G.R. No. 180639 - Lepanto Consolidated Mining Co. vs. Ambanloc

Case Summary (G.R. No. 180639)

Petitioner

Lepanto Consolidated Mining Company — holder of a national government mining lease covering the “TIKEM” leased mining claim at Sitio Nayak, Barrio Palasan (Suyoc), Municipality of Mankayan, Benguet, with contractual rights to extract and utilize mineral deposits within the leased boundaries.

Respondent

Mauricio B. Ambanloc — Provincial Treasurer of Benguet, who assessed and demanded payment of P1,901,893.22 as sand-and-gravel tax for materials extracted by Lepanto from 1997 to 2000 and enforced administrative penalties for nonpayment.

Key Dates

Extraction and assessment period: 1997–2000. Decision relevant here: appeal resolved by the Supreme Court (decision date in prompt is June 29, 2010), thus the 1987 Constitution is the constitutional basis applicable to the decision.

Applicable Law

1987 Philippine Constitution (as the governing constitution applicable to decisions dated 1990 or later).
Republic Act No. 7160, the Local Government Code, Section 138 (statutory authorization for provincial taxation of quarry resources), quoted in the record.
Revised Benguet Revenue Code (Provincial Ordinance No. 01, Series of 1993), Article D, Sections 3–6 and related provisions on permits, payment, reporting, surcharges, and interest (expressly governing the revenue measure applied by the Province).
Mines Administrative Order MRD-27 and the Mines and Geo-Sciences Bureau’s administrative advice (referenced but not determinative of local taxation).
Precedent cited in the case: Province of Bulacan v. Court of Appeals (1998), recognizing provincial authority to levy excise taxes on quarry resources.

Facts

Lepanto, relying on the mining lease and the Mines and Geo-Sciences Bureau’s advice that no permit under MRD-27 was required, extracted sand, gravel, and earth materials within its mining claim and used those materials internally to back-fill stopes and construct/maintain mining infrastructure (tailings dam, roads, offices). The Provincial Treasurer assessed a sand-and-gravel tax for the extracted materials and, after Lepanto’s protest, demanded payment including surcharges and interest. Lepanto initiated judicial proceedings contesting the assessment.

Procedural History

The Regional Trial Court (Benguet) found Lepanto liable for the assessed tax with interest. The Court of Tax Appeals (CTA) Second Division affirmed liability and limited the 2% per month interest to a maximum of 36 months. On appeal to the CTA En Banc, the vote was evenly split (3–3), resulting in dismissal of the appeal and affirmance of the Second Division decision. The Supreme Court denied Lepanto’s petition, affirming the CTA En Banc outcome.

Issue Presented

Whether Lepanto is liable for the provincial sand-and-gravel tax on quarry materials it extracted from within its mining claim and used exclusively in its mining operations — specifically, whether the provincial tax applies to non-commercial extraction incidental to the mining company’s operations and whether Lepanto’s mining lease or DENR advice exempts it from the provincial revenue measure and permit requirements.

Court’s Analysis — Scope of the Provincial Sand-and-Gravel Tax

The Court examined both the general grant of taxing power under Section 138 of RA 7160 and, importantly, the specific provincial revenue measure (Revised Benguet Revenue Code) that imposed the tax. Section 138 authorizes provinces to levy up to 10% of fair market value per cubic meter on quarry resources extracted from public lands within provincial jurisdiction, without expressly distinguishing commercial and non-commercial extractions. The Benguet revenue code, however, is the operative revenue measure here; its Article D, Section 3 levies a 10% tax of fair market value per cubic meter on quarry resources applied for and expected to be extracted or removed from public lands within the province. Article D requires reporting and payment, prescribes the timing of payment (before approval of the permit and before extraction), enumerates permit types (commercial, industrial, special, gratuitous), and provides that only gratuitous permits for government projects may be exempt. Section 4 imposes reporting obligations, and Section 6 prescribes surcharges and interest (25% surcharge plus 2% per month, capped at 36 months).

The Court rejected Lepanto’s contention that the tax applies only to commercial extractions because Article D’s structure and permit classifications demonstrate that special permits for personal use (non-commercial) remain subject to the tax, and only gratuitous permits for government projects are exempt. Thus, the revenue code’s language and scheme indicate the tax is payable regardless of whether extracted materials are sold or disposed of commercially.

