4.summary of significantsc decisions (august 2008 - january 2009)

8/7/2019 4.Summary of SignificantSC Decisions (August 2008 - January 2009)

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Summary of Significant

Supreme Court Decisionson Tax Cases (August2008 January 2009)by Atty. Oliver Gil M. Beltran

1. COMMISSIONER OF INTERNALREVENUE vs. ENRON SUBIC POWERCORPORATION (G.R. No. 166368, January19, 2009)

Is it mandatory for the BIR to indicate the

legal and factual bases of their findings in theassessment? Is the notice requirementsatisfied when the BIR advised the taxpayersrepresentative of the tax deficiency during thepre-assessment stage, and furnished thetaxpayer of a copy of the audit workingpapers?

Enron, a duly registered Subic Bay FreeportZone enterprise received a formal notice ofassessment from the Commissioner ofInternal Revenue (CIR) despite filing itsprotest letter to the preliminary five-day letter.

The Company filed a Petition for Review withthe Court of Tax Appeals (CTA) since the CIRfailed to resolve its protest against the formalnotice of assessment within the mandated180-day period. Enron alleged that the BIRfailed to provide the legal and factual bases ofthe assessment in violation of Section 3.1.4 ofRevenue Regulations No. 12.99

Finding for Enron, the CTA held that theassessment notice sent to the Companyfailed to comply with the requirements of avalid written notice set by the law. The CIRsmotion for reconsideration was likewisedenied.

On appeal, the Court of Appeals (CA)affirmed the decision of the CTA and held thatthe audit working papers presented to the

taxpayer by the BIR in support of theassessment did not substantially comply withSection 228 of the NIRC and RR No. 12-99

because the aforementioned documentsfailed to show the applicability of the law theBIR cited to the facts of the assessment.

The CIR then elevated the case to the SCclaiming that Enron was informed of the legaland factual bases of the deficiencyassessment against it.

In denying the CIRs petition for review, theSC held that Section 3.1.4 of RR No. 12-99 isexplicit that a taxpayer must be informed in

writing of the legal and factual bases of thetax assessment made against it.

The Court said that the use of the word shallindicates the mandatory nature of therequirements laid down therein.

Even so, taking note of the CTAs findings,the SC held that the CIR merely issued aformal assessment and indicated therein thesupposed tax, surcharge, interest andcompromise penalty due thereon. The

Revenue Officers of the CIR in the issuanceof the Final Assessment Notice did notprovide Enron with the written bases of thelaw and facts on which the subjectassessment is based. The CIR did not botherto explain how it arrived at such anassessment. Moreso, he failed to mention thespecific provision of the Tax Code or rulesand regulations which were not complied withby Enron.

The SC gave weight to the findings of the

CTA and CA that the BIR failed to indicate thefactual and legal bases of the deficiency taxassessment as the same merely itemized thedeductions disallowed and included these inthe gross income, aside from imposing thepreferential rate of 5% on some itemscategorized by Enron as costs.

Ultimately, the CIR alleged that during thepre-assessment stage, they supposedly haveadvised and informed Enrons representativeof the proposed tax deficiency through a


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preliminary five-day letter apart fromfurnishing the latter a copy of the auditworking paper.

However, the SC ruled that (t)he advice oftax deficiency, given by the CIR to anemployee of Enron, as well as the preliminaryfive-day letter, were not valid substitutes forthe mandatory notice in writing of the legaland factual bases of the assessment.

According to the SC, the requirement forissuing a preliminary or final notice, as thecase may be, informing a taxpayer of theexistence of a deficiency tax assessment is

markedly different from the requirement ofwhat such notice must contain. Just becausethe CIR issued an advice, a preliminary letterduring the pre-assessment stage and a finalnotice, in the order required by law, does notnecessarily mean that Enron was informed ofthe law and facts on which the deficiencyassessment was made.

Hence, the assessment against Enron wasdeclared to be void by reason of the absenceof a fair opportunity for Enron to be informed

of the aforesaid assessments legal andfactual bases.

2. EL GRECO SHIP MANNING ANDMANAGEMENT CORPORATION vs.COMMISSIONER OF CUSTOMS (G.R. NO.177188, December 4, 2008)

What pieces of information are helpful inidentifying a particular vessel? What are thequantum of proof required and the essence of

due process in proceedings pending beforethe Bureau of Customs (BOC)? When is thepenalty of forfeiture imposed?

A Warrant of Seizure and Detention (SeizureIdentification No. 06-2001) was issued by theLegaspi District Collector for the 35,000 bagsof imported rice shipped by M/V Criston onthe ground that it allegedly left the Port of

Manila without the necessary clearance fromthe Philippine Coast Guard.

