Caltex Philippines, Inc.

v COA (1992)

Caltex Philippines, Inc. v Commission on Audit GR No. 92585, May 8, 1992

FACTS:
In 1989, COA sent a letter to Caltex, directing it to remit its collection to the Oil Price
Stabilization Fund (OPSF), excluding that unremitted for the years 1986 and 1988, of the
additional tax on petroleum products authorized under the PD 1956. Pending such remittance, all
of its claims for reimbursement from the OPSF shall be held in abeyance. The grant total of its
unremitted collections of the above tax is P1,287,668,820.
Caltex submitted a proposal to COA for the payment and the recovery of claims. COA approved
the proposal but prohibited Caltex from further offsetting remittances and reimbursements for the
current and ensuing years. Caltex moved for reconsideration but was denied. Hence, the present
petition.

ISSUE:
Whether the amounts due from Caltex to the OPSF may be offsetted against Caltexs outstanding
claims from said funds

RULING:
No. Taxation is no longer envisioned as a measure merely to raise revenue to support the
existence of 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.
PD 1956, as amended by EO 137, explicitly provides that the source of OPSF is taxation. A
taxpayer may not offset taxes due from the claims 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.
Hence, COA decision is affirmed except that Caltexs claim for reimbursement of underrecovery
arising from sales to the National Power Corporation is allowed.

Philippine Acetylene Co. Inc v CIR (1967)

Philippine Acetylene Co. Inc. v CIR GR No L-19707, August 17, 1967

FACTS:
Philippine Acetylene Co. Inc. is engaged in the manufacture and sale of oxygen and acetylene
gases. It sold its products to the National Power Corporation (Napocor), an agency of the
Philippine Government, and the Voice of America (VOA), an agency of the United States
Government. When the commissioner assessed deficiency sales tax and surcharges against the
company, the company denied liability for the payment of tax on the ground that both Napocor
and VOA are exempt from taxes.

ISSUE:
Is Philippine Acetylene Co. liable for tax?

RULING:
Yes. Sales tax are paid by the manufacturer or producer who must make a true and complete
return of the amount of his, her or its gross monthly sales, receipts or earnings or gross value of
output actually removed from the factory or mill, warehouse and to pay the tax due thereon. The
tax imposed by Section 186 of the Tax Code is a tax on the manufacturer or producer and not a
tax on the purchaser except probably in a very remote and inconsequential sense. Accordingly,
its levy on the sales made to tax- exempt entities like the Napocor is permissible.

On the other hand, there is nothing in the language of the Military Bases Agreement to warrant
the general exemption granted by General Circular V-41 (1947). Thus, the expansive
construction of the tax exemption is void; and the sales to the VOA are subject to the payment of
percentage taxes under Section 186 of the Tax Code. Therefore, tax exemption is strictly
construed and exemption will not be held to conferred unless the terms under which it is granted
clearly and distinctly show that such was the intention.

HE COMMISIONER OF INTERNAL REVENUE,

Petitioner, vs.

ACESITE (PHILIPPINES) HOTELCORPORATION,

Respondent.
FACTS:
1. Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel. It leases 6,768.53
square meters
of the hotels premises to the Philippine Amusement and Gaming Corporation for casino operations
and caters
food and beverages to PAGCORs casino patrons through the hotels restaurant outlets.
2.For the period January 96 to April 1997, Acesite incurred VAT amounting to P30,152,892.02 from its
rentalincome and sale of food and beverages to PAGCOR during said period. Acesite tried to shift the
said taxes toPAGCOR by incorporating it in the amount assessed to PAGCOR but the latter refused
to pay the taxes onaccount of its tax exempt status.
1awphi1.net
3. PAGCOR paid the amount due to Acesite minus the P30,152,892.02 VAT while the latter paid the
VAT tothe Commissioner of Internal Revenue.4.However, Acesite belatedly arrived at the conclusion
that its transaction with PAGCOR was subject to zerorate as it was rendered to a tax-exempt entity.5.
Acesite filed an administrative claim for refund with the CIR but the latter failed to
resolve the same. Acesitefiled a petition with the Court of Tax AppealsCTA Decision: Petitioner is
subject to zero percent tax insofar as its gross income from rentals and salesto PAGCOR, a
tax exempt entity by virtue of a special law.
 Accordingly, the amounts of P21,413,026.78and P8,739,865.24, representing the 10% EVAT
on its sales of food and services and gross rentals,respectively from
PAGCOR shall be refunded
to the petitioner..CA Decision:
PAGCOR was not only exempt from direct taxes but was also exempt from indirect taxeslike
the VAT
and consequently, the transactions between respondent Acesite and PAGCOR were "effectivelyzero-
rated" because they involved the rendition of services to an entity exempt from indirect taxes.
ISSUE/S:

(1) whether PAGCORs tax exemption privilege includes the indirect tax of VAT to entitle Acesite to
zero percent (0%) VAT rate; and (2) whether the zero percent (0%) VAT rate under then Section 102
(b)(3) ofthe Tax Code (now Section 108 (B)(3) of the Tax Code of 1997) legally applies to Acesite.
HELD:1. Yes. PAGCOR is exempt from payment of indirect taxes
It is undisputed that P.D. 1869, the charter creating PAGCOR, grants the latter an exemption from the
paymentof taxes. Section 13 of P.D. 1869 pertinently provides exemption.Under the above provision
[Section 13 (2) (b) of P.D. 1869], the term "Corporation" or operator refers to
PAGCOR. Although the law does not specifically mention PAGCORs exemption from indirect taxes,
PAGCORis undoubtedly exempt from such taxes because the law exempts from taxes
persons or entitiescontracting with PAGCOR in casino operations
. Although, differently worded, the provision clearly exemptsPAGCOR from indirect taxes.
In fact, it goes one step further by granting tax exempt status to personsdealing with
PAGCOR in casino operations
. The unmistakable conclusion is that PAGCOR is not liable forthe P30,152,892.02 VAT and neither is
Acesite as the latter is effectively subject to zero percent rate underSec. 108 B (3). R.A. 8424.
(Emphasis supplied.