liill'1.1~<~UC OF TUH. I'IUUI'PlNl>.:. _,llli··~ ~ OF TAX A.PP£.A.Ls U17.0N CITY / cANTILAN LUMBER COMPANY, Pe.ti tioner vs. THE COMMISSIONER OF INTERNAL REVENUE

DECISION -

- 2 - The Poblacion of Carrascal, Sitio Gango, Gango Point, Barrio Adlay of the Muni~ipality of Carrascal, and the shoreline along Carrascal Bay are all within the Surigao Mineral Reservation . Petitioner's log pond is located at Sitio Gango, Gango Point, Barrio Adlay of the Municipal- ity of Carrascal which is about 20 to 25 kilo- meters from its forest cutting area. The forest products were transported to petitioner's log pond thru its logging road connected to the Paniguian feeder road which in turn connects the national highway that leads to the said log pond.

It appears that all logs cut and hauled by petitioner from its cutting area at Carrascal, Surigao del Sur, to its log pond were properly scaled by the personnel of the district forester. The records show that petitioner has taken and maintained a forestry bond in the amount of Pl5,525.00 (MICO Bond No. 14024 issued by the Malayan Insurance Co. , Inc. as surety) ftated September 26, 1957, effective from that date, during the years 1965 and 1966, conditioned ~pon petitioner's faithful compliance with all the provisions of the Forestry Laws, the National Internal Revenue Code, and the regulations issued l' '} ( _:t •'"'c'

I

DECISION -

C'I'A CASE NO. 2153 - 3 - pursuant thereto.

Sometime in the early part ~f 1966 , respon- dent caused the investigation of the business tax liability of petitioner for t.e period from July to December, 1965 and its sales and percentage tax liabilities as exporter and manufacturer during the year~ 1965 and 1966.

As a result thereof, respondent, through the chief, business tax division, addressed a letter to petitioner dated March 21 1 1969, propo~;ing to assess peti- tio;:ler 1 as a log producer and exporter 1 the amounts of Pll 1 716.54, PB O.OO and P8.70, repre- senting 50% forest surcharge for transporting timber without auxiliary invoice and discharging the same without permit, fixed tax and deficiency sales ~ax and surcharge for the years 1965 and 1966; and inviting petitioner to an informal conference to present its side of the case, bringing all the necessary documents and other pertinent papers in support thereof. By its letter of April 29, 1969 1 petitioner, through its external emdi tors, disputed and pro- tested the proposed assessment.

However, in response thereto, respondent wrote a letter dated May 6, 19691 assessing and demanding from peti- .

- 4 - tioner the payment of the total anount of ~11,805.22 2s surcharge on forest charges, fix8d and deficiency sales taxes and surcharge during the years 1965 and 1966, computed as follows: 1.

Forest charges paid durir.g the period (July-December 31, 1965) •••••••••••••••. ~23,433.06 25% surcharge trans- porting wjo invoice •••••• " .... ~5~858.26 25% surcharge for dis- charging w/o permit •..•..••.•• 5,858.26 2.

C-14 PTR for 1965 & 1966

As producer .••.••••.• 40.00 As exporter •••••••••.

40.00 3.

Deficiency sales tax - Sales ...••• ••.• ~.1,521.89 7% tax thereon 106.53 Amount paid ..•.

99.57 Deficie1.cy sales tax ....... .

25% surcharge for late payment • 6.96 1.74 80.00 8.70

TOTAL AMOUNT DUE

•••••••••••••••· ~~~~gQ~~~~ By its .letter of June 19, 1969, petitioner disputed the 50% surcharge on forest charges paid by it during the period from July to December, 1965 but did not protest the a~sessment of the deficiency sales and privilege taxes.

In his letter dated April 23, 1970, respondent however reiterated his assessment of Pll,B05.Z2 and requested petitioner to pay said tax l.iabili ty, othen'lise, the collection thereof would be enforced by means of the summary remedies provided for by law.

Hence, this appeal.

- 5 - The issue proposed to be taken up on appeal is whether petitioner violated s~ction 11 of Finance Regulations No. 85 (Revised Internal Revenue Forest Products Regulations No. 85 dated December 28, 1934) .and, hence, is liable under Section 267 of the then in force National Internal

Revenue Code for 25%

surcharg~ for removing and transporting forest products from its cutting area to its log pond without auxiliary invoice and another 25% for discharging said forest products without securing discharge permit from the Com- missioner of Internal Revenue.

In assailing respondent's right to impose the 50% surchurge on forest charges paid by it during the period from July to December, 1965, petitioner alleges that no auxiliary invoice was .

necessary since the transportation of logs from its cutting area to its log pond located in the same municipality does not constitute a removal for purposes of Section 11 of Finance Regulations No. 85.

The requirement of listing forest products on blank forms of auxi£iary invoices under Section 11 is intended, according to petitioner, to prevent the cutting of logs from the area outside of the licensed area.

