9/17/2015 G.R. No.

L-31057

TodayisThursday,September17,2015

RepublicofthePhilippines
SUPREMECOURT
Manila

ENBANC

G.R.No.L31057May29,1981

INSULARLUMBERCOMPANY,petitioner,
vs.
COURTOFTAXAPPEALSandCOMMISSIONEROFINTERNALREVENUE,respondents.

G.R.No.L31137May29,1981

COMMISSIONEROFINTERNALREVENUE,petitioner,
vs.
COURTOFTAXAPPEALSandINSULARLUMBERCOMPANY,respondents.

DECASTRO,J.: 1wph1.t

These two (2) cases are appeals by way of certiorari from the decision dated July 31, 1969 of the Court of Tax
AppealsorderingtheCommissionerofInternalRevenuetorefundtotheInsularLumberCompanytheamountof
P10,560.20 instead of P19,921.37, representing 25% of the specific tax paid on manufactured oil and motor fuel
utilizedbysaidcompanyintheoperationofitsforestconcessionintheyear1963.

Theundesputedfatsofthesecasesareasfollows:

InsularLumberCompany(Companyforshort).acorporationorganizedandexistingunderthelawsofNewYork.
U.S.A., and duly authorized to do business in the Philippines is a licensed forest concessionaire. The Company
purchasemanufacturedoilandmotorfuelwhichitusedintheoperationofitsforestcocession,sawmill,planning
mills, power units, vehicles, dry kilns, water pumps, lawn mowers, and in furnishing free water and light to its
employees.onwhichspecifictaxwaspaid.OnDecember22,1964,theCompanyfiledwiththeCommissionerof
InternalRevenue(Commissionerforshort),aclaimforrefundofP19,921.37representing25%ofthespecifictax
paidonthemanufacturedoilandfuelusedinitsoperationspursuanttotheprovisionsofSection5,RepublicAct
No.1435.1InaletterdatedFebruary11,1965,receivedbytheCompanyonMarch31,1965,thecommissionerdeniedthe
Company'sclaimforrefundonthegroundthattheprivilegeofpartialtaxrefundgrantedbySection5ofRepublicActNo.
1435tothoseusingoilintheoperationofforestandminingconcessionsislimitedtoaperiodoffive(5)yearsfromJune14,
1956,thedateeffectivityofsaidAct.Consequently,oilusedinsuchconcessionafterJune14,1961aresubjecttothefulltax
prescribedinSection142oftheNationalInternalRevenueCode.

Itsclaimhavingbeendenied,theCompanyfiledapetitionforreviewbeforetherespondentcourtonApril29,1965.
Afterhearing,theCourtofTaxAppealsruledthattheoperationofasawmillisdistinctfromtheoperationofaforest
concession,hence,therefundprovisionofSection5ofRepublicActNo.1435allowingpartialrefundtoforestand
mining concessionaires cannot be extended to the operators of a sawmill. And out of the P19,921.37 claimed,
representingthe25%ofspecifictaxpaid,respondentcourtfoundoutthatonlytheamountofP14,598.08waspaid
on oil utilized in logging operations. Respondent court, however, did not allow the refund of the full amount of
P14,598.08becausetheCompany'srighttoclaimtherefundofaportionthereof,particularlythosepaidduringthe
periodfromJanuary1,1963toApril29,1963hadalreadyprescribed.Hence,theCompanywascreditedtherefund
ofP10,560.20only.BothpartiesappealedfromthedecisionoftheCourtofTaxAppeals.

Inhisappeal,theCommissionerassignsthefollowingerrors: 1wph1.t

THE COURT OF TAX APPEALS ERRED IN NOT HOLDING THAT THE FIRST PROVISO IN
SECTION5OFREPUBLICACTNO.1435INVOKEDBYINSULARLUMBERCOMPANYASLEGAL
BASISFORITSCLAIMFORTAXREFUND,ISNULLANDVOIDFORBEINGUNCONSTITUTIONAL

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II

THE COURT OF TAX APPEALS ERRED IN NOT HOLDING THAT THE PARTIAL EXEMPTION IN
FAVOR OF MINERS AND FOREST CONCESSIONAIRES UNDER REPUBLIC ACT NO. 1435 IS
LIMITEDTOONLYFIVEYEARSCOUNTEDFROMJUNE14,1956,THEDATEOFAPPROVALAND
EFFECTIVITYOFTHESAIDACT.

