OTHER PERCENTAGE TAXES

CASE No. 1

[G.R. No. 146749. June 10, 2003]CHINA BANKING CORPORATION, petitioner, vs. COURT

OF APPEALS, COURT OF TAX APPEALS, and COMMISSIONER OF INTERNAL REVENUE,respondents.

[G.R. No. 147938. June 10, 2003]COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.

CHINA BANKING CORPORATION, respondent.

FACTS: CBC paid P12,354,933.00 as gross receipts tax on its   income   from   interests   on   loan   investments, commissions, services, etc. during the second quarter of 1994.

Thereafter,   Court   of   Tax   Appeals   in Asian Bank Corporation v. Commissioner of Internal Revenue[4] ruled that the 20% final withholding tax on a banks passive interest income does not form part of its taxable gross receipts.

CBC filed with the CIR a formal claim for tax refund or   credit   of P1,140,623.82   from   the P12,354,933.00 gross receipts tax that CBC paid for the second quarter of 1994.  CBC also filed on the same day a petition for review   with   the   Court   of   Tax   Appeals. Citing Asian Bank, CBC argued that   it  was not   liable   for   the gross receipts tax - amounting to P1,140,623.82 - on the sums withheld   by   the Bangko Sentral ng Pilipinas as   final withholding   tax   on   CBCs   passive   interest incomehttp://sc.judiciary.gov.ph/jurisprudence/2003/jun2003/146749.htm - _ftn7 in 1994.

ISSUE: WON the 20% final withholding tax on interest income   should   form   part   of   CBCs   gross   receipts   in computing the gross receipts tax on banks?

RULING: YES. The amount of interest income withheld in payment of the 20% final withholding tax forms part of CBCs gross receipts in computing the gross receipts tax on banks.

CBC relied on the Tax Courts ruling in Asian Bank that Section   4(e)   of   Revenue   Regulations   No.   12-80 authorizes the exclusion of the final tax from the banks taxable   gross   receipts. Section   4(e)   provides   that   the rates of taxes to be imposed on the gross receipts of such financial institutions shall be based on all items of

income actually received. The final tax, not having been received   by   the   petitioner   but   instead   went   to   the coffers of the government, should no longer form part of its gross receipts for the purpose of computing the GRT. 

The   Supreme   Court,   however,   ruled   that   the   final withholding   tax   on   interest   comes   from   the   banks income and is money the bank owns that is used to pay the   banks   tax   liability.   The   bank   can   only   pay  with money   it   owns,   or   with   money   it   is   authorized   to spend. In   either   case,   such   money   comes   from   the banks revenues or receipts, and certainly not from the government’s   coffers.   Thus,   the   amount   constituting the final tax, being originally owned by CBC as part of its interest income, should form part of its taxable gross receipts.

CBCs argument will create tax exemptions where none exist.   If   the   amount   of   the   final   withholding   tax   is excluded from taxable gross receipts, then the amount of   the   creditable   withholding   tax   should   also   be excluded from taxable gross receipts. For that matter, any  withholding   tax  should be excluded  from taxable gross receipts because such withholding would qualify as earmarking by regulation. Under Section 57(B) of the Tax Code, the Commissioner, with the approval of the Secretary   of   Finance,   may   by   regulation   impose   a withholding tax on other items of income to facilitate the   collection   of   the   income   tax. Every   time   the Commissioner   expands   the   withholding   tax,   he   will create tax exemptions where the law provides for none. Obviously, the Court cannot allow this.

CASE No. 2

CIR vs. PAL (OPT #2)

Facts:   A   franchise   is   a   legislative   grant   to   operate   a public utility. In the present case, P.D. 1590 granted PAL an option to pay the lower of two alternatives: (a) “the basic corporate income tax based on PAL’s annual net taxable   income   computed   in   accordance   with   the provisions of the NIRC” or (b) “a franchise tax of 2% of gross   revenues.”   Availment   of   either   of   these   two alternatives shall exempt the airline from the payment of   “all   other   taxes”   including   the   20   percent   final withholding   tax   on   bank   deposits.  On  Nov.   5,   1997, PAL’s AVP-Revenue filed with the CIR a written request for refund in the amount of P2M, which represents the 

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total amount of 20% final withholding tax withheld from the   respondent   by   various  withholding   agent   banks. CTA ruled PAL was not entitled to refund. The CA held that PAL was bound to pay only either (A) or (B); that Sec. 13 of PD 1590 exempts respondent form paying all other   taxes,   duties,   royalties   and  other   feeds  of   any kind.  Having   chosen   to  pay   its   corporate   income   tax liability, respondent should now be exempt from paying all other taxes including the final withholding tax. 

Issue: Whether the CA erred on a question of law ruling that the “in lieu of all other taxes” provisions in Sec. 13 of  PD No. 1590 applies  even  if  there were  in fact  no taxes paid under any of subsections (A) and (B) of the said decree. 

Held: Note that the tax liability of PAL under the option it   chose   (Item   ‘a’   of   Sec.   13   of   PD   1590)   is   to   be “computed   in   accordance  with   the   provisions   of   the NIRC”. “Taxable income” means the pertinent items of gross   income   specified   in   the   Tax   Code,   less   the deductions and/or personal and additional exemptions, if any, authorized for these types of income. Under Sec. 32 of the Tax Code, gross income means income derived from   whatever   source,   including   compensation   for services;   the   conduct   of   trade   or   business   or   the exercise of a profession; dealings in property; interests; rents;   royalties;   dividends;   annuities;   prizes   and winnings; pensions; and a partner’s distributive share in the net  income of a general  professional  partnership. Sec. 34 enumerates the allowable deductions; Sec. 35, personal and additional exemptions. 

The   definition   of   gross   income   is   broad   enough   to include all passive incomes subject to specific rates or final  taxes.  However,  since these passive  incomes are already  subject   to  different   rates  and  taxed finally  at source, they are no longer included in the computation of gross income, which determines taxable income. 

Thus,  PAL’s   franchise  exempts   it   from paying any  tax other   than   the   option   it   chooses:   either   the   “basic corporate income tax” or the 2% gross revenue tax.

CASE No. 3

CIR v Solidbank

Facts: Solidbank has previously paid its 1995 quarterly percentage tax returns for its gross receipts tax inclusive of its interest income. However, in 1996  [the Court of Tax Appeals] rendered a decision in CTA Case No. 4720 entitled Asian Bank Corporation vs. Commissioner of

Internal Revenue[,]  wherein  it  was held  that   the 20% final   withholding   tax   on   [a]   banks   interest   income should not   form part  of   its   taxable gross   receipts   for purposes of computing the gross receipts tax.

Thus, Solidbank filed a claim for refund or issuance of tax credit certificate with the BIR for the overpaid gross receipts tax for the year 1995. 

Issue: Whether or not the 20% final withholding tax on [a]   banks   interest   income   forms   part   of   the   taxable gross receipts in computing the 5% gross receipts tax

Ruling: Yes. 

1.  FWT and GRT are two different taxes.  The 5% GRT[15] is included under Title V. Other Percentage Taxes of the Tax Code and is not subject to withholding. The banks   and   non-bank   financial   intermediaries   liable therefor shall, under Section 125(a)(1),[16] file quarterly returns  on the amount of  gross  receipts  and pay the taxes due thereon within twenty (20)[17] days after the end of each taxable quarter.

The 20% FWT  is  a  Tax  on   Income. It   is  a   tax  on passive income, deducted and withheld at source by the payor-corporation and/or person as withholding agent pursuant to Section 50,[20] and paid in the same manner and subject to the same conditions as provided for in Section 51.[21]

A perusal  of   these  provisions   clearly   shows   that two   types   of   taxes   are   involved   in   the   present controversy: (1) the GRT, which is a percentage tax; and (2)   the   FWT,   which   is   an   income   tax. As   a   bank, petitioner is covered by both taxes.

A percentage tax is  a  national  tax measured by a certain  percentage  of   the  gross   selling  price  or  gross value in money of goods sold, bartered or imported; or of the gross receipts or earnings derived by any person engaged  in  the sale  of  services.[22] It   is  not  subject   to withholding.

An income tax, on the other hand, is a national tax imposed on the net or the gross  income realized in a taxable year.[23] It is subject to withholding.

2. Solidbank argues that gross receipt tax can only be subjected on income actually received by the bank, invoking  Section 4(e) of RR 12-80. The court overruled its  argument by applying the provisions of possession under the civil code.  Article 531 of the Civil Code clearly provides that the acquisition of the right of possession is   through   the   proper   acts   and   legal   formalities 

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established   therefor. The   withholding   process   is   one such act. There may not be actual receipt of the income withheld;   however,   as   provided   for   in   Article   532, possession   by   any   person   without   any   power whatsoever   shall   be   considered   as   acquired   when ratified   by   the   person   in   whose   name   the   act   of possession is executed.

In our withholding tax system, possession is acquired by the payor as the withholding agent of the government, because the taxpayer ratifies the very act of possession for   the   government. There   is thus constructive receipt. The processes of bookkeeping and  accounting   for   interest  on  deposits  and yield  on deposit   substitutes   that   are   subjected   to   FWT   are indeed -- for legal purposes -- tantamount to delivery, receipt   or   remittance.[35] Besides,   respondent   itself admits   that   its   income   is   subjected   to   a   tax   burden immediately   upon   receipt,   although   it   claims   that   it derives no pecuniary benefit or advantage through the withholding process. There being constructive receipt of such  income --  part  of  which   is  withheld   --  RR 17-84 applies, and that income is included as part of the tax base upon which the GRT is imposed. (RR 12-80 – the regulation   invoked   by   solidbank   stating   that   only incomes   actually   received   is   subjected   to   GRT   has already been superseded through implied repeal by RR 17-84,  a   regulation  which  no   longer  excepts   incomes constructively received) 

3. No double taxation. 

Double taxation means   taxing   the  same property twice when it should be taxed only once; that is, x x x taxing the same person twice by the same jurisdiction for the same thing.[117] It is obnoxious when the taxpayer is taxed twice, when it should be but once.[118] Otherwise described as  direct  duplicate  taxation,[119] the  two taxes must  be  imposed on the same subject  matter,   for   the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period; and they must be of the same kind or character.[120]  

First, the taxes herein are imposed on two different subject matters. The subject matter of the FWT is the passive   income generated   in   the   form of   interest  on deposits   and   yield   on   deposit   substitutes,  while   the subject matter of the GRT is the privilege of engaging in the business of banking.

A tax based on receipts is a tax on business rather than on the property;  hence,   it   is  an excise[121] rather than a property tax It is not an income tax, unlike the 

FWT. In   fact,  we   have   already   held   that   one   can  be taxed   for   engaging   in   business   and   further   taxed differently for the income derived therefrom.[123] Akin to our   ruling   in Velilla v. Posadas,   these   two   taxes   are entirely   distinct   and   are   assessed   under   different provisions.

Second, although both taxes are national in scope because they are imposed by the same taxing authority -- the national government under the Tax Code -- and operate within the same Philippine jurisdiction for the same purpose of   raising   revenues,   the   taxing  periods they   affect   are   different. The   FWT   is   deducted   and withheld as soon as the income is earned, and is paid after  every calendar quarter   in  which   it   is   earned. On the   other   hand,   the   GRT   is   neither   deducted   nor withheld, but is paid only after every taxable quarter in which it is earned.

