Lepanto Consolidated Mining Company, Inc. vs. Commissioner of Internal. Promulgated: | a

DECISIO N

C.T.A. CASE HO. 4172 Promulgated

SEP 0 11994

/ Thil3 is a judicial claim for refund filed by petitione r seeking to recover 25X of t h e specific taxes paid on various manufactured oils and fuels pursuant to the provision of Sec. 5 of Republic Act No. 1435 in the amount o£ Pl,056,316.90 covering the period of March 1985 to February 1987.

The facts of the cas e are nat disputed. Respondent either admits or merely denies far lack of knowledge the material allegations in the petition and raises defenses that are legal in nature. Petitioner is a domestic corporation duly organized and existing under the Philippine laws. lt is a licensed mining firm with Mining Lease Contract Nos. MRD-353, 354, ~3 1

DECISION ~

C.T.A. CASE NO. 4172 and 355 (Exhs. PAS, “A-1", "A-2") duly entered into with the Ministry of Natural Resources.

In erder to carry aut its mining business, petitioner purchased petroleum products from various oil companies which were subjected to specific taxes under Sees. 1593 and 156 (formerly 142 and 145) af the National Internal Revenue Code. These specific taxes were paid and pagsed an to the petitioner.

Qn June 15, 1987, petitioner filed a letter claim for a refund or tax credit (Exh. "I") with the Bureau of Internal Revenue asking for the recovery of 25% of the specific taxes paid on refined and #anudectured mineral cils, motor fuelm and diesel fuel oils during the period Narch 1985 to February 1987 in the amount of P1,056, 316.90, computed as follews:

Volume ST fete Specific Refundable iLiters) Per Liter Jexes Paid y=) Lepanto Hine Division Diesel - Mar, to Dec. 1985 1,524,748.20 No ST Jen. to Ray 21, 1986 621,036.60 No ST Hay 22 to Dec. 1986 894,638.70 PO.523 P 467,89%.04 P 136,974,0) Requiar Gasoline - Mar. to Lec. 1985 106,253.60 1.290 137,067.14 Jan. to Ray 21, 19% 34,973.00 1.575 86, 503, 73 lay 22 to Dec. 1986 $1,781.70 2.489 12, 959, 55 242, 958. 30 __ 496, 530, 42, 109, 132. 61 Extra Gasoline - Nar. to Dec. 1985 $2,457.60 1.185 14, 762, 26 ; Jan. to Hay 21, 1986 5,667.00 1.490 6,741.83 Nay 22 to Dec. 1986 9,856.70 2.489 __ 24,593,353. 28,181, 30. 48,037, 42. 12, 009. 36 Lube-oil - Mar. to Dec, 1985 285,349.00 4,50 1, 284, 970. 30 832 Vs DEGlSION - G.T.A. GASE NO. 4172 ~pjnt~~~ · viaion Jan. to ftay 21, 19Sb ftay 2Z to Pee. 1986 Bunker - liar. to Dec. 1985 Jan. to llay 21, 1986 llay 22 to Dec. 1986 Aviation Turbo Jet Fuel - liar. to llf>e. 1985 LPG - liar. to Dec. 1985 Jan. to llay 21, 1986 liar ~:2 to Dec. 1986 Aviation Departaent Aviation lurbn .let f'uPl - ftar. to lll>c. 1985 Jan. t~ J!ay 21, 1986 l!ay ~!2 to Dt>c. 1986 T 0 t A L <see Exh. "H'I Vt~lu tLHruJ 120,~131.00 ~~711~,!00 593,472.00 46,311.8 K 2 .972.4 K 4s,m._u ST Rete Per Liter 4.50 4.50 0.25 0.443 0.51\ 1.20 0.625/K 0.029/K 1.247/K 1.20 1.509 2.'!1J7 This claim for r fund w Specific l'ax!'S Paid 544,189.50 8421364!00 2,670,624.00 12,662.50 55,911.92 166 4 1. 47 ___]15~!!2._ l, Q93. ZQ..

28,944.88 695.20 571354.89 861994. 97 99,948.00 66,(1f?7.04 !72,47l.GO .

Refundable 25t 667, 656.00 58,766.47 273.30 21,748.74 3 466.64 69,756.41 P~267 . S8 Pl, OS6,316.90 nchored on Sec.