III

THE COURT OF' TAX APPEALS ERRED IN NOT HOLDING THAT INSULAR LUMBER COMPANY
USEDTHEOILSANDFUELSINQUESTIONAFTERTHEEXEMPTIONINFAVOROFMINERSAND
FORESTCONCESSIONAIRESHADALREADYLAPSEDOREXPIREDANDHENCE,NOLONGER
INFORCE.

IV

THE COURT OF TAX APPEALS ERRED IN HOLDING THAT INSULAR LUMBER COMPANY IS
ENTITLEDTOTHETAXREFUNDOFP10,560.20.

Ontheotherhand,theCompany,asappellant,hasalsoassignedthefollowingerrors: 1wph1.t

THE RESPONDENT COURT ERRED IN RULING THAT THE PETITIONER IS NOT ENTITLED TO
CLAIM A PARTIAL REFUND OF THE SPECIFIC TAX PAID ON MANUFACTURED OILS USED IN
THEOPERATIONOFITSSAWMILL.

II

THERESPONDENTCOURTERREDINHOLDINGTHATPETITIONER'SCLAIMFORREFUNDOF
THE SPECIFIC TAX PAID ON MANUFACTURED OILS USED DURING THE PERIOD FROM 1
JANUARY1963TO29APRIL1963HADALREADYPRESCRIBED.

III

THE RESPONDENT COURT ERRED IN ORDERING THE RESPONDENT COMMISSIONER TO

REFUND TO THE PETITIONER ONLY THE SUM OF P10,560.20 INSTEAD, IT SHOULD HAVE
ORDEREDTHEREFUNDOFP19,921.37ASCLAIMEDBYTHEPETITIONER.

AppealbytheCommissioner

Inthefirstassignmentoferror,theCommissionercontendsthatthefirstprovisoinSection5ofRepublicActNo.
1435isunconstitutional.Inclaimingtheunconstitutionalityoftheaforesaidsection,theCommissioneranchoredits
argumentonArticleVI,Section21(l)ofthe1935Constitutionwhichprovides: 1wph1.t

Nobillwhichmaybeenactedintoalawshallembracemorethanonesubjectwhichshallbeexpressed
inthetitleofthebillbe

The title of R.A. No. 1435 is "An Act to Provide Means for Increasing The Highway Special Fund." The
CommissionercontendsthatthesubjectofR.A.No.1435wastoincreaseHighwaySpecialFund.However,Section
5 of, the Act deals with another subject which is the partial exemption of miners and loggers. And tills partial
exemptiononwhichtheCompanybaseditsclaimforrefundisclearlynotexpressedinthetitleoftheaforesaidAct.
Moreimportantly,Section5providesforadecreaseratherthananincreaseoftheHighwaySpecialFund.

Wefindnomeritintheargument.RepublicActNo.1435dealswithonlyonesubjectandproclaimsjustonepolicy,
namely,thenecessityforincreasingtheHighwaySpecialFundthroughtheimpositionofanincreasedspecifictax
on manufactured oils. The proviso Id. Section 5 of the law is in effect a partial exemption from the imposed
increasedtax.Saidproviso,whichhasreferencetospecifictaxonoilandfuel,isnor,adeviationfromthegeneral
subject of the law. The primary purpose of the aforequoted constitutional provision is to prohibit duplicity in
legislation the title of which might completely fail to apprise the legislators or the public of the nature, scope and
consequences of the law or its operation. 2 This does not seem to this Court to have been ignored in the passage of
RepublicActNo.1435since,astherecordsofitsproceedingsbearout,afulldebateonpreciselytheissueofwhetherits
titlereflectsitscompletesubjectwasheldbyCongresswhichpassedit. 3Furthermore,indecidingtheconstitutionalityofa
statuteallegedtobedefectivelytitled,everypresumptionfavorsthevalidityoftheAct.Asistruerepublicincasespresenting
otherconstitutionalissues,thecourtsavoiddeclaringanActunconstitutionalwheneverpossible.Wherethereisanydoubt
astotheinsufficiencyofeitherthetitle,ortheArt,thelegislationshouldbesustained. 4Intheincidentonhand,thisCourt
doesnotevenhaveanydoubt.

