Political Law

Insular Lumber Company vs Court of Tax Appeals

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G.R. No. L-31057 – 104 SCRA 710 – Political Law – Constitutional Law – The Legislative Department – Legislative Powers; Lawmaking Power – One Subject Embraced in the Title of a Bill – Provision Germane to the Purpose of the Law

Insular Lumber Company (ILC) is an American company engaged as a licensed forest concessionaire. The ILC purchased manufactured oil and motor fuel which it used in the operation of its forest concession. In 1956, Republic Act No. 1435 was passed. Section 5 thereof provides that there should be a partial tax refund to those using oil in the operation of forest and mining concessions.

In 1964, ILC filed with the Commissioner of Internal Revenue (CIR) to have a tax refund of P19,921.37 pursuant to the said RA. The Court of Industrial Relations (CIR) ruled that ILC is not covered by such provision because Sec. 5, RA 1435 is only effective 5 years from its enactment. Hence, in 1961 the provision ceased to be effective. ILC appealed the issue to the CTA and the CTA ruled the operation of a sawmill is distinct from the operation of a forest concession, hence, the refund provision of Sec 5, RA 1435 allowing partial refund to forest and mining concessionaires cannot be extended to the operators of a sawmill. And out of the P19,921.37 claimed, only the amount of P14,598.08 was paid on oil utilized in logging operations. The CTA did not allow the refund of the full amount of P14,598.08 because the ILC’s right to claim the refund of a portion thereof, particularly those paid during the period from January 1, 1963 to April 29, 1963 had already prescribed. Hence, ILC was credited the refund of P10,560.20 only. Both parties appealed from the decision of the CTA.

The CIR averred that CTA should not have ruled this way: The title of RA 1435 is “An Act to Provide Means for Increasing The Highway Special Fund.” The CIR contends that the subject of RA 1435 was to increase Highway Special Fund. However, Section 5 of the Act deals with another subject which is the partial exemption of miners and loggers. And this partial exemption on which the Company based its claim for refund is clearly not expressed in the title of the aforesaid Act. More importantly, Section 5 provides for a decrease rather than an increase of the Highway Special Fund.

ISSUE: Whether or not to grant the partial tax refund to ILC.

HELD: Yes, but only in the amount as found by the CTA. The Supreme Court ruled that there is no merit in the contention of the CIR. RA 1435 deals with only one subject and proclaims just one policy, namely, the necessity for increasing the Highway Special Fund through the imposition of an increased specific tax on manufactured oils. The proviso in Sec 5 of the law is in effect a partial exemption from the imposed increased tax. Said proviso, which has reference to specific tax on oil and fuel, is not a deviation from the general subject of the law. The primary purpose of the aforequoted constitutional provision is to prohibit duplicity in legislation the title of which might completely fail to apprise the legislators or the public of the nature, scope and consequences of the law or its operation. But that is not so for in the passage of RA 1435 since, as the records of its proceedings bear out, a full debate on precisely the issue of whether its title reflects its complete subject was held by Congress which passed it.

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