G.R. No. L-20563 October 29, 1968
CEBU PORTLAND CEMENT COMPANY, petitioner, vs. COLLECTOR (Now COMMISSIONER) OF INTERNAL REVENUE, respondent.

FACTS

The petitioner, Cebu Portland Cement Company, sought a refund of sales tax paid from November 1, 1954 to March 1955, and ad valorem tax paid from April 1955 to September 30, 1956, on the sale of its APO portland cement. Prior to the effectivity of Republic Act No. 1299 on June 16, 1955, the petitioner paid a 7% sales tax on the gross selling price, inclusive of the cost of bag containers and imported gypsum. After the law’s amendment, it paid ad valorem tax on the selling price after deducting the cost of containers. The petitioner had been protesting these taxes since 1952 and filed a written claim for refund in September 1955. Without awaiting a ruling, it filed a petition for review with the Court of Tax Appeals on January 24, 1957. The Tax Court dismissed the petition, ruling that the petitioner was not exempt from sales tax before R.A. No. 1299 , was not entitled to certain deductions, was not the proper party to claim refund for taxes passed to customers, and that the claim was barred by prescription. The petitioner elevated the case to the Supreme Court.

ISSUE

1. Whether Republic Act No. 1299 , which amended the Tax Code to define “minerals” and “mineral products,” should be applied retroactively to exempt the petitioner’s cement from sales tax prior to its effectivity.
2. Whether the cost of gypsum and bag containers are deductible from the gross selling price in computing the sales tax.
3. Whether the petitioner is the proper party to claim a refund for sales taxes it billed and collected from its customers.
4. Whether the claim for refund of alleged overpayments is barred by prescription.

RULING

1. No. Republic Act No. 1299 operates prospectively only. The general rule is that statutes operate prospectively unless legislative intent for retroactivity is clear. The use of the word “shall” indicates future effect. Nothing in the law’s context or legislative history suggests an intent to apply it retroactively to unsettle past transactions. Therefore, before the law’s enactment, cement was not considered a “mineral product” exempt from sales tax under Section 188(c) of the Tax Code and was taxable as a manufactured product.
2. Yes. The cost of gypsum and bag containers are deductible from the gross selling price for computing the 7% sales tax. In the absence of evidence that the petitioner manufactured the bags, the inference is they were purchased from others who had been taxed. The imported gypsum was subject to a compensating tax, which is the equivalent of the sales tax on imported articles.
3. Yes. The petitioner is the proper party to claim the refund. Under Section 186 of the Tax Code, the sales tax is imposed upon and shall be paid by the manufacturer or producer. The fact that the economic burden may be passed on to the purchaser does not change the nature of the tax or the manufacturer’s liability to pay it and right to claim a refund.
4. Yes. The claim for refund of taxes alleged to have been erroneously paid through wrong computation or double payment is barred by prescription. The written claim for refund was filed in September 1955, more than two years after the payments were made from November 1954 to March 1955. The two-year prescriptive period under Section 306 of the Tax Code had lapsed.
The decision of the Court of Tax Appeals is modified regarding the deductibility of gypsum and bag containers and the petitioner’s standing to claim a refund, but affirmed as modified.