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Asregardsthesecondandthirdassignmentoferrors,thecommissionercontendsthatthefiveyearlimitationperiod
forpartialrefundofspecifictaxpaidforoilandfuelusedinagricultureandaviationprovidedinSection1ofRepublic
Act No. 1435 is also applicable to Section 5 of said Act which grants partial refund of specific tax for oil used by
miners or forest concessionaires. Such being the case, the Commissioner said that the tax exemption already
expiredonJune14,1961.

ThepertinentportionofSection1ofRepublicAct.No.1435provides: 1wph1.t

Section1.SectiononehundredandfortytwooftheNationalInternalRevenueCode,asamended,is
furtheramendedtoreadasfollow: 1wph1.t

Section 142: Specific tax on manufactured oils and other fuels. On refined and
manufacturedmineraloilsandmotorfuels,thereshallbecollectedthefollowingtaxes: 1wph1.t

(a)xxx

(b)xxx

(c)xxx

(d)xxx

Wheneveranyoftheoilsmentionedaboveare,duringthefiveyearsfromJuneeighteen,
nineteen hundred and fiftytwo, used in agriculture and aviation, fifty per centrum of the
specifictaxpaidthereonshallberefundedbytheCommissionerofInternationalRavenue
uponsubmmissionofthefollowing:

1. A sworn affidavit of the producer and two disinterested persons proving that the said oils were
actuallyusedinagriculture,orinlieuthereof.

2. Should the producers belong to any producers' association or federation, duly registered with the
Securities and Exchange Commission, the affidavit of the president of tile association or federation,
attestingtothefactthattheoilswereactuallyusedinagriculture.

Section5ontheotherhandprovides: 1wph1.t

Section5. Provided,however,thatwheneveranyoilsmentionedabove areused by minersorforest

concessionaires in their operations, twentyfive per centum of the specific tax paid thereon shall be
refundedbytheCommissionerofInternalRevenueuponsubmissionofproofofactualuseofoilsand
under similar conditions enumerated in subparagraph one and two of section one hereof, amending
sectiononehundredfortytwooftheNationalInternalRevenueCode:....

Basedontheaforequotedprovisions,itisveryapparentthatthepartialrefundofspecifictaxpaidforoilsusedin
agricultureandaviationislimitedtofiveyearswhilethereisnotimelimitforthepartialrefundofspecifictaxpaidfor
oilsusedbyminersandforestconcessionaires.Wefindnobasisinapplyingthelimitationoftheoperativeperiod
providedforoilsusedinagricultureandaviationtotheprovisionontherefundtominersandforestconcessionaires.
ItshouldbenotedthatSection5makesreferencetosubparagraphs1and2ofSection1onlyforthepurposeof
prescribingtheprocedureforrefund.Thisexpressreferencecannotbeexpandedinscopetoincludethelimitation
of the period of refund. If the limitation of the period of refund of specific taxes paid on oils used in aviation and
agricultureisintendedtocoversimilartaxespaidonoilusedbyminersandforestconcessionairestherewouldhave
beennoneedofdealingwithoilusedinminingandforestconcessionsseparatelyandSection5shouldverywell
havebeenincludedinSection1ofRepublicActNo.1435,notwithstandingthedifferentrateofexemption.

AppealbytheCompany

Anent the first assignment of error, the Company contends that by express provision of its timber license, it is
requiredto"maintainamodernsawmillorsawmillsofsufficientcapacity."Clearly,theCompanysaid,theoperation
ofthesawmillisnotmerelyincidentaltotheoperationoftheforestconcessionbutisindispensablethereto,orforms
partthereof.WithintheframeworkofthetermsandconditionsofthetimberLicensethecuttingoftimberandthe
processing of the felled logs by the sawmill constitute one, continuous and integrated operation such that one
cannotexistsindependentlyoftheother.TheCompanyalsoreliesonSection5ofRepublicActNo.1435whereinit
isprovidedthat"wheneveranyoils...areusedbyminersorforestconcessionairesintheiroperations,theyshallbe
entitled to claim a refund of 25% of the specific tax paid on said oils." The Company believes that the word
operationsincludeallactivitiesofforestconcessionaireswhichareindispensableto,orrequiredin,theexploitation
oftheirforestconcessionsandnotlimitedtopurelyloggingoperations.

