Resins, Incorporated vs. Auditor General

Separate importations of urea and of formaldehyde are not exempt from the margin fee under Republic Act No. 2609, which by its terms exempts only "urea formaldehyde" as a finished product distinct from its component articles, the enrolled bill being conclusive and tax exemptions being strictly construed against the claimant.

Resins, Incorporated is a manufacturer of synthetic glue using urea and formaldehyde as raw materials. Republic Act No. 2609 required payment of a margin fee on foreign exchange for importations, with Section 2, paragraph XVIII exempting "urea formaldehyde." The Central Bank administered the margin fee, while the Auditor General exercised constitutional authority to audit expenditures and property of the Government and to call attention to irregular expenditures.

Resins, Incorporated is a manufacturer of synthetic glue and imported urea and formaldehyde as separate units for use in that manufacture. Upon importation, it deposited with the Central Bank of the Philippines the margin fee required under Republic Act No. 2609, amounting to P52,271.09 as stated in its prayer, exclusive of further sums deposited since the filing of the petition.

Thereafter, Resins, Incorporated sought a refund on the claim that its importations were exempt under Section 2, paragraph XVIII of Republic Act No. 2609, which speaks of "urea formaldehyde." Petitioner admittedly did not import the finished product "urea formaldehyde" but imported urea and formaldehyde separately, contending that the two articles as separate units should be read into the exemption.

The Auditor General, by 3rd Indorsement dated July 13, 1960 to the Central Bank, took the view that importation of urea and of formaldehyde as separate units did not come within the purview of the statutory language granting exemption. The Central Bank overruled its previous resolution and adopted the view stated in that indorsement, with the result that the claimed refund was not allowed. Because no refund followed, Resins, Incorporated brought the present petition before the Supreme Court to compel refund.

• Exemption and Legislative Intent: Petitioner argued that its importations of urea and formaldehyde as separate units used for production of synthetic glue were exempt from the margin fee under Republic Act No. 2609, maintaining that the bill approved in Congress contained the copulative conjunction "and" between "urea" and "formaldehyde" and that members of Congress intended to exempt "urea" and "formaldehyde" separately as essential elements, citing statements made on the floor of the Senate during consideration of the bill.
• Auditor General's Action: Petitioner assailed as devoid of support in law the action taken by the Auditor General in the indorsement to the Central Bank causing it to overrule its previous resolution and to adopt the view that separate importations did not fall within the exemption.

• Strict Construction of Refund as Exemption: Respondent, through the Solicitor General as counsel for the Central Bank and the Auditor General, contended that a refund partakes of the nature of an exemption and cannot be allowed unless granted in the most explicit and categorical language, strictly construed against the taxpayer.
• Correctness of Auditor's Interpretation: Respondent maintained that the Auditor General's interpretation amounted to literal adherence to the statute as enacted and therefore could not be said to be contrary to law, but was in compliance with constitutional duty to ensure that no diminution of public funds occurs unless clearly provided by law.

• Exemption under Republic Act No. 2609: Whether importation of urea and formaldehyde as separate units used in the manufacture of synthetic glue is exempt from the margin fee as "urea formaldehyde" under Section 2, paragraph XVIII of Republic Act No. 2609.
• Authority of the Auditor General: Whether the Auditor General acted without support in law in issuing the indorsement causing the Central Bank to overrule its previous resolution and deny the exemption for separate importations of urea and formaldehyde.

• Exemption under Republic Act No. 2609: No. Separate importations of urea and of formaldehyde are not within the exemption, which covers only "urea formaldehyde" as a finished product, the enrolled bill being conclusive and exemptions being strictly construed.
• Authority of the Auditor General: No. The indorsement was not contrary to law, being a literal adherence to the statute and a proper discharge of the constitutional duty to guard against payments or refunds not clearly authorized by law.

• Exemption under Republic Act No. 2609: The plea could be granted only by construing "urea formaldehyde" to read "urea and formaldehyde," which was rejected in Casco Philippine Chemical Co., Inc. vs. Gimenez and rejected again here. "Urea formaldehyde" is a finished product patently distinct from "urea" and "formaldehyde" as separate articles used to manufacture synthetic resins. Individual statements on the Senate floor do not necessarily reflect the view of the Senate, much less the House, and the enrolled bill using "urea formaldehyde" is conclusive upon courts as to the tenor passed and approved, any mistake being remediable only by amendment or curative legislation, not judicial decree. Fidelity to the judicial function requires applying the law as found, with construction precluded where application is possible without it. Moreover, a refund partakes of an exemption and must be granted in explicit and categorical language, strictly construed against the taxpayer, which the statutory language does not supply.
• Authority of the Auditor General: The Auditor General's interpretation was a literal adherence to the statute as enacted and therefore in accordance with law, any contrary view lacking legal basis. Under the Constitution, the Auditor General audits expenditures of funds or property pertaining to or held in trust by the Government and must determine whether there is a law appropriating funds for a given purpose, bringing irregular expenditures to the attention of the proper administrative officer. In the same way, no refund representing a diminution of public funds should be allowed unless the law clearly so provides, so that disallowing a refund not authorized by the statutory terms was precisely in accordance with the constitutional mandate that no money be paid out of the treasury except in pursuance of appropriation made by law.

