Semirara Mining Corporation vs. Commissioner of Internal Revenue

DECISION

Page 2 of 25

Revenue (CIR) a s respondent, for the Court in Division, pursuant to Rule 4, Section 3 (a) (2) , in relation to Rule 8, Section 4(o), o f the Revised Rules o f the Court of Tax Appeals (RRCTA). Petitioner seeks the issuance of a tax credit certificate or refund of the final value-added tax (VAT) erroneously withheld by the Notional Power Corporation (NPC) and remitted to the Bureau of Internal Revenue (BIR) on its cool soles for the period covering January 1, 2006 to June 30, 2006 in the amount of P86, 108,626.10, broken down os follows: CTA Case No.

Period Covered

Amount of Claim

7727 January 1 to March 3 1, 2006 p 47,560,418.57 7783 April 1 to June 30, 2006 38,548,207.62

Total

p 86,108,626.19 Petitioner is a domestic corporation duly organized and existing under the lows o f the Republic o f the Philippines, with principal o ffice at 2nd Floor, DMCI Plaza, 2281 C hino Roces Avenue, Makoti City, Metro Monilo. 1 It is registered with the BIR os a non-VAT en terprise engaged in the cool mining business, with Taxpayer Identification No. (TIN) 000-190- ( 324-000 and OCN 8RC00000 1811 9.2 1 Par. 1, The Fac ts, Join t Stipulation o f Consolidated Facts and Issues (JSCFI) , Docket,

p. 237. 2Exhibit "A" .

''

SEMIRARA MINING CORPORATION v. CIR

Respondent is the duly-appointed Commissioner of the Bureau of Internal Revenue (BIR). with office address at the BIR National Office Building, Diliman, Quezon City.3 On July 11, 1977, petitioner's predecessors-in-interest, Vulcan Industrial and Mineral Exploration Corporation and Sulu Sea Oil Development Corporation, entered into a Coal Operating Contract

(COC)

with the

Philippine

Government, through the

Energy

Development Board (EDB) of then Ministry of Energy, pursuant to Presidential Decree (PD) No. 972. 4 Subsequently, the COC and all the rights, privileges and obligations appurtenant thereto were transferred to Semirara Coal Corporation (SCC) by virtue of a Deed of Assignments dated April 7, 1980. The term of the COC is until the year 20126. The COC implements the declared state policy stated in PD No. 972 to accelerate the exploration, development, exploitation, production, and utilization of the country's coal resources. In line with this policy, Section 16 of the said Decree provided for various incentives {. to operators. Section 16 reads in part as follows: "Section 16. Incentives to Operators. - The provisions of any low to the contrary notwithstanding, a contract executed under this Decree may provide that the operator shall hove the following incentives:

a) Exemption from all taxes except income tax;

SEMIRARA MINING CORPORATION v. C/R b) Exemption from payment of tariff duties and compensating tax on importation of machinery and equipment and spare parts and materials required for the coal operations subject to the following conditions:"

The fo regoing provision was in turn incorporated in the terms and conditions o f the COC, as amended, to wit: "SECTION V- RIGHTS AND OBLIGATIONS OF THE PARTIES

XXX

XXX

XXX

5.2. The OPERATOR shall have the following rights: a) Exemption from all taxes (national and local) except income tax;

XXX

XXX

xxx" Petitioner sells its coal production, under the COC, to the NPC, a government-owned and contro lled corporation, pursuant to a Coal Supply Agreement? executed between the NPC and petitioner in 1995. Petitio ner allegedly had been selling coal to the NPC fo r years without payment o f the VAT, pursuant to the exemption granted under PO No. 972, as amended, w hic h is embodied in the COC, as amended and as provided for under Sectio n 109 o f the National Internal Revenue Code (NIRC) of 1997 (prior to its amendment under Republic Ac t No. {. 9337). viz.:

"SEC. 109. Exempt Transactions.- The following shall be exempt from the value-added tax:

XXX

XXX

XXX

7 Exhibit "U".

. .'

