CTA Case No. 3574

DECISION

Petitioner herein seeks for a partial refund of the specific taxes imposed on oils and fuels that were actually used in connection with the exploitation and operation of its forest concession. Petitioner is a duly licensed forest concessionaire with a timber license agreement with the then Ministry of National Resources.

From July 1, 1980 to January 31, 1982, the petitioner purchased from various oil companies refined and manufactured oils and fuel on which said companies paid specific taxes pursuant Sec. 153 and 156 (formerly 142 and 145> of the 1977 National Internal Revenue Code <NIRC).

Relying on the provisions of Republic Act 1435 <RA 1435> and the decision of the Supreme Court in the case of Insular Lumber Co. vs. Court of Tax Appeals, <G.R. No.

44 3

DEGISION -

- 2 - L-31057, May 29, 1981) the petitioner filed with the respondent a claim for refund of the amount of Pl20,825.11 representing 25X of the specific taxes imposed on the oils and fuel used by the petitioner in its business operations.

However, without any response I from the respondent and in order to toll the running of the two year prescriptive period, the petitioner filed the instant petition. Sec. 4 and 5 of RA 1435 provide: "SECTION 4 .

Municipal Boards or councils may, notwithstanding the provisions of sections one hundred and forty-two and one hundred and forty-five of the National Revenue Code, as hereinabove amended, levy an additional tax of not exceeding twenty-five per cent of the rates fixed in said sections, on manufactured oils sold or distributed within the limits of the city or municipality: Provided, That municipal taxes heretofore levied by cities through city ordinances on gasoline, airplane fuel, lubricating oil and other fuels, are hereby ratified and declared valid.

The method of collecting said additional tax shall be prescribed by the municipal board or council concerned .

SECTION 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 tax is collected:

Provided, however, That wh~never any oils mentioned above are used by miners or fore s t concessionaires in the operations, twenty -five per centum of the specific ta~~ paid thereon shall be refunded by the Collector of Inter nal Revenue upon submission of proof of actua l use of oils and under similar conditions enumerated in s ub-paragraphs one and two of sect ion one hereof, amending section one 444

DECISION -

G.T.A. Case No. 3574 - 3 - hundred forty-two of the Internal Revenue Code~ Provided, further, That no new road shall be constructed unless the routes or locations 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 articulate route in the Philippines Highway System, as required in section twenty-six of the Philippine Highway Act of 19!:•:=t. "

It is submitted by respondent that the subsequent enactment of various Presidential Decrees and Executive Orders increasing the rate of specific taxes impliedly repealed the partial refund privilege under Sec . 5 of RA 1435 considering that the legislative purpose of the said increases is to generate additional revenue for the construction and improvement of roads, bridges and other infrastructures.

According to the respondent, the grant of the partial refund is inconsistent with amendatory laws.

He likewise submits that Sec 4 of RA 14:=t5 in conjunction with Sec . 5 thereof requires that in order to be entitled to the partial refund of the specific taxes on oils, there must also be an additional imposition of tax by the local political unit concerned. We disagree with the respondent. Th e issues in the case ~t bar are not of first impression.

The Court., in t .he case of Aras-Asan Timber 44

- 4 - Co., Inc.

vs. Commissioner o~ Internal Revenue, <C.T.A .

Case No. 3524, December 17, 1993J , held. nAnent the first issue, respondent stressed that the subsequent enactment of various Presidential Decrees and Executive Orders, increasing the rate of specific taxes under the National Internal Revenue Code, impliedly revoked the partial refund privilege under Section 5 of Republic Act No. 1435.

He stressed that the very purpose why the government increased the rates of specific taxes is to provide additional revenues to acce ler ate economic development in the country.

The grant of partial reftind would therefore run counter to the very p~rpose for which the specific tax rates were increased. We disagree with respondent. In the case of Commissioner o~ Internal Revenue ve.

Atlas Consolidated Mining and Development Corporation, et.

al., G.R.

No.

93631, Novemb~r 12 , 1990, the Supreme Court, in a Resolution by the Third Division, had the occasion to rule that 'the purpose for the increase in the specific tax rates and the retention of the refund privilege.

In fact, with the increased specific tax rates, the grant of partial refund to mining and lumber concessionaires consi dering t .hat.

the construction specific t .a:-ces.

is made more imperative We find t .he Supreme o:f Internal they seldom use the highways, of which are financed by f i t .tin£1 t .he following comments of Court. in the case of Co••ti ssi oner Revenue VB.