Third,   these   two   taxes   are   of   different   kinds   or characters. The   FWT   is   an   income   tax   subject   to withholding,   while   the   GRT   is   a   percentage   tax   not subject to withholding.

In short, there is no double taxation, because there is no taxing twice, by the same taxing authority, within the same jurisdiction, for the same purpose, in different taxing periods,  some of   the property   in  the territory. Subjecting interest income to a 20% FWT and including it   in   the   computation   of   the   5%  GRT   is   clearly   not double taxation.

CASE No. 4

CIR vs Lhuillier GR No. 15094 (15 July 2003)

FACTS:

On 1991, the CIR issued Revenue Memorandum Order (RMO) No. 15-91, which was clarified by RMO No. 43-91 imposing a 5% lending investors tax on pawnshops. It held that the principal activity of pawnshops is lending money at   interest  and  incidentally  accepting personal property as security for the loan. Since pawnshops are considered   as   lending   investors   effective,  they   also become subject to documentary stamp taxes.

On 1997, the Bureau of Internal Revenue (BIR) issued an Assessment   Notice   against   Lhuillier   demanding payment of deficiency percentage.

Lhuillier filed an administrative protest with the Office of   the   Revenue   Regional   Director   contending   that 

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neither   the   Tax   Code   nor   the   VAT   Law   expressly imposes   5%   percentage   tax   on   the   gross   income   of pawnshops; that pawnshops are different from lending investors, which are subject to the 5% percentage tax under the specific provision of the Tax Code; that RMO No.   15-91   is   not   implementing   any   provision   of   the Internal Revenue laws but is a new and additional tax measure   on   pawnshops,   which   only   Congress   could enact, and that it impliedly amends the Tax Code, and that it is a class legislation as it singles out pawnshops.On  1998,   the  BIR   issued  Warrant  of  Distraint   and/or Levy against Lhuilliers property for the enforcement and payment of the assessed percentage tax.

When   Lhuiller's   protest   was   not   acted   upon,   they elevated it to the CIR which was also not acted upon. Lhuiller  filed a Notice and Memo on Appeal  with the CTA.

On 2000, the CTA held the the RMOs were void and that the Assessment Notice should be cancelled.

The CIR filed a motion for review with the CA which only affirmed the CTA's decision thus this case in bar.

ISSUES:  a. Whether   pawnshops   included   in   the 

term lending investors for   the   purpose   of imposing   the   5%   percentage   tax   under   the NIRC.

b. Whether or not the RMOs in question are valid

RULING:a. While it is true that pawnshops are engaged in 

the   business   of   lending  money,   they   are   not considered lending investors for the purpose of imposing   the   5%  percentage   taxes   citing   the following reasons: Pawnshops   and   lending   investors   were 

subjected to different tax treatments as per the NIRC.

Congress never intended pawnshops to be treated   in   the   same   way   as   lending investors.

The BIR had ruled several times prior to the issuance of the RMOs that pawnshops were not   subject   to   the   5%   percentage   tax imposed   by   Section   116   of   the   NIRC   of 1977.   As Section 116 of the NIRC of 1977 was  practically   lifted   from  Section  175  of the   NIRC   of   1986,   and   there   being   no 

change   in   the   law,   the   interpretation thereof should not have been altered.

Section   116   of   the   NIRC   of   1977,   as amended   by   E.O.   No.   273,   subjects   to percentage   tax   dealers   in   securities   and lending investors only. There is no mention of pawnshops.In   the   NIRC,   the   term lending investor includes   all   persons  who  make   a practice of lending money for themselves or others   at   interest. A pawnshop,   on   the other  hand,   is  defined under  Section 3 of P.D. No. 114 as a person or entity engaged in   the   business   of   lending   money   on personal property delivered as security for loans.

b. The RMOs are not valid. 

There are two kinds of administrative issuances: the legislative rule and the interpretative rule. A legislative rule  is   in the nature of subordinate legislation,   designed   to   implement   a   primary legislation by providing the details thereof. An interpretative   rule,   on   the   other   hand,   is designed to provide guidelines to the law which the   administrative   agency   is   in   charge   of enforcing. 

When   an   administrative   rule   is   merely interpretative in nature,   its  applicability  needs nothing   further   than   its   bare   issuance,   for   it gives no real consequence more than what the law itself has already prescribed. When, on the other   hand,   the   administrative   rule   goes beyond merely providing for the means that can facilitate   or   render   least   cumbersome   the implementation   of   the   law   but   substantially increases   the   burden   of   those   governed,   it behooves the agency to accord at least to those directly   affected   a   chance   to   be   heard,   and thereafter to be duly informed, before that new issuance is given the force and effect of law.

RMO No. 15-91 and RMC No. 43-91 cannot be viewed   simply   as   implementing   rules   or corrective measures revoking in the process the previous   rulings   of   past   Commissioners. Specifically, they would have been amendatory provisions   applicable   to   pawnshops.  Without these disputed CIR issuances, pawnshops would not   be   liable   to   pay   the   5%   percentage   tax, 

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considering   that   they   were   not   specifically included in Section 116 of the NIRC of 1977, as amended.   In  so doing,   the CIR did  not  simply interpret   the   law.  The due  observance  of   the requirements   of   notice,   hearing,   and publication should not have been ignored.

Thus, the Supreme Court held that even though the RMOs were issued in accordance with the power   of   the   CIR,   they   cannot   issue administrative rulings or circulars not consistent with   the   law   sought   to   be   applied. It   should remain consistent  with the  law they  intend to carry out. Only Congress can repeal or amend the law.

CASE No. 5

TAMBUNTING PAWNSHOP V. CIR

Facts:   The   CIR   sent   Tambunting   Pawnshop,   Inc. (petitioner)   an   assessment   notice   dated   January   15, 2003   for   P3,055,564.34   deficiency   value-added   tax (VAT),  P406,092.50 deficiency documentary stamp tax on pawn tickets, P67,201.55 deficiency withholding tax on compensation, and P21,723.75 deficiency expanded withholding tax, all inclusive of interests and surcharges for the taxable year 1999. 

Petitioner protested the assessment.  2 As the protest merited  no   response,   it  filed  a  Petition  for  Review 3 with the Court of Tax Appeals. It contended that Pawn Tickets are not subject to DST.

The  First  Division  of   the  CTA   ruled   that  petitioner   is liable for VAT and documentary stamp tax but not for withholding   tax   on   compensation   and   expanded withholding tax.

Petitioner's   Motion   for   Partial   Reconsideration   11 having been denied, 12 it filed a Petition for Review 13 before the CTA En Banc which dismissed 14 it as it did petitioner's Motion for Reconsideration. 15

Issue: Whether Pawn Tickets are subject to DST.

Held: YES.

Section   195   of   the   National   Internal   Revenue   Code provides:Section   195.  On  every  mortgage   or   pledge  of   lands, estate   or   property,   real   or   personal,   heritable   or 

movable, whatsoever, where the same shall be made as a security for the payment of any definite and certain sum of money lent at the time or previously due and owing or forborne to be paid, being payable, and on any conveyance of land, estate, or property whatsoever, in trust or to be sold, or otherwise converted into money which shall be and intended only as security, either by express stipulation or otherwise,there shall be collected a documentary stamp tax . . . . (underscoring supplied)A D[ocumentary] S[tamp] T[ax] is an excise tax on the exercise of a right or privilege to transfer obligations, rights or properties incident thereto.

Pledge is among the privileges, the exercise of which is subject   to   DST.   A   pledge   may   be   defined   as   an accessory,   real   and   unilateral   contract   by   virtue   of which   the   debtor   or   a   third   person   delivers   to   the creditor   or   to   a   third   person   movable   property   as security for the performance of the principal obligation, upon the fulfillment of which the thing pledged, with all its accessions and accessories, shall be returned to the debtor or to the third person.

Section   3   of   the   Pawnshop  Regulation  Act   defines   a pawn ticket as follows:

"Pawn ticket" is the pawnbrokers' receipt for a pawn. It is   neither   a   security   nor   a   printed   evidence   of indebtedness."

True,   the   law   does   not   consider   said   ticket   as   an evidence   of   security   or   indebtedness.   However,   for purposes of taxation, the same pawn ticket is proof of an   exercise   of   a   taxable   privilege   of   concluding   a contract   of   pledge.   There   is   therefore   no   basis   in petitioner's  assertion that a DST is  literally a tax on a document and that no tax may be imposed on a pawn ticket. 23 (emphasis and underscoring supplied)

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CASE No. 6

MANILA ELECTRIC COMPANY VS. YATCO

“ The premium tax is due on a policy issued by a foreign insurance company, although perfected abroad, if the risk covered by the insurance is located in the Phils.”Facts:

Manila   Electric   Company   (MERALCO)   is   a corporation  organized   and   existing   under   the laws of   the  Phils.  with   its  principal  office and place of business in the City of Manila.

In 1953,  it   insured with the  City of New York Insurance Company and   the  United States Guaranty Company,   certain   real  and personal properties situated in the Phils.  The insurance was entered into in behalf of MERALCO by its broker in New York City.

The   insurance   companies   are   foreign corporations not licensed to do business in the Phils. and having no agents therein.

MERALCO throught its broker, paid, in New York the insurance premiums in the sum of P91,696. The CIR, under the authority of Sec. 192 of Act. No.  2427,  as  amended,  assessed and  levied a tax  of  1% on said  premiums which  MERALCO paid under protest.

SEC 192.  xxx . . . In all cases where owners of 

property obtain insurance directly with foreign companies, it shall be the duty of   said   owners   to   report   to   the insurance commissioner and to the CIR each case where insurance has been so effected, and shall  pay the tax of one per centum on premium paid,   in   the manner   required   by   law   of   insurance companies, and shall be subject to the same penalties for failure to do so.

MERALCO assailed the constitutionality  of  this provision relying upon a decision made by the Supreme Court of the United States (our SC said that the US case relied upon by MERALCO is not applicable in their case). 

Issue: WON the disputed tax  is  one  imposed by the Commonwealth of the Phils.  upon a   contract beyond its jurisdiction.

Held: The Commonwealth of the Phils. has the power to impose the tax upon the insured, regardless 

of whether the contract is executed in a foreign country and with a foreign corporationwhere:a) Where the insured in the Phils. b) the risk insured against also within the

Phils. c) and certain incidents of the contract are to 

be attended to in the Phils.such as:

payment   of   dividends   when received in cash

sending   of   an   adjuster   into   the Phils. in case of dispute

or making of proof of lossUnder such circumstances, substantial elements of the contract may be said to be so situated in the Phils. as to give its government the power to tax. And, even if it be assumed that the tax imposed   upon   the   insured  will   ultimately   be passed on to the  insurer,  thus constituting an indirect   tax   upon   the   foreign   corporation,   it would   still   be   valid   because   the   foreign corporation, by the stipulations of its contract, has subjected itself to the taxing jurisdiction of the Phils.

