THIRD DIVISION
[ G.R. Nos. 83583-84, September 30, 1991 ]CIR v. RIO TUBA NICKEL MINING CORPORATION +
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. RIO TUBA NICKEL MINING CORPORATION AND COURT OF TAX APPEALS, RESPONDENTS.
D E C I S I O N
CIR v. RIO TUBA NICKEL MINING CORPORATION +
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. RIO TUBA NICKEL MINING CORPORATION AND COURT OF TAX APPEALS, RESPONDENTS.
D E C I S I O N
FERNAN, C.J.:
Edmund Burke once said laws, like houses, lean on one another. The question concerning their repeal then becomes difficult especially when the new law does not expressly provide for the repeal of the old law. Whether or not Republic Act No. 1435
(An Act To Provide Means of Increasing the Highway Special Fund) or certain provisions thereof have been repealed by subsequent statutes is the problem now confronting us.
Private respondent Rio Tuba Nickel Mining Corporation is a domestic corporation engaged in the business of mining with several mining lease contracts entered into with the Republic of the Philippines. During the period from June 1, 1980 to May 31, 1982 and from May, 1982 to March, 1983, Rio Tuba purchased from Petrophil Corporation and other oil companies varied quantities of manufactured mineral oils, motor fuel oils and diesel fuel oils which respondent actually and exclusively used in connection with the exploitation and operation of its mining concessions. Petrophil Corporation and the other oil companies paid and passed on to Rio Tuba the specific taxes imposed under Sections 153 and 156 (formerly Sections 142 and 145) of the National Internal Revenue Code of 1977 on refined and manufactured oils, motor fuels and diesel fuel oils that the said oil companies had sold to the mining firm.
On July 7, 1982 and September 23, 1983 and pursuant to Section 5 of Republic Act No. 1435 and the Supreme Court decision in the case of Insular Lumber Co. vs. Court of Tax Appeals[1] Rio Tuba filed with the Commissioner of Internal Revenue two separate written claims for refund in the amounts of P974,978.50 and P424,303.33, respectively, representing 25% of the specific taxes collected on the refined and manufactured mineral oils, motor fuel and diesel fuel oils that it had utilized in its operations as a mining concessionaire. In support of its claims for refund, Rio Tuba submitted affidavits of its president and of at least two disinterested persons attesting to the fact that the refined and manufactured mineral oils, motor fuels and diesel fuel oils purchased from Petrophil were actually and exclusively used in the exploitation and operation of its mining concession.
Said claims were not immediately acted upon by the Commissioner of Internal Revenue, thus compelling taxpayer Rio Tuba to seek recourse in the Court of Tax Appeals by means of a petition for review. During the pendency of the said petition, petitioner Commissioner denied the first claim for refund and ruled:
In the assailed decision dated February 11, 1988, the Court of Tax Appeals reversed the decision of the Commissioner and instead granted Rio Tuba's claims for refund. Accordingly, the Commissioner was ordered "to refund to x x x Rio Tuba Nickel Mining Corporation the sums of P695,216.36 and P859,076.90 as specific tax paid, without interest."[4]
The Commissioner of Internal Revenue now asserts that the tax refunds granted to Rio Tuba are without legal basis. He raises various arguments which can be simplified into two basic issues, to wit:
The cases of Commissioner of Internal Revenue vs. Insular Lumber Co., No. L-24221, December 11, 1967, 21 SCRA 1237, and Insular Lumber Co. vs. Court of Tax Appeals, No. L-31057, May 29, 1981, 104 SCRA 710, cited by Rio Tuba are not on all fours with the instant petition. For one thing, the factual milieu in the earlier cases occurred between 1958 and 1963. Since then, much has taken place, including the imposition of martial law which saw the seemingly endless enactment of tax decrees transforming manufactured oils into a major source of revenue for the government. And this brings us to the discussion of the reason why Rio Tuba's two claims for refund cannot be allowed.