Atlas Consolidated Jtining and Development Corp. et. al., (supr:a. ) : 'A reading of the le~islative proceedings leading to the enactment of RA 1435 shows that mining and lu m b~r concessionaires were granted partial refund of specific taxes bec ause the gasoline and fuel they c onsume is mostly used within their 446

- 5 - own compounds and roads.

RA 1435 gave these concessionary relief, in the form of 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 therefore no rationale in conditioning the grant of refund on the payment of these mining or lumber concessionaires of any additional local tax. Moreover, Section 5 states 'that the 25% specific tax shall be refunded by the Collector of Internal Revenue. ' Since it is the latter vho collects the specific taxes due to the national government, then it follows that the refund refers to a refund of the specific taxes due to the national government, not the specific taxes paid to the local government. • And in the more recent case of Commissioner of Internal Revenue vs~ Rio Tuba Nickel ~ining Corporation and Court of Tax Appeals, G.R. Nos. 83583-84, September 30, 1991 <202 SCRA 137>, the Supreme Court Third Division held: "CtJo our mind, the provision in Section 5 standing alone is enough basis for the grant of refund.

x x

x.

In fact, the entire proviso of Section 5 does not even make any reference to Section 4 which empowers municipalities and cities to impose the addi tional tax on oils sol d or distributed within their territorial jurisdiction. What is clear therein is that the Revenue Commissioner shall refund 25% of the specific tax whether 'any oils mentioned above are used by miners or fo rest concessionaires in their operations and the procedure for refund is complied with• Finally , the res pondent claims that assuming arguendo that the pri vilege of the partial tax refund under RA 1435 stil subsists, the right to file a 447

- £ - judicial action for refund of specific taxes paid before January 20, 1981 or 2 years prior to the filing of the instant petition has already prescribed. In this connection Sec. 135 of the NIRC provi~es "that specific taxes on locally manufactured petroleum products levied under Section 153, 155 and 156 of the title, except lubricating oil and grease, shall be paid within fifteen<15> days from the date of removal thereof from the place of production. ft Clearly therefore, manufacturers are given 15 days from the date of the removal of their petroleum products to pay the s pecific taxes due thereon, except lubricating oils and g r ease whose specific taxes are to be paid on the very date of their removal from their place of production.

Thus , with respect to lubricating oils and grease whose s pecific taxes were deemed paid on the date of thei r removal, the petitioner's claim for partial refund on oils and lubricants purchased delivered prior to Januar y 20, 1981 had indeed prescribed. However, With r espect to the other purchases of petroleum products whose, specific taxes were deemed paid on the 15th day following their removal, only those which were purcha s ed from January 5, 1981 or 15 days prior to 448

- 7 - January 20, 1981, may be considered in the petitioner's claim for partial refund . Furthermore, only those item which were included as claims in the administrative level may be given due course by this Court.

Those purchases which were never brought to the attention of the respondent and are being claimed fo r the first time in this appeal may not be considered in the present claim for refund. Prescinding from the foregoing discussion, this Court finds the herein petitioner entitled to a partial refund of specific taxes only in the amount of P2,923.15 computed as follows~

RECKONING PERIODS:

Original period of claim for refund Case filed with C.T.A: Period claim by Pet.

in Memorandum RECOMMENDATION:

July 1, 1980 to January 31, 1982 January 20, 1983 January 1, 1980 to June 30, 1982 1.

Period to be considered are~

a. In case of lubricating oils

b. Manufactured oils other than lubricants 2.

Period prescribed January 20, 1981 to January 31, 1982 January 5, 1981 to January 31, 1982

a. Lubricating oils purchases from July 1, 1980 to January 19, 1981 449

DECISION -

C.T.A. Gase Mo. 3574

b. Nanufactured oils other than lube : purchases from July 1, 1980 te January 4, 1981 (Exhs. I-1 ta 1-8, J-2 ta JI-9, L-1 ta L-18, M-4 to M-12, M-14 to M-25 and RR-1) Purchases of manufactured oils nat on the original period of 3.

claim for refund should not be included in the computation. These are purchases of manufactured oils from January 1, 1980 ta June 30, 1980 (Exhe. J-1, K-1 to K-19, M-1 to M-3, M-13, & N-i to N-29) and from February 1, 1982 to June 30, 1982 (Exhe. AB-1 ta AB-7, AC-1 to AC-12, AD-1 to AD-13, AE-1, AF-1 to AF- 41, & AG-1 to AG-11). SUPPLIER : PETROPHIL CORPORATION (Exh. °P*)