Since Seizure Identification No. 06-2001merely covered the cargo, but not the M/VCriston which transported it, SeizureIdentification No 6-2001-A was subsequentlyissued particularly for the said vessel.

The 35,000 bags of rice were consequentlyreleased to the consignees, Antonio Chua Jr.and Carlos Carillo, after the two have postedthe P31,450,000.00 bond required by theRegional Trial Court of Tabaco, Albay.

Meanwhile, as M/V Criston was under thecustody of the Bureau of Customs of theProvince of Albay, the vessel was allowed totemporarily transfer to another anchoragearea in order to prevent any damage whichcould be caused by typhoon Manang.Nonetheless, M/V Criston failed to return tothe Port of Tabaco after Manang hadpassed through the area.

M/V Crimson was thereafter found in thewaters of Bataan sporting the name M/V

Neptune Breeze.

The BOC District Collector of the Port ofManila issued a Warrant of Seizure andDetention under Seizure Identification No.2001-208 against M/V Neptune Breeze inview of the vessels failure to present aclearance from its last port of call.

On June 27, 2002, the Legaspi DistrictCollector rendered a Decision in seizureIdentification No. 06-2001 and Seizure

Identification No. 06-2001-a ordering theforfeiture of M/V Criston (M/V NeptuneBreeze), and its cargo, for violating Section2530 (a), (f) and (k) of the Tariff and CustomsCode.

El Greco, filed a Motion for Intervention andMotion to Quash with the Manila DistrictCollector asserting that M/V Neptune Breezewas a foreign registered vessel owned byAtlantic Pacific Corporation, Inc. and differentfrom M/V Criston. The Manila District


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Collector ruled in favor of El Greco for lack ofprobable cause showing that M/V NuptuneBreeze is the same vessel known as M/V

Criston.

The abovementioned ruling by the ManilaDistrict Collector was reversed by BOCCommissioner Antonio Bernardo when thelatter ruled that M/V Neptune Breeze and M/VCriston were one the same and that theLegaspi District Collector had alreadyacquired prior jurisdiction over the vessel.

El Greco sought the reversal of theaforementioned Decision and accordingly

filed a Petition for Review with the CTAclaiming that M/V Criston is entirely differentfrom M/V Neptune Breeze the two havedifferent and separate Certificates of Registry,and that the decision of the Manila DistrictCollector already became final and executoryin view of the BOC Commissioners failure toact thereon within the 30-day period requiredunder Section 2313 of the tariff and CustomsCode.

The 2nd Division of the CTA denied the

Petition and held that both vessels wereindeed one and the same by giving credenceto the crime laboratory report submitted by thePhilippine National Police which indicated thatthe M/V Criston and M/V Neptune Breezehave similar serial numbers in their respectiveengines and generators.

The CTA En Banc dismissed the Petition forReview filed by El Greco for lack of merit.

On appeal, the Supreme Court sustained the

findings of the CTA En Banc and ruled thatthere is more than substantial evidence toestablish that M/V Neptune Breeze is the verysame vessel as M/V Criston.

The SC took judicial notice of the fact thatalong with the gross tonnage, net tonnage,length and breadth of the vessel, the serialnumbers of its engine and generator are thenecessary information identifying the vessel.According to the SC, (i)n as much the sameway, the identity of a land motor vehicle is

established by its unique motor and chassisnumbers. It is, thus, highly improbable thattwo totally different vessels would have

engines and generators bearing the verysame serial numbers; and the only logicalconclusion is that they must be one and thesame vessel.

The SC further said that the failure of thesupposed operator to appear before theLegaspi District Collector is surprising since itis highly unfathomable for a purported ownerto ignore proceedings for the seizure of itsvessel since it risks the loss of a property ofenormous value.

While the foreign registration of M/V NeptuneBreeze proves that it was registered in aforeign country; it does not render impossiblethe conclusions consistently reached by theLegaspi District Collector, the CTA SecondDivision, the CTA En Banc, and the SC thatM/V Neptune Breeze was the very samevessel used in the conduct of smugglingactivities in the name M/V Criston.

The technical rules of procedure and

evidence are not strictly applied inadministrative proceedings. The essence ofdue process in BOC proceedings is simplyan opportunity to be heard or, as applied toadministrative proceedings, an opportunity toexplain ones side or an opportunity to seekreconsideration of the action or rulingcomplained of.1

Hence, El Greco cannot claim that it wasdenied due process since it was given ampleopportunity to rebut the findings of the

Legaspi District Collector.