Weagreewithrespondentcourtthattheoperationofsawmillisdistinctfromtheoperationofaforestconcessions.
By the very nature of their operations, they are entirely two different business ventures. It is very clear from the
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languageofSection5thatonlyminersorforestconcessionariesaregiventheprivilegetoclaimthepartialrefund.
Sawmilloperatorsareexcluded,becausetheyneednotbeforestconcessionairesnorthelatter,alwaysaresawmill
operators.

Where the provision of the law is clear and unambiguous. so that there is no occasion for the court's seeking
legislativeintent,thelawmustbetakenasitis,devoidofjudicialadditionorsubtraction.5Furthermore,theauthorized
partialrefundundersaidsectionpartakesofanatureofataxexemptionandthereforeitcannotbeallowedunlessgrantedin
themostexplicitandcategoricallanguage.Wellsettledistherulethatexemptionfromtaxationisneverpresumed.Fortax
exemptiontoberecognized,liegrantTrustbeclearandexpressitcannotbemadetorestonvagueimplications.6

As regards prescriptive period in claiming refund, it was ruled by respondent court that the Company's cause of
actionforapartialrefundofthespecifictaxpaidontheoilsusedduringtheperiodfromJanuary1,1963toApril29,
1963,hadalreadyprescribed.Inmakingsuchpronouncement,respondentcourtreliedonthedoctrinelaiddownby
taxCourtinthecaseofCommissionerofInternalRevenuevs.InsularLumberCompany7whereThesameCompany
hereininvokedthesameSection5ofRepublicActNo.1435toclaimpartialrefundonspecificflaxpaidonmanufacturedoils
andfuels.Thiscourt,indismissingtheCompany'sclaimforrefundonthegroundofprescription,saidthatinthosecases
where the tax sought to be refunded was illegally or erroneously collected, the running of the two year prescriptive period
providedforinSection3068oftheNationalInternalRevenueCodestartsfromthedatethetaxwaspaid.Butwhenthetaxis
legallycollectedasinthepresentcase.thetwoyearprescriptiveperiodcommencestorunfromthedateofoccurrenceof
thesuperveningcausewhichgaverisetotherightofrefund.Thesuperveningcauseincasesofthisnatureisthedateofuse
of manufactured of and fuels. Thus, the Court said that when the supervening cause happened in 1958 but the claim for
refund was filed with the Commissioner op February 23, 1961 and the petition for review was filed in the Court of Tax
AppealsonFebruary17,1962,butlaterdatesbeingmorethantwoyearsafter1958,therighttoclaimrefundofthetaxpaid
hasprescribed.

Weagreewiththerespondentcourt.ThisCourthasconsistentlyadheredtotherulethattheclaimforrefundshould
first,befiledwiththeCommissionerofInternalRevenue,andthesubsequentappealtotheCourtofTaxAppeals
mustbeinstituted,withinthesaidtwoyearperiod.If,however,theCommissionertakestimeindecidingtheclaim,
and the period of two years is about to end, the suit of proceeding must be started in the Court of Tax Appeals
beforetheendofthetwoyearperiodwithoutawaitingthedecisionoftheCommissioner. 9Inthepresentcase,itwill
bedatedthatalthoughtheclaimforrefundwasfiledwiththeCommissioneronDecember22,1964,thepetitionforreview
wasfiledbytheCompanyonlyonApril29,1965prayingfortherefundofspecifictaxcoveringseveralperiodstartingfrom
January1,1963.Asfoundbyrespondentcourt,portionsoftheamountclaimedbytheCompanywereusedduringtheperiod
fromJanuary1,1963toApril29,1963.ThisCourtisboundbysaidfindings,thesamebeingfindingsoffact. 10Following,
therefore,therulinginCommissionerofInternalRevenuevs.InsularLumberCompany,supra,WeholdthattheCompanyis
notentitledtotheclaimforrefundfortheoilsusedfromJanuary1,1963toApril29,1963,onthegroundthattherightto
claimrefundofthetaxinquestionpaidduringthesaidperiodshasprescribed,thepetitionforreviewhavingbeenfiledwith
therespondentcourtonlyonApril29,1965,whichwasbeyondthetwoyearprescriptiveperiodprovidedforinSection306of
theTaxCode.

