Philippine Polyamide Industrial Corporation vs. ··- the Commissioner of Internal Revenue, et al.

DECISION

CTA CASE NO. 349 1 2 the production of nylon 6 filam e nt. As a pre ferr-e d pioneer enterpr·i'=·e, petitioner-· i s entitl e d to exemption from a ll national inte rnal rev e nue ta xes, except income t a x, on a dimini s h i ng bas i s . For the period from July 8, 1980 to January 7, 1981, peti t.ion e r-· on seve r-· a 1 occ a s ions ma d e importations of raw materials in i t s manuf a c t ure of nylon ·f.i lament Y•3t"Tl S an d p <~i d the 5/.

inteTnal revenue ta:·: thereon in the amount of F'690, 331.00 purs uant to Pres identia l Dec r ee No. 13 52 a s amended by Presidential Decree No. 1395. C 1 aiming hov~ ever that Presidenti a l Decree No.

1584 in r·elation to Executive Orde r No. 569 res tore d .its ta x exemption pr i vi 1 eg e s 1 r r1de1~ Repub 1 ic Ac t No.

5186 the reby exempting its importations from the 5/.

internal r·evenue ta >:, pe titi c.m e r ·fil e d its cl a im for refund with r .. e s pond e n t Comm.iss .im1 e r of In tern a 1 Re v enU£-:' and this insta nt petition for revi e w on July 8, 1982.

Since no action season .3b 1 y taken by respondent on petitione r-' s c 1 a im for· r e fund, the parties s ubmit ted thi s c ase fo r dec ision, a fter hearing and s ubmiss ion o f e v iden c e, o n the iss ue of 78 J

DECISION -

CTA CASE NO. 2491 whether petitioner is exempt from the S% internal revenue tax (advance sales tax) paid on the importations in question and thereby entitled to a refund of the sum of P6900, 531.00, It seems clear that under Republic Act No. 5186, particularly Section 8(a) thereof, anacted by Congress on September 16, 1967, petitioner as a preferred pianeer enterprise, is entitled to exemption from all mational internal revenue taxes, except income tax, oan a diminishing basis as follows:

(1) One hundred per cent up to December Fl, 197235

(2) Seventy-five per cant up to December 21, i9793

(3) Fifty per cent up to December 71, 1977;

(4) Twenty per cent up to December 1, 19793 and

(5) Ten per cent up to December Si, 1980.

However ; on April el, 1978, with the promulgation of Fresidential Decree No. 1352, the tax-free importation privilege granted to petitioner as a preferred pioneer enterprise under Republic Act No. S186 was withdrawn and instead 73

DECISION -

CTA CASE NO. 349] gubject to a five percent customs duty and five percent internal revenue tax. To quote the pertinent provisions of Presidential Decree No.

13523 SECTION i. All importatioans which are presently exempt from custome duties and/or internal revenue taxes under the pravisienrs af any general or special laws shall be subject to a 3S percent customs duty and S percent internal revenue taxes subject to the same limitations and conditions prescribed under such law, if ATTY » The duty amd tax imposed herein shall be computed in accordance with the applicable provisions of the Tariff and Cus toms Code, as amended , and the National Internal Revenue Code of 1977, respectively.

The cue toms duty ane internal revenue taxes imposed under this section shall not apply to the following importationsg:

1. Those which are exempt. in pursuance of or in compliance with international treaties or commitments, such as the ADB-RF Host Agreement (1966): the 1947 Convention on Frivileges aricl Immunities of the United Nations and its specialized agencies; the United States Agency for International Deve lopment-RF Agreement. y the 1947 Military Rases Agreements and ather similar treaties or commitments:

Ze Those which are exempt under Section 17 of Fresidential Decree No. 4;

80 DECISION .. _ of --· 5 -- 3.

Those whi c h are exempt under Section 12 of Preside ntial Decree Nn. 87;

4.

Those which are e xempt under· Pr·esidential Decr·e e No .

215;

5.

Those which are exempt under Sec tion 1 of Presi de ntial D £~c ree No. 292 ;

6.

Those which are e xempt under Presidential Decree No.

