USA College of Law

Case Name Caltex Philippines vs COA, 208 SCRA 726, 05/08/1992

(1) tax vs. ordinary debt
Topic
(2) purpose/objective of taxation: non- revenue / special / regulatory
Case No. |
G.R. No. 92585 | May 8, 19923,
Date
Ponente Davide, Jr. J.
A taxpayer may not offset taxes due from the claims that he may have against the
Doctrine
government.
Link https://lawphil.net/judjuris/juri1992/may1992/gr_92585_1992.html

RELEVANT FACTS:
● The Oil Price Stabilization Fund (OPSF) was created under Sec. 8, PD 1956, as amended by EO
137 for the purpose of minimizing frequent price changes brought about by exchange rate
adjustments. It will be used to reimburse the oil companies for cost increase and possible cost
underrecovery incurred due to reduction of domestic prices.
● COA sent a letter to Caltex directing the latter to remit to the OPSF its collection. Caltex requested
COA for an early release of its reimbursement certificates which the latter denied.
● COA disallowed recovery of financing charges, inventory losses and sales to marcopper and atlas
but allowed the recovery of product sale or those arising from export sales.
● Petitioner’s Contention:
Department of Finance issued Circular No. 4-88 allowing reimbursement. Denial of claim for
reimbursement would be inequitable. NCC (compensation) and Sec. 21, Book V, Title I-B of the
Revised Administrative Code (Retention of Money for Satisfaction of Indebtedness to Government)
allows offsetting.
Amounts due do not arise as a result of taxation since PD 1956 did not create a source of taxation,
it instead established a special fund. This lack of public purpose behind OPSF exactions
distinguishes it from tax.
● Respondent’s Contention:
Based on Francia v. IAC, there’s no offsetting of taxes against the the claims that a taxpayer may
have against the government, as taxes do not arise from contracts or depend upon the will of the
taxpayer, but are imposed by law.

ISSUE: W/N Caltex is entitled to offsetting DECISION

RULING:
NO. COA AFFIRMED

It is settled that a taxpayer may not offset taxes due from the claims that he may have against the
government. Taxes cannot be subject of compensation because the government and taxpayer are not
mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract
or judgment as is allowed to be set-off.

Technically, the oil companies merely act as agents for the Government in the latter’s collection since
 USA College of Law
the taxes are, in reality, passed unto the end-users – the consuming public. Their primary obligation is to
account for and remit the taxes collection to the administrator of the OPSF.

There is no merit in Caltex’s contention that the OPSF contributions are not for a public purpose
because they go to a special fund of the government. Taxation is no longer envisioned as a measure
merely to raise revenue to support the existence of the government; taxes may be levied with a
regulatory purpose to provide means for the rehabilitation and stabilization of a threatened industry
which is affected with public interest as to be within the police power of the State.

The oil industry is greatly imbued with public interest as it vitally affects the general welfare.

PD 1956, as amended by EO No. 137 explicitly provides that the source of OPSF is taxation.

RULING
WHEREFORE, in view of the foregoing, judgment is hereby rendered AFFIRMING the challenged
decision of the Commission on Audit, except that portion thereof disallowing petitioner's claim for
reimbursement of underrecovery arising from sales to the National Power Corporation, which is
hereby allowed.

With costs against petitioner.

SO ORDERED.

NOTES
(Provisions mentioned in the case)

Caltex Philippines questions the decisions of COA for disallowing the offsetting of its claims for
reimbursement with its due OPSF remittance