CTA Case No. 4702

DECISION

- 2 - D tn~ in g t h e pet~ i o d co v e t~ i n g t h e m on t h s o f J' u 1 y t o December, 1989, petitioner removed, shipped and sold substantial quantities

of Beneficiated Nickel Silicate

ore and ctn~omite ot~e and as a consequence paid excise taxes in the amount of six million two hundt~ed seventy seven thousand nine hundred ninety three and 65/100 pesos <P6,;:::T7,993.65) in compliance with section 151 (3) of the Tax Code.

The 5'1- excise tax was based on the amount and weight shown in the provisional invoice issued by

Taganito Mining

Cot~pot~ation. These metallic minet~als are then shipped to

Japanese

buyers where these minet~als at··e analyzed allegedly by independent sut~veyot~s upon unloading at its pot·•t of destination. The pt~ocedm~e seems simple enough, except fot~ the fact that analysis abroad would oftentimes reveal a different value for the metallic minerals from that indicated in the temporary or provisional invoice submitted by se 11 et~ Tagan ito Mining Cot~poration.

Thet~e is almost always a vat~iance in "mat~~<et values" between that shown in the pt~ov is i onal invoice and that indicated in the final calculation sheet pt~esented by the buyet~s.

A

compat~ison betlo'Jeen the values found in the two invoices is illustrated hereunder. 723

DECISION

C.T.A. CASE Ne. 4702 - 3 - A. FIRST SHIPMENT — JULY 30,1989

FROVISIONAL INVOICE FINAL INVOICE

Quantity - 18,073, 300 DMT Quantity - 17,898,873 DMT Nickel content = 2.4% Nickel content = 2.53% = 18,073,300 x 2.4 = 17,898,873 x 2.53% = 433,759 Ky. = 447,781 Kg.

Unit Price = US$ 3. 42/Kqg. Unit Price = US$ 3.4 Kg.

Total Frice Total Price

= US# 1,483,455. 78 = US$ 1,559,173. 44 B. SECOND SHIPMENT — OCTOBER 6, 1989

FROVISTONAL INVOICE FINAL INVOICE

Quantity ~ 18,163,600 DMT Quantity ~- 18,183,866 Drt Nickel content - 2.45 Nickel content ~ 2.48 = 18,163,600 x 2.45 = 18,183,866 x 2.48 = 445,006 Kg. = 451,869 Kg.

Unit Price = USt 3.44/Kq. Unit Price = US$ &.96/Kqg.

Total Frice Total Frice

= (S$ 1,523, o52. 56 = US$ 1,337, S32. 24 C. THIRD SHIPMENT — NOVEMBER 20,1989

FROVISTONAL INVOICE FINAL INVOICE

Quantity ~ 15,494,500 DMT Quantity - 14,638.977 DMT Nickel content - 2.45 Nickel content -—- 2.46 = 15,494,500 x 2.45 = 14,636.977 x 2.46 = 379,615 Kg. = 360,119 Kgs. Unit Price = USt £.94/ kg. Unit Price = US$ #.94/Kq.

Total Frice Total Frice

= US$ 1,117,017. 14 = US$ 1,961,450. 75 D. FOURTH SHIPMENT — DECEMBER 27,1989

FROVISTONAL INVOICE FINAL INVOICE

Quantity ~ 18,200,000 DMT Quantity - 17,971.8790 DMT Nickel content ~—- 2.45 Ky. Nickel content - £.49 Kg. = 18,200,900 x 2.45 = 17,921,870 x 2.45 = 445,900 Kgs = 441,209 Kgs. Unit Price = USt <.94/Kqg. Unit Frice = US$ =. 48/Kq.

Total Frice Total Frice

= US$ 1,312,960. 75 = US$ 1,096,095. 52 724

- 4 - E. FIFTH SHIPMENT < Chromite> NOVEMBER 21,1989

PROVISIONAL INVOICE

Quantity -

3,800 DMT Ore content - 38% Unit Price = US$ 70.00/Kg.

Total

p~~ice :::US$ 266,000.00 FINm. INVOICE

Quantity -

4,380.317 DMT Ore content - 38% Unit Price = US$ 70.00/kg.