5 o:f Republic Act No.

1435 and h D tision of the SuprPme Court in the case of lnaula Lumb r Co . v. Court o:f Tax Appea1s, G. R.

No.

L- 1057, May 2 9 , 1981.

And was suppo r t e d b y A:f~ i d a v its of its Senior Vice-Presi dent and four <4> disinteres ted pers ons <Exhs. "I-1" to "1 -5 "> attesting to the ~ a ct that the petroleum produc ts p ur chased f r om various oil c ompanies were exclusively and a ctually used in t he exploitation and opera.tions . o~ its mining cl aims.

(}33 ,I U£CIS1Uri. - C.T.A. CA E NO. 4172 - 4 - Respondent has not ac ed on the claim filed by petitioner.

Thu ~n order to toll the -running of he ,I two-year preecri tiv p . r otl unde Sec.

230 (formerly 292 ) of the N iona Int rnal Revenue Code, petitioner filed the in t.n J.l t . . Oft ' v ew on July 1, 1987 praying for the refund of Pl, 56. 316. 9 ~ a 20X interest per annum; a nd h o of ui t..

Respond nt n h , An nd by way of s p cial and affir mative def na r h .fol l owing:

a.

the refund pr vile und Sec. 5 of Republic Act No.

1435 h s ei h xpired o is de@m d superseded and I or repe Jed wi h the .. su no nd/or p omulgation of ' an y of P. D.

Nc1.

14 ; Local Tax Co e 1974; P. D.

No.

4 26; P. D.

No. 711 :

P.O. Nos .

1 58 and 158-A; and P.O.

No. 1955;

b.

the government cannot be made to pay interest on the amount to be refunded <At.J.as FertiJ. · zer Corp. vs.

CIH, 100 SCRA !:•5 6 r CIH vs. St. Paul. ' a Hospi tal. o:f Iloilo, 105 Phil. 1 3 19 > ;

c.

it is incumbent upon petitioner to show that it has complied with the provisions of Sees.

243 and 246 (now 230) of the 1986 Tax Code ; and d.

claims for re1und of taxes are construed strictl y ag8inet claimants, t he same being in the nature 83 4

DECIS ION -·

C. T . A. CASE NO. 41 T2 - 5 - of an ex~mption from taxation <Manila Electric Co. va.

GIR, 6? SC:RA 357 >.

The only issue to be eaolved by this Court is whether or not p it.ione:r s still entitle d under Sec .

5 of Republic Act No. 1435 to he re und of 25X of the specific taxes p ·d on pet. oleum products taxed under Sees . 153 and 156 <:fa merly Sec • 142 and 145> of the 1977 Tax Code.

Respondent main ains, in his Memorandum, that the refund privilege unrlPr Sec:. .

!:• of RA No.

1435 was withdrawn by promulgation i HA No .

19~5 which became effective on October 1-, 19B4. We d:Lsagree wi t .he respondent.

Spc. 5 of Republic Ac t No. 435 p.r·ov:ldes :

Sec.

The proc . r· ~ lro: ot he addi t ional t.ax on manu:f act.ured oi 1 t:) ollol .l ccrue tc• the road And bridge 1undl n t n pol tical subdivi.ion for whose> ll PnP:t · t i .h .

tax is c ollected:

Provided, however, Tha whenever any oils mPntioned abnve ·rp ae d 'Y miners or fnrest conc1:ossionai:r·es in th4"'.' T ope At-i ons , twenty- five per cen um nt he vpeoific tax paid ther1:oon shall bt=> r ·r nJrlf"'cl by the- Cnl lector of lnte:cnal ReveTHH? upnn . llt•miBs ·on cd proof of Actu''*l usP o:f c:• 1 an<i Hnder· simi ar c:ondit.ions •numerated n suh-parRgraph~ one and two of section one hereof, am nding ~ecti on one hundred for y - w of the ln rnal Revenue Code:

Provided, further. Th t no read sha 1 be constructed unless the e or location thereof shall have be n approved by the Commissioner of Public Highw ys a:fter a dete:rmination ·that such road can be made part of an integral and articulated route in the 835 .I

DECISION -

C.T.A . CASE NO. 4172 Philip·,ine Highway section twen y-s·x Act o:f 195:-t.