Interestingly enough, the Solicitor General, as counsel for the Commissioner, has painstakingly provided us with a detailed overview of the relevant revenue laws starting with Republic Act 1435 and including the Local Tax Code and the National Internal Revenue Code of 1977 to drive home his main contention that the disputed refund privilege or exemption laid down in RA No.1435 has been repealed by subsequent laws. But in our opinion, the tax measure most decisive of the present issue and the one that clearly demonstrates the intent of the law-making body to legislate the exemption out of existence is Presidential Decree No. 711[6] issued on July 1, 1975. Reportedly concerned over the accumulation of big cash balances in special and fiduciary funds which adversely affected the management and control of such cash resources in the National Treasury and thus resulting in the useless immobilization of public funds which could otherwise be advantageously availed of to finance the various essential public services, then President Marcos abolished the so-called special funds. Section 1 of P.D. 711 states:
The laudable social and encompassing objective of PD No. 711 is precisely the reason why said decree cannot be considered as consistent with the proviso set forth in Section 5 of RA No. 1435 which allows a partial exemption to the miners and forest under special conditions. Section 5 does not extend to all and sundry the privilege of partial refund of specific taxes on oils used in one's operations. Only to the miners and forest concessionaires is given that privilege on account of circumstances peculiar to them. " x x x (T)hese lumber and mining companies seldom use the national highways because they have their own roads, they have their own compounds. x x x So if they are not entitled to the benefit of the law, it will be unfair if they will be required to pay."[7]
Thus we find that the disputed proviso found in Section 5 of RA No. 1435 was drafted to favor a particular group of taxpayers the miners and the lumbermen because it was "unfair" to subject them to the increased rates and in effect make them subsidize the construction of highways from which they did not directly benefit. This is the raison d'etre for the grant of partial tax exemption under RA No. 1435. Now, if, by virtue of PD No. 711, the funds that have accrued from the various special funds are channeled to the so-called General Fund, then there is no need or justification for the continued special treatment accorded to the miners. With PD No. 711, any government project can be the beneficiary of such funds as long as it is for the general welfare of the masses. Given the present concept of the general fund and its wide application, then the proviso in Section 5 of RA No. 1435 has truly become an anachronism. It is inevitable that, sooner or later, the miners will stand to benefit from any of the government endeavors and it will no longer be correct to asseverate that the imposition of the increased rates in specific taxes to augment the general fund for government undertakings is "unfair" to the miners because they are not directly convenienced.
While we generally do not favor repeal by implication, it cannot be denied that situations can and do arise wherein we are left with no other alternative but to concede the point that an earlier law has been impliedly repealed or revoked by a later law because of an obvious inconsistency.
Tax measures, in recent years, have proliferated to alarming proportions, More often than not, they serve to worsen the already growing confusion in the minds of our taxpayers. There is much to be said about the strong and persuasive arguments of both sides but we are compelled to abide by the maxim that all doubts must be resolved in favor of the taxing authority and that tax exemptions (or tax refunds for that matter) must be strictly construed and can only be given force when the grant is clear and categorical. We therefore hold that the tax refunds in the amounts of P695,216.36 and P859,076.90 in favor of private respondent Rio Tuba must be set aside.
WHEREFORE, the instant petition is hereby GRANTED. The questioned decision of the Court of Tax Appeals is SET ASIDE. Private respondent Rio Tuba Mining Corporation's twin claims for refunds of specific taxes paid on manufactured oils are DENIED. No costs.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin, and Davide, Jr., JJ., concur.
[1] 104 SCRA 718
[2] Original Record, CTA Case No. 3510, p. 205
[3] CTA Cases Nos. 3510 and 3899
[4] Original Record, CTA Case No. 3510, p. 275.
[5] Emphasis supplied
[6] Abolishing All Existing Special and Fiduciary Funds and Transferring to the General Fund the Operations and Funding of All Special and Fiduciary Funds.
[7] Congressional Record, 3rd Congress, 3rd Regular Session, 7, 1967, Vol. III, No. 67, pp. 2093-2107, cited in Memorandum for Private Respondent, pp. 24-25.
Private respondent Rio Tuba Nickel Mining Corporation is a domestic corporation engaged in the business of mining with several mining lease contracts entered into with the Republic of the Philippines. During the period from June 1, 1980 to May 31, 1982 and from May, 1982 to March, 1983, Rio Tuba purchased from Petrophil Corporation and other oil companies varied quantities of manufactured mineral oils, motor fuel oils and diesel fuel oils which respondent actually and exclusively used in connection with the exploitation and operation of its mining concessions. Petrophil Corporation and the other oil companies paid and passed on to Rio Tuba the specific taxes imposed under Sections 153 and 156 (formerly Sections 142 and 145) of the National Internal Revenue Code of 1977 on refined and manufactured oils, motor fuels and diesel fuel oils that the said oil companies had sold to the mining firm.
