GR L 17798; (March, 1965) (Digest)
G.R. No. L-17798; March 31, 1965
VICTORIAS MILLING CO., INC., plaintiff-appellee, vs. CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.
FACTS
The plaintiff-appellee, Victorias Milling Co., Inc., imported Fiji cloth and used it to manufacture sugar bags. For this importation, it purchased foreign exchange from the defendant-appellant, Central Bank of the Philippines, which collected a 17% special excise tax under Section 1 of Republic Act No. 601 . Some of these sugar bags were subsequently exported as containers for sugar. The appellee demanded a refund of the excise tax corresponding to the exported bags under Section 3 of R.A. No. 601 , which provides for a refund of tax on foreign exchange used for importing containers that are later used for exported local products. The Central Bank admitted the bags were used and exported but refused most of the refund claim, amounting to P151,756.06 out of P194,058.62, on the ground that the right to claim a refund had prescribed.
ISSUE
The principal issue is the applicable prescriptive period for claims for refund under Section 3 of Republic Act No. 601 , as originally enacted.
RULING
The Supreme Court ruled that the applicable prescriptive period is ten years. The Court distinguished this case from Belman Cia., Inc. v. Central Bank, where a six-year prescriptive period was applied based on quasi-contract (solutio indebiti) principles for an illegal or erroneous tax collection. In the present case, the tax collection was proper and authorized, and the refund claim is based on a positive provision of law (Section 3, R.A. No. 601 ). Therefore, the obligation to refund is one “created by law” under Article 1144(2) of the New Civil Code, which prescribes in ten years. The Court also held that the prescriptive period should be counted from the date of exportation, as the right to refund accrues only upon export, not from the date of tax payment. Since the longest elapsed period from payment (based on the Bank’s own computation) was 7 years, 9 months, and 12 days, none of the claims had prescribed under the ten-year period. The Court further rejected the Central Bank’s argument that it was not liable after turning over the tax proceeds to the National Treasurer, citing Central Azucarera Don Pedro v. Central Bank and Section 5 of R.A. No. 601 , which mandates the Central Bank to make the refund. The decision of the lower court ordering the refund was affirmed.