PACIFIC OXYGEN & ACETYLENE CO., PETITIONER AND APPELLANT, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT AND APPELLEE.

Appellant is a domestic
corporation engaged in the manufacture and sale of acetylene and oxygen. In the
process of manufacture it uses calcium carbide purchased from the Maria Cristina
Chemical Industries of the Philippines, a concern engaged in an industry that is
tax-exempt under Republic Act No. 901 (which grants such exemption to new and
necessary industries). In computing the percentage taxes on its sales of
acetylene for the year 1954, 1955 and 1956, appellant deducted the price of the
calcium carbide from the gross selling price of said product, but the deduction
was not allowed by the Commissioner of Internal Revenue. As a result an
assessment for deficiency taxes was made in the sum of P5,855.97. Protesting the disallowance, appellant sought a
review of the assessment in the Court of Tax Appeals, which sustained the
Commissioner’s ruling and also granted the latter’s counterclaim for an amount
erroneously credited in favor of appellant. The case is now before us on appeal
from the Tax Court’s decision.

The assessment made by the
Commissioner is based on Section 186 of the Internal Revenue Code, which fixes
the tax at seven (7%) per cent “of the gross selling price or gross value in
money of the articles sold * * *, such tax to be paid by the manufacturer or
producer.” Appellant, on the other hand, relies on the following proviso in the
same section, to wit:

“That where the articles subject
to tax under this section are manufactured out of materials likewise subject to
tax under this section and section one hundred and eighty-nine the total cost of
such materials, as duly established, shall be deductible from the gross selling
price or cross value in money of such manufactured
articles.”

Appellant’s contention is that it
bought the calcium carbide not from the tax-exempt Maria Cristina Chemical
Industries of the Philippines but from the National Carbon Philippines, Inc.,
which, it is averred, may be presumed to have paid the corresponding percentage
taxes in view of the usual business practice of adding the amount thereof to the
sales price of every article sold. Appellant points to the sales invoices
(Exhibits A-l to A-45) covering the purchases of calcium carbide made by it,
wherein the National Carbon Philippines, Inc. appears to be the seller. However,
this is contradicted by the statement in the stipulation of facts entered into
by the parties, to the effect that “the calcium carbide used by the petitioner
in the manufacture of acetylene and oxygen was purchase from a tax-exempt
industry, the Maria Cristina Chemical Industries of the
Philippines thru
the National Carbon Philippines, Inc.” In merely as an agent
of the real seller and in that capacity issued its own receipts to cover the
purchases.

The proviso in Section 186 relied
upon by appellant is intended to prevent a second assessment of the percentage
tax on materials that go into the production of a manufactured article. Since
the calcium carbide used by appellant had not been previously taxed because of
the exemption admittedly granted by Republic Act No. 901 to the Maria Cristina
Chemical Industries of the Philippines, the cost thereof cannot be allowed as a
deduction (Tan Chiu vs. The Collector of Internal Revenue, L-15008, January 28,
1961). And in the absence of evidence as in this case there is none that in the
sales invoices issued by the National Carbon Philippines, Inc. the percentage
taxes were included as part of the purchase prices paid by appellant, we cannot
make an affirmative finding on the point. No reliance can be placed on a mere
presumption that a “usual business practice” has been followed, the inclusion of
such taxes as part of the prices paid by appellant being, if true, easily
capable of positive proof.

Appellant next seeks refuge in
Section 186-A of the Tax Code, which provides that “whenever a tax-free product
is utilized in the manufacture or production of any article, in the
determination of the value of such finished article, the value of such tax-free
product shall be deducted.” This provision does not apply to the taxes subject
of this ca»e, because Republic Act No. 2025, which inserted Section 186-A in the
Tax Code (and amended some other 8ections thereof), expressly states that it
would take effect upon its approval, and it was approved only on June 22, l957,
or after the period for which the deficiency taxes were assessed. There is
nothing in that statute to indicate that it was meant to have retrospective
effect. Like other statutes, tax laws operate prospectively, whether they enact,
or repeal, unless the purpose of the legislature to give retrospective effect is
expressly declared or may be implied from the language used (Lorenzo vs. Posadas, G4 Phil. 353; Commissioner of
Internal Revenue, vs.
Filipinas Compaña de Seguros
58 Off. Gaz. No. 3, p. 460).

With respect to appellee’s counterclaim, the Court of Tax Appeals, found
that an investigating agent of the Bureau of Internal Revenue had mistakenly
credited appellant with P364.02 as alleged overpayment of percentage taxes for
the year 1955 and 1956. The counterclaim for this amount was properly granted by
the Tax Court on the ground that appellant had not filed a written claim in
order that the same might be credited to it. According to Section 309 of the Tax
Code, before the Commissioner of Internal Revenue can exercise his authority to
credit or refund taxes erroneously or illegally reviewed, a written claim therefor must be died with him by the taxpayer within two
years after payment (Section 309 Tax Code). An investigating agent has no such
authority in the first place, much less where no written claim for credit has
been filed; and his error in crediting appellant with the amount in question
does not place the Government in estoppel (Pineda vs.
Court of First Instance of Tayabas, 52 Phil. 803;
Canlubang Sugar Estate vs. Standard Alcohol Co. (Phil.), Inc.,
L-10387, April 16, 1958; Philippine American Drug Co. vs. Collector of Internal Revenue and
Court of Tax Appeals, 106 Phil. 161] nor preclude it from correcting the mistake
upon discovery thereof (Genato Commercial Corporation
vs. Court of Tax Appeals, 104
Phil. 615).

The decision appealed from is
affirmed, with costs against appellant.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, Bengzon,
J.P. and Zaldivar, JJ.,
concur.