SEM IRARA M INING CORPORATION v. CIR

Page 5 o f 25 (e ) Sole or importation of cool and natural gas, in whatever form or stole, and pe troleum products (except lubricating oil, processed gas, grease, wax, and petrolatum) subject to excise lox imposed under Title VI ;

XXX

XXX

XXX

(q) Tra nsactions whic h ore exempt under international agreements to whic h the Philippines is a sig natory or under special lows, except those under Presidential Decree Nos. 66, 529 and 1590;

XXX

XXX

xxx" Whe n Re public

Act

(R AJ No. 9337 b ecome e ffective o n Novembe r l , 2005, Sectio n l 09(E) w as d e leted fro m the NIRC o f 1997. As a result, the NPC b ega n to w ithho ld a final VAT o f five p e rcent (5%) o n cool b illings o f p etitio ner, o n the g ro und that p e titio ner's cool soles ore no lo nger exempt fro m VAT, pursuant to Sectio n ll4(C ) o f RA No. 9337, w hic h states:

" (C) Withhold ing o f

Value-added

Tax.

The Government or a ny o f its politic al subdivisions, instrumentalities or agencies, inc luding government-owned or -controlled corpora tions (GOCCs) sha ll, before making payment on account of eac h purc hase of goods and services which ore subjec t to the value-added tax imposed in Sections l 06 a nd l 08 o f this Code, deduc t a nd withhold a final value-added tax a t the ro le of five percent (5%) o f the gross payment thereof:

XXX

The value-added tax withheld under this Section sha ll be remitted within ten ( l 0) days following the end o f the month the withholding was mode."

Pe titio ne r a llegedly file d a pro test o n the w ithho lding m o d e b y the NPC a nd thus fil ed a request fo r a BIR ruling w ith the Commissio ner o f Interna l Revenue to confirm tha t the sole o f cool mode b y p e titio ner [.

SEMIRARA MINING CORPORATION v. C IR is still exempt from VAT, notwithstanding the amendments to the NIRC of 1997 by RA No. 9337.

On March 7, 2007, the BIR issued BIR Ruling No. 006-20078, confirming the position of petitioner that its sale of coal remains exempt from VAT, to wit:

"xxx

XXX

XXX

In view of the foregoing, this office hereby rules that since the main object of the COC for which the tax exemption was granted is the active exploration, development and production of cool resources, SMC's soles of cool produced by virtue of a COC with EDB remain exempt from VAT pursuant to Section 1 09(k) of the Tax Code, as amended by R.A. 9337, in relation to PO 972, as amended."

On May 21, 2007, petitioner filed with the Revenue District Office No. 121 (ROO 121), Lorge Taxpayer's Division (LTAD) of the BIR, a letter requesting for the issuance of o tax credit certificate in the amount of P 163,361,725.37, allegedly representing final withholding VAT on petitioner's cool soles covering the period January to December 2006, which the NPC erroneously withheld and remitted to the BIR.9 On January 21, 2008, the aforesaid request was amended to reflect the correct amount of final VAT withheld for the year 2006, amounting to P 1 63,361 ,87 1 .58, based on certifications provided by the ( NPC. IO a Exhibit "I".

9 Exhibit"J".

1o Exhibit "L".

SEMIRARA MINING CORPORATION v. CIR

On January 29, 2008, petitioner filed a letter with the SIR Large Taxpayer's Division to follow-up its pending claim for the issuance of a tax credit certificate for the year 2006, drawing particular attention to the amount of VAT withheld by the NPC for the first quarter of 2006 in the amount of P47,560,418.57, considering that the two-year prescriptive period for filing a judicial claim for refund or issuance of a tax credit certificate for January 2006 was about to expire. 11 There being no immediate action on the claim from respondent and in order to toll the running of the two (2) -year prescriptive period within which to file a judicial claim for refund, petitioner elevated its claim for the first and second quarters of 2006 in the respective amounts of P47,560,418.57 ·and P38,548,207.62 or a total of P86, 108,626.19, before this Court by way of separate Petitions for Review filed on the following dates:

Date of Filing of

Petition for

CTA Case No.

Review

Period Covered

Amount of Claim

7727 February 4, 2008 Jan. l lo Mar 31, 2006 p 47,560,4 18.57 7783 May 6, 2008 April 1 to June 30, 2006 38,548,207.62

Total

p 86,108,626.19 Respondent interposed the following Special and Affirmative Defenses in his Answer for CTA Case No. 7727 12 and CTA Case No.£ 7783 13 onApril 15, 2008 and June 16, 2008, respectively: 11 Exhibil "N".