QUANTITY IN LITERS

Invoice Date Oil and Regular No. Shipped Exh. Diesel Lubricants Gasoline 95027 01-08-81 = P-1 8, 000 4,000 12700 Q2-11-81 P-2 12, 000 27827 02-26-81 P-3 12, 000 27828 02-26-81 P-4 12, 000 28515 04-20-81 = P-5 12, 000 55135 O6-19-81 8 P-6 12, 000 72384 O7-09-81 P-7 12, 000

34222 01-28-81 P-8 840 P

34522 03-10-81 P-9 210 j T O T AL 80, 000 1, 050 4, 000 NOTE:

In the computation made hy petitianer in its MNemarandum, purchases of manufactured oils in pails and in cans are not cansidered. Thus, the same are excluded in my computation for failure of petitioner to give proper conversion rate.

a. Petrophil - Exhs P-10 to P-12, and XX

b. Pilipinas - Exhs S-13, T-1, AA-3, BB-1, BB-5, MH- 1, PP-1, VV¥-1, VV-a, and 22-1 490

DECISION -

G.T.A. Case No. 3574 - 9 - SUPPLIER : PILIPINAS SHELL PETROLEUM CORP. (Exhs. @, U, CC, RR & WW)

QUANTITY IN LITERS

Invoice Date Oil and Regular No. Shipped Exh, Diesel Lubricants Gasoline 83355 10-16-81 Q-2 9, 000 83332 10-09-81 Q-3 6, 000 3, 000 83269 10-03-81 Q-4 6, 000 83254 10-02-81 Q-5 10, 000 83255 10-02-81 Q-6 10, 000 83457 10-22-81 Q-7 8, ODO 2, 000 83496 10-27-81 Q-8 © 8, 000 87068 11-03-81 R-1 9, 000 3, 000 87102 11-05-81 R-2 8, 000 2, 000 87166 11-09-81 R-3 6, 000 87251 11-15-81 R-4 6, 000 3, 000 87321 11-23-81 R-S 10, 000 87518 12-08-81 S-1 9, 000 3, 000 O3711 12-10-81 S-2 10, 000 87519 ‘12-09-81 S-3 10, 000 87403 12-01-81 5-4. 9, 000 87620 12-14-81 $-5 8, 000 2, 000 87691 12-18-81 S-6 3, 900 87692 12-18-81 S-7 3, 000 87693 12-18-81 s-8 10, 000 92573 12-28-81 5S-9 10, 000 92574 12-28-81 $-10 10, 000

00764 10-03-81 S-11 420

00765 10-03-81 S-12 1,680

01455 10-27-81 S-14 420

01716 11-23-81 S-15 1, 260 01718 11-23-81 $-16 420

01719 11-23-81 S-17 420

01555 11-04-81 S-18 1, 470 01566 11-04-81 $-19 1,050 02642 12-11-81 T-2 1, 260 02643 12-11-81 T-3 1, 680 02644 12-11-81 T-4 1,680 74604 07-06-81 U-2 6, 000 3, 000 74684 07-14-81 V-1 9, 000 74796 07-28-81 W-1 9, 000 74711 07-18-81 W-2 10, 000 74729 07-20-81 W-3 10, O00 74771. 07-24-81 W-4 6, 000 3, 000 74839 08-03-81 X-l-a 93, 000 74878 08-05-81 K-1 8, 000 2, 000 74892 08-06-81 X-2 8, 000 2, O00 401

- 10 - QUAHTITY IN LITERS Invoice Date Oil and Regular No.

Shipped Ex h.

Diesel Lubricants Gasoline 74977 08- 14-81

X- 3

6 , 000 3,000 77258 08-19-81

X- 4

8,000 2,000 77259 08 - 19-81 X-5 10,000 77287 08 -24-81 X-6 6,000 3,000 81518 09 - 17- 81

Y- 1

6,000 3,000 03708 0'3-24-81 Y-2 3,000 81580 0'3-24-81 Y-3 3,000 81578 0'3-24-81 Z-1 8,000 2,000 81519 0'3- 17 -81 Z-2 6 ,000 3,000 77397 09-04-81 Z-3 10,000 77396 09 - 04-81 Z-4 10,000 77 424 09-07-81 Z-5 9,000 96217 06 -30-81 AA-1 840 96218 06 - 30-81

AA -2

1,680 96753 08 -26-81

AA -4

1,260 96931 0'3-23-81 BB-2 420 96828 09-07-81 BB-3 1,680 96829 09 - 07-81 BB-4 1,680 62:3'70 04- 02-81 ~C-2 6,000 3,000 62426 04-08-81 DD-1 10,000 62427 04-08-81 DD-2 10,000 62578 04 -28-81 EE-l 8,000 2,000 62477 04- 15- 81