Considering that the log pond of '

C) "'

Lj ~~ ' I

- 6 - petitioner is situated within the municipality where its concession ~rea is loc~ted and that there is only one logging road as an outlet of all logs hauled to its log pond, petitioner argues that there was no removal of the logs within the contemplation of Section 11. Hence, there was no necessity to comply with the require- ment of auxiliary invoices for purposes of trans- porting the logs from the cutting area to the log pond, as well as the permit for disclarging the same.

As basis further for claiming that no auxiliary invoice was necessary, petitioner would invoke the certification dated July 21, 1966 issued by Mr. Donato R. Arenas, officer~in- charge of the Carrascal Forest Station, authorizing removal of logs from i.ts forest concession wi·thout the auxiliary invoice and discharge permit, as well as the certification dated July 26, 1966 issued by the District. Forester to the effect that there is no necessity of preparing auxiliary invoice cover :i .. ng the legs cut at petitioner's cutting area before said loJS are brought down to its log pond.

In its textual completeness, Section 267 of

- 7 - · the then in force Tax Code provides as follows: Section 267.

Surcharges for illegal cutting and removal of forest products or for delinquency. - Where forest products are unlawfully cut or gathered in any public f orest without license or, if under license, in violation of the terms thereof, the charges on such products shall be increased by three hundred per centum.

If forest products shall be removed wit~out invoice, or upon removal, shall be discharged without permit from boat, car, cart, or other means of transportation, the charges shall be increased by twenty-five per centum, and if , in any case, the proper charges upon forest products are not paid within sixty days after the same shall be due and payable, such charges shall be increased by twenty-five per centum: Provided, however, 'l'hat the Commissioner of Internal Revenue may, in meritorious cases, waive the surcharge of twenty-five per centum for discharging without permit or grant an extension of time not exceed- ing thirty days for the payment of the forest charges without surcharge.

Section 11 of the Revised Internal Forestry

Regulationspo. 85 specifically points o~t in detail the procedure t o be followed by licensees of timber from the time of cutting timber, during the transportation of the same to its destination, and the discharge thereof at the said destination. As reduced by the Supreme Court into simple terms in Collector of Internal Revenue vs. Pio Barretto Sons, Inc., L-11805, May 31, 1960, 108 Phil. 542, thP regulations praide that upon cutting timber the licensee must submit to the nearest Internal

- 8 - Revenue officer, or the deputy provincial treasure~ of the province where the timbei is cut, an auxi- liary invoice in quintuplicate of the timber cut, containing the serial number of the logs, their species, thei lenghts , radius, if round, thickness and width if squared, and their volume in cubic meters.

These auxiliary invoices are then sworn to before the deputy provincial treasurer (now collection agent) ~ who shall prepare an official invoice together with its stub and coupons and collect from the l i censee or his agent the amount of charges due on the product so invoiced. The official invoice or receipt of payment is then detached and together wi t h two copies of the auxiliary invoice is delivered to the licensee, to be carried along with the logs to the point of destination.

Upon arrival at the point of destination, the licensee or his agent shall present the off i cial invoice and the auxiliary invoice to the deputy provincial treasurer (now collection agent) .thereat and apply for a dis- charge permit.

Note that at this time the deputy provincial treasurer (now collection agent) .is supposed to check if the timber described in the auxiliary invoice tallies with the timber actuaLly / discharged .

1he deputy p!ovincial treasurer (now

- 9 - collection agent} .then grants a permit to dis- charge the timber and returns the official invoice to the consignee, together with the auxiliary We find no merit in petitioner's cause. Petitioner's submission that there was no removal of the logs within the contemplation of

Section 11 of the Revised Internal Revenue Forestry

Regulations No. 85 and, hence, there was no neces- sity to comply with the requirement of auxiliary invoices for purposes of transporting the logs from the cutting area to t he log pond since the log pond is situated within the same municipality where the concession is located and there is only one logging road as an outlet of all logs hauled to the log pond is positively without me~it. 1.

Referring to the terms of the law, it is quite clear that the right of the Government to impose surcharges for removal and transportation without invoice of forest products and for discharge of the same \'lithout permit is not planted upon the condition that the.cutting area and the log pond of the licensee should be situated in the different municipalities where the licensee's concession area is located.

The law speaks of

- 10 - "If forest products shall be removed without invoice, or upon removal, shall be discharged without permit from boat, car, cart, or other means of transportation, the charges shall be increased by twenty-five~ centum," - .without more.

Nothing in the law is said of removal of the forest products from the cutting area and transportation of the same to a log pond situated in a different municipality where the concession area is located.

Where the law does not exact t.he separate location in different municipalities of the cutting area and the log pond where the concession is situated, or there is only one logging road as outlet of the logs, as a condition for the issuance of auxiliary invoices and discharge permits, that condition should not be read into the law.

The law is clear and free from ambiguity. It should therefore be enforced as written, devoid of judicial addition and subtraction. We are not to indulge in statutory construction. 2.

Forest charges, like mining taxes, are regarded as excise taxes.

Th~y are directed against the production, or severance from the soil, of forest products, and are m~asured according to quantity and value of the forest products pro- '· " l ~t ~ " (

DECISIO~ -

CTP. C- 83 NO . 2153 - 11 - duccd or severed.

