~ He Repu Bese of THT Pmailippint ! Court of Tax Appeals Qukmen City Central Azucarers Don Pedro, et al.

DECISION

This is a petition to review the decision of respondent denying petitioner's claim for tex credit of the sum of P48,302,.00, representing com= penseting tax paid on its importation of certain machinery, spare parts and/or equipment.

retitioner, a domestic corporation with ao sugar central in Nasugbu, Batangas, is engeged in the manufacture of sugar, alcohol and yeast out of sugar cane. On May 22, 1963, it filed with the Board of Industries an application for tax exemption under Republic Act No. 3127, which authorized the exemption of besic industries from the payment of certain taxes, ineluding compensating tax, in respect to importations of machinery, spare parts and/or equipment to be used in the industry (Pars. 1 & 2, Petition for Review, admitted in par. 1, Answer).

On various importations meade by petitioner in 464

DECISION -

CTA CASE WO. 1768 2 1963 and 196%, the aggregste amount of #294,705,00 was assessed, collected and paid under protest as coupensating tax pursuant to Section 199 of the Revenue Code (fxh. B, pp. 1-99, BIR ree.). Included in the said amount is the sum of »48,302.00 which was peid on Mey 29, 1963 (Exh. Ay pe 27, CTA reas; pe 87, DIP ree.) on the following importation:

Verte) 5 fully sutonatie uestarn state 1 ease) seateifegnly oumtete, O56 cere...

Im a letter dated July 21, 1965, and reeeived by respondent on July 22, 1965, petitioner claimed a tax credit for the compensating taxes paid under protest on its importations of sachineries, spare parts and/or equipment; informed respondent of the pendeney of its application with the Board of Iindus~- tries; and undertook to submit the tax exemption cer- tificate upon the approval of its application (®xh. 1, Pe 212, BAIN ree.).

On October 5, 1965, petitioner was found by the Board of Industries to be « basic industry under Sec- tion 2, paragraphs 5 end 5 of Repwhlic Act No, 3127 (pe. 30, CTA ree.), in view of which a certificate of tax exemption wes issued in its favor on Uctober 5, 1965, entitling it to exemption from the payment of special import tax, somnengatine tax, foreign ex- change margin fees and teriff duties directly payable 465 h —_—_ —,.-. °° Lt, ~*~ es? —— -s 2. 2. ””©6 CC i ol ™ ‘ r 7 ww = "aa! re Latha ¥ ‘a ‘

DRCISION «

CTA CASE NO. 1768 3 by it in respect to the importation of machinery, spare parts and/or equipment found te be directiy and actually needed ané will be used exelusively by the said industry (fxn. B-2, po M+, MIA rece). Under Section 7 of the said law, the exemption retrosects as of the date of the filing of the application.

Petitioner, in a letter dated October 30, 1965, informed respondent that its application for tax exemption had been approved and claimed tax credit for the sum of #29%,705.00, paid as compensating tex on its importations (Par. 6, Petition for Rev lew, sdmitted in par. 1, Answer). Ina letter dated May 12, 1966, and received by petitioner an Nay 23, 1966 (Por, 9, Pet. for Review, admitted in par. 1, Answer), respondent allowed a tax eredit of only 246,403.00, disallowing the sum of P48,302,00. The basis for the disellowance is that the claim for tex credit for seid sun hed already preseribed under | Section 309 of the Revenue Code, since the claims was filed only on July 22, 1965, or more than 2 years from May 29, 1963, the date of payment (Exh. 4, p. 260, BIR rece). On June &, 1966, petitioner insti- tuted the instant petition for review, questioning the legality of the denial of its claim for tax credit.

