Eastern Plywood Corp. v. Commissioner of Internal Revenue
REITERATIONFacts
The Antecedents: Eastern Plywood Corporation (plaintiff-appellant) was assessed and collected sales taxes of 7% under Section 186 of the National Internal Revenue Code on its sales of saw logs and waste products from December 1963 to April 1965, amounting to P22,153.23. The plaintiff filed a claim for refund with the Commissioner of Internal Revenue, citing the case of Dingalan Forest Products Corporation v. Commissioner of Internal Revenue, where the Court of Tax Appeals held that the sale of forest products was not subject to percentage sales tax as it was not an original sale taxable under Section 186. Procedural History: The Commissioner moved to dismiss the complaint for refund on the ground that the Court of Tax Appeals has exclusive appellate jurisdiction over such cases. The plaintiff opposed, arguing that the Commissioner had not issued a decision but merely an order holding action in abeyance pending resolution of the Dingalan case. The Court of First Instance of Rizal dismissed the complaint for lack of jurisdiction. The plaintiff's motion for reconsideration was denied. The Petition: The plaintiff appealed the dismissal order, questioning the lower court's jurisdiction and arguing that the Commissioner's order was not a decision appealable to the tax court.
Issue(s)
Whether the Court of First Instance erred in dismissing the complaint for lack of jurisdiction. Whether the sales of saw logs and waste products by the plaintiff are subject to the 7% percentage sales tax under Section 186 of the National Internal Revenue Code.
Ruling
The appeal is dismissed. The sales taxes in question were properly assessed and collected from the appellant, and the dismissal of the complaint would have been proper on the merits.
Ratio Decidendi
On the issue of jurisdiction and the nature of the Commissioner's order: The procedural question regarding the jurisdiction of the Court of First Instance has become moot and academic. While the plaintiff argued that the Commissioner's order to hold action in abeyance was not a decision appealable to the tax court, the Supreme Court's subsequent decision in the Dingalan Forest Products Corporation case, which was the basis of the plaintiff's claim, rendered this procedural argument moot. The Court noted that even if the procedural issue were to be decided, the dismissal on the merits would have been proper. On whether sales of saw logs and waste products are subject to sales tax: The Supreme Court reversed its earlier stance and the ruling of the Court of Tax Appeals in the Dingalan Forest Products Corporation case. The Court held that a forest charge is a tax on the privilege of cutting and carting away timber and forest products, and these products are not considered sold by the government to the forest concessionaire. Consequently, the original sale subject to the tax imposed under Section 186 of the Tax Code is that made by the cutter or concessionaire. Therefore, the sales taxes assessed and collected from Eastern Plywood Corporation were proper.
Main Doctrine
The sale of forest products by a concessionaire is subject to the percentage sales tax under Section 186 of the National Internal Revenue Code, as the original sale contemplated by the law is that made by the concessionaire, not the sale by the government to the concessionaire.