Total Price

= US$ 305, 6i=:2. 19 .The differences as shown reveal that variances occur in the weight of the shipment or the price of the metallic mine~~als pe~·· ~dlog~~am and sometimes in theit~ metallic content ~~esulting in disct··epancies in the total selling pt~ice. Be that as it may, it is always the p~~ice indicated in the final invoice that is detet~minative of the amount that the buyet~s ~~ill eventually pay Taganito Mining Corporation. Petitioner on its part has no quarr~l with the p~~ice that they will t~eceive ft~om the clients for the metallic minet~aJ.s sold, it howevet~ claims that thet~e has been ovet~payment of excise taxes alt~eady paid to the government d~claring that the 5% excise taxes were based on the amount indicated in the pt~ovisional invoice and final computation show that if it based its excise taxes on the amount shown in the final invoice, which they asset~t is the actual mat~l<et value, they would have been required to pay a lesser amount, computed as follo\I'Js:

725

DECISION

C.T.A. CASE No.

4702

-S5 -

SHIPMENT COMMODITY FINAL VALUE

NO. (in pesos ) 1 Nickel 34,078, 880. 07 2 Nickel F29,187, 720.03 3 Nickel P23, 668,157.51 4 Nickel Fe4, 537, 340. 73 1 Chromite FL 6, 835,198. 39 Total F1LL8, 307, 296. 73

Less: Excise Tax Paid

Overpaid Excise Tax

Fetitioner opted to pay the excise

CORRECT EXCISE TAX

(5%) Pl, 703, 944.00 Pl, 459, 386. 00 Fl, 183, 497.88 Pi, 226, 867.04 FB 341,759.91 PS, 915, 364. 83 P6,277, 993.65 P 362,628. 42 taxes quarterly basis and made payments on the following dates:

DATE PAID AMOUNT

July 20, 1989 Be 250,000.00 September 21,1989 Fo 120, 000.00 October £0, 1989 Fi, 376, 296. 40 November 6, 1989 Fo 120, O00, 00 November 7, 1989 FE IO, OOO, OO December 18,1989 Po 12Oo, 000, 00 January 19,1990 4,241,787. 25 Total FG.277, 993.65 {see Exhibits "I", "FRA", "TRI", "Tere", "IO R", "I-3a", "E-4", “Tegal, "I-3", "“I-Sa", "“I~-6") Fetitioner would like to impress upon us that it is entitied to claim for a refund of excise taxes in the amount of FSG6c¢,628.82 because the actual market value that should be made the basis of these taxes is that amount specified by the independent strveyor abroad after analysis of the products and indicated in the final calculation sheet. To strengthen this assertion, petitioner mentioned the fact that even the government in receiving the royalties die it from the mining 726 - 6 - COY'pot~ation based the 5Y.

fot' nic~<el and BY.

fot' cht'omite fees in the amount indicatf~d in the final invoice, which is the t'ate detet~mined aftet' its analysis

Respondent

in het~ ans\'H~t~ pt~esented as special and affirmative defenses the following: E...

claim fot~ is pending administrative investigation; 7.

The tax in question was collected in accordance with lc::o.w;

8.

In an action fot' t'efund, the but'den of pt~oof is upon the taxpayer to establish its right to refund.

Failure to sustain the burden is fatal to the action; 9.

Mere allegations regarding refundability do not ipso facto merit the refund claimed; 10.

Claims

fot~ of taxes at'e constt~• . .ted s t t~ i ct l. y against c 1 a i m e:m t , the same be in g in the nat t.n' e of an exemption.

Respondent

in her memorandum raised the issue of prescription claiming that the petitioner's right to claim fot' a t'efund is ah~eady bat't'ed having been filed beyond the 2 yeat~ pt'esct~iptive pet'iod.

She based this argument on her theory that the prescriptive period of 2 727

- 7 - years should be counted ft~om the time specified by the law for payment and not on the date of actual payment. In the case of excise t<:~xes on minet··al pt~oducts, the law t~equit~es that these should be paid upon t~emoval of the minerals. Section 151 (c) of the Tax Code provides: "<C> Time, marmet·· and place of payment of excise Tax tn·· minet~al and minet··al pt~oducts unless othet~wise pt~ovided, the excise tax on minet~als ot~ minet~al pt~oducts shall be due and payable upon removal of the minerals or mineral products or quarry resources from the locality whet~e mined or upon t~emoval ft~om customs custody in the case of impot~tations." Records show that petitioner did not pay the excise taxes upon removal but availed of the quarterly scheme of payment, the last payment of which was made on ~Tanuat~y 1 '3, 1990.

Petitionet~

howe vet~ maintains in its memorandum, that pt~escl·"'iption not having been t~aised by respondent in her answer can no longer raise it in issue.

