Ban Carlos Milling Co., Inc. vs. Commissioner of Internal Revenue

DECISION

- 2 - \.

pt..n~st..tant to a management cont t~act <Exhibi t A, pp.

33-40, CTA rec.>.

Sometime in November, 1 '384, petitioner imported one case of stc spare parts for its Niigata diesel generator, used in its sugar milling operations, and paid the corresponding compensating / tax due on the said imported parts i~ the amount of P7, 8'32. 00 as evidenced by Bt..treaLI of C•.tstoms Ufficial Receipt No. 558272 dated November 12, 1'384 (Exhibits B and B-1.

p.

'+1.

CTA rec . >.

The spare parts were released under Central Bank Release Ce'r"t if icat e No. 843624 dated November 12, 1 '384 •Jpon payment of import duties, compensating tax and other fees <Exh. c, p. 42 , CTA t"ec. >.

In a letter dated Mat~ch G, 1986, petitioner filed a claim for reft..md of alleged et"roneou5ly paid compensating tax amounting to P7,892.00 on the gro1..md that although its tax and d•Jty exemption privileges under Presidential Decree No.

791 was withdrawn by Presidential Dec'r"ee No. 1955, the tsame privileges were however restored by the Fiscal and Incentives Review Boat"d in a Re5olution No. 53-85 dated October 1, 1985 which We qt..totel

- 3 -

REPUBLIKA NG P I L IP INAB

MINISTRI NG PANANALAPI

MAYNILA Oc tober 1, 1985

FISCAL INCENTIV ES REVIEW BOARD

RESOLUT I ON NO.

5 3- 8 ~ BE IT RESOLVED AS IT IS HEREBY RESOLVED, That the tax and ' duty exemption privileges of sugar millers granted under PD 791, as amended, and withdrawn by PO No.

1955, are h e t~ eby restored: Pr.. 9.Y .!.Q_~.Q., That such privileQe s shall extend only to impot~ted articles which arrived in the Philippines on or b e fore 30 June 1985 . The pr· o v i si ons of Fi scal Incentives Review Board Resolution No. 2-8 5 , insofar as they affect sugar millers, are hereby amended accordingly.

<Sgd. > CESAR E. A.

VIRATA Minister of Finance Chairman-FIRS Without waiting for respondent's decision, petitioner filed this present petition on September 25, 1986 well within · the two-year prescriptive period provided in Section 292 (now Section 230) of the National Internal Revenue Code. The sole issue presented is whether petitioner is exempt from the payment of com pen sating tax on the imported spare parts of its Niigata diesel generator to be used in its sugar milling operations pursuant to Presidential Decree No. 791 a• amended by Pr~tsidential Decr~te No. 1710.

- 4 - There i~ no dispute that P.O. No. 791 exempted sugar millers from the payment of compensating tax, among others, with respect to the importation of plant machinet~y, spe:n~ e pat~ ts, and other equipment. As stated in the decree, which took effect on Septembet~ 3, 1975, the compensati'ng tax exemption privilege is good until June 30, 1980.

pertinent provision reads as follows: "Section 1.

Any person, partnership, company or corporation who or which now engaged or shall engage in the business of manufactut"ing, milling, processing or refininq of sugar shall bl! exempted from the payment of special impot"t tax, com pens~t in~ tax and customs and tariff duties in respect to import~tion of plant machinery, spare parts and other equipment effecti ve upon approval of this Dect"ee unt i 1 J•.tne 30, 1980."

The P. D.

No.

7'31 was later amended by P. D.

No.

1710, promulgated on ~1ltgust 13, 1'3BO, extending the period of the exemption privilege up to June 30, 1985.

Section 1 of P.O. No. 1710 provides• "Section 1.

Section Presidential Decree No.

791 is amended to re~d as follows• 1 of hereby Section 1.

Any person, partnership, company or corporation who or which now engaged or shall engage in the business of manufacturing, milling, proces s it1Q ot" t"efining of !Htgar, shall be exempted from the p~yment of speci~l import

- 5 - ta><, compensating ta>< and customs ~nd tariff duties in respect to the importation of plant m e.chinen~y, spare parts and o t h e r e q u i p m en t ~ .t:.f -~ -~ .t ... i. v. .. ~ __ _t,!p _QJJ ~ppr_Q_V,J .. ____ R .. f ..... _ t h i __ s _____ p~ _G.r: .~. f?. ......... J.t.n.t .. ~ 1 J.t,m ... I\'L . ______ ~Q_ , _________ J-~.!2-~!!.- " <Em ph as is Ours.> Howeven~ , on October~ 10, 1984, P. D.

