TAXATION LAW II | B2015

CASE DIGESTS
CIR v. CA, ACMDC
March 10, 1995
Regalado, J.
Raeses, Roberto Miguel O.
SUMMARY: The Commissioner of Interna !e"en#e ser"e$
t%o noti&es an$ $eman$ for 'a(ment of the res'e&ti"e
$e)&ien&( a$ "aorem an$ *#siness ta+es for ta+a*e (ears
1,-5 an$ 1,-. a/ainst the res'on$ent Atas Consoi$ate$
0inin/ an$ De"eo'ment Cor'oration 1AC0DC23 The atter
'roteste$ *oth assessments *#t the same %ere $enie$4
hen&e it )e$ t%o se'arate 'etitions for re"ie% in the Co#rt
of Ta+ A''eas3 The CTA ren$ere$ a &onsoi$ate$ $e&ision
ho$in/4 inter aia4 that AC0DC %as not ia*e for $e)&ien&(
a$ "aorem ta+es on &o''er an$ si"er for 1,-5 an$ 1,-.
there*( e5e&ti"e( s#stainin/ the theor( of AC0DC that in
&om'#tin/ the a$ "aorem ta+ on &o''er minera4 the
re)nin/ an$ smetin/ &har/es sho#$ *e $e$#&te$4 in
a$$ition to frei/ht an$ ins#ran&e &har/es3
6o%e"er4 the ta+ &o#rt he$ AC0DC ia*e for the amo#nt
&onsistin/ of 257 s#r&har/e for ate 'a(ment of the a$
"aorem ta+ an$ ate )in/ of noti&e of remo"a of si"er4
/o$ an$ '(rite e+tra&te$ $#rin/ &ertain 'erio$s4 an$ for
ae/e$ $e)&ien&( man#fa&t#rer8s saes ta+ an$ s#&h
&ontra&tor8s ta+ for easin/ o#t of its 'ersona 'ro'erties3
ACD0C ee"ate$ the matter to the SC &aimin/ that the
easin/ o#t %as a mere isoate$ transa&tion4 hen&e sho#$
not *e s#*9e&te$ to &ontra&tor8s ta+3 The SC a:rme$ the
r#in/ of the CA an$ CTA4 tho#/h it e+em'te$ AC0DC from
man#fa&t#rer;s ta+3
DOCTRINE: Assessments are 'rima fa&ie 'res#me$
&orre&t an$ ma$e in /oo$ faith3 <Contrar( to the theor( of
AC0DC=4 it is the ta+'a(er an$ not the BI! %ho has the
$#t( of 'ro"in/ other%ise3 In the a*sen&e of 'roof of an(
irre/#arities in the 'erforman&e of o:&ia $#ties4 an
assessment %i not *e $ist#r*e$3 A 'res#m'tions are in
fa"or of assessments3 >ai#re to 'resent 'roof of error in
assessments %i 9#stif( 9#$i&ia a:rman&e of sai$
assessment3
FACTS: Atas Consoi$ate$ 0inin/ an$ De";t Cor'o 1AC0DC2
is a $omesti& &or'3 %hi&h o'erates a minin/ &on&ession at
Toe$o Cit(3
13 The CI!4 '#rs#ant to the re'ort ma$e *( BI!
e+aminers4 &a#se$ the ser"i&e of an assessment
noti&e an$ $eman$ for 'a(ment of ?124@,140-03513
a3 These %ere $e)&ien&( ad valorem 'er&enta/e
an$ )+e$ ta+es for the ta+a*e (ear 1,-53
23 Another assessment noti&e %as sent4 this time for
the amo#nt of ?1@45@14A..3B0 for the ta+a*e (ear
1,-.3
AC0DC 'roteste$ *oth assessments3 Both %ere $enie$3
13 T%o se'arate 'etitions for re"ie% %ere )e$ to the
CTA3 These %ere e"ent#a( &onsoi$ate$3
CTA ren$ere$ a $e&ision 'art( in fa"or of AC0DC3
13 It %as not ia*e for $e)&ien&( ad valorem ta+es on
&o''er an$ si"er for 1,-5 an$ 1,-.3
a3 S#staine$ AC0DC;s theor( that in &om'#tin/
s#&h ta+4 re)nin/ an$ smetin/ &har/es
sho#$ *e $e$#&te$4 in a$$ition to frei/ht an$
ins#ran&e &har/es4 from the Lon$on 0eta
E+&han/e 1L0E2 'ri&e of man#fa&t#re$
&o''er3
23 6OWECE!4 it he$ AC0DC %as he$ ia*e for
?145-24.@-3AB4 e+&#si"e of interest3
a3 257 s#r&har/e for ate 'a(ment of the ad