(51 Am. JuJ.:. 1072) . Since fo~: at charges are severance ta~es, i.e., charges upon the privilege of severing or producing from the soil of forest products, and are due and payable UP,on remo\Jal of the forest products from the forest, proper documentation or invoicing must be made in the cutting, gathering, production or severance area, and not after they have been transported to another place. It is only by invoicing logs or other forest products at the cutting, gathering, production or severance area that the Government can find out whether logs or timber have been illegally cut or forest products have been gather ed without permit, and the collec- tion of all forestry charges insured. 3.

To protect our forests against denudement, waste and spoliation by licensees, trespassers and kaingineros, public policy requires that proper documentation of logs and other forest products must be made ( 1) _upon severance or pro- duction from the soil and before removal from the cutting ar ea; (2) _during transportat i on; and,

(3) at the time of discharge. Thus, Section 267, supra, explicitly provides for the imposition of surcharges if forest products shall be removed

L' ' J (\

1 ,,_, • r

- 12 - without invoice, and upon removal, di s ~ha~ged without permit from their transp'ortation. The peremptory requirements of public policy t.vould seem to stress therefore the necessity for full and unconditional compliance with the language of the statute and the regulations. It is only by such practical application of the law and the regulations, and by the strict implementation of such a public policy, that the national patri- mony can be properly conserved and wisely exploited. The unregulated and uncontrolled production and severance of timber and other forest products from the soil have already meant spoliation and ruin of our fo~est resources, resulting in re- current floods, erosion of the soil and increasing expenditures for raorestation.

4.

And on the point that no auxiliary invoice was necessary on the ground that petitioner was author.ized by local forestry employees to trans- port logs from the cutting area to the log pond without need of accompanying invoices, as well as to discharge the same without permit, no law or regulation has been pointed out to us which authorizes forestry employees to dispense with such requirements.

While petitioner attempt s to

- 13 - draw support from Section 262 of the then in fo~ce National Internal Revenue 'code which simply states, insofar as pertinent hereto, that "Employees of the Bureau of Forestry may be deputized by the Commissioner of Internal Revenue for the perform- ance of duties incident to the measuring and invoicing of forest products x x x", nothing there may be consi dered as empowering forestry employees to dispense with the requirements of auxiliary invoices or discharge permits upon the removal or transportation of logs.

Performance

of duties incident to the measuring and invoicing of forest products cannot by any stretch of the imagination include the authority to grant dis- pensation from the requirements of auxiliary. invoices and discharge permits.

There is patently an absence of analogy or similarity between in- voicing and dispensing \vi th the invoice. And the absurdity is at once brought into bold relief when it is considered that under Section 262, as clearly and explicitly specified therein, it is only upon authority of the Commissioner of Internal Revenue that employees of the Bureau of Forestry may be deputized for the performance of duties incident to invoicing of forest products. It is therefore

- 14 - self-evident that the local forestry employees acted without any au thor i ty \'lhen' they issued a certification authorizing the removal of logs from petitioner's forest concession without auxiliary invoices and discharge permits, as well as a certification that there is no neces- sity of preparing auxiliary invoices covering logs cut at the cutting area before said logs are brought down to the log pond. The fixed taxes as producer and exporter for l965 and 1966 in the amount of P 80.00 and defi- ciency sales tax and surcharge in the sum of £18.70 sought also to be collected by respondent in his demand-letter dated May 6, 1969 and reite- rated in his decision-letter dated April 23, .1970 have not been controverted by petitioner. Hence, may be considered as admitted to be due and collectible.

We, accordingly, sustain the decision under ,review.

Petitioner Cantilan Lumber Company is therefore ordered to pay to respondent Commis- sioner of Internal Revenue the amount of Pll,805.22 representing 50% surcharge on forest charges paid by it during the period from July to December, 1965 and the deficiency sales and

DECISION -

CTA CASE NO. 21 53 - 15 - privilege t a xe d a s c~port er a~d manufacturer of logs during the years 1965-1966 plus the incre- ments incident to la t e payment.

WHEREFORE, the judgment appealed from is hereby affirmed at petitioner's costs.

<Ctn/1/~~-

AMANTE

ILL,E Presidi g Judge

\'V'E CONCUR:

CONSTANTE C. ROAQUIN Associate Judge- Dissent in a separate opinion.

r'lb,}'~ ~

~- REYESV

Associate Judge

l!.ltPUDLiC OF THl~ PHILJPI'P•o. . • OOU!tT OF TAX APPEALS ftt:!tf.ON CiT7 /CPFTIIJLAN LUt'1BS..tt CONPANY, Petitioner, - versus - COHHISS IONEH. o:F'

TI~TERNAL

REVENUE, Respo"i1dent.

