PHILAM MINING, INC., PETITIONER-APPELLANT, VS. COURT OF TAX APPEALS, ET AL., RESPONDENT-APPELLEE.

A petition by Philam Mining Co. —
hereinafter referred to simply as petitioner — for review of the decision
rendered by the Court of Tax Appeals, dated May 29, 1964, in the consolidated
cases docketed before the said court as CTA Cases Nos. 937, 1138 and 1160,
affirming the decision of the Commissioner of Internal Revenue which denied
petitioner’s claims for refund or sales
taxes paid by it to said Commissioner. 
The dispositive portion of the decision of the
Court of Tax Appeals reads as follows:

“WHEREFORE, the appeal in C.T.A. No. 937 is hereby dismissed
for lack of jurisdiction, and the decisions of respondent appealed from in C.
T. A. Nos. 1138 and 1160 are hereby affirmed, with costs against
petitioner.”

Petitioner is the
concessionaire/lessee and operator of the rock quarry owned by the Talim Quarry Co., Inc. situated at Barrio Ticolio, Cardona, Rizal, covered
by Transfer Certificate of Title No. 18480 issued by the Register
of Deeds of the province of Rizal.  From October, 1958 to sometime in 1961
petitioner, as lessee/concessionaire or the above-mentioned
quarry, was engaged in the production and sale of crushed
rock which was extracted from the quarry by light blasting and barring down
with steel bars.  The broken rocks
produced or extracted by this process or method of operation were further
broken into smaller pieces by manual labor for feeding into crushers to be
washed, ground and sized to specifications. 
These crushed stones, which are used for building and construction purposes,
were then sold directly by petitioner to its numerous customers.

On the sales of the
crushed stones by petitioner, during the period from January to November
20, 1959, the
Commissioner of Internal Revenue assessed and collected from petitioner the sum
of P17,067.10, as sales tax, representing seven (7%) percent of the gross value
of such sales.  In a letter, dated
December 8, 1959, petitioner filed with the Commissioner a claim for refund of
the aforementioned sum of P17,067.10, claiming that under the provisions of
paragraph (c) of Section 188 of the National Internal Revenue Code no sales tax
is imposed on the sales of mineral and mineral products, whether in
their original state or not, when sold, bartered or exchanged by the lessee,
concessionaire, or owner of the mineral land from which the same were
removed.  The Commissioner of Internal
Revenue, however, in a letter dated January 7, 1960, denied petitioner’s claim
for refund, stating that “crushed stone is nothing more than gravel”
and that, therefore, producers of crushed stones, like producers of gravel and
sand, “are subject to the fixed and percentage taxes imposed under Section
182 (A)-(1), and Section 186 of the Tax Code, as amended.  Petitioner received notice of this
denial on February 10, 1960.  On March
16, 1970 petitioner sought a reconsideration of the Commissioner’s
decision denying the refund.  On August 27, 1960, petitioner received
a letter from the Commissioner, dated July
7, 1960, denying the request for
reconsideration, upon the ground that the crushed stones produced and sold by
petitioner are not minerals within the purview of Section 188 (c) of the
National Internal Revenue Code.  On August 29, 1960, petitioner filed
with the Court of Tax Appeals an appeal from the ruling of the Commissioner or
Internal Revenue.  Said appeal was
docketed as CTA Case No. 937.

Likewise, on petitioner’s sales of crushed stones extracted from
the same quarry for the period from July 21, 1959 to June 20, 1960 the
Commissioner of Internal Revenue collected from petitioner the sum of
P7,805.13, also as sales tax, representing seven (7) percent tax on the gross
value of the sales.  A claim for refund was also filed by
petitioner wits respondent Commissioner for the said amount of P7,806.13, based
on the same grounds availed of in tine for refund or the previous amount of
P17,067.10. The claim for refund was denied by the Commissioner of Internal
Revenue, also for the reason that the crushed stones sold by the petitioner are
not minerals.  On October 17, 1961, petitioner filed with the
Court of Tax Appeals an appeal from the ruling of the Commissioner or Internal
Revenue.  The said appeal was docketed as
CTA Case No. 1138.

Meanwhile, petitioner continued selling its crushed stones to its
customers, and on such sales for
the period from July 20, 1960
to July 21, 1961, the
Commissioner of Internal Revenue again collected from petitioner the sum of
P19,250.72, as sales tax on the gross value of the sales.  On July
26, 1961, petitioner filed with respondent Commissioner a claim for
the refund of the aforementioned sum of P19,250.72, invoking once again the
provisions of the National Internal Revenue Code relied upon by it in its previous
claims for refund.  As in the two
previous cases, the Commissioner of Internal Revenue denied petitioner’s claim
for refund of the last named
amount, stating, in his letter of denial, dated October 18, 1961, that
“the crushed stones you (petitioner) mine are not minerals and hence
subject to the sales tax.” Again petitioner appealed to the Court of Tax
Appeals from the denial by the Commissioner of Internal Revenue of its third
claim for refund.  Said appeal, filed on January 9, 1962, was docketed as CTA
Case No. 1160.

By agreement of the parties, the three cases, CTA Nos. 937, 1138
and 1160, were jointly heard by the Court of Tax Appeals on February 27, 1963.

After the joint hearing, under date of May 29, 1964, the Court of
Tax Appeals rendered a decision, dismissing CTA Case No. 937 upon the ground of
lack of jurisdiction because the petition for review was filed out of time, and
affirming the decisions of respondent Commissioner of Internal Revenue in CTA Cases Nos. 1138 and 1160, with costs
against petitioner.

