G.R. No. L-20563 - Cebu Portland Cement Co. vs. Collector of Internal Revenue

Cebu Portland Cement Company (petitioner) sought a refund for taxes paid on the sale of its APO Portland cement.
The petitioner claimed a refund of P458,241.45 in sales (percentage) tax paid from November 1, 1954 to March 1955 and P427,552.95 in ad valorem tax paid from April 1955 to September 1956.
Before the effectivity of Republic Act No. 1299 (June 16, 1955), the petitioner had been paying a 7% sales tax computed on the gross selling price, which included the cost of bag containers and gypsum used in production.
After the amendment introduced by RA 1299, the petitioner ceased paying sales tax on gross sales and instead paid an ad valorem tax based on the selling price less the cost of the containers.

The petitioner had long protested the imposition of the sales tax since 1952, and on January 16, 1953, it protested also the payment of ad valorem taxes.
A written claim for refund was initially filed in September 1955 and reiterated in July 1956.
Without waiting for the administrative ruling on the refund claim, the petitioner filed a petition for review with the Court of Tax Appeals on January 24, 1957, challenging the Collector (now Commissioner) of Internal Revenue’s decision.
The petition was subsequently amended on October 24, 1959, and June 23, 1961, to include claims for the refund of ad valorem taxes alleged to have been overpaid due to double payments.

Whether cement, which was taxed as a manufactured product prior to RA 1299, should have been considered a “mineral product” (and thus exempt from the percentage tax) even before the enactment of the law.
The validity of deducting the cost of bag containers and gypsum from the gross selling price in computing the 7% compensating tax.
The proper party entitled to claim a refund for the sales tax—that is, whether the burden can be shifted to or recovered by the manufacturer rather than the purchaser.
The issue of prescription in filing the refund claim, specifically whether taxes paid before or after certain dates (i.e., January 25, 1955, and October 25, 1957) were barred by the two-year prescriptive period under Section 306 of the Tax Code.

The petitioner was held not to be exempt from the sales tax on its cement before the effectivity of RA 1299, as cement was then treated as a manufactured product.
The deduction of the cost of raw materials, specifically the bag containers and gypsum, was disallowed unless it was shown that such items had already been subjected to the 7% tax.
It was ruled that for the part of the sales taxes that were billed to and paid by the customers, the petitioner was not the proper party to claim any refund.
The claim for refund was held to be barred by prescription, as the action for refund was not instituted within the two-year period from the date of tax payment.

Dissatisfied with the ruling of the Court of Tax Appeals, the petitioner elevated the case to the Supreme Court via a petition for review.
The petitioner challenged, among other points, the prospective versus retrospective application of RA 1299 and the interpretation of Section 186 on the imposition of percentage tax.

Whether the amendment to Section 246 of the National Internal Revenue Code, effected by RA 1299, should be applied retrospectively to classify cement as a “mineral product” thereby exempting it from the percentage tax.
Whether such reclassification was intended to affect taxes already collected before June 16, 1955.

Whether the costs incurred for bag containers and gypsum used in the manufacture of cement can be deducted from the gross selling price in computing the 7% sales (percentage) tax before the amendment.
Whether evidence is required to show that these inputs had already been subjected to the tax in their original sale.

Whether the petitioner, as the manufacturer and producer, is the proper party to claim a refund for the percentage tax, even if the tax was billed to and seemingly passed on to its customers.
Analysis of the statutory provision in Section 186 regarding the imposition of the tax directly on the manufacturer.

Whether the refund claims for sales or percentage taxes and ad valorem taxes are barred by prescription based on the two-year period from the time of payment.
The effect of the timing of the filing of the original and amended petitions on the application of the prescriptive period.