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DECISION -

CTA CASK NO, 1768 u The issues raised are purely legal, to wits

1. Whether of not the right of petitioner to ciaim tax credit for the sum of P48,302.00 has already pre- seribed; and

2. Whether or not the right of petitioner to enforce its claim by udieial action has preseribed.

The provisions of the Revenne Code relied upon by respondent te support his stand denying the claim for tax credit provides SEC. 306.

or pr “ main- teined in any court for the recovery of any nationsl internel-revenne tex hereafter alleged to have been erro- neously or illegelly assessed or col- lected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any wannrer wrongfully collected, until a claim for refund or eredit has been duly filed with the Commissioner of internal Sevenues; but such suit or proceeding may be saintsined, whether or not such tax, hor gen dg or sum has been paid under protest or duress, in eny ease, no such suit pel oe org shall be begun after the expiration of two yeera from the date of payment of the tax or penalty.

The authority of the Commissioner of Internoel Revenue to eredit or refund texes or penalties under thie seetion ean only exercised if the claim for eredit or refund is made in wri and filed with him within two years the payment of the tax or penalty.

Respondent argues that the claiz for tex credit

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DECISION -

CTA Case WO, 1768 5 and the suit to enforee the same were filed beyond the two-year preseriptive period of sections 306 anf 309 of the Tax Code, the claim having been filed only on July 22, 1965 and the suit instituted on June 8, 1966, while the tax was paid on May 29, 1963. Petitioner, on the other hand, maintains that Sections 306 end 399 aforesaid do not apply to the case at bar and in support thereof cites the case of “uller & Phipps (Manila) Ltd. v. Collector of Internal Keverme (6.f. So. [=1069%, March 20, 1958). In the Muller & Phipps case, gupra, Muller & Phipps imported in 1951 and 1952 Kolynos essence, poviered soap, and calcium carbonate for the manufacture of Kolynos and paid the advance sales tax thereon upon their withdrawal from customs eustody. Decause of leek of packaging materials, petitioner was not able to use all of seid raw seterials so that it shipped baek te its supplier in the United States the unused materials < to prevent their deterfiorstion, Petitioner filed a claim for refund with the Collector of Internal Nevenne of the amount peid as edvanee sales tex on the re-exported goods. The Collector denied the claim for refund snd upon appeal to this Court, we diemicsed the cage for lack of jurisdiction on the ground that the euit to enforce the claim was filed beyond the 2-year period preseribed in Section 3%

DECISION -

CTA Case WO, 1768 6 of the Revenue Code, counted from the date of the payment of the taxes. Upon appeel, the Supreme Court, reversing our decision, held:

“We think it plein that the provisions of section 306 do not apply to appellant's case. its terms, the two-year limit established by said section applies only to actions to re- eover (1) ‘any---tax alleged to have assessed or collected’, or (2) tany pena itya= ee ng AE 3) ‘any su ‘.

In such cases, as he the gaee of P. J, Riener & Co, Ltd. va. be NOe L-5163, April 22, 1959) and he recent one of College of and penten Surgery vs. Court of Tax ol a (G. Re. Yow L~10e46, Jan- 1996), the taxpayer aust file 5 years from payment of the tax, and need not wait for a decision of the “ollector on his claim for refund before taking the matter to court. x x = “Rut the case of a nt “aller & Phipps (Manile) Ltd., is entirely different. Here, the original action - of the Collector in assessing advance sales tax on the imported raw materials fis not challenged. Appellant admits that the taxes so assessed, collected and paid in 1951 and 1952 were te imately due, and were not — or erroneously collected.

payer's position is that, Rane oan of supervening circumstances (i.t., the reexportetion of part of the in- meterials), it sw aie came entitled te & pertiel refund of the the taxes paid. There- fore, until the “olliector rejected that claim for refund, the texpayer hed no eause of action. Before such Pn there was no ruling or aay of the Collector that the taxpayer could con- test or submit to a review wherefore, no preseriptive period on to run until and unless the © 469 Fin ntti) is Urge, oe a < * ae Se S 7 . ae =

DECISION «

CTA CASE WO. 1768 7 refuged to make a refund. ne the eee, She ried ef two year years rom ’ ean — apply to the present ease.