1.  The first error assigned
by petitioner, as having been committed by the Court of Tax Appeals, is that of
having dismissed CTA Case No. 937 upon the ground of lack of jurisdiction.  We find that the Court of Tax Appeals had
correctly found that the petitioner had filed its motion for reconsideration of
the denial by the Commissioner of Internal Revenue of its petition for refund
more than 30 days after receipt of said denial — or at a time when the decision
of the Commissioner was already final. 
When the appeal from the decision of the Commissioner of Internal
Revenue was filed with the Court of Tax Appeals the decision of the
Commissioner was already final, too.  The
appeal was not filed in accordance with the provisions of Section 11 of
Republic Act 1125, so that the Court of Tax Appeals did not acquire
jurisdiction to entertain the appeal in CTA Case No. 937.

2.  However, the principal
issue in the present appeal — which involves the three cases, including CTA
Case No. 937 — is whether or not the crushed rocks sold by petitioner are
considered minerals or mineral products for the purposes of the imposition of
the sales tax.  If resolved in the
affirmative, then the crushed rock sold by petitioner is exempt from payment of
sales tax under Section 188(c) of the National Internal Revenue Code, and
petitioner is entitled to the refund of the sales tax that it paid, minus
whatever mining taxes may be due; but if resolved in the negative, the sales of
the crushed rocks are subject to sales tax under Section 186 of the National Internal
Revenue Code and, therefore, the decision of the Court of Tax Appeals should be
affirmed.

The Mining Law (Commonwealth Act 137), gives the definition of
“minerals”, as follows:

“With the exception of the soil which supports organic life
and of ordinary earth, gravel, sand, and stone which are used for building
or construction purposes, the disposition of which is governed by Act
Numbered Three thousand seventy-seven, as amended by Act Numbered Three
thousand eight hundred and fifty-two ‘of the Philippine Legislature, all
inorganic substances found in nature in solid, liquid, gaseous, or any
intermediate state are minerals within the purview of this Act.” (underscoring supplied).

The evidence shows that the crushed rocks sold by petitioner were
“used for road foundation and cement aggregates”.^[1]
It is clear therefore, that the crushed rocks in questions fall within the category of “stone…used for
building and construction purposes”, referred to in Section 7 of the
Mining Law.

We quote with approval the decisive portion of the decision of the Court of Tax
Appeals, penned by Associate Judge Roman M. Umali,
and concurred in by Presiding Judge Mariano Nable and
Associate Judge Augusto M. Luciano,
as follows:

“Section 188(c)
of the Revenue Code exempts from the sales tax sales of minerals
and mineral products if made by the lessee, concessionaire or owner or the
mineral land from which removed.  The
word ‘mineral’ means all inorganic substances found in nature whether in solid,
liquid, gaseous, or any intermediate state. 
The term ‘mineral products’ means things produced by the lessee, concessionaire
or owner of mineral lands, at least eighty per cent of which things must be
minerals extracted by such lessee, concessionaire, or owner of mineral
lands.  (Sec. 246, Rev. Code). Section 7
of the Mining Act defines ‘minerals’ as including ‘all inorganic substances
found in nature in solid, liquid, gaseous or any intermediate state’, but
does not include ‘soil which supports organic life,… gravel, sand and
stone which are used for  building or
construction purposes.’

“From the foregoing definitions of ‘minerals’ and ‘mineral
products’ it appears clear that crushed rocks for use in building and
construction purposes, such as those produced and sold by petitioner, are not
‘minerals’ or ‘mineral products’ within the meaning of Section 188(c) of the
Revenue Code, because they are not minerals or mineral products under the
Mining Act and are not subject to the mining tax.  The records show that the quarry from which
the rocks were obtained by petitioner was not registered with the Mining
Recorder as a mining claim and no mining tax was paid on such rocks.

“The minerals and mineral products which are exempt from the
sales tax under Section 188(c) of the Revenue Code are those which are obtained
from mineral lands and are subject to the mining tax provided in Title VII of
the Revenue Code.  The reason for the
exemption is that the mining taxes ‘appear to be adequate as means of taxing
the mining industry.’

‘Under this section, it is proposed further to exempt from the
sales tax, sales and consignments of minerals and mineral products by the lessee,
concessionaire, or owner of the mineral lands from which removed, because the
rate proposed under special mining taxation appear to be adequate as a means of taxing the mining industry.  Minerals and mineral products extracted from
mineral lands covered by lease are subject under another section to a royalty
of 1-1/2% of the actual market value of the gross output thereof, and those extracted
from mineral lands not covered by lease are subject to an ad valorem tax of 1-1/2% of the actual market value or the
annual gross output of the minerals or mineral products extracted or produced
from the mineral lands. x x x.  In addition to the royalty above stated, the
lessee of the mineral lands pays a rental of P1 per hectare or fraction of a
hectare of the mineral lands leased.  It
seems fair and just, therefore, that sales and consignments of minerals and
mineral products by the lessee, concessionaire, or owner of mineral lands
should be exempt from the sales tax. 
(Vol. II, Report of the Tax Commission of the Phil. on National Internal
Revenue Taxes, Feb. 1939, pp. 202-203.)’

“The crushed rocks produced and sold by petitioner during the
period under review not being minerals or mineral products which are subject to
the mining tax, the sales thereof are not exempt from the sales tax under
Section 188(c) of the Revenue Code. 
Accordingly, we find it unnecessary to pass upon the other issues raised
by respondent.”

WHEREFORE, the decision appealed from is affirmed, with
costs against petitioner-appellant Philam Mining,
Inc.

IT IS SO ORDERED.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Castro, Fernando,
Teehankee, Barredo, Villamor, and Makasiar, JJ., concur.

^[1]
Exhibit “H”, p. 28, BIR Record – CTA 937, 1138 and 1160.