DOCUMENTARY STAMP TAX

CASE No. 1

Philippine Banking Corp. vs CIRG.R. No. 170574

Facts:Philippine Banking Corp. (PBC)  is  a banking institution which offered its SSDA to its depositors. The SSDA is a form of a savings deposit evidenced by a passbook and earning   a  higher   interest   rate   than  a   regular   savings account.  PBC believes that the SSDA is not subject to Documentary Stamp Tax (DST) on the ground that such is   in   the   nature   of   a   regular   savings   account.   CIR explains   that   certificates  of  deposits  deriving   interest are   subject   to   the   payment   of   DST.   In   addition,   it reiterates   that  PBC’s  passbook  evidencing   its   SSDA  is considered   a   certificate   of   deposit,   and   being   very similar to a time deposit account, it should be subject to the payment of DST.

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Issue:Whether or not PBC’s SSDAs are "certificates of deposits drawing interest" which are subject to DST?Held:Yes, an SSDA is identical to a time deposit account and is therefore subject to DST.Documentary   stamp   tax   is   a   tax   on   documents, instruments,   loan  agreements,  and  papers  evidencing the   acceptance,   assignment,   sale   or   transfer   of   an obligation, right or property incident thereto. A DST is actually   an   excise   tax   because   it   is   imposed   on   the transaction   rather   than   on   the   document.   Hence,   in imposing   the  DST,   the   Court   considers   not   only   the document   but   also   the   nature   and   character   of   the transaction.As   correctly   observed   by   the   CTA,   a   certificate   of deposit is a written acknowledgment by a bank of the receipt of a sum of money on deposit which the bank promises to pay to the depositor,  to the order of the depositor,   or   to   some   other   person   or   his   order, whereby the relation of debtor or creditor between the bank and the depositor is created.Based   on   its   features,   it   is   clear   that   the   SSDA   is   a certificate  of  deposit  drawing   interest   subject   to  DST even if it is evidenced by a passbook and non-negotiable in character. A document to be deemed a certificate of deposit   requires  no   specific   form as   long  as   there   is some written memorandum that the bank accepted a deposit of a sum of money from a depositor. What is important   and   controlling   is   the   nature   or  meaning conveyed by the passbook and not the particular label or nomenclature attached to it, inasmuch as substance, not form, is paramount.

CASE No. 2

Fort Bonifacio Development Corp., Petitioner vs. Commissioner of Internal Revenue (CIR)

Facts:  Congress   created   the   Bases   Conversion Development   Authority(BCDA)   for   the  purpose   of raising   funds   through  the  sale   to  private   investors  of military   camps   located   in  Metro  Manila.   To   do   this, BCDA   established   the  Fort   Bonifacio   Development Corporation  (FBDC  )  to develop a 440-hectare area in Fort   Bonifacio,   Taguig   City,   for   mixed   residential, commercial,   business,   institutional,   recreational, tourism, and other purposesThe Republic sold the Fort Bonifacio land to FBDC under a   special   patent   and   the   latter   paid   for   it   with   a promissory note. Subsequently, the Republic executed a 

Deed   of   Absolute   sale.   Congress   then,   enacted R.A. 7917,   declaring   exempt   from   all   forms   of   taxes   the proceeds of the Government sale of the Fort Bonifacio land.More than three years later the CIR issued a Letter of Authority,   providing   for   the   examination   of   FBDC's books   and   other   accounting   records   covering   all   its internal revenue liabilities for the 1995 taxable year, the year   it   came  into  being.   It   issued a  Final  Assessment Notice to FBDC for deficiency documentary stamp tax of P1,068,412,560.00 based on the Republic's 1995 sale to it of the Fort Bonifacio land.FBDC   protested   the   assessment   invoking R.A.   7917, which exempted the proceeds of the sale of the Fort Bonifacio land from all forms of taxes.CTA   denied   FBDC's   petition   and   affirming   the Commissioner's  DST assessment.  The CTA treated the Republic's issuance of the Special Patent separate and distinct from the Deed of Absolute Sale that it executed. The former, said the CTA, was tax exempt but the latter was not.During the pendency of these petitions or on December 17,   2004   the   FBDC  filed  a  manifestation  and  motion informing the Court that the disputed assessment had already been paid.

IssueWhether or not the FBDC is liable for the payment of the DST and a 20% delinquency interest on the Deed of Absolute   Sale  of   the  214-hectare   Fort  Bonifacio   land that the Republic executed in FBDC's favor

The Ruling of the Court

No.

The   Republic's   subsequent   execution   of   a  Deed  of Absolute   Sale   cannot   be   regarded   as   a   separate transaction   subject   to   the   payment   of   DST.   The Republic's sale of the land to FBDC under the Special Patent was a complete and a valid sale that conveyed ownership of the land to the buyer.Clearly, in acknowledging that the Republic "has issued . . . a Special Patent which will absolutely and irrevocably grant and convey" the legal title over the land to FBDC, the   Republic   in   effect   admitted   that   the   Deed   of Absolute  Sale  was  only  a   formality,  not  a  vehicle   for conveying ownership, that it thought essential for the issuance of an Original Certificate of Title (OCT) covering the   land.   The   issuance   of   the   OCT   lent   itself   to unrestricted   commercial   use   that   helped   attain   the law's   objective   of   raising   through   the   BCDA   and   its subsidiaries the funds needed for specified government projects.   Furthermore,   the   government   warranted 

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under the Deed of Absolute Sale it executed in FBDC's favor that "[T]here are no . . . taxes due and owing on or in   respect   of   the   subject   property   or   the   transfer thereof in favor of the buyer."

The sale of Fort Bonifacio land was  not a privilege but an obligation imposed by law which was to sell lands in order   to   fulfill  a  public  purpose.  To  charge  DST  on a transaction  which  was   basically   a   compliance  with   a legislative mandate would go against its very nature as an excise tax.

CASE No. 3

COMMISSIONER OF INTERNAL REVENUE, Petitioner , v. MANILA BANKERS' LIFE INSURANCE CORPORATION, Respondent (G.R. No. 169103:March 16, 2011.)

 FACTS: On December  14,  1999,  based on   the  findings  of   its Revenue   Officers,   the   petitioner   BIR   issued   a Preliminary Assessment Notice against the respondent Manila   Bankers   Life   Insurance   Corporation   for   its deficiency internal revenue taxes for the year 1997.The respondent agreed to all the assessments issued against it except to the amount of P2,351,680.90 representing deficiency   documentary   stamp   taxes   on   its   policy premiums and penalties.Thus, on January 4, 2000, the petitioner issued against the   respondent  a  Formal   Letter  of  Demand  with   the corresponding   Assessment   Notices   attached,   one   of which was pertaining to the documentary stamp taxes due on respondent’s policy premiums. On February 3, 2000, the respondent filed its Letter of Protest   with   the   Bureau   of   Internal   Revenue   (BIR) contesting the assessment for deficiency documentary stamp tax on its insurance policy premiums. It remained unacted   upon,   and   thus,   on   October   26,   2000,   the respondent filed a Petition for Review with the CTA for the cancellation of Assessment Notice. The CTA granted the petition, which the CA affirmed. Thus, this petition filed by the CIR. The deficiency documentary stamp tax was assessed on the increases in the life insurance coverage of two kinds of policies: the "Money Plus Plan," which is an ordinary term life insurance policy; and the group life insurance policy.   The   increases   in   the   coverage   of   the   life 

insurance policies were brought about by the premium payments   made   subsequent   to   the   issuance   of   the policies. The Money Plus Plan is a 20-year term ordinary life   insurance   plan   with   a   "Guaranteed   Continuity Clause" which allowed the policy holder to continue the policy   after   the   20-year   term   subject   to   certain conditions. Under the plan, the policy holders paid their premiums  in five separate periods,  with the premium payments, after the first period premiums, to be made only   upon   reaching   a   certain   age.   The   succeeding premium payments translated to increases in the sum assured.   Thus,   the  petitioner  believed   that   since   the documentary stamp tax was affixed on the policy based only on the first period premiums, then the succeeding premium   payments   should   likewise   be   subject   to documentary   stamp   tax.   In   the   case   of   respondents group insurance, the deficiency documentary stamp tax was   imposed   on   the   premiums   for   the   additional members   to   already   existing   and   effective   master policies.  The petitioner  concluded  that  any  additional member to the group of employees, who were already insured   under   the   existing   mother   policy,   should similarly be subjected to documentary stamp tax. ISSUE  Whether   or   not   documentary   stamp   tax   should   be imposed on increase due to additional premiums in the Money Plus Plan and the group insurance plan HELDThe petition is granted. TAXATION:   Documentary   stamp   tax   on   insurance policies.Under Section 173 of the Tax Code, the documentary stamp tax becomes due and payable at   the time the insurance policy   is   issued,  with   the  tax  based on  the amount insured by the policy as provided for in Section 183. The provision which specifically applies to renewals of   life   insurance  policies   is  Section  183,  which   states that on all policies of insurance or other instruments by whatever name the same may be called, whereby any insurance shall  be made or renewed upon any  life or lives, there shall be collected a documentary stamp tax. 

DST on “Money Plus Plan”To   argue   that   there   was   no   new   legal   relationship created by the availment of the guaranteed continuity clause   would   mean   that   any   option   to   renew, 

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integrated in the original agreement or contract, would not in reality be a renewal but only a discharge of a pre-existing obligation. The truth of the matter is that the guaranteed continuity clause only gave the insured the right to renew his life insurance policy which had a fixed term of  twenty years.  And although the policy would still   continue   with   essentially   the   same   terms   and conditions, the fact is, its maturity date, coverage, and premium rate would have changed.  We cannot agree with the CTA in its holding that "the renewal, is in effect treated as an increase in the sum assured since no new insurance   policy   was   issued."   The   renewal   was   not meant   to   restore   the   original   terms   of   an   old agreement, but instead it was meant to extend the life of an existing agreement, with some of the contract's terms  modified.  This   renewal  was  still   subject   to   the acceptance and to the conditions of both the insured and   the   respondent.   This   is  entirely  different   from a simple mutual agreement between the insurer and the insured,   to   increase   the   coverage  of   an   existing   and effective life insurance policy.It   is   clear   that   the   availment   of   the   option   in   the guaranteed continuity clause will effectively renew the Money Plus Plan policy, which is indisputably subject to the imposition of documentary stamp tax under Section 183   as   an   insurance   renewed   upon   the   life   of   the insured.

