G.R. No. L-31364 March 30, 1979MISAEL P. VERA, as Commissioner
of Internal Revenue, and JAIME ARANETA, as Regional Director,
Revenue Region No. 14, Bureau of Internal
Revenue,petitioners,vs.HON. JOSE F. FERNANDEZ, Judge of the Court
of First Instance of Negros Occidental, Branch V, and FRANCIS A.
TONGOY, Administrator of the Estate of the late LUIS D.
TONGOYrespondents.DE CASTRO,J.:Appeal from two orders of the Court
of First Instance of Negros Occidental, Branch V in Special
Proceedings No. 7794, entitled: "Intestate Estate of Luis D.
Tongoy," the first dated July 29, 1969 dismissing the Motion for
Allowance of Claim and for an Order of Payment of Taxes by the
Government of the Republic of the Philippines against the Estate of
the late Luis D. Tongoy, for deficiency income taxes for the years
1963 and 1964 of the decedent in the total amount of P3,254.80,
inclusive 5% surcharge, 1% monthly interest and compromise
penalties, and the second, dated October 7, 1969, denying the
Motion for reconsideration of the Order of dismissal.The Motion for
allowance of claim and for payment of taxes dated May 28, 1969 was
filed on June 3, 1969 in the abovementioned special proceedings,
(par. 3, Annex A, Petition, pp. 1920, Rollo). The claim represents
the indebtedness to the Government of the late Luis D. Tongoy for
deficiency income taxes in the total sum of P3,254.80 as above
stated, covered by Assessment Notices Nos. 11-50-29-1-11061-21-63
and 11-50-291-1 10875-64, to which motion was attached Proof of
Claim (Annex B, Petition, pp. 21-22, Rollo). The Administrator
opposed the motion solely on the ground that the claim was barred
under Section 5, Rule 86 of the Rules of Court (par. 4, Opposition
to Motion for Allowance of Claim, pp. 23-24, Rollo). Finding the
opposition well-founded, the respondent Judge, Jose F. Fernandez,
dismissed the motion for allowance of claim filed by herein
petitioner, Regional Director of the Bureau of Internal Revenue, in
an order dated July 29, 1969 (Annex D, Petition, p. 26, Rollo). On
September 18, 1969, a motion for reconsideration was filed, of the
order of July 29, 1969, but was denied in an Order dated October 7,
1969.Hence, this appeal on certiorari, petitioner assigning the
following errors:1. The lower court erred in holding that the claim
for taxes by the government against the estate of Luis D. Tongoy
was filed beyond the period provided in Section 2, Rule 86 of the
Rules of Court.2. The lower court erred in holding that the claim
for taxes of the government was already barred under Section 5,
Rule 86 of the Rules of Court.which raise the sole issue of whether
or not the statute of non-claims Section 5, Rule 86 of the New Rule
of Court, bars claim of the government for unpaid taxes, still
within the period of limitation prescribed in Section 331 and 332
of the National Internal Revenue Code.Section 5, Rule 86, as
invoked by the respondent Administrator in hid Oppositions to the
Motion for Allowance of Claim, etc. of the petitioners reads as
follows:All claims for money against the decedent, arising from
contracts, express or implied, whether the same be due, not due, or
contingent, all claims for funeral expenses and expenses for the
last sickness of the decedent, and judgment for money against the
decedent, must be filed within the time limited in they notice;
otherwise they are barred forever, except that they may be set
forth as counter claims in any action that the executor or
administrator may bring against the claimants. Where the executor
or administrator commence an action, or prosecutes an action
already commenced by the deceased in his lifetime, the debtor may
set forth may answer the claims he has against the decedents,
instead of presenting them independently to the court has herein
provided, and mutual claims may be set off against each other in
such action; and in final judgment is rendered in favored of the
decedent, the amount to determined shall be considered the true
balance against the estate, as though the claim has been presented
directly before the court in the administration proceedings. Claims
not yet due, or contingent may be approved at their present value.A
perusal of the aforequoted provisions shows that it makes no
mention of claims for monetary obligation of the decedent created
by law, such as taxes which is entirely of different character from
the claims expressly enumerated therein, such as: "all claims for
money against the decedent arising from contract, express or
implied, whether the same be due, not due or contingent, all claim
for funeral expenses and expenses for the last sickness of the
decedent and judgment for money against the decedent." Under the
familiar rule of statutory construction ofexpressio unius est
exclusio alterius,the mention of one thing implies the exclusion of
another thing not mentioned. Thus, if a statute enumerates the
things upon which it is to operate, everything else must
necessarily, and by implication be excluded from its operation and
effect (Crawford, Statutory Construction, pp. 334-335).In the case
ofCommissioner of Internal Revenue vs. Ilagan Electric & Ice
Plant, et al., G.R. No. L-23081, December 30, 1969, it was held
that the assessment, collection and recovery of taxes, as well as
the matter of prescription thereof are governed by the provisions
of the National Internal revenue Code, particularly Sections 331
and 332 thereof, and not by other provisions of law. (See also Lim
Tio, Dy Heng and Dee Jue vs. Court of Tax Appeals & Collector
of Internal Revenue, G.R. No. L-10681, March 29, 1958). Even
without being specifically mentioned, the provisions of Section 2
of Rule 86 of the Rules of Court may reasonably be presumed to have
been also in the mind of the Court as not affecting the aforecited
Section of the National Internal Revenue Code.In the case ofPineda
vs. CFI of Tayabas,52 Phil. 803, it was even more pointedly held
that "taxes assessed against the estate of a deceased person ...
need not be submitted to the committee on claims in the ordinary
course of administration. In the exercise of its control over the
administrator, the court may direct the payment of such taxes upon
motion showing that the taxes have been assessed against the
estate." The abolition of the Committee on Claims does not alter
the basic ruling laid down giving exception to the claim for taxes
from being filed as the other claims mentioned in the Rule should
be filed before the Court. Claims for taxes may be collected even
after the distribution of the decedent's estate among his heirs who
shall be liable therefor in proportion of their share in the
inheritance. (Government of the Philippines vs. Pamintuan, 55 Phil.
13).The reason for the more liberal treatment of claims for taxes
against a decedent's estate in the form of exception from the
application of the statute of non-claims, is not hard to find.
Taxes are the lifeblood of the Government and their prompt and
certain availability are imperious need. (Commissioner of Internal
Revenue vs. Pineda, G. R. No. L-22734, September 15, 1967, 21 SCRA
105). Upon taxation depends the Government ability to serve the
people for whose benefit taxes are collected. To safeguard such
interest, neglect or omission of government officials entrusted
with the collection of taxes should not be allowed to bring harm or
detriment to the people, in the same manner as private persons may
be made to suffer individually on account of his own negligence,
the presumption being that they take good care of their personal
affairs. This should not hold true to government officials with
respect to matters not of their own personal concern. This is the
philosophy behind the government's exception, as a general rule,
from the operation of the principle of estoppel. (Republic vs.
Caballero, L-27437, September 30, 1977, 79 SCRA 177; Manila Lodge
No. 761, Benevolent and Protective Order of the Elks Inc. vs. Court
of Appeals, L-41001, September 30, 1976, 73 SCRA 162; Sy vs.
Central Bank of the Philippines, L-41480, April 30,1976, 70 SCRA
571; Balmaceda vs. Corominas & Co., Inc., 66 SCRA 553; Auyong
Hian vs. Court of Tax Appeals, 59 SCRA 110; Republic vs. Philippine
Rabbit Bus Lines, Inc., 66 SCRA 553; Republic vs. Philippine Long
Distance Telephone Company, L-18841, January 27, 1969, 26 SCRA 620;
Zamora vs. Court of Tax Appeals, L-23272, November 26, 1970, 36
SCRA 77; E. Rodriguez, Inc. vs. Collector of Internal Revenue, L-
23041, July 31, 1969, 28 SCRA 119.) As already shown, taxes may be
collected even after the distribution of the estate of the decedent
among his heirs (Government of the Philippines vs. Pamintuan,supra;
Pineda vs. CFI of Tayabas,supraClara Diluangco Palanca vs.
Commissioner of Internal Revenue, G. R. No. L-16661, January 31,
1962).Furthermore, as held in Commissioner of Internal Revenue vs.
Pineda, supra, citing the last paragraph of Section 315 of the Tax
Code payment of income tax shall be a lien in favor of the
Government of the Philippines from the time the assessment was made
by the Commissioner of Internal Revenue until paid with interests,
penalties, etc. By virtue of such lien, this court held that the
property of the estate already in the hands of an heir or
transferee may be subject to the payment of the tax due the
estate.A fortioribefore the inheritance has passed to the heirs,
the unpaid taxes due the decedent may be collected, even without
its having been presented under Section 2 of Rule 86 of the Rules
of Court. It may truly be said that until the property of the
estate of the decedent has vested in the heirs, the decedent,
represented by his estate, continues as if he were still alive,
subject to the payment of such taxes as would be collectible from
the estate even after his death. Thus in the case above cited, the
income taxes sought to be collected were due from the estate, for
the three years 1946, 1947 and 1948 following his death in May,
1945.Even assumingarguendothat claims for taxes have to be filed
within the time prescribed in Section 2, Rule 86 of the Rules of
Court, the claim in question may be filed even after the expiration
of the time originally fixed therein, as may be gleaned from the
italicized portion of the Rule herein cited which reads:Section 2.