SfMIRARA MINING CORPORATION v. C/R

Page 8 o f 25 "5.

Petitioner's

c laim for tax re fund is subject to administrative investigation and/or examination by respondent;

6.

To support its claim, it is impera tive for the petitioner to prove the following, viz:

o.)

The registration requirements o f o volue-odded taxpayer in compliance with Section 9.236-1 (o) of Revenue Regulations No. 16-2005, and Section 236 of the Tax Code, os amended;

b.)

The invoic ing and accounting requirements for VAT- registered persons os well os the filing and payment of VAT in compliance with the provisions of Section 11 3 and 114 of the Tax Code, os amended; c.)

Proof o f complia nce with the prescribed c hecklist of requirements to be submitted involving claim for VAT re fund in pursuance with Sec tio n 9.236- 1 (o) o f

Revenue

Regulations

No.

16-2005,

Revenue

Memorandum Order No . 53-98, otherwise there would be no sufficien t compliance with the filing of administrative claim for refund whic h is o . condition sine quo non prior to the filing of judic ial claim in accordance with the provision of Section 229 of the Tax Code, os amended. It is worthy o f emphasis tha t Sec tio n 11 2 (D) o f the Tax Code, os amended, requires the submission o f comple te documents in support o f the application filed with the Bureau o f Internal Revenue before the 120-doy audit period shall apply and before the taxpayer could ovoil o f judicial remedies os provided for in the low. Hence, petitioner's failure to submit proof o f compliance with the above stated requirements warrants the dismissal of the petition for review;

d.)

That petitioner's administrative and judicial claims for fox re fund was (sic, were) filed within two (2) years after the c lose of the taxable quarter w hen the soles were mode in accordance w ith Sections 1 12 (A) and (D) a nd 229 of the Tax Code, os amended; 7.

Taxes paid and collected by the Bureau of Internal Revenue ore presumed to hove been mode in t.

SEMIRARA MINING CORPORATION v. C/R

Page 9 o f 25 accordance with law and the rules and regulatio ns, and the burden to prove otherwise is upon the petitioner; 8.

Republic Ac t No. 9337 o therwise known as the 'New Expanded Value-Added Tax' states the following exempt transac tions, to wit:

XXX

XXX

XXX

9.

Upon careful perusal of the above-quoted provision o f the (sic ) Republic Act No. 9337, said act already amended certain provisions o f the National Internal Revenue Code of 1997 (R .A. 8424) particularly on Value Added Tax (VAT). The said act dele ted among others; the provisio n which grants the tax exemptio n to the petitioner under R.A. 8424 regarding the 'sale or importatio n of coal a nd natural gas, in whatever form or sta te;

10.

It is worthy to no te that a number of exempt transactions from VAT under R.A. 8424 were no t included or adapted as exempt transactions in the New Expanded VAT law (R .A. 9337) and this only shows the inte ntion to subject these transactions including the sale or importation of coal and gas, the subject of the instant petition, into Value-Added Tax (VAT) . O therwise, if it is indeed the intention o f the legislature to include the same under the exempt transac tions, it should have restated the same under the New Expanded VAT law as what was done with the other exempt transactio ns;

1 1.

Expressio unius est exclusio alterius.

Under this legal maxim in statutory constructio n, the express mention of one thing in law means the exclusion of others not expressly mentioned.

Thus, the omission of 'sale or importation of coal and natural gas, in whatever form or state' from the exempt transactions under the New Expanded VAT Law only means that the same is subject to Value-Added Tax;

12.

Petitioner also seeks tax exemption under the guise that the same was granted under a special law. However, in on action for refund, the burden o f proof is on the taxpayer to establish its right to refund and failure lo sus tain the burden is fatal to lhe c laim for tax re fund/credit.

This

is so because exemptions from taxa tion are highly disfavored in law and he who claims L

SEMIRARA MINING CORPORATION v. CIR exemption must be able to justify his claim by the clearest grant of organic or statutory low. An exemption from common burden canno t be permitted to exist upon vogue implications;

13.

The claims for refund ore construed strictly against the claimant for the some partakes the nature of exemption from taxation and liberally in favor of the taxing authority; 14.

