G.R.No.

L29059December15,1987
COMMISSIONEROFINTERNALREVENUE,petitioner,
vs.
CEBUPORTLANDCEMENTCOMPANYandCOURTOFTAXAPPEALS,respondents.
ByvirtueofadecisionoftheCourtofTaxAppealsrenderedonJune21,1961,asmodifiedon
appealbytheSupremeCourtonFebruary27,1965,theCommissionerofInternalRevenuewas
orderedtorefundtotheCebuPortlandCementCompanytheamountofP359,408.98,representing
overpaymentsofadvaloremtaxesoncementproducedandsoldbyitafterOctober1957.1
OnMarch28,1968,followingdenialofmotionsforreconsiderationfiledbyboththepetitionerand
theprivaterespondent,thelattermovedforawritofexecutiontoenforcethesaidjudgment.
2

Themotionwasopposedbythepetitioneronthegroundthattheprivaterespondenthadan
outstandingsalestaxliabilitytowhichthejudgmentdebthadalreadybeencredited.Infact,itwas
stressed,therewasstillabalanceowingonthesalestaxesintheamountofP4,789,279.85plus
28%surcharge.
3

OnApril22,1968,theCourtofTaxAppeals*grantedthemotion,holdingthattheallegedsalestax
liabilityoftheprivaterespondentwasstillbeingquestionedandthereforecouldnotbesetoff
againsttherefund.
4

Inhispetitiontoreviewthesaidresolution,theCommissionerofInternalRevenueclaimsthatthe
refundshouldbechargedagainstthetaxdeficiencyoftheprivaterespondentonthesalesof
cementunderSection186oftheTaxCode.Hispositionisthatcementisamanufacturedandnota
mineralproductandthereforenotexemptfromsalestaxes.Headdsthatenforcementofthesaid
taxdeficiencywasproperlyeffectedthroughhispowerofdistraintofpersonalpropertyunder
Sections316and318
5
ofthesaidCodeand,moreover,thecollectionofanynationalinternal
revenuetaxmaynotbeenjoinedunderSection305,
6
subjectonlytotheexceptionprescribedin
Rep.ActNo.1125.
7
Thisisnotapplicabletotheinstantcase.Thepetitioneralsodeniesthatthe
salestaxassessmentshavealreadyprescribedbecausetheprescriptiveperiodshouldbecounted
fromthefilingofthesalestaxreturns,whichhadnotyetbeendonebytheprivaterespondent.
Foritspart,theprivaterespondentdisclaimsliabilityforthesalestaxes,onthegroundthatcement
isnotamanufacturedproductbutamineralproduct.
8
Assuch,itwasexemptedfromsalestaxes
underSection188oftheTaxCodeaftertheeffectivityofRep.ActNo.1299onJune16,1955,in
accordancewithCebuPortlandCementCo.v.CollectorofInternalRevenue,
9
decidedin1968.Here
JusticeEugenioAngelesdeclaredthat"beforetheeffectivityofRep.ActNo.1299,amending
Section246oftheNationalInternalRevenueCode,cementwastaxableasamanufacturedproduct
underSection186,inconnectionwithSection194(4)ofthesaidCode,"therebyimplyingthatitwas
notconsideredamanufacturedproductafterwards.Also,theallegedsalestaxdeficiencycouldnot
asyetbeenforcedagainstitbecausethetaxassessmentwasnotyetfinal,thesamebeingstill
underprotestandstilltobedefinitelyresolvedonthemerits.Besides,theassessmenthadalready
prescribed,nothavingbeenmadewithinthereglementaryfiveyearperiodfromthefilingofthetax
returns.10
Ourrulingisthatthesalestaxwasproperlyimposedupontheprivaterespondentforthereason
thatcementhasalwaysbeenconsideredamanufacturedproductandnotamineralproduct.This
matterwasextensivelydiscussedandcategoricallyresolvedinCommissionerofInternalRevenue
v.RepublicCementCorporation,11decidedonAugust10,1983,whereJusticeEfrenL.Plana,
afteranexhaustivereviewofthepertinentcases,declaredforaunanimousCourt:
Fromalltheforegoingcases,itisclearthatcementquacementwasnever
consideredasamineralproductwithinthemeaningofSection246oftheTax
Code,notwithstandingthatatleast80%ofitscomponentsareminerals,forthe
simplereasonthatcementistheproductofamanufacturingprocessandisno
longerthemineralproductcontemplatedintheTaxCode(i.e.mineralssubjected
tosimpletreatments)forthepurposeofimposingtheadvaloremtax.