Further, the fact that M/V Neptune Breeze(a.k.a. M/V Criston), was caught carrying35,000 bags of imported rice without thenecessary papers showing that they wereentered lawfully through a Philippine port afterthe payment of appropriate taxes and dutiesthereon, gives rise to the presumption that the

1Danan vs. Court of Appeals, G.R. No. 132759, 25 October2005.


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importation involved was illegal. By reason ofEl Grecos failure to rebut such presumption,the 35,000 bags of rice and the concerned

vessel are subject to forfeiture.

The penalty of forfeiture is imposed on anyvessel engaged in smuggling, provided thatthe following conditions are present: 1.) Thevessel is used unlawfully in the importation orexportation of articles into or from thePhilippines; 2.) The articles are imported to orexported from any Philippine port or place,except a port of entry; or 3.) If the vessel hasa capacity of less than 30 tons and is used inthe importation of articles into any Philippine

port or place other than a port of the SuluSea, where importation in such vessel may beauthorized by the Commissioner, with theapproval of the department head.2

Lastly, the Decision of the Manila DistrictCollector could not have become final andexecutory since Section 2313 of the Tariff andCustoms Code provides that in the case theBOC Commissioner fails to decide on theautomatic appeal of the Collectors Decisionwithin 30 days from receipt of the records

thereof, the case shall again be deemedautomatically appealed to the Secretary ofFinance.

3. SILKAIR (SINGAPORE) PTE. LTD.,vs. COMMISSIONER OF INTERNALREVENUE (G.R. No. 171383 & 172379, 14November 2008)

Who is the proper party to claim a refund forthe payment of excise taxes? What is anexcise tax? What is the remedy of a taxpayer

who enjoys tax exemption with regard to thepayment of excise taxes?

Silkair (Singapore Pte. Ltd. purchasedaviation jet fuel from Petron, to which thelatter imposed a P3.67 per liter excise(specific) tax.

2Commissioner of Customs vs. Manila Star Ferry, Inc., G.R. No.31776-78, 21 October 1993.

Claiming exemption from payment of excisetaxes pursuant to Section 135 of the TaxCode and Article 4 of the Philippines

Singapore Air Agreement, Silkair filed aformal claim for refund with the Commissionerof Internal Revenue (CIR).

Silkair alleged that it was the one who actuallypaid the excise taxes due on the transactionswhile Petron merely remitted the payment tothe BIR, thereby negating the tax exemptionexpressly granted to it.

Nonetheless, the Supreme Court held thatthe proper party to question, or seek a refund

of an indirect tax is the statutory taxpayer, theperson on whom the tax is imposed by lawand who paid the same even if he shifts theburden thereof to another.3

Excise tax, whether classified as specific orad valorem tax, is basically an indirect taximposed on the consumption of a specifiedlist of goods or products. The tax is directlylevied on the manufacturer upon removal ofthe table goods from the place of productionbut in reality, the tax is passed on to the end

consumer as part of the selling price of goodssold.4

In view thereof, while Petron actually passedon the burden of the tax to Silkair, theadditional amount billed to the latter wasessentially a part of the purchase price andnot a tax in itself.

Hence, the SC ruled that even if theconsumers or purchasers ultimately pay forthe tax, they are not considered the

taxpayers. The fact that Petron, on whom theexcise tax is imposed, can shift the taxburden to its purchasers does not make thelatter the taxpayers and the former thewithholding agent.

3 Silkair (Singapore) Pte. Ltd. vs. Commissioner of InternalRevenue, G.R. No. 173594, 6 February 2008.4 De Leon and De Leon, Jr., The National Internal Revenue CodeAnnotated, Volume 2 (2003), p. 198.


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Although it was ruled in the instant case thatPetron is the proper party that can claim therefund of the excise taxes paid to BIR, the SC

said that Silkair may nevertheless invoke itstax exemption to Petron before buyingaviation jet fuel in the future.

4. ANTAM PAWNSHOPCORPORATION vs. COMMISSIONER OFINTERNAL REVENUE (G.R. No. 167962, 19September 2008)

Are pawn tickets subject to documentarystamp tax (DST)? What contract is enteredinto by the pawnshop and the

pawner/borrower? Is good faith enoughjustification to spare a taxpayer from paymentof interest and surcharges?

The Petitioner (Antam), alleged that a pawnticket, being merely a receipt for pawn, is notsubject to DST. It is neither a security nor aprinted evidence of indebtedness.

On the other hand, the CIR averred that apawn ticket is proof of a contract of pledge,

and as such, is subject to DST.

In ruling for the CIR, the Supreme Court heldthat in accordance with Articles 2085, 2087and 2093 of the Civil Code, a pawnshop inessence, as defined under Section 3 of P.D.No. 114, enters into a contract of pledge withthe pawner or the borrower.

