G.R. No. L-51353 June 27, 1988
SHELL PHILIPPINES, INC., plaintiff-appellee, vs. CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.

FACTS

Republic Act No. 6125 imposed a stabilization tax on certain exports. A key provision stated that any export product whose aggregate annual F.O.B. value exceeds five million US dollars in any calendar year “shall likewise be subject to the rates of tax in force during the fiscal year following its reaching the said aggregate value.” In 1971, Shell Philippines, Inc. exported seria residues exceeding the $5 million threshold. The Central Bank, through Monetary Board Resolution No. 47 implemented by its Circular No. 309, subjected these exports to the tax effective January 1, 1972. Shell paid the tax under protest, arguing that under RA 6125, the tax should commence only on July 1, 1972—the start of the fiscal year following the calendar year (1971) the threshold was met. Shell filed suit for a declaration of nullity of the resolution and a refund of taxes paid from January to June 1972. The trial court ruled in favor of Shell, declaring the resolution void and ordering the refund.

ISSUE

Whether the Central Bank’s Monetary Board Resolution No. 47, which imposed the stabilization tax on Shell’s exports effective January 1, 1972, is valid, or whether the tax liability should commence only on July 1, 1972, as the start of the fiscal year following the calendar year the $5 million threshold was reached.

RULING

The Supreme Court affirmed the trial court’s declaration that Resolution No. 47 was void insofar as it imposed the tax effective January 1, 1972, but modified the judgment by disallowing the tax refund. The Court held that the statutory language of RA 6125 was clear: when an export product’s value exceeds $5 million in a calendar year, it becomes subject to the tax rates “in force during the fiscal year following its reaching the said aggregate value.” The Court interpreted “fiscal year” in its ordinary sense as the period from July 1 to June 30. Since Shell reached the threshold in the calendar year 1971, the tax liability properly commenced in the next fiscal year, starting July 1, 1972. The Central Bank’s rule-making authority under the law is limited to carrying into effect the law’s provisions and cannot amend or extend the law itself. Resolution No. 47, by advancing the tax’s effectivity to January 1, contravened the plain mandate of the statute. However, the tax itself was due and correct; the Central Bank’s error was merely in collecting it prematurely. Consequently, no refund was warranted. The well-entrenched rule is that in the absence of statutory authority or arbitrariness, the government cannot be required to pay interest on refunds, and no arbitrariness was found in this case. The tax collected was thus retained by the Central Bank.