FF - 1

6,000 3,000 62550 04 - 24-81

GG- 1

10,000 62678 05-11-81

HH - 1

10,000 6 2679 05-11-81 HH-2 10,000 62689 05- 12-81 HH-3 6,000 62694 05-12-81 HH-4 4,000 6,000 6G745 05- 18-81 II-1 10,000 62746 05- 18-81 II-2 10,000 68018 05-21-81 II-3 b,OOO 3,000 73606 06-05-81 JJ-1 4,000 73629 06- 19-81 KKK-1 8,000 2,000 73696 06-l'l-81 LL-1 9,000 73733 06-22-81 LL-2 9,000 92214 04-09-81 NN-1 1, 260 92240 04- 22-81 00- 1 1, 680 92269 04 - 15-81 00- 2 1,680 92432 05-18- 81 00-3 840 9 4720 05 - 11 - 81 00- 4 1,680 92486 06 - 01 - 81 00-5 1,260 94719 06- 11 - 81 00-6 1,260 452

DECISION -

t.;. T. A. Case No. 3574 - 11 - QUANTITY IN LITERS Invoice Date Oil and Regular No.

Shipped Ex h.

Diesel Lubricants Gasoline 96146 06-22-81 00- 7 840 96145 06-22-81 00-8 1,260 96112 06-17-81 00-9 1,680 96113 06-17-81 00- 10 420 96114 06-17-81 QQ-1 210 9215 01-06-81.

RR-2 8,000 9244 01-08-81

RR - 3

10,000 9323 01-14-81 RR-4 6,000 3,000 9446 01-26-131 RR-5 6,000 9485 01-28-81 RR-6 8,000 5818 02-02 ~ 81

RR -7

6,000 3,000 5924 02- 11 - 81 RR-8 6,000 4,000 5'329 02-12- 81 RR-9 6,000 5980 02-17-81

RR - 10

6,000 3,000 6077 02 -23-81

RR - 11

6,000 6170 03-02-81 RR-12 6,000 4,000 59169 03-06-81 SS-1 6,000 6152 02-28-81 SS-2 6,000 3,000 62270 03-19-81 TT-l 10,000 62271 03- 19-81 TT-2 8,000 2, 000 62261 03- 18- 81

TT -3

6,000 62323 03-25-81 UU-1 6,000 0366 01-15-81 UU-2 210 0359 01 - 15- 81 UU-3 1, 050 0416 02-03- 81 UU-4 1,050 0412 02-02-81

UU -5

1,890 0421 02-04-81 VV-2 630 2705 02- 2 4- 81

VV - 4

1,470 2733 03-03-81 VV-5 1, 470 91425 03-10-81

VV -6

420 91418 03-10-81

VV -7

840 92043 03 - 19-81

VV - 8

630 92088 03-23-81

VV - 9

420 92627 01 -04- 82 YY-1 9,000 3, 000 83'742 01 - 18-82 YY-2 7,000 3,000 86502 01 - 19-82

YY -3

10,000 02942 01-18-82 YY-4 1,470 02943 01 - 18- 82

YY - 5

630 ---- T 0 T A L 619e000 45,570 94,000

G R A N D

T 0 T A L

699e000 461620 981000 453 DEGISlUN -

- 12 -

COMPUTATION OF 25X SPECIFIC TAX REFUND

UNDER RA 1435

Manufactured Oils Diesel Quantity C699,000 x .8429; lUUOJ 589.19 MT Oils and lubricants 46,620 L Regular gasoline 98,000 L Total specific tax paid under RA 1435 Multiply by refundable percentage Refundable specific tax under RA 1435 Specific Tax Rate Pl. 00/PIT 0.07/L 0.08/L Sp~cific Tax p 589.19 3,263.40 7,840.00 Pll, 692.59 25X p 2,923.15

WHEREFORE, judgment is hereby rendered ordering the respondent to refund to the petitioner the amount of P2,923.15 representing the partial refund of speciific taxes paid on manufactured oils and fuels.

DEGISIUN -

G.T.A. Gase No. 3574 - 13 - CERTIFICATION I hereby certi£y that this decision was reached a f ter due con s ultation among the members of the Court of Tax Appeals in accordance with Section 13t Article VIII of the Constitution.

455 Q ... «7Q. ~ ERHESTO D. ACOSTA Presiding Judge Court of Tax Appeals