Republic of the Philippines Court of Tax Appeals Quezon City. Sirawai Plywood and Lumber, Co., Inc. vs. Commissioner of Internal Revenue

DECISION

C.T.A. Case No. 3554 This is a claim for refund in the total amount o.f P99, 226 . 17 allegedly representing 25Y.

o.f the speci.fic taxes paid on the oils and .fuels actually used by Petitioner in its operations ' as a duly licensed .forest concessionaire.

During the period .from July 1, 1980 to May 31, 1982, Petitioner purchased .from various oil companies re.fined and manu.factured mineral oils, motor .fuels and diesel fuel oils which petitioner actually and exclusively used in connection with the exploitation and operation o.f its forest concession.

The said oil companies paid and passed on to the Petitioner the specific taxes imposed on said oils sold to Petitioner under Sections 153 and 156 (formerly Sections 142 and 145> of the 1977 Tax Code. £32 3 - w

DECISION -

C.T.A. CASE NO. 3554 - 2 - On' November 8, 1982 Petitioner .filed a writ ten claim .for . re.fund in the amount of P99,226.17 computed as .follows:

VOLUftE I Liters) DIESEL 1,390,42& GASOLINE REG.

74,203

GASOLINE EXTRA

4,72&

OILS & LUBRICANTS

93,318

AV GAS

7,417 SIRAVAI PLYVOOD LUftBER CO., INC. lfor~erly ftisa•is Luaberl July 1980 - nay 1982 PRODUCT COST SPECIFIC TAX P3, 98&, 229. 00 .

P243,324.55 349,&75.00 &&,782.70 22,124.00 4,72&.00 754, 9&1.00 74,&54.40 59,087.00 7,417.00 P511721076.00 P39&1904.&5 251 REFUND P&0,831.14 1&,&95.&8 1, 181.50 18,&&3.&0 1,854.25 P991226.17 representing twenty-.five percent <251.> o£ the speci.fic taxes collected on the oils used by the Petitioner in its operations as a .forest concessionaire. Such claim .for refund was never acted upon by the Respondent. Hence, this appeal.

In its appeal, Petitioner, prayed .for an order requiring Respondent to pay 201. interest per annum, in addition to its claim .for re.fund, .for her alleged arbitrary re.fusal to refund the instant cla:iJm.

Petitioner likewise prayed .for the costs o£ suit. In support to its claim .for re.fu nd, Petitioner ~li e d on the case of Insular Lumber Company vs. Court o.f Ta>-.

Ap pe al s and Co mmissioner of I nterna l Revenue, G. R.

N - 31057, May 2 9 , 1981 in which the Supr e me Court held t~ t e pr oviso o f Section 5 of Republic Act No .1 435 is 62 4 - ....

DECISION -

C.T.A. CASE NO. 3554 - 3 - in effeb t a partial exemptipn from the imposed increased specific tax on manufact ured oils. Section 5 of Republic Act No. 1435 provides: "SEC.

5.

The proc eeds of the addi ·tional tax on manufactured oils shall accrue to the road and bridge funds of the political subdivision for whose benefit the tax is collected:

Provided, however, That whenever any oils mentioned above are used by miners or forest concessionaires in their operations, twenty - five per centum of the specific tax paid thereon shall be refunded by the Collector of Internal Revenue upon submission of proof of actual use of oils and under similar c~nditions enumerated in sub - paragraphs ~one and two of section one hereof, amending section one hundred forty-two of the Internal Revenue Code: Provided, further, That no new road shall be constructed unless the routes or location thereof shall have been approved by the Commissioner of Public Highways after a determination that such road can be made part of an integral and articulated route in the Philippine Highway System, as required in section twenty-six of the Philippine Highway Act of 1953."

Respondent, however, asserted that the above - quoted Section of R. A.

1435 has already been repealed by Section 343 of the 1977 Tax Code <Presidential Decree Nos. 1158 and 1158- A> which provides in part: "SEC. 343.

Granting provinces, cities and municipalities shares in the specific tax on certain petroleum products. In addition to the internal revenue allotment under Section three hundred forty - four, provinces, cities and municipalities shall share in the specific taxes on the following petroleum products in such amounts as may be equivalent to the collections therefrom at the rates indicated he r eunder.