- b - System , as required in of the Philippine Highway It is ~xp1i ci from the above- quoted law that miners and :forest concessionaires were given a r e :fund privilege E?quivalent to 25:1.

oi the specific taxes paid manu:factured oils ac .ua ly userl :n heir operations .

The r8tjonale ~eh'nd this gr nt was •xplained through a re1:::c•1ution tty C:ourt in t.he case o:f Cnm ission :r o

v. Atlas Consolidated 1 -~ G. R. No.

9:3601 , Nov.

1 ' .

..:.., 1 y·~o:

A TPAding h 1 n e i ve proceedings leading to the of RA 435 shows that mi ninq and nmb . n .

sicanaires wer ~ ~rant ed partial rP und o1 pPcif c axes because the g~s •line an ~tPl h~y consume is mos ly used wjthin t ir own compuund~ and roads.

RA 1435 gave t hese conce ~ on~i eB rPlief , i n .he :form of a tax ,e:.f untl, : ru~ ~ E-ir · rucks and ve-hicl•?s SP.ldom ply the:- 11~t ·. nnal h ighwa y , the const r•Jction of w 1 • ch · f1 :fundpcl by t f!> spe~:i fj c t a:x r.n llec. ed by ttteo nat_ioua l government.

There ·ic:: there_ .11 ·e nn r-atic•r1ale- in c Jn itioning the qrant of reiund on the paymen o£ these mining or lumber c oncess onaires o£ any additional local tax. Furthe r ~ ~n h& cas~ oi Com ~s o ner o~ Internal RPvenuP v.

Rio Tuba N-ckP.l Mininn Corporation and Court o1 Tax Appe~la, G.R.

Sept .ernber 30, 1991 <202

SGRA 137)'

the Supreme Court Third Division held :

"<t>o a r mind, he prov · so in SPc ~on 5 standing alone is enough basis £or the gr nt oi refund. )C}t)( •• 836 ) )I·:C f!->ION - C.T.A. CASE NO. 4172 - 7 - Findinp for p titi ner , th~ only hing left to be dete minPd Py thiG Cour~ is he am unt of specific ponctent Commissi oner of itioner.

It a :;1uld b .

lfl d elf> r thnt pet ioner asked for fl er nq purchases of 111anuf a c Ur•. d ebrua y 1 9 87.

Hnwever, si.nc.e the 1-i'!Jhwny t'pl"'r::it_l f'und ( >J fund on which t .he speci .f ic taxes on rP roleum pTO ~U C.tS accrued) cont.inued .its existence only up to 1 CJS~, petitioner can only be accorded a refund privilege on its purchases of refined a nd manufactured oils for the year 1 985 <see Commissioner of Inter nal Revenue v.

Jho Tuba Nickt?l Mi n inq Corp oration, G. H .

tlc.•s .

~3!:•H::~ - 84 , Resolution d a t .ecl r1:::tT c h ~5 , .l9Y2) .

1t follow s , therefore , hat t he parti al TP.:funti of specific ta:-ces pa:i d on pet rolPu m pro d tcts l1y petiti oner from January 1986 to February 1987 <Ex h s . "B - ·'

1. 76" to "B ·-468 ", "D-1 " t. o "D- 1.18" , "F - 14" t o " F-27" , "F- 4 2 " to "F ·-46", "G-233 " to "Li-5lrt") is no longer c overed by t.he refund privilege under Sec. 5 of RA 1 4 3!:•. Further , this Court would like to emphasize that the j udici a l remedy for filing a claim for refu nd should be made within a t wo-year period :from the date o:f payment of 83 ?

DECTSION -

C.T.A. CASE NO. 4172 the tax pursuant to the provision of Sec. 2390 (formerly Sec, 292) af the Tax Cade.

