COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. VICTORIAS MILLING CO., INC., AND THE COURT OF TAX APPEALS, RESPONDENTS.

Specific tax on manufactured oils and other fuels used in
agriculture during the five years from June
18, 1952 shall be refunded by the Commissioner of Internal Revenue
to the extent of 50%.^[1]

Accordingly, on December
23, 1957 Victorias Milling Co., Inc., filed
a claim for the refund of the sum of P12,464.53 representing 50% of the
specific tax paid on the manufactured oils and fuels used in its agricultural
operation for the period from June 18,
1952 to June 18, 1957.  The Commissioner of Internal Revenue granted
refund in the sum of P3,415.18 representing the tax paid for the period from
January 1, 1956 to June 18, 1957 but denied the claim in the amount of
P2,817.08 which corresponds to the tax paid during the period from June 18,
1952 to December 31, 1955 for the reason that the same was filed after the two-year
period provided for in Section 306 of the Tax Code had elapsed.

Subsequently, Victorias Milling Co.,
Inc. appealed to the Court of Tax Appeals contending that the aforesaid Section
306 does not apply to its claim in the light of Our ruling in Muller &
Phipps (Manila) Ltd. v. Collector of Internal Revenue, 103 Phil. 145.  The Court of Tax Appeals took the taxpayer’s
view and rendered the following judgment on January 4, 1965:

“WHEREFORE, in view of the foregoing considerations, the
respondent is hereby ordered to refund to the petitioner the amount of
P2,817.08 representing the 50% of the specific tax paid on the oils used by it
in agriculture during the period from June
18, 1952 to December 31,
1955.”

From said judgment, the Commissioner of
Internal Revenue has appealed, maintaining that Section 306 of the Tax Code
applies to the instant claim for refund. 
On the other hand, Victorias Milling Co., Inc.
insists that since the tax sought to be refunded was not originally collected
erroneously or illegally, Section 306 of the Tax Code which states ?

“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 Collector 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.”

finds no application.

This legal controversy has already been settled in the case of
Commissioner of Internal Revenue v. Insular Lumber Company and Court of Tax
Appeals, L-24221, December 11, 1967,
the facts of which are similar to those in the present case.  We there stated that:

“Sections 306 and 309 of the National Internal Revenue Code
were intended to govern all kinds of refunds of internal revenue tax­es – those
taxes imposed and collected pursuant to the National Internal Revenue
Code.  Thus, this Court stated that ‘this
provision’ referring to Section 306, ‘which is mandatory, is not subject to
qualification, and, hence, it applies regardless of the conditions under
which payment has been made.’ And to hold that the instant claim for refund
of a specific tax, an internal revenue tax imposed in Section 142 of the
National Internal Revenue Code, is beyond the scope of Sections 306 and 309 is
to thwart the aforesaid intention and spirit underlying said provisions.

x        x          x          x          x

“x x x the
intention is clear that refunds of internal revenue taxes are generally
governed by Sections 306 and 309 of the Tax Code.  Since in those cases the tax sought to be refunded
was collected legally, the running of the two-year prescriptive period provided
for in Section 306 should commence, not from the date the tax was paid, but
from the happening of the supervening cause which entitled the taxpayer to a
tax refund.  And the claim for refund
should 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.

x        x          x          x          x

“In fine, when the tax sought to be refunded is illegally or
erroneously collected, the period of prescription starts from the date the tax
was paid; but when the tax is legally collected, the prescriptive period
commences to run from the date of occurrence of the supervening cause which
gave rise to the right of refund.  The
ruling in Muller & Phipps is accordingly modified.”

It is not disputed that the oils and fuels involved in this case
were used during the period from June
18, 1952 to December 31,
1955; that the claim for refund was filed on December 23, 1957; and that the appeal to the
Court of Tax Appeals was instituted only on February 14, 1962. 
The taxpayer’s claim for refund with the Bureau of Internal Revenue of December 23, 1957 is within two
years from December 1955 – the last month of the period during which the fuels
and oils were used.  The appeal to the
Court of Tax Appeals however, was instituted six years and two months from December 31, 1955.  We have repeatedly held that the claim for
refund with the Bureau of Internal Revenue and the subsequent appeal to the
Court of Tax Appeals must be filed within the two-year period.  “If, however, the Collector 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 Collector.”^[2]
In the light of the above quoted ruling, We find that the right of Victorias Milling Co., Inc. to claim refund of P2,817.08
has prescribed.

WHEREFORE, the decision appealed from is reversed, and the
petition for refund is dismissed on the ground of pres­cription.  No costs.

SO ORDERED.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Ruiz Castro, Angeles, and Fernando, JJ., concur.

^[1] Sec.
142, as amended by Republic Act 775 which took effect on June 18, 1952, of the
National Internal Revenue Code.

^[2] Gibbs
v. Collector, L-13453, Feb. 29, 1960,
citing College of Oral and Dental Surgery v.
Court of Tax Appeals, 102 Phil. 912; Collector v. Court of Tax Appeals, L-11494, Jan. 28, 1961.