G.R. No. L-24405 - Commissioner of Internal Revenue vs. Dingalan Forest Product Corporation, et al.

In view of the ruling of this Court in the case abovequoted, and it appearing from the evidence of record that of the P48,767.73 sought to be refunded, the sum of P27.92 was not assigned to the petitioner, and the amount of P3,065.86 represents sales taxes on hand-sawn lumber, the sale of which manufactured products was properly treated as original sale effected by the petitioner, we hold that the petitioner is entitled to the refund of the sum of P45,673.95.

WHEREFORE, the respondent is hereby ordered to refund to the petitioner the sum of P45,673.95, without any pronouncement as to costs.

1. That the petitioner is a corporation duly organized and existing under and by virtue of the laws of the Philippines, with offices at the ground floor, Ledesma Bldg., Intramuros, Manila; while respondent is the Commissioner of Internal Revenue, duly appointed and acting as such, with offices at the Finance Building, Manila;

2. That petitioner has, since October 30, 1957, to date, been the holder of forest concession located in the Municipality of Dingalan, Gabaldon, and Baler, of the Province of Nueva Ecija and Quezon, respectively;

3. That during the period from January of 1960 to January 19, 1962, the petitioner cut and removed forest product from its aforesaid concession and paid the corresponding forest charges thereon to the Government pursuant to the applicable provisions of the National Internal Revenue Code; .

4. That petitioner sold the said forest products to its various customers who were billed in the sale invoices the corresponding sales tax but the latter assigned to the former, as shown by the attached annexes "A-1" to "A-50" whatever refund may be due them by reason of the payment thereof the respondent, except the amount of P27.92 representing the sales tax billed by its customers who did not make the necessary arrangement; .

5. That out of the sum of P48,767.73 representing sales taxes paid and involved in this case, the amount of P3,065.86 represents taxes billed to petitioner's customers on its sales of hand-sawn lumber: .

6. That in the sale of said forest products by the petitioner, the latter paid the sum of P48,767.73 to the respondent in the concept of percentage or sales taxes for the period from April, 1960 to January 20, 1962 per Annex "B" hereto attached and incorporated herein as part of this Stipulation of Facts; .

7. That petitioner requested a refund of this said percentage or sales taxes but the respondent denied the same; .1äwphï1.ñët

8. That the parties confine the issue of this case on the question of whether or not the petitioner is entitled to the refund of the said amount of P48,767.73." .

As regards the second item of P1,192.51, representing fixed and percentage taxes and surcharges, as producer of the logs involved in the reassesment, the Court of Tax Appeals held that Guerrero is not liable therefor, upon the theory that said logs weresold by the Governmentto the one who had cut and removed the products from the forest; that the original sale of said logs was, therefore, made by the Government, not by the concessionaire or cutter of the forest products; and that, accordingly, Guerrero is not liable for the payment of the corresponding fixed and percentage taxes thereon. This theory is based upon the premise that, whereas in Collector of Internal Revenue vs. Mr. Lacson, L-12945 (April 29, 1960), we held that forest charges are internal revenue taxes, this ruling was reversed in Collector of Internal Revenue vs. Pio Barretto Sons, L-11805 (May 31, 1960).

It is true that the dispositive portion of our decision in the first case expressly sustained the concurring and dissenting opinion of a member of the Court of Tax Appeals in the appealed decision thereof and that the writer of the opinion maintained that forest charges are internal revenue taxes. A careful perusal of the text of the decision of the Supreme Court therein shows, however, that said dissenting opinion is not theratio decidendiof the aforementioned decision. It should be noted that the Collector of Internal Revenue contested the jurisdiction of the Court of Tax Appeals to entertain the appeal taken by Lacson from the assessment made by said officer involving forest charges, and that the Supreme Court upheld the authority of the tax court to hear and decide said appeal, because the issue therein was thevalidity of said assessment.From the viewpoint of the Supreme Court, this issue was decisive on the question of jurisdiction of the Court of Tax Appeals,regardlessof whether forest charges were taxes or not.

At this juncture, it may not be amiss to advert to a problem of semantics arising from the operation of Section 1588 of the Revised Administrative Code, the counterpart of which is now Section 315 of the National Internal Revenue Code, pursuant to which:.

x x x           x x x           x x x

The enforcement of this lien by the Commissioner (formerly Collector) of Internal Revenue, has often induced the parties adversely affected thereby to raise the question whether a given charge is a tax or not, on the theory that there would be no lien if said question were decided in the negative. In connection therewith, said parties had tended to distinguish between taxes, on the one hand — as burdens imposed upon persons and/or properties, by way of contributions to the support of the Government, in consideration ofgeneralbenefits derived from its operation — and license fees — charged in the exercise of theregulatoryauthority of the state, under its police power — and other charges — forspecificthings or special orparticularbenefits received from the Government — on the other hand.

It is high time to stress that the term "tax", as it appears in said Section 1588 of the Revised Administrative Code and Section 315 of the National Internal Revenue Code, is used in these provisions,notin the limited sense adverted to above, but, in abroadsenseencompassing all Government revenues collectible by the Commissioner of Internal Revenue under said Code,whether involving taxes, in the strict technical sense thereof, or not. Thus, under the heading "injunction not available to restrain collection oftax", Section 305 of said Code — which is the first provision of Title IX (entitled "General Administrative Provisions"), Chapter I (entitled "Remediesin General) thereof — provides:

Similarly, under the heading "Civil remedies for the collection of delinquenttaxes," Section 316 of the same Code ordains:1äwphï1.ñët

In other words, the National Internal Revenue Codemakes a distinctionbetweentaxes, on the one hand, andfees or charges,on the other; butas used in Title IX of said Code,the term "tax"includes"any national internal revenue tax,fee or chargeimposed" by the Code. And it is in this sense only that we sustained the view taken in the aforementioned concurring-dissenting opinion in Collector of InternalRevenue vs. Lacson(supra). Hence, in the Barretto case, it was held that the Government doesnotsell forest products, but merelycollects chargeson the privilege granted by it "for theexploitationof forest concessions, i.e., chargesfor the right to exercisethe privilege granted by the Government to the licensee of cutting timber from a public forest or forest reserve." In line with this view, we stressed inCordero vs. Conda,L-22369 (October 15, 1966), the declaration made inCebu Portland Cement Co. vs. Commissioner of Internal Revenue,L-18649 (February 27, 1965), that a forest charge "is a taxnoton the minerals, butupon the privilegeof severing or extracting the same from the earth," although strictly a fee for something received isnota tax. As a consequence, the original sale, as contemplated in Section 189 of the Internal Revenue Code, is madeby the concessionaireor whoever cuts or removes forest products from public forests or forest reserves — in the case at bar, Guerrero, who is accordingly, bound to pay said sum of P1,192.51.

¹L-11805, May 31, 1960. See Resolution of August 31, 1960.

²L-22369, October 15, 1966.

³G.R. Nos. L-19074 and L-19089.