Respondent

also attacked petitioner's failure to post a bond when it subsct··ibed to quat~tet~ly payments of the said excise taxes citing as his basis, Section 151(c) of the Tax Code which provides in part: Any person liable to pay the excise tax on locally pt~oduced ot~ extt~acted minet~al, minet~al pt~oducts ot"' quat~t~y t~esout"'ces shall, befot~e removal of such pt~oducts file, in duplicate, a return setting forth the quantity and the actual mat~~<et value of the minet"'al or minet··al products to be removed and pay the excise taxes 728 - 8 - dtH?

thet~E!on to the co 1 J. ect ion agent,

<H~ the

tl·~ e a!:. a_u-~ e Y' o f t h e c i t y o t~ m u n i c i p a J. i t y o f t h e place where the mine is located except as therein below provided.

However

the output of the mine may be removed from such locality without the pt··ep<:71yment of such f~xcis£·! taxes if the lessee ownet··, tn~ opet~atcn~ of the mining claim shall f i 1 <·?

a bond i n t h e f o y~ m and am o u n t and w i t h such sa_n··et ies as conditioned upon taxes.

t h e Com m i s ~; i DTHn~ the payment of may t~equi t~e, such excise It is the contention of the t~espondent that failw~e to post a bond is enou[.;th y·•eason to deny petitionet~'s claim for a refund.

At~guments pt·•es€~ntf.~tl to us by both pat .. ·ties show the:\t this is not just a simple case of refund where the only issue to be t~esolved is l<'lhethet~ OY' not the taxpayet·· is entitled to a t··e fund, more than this, it question of intet~pretation of the pt~o\d~;ion of the

Ta><

Code, pm··ticulat··ly Section 151(3) as applied to minet~al products extt~acted in the PhilippitH~s but ~;old atn~oad.

What then should be the basis of the excise taxes?

What

is the meaning of the actual market value as mentioned in th~? Tax Code?

This case also 1···aises the issue of pt~esct~iption l<'lhethet·· the t~'lo-·yeat·· pt~esct~iptive pet~iod fat~ claiming a refund should be reckoned from the actual date of payment of the t<:\X

OY'

ft~om the due dc:'lte of payment pt~ovided by the law.

729

DECISION

C.T.A. CASE Ne. 4702 We shall first tackle the issue of prescription.

Petitianer ain ats reply memorandum contends that respondent can no longer raise the issue of prescription hecanuse nowhere ain her answer or curing the entire proceeding did she aver that defense, besides it is the gpinien of the petitioner that the claim for refund was Filed an time, This Court finds that the petition for review was Filed within the period pravided by law. Fetitioner paid the excise taxes an a quarterly basis, the last and final yayment being on January 19, 1990. The claim for refund was filed on September 21, 1990 and the petition for review was received by this Court on January 17, 1994, The Supreme Court has ruled that if a tax is paid on installments or only in part, the period is counted from the date of the last or final payment until the whole or entire tax liability is fully paid (Comm. vs. Prieto, @ SCRA LOoOOys Comm. vs. FPalanca, 18 SCRA 496). Tt ais but legical ta infer that the period shauld be counted from Full payment because ait is only then that one can determine if there was overpayment.

We do not agree with the contention of respondent that the two-year period should be reckoned from the due date of payment and not on the actual date of payment.

730

DECISION

C.7T.A. CASE No. 4702 Section 230 af the Tax Cede clearly pravides that the two

(2) year prescriptive period far the recovery of the tax (ist erroneously or illegally ceallected shall be reckoned from the "date of payment of the tax or penalty regardless of any supervening cause that may arise after payment", thus:

SEC. 230. Recavery af tax erraeneausly ar illegally collected. ~ Wo suit or proceecting shal he maintained in any caurt for the recavery af any national internal revenue tax hereafter alleged to have heen erroneously or illegally assessed or collected, or of any penalty claimed ta have been collected without authority or of any sum alleged to have been PXCASELVE ar in ary manner wrongfully collected, until a claim for refund ar credit has been duly filed with the Commissioners tut such suit or proceeding may be maintained, whether oar not such tax, penalty, ar sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be begun after the expiration of two ears from the date of payment of the tax or genialty regardless of an Siupervenin Cause that mex arise after yaymernt s Provided, however, That the Commissianer MAY. even witheaut ai written claim therefor, refund or credit any tax, where on the face of the return upean which payment WAS made, such payment appears clearly to have been erroneously paid.