XXX XXX XXX 625

DECISION -

C.T.A. CASE NO. 3554 - 4 - The addi t ional allotment is in lieu of local t axes imposed on petroleum products and for this purpose, Section twenty - four of Presidential Decree numbered 231, otherwise known as the Local Tax Code, has been repealed by Presidential Decree numbered 435 on l'larch :30, 197 4.

XXX XXX xxx" Even assuming that Section 5 of Republic Act No. 1435 is still in effect, partial ta>: refund thereunder refers to specific taxes paid by miners and concessionaires on fuel oil, commercially known as diesel fuel oil, and other similar o ils having more or less the same generating power, and hence, according to the Respondent, Petitioner is not entitled to a refund of 251. on the specific tax it paid on gasoline, kerosene, avgas <aviation gas> or petroleum and lubricating oils.

Respondent also contended that Petitioner's right to file a judicial I action for refund of all taxes paid before December 13, 198~ has already prescribed. Is the Petitioner entitled to the refund claimed representing 251. of the specific taxes paid on the oils and fuels actually used by Petitioner in its operations a s a forest c oncessionai r e? If entitled to the refund claimed, were they filed within the prescriptive period of two years ?

These are the issues involved. We find for the Petitioner. In the case of Commissioner of Internal Revenue vs. Atlas Consolidated nining and Development Corporation, et

I I

626

DECISION -

C.T.A. CASE NO. 3554 - 5 - al., G ~ R.

No.

93631, November 12, 1990, the Supreme Court, in a Resolutio n by the Third Division, had the occasion to rule that 11 the purpose £or the increase in the rate of tax cannot in anyway negate the policy behind the grant of partial refu nd.

The Court sees no inconsistency between the increase i n specific tax rates and the retention of th e ref und privilege. In £act, with the increased specific tax rates, the grant of partial refund to mining and lumber concessionaires is mad e more imperative considering that they seldom use the highways, t he construction of which are £inanced by specific taxes.

11 Moreover , we fi nd fitting the following co mments of the Supreme Court in the case of Commissioner of Internal Revenue va.

Atlas Consolidated Mining and Development Corp. , et al. , <supra>. : "A reading of the legislative proceedings leading to the e nact ment of RA 1435 shows that mining and lumber concessionaires were granted partial refund of s pecific taxes because the gasoline and fuel they consume is mostly used within their own compounds and roads. RA 1435 .. i gave these concessionaires relief, in the form of a tax refund, since their trucks and vehicles seldom ply the national : highways, the construction of which is funded by the specific tax collected by the national .government . There is therefor~ no rationale i .n conditionin g the gr a nt • f refund on the payment of these mining o r l um~ e r c oncessionaires of ~ ny ad ional l o c a l ta x .

t1o - o ve r , Sect i on 5 states 'tha t ,. i-ot 25Y.

s p e c i fic· t a x sha l l b e refunded by th e Co.L.L e ctor o f I nter n a l Re v e n u e.

Since i t is the l a tter 627

DECISION -

C.T.A. CASE NO. 3554 - 6 - who collects the specific taxes due to the na-tional government, then it follows that the refund refers to a refund o£ the specific taxes . paid to the national government, not the specific taxes paid to the local government. " And in the more recent case o£ Commissioner o£ Internal Revenue vs.

Rio Tuba Nickel Mining Corporation and Court o£ Tax Appeals, G. R.

Nos. 83583- 84, September 30, 1991 <202 SCRA 137>, the Supreme Court Third Division held:

"to our mind, the proviso in Section 5 standing alone is enough basis for the grant o£ refund. x x x In £act, the entire proviso o£ Section 5 does not even make any reference to Section 4 which empowers municipalities and cities to impose the additional tax on oils sold or distributed within their territorial jurisdiction. What is clear therein is that the Revenue Commissioner shall refund 251.

