CTA Case No. 4002 (Decision)

REPUBLI C OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY PLANTERS PRODUCTS, INC., C.T.A. CASE NO. 4002 Petitioner~ ��� versus - COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - X DE C I0N The c a s e i s about an availment by a local fert i li ze r manufacturer.. o �f the r/ ta >: exempt. .ion privilege under Pres idential Decn:e No. 1144, otherwi s e e n t.i t 1 ed ~ "Cr�ea ting the Fer�ti 1 i ze r� and Pesticide Aut.hrJr� ity a nd Aboli s hing the Ferti l izer� Indu s try Author�i ty" whi c: h particular provision reads: Sec . 6. Powers and Functions. - The FPA shall have jur� isdiction, on overall existing handlers of pesticides, �ferti 1 i zers and other agr ic:ul tura 1 chemic a 1 inputs. The FPA sha 11 have the following powers and functions: 2 U~

DECISION CTA CASE NO. 4002 II. Fer-tilizer-s 5. To impor� t f~?r-til.i.zer� and �fer.. tilizer� inpub;; E!}:empt fn)fTl customs duties~ cnmp!:?nsat .i.ng and sales taxes and all other- taxes~ and to pur-chase naptha locally fr-ee fr-om s pecific taxes and the cor-responding duty on the impor-ted cr� ude~ and to ~:; ell ot'" convr,~y such �fer�t i l i z e r � or� fr:~r� ti 1 izer.. input to any individual, ass ociation, or corporation likewise e>:Pmpt �fr�om the P�"Yrn:?nt: o �f customs duties and all other- taxes. The 1'1.i. n .i. st. r �y of F i.n<~nce had the same construed, thus - Fr� om the abovf.�? quoted pn:>vi.~don o �f law~ i t is very evident that the purpose o �f th�"' ~?>:emption is tel pr�ovide the much needed incentive to local �fer�tiliZE?r- manufac turer-s. Fer-tilizer is a vital input to all gover-nment's food pr-oduction pr�ogr-am. Cognizant with the under� l ying purpose of Section 6 (II - 5 ) as above s tated~ this Ministry believes that: local �fer�� t i 1 .i :u~r�� manu f ac: tur�er�s a r �e e >:empt fr-o m the payment of 10% manufactur-er-'s tax imposed by the Nr." tiona 1 In ter�na 1 Revenue Code. This cone lusicm i s ~~ uppcn-ted by the language of the law granting the tax exemption wh ich in r-efer-ring to the exemption uses the br-oad and all encompassing phr-ase " customs duties and a 11 other- ta>:es". 1.-<J.i. t:.h r� e~;; per.:t. to thf: local pur-chase of refinery gas which is a s ubstitute to naptha~ the same is exempted fr-o m the payment of specific: tax. Likewise~ diesel n i l C\nd industr�ial fuel oil ~.oJhich 2i LJ

DECISION CTA CASE NO . 4002 - 3- are basic inputs to the manufacture of fertilizer are exempt from customs duties and taxes pursuant to Section 6 (II-5) of Presidentia 1 Decree No. 1144 . (Letter of Acting Minister of Finance Alfredo Pio De Roda~ Jr. to Mr. Alfredo Montelibano~ Pr. esident of Planters Products~ Inc., April 12~ 1983.) The respondent had his own ruling of March 8, 1984 in a letter addressed to the Fertilizer & Pesticide Authority authorizing the purchase of fertilizer inputs for the account of Planters Products~ Inc., free fn.:>m the payment of specific tax in reiteration of the Ministry of Finance' ruling~ to wit: In view thereof. your request is hereby granted. Accordingly, you may wi t.hdraw �fr�om Petrophi 1 Cor. poration the above-mentioned quantities of refinery gas, industrial diesel oil and industrial fue 1 o.i.l, �free from the payrnen t of the spec i �f ic ta>: impt:>secf i.rl Sec 'tion 153 ( r.:) of the Tax Code of 1977~ as amended. However, the conditions set forth in Revenue Regulations No. 13-77 regarding the recording and reporting of deliveries of petroleum products to tax exempt entities should be complied with. (Exhs. D-2 and D�-3) The records show that during the period, January to September, 1984, petitioner bought from Petrophil Corporation, 10,871,803 1i ter�s of refinery or process gas~ 8~809~933 liters of in d l .l s t r i a 1 fuel oil and 3,340,851 liters of 21 ..L