valorem ta+ an$ ate )in/ of noti&e of
remo"a of si"er4 /o$4 an$ '(rite e+tra&te$
$#rin/ &ertain 'erio$s
*3 De)&ien&( man#fa&t#rer;s saes ta+ an$
&ontra&tor;s ta+3
The &ase %as ee"ate$ to the CA3
13 The 'etition )e$ *( the Commissioner D#estione$
the $eetion of ad valorem ta+ on &o''er an$ si"er3
a3 This %as $ismisse$ *( the CA3
TAXATION LAW II | B2015
CASE DIGESTS
23 The a''ea *( AC0DC assaie$ the or$er to 'a(
?145-24.@-3AB3
a3 The CA f#rther re$#&e$ the ta+ ia*iit( of
AC0DC3
i3 Deete$ the 257 s#r&har/e on the
si"er an$ '(rite e+tra&te$3
ISSUES:
13 WON in &om'#tin/ ad valorem ta+ on &o''er4
&har/es for smetin/ an$ re)nin/ sho#$ *e
$e$#&te$4 in a$$ition to frei/ht an$ ins#ran&e &osts4
from the 'ri&e of &o''er &on&entrates3
23 WON AC0DC sho#$ *e ia*e for the 1a2 s#r&har/e4
1*2 man#fa&t#rer;s ta+4 an$ 1&2 &ontra&tor;s ta+3

RULING:
13 EES4 &har/es for smetin/ an$ re)nin/ sho#$ *e
$e$#&te$3
23 EES4 it is ia*e for s#r&har/e3 NO4 it is not ia*e for
man#fa&t#rer;s ta+3 EES4 it is ia*e for &ontra&tor;s
ta+3
RATIO:
First Issue: deduction of refning and smelting
charges
CommissionerF The a&t#a marGet "a#e of minera 'ro$#&ts
sho#$ *e the /ross saes reaiHe$ from &o''er &on&entrates4
$e$#&tin/ therefrom minin/4 miin/4 re)nin/4 trans'ortin/4
han$in/4 or an( other e+'enses3
13 IAn( other e+'enseJ in&#$es smetin/ an$ re)nin/
&har/es3
23 The a% ao%s $e$#&tions for a&t#a &ost of o&ean
frei/ht an$ ins#ran&e on( %here the mineras or
minera 'ro$#&ts are &onsi/ne$ a*roa$ #n$er C3I3>3
terms3
Sureme Court! This is #ntena*e3
13 Kn$er Sec. "#$ an$ "#% of the NI!C4 the ad valorem
ta+ of 27 is im'ose$ on the a&t#a marGet "a#e of
the ann#a /ross o#t'#t of the mineras or minera
'ro$#&ts e+tra&te$ or 'ro$#&e$ from a minera
an$s not &o"ere$ *( the ease3
a3 IGross o#t'#tJ sha *e the a&t#a marGet
"a#e of mineras or minera 'ro$#&ts4 or of
*#ion from ea&h mine or minera an$s
o'erate$ as a se'arate entit(4 %itho#t an(
$e$#&tion for minin/4 miin/4 re)nin/4
trans'ortin/4 han$in/4 marGetin/4 or an(
other e+'ense3
*3 If the( are &onsi/ne$ or so$ a*roa$ #n$er
C3I3>3 terms4 the a&t#a &ost of o&ean frei/ht
an$ ins#ran&e sha *e $e$#&te$3
2. In other words, ssess!ent sh"" #e #sed not
on the $ost o% &rod'$t(on or e)tr$t(on o% s(d
!(ner"s or !(ner" &rod'$ts #'t on the &r($e
wh($h the s!e * #e%ore or w(tho't 'nder+o(n+
!n'%$t'r(n+ &ro$ess * wo'"d $o!!nd (n
the ord(nr, $o'rse o% #'s(ness.
@3 Ao%an&e of the CTA of smetin/ an$ re)nin/
&har/es as $e$#&tions is not &ontrar( to the
aforementione$ 'ro"isions3
a3 It %as the L0E 'ri&e on %ire *ar %hi&h %as
#se$ as ta+ *ase *( AC0DC for the 27 ad
valorem ta+ on &o''er &on&entrates4 as there
%as no a"aia*e marGet 'ri&e D#otation nor
%as there an( marGet D#otation o&a(
o*taina*e3
*3 Char/es for smetin/ an$ re)nin/ %ere
therefore assesse$ not on the *asis of the
'ri&e of the &o''er e+tra&te$ at the mine site
*#t on the a&t#a marGet "a#e of the
man#fa&t#re$ &o''er3
A3 >oo%in/ the $o&trine ai$ $o%n in Cebu &ortland v.