In computing for the prescriptive period, We shall adopt our ruling in the osse of Aras-asan Timber Co., Inc. v. Cowwiesioner of Internal Revenue, CTA Case No. 3524, December 17, 1993, where We followed Seotian 135 of the Tax Cade as a wanher in paying ter the specitic tax. We quote:

The Tax Cade pravides fer the judicial remedy af filing a claim for refund within a periad of twa (2) years from the date of payment of the tax pureuant tao the provision af Section 230 (farmerly 292), Section 135 of the Tax Code insefar as pertinent provides “that mpecific taxes an locally manufactured petroleum products levied under Sectians 153, 155 and 156 of this title, except luhricating oil and qrease shall be paid within fifteen (15) days fram the date oaf remaval thereaf fram the place of productian.

it is therefore evident that the manufacturer of petraleun pooduct has up to 15 days f:rom the date of its removal within which te pay the specific taxer an lacally manufactured petroleum products. As an exceptian, manufacturers of lubricating c«diis and qreare have to poy the specific tax collected from the purchaser on the date of its remaval fram the place of praduction.

Inasmuch as the petition for review was filed only on July 1, 1987, petitioner is then bound hy prescriptive period. The 25% refund of specific taxes paid an lubricating oils purchased prior to July 1, 1985 (twa 838

DECLSION -

G.T. A. CASE NO. 4172 years prior to the filing ef the petition) have prescribed since the specific tax on lubricating oils and qreaBpe are deemed paid _— the date of removal. All cther purchases of manufactured petroleum products such as diesel, gasaline, bunker fuel and aviation gas, where the specific taxes are collected, are deemed paid on the 1Sth day following the date of its removal. Thus, petitioner’s purchases of diesel, gascline, hunker fuel and aviation gas priar td June 16, 1985 have prescribed {(Exhs, ")-119" to "D-189" and *G-1" to "G-55") and those purchases ef said oils on June 16, 1985 are deemed paid on July lt, 1985 which is still within the two-year period to claim for a refund.

Fram sadog the exhibits presented by petitianer, this Court excluded in the computation:

1. Exuhp. eRe. ta "B-A75" and Exhs, "F-3" tea *F-41" in ea far ae the purchases pertain tao diesel fuel cil since petitioner did not pay specific tax thereon (see Exh. "H"™);

2 Fuhs. "D-AS6E" to "D-192" for ‘ the reason thst said documents vere mere reproduction ef Exhs. *"D-318" ta *D-155": and

ECTSION -

DEC C.T.A. CASE NO. 4172

a. Esha. "G-1" tea °G-232" on the graund that yetitiaoner failed to give the praper converaion rate of LPG in pounds to liters, What can be granted to petitioner Lepanta are the following:

Invoice Pate Hle and Bunker Avistion Ho. Shipped Exh. Gennline Lubricants Fuel Oil Baro line I2787 MG-28-BS BI 3,00 41029 (07-08-BS B-19 3, 000 41064 07-12-85 B-23 3, 00% 43380) 07-19-85 B-25 3,000 41194 07-19-85 8-28 3, 000 41158 07-19-85 A-M 3, 000 41324 07-33-85 B-41 3, 000 414 08-02-85 8-47 3,000 $4755 (8-22-85 8-34 3,000 44763 OB-22-85 B-55 3, 000 44765 QR-22-85 8-6 3,909 4°44 09-12-85 8-62 3,000 4ESGS 10-02-85 8-83 3, 008 $6604 10-94-85 B-88 2, OO 4£619 10-04-85 B-B9 2, 587 46619 10-15-65 8-90 2,960 46624 30-07-85 8-99 (2,970 $9607 10-15-85 8-104 2,57 ABBY} 10-55-85 8-305 3,94 gebhh 38-05 A-910 10,00) 42794 10-78-85 B16 3.000 M8752 10-78-85 R197 3, 00) 48772 10-X-85 A318 2, FEN 49795 13-02-85 8-120 3, 000 4PQ19 1-€4-85 B-125 10, Goa 48878 13-07-85 8-127 10, 000 ARQ27 V4-21-85 B-39) 10, 000 $9006 17-15-85 B-199 3, O00 49081 21-15-85 8-340 4,000 49902 11-19-85 B-147 3,008 S9992 13-21-85 8-145 10, 000 S9605 11-25-85 8-148 3, 000 840 DECTSLON - .