DST on Group Life InsuranceWith regard to the group policy, the respondent asserts that since the documentary stamp tax, by its nature, is paid  at   the time of   the   issuance of   the  policy,   “then there   can   be   no   other   imposition   on   the   same, regardless of any change in the number of employees covered by the existing group insurance.“However,   every   time   the   respondent   registers   and attaches another employee an existing master policy, it exercises   its   privilege   to   conduct   its   business   of insurance and this  is patently subject to documentary stamp tax as insurance made upon a life under Section 183.   Whenever   a   master   policy   admits   of   another member, another life is insured and covered. Petition is GRANTED and the decisions of the CTA and CA are SET ASIDE. CASE No. 4

H. TAMBUNTING VS CIR

FACTS:• The   case   stemmed   from   a   Pre-Assessment Notice[4]   issued   by   the   Commissioner   of   Internal Revenue   (CIR)   against  H.   Tambunting  Pawnshop,   Inc. (Tambunting)   for,   among   others,   deficiency documentary stamp tax (DST) of P50,910.• Tambunting   filed   its   written   protest   to   the assessment  notice  alleging   that   it  was  not  subject   to documentary   stamp   tax   under   Section  195[7]   of   the National   Internal   Revenue   Code   (NIRC)   because documentary   stamp   taxes   were   applicable   only   to pledge contracts,  and the pawnshop business did not involve contracts of pledge.AARGUMENTS:• SOLGEN:  argues   that  Section 195 of   the  NIRC expressly provides that a documentary stamp tax shall be collected on every pledge of personal property as a security for the fulfillment of the contract of loan. Since the transactions in a pawnshop business partake of the nature of pledge transactions, then pawn transactions evidenced by pawn tickets, are subject to documentary stamp taxes.• PETITIONER TAMBUNTING: Petitioner contends that it is the document evidencing a pledge of personal property which is subject to the DST. A pawn ticket is defined   under   Section   3   of   Presidential   Decree   No. 114[11] as the pawnbrokers receipt for a pawn [and] is neither   a   security   nor   a   printed   evidence   of indebtedness.   Petitioner   argues   that   since   the document   taxable  under   Section  195  must   show  the existence  of  a  debt,  a  pawn ticket  which   is  merely  a receipt for a pawn is not subject to DST.• Petitioner   further   contends   that   the   DST   is imposed on the documents issued, not the transactions so had or accomplished. It insists that the document to be taxed under the transaction contemplated should be the pledge agreement,   if  any  is   issued,  not the pawn ticket.ISSUES:RULING:LEGAL PROVISION APPLICABLE: 

“SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust. On every mortgage or pledge of lands, estate, or   property,   real   or   personal,   heritable   or  movable, whatsoever, where the same shall be made as a security for   the   payment   of   any   definite   and   certain   sum  of money lent at the time or previously due and owing or forborne to be paid,….”

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• The  law imposes DST on documents  issued  in respect  of   the   specified   transactions,   such  as  pledge, and   not   only   on   papers   evidencing   indebtedness. Therefore, a pawn ticket,  being issued in respect of a pledge   transaction,   is   subject   to   documentary   stamp tax.• Petitioners explanations fail to dissuade us from recognizing   the   pawn   ticket   as   the   document   that evidences the pledge. True, the pawn ticket is neither a security  nor  a  printed  evidence  of   indebtedness.  But, precisely being a receipt for a pawn, it documents the pledge. A pledge is a real contract, hence, it is necessary in order to constitute the contract of pledge, that the thing   pledged   be   placed   in   the   possession   of   the creditor,  or of a third person by common agreement.[15] Consequently, the issuance of the pawn ticket by the pawnshop means that the thing pledged has already been placed in its possession and that the pledge has been constituted.

DECISION:   TAMBUNTING   is   hereby   ordered   to   pay petitioner   Commissioner   of   Internal   Revenue,   the amount   of   Php50,910.00   as   1997   deficiency documentary   stamp   tax   assessment.   EXCLUDING SURCHARGES

CASE No. 5

COMMISSIONER OF INTERNAL REVENUE vs. LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. (now JARDINE-CMA LIFE INSURANCE COMPANY, INC.) and THE COURT OF APPEALSG.R. No. 119176 | March 19, 2002

Facts:In the years prior to 1984, private respondent issued a special kind of life insurance policy known as the "Junior Estate   Builder   Policy,"   the   distinguishing   feature   of which is a clause providing for an automatic increase in the amount of life insurance coverage upon attainment of  a   certain  age  by   the   insured  without   the  need  of issuing a new policy. The clause was to take effect in the year 1984. Documentary stamp taxes due on the policy were paid by petitioner only on the initial sum assured.Subsequently, petitioner issued deficiency documentary stamps tax assessment for the year 1984 in the amount of   P464,898.75   corresponding   to   the   amount   of automatic   increase  of   the   sum assured  on  the  policy issued by respondent.Private   respondent   questioned   the   deficiency assessments and sought their cancellation in a petition 

filed in the Court of Tax Appeals.The Court of Tax Appeals found no valid basis for the deficiency tax assessment on the insurance policy. The Court of Appeals affirmed the decision of the Court of Tax Appeals decision insofar as it nullified the deficiency assessment on the insurance policy.The Commissioner of Internal Revenue filed the present petition   questioning   that   portion   of   the   Court   of Appeals’   decision   which   invalidated   the   deficiency assessment on the insurance policy.Petitioner claims that the "automatic increase clause" in the   subject   insurance   policy   is   separate   and   distinct from   the   main   agreement   and   involves   another transaction; and that, while no new policy was issued, the original  policy  was essentially   re-issued when the additional obligation was assumed upon the effectivity of   this  "automatic   increase  clause"   in  1984;  hence,  a deficiency   assessment   based   on   the   additional insurance not covered in the main policy is in order.Issues:1.  Whether  or  not  the automatic  increase clause  is  a single agreement embodied in the policy or a separate agreement.2.  Whether  or  not   the Court  of  Appeals  erred  in  not computing the amount of tax on the total value of the insurance assured in the policy including the additional increase assured by the automatic increase clause.Ruling:The petition is impressed with merit.It   is   clear   from   Section   173   that   the   payment   of documentary stamp taxes is done at the time the act is done   or   transaction   had   and   the   tax   base   for   the computation   of   documentary   stamp   taxes   on   life insurance policies under Section 183 is the amount fixed in   policy,   unless   the   interest   of   a   person   insured   is susceptible   of   exact   pecuniary   measurement.   The amount fixed in the policy  is the figure written on its face   and   whatever   increases   will   take   effect   in   the future   by   reason   of   the   "automatic   increase   clause" embodied   in   the  policy  without   the  need  of  another contract.Here, although the automatic increase in the amount of life insurance coverage was to take effect later on, the date   of   its   effectivity,   as  well   as   the   amount   of   the increase,   was   already   definite   at   the   time   of   the issuance of the policy. Thus, the amount insured by the policy at   the time of   its   issuance necessarily   included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy.

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The deficiency of documentary stamp tax imposed on private respondent is definitely not on the amount of the original insurance coverage, but on the increase of the amount insured upon the effectivity of the "Junior Estate Builder Policy."To claim that the  increase  in the amount  insured (by virtue   of   the   automatic   increase   clause   incorporated into the policy at the time of issuance) should not be included in the computation of the documentary stamp taxes due on the policy would be a clear evasion of the law requiring that the tax be computed on the basis of the amount insured by the policy.

CASE No. 6

JAKA INVESTMENTS CORP. VS. CIR, GR NO. 147629, JULY 28, 2010

Facts:

Sometime in 1994, petitioner sought to invest in JAKA Equities Corporation (JEC), which was then planning to undertake an initial public offering (IPO) and listing of its shares of stock with the Philippine Stock Exchange. JEC increased its authorized capital stock from One Hundred Eighty-Five   Million   Pesos   (P185,000,000.00)   to   Two Billion  Pesos   (P2,000,000,000.00).  Petitioner  proposed to   subscribe   to   Five   Hundred   Eight   Million   Eight Hundred   Six   Thousand   Two   Hundred   Pesos (P508,806,200.00) out of the increase in the authorized capital stock of JEC through a tax-free exchange under Section 34(c)(2) of the National Internal Revenue Code (NIRC) of 1977, as amended, which was effected by the execution   of   a   Subscription  Agreement   and  Deed   of Assignment   of   Property   in   Payment   of   Subscription. Under   this   agreement   the   petitioner   assigned   and transferred   to   JEC   all   its   shares   from  Republic  Glass Holdings   Corp.,   Phil.   Global   Communications,   Inc., United Coconut  Planters  Bank and Far  East  Bank and Trust Company.

The  intended IPO and listing of shares of  JEC did not materialize. However, JEC still decided to proceed with the   increase   in   its   authorized   capital   stock   and petitioner   agreed   to   subscribe   thereto,   but   under different   terms  of  payment.  Thus,  petitioner  and   JEC executed the Amended Subscription Agreement[4]  on September   5,   1994,   wherein   the   above-enumerated RGHC, PGCI, and UCPB shares of stock were transferred to   JEC.   In   lieu   of   the   FEBTC   shares,   however,   the amount   of   Three   Hundred   Seventy   Million   Seven 

Hundred   Sixty-Six   Thousand   Pesos   (P370,766,000.00) was paid for in cash by petitioner to JEC.

On  October  17,  1994,  Revenue  District  Officer   (RDO) Atty. Sixto S. Esquivias IV (RDO Esquivias) issued three Certifications.   Petitioner,   after   seeing   the   RDOs certifications, the total amount of which was less than the actual  amount it  had paid as documentary stamp tax,   concluded   that   it   had   overpaid.   Petitioner subsequently   sought   a   refund   for   the   alleged   excess documentary stamp tax and surcharges it had paid on the Amended Subscription Agreement in the amount of Four Hundred Ten Thousand Three Hundred Sixty-Seven Pesos (P410,367.00).

Petitioners main contention in this claim for refund is that the tax base for the documentary stamp tax on the Amended   Subscription   Agreement   should   have   been only the shares of stock in RGHC, PGCI, and UCPB that petitioner   had   transferred   to   JEC   as   payment   for   its subscription   to   the   JEC   shares,   and   should   not   have included   the   cash   portion   of   its   payment,   based   on Section 176 of the National  Internal  Revenue Code of 1977, as amended by Republic Act No. 7660, or the New Documentary Stamps Tax Law (the 1994 Tax Code), the law applicable at the time of the transaction. Petitioner argues that the cash component of its payment for its subscription to the JEC shares, totaling Three Hundred Seventy   Million   Seven   Hundred   Sixty-Six   Thousand Pesos (P370,766,000.00) should not have been charged any documentary stamp tax.CTA denied its petition for refund.CA sustained the CTA.

Issue: WON petitioner is entitled to a partial refund of the DST and surcharges it paid on the execution of the Amended Subscription Agreement.

Held: NO.

The court cited Compagnie Financiere Sucres Et Denrees v. Commissioner of Internal Revenue:

x   x   x   Tax   refunds   are   a derogation of the State's taxing power. Hence,   like   tax   exemptions,   they   are construed strictly  against   the  taxpayer and   liberally   in   favor   of   the   State. Consequently,   he   who   claims a refund or   exemption   from   taxes   has the burden of justifying the exemption 

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by words too plain to be mistaken and too categorical to be misinterpreted. x x x.

It was thus incumbent upon petitioner to show clearly its   basis   for   claiming   that   it   is   entitled   to   a   tax refund. This, to our mind, the petitioner failed to do.

