Case Digest - Shell v. C.B

SHELL PHILIPPINES INC. VS.
CENTRAL BANK OF
THE PHILIPPINES
162 SCRA 628
Case #8
MAGNO, ALEXIS JOYCE B.

GOLOCAN LISLE A.
SHELL PHILIPPINES INC. VS. CENTRAL BANK OF THE PHILIPPINES
Facts :
The case arise when the appellee; Shell Philippines Inc, filed suit against the Central Bank before the Court of
First Instance of Manila, praying that Monetary Board Resolution No.47 be declared null and void, and that Central
Bank be ordered to refund the stabilization tax it paid during the first semester of 1972.
The Act imposing a stabilization tax on consignments abroad (RA 6125) was approved by the Congress on May
1, 1970. During 1971, appellee Shell Philippines, Inc. exported seria residues, a by-product of petroleum refining, to
an extent reaching ＄5 million. After that, the Monetary Board issued a Resolution No.47 “subjecting petroleum
pitch and other petroleum residues” to the stabilization tax that is under the Central Bank Circular No. 309 where the
appellee had to pay the stabilization tax starting January 1, 1972. The lower court then sustained the petitioner and it
declared Monetary Board Resolution No. 47 as null and void and it orders the refund of the stabilization tax paid by
appellee. The trial court opined mentioning the difference between calendar year and fiscal year wherein calendar
year refers to one year starting from January to December. Fiscal year, as it is usually and commonly used, refers to
the period covered between July 1 of a year to June 30 of the following year.The Central Bank then appealed from
the judgement. It also mentioned there that even though the lower court was influence by the senate deliberation the
result in the trial court examination about the case does not have anything wrong.
It is true that under the same law, the Central Bank was given an authority to promulgate rules and regulation
and it is only limited according to the basic law which was first implemented, and if there’s a difference between the
basic law and implementing rules and regulation, the former prevails, so it means the rules and regulations they want
to implement must not exceed.
Issues :
1. Whether or not the case is subjected to calendar year?
2. Whether or not the Monetary Board Resolution NO.47 is null or void?
3. Which should prevail in cases of discrepancy, the basic law or the rules and regulation issued to implement
said law?
Ruling :
1.Yes, because the imposition of the tax is only deferred until the “ fiscal year following it’s reaching the said
aggregate value.” It is only then that the rates in force are ascertained. In this case there is no question that in 1971,
the appellee exported seria residue with an F.O.B. value of more than 5 million US dollars. The appellee’s objection
lies in the collection of the tax thereon as of January 1972 rather than in July 1972.
2.Yes. While it is true that under the same law the Central Bank was given the authority to promulgate rules and
regulations to implement the statutory provision in question but its authority is limited only to carrying into effect
what the law being implemented provides. The trial court was then correct in declaring that “Monetary Board
Resolution No.47 is void insofar as it imposes the tax mentioned in Republic Act No. 6125 on the export seria
residue of (plaintiff) the aggregate annual F.O.B., value of which reached the five million United States dollars in
1971 effective on January 1, 1972.” The said resolution runs counter to the provisions of R.A. 6125 which provides
“Any export product the aggregate annual F.O.B. value of which shall exceed five million United States dollars in
any one calendar year during the effectivity of this Act shall likewise be subject to the rates of tax in force during the
fiscal year following its reaching the said aggregate value.
3. In cases like this, the basic prevails because the said rules or regulation cannot go beyond the terms and
provisions of the basic law (People v. Lim, 108 Phil. 1091) The rule or regulation should be within the scope of
SHELL PHILIPPINES INC. VS. CENTRAL BANK OF THE PHILIPPINES
the statutory authority granted by the legislative to the administrative agency. (Davis, Administrative Law, p. 194,
197, cited in Victorias Milling Co., Inc. v. Social Security Commission, 114 Phil. 555, 558)
Decision :
In this case, there is no question that in 1971, the appellee exported seria residue with an F.O.B. value of more
than five million US dollars. The appellee’s objection lies in the collection of tax thereon as of 1972 rather than in
July 1972.
It is, therefore, undeniable that the respondent was liable to pay the tax and that the Central Bank merely
collected the said tax prematurely. There is likewise no controversy over the rate of tax in force when payment
became due. Thus, the tax refund granted by the trial court was not proper because the tax paid was in fact, and in
law due to the government at the correct time.
The court decline to grant to the respondent an amount equivalent to the interest on the prematurely collected
tax because of the well entrenched rule that in the absence of a statutory provision clearly or expressly directing or
authorizing payment of interest on the amount to be refunded to the taxpayer, the Government cannot be required to
pay interest. Likewise, it is the rule that interest may be awarded only when the collection of tax sought to be
refunded was attended with arbitrariness (Atlas Fertilizer Corp. v. Commission on Internal Revenue, 100 SCRA
556). There is no indication of arbitrariness in the questioned act of the appellant.
In the end, the assailed decision is hereby AFFIRMED but MODIFIED to the effect that the tax refund
granted by the trial court is ordered to retained by or reverted to, as the case may be, the Central Bank.

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SHELL PHILIPPINES INC. VS.

MAGNO, ALEXIS JOYCE B.

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