G.T.A. CASE NU. 4172 Invoice [ate Qilg and = Bunker Aviation No, Shipped Exh. Gasoline Lubricants Fuel Oil Gasoline 49628 32-28-85 8-150 3,000 49627 14-28-85 B+159 3, 980 49743 12-06-85 B-159 9, OU 49806 17-10-85 B-162 3, 000 49802 17-12-85 B-164 9,000 49895 37-16-88 8-368 9, 000 ; 18794 05-07-85) p-129 4,189,00 1879 1-07-85 0-120 994,00 LAIR 11-85 D122 1,617.00 18%4 0-29-85 1-123 1,018.70 16967 (12-14-85 124 1,041.60 18968 03-16-85 D125 4,125.70 18992 03-28-85 D-126 693.390 18993 03-28-85 D-127 1,299.00 172% 04-03-65 D-128 816.80 17258 01-03-85 p-129 913, 40 17261 04-04-85 D-190 71.0 17262 4-04-85 0-191 281.70 17266 (4-07-85 D-192 726..00 17282 04-13-85 D-193 629.0 17336 04-11-85 D-194 1, 030.00 17292 04-18-85 D-135 781.00 17298 04-20-85 1-196 602, 90 17462 04-26-85 D-137 914, 40 17464 04-26-88 D-328 545,20 17479 05-0)-BS 2958 . (6a. 20 17480 05-01-88 D140 : )4. 80 17487 05-07-85 D-141 200,00 17492 05-10-85 D-142 780.70 17494 05-10-85 D-143 1, 466,00 7701 (5-14-85 0-144 1,057.00 17709 05-16-85 0-145 1,166.50 J7715 (5-18-85 D-146 658,60 417733 05-27-85 -147 960. 40 17739 05-33-85 1-348 776.00) 19001 06-11-85 e149 . 795.90 19002 06-11-84 1-350 1,446.50 1907 06-14-85 15) 75.50 19010 06-15-89 D182 Ma. 0 19014 (6-398 D159 784.50 19022 (6-24-85 D-154 972.0 19028 (6-26-85 1-155 929,50 19939 11-03-65 1-193 841.00 19962 11-06-85 D-194 1,335.90 20004 11-08-85 D-195 1,747.10 20012 43-11-85 D-196 1,422, 00

DECISLON -

C.T.A. CASE NU.

Invoice Date No, 2016 20020 20029 20034 20040 19732 19708 19712 1972) 19723 19724 gi 1S7R 19743 19745 19039 19040 49203 19232 49225 19248 19240 19249 19435 1946) 19463 19499 19496 19704 19706 20044 249 20553 Shipped 11-14-85 32-18-85 12-25-85 11-26-85 11-29-85 4-02-85 10-04-85 3-07-85 1-96-85 13-18-85 10-19-85 10-23-85 0-28-85 10-90-85 10-33-85 (17-08-85 (17-06-85 07-45-85 (7-39-85 17-24-85 98-01-85 08-16-85 8-09-05 08-17-85 08-20-85 09-02-85 09-03-85 09-36-65 (19-39-85 09-24-85 09-27-85 32-09-85 12-07-85 2-29-85 12-32-85 12-17-85 §2-38-85 12-21-85 12-29-85 42-29-85 12-26-85 12-27-85 08-26-85 08-06-85 13-08-85 12-14-85 4172 Exh.

b-197 p-198 -193 D-200 D-201 D-202 D-203 0-228 0-229 h-2390 231 D-222 D-233 D-234 N-235 D-2% b-237 -238 D239 Fe2 F-4 P-13 F+32 Gasoline 84 5 - 32 - (ils end Bunker Lubricants Fuel 03} 60 4,260 630 1, 2 Aviation Gasoline 1,095.90 1,480.20 747.00 1,124.50 1,046.90 1,471.30 805, 80 1, 455.00 1,145.50 1,415.00 713.9% 77.80 1,376, 40 1, (24,90 790, 10 850. 70 740, 00 1, 235. 60 1, 066. 00 1, 284.10 961, 50 1,033.20 1,173.50 1,774.30 654.00 1,242.00 1,692. 80 847.90 799.00 ABO. 00 1, 0%. 30 1,398.70 " 872.00 1, 805.00 719.00 1,423.70 1,010.60 _ 870.00 840,10 841,00 680.60 986,00

DECISION -

C.T. A. CASE NU. 4172 -~ $3 - ‘Invoice Date CQils and Bunker Aviation No, Shipped Exh, Gasoline Lubricants Fuel Oil Gasoline

14503 03-15-85 F-28 210

(19896 03-08-85 F-90 210

14541 04-23-85 F-34 210

14553 05-07-85 F-35 210

14549 05-03-85 F-36 — 420

TOT Ab $2810 3:00 77,000 44,.662:00.