DECI S ION CTA CASE NO . 4002 - 4 �- industrial diesel oil as basic inputs in the manufacture of fertilizer~ and was charged and paid the amounts o �f F'326~154.09~ P1~357~791.39 and P1~068~434.64~ as s peciflc ta>:es due thereon~ respectively. On the basis of the r. ul ing of the Ministry of Finance~ petitioner filed on March 22~ 1985 a c lalm for the refund/tax credit of the s pecif i c taxes in the total amount of P2~752~380.12 it paid. Respondent Commissioner of Internal Revenue �failed tel act em petitioner� '~; claim~ h ence, this petition. All told the material �facts ar�e relatively simple and s o i s the issue under resolve but the parties seem trying to get the better of each other over by a quibble a s to the proper import and s c ope of the ta x e xemption proviso in PO 1144. Taking exc eption, res pondent avers that the under Section 6 (11-5) of Presidential Decree No. 1144~ s upra, refers to the transactions Clf the Fertilizer Pesticide Authority in importing fertilizer inputs, purchas ing naptha l ocally or imported crude and s elling or� conveying fertilizer or fertilizer 21~

DECISION CTA CASE NO. 4002 - 5 -� inputs to any individual~ association or corporation. Nothing is said about exempting local fer�tilizer manufacturers from payment of specific under� the Ta>: Code. Furthermore~ Presidential Decree No. 1144 does not speak of granting incentives to local manufacturers. Be that as it may~ We find nothing ambiguous nor� obscur�e in the language the statutory proscription made positive by the administrative rulings insofar as the sa me is brought to bear upon the circumstances of the petitioner. Far be it a theoretic: a 1 gobbledygook the rulings above-quoted establish the appropr� iate legal moorings and lend settling eloquence to the precise issue in the case at bar. Respondent should not further expect the unexpected towards flirting to a volte-face ruling. In a case invo 1v ing the same petitioner and touching on the similar if not the same issue, We held~ inter alia .~ that "As a r� esult~ Section 6 (11-5) alludes to the existence of individuals~ associations or corporations granted the privilege and functions of FPA ~ speaks in this wise: 'To import fertilizer and fertilizer inputs exempt from ....

DECISION CTA CASE NO. 4002 - 6 -� customs duties, compensating and sales ta>:es and all other taxes and to purchase naptha locally free from spec i �f ic t.:u:es and the cor-responding duty on imported crude~ and to sell or convey such fer-tilizer or� fertilizer- input to any individual, association or corporation likewise exempt fro m the payment o �f custt-:>ms dutie~-s and a l l other ta>:es � " . We do not think any d .i. f fer en t cone 1us ion ought be reached in the case at bar. And, the records make it clear that the specific ta>:r.~s s;<:>ught to be r�efunded were paid by the petitioner, viz.: E>:hibits A, A-1 to A-6 (specific taxes on refinery gas~ summarized in E>:hibit A-7); E:�:hibits B~ B-1 t<:> B-35 (specific taxes on industrial fuel oil, su mmarized in Ex h ibit B-54); and Exhibits C~ C-1 to C-18 (specific taxes on industrial diesel oil~ summarized in E>:hibit C-19) . We cone: 1 ude and this is a 1 1 we need dec ide that petitioner has fared consistent wit h t h e requirements of law and regulations in estab l is hing its legal right to the claim. 2 lt

~ r DECISION CTA CASE NO. 4002 -- 7 - WHEREFORE, respondent is hereby ordered to grant the refund/tax credit to the petitioner without pronouncement as to costs. SO ORDERED. Quezon Cit y ~ Metro Manila, August 3 1, 1990 . . REYES I CONCUR: . ROAQUIN ,Judge CERTIFICATION I hereby certify that this decision was reached after due consu l tation bet wee n t he me mbers of t he Court of Tax Appea l s in accordance wit h Section 13, Artic l e VII I of the .,socia t e Jud ge C urt of Ta x Appea l s