Time within which claims shall be filed. - In the notice provided
in the preceding section, the court shall state the time for the
filing of claims against the estate, which shall not be more than
twelve (12) nor less than six (6) months after the date of the
first publication of the notice.However, at any time before an
order of distribution is entered, on application of a creditor who
has failed to file his claim within the time previously limited the
court may, for cause shown and on such terms as are equitable,
allow such claim to be flied within a time not exceeding one (1)
month.(Emphasis supplied)In the instant case, petitioners filed an
application (Motion for Allowance of Claim and for an Order of
Payment of Taxes) which, though filed after the expiration of the
time previously limited but before an order of the distribution is
entered, should have been granted by the respondent court, in the
absence of any valid ground, as none was shown, justifying denial
of the motion, specially considering that it was for allowance Of
claim for taxes due from the estate, which in effect represents a
claim of the people at large, the only reason given for the denial
that the claim was filed out of the previously limited period,
sustaining thereby private respondents' contention, erroneously as
has been demonstrated.WHEREFORE, the order appealed from is
reverse. Since the Tax Commissioner's assessment in the total
amount of P3,254.80 with 5 % surcharge and 1 % monthly interest as
provided in the Tax Code is a final one and the respondent estate's
sole defense of prescription has been herein overruled, the Motion
for Allowance of Claim is herein granted and respondent estate is
ordered to pay and discharge the same, subject only to the
limitation of the interest collectible thereon as provided by the
Tax Code. No pronouncement as to costs.SO ORDERED.
G.R. Nos. L-49839-46 April 26, 1991JOSE B. L. REYES and EDMUNDO
A. REYES,petitioners,vs.PEDRO ALMANZOR, VICENTE ABAD SANTOS, JOSE
ROO, in their capacities as appointed and Acting Members of the
CENTRAL BOARD OF ASSESSMENT APPEALS; TERESITA H. NOBLEJAS, ROMULO
M. DEL ROSARIO, RAUL C. FLORES, in their capacities as appointed
and Acting Members of the BOARD OF ASSESSMENT APPEALS of Manila;
and NICOLAS CATIIL in his capacity as City Assessor of
Manila,respondents.Barcelona, Perlas, Joven & Academia Law
Offices for petitioners.
PARAS,J.:This is a petition for review oncertiorarito reverse
the June 10, 1977 decision of the Central Board of Assessment
Appeals1in CBAA Cases Nos. 72-79 entitled "J.B.L. Reyes, Edmundo
Reyes, et al. v. Board of Assessment Appeals of Manila and City
Assessor of Manila" which affirmed the March 29, 1976 decision of
the Board of Tax Assessment Appeals2in BTAA Cases Nos. 614,
614-A-J, 615, 615-A, B, E, "Jose Reyes, et al. v. City Assessor of
Manila" and "Edmundo Reyes and Milagros Reyes v. City Assessor of
Manila" upholding the classification and assessments made by the
City Assessor of Manila.The facts of the case are as
follows:Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are
owners of parcels of land situated in Tondo and Sta. Cruz
Districts, City of Manila, which are leased and entirely occupied
as dwelling sites by tenants. Said tenants were paying monthly
rentals not exceeding three hundred pesos (P300.00) in July, 1971.
On July 14, 1971, the National Legislature enacted Republic Act No.
6359 prohibiting for one year from its effectivity, an increase in
monthly rentals of dwelling units or of lands on which another's
dwelling is located, where such rentals do not exceed three hundred
pesos (P300.00) a month but allowing an increase in rent by not
more than 10% thereafter. The said Act also suspended paragraph (1)
of Article 1673 of the Civil Code for two years from its
effectivity thereby disallowing the ejectment of lessees upon the
expiration of the usual legal period of lease. On October 12, 1972,
Presidential Decree No. 20 amended R.A. No. 6359 by making absolute
the prohibition to increase monthly rentals below P300.00 and by
indefinitely suspending the aforementioned provision of the Civil
Code, excepting leases with a definite period. Consequently, the
Reyeses, petitioners herein, were precluded from raising the
rentals and from ejecting the tenants. In 1973, respondent City
Assessor of Manila re-classified and reassessed the value of the
subject properties based on the schedule of market values duly
reviewed by the Secretary of Finance. The revision, as expected,
entailed an increase in the corresponding tax rates prompting
petitioners to file a Memorandum of Disagreement with the Board of
Tax Assessment Appeals. They averred that the reassessments made
were "excessive, unwarranted, inequitable, confiscatory and
unconstitutional" considering that the taxes imposed upon them
greatly exceeded the annual income derived from their properties.
They argued that the income approach should have been used in
determining the land values instead of the comparable sales
approach which the City Assessor adopted (Rollo, pp. 9-10-A). The
Board of Tax Assessment Appeals, however, considered the
assessments valid, holding thus:WHEREFORE, and considering that the
appellants have failed to submit concrete evidence which could
overcome the presumptive regularity of the classification and
assessments appear to be in accordance with the base schedule of
market values and of the base schedule of building unit values, as
approved by the Secretary of Finance, the cases should be, as they
are hereby, upheld.SO ORDERED. (Decision of the Board of Tax
Assessment Appeals,Rollo, p. 22).The Reyeses appealed to the
Central Board of Assessment Appeals.1wphi1They submitted, among
others, the summary of the yearly rentals to show the income
derived from the properties. Respondent City Assessor, on the other
hand, submitted three (3) deeds of sale showing the different
market values of the real property situated in the same vicinity
where the subject properties of petitioners are located. To better
appreciate the locational and physical features of the land, the
Board of Hearing Commissioners conducted an ocular inspection with
the presence of two representatives of the City Assessor prior to
the healing of the case. Neither the owners nor their authorized
representatives were present during the said ocular inspection
despite proper notices served them. It was found that certain
parcels of land were below street level and were affected by the
tides (Rollo, pp. 24-25).On June 10, 1977, the Central Board of
Assessment Appeals rendered its decision, the dispositive portion
of which reads:WHEREFORE, the appealed decision insofar as the
valuation and assessment of the lots covered by Tax Declaration
Nos. (5835) PD-5847, (5839), (5831) PD-5844 and PD-3824 is
affirmed.For the lots covered by Tax Declaration Nos. (1430)
PD-1432, PD-1509, 146 and (1) PD-266, the appealed Decision is
modified by allowing a 20% reduction in their respective market
values and applying therein the assessment level of 30% to arrive
at the corresponding assessed value.SO ORDERED. (Decision of the
Central Board of Assessment Appeals,Rollo, p. 27)Petitioner's
subsequent motion for reconsideration was denied, hence, this
petition.The Reyeses assigned the following error:THE HONORABLE
BOARD ERRED IN ADOPTING THE "COMPARABLE SALES APPROACH" METHOD IN
FIXING THE ASSESSED VALUE OF APPELLANTS' PROPERTIES.The petition is
impressed with merit.The crux of the controversy is in the method
used in tax assessment of the properties in question. Petitioners
maintain that the "Income Approach" method would have been more
realistic for in disregarding the effect of the restrictions
imposed by P.D. 20 on the market value of the properties affected,
respondent Assessor of the City of Manila unlawfully and
unjustifiably set increased new assessed values at levels so high
and successive that the resulting annual real estate taxes would
admittedly exceed the sum total of the yearly rentals paid or
payable by the dweller tenants under P.D. 20. Hence, petitioners
protested against the levels of the values assigned to their
properties as revised and increased on the ground that they were
arbitrarily excessive, unwarranted, inequitable, confiscatory and
unconstitutional (Rollo, p. 10-A).On the other hand, while
respondent Board of Tax Assessment Appeals admits in its decision
that the income approach is used in determining land values in some
vicinities, it maintains that when income is affected by some sort
of price control, the same is rejected in the consideration and
study of land values as in the case of properties affected by the
Rent Control Law for they do not project the true market value in
the open market (Rollo, p. 21). Thus, respondents opted instead for
the "Comparable Sales Approach" on the ground that the value
estimate of the properties predicated upon prices paid in actual,
market transactions would be a uniform and a more credible
standards to use especially in case of mass appraisal of properties
(Ibid.). Otherwise stated, public respondents would have this Court
completely ignore the effects of the restrictions of P.D. No. 20 on
the market value of properties within its coverage. In any event,
it is unquestionable that both the "Comparable Sales Approach" and
the "Income Approach" are generally acceptable methods of appraisal
for taxation purposes (The Law on Transfer and Business Taxation by
Hector S. De Leon, 1988 Edition). However, it is conceded that the
propriety of one as against the other would of course depend on
several factors. Hence, as early as 1923 in the case of Army &
Navy Club, Manila v. Wenceslao Trinidad, G.R. No. 19297 (44 Phil.
383), it has been stressed that the assessors, in finding the value
of the property, have to consider all the circumstances and
elements of value and must exercise a prudent discretion in
reaching conclusions.Under Art. VIII, Sec. 17 (1) of the 1973
Constitution, then enforced, the rule of taxation must not only be
uniform, but must also be equitable and progressive.Uniformity has
been defined as that principle by which all taxable articles or
kinds of property of the same class shall be taxed at the same rate
(Churchill v. Concepcion, 34 Phil. 969 [1916]).Notably in the 1935
Constitution, there was no mention of the equitable or progressive
aspects of taxation required in the 1973 Charter (Fernando "The
Constitution of the Philippines", p. 221, Second Edition). Thus,
the need to examine closely and determine the specific mandate of
the Constitution.Taxation is said to be equitable when its burden
falls on those better able to pay. Taxation is progressive when its
rate goes up depending on the resources of the person affected
(Ibid.).The power to tax "is an attribute of sovereignty". In fact,
it is the strongest of all the powers of government. But for all
its plenitude the power to tax is not unconfined as there are
restrictions. Adversely effecting as it does property rights, both
the due process and equal protection clauses of the Constitution
may properly be invoked to invalidate in appropriate cases a
revenue measure. If it were otherwise, there would be truth to the
1903 dictum of Chief Justice Marshall that "the power to tax
involves the power to destroy." The web or unreality spun from
Marshall's famous dictum was brushed away by one stroke of Mr.
Justice Holmes pen, thus: "The power to tax is not the power to
destroy while this Court sits. So it is in the Philippines "
(Sison, Jr. v. Ancheta, 130 SCRA 655 [1984]; Obillos, Jr. v.
Commissioner of Internal Revenue, 139 SCRA 439 [1985]).In the same
vein, the due process clause may be invoked where a taxing statute
is so arbitrary that it finds no support in the Constitution. An
obvious example is where it can be shown to amount to confiscation
of property. That would be a clear abuse of power (Sison v.
