Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-29059 December 15, 1987
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS, respondents.

CRUZ, J.:
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 fiveyear period from the filing of the tax returns. 10
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, 11decided 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 manufacturingprocess 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
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. L20563) 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, L20563, 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 resolution:
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
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.

Held: It is petitioner's main contention that the orders of respondent RTC judge involved
the net amount of P4,965,506.45, wherein the funds garnished by respondent sheriff are in
excess of P99,743.94, which are public fund and thereby are exempted from execution
without the proper appropriation required under the law. There is merit in this contention. In
this jurisdiction, well-settled is the rule that public funds are not subject to levy and

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.

execution, unless otherwise provided for by statute. Municipal revenues derived from
taxes, licenses and market fees, and which are intended primarily and exclusively for the
purpose of financing the governmental activities and functions of the municipality, are
exempt from execution. Absent a showing that the municipal council of Makati has passed
an ordinance appropriating the said amount from its public funds deposited in their PNB
account, no levy under execution may be validly effected. However, this court orders

SO ORDERED.
Teehankee, C.J., Narvasa, Paras and Gancayco, JJ., concur.

petitioner to pay for the said land which has been in their use already. This Court will not
condone petitioner's blatant refusal to settle its legal obligation arising from expropriation of
land they are already enjoying. The State's power of eminent domain should be exercised
within the bounds of fair play and justice.

MUNICIPAL of MAKATI vs. CA

Facts: Petitioner Municipality of Makati expropriated a portion of land owned by private
respondents, Admiral Finance Creditors Consortium, Inc. After proceedings, the RTC of
Makati determined the cost of the said land which the petitioner must pay to the private

COMMISSIONER

v.

ALGUE,

INC.

GR No. L-28896, February 17, 1988

158 SCRA 9

respondents amounting to P5,291,666.00 minus the advanced payment of P338,160.00. It

issued the corresponding writ of execution accompanied with a writ of garnishment of

FACTS: Private respondent corporation Algue Inc. filed its income tax returns for 1958 and

funds of the petitioner which was deposited in PNB. However, such order was opposed by

1959showing deductions, for promotional fees paid, from their gross income, thus lowering

petitioner through a motion for reconsideration, contending that its funds at the PNB could

their taxable income. The BIR assessed Algue based on such deductions contending that

neither be garnished nor levied upon execution, for to do so would result in the

the claimed deduction is disallowed because it was not an ordinary, reasonable and

disbursement of public funds without the proper appropriation required under the law, citing

necessary expense.

the case of Republic of the Philippines v. Palacio.The RTC dismissed such motion, which
was appealed to the Court of Appeals; the latter affirmed said dismissal and petitioner now

ISSUE: Should an uncommon business expense be disallowed as a proper deduction in

filed this petition for review.

computation of income taxes, corollary to the doctrine that taxes are the lifeblood of the
government?

Issue: Whether or not funds of the Municipality of Makati are exempt from garnishment
and levy upon execution.

HELD: No. Private respondent has proved that the payment of the fees was necessary and
reasonable in the light of the efforts exerted by the payees in inducing investors and
prominent businessmen to venture in an xperimental enterprise and involve themselves in

a new business requiring millions of pesos. This was no mean feat and should be, as it
was,

sufficiently

recompensed.

It is well-settled that taxes are the lifeblood of the government and so should be collected
without unnecessary hindrance On the other hand, such collection should be made in

reconsideration clearly showed that it suffered a net loss in 1990. Contrary to the
holding of the CA and CTA, BPI could not have applied the amount as a tax credit.
When it is undisputed that a taxpayer is entitled to a refund, the State should not
invoke technicalities to keep money not belonging to it.

accordance with law as any arbitrariness will negate the very reason for government itself.
It is therefore necessary to reconcile the apparently conflicting interests of the authorities

CIR v Tokyo Shipping Co. LTD

and the taxpayers so that the real purpose of taxation, which is the promotion of the
common

good,

may

be

achieved.