Xxxxxxxxxx

Sec. 173.  Stamp taxes upon documents, instruments, and papers. Upon documents, instruments, and papers, and upon acceptances, assignments, sales, and transfers of   the  obligation,  or  property   incident   thereto,   there shall be levied, collected and paid for, and in respect of the   transaction   so   had   or   accomplished,   the corresponding documentary stamp taxes prescribed in the   following   sections   of   this   Title,   by   the   person making,  signing,   issuing,  accepting,  or transferring the same, whenever the document is made, signed, issued, accepted  or   transferred  when   the  obligation  or   right arises   from   Philippine   sources   or   the   property   is situated in the Philippines, and at the same time such act is done or transaction had: Provided, That whenever one party to the taxable document enjoys exemption from the tax herein  imposed, the other party thereto who is not exempt shall be the one directly liable for the tax. (as amended by R.A. No. 7660)

The DST imposition is essentially addressed and directly   brought   to   bear   upon   the   DOCUMENT evidencing   the   transaction   of   the   parties   which establishes its rights and obligations. In the case at bar, the rights and obligations between petitioner   JAKA   Investments   Corporation   and   JAKA Equities Corporation are established and enforceable at the   time   the   Amended   Subscription   Agreement   and Deed   of   Assignment   of   Property   in   Payment   of Subscription   were   signed   by   the   parties   and   their witness,   so   is   the   right   of   the   state   to   tax   the aforestated document evidencing the transaction. DST is a tax on the document itself and therefore the rate of tax must be determined on the basis of what is written or indicated on the instrument itself independent of any adjustment   which   the   parties  may   agree   on   in   the future x x x. The DST upon the taxable document should be paid at the time the contract is executed or at the time   the   transaction   is   accomplished.   The   overriding purpose of   the  law  is  the collection of   taxes.  So that when it paid in cash the amount of P370,766,000.00 in 

substitution for, or replacement of the 1,313,176 FEBTC shares,   its   payment   of   P1,003,835.65   documentary stamps tax pursuant to Section 175 of NIRC is in order.

A documentary stamp tax is in the nature of an excise tax. It is not imposed upon the business transacted but is  an excise upon the privilege,  opportunity or facility offered at exchanges for the transaction of the business. It is an excise upon the facilities used in the transaction of the business separate and apart from the business itself.   Documentary   stamp   taxes   are   levied   on   the exercise by persons of  certain privileges conferred by law for the creation, revision, or termination of specific legal   relationships   through   the   execution   of   specific instruments. Thus, we have held that documentary stamp taxes are levied   independently   of   the   legal   status   of   the transactions   giving   rise   thereto.   The   documentary stamp taxes must be paid upon the issuance of the said instruments,  without  regard to whether the contracts which gave rise to them are rescissible, void, voidable, or unenforceable.

The relevant provisions of the Tax Code at the time of the transaction are quoted below: Sec. 175.  Stamp tax on original issue of certificates of stock. On every original issue, whether on organization, reorganization or for any lawful purpose, of certificates of stock by any association, company, or corporations, there   shall  be  collected  a  documentary   stamp  tax  of Two   pesos   (P2.00)   on   each   two   hundred   pesos,   or fractional   part   thereof,   of   the   par   value   of   such certificates:  Provided,  That   in  the case of   the original issue   of   stock  without   par   value   the   amount   of   the documentary   stamp   tax   herein   prescribed   shall   be based  upon   the  actual   consideration   received  by   the association, company, or corporation for the issuance of such stock,  and in the case of stock dividends on the actual value represented by each share. Sec. 176.  Stamp tax on sales, agreements to sell, memoranda of sales, deliveries or transfer of due-bills, certificates of obligation, or shares or certificates of stock. On all sales, or agreements to sell, or memoranda of   sales,   or   deliveries,   or   transfer   of   due-bills, certificates   of   obligation,   or   shares   or   certificates   of stock   in   any  association,   company  or   corporation,  or transfer of such securities by assignment in blank, or by delivery,   or   by   any   paper   or   agreement,   or memorandum  or   other   evidences   of   transfer   or   sale 

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whether   entitling   the   holder   in   any  manner   to   the benefit  of   such  due-bills,   certificates  of   obligation  or stock, or to secure the future payment of money, or for the   future   transfer   of   any   due-bill,   certificates   of obligation   or   stock,   there   shall   be   collected   a documentary  stamp tax of  One peso (P1.00)  on each two hundred pesos,  or   fractional  part   thereof,  of  the par value of such due-bill,  certificates of obligation or stock: Provided, That only one tax shall be collected on each  sale  or   transfer  of   stock  or   securities   from one person   to   another,   regardless   of   whether   or   not   a certificate of stock or obligation is issued, endorsed, or delivered   in   pursuance  of   such   sale   or   transfer:   and Provided, further, That in the case of stock without par value   the   amount  of   the   documentary   stamp  herein prescribed   shall   be   equivalent   to   twenty-five   per centum of the documentary stamp tax paid upon the original issue of said stock: Provided, furthermore, That the tax herein imposed shall be increased to One peso and fifty centavos (P1.50) beginning 1996. The court cited its previous rulings:

Commissioner of Internal Revenue v. First Express Pawnshop Company, Inc.:

In Section 175 of the Tax Code, DST is imposed on the original issue of shares of stock. The DST, as an excise tax, is levied upon the privilege, the opportunity and the facility  of   issuing   shares  of   stock.   In Commissioner of Internal Revenue v. Construction Resources of Asia, Inc., this   Court   explained   that the DST attaches upon acceptance of the stockholder's subscription in the corporation's capital stock regardless of actual or constructive delivery of the certificates of stock.

Philippine Consolidated Coconut Ind., Inc. v. Collector of Internal Revenue:

When is the certificate of stock deemed 'issued' for the purpose   of   imposing   the   documentary   stamp   tax? Ordinarily,  when  a   corporation   issues   a   certificate  of stock   (representing   the   ownership   of   stocks   in   the corporation to fully paid subscription) the certificate of stock can be utilized for the exercise of the attributes of ownership over the stocks mentioned on its face. The stocks can be alienated; the dividends or fruits derived therefrom can be enjoyed, and they can be conveyed, pledged or encumbered. The certificate as issued by the corporation, irrespective of whether or not it is in the actual or constructive possession of the stockholder, is 

considered  issued because  it   is  with value and hence the documentary stamp tax must be paid as imposed by Section 212 of the National Internal Revenue Code, as amended.

In Compagnie Financiere Sucres et Denrees v. Commissioner of Internal Revenue, the Court held that under Section 176 of the Tax Code, sales to secure the future transfer of due-bills, certificates of obligation or certificates of stock are subject to documentary stamp tax.

RMO 08-98, reiterating Revenue Memorandum Circular No. 47-97 (RMC 47-97), also states that what is being taxed   is   the  privilege  of   issuing   shares  of   stock,  and, therefore, the taxes accrue at the time the shares are issued. RMC 47-97 also defines issuance as the point in which   the   stockholder   acquires   and   may   exercise attributes of ownership over the stocks. As pointed out by the CTA, Sections 175 and 176 of the Tax   Code   contemplate   a   subscription   agreement   in order   for   a   taxpayer   to   be   liable   to   pay   the  DST.  A subscription contract  is defined as any contract for the acquisition of unissued stocks in an existing corporation or a corporation still to be formed. A stock subscription is a contract by which the subscriber agrees to take a certain   number   of   shares   of   the   capital   stock   of   a corporation,   paying   for   the   same   or   expressly   or impliedly promising to pay for the same.  Petitioner   claims   overpayment   of   the   documentary stamp tax but its basis for such is not clear at all. While insisting that the documentary stamp tax it had paid for was not based on the original issuance of JEC shares as provided   in   Section   175   of   the   1994   Tax   Code, petitioner failed in showing, even through a mere basic computation of the tax base and the tax rate, that the documentary stamp tax was based on the transfer of shares  under  Section 176  either.   It  would  have  been helpful for petitioners cause had it submitted proof of the par value of the shares of stock involved, to show the   actual   basis   for   the   documentary   stamp   tax computation. For comparison, the original Subscription Agreement ought to have been submitted as well. All that petitioner submitted to back up its claim were the   certifications   issued   by   then   RDO   Esquivias.   As correctly   pointed   out   by   respondent,   however,   the amounts  in the RDO certificates were the amounts of documentary stamp tax representing the equivalent of 

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each group of  shares being applied for  payment.  The purpose   for   issuing   such   certifications   was   to   allow registration of transfer of shares of stock used in partial payment   for   petitioners   subscription   to   the   original issuance   of   JEC   shares.   It   should   not   be   used   as evidence   of   payment   of   documentary   stamp   tax. Neither   should   it   be   the   lone  basis   of   a   claim   for   a documentary stamp tax refund. The fact that it was petitioner and not JEC that paid for the documentary stamp tax on the original issuance of shares is of no moment, as Section 173 of the 1994 Tax Code states that the documentary stamp tax shall  be paid by the person making, signing, issuing, accepting or transferring the property, right or obligation.

CASE No. 7

CIR vs First Express Pawnshop Company, Inc.

Facts:CIR   through   Acting   Regional   Director   of 

Revenue  Region  6,   issued  assessment  notices  against First   Express   Pawnshop   Company,   Inc.   (FIPC)   for deficiency   income   tax,   VAT   and   DST   on   deposit   on subscription and on pawn tickets. FIPC filed its written protest on the assessments. Since CIR did not act on the protest during the 180-day period, FIPC filed a petition before the CTA.

On liability to pay DST:FIPC   contends   that   it   is   not   liable   for   the 

deficiency in DST on deposit on subscription.The P800, 000 represents the payment by the 

stockholders to the company for the deposit for future subscription.   As   there   had   been   yet   no   subscription contract, FIPC should not be liable for DST. 

On finality of assessment:CIR asserts that even if FIPC filed a protest,   it 

did   not   offer   evidence   to   prove   its   claim   that   the deposit   on   subscription  was   an   “advance”  made   by FIPC’s   stockholders.   CIR   alleges   that   FIPC’s   failure   to submit supporting documents within 60 days from the filing of its protest as required    under Section 228    of the   Tax Code caused   the assessment   of P12, 328.45 for   deposit       on   subscription   to   become   final   and unassailable.Issue:

1.  Whether   respondent   is   liable   to   pay   P12, 328.45   as   DST   on   deposit   on   subscription   of   capital stock.

2.  Whether   the   assessment   (#3)   has   become final and unappealable. Held: 

1. NO, deposit on stock subscription is merely an amount of money received by a corporation with a view of  applying   the  same as  payment   for  additional issuance of shares in the future, an event which may or may not happen. 

A   subscription   contract   is   defined   as   any contract   for   the   acquisition  of   unissued   stocks   in   an existing corporation or a corporation still to be formed. 

A   stock   subscription   is   a   contract   by which the subscriber agrees to take a certain number of shares of the capital stock of a corporation, paying for the same or expressly or impliedly promising to pay for the same. 

Based on Rosario’s (company’s external auditor) testimony and respondent’s financial statements as of 1998,   there   was   no   agreement   to   subscribe   to   the unissued shares. 

As   regards   those  certificates  of   stocks temporarily subject to suspensive conditions they shall be   liable   for   said   tax   only  when   released   from   said conditions,   for   then   and   only   then   shall   they   truly acquire   any   practical   value   for   their   owners. (Commissioner   of   Internal   Revenue   v.   Construction Resources of Asia, Inc.)

Clearly,   the   deposit   on   stock   subscription   as reflected  in respondent’s  Balance Sheet as of  1998  is not a subscription agreement subject to the payment of DST. There is no P800, 000 worth of subscribed capital stock that is reflected in respondent’s GIS. 