o£ the specific tax whenever 'any oils mentioned above are used by miners or forest concessionaires in their operations and the procedure £or refund is complied with." <see also Aras - Asan Timber Co., Inc., CTA Case No. 3524, Dec. 17, 1993>,.- Finding for the Petitioner, this l Court after examining the Invoices offered by Petitioner as evidence ar ived at the :t;ollowing computation on the refundable 2 ~~ specific ta ~ es paid on Diesel, Lu br icating oils, \• as~l in e and Av Ga s fr o m December 2, 1980 to May 28, 1982 !".

b e.''"' .

n the fo r mula s ubmitted by the Petitioner without 628

DECISION -

C.T.A. CASE NO. 3554 any comment from the. Respondent on September 28, 1993 (see Compliance, p. 126 CTA Records):

QUANTITY IN LITERS

Invoice Date 0il and Regular No. Shipped Exh. Diesel Lubricants Gasoline AV GAS E0092 12-02-80 £E-85 6, 000 3, 000 £0098 12-05-80 E-86 9, 000 E9008 12-10-80 E-89 9, 000 E9014 12-12-80 E-90 9, 000 E9084 01-20-81 £E-92 9, 000 E9060 01-08-81 E-93 9, 000 M6307 01-08-81 E-95 2,010 .

E9068 01-12-81 E-96 6, 000 3, 000 E9075 01-16-81 E-97 6, 000 E9091 01-23-81 E-98 9, 000 M6332 01-28-81 E-99 1,890 E9100 01-28-81 E-101 9, 000 F3005 02-02-81 E-102 9, 000

10036S 02-12-81 £E-103 72

M6343 02-06-81 E-104 1, 260 F3011 02-06-81 E-105 9, 000 F3016 02-10-81 £E-106 9, 000 F3029 02-18-81 £-107 9, 000

M6278 02-18-81 E-108 420

F3040 02-20-81 E-109 9, 000 M6281 02-20-81 E-110 1,050

N6286 02-26-81 E-111 80

F3047 02-26-81 £E-113 9, 000 F3055 03-02-81 E-114 9, 000 F3064 03-05-81 E-115 9, 000 M6295 03-05-81 E-116 1, 890 F3084 03-13-81 £-119 9, 000 F3097 03-17-81 -120 9, 000 F3108 03-23-81 -121 6, 000 F3110 03-26-81 -122 9, 000 F3115 03-30-81 -123 3, 000 F3120 04-03-81 -124 9, 000

102585 04-13-81 - B-125 38

F3128 04-08-81 -126 9, 000

Q1834 04-10-81 -127 630

F3i32 04-10-81 £-129 9, 000 HO F3138 04-14-81 £-130 9, 000 F3145 04-21-81 = £-131 9, 000 @1843 04-21-81 #£-132 2,310 48269) 04-24-81 £E-133 9, 000 64257 04-29-81 E-134 3, 000 G4262 05-01-81 £-135 9, 000 629 DECISION -.

C.T.A.

G4266 Q1868 G4274 G4284 Q1873 G4295 G4304 Q1877 G4309 64313 @1900 G4374 G4328 G4334 64338 64348 G4356 a1898 G4365 @1899 G4381 R3520 R3507 G4388 R3511 64393 G5251 105528 H5260 H5265 H5273 H5278 H5285 R3528 H5293 105845 H5300 R3534 H5306 10598S H5317 R3539 10610S H5331 H5325 10631S H5340 H5349 106398 106415 R3551 H5356 CASE NO.

05-04-81 * 95-08-81 05-08-81 05-13-81 05-20-81 05-21-81 05-23-81 05-27-81 05-27-81 06-01-81 06-30-81 06-30-81 05-06-81 06-09-81 06-11-81 06-17-81 06-19-81 06-20-81 06-25-81 06-26-81 07-03-81 07-30-81 07-06-81:

