Unformatted text preview: G.R. No. L-29059 December 15, 1987
CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS,
By virtue of a decision of the Court of Tax Appeals rendered on June 21, 1961, as
modified on appeal by the Supreme Court on February 27, 1965, the Commissioner
of Internal Revenue was ordered to refund to the Cebu Portland Cement Company
the amount of P 359,408.98, representing overpayments of ad valorem taxes on
cement produced and sold by it after October 1957. 1
On March 28, 1968, following denial of motions for reconsideration filed by both the
petitioner and the private respondent, the latter moved for a writ of execution to
enforce the said judgment . 2
The motion was opposed by the petitioner on the ground that the private respondent
had an outstanding sales tax liability to which the judgment debt had already been
credited. In fact, it was stressed, there was still a balance owing on the sales taxes
in the amount of P 4,789,279.85 plus 28% surcharge. 3
On April 22, 1968, the Court of Tax Appeals * granted the motion, holding that the
alleged sales tax liability of the private respondent was still being questioned and
therefore could not be set-off against the refund. 4
In his petition to review the said resolution, the Commissioner of Internal Revenue
claims that the refund should be charged against the tax deficiency of the private
respondent on the sales of cement under Section 186 of the Tax Code. His position
is that cement is a manufactured and not a mineral product and therefore not
exempt from sales taxes. He adds that enforcement of the said tax deficiency was
properly effected through his power of distraint of personal property under Sections
316 and 318 5 of the said Code and, moreover, the collection of any national internal
revenue tax may not be enjoined under Section 305, 6 subject only to the exception
prescribed in Rep. Act No. 1125. 7 This is not applicable to the instant case. The
petitioner also denies that the sales tax assessments have already prescribed
because the prescriptive period should be counted from the filing of the sales tax
returns, which had not yet been done by the private respondent.
For its part, the private respondent disclaims liability for the sales taxes, on the
ground that cement is not a manufactured product but a mineral product. 8 As such,
it was exempted from sales taxes under Section 188 of the Tax Code after the
effectivity of Rep. Act No. 1299 on June 16, 1955, in accordance with Cebu Portland
Cement Co. v. Collector of Internal Revenue, 9 decided in 1968. Here Justice
Eugenio Angeles declared that "before the effectivity of Rep. Act No. 1299,
amending Section 246 of the National Internal Revenue Code, cement was taxable
as a manufactured product under Section 186, in connection with Section 194(4) of
the said Code," thereby implying that it was not considered a manufactured product
afterwards. Also, the alleged sales tax deficiency could not as yet be enforced
against it because the tax assessment was not yet final, the same being still under
protest and still to be definitely resolved on the merits. Besides, the assessment had
already prescribed, not having been made within the reglementary five-year period
from the filing of the tax returns. 10
Page 1 of 709 Our ruling is that the sales tax was properly imposed upon the private respondent for
the reason that cement has always been considered a manufactured product and
not a mineral product. This matter was extensively discussed and categorically
resolved in Commissioner of Internal Revenue v. Republic Cement Corporation, 11
decided on August 10, 1983, where Justice Efren L. Plana, after an exhaustive
review of the pertinent cases, declared for a unanimous Court:
From all the foregoing cases, it is clear that cement qua cement was
never considered as a mineral product within the meaning of Section
246 of the Tax Code, notwithstanding that at least 80% of its
components are minerals, for the simple reason that cement is the
product of a manufacturing process and is no longer the mineral
product contemplated in the Tax Code (i.e.; minerals subjected to
simple treatments) for the purpose of imposing the ad valorem tax.
What has apparently encouraged the herein respondents to maintain
their present posture is the case of Cebu Portland Cement Co. v.
Collector of Internal Revenue, L-20563, Oct. 29, 1968 (28 SCRA 789)
penned by Justice Eugenio Angeles. For some portions of that decision
give the impression that Republic Act No. 1299, which amended
Section 246, reclassified cement as a mineral product that was not
subject to sales tax. ...
