, exempted it from VAT on its sales or importation of coal. However, after the NIRC was amended by RA 9337, NPC began withholding 5% final VAT on coal billings of SMC. On February 9, 2007, NPC remitted to the Bureau of Internal Revenue (BIR) the final VAT withheld from SMC's sales of coal in the total amount of P15,292,054.93.

In response to SMC's request for a BIR pronouncement confirming that its sales of coal to NPC remained VAT-exempt, the CIR issued BIR Ruling No. 0006-2007 confirming the exemption. On May 21, 2007, SMC filed with Revenue District Office No. 121 an Application for Tax Credits/Refunds for P15,292,054.93, attaching all supporting documents representing the final VAT withheld on its coal billings for January 2007. Due to the CIR's alleged inaction, SMC filed a Petition for Review with the CTA Division on February 4, 2009. The CTA Division granted the refund on January 4, 2011, finding the transaction VAT-exempt under Section 109(K) of the NIRC as amended by RA 9337 in relation to Section 16 of PD 972, and ruling that both the administrative and judicial claims were filed within the two-year prescriptive period. The CTA En Banc affirmed this decision on March 22, 2012, and denied the CIR's Motion for Reconsideration on June 28, 2012.

• Repeal of VAT Exemption: Petitioner argued that SMC's VAT exemption under PD 972 had already been repealed by RA 9337, which amended the NIRC and removed coal from the list of VAT-exempt transactions.
• Premature Judicial Claim: Petitioner belatedly contended that SMC's judicial claim was premature for failing to exhaust all administrative remedies, raising this argument only after the CTA Division rendered its decision in favor of SMC.
• Rehash of Issues: Petitioner raised before the CTA En Banc the same issues already passed upon by the CTA Division, without presenting any new matter or arguments.

• VAT Exemption: Whether SMC is exempt from payment of VAT on its sales of coal to NPC under Section 16 of PD 972, notwithstanding the amendment of the NIRC by RA 9337.
• Repeal by Implication: Whether RA 9337, a general law, repealed PD 972, a special law, such that SMC's VAT exemption no longer exists.
• Prematurity of Judicial Claim: Whether SMC's judicial claim for tax refund was premature for failure to exhaust administrative remedies.

• VAT Exemption: Yes. SMC's sales of coal remain VAT-exempt under Section 16 of PD 972, as Section 109(K) of RA 9337 expressly recognizes VAT exemptions granted under special laws.
• Repeal by Implied Repeal: No. RA 9337, a general law, did not repeal PD 972, a special law, because the repealing clause of RA 9337 did not expressly mention PD 972, and neither category of implied repeal — irreconcilable inconsistency nor substitution of subject matter — applies.
• Prematurity of Judicial Claim: No. The judicial claim was not premature because the CIR failed to act on SMC's administrative claim for two years, and the contention was belatedly raised only after an unfavorable CTA Division ruling.

• VAT Exemption: Section 16 of PD 972 expressly grants coal operators exemption from all taxes except income tax, and this exemption was incorporated into Section 5.2 of the COC between SMC and the government. Section 109(K) of RA 9337, amending the NIRC, explicitly exempts from VAT "transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws." Since PD 972 is a special law, SMC's VAT exemption was expressly preserved by RA 9337 itself. The claim is grounded on an express statutory grant, not on estoppel, although the CIR's own BIR Ruling No. 0006-2007 was consistent with the facts and law.

• Repeal by Implied Repeal: A fundamental rule in statutory construction provides that a special law cannot be repealed or modified by a subsequently enacted general law absent an express provision in the latter to that effect. The repealing clause of RA 9337 — Section 24 — specifically identified Section 13 of RA 6395 and Section 6, fifth paragraph of RA 9136 as repealed, but made no mention of Section 16 of PD 972. Had Congress intended to withdraw the tax exemptions under PD 972, it would have expressly done so. As to implied repeal, two categories exist: irreconcilable conflict and substitution of the whole subject matter. Neither applies here: RA 9337 does not cover the whole subject of PD 972, and no irreconcilable inconsistency exists because Section 109(K) of RA 9337 itself carves out an exemption for transactions under special laws. The deletion of "sale or importation of coal and natural gas" from the list of VAT-exempt transactions did not negate the exemption, because the general recognition of special-law exemptions in Section 109(K) preserved it.