X -

- - - - - - - - - - -

X

C.T.Au CASE NO. 2153

DISSENTING OPINION

It is my considered opinion that with the exc~ptian of the F8o.oo fixed taxes and P8.70 deficiency sales tax and surcharge for 1965 and 1966, petitioner Cantillan Lumber Company is not liable for the slun of ?11,716.5'4-, representing 25% forest surcharges for transporting its cut logs vri thout auxiliary invoices and 25% surcharges for unloading the logs without discharge perm1ts contrary to what was reached by my majority colleagues.

And inasmuch as I believe the factual account or this case by the rnajority decision is not complete, it is my singular purpose to give an aceount of thd facts as complete as possible and to the extent chat it may be material to the is :.:'.le or issues in this case.

Peti ti.oner is a forest concessio~1aire and is engaged under the Forestry Law and the ?~ational Internal Re-venue Code in cutting and extracting forest products fro!ll the public forests and forest reser-ves, among others, in the Hunicipality of Carrascal, Surigao del Sur.

The poblacion, Sitio Gango, Gango Point, Barrio Adlay of the Iv:l.U1Lcipali ty of Car rascal, and the shoreline of Carrascal Bay, where it extracted its logs are all 1,-Ji ti1in the 8-;n·Cg:i.o H.i.ne ral l1eserva tion. (Exh. A, p. 54 CTA rec.)

The logs cut, extracted and. removed or haulecl by petitioner fro~ its concession area, that is from . ") 1 . '.1!. ·-~ ' !

DISSI!~NTING OPINION -

... 2 - the cutting area to its log pond. u1ere sca1ed by the personnel of the ·Bureau of Forestry. Trip tickets were issued for the logs loaded from the cutting area and hauled by petitioner's trucks and surrendered to the person in charge of the log pong upon delivery of the logs.

The auxiliary invoices covering all the logs scaled at the cutting area and delivered at petitioner's log pond were prepared by the Bureau of Forestry sta- .c tion at the said Municipality of Carrasca,l and submit ... ted at the end of each month to the Collection Agen·t.. Bureau of Internal Revenue. also stationed at carrascal. (t.s . n •• PP• 9··10; 27-31; Exh. B• Po 55• CTA rec.) Petitioner was authorized on JulY 21•' 1966 by Donato R. Ara~as. Officer-in-charge of the Carrascal Forest Station,. at Carrascal.- Suriga.o del sur, to remove logs from its Forest concession "xxx Hithout Auxiliary Iflvoices and Discharge Permit XXlt" provided petitioner maintains an Internal Revenue Forestry Bond. From September 26• 1957. petitioner maintained a bond · ..;.

(Malayan Insurance Co. Bond N0 • 14024) in the ~noumt .,_.., of Pl5.525o00• 1hich subsisted through the years 1965 and 1966 which guarar1teed the faithful compliance·of the Forestry Laws •. the National Internal Revenue Code• and regulations. (Exhs. D, D-1 to D-2. PP• 57-60., CTA rec.)

In a certification issued by District Forester JustiAiano ~abiles of the Bureau of Forestry dated

July 26•

1966~ he stated thus:

DISSENTING OPINION -

C'rA CASE NO. 2153 D-47, Licences

Supervision

- 3 -

July 26" 1966

TO

1,ffiQM IT MJ."\Y CONCERN:

This is to certify that all logs cut and hauled by the Cantllan Lumber Company located at Carrascal• Surigao del Sur. from their cut~ ting area to their logpond are properly scaled by the personnel of this OfficeQ That logs loaded and hauled by the Company trucks are issued the cor- responding trip tickets which are handed to the logpond incharge upon delivery thereat~ I further certify that the above mentioned Company has its logpond si·tuated ·within the Mu- nicipality where the concession area is located a.nd that there is only one logging road as an outlet of all logs hauled to their logpond, hence. there is no necessity of preparing auxillary im-,. voices covering the logs cut at their cutting area before said logs are bfought down to their log~ pond.

The auxillary invoices cove ring all logs scaled at their cutting area and at their log- pond are prepared by the Bureau of Fore st.ry sta- tion at Carrascal•· Surigao del Sur and subm.tted always at the end of each month to the Collect- ion ~.gent0 Bureau of Internal Revenue:.t: Carrascal. Surigao del Sur.

This certificate is issued upon the request: of Cantilan Lumber Company in connection with their operation.

No·t.e:

(SGD) JUSTINIANO CABILES

District f:orester This certificate is issued having knowledge and being the District F'orester of Surigao del Sur until I was ·transferred to the Off i ce of the Director of Forestry. Manila.

Copy E'urnished :

(SGD} J-uSTINIANO CJ!.BILES

District Forester

Direc-cc,r o f Forestry.;: Manila ...

..

~ be i mer mec sekd Poreskt charge:s anc taxes in the anonnt ef from July to TLecember, 1965 ene tis sun of £99.56 as its Sale. aur Loge. of 1,521.09. (t.s.n., Dp. 19.)