On July 7, 1982 and September 23, 1983 and pursuant to Section 5 of Republic Act No. 1435 and the Supreme Court decision in the case of Insular Lumber Co. vs. Court of Tax Appeals[1] Rio Tuba filed with the Commissioner of Internal Revenue two separate written claims for refund in the amounts of P974,978.50 and P424,303.33, respectively, representing 25% of the specific taxes collected on the refined and manufactured mineral oils, motor fuel and diesel fuel oils that it had utilized in its operations as a mining concessionaire. In support of its claims for refund, Rio Tuba submitted affidavits of its president and of at least two disinterested persons attesting to the fact that the refined and manufactured mineral oils, motor fuels and diesel fuel oils purchased from Petrophil were actually and exclusively used in the exploitation and operation of its mining concession.
Said claims were not immediately acted upon by the Commissioner of Internal Revenue, thus compelling taxpayer Rio Tuba to seek recourse in the Court of Tax Appeals by means of a petition for review. During the pendency of the said petition, petitioner Commissioner denied the first claim for refund and ruled:
"It appears that your claim is principally anchored on the provisions of Republic Act No. 1435, Section 5 of which authorizes the refund of 25% of the specific tax paid on petroleum products if used in mining or logging. Said provision should however be read in conjunction with the provision of Section 4 of that law. It is our view that in order to avail of the benefits of partial tax refund mentioned in said Act, there must also be a municipal or city ordinance which imposes an additional tax of not exceeding 25% of the regular specific tax levied under Sections 142 and 145 of the Tax Code. In other words, refund will arise only after the enactment of the required ordinance levying the additional tax and subsequent payment thereof. In fine, it is no longer the national tax that is being refunded but only 25% local additional tax.As there was still no action on the second claim for refund and since the two-year period required by law for bringing the claim before the Court of Tax Appeals was about to lapse, Rio Tuba elevated that claim to the Tax Court without waiting for the Commissioner's decision. Both claims were consolidated.[3]
"With the issuance however of Presidential Decrees Nos. 231 and 426 dated June 28, 1973 and March 30, 1984, respectively, cities and municipalities can no longer levy any additional tax on articles subject to the specific tax. Consequently, and as the refund sought entirely depends on the exercise of such power, partial refund of specific tax payments on the petroleum products used in logging or mining can no longer be authorized. Furthermore, Presidential Decree No. 711 which took effect on July 1, 1975 abolished all special and fiduciary funds. Since Republic Act No. 1435 was passed by Congress precisely to provide the means of increasing the Highway Special Fund, said Decree has in effect repealed said Act; hence, the same can no longer be invoked as the basis for instituting claims for refund of alleged overpaid specific tax."[2]
In the assailed decision dated February 11, 1988, the Court of Tax Appeals reversed the decision of the Commissioner and instead granted Rio Tuba's claims for refund. Accordingly, the Commissioner was ordered "to refund to x x x Rio Tuba Nickel Mining Corporation the sums of P695,216.36 and P859,076.90 as specific tax paid, without interest."[4]
The Commissioner of Internal Revenue now asserts that the tax refunds granted to Rio Tuba are without legal basis. He raises various arguments which can be simplified into two basic issues, to wit:
1. Whether the privilege of a partial refund of specific tax paid on manufactured oils used in mining concessions as provided under Section 5, R.A. No. 1435 presently subsists; andThe full text of Republic Act No. 1435 states:
2. Assuming arguendo that such privilege still exists, whether Rio Tuba is entitled to such refund.
"Section 1. Section one hundred and forty-two of the National Internal Revenue Code, as amended, is further amended to read as follows:It is the position of the Revenue Commissioner that the subject refund privilege is conditioned on the actual payment of an additional tax imposed by the local government to augment the highway fund pursuant to Section 4 of Republic Act 1435. Not having shown any proof that it has paid the additional specific taxes pursuant to a municipal ordinance in accordance with Section 4 of RA No. 1435, Rio Tuba cannot consider itself entitled to the partial refund. We disagree. To our mind, the proviso in Section 5 standing alone is enough basis for the grant of refund. However, in the case of private respondent Rio Tuba, the Commissioner interjected the aforementioned pre-requisite to justify his denial of the claimed exemption. He proceeded to interpret the term "additional taxes" as referring to the municipal-imposed specific taxes. The statutory grant of a partial exemption from the imposed increased specific taxes is manifest from a reading of the proviso in Section 5, Republic Act 1435. As contended by Rio Tuba, there is nothing in that proviso which states that before a miner can be entitled to the 25% tax refund of specific tax paid on the oils it used in its operations, there must first be a municipal or city ordinance levying an additional tax not exceeding 25% of the rates fixed in Sections 142 and 145 of the Tax Code. In fact, the entire Section 5 does not even make any reference to Section 4 which empowers municipalities and cities to impose the additional tax on oils sold or distributed within their respective territorial jurisdictions. What is clear therein is that the Revenue Commissioner shall refund 25% of the specific tax whenever "any oils mentioned above are used by miners or forest concessionaires in their operations" and the procedure for refund is complied with. But even on the supposition that private respondent Rio Tuba could avail itself of the privilege of tax refund on the basis of the proviso in Section 5, RA No. 1435, we are not prepared to affirm the ruling of the Tax Court.
"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 (ninety per centum absolute 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, fifty per centum of 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, 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.
"Section 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.
"Section 3. The proceeds of the increased taxes accruing to the Highway Special Fund, as a result of the amendment of Sections one hundred and forty-two and one hundred and forty-five of the National Internal Revenue Code as above provided, shall be set aside exclusively for amortizing loans or bonds that may have been authorized for the construction, reconstruction or improvement of highways including bridges as well as for liquidating toll bridges constructed from revolving funds authorized under Act Numbered Thirty-five hundred, as amended, whenever such liquidation is recommended by the Secretary of Public Works and Communications and approved by the President.
"Section 4. Municipal Boards or councils may, notwithstanding the provisions of sections one hundred and forty-two and one hundred and forty-five of the National Internal Revenue Code, as hereinabove amended, levy an additional tax of not exceeding twenty-five per centum of the rates fixed in said sections, on manufactured oils sold or distributed within the limits of the city or municipality; Provided, That municipal taxes heretofore levied by cities through city ordinances on gasoline, airplane fuel, lubricating oil and other fuels, are hereby ratified and declared valid. The method of collecting said additional tax shall be prescribed by the municipal board or council concerned.
"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 sub-paragraphs one and two of section one thereof, 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.
"Section 6. This Act shall take effect upon its approval.
"Approved, June 14, 1956."[5]
The cases of Commissioner of Internal Revenue vs. Insular Lumber Co., No. L-24221, December 11, 1967, 21 SCRA 1237, and Insular Lumber Co. vs. Court of Tax Appeals, No. L-31057, May 29, 1981, 104 SCRA 710, cited by Rio Tuba are not on all fours with the instant petition. For one thing, the factual milieu in the earlier cases occurred between 1958 and 1963. Since then, much has taken place, including the imposition of martial law which saw the seemingly endless enactment of tax decrees transforming manufactured oils into a major source of revenue for the government. And this brings us to the discussion of the reason why Rio Tuba's two claims for refund cannot be allowed.
Interestingly enough, the Solicitor General, as counsel for the Commissioner, has painstakingly provided us with a detailed overview of the relevant revenue laws starting with Republic Act 1435 and including the Local Tax Code and the National Internal Revenue Code of 1977 to drive home his main contention that the disputed refund privilege or exemption laid down in RA No.1435 has been repealed by subsequent laws. But in our opinion, the tax measure most decisive of the present issue and the one that clearly demonstrates the intent of the law-making body to legislate the exemption out of existence is Presidential Decree No. 711[6] issued on July 1, 1975. Reportedly concerned over the accumulation of big cash balances in special and fiduciary funds which adversely affected the management and control of such cash resources in the National Treasury and thus resulting in the useless immobilization of public funds which could otherwise be advantageously availed of to finance the various essential public services, then President Marcos abolished the so-called special funds. Section 1 of P.D. 711 states:
"All existing special and fiduciary funds are hereby abolished and all assets, liabilities, surpluses and appropriations pertaining to all special and fiduciary funds as authorized by the corresponding acts, laws, or decrees creating such special and fiduciary funds, as well as the financing and operations thereof, are hereby transferred to the General Fund of the National Government; provided that the personnel whose salaries and/or wages are drawn from such special and fiduciary funds shall be paid out of the General Fund subject to the provisions of Section 2 hereof."Private respondent Rio Tuba submits that the mere abrogation of the Highway Special Fund itself did not make RA No. 1435, particularly its Section 5, inconsistent with PD No. 711 to warrant an implied repeal. What in effect was abolished was the designation and destination of the particular taxes, levies, fees or imposts comprising the special fiduciary funds and their being spent only for the particular purposes designated by the law creating them. In other words, the components of the various special funds and the operations thereof, as well as all assets, liabilities, etc. were only transferred to the General Fund of the government. Section 2 of said decree provides:
"The existing functions and activities authorized under present laws creating each of the special and fiduciary funds which, as determined by the National Economic and Development Authority, are in conformity with the present social and economic plans and programs formulated consistent with national development goals shall continue to be maintained under the General Fund. All taxes, levies, fees, imposts and other income of all special and fiduciary funds duly authorized under existing laws shall remain in force and shall accrue to the General Fund."According to Rio Tuba, the essence of PD No. 711 is simply the transfer of the funding and operations of all existing special and fiduciary funds into one fund, known as the General Fund, in order to facilitate the implementation of social and economic programs and projects of the government for the general welfare of the masses.