Ancheta,supra).The taxing power has the authority to make a
reasonable and natural classification for purposes of taxation but
the government's act must not be prompted by a spirit of hostility,
or at the very least discrimination that finds no support in
reason. It suffices then that the laws operate equally and
uniformly on all persons under similar circumstances or that all
persons must be treated in the same manner, the conditions not
being different both in the privileges conferred and the
liabilities imposed (Ibid., p. 662).Finally under the Real Property
Tax Code (P.D. 464 as amended), it is declared that the first
Fundamental Principle to guide the appraisal and assessment of real
property for taxation purposes is that the property must be
"appraised at its current and fair market value."By no strength of
the imagination can the market value of properties covered by P.D.
No. 20 be equated with the market value of properties not so
covered. The former has naturally a much lesser market value in
view of the rental restrictions.Ironically, in the case at bar, not
even the factors determinant of the assessed value of subject
properties under the "comparable sales approach" were presented by
the public respondents, namely: (1) that the sale must represent
abonafidearm's length transaction between a willing seller and a
willing buyer and (2) the property must be comparable property
(Rollo, p. 27). Nothing can justify or support their view as it is
of judicial notice that for properties covered by P.D. 20
especially during the time in question, there were hardly any
willing buyers. As a general rule, there were no takers so that
there can be no reasonable basis for the conclusion that these
properties were comparable with other residential properties not
burdened by P.D. 20. Neither can the given circumstances be
nonchalantly dismissed by public respondents as imposed under
distressed conditions clearly implying that the same were merely
temporary in character. At this point in time, the falsity of such
premises cannot be more convincingly demonstrated by the fact that
the law has existed for around twenty (20) years with no end to it
in sight.Verily, taxes are the lifeblood of the government and so
should be collected without unnecessary hindrance. However, such
collection should be made in accordance with law as any
arbitrariness will negate the very reason for government itself It
is therefore necessary to reconcile the apparently conflicting
interests of the authorities and the taxpayers so that the real
purpose of taxations, which is the promotion of the common good,
may be achieved (Commissioner of Internal Revenue v. Algue Inc., et
al., 158 SCRA 9 [1988]). Consequently, it stands to reason that
petitioners who are burdened by the government by its Rental
Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle
of social justice should not now be penalized by the same
government by the imposition of excessive taxes petitioners can ill
afford and eventually result in the forfeiture of their
properties.By the public respondents' own computation the
assessment by income approach would amount to only P10.00 per sq.
meter at the time in question.PREMISES CONSIDERED, (a) the petition
is GRANTED; (b) the assailed decisions of public respondents are
REVERSED and SET ASIDE; and (e) the respondent Board of Assessment
Appeals of Manila and the City Assessor of Manila are ordered to
make a new assessment by the income approach method to guarantee a
fairer and more realistic basis of computation (Rollo, p. 71).SO
ORDERED.Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr.,
Cruz, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Grio-Aquino,
Medialdea, Regalado and Davide, Jr., JJ., concur.
G.R. No. L-7859December 22, 1955WALTER LUTZ, as Judicial
Administrator of the Intestate Estate of the deceased Antonio Jayme
Ledesma,plaintiff-appellant,vs.J. ANTONIO ARANETA, as the Collector
of Internal Revenue,defendant-appellee.Ernesto J. Gonzaga for
appellant.Office of the Solicitor General Ambrosio Padilla, First
Assistant Solicitor General Guillermo E. Torres and Solicitor
Felicisimo R. Rosete for appellee.REYES, J.B L.,J.:This case was
initiated in the Court of First Instance of Negros Occidental to
test the legality of the taxes imposed by Commonwealth Act No. 567,
otherwise known as the Sugar Adjustment Act.Promulgated in 1940,
the law in question opens (section 1) with a declaration of
emergency, due to the threat to our industry by the imminent
imposition of export taxes upon sugar as provided in the
Tydings-McDuffe Act, and the "eventual loss of its preferential
position in the United States market"; wherefore, the national
policy was expressed "to obtain a readjustment of the benefits
derived from the sugar industry by the component elements thereof"
and "to stabilize the sugar industry so as to prepare it for the
eventuality of the loss of its preferential position in the United
States market and the imposition of the export taxes."In section 2,
Commonwealth Act 567 provides for an increase of the existing tax
on the manufacture of sugar, on a graduated basis, on each picul of
sugar manufactured; while section 3 levies on owners or persons in
control of lands devoted to the cultivation of sugar cane and ceded
to others for a consideration, on lease or otherwise a tax
equivalent to the difference between the money value of the rental
or consideration collected and the amount representing 12 per
centum of the assessed value of such land.According to section 6 of
the law SEC. 6. All collections made under this Act shall accrue to
a special fund in the Philippine Treasury, to be known as the
'Sugar Adjustment and Stabilization Fund,' and shall be paid out
only for any or all of the following purposes or to attain any or
all of the following objectives, as may be provided by law.First,
to place the sugar industry in a position to maintain itself,
despite the gradual loss of the preferntial position of the
Philippine sugar in the United States market, and ultimately to
insure its continued existence notwithstanding the loss of that
market and the consequent necessity of meeting competition in the
free markets of the world;Second, to readjust the benefits derived
from the sugar industry by all of the component elements thereof
the mill, the landowner, the planter of the sugar cane, and the
laborers in the factory and in the field so that all might continue
profitably to engage therein;lawphi1.netThird, to limit the
production of sugar to areas more economically suited to the
production thereof; andFourth, to afford labor employed in the
industry a living wage and to improve their living and working
conditions: Provided, That the President of the Philippines may,
until the adjourment of the next regular session of the National
Assembly, make the necessary disbursements from the fund herein
created (1) for the establishment and operation of sugar experiment
station or stations and the undertaking of researchers (a) to
increase the recoveries of the centrifugal sugar factories with the
view of reducing manufacturing costs, (b) to produce and propagate
higher yielding varieties of sugar cane more adaptable to different
district conditions in the Philippines, (c) to lower the costs of
raising sugar cane, (d) to improve the buying quality of denatured
alcohol from molasses for motor fuel, (e) to determine the
possibility of utilizing the other by-products of the industry, (f)
to determine what crop or crops are suitable for rotation and for
the utilization of excess cane lands, and (g) on other problems the
solution of which would help rehabilitate and stabilize the
industry, and (2) for the improvement of living and working
conditions in sugar mills and sugar plantations, authorizing him to
organize the necessary agency or agencies to take charge of the
expenditure and allocation of said funds to carry out the purpose
hereinbefore enumerated, and, likewise, authorizing the
disbursement from the fund herein created of the necessary amount
or amounts needed for salaries, wages, travelling expenses,
equipment, and other sundry expenses of said agency or
agencies.Plaintiff, Walter Lutz, in his capacity as Judicial
Administrator of the Intestate Estate of Antonio Jayme Ledesma,
seeks to recover from the Collector of Internal Revenue the sum of
P14,666.40 paid by the estate as taxes, under section 3 of the Act,
for the crop years 1948-1949 and 1949-1950; alleging that such tax
is unconstitutional and void, being levied for the aid and support
of the sugar industry exclusively, which in plaintiff's opinion is
not a public purpose for which a tax may be constitutioally levied.
The action having been dismissed by the Court of First Instance,
the plaintifs appealed the case directly to this Court (Judiciary
Act, section 17).The basic defect in the plaintiff's position is
his assumption that the tax provided for in Commonwealth Act No.
567 is a pure exercise of the taxing power. Analysis of the Act,
and particularly of section 6 (heretofore quoted in full), will
show that the tax is levied with a regulatory purpose, to provide
means for the rehabilitation and stabilization of the threatened
sugar industry. In other words, the act is primarily an exercise of
the police power.This Court can take judicial notice of the fact
that sugar production is one of the great industries of our nation,
sugar occupying a leading position among its export products; that
it gives employment to thousands of laborers in fields and
factories; that it is a great source of the state's wealth, is one
of the important sources of foreign exchange needed by our
government, and is thus pivotal in the plans of a regime committed
to a policy of currency stability. Its promotion, protection and
advancement, therefore redounds greatly to the general welfare.
Hence it was competent for the legislature to find that the general
welfare demanded that the sugar industry should be stabilized in
turn; and in the wide field of its police power, the lawmaking body
could provide that the distribution of benefits therefrom be
readjusted among its components to enable it to resist the added
strain of the increase in taxes that it had to sustain (Sligh vs.
Kirkwood, 237 U. S. 52, 59 L. Ed. 835; Johnson vs. State ex rel.
Marey, 99 Fla. 1311, 128 So. 853; Maxcy Inc. vs. Mayo, 103 Fla.
552, 139 So. 121).As stated in Johnson vs. State ex rel. Marey,
with reference to the citrus industry in Florida The protection of
a large industry constituting one of the great sources of the
state's wealth and therefore directly or indirectly affecting the
welfare of so great a portion of the population of the State is
affected to such an extent by public interests as to be within the
police power of the sovereign. (128 Sp. 857).Once it is conceded,
as it must, that the protection and promotion of the sugar industry
is a matter of public concern, it follows that the Legislature may
determine within reasonable bounds what is necessary for its
protection and expedient for its promotion. Here, the legislative
discretion must be allowed fully play, subject only to the test of
reasonableness; and it is not contended that the means provided in
section 6 of the law (above quoted) bear no relation to the
objective pursued or are oppressive in character. If objective and
methods are alike constitutionally valid, no reason is seen why the
state may not levy taxes to raise funds for their prosecution and
attainment. Taxation may be made the implement of the state's
police power (Great Atl. & Pac. Tea Co. vs. Grosjean, 301 U. S.
412, 81 L. Ed. 1193; U. S. vs. Butler, 297 U. S. 1, 80 L. Ed. 477;
M'Culloch vs. Maryland, 4 Wheat. 316, 4 L. Ed. 579).That the tax to
be levied should burden the sugar producers themselves can hardly
be a ground of complaint; indeed, it appears rational that the tax
be obtained precisely from those who are to be benefited from the
expenditure of the funds derived from it. At any rate, it is
inherent in the power to tax that a state be free to select the
subjects of taxation, and it has been repeatedly held that
"inequalities which result from a singling out of one particular
class for taxation, or exemption infringe no constitutional
limitation" (Carmichael vs. Southern Coal & Coke Co., 301 U. S.