The Court further said that is a pawn ticket isa proof of a contract of pledge, since for everytransaction, a pawnshop is required to deliver

to each person a signed copy thereofcontaining, among others: 1.) the amount ofthe loan; 2.) the date the loan was granted;3.) rate of interest; 4.) the name andresidence of the pawnee.

Moreover, though the law neither considers apawn ticket as a security nor a printedevidence of indebtedness, what is subject toDST is not the ticket itself but the privilege ofentering into a contract of pledge.

In spite of such pronouncement, the SC stilldeclared that Antam is not liable for

delinquency interest and surcharges byreason of its good faith in relying on its honestbelief that one is not subject to tax in the lightof the BIRs previous interpretation that apawn ticket is not a printed evidence ofindebtedness.

5. COMMISSIONER OF INTERNALREVENUE vs. DOMINADOR MENGUITO(G.R. No. 167560, September 17, 2008)

What are the circumstances that would

warrant the piercing of the veil of corporatefiction? Is the taxpayers right to due processof law violated with the non-issuance of apost-reporting notice and pre-assessmentnotice?

Menguito is a restaurateur who operatedbranches in the cities of Pasay and Baguio.

Sometime in 1997, Menguito and his wife

were informed by the Assessment Division ofthe BIR Baguio that the results of theirinvestigation showed that they haveundeclared sales for the periods 1991, 1992and 1993, thereby resulting to deficiencyincome and percentage taxes amounting toP34, 193,041.55. The BIR alleged thatMenguito committed fraud with intent toevade the payment of tax by under declaringhis sales.

The CTA ruled in favor of the CIR and

ordered Menguito to pay deficiency andpercentage tax liabilities. Menguitos motionfor reconsideration was likewise denied.

Menguito then sought redress with the Courtof Appeals (CA), arguing that Copper KettleCatering Services, Inc. (CKCS, Inc.) was aseparate and distinct entity from CopperKettle Cafeteria Specialist (CKCS) and in viewthereof:


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1.) the sales and revenues of CKCS, Inc.could not be ascribed to CKCS;

2.) neither may the taxes due from one,

charged to the other;3.) nor the notices to be served on the

former, coursed through the latter.

The CA gave greater weight to the argumentsof Menguito and reversed the decision of theCTA. The motion for reconsiderationsubsequently filed by the CIR was alsodenied by the CA.

Nevertheless, the SC overturned the decisionof the CA and interpreted the presence of the

following circumstances as substantialevidence in support of the CIRs contentionthat CKSC, Inc. and CKSC are actually onejuridical taxable personality:

1. the owner of one directs and controlsthe operations of the other; and

2. the payments effected or received byone are for the accounts due from orpayable to the other; or

3. when the properties or products of oneare all sold to the other, which in turn

immediately sells them to the public.5

The Supreme Court said that the facts andcircumstances of the case belie the claim ofMenguito that CKCS, Inc. is different fromCKCS. Although it is established that theArticles of Incorporation of CKCS, Inc wasissued in 1989, the pieces of documentaryevidence submitted before the Court indicatethat after the aforementioned issuance,CKCS, Inc. has also assumed the nameCKCS, and vice-versa.

Hence, the SC ruled that it is undeniable thatthe Menguito spouses operated therestaurants in Club John Hay and TexasInstruments under the names Copper KettleCafeteria Specialist (CKCS) and CopperKettle Catering Services or Copper KettleCatering Services, Inc.

5 Liddell & Co., Inc. vs. Commissioner of Internal Revenue, 112Phil. 524. See also Commissioner of Internal Revenue vs. Toda,G.R. No. 147188, September 14, 2004.

As regards, the issue on the non-issuance ofa post-reporting notice and pre-assessment

notice by the BIR, the SC stressed that thestringent requirement that an assessmentnotice be satisfactorily proven to have beenissued and released or, if receipt thereof isdenied, that said assessment notice havebeen served on the taxpayer, applies only toformal assessments prescribed under Section228 of the National Internal Revenue Code,and not to post-reporting notices or pre-assessment notices.

According to the SC, a post-reporting notice

and pre-assessment notice do not bear thegravity of a formal assessment notice. Thepost-reporting notice and pre-assessmentnotice merely hint at the initial findings of theBIR against a taxpayer and invites the latterto an informal conference or clarificatorymeeting. Neither notice contains a declarationof the tax liability of the taxpayer or a demandfor payment thereof. Hence, the lack of suchnotices inflicts no prejudice on the taxpayerfor as long as the latter is properly served aformal assessment notice.