As to the allegations of petitioner that its tax exemptio n is protected by the non-impairment of the obligation contrac t clause o f the Constitution, the some is misplaced as the tax exemptio ns granted under a legislative franc hise ore subject to the condition that the some shall be subject to amendment, alteration or repeal by Congress and when the common good requires;

15.

Based from the foregoing, the petitioner's claim for tax re fund and/or credit has no basis in fac t and in low, hence lhe instonl petition should be dismissed for absence of cause of action."

O n July 8, 2008, petitioner filed "Motions fo r Consolidation and

Correction"

SEM IRARA MINING CORPORATION v. CIR

Page II o f 25 In the hearing held on July ll, 200815 and confirming Resolution 16 doted July 25, 2008, this Court's First Division granted the Motion for Consolidation subject to the conformity of this Court's Second Division. Likewise, this Court's First Division approved the change in petitioner's nome in CTA Case No. 7783 from "Semiraro Cool Corporation" to "Semiraro Mining Corporation".

On August 4, 2008, this Court's Second Division issued a Resolution stating its conformity to the consolidation of the subject coses. 17 On August 26, 2008, petitioner filed its Motion for Correction IB to seek the correction or amendment of its nome in the caption of CTA Case No. 7727 to "Semiraro Mining Corporation" to re flect its existing corporate nome.

The said Motion was granted by this Court in a Resolutio n 19 doted September 2, 2008.

During trial, petitioner presented documentary and testimonial evidence which includes that o f witnesses Junalina S. Tabor, Amorlina R. Matulac, and Myra Celeste 0. Dabalos. Thereafter, petitioner filed its Formal O ffer o f Evidence 2o on May 20, 2009, submitting Exhibits "A" to {._ 1s CTA Case No. 7783, Docket, p. 17 4 16 CT A Case No. 7783, Docket, p. 175.

11 CTA Case No. 7727, Docket, p. 180.

1s CT A Case No. 7727, Docket, pp. 181-183. 19 CTA Case No. 7727, Docket, p. 215.

2o CTA Case No. 7727, Docket, pp. 32 1 to 334.

SEM IRARA MINING CORPORATION v. CIR

"FF", inclusive of sub-markings. In a Resolution21 dated June 22, 2009, the afore-mentioned exhibits were admitted, except for Exhibits "B" and "C" on ground of petitioner's failure to identify them during trial. On July 8, 200922. petitioner moved for the reconsideration of a Resolution dated June 22, 2009, regarding the non-admission of Exhibits "B" and "C"; which this Court granted in the Resolution23 issued on the same date.

Respondent likewise filed his Formal Offer of Evidence24 on December 8, 2009, which was admitted by this Court in a Resolution2s dated January 21, 2010.

On March 3, 2010, the instant cases were submitted for decision, taking into consideration the parties' Memoranda filed on February 23, 2010 for petitioner and on February 26, 2010 for respondent. In their Joint Stipulation of Consolidated Facts and Issues, the ( parties submitted the following issues for this Court's resolution: "1 . Whether or not petitioner is entitled to a tax refund in the amount of EIGHTY-S IX MILLION ONE HUNDRED EIGHT THOUSAND

SIX

HUNDRED

TWENTY-SIX

PESOS

AND

TEN

CENTAVOS

(P86, 108,626.1 0) erroneously withheld by NPC for the period January 1, 2006 to June 30, 2006.

21 CTA Case No. 7727. Docket, pp. 338 to 339. n CTA Case No. 7727. Docket, p. 342.

23 CTA Case No. 7727, Docket. p. 343.

24 CT A Case No. 7727, Docket. pp. 357 to 359. 2s CTA Case No. 7727. Docket. pp. 367 to 368.

SEMIRARA MINING CORPORATION v. C IR

2. Whether or not petitioner filed the Petition for Review within the prescribed period in accordance with Section 112(0) of the 1997 NIRC.

3. Whether or not petitioner's claim for tax refund/credit was filed within the two-year (2) prescriptive period in accordance with Section 112(A), (B) and (D) and Section 229 of the 1997 National Internal Revenue Code."

Before discussing the merits o f petitioner's c laims, this Court finds it appropriate to determine first the timeliness of the filing of the instant claims considering that claims which are filed beyond the reglem entory period will not prosper.