CONPUTATION OF PARTIAL REFUND

Rased or Seca. 1, 2 and 5 of RA 1435 Sperific Specific Renufsctured Bile Quantity Tax Pate Tax Gasoline 92,610.00 L 0. 08/1 P 7, 424. 80 Oiss and lubricants $040.00 1 O.O77E 392, 80 Bunker fuel of) (77,000 % 0.9439 # 1,000) 72.68 AT L.O0/NT 72.68 Aviation gasoline 61,662.00 L =O. 04/L 6, 532.3% Total specific taxes paid under Secs. 1 & 2 P14, JB3. 24 Multiply by percentage refundable ender Sec. 5 25k, AMOUNT REFUNDABLE P3992. 81 As regards the 20% interest per annum being claimed by petitioner, the rule is that no interest on refund of tax can be awarded unless authorized hy law or thé collection ot the tax was attended by arbitrariness (Collector 4. Prieto, 132 Phil 907; Cowmmtanioner v. Asturias Sugar Central, 2 SURA 1140; Commissioner of Internal Revenue v. American Rubber Co., 18 SCRA 842; Atlas Fertilizer Corporation v. Commissioner ot Internal Revenue, 100 SCRA 556; Shell Philippines, Inc. v. Central Hank of the Philippines, 162 SCRA 628). An action is fot arbitrary when exercised honestly and upon due consideration where there is room for two opinions:

$43 DECISION G.T. A. CASE NO. 4172 however, much it may he believed that an erronecus canclusion was reached (F.85. Noreno, Philippine Law Dictionary Lard Ed. J, xs.) 6 ©66o, Gditing Imperial Development Corporation v. Afiove:, QWHA7iU-AP, Auquat 23, 1979). Arhitrarirness presupposes inexcusable or obstinate disregard of Jleyal provisions (Victorias Milling Co., Inc. v. Commissioner of Internal Revenue, et al., 19 SCRA 430). None of the exceptions are fresent in the case at bar. Respandent’s decision denying pétitioner’sa claim far refund was based on an hanest interpretation of law. We, therefure, see ma reason why petitioner shauld he entitled ta the payment af interest.

Moreover, the Supreme Court held in the Ric Tuba cage that neo interest shall he charged in computing the 25% retund on specitic taxes uaaid (see Gupreme Court Resolution dated Match #5, 194%, supra).

In the same marner, pelitioner’s prayer hs the cast of suit cannot tbe awarded. ft. is an &iGubbeary rule that the qovernment shall not te liable tor the costs of suite unless atherwige previded by law (Set, Y Rule 142, Revised Rules of Court; Collector of Internal Revenue v. Convention of Philippine Baptist Churches and the Court af Tax Appeals, 2 SCRA 105).

© a a vss

DECTSLON ~

C. YT. A. CASE Nil. 4972

WHEREFORE, the petition for = is hereby GRANTED, Respondent im hereby orcered to REFUND af favor of petitioner the amount of Pu, S42. 81 representing 25% specitic taxes paid on learally purchaser gasoline, nails and lubricants, bunker fuel oils and aviation gasoline pursuant to the provision of Section 5 of Resiinig Act fin. 1435.

No pronouncement am to caste, SU OWDERED, | Cuz 2.

ERNESTO A. ACOSTA Presiding Judqe

WE CUONUUR:

GRURA Asgac:ia Judge 4 aad “ RAMON O, DE VEYA Associate Jude

DECISION ~-

G.T.A. CASE NU. 4172 -~ 16 - CERTIFICATION 4 hereby certity that this decision was reached after due cansultation among the members af the Court of Tax Appeals in accardance with Section 12 Article Vil at the Constitution.

ant Clavie ERNESTO 0. ACOSTA Presiding Judqe Court of Tax Appeals 846