However, (t)he issuance of a valid formalassessment is a substantive prerequisite totax collection, for it contains not only acomputation of tax liabilities but also ademand for payment within a prescribedperiod, thereby signaling the time whenpenalties and interests begin to accrueagainst the taxpayer and enabling the latter todetermine his remedies therefore. Dueprocess requires that it must be served onand received by the taxpayer.6

6. COMMISSIONER OF INTERNALREVENUE vs. MIRANT PAGBILAOCORPORATION (Formerly SOUTHERNENERGY QUEZON, INC.) (G.R. No. 172129,12 September 2008)

6Roxas Securities, Inc. vs. Commissioner of Internal Revenue,G.R. No. 157064, August 7, 2006.


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What is the best evidence to substantiate thepayment of input VAT? Is the non-payment ofinterest by reason of the late payment of input

VAT fatal to a claim for refund thereof? How isthe prescriptive period in filing a claim forrefund of unutilized input VAT reckoned?

Mirant Pagbilao Corporation (MPC) sells itsgenerated power to the National PowerCorporation (NPC).

By reason of NPCs tax exempt status, MPCfiled an Application for Effective Zero Ratingwith the BIRs Revenue District Office No. 60in Lucena City.

Getting no response from the RDO, MPC fileda request for ruling with the VAT ReviewCommittee at the BIR National Office.Subsequently, the CIR issued VAT Ruling No.052-99, stating that the supply of electricityby Hopewell Phil. To the NPC shall be subjectto zero percent (0%) VAT.

MPC then chose not to pay the VAT in theprogress billings from Mitsubishi for the periodcovering April 1993 to September 1996. It

was only in April 14, 1998 that MPC paidMitsubishi the abovementioned VATcomponent of P135,993,570.

While awaiting the approval of its applicationwith the RDO, MPC filed its quarterly VATreturn for the second quarter of 1998 onAugust 25, 1998 where it reflected an inputVAT of P148,003,047.62, which amountincludes the abovementioned P135,993,570supported by Official Receipt 0189.

MPC subsequently filed an administrativeclaim for refund of unutilized input VAT,however, the CIR failed to act on the same.Hence, MPC filed a petition with the CTA.

The CTA granted MPCs claim for input VATrefund or credit, but only for the amount ofP10,766,939.48.

On appeal, the CA modified the decision ofthe CTA and granted MPCs claim for taxrefund or credit in the total amount of

P146,760,509.48. The CA likewise denied theCIRs motion for reconsideration.

The main difference between the decisions ofthe CTA and CA involves the sufficiency ofO.R. No. 0189 to substantiate the payment ofinput VAT. While the CA claimed that O.R.No. 0189 was the best evidence for thepayment of input VAT by MPC to Mitsubishi,on the other hand, the CTA claims otherwiseand doubted the veracity and genuineness ofO.R. No. 0189.

Eventually, the SC held that O.R. No. 0189undoubtedly proves payment by MPC of its

creditable input VAT relative to its purchasesfrom Mitsubishi.

The SC affirmed that O.R. No. 0198 in itselfsufficiently proves payment of creditable inputVAT involved pursuant to Section 110(A)(1)(B) of the NIRC. The Court said thatalthough the BIR is not precluded fromrequiring additional evidence to prove thatinput VAT had indeed been paid or, in fine,that the taxpayer is indeed entitled to a taxrefund or credit for input VAT,xxx..the law

considers a duly executed VAT invoice or ORas sufficient evidence to support a claim forinput tax credit.

The SC further said that any doubt as to whatOR 0198 was issued for was put to rest bythe report of the independent accountant thatO.R. No. 0189 dated April 14, 1998 is forpayment of the VAT on the progress billingsfrom Mitsubishi Japan.

Furthermore, the SC ruled that MPCs non-

payment of interest to Mitsubishi, in view ofthe formers late payment of creditable inputVAT, is not fatal to MPCs claim for refundsince such issue does not belie the fact ofpayment by MPC of the input VAT involved,as well as, the genuineness of OR 0189.

Nonetheless, the Court affirmed that MPC hasalready lost its right to file the instant claim forrefund of the unutilized input VAT sinceprescription has already set in.


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Section 112(A) of the NIRC declares that aVAT registered person may file for theissuance of a tax credit certificate or refund of

creditable input tax within two (2) years afterthe close of the taxable quarter when thesales were made.

As pronounced by the Court, prescriptiveperiod commences from the close of thetaxable quarter when the sales were madeand not from the time the input VAT was paidnor from the time the official receipt wasissued. Thus when a zero-rated VAT taxpayerpays its input VAT a year after the pertinenttransaction, said taxpayer only has a year to

file a claim for refund or tax credit of theunutilized creditable input VAT. The reckoningframe would always be the end of the quarterwhen the pertinent sales or transaction wasmade, regardless when the input VAT waspaid.