Whathasapparentlyencouragedthehereinrespondentstomaintaintheirpresent
postureisthecaseofCebuPortlandCementCo.v.CollectorofInternalRevenue,
L20563,Oct.29,1968(28SCRA789)pennedbyJusticeEugenioAngeles.For
someportionsofthatdecisiongivetheimpressionthatRepublicActNo.1299,
whichamendedSection246,reclassifiedcementasamineralproductthatwasnot
subjecttosalestax....
xxxxxxxxx
Afteracarefulstudyoftheforegoing,weconcludethatrelianceonthedecision
pennedbyJusticeAngelesismisplaced.Thesaiddecisionisnoauthorityforthe
propositionthataftertheenactmentofRepublicActNo.1299in1955(defining
mineralproductasthingswithatleast80%mineralcontent),cementbecamea
'mineralproduct,"asdistinguishedfroma"manufacturedproduct,"andtherefore
ceasedtobesubjecttosalestax.ItwasnotnecessaryfortheCourttosorule.It
wasenoughfortheCourttosayineffectthatevenassumingRepublicActNo.
1299hadreclassifiedcementwasamineralproduct,thereclassificationcouldnot
begivenretrospectiveapplication(soastojustifytherefundofsalestaxespaid
beforeRepublicAct1299wasadopted)becauselawsoperateprospectivelyonly,
unlessthelegislativeintenttothecontraryismanifest,whichwasnotsointhe
caseofRepublicAct1266.[ThesituationwouldhavebeendifferentiftheCourt
insteadhadruledinfavorofrefund,inwhichcaseitwouldhavebeenabsolutely
necessary(1)tomakeanunconditionalrulingthatRepublicAct1299reclassified
cementasamineralproduct(notsubjecttosalestax),and(2)todeclarethelaw
retroactive,asabasisforgrantingrefundofsalestaxpaidbeforeRepublicAct
1299.]
Inanyevent,weoverruletheCEPOCdecisionofOctober29,1968(G.R.No.
L20563)insofarasitspronouncementsoranyimplicationtherefromconflictwith
theinstantdecision.
Theaboveviewswerereiteratedintheresolution12denyingreconsiderationofthesaiddecision,
thus:
Thenatureofcementasa"manufacturedproduct"(ratherthana"mineralproduct")
iswellsettled.Theissuehasrepeatedlypresenteditselfasathresholdquestion
fordeterminingthebasisforcomputingtheadvaloremminingtaxtobepaidby
cementCompanies.Nopronouncementwasmadeinthesecasesthatasa
"manufacturedproduct"cementissubjecttosalestaxbecausethiswasnotat
issue.
Thedecisionsoughttobereconsideredherereferredtothelegislativehistoryof
RepublicActNo.1299whichintroducedadefinitionoftheterms"mineral"and
"mineralproducts"inSec.246oftheTaxCode.Giventhelegislativeintent,the
holdingintheCEPOCcase(G.R.No.L20563)thatcementwassubjecttosales
taxpriortotheeffectivityfRepublicActNo.1299cannotbeconstruedtomean
that,afterthelawtookeffect,cementceasedtobesosubjecttothetax.Toerase
anyandallmisconceptionsthatmayhavebeenspawnedbyrelianceonthecase
ofCebuPortlandCementCo.v.CollectorofInternalRevenue,L20563,October
29,1968(28SCRA789)pennedbyJusticeEugenioAngeles,theCourthas
expresslyoverruleditinsofarasitmayconflictwiththedecisionofAugust10,
1983,nowsubjectofthesemotionsforreconsideration.
Onthequestionofprescription,theprivaterespondentclaimsthatthefiveyearreglementaryperiod
fortheassessmentofitstaxliabilitystartedfromthetimeitfileditsgrosssalesreturnsonJune30,
1962.Hence,theassessmentforsalestaxesmadeonJanuary16,1968andMarch4,1968,were
alreadyoutoftime.Wedisagree.ThiscontentionmustfailforwhatCEPOCfiledwasnotthesales
returnsrequiredinSection183(n)buttheadvaloremtaxreturnsrequiredunderSection245ofthe
TaxCode.AsJusticeIreneR.Cortesemphasizedintheaforestatedresolution:
Inordertoavailitselfofthebenefitsofthefiveyearprescriptionperiodunder
Section331oftheTaxCode,thetaxpayershouldhavefiledtherequiredreturnfor
thetaxinvolved,thatis,asalestaxreturn.(ButuanSawmill,Inc.v.CTA,etal.,
G.R.No.L21516,April29,1966,16SCRA277).ThusCEPOCshouldhavefiled
salestaxreturnsofitsgrosssalesforthesubjectperiods.Bothpartiesadmitthat
returnsweremadefortheadvaloremminingtax.CEPOCarguesthatsaidreturns
containtheinformationnecessaryfortheassessmentofthesalestax.The
Commissionerdoesnotconsidersuchreturnsascompliancewiththerequirement
forthefilingoftaxreturnssoastostarttherunningofthefiveyearprescriptive
period.