C'R4 ad valorem ta+ sho#$ *e &om'#te$ on the *asis
of the marGet "a#e minera in its &on$ition at the
time of s#&h remo"a an$ *efore it #n$er/oes a
&hemi&a &han/e thro#/h the man#fa&t#rin/ 'ro&ess3
53 If the marGet "a#e &hosen for the re&Gonin/ is the
"a#e of the man#fa&t#re$ or )nishe$ 'ro$#&t4 then
TAXATION LAW II | B2015
CASE DIGESTS
a e+'enses of 'ro&essin/ or man#fa&t#rin/ sho#$
*e $e$#&te$ in or$er to a''ro+imate the a&t#a
marGet "a#e of the ra% minera at the mine site3
.3 Co''er %ire *ar is man#fa&t#re$ &o''er3 It is not the
minera e+tra&te$ from the mine as it #n$er%ent a
man#fa&t#rin/ 'ro&ess3
a3 This is s#''orte$ *( Sec. 19#()*4 %hi&h
$e)nes Iman#fa&t#rerJ 1'h(si&a or &hemi&a
'ro&ess23
-3 De&ision *( the CTA %as *ase$ on its 're"io#s r#in/
in the &ase of +CM,C v. C'R.
a3 +d valorem ta+ is a se"eran&e ta+4 a &har/e
#'on the 'ri"ie/e of se"erin/ or e+tra&tin/
mineras3
Commissioner !#in/ in +C,MC v. C'R not *in$in/4
&onsi$erin/ that the in&#m*ent &ommissioner &annot *e
*o#n$ *( $e&isins or r#in/s of his 're$e&essor4 '#rs#ant to
-ilado v. C'R3
Sureme Court! This is #ntena*e3
13 -ilado in"o"e$ a 're"io#s r#in/ of a former
&ommissioner3
23 In CAB4 the &ommissioner *ase$ his )n$in/s on a
're"io#s $e&ision ren$ere$ *( the CTA3
a3 The CTA is not a mere s#'erior a$ministrati"e
a/en&( or tri*#na *#t is a 'art of the 9#$i&ia
s(stem3
i3 Ceste$ %ith e+&#si"e a''eate
9#ris$i&tion o"er NI!C4 Tari5 an$
C#stoms Co$e4 an$ Assessment La%
&ases3
*3 Atho#/h on( the SC &an esta*ish $o&trines4
the $e&isions of &o#rts iGe the CTA ha"e a
'ers#asi"e e5e&t3
i3 Their $e&isions &an e"en *e&ome
$o&trine if the SC $e&i$es that the(
ma( *e so3
&3 As a matter of 'ra&ti&e an$ 'rin&i'e4 the SC
%i not set asi$e the &on&#sions of the CTA3
Second issue: liability on the 25% surcharge,
manufacturers sales tax, and contractors tax.
+CM,C! Not ia*e for the 257 s#r&har/e *e&a#se the
&orre&t D#antit( of /o$ an$ si"er &o#$ *e $etermine$ on(
after the &o''er &on&entrates ha$ /one thro#/h smetin/
an$ re)nin/3 The amo#nt of '(rite &annot *e $etermine$
#nti the Lotation 'ro&ess se'aratin/ &o''er minera from
%aste %as )nishe$3
Sureme Court! Kntena*e3 The CTA is &orre&t in ho$in/
ACMDC ia*e for the s#r&har/e3
13 The estimate$ &ommer&ia D#antit( of the si"er an$
/o$ &o#$ ha"e *een $etermine$ in m#&h the same
%a( the 'etitioner is a*e to estimate the &ommer&ia
D#antit( of &o''er $#rin/ assa(3
23 If it &o#$ estimate the /ra$e of &o''er ore4 an$ has
$etermine$ the /ra$e of not on( &o''er *#t aso
/o$ an$ si"er4 the estimate$ &ommer&ia D#antit( of
si"er an$ /o$ s#*9e&t to ad valorem ta+ &o#$ ha"e
*een $etermine$ an$ 'ro"isiona( 'ai$ for3
+CM,C There %as no remo"a of '(rite *e&a#se it %as
$ei"ere$ to its sister &om'an( 1Atas >ertiiHer Cor'32 %hose
'ant is o&ate$ %ithin the minera &on&ession3
Sureme Court! Barre$ *( esto''e in ais3
13 +d valorem ta+ on '(rite ha$ area$( *een $e&are$
an$ 'ai$ for3
a3 Amo#nt 'ai$ %as #se$ to &om'#te s#r&har/e3