07-08-81 07-10-81 07-10-81 07-15-81 07-20-81 07-21-61 07-23-81 07-27-81 07-30-81 08-04-81 08-06-81 08-07-81 08-08-81 08-10-81 08-12-81 08-13-81 08-17-81 08-19-81 08-19-81 08-21-81 08-27-81 08-24-81 09-01-81 09-01-81 09-04-81 09-04-81 09-05-81 09-07-81 09-09-81 3554 E-136 E-137 E-138 E-139 E-141 E-142 E-143 E-144 E-145 E-146 E-147 E-148 £-149 £-150 E-151 E-152 E-153 E-154 E-155 E-156 E-157 E-158 E-159 E-160 ‘E-162 E-163 E-164 E-165 E-166 E-167 E-168 E-169 E-170 E-171 E-172 E-173 E-174 E-175 E-176 E-177 E-178 E-179 E-180 E-181 E-182 E-183 E-184 E-185 E-186 E-187 E-188 E-190 9, 000 9,000 9,000 9, 000 6, 000 9, 000 6, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9,000 9, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9,000 9, 000 9, 000 1, 340 840 1,540 80 420 1, 260 620 420 1,680 1,130 1,050 840 2,810 1 ai 49 106 655 hee, 98 30 30 DECISION C.T.A. CASE NO. 3554 106515

H5362 *

H5366.

10675S R3554 H5379 H5392 H5399 H5408 10905S H5416 5426 H5430 10957S R3558 10966S H5437 H5451 10985S H5459

- 10994S

H5463 H5473 2201358 H5480 R3567 R3561 R3I3569 220278 45494 H5499 BoGOog

R357 1

B0024 220845 BOO31 R3573 220908 O04310A 220975 48370D 22211S B0039 BO046 B1939 Bi901 222298 R3584 B1i910 B1920 222418 B1926 09-11-81 09-12-81 09-15-81 09-21-81 09-22-81 09-23-81 10-01-81 10-06-81 10-09-81 10-05-81 10-14-81 10-20-81 10-22-81 10-22-81 10-22-81 10-26-81 10-28-81 11-04-81 11-06-81 11-07-81 11-09-81 11-10-81 11-16-81 11-16-81 11-18-81 11-18-81 11-09-81 11-23-81 11-21-81 11-23-81 11-25-81 12-01-81 12-04-81 12-08-81 12-10-81 12-14-81 12-14-81 12-14-81 12-15-81 12-16-81 12-17-81 12-21-81 12-22-81 12-28-81 01-20-82 01-04-82 01-04-82 01-06-82 01-06-82 01-11-82 01-11-82 01-12-82 E-191 E-192 E-193 E-194 E-196 E-197 E-198 E-199 E~-200 E-201 E~202 E-204 E-205 E-206 E-207 E-208 E-209 E-210 E-211 E-212 E-213 E-214 E-215 E-216 E-217 E-218 E-219 E-220 E-221 E-222 E-223 E-224 E-225 E-226 E-227 E-228 E-229 £E-230 E-231 E-232 E-233 E-234 E-235 E-236 E-237 E-238 E-239 E-240 E-241 E-242 E-243 E-244 9, 000 9,000 9,000 9, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9,000 — 9, 000 6, 000 9, 000 9, 000 9, 000 9, 000 6, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9, 000 9,000 9, 000 631 2, 810 1, 680 650 420 420 420 1,050 250 880 72 33 45 30 49 53 38 76 76 38 68 114 38 38 79

DECISION -

C.T.A.

R3591 B1929 222548 2227058 222728 222775 J1755 B1952 222835 2230058 223028 B1975 Bi985 J1770 223215 22325S 2233458 J1L777 223458 223468 223558 223635 223675 223745 223838 223885 22502S 28159G 28161G 2251358 225215 225268 282876 225325 225448 229925 283496 283366 283356 283346 225638 225678 225708 229738 223785 22581S 229835 2259855 226/35 2261758 226185 226205 CASE NO.

