G.R. No.

92585 May 8, 1992

CALTEX PHILIPPINES, INC., petitioner, 
vs.
THE HONORABLE COMMISSION ON AUDIT, HONORABLE COMMISSIONER BARTOLOME C.
FERNANDEZ and HONORABLE COMMISSIONER ALBERTO P. CRUZ, respondents.

Topic: (1) tax vs. ordinary debt, (2) purpose/objective of taxation: non-revenue / special /
regulatory
Ponente: Davide, Jr. J.

DOCTRINE:
A taxpayer may not offset taxes due from the claims that he may have against the government.

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

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 recover 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: WON Caltex is entitled to offsetting

DECISION: NO. COA AFFIRMED

HELD:
 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 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 not 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.

https://www.batasfilipinas.com/2021/06/case-digest-lutz-vs-araneta-98-phil-148.html
https://www.scribd.com/document/426746708/Tax-Case-Digest-Commissioner-of-Internal-
Revenue-vs-Algue-Inc-GR-No-L-28896
National Power Corporation vs. City of Cabanatuan
G.R. No. 177332
October 1, 2014

NPC, a GOCC, created under CA 120 as amended, selling electric power, was assessed
by the City of Cabanatuan for franchise tax pursuant to sec. 37 of Ordinance No. 165-92.
NPC refused to pay the tax assessment on the grounds that the City of Cabanatuan has no
authority to impose tax on government entities and also that it is exempted as a non-profit
organization. For its part, the City government alleged that NPC’s exemption from local
taxes has been repealed by sec. 193 of RA 716 

Issue: Whether NPC is liable to pay an annual franchise tax to the City government. 

Ruling: Yes, NPC is liable. As a general rule, LGUs cannot impose taxes, fees or charges
of any kind on the National Government, its agencies and instrumentalities, this rule now
admits an exception, i.e., when specific provisions of the LGC authorize the LGUs to
impose taxes, fees or charges on the aforementioned entities.