Hence, while the creditable input VATinvolved in the present case relates to theprogress billing dated September 6, 1996,MPC filed the present claim for refund only onDecember 10, 1999, which is clearly beyond

the period provided under the law.

7. JUDY ANNE L. SANTOS vs.PEOPLE OF THE PHILIPPINES, ET AL.(G.R. No. 173176, August 26, 2008)

Is the filing of a Petition for Review with theCTA En Banc the proper remedy for a partyaggrieved by an interlocutory order of aDivision of the CTA?

The case began when then CIR Guillermo L.Parayno Jr. recommended the criminalprosecution of Juday to Justice SecretaryRaul M. Gonzales for substantialunderdeclaration of income.

Juday allegedly declared in her Income TaxReturn for 2002 an income of P8,033,332.70

solely derived from the talent fees paid to herby the Kapamilya Network.

However, this was belied by documents givenby Judays accountant and other parties,which establish that Juday actually had anincome of at least P14,796,234.70, comingnot only from the Kapamilya Network, butfrom movies and product endorsements aswell. The non-declaration made by Judayamounts to at least 84.18% of the incomedeclared in her ITR, which constitutes primafacie evidence of false or fraudulent return.

Consequently, an Information charging Juday

for violation of Section 255 in relation toSections 254 and 248 (B) of the Tax Codewas filed with the CTA.

Juday then filed a Motion to Quash theInformation which the CTA denied. Similarly,Judays reconsideration was also denied bythe CTAs First Division.

Juday then filed with the CTA en banc, aMotion for Extension of Time to File Petitionfor Review to appeal the denial of the

abovementioned Motion to Quash.

In the meantime, while Juday was able to fileher Petition for Review with the CTA en bancon June 16, 2006, the CTA en banc deniedon June 19, 2006 the Motion for Extension oftime to file Petition for Review previously filedby Juday.

Aggrieved, Juday sought redress from theSupreme Court asserting that the resolutionof the CTA Division denying a motion to

quash is appealable to the CTA en bancpursuant to Section 18 of Republic Act No.1125, as amended. Juday alleged that if thatis not the case, a procedural void would becreated, leaving the parties without anyremedy involving erroneous resolutions of theCTA Division.

However, this failed to persuade the SupremeCourt.


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The SC ruled that the petition for review tobe filed with the CTA en banc as the mode forappealing a decision, resolution, or order of

the CTA Division, under Section 18 ofRepublic Act No. 1125, as amended, is not atotally new remedy, unique to the CTA, with aspecial application or use therein. To thecontrary, the CTA merely adopts theprocedure for petitions for review and appealslong established and practiced in otherPhilippine courts. Accordingly, doctrines,principles, rules, and precedents laid down injurisprudence by this Court as regardspetitions for review and appeals in courts ofgeneral jurisdiction should likewise bind the

CTA, and it cannot depart therefrom.

Section 1, Rule 41 of the Revised Rules ofCourt, governing appeals from the RegionalTrial Courts (RTCs) to the Court of Appeals,provides that an appeal may be taken onlyfrom a judgment or final order that completelydisposes of the case or of a matter thereinwhen declared by the Rules to be appealable.Said provision, thus, explicitly states that noappeal may be taken from an interlocutoryorder.

It is well-settled that after a final order orjudgment has been issued, the court shouldhave nothing more to do in respect of therelative rights of the parties to the case.Conversely, "an interlocutory order is one thatdoes not finally dispose of the case and doesnot end the Court's task of adjudicating theparties' contentions in determining their rightsand liabilities as regards each other, butobviously indicates that other things remain tobe done by the Court."7

Further, the SC stressed that one reason whythe law does not permit an appeal from aninterlocutory order is to avoid the multiplicityof appeals in a single action, which wouldresult into the delay of the trial on the meritsof the case in the course of such appeal.

7BA Finance Corporation vs. Court of Appeals, G.R. No.84294, October 16, 1989.

Finally, the SC emphasized that there is nodispute that a court order denying a motion toquash is interlocutory. The denial of the

motion to quash means that the criminalinformation remains pending with the court,which must proceed with the trial to determinewhether the accused is guilty of the crimecharged therein. Equally settled is the rulethat an order denying a motion to quash,being interlocutory, is not immediatelyappealable,8 nor can it be the subject of apetition for certiorari. Such order may only bereviewed in the ordinary course of law by anappeal from the judgment after trial.9

Therefore, the Petition for Review filed byJuday is the wrong remedy to assail aninterlocutory order denying her Motion toQuash.

The SC declared that assuming JudaysPetition for Review was treated by the CTA asa special civil action for certiorari, the samewould still be dismissed for lack of merit.