495, 81 L. Ed. 1245, citing numerous authorities, at p. 1251).From
the point of view we have taken it appears of no moment that the
funds raised under the Sugar Stabilization Act, now in question,
should be exclusively spent in aid of the sugar industry, since it
is that very enterprise that is being protected. It may be that
other industries are also in need of similar protection; that the
legislature is not required by the Constitution to adhere to a
policy of "all or none." As ruled in Minnesota ex rel. Pearson vs.
Probate Court, 309 U. S. 270, 84 L. Ed. 744, "if the law presumably
hits the evil where it is most felt, it is not to be overthrown
because there are other instances to which it might have been
applied;" and that "the legislative authority, exerted within its
proper field, need not embrace all the evils within its reach" (N.
L. R. B. vs. Jones & Laughlin Steel Corp. 301 U. S. 1, 81 L.
Ed. 893).Even from the standpoint that the Act is a pure tax
measure, it cannot be said that the devotion of tax money to
experimental stations to seek increase of efficiency in sugar
production, utilization of by-products and solution of allied
problems, as well as to the improvements of living and working
conditions in sugar mills or plantations, without any part of such
money being channeled directly to private persons, constitutes
expenditure of tax money for private purposes, (compare Everson vs.
Board of Education, 91 L. Ed. 472, 168 ALR 1392, 1400).The decision
appealed from is affirmed, with costs against appellant. So
ordered.Paras, C. J., Bengzon, Padilla, Reyes, A., Jugo, Bautista
Angelo, Labrador, and Concepcion, JJ., concur.
G.R. No. L-4817 May 26, 1954SILVESTER M. PUNSALAN, ET
AL.,plaintiffs-appellants,vs.THE MUNICIPAL BOARD OF THE CITY OF
MANILA, ET AL.,defendants-appellants.Calanog and Alafriz for
plaintiffs-appellants.City Fiscal Eugenio Angeles and Assistant
Fiscal Eulogio S. Serreno for defendants-appellants.REYES,J.:This
suit was commenced in the Court of First Instance of Manila by two
lawyers, a medical practitioner, a public accountant, a dental
surgeon and a pharmacist, purportedly "in their own behalf and in
behalf of other professionals practising in the City of Manila who
may desire to join it." Object of the suit is the annulment of
Ordinance No. 3398 of the City of Manila together with the
provision of the Manila charter authorizing it and the refund of
taxes collected under the ordinance but paid under protest.The
ordinance in question, which was approved by the municipal board of
the City of Manila on July 25, 1950, imposes a municipal occupation
tax on persons exercising various professions in the city and
penalizes non-payment of the tax "by a fine of not more than two
hundred pesos or by imprisonment of not more than six months, or by
both such fine and imprisonment in the discretion of the court."
Among the professions taxed were those to which plaintiffs belong.
The ordinance was enacted pursuant to paragraph (1) of section 18
of the Revised Charter of the City of Manila (as amended by
Republic Act No. 409), which empowers the Municipal Board of said
city to impose a municipal occupation tax, not to exceed P50per
annum, on persons engaged in the various professions above referred
to.Having already paid their occupation tax under section 201 of
the National Internal Revenue Code, plaintiffs, upon being required
to pay the additional tax prescribed in the ordinance, paid the
same under protest and then brought the present suit for the
purpose already stated. The lower court upheld the validity of the
provision of law authorizing the enactment of the ordinance but
declared the ordinance itself illegal and void on the ground that
the penalty there in provided for non-payment of the tax was not
legally authorized. From this decision both parties appealed to
this Court, and the only question they have presented for our
determination is whether this ruling is correct or not, for though
the decision is silent on the refund of taxes paid plaintiffs make
no assignment of error on this point.To begin with defendants'
appeal, we find that the lower court was in error in saying that
the imposition of the penalty provided for in the ordinance was
without the authority of law. The last paragraph (kk) of the very
section that authorizes the enactment of this tax ordinance
(section 18 of the Manila Charter) in express terms also empowers
the Municipal Board"to fix penalties for the violation of
ordinances which shall not exceed to(sic) two hundred pesos fine or
six months" imprisonment, or both such fine and imprisonment, for a
single offense."Hence, the pronouncement below that the ordinance
in question is illegal and void because it imposes a penalty not
authorized by law is clearly without basis.As to plaintiffs'
appeal, the contention in substance is that this ordinance and the
law authorizing it constitute class legislation, are unjust and
oppressive, and authorize what amounts to double taxation.In
raising the hue and cry of "class legislation", the burden of
plaintiffs' complaint is not that the professions to which they
respectively belong have been singled out for the imposition of
this municipal occupation tax; and in any event, the Legislature
may, in its discretion, select what occupations shall be taxed, and
in the exercise of that discretion it may tax all, or it may select
for taxation certain classes and leave the others untaxed. (Cooley
on Taxation, Vol. 4, 4th ed., pp. 3393-3395.) Plaintiffs' complaint
is that while the law has authorized the City of Manila to impose
the said tax, it has withheld that authority from other chartered
cities, not to mention municipalities. We do not think it is for
the courts to judge what particular cities or municipalities should
be empowered to impose occupation taxes in addition to those
imposed by the National Government. That matter is peculiarly
within the domain of the political departments and the courts would
do well not to encroach upon it. Moreover, as the seat of the
National Government and with a population and volume of trade many
times that of any other Philippine city or municipality, Manila, no
doubt, offers a more lucrative field for the practice of the
professions, so that it is but fair that the professionals in
Manila be made to pay a higher occupation tax than their brethren
in the provinces.Plaintiffs brand the ordinance unjust and
oppressive because they say that it creates discrimination within a
class in that while professionals with offices in Manila have to
pay the tax, outsiders who have no offices in the city but practice
their profession therein are not subject to the tax. Plaintiffs
make a distinction that is not found in the ordinance. The
ordinance imposes the tax upon every person "exercising" or
"pursuing" in the City of Manila naturally any one of the
occupations named, but does not say that such person must have his
office in Manila. What constitutes exercise or pursuit of a
profession in the city is a matter of judicial determination. The
argument against double taxation may not be invoked where one tax
is imposed by the state and the other is imposed by the city (1
Cooley on Taxation, 4th ed., p. 492), it being widely recognized
that there is nothing inherently obnoxious in the requirement that
license fees or taxes be exacted with respect to the same
occupation, calling or activity by both the state and the political
subdivisions thereof. (51 Am. Jur., 341.)In view of the foregoing,
the judgment appealed from is reversed in so far as it declares
Ordinance No. 3398 of the City of Manila illegal and void and
affirmed in so far as it holds the validity of the provision of the
Manila charter authorizing it. With costs against
plaintiffs-appellants.Pablo, Bengzon, Montemayor, Jugo, Bautista
Angelo, Labrador, and Concepcion, JJ., concur.
Separate OpinionsPARAS,C.J.,dissenting:I am constrained to
dissent from the decision of the majority upon the ground that the
Municipal Board of Manila cannot outlaw what Congress of the
Philippines has already authorized. The plaintiffs-appellants two
lawyers, a physician, an accountant, a dentist and a pharmacist had
already paid the occupation tax under section 201 of the National
Internal Revenue Code and are thereby duly licensed to practice
their respective professions throughout the Philippines; and yet
they had been required to pay another occupation tax under
Ordinance No. 3398 for practising in the City of Manila. This is a
glaring example of contradiction the license granted by the
National Government is in effect withdrawn by the City in case of
non-payment of the tax under the ordinance. I fit be argued that
the national occupation tax is collected to allow the professional
residing in Manila to pursue his calling in other places in the
Philippines, it should then be exacted only from professionals
practising simultaneously in and outside of Manila. At any rate, we
are confronted with the following situation: Whereas the
professionals elsewhere pay only one occupation tax, in the City of
Manila they have to pay two, although all are on equal footing
insofar as opportunities for earning money out of their pursuits
are concerned. The statement that practice in Manila is more
lucrative than in the provinces, may be true perhaps with reference
only to a limited few, but certainly not to the general mass of
practitioners in any field. Again, provincial residents who have
occasional or isolated practice in Manila may have to pay the city
tax. This obvious discrimination or lack of uniformity cannot be
brushed aside or justified by any trite pronouncement that double
taxation is legitimate or that legislation may validly affect
certain classes.My position is that a professional who has paid the
occupation tax under the National Internal Revenue Code should be
allowed to practice in Manila even without paying the similar tax
imposed by Ordinance No. 3398. The City cannot give what said
professional already has. I would not say that this Ordinance,
enacted by the Municipal Board pursuant to paragraph 1 of section
18 of the Revised Charter of Manila, as amended by Republic Act No.
409, empowering the Board to impose a municipal occupation tax not
to exceed P50 per annum, is invalid; but that only one tax, either
under the Internal Revenue Code or under Ordinance No. 3398, should
be imposed upon a practitioner in Manila.
G.R. No. L-18994 June 29, 1963MELECIO R. DOMINGO, as
Commissioner of Internal Revenue,petitioner,vs.HON. LORENZO C.