The laudable social and encompassing objective of PD No. 711 is precisely the reason why said decree cannot be considered as consistent with the proviso set forth in Section 5 of RA No. 1435 which allows a partial exemption to the miners and forest under special conditions. Section 5 does not extend to all and sundry the privilege of partial refund of specific taxes on oils used in one's operations. Only to the miners and forest concessionaires is given that privilege on account of circumstances peculiar to them. " x x x (T)hese lumber and mining companies seldom use the national highways because they have their own roads, they have their own compounds. x x x So if they are not entitled to the benefit of the law, it will be unfair if they will be required to pay."[7]
Thus we find that the disputed proviso found in Section 5 of RA No. 1435 was drafted to favor a particular group of taxpayers the miners and the lumbermen because it was "unfair" to subject them to the increased rates and in effect make them subsidize the construction of highways from which they did not directly benefit. This is the raison d'etre for the grant of partial tax exemption under RA No. 1435. Now, if, by virtue of PD No. 711, the funds that have accrued from the various special funds are channeled to the so-called General Fund, then there is no need or justification for the continued special treatment accorded to the miners. With PD No. 711, any government project can be the beneficiary of such funds as long as it is for the general welfare of the masses. Given the present concept of the general fund and its wide application, then the proviso in Section 5 of RA No. 1435 has truly become an anachronism. It is inevitable that, sooner or later, the miners will stand to benefit from any of the government endeavors and it will no longer be correct to asseverate that the imposition of the increased rates in specific taxes to augment the general fund for government undertakings is "unfair" to the miners because they are not directly convenienced.
While we generally do not favor repeal by implication, it cannot be denied that situations can and do arise wherein we are left with no other alternative but to concede the point that an earlier law has been impliedly repealed or revoked by a later law because of an obvious inconsistency.
Tax measures, in recent years, have proliferated to alarming proportions, More often than not, they serve to worsen the already growing confusion in the minds of our taxpayers. There is much to be said about the strong and persuasive arguments of both sides but we are compelled to abide by the maxim that all doubts must be resolved in favor of the taxing authority and that tax exemptions (or tax refunds for that matter) must be strictly construed and can only be given force when the grant is clear and categorical. We therefore hold that the tax refunds in the amounts of P695,216.36 and P859,076.90 in favor of private respondent Rio Tuba must be set aside.
WHEREFORE, the instant petition is hereby GRANTED. The questioned decision of the Court of Tax Appeals is SET ASIDE. Private respondent Rio Tuba Mining Corporation's twin claims for refunds of specific taxes paid on manufactured oils are DENIED. No costs.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin, and Davide, Jr., JJ., concur.
[1] 104 SCRA 718
[2] Original Record, CTA Case No. 3510, p. 205
[3] CTA Cases Nos. 3510 and 3899
[4] Original Record, CTA Case No. 3510, p. 275.
[5] Emphasis supplied
[6] Abolishing All Existing Special and Fiduciary Funds and Transferring to the General Fund the Operations and Funding of All Special and Fiduciary Funds.
[7] Congressional Record, 3rd Congress, 3rd Regular Session, 7, 1967, Vol. III, No. 67, pp. 2093-2107, cited in Memorandum for Private Respondent, pp. 24-25.