01-13-82 *O1-13-82 01-15-82 01-21-82 01-22-82 01-25-82 01-25-82 01-25-82 01-26-82 02-01-82 02-02-82 02-02-82 02-11-82 02-11-82 02-11-82 02-13-82 02-16-82 02-19-82 02-20-82 02-20-82 02-25-82 02-27-82 03-01-82 03-03-82 03-05-82 03-08-82 03-12-82 03-15-82 03-15-82 03-16-82 03-20-82 03-22-82 03-24-82 03-25-82 03-29-82 04-01-82 04-01-82 03-29-82 03-29-82 03-29-82 04-06-82 04-08-82 04-12-82 04-14-82 04-15-82 04-16-82 04-17-82 04-19-82 05-01-82 95-01-82 05-02-82 05-03-82 3554 E-245 E-246 E-247 E-248 E-249 E-250 E-251 E-252 E-253 E-254 E-255 E-256 E-257 E-258 E-259 E-260 E-260 E-262 E-263 E-264 E-265 E-266 E-267 E-268 E-269 E-270 E-271 E-272 E-273 E-274 E-275 E-276 E-277 E-278 E-279 E-280 E-281 E-282 E-283 b-284 a -287 -288 = E-290 E-291 E-292 E-293 E-294 E-295 E-296 £-285 6, 000 9, 000 6, 000 9, 000 10, 000 8, 000 6, 000 10, 000 8, 000 10, 000 10, 000 632 880 840 420 420 87 140 132 38 129 98 37 176 178 212 170

DECISION ~

C.T.A. CASE NO. 3554 - 11 - 22703S 05-04-82. £-297 121

22711S * 05-07-82 £E-298 125

227198 05-10-82 §E-299 333

22720S 05-10-82 £-300 45

227228 05-11-82 E-30) 144

227298 05-13-82 E-302 . 76

227378 05-17-82 E-303 159

227508 05-24-82 E-304 83

227528 05-24-82 £E-305 ‘136

C4808 05-24-82 E-306 6, 000

227538 05-26-82 £E-307 ‘121

22758S 05-27-82 E-308 . 125

227598 05-28-82 £E-309 76

T OT AL 887, 000 36, 710 6, 000 7, 586

COMPUTATION OF 25% SPECIFIC TAX REFUND

UNDER RA NO. 1435

SPECIFIC SPECIFIC

MANUFACTURED OILS QUANTITY TAX RATE TAX

DIESEL [(887,000 x 0.8429) + 1,000] 748 MT = =P1.00/T 748.00, LUBRICATING OILS 36,710 L 0.07/L 2, 969. 70 GASOLINE 6,000 L 0. 08/L 480. 00 : AV GAS 7,386 L 0. 08/L 606, 88° TOTAL 4, 404. 58 ;

MULTIPLY BY SPECIFIC TAX REFUND RATE 234):

SPECIFIC TAX REFUND UNDER RA 1435 1,101.15) Exhibits E, E-1, E-2, E-4 to E-84, E-87 and E-91. were not included in the computation as they are already beyond the prescriptive period.

The Tax Code provides for the judicial remedy of filing a claim for refund within a period of two (2) years from the date of payment of the tax pursuant to the provision of Section 230 (formerly Section 292).

Section 135 of the Tax Code insofar as pertinent provides "that specific taxes on locally manufactured } petroleum products levied under Sections 153, 155 and 156 633

DECISION -

C.T.A. CASE NO. 3554 - 12 - of this' title, except lubricating oil and grease, shall be paid within fifteen <15> days from the date of removal thereof from the place of production. "

Emphasis supplied> It is therefore evident that the manufacturer of petroleum products has up to 15 day~ from the date of its removal within which to pay the specific taxes on locally manufactured petroleum products.

As an exception, manufacturers of lubricating oils and grease have to pay the specific tax collected from the purchaser on the date of its removal from the place of production. Petitioner purchased both manufactured petroleum products and lubricating oils and grease. Thus, with respect to its purchases of lubricating oils, the specific taxes paid thereon are deemed paid at the date of its removal.

The claim for refund of the 25Y. specific taxes paid on oils and lubricants ~urchased and delivered prior to ~ovember , 28, 1980 had indeed prescribed. Let us elaborate.