GARLITOS, in his capacity as Judge of the Court of First Instance
of Leyte,and SIMEONA K. PRICE, as Administratrix of the Intestate
Estate of the late Walter Scott Price,respondents.Office of the
Solicitor General and Atty. G. H. Mantolino for
petitioner.Benedicto and Martinez for respondents.LABRADOR,J.:This
is a petition forcertiorariandmandamusagainst the Judge of the
Court of First Instance of Leyte, Ron. Lorenzo C. Garlitos,
presiding, seeking to annul certain orders of the court and for an
order in this Court directing the respondent court below to execute
the judgment in favor of the Government against the estate of
Walter Scott Price for internal revenue taxes.It appears that in
Melecio R. Domingo vs. Hon. Judge S. C. Moscoso, G.R. No. L-14674,
January 30, 1960, this Court declared as final and executory the
order for the payment by the estate of the estate and inheritance
taxes, charges and penalties, amounting to P40,058.55, issued by
the Court of First Instance of Leyte in, special proceedings No. 14
entitled "In the matter of the Intestate Estate of the Late Walter
Scott Price." In order to enforce the claims against the estate the
fiscal presented a petition dated June 21, 1961, to the court below
for the execution of the judgment. The petition was, however,
denied by the court which held that the execution is not
justifiable as the Government is indebted to the estate under
administration in the amount of P262,200. The orders of the court
below dated August 20, 1960 and September 28, 1960, respectively,
are as follows:Atty. Benedicto submitted a copy of the contract
between Mrs. Simeona K. Price, Administratrix of the estate of her
late husband Walter Scott Price and Director Zoilo Castrillo of the
Bureau of Lands dated September 19, 1956 and acknowledged before
Notary Public Salvador V. Esguerra, legal adviser in Malacaang to
Executive Secretary De Leon dated December 14, 1956, the note of
His Excellency, Pres. Carlos P. Garcia, to Director Castrillo dated
August 2, 1958, directing the latter to pay to Mrs. Price the sum
ofP368,140.00, and an extract of page 765 of Republic Act No. 2700
appropriating the sum of P262.200.00 for the payment to the Leyte
Cadastral Survey, Inc., represented by the administratrix Simeona
K. Price, as directed in the above note of the President.
Considering these facts, the Court orders that the payment of
inheritance taxes in the sum of P40,058.55 due the Collector of
Internal Revenue as ordered paid by this Court on July 5, 1960 in
accordance with the order of the Supreme Court promulgated July 30,
1960 in G.R. No. L-14674, be deducted from the amount of
P262,200.00 due and payable to the Administratrix Simeona K. Price,
in this estate, the balance to be paid by the Government to her
without further delay. (Order of August 20, 1960)The Court has
nothing further to add to its order dated August 20, 1960 and it
orders that the payment of the claim of the Collector of Internal
Revenue be deferred until the Government shall have paid its
accounts to the administratrix herein amounting to P262,200.00. It
may not be amiss to repeat that it is only fair for the Government,
as a debtor, to its accounts to its citizens-creditors before it
can insist in the prompt payment of the latter's account to it,
specially taking into consideration that the amount due to the
Government draws interests while the credit due to the present
state does not accrue any interest. (Order of September 28,
1960)The petition to set aside the above orders of the court below
and for the execution of the claim of the Government against the
estate must be denied for lack of merit. The ordinary procedure by
which to settle claims of indebtedness against the estate of a
deceased person, as an inheritance tax, is for the claimant to
present a claim before the probate court so that said court may
order the administrator to pay the amount thereof. To such effect
is the decision of thisCourt in Aldamiz vs. Judge of the Court of
First Instance of Mindoro, G.R. No. L-2360, Dec. 29, 1949, thus:. .
. a writ of execution is not the proper procedure allowed by the
Rules of Court for the payment of debts and expenses of
administration. The proper procedure is for the court to order the
sale of personal estate or the sale or mortgage of real property of
the deceased and all debts or expenses of administrator and with
the written notice to all the heirs legatees and devisees residing
in the Philippines, according to Rule 89, section 3, and Rule 90,
section 2. And when sale or mortgage of real estate is to be made,
the regulations contained in Rule 90, section 7, should be complied
with.1wph1.tExecution may issue only where the devisees, legatees
or heirs have entered into possession of their respective portions
in the estate prior to settlement and payment of the debts and
expenses of administration and it is later ascertained that there
are such debts and expenses to be paid, in which case "the court
having jurisdiction of the estate may, by order for that purpose,
after hearing, settle the amount of their several liabilities, and
order how much and in what manner each person shall contribute, and
mayissue executionif circumstances require" (Rule 89, section 6;see
alsoRule 74, Section 4; Emphasis supplied.) And this is not the
instant case.The legal basis for such a procedure is the fact that
in the testate or intestate proceedings to settle the estate of a
deceased person, the properties belonging to the estate are under
the jurisdiction of the court and such jurisdiction continues until
said properties have been distributed among the heirs entitled
thereto. During the pendency of the proceedings all the estate is
incustodia legisand the proper procedure is not to allow the
sheriff, in case of the court judgment, to seize the properties but
to ask the court for an order to require the administrator to pay
the amount due from the estate and required to be paid.Another
ground for denying the petition of the provincial fiscal is the
fact that the court having jurisdiction of the estate had found
that the claim of the estate against the Government has been
recognized and an amount of P262,200 has already been appropriated
for the purpose by a corresponding law (Rep. Act No. 2700). Under
the above circumstances, both the claim of the Government for
inheritance taxes and the claim of the intestate for services
rendered have already become overdue and demandable is well as
fully liquidated. Compensation, therefore, takes place by operation
of law, in accordance with the provisions of Articles 1279 and 1290
of the Civil Code, and both debts are extinguished to the
concurrent amount, thus:ART. 1200. When all the requisites
mentioned in article 1279 are present, compensation takes effect by
operation of law, and extinguished both debts to the concurrent
amount, It is clear, therefore, that the petitioner has no clear
right to execute the judgment for taxes against the estate of the
deceased Walter Scott Price. Furthermore, the petition
forcertiorariandmandamusis not the proper remedy for the
petitioner. Appeal is the remedy.The petition is, therefore,
dismissed, without costs.
[G.R. No. 117359.July 23, 1998]DAVAOGULFLUMBER
CORPORATION,petitioner, vs.COMMISSIONER OF INTERNAL REVENUE and
COURT OF APPEALS,respondents.D E C I S I O NPANGANIBAN,J.:Because
taxes are the lifeblood of the nation, statutes that allow
exemptions are construed strictly against the grantee and liberally
in favor of the government. Otherwise stated, any exemption from
the payment of a tax must be clearly stated in the language of the
law; it cannot be merely implied therefrom.Statement of the
CaseThisprincipiumis applied by the Court in resolving this
petition for review under Rule 45 of the Rules of Court, assailing
the Decision[1]of Respondent Court of Appeals[2]in CA-GR SP No.
34581 dated September 26, 1994, which affirmed the June 21, 1994
Decision[3]of the Court of Tax Appeals[4]in CTA Case No. 3574.The
dispositive portion of the CTA Decision affirmed by Respondent
Court reads:WHEREFORE,judgment is hereby rendered ordering the
respondent to refund to the petitioner the amount ofP2,923.15
representing the partial refund of specific taxes paid on
manufactured oils and fuels.[5]The Antecedent FactsThe facts are
undisputed.[6]Petitioner is a licensed forest concessionaire
possessing a Timber License Agreement granted by the Ministry of
Natural Resources (now Department of Environment and Natural
Resources).From July 1, 1980 to January 31, 1982 petitioner
purchased, from various oil companies, refined and manufactured
mineral oils as well as motor and diesel fuels, which it used
exclusively for the exploitation and operation of its forest
concession.Said oil companies paid the specific taxes imposed,
under Sections 153 and 156[7]of the 1977 National Internal Revenue
Code (NIRC), on the sale of said products. Being included in the
purchase price of the oil products, the specific taxes paid by the
oil companies were eventually passed on to the user, the petitioner
in this case.On December 13, 1982, petitioner filed before
Respondent Commissioner of Internal Revenue (CIR) a claim for
refund in the amount ofP120,825.11,representing25%ofthespecific
taxes actually paid on the above-mentioned fuels and oils that were
used by petitioner in its operations as forest concessionaire.The
claim was based onInsular Lumber Co. vs. Court of Tax Appeals[8]and
Section 5 of RA 1435 which reads: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 whenever any oils mentioned
above are used by miners or forest concessionaires in their
operations, twenty-five per centum of the specific tax paid thereon
shall be refunded by the Collector of Internal Revenue upon
submission of proof of actual use of oils and under similar
conditions enumerated in subparagraphs one and two of section one
hereof, amending section one hundred forty-two of the Internal
Revenue Code:Provided, further, That no new road shall be
constructed unless the routes or location 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
articulated route in the Philippine Highway System, as required in
section twenty-six of the Philippine Highway Act of 1953.It is an
unquestioned fact that petitioner complied with the procedure for
refund, including the submission of proof of the actual use of the
aforementioned oils in its forest concession as required by the
above-quoted law.Petitioner, in support of its claim for refund,
submitted to the CIR the affidavits of its general manager, the
president of the Philippine Wood Products Association, and three
disinterested persons, all attesting that the said manufactured
diesel and fuel oils were actually used in the exploitation and
operation of its forest concession.On January 20, 1983, petitioner
filed at the CTA a petition for review docketed as CTA Case No.