529;

7.

Those which are e xempt under· Bec: t ion 1 5 o ·f F'resid!:mtia l D('~c r·ee 572;

under 604;

under· 666;

B.

9.

Those which are exempt · Pn~si dential Decr·ee No .

Those which are e xemp t Presidential Dec ree No.

10 .

Those wh ich are ~xe mpt under Section 76 o f Preside ntial Decree NCJ . 768 ;

11.

Those which are exempt under Pn:?siden ti a 1 Dec r·e e No .

783;

12.

Those which are exempt under Pr-esidential Dec r-ee No.

972; a nd 13.

Those which are exempt under Section 18 of Re public Act No. 6234.

SEC. 2.

The Presidential per·t i rH:m t Decr·ee 81 provisions No.

2.18,

- 6 -- Presidential Decree No. 269, Presidential Dec n:.~e No.

3tl8, Pr-esiden ti a 1 Decree No . 413, Presid8ntial Decree No.

440, Preside · ~ial Decree No . 535, Presidential D ~?c: r .. ee r.,o.

5~:.8, Pr·esidc~ntial Decree No. 634, Presi d e ntial Dec ree No.

681, Pres idential Decree No. 690, Presidential Decr-ee No. 926, Pr-esidenti a l Dec ree No.

990, Presi d entia l Decree No.

992, Presidential Decree No.

1159 ,

Republic Act No.

720, Republic Act No.

3470, Repub 1 ic Act No. 4156, B.f:?_ [l,\.,_tt:J. Lt~ .... ..B..c;::.t .... J~g .. ! . . · .~.J.8~ . , Repub 1 i c Act No. 6135, Repub 1 ic Act No. 1161, Rep•..tblic Act No. 1370, F~epublic Ac t No.

2640, Republic Act No.

3054, Republic f.kt No. 4690, F~epubli c Act No .

4850, Republic Act No. 4071, and Republic Act No.

6042 are hereby repealed or amended according 1 y. ( e mphasi s s upp 1 ied) SEC. 3.

All pertinent p r ovi s ions of specia l c harters granting fran c hi se and/or s imilar provi s ions of other general and special l aws are likewise repealed or amended acco rdingly;

Prov.ided, IH.Ho.J e ~' er, That the Pr·es.i.dent may, upon recommendation of the F iscal Inc e ntives Review Boa rd, declare a par·ticular- pr .. ovis.i cm of <.:~n e:d.st ing law other· than those en urner·;O\ t ed in the-:• preced i.ng pa~- · agraph as nD t amo ng thosr.;)

l"·epea 1 <?d ot"· amended by thi. s par .. a gl"·aph. As a matter of fact, as clearly and expressly provided in Sf.~c: ti.on 2 thet-eo ·f, quoted above, thE"J pel"·tinen t pn::>v is i o ns o·f Repub 1 ic:

Pic t No.

5.186 e>:empti.on ·from r.:~ ll nat.ion.::l.l inter·Tl <.~l.

r-evenu E! ta:·:es And to r-emove whateve r doubts as to 82

- 7 -· the taxability o f a ll importations which were then tot a 11 y or part i e\ 11 y e:<ernpt f r·orn c:u.s toms clu t:ies and/or internal revenue ta xes under a ny genera l or special lal'>~~ SE?c:tion 1 of F'r<?.sident.i. a l Decr·e e No.

1395, promulg.=~ted on May 31., 1 9 78 ~ rei tet-c'1.tf:>s i n c 1 ear· and unambiguous ter-ms: .1352 SECT I ON .t.

is hen:..? by F' n?.s i dent. .i. 21.1 a mended to Decrr--:!e r·ead ·follows:

"SECTION 1..

Al 1 impot-t-· ations which are at present to t a lly or partially exempt from customs duties a nd/or internal revenue tax under the provis ion s of ,:;my gene r-a l or spec ia 1 1 a 1"' s ha ll be subject to a fi ve (5%) percent c ustoms duty and five (5%) percent internal revenue tax, s ubject to the same limitations prescribed a ny .

and condition s under· such l a w~ if "In the case"?

o f importations enj o y i ng parti a l exempti on~ the sai d duty and ta x s hall bE' imposed o n t he e:-:empt.

pc:wtic.m in ad d .i tion to the du ty and tax due on t he t ax able por·tion .