xxx xxx xxx
After a careful study of the foregoing, we conclude that reliance on the
decision penned by Justice Angeles is misplaced. The said decision is
no authority for the proposition that after the enactment of Republic Act
No. 1299 in 1955 (defining mineral product as things with at least 80%
mineral content), cement became a 'mineral product," as distinguished
from a "manufactured product," and therefore ceased to be subject to
sales tax. It was not necessary for the Court to so rule. It was enough
for the Court to say in effect that even assuming Republic Act No. 1299
had reclassified cement was a mineral product, the reclassification
could not be given retrospective application (so as to justify the refund
of sales taxes paid before Republic Act 1299 was adopted) because
laws operate prospectively only, unless the legislative intent to the
contrary is manifest, which was not so in the case of Republic Act
1266. [The situation would have been different if the Court instead had
ruled in favor of refund, in which case it would have been absolutely
necessary (1) to make an unconditional ruling that Republic Act 1299
re-classified cement as a mineral product (not subject to sales tax),
and (2) to declare the law retroactive, as a basis for granting refund of
sales tax paid before Republic Act 1299.]
In any event, we overrule the CEPOC decision of October 29, 1968
(G.R. No. L-20563) insofar as its pronouncements or any implication
therefrom conflict with the instant decision.
The above views were reiterated in the resolution 12 denying reconsideration of the
said decision, thus:
The nature of cement as a "manufactured product" (rather than a
"mineral product") is well-settled. The issue has repeatedly presented
itself as a threshold question for determining the basis for computing
the ad valorem mining tax to be paid by cement Companies. No
Page 2 of 709 pronouncement was made in these cases that as a "manufactured
product" cement is subject to sales tax because this was not at issue.
The decision sought to be reconsidered here referred to the legislative
history of Republic Act No. 1299 which introduced a definition of the
terms "mineral" and "mineral products" in Sec. 246 of the Tax Code.
Given the legislative intent, the holding in the CEPOC case (G.R. No.
L-20563) that cement was subject to sales tax prior to the effectivity f
Republic Act No. 1299 cannot be construed to mean that, after the law
took effect, cement ceased to be so subject to the tax. To erase any
and all misconceptions that may have been spawned by reliance on
the case of Cebu Portland Cement Co. v. Collector of Internal
Revenue, L-20563, October 29, 1968 (28 SCRA 789) penned by
Justice Eugenio Angeles, the Court has expressly overruled it insofar
as it may conflict with the decision of August 10, 1983, now subject of
these motions for reconsideration.
On the question of prescription, the private respondent claims that the five-year
reglementary period for the assessment of its tax liability started from the time it filed
its gross sales returns on June 30, 1962. Hence, the assessment for sales taxes
made on January 16, 1968 and March 4, 1968, were already out of time. We
disagree. This contention must fail for what CEPOC filed was not the sales returns
required in Section 183(n) but the ad valorem tax returns required under Section 245
of the Tax Code. As Justice Irene R. Cortes emphasized in the aforestated
In order to avail itself of the benefits of the five-year prescription period
under Section 331 of the Tax Code, the taxpayer should have filed the
required return for the tax involved, that is, a sales tax return. (Butuan
Sawmill, Inc. v. CTA, et al., G.R. No. L-21516, April 29, 1966, 16 SCRA
277). Thus CEPOC should have filed sales tax returns of its gross
sales for the subject periods. Both parties admit that returns were
made for the ad valorem mining tax. CEPOC argues that said returns
contain the information necessary for the assessment of the sales tax.
The Commissioner does not consider such returns as compliance with
the requirement for the filing of tax returns so as to start the running of
the five-year prescriptive period.
We agree with the Commissioner. It has been held in Butuan Sawmill
Inc. v. CTA, supra, that the filing of an income tax return cannot be
considered as substantial compliance with the requirement of filing
sales tax returns, in the same way that an income tax return cannot be
considered as a return for compensating tax for the purpose of
computing the period of prescription under Sec. 331. (Citing Bisaya
Land Transportation Co., Inc. v. Collector of Internal Revenue, G.R.
Nos. L-12100 and L-11812, May 29, 1959). There being no sales tax
returns filed by CEPOC, the statute of stations in Sec. 331 did not
begin to run against the government. The assessment made by the
Commissioner in 1968 on CEPOC's cement sales during the period
from July 1, 1959 to December 31, 1960 is not barred by the five-year
prescriptive period. Absent a return or when the return is false or
fraudulent, the applicable period is ten (10) days from the discovery of
the fraud, falsity or omission. The question in this case is: When was
CEPOC's omission to file tha return deemed discovered by the
government, so as to start the running of said period? 13 Page 3 of 709 The argument that the assessment cannot as yet be enforced because it is still
being contested loses sight of the urgency of the need to collect taxes as "the
lifeblood of the government." If the payment of taxes could be postponed by simply
questioning their validity, the machinery of the state would grind to a halt and all
government functions would be paralyzed. That is the reason why, save for the
exception already noted, the Tax Code provides:
Sec. 291. Injunction not available to restrain collection of tax. — No
court shall have authority to grant an injunction to restrain the
collection of any national internal revenue tax, fee or charge imposed
by this Code.
