G.R. No. L-23188, August 31, 1970
PHILAM MINING, INC., Petitioner-Appellant, v. COURT OF TAX APPEALS, ET AL., Respondent-Appellee.

FACTS

Petitioner Philam Mining, Inc., as lessee/concessionaire of a rock quarry in Cardona, Rizal, produced and sold crushed rock for building and construction purposes from October 1958 to 1961. The Commissioner of Internal Revenue assessed and collected sales taxes on these sales for three separate periods: (1) P17,067.10 for January to November 20, 1959; (2) P7,805.13 for July 21, 1959 to June 20, 1960; and (3) P19,250.72 for July 20, 1960 to July 21, 1961. Petitioner filed claims for refund for all three amounts, arguing that under Section 188(c) of the National Internal Revenue Code, sales of minerals and mineral products by a lessee of mineral land are exempt from sales tax. The Commissioner denied all claims, ruling that crushed stone is not a mineral but akin to gravel and sand, which are subject to sales tax. Petitioner appealed these denials to the Court of Tax Appeals, docketed as CTA Cases Nos. 937, 1138, and 1160, which were consolidated. The Court of Tax Appeals dismissed CTA Case No. 937 for lack of jurisdiction due to an untimely appeal and affirmed the Commissioner’s decisions in CTA Cases Nos. 1138 and 1160, holding that the crushed rocks were not minerals or mineral products exempt from sales tax.

ISSUE

The principal issue is whether the crushed rocks sold by petitioner are considered minerals or mineral products exempt from sales tax under Section 188(c) of the National Internal Revenue Code.

RULING

The Supreme Court affirmed the decision of the Court of Tax Appeals. The crushed rocks are not minerals or mineral products exempt from sales tax. Citing Section 7 of the Mining Law (Commonwealth Act 137), which defines minerals but explicitly excludes “ordinary earth, gravel, sand, and stone which are used for building or construction purposes,” the Court held that petitioner’s crushed rocks, used for road foundation and cement aggregates, fall within this exclusion. Therefore, they are not “minerals” under the Mining Act and are not subject to the mining tax. The exemption under Section 188(c) of the Tax Code applies only to minerals and mineral products obtained from mineral lands and subject to the mining tax. Since the crushed rocks were not minerals subject to mining tax, their sales were properly subject to the sales tax under Section 186 of the National Internal Revenue Code. The Court also upheld the dismissal of CTA Case No. 937 for lack of jurisdiction, as the appeal was filed after the Commissioner’s decision had become final.