Exhibits "E", "E - 1" to "E - 3'3" were purchases made on J- ·ua ry 5 , 980 to June 27, 1980 but were not included in t >r o r iginal claim as Petitioner slaimed only purchases 1 9t~O to May 3 1, 1'382 <see Petition for Review l-'· 2 ' Bu-r. even gran t i ng arguemdo t at the y are inc 1 uded i n the cla im.

the s ame ha ve alreaoy prescri bed trey we rt ?Urchases made prior to No vembex 28, 1980.

i' 634

DECISION -

C.T.A. CASE NO. 3554 - 13 - .·, The same reason is also true to Exhibits "E-40" to "E - 82", since they were purchases made on July 7, 1980 to November 26, 1980, again prior to the November 28, 1980 prescriptive deadline. Exhibits "E - 87" and "E-91" were lubricants purchased on December '3, 1980 and December 12, 1980, hence, the claim for lubricants was filed beyond the prescriptive deadline of December 13, 1980 the date this instant Petition was filed.

Exhibits "E - 83", "E - 88", "E-94", "E-100", E-112, "E- 117", "E-128", "E - 140", "E-161", "E-189", "E-195" and "E- 203" were invoices covering purchases o~ brake fluid which is neither classified as fuel oil nor lubricating oil.

Hence, not included in the computation. Lastly, Exhibits "E-118" and "E-261" are not found on the record.

As regards the 201. interest per annum being claimed i ' ' by petitioner, the rule is that no interest on refund o~ tax can be awarded unless authorized by law or the collection of the tax was attended by arbitrariness.

<CoLlector vs.

Prieto, 112 Phil.

907; Commissioner vs. Ast• ria s Sugar Central, 2 SCRA 1140;

Commissioner of Ir· _er nal Reve nue vs. American Rubber Co. , 18 SCRA 842;

Atl"s Fer tilizer Corporation vs. Commission r of Internal ':"even e.

100 SCRA 5 5 6 ;

Shell Philippinesp Inc.

vs.

Centr a l Bank of the Phi lippines,

162 SCRA

6 28. > An 635

DECISION -

C.T.A. CASE NO. 3554 - 14 - action ~s not arbitrary when exercised honestly and upon due consideration where there is room :for two opinions, however much it may be believed that an erroneous conclusion was reached.

<F.B.

Moreno, Ph~l~pp~ne Law Dictionary (3rd ed. ),

p. 69, citing Imper~al Development Corporation vs.

AHover, 08473- AP, August 23,1979.)

Arbitrariness presupposes ine xcusable or obstinate disregard of legal provisions. ( V~ctor~as Hill~ng Co. , Inc.

vs.

Commissioner of Internal Revenue, et al . , 19 SCRA 430. )

None of the exceptions are present in the case at bar.

Respondent's decision denying petitioner ' s claim for refund was based on an honest interpretation of law.

We, therefore, see no reason why petitioner should be entitled to the payment of interest. Moreover, the S upreme Court held in the Rio Tuba case that no interest shall be c harged in computing the 25% refund on specific taxes paid. <See Supreme Court Resolution dated March 25, 1992. ) 11 In the same manner, petitioner's prayer :for cost of suit cannot be awarded. It is an elementary rule that the government shall not be liable :for costs of suits unless otherwise provided by law. (Sfct~on 1, Rule 142, rpu ·sed Rules of Court; Collector of Internal Revenue vs. CoP •en tion o:f Ph:llipp · ne Baptist Chur.ches and the Court u- ~ x a peals, 2 SCRA 10. )

636

DECISION -

C.T.A. CASE NO. 3554 - 15 -

WHEREFORE, in a ll the :foregoing, Respondent Commissioner of Internal Revenue is hereby ORDERED to REFUND the sum of P1, 101. 15 in :favor o:f the herein petitioner which is equivalent to 25/. partial re:fund of specific taxes paid on its purchases of fuel oils and lubricants pursuant to the provision of Section 5 of Republic Act No. 1435, in relation to Section 142 < b > and <c> of the National Internal Revenue Code and Section 145 as prescribed under Sections 1 and 2 of R.A. 1435. No pronouncement as to costs.

WE CONCUR:

I I

() 1-.- CJl..~ ~ ~0 D. ACOSTA P esiding Judge 637 l.

.: ;

~ I>I·:C (~:; UlN - r.. T. A.

CA~it-: Nil.

:-J:1:14 - lb - This is to certify that the above decision was reached after due consul tat ion among the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. 638 ~r2'~ ERNESTO D. ACOSTA Presiding Judge Court ox Tax Appeals ,,