23 Iss#e of s#r&har/e raise$ on( %hen AC0DC %as
area$( *ein/ &har/e$ for s#&h3
@3 The $ei"eries %ere not e+&#si"e( ma$e to its sister
&om'an(3
+C,MC! It is not en/a/e$ in the *#siness of sein/ /rin$in/
stee *as4 *#t it on( 'ro$#&es s#&h for its o%n #se or
&ons#m'tion3 Th#s4 it is not ia*e for man#fa&t#rer;s ta+3
TAXATION LAW II | B2015
CASE DIGESTS
Sureme Court! Ees4 ACD0C &annot *e ia*e #n$er s#&h3
13 A man#fa&t#rer to *e s#*9e&te$ to the ne&essit( of
'a(in/ the 'er&enta/e ta+ im'ose$ *( Sec. 1.%4 it
m#st *e en/a/e$ in the sae4 *arter4 or e+&han/e of
'ersona 'ro'ert(
a3 A 'erson &an har$( *e &onsi$ere$ as
o&&#'ie$ or em'o(e$ in the sae4 *arter4 or
e+&han/e of 'ersona 'ro'ert( %hen he has
ma$e one '#r&hase an$ sae on(3
23 No sho%in/ that the transa&tion #n$ertaGen *(
ACD0C in 1,-5 %herein it so$ /rin$in/ stee *as
%as %ith a "ie% to /ain 'ro)t3
a3 What ha''ene$ %as more of an
a&&ommo$ation to other minin/ &om'anies3
*3 Where a 'erson or &or'oration is en/a/e$ in a
$istin&t *#siness an$4 as a feat#re thereof4 in
an a&ti"it( mere( in&i$enta %hi&h ser"es no
other 'erson or *#siness4 the in&i$enta an$
restri&te$ a&ti"it( is not &onsi$ere$ as
inten$e$ to *e se'arate( ta+e$3
+C,MCF It &annot *e ia*e for &ontra&tor;s ta+ as the
easin/ o#t of its 'ersona 'ro'erties is an isoate$
transa&tion3
Sureme Court! This is #ntena*e3 ACD0C is ia*e for
&ontra&tor;s ta+3
13 The *ooG of a&&o#nts sho% that se"era $istin&t
'a(ments %ere ma$e for the #se of its 'ersona
'ro'erties 1e3/3 'ane4 motor *oat4 an$ $#m' tr#&G2
23 >or the ta+ (ears 1,-5 an$ 1,-.4 there %ere 'ro)ts
earne$ an$ re'orte$ %ith res'e&t to its ease of
'ersona 'ro'erties3
@3 As there %as a series of transa&tions in"o"e$4 '#s
the fa&t that there %as an intent to 'ro)t4 AC0DC
%as th#s ha*it#a( en/a/e$ in easin/ o#t its
'ersona 'ro'erties3
a3 No e"i$en&e to s#''ort &aim that in&ome
earne$ %as 9#st eno#/h to &o"er &osts of
o'eration3
A3 Assess!ents re &r(! %$(e &res'!ed $orre$t
nd !de (n +ood %(th. Contrr, to the theor,
o% ACMDC, (t (s the t)&,er nd not the -IR
who hs the d't, o% &rov(n+ otherw(se. In the
#sen$e o% &roo% o% n, (rre+'"r(t(es (n the
&er%or!n$e o% o.$(" d't(es, n ssess!ent
w("" not #e d(st'r#ed. A"" &res'!&t(ons re (n
%vor o% ssess!ents. F("'re to &resent &roo%
o% error (n ssess!ents w("" /'st(%, /'d($("
.r!n$e o% s(d ssess!ent.
53 Ta+ stat#tes are to re&ei"e a reasona*e &onstr#&tion
%ith a "ie% to &arr(in/ o#t their '#r'oses an$ intent3
a3 The( sho#$ not *e &onstr#e$ as to 'ermit the
ta+'a(er to easi( e"a$e 'a(ment of ta+es3

DIS0OSITI1E: W6E!E>O!E4 the im'#/ne$ 9#$/ment of
res'on$ent Co#rt of A''eas in CANG3!3 S? No3 25,A54
s#*9e&t of the 'resent 'etition in G3!3 No3 10A151 is here*(
A>>I!0EDO an$ its assaie$ 9#$/ment in CANG3! S? No3
2.0B- is here*( 0ODI>IED *( e+em'tin/ Atas Consoi$ate$
0inin/ an$ De"eo'ment Cor'oration4 'etitioner in G3!3 No3
1055.@ of this Co#rt4 from the 'a(ment of man#fa&t#rer8s
saes ta+4 s#r&har/e an$ interest $#rin/ the ta+a*e (ear
1,-53