WeagreewiththeCommissioner.IthasbeenheldinButuanSawmillInc.v.CTA,
supra,thatthefilingofanincometaxreturncannotbeconsideredassubstantial
compliancewiththerequirementoffilingsalestaxreturns,inthesamewaythatan
incometaxreturncannotbeconsideredasareturnforcompensatingtaxforthe
purposeofcomputingtheperiodofprescriptionunderSec.331.(CitingBisaya
LandTransportationCo.,Inc.v.CollectorofInternalRevenue,G.R.Nos.L12100
andL11812,May29,1959).TherebeingnosalestaxreturnsfiledbyCEPOC,the
statuteofstationsinSec.331didnotbegintorunagainstthegovernment.The
assessmentmadebytheCommissionerin1968onCEPOC'scementsalesduring
theperiodfromJuly1,1959toDecember31,1960isnotbarredbythefiveyear
prescriptiveperiod.Absentareturnorwhenthereturnisfalseorfraudulent,the
applicableperiodisten(10)daysfromthediscoveryofthefraud,falsityor
omission.Thequestioninthiscaseis:WhenwasCEPOC'somissiontofiletha
returndeemeddiscoveredbythegovernment,soastostarttherunningofsaid
period?13
Theargumentthattheassessmentcannotasyetbeenforcedbecauseitisstillbeingcontested
losessightoftheurgencyoftheneedtocollecttaxesas"thelifebloodofthegovernment."Ifthe
paymentoftaxescouldbepostponedbysimplyquestioningtheirvalidity,themachineryofthe
statewouldgrindtoahaltandallgovernmentfunctionswouldbeparalyzed.Thatisthereasonwhy,
savefortheexceptionalreadynoted,theTaxCodeprovides:
Sec.291.Injunctionnotavailabletorestraincollectionoftax.Nocourtshall
haveauthoritytograntaninjunctiontorestrainthecollectionofanynational
internalrevenuetax,feeorchargeimposedbythisCode.
Itgoeswithoutsayingthatthisinjunctionisavailablenotonlywhentheassessmentisalready
beingquestionedinacourtofjusticebutmoresoif,asintheinstantcase,thechallengetothe
assessmentisstillandonlyontheadministrativelevel.Thereisallthemorereasontoapplythe
ruleherebecauseitappearsthatevenaftercreditingoftherefundagainstthetaxdeficiency,a
balanceofmorethanP4millionisstillduefromtheprivaterespondent.
Torequirethepetitionertoactuallyrefundtotheprivaterespondenttheamountofthejudgment
debt,whichhewilllaterhavetherighttodistrainforpaymentofitssalestaxliabilityisinourview
anIdleritual.WeholdthattherespondentCourtofTaxAppealserredinorderingsuchacharade.
WHEREFORE,thepetitionisGRANTED.TheresolutiondatedApril22,1968,inCTACaseNo.786
isSETASIDE,withoutanypronouncementastocosts.
SOORDERED.
Footnotes
7Sec.11.xxx.
NoappealtakentotheCourtofTaxAppealsfromthedecisionoftheCollectorof
InternalRevenueortheCollectorofCustomsshallsuspendthepayment,levy,
distraintand/orsaleofanypropertyofthetaxpayerforthesatisfactionofhistax
liabilityasprovidedbyexistinglaw:Provided,however,Thatwhenintheopinionof
theCourtthecollectionbytheBureauofInternalRevenueortheCommissionerof
CustomsmayjeopardizetheinterestoftheGovernmentand/orthetaxpayerthe
Courtatanystageoftheproceedingmaysuspendthesaidcollectionandrequire
thetaxpayereithertodeposittheamountclaimedortofileasuretybondfornot
morethandoubletheamountwiththeCourt.