3574.On June 21, 1994, the CTA rendered its decision finding
petitioner entitled to a partial refund of specific taxes the
latter had paid in the reduced amount ofP2,923.15.The CTA ruled
that the claim on purchases of lubricating oil (from July 1, 1980
to January 19, 1981), and on manufactured oils other than
lubricating oils (from July 1, 1980 to January 4, 1981) had
prescribed.Disallowed on the ground that they were not included in
the original claim filed before the CIR were the claims for refund
on purchases of manufactured oils from January 1, 1980 to June 30,
1980 and from February 1, 1982 to June 30, 1982.In regard to the
other purchases,the CTA granted the claim, but it computed the
refund based on rates deemed paid under RA 1435, and not on the
higher rates actually paid by petitioner under the NIRC.Insisting
that the basis for computing the refund should be the increased
rates prescribed by Sections 153 and 156 of the NIRC, petitioner
elevated the matter to the Court of Appeals.As noted earlier, the
Court of Appeals affirmed the CTA Decision.Hence, this petition for
review.[9]Public Respondents RulingIn its petition before the Court
of Appeals, petitioner raised the following arguments:I.The
respondent Court of Tax Appeals failed to apply the Supreme Courts
Decision inInsular Lumber Co. v. Court of Tax Appealswhich granted
the claim for partial refund of specific taxes paid by the
claimant, without qualification or limitation.II.The respondent
Court of Tax Appeals ignored the increase in rates imposed by
succeeding amendatory laws, under which the petitioner paid the
specific taxes on manufactured and diesel fuels.III.In its
decision, the respondent Court of Tax Appeals ruled contrary to
established tenets of law when it lent itself to interpreting
Section 5 of R.A. 1435, when the construction of said law is not
necessary.IV.Sections 1 and 2 of R.A. 1435 are not the operative
provisions to be applied but rather, Sections 153 and 156 of the
National Internal Revenue Code, as amended.V.To rule that the basis
for computation of the refunded taxes should be Sections 1 and 2 of
R.A. 1435 rather than Section 153 and 156 of the National Internal
Revenue Code is unfair, erroneous, arbitrary, inequitable and
oppressive.[10]The Court of Appeals held that the claim for refund
should indeed be computed on the basis of the amounts deemed paid
under Sections 1 and 2 of RA 1435.In so ruling, it cited our
pronouncement inCommissioner of Internal Revenue v. Rio Tuba Nickel
Mining Corporation[11]and our subsequent Resolution dated June 15,
1992 clarifying the said Decision.Respondent Court further ruled
that the claims for refund which prescribed and those which were
not filed at the administrative level must be excluded.The IssueIn
its Memorandum, petitioner raises one critical issue:Whether or not
petitioner is entitled under Republic Act No. 1435 to the refund of
25% of the amount of specific taxes it actually paid on various
refined and manufactured mineral oils and other oil products taxed
under Sec. 153 and Sec. 156 of the 1977 (Sec. 142 and Sec. 145 of
the 1939) National Internal Revenue Code.[12]In the main, the
question before us pertains only to the computation of the tax
refund.Petitioner argues that the refund should be based on the
increased rates of specific taxes which it actually paid, as
prescribed in Sections 153 and 156 of the NIRC.Public respondent,
on the other hand, contends that it should be based on specific
taxes deemed paid under Sections 1 and 2 of RA 1435.The Courts
RulingThe petition is not meritorious.Petitioner Entitled to
RefundUnder Sec. 5 of RA 1435At the outset, it must be stressed
that petitioner is entitled to a partial refund under Section 5 of
RA 1435, which was enacted to provide means for increasing the
Highway Special Fund.The rationale for this grant of partial refund
of specific taxes paid on purchases of manufactured diesel and fuel
oils rests on the character of the Highway Special Fund.The
specific taxes collected on gasoline and fuel accrue to the Fund,
which is to be used for the construction and maintenance of the
highway system.But because the gasoline and fuel purchased by
mining and lumber concessionaires are used within their own
compounds and roads, and their vehicles seldom use the national
highways, they do not directly benefit from the Fund and its
use.Hence, the tax refund gives the mining and the logging
companies a measure of relief in light of their peculiar
situation.[13]When the Highway Special Fund was abolished in 1985,
the reason for the refund likewise ceased to exist.[14]Since
petitioner purchased the subject manufactured diesel and fuel oils
from July 1, 1980 to January 31, 1982 and submitted the required
proof that these were actually used in operating its forest
concession,it is entitled to claim the refund under Section 5 of RA
1435.Tax Refund Strictly ConstruedAgainst the GranteePetitioner
submits that it is entitled to the refund of 25 percent of the
specific taxes it had actually paid for the petroleum products used
in its operations.In other words, it claims a refund based on the
increased rates under Sections 153 and 156 of the
NIRC.[15]Petitioner argues that the statutory grant of the refund
privilege, specifically the phrase twenty-fivepercentum ofthe
specific tax paid thereon shall be refunded by the Collector of
Internal Revenue, is clear and unambiguous enough to require
construction or qualification thereof.[16]In addition, it cites our
pronouncement inInsular Lumber vs. Court of Tax Appeals:[17]x x x
Section 5 [of RA 1435] makes reference to subparagraphs 1 and 2 of
Section 1 only for the purpose of prescribing the procedure for
refund.This express reference cannot be expanded in scope to
include the limitation of the period of refund.If the limitation of
the period of refund of specific taxes paid on oils used in
aviation and agriculture is intended to cover similar taxes paid on
oil used by miners and forest concessionaires, there would have
been no need of dealing with oil used by miners and forest
concessions separately and Section 5 would very well have been
included in Section 1 of Republic Act No. 1435, notwithstanding the
different rate of exemption.Petitioner then reasons that the
express mention of Section 1 of RA 1435 in Section 5 cannot be
expanded to include a limitation on the tax rates to be applied x x
x [otherwise,] Section 5 should very well have been included in
Section 1 x x x.[18]The Court is not persuaded.The relevant
statutory provisions do not clearly support petitioners claim for
refund.RA 1435 provides:SECTION 1.Section one hundred and forty-two
of the National Internal Revenue Code, as amended, is further
amended to read as follows:SEC. 142.Specific tax on manufactured
oils and other fuels. --On refined and manufactured mineral oils
and motor fuels, there shall be collected the following
taxes:(a)Kerosene or petroleum, per liter of volume capacity, two
and one-half centavos;(b)Lubricating oils, per liter of volume
capacity, seven centavos;(c)Naptha, gasoline, and all other similar
products of distillation, per liter of volume capacity, eight
centavos; and(d)On denatured alcohol to be used for motive power,
per liter of volume capacity, one centavo:Provided,That if the
denatured alcohol is mixed with gasoline, the specific tax on which
has already been paid, only the alcohol content shall be subject to
the tax herein prescribed.For the purpose of this subsection, the
removal of denatured alcohol of not less than one hundred eighty
degrees proof (ninetyper centumabsolute alcohol) shall be deemed to
have been removed for motive power, unless shown to the
contrary.Whenever any of the oils mentioned above are, during the
five years from June eighteen, nineteen hundred and fifty two, used
in agriculture and aviation, fiftyper centumof the specific tax
paid thereon shall be refunded by the Collector of Internal Revenue
upon the submission of the following:(1)A sworn affidavit of the
producer and two disinterested persons proving that the said oils
were actually used in agriculture, or in lieu thereof(2)Should the
producer belong to any producers association or federation, duly
registered with the Securities and Exchange Commission, the
affidavit of the president of the association or federation,
attesting to the fact that the oils were actually used in
agriculture.(3)In the case of aviation oils, a sworn certificate
satisfactory to the Collector proving that the said oils were
actually used in aviation:Provided,That no such refunds shall be
granted in respect to the oils used in aviation by citizens and
corporations of foreign countries which do not grant equivalent
refunds or exemptions in respect to similar oils used in aviation
by citizens and corporations of the Philippines.SEC. 2.Section one
hundred and forty-five of the National Internal Revenue Code, as
amended, is further amended to read as follows:SEC. 145.Specific
Tax on Diesel fuel oil. --On fuel oil, commercially known as diesel
fuel oil, and on all similar fuel oils, having more or less the
same generating power, there shall be collected, per metric ton,
one peso.x x xx x xx x xSection 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 whenever any oils mentioned above
are used by miners or forest concessionaires in their operations,
twenty-five per centum of the specific tax paid thereon shall be
refunded by the Collector of Internal Revenue upon submission of
proof of actual use of oils and under similar conditions enumerated
in subparagraphs one and two of section one hereof, amending
section one hundred forty-two of the Internal Revenue
Code:Provided, further, That no new road shall be constructed
unless the route or location 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 articulated route in the
Philippine Highway System, as required in section twenty-six of the
Philippine Highway Act of 1953.Subsequently, the 1977 NIRC, PD 1672
and EO 672 amended the first two provisions, renumbering them and
prescribing higher rates.Accordingly, petitioner paid specific
taxes on petroleum products purchased from July 1, 1980 to January
31, 1982 under the following statutory provisions.From February 8,
1980 to March 20, 1981, Sections 153 and 156 provided as
follows:SEC. 153.Specific tax on manufactured oils and other fuels.
--On refined and manufactured mineral oils and motor fuels, there
shall be collected the following taxes which shall attach to the
articles hereunder enumerated as soon as they are in existence as
such:(a)Kerosene, per liter of volume capacity, seven
centavos;(b)Lubricating oils, per liter of volume capacity, eighty
centavos;(c)Naphtha, gasoline and all other similar products of
distillation, per liter of volume capacity, ninety-one
centavos:Provided, That,on premium and aviation gasoline, the tax
shall be one peso per liter of volume capacity;(d)On denatured
alcohol to be used for motive power, per liter of volume capacity,
one centavo:Provided, That,unless otherwise provided for by special
laws, if the denatured alcohol is mixed with gasoline, the specific
tax on which has already been paid, only the alcohol content shall
be subject to the tax herein prescribed.For the purposes of this
subsection, the removal of denatured alcohol of not less than one
hundred eighty degrees proof (ninety per centum absolute alcohol)
shall be deemed to have been removed for motive power, unless shown
to the contrary;(e)Processed gas, per liter of volume capacity,
three centavos;(f)Thinners and solvents, per liter of volume
capacity, fifty-seven centavos;(g)Liquefied petroleum gas, per
kilogram, fourteen centavos:Provided, That,liquefied petroleum gas
used for motive power shall be taxed at the equivalent rate as the
specific tax on diesel fuel oil;(h)Asphalts, per kilogram, eight
centavos;(i)Greases, waxes and petrolatum, per kilogram, fifty
centavos;(j)Aviation turbo jet fuel, per liter of volume capacity,
fifty-five centavos. (As amended by Sec. 1, P.D. No. 1672.)x x xx x
xx x xSEC. 156.Specific tax on diesel fuel oil. --On fuel oil,
commercially known as diesel fuel oil, and on all similar fuel
oils, having more or less the same generating power, per liter of
volume capacity, seventeen and one-half centavos, which tax shall
attach to this fuel oil as soon as it is in existence as such."Then
on March 21, 1981, these provisions were amended by EO 672 to
read:SEC. 153.Specific tax on manufactured oils and other fuels.