• Prematurity of Judicial Claim: The CTA En Banc correctly rejected this contention. SMC filed the judicial claim because the CIR failed to act on the administrative claim for two years. Moreover, it was erroneous for the CIR to raise the issue of prematurity only after the CTA Division rendered a favorable decision for SMC. The Court also deferred to the CTA's factual conclusions and expertise in tax matters, finding no abuse or improvident exercise of authority.

• Special Law vs. General Law Doctrine — A special law cannot be repealed or modified by a subsequently enacted general law in the absence of any express provision in the latter to that effect. A special law must be interpreted to constitute an exception to the general law. The Court applied this doctrine by holding that PD 972, a special law governing coal operations and incentives, was not repealed by RA 9337, a general revenue law amending the NIRC, because RA 9337's repealing clause did not expressly mention PD 972.

• Implied Repeal — There are two categories of repeal by implication: (1) where provisions in two acts on the same subject matter are in irreconcilable conflict, the later act to the extent of the conflict repeals the earlier one; and (2) where the later act covers the whole subject of the earlier one and is clearly intended as a substitute. Implied repeal by irreconcilable inconsistency requires that the two statutes cover the same subject matter, are so clearly inconsistent and incompatible that they cannot be reconciled, and both cannot be given effect. The Court found neither category applicable because RA 9337 does not cover the whole subject of PD 972 and no irreconcilable inconsistency exists, given Section 109(K)'s express recognition of special-law exemptions.

• CTA Expertise Doctrine — The Court will not lightly set aside the factual conclusions reached by the CTA, which, by the very nature of its function of being dedicated exclusively to the resolution of tax problems, has developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority.

• "It is a fundamental rule in statutory construction that a special law cannot be repealed or modified by a subsequently enacted general law in the absence of any express provision in the latter law to that effect." — This passage articulates the controlling ratio decidendi: the principle that preserved SMC's VAT exemption under PD 972 despite the enactment of RA 9337.

• "Had Congress intended to withdraw or revoke the tax exemptions under PD No. 972, it would have explicitly mentioned Section 16 of PD No. 972, in the same way that it specifically mentioned Section 13 of RA No. 6395 and Section 6, paragraph 5 of RA No. 9136, as among the laws repealed by RA No. 9337." — This reasoning demonstrates the application of expressio unius est exclusio alterius in the repealing clause analysis, showing that the specific enumeration of repealed provisions excludes those not mentioned.

• "It is important to emphasize that the claim of respondent SMC is expressly granted by pertinent law, and not based on an estoppel on the part of the government." — This passage distinguishes the basis of the tax refund claim as resting on a statutory grant rather than on estoppel, reinforcing that the government cannot invoke technicalities to retain money it is not entitled to keep.

• Commissioner of Internal Revenue vs. Semirara Mining Corp., 811 Phil. 113 (2017) — Controlling precedent with substantially identical facts and issues, involving the CIR's challenge to SMC's VAT refund claim for the period July 1 to December 31, 2006. The Court relied on this case for its in-depth discussion of why PD 972 cannot be impliedly repealed by RA 9337, and for the doctrine of deference to the CTA's expertise.

• Mecano vs. Commission on Audit — Cited for the Court's extensive discussion of how repeals by implication operate, providing the two-category framework for analyzing implied repeal that was applied to determine that neither form of implied repeal existed between RA 9337 and PD 972.

• Section 16, Presidential Decree No. 972 — Grants COC operators exemption from all taxes except income tax. The Court held that this provision remained in force and was not repealed by RA 9337, and that it was the express statutory basis for SMC's VAT exemption.

• Section 109(K), Republic Act No. 9337 (amending Section 109 of the NIRC of 1997) — Exempts from VAT "transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree No. 529." The Court held that this provision expressly preserved VAT exemptions granted under special laws such as PD 972.

• Section 24, Republic Act No. 9337 (Repealing Clause) — Enumerates specific laws repealed by RA 9337, including Section 13 of RA 6395 and Section 6, fifth paragraph of RA 9136. The Court held that the absence of any mention of Section 16 of PD 972 in this clause meant Congress did not intend to repeal the coal operator tax exemption.

Justice Carpio (Chairperson), Justice Perlas-Bernabe, Justice Caguioa, and Justice Carandang (designated Member per Special Order No. 2624, dated November 29, 2018) concurred.