WHEREFORE,judgmentisherebyrenderedaffirmingthedecisionoftheCourtofTaxAppeals.Nocost

SOORDERED.

Fernando, C.J., Teehankee, Barredo, Makasiar, Aquino, Concepcion, Jr., Fernandez, Guerrero, Abad Santos and
MelencioHerrera,JJ.,concur. 1wph1.t

Footnotes 1wph1.t

1Section5.Theproceedsoftheadditionaltaxonmanufacturedoilsshallaccruetotheroadand
bridgefundsofthepoliticalsubdivisionforwhosebenefitsthetaxiscollected:Provided.however.that
wheneveranyoilsmentionedaboveareusedbyminersorforestconcessionariesintheiroperations
twentyfivepercentumofthespecifictaxpaidthereonshallaboutrefundedbytheCollectorofInternal
Revenueuponsubmissionofproofofactualuseofoilsandundersimilarconditionsenumeratedin
subparagraphsoneandtwoofsectiononehereof,amendingsectiononehundredfortytwoofthe
InternalRevenueCodeProvincialfurther,thatnonewroadshallbeconstructedunlesstheroutesor
locationthereofshallhavebeenapprovedbytheCommissionerofPublicHiwaysafteradetermination
thatsuchroadcanbemadepartofanintegralandarticulatedrouteinthePhilippinesHighwaySystem,
asrequiredinsectiontwentysixofthePhilippineHighwayArticleof1953.

2DelRosariovs.CommissiononElections35SCRA367Alalayanvs.NationalPowerCorporation24
SCRA172Lidasanvs.CommissiononElections21SCRA496.

3SeeCongressionalRecord,HouseofRepresentativesVol.III,No.67,p.2098.

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4Sutherland,StatutoryConstruction,Vol.I,p.295

5ActingCommissionerofCustomsvs.ManilaElectricCompany,77SCRA473.

6DavaoLightandflowerCo.,Inc.vs.CommissionerofCustom44SCRA129,citingResins,Inc.vs.
AuditorGeneral25SCFA754,AsturasSugarCentralinc.vs.CommissionerofCustom,29SCRA617,
CommissionerofInternalRevenuevs.VisayanElectricCo.,2SCRA715,CommissionerofInternal
Revenuevs.Guerrero,21SCRA180EssoStandardEasternInc.vs.ActingofCustomsisSCRA488,
Borjavs.CollectorofInternationalRevenue3SCRA590.

721SCRA1235.

8Sec.306.Recoveryoftaxerroneouslyorillegallycollected.Nosuitorproceedingshallbe
maintainedinanycourtfortherecoveryofanynationalinternalrevenuetaxhereafterallegedtohave
beenerroneouslyorillegallyassessedorcollectedorofanypenaltyclaimedtohavebeencollected
withoutauthority,orofanysumallegedtohavebeenexcessiveorinanymannerwrongfullycollected,
untilaclaimrefundorcredithasbeendulyfiledwiththeCommissionerofinternalRevenue:butsuch
suitorproceedingmaybemaintained,whetherornotsuchtax,Penalty,orsumhasbeenpaidunder
protestorduress.Inanycase,nosuchsuitorproceedingshallbebegunaftertheexpirationoftwo
yearsfromthedateofpaymentofthetaxorpenalty."

9CommissionerofInternalRevenuevs.VictoriaMillingCompany,Inc.,22SCRA12Collectorvs.
CourtOfTaxAppeal,1SCRA87Gibbsvs.Collector,107Phil.232,CollegeofOralandDental
Surgeryvs.CourtofTaxAppeal,92Phil.945.

10ActingCommissionerofCustomvs.ManilaElectricCo.,supraChuiHoyHornvs.CourtofTax
Appeals,25SCRA809AlhambraCigar&CigaretteMfg.Co.vs.CommissionerofInternalRevenue,
21SCRA1111Balbasvs.Domingo,21SCRA444.

TheLawphilProjectArellanoLawFoundation

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