On March 31, 1969, resvoncent, through soises

a. Siler, Chief, Tax Division of the buresu of Inter- nal tevenues a letter to setitioner yrovosing to assess t eo sum of 11,770.50, F20.00 and the res ane.

surcharge for transovortir are Z any se het

Leary a

wa for oT Irnvedecs en Ciser ia c EF y Peres sy SUPP ee ee

A

re Shy yas an yew Ft ren] oy . }. hey J eae logs without ocrmit, Pixec tax (C-1% PKs) for 1965 19660, ond Celicienecy teles tax ance surcharge for pase trey st y + oo oul awn x eal Y Cala Lay lew 64 3 site YES e) 5 ectively, 2ursuent to 207, 17S anc O2, 163 and 166 of tne Tex vote Co horil 245 1969, -etiigcner Sissutes snd pro- “d the prevosee assessnicnt trans- ing of dts lors from the cutting ores to its log PTESEPrVES.

& DISSP.NTING OPINION

- 5 - Respondent.-in a letter dated May 6•· 1969 (Exh. G• pp. 64-65,. CTA rec.) stated that tt ~ let'.t.er of Dona.to R. Ararias of the Carrascal Forest Station. dated JulY 21• 1966• and the certification of Justiniano Cabiles• District Forester• dated July 26• 1966• stating and confirming that petitioner was authorized to remove the logs ou.t from the cutting area to the log pond is illega.~ . on the ground that th2 Bureau of Fdlrestry .. was not given the power to authoriz~ the removal of t he logs cut without auxiliary invoices and fouad petitioner liable to p~y the amount of Pll 1805o 22 as forest charges, fixed and deficiency sales taxes and surcharge for the years 1965 and 1966 computed as follows:

l. Forest charges paid duriag the period (July-December 31,.

1965). • • • • • P23.433.06 25% sur. for transporting w/o invoice ••••••••• ?5~858.26 25% sur. for discharging w/o permit • • • • • • • • • 5~858.26 2.

C-14 PTR for 1965 &

1966 As producer • • • 40.00 As exporter • • • 40.00 3.

Deficiency sales tax -

Sales • • • •

.~1~?2lo89 7"/o tax .there- on • • • • • 106.53

I

~, ,.

'J. d i ao.oo owas TOTAL coe 8 ee we GOR 22 exclusive of #370 cs comsbromise denalties. Petitioner ir 6 Letter dated Tune

12 ESSessigent of Me 5

eordl 23, 1969 (xn. 1, 99. Go-7I snes vebiticner a nsedie ment oof flaesced me in the emountis theref be.

fry io) oo o ww homer cern gd

(1) Whether or not Secticn ti of the Revi:

Forest Spar Soe sulla tiloner tre te tne 1 aischerge .

- " are Bet 1 4 fy & nn ny G8 a orl Section eG/ or tuc Netdonts. Internal bevenue Ccde, tne Laws rGivec in this ceec, Le wrovide

Vevey

- 7 - in the casf of timber or B.I.R. Form No. 1ll.CIS :Ln the C<lSP of fir r::~.1ood or otnr:.r minor forf'St ,Qr o:iuct§r whicl1_may be sc:cure( . ..from tl.lr: ce mty nrovinci<:Jl.

tre<:~s~·-r c r of tl1 r:: rpunicj_ l<Al:Lty wlH::.£..§. the s<'>ici fore s t ''"Jroc2..lJ.rt.c; t1c.ye bE en cut ..Q£_gr.thcreC1. Said ~uxiliary i nvoices, when completea shall be sworn to before the ac~uty nrovincinl tr cGsur er concnrnerJ by the lic cnSN! or his ogc;nt cJuly au- thorized in writing.

These auxiljary invoices shall, in the caso of timb~r, be made in quintu~­ licate ana in the case of fir ewood and minor for r;;st Dro c:_uc t s, i n quac1r U 1liCcl te. .i.ft er they arci·duly S\vorn to, ths de ;uty •.Jrovinci<:l treasu- r er shall comnar c the bArrios or sitios shown th~rcon with those described in the copy of the license furnished by th e Bur eau of For es try, and she:•ll ·1r'e 1J8re an officiel invoice togc:ther \vitL its stub Bn(! cou rJons end collc.=;ct fror.1 th e.=; licensee or his agent thn CJmount of charges dt~c: on the 1Jro- ducts so invoiced.

He shall then affix to the official invoice in the snace ~rov i ded for that purpose int Errwl rcovsnue stc<Ln·Js in on amount equal to the charges coll 0Ct0d , end cancel thorn. He shall also cntsr the ~ssessm8nt an6 seri&l numbers of th ~ official invoice on each copy of th~ bUXili ~ r y invoicE..

The· of fie ic)l invoice shall then bP det~che~ Gnd together ~ith two co- oi es of the <;uxil:i<.ry invoice in the cr:.sc of ti ~ ber, or one co1y in th€ case of firewood or minor for Est oroducts; sh&ll be delivered to the licensee, to be sent ulong with the nro~tds until they arrive c:1t their destimt i on.

If

the barrios or sitios shown on the auxi li ~ry invoice differ fro~ tho3 e shown on the coJy of the licf_mse , such di scrEO JErlCY shall be consi- dered nrimc facie evidence that the oroducts were not cut-on the licensed ~re& ~nd the a ~f i­ tional chDrgss of on -:?

htm '~rE::d 'Er cr:ntum si1all be collected unless the licensee ·Jr':'scnts s~3tj_s­ f sctory proof th<;t the 'Jrc;rlucts 1,ver~ cut in the license~ area.

