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[ G.R. No. 31230-32. February 14, 2000]

Quoted hereunder, for your information, is a resolution of this Court dated FEB 14, 2000.

G.R. No. 31230-32 (Commissioner of Internal Revenue vs. CMS Logging, Inc. and Court of Tax Appeals.)

Assailed in this petition for review is the decision of the Court of Tax Appeals (CTA) promulgated on August 30, 1969 in CTA Cases Nos. 1569, 1674 and 1804 entitled "CMS Logging, Inc. vs. Commissioner of Internal Revenue."

CMS Logging, Inc., a domestic corporation, is a duly licensed forest concessionaire operating in Baganga, Davao. Pursuant to Section 5 of republic Act (RA) No. 1435, CMS Logging filed several claims for tax refund for 25% of the specific taxes on fuel and lubricants used by it in its logging operation, enumerated as follows:

The first five claims and the seventh were denied by the Commissioner of Internal Revenue in six separate letters addressed to private respondent. However, no letters of denial were received by private as to the sixth and eight claims. Private respondent's motion for reconsideration of the denials of the first five claims were similarly rejected. Private respondent filed three separate cases with the CTA, which were docketed as CTA Cases Nos. 1569, 1674 and 1804.1 CTA Cases Nos. 1569, 1674 and 1804 were filed on February 8, 1965, August 5, 1965 and October 6, 1966, respectively. CTA Case No. 1569 involved the first five claims, the sixth and seventh claims constituted CTA Case No. 1674 and the eighth claim was dealt with CTA Case No. 1804.2 CTA Decision, 1-2; Rollo, 82-83.

After a joint hearing, the Court of Tax Appeals rendered the assailed decision, the dispositive portion of which provides -

Both parties appealed to this Court from CTA's decision.3 The appeal of private respondent was docketed as G.R. No. 31140-42. However, in our Resolution dated February 21, 1996, we dismissed private respondent's petition for lack of interest to prosecute, which dismissal became final and executory on June 5, 1996. Petitioner, however, in compliance with our December 15, 1999 Resolution, manifested on January 7, 2000 that he is still interested in continuing his appeal since there have been no supervening events which would render the present case moot and academic.4 Rollo, 180-181. We are therefore resolving the petition filed by the Commissioner of Internal Revenue.

The parties agree that the sole issue in this case is whether the 25% specific tax exemption granted by Section 5 of RA 1435 on manufactured oils and other fuels used by miners and forest concessionaires in their operation is limited to a period of five (5) years from the effectivity of RA 1435 on June 14, 1956.5 Petition, 4; Rollo, 9; Answer, 1 Rollo, 100.

Republic Act No. 1435, entitled "An Act To Provide Means For Increasing The Highway Special Fund," was approved and took effect on June 14, 1956. Its full text is reproduced herein:

Sec. 2. Section one hundred and forty-five of the National Internal Revenue Code, as amended, is further amended to read as follows:

Sec. 3. The proceed 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 for 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 Communication and approved by the President.

Sec. 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 cent of the rates fixed in said sections, on manufactured oils sold or distributed within the limits of the city or the 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 prescribe by the municipal board or council concerned.

Sec. 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.

Sec. 6. This Act shall take effect upon its approval.

Approved, June 14, 1956.

It is petitioner's contention that the 25% tax refund of specific tax paid on oils used by miners or forest concessionaires granted by Section 5 RA 1435 should be limited to a period of five years to be counted from June 14, 1956, the date of effectivity of RA 1435, as is the case in the partial tax refund of specific tax paid on oils used in agriculture and aviation granted by Section 142 of the National Internal Revenue Code, as amended by Section 1 of RA 1435. Petitioner maintains that the Court of Tax Appeals erred in ordering him to grant tax refunds to private respondents corresponding to the period from February 8, 1963 to August 31, 1965 since said period is obviously beyond the five-year period.6 Petition, 4-5; Rollo, 9-10.

The petition must fail.

This issue has already been resolved in Insular Lumber Co. vs. Court of Tax Appeals,7 104 SCRA 710 (1981). which is squarely applicable to the case at bench. In Insular Lumber, a licensed forest concessionaire filed a claim with the Commissioner of Internal revenue for refund of P19,921.37 representing 25% of the specific tax paid on manufactured oil and fuel used in its operations pursuant to Section 5 of RA 1435. The Commissioner denied the company's claim for refund on the ground that the privileged of partial tax refund granted by Section 5 of RA 1435 to those using oil in the operation of forest and mining concessions is limited to a period of five (5) years from June 14, 1956, the date of effectivity of said law. Thus, oil used in such concessions after June 14, 1961 are subject to the full tax prescribe in Section 142 of the National Internal Revenue Code (NIRC). In passing upon this issue, the Court held that -

In fact, in a recent case we declared that mining and logging companies were entitled to the refund privilege granted by RA 1435 on specific taxes paid up to 1985, after which the Highway Special Fund was abolished.9 Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corporation, 207 SCRA 549 (1992).

The rationale for extending a tax privilege to lumber and mining companies was explained in Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corporation. 10 202 SCRA 137 (1991). Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corporation, 207 SCRA 549 (1992). Citing the congressional deliberations on RA 1435, we explained that it would be unfair to subject miners and forest concessionaires to the increased rates and in effect make them subsidize the construction of highways from which they did not directly benefit since these companies seldom used the national highways because they have roads and compounds of their own.11 Id., citing Congressional record, 3rd Congress, 3rd Regular Session, 7, 1967, Vol. III, No. 67, pp. 2093-2107.

WHEREFORE, the petition is DENIED. The challenged decision of the Court of Tax Appeals in CTA Cases Nos. 1569, 1674, and 1804 is AFFIRMED.

SO ORDERED.