"The duty and ta:-:

imposed her·ein sha 11 be cornpu ted in accordan ·=e wit h the app 1 ica b 1 e prov isions of the Tariff and Customs Code of the Philippines , as a mended, a nd the National In t.er·na 1 Reve nue Cod e of 1977, as amended, res pec tively. 83 No.

DECISION -

CTA CASE NO. 2491 eee 8 wane "SEC. 4. The pertinent provisions of the following laws are hereby repealed oar amendect accordingly:

“(a) Fresidential Decrees No. 218, as amended by Presidential Decree No. 3463 “(b) Presidential Decree No. 41°33 “(c) Fresidential Decree Na. 4403 "“(d) Presidential Decree Now GSS:

"(e) Fresidential Decree No. S28;

"(f) Fresidential Decree Nao. O24 3 “(g) Fresidential Decree No. 9925 "(h) Fresidential Decree No. Lisgs;

"(i) Republic Act No. 7203 "(j) Republic Act No. i370; "(k) Republic Act No. 3640; "(1) Republic Act No. 3470, as amendec:

"(m) Republic Act No. 5186, "(n) Republic Act No. S125, as amended: and 84

DECISION ~

CTA CASE NO. 34971 "Co) Other general and special laws, and special charters granting franchises, (emphasis supplied) Fetitioner however argues that Fresidential Decree No. 1584, promulgated on June 11, 1978, in conjunetion with Executive Order No. 569, impliedly repealed Fresidential Decree No. 1252, as amended by Fresidential Decree No. i395, (insofar as the latter seeks to impose the 5% internal revenue tax on the importatinanns at issue made by petitioner, to which full tax examption was extended under said Presidential Decree No. 1584 and Executive Order No. S69, both of which are later and special enactments, Fetitioner stresses that Presidential Decree No. S92 promulgated on April 21, i978, as amended by Fresidential Decree No. L395 dated May S31, 1978 which withdrew the tax exemption granted to Board of Investments registered enterprises under Republic Act No. 5184, are earlier enactments. According to petitioner, Fresidential Decree No 1-84 restored the exemption earlier Withdrawn under PFresidential Decree No. 1352 as - DECISION -..

-- 10 -··· amended by Pn·?siden t.ia l Dec r:·ee No. 1395.

Being a later an d spcc?c.ial enactment, Pr·esidential Decree No .

1~."184, in r·e lation to E:-: ecut.ive Or·der- No. 569, should prevai 1 ovet'" bot1·1 Pr .. esiclen tia 1 Dec r .. ee Nos.

1352 and .1395.

Insof a r pet'" tinent Pn?.siden tia 1 Decr-ee No.

1584, which took effec t on June 11 , .1978, pt'"OV ides:

S ECT ION

1 .

S t:~c:t.i.o n 1 5 o r F~epubl ic:

Ac: t No.

5186 .1.s hen:= by amenci E?d by the addition of subsE:>ction s "q" and "r-", whi c h s hall read as follows: "q.

Recommend to the President in meritorious cas e s , t h e liber·a lizat.i.on of incentives granted by the Board for particular firms or specific industries under Republic Act No.

5186, Republic Act No ,

6135 ,

and Presidential Decree f\lo.

1159;

t:he Pn~~;ident. may in the interest of nation a l socio- economic de ve lopment, general welfare and/or national ~;ec: ur~ .i.ty libe rali ze incentives for s uch parti c ular firms or specific industr-ies by:

(J.)

extending the period of <'l.vai lment of incentives, which may be enjoyed only for a limited period;

or (2) increasing the rates of tax exemp tion s prescribed f or e nterprises regi s tered with the Board.

86

DECISION ~-

CTA CASE NO. 2494 "rr. Recommend to the Fresident, wha, in the interest of general welfare and development, may eliminate, reduce or suspend the enjoyment af any of the tax incentives administered by the Board of Tnvestments provided that such reduction shall not affect firms previously registered or approved by the Board prior to such reduction."