According to the Court, although the CityProsecutor has the power to investigate

crimes, misdemeanors, and violations ofordinances committed within the territorialjurisdiction of the city, and which can beprosecuted before the trial courts of the saidcity, however, said prosecutor had noauthority to appear before the CTA where thecase was already pending.

Besides, there is nothing in the RevisedQuezon City Charter which would suggestthat the power of the City Prosecutor toinvestigate and prosecute crimes,

misdemeanors, and violations of ordinancescommitted within the territorial jurisdiction ofthe city is to the exclusion of the StateProsecutors.

Moreover, there could not have been aviolation of Judays right to due process andequal protection of laws just because a similar

8Villasin vs. Seven-Up Bottling Co. of the Philippines, 107 Phil.801.9Gamboa vs. Cruz, G.R. No. L-56291, June 27, 1988.


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case filed against the Songbird weredismissed by the DOJ.

The SC emphasized that the moreappropriate course of action that Judayshould have taken is to appeal the Resolutionof the State Prosecutor to the DOJ Secretary.

Juday was also not denied of due processsince she was given the opportunity to fileher affidavits and other pleadings and submitevidence before the DOJ during thepreliminary investigation of her case andbefore the Information was filed against her.Due process is merely an opportunity to be

heard. In addition, preliminary investigationconducted by the DOJ is merely inquisitorial.It is not a trial of the case on the merits. Itssole purpose is to determine whether a crimehas been committed and whether therespondent therein is probably guilty of thecrime. It is not the occasion for the full andexhaustive display of the parties' evidence.Hence, if the investigating prosecutor isalready satisfied that he can reasonablydetermine the existence of probable causebased on the parties' evidence thus

presented, he may terminate the proceedingsand resolve the case.10

There was likewise no violation of Judaysrights to equal protection of the law since shewas not able to establish that she and theSongbird were similarly situated, i.e., that theycommitted identical acts for which they werecharged with the violation of the sameprovisions of the NIRC; and that theypresented similar arguments and evidence intheir defense yet, they were treated

differently.

Much less, aside from her claim that a similarcharge against the Songbird was dismissedwhile that against her prospered, Juday hasfailed to present evidence showing that theDOJ committed a clear and intentionaldiscrimination against her.

10De Ocampo vs. Secretary of Justice, G.R. No. 147932, 25January 2006.

8. CHEVRON PHILIPPINES, INC. vs.COMMISSIONER OF CUSTOMS (G.R. No.178759, 11 August 2008)

Does entry under Section 1301 in relation toSection 1801 of the Tariff and Customs Code(TCC) refer to the Import Entry Declation(IED) or the Import Entry and InternalRevenue Declaration (IEIRD)? When shouldthe IED and IEIRD be filed? How areimportations considered abandoned underSection 1801 of the TCC? Is notice necessarybefore importations shall be deemed asimpliedly abandoned by the importer?

Chevron is engaged in importing, distributingand marketing of petroleum products.

In 1996, the importations made by theCompany were appraised at a duty rate of 3%pursuant to RA 8180.

In 1999, then Finance Secretary EdgardoEspiritu received a letter from a certainAlfonso A. Orioste, which alleged the

deliberate concealment, manipulation andscheme employed by petitioner and PilipinasShell in the importation of crude oil, therebyresulting in huge losses of revenue for thegovernment.

Subsequent to an investigation conducted bythe Bureau of Customs, Chevron received ademand letter from the District Collector ofCustoms of the Port of Batangas, requiringthe immediate settlement of the amount ofP73,535,830 which represents the difference

between the 10% duty rate prior to theeffectivity of RA 8180 on April 16, 1996 andthe 3% tariff rate under RA 8180 on theshipments made by the Company.

Acting on Chevrons request for the creationof a unified team with exclusive authority toact on the matter, the Commissioner ofCustoms assigned the Investigation andProsecution Division, Customs Intelligenceand Investigation Service (IPD-CIIS), to the


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exclusion of the Legal Division and the DistrictCollector, to handle the case.

The IPD-CIIS alleged that since the importentries pertaining to Chevrons transactions in1996 were filed beyond the 30-day non-extendible period, the importations werealready considered abandoned in favor of thegovernment.

The Commissioner of Customs subsequentlyinformed Chevron of the findings ofirregularity in the filing and acceptance of theimport entries beyond the period required bycustoms law and in the release of the

shipments after the same had already beendeemed abandoned in favor of thegovernment. In view of the foregoing,Chevron was ordered to pay the amount ofP1,180,170,769.21 representing the totaldutiable value of the importations.

On appeal with the CTA, the Courts FirstDivision affirmed the existence of fraud andordered Chevron to pay deficiency customsduties equal to P105,899,569.05.