It goes without saying that this injunction is available not only when the assessment
is already being questioned in a court of justice but more so if, as in the instant case,
the challenge to the assessment is still-and only-on the administrative level. There is
all the more reason to apply the rule here because it appears that even after
crediting of the refund against the tax deficiency, a balance of more than P 4 million
is still due from the private respondent.
To require the petitioner to actually refund to the private respondent the amount of
the judgment debt, which he will later have the right to distrain for payment of its
sales tax liability is in our view an Idle ritual. We hold that the respondent Court of
Tax Appeals erred in ordering such a charade.
WHEREFORE, the petition is GRANTED. The resolution dated April 22, 1968, in
CTA Case No. 786 is SET ASIDE, without any pronouncement as to costs.
Teehankee, C.J., Narvasa, Paras and Gancayco, JJ., concur. Footnotes
1 Rollo, pp. 34-37.
2 Ibid, p. 67.
3 Id, pp. 69-70.
* Judges Roman L. Umali, presiding, Ramon L. Avancena and
Estanislao R. Alvarez.
4 Id, pp. 69-71.
5 Now Secs. 302 & 304, National Internal Revenue Code.
6 Now Sec.291,National Internal Revenue Code.
7 Sec. 11. x x x.
No appeal taken to the Court of Tax Appeals from the decision of the
Collector of Internal Revenue or the Collector of Customs shall
suspend the payment, levy, distraint and/or sale of any property of the
taxpayer for the satisfaction of his tax liability as provided by existing
law: Provided, however, That when in the opinion of the Court the
Page 4 of 709 collection by the Bureau of Internal Revenue or the Commissioner of
Customs may jeopardize the interest of the Government and/or the
taxpayer the Court at any stage of the proceeding may suspend the
said collection and require the taxpayer either to deposit the amount
claimed or to file a surety bond for not more than double the amount
with the Court.
8 Rollo, pp. 77-78.
9 25 SCRA 789.
10 Rollo, p. 78.
11 142 SCRA 46.
12 Commissioner of Internal Revenue v. Republic Cement Corp., et al.,
G.R. Nos. L-35668-72 & L-35683, May 7, 1987; Commissioner of
Internal Revenue v. CEPOC Industries, Inc., et al., G.R. No. L-35677,
May 7, 1987.
13 Ibid. Page 5 of 709 G.R. Nos. 89898-99 October 1, 1990
THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN,
JR., as Judge RTC of Makati, Branch CXLII ADMIRAL FINANCE CREDITORS
CONSORTIUM, INC., and SHERIFF SILVINO R. PASTRANA, respondents.
Defante & Elegado for petitioner.
Roberto B. Lugue for private respondent Admiral Finance Creditors' Consortium, Inc.
The present petition for review is an off-shoot of expropriation proceedings initiated
by petitioner Municipality of Makati against private respondent Admiral Finance
Creditors Consortium, Inc., Home Building System & Realty Corporation and one
Arceli P. Jo, involving a parcel of land and improvements thereon located at Mayapis
St., San Antonio Village, Makati and registered in the name of Arceli P. Jo under TCT
It appears that the action for eminent domain was filed on May 20, 1986, docketed
as Civil Case No. 13699. Attached to petitioner's complaint was a certification that a
bank account (Account No. S/A 265-537154-3) had been opened with the PNB
Buendia Branch under petitioner's name containing the sum of P417,510.00, made
pursuant to the provisions of Pres. Decree No. 42. After due hearing where the
parties presented their respective appraisal reports regarding the value of the
property, respondent RTC judge rendered a decision on June 4, 1987, fixing the
appraised value of the property at P5,291,666.00, and ordering petitioner to pay this
amount minus the advanced payment of P338,160.00 which was earlier released to
After this decision became final and executory, private respondent moved for the
issuance of a writ of execution. This motion was granted by respondent RTC judge.
