INSULAR LUMBER COMPANY, PETITIONER, VS. COURT OF TAX APPEALS AND COMMISSIONER OF INTERNAL REVENUE, RESPONDENTS.

These two (2) cases are appeals by way of certiorari from
the decision dated July 31, 1969 of the Court of Tax Appeals order­ing the
Commissioner of Internal Revenue to refund to the Insular Lumber Company the
amount of P10,560.20 instead of P19,921.37,
representing 25% of the specific tax paid on manufactured oil and motor fuel
utilized by said company in the operation of its forest concession in the year
1963.

The undisputed facts of these cases are as follows:

Insular Lumber Company (Company for short), a corporation
organized and existing under the laws of New York,
U.S.A., and duly
authorized to do business in the Philippines,
is a licensed forest concessionaire.  The
Company purchased manufactured oil and motor fuel which it used in the
operation of its forest concession, sawmill, planning mills, power units,
vehicles, dry kilns, water pumps, lawn mowers, and in furnishing free water and
light to its employees, on which specific tax was paid.  On December
22, 1964, the Company filed with the Commissioner of Internal
Revenue (Commissioner for short), a claim for refund of P19,921.37
representing 25% of the specific tax paid on the manufactured oil and fuel used
in its opera­tions pursuant to the provisions of Section 5, Republic Act No.
1435.^[1]
In a letter dated February 11, 1965, received by the Company on March 31, 1965,
the Commissioner denied the Company’s claim for refund on the ground that the
privilege of partial tax refund granted by Section 5 of Republic Act No. 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 Act. 
Consequently, oil used in such concessions after June 14, 1961 are
subject to the full tax prescribed in Section 142 of the National Inter­nal
Revenue Code.

Its claim having been denied, the Company filed a petition for
review before the respondent court on April
29, 1965.  After hearing, the
Court of Tax Appeals ruled that the operation of a saw­mill is distinct from
the operation of a forest concession, hence, the refund provision of Section 5
of Republic Act No. 1435 allowing partial refund to forest and mining
concessionaires cannot be extended to the operators of a sawmill.  And out of the P19,921.37
claimed, representing the 25% of specific tax paid, respondent court found out
that only the amount of P14,598.08 was paid on oil utilized in logging
operations.  Respondent court, however,
did not allow the refund of the full amount of P14,598.08
because the Company’s right to claim the refund of a portion thereof,
particularly those paid during the period from January 1, 1963 to April
29, 1963 had already prescribed. 
Hence, the Company was credited the refund of P10,560.20
only.  Both parties appealed from the
decision of the Court of Tax Appeals.

In his appeal, the Commissioner assigns the following errors:

I

“THE COURT OF TAX APPEALS ERRED IN NOT HOLDING THAT THE FIRST
PROVISO IN SECTION 5 OF REPUBLIC ACT NO. 1435 INVOKED BY INSULAR LUMBER COMPANY
AS LEGAL BASIS FOR ITS CLAIM FOR TAX REFUND, IS NULL AND VOID FOR BEING
UNCONSTITUTIONAL.

II

“THE COURT OF TAX APPEALS ERRED IN NOT HOLDING THAT THE
PARTIAL EXEMPTION IN FAVOR OF MINERS AND FOREST
CONCESSION­AIRES UNDER REPUBLIC ACT NO. 1435 IS LIMITED TO ONLY FIVE YEARS
COUNTED FROM JUNE 14, 1956,
THE DATE OF APPROVAL AND EFFECTIVITY OF THE SAID ACT.

III

“THE COURT OF TAX APPEALS ERRED IN NOT HOLDING THAT INSULAR
LUMBER COMPANY USED THE OILS AND FUELS IN QUESTION AFTER THE EXEMPTION IN FAVOR
OF MINERS AND FOREST CONCESSIONAIRES HAD ALREADY LAPSED OR EX­PIRED AND HENCE,
NO LONGER IN FORCE.

IV

“THE COURT OF TAX APPEALS ERRED IN HOLDING THAT INSULAR LUMBER
COMPANY IS ENTITLED TO THE TAX REFUND OF P10,560.20.”