"“Sinee Republie Act Noe. 1125, sec. 7, conferred upon the Court of Tax Ap- als exclusive jurisdiction te review ap decisions of the Colleetor of In ernal Revenve in esses involving bag ef internal revenue taxes, the licable to appellant's eane is rf of said Act He, 1129:* V te ave in eccord vith petitioner that the éeetrine in the Muller and Phipps is applicable te the case at bar. The compensating tax paid by petie tioner on the importetion in question was net wrong-~ folly or erroneeusily collected. fetitioner wes not exempt from the payaent ef compensating tax at the time of the release of the articles from oustoms eus- tody becouse it is not enough fer petitioner to be engaged in the basic industries enumerated in Republic Aet %o. 3127 te be entitied te the tex exemption in question. Under said law petitioner can claim exexption only if petitioner files an applice« tion therefor anf if the Board ef Industries approves the eppliestion and issues, « certifieate of exemption in petitioner's faver after 1t hes conducted the necessary investigation and tt finds that the statutory requirements have been met, These gre supervening cir- » 6-470

DECISION «

CTA CASE NO, 1768 quastances conperable to the reexportation in the Muller and Phipps case. By the same token that Sec- tion 366 is not applicable to the “wller and Phipps case, the same provision of law is not applicable to the present case.

In line with the doctrine in the Muller and Phipps case, the law applicable to the present case as regerds the time to file the suit for refund is Section 11 of Republic Act Mo, 1125 and not Section 306 of the Revenues Code. In this respect, it appears that when respondent denied the claim for tex credit in his letter dated May 12, 1966, which was received by petitioner on May 23, 1966, the right te enforce the claim by judicial aetion scerued. Since the petition for review was filed on June 6, 1966, or only 16 days from receipt of the decision denying the claim tex credit, the seme was seasonably filed. F | We find no merit in respondent's pretension thet petitioner's failure to file his clain for refund within two years from the date of payment of the tex in accordance with section 309 of the Revenue Code is fatel. In the “uller and Phipps case, the Supreme Court held that the preseriptive period for the filing of the suit for refund of tax payments provided in section 306 of the Revenue Code in cases of illegality ' OF error in the eollection is not applicable to cases where refund is based on supervening circumstances.

CTA CASF NO, 1768 9 Since section 309 also governs taxes erronecusly or illegally received, by parity of reasoning the pre- scriptive period in seid section cannot be applied to cases involving claims for refund or tax eredit due to svperveninge circumstances as the case at bar, J fo our mind, the preseriptive period for the filing | of cleims for refund or tex credit in supervening circumstances should be counted from the happening of the supervening cireumstanees which in the present case should be from the issuenee of the certificate eof tax exemption for it is only then when the right to a tex credit or refund sttaches or accrues, ‘efore thet «vent the taxpayer cannot file any claim for refund or tax credit because he has no right to ite) The record shows that the Board of Industries ap- proved the spplication in its meeting of September 20, 1965, the corresponding certificate of tax exemption was issued by the Board only on October 5, 1965, and the cleim for refund was filed 29 days later, that is, “‘ovomber 3, 1965, Lastly, respondent contends that the doctrine in the case of “orth Camarines lamber Co, v. David (51

0. Ge Ze7 1960) shoulé be applied to the cose at bar, Suffice it to say in this respect that the doctrine in said case has been superseded by the ruling in the Muller and Phipps case, supre.

DECISION «

CTA CASE NO, 1768 10 WHEARPORE, the decision apresled from is hereby reversed and respondent is ordered to allow reti-e tioner a.tex credit in the amount of P48,302,00, representing pwyment of compensating tax. Without pronouncement as to costs,

Associate Judge

@e CONCOR:

ROMAN M. UMALI

Presiding Judge

HIGLAO R. ALVAREZ /-~

Associate Judge

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