The   deposit   on   stock   subscription   is merely an amount of money received by a corporation with   a   view   of   applying   the   same   as   payment   for additional   issuance  of   shares   in   the   future,   an  event which may or may not happen.

The person making a deposit  on stock subscription   does   not   have   the   standing   of   a stockholder and he is not entitled to dividends, voting rights   or   other   prerogatives   and   attributes   of   a stockholder. 

Hence, respondent is not liable for the payment of DST on its deposit on subscription for the reason   that   there   is   yet  no   subscription   that   creates rights and obligations between the subscriber and the corporation. 

2.   No.     Respondent   has   complied   with   the requisites   in   disputing   an   assessment   pursuant   to Section 228 of the Tax Code. Hence, the tax assessment cannot   be   considered   as   final,   executory   and 

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demandable.   Further,   respondent’s   deposit   on subscription   is   not   subject   to   the   payment   of   DST. Consequently,   respondent   is   not   liable   to   pay   the deficiency DST of P12, 328.45.   

We reject petitioner’s view that the assessment has become final and unappealable.  It  cannot be said that   respondent   failed   to   submit   relevant   supporting documents   that   would   render   the   assessment   final because   when   respondent   submitted   its   protest, respondent   attached   the   GIS   and   Balance   Sheet. Further,  petitioner cannot  insist  on the submission of proof of DST payment because such document does not exist as respondent claims that  it   is not  liable to pay, and   has   not   paid,   the   DST   on   the   deposit   on subscription.  

The   term   “relevant   supporting   documents” should be understood as those documents necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer.  The BIR can only  inform the taxpayer to submit additional documents. 

The BIR   cannot   demand   what   type of     supporting     documents     should     be     submitted. Otherwise, a taxpayer will be at the mercy of the BIR, which may require the production of documents that a taxpayer cannot submit.   

After   respondent   submitted   its   letter-reply stating that it could not comply with the presentation of the proof of DST payment, no reply was received from petitioner.  

Section 228 states that if the protest is not   acted   upon  within   180   days   from   submission  of documents,   the   taxpayer   adversely   affected   by   the inaction may appeal to the CTA within30     days     from the     lapse     of     the     180-day     period.     Respondent, having     submitted      its supporting documents on the same day the protest was filed, had until 31 July 2002 to wait for petitioner’s reply to its protest. On 28 August 2002 or within 30 days after the lapse of the 180-day period   counted   from  the  filing  of   the  protest   as   the supporting   documents   were   simultaneously   filed, respondent filed a petition before the CTA.

CASE No. 8

INTERNATIONAL EXCHANGE BANK VS CIR

FACTS:The   International   Exchange   Bank   (IEB)   personally received   an   assessment   for   deficiency   Documentary Stamp Tax (DST) on its purchases of securities from the Bangko   Sentral   ng   Pilpinas   (BSP)or   Government 

Securities   Purchased-Reverse   Repurchase   Agreement (RRPA)  and   its  Savings  Account-Fixed  Savings  Deposit (FSD) for the taxable years 1996 and 1997.

The IEB then filed a protest letter alleging that its FSD is not   subject   to   DST   since   it   cannot   be   considered   a certificate of deposit subject to DST under Section 180 of the Tax Code for, unlike a certificate of deposit which is a negotiable instrument, the passbook it issued for its FSD was not payable to the order of the depositor or to some   other   person   as   the   deposit   could   only   be withdrawn  by   the  depositor  or   by   a  duly   authorized representative.

Furthermore, the bank argued that deposits evidenced by   a   passbook   which   have   features   akin   to   a   time deposit such as petitioner’s FSD, is not subject to DST under the Tax Code and the NIRCISSUES: Whether or not the IEB’s Fixed Savings Deposit evidenced by a passbook is subject toDocumentary Stamp Tax for the years assessedRULING: A passbook representing an interest earning deposit 

account issued by a bank qualifies as a certificate of deposit   drawing   interest.   A   document   to   be deemed a certificate of deposit requires no specific form as long as there is some written memorandum that the bank accepted a deposit of a sum of money from a depositor. What is important and controlling is the nature or meaning conveyed by the passbook and   not   the   particular   label   or   nomenclature attached to it, inasmuch as substance, not form, is paramount.

The negotiable character of any and all documents under   Section   180   is   immaterial   for   purposes   of imposing  DST.  Orders   for   the  payment  of  sum of money payable at sight or on demand are of course explicitly exempted from the payment of DST.

Thus,   a   regular   savings   account  with   a   passbook which is withdrawable at any time is not subject to DST,  unlike  a  time deposit  which   is  payable  on a fixed maturity date.

As for the IEB’s argument that its FSD is similar to a regular savings deposit because it is evidenced by a passbook, the same does not lie.

The FSD, like a time deposit, provides for a higher interest   rate  when   the   deposit   is   not  withdrawn within the required fixed period; otherwise, it earns interest   pertaining   to   a   regular   savings   deposit. Having a fixed term and the reduction of  interest rates   in   case   of   pre-termination   are   essential 

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features of a time deposit.   It  bears emphasis that DST is an excise tax upon the privilege, opportunity or facility offered at exchanges for the transaction of the business. While tax avoidance schemes and arrangements are not prohibited,   tax  laws cannot be circumvented in order to evade payment of just taxes.

To claim that time deposits evidenced by passbooks should not be subject to DST is a clear evasion of the rule on equality and uniformity in taxation that requires   the   imposition   of   DST   on   documents evidencing   transactions  of   the   same   kind,   in   this particular   case,   on   all   certificates   of   deposits drawing interest

CASE No. 9

PHILIPPINE HEALTH CARE PROVIDERS, INC., Petitioner, v.COMMISSIONER OF INTERNAL REVENUE, Respondent.G.R. No. 167330June 12, 2008

FACTS:  Petitioner   is   a   domestic   corporation   whose primary purpose is [t]o establish, maintain, conduct and operate a prepaid group practice health care delivery system or  a  health  maintenance  organization to   take care  of   the  sick  and disabled persons  enrolled   in  the health care plan and to provide for the administrative, legal, and financial responsibilities of the organization.[2] Individuals enrolled in its health care programs pay an annual   membership   fee   and   are   entitled   to   various preventive,   diagnostic   and   curative   medical   services provided by its duly licensed physicians, specialists and other   professional   technical   staff   participating   in   the group practice health delivery system at a hospital  or clinic owned, operated or accredited by it.

On January 27, 2000, respondent Commissioner of   Internal  Revenue  sent  petitioner  a   formal  demand letter   and   the   corresponding   assessment   notices demanding the payment of deficiency taxes,   including surcharges and interest, for the taxable years 1996 and 1997 in the total amount of P224,702,641.18. 

The deficiency DST assessment was imposed on petitioners health care agreement with the members of its health care program pursuant to Section 185 of the 1997 Tax Code which provides:

 

Section   185. Stamp tax on fidelity bonds and other insurance policies. On all policies of insurance or bonds  or  obligations of the nature of indemnity for loss, damage, or liability made or renewed by any person, association or company or corporation transacting the business of accident, fidelity, employers liability, plate, glass, steam   boiler,   burglar,   elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance),   and   all   bonds, undertakings,   or   recognizances, conditioned for the performance of the duties of any office or position, for the doing or not doing of anything therein specified,   and   on   all   obligations guaranteeing the validity or legality of any bond or other obligations issued by any   province,   city,   municipality,   or other public body or organization, and on all obligations guaranteeing the title to any real estate, or guaranteeing any mercantile credits, which may be made or   renewed   by   any   such   person, company or corporation, there shall be collected a documentary stamp tax of fifty   centavos   (P0.50)   on   each   four pesos (P4.00),   or   fractional   part thereof,   of   the   premium   charged. (emphasis supplied)

ISSUE:  Is a health care agreement in the nature of an insurance   contract   and   therefore   subject   to   the documentary  stamp tax   (DST)   imposed under  Section 185 of Republic Act 8424 (Tax Code of 1997)?RULING: Yes. 

The DST is levied on the exercise by persons of certain   privileges   conferred   by   law   for   the   creation, revision,  or   termination  of   specific   legal   relationships through the execution of specific instruments.[12] It is an excise upon the privilege, opportunity, or facility offered at  exchanges for  the transaction of  the business.[13] In particular, the DST under Section 185 of the 1997 Tax Code is imposed on the privilege of making or renewing any policy of insurance (except life, marine, inland and fire insurance),   bond  or  obligation in the nature of indemnity for loss, damage, or liability.

 

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Under   the   law,   a   contract  of   insurance   is   an agreement whereby one undertakes for a consideration to  indemnify  another  against   loss,  damage or   liability arising   from  an   unknown  or   contingent   event.[14] The event   insured   against   must   be   designated   in   the contract and must either be unknown or contingent.[15]

 Petitioners health care agreement is primarily a 

contract  of   indemnity.  And  in  the recent case of Blue Cross Healthcare, Inc. v. Olivares,[16] this Court ruled that a health care agreement is in the nature of a non-life insurance policy.

  Petitioners   health   care   agreement   is 

substantially   similar   to   that   involved   in Philamcare Health Systems, Inc. v. CA.[18] The health care agreement in that   case entitled   the   subscriber   to   avail   of   the hospitalization   benefits,   whether   ordinary   or emergency,   listed   therein.   It   also   provided   for   out-patient benefits such as annual physical examinations, preventive   health   care   and   other   out-patient services.This Court ruled in Philamcare Health Systems, Inc.:

[T]he   insurable   interest   of   [the subscriber] in obtaining the health care agreement   was   his   own   health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. Once   the   member   incurs   hospital, medical  or  any  other  expense  arising from   sickness,   injury   or   other stipulated contingency, the health care provider must pay for the same to the extent   agreed   upon   under   the contract.[19] (emphasis supplied)  Moreover,   DST   is   not   a   tax   on   the   business 

transacted but an excise on the privilege, opportunity, or   facility  offered at  exchanges  for   the transaction of the business.[21] It is an excise on the facilities used in the   transaction   of   the   business, separate and apart from the business itself.[22]

 CASE No. 10

G.R. No. 166786 September 11, 2006MICHEL J. LHUILLER PAWNSHOP, INC.,petitioner,   vs. COMMISSIONER OF INTERNAL REVENUE,respondent.

FACTS:MICHEL J. LHUILLER PAWNSHOP, INC. is a 

corporation   engaged   in   the   pawnshop   business, received   Assessment   Notice   issued   by   the   Chief Assessment Division, Revenue Region No. 13, Cebu City, for deficiency VAT in the amount of P19,961,636.09 and deficiency DST in the amount of P13,142,986.02, for the year 1997.

