Philex Mining Corporation v Commissioner of Internal Revenue

QUISUMBING, J. April 21, 1999

Petition for Review on Certiorari
Strict and liberal construction
[FACTS]
- Philex entered into an agreement with the Ministry of Natural Resources
- July 1, 1980 to Dec. 31, 1981: Philex purchased from several oil companies (refined and manufactured oils, motor fuels, and diesel fuel oils)
- Specific taxes passed on to the Philex = P2,492,677.22
- Oct. 22, 1982: Purusant to RA 1435, Philex filed a claim for a refund with the CIR for P623,169.30 (25% of taxes paid)
o Nov. 16, 1982: Filed a case for tax refund with the CTA; sought judgment for payment + 20%/annum interest
- Court of Tax Appeals ruling: CIR ordered to REFUND in favor of petitioner (Philex) P16,747.36
o CA affirmed
- Petitioner Philex said CA erred in the ff:
1. Basing the refund on the amounts deemed paid under Sections 1 and 2 of RA 1435 is contrary to the SC decision (Insular Lumber v CTA) which granted the claim for partial
refund on the basis of SPECIFIC TAXES ACTUALLY PAID by the claimant without qualification or limitation.
2. CA ignored the increase in rates imposed by succeeding amendatory laws, under which the petitioner paid the specific taxes on manufactured and diesel fuels.
3. In making the ruling, the CA went against the established rules of construction in that it lent itself to interpreting Sec. 5 of RA 1435 when the construction of the law is not necessary.
4. Sections 1 and 2 of RA 1435 are not the operative provisions to be applied but rather Sections 142 and 145.
5. Basing the computation of the partial tax refund on Sections 1 and 2 of RA 1435, rather than on Secs. 153 and 156 of the National Internal Revenue Code is wrong.
ISSUE 1: WON RESPONDENT COURT (CA) ERRED IN BASING TH TAX REFUND
UNDER SECTIONS 1 and 2 OF RA 1435 (instead of the increased rates in Sections 142 and 145 of the Natl Internal Revenue Code)
ISSUE 2: WON RESPONDENT COURT ERRED IN RELYING ON CIR vs RIO TUBA
NICKEL MINIING WHICH ALLEGEDLY RUNS COUNTER TO THE COURTS
DECISION IN INSULAR LUMBER vs CTA
- RA 1435 An Act to Provide Means for Increasing the Highway Special Fund
o Specific taxes on gasoline and fuel which accrue to the Fund shall be used for the national highway system
o Since mining and lumber companies use national highways, they do not directly benefit from the fund and were granted 25% partial refund on these specific taxes (Section 5)
- 1977: PD 1158 codified all existing laws. Sections 142 and 145 of the Tax Code (as amended by Sections 1 and 2 of RA 1435) were re-numbered Sections 153 and 156.
o Later amended by PD 1672 and EO 672, increasing the tax rates on certain oil and fuel products
- 1985: Highway Special Fund abolished, no more reason for refund
- The court said that it repeatedly held that the tax refund under RA 1435 should be computed on specific tax deemed paid under Sections 1 and 2 and not under the increased rates paid under the 1977 Natl
Internal Revenue Code
- Bound by case precedent: DAVAO GULF LUMBER vs CIR and CA
o Sec. 5 of RA 1435 partial refund is in the nature of a tax exemption, therefore, it must be construed stritissimijuris against the grantee (petioner)
o Any refund must be stated in a language too clear to be mistaken
o The law does not explicitly state that a refund under RA 1435 may be based on higher rates which were non-existent at the time of its enactment- court cannot assume that those later higher rates are
to be used
o On the alleged conflict between Insular Lumber and Rio Tuba decisions: Insular Lumber claimed a refund on specific tax paid in 1963, before the increased rates of the NIRC of
1977 were in effect. Therefore the issue now was inexistent at that time.
MAIN POINT FOR DECISION:

Sections 153 and 156 of the 1977 NIRC mandated the increased rates of specific taxes on manufactured oils, other fuels and diesel oils
Philex paid the taxes based on these increased rates
HOWEVER, the latter law did not provide for a refund based on the increased rates, but the old rates
THE GRANT OF REFUND PRIVILEGES MUST BE STRICTLY CONSTRUED
AGAINST THE TAXPAYER
- Therefore, the basis for the refund remains to be the amounts deemed paid under Sections 1 and 2 of 1435 (lower rates).
- PETITION DENIED.