Respondent, in his Memorandum, alleges that the judic ial claims for refund under CTA Case Nos. 7227 and 7783 filed o n February 4, 2008 and May 6, 2008, respectively, had already prescribed since "(p)etitioner filed its administrative claim for refund o n 19 May 2007." Under Sectio n 11 2(0) of the NIRC o f 1997, respondent has o ne hundred twenty ( 120) days within which to process claims for refund o f unutilized input tax; then petitioner has thirty (30) days to appeal the full or partial denial o f the claim or the inaction of respondent. For easy reference C. Section 11 2(0) o f the NIRC of 1997, is hereby quoted as fo llows: "SEC. 11 2. Refunds or Tax Credits of Input Tax. -

XXX

XXX

XXX

(D) Period within whic h Refund or Tax Credit o f Input Taxes shall be Made.- In pr·oper cases, the Commissioner shall grant a refund or issue the tax credit certifica te for creditable input taxes within one hundred twenty ( 120) days from the dote

SEMIRARA MINING CORPORATION v. CIR of submission of complete documents in support of the application filed in accordance with Subsections (A) and (B) hereof."

This Court disagrees with respondent.

It must be emphasized that Section 112(0) of the NIRC of 1997, in relation to Sections 112(A) and (B) of the same Code, pertains to tax refund or credit of unutilized input taxes by VAT-registered persons (a) arising from their purchases of goods and services attributable to zero- rated or effectively zero-rated sales or (b) upon retirement from or cessation of business, or due to changes in or cessation of status. Thus, Section 112(0). in relation to Sections 112(A) and (B) of the NIRC of 1997, is inapplicable to the instant claims since petitioner is registered as a non-VAT enterprise and the subject matter of the claims for refund refers to output VAT on petitioner's VAT-exempt sale of coal erroneously withheld by the NPC pursuant to Section 114(C) of the NIRC of 1997. The pertinent provisions applicable to the instant cases are Sections 204(C) and 229 of the NIRC of 1997, as amended, which are C. quoted herein below:

"SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes.- The Commissioner may -

XXX

XXX

XXX

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or

SEMIRARA MINING CORPORATION v. C/R c hange unused stamps tha t have been rendered unfit for use and refund their value upon proof o f destruction. No credit or re fund o f taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for c redit or refund within two (2) years after the payment o f the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or re fund." "SEC. 229. Recovery of Tax Erroneously or 1//ega//y Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty c laimed to have been collected without authority, or o f any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or c redit has been duly filed with the Commissioner; bu t such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration o f two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor. re fund or credit any tax, where on the face of the return upon which payment was made, such payment appears c learly to have been erroneously paid."

C le arly, the law mandates that both the administrative and judicial remedies o f filing a c laim fo r refund o f erroneously paid tax must be done within two (2) years fro m the payment o f the tax. The instant claims pertain to fina l w ithholding VAT, w hic h must be remitted within te n ( 1 0) days fo llowing th e end of th e month when the withholding was made pursuant to Sectio n 114(C ) o f the NIRC o f 1997, C. as amended, to w it:

"SEC. 114. Return and Paymen t of Value-added Tax. -

XXX

XXX

XXX

·~ (

SEMIRARA MINING CORPORATION v. C/R

(C)

Withholding

of

Value-added

Tax.

- The Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or -contro lled corporations (GOCCs) shall, before making payment on account of each purchase of goods and services which are subject to the value-added tax imposed in Sectio ns 106 and 1 08 o f this Code, deduct and withhold a final value-added lox at the rate of five percent (5%) o f the gross payment thereof: Provided, That the payment for lease or use o f properties or property rights to no nresident owners shall be subject to ten percent ( 1 0%) withholding tax at the time o f payment. For purposes o f this Section, the payor or person in con trol of the payment shall be considered as the withholding agent. The value-added tax withheld under this Sectio n sha ll be remitted within ten ( 1 0) days following the end of the mon I h the withholding was made."