--On refined and manufactured mineral oils and motor fuels, there
shall be collected the following taxes which shall attach to the
articles hereunder enumerated as soon as they are in existence as
such:(a)Kerosene, per liter of volume capacity, nine
centavos;(b)Lubricating oils, per liter of volume capacity, eighty
centavos;(c)Naphtha, gasoline and all other similar products of
distillation, per liter of volume capacity, one peso and six
centavos:Provided,That on premium and aviation gasoline, the tax
shall be one peso and ten centavos and one peso, respectively, per
liter of volume capacity;(d)On denatured alcohol to be used for
motive power, per liter of volume capacity, one
centavo;Provided,Thatunless otherwise provided for by special laws,
if the denatured alcohol is mixed with gasoline, the specific tax
on which has already been paid, only the alcohol content shall be
subject to the tax herein prescribed.For the purpose of this
subsection, the removal of denatured alcohol of not less than one
hundred eighty degrees proof (ninetyper centumabsolute alcohol)
shall be deemed to have been removed for motive power, unless shown
to the contrary;(e)Processed gas, per liter of volume capacity,
three centavos;(f)Thinners and solvents, per liter of volume
capacity, sixty-one centavos;(g)Liquefied petroleum gas, per
kilogram, twenty-one centavos:Provided,That,liquified petroleum gas
used for motive power shall be taxed at the equivalent rate as the
specific tax on diesel fuel oil;(h)Asphalts, per kilogram, twelve
centavos;(i)Greases, waxes and petrolatum, per kilogram, fifty
centavos;(j)Aviation turbo-jet fuel, per liter of volume capacity,
sixty-four centavos.x x xx x xx x xSEC. 156.Specific tax on diesel
fuel oil. --On fuel oil, commercially known as diesel fuel oil, and
all similar fuel oils, having more or less the same generating
power, per liter of volume capacity, twenty-five and one-half
centavos, which tax shall attach to this fuel oil as soon as it is
in existence as such.A tax cannot be imposed unless it is supported
by the clear and express language of a statute;[19]on the other
hand, once the tax is unquestionably imposed, [a] claim of
exemption from tax payments must be clearly shown and based on
language in the law too plain to be mistaken.[20]Since the partial
refund authorized under Section 5, RA 1435, is in the nature of a
tax exemption,[21]it must be construedstrictissimijurisagainst the
grantee.Hence, petitioners claim of refund on the basis of the
specific taxes it actually paid must expressly be granted in a
statute stated in a language too clear to be mistaken.We have
carefully scrutinized RA 1435 and the subsequent pertinent statutes
and found no expression ofalegislative will authorizing a refund
based on the higher rates claimed by petitioner.The mere fact that
the privilege of refund was included in Section 5, and not in
Section 1, is insufficient to support petitioners claim.When the
law itself does not explicitly provide that a refund under RA 1435
may be based on higher rates which were nonexistent at the time of
its enactment, this Court cannot presume otherwise.A legislative
lacuna cannot be filled by judicial fiat.[22]The issue is not
really novel.InCommissioner of Internal Revenue vs. Court of
Appeals and Atlas Consolidated Mining and Development
Corporation[23](the second Atlas case),the CIR contended that the
refund should be based on Sections 1 and 2 of RA 1435, not Sections
153 and 156 of the NIRC of 1977.In categorically ruling that
Private Respondent Atlas Consolidated Mining and Development
Corporation was entitled to a refund based on Sections 1 and 2 of
RA 1435, the Court, through Mr. Justice Hilario G. Davide, Jr.,
reiterated our pronouncement inCommissioner of Internal Revenue vs.
Rio Tuba Nickel and Mining Corporation:Our Resolution of 25 March
1992 modifying our 30 September 1991 Decision in theRio Tubacase
sets forth the controlling doctrine.In that Resolution, we
stated:Since the private respondents claim for refund covers
specific taxes paid from 1980 to July 1983 then we find that the
private respondent is entitled to a refund.It should be made clear,
however, that Rio Tuba is not entitled to the whole amount it
claims as refund.The specific taxes on oils which Rio Tuba paid for
the aforesaid period were no longer based on the rates specified by
Sections 1 and 2 of R.A. No. 1435 but on the increased rates
mandated under Sections 153 and 156 of the National Internal
Revenue Code of 1977.We note however, that the latter law does not
specifically provide for a refund to these mining and lumber
companies of specific taxes paid on manufactured and diesel fuel
oils.InInsular Lumber Co. v. Court of Tax Appeals,(104 SCRA 710
[1981]), the Court held that the authorized partial refund under
Section 5 of R.A. No. 1435 partakes of the nature of a tax
exemption and therefore cannot be allowed unless granted in the
most explicit and categorical language.Since the grant of refund
privileges must be strictly construed against the taxpayer, the
basis for the refund shall be the amounts deemed paid under
Sections 1 and 2 of R.A. No. 1435.ACCORDINGLY, the decision in G.R.
Nos. 83583-84 is hereby MODIFIED.The private respondents CLAIM for
REFUND is GRANTED, computed on the basis of the amounts deemed paid
under Sections 1 and 2 of R.A. NO. 1435, without interest.[24]We
rule, therefore, that since Atlass claims for refund cover specific
taxes paid before 1985, it should be granted the refund based on
the rates specified by Sections 1 and 2 of R.A. No. 1435 and not on
the increased rates under Sections 153 and 156 of the Tax Code of
1977, provided the claims are not yet barred by prescription.
(Underscoring supplied.)Insular Lumber Co.and First Atlas Case Not
Inconsistent WithRio TubaandSecond Atlas CasePetitioner argues that
the applicable jurisprudence in this case should beCommissioner of
Internal Revenue vs. Atlas Consolidated and Mining Corp. (the first
Atlas case), an unsigned resolution, andInsular Lumber Co. vs.
Court of Tax Appeals,anen bancdecision.[25]Petitioner also asks the
Court to take a second look atRio Tubaand the second Atlas case,
both decided by Divisions, in view ofInsularwhich was decideden
banc.Petitioner posits that [I]n view of the similarity of the
situation of herein petitioner with Insular Lumber Company
(claimant inInsular Lumber) and Rio Tuba Nickel Mining Corporation
(claimant inRio Tuba), adilemmahas been created as to whether or
notInsular Lumber, which has been decided by the Honorable Courten
banc, orRio Tuba, which was decided only [by] the Third Division of
the Honorable Court, should apply.[26]We find no conflict between
these two pairs of cases.NeitherInsular Lumber Co.nor the first
Atlas case ruled on the issue of whether the
refundprivilegeunderSection5shouldbe computed based on the specific
tax deemed paid under Sections 1 and 2 of RA 1435, regardless of
what was actually paid under the increased rates.Rio Tubaand the
second Atlas case did.Insular Lumber Co.decided a claim for refund
on specific tax paid on petroleum products purchased in the year
1963, when the increased rates under the NIRC of 1977 were not yet
in effect.Thus, the issue now before us did not exist at the time,
since the applicable rates were still those prescribed under
Sections 1 and 2 of RA 1435.On the other hand, the issue raised in
the first Atlas case was whether the claimant was entitled to the
refund under Section 5, notwithstanding its failure to pay any
additional tax under a municipal or city ordinance.Although Atlas
purchased petroleum products in the years 1976 to 1978 when the
rates had already been changed, the Court did not decide or make
any pronouncement on the issue in that case.Clearly, it is
impossible for these two decisions to clash with our pronouncement
inRio Tubaand secondAtlascase, in which we ruled that the refund
granted be computed on the basis of the amounts deemed paid under
Sections 1 and 2 of RA 1435.In this light, we find no basis for
petitioners invocation of the constitutional proscription that no
doctrine or principle of law laid down by the Court in a decision
rendereden bancor in division may be modified or reversed except by
the Court sittingen banc.[27]Finally, petitioner asserts that
equity and justice demand that the computation of the tax refunds
be based on actual amounts paid under Sections 153 and 156 of the
NIRC.[28]We disagree.According to an eminent authority on taxation,
there is no tax exemption solely on the ground of
equity.[29]WHEREFORE, the petition is hereby DENIEDand the assailed
Decision of the Court of Appeals is AFFIRMED.SO ORDERED.Narvasa,
C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug,
Kapunan, Mendoza, Martinez, Quisumbing,andPurisima, JJ.,concur.
G.R. Nos. 141104 & 148763 June 8, 2007ATLAS CONSOLIDATED
MINING AND DEVELOPMENT CORPORATION,petitioner,vs.COMMISSIONER OF
INTERNAL REVENUE,respondent.D E C I S I O NCHICO-NAZARIO,J.:Before
this Court are the consolidated cases involving the unsuccessful
claims of herein petitioner Atlas Consolidated Mining and
Development Corporation (petitioner corporation) for the
refund/credit of the input Value Added Tax (VAT) on its purchases
of capital goods and on its zero-rated sales in the taxable
quarters of the years 1990 and 1992, the denial of which by the
Court of Tax Appeals (CTA), was affirmed by the Court of
Appeals.Petitioner corporation is engaged in the business of
mining, production, and sale of various mineral products, such as
gold, pyrite, and copper concentrates. It is a VAT-registered
taxpayer. It was initially issued VAT Registration No.
32-A-6-002224, dated 1 January 1988, but it had to register anew
with the appropriate revenue district office (RDO) of the Bureau of
Internal Revenue (BIR) when it moved its principal place of
business, and it was re-issued VAT Registration No. 32-0-004622,
dated 15 August 1990.1G.R. No. 141104Petitioner corporation filed
with the BIR its VAT Return for the first quarter of 1992.2It
alleged that it likewise filed with the BIR the corresponding
application for the refund/credit of its input VAT on its purchases
of capital goods and on its zero-rated sales in the amount
ofP26,030,460.00.3When its application for refund/credit remained
unresolved by the BIR, petitioner corporation filed on 20 April
1994 its Petition for Review with the CTA, docketed as CTA Case No.