But even as we concede the inevitability and indispensability of taxation, it is a

requirement in all democratic regimes that it be exercised reasonably and in accordance
with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the
courts will then come to his succor. For all the awesome power of the tax collector, he may
still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law
has not been observed.

CIR v Tokyo Shipping Co. LTD. GR No L-68252, May 26, 1995

FACTS:
Tokyo Shipping filed a claim for refund from the BIR for erroneous prepayment of
income and common carriers taxes amounting to P107,142.75 since no receipt was
realized from its charter agreement. BIR failed to act promptly on the claim and thus it
was elevated to the Court of Tax Appeals which decided in favor of the refund. Hence,
this petition for review on certiorari.
ISSUE:
Whether Tokyo Shipping is entitled to a refund or tax credit for the prepayment of
taxes

BPI-Family Savings Bank, Inc v CA (2000)

BPI-Family Savings Bank, Inc. v CA GR No 122480, April 12, 2000
FACTS:
The case involves a claim for tax refund on the amount of P112,491 representing
BPIs tax withheld for 1989. This was initially filed with the CIR alleging that the
company did not apply the 1989 refundable amount to its 1990 Annual Income Tax
Return or other tax liabilities due to the alleged business losses it incurred for the
same year. But, without waiting for CIR, it filed a petition for review with the CTA
which dismissed the petition. Hence, this petition.
ISSUE:
Whether BPI is entitled to the refund
RULING:
Yes. In the present case, the return attached to the companys motion for

RULING:
Yes. The power of taxation is sometimes called also the power to destroy. Therefore,
it should be exercised with caution to minimize injury to the proprietary rights of a
taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill
the hen that lays the golden egg. Fair deal is expected by taxpayers from the BIR
and the duty demands that BIR should refund without unreasonable delay the
erroneous collection.
http://purplehorn.blogspot.com/2011/09/digested-cases-in-taxation.html
http://purplehorn.blogspot.com/2012/01/digested-cases-in-taxatin.html

Bache and Co vs
Ruiz GR 32409
27

Decision: This cannot be consider a personal examination. If there

was an examination at all of the complainant and his witness, it
was the one conducted by the Deputy Clerk of Court. But, as
stated, the Constitution and the rules require a personal
examination by the judge. It was precisely on account of the
intention of the delegates to the Constitutional Convention to make
it a duty of the issuing judge to personally examine the
complainant and his witnesses that the question of how much time

Facts: Commissioner of Internal Revenue, wrote a letter addressed

would be consumed by the judge in examining them came up

to respondent Judge Vivencio M. Ruiz requesting the issuance of a

before the Convention, as can be seen from the record of the

search warrant against petitioners for violation of Section 46(a) of

proceedings quoted above. The reading of the stenographic notes

the National Internal Revenue Code. Revenue Examiner Rodolfo de

to respondent Judge did not constitute sufficient compliance with

Leon and Arturo Logronio went to CFI with proper documents.

the constitutional mandate and the rule; for by that manner

Judge Vivencio Ruiz asked his secretary to take the deposition and

respondent Judge did not have the opportunity to observe the

when done stenographer read it to the judge. Logronio took the

demeanor of the complainant and his witness, and to propound

oath ans was warned by judge that he may be charged with

initial and follow-up questions which the judicial mind, on account

perjury if found lying. Search warrant was issued and served.

of its training, was in the best position to conceive. These were

Petitioners lawyers protested the search on the ground that no

important in arriving at a sound inference on the all-important

formal complaint or transcript of testimony was attached to the

question of whether or not there was probable cause.

warrant. The agents nevertheless proceeded with their search

which yielded six boxes of documents. BIR based on the

http://docslide.us/documents/cir-v-burroughs-digest.html

documents seized. Petitioner contend that judged failed to

https://lawfacilitate.wikispaces.com/ABS-CBS+vs+CTA

personally examine the complainant and witnesses.

Issue: Whether or not search warrant is null and void on the
ground of no personal examination of the jusge?