No.

1955 was promulgated withdrawing, subject to certain conditions, the duty and tax exemption privileges granted to private business enterprises and/or persons engaged in any economic activity, effective on October 15, 1984, e><cept those enjoyed by the following• "<a> Those reqister~ ed by the Boar~d of Inve!!ltmenta under~ Pre5idential Decree No.

1789, as amended by Batas Pambansa Blg.

391, and those registered by the Export Proces sin g Zo ne Authority under Presidential Decree No. 66 , as amended by Presidential Decr~ee Nos.

144'3,

1776 ,

1 T76-A and 1786 = (b) accor~d ance 1416;

Tt1e coppet~ with the mininq industt~y pr~ ovisions of in LOI (c) Tho5e cover~ed by international aqreements to which the Philippines is a signet ot~y;

(d) impairment and Those cover~ed clause of the by the non- Constitution;

(e) Those that will be approved by the President of t he Philippines upon the recommendation of the Mini5ter of F inance."

<Sec. 1, P.O. No. 1955)

- 6 - Petitioner admit s t h a t it s tax and duty exemption privileg e s qt'ante d 1..1nd er P .O. No. 7 91, as amended, has been withdrawn by P.O.

No.

1955 <Petitioner's Memorandum, p.

71, CTA rec.>.

In fact,

F IRB

Resol1..1tion No.

53-85 clearly states that:

"the tax and duty exemption privileges of s1..1gar millers granted 1..1nd e r P. O.

No.

791' as am ended, and ~~ ..

:tttQ.r~~.D. .. __ p_y ____ ~-~- P.~---~.fh _ .. L~_;;_q_, are here by X X

x. II <Underlining Ours, supra.> There is no question therefore that P. D. No.

1955 has indeed revoked the tax exemption privileges of petitioner.

Petitioner, howeve r , claims that its exemption from the payment of compensating tax on the impo~~tation of spare pat~ ts under P. D.

No.

791, as amended, was restored by vh~ tt..le of FIRB Resolution No.

53-85 dated October 1, 1985, provided, the imported articles arrived in the Philippines on or befot~e June 30, 1985.

In this case petitioner's imported spare part s arrived in the Philippines priot~ to June 30, 1':385 and in fact were released on November 12, 1984.

Respondent contends that petitioner's tax exemption under P.D.

No.

"791' as amended, was withdrawn by P.O. No. 195 5 it app e aring that it is 1 ~ -~ - - 7 - not one of those enumet~ated Linder the exception clause therein provided. There is no questi on that P.O. No.

1'355 has withdrawn the tax exemption privilege5 of petitioner undet~ P.O.

No.

7'31, as amended by P.O. 1710.

But petitionet~ places heavy stress on the FIRB Resolution No.

53-8 3 , dated October 1, 1'385, which restored its previous tax exemption until June 30, 1 '385.

In the recent case of National Power Corporation vs. Provinc e of Albay, et al., 186 SCRA 198, the Supreme Court ruled on the . power or authority of the Fiscel Incentives Review Board, Linder P.O.

776, to grant or extend tax and duty exemption privileges of the grantee. The power of the FIRB was merely to r e co mmend to the President of the Philippines what subsidies or tax exemption qrants should be withdrawn, modified, revoked or suspended.

The Supt~eme Court added that "the FIRB ha5 no authority to impose taxe• or revoke existing ones, which, after all, under the Constitution, only the legislatt..tre may accomplish." In this connection, suffice it to state, the FIRB Resolution No.

53-85 could not have validly ·restored the tax exemption privileqe of petitioner 1~ ?

- 8 - when that same privilege has already been withdrawn by P.D.

No.

1955 as early as October 15, 1984 <effectivity date>.

By itself, it co•..tld not have validly prescribed exemption!!

or taxability.

<NAPOCOR v. Province of Albay, et al., t1 •..tpra. > By and large, exemption statutes are construed t~trictly against persons claiMing exemption and liberally in favor of the Government. Thus, claims for refund are strictly construed against the claimant since a claim for refund is in the nature of an exempt i on from tax at i on. <CoMIIIissioner of Internal Revenue v. Guerrero, 21 SCRA 180.) The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. <Government of the Phi 1 ippines v. Monte de Piedad, 35 Phil.

42; Commissioner of Internal Revenue v. P. J. Kiener Company, Ltd.,

65. SCRA 142J Western Minolco Corporation v.

Co mmissioner of Internal Revenue, 124 SCRA 121. > Petitioner failed in this respect.

- '3 - DISMISSED without pronounce•ent as to costs.