4 Insular Lumber Company vs. Yr Commissioner of Internal Revenue

DECISION -

CASE NO. 1179 3 te recover the same has already prescribed.

"6. On Cctober 27, 1961, petition- er filed with respondent b letter, dated October 26, 1961, request @ recon- sideration of his decision disallowing the refund of the sum of #5,363.22 on the ground that the two-year prescriptive riod in Section 309 of the National nternsl Revenue Code is not applicable because the specific tax paid on the manufactured oils and other fuels pur- chased and used by petitioner as afore- said was not ‘illegally or erroneously received, ' "7. On February 15, 1962, petition- er received respondent's reply, dated January 16, 1962, denying petitioner's request for reconsideration."

- The only question reised in this appeal is whe- ther or not the petitioner is entitled to the refund of the amount of ?5,363.22 which represents 25% of the specific tax paid on manufactured oils and fuels used in its logging and timber operetions in 1958, although the claim for refund of said amount was filed admitte@ly beyond the twoeyear period pres- eribed in ®ections 306 and 309 of the Tax Code from the date of payment of the specifie tax in question, In short, has petitioner's setion for refund already preseribed?

Petitioner bases its claim for refund on Seetion et Republic Act No. 1435, which provides in pert as follows:

"Sec. 5. The proceeds of the additional tax on manufactured oils shall accrue to the road and bridge funds of the political subdivision for whose benefit the tex is col- leeted: Provided, however, That fr 42

DECISION -

CASE NO. 1179 h whenever any ofls mentioned above are used by miners or forest con- cessionaries in their operations, twenty-five per of the speaifie tax paid therecn shall be refunded

by the Commissioner of Internal

Reverme upon submission of proof ef actual use of oils and under similar conditions en:merated in subparagraphs one and two of sec- tions one hereof, amending section one hundred forty-two of the Inter- nal Revenue Codes x x x* The petitioner contends that the two-year period preseribed in Sections 306 and 309 of the Tax Code within whieh to file a claim and initiate a court action for refund do not apply to this case because the amount sought te be refunded was not erroneously or illegally collected. And, citing the ease of Muller 7931) petitioner asserts that the applicable statute of limitation is Seetion 11 of Republic Act No. 1125, whieh requires that the judicial action should be brought within thirty (30) days from receipt of res- pondent's deeision denying petitioner's claim for re- fund.

On the other hand, the respondent maintains that, in this particular appeal, the requirements of ‘ec- tions 306 and 309 ef the Tax Code should be strictly ecomplied with and that in order to entitle one to the recovery of any national internal revenue tax erroneocus- ly or illegally collected, the administrative clain for refund as well as the judicial aetion to enforce ”

DECISION «

CASE NO, 1179 5 said claim must be filed within two (2) years frou the date of payment of the tex in question. The respondent argues that “the ruling in the Muller & Phipps ease has been superseded, almost immedietely, by subsequent decisions x x x." (Nenerenten for Respondent, pe 5.)

After a careful consideration of the contentions of the perties, we believe and so hold that the stand of the petigioner is in accord with the lew ond juris- prudence. ‘ete that beth Sections 396 and 309 of the Tax Code refer to the refund of national internal revenue taxes erroneously paid or illegally collected (Vietorias Milling Co., Inc. vs. Commissioner of In- ternal Revenue, CTA Case No. 1176, Jan. +, 1965).

In the instant case, the specific tax in question was not erroneously paid or illegally collected. liowever, by reason of circumstances which occurred subsequent to the payment or collection, &.e., the use of the samfactured cils and fuels by the peti- tioner, a duly licensed forest concessionaire, in its logging and timber operations, it became entitled, under Republic Act No, 1435, to a 25% refund of the specific tex paid thereon, Therefore, its cause of action for refund arose, not from the date of payment, but only upon the denial by respondent Commissioner of Internal Reverme of its claim for recovery of the specific tex in question. ] ' r 44

DECISIUN «

CaSsm NO, 1179 In the Muller 4 Vhipps case, gupra, where the taxpayer therein was similarly situated «s the peti- tioner in the present case, the Supreme Court held:

“We think it + ron thet the provi- sions of seetion 306 do not apply to appellant's case. its terms, the two-year limit established by said section es only to actions to recover ‘any—tax to have been 4 2 — er co or Keer ts ‘any sum .

x K Xe “But the case of appellant Muller & Phipps (Manile) Ltd., is different. Here, original of the Collector in assessing sdvance sales tax on the raw materiais is not chall « Appellant admits that the collected and . Claim for the had ne ccs of enttans” Domine Eee sale ion, there was no ru or action of the Collector thet the er could

DECISION «

CASE NO, 1179 7 involving refunds of internal reverve taxes, the tow epsliceble to appellent's case ts sec. 11 cf said Act ho, 11252" We are not eware of any subsequent decision of the Supreme Court whieh superseded the above ruling, as claimed by the respondent, And we fina po valid reason to depart from: sald ruling. Consequently, ve are of the opinion and so hold thet Seetions 306 and 309 of the Tax Gcde do not epely to petitioner's claim for refund and that the judicial action to en- force its right to the refund has not preseribed, considering that the oxesent case wes filed weit within the }0-day period preseribed in “ection +1 of Republic 4et No. 1125.

WHEREFORE, the decision appesied from is reversed, and respondent Commissioner of internal ‘Nevonve fs hereby ordered to refené te petitioner Trevler ‘owber Company the swount of #5,363.22, representing 25% of the specifie tex paid on the marmfoctured oils and fuels used by it in its logging and timber operations dering the year 1998, to costs, SU ORDERED.

quezon City, January 13, 1965.

Yt) swonswe Ki, -LICTANO

Aeting Presiding Judge