Facts: From July 1, 1980 to December 31, 1981, Philex Mining Corp. purchased from several oil companies, refined and manufactured minerals, motor fuels, and diesel fuel oils. Specific taxes of P2,492,677.22 were paid. On October 22, 1982, the company availed of the provisions of RA 1435 granting refund of 25% of the tax paid and provided proof of the use of the oils, as required. Pending such claim for refund (P623,169.30 representing the 25%) with the CIR, the company filed another claim for refund with the same amount plus 20% interest thereon with the CTA on November 16, 1982. The CTA granted the refund but only P16,747.36 which was based on the amount deemed paid under Sections 1 & 2 of RA 1435. Philex contends the refund should be based on the actual specific taxes paid as per the increased rates provided in Sections 142 and 145 (which became Sections 153 and 156) of the NIRC.
Held: CTA is incorrect. In 1977, PD 1158 codified all existing laws. Sections 142 and 145 of the Tax Code, as amended by Sections 1 and 2 of RA 1435 were re-numbered to Sections 153 and 156. Later, these sections were amended by PD 1672 and subsequently by EO 672 increasing the tax rates for certain oil and fuel products. In effect, the reason for the refund ceased to exist. (The purpose of the tax was for Highway Special Fund which was abolished in 1985). SC affirmed therefore the decision of the CA & CTA that the basis of tax refund under RA 1435 is computed on the basis of the specific tax deemed paid under Sections 1 & 2 and not the increased rates actually paid under the 1977 NIRC, citing several cases in support thereof.
Further, although Philex paid the taxes on their oil and fuel purchases based on the increased rates, the latter law did not specifically provide for a refund based on the increased rates. Since the grant of refund privileges must be strictly construed against the taxpayer, the basis for the refund remains to be the amounts deemed paid under Sections 1 and 2 of RA 1435. Also, there is no merit to petitioner’s assertion – that equity and justice demands that the computation for tax refunds be based on actual amounts paid under Sections 153 and 156 of the NIRC, there being no tax exemption solely on the ground of equity.
SC finally held: “The rule is that no interest on refund of tax can be awarded unless authorized by law of the collection of the tax was attended by arbitrariness. An action is not arbitrary when exercised honestly and upon due consideration where there is room for two opinions, however much of it may be believed that an erroneous conclusion was reached. Arbitrariness presupposes inexcusable or obstinate disregard of legal provisions. None of the exceptions are presents in this case. Respondent’s decision was based on an honest interpretation of the law. We see no reason why there should be payment of interest.”
Held: CTA is incorrect. In 1977, PD 1158 codified all existing laws. Sections 142 and 145 of the Tax Code, as amended by Sections 1 and 2 of RA 1435 were re-numbered to Sections 153 and 156. Later, these sections were amended by PD 1672 and subsequently by EO 672 increasing the tax rates for certain oil and fuel products. In effect, the reason for the refund ceased to exist. (The purpose of the tax was for Highway Special Fund which was abolished in 1985). SC affirmed therefore the decision of the CA & CTA that the basis of tax refund under RA 1435 is computed on the basis of the specific tax deemed paid under Sections 1 & 2 and not the increased rates actually paid under the 1977 NIRC, citing several cases in support thereof.
Further, although Philex paid the taxes on their oil and fuel purchases based on the increased rates, the latter law did not specifically provide for a refund based on the increased rates. Since the grant of refund privileges must be strictly construed against the taxpayer, the basis for the refund remains to be the amounts deemed paid under Sections 1 and 2 of RA 1435. Also, there is no merit to petitioner’s assertion – that equity and justice demands that the computation for tax refunds be based on actual amounts paid under Sections 153 and 156 of the NIRC, there being no tax exemption solely on the ground of equity.
SC finally held: “The rule is that no interest on refund of tax can be awarded unless authorized by law of the collection of the tax was attended by arbitrariness. An action is not arbitrary when exercised honestly and upon due consideration where there is room for two opinions, however much of it may be believed that an erroneous conclusion was reached. Arbitrariness presupposes inexcusable or obstinate disregard of legal provisions. None of the exceptions are presents in this case. Respondent’s decision was based on an honest interpretation of the law. We see no reason why there should be payment of interest.”
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