On the other hand, the Company, as appellant, has also assigned
the following errors:

I

“THE RESPONDENT COURT ERRED IN RULING THAT THE PETITIONER IS
NOT ENTITLED TO CLAIM A PARTIAL REFUND OF THE SPECIFIC TAX PAID ON MANUFACTURED
OILS USED IN THE OPERATION OF ITS SAWMILL.

II

“THE RESPONDENT COURT
ERRED IN HOLDING THAT PETITIONER’S CLAIM FOR REFUND OF THE SPECIFIC TAX PAID ON
MANUFACTURED OILS USED DURING THE PERIOD FROM 1 JANUARY 1963 TO 29
APRIL 1963 HAD ALREADY PRESCRIBED.

III

“THE RESPONDENT COURT
ERRED IN ORDERING THE RESPONDENT COMMISSIONER TO REFUND TO THE PETITIONER ONLY
THE SUM OF P10,560.20; INSTEAD, IT SHOULD HAVE ORDERED
THE REFUND OF P19,921.37 AS CLAIMED BY THE PETITIONER.”

Appeal by the Commissioner

In the first assignment of error, the Commissioner contends that
the first proviso in Section 5 of Republic Act No. 1435 is
unconstitutional.  In claiming the
unconstitutionality of the aforesaid section, the Commissioner anchored its
argument on Article VI, Section 21(1) of the 1935 Constitution which provides:

“No bill which may be enacted unto a law shall embrace more
than one subject which shall be expressed in the title of the bill.”

The title of R.A.
No. 1435 is “An Act to Provide Means for Increas­ing The
Highway Special Fund.” The Commissioner contends that the subject of R.A. No. 1435 was to increase Highway
Special Fund.  However, Section 5 of the
Act deals with another subject which is the partial exemption of miners and
loggers.  And this partial exemption on
which the Company based its claim for refund is clearly not expressed in the
title of the aforesaid Act.  More
importantly, Section 5 provides for a decrease rather than an increase of the
Highway Special Fund.

We find no merit in the argument. 
Republic Act No. 1435 deals with only one subject and proclaims just one
policy, namely, the necessity for increasing the Highway Special Fund through
the imposition of an increased specific tax on manufactured oils.  The proviso in Section 5 of the law is in
effect a partial exemption from the imposed increased tax.  Said proviso, which has reference to specific
tax on oil and fuel, is not a deviation from the general subject of the law.  The primary purpose of the aforequoted constitutional provision is to prohibit
duplicity in legislation the title of which might completely fail to apprise
the legislators or the public of the nature, scope and consequences of the law
or its operation.^[2]
This does not seem to this Court to have been ignored in the passage of
Republic Act No. 1435 since, as the records of its proceedings bear out, a full
debate on precisely the issue of whether its title reflects its complete
subject was held by Congress which passed it.^[3]
Furthermore, in deciding the constitutionality of a statute alleged to be
defectively titled, every presumption favors the validity of the Act.  As is true in cases presenting other
constitutional issues, the courts avoid declaring an Act unconstitutional
whenever possible.  Where there is any
doubt as to the insufficiency of either the title, or the Act, the legislation
should be sustained.^[4]
In the incident on hand, this Court does not even have any doubt.

As regards the second and third assignment of errors, the
Commissioner contends that the five-year limitation period for partial refund
of specific tax paid for oil and fuel used in agriculture and aviation provided
in Section 1 of Republic Act No. 1435 is also applicable to Section 5 of said
Act which grants partial refund of specific tax for oil used by miners or
forest concessionaires.  Such being the
case, the Commissioner said that the tax exemption already expired on June 14, 1961.

The pertinent portion of Section 1 of Republic Act No. 1435
provides:

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

“Section 142:  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)  x x x

“(b)  x
x x

“(c)  x
x x

“(d)  x
x x

“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 per centum of the specific tax paid thereon shall be
refunded by the Commissioner of Internal Revenue upon 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 producers belong to any producers’
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.“

Section 5 on the other hand provides:

“Section 5.  x x x 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
Commissioner 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 Na­tional
Internal Revenue Code:  x x x.”