Petitioner contends that before an exercise of a taxable   privilege   may   be   subject   to   DST,   it   is indispensable that the transaction must be embodied in and evidenced by a document. Since a pawn ticket as defined   in   Presidential   Decree   (P.D.)   No.   114   or   the Pawnshop  Regulation  Act   is  merely   the  pawnbrokers' receipt   for   a  pawn  and  not   a   security  nor   a  printed evidence  of   indebtedness,   it  cannot  be considered as among the documents subject to DST.ISSUE:

1.Whether   petitioner’s   pawnshop   transactions are subject to DST

2.   Whether     the   petitioner   is   liable   to   pay surcharges and interest?RULING:1.) The Court rules in the affirmative.Sections 173 and 195 of the NIRC, state:SEC.   173.Stamp Taxes Upon Documents, Loan Agreements, Instruments, and Papers.   –Upon documents, instruments, loan agreements and papers, and upon acceptances, assignments, sales and transfers of the obligation, right or property incident thereto,   there  shall  be   levied,  collected  and paid   for, and   in   respect   of   the   transaction   so   had   or accomplished,   the   corresponding  documentary   stamp taxes x x x. (Emphasis supplied)SEC. 195.Stamp Tax on Mortgages, Pledges, and Deeds of Trust. –On every mortgage or pledge of lands, estate, or   property,   real   or   personal,   heritable   or  movable, whatsoever, where the same shall be made as security for   the   payment   of   any   definite   and   certain   sum  of money lent at the time or previously due and owing or forborne   to   be   paid,   being   payable   and   on   any conveyance of land, estate, or property whatsoever, in trust or to be sold, or otherwise converted into money which shall be and intended only as security, either by express   stipulation   or   otherwise, there shall be collected a documentary stamp tax at   the   following rates:"(a)  When the amount  secured does  not  exceed Five thousand   pesos   (P5,000),   Twenty   pesos (P20).1avvphil.net(b) On each Five thousand pesos (P5,000), or fractional 

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part thereof in excess of Five thousand pesos (P5,000), an additional tax of Ten pesos (10.00).

In general, documentary stamp taxes are levied on   the   exercise   by   persons   of   certain   privileges conferred   by   law   for   the   creation,   revision,   or termination of  specific   legal   relationships   through the execution   of   specific   instruments.   Examples   of   such privileges, the exercise of which, as effected through the issuance  of   particular   documents,   are   subject   to   the payment   of   documentary   stamp   taxes   are leases of lands, mortgages, pledges and trusts, and conveyances of real property

Section  195  of   the  National   Internal  Revenue Code (NIRC) imposes a DST on every pledge regardless of whether the same is a conventional pledge governed by   the   Civil   Code   or   one   that   is   governed   by   the provisions of P.D. No. 114. All pledges are subject to DST, unless   there   is   a   law   exempting   them   in   clear   and categorical   language.     These   pledges   are   already covered   by   Section   195   and   to   create   a   separate provision especially for them would be superfluous.

it is the exercise of the privilege to enter into an accessory  contract  of  pledge,  as  distinguished  from a contract  of   loan,  which gives rise to the obligation to pay DST. If the DST under Section 195 is levied on the loan or the exercise of the privilege to contract a loan, then there would be no use for Section 179 of the NIRC, to separately impose stamp tax on all debt instruments, like a simple loan agreement. It is for this reason why the definition of pawnshop ticket, as not an evidence of indebtedness, is inconsequential to and has no bearing on the taxability of contracts of pledge entered into by pawnshops.   For   purposes   of   Section   195,   pawnshop tickets need not be an evidence of indebtedness nor a debt instrument because it taxes the same as a pledge instrument. Neither should the definition of pawnshop ticket, as not a security, exempt it from the imposition of  DST.   It  was   correctly  defined  as   such  because   the ticket   itself   is   not   the   security   but   the  pawn  or   the personal property pledged to the pawnbroker.

Moreover,   it   should   be   pointed   out   that   the provisions   of   the   NIRC   on   DST   has   recently   been amended   by   R.A.   No.   9243.   Among   the   highlights thereof  were   the  amendments   to  Section 199,  which incorporated   12   more   categories   of   documents   in addition   to   the   initial   two   categories   exempted   from DST. As stated in our May 3, 2006 Decision, pawnshop tickets is not one of them. Expressio unious est exclusion alterius. The omission of pawnshop tickets only means that it is not among the documents exempted from DST.

In   establishing   tax   exemptions,   it   should   be 

borne in mind that taxation is the rule, exemption is the exception. Accordingly, statutes granting tax exemptions must   be   construed in strictissimi juris against   the taxpayer and  liberally   in favor of  the taxing authority. One who claims an exemption from tax payments rests the  burden of   justifying   the  exemption by  words   too plain   to   be   mistaken   and   too   categorical   to   be misinterpreted.2.) NO. He is not liable to surcharge and interest. The settled rule is that good faith and honest belief that one is   not   subject   to   tax   on   the   basis   of   previous interpretation   of   government   agencies   tasked   to implement   the   tax   law,   are   sufficient   justification   to delete the imposition of surcharges and interest.

TARIFF AND CUSTOMS CODE

CASE No. 1

ILLUH ASAALI, HATIB ABDURASID, INGKOH BANTALA, BASOK INGKIN, and MOHAMMAD BANTALLA,petitioners, vs. THE COMMISSIONER OF CUSTOMS, respondent.G.R. No. L-24170 December 16, 1968 FACTS: Illuh Asaali et al. owned 5 sailing vessels ships bound for Tawi-tawi, Sulu. Said ships were intercepted by   customs   officials   on   the   high   seas.   The   ship contained   rattan   products   and   cigarettes   which   the customs confiscated on the ground of smuggling. Asaali et al did not have the required import permits for the said goods. Asaali contended that the interception and confiscation   were   not   valid   because   the   customs officers  made   such   not  within   Philippine  waters   but rather,   on   the   high   seas.   Hence,   according   to   him, Philippine   importation  laws  are  not  applicable   to   the case at bar.The Commissioner  of  Customs decided  in   favor  of   its validity which the CTA likewise reached such conclusion. Hence this appeal.

ISSUE:     WoN   the   interception   and   seizure   by   the customs   officials   on   the   high   seas,   of   the   5   sailing vessels and the cargo loaded therein for smuggling, was valid.

HELD: Yes. It is of no doubt that the ships intercepted were   of   Philippine   registry.   The   Revised   Penal   Code leaves no doubt as to its applicability and enforceability not only within the Philippines, its interior waters and maritime   zone,   but   also   outside   of   its   jurisdiction 

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against those committing offense while on a Philippine ship. Furthermore,   it  has been an establish principle that a state has the right to protect itself and its revenues, a right not  limited to its own territory but extending to the high seas. The authority of a nation within its own territory   is   absolute   and   exclusive.   The   seizure   of   a vessel within the range of its cannon by a foreign force is an invasion of that territory, and is a hostile act which it is its duty to repel. But its power to secure itself from injury may certainly be exercised beyond the limits of its territory.Hence,  CTA's  decision   sustaining   the  action   taken  by respondent Commissioner of Customs is affirmed.

CASE No. 2

PILIPINAS SHELL PETROLEUM CORPORATION vs COMMISSIONER OF CUSTOMS, G.R. No. 176380

Facts: Shell is engaged in the importation of petroleum and its by-products   into  the country.  Shell  was  assessed and required   to  pay   customs  duties  and  internal   revenue taxes.

In 1997 and 1998, Shell settled its liabilities for customs duties   and   internal   revenue   taxes   using   tax   credit certificates (TCCs) that were transferred to it for value by   several   Board   of   Investment   (BOI)-registered companies which were accepted by the BIR and BOC on the belief that such were good and valid. 

In a letter dated November 3, 1999, the Center, through the  Secretary  of   the  DOF,   informed Shell   that   it  was cancelling the TCCs transferred to and used as payment. It was discovered that the TCCs had been fraudulently secured   by   the   original   grantees   before   transferring them to Shell.   In view of the cancellation, the Center required   Shell   to  pay   the  BIR   and  BOC   the  amounts corresponding to the TCCs Shell had used to settle its liabilities.

Shell objected to the cancellation of the TCCs claiming that it had been denied due process. Apparently, Shell had sent a  letter to the Center on November 3, 1999 adducing reasons why the TCCs should not be cancelled. But, the Center didn’t act on Shell’s letter, instead, they sent a letter on November 19, 1999 requiring Shell to replace   the  amount  equivalent   to   the  TCCs  however, 

Shell   still   maintained   that   the   cancellation   was improper.

Three years later, through letters signed by Atty. Valera, dated February 15, February 20, and April 12, 2002, the respondent, formally demanded from Shell payment of the amounts corresponding to the listed TCCs that the Center had previously cancelled. 

Shell received on April 23, 2002 the summons in one of the three collection cases filed by respondent against Shell  before   the  Regional  Trial  Court   (RTC)  of  Manila and on May 23, 2002, Shell filed with the CTA a Petition for  Review questioning   the  BOC collection  efforts   for lack of legal and factual basis. But the respondent filed a motion   to   dismiss   Shells   petition   for   review   on   the ground of prescription claiming that Shell’s petition was filed   beyond   the   30-day   period   provided   by   law   for appeals of decisions of the Commissioner of Customs to the   CTA.   Also   this   30-day   period   should   be   counted from the time Shell received the respondents collection letters.

Shell   countered   that   the  30-day   reglementary  period should   be   counted   from   the   date   it   received   the summons   for   one   of   the   collection   cases   filed   by respondent or, specifically, on April 23, 2002, not from the  date   that   it   received   the   respondent’s   collection letters.   The  petition   for   review,  having  been  filed  on May  23,  2002,  was   thus   instituted  within   the  period provided by law.Issue: Whether or not Shell’s petition was filed within the reglementary period Held:   No.   The   present   case   does   not   involve   a   tax protest case which is within the jurisdiction of the CTA to resolve.

In the present case, the facts reveal that Shell received three sets of letters:a.           the  Centers  November  3   letter,   signed  by   the Secretary of Finance, informing it of the cancellation of the TCCs;b.     the respondents November 19 letter requiring it to replace   the amount  equivalent   to   the amount  of   the cancelled TCCs used by Shell; andc.           the respondents collection letters issued through Atty. Valera, formally demanding the amount covered by the cancelled TCCs.

None of these letters, however, can be considered as a liquidation   or   an   assessment   of   Shell’s   import   tax 

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liabilities that can be the subject of an administrative tax  protest  proceeding  before   the   respondent  whose decision   is   appealable   to   the  CTA.   Shell’s   import   tax liabilities had long been computed and ascertained in the original assessments, and Shell paid these liabilities using the TCCs transferred to it as payment. However, on   account   of   the   cancellation   of   the   TCCs,   the   tax liabilities of Shell under the original assessments were considered unpaid;  hence,  the  letters and the actions for collection. When Shell went to the CTA, the issues it raised  in   its  petition were all   related  to  the  fact  and efficacy   of   the   payments   made,   specifically   the genuineness of the TCCs; etc. These are payment and collection issues, not tax protest issues within the CTAs jurisdiction to rule upon.

Thus, Shell never protested the original assessments of its tax liabilities and in fact settled them using the TCCs. These   original   assessments,   therefore,   have   become final, incontestable, and beyond any subsequent protest proceeding, administrative or judicial, to rule upon.

Shell’s  petition  before   the  CTA principally  questioned the validity of the cancellation of the TCCs a decision that   was  made   not   by   the   respondent,   but   by   the Center. As the CTA has no jurisdiction over decisions of the   Center,   Shell’s   remedy   against   the   cancellation should   have   been   a   certiorari   petition   before   the regular courts, not a tax protest case before the CTA. Records   do  not   show   that   Shell   ever   availed   of   this remedy.   The   appropriate   forum   for   Shell   under   the circumstances of this case should be at the collection cases before the RTC where Shell can put up the fact of its payment as a defense.