ThP couJon ana two coryies of the auxiliary invoice shall be forwarded to the Collector of I1;1t r:rn< :l Hevcnue ,,;j_th ths rc- ~ort of stG~1s sol..

Ths Collector of Int ernal ~evenue will tr6nsmit "onc cony of thu ~ uxiliary invoice to th( rirector of Forestry. Thr: r e- .illf,j.ni.Gg one- coQ.Y.:._ of tflJLt-.i UXiJ iDrv j_nvoic--;sh.all be sent by the deauty ~ro vinci ~l tr~~sGrer to .'._! :~ )

DISSENTI~G 02INION -

ern · C '"'"' 1'1 • · 21 5'3 ' ':Lh 1-.lJJ'.

h '._,. .

- - 8 - 11 lf Ute lic ensee or his author i zec3 agent prefers to 0~y the forest c~~ r g~s and secur e the of ficic-1l i nvoice i n a mu.n ici2} <;1i t y oth er than thc..t vJherc:: the for c:s t ')rO ·u c t~: iloVC been cut or gutherc~ , b~forc the r cmov~ l of tnc nro~ucts froo the cutting arra, b written ncrmission of thf: Coll rctor of In tr-Trwl Hr::vrnw=· to that c:ffcct should be nrcviously secure~ .

11 9ersons r(.:oquire d by the r r:gulc;:tions to execute nncl orcsent schec"ule 11 1 11 , nar<,p;r&0hs 1 to 4 auxilinry invoicGs (E. I.R. For~ No . 1 ~ · . G4) t:J.us t Drf ::JLrc this for ui i n D manner as to ··mt together c.ll t i!nhcr or lumbEr of th·: sc-:;me form , t .hc ::<;:nc s·•ecit::s i:-cC: the s<jmc~ group. 11 ( Cnc! crl ird n g s u ,.) ~;liF:cl) Sec. 26'7.

Surchc,r.r;.cs for ill nr:al cutting 8110 r emOVE; }_ of forest nror5ucts ;r· lQLClcJ.in-' quency.'- dhen fores-t ·1ro(1ucts e1rc unlo,,vfully cut or g&thcr(:d i n <my ::mblic for"s t ·~1itllout licPnsf:: or , i f un <'"er licens e , in viol ~-t ion of the t erms thci8of , t h e chnr gcs on such oro0 ucts shall be incr cbsed by three hunCrc~. ac r centum .

If

for es t 0ro'ucts sllall b~.o rc~movec'1 ':Jithout in- voice, or u 0on r emov~. l sh<-,J.l be Ci iscn~ .. rg~ :c 1 vJith- out pcrrr;:; t fr om bo c::t, CEJr , cu·t, or oti:cr rncr.ns of tr::-nsoortc~tioc, the ch::rg ::s sllc:~11 b (o ir:cr e<~sed by twenty- fiv0 9cr CGntum , &n~ if, in nny c Gse, the oro0er ch<u·g(~S U:)On forc!::t ')roducts ere not o<:dc ·wit ni.n sixty 0sys ~~ftcr the. s<A11 s she-ll be due an'~ •1uy;-;'o] c , such ci1e . .rgcs slial.J bc i r.cr e<JsE:d by "'ti,.;cr2ty-f.ivc ')C.t' ccr1tu;n ; .?rcvic cd , hc\·Jcvcr, .{·1h~t the Cor:-!:nissior.Jc-r of Int ernal Levfr:u c ~n;:;y, :

• · ,. r. • ·t 1·· • "' - c , · c - c .,, . J. 'I r· t ' c · r• c · 1 "· r o· ~ f' lD Hl•. 1.l .0 -lul;~, c,-,,, l ~:, '·'" . !

_.

flC .> L'.- Lc· .. c- Q.._ hJrnty-fiv c cer centt:ir:l .for di.scn~1rgc · .. 1ithout xrmit or r;r<.nt bn e::,.::t':r~s i on of tirr::r~ not ex- ceeding thirty days for the payment of the forest chcrg,~s vJ i thout surc h<; r ge .

L_~ • -- J

PISS WIG OS

& CaSl Nu.

oa eo

Oa Coen Peeso

fron its own evi ootitiorer re ~ pte at od cT hs a} oe sar sn Pre a “+ Fey “y . « yey es . . . - to before removing its cut Logs, ana cid mat easly for

OPOVISLONS OL

‘ure, with resosect co the transnortation of the loge from tne cutting ercé to tne log sone, was substantitlly comnlied with. it asserted that auxiliary invoices were only needed dn orecer to Fainc out whether the timber oreducts were wu Pee ¢ ome Try. Jae Po . a eowrt or oo Ste ” . a the Municiwlity of fl), ona thet ite Log vor being Loc. co in 4 ae Mead OL Srceg motor as be boy g

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Hane

oy LA a?