• Enrolled bill doctrine — The enrolled bill, certified by the officers of Congress and approved by the Executive, is conclusive upon the courts as regards the tenor of the measure passed by Congress and approved by the President. Individual floor statements do not override that tenor, and any mistake in printing must be corrected by amendment or curative legislation, not by judicial decree. Applied here to reject reliance on Senate deliberations to read "urea and formaldehyde" into the enrolled term "urea formaldehyde."
• Strict construction of tax exemptions — Exemption from taxation is not favored and is never presumed; if granted, it must be strictly construed against the taxpayer, or stated affirmatively, an exempting provision should be construed strictissimi juris. Applied here to deny a refund, which partakes of the nature of an exemption, absent clear and manifest legislative intention in Republic Act No. 2609 to exempt urea and formaldehyde imported separately.
• Duty of courts to apply the law as found — The first and fundamental duty of courts is to apply the law as found, not as they would like it to be, with construction or interpretation precluded unless application is impossible or inadequate without it. Applied here to refuse to construe "urea formaldehyde" to mean "urea and formaldehyde" where the statute could be applied as written.
• Scope of Auditor General's audit function — The Auditor General's authority in connection with Government expenditures is limited to auditing whether there is a law appropriating funds, whether contracts conform thereto, whether goods or services were delivered, and whether payment was authorized, with the duty to bring irregular, unnecessary, excessive or extravagant expenditures to the attention of the proper officer. Applied here to sustain the indorsement calling the Central Bank's attention to a refund not authorized by the statute, consistent with the rule that no money shall be paid out of the treasury except pursuant to appropriation made by law.

• "Hence, 'urea formaldehyde' is clearly a finished product, which is patently distinct and different from 'urea' and 'formaldehyde', as separate articles used in the manufacture of the synthetic resins known as 'urea formaldehyde'." — States the textual basis for denying exemption, distinguishing the finished product from its separate component articles.
• "Furthermore, it is well settled that the enrolled bill — which uses the term 'urea formaldehyde' instead of 'urea and formaldehyde' — is conclusive upon the courts as regards the tenor of the measure passed by Congress and approved by the President ..." — Articulates the enrolled-bill rule barring reliance on floor statements to alter the certified statutory language.
• "For nothing is better settled than that the first and fundamental duty of courts is to apply the law as they find it, not as they would like it to be." — Defines the limit of judicial construction invoked to refuse rewriting the exemption.
• "Affirmatively put, the law frowns on exemption from taxation, hence, an exempting provision should be construed strictissimi juris." — Gives the canonical strict-construction formulation applied to deny the claimed refund.

• Casco Philippine Chemical Co., Inc. vs. Gimenez, L-17931, February 28, 1963 — Followed as controlling precedent holding that "urea formaldehyde" is a finished product distinct from urea and formaldehyde separately and denying the same margin-fee refund claim.
• Commissioner of Internal Revenue vs. Guerrero, L-20942, September 22, 1967 — Followed for the rule that exemptions from taxation are not favored, never presumed, and must be strictly construed against the taxpayer.
• Guevara vs. Gimenez, L-17115, November 30, 1962 — Followed to define the Auditor General's constitutional function as limited to audit and to calling attention to irregular expenditures, without discretion to approve payments lacking legal authorization.
• People vs. Mapa, L-22301, August 30, 1967; Pacific Oxygen & Acetylene Co. vs. Central Bank, L-21881, March 1, 1968; Dequito vs. Lopez, L-27757, March 28, 1968; Padilla vs. City of Pasay, L-24039, June 29, 1968 — Cited as authority that courts must apply the law as found, with construction allowed only where application is impossible or inadequate without it.

• Section 2, par. XVIII, Republic Act No. 2609 — Exempts "urea formaldehyde" from the margin fee; applied to hold that only the finished product is exempt, not urea and formaldehyde imported as separate units.
• Article XI, Section 2, Constitution of the Philippines — Vests audit authority over Government funds or property and imposes the duty to bring irregular, unnecessary, excessive or extravagant expenditures to the attention of the proper officer; applied to sustain the Auditor General's indorsement.
• Paragraph 2, Section 23, Article VI, Constitution of the Philippines — Provides that no money shall be paid out of the treasury except in pursuance of appropriation made by law; applied by analogy to require clear statutory authority before allowing a refund diminishing public funds.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Castro, Angeles and Capistrano, JJ., concur. Zaldivar, J., is on leave.