Shortly thereafter, the then Fresident af the Philippines on November 22, 1979, pursuant to the above-quoted provision promulgated Executive Order Neo . no? wherein hes authordi zec the Board of Investments not to merely recommend , but to actually ex tern the period of availmant of incentives hy any registered enterprise for a period nok exceeding five (5) years and/or increase the rate of exemption of registered Piloneer enterprises.

Upon request of petitioner, the Roard of Investments during its meeting on Narch 20, 1980 extended the time within which petitioner can enjoy tax exemptions under Section 8(a) of Republic Act No. S186 at increased exemption rakes pursuant toa Fresidential Decree No. IS@4. (Exh. J, p. 60, CTA 87

DECISION ~-

CTA CASE NO.. 34971 records) To quote the Board of Investments’ letter of March 26, 1980 to petitioner:

1980 March 24 Philippine Folyamide Industrial Ce Suite 7OL Ermita Center Roxas Boulevard Manila Attention: Mr. Ramon C. Lee Fresident Gentlemen:

Nop.

The Roard during its meeting last March 2O, 1980 approved your request for an extention ain time within which to enjoy tax exemptions under Sec.

B8(a) af R.A. S186 at increased exemption rates, pursuant to P.D. 1584, as follows: Rate of Exemption. Period 100% Up to December 21, 1984 Pan Up to December 1984 man Up ta December i988 ROA Up to December 1989 It is nnderstoad that the BOT reserves the right ta withdraw, terminate ar reduce, ato any time the extended periad and/or increased @> benefits, whenever in the opinion cemption of the BOT, your firm na longer needs such aASSsistance.

Flease be guided accordingly.

Very truly yours, H. ZAYCO Governor Since Fresidential Decree No. i153 April 21, 1978 and FPresidential Decr 88 52 issued oan rae No. L295

-· 13 -- pr-omulgated on !"lay ::H~ 1978 had alr·eady withdr-awn petitioner-'s ta:-:

fr·ee impor · t,~tion pr-ivilege i.\S a pr-efer-r-ed pioneer enter-prise under Republic Act No. 5186 and insh~ad :;ubj ec ted it tcJ a five per-cent customs duty " rid five per-ct?nt intenH:\1. r-evenue ta}:~ obviously~ theta:-: e:-:emptions of pe:?t itioner- under- Secticm E3(a) of Republic Act No .

51.86 cannot anymore be e:-: tended. Presidential Decree No. 1352 imposing a five pe:?rcen t customs ancj five percent inter-nal revenue t.a:-:

in lieu of t h E• duty and/or ta:-:-free import c:1t.i.nn pr·ivilege i~.;

very c le <.:\ r and e:-:plicit on this point. Section 2 and Section 3 and c learl y pr·ov i de , respectively, that the per·ti.nen t rwov i sicms of Presidential Decree No.

5186 and a ll pertinent provisions of specia l c har·t.£,.n; gr·,,m ting f r ··.:;~. n c hi se and/or similar provision s of othe r genera l and special laws are otherwise repe a l ~ d or amended accordingly.

Tht'?

pertinent provisions of Pr·esid£-mtial Decree No.

1584 ar·e very s pec if i.e a nd mandatory.

"Recommend to the Pr·esident in meritorious cases, the liberalization of incenti ves granted by the Board for par-t: icu 1 . :~r· f i r-rns or spec ific indus tr· ies 89 under Republic Act No. S186", but there is no more incentive to iberalize because petitioner’s tax- free importation privilege under Republic Act No. 9186 had already been withdrawn by Fresidential Decree No. L352 om April B21, 1978. Then, by "(1) extending the period of availment af incentives, which may be enjayed only for a limited period; or

(2) increasing toe rates of bar exemption prescribed for enterprises registered with the Roard". However, Fresidential Decree Wo. 1584 could not have extended the tax exemption privilege of petitioner under Republic Act No. 31846 since the pertinent provisions of Republic Act No. S186 on this matter of tax exemption have already been repealed upan the promulgation af Fresidential Decree Nos. L252 anc L295 an April 21, 1978 and May S1, 1978 respectively. If we are to adhere, as we should, to the commonly accepted meaning of wards in cansonance with settled rules af interpretation, the very logical view is that you cannot liberalize an incentive or extend a period which has already been repealed.

The rule is well settled that one who claims to be exempt from the payment af a particular tax JU

DECISION --

-·- 15 ·-- must do so under clear and u nmi s takable t e rms f o und in the statute.

Tax exemptions are s trictly construed against. the ta:·:payer·; thr.~ y being highly disfavol~ed .::tnd may almost bE? said "to be odious to the law".

He who claims an e:<emption mus t be a ble to point to some pos itive provi s ion of law c rea ting the r·ight; it c a nrtot bE?

i·:dlow E-~ d to e :d ~-; t upo n a mere vague impli ca t i on or inferen ce .

(Asiatic Petroleum vs.

Llan es , 49 Phil..

4 66 , 471;

Union Garment Co. , Inc.

v~;.

Co u r t o f Appea ls, L- 16809, ~January T l ,

1962 ,

4 S CI~A 304· ;

Ph i lippine AcetylEme Co., Inc:.

vs.

Commiss iorH? r ..

of Inte rn a l Revenue, L- 190707, Augus t 17, 1967, 2 0 SCF\A 1056;

Republic Flour Mills, Inc.

vs.

Commiss i o ner of Internal Revenue Revenue, L-25602, Februa ry 18, 1970, 3.1 SCRA ~~ 2 0;

Comm .i. ss i em E·? ,.... of Cu ~:; t o m s vs .

Philippine Ac:etylE!nC-?

Co .

8( Court o f Ta:·:

App e.:~. ls, L-22443, May 29, 1971, 39 SCRA 7 1; Davao Light and Power Co., Inc:.

v s .

Comrn i s~=; .i one1·- of Custo ms , L- 28902, March 29 ,

1972 ,

44 S CRA 122 .)

The right of ta:·:ation will not be h E>Jd to hi:\Ve been surrender·ed un 1 ess the intention to surTender is manifes ted by word s too pl a in to be mistaken (Ohio Life Insurance 8( T!-u s t Co.

v s .

De bolt, 60 Hm·1ard, 91 - - - u -

- 16 - 416), for the state cannot strip itse lf of the mos t essen tia 1 power of ta:·:a tion by doubt fu 1 wor-cj ::; ; it cannot, by ambiguous language, be d epr ive d of this highest a ttt .. ·ibute •::Jf :mVE"J r ·e-:~ .iqnty ( E ri E.~ F\a ih'I<:\Y Co.

vs. Commonwealth of Pennsylvania, 21 Wallace, 492, 499).

So, whr:!n e:·:empt.ion i s c laim ~~ d, it must be shown indubitably to e:·:i •s t, fnr· e ver·y pr-esumption is against it, and a well-f oun ded dou bt i s fatal to the c 1 aim ( F arr inqton vs.

Tennessee & County of Shelby, 95 U.S. 679, 686). (As iatic Petroleum Co. vs.

Llanes, 49 Phil.

466, 471;

Manila Electri c Company vs.

Comr.1issioner CJ ·f Internal F\evenue, L-29987 & L-23844, October 22 , 1975, 67 SCRA 351. ) WHEREFOF\E, we find no mer i. t.

in the instant petition ·fo l and the same is hereby dismissed at petitioner's costs. SO OF\DEF:;:ED.

Quezon City, t1et.n:> l"lan.ila, 11ar-c:h :31, 19B'.f. 92 ~-di,~· ~ AMANTE ILLER F'n:!s .i.dir g Judge

WE CONCUR:

Se MMI CONSTANTE C. ROAQUIN Agsaociate Judge Ye J . REYES Assaciate Judde CERTIFICATION I hereby certify that this decision was reached after due camsultatian among Lhe members of the Court of Tax Appeals in accordance with Section 13, Article VITI of the Constitution.

os - ft —_ y Cx) te? Lh CA- ca A

AMANTE FILLER

Frasiqding Judqe fourt af Tax Appeals 93