Latte Ob

Nersompel in the cuttin, eres or in tng woeotss; tha ef gumiidiry inveie ss as ene af tie Aulics whien the Bareay of Forestry wos Gecutized To serfors; toed

DISSENTING -OPINION

- lo - the Bureau of. Forestry 'is in a position to determine whether a certain concessionaire would be required to GCCO plish auxiliary invoices with respect to the transportation of logs; and that based upon that au- thority. petitioner was authorized by the Officer-.In- Charge, . Mr. Donato R. Ara11as, of Carrascal Fo rest Sta- tion. on July 21. 1966, to remove the logs from its fo- rest concession without a.uxiliary invoices and dis- · charge ~ permits. provided it executes a forestry bondr and that the logs cut were properly scaled b y the Bu- reau of Fore stry personnel• and the auxiliary invoices were prepared by the Bureau of Forestry station at Carrascal• and submitted at the end of each month to its Collection Agent~ Bureau of Interna l Revenue at Carrascal• as certified to by District Forester Jus~i­ niano Cabiles.

Finally. it contended that it has paid all for.est charges.

On the other hand. respondent contended ana in• sisted that petitioner had violated said Section 11 of Revised Regulation N,:>o 65 and is liable under Section 267 of the Tax Code for 25% for r emov ing forest pro- ducts without auxiliary invoices and 25% for unloading forest products without discharge permitso Respondent• strongly. arcued that the requirements of an auxilia.ty i nvoice and discharge !.)e rmit are man- datory and admits of no exception ~

I<)

i1 'i. ') DIS S ~NTI~G O?INION - CTl;, C.LSE NU . 21 5.3 - - 1 1 - I agree with the cont ention of r esDondent , Com- missioner of Int crn~ l Revenue that un~er the law and regulations, the requirements of Dre~&ring ~ux ili ary invoices and the oroc ur cment of (iscrwr ge oermi t s fro1.1 t he Forestry or BIR authorit i es E1re mc:-;nc1<Jtcril y rFquir~~ before thr logs cut are removed ~nd trans- nort cd .

0hen the ~or Gstry off icer 3, )artic ul G~r ly t he Offic cr-in- chc..r gc , Done:.t o R. F....rano s of the Carras- cal Forest stc.tioc c.:nci the ristri.ct Forr::ster Justiniano Cabiles certified that the logs cut may be r~mov ~d or trbns0ortef without the nece~sa ry auxiliar y in- voi.ccs e:ncJ rHscl t1rge •)errnits , they Here c..ctin;:; i.n ooen v iol ~tion of Sect ion 11 of Regulation No . 85 , as thcy, the oetiti nner herein, and net the obligHtion or duty of the Burebu of Forestry nerson~el GS asserted by octi- tioner , f r om nren2r i ng ~uxi li ~ry i nvoices in BIR For~ No. 14.04 as r equir ed un~er Section 11 of Begulation No . 8 [:;' .J• themselves higher the:.n the authority of the l &\AI Gnd r cgul6t ion.

The lllegcl act of the forestry officers in not requirin g fror.n net:Lt ioncr thE co:n'll hr.c e of Section 11 of Rrcul~ti8n 85 with rcs1cct to auxil j ~ry i11egLlity.

Lut

co~~;ir~·:"r.iJ."}g th e cior·ccunst:~nccs thct ore

WAT

Looe

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OPLNLCN -

2153 ~ 12.

charge germi ly or erronc securing “is Tax Code, 1 whieh, Gs one oi satitione

Che

a t ously on that to imoose wht hoon we be charge vermits urcer Sect -~imoosition of the r, is stren cuted euarontee of sny forest cnuor to be “ue thece to tne authority eronted by Toaneta RR, invel surcnurpze for

Lor

the ~

On COni or

APGNnS,

NOV De

Lind no Legal

Tes

a pete es Le mistecken- feilure to yrment bly crfiercr in-charge of the Carréscal Porest Stition. Unsere wes, taerefors, ne seintille of cvicerce «whieh would cle snow any erimins 3 to violste or in two €2) nrevious cases decided py tnis tous ffFeat thst good Faith enn honest mistehe ore agéicst the imsosition of 2%. surehorges or ie Z Lisnge Co. ame. ve. Comm. of int. CTA Cese No. 1678, June 30, 1969, citing Paver Corooretion of tne lnildsoines v. Com ane

Ineugtrics

of

Toternél

DISS~NTING OPINION -

- 13 - Revenue (CTA Case No. 1680, July 22, 1966), which cited in turn Connel Bros. Co. LPhil~ v. Collector of Internal Revenue, G.R. No. L-15470, December 26, 1963; see Amado Ao Colon, Court of Tax AnQeals, D:i.gest of l.n.t..§.rna.l Reven;y& Tax Qn.ses_, Vol. I (Quezon City; Central Lawbook Publishing Co. Inc.), pp. 5'03- 504~ Said this Court:

With respect to p titionet's liability to ·. the surcharge, it appears, as adverted to further above, that petitioner paid on time the charges stated in the scale recort of the forest officers and it also paid the deficiency forPst charges after a recomputation on the basis of the revised recla ... $ification of trees which was overlooked by the Forest Officer. Petitioner only questions the im- position of the 25% surcharge against it. The fact;s and issues of this case are the same as the case of Paper Industries Corporation of the Philip- pines (formerly Bislig Industries, Incs) vs. Com• missioner of Internal Revenue (CTA Case No. 1680, July 22, 1966) which this Court decided adversely against the Commissioner of Internal Revenue, and hereunder we reiterate \'That ,.,e said there: "The only question posed before this Court is the validity of the 25% surcharge imposed by .respondent on petitioner.