In keeping with Section 114(C ), the NPC remitte d to the BIR the final withholding VAT o n the fo llowing dates:

Date of Filing of

Exhibit

Period Covered

Return/ Paym ent

of Tax

February 1 0, AA-1. AA- 1-a

January 2006

2006 AA-2, AA-2-o

February 2006

Marc h 10, 2006 AA-3, AA-3-a

March 2006

April 1 0, 2006 AA-4, AA-4-a

April 2006

May 10,2006 AA-5, AA-5-a

May 2006

June 9, 2006 AA-6, AA-6-a

June 2006

July 10, 2006 Counting from February 10, 2006, petitioner had until February 10, 2008 at th e e arliest within which to file its claims both in the administrative and judicial ,levels. Therefo re, th e o riginal administrative claim filed on May 2 1, 200726, the amended administrative claim filed (

SEMIRARA MINING CORPORATION v. C IR on January 21, 200827, and the Petitions for Review filed on February 4, 200828 and May 6, 200829 fell within the two-year prescriptive period. Finding that the cases were filed within the reglementary period, this Court shall resolve the principal issue which is - whether petitioner is entitled to the tax refund amounting to P86, 108,626.1 0 claimed to be erroneously withheld by the NPC for the period covering January 1, 2006 to June 30, 2006.

Petitioner argues that it is entitled to a refund pursuant to PD No. 972 and Section 1 09(k) of RA No. 9337, and its exemption from which the refund is based was confirmed by no less than the respondent in BIR Ruling No. 006-07.

Respondent, however, claims that RA No. 9337 deleted the exemption under Section 1 09(e) of the NIRC of 1997, which granted petitioner's exemption from VAT.

Accordingly, he argues that petitioner's sale or importation of coal and natural gas, in whatever form or state, is subject to VAT.

Petitioner's argument is meritorious.

The issue is not novel.

In a number of decisions involving the same parties and issue but different taxable years, this Court had ruled that based on Section 1 09(k) of RA No. 9337, petitioner is entitled to an C. 27 Exhibit "L- 1 ".

28 CTA C ase No. 7727 .

29 CT A C ase No. 7783.

SEMIRARA MINING CORPORATION v. CIR

Page 18 o f 25 exemption from VAT as provided under a special low, specifically, PO No. 9723o.

PD No. 972 is a special low, the spirit of which is to accelerate the exploration, development, exploitation, production and utilization of the country's cool resources, and to provide incentives not only to cool users, but more importantly, to operators of cool operating contracts. In order to encourage and promote said policy, the low provided a tax incentive which expressly grants to operators of a contract under said Decree exemption from all taxes except income tax, thus: "SECTION. 16. Incentives to Operators. - The provisions of any low to the contrary notwithstanding, a contract executed under this Decree may provide that the operator shall hove the following incentives:

(a) Exemption from all taxes except income tax; "

Hence, petitioner, as on operator under its Cool Operating ControcP 1, is entitled to exemption from both loc al and notional taxes, except income taxes.

Pertinent is the disquisition in the case of Semirora Mining ( Corporation vs. Commissioner of Internal Revenue32, to wit: "We agree with petitioner.

30 Presidential Decree No. 972, Promulgating on Ac t to Promote on Accelerated Exploratio n. Development, Exploitotion, Production ond Utiliza tion o f Cool.

SEM IRARA MINING CORPORATION v. CIR

The inherent power o f the state to impose taxes includes the power to grant tax exemptio ns. Tax exemptio ns may be granted either by the Constitution or by an act o f legislature, subject to limitatio ns as the Constitution may provide. The tax exemption being availed o f by the petitioner is a tax exemptio n g ranted by an act o f legislature, which is, P.D. No. 972. Under Sectio n 16 of the said law, operators of coal operating con tracts are g iven various incentives, which include exemptio n from all taxes except income tax. Furthermore, the said incentive or tax exemptio n provided for by P.D. 972 was embodied and incorporated in Section 5.2 o f the Coal Operating Contrac t between petitioner and the Philippine Government. In the present case, the petitioner is seeking exemptio n from VAT. As provided under Sectio n 21 o f the 1997 Tax Code, VAT is one o f the no tiona I internal revenue taxes, hence, exemption fro m VAT falls within the exemptio ns provided by P.D. 972 and its Coal Operating Contract. Furthermore, petitioner's claim for exemption from payment o f the VAT is a lso covered by the 1997 Tax Code notw ithstanding its amendment by R.A. 9337, as provided by Section 109 (K) , which reads as follows:

'REPUBLIC ACT NO. 9337 AN ACT AMENDING SECTIONS 27, 28, 34, 106, 107, 108, 109, 110, 111 , 112, 113, 114,116, 117, 119, 121 , 148, 151 , 236, 237 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR

OTHER PURPOSES

Sec. 7. Section 109 of the same Code, as amended, is hereby further amended to read as follows: SEC. 109. Exempt Transactions. -

(1) Subject to the provisions of subsection (2) hereof. the following transac tions shall be exempt from the value-added tax:

XXX

XXX

XXX

(K)

Transac tions which are exempt under international agreements to w hich the Philippines is a signa tory or under special laws, exc ept those under Presidential Decree No. f... 529;

XXX

XXX

xxx'

SEMIRARA MINING CORPORATION v. C/R

Based on the aforequoted provision of Section 109, petitioner is entitled to exemption from VAT since its sale of coal is exempted from VAT as provided under a special law, which is PD 972."

(Emphasis supplied) As to respondent's allegation that Section 24 of RA No. 9337 repealed the tax exemption under PD No. 972, significant is this Court's ruling in Semiraro Mining Corporation vs. Commissioner of Internal Revenue33, which laid to rest the issue by declaring that petitioner's tax exemption under PD No. 972 still subsists, viz: "As regards the alleged repeal of the provisions pertinent to this case, which according to respondent effectively removed petitioner's exemption from VAT, the repealing c lause of RA 9337. Section 24 pertinently states: 'Sec. 24. Repealing Clouse. - The following lows or provisions of lows ore hereby repealed and the persons and/or transactions affected herein ore mode subject to the value-added tax subject to the provisions of.Title IV of the Notional Internal Revenue Code of 1997. as amended:

(A) Section 13 of R.A. No. 6395 on the exemption from value-added tax of Notional Power Corporation (NPC) ;

(B) Section 6, fifth paragraph of R.A. No. 9136 on the zero VAT rote imposed on the soles of generated power by generation companies; and {C) All other lows. acts. decrees. executive orders. issuances and rules and regulations or ports thereof which ore contrary to and inconsistent with any provisions of this Act ore hereby repealed. amended or modified accordingly.' Indeed. there is no indication that RA 9337 repealed PO No. 972 or any section or paragraph thereof, whether express or implied. It has been ruled that a special low such as PO No. 972 cannot be repealed. amended or altered by a subsequent general low by mere implication. If the intent to repeal is not [.

SEMIRARA MINING CORPORATION v. CIR

Page 2 1 of 25

clear, the later act should be construed as a continuation of, and not a substitute for, the earlier act. The legislature is presumed to know the existing laws; if it intended a repeal of the earlier law, it should have so expressed that intention in the subsequent statute. Thus, a statute will not be deemed to have been impliedly repealed by another enacted subsequent thereto unless there is a showing that a plain, unavoidable and irreconcilable repugnancy exists between the two. Absent an express repeal, as in this case, a subsequent law cannot be construed as repealing a prior one unless an irreconcilable inconsistency or repugnancy exists in the terms of the new and old laws. An express repeal, is one wherein a statute declares, usually in its repealing clause, that a particular and specific law, identified by its number or title, is repealed. Absent this specific requirement, an express repeal may not be presumed. There being no plain and irreconcilable repugnancy between the relevant provisions of the pertinent laws and considering that the repealing clause of R.A. No. 9337, specifically Section 24 thereof did not expressly include P.O. 972 in its enumeration of repealed laws or provisions, it is plciin that the latter has not been repealed by R.A. No. 9337 and petitioner may still invoke in its favor VAT exemption under the COC." (Emphasis supplied) It is noteworthy that in BIR Ruling No. 006-07, respondent admitted petitioner's exemption from VAT pursuant to Section 16 of PO No. 972, to wit:

"In view of the foregoing, this office hereby rules !hat since the main object o f the COC for which the tax exemption was granted is the active exploration, development and production of coal resources, SMC's (petitioner's) sales of cool produced by virtue of a COC with EDB remain exempt from VAT pursuant to Section 109 (k) of the Tax Code, as amended by RA 9337, in relation to PO 972, as amended." Respondent, therefore, cannot just change his mind on on opinion on which petitioner has relied.

In summary, petitioner is {.

exempted from the payment of VAT.

