G.R. No. L-27075 April 27, 1972
EASTERN PLYWOOD CORPORATION, plaintiff-appellant, vs. COMMISSIONER OF INTERNAL REVENUE, defendant-appellee.

FACTS

Eastern Plywood Corporation filed a complaint for tax refund in the Court of First Instance of Rizal on January 11, 1966. The company sought to recover sales taxes amounting to P22,153.23, which were assessed and collected under Section 186 of the National Internal Revenue Code on its sales of saw logs and waste products from December 1963 to April 1965. The refund claim was premised on a prior Court of Tax Appeals (CTA) ruling in Dingalan Forest Products Corporation vs. Commissioner of Internal Revenue, which held that sales of forest products by a concessionaire were not subject to the percentage sales tax, as the original sale was deemed to be the one made by the government.
The Commissioner of Internal Revenue moved to dismiss the complaint, asserting that the CTA had exclusive appellate jurisdiction over tax refund cases. Eastern Plywood opposed, arguing that the Commissioner had not rendered a formal “decision” appealable to the CTA, but merely issued an order holding its administrative claim in abeyance pending the Supreme Court’s review of the Dingalan case. The lower court granted the motion and dismissed the complaint for lack of jurisdiction.

ISSUE

Whether the Court of First Instance correctly dismissed the complaint for lack of jurisdiction.

RULING

The Supreme Court dismissed the appeal. While the procedural question regarding the proper court (Court of First Instance versus Court of Tax Appeals) was rendered moot, the dismissal of the complaint was ultimately affirmed on substantive grounds. The legal logic is that the foundational premise of Eastern Plywood’s claim was invalidated by a subsequent Supreme Court ruling. The Court, in its August 27, 1968 decision in Dingalan Forest Products Corporation vs. Commissioner of Internal Revenue (G.R. L-24405), had reversed the CTA decision upon which Eastern Plywood relied. The Supreme Court reaffirmed established doctrine that the forest charge paid to the government is a tax on the privilege of cutting timber, not a sale price. Consequently, the “original sale” subject to sales tax under Section 186 is the first sale by the concessionaire, not a prior sale by the government. Therefore, the sales taxes assessed on Eastern Plywood’s sales were legally due and properly collected. Since no refundable overpayment existed, the complaint correctly failed, irrespective of the initial jurisdictional question.