5102. Asserting that it was a "zero-rated VAT person," it prayed
that the CTA order herein respondent Commissioner of Internal
Revenue (respondent Commissioner) to refund/credit petitioner
corporation with the amount ofP26,030,460.00, representing the
input VAT it had paid for the first quarter of 1992. The respondent
Commissioner opposed and sought the dismissal of the petition for
review of petitioner corporation for failure to state a cause of
action. After due trial, the CTA promulgated its Decision4on 24
November 1997 with the following disposition WHEREFORE, in view of
the foregoing, the instant claim for refund is herebyDENIEDon the
ground of prescription, insufficiency of evidence and failure to
comply with Section 230 of the Tax Code, as amended. Accordingly,
the petition at bar is herebyDISMISSEDfor lack of merit.The CTA
denied the motion for reconsideration of petitioner corporation in
a Resolution5dated 15 April 1998.When the case was elevated to the
Court of Appeals as CA-G.R. SP No. 47607, the appellate court, in
its Decision,6dated 6 July 1999, dismissed the appeal of petitioner
corporation, finding no reversible error in the CTA Decision, dated
24 November 1997. The subsequent motion for reconsideration of
petitioner corporation was also denied by the Court of Appeals in
its Resolution,7dated 14 December 1999.Thus, petitioner corporation
comes before this Court,viaa Petition for Review onCertiorariunder
Rule 45 of the Revised Rules of Court, assigning the following
errors committed by the Court of Appeals ITHE COURT OF APPEALS
ERRED IN AFFIRMING THE REQUIREMENT OF REVENUE REGULATIONS NO. 2-88
THAT AT LEAST 70% OF THE SALES OF THE [BOARD OF INVESTMENTS
(BOI)]-REGISTERED FIRM MUST CONSIST OF EXPORTS FOR ZERO-RATING TO
APPLY.IITHE COURT OF APPEALS ERRED IN AFFIRMING THAT PETITIONER
FAILED TO SUBMIT SUFFICIENT EVIDENCE SINCE FAILURE TO SUBMIT
PHOTOCOPIES OF VAT INVOICES AND RECEIPTS IS NOT A FATAL
DEFECT.IIITHE COURT OF APPEALS ERRED IN RULING THAT THE JUDICIAL
CLAIM WAS FILED BEYOND THE PRESCRIPTIVE PERIOD SINCE THE JUDICIAL
CLAIM WAS FILED WITHIN TWO (2) YEARS FROM THE FILING OF THE VAT
RETURN.IVTHE COURT OF APPEALS ERRED IN NOT ORDERING CTA TO ALLOW
THE RE-OPENING OF THE CASE FOR PETITIONER TO PRESENT ADDITIONAL
EVIDENCE.8G.R. No. 148763G.R. No. 148763 involves almost the same
set of facts as in G.R. No. 141104 presented above, except that it
relates to the claims of petitioner corporation for refund/credit
of input VAT on its purchases of capital goods and on its
zero-rated sales made in the last three taxable quarters of
1990.Petitioner corporation filed with the BIR its VAT Returns for
the second, third, and fourth quarters of 1990, on 20 July 1990, 18
October 1990, and 20 January 1991, respectively. It submitted
separate applications to the BIR for the refund/credit of the input
VAT paid on its purchases of capital goods and on its zero-rated
sales, the details of which are presented as follows Date of
ApplicationPeriod CoveredAmount Applied For
21 August 19902ndQuarter, 1990P54,014,722.04
21 November 19903rdQuarter, 199075,304,774.77
19 February 19914thQuarter, 199043,829,766.10
When the BIR failed to act on its applications for
refund/credit, petitioner corporation filed with the CTA the
following petitions for review Date FiledPeriod CoveredCTA Case
No.
20 July 19922ndQuarter, 19904831
9 October 19923rdQuarter, 19904859
14 January 19934thQuarter, 19904944
which were eventually consolidated. The respondent Commissioner
contested the foregoing Petitions and prayed for the dismissal
thereof. The CTA ruled in favor of respondent Commissioner and in
its Decision,9dated 30 October 1997, dismissed the Petitions mainly
on the ground that the prescriptive periods for filing the same had
expired. In a Resolution,10dated 15 January 1998, the CTA denied
the motion for reconsideration of petitioner corporation since the
latter presented no new matter not already discussed in the court's
prior Decision. In the same Resolution, the CTA also denied the
alternative prayer of petitioner corporation for a new trial since
it did not fall under any of the grounds cited under Section 1,
Rule 37 of the Revised Rules of Court, and it was not supported by
affidavits of merits required by Section 2 of the same
Rule.Petitioner corporation appealed its case to the Court of
Appeals, where it was docketed as CA-G.R. SP No. 46718. On 15
September 2000, the Court of Appeals rendered its
Decision,11finding that although petitioner corporation timely
filed its Petitions for Review with the CTA, it still failed to
substantiate its claims for the refund/credit of its input VAT for
the last three quarters of 1990. In its Resolution,12dated 27 June
2001, the appellate court denied the motion for reconsideration of
petitioner corporation, finding no cogent reason to reverse its
previous Decision.Aggrieved, petitioner corporation filed with this
Court another Petition for Review onCertiorariunder Rule 45 of the
Revised Rules of Court, docketed as G.R. No. 148763, raising the
following issues A.WHETHER OR NOT THE COURT OF APPEALS ERRED IN
HOLDING THAT PETITIONER'S CLAIM IS BARRED UNDER REVENUE REGULATIONS
NOS. 2-88 AND 3-88 I.E., FOR FAILURE TO PTOVE [sic] THE 70%
THRESHOLD FOR ZERO-RATING TO APPLY AND FOR FAILURE TO ESTABLISH THE
FACTUAL BASIS FOR THE INSTANT CLAIM.B.WHETHER OR NOT THE COURT OF
APPEALS ERRED IN FINDING THAT THERE IS NO BASIS TO GRANT
PETITIONER'S MOTION FOR NEW TRIAL.There being similarity of
parties, subject matter, and issues, G.R. Nos. 141104 and 148763
were consolidated pursuant to a Resolution, dated 4 September 2006,
issued by this Court. The ruling of this Court in these cases
hinges on how it will resolve the following key issues: (1)
prescription of the claims of petitioner corporation for input VAT
refund/credit; (2) validity and applicability of Revenue
Regulations No. 2-88 imposing upon petitioner corporation, as a
requirement for the VAT zero-rating of its sales, the burden of
proving that the buyer companies were not just BOI-registered but
also exporting 70% of their total annual production; (3)
sufficiency of evidence presented by petitioner corporation to
establish that it is indeed entitled to input VAT refund/credit;
and (4) legal ground for granting the motion of petitioner
corporation for re-opening of its cases or holding of new trial
before the CTA so it could be given the opportunity to present the
required evidence.PrescriptionThe prescriptive period for filing an
application for tax refund/credit of input VAT on zero-rated sales
made in 1990 and 1992 was governed by Section 106(b) and (c) of the
Tax Code of 1977, as amended, which provided that SEC. 106.Refunds
or tax credits of input tax. x x x.(b)Zero-rated or effectively
zero-rated sales. Any person, except those covered by paragraph (a)
above, whose sales are zero-rated may, within two years after the
close of the quarter when such sales were made, apply for the
issuance of a tax credit certificate or refund of the input taxes
attributable to such sales to the extent that such input tax has
not been applied against output tax.x x x x(e)Period within which
refund of input taxes may be made by the Commissioner. The
Commissioner shall refund input taxes within 60 days from the date
the application for refund was filed with him or his duly
authorized representative. No refund of input taxes shall be
allowed unless the VAT-registered person files an application for
refund within the period prescribed in paragraphs (a), (b) and (c)
as the case may be.By a plain reading of the foregoing provision,
the two-year prescriptive period for filing the application for
refund/credit of input VAT on zero-rated sales shall be determined
from the close of the quarter when such sales were made.Petitioner
contends, however, that the said two-year prescriptive period
should be counted, not from the close of the quarter when the
zero-rated sales were made, but from the date of filing of the
quarterly VAT return and payment of the tax due 20 days thereafter,
in accordance with Section 110(b) of the Tax Code of 1977, as
amended, quoted as follows SEC. 110.Return and payment of
value-added tax. x x x.(b)Time for filing of return and payment of
tax. The return shall be filed and the tax paid within 20 days
following the end of each quarter specifically prescribed for a
VAT-registered person under regulations to be promulgated by the
Secretary of Finance:Provided, however,That any person whose
registration is cancelled in accordance with paragraph (e) of
Section 107 shall file a return within 20 days from the
cancellation of such registration.It is already well-settled that
the two-year prescriptive period for instituting a suit or
proceeding for recovery of corporate income tax erroneously or
illegally paid under Section 23013of the Tax Code of 1977, as
amended, was to be counted from the filing of the final adjustment
return. This Court already set out inACCRA Investments Corporation
v. Court of Appeals,14the rationale for such a rule, thus Clearly,
there is the need to file a return first before a claim for refund
can prosper inasmuch as the respondent Commissioner by his own
rules and regulations mandates that the corporate taxpayer opting
to ask for a refund must show in its final adjustment return the
income it received from all sources and the amount of withholding
taxes remitted by its withholding agents to the Bureau of Internal
Revenue. The petitioner corporation filed its final adjustment
return for its 1981 taxable year on April 15, 1982. In our
Resolution dated April 10, 1989 in the case ofCommissioner of
Internal Revenue v. Asia Australia Express, Ltd.(G.R. No. 85956),
we ruled that the two-year prescriptive period within which to
claim a refund commences to run, at the earliest, on the date of
the filing of the adjusted final tax return. Hence, the petitioner
corporation had until April 15, 1984 within which to file its claim
for refund.Considering that ACCRAIN filed its claim for refund as
early as December 29, 1983 with the respondent Commissioner who
failed to take any action thereon and considering further that the
non-resolution of its claim for refund with the said Commissioner
prompted ACCRAIN to reiterate its claim before the Court of Tax
A