CTA C ase Nos. 7727 and 7783 SEMIRARA MINING CORPO RATION v. CIR

DE C ISION

Pa ge 22 of 25 Petitioner proffered various documents to substantiate its claim that the NPC withheld and remitted to the BIR five percent (5%) final withholding VAT on its gross payments for coal purchases from petitioner for the period from January 1, 2006 to June 30, 2006. Among the documents presented were:

(a) Monthly Remittance Return of Value-added Tax and other Percentage Taxes Withheld (BIR Form No. 1600) filed by the NPC with the BIR for the months of January 2006 to June 2006;34 (b) Alphabetical List of Payees from whom Taxes were Withheld (BIR Form No. 1600-Schedule II) filed by the NPC with the BIR for the months of January 2006 to June 2006;35 (c) Revenue Official Receipts (BIR Form No. 2524) ;36 (d) Certificates of Final Tax Withheld at Source (BIR Form No. 2306) issued by the NPC to petitioner;37 (e) NPC's "Certification" dated December 10, 2007, certifying the amount of final VAT withheld by the NPC from its gross payments made to petitioner from January 1, 2006 to June 30, 2006;38 and (f) Comparison of VAT Withheld per NPC Alphalist against BIR Form 2306 for the months of January 2006 to June 200639. A scrutiny of these documents shows that the total final VAT withheld, as reflected in the Monthly Remittance Returns/ Alpha list, in £..

SEM IRARA MINING CORPORATION v. C/R the a mount of P86, 106,632. 15 is higher by P 1.18 w hen comp ared with the to ta l final VAT w ithheld ind icated per certificates in the a mount of P86, 108,630.97, as shown below:

Per Monthly

Period

Remittance

Covered

Exhibit

Returns/ Alphalist

Per Certific ates

Difference

January 2006

BB- 1

p 16,652,595.00 p 16,652,595.0 1 p (0.01 1

February 2006

BB-2

15,547,5 12.63 15,547,5 11 .34 1.29

March 2006

BB-3

15,360,3 10.93 15,360,3 10.98 (0.05)

April 2006

BB-4

4,758,980.34 4,758,980.35 (0.01 )

May 2006

BB-5

15,793,04 1 .68 15,793,04 1.72 (0.041

June 2006

BB-6

17,996, 19 1.57 17,996, 19 1.57 -

Total

p 86,108,632.15 P86, 108,630.97 p 1.18 As found by the Court-commissioned Independent Certified Pub lic Accounta nt (CPA), the P1.00 difference pertains to the over- remittance mode by the NPC for the month o f February 2006, particularly for the final withholding VAT shown per certificate marked as Exhibit '"Z-2-58" .40 The remaining difference of P.18 is due to rounding o ff.

In fine, this Court finds petitioner as having substa ntia ted its claimed fin al w ithholding VAT in the amount of P86, 108,630.97. However, this Court grants the lower a mount of P86, 1 08,626.1 0 that was prayed for in the consolidated Petitions for Review.

WHEREFORE, the insta nt Petitions for Review ore hereby GRANTED. Accordingly, respondent is hereby ORDERED to REFUND or to ISSUE A (

SEM IRARA M INING CORPORATION v. C IR

Page 24 o f 25 TAX CREDIT CERTIFICATE in favor of petitioner in the a mount of EIGHTY- SIX MILLION ONE HUNDRED EIGHT THOUSAND SIX HUNDRED TWENTY -SIX and 10/ 100 PESOS (P86, 1 08,626.1 0), representing 5% fina l VAT o n its cool soles, w hic h the No tio nal Power Corporatio n erro neously withheld and remitted to the BIR for the period coverin g January 1, 2006 to June 30, 2006.

WE CONC UR :

~~~c~~q_.

C1UANITO C . CASTANEDA, 1ff.-

Associate Justice

~N.M~ . (;~ CIELITO N. MINDARO-GRULLA Associa te Justice a CAESAR A. CASANOVA Associate Justic e

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court' s Division.

~-:t:-c.G.YL~, 9..

JUANITO C . CASTANEDA,/' ffi.,.

Associate Justice

Chairperson

SEM IRARA MINING CORPORATION v. C IR

C ERTIFICATION

Page 25 o f 25 Pursuant to Artic le VIII, Sec tion 13 of the Constitution, a nd the Di-vision Chairperson' s Attestation, it is hereby certified tha i the conclusions in the above Decision were reached in consultation be fore the case was assigned to the writer o f the opinion of the Court' s Division. l._-r-v. ~ ERNESTO D. ACOSTA

Presiding Justice