After issuance of the writ of execution, a Notice of Garnishment dated January 14,
1988 was served by respondent sheriff Silvino R. Pastrana upon the manager of the
PNB Buendia Branch. However, respondent sheriff was informed that a "hold code"
was placed on the account of petitioner. As a result of this, private respondent filed a
motion dated January 27, 1988 praying that an order be issued directing the bank to
deliver to respondent sheriff the amount equivalent to the unpaid balance due under
the RTC decision dated June 4, 1987.
Petitioner filed a motion to lift the garnishment, on the ground that the manner of
payment of the expropriation amount should be done in installments which the
respondent RTC judge failed to state in his decision. Private respondent filed its
opposition to the motion.
Pending resolution of the above motions, petitioner filed on July 20, 1988 a
"Manifestation" informing the court that private respondent was no longer the true
and lawful owner of the subject property because a new title over the property had
been registered in the name of Philippine Savings Bank, Inc. (PSB) Respondent
RTC judge issued an order requiring PSB to make available the documents
pertaining to its transactions over the subject property, and the PNB Buendia Branch
to reveal the amount in petitioner's account which was garnished by respondent
Page 6 of 709 sheriff. In compliance with this order, PSB filed a manifestation informing the court
that it had consolidated its ownership over the property as mortgagee/purchaser at
an extrajudicial foreclosure sale held on April 20, 1987. After several conferences,
PSB and private respondent entered into a compromise agreement whereby they
agreed to divide between themselves the compensation due from the expropriation
Respondent trial judge subsequently issued an order dated September 8, 1988
which: (1) approved the compromise agreement; (2) ordered PNB Buendia Branch
to immediately release to PSB the sum of P4,953,506.45 which corresponds to the
balance of the appraised value of the subject property under the RTC decision dated
June 4, 1987, from the garnished account of petitioner; and, (3) ordered PSB and
private respondent to execute the necessary deed of conveyance over the subject
property in favor of petitioner. Petitioner's motion to lift the garnishment was denied.
Petitioner filed a motion for reconsideration, which was duly opposed by private
respondent. On the other hand, for failure of the manager of the PNB Buendia
Branch to comply with the order dated September 8, 1988, private respondent filed
two succeeding motions to require the bank manager to show cause why he should
not be held in contempt of court. During the hearings conducted for the above
motions, the general manager of the PNB Buendia Branch, a Mr. Antonio Bautista,
informed the court that he was still waiting for proper authorization from the PNB
head office enabling him to make a disbursement for the amount so ordered. For its
part, petitioner contended that its funds at the PNB Buendia Branch could neither be
garnished nor levied upon execution, for to do so would result in the disbursement of
public funds without the proper appropriation required under the law, citing the case
of Republic of the Philippines v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA
Respondent trial judge issued an order dated December 21, 1988 denying
petitioner's motion for reconsideration on the ground that the doctrine enunciated in
Republic v. Palacio did not apply to the case because petitioner's PNB Account No.
S/A 265-537154-3 was an account specifically opened for the expropriation
proceedings of the subject property pursuant to Pres. Decree No. 42. Respondent
RTC judge likewise declared Mr. Antonio Bautista guilty of contempt of court for his
inexcusable refusal to obey the order dated September 8, 1988, and thus ordered
his arrest and detention until his compliance with the said order.
Petitioner and the bank manager of PNB Buendia Branch then filed separate
petitions for certiorari with the Court of Appeals, which were eventually consolidated.
In a decision promulgated on June 28, 1989, the Court of Appeals dismissed both
petitions for lack of merit, sustained the jurisdiction of respondent RTC judge over
the funds contained in petitioner's PNB Account No. 265-537154-3, and affirmed his
authority to levy on such funds.
Its motion for reconsideration having been denied by the Court of Appeals, petitioner
now files the present petition for review with prayer for preliminary injunction.
On November 20, 1989, the Court resolved to issue a temporary restraining order
enjoining respondent RTC judge, respondent sheriff, and their representatives, from
enforcing and/or carrying out the RTC order dated December 21, 1988 and the writ
of garnishment issued pursuant thereto. Private respondent then filed its comment to
the petition, while petitioner filed its reply.
Petitioner not only reiterates the arguments adduced in its petition before the Court
of Appeals, but also alleges for the first time that it has actually two accounts with the
PNB Buendia Branch, to wit:
Page 7 of 709 xxx xxx xxx
(1) Account No. S/A 265-537154-3 — exclusiv...
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