We cannot entertain petitioner? s plea that prescription can no longer be raised for the first time if it was not made an issue in the answer af respondent because the issue of prescription determines whether or not this Court has jurisdiction to consider this petition 734 and it is a well-settled rule that the question af lack of jurisdiction can be raised anytime even on appeal.

As to the matter of actual market value as basis for the &% excise taxes, we cite the specific provision of

Section 15163) of the Tax Code:

On all metallic minerals, a tax of five Percent (3%) based an the actual market value ef the gross output thereof at the time of removal, in the case af those locally extracted or produced: ar the value used by the Bureau of Custams in determining tariff ancl custams duties, net of excise tax and value~added tax, in the case of importation, This Court takes notice of the phrase at the time af removal”. The law refers toa the actual market value eof the minerals at the time these minerals were moved away from the position ait oaceupied, obviausly referring to Philippine valuation and analysis because it is in this cauntry where these minerals were extracted, removed and eventually shipped abroad. To reckon the actual market value at the time af removal is also consistent with the essence of an excise tax. Tt is a charge upon the privilege of severing or extracting minerals from the earth, and is due and payable upon removal of the mineral products from its bed or mines (see Republic Cement vs, Comm, £3 SCRA 967). The law is clear. It does not speak of actual market value at the time the mineral products are unloaded at the country of destination neither daes 732

DECISION

C.T.A. CASE Ne. 4702 it speak of the selling price as the basis of the excise tax. The law even requires payment of excise taxes upon the removal af the mineral er mineral praduct or quarry resources from the locality where mined ar upon removal from customs custody ain the case of importations (Sec. LSite) af the Tax Code). It would then necessitate an analysis of these metallic minerals upon its removal to be able ta accomplish the payment of excise taxes as required by law. Furthermore, it wanld be impossible for ane to comply with the date prescribed by law far the payment af excise taxes if one has to wait for the final a analysis ta be done in the country where it is to he shipped and certainly impractical as what the petitioner has done, to base the excise tax on the valuation done here ain the Philippines and then later on claim for a refund if ait appears that the final analysis accomplished abroad reveal a much lower price.

This set-up established by the petitioner 158 contrary to the principle of administrative feasibility which is one of the basic principles of a sound tax system. Yax laws should be capable of convenient, just and effective administration which is why ait fixes a standard or a uniform tax base upon which taxes shoauld be paid. In the case of excise taxes on minerals and 733 mineral products, the basis provided by law is the actual market value af these minerals at the time of removal. Fetitieoner argues that excise taxes should be based on the amount indicated in the final invoice because the government ain receiving its royalties acknowledges this amount as its basis. We disagree with the reasoning of petitioner because excise tax is different from royalties. Exeise tax as earlier mentioned is a tax oan the privilege of extracting minerals from the earth while royalty as the term is used and understood in mining and oil aperatiaons means a share in the product or profit paid to the awner of the property ‘(Words and Fhrases, Vol. aA, pe G0). Therefore rayalty paid to the government is rightfully based on the amount indicated in the final invoice because it is this amount which will be received by the seller from the buyer as consideration for the sale of mineral products.

It is well settled ino aur jurisdictien that tax refund cases partake of the nature of an exemption, and as such, tax exemption cannot be allowed unless granted in the mast explicit and cateyorical language. (Resin Inc. vs. Auditor General of the Fhil., et.al., G.R. No. 17888, Get. 2&9, 19809; Union Carbide Phil. vs. Comm. of Internal Revenue, CTA Case No. €476, Aug. 15, 1983).

734

Lastiy, taxes are whak we pay for mivilized society, Wibbeuh bases » the gevoernmcmenck would he paralyzed for lack oy khe wabive paca ery bs ativekbe ancl operate it.

({Clommiasianer of Inbernal Hevenue ve. Algue, Ine., Jaa

SLR

IN VIEW OF ALL THE FOREGOING, petitioner’ «s claim for refund on the amount af FUsbe, hes. Ac is hereby denied with conke ayainget pebitioner, 50 ORDERED.

MANUELLK. GRUBA fissaciate Judge

WE CONCUR:

(lin Leave?

ERWESTO Dp. ACOSTA

Aresicdiny Judge

-/ 4 RAMON O. DE VEY

Aasaciabe Tacipe

CeERTITF £eAest toon { hereby cearbity that this deciscian was reached after due consultation among the members of the Caurt af Tax Appeals ain aceerdance with Seectian 13, Article VAN of bine GConsbibtutvian.

GRUBA

nachiy & fourk af Tax fippeals 730