G.R. No. 92585 May 8, 1992 CALTEX PHILIPPINES, INC., petitioner, vs.

THE HONORABLE COMMISSION ON AUDIT, HONORABLE COMMISSIONER BARTOLOME C. FERNANDEZ and HONORABLE COMMISSIONER ALBERTO P. CRUZ, respondents. Topic: (1) tax vs. ordinary debt, (2) purpose/objective of taxation: nonrevenue / special / regulatory Ponente: Davide, Jr. J. DOCTRINE: A taxpayer may not offset taxes due from the claims that he may have against the government. QUICK FACTS: Caltex Philippines questions the decisions of COA for disallowing the offsetting of its claims for reimbursement with its due OPSF remittance FACTS: The Oil Price Stabilization Fund (OPSF) was created under Sec. 8, PD 1956, as amended by EO 137 for the purpose of minimizing frequent price changes brought about by exchange rate adjustments. It will be used to reimburse the oil companies for cost increase and possible cost underrecovery incurred due to reduction of domestic prices. COA sent a letter to Caltex directing the latter to remit to the OPSF its collection. Caltex requested COA for an early release of its reimbursement certificates which the latter denied. COA disallowed recover of financing charges, inventory losses and sales to marcopper and atlas but allowed the recovery of product sale or those arising from export sales. Petitioners Contention: Department of Finance issued Circular No. 4-88 allowing reimbursement. Denial of claim for reimbursement would be inequitable. NCC (compensation) and Sec. 21, Book V, Title I-B of the Revised Administrative Code (Retention of Money for Satisfaction of Indebtedness to Government) allows offsetting. Amounts due do not arise as a result of taxation since PD 1956 did not create a source of taxation, it instead established a special fund. This lack of public purpose behind OPSF exactions distinguishes it from tax. Respondents Contention: Based on Francia v. IAC, theres no offsetting of taxes against the the claims that a taxpayer may have against the government, as taxes do not arise from contracts or depend upon the will of the taxpayer, but are imposed by law.

ISSUE: WON Caltex is entitled to offsetting DECISION: NO. COA AFFIRMED HELD: It is settled that a taxpayer may not offset taxes due from the claims that he may have against the government. Taxes cannot be subject of compensation because the government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off. Technically, the oil companies merely act as agents for the Government in the latters collection since the taxes are, in reality, passed unto the end-users the consuming public. Their primary obligation is to account for and remit the taxes collection to the administrator of the OPSF. There is not merit in Caltexs contention that the OPSF contributions are not for a public purpose because they go to a special fund of the government. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of the government; taxes may be levied with a regulatory purpose to provide means for the rehabilitation and stabilization of a threatened industry which is affected with public interest as to be within the police power of the State. The oil industry is greatly imbued with public interest as it vitally affects the general welfare. PD 1956, as amended by EO No. 137 explicitly provides that the source of OPSF is taxation.