In Dayrit v. Cruz, as declared: [A] suit for the collection of   internal   revenue   taxes,  where   the  assessment  has already   become   final   and   executory,   the   action   to collect is akin to an action to enforce the judgment. No inquiry   can  be  made   therein  as   to   the  merits  of   the original   case   or   the   justness   of   the   judgment   relied upon. CASE No. 3

NARCISO O. JAO and BERNARDO M. EMPEYNADO, petitioners, vs. COURT OF APPEALS; COMMISSIONER OF CUSTOMS; COLLECTOR OF CUSTOMS, Port of Manila

Can the Collector of Customs issue warrant of seizure and detention for untaxed imported articles, and can the Regional Trial Court enjoin the Collector of Customs from the exercise of such power? The Collector can issue warrant of seizure and detention of untaxed imported articles, and the Regional Trial Court lacks the jurisdiction to enjoin the Collector from the exercise of such power. The Collector of Customs when sitting  in   forfeiture  proceedings  constitutes  a   tribunal expressly  vested by  law with   jurisdiction  to hear  and determine   the   subject   matter   of   such   proceedings without   any   interference   from   the   Court   of   First Instance. (Auyong Hian v. Court of Tax Appeals, et al., 19 SCRA 10).

Facts:

On   August   10,   1990,   the   Office   of   the   Director, Enforcement   and   Security   Services   (ESS),   Bureau   of Customs, received information regarding the presence of allegedly untaxed vehicles and parts in the premises owned   by   a   certain   Pat   Hao   located   along   Quirino Avenue,   Paranaque   and   Honduras   St.,  Makati.   After conducting a surveillance of the two places, respondent Major   Jaime   Maglipon,   Chief   of   Operations   and Intelligence of the ESS, recommended the issuance of warrants  of  seizure and detention against  the articles stored   in   the  premises.  On  August   13,   1990,  District Collector   of   Customs   Titus   Villanueva   issued   the warrants of seizure and detention. The team searched the premises and found untaxed imported articles, and found  out   that   there  were  untaxed   imported  articles which   were   not   described   in   the   warrant,   hence warrant was amended. This prompted the owner to file preliminary prohibitory and mandatory injunction which was   granted   by   the   RTC.   The   Court   also   prohibited respondents   from seizing,  detaining,   transporting  and selling   at   public   auction   petitioners'   vehicles,   spare parts,  accessories and other properties located at No. 2663 Honduras St.,  San Isidro, Makati and at No. 240 Quirino   Avenue,   Tambo,   Paranaque,   Metro   Manila. Respondents  were   further  prohibited   from disturbing petitioners'   constitutional   and  proprietary   rights   over their   properties   located   at   the   aforesaid   premises. Lastly, respondents were ordered to return the seized items   and   to   render   an   accounting   and   inventory thereof.

Issue: 

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Whether or not the Regional Trial Court has jurisdiction to issue the questioned order.

Ruling:

 No. The Regional Trial Court has no jurisdiction to issue the questioned order. 

There   is   no   question   that   Regional   Trial   Courts   are devoid of any competence to pass upon the validity or regularity   of   seizure   and   forfeiture   proceedings conducted by the Bureau of Customs and to enjoin or otherwise   interfere   with   these   proceedings . The Collector   of   Customs   sitting   in   seizure   and   forfeiture proceedings   has exclusive jurisdiction to   hear   and determine   all   questions   touching  on   the   seizure   and forfeiture of dutiable goods. The Regional Trial Courts are   precluded   from   assuming   cognizance   over   such matters even through petitions of certiorari, prohibition or mandamus.

It is likewise well-settled that the provisions of the Tariff and Customs Code and that of Republic Act No. 1125, as amended,   otherwise   known   as   "An  Act   Creating   the Court of Tax Appeals," specify the proper procedure for the ventilation of any legal objections or issues raised concerning   these   proceedings.   Thus,   actions   of   the Collector   of   Customs   are   appealable   to   the Commissioner  of  Customs,  whose decision,   in  turn,   is subject   to   the   exclusive   appellate   jurisdiction   of   the Court  of  Tax Appeals  and from there to the Court  of Appeals.

The   rule   that   Regional   Trial   Courts   have   no   review powers  over   such  proceedings   is   anchored  upon   the policy   of   placing   no   unnecessary   hindrance   on   the government's drive, not only to prevent smuggling and other frauds upon Customs, but more  importantly,  to render  effective and efficient  the collection of   import and   export   duties   due   the   State,  which   enables   the government   to   carry   out   the   functions   it   has   been instituted to perform.

Even  if   the seizure by  the Collector  of  Customs were illegal, which has yet to be proven, we have said that such act  does  not  deprive   the  Bureau of  Customs of jurisdiction   thereon.   The   Collector   of   Customs  when sitting  in   forfeiture  proceedings  constitutes  a   tribunal expressly  vested by  law with   jurisdiction  to hear  and determine   the   subject   matter   of   such   proceedings without   any   interference   from   the   Court   of   First 

Instance. (Auyong Hian v. Court of Tax Appeals, et al., 19 SCRA 10).

CASE No. 4

HON. SALVADOR M. MISON, Commissioner of Customs v. HON. ELI G.C. NATIVIDAD, Presiding Judge of the Regional Trial Court [G.R. No. 82586. September 11, 1992.]

Facts:  A   team   from   the   National   Customs   Police proceeded to San Fernando,  Pampanga to act  on the information given on the existence of both “assembled and disassembled” knocked-down vehicles, particularly Toyota Lite Aces, at the compoung of CVC Trading.Upon arrival at the place the team found a fenced area containing   twenty   (20)   units   of   fully   and   partly assembled  Toyota   Lite  Ace  vans.   It   immediately   took possession   and   control   of   the   motor   vehicles   by cordoning off the enclosure. Thereafter, at about 11:30 p m., two (2) members of the team were designated to secure   a  warrant   of   seizure   and   detention   from   the Collector of Customs of the Subport of Clark. A collector of   the Customs  instituted seizure proceedings  against the   abovementioned   vehicles   for   the   violation   of "Section   2530   (f)   and   (1)-1   &   5"   of   the   Tariff   and Customs Code, in relation to Central Bank regulations. Accordingly, at about 8:00 a.m. on 12 February 1988, he issued   a   Warrant   of   Seizure   and   Detention.   .

At  about  11:00  a.m.  on  12  February  1988,  when  the team was about to haul the motor vehicles away, two (2) Regional Trial Court sheriffs arrived with a temporary restraining order issued on that date by the respondent Judge in connection with Civil  Case No. 8109, entitled "Sonny   Carlos,   plaintiff,   versus   Bureau   of   Customs and/or Customs Police from seizing or confiscating the vehicles until further ordered.On 16 February 1988, lawyers of the Bureau of Customs filed a Motion to Dismiss 12 Civil Case No. 8109 alleging therein (a) the lack of jurisdiction of the Regional Trial Court over the subject vehicles in view of the exclusive jurisdiction of the Collector of Customs over seizure and forfeiture cases,  and (b)   the failure of   the plaintiff to exhaust   administrative   remedies.

On 17 February 1988, the private respondent filed an Oppositions/Comment   on   the  Motion   to   Dismiss   13 alleging, among others, that the Warrant of Seizure and Detention did not comply with the requirements for a valid search warrant  under the Constitution, and that 

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taxes for the vehicles have been paid to the Bureau of Internal Revenue (BIR).Issue: Whether or not the Regional Trial  Court  lacked jurisdiction   over   the   subject   vehicles.

Held:    The   respondent   Judge   acted   arbitrarily   and despotically in issuing the temporary restraining order, granting the writ of preliminary injunction and denying the motion to dismiss, thereby removing the res from the control of the Collector of Customs and depriving him   of   his   exclusive   original   jurisdiction   over   the controversy.  Respondent   Judge exercised  a  power  he never had and encroached upon the exclusive original jurisdiction   of   the   Collector   of   Customs.   By   express provision   of   law,   amply   supported   by   well-settled jurisprudence,   the  Collector  of  Customs has  exclusive jurisdiction over seizure and forfeiture proceedings and regular courts cannot interfere with his exercise thereof or stifle or put it to naught.The   governmental   agency   concerned,   the   Bureau   of Customs, is vested with exclusive authority. Even if it be assumed   that   in   the   exercise   of   such   exclusive competence   a   taint   of   illegality   may   be   correctly imputed, the most that can be said is that under certain circumstances the grave abuse of discretion conferred may   oust   it   of   such   jurisdiction.   It   does   not   mean however that correspondingly a court of first instance is vested with competence when clearly in the light of the above decisions the law has not seen fit to do so. The proceeding before the Collector of Customs is not final. An   appeal   lies   to   the  Commissioner   of  Customs  and thereafter   to   the  Court  of   Tax  Appeals.   It  may  even reach   this  Court   through   the  appropriate  petition  for review. The proper ventilation of the legal issues raised is thus indicated. Certainly a court of first instance is not therein   included.   It   is   devoid   of   jurisdiction.

CASE No. 5

NESTLE PHILIPPINES, INC., (FORMERLY FILIPRO, INC.), petitioner, vs.  HONORABLE COURT OF APPEALS, COURT OF TAX APPEALS and COMMISSIONER OF CUSTOMS,respondents.G.R. No. 134114 July 6, 2001

FACTSNestle imported milk and milk products. It was assessed customs duties and advance sales taxes on the basis of the   published   Home   Consumption   Value   (HCV) indicated in the Bureau of Customs Revision Orders. 

1984. Nestle paid the tax but filed protest cases for the alleged   overpaid   import   duties and   protest   cases   for advance   sales   taxes.   It   alleged   that   BIR   erroneously applied   higher   home   consumption   values   in determining   the   dutiable   value   for   each   of   these separate importations. 

October 14, 1986. Nestle filed a claim for refund for the advance sales tax with the BIR.October 15, 1986. Nestle filed a petition for review with the CTA.January   3,   1994,   CTA   ruled   in   favor   of   Nestle   and ordered the refund.

On the other hand, the sixteen (16) protest cases for refund  of   alleged  overpaid customs duties  were   left with the Collector of Customs of Manila. However, the said Collector of Customs failed to render his decision thereon after almost six (6) years since petitioner paid under  protest   the customs duties on the said sixteen (16)   importations of  milk  and milk  products  and filed the corresponding protests.August  2,  1990.  To prevent  the claim from becoming stale   on   the   ground   of   prescription,   Nestle   filed   a petition for review with the CTA despite absence of the ruling of the Collector of Customs and Commissioner of Customs.

CTA dismissed the PFR.

ISSUEWON the claims for refund of alleged overpayment of customs duties may be deemed established  from the findings of the tax court in C.T.A. Case No. 4114 on the Advance Sales Tax.

WON   the   pendency   of   the   protest   cases   before   the office   of   the   Collector   of   Customs   interrupted   the running of the prescriptive period considering that it is only   an   administrative  body  performing  quasi-judicial function and not a regular court of justