[G.R. No. 31230-32.

February 14, 2000]

COMMISSIONER OF INTERNAL REVENUE vs. CMS LOGGING, INC., et al.

THIRD DIVISION

Gentlemen:

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:

1. On June 21, 1962, the sum of P4,894.63, covering the period from July 1 to
December 31, 1961;

2. On November 5, 1962, the sums of P6,294.26 covering the period from January
1, to June 30, 1962;

3. On August 6, 1963, the sum of P5,998.46, covering the period from July 1 to
December 31, 1962.

4. On January 20, 1964, the sum of P4,918.00, covering the period from January
1, to June 30, 1963;

5. On September 25, 1964, the sum of P4,932.96, covering the period from July 1
to December 31, 1963;

6. On May 31, 1965, the sum P5,859.84, covering the period from January 1 to
July 31, 1964;

7. On June 16, 1965, the sum of P5,707.01, covering the period from August 1,
1964 to February 23, 1965;

8. On September 27, 1966, the sum of P6,135.24 covering the period from March
1 to August 31, 1965.

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 -
IN VIEW OF THE FOREGOING, the petitions for review filed by petitioner in CTA Case No. 1569 is
dismissed with regard to the 1st, 2nd, 3rd, 5th, and part of the 4th causes of action. Respondent
is hereby ordered to refund or grant a tax credit to petitioner [in] the sums of P3,893.44,
corresponding to the period from February 8 to June 30, 1963 in CTA Case No. 1569; P11,566.85
in CTA Case No. 1674; and P6,135.25 in CTA Case No. 1804, representing 25% of the specific
taxes paid on manufactured oils and other fuels. Without pronouncement as to costs.

SO ORDERED.

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

"Sec. 42. Specific Tax on manufactured oils and other fuels. - On refined and manufactured
mineral oils and motor fuels, there shall be collected the following taxes:

"(a) Kerosene or petroleum, per liter of volume capacity, two and one-half centavos;

"(b) Lubricating oils, per liter of volume capacity, seven centavos;

"(c) Naptha, gasoline, and all other similar products of distillation, per liter of volume capacity,
eight centavos; and

"(d) On denatured alcohol to be used for motive power, per liter of volume capacity, one centavo:
Provided, That if the denatured alcohol is mixed with gasoline, the specific tax on which has
already been paid, the purpose of this subsection, the removal of denatured alcohol of not less
than one hundred eighty degrees proof (ninety percentum absolute alcohol) shall be deemed to
have been removed for motive power, unless shown to the contrary.

"Whenever any of the oils mentioned above are, during the five years from June eighteen,
nineteen hundred and fifty-two, used in agriculture and aviation, fifty percentum of the specific
tax paid thereon shall be refunded by the Collector of Internal Revenue upon the submission of
the following:

"(1) A sworn affidavit of the producer and two disinterested persons proving that the said oils
were actually used in agriculture, or in lieu thereof.

"(2) Should the producer belong to any producer's association or federation, duly registered with
the Securities and Exchange Commission, the affidavit of the president of the association or
federation, attesting to the fact that the oils were actually used in agriculture.
"(3) In the case of aviation oils, a sworn certificate satisfactory to the Collector proving that the
said oils were actually used in aviation: Provided, that no such refunds shall be granted in
respect to the oils used in aviation by citizens and corporations of foreign countries which do not
grant equivalent refunds or exemptions in respect to similar oils used in aviation by citizen and
corporation of the Philippines."

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

"Sec. 145. Specific Tax on Diesel fuel oil. - On fuel oil commercially known as diesel fuel oil, and
on all similar fuel oils, having more or less the same generating power, there shall be collected,
per metric ton, one peso."

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 -

Based on the aforequoted provisions, it is very apparent that the partial refund of specific tax
paid for oils in agriculture and aviation is limited to five years while there is no time limit for the
partial refund of specific tax paid for oils used by miners and forest concessionaires. We find no
basis in applying the limitation of the operative period provided for oils used in agriculture and
aviation to the provisions on the refund to miners and forest concessionaires. It should be noted
that Section 5 makes reference to subparagraphs 1 and 2 of Section 1 only for the purpose of
prescribing the procedure for refund. This express reference cannot be expanded in scope to
include the limitation to include the limitation of the period of refund. If the limitations of the
period of refund of specific taxes on oils used in aviation and agriculture is intended to cover
similar taxes paid on oil use by miners and forest concessionaires, there would have been no
need of dealing with oil used in mining and forest concessions separately and Section 5 should
very well have been included in Section 1 of Republic Act No. 1435, notwithstanding the different
rate of exemption.8 Id., 718-719.

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.