The CTA En Banc sustained the findings offraud by the First Division and orderedChevron to pay the total dutiable value of theshipments equal to P893,781,768.21.

Chevron then filed an appeal to the SupremeCourt, which ruled that (t)he term "entry" incustoms law has a triple meaning. It means(1) the documents filed at the customs house;(2) the submission and acceptance of thedocuments and (3) the procedure of passinggoods through the customs house.11

According to the SC, the IED serves as basisfor the payment of advance duties onimportations whereas the IEIRD evidencesthe final payment of duties and taxes.

Moreover, Section 205 of the TCC defines theprecise moment when imported articles aredeemed entered in the Philippines as the

11Rodriguez vs. CA, G.R. No. 115218, September 18, 1995.

period when the specified entry form isproperly filed and accepted.

Hence, the operative act that constitutes"entry" of the imported articles at the port ofentry is the filing and acceptance of the"specified entry form" together with the otherdocuments required by law and regulations.There is no dispute that the "specified entryform" refers to the IEIRD.

In addition, the word entry was interpreted inGo Ho Lim vs. The Insular Collector ofCustoms (64 Phil. 64) as referring to theregular consumption entry, which in present

terms is the IEIRD and not the IED whichindicates provisional entry only.

The important purposes addressed by thefiling of the IEIRD are the following:1. to ascertain the value of the importedarticles; 2. collect the correct and final amountof customs duties and avoid smuggling ofgoods into the country.

Lastly, the IEIRD accompanies the finalpayment of duties and taxes which must first

be paid in full before the BOC can allow therelease of the imported goods from itscustody.

For the abovementioned reasons, the SCheld that the submission of the IEIRD cannotbe left to the exclusive discretion or whim ofthe importer.

Therefore, both the IED and IEIRD should befiled within 30 days from the date of dischargeof the last package from the vessel or aircraft.

The SC likewise found Chevron guilty offraud since the evidence showed that theCompany bided its time to file the IEIRD inorder to enable it to avail of the new rate of3% mandated under RA 8180, instead of theprevious rate of 10%.

The SC stated that (t)here was a calculatedand preconceived course of action adoptedby petitioner purposely to evade the paymentof the correct customs duties then prevailing.


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As proven during the investigation of the IPD-CIIS which was further affirmed by the CTA

First Division and CTA En Banc, indications ofChevrons deliberate intention to defraud thegovernment were its collusion with the formerDistrict Collector, who allowed the acceptanceof the late IEIRDs and the collection of dutiesusing the 3% declared rate; as well as, theCompanys non-disclosure of discrepancieson the duties declared in the IEDs (10%) andIEIRDs (3%) covering the shipments.

Under RA 7651, Chevrons failure to file therequired IEIRD within the non-extendible

period of 30 days indicates that the Companyis already deemed to have renounced all itsinterests and property rights to theimportations, even as the cargo shall beconsidered as impliedly abandoned in favor ofthe government.

Consequently, the SC ruled that in order for ashipment to be considered abandoned, italready sufficient that an importer fails to filethe required import entries within theindicated reglementary period as the law no

longer requires that there be acts oromissions where intent to abandoned may beinferred.

Moreover, the SC likewise held that notice tothe importer is not required in view of thepeculiar facts of the case.

A review of the deliberation of the Committeeon Ways and Means of the House ofRepresentatives concerning the proposedamendment to Section 1801 of the TCC,

revealed that the phrase after due noticewas intended to assist the owners/importerswho live in rural areas or places far from theport and are unfamiliar with customsprocedures and need help and advice ofpeople on how to file an entry.

More importantly, notice to Chevron is nolonger necessary as it was aware that theshipments already arrived at the Port ofBatangas, aside from the fact that the

Company already had actual physicalpossession of the property.

Since the purpose of posting an "urgentnotice to file entry" pursuant to Section B.2.1of CMO 15-94 is only to notify the importer ofthe "arrival of its shipment" and the details ofsaid shipment. Compliance with the noticerequirement is no longer required in theinstant case.

Finally, the SC ruled that the commencementof abandonment proceedings is not anecessary requirement in order to effect thetransfer of ownership of the abandoned

articles to the government.

Section 1802 of the TCC makes use of theterm ipso facto, which may be translated asby the fact itself.

Accordingly, there was no need for anyaffirmative act on the part of the governmentwith respect to the abandoned importedarticles since the law itself provides that theabandoned articles shall ipso facto bedeemed the property of the government.

Ownership over the abandoned importationwas transferred to the government byoperation of law under Section 1802 of theTCC, as amended by R.A. 7651.

4.summary of significantsc decisions (august 2008 - january 2009)

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