Court’s Analysis — Permit Requirement and Effect of the Mining Lease / DENR Advice

Lepanto argued that its national mining lease conferred an unqualified right to extract and use mineral deposits within its claim and thus obviated the need to obtain provincial permits or to pay the provincial tax. The Court interpreted the lease provision as recognition of national-government consent to extraction under State control, but not as an express exemption from local ordinances or permit requirements. The Mines and Geo-Sciences Bureau’s administrative view that MRD-27 permits were not required for Lepanto addressed only MRD-27 obligations; the Bureau lacked authority to determine applicability of provincial ordinances. Moreover, the Bureau’s own position limited its exemption where extracted sand and gravel would be disposed of commercially. Because Lepanto failed to demonstrate any clear legal basis — by law, local ordinance, or explicit contra

Case Syllabus (G.R. No. 180639)

The Facts and the Case

The national government issued to Lepanto Consolidated Mining Company (Lepanto) a mining lease contract covering, among others, its "TIKEM" leased mining claim at Sitio Nayak, Barrio Palasan (Suyoc), Municipality of Mankayan, Benguet, granting the right to extract and use for its purposes all mineral deposits within the boundary lines of its mining claim.
The Mines and Geo-Sciences Bureau of the Department of Environment and Natural Resources (DENR) advised Lepanto that, under its contract, it did not have to get a permit to extract and use sand and gravel from within the mining claim for its operational and infrastructure needs.
Acting on that advice, Lepanto extracted and removed sand, gravel, and other earth materials from the mining site and used them exclusively in its mining operations.
The quarried materials were used to back-fill stopes (replacing what had been mined), to construct and maintain concrete structures necessary for mining operations (such as a tailings dam), to build and maintain access roads, and to construct offices.
Lepanto preferred to use quarry resources readily available within its mining claim for practicality and cost reasons rather than outsourcing such materials.
Mauricio Ambanloc, Provincial Treasurer of Benguet (respondent), sent a demand letter to Lepanto for P1,901,893.22 as sand and gravel tax for quarry materials extracted from Lepanto’s mining site for the period 1997 to 2000.
Lepanto filed a letter-protest to the provincial treasurer; the treasurer denied the protest and insisted on payment.
Lepanto filed a petition in the Regional Trial Court (RTC) of Benguet to question the assessment (docketed Civil Case 01-CV-1652).
The RTC ruled that Lepanto was liable for the assessed amount, with interest at the rate of 2% per month from the time the tax should have been paid.
Lepanto appealed to the Court of Tax Appeals (CTA), Second Division (docketed CTA AC 13). The Second Division affirmed the RTC ruling with the modification that the 2% per month interest shall not exceed 36 months.
Lepanto appealed to the CTA En Banc (docketed CTA EB 201). The En Banc vote resulted in a dismissal of the appeal because the needed vote of four members could not be obtained—three justices voted to affirm and three dissented. Lepanto’s motion for reconsideration in the CTA met the same fate.
Lepanto brought the appeal to the Supreme Court.

Procedural History and Docket References

RTC of Benguet: petition filed as Civil Case 01-CV-1652; RTC ruled Lepanto liable with 2% per month interest.
Court of Tax Appeals, Second Division: appeal docketed CTA AC 13; Decision dated February 27, 2006, penned by Associate Justice Olga Palanca-Enriquez, concurred in by Associate Justices Juanito C. Castaneda, Jr. and Erlinda P. Uy; affirmed RTC, capping interest to 36 months.
Court of Tax Appeals, En Banc: appeal docketed CTA EB 201; tie vote led to dismissal and affirmance of Second Division decision; motion for reconsideration denied.
Supreme Court: decision authored by Justice Abad; final disposition denies the petition and affirms the CTA En Banc decision in CTA EB 201 dated May 17, 2007.

Issue Presented

Whether Lepanto is liable for the sand and gravel tax imposed by the Province of Benguet on the sand and gravel that it extracted from within the area of its mining claim and used exclusively in its mining operations.

Relevant Statutory and Ordinance Provisions Quoted in the Case

Republic Act No. 7160 (Local Government Code), Section 138 (as quoted in the source):
- "Sec. 138. Tax on Sand, Gravel and Other Quarry Resources. - The province may levy and collect not more than ten percent (10%) fair market value in the locality per cubic meter of ordinary stones, sand gravel, earth, and other quarry resources, as defined under the National Internal Revenue Code, as amended, extracted from public lands or from the beds of seas, lakes, rivers, streams, creeks, and other public waters within its territorial jurisdiction."
Revised Benguet Revenue Code (Provincial Ordinance No. 01, Series of 1993), Article D, Tax on Sand, Gravel and Other Quarry Resources (relevant provisions as quoted in the source):
- SECTION 3. Imposition of Tax:
  - "There shall be levied a tax of ten (10) percent of fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and other quarry resources, x x x applied for and expected to be extracted or removed from public lands x x x within the territorial jurisdiction of Benguet Province. This provision may not apply in case of gratuitous permits for government projects within Benguet Province."
- SECTION 4. Conditions for the Issuance of Permit:
  - Subsection (g): "The permittee shall within ten (10) days after the end of each month submit to the Provincial Treasurer, the Municipal Treasurer and Barangay Treasurer where the materials are extracted, copies of sworn statement stating the quantity in terms of cubic meter and kind of materials extracted or removed by him; the amount of tax or fees paid; the quantity and kind of materials sold or disposed of during the period covered by said report; the selling price per cubic meter; the names and addresses of the buyers; and the quantity and kind of materials left in stock."
- SECTION 5. Mode, Time and Place of Payment:
  - "The tax shall be paid to the Provincial Treasurer or h
...continue reading