This question brings to mind Regulation No. 85 of the De• partment of !:1inance that, among other things, regulates the manner of paying forest charges, the pertinent provision of which being Section 28 thereof, which reads as follows: '(b) At the end of each month and without the necessity of waiting for the result of the revision to be made in the Bureau of Forestry, the forest officers .stationed at the sawmill ha.ve been instructed by the Director of Forestry to forward the original of the Monthly Scale Report (Bor'. F'orm No. 24.33) to the deputy provincial treasurer concerned for collection. Said forest officer shall deliver the triplicate of the Monthly Scale DISSENTING O?INION ~

- 14 - Repo~t to the operator or manager of the sawmill \,rho shall present it to the deputy provincial treasurer on or before the last date. on which the amou~t due thereon and indicated in the scale report may be paid without surcharge. which date shall not be later than the 45th day from the last day of the month in '>-lhich the timber \>las scaled by t.he forest charges without awaiting any de- mand for the payment thereof.

If upon the revision made in the Bureau of Forest:rye there should be found any short charge s cr overcharges, the nesessary adjustment shall be made on the M0 nthly Scale Report (B.P. Form No~ 1-Slfor the subsequent month. 1 "It will be noted from the foregoing regula- tion that petitione~'s forest charges are required to be paid after receipt of the monthly scale re- port of the forest officer or forester~. on which the amount payable is based.

Payments are even subject to correction for if upon revision made in the Bureau of Forestry. there should be found any short charges or overcharges~ the necessary · adjustments are made on the monthly scale report for the subsequent month \oJhich is the basis of t.he next par!mentt~ From this very manner of pay- ment it would seem that surcharges are not con- templated in case of short charges because in that event the necessary correction is made in ~he next monthly scale report as the regulation itself provides.

Of course surcharges are due when the'taxpayer fails to pay on time the forest charges collectible on the basis of the monthly scale report of the forest officers. "In the present case, it is controverted that petitioner paid on time the fo r est charges for the month of July, 1961 collectible under the monthly scale report of the forest officers~ If the cor- rect tax v..'as not paicl .it was because the scale report 1 Now 75 days. pursuant to Seco 267• Natg Int. RevQ Code.- in relatJon to Sec. 28(b), Regs. No. 85 of the Dept. of Finance; B.I.R. Ruling No. l2lr Febo 20• 1959o

DISSENTl ~ G OPINION -

- 15 - did not reflect the new re-classification* the f~· rest officers having overlooked same. If petitioner did not pay the shortage earlier than the preli- minary 5-day ·letter of June 18• 1962., it '"as obviously because the necessary adjustment was not made by the Bureau of Fores try in the monthly scale report of the succeeding month as provided by the regulation.

Under these circumstances we cannot find j~stification for penalizing petitioner solely for the errors of the forestry officers act- ing as deputies of respondent.

Petitioner had no part in the making of the scale reports and all it did wa.s to pay the forest. cha rges on the basis of the scale reports.

Said this Court in the cas e of Philippine Power and Development Co •• Inco vs. Com- missioner 6f Internal Revenue (C.T.Ao Case No. 1152~ Oct. 31,. 1965):

'On the third issue;.; :[betitioner c on- tends that he is not liabl e for the sum of P28.293.88• representing the 25% surcharge~ for the reason th.:~.t the failure to pay the 5% franchise tax was due to responde nt's letters dated June 15-., 1955,. and July 13~ · 1955~ respectively~ which led him to be~ lieve t hat the correct rate of percentage tax du e \"'as only 2%~ and in consequence of which it was granted a tax credit of ~39 1 830.76• or the difference between the 5% prescribed in Sece 259 of the Tax. Code a nd the 2% provided in its franchiseo ''l'his con tention is ~1ell taken. Ha .... ving acted in good faith and havin9 been misled by the respondent• it would no·t be fair and equitable to impose upon the peti- tio ner the 25% surchargeo In the cas e of Ilagan Electric & Ice Plant •. Inc. vs. The Comm. of Internal Revenue. C.T.Ao Case N0 • 1178~ May 18~ 1964, this Court held: "It is undisputed that petitioner paid the 2% franchise tax in accordanc~ with the view of respondent.• s deputy that the former was liable only for the 2% fra nchise ta.x.

It may, therefore, be said that the fai lure to pay the correct amount of tax is clearly and directly attributable to the mistaken

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