Based on the aforequoted provisions, it is very apparent that the partial
refund of specific tax paid for oils used
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 provision 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 of the period of refund.  If the limitation of the period of refund of
specific taxes paid on oils used in aviation and agriculture is intended to
cover similar taxes paid on oil used 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.

Appeal by the Company

Anent the first
assignment of error, the Company contends that by express provision of its
timber license, it is required to “maintain a modern sawmill or sawmills
of sufficient capacity.” Clearly, the Company said, the operation of the sawmill is not merely incidental to the operation of the
forest concession but is indispensable thereto, or forms part thereof.  Within the framework of the terms and
conditions of the timber license, the cutting of tim­ber and the processing of
the felled logs by the sawmill constitute one,
continuous and integrated operation such that one cannot exists independently
of the other.  The Company also
relies on Section 5 of Republic Act No. 1435 wherein it is provided that
“whenever any oils x x x
are used by miners or forest concessionaires in their operations, they
shall be entitled to claim a refund of 25% of the specific tax paid on said
oils.” The Company believes that the word operations include all
activities of forest concessionaires which are indispensable to, or required
in, the exploitation of their forest concessions and not limited to purely
logging operations.

We agree with respondent court that the operation of sawmill is
distinct from the operation of a forest concession.  By the very nature of their operations, they
are entirely two different business ventures. 
It is very clear from the language of Section 5 that only miners or
forest concessionaries are given the privilege to claim the partial
refund.  Sawmill operators are excluded,
because they need not be forest concessionaires, nor the latter, always are
sawmill operators.

Where the provision of the law is clear and unambiguous, so that
there is no occasion for the court’s seeking legislative intent, the law must
be taken as it is, devoid of judicial addition or subtraction.^[5]
Furthermore, the authorized partial refund under said section partakes of a
nature of a tax exemption and therefore it cannot be allowed unless granted in
the most explicit and categorical language. 
Well-settled is the rule that exemption from taxation is never presumed.  For tax exemption to be recognized,
the grant must be clear and expressed; it cannot be made to rest on vague
implications.^[6]

As regards prescriptive period in claiming refund, it was ruled
by respondent court that the Company’s cause of action for a partial refund of
the specific tax paid on the oils used during the period from January 1, 1963 to April 29, 1963, had already pres­cribed.  In making such pronouncement, respondent
court relied on the doctrine laid down by this Court in the case of
Commissioner of Internal Revenue vs. Insular Lumber Company^[7]
where the same Company herein invoked the same Section 5 of Republic Act No.
1435 to claim partial refund on specific tax paid on manufactured oils and
fuels.  This court, in dismissing the
Company’s claim for refund on the ground of prescription, said that in those cases where the tax sought to be
refunded was illegally or erroneously collected, the running of the two year
prescriptive period provided for in Section 306^[8]
of the National Internal Revenue Code starts from the date the tax was paid.  But when the tax is legally collected, as in
the present case, the two-year prescriptive period commences to run from the
date of occurrence of the supervening cause which gave rise to the right of
refund.  The supervening cause in cases
of this nature is the date of use of manufactured oils and fuels.  Thus, the Court said that when the
supervening cause happened in 1958 but the claim for refund was filed with the
Commissioner on February 23, 1961 and the petition for review was filed in the
Court of Tax Appeals on February 17, 1962, both later dates being more than two
years after 1958, the right to claim refund of the tax paid has prescribed.

We agree with the respondent court.  This Court has consistently adhered to the
rule that the claim for refund should first be filed with the Commissioner of
Internal Revenue, and the subsequent appeal to the Court of Tax Appeals must be
instituted, within the said two-year period. 
If, however, the Commissioner takes time in deciding the claim, and the
period of two years is about to end, the suit or proceeding must be started in
the Court of Tax Appeals before the end of the two-year period without awaiting
the decision of the Com­missioner.^[9]
In the present case, it will be noted that although the claim for refund was
filed with the Commissioner on December
22, 1964, the petition for review was filed by the Company only on April 29, 1965 praying for the refund
of specific tax covering several periods starting from January 1, 1963. 
As found by respondent court, portions of the amount claimed by the
Company were used during the period from January
1, 1963 to April 29, 1963.  This Court is bound by said findings, the
same being findings of fact.^[10]
Following, therefore, the ruling in Commissioner of Internal Revenue vs.
Insular Lumber Company, supra, We hold that the Company is not entitled
to the claim for refund for the oils used from January 1, 1963 to April 29, 1963, on the ground that the right
to claim refund of the tax in question paid during the said periods has
prescribed, the petition for review having been filed with the respondent court
only on April 29, 1965, which
was beyond the two-year prescriptive period provided for in Section 306 of the
Tax Code.

WHEREFORE, judgment is hereby rendered affirming
the decision of the Court of Tax Appeals. 
No costs.

SO ORDERED.

Fernando, C.J., Teehankee,
Barredo, Makasiar, Aquino, Concepcion, Jr.,
Fernandez, Guerrero, Abad Santos, and Melencio-Herrera,
JJ.,
concur.

^[1]
Section 5.  The
proceeds of the additional tax on manufactured oils shall accrue to the road
and bridge funds of the political subdivision for whose benefits 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 Article of 1953.

^[2]
Del Rosario vs. Commission on Elections, 35 SCRA 367; Alalayan vs.
National Power Corporation, 24 SCRA 172; Lidasan vs. Commission on Elections, 21 SCRA 496.

^[3]
See Congressional Record, House of Representatives, Vol. III, No. 67, p. 2098.

^[4]
Sutherland, Statutory Construction, Vol. I, p. 295

^[5]
Acting Commissioner of Customs vs. Manila Electric
Company, 77 SCRA 473.

^[6]
Davao Light and Power Co., Inc. vs.
Commissioner of Customs, 44 SCRA 129, citing Resins,
Inc. vs. Auditor General, 25 SCRA 754,
Asturias Sugar Central Inc. vs. Commissioner of Customs, 29 SCRA 617, Commissioner of Internal Revenue vs. Visayan Electric Co., 23 SCRA
715, Commissioner of Internal Revenue vs. Guerrero, 21 SCRA 180, Esso Standard Eastern
Inc. vs. Acting Commissioner of Customs, 18 SCRA
488, Borja vs. Collector of Internal Revenue,
3 SCRA 590.

^[7]
21 SCRA 1235.

^[8]
“Sec. 306. 
Recovery of tax erroneously or illegally collected.  – No suit or proceeding shall be maintained
in any court for the recovery of any national internal revenue tax hereafter alleged
to have been erroneously or illegally assessed or collected or of any penalty
claimed to have been collected without authority, or of any sum alleged to have
been excessive or in any manner wrongfully collected, until a claim for refund
or credit has been duly filed with the Commissioner of Internal Revenue; but
such suit or proceeding may be maintained, whether or not such tax, penalty, or
sum has been paid under protest or duress. 
In any case, no such suit or proceeding shall be begun after the
expiration of two years from the date of payment of the tax or penalty.”

^[9]
Commissioner of Internal Revenue vs. Victorias
Milling Company, Inc., 22 SCRA 12; Collector vs. Court of Tax Appeals, 1 SCRA 87; Gibbs
vs. Collector, 107 Phil. 232; College of Oral and Dental Surgery vs.
Court of Tax Appeals, 102 Phil. 912; P.J. Kenner
& Co., Ltd. vs. Court of Tax Appeals, 92 Phil. 945.

^[10]
Acting Commissioner of Customs vs. Manila Electric Co., supra;
Chui Hoi Horn vs. Court of Tax Appeals,
25 SCRA 809; Alhambra Cigar & Cigarette Mfg. Co. vs.
Commissioner of Internal Revenue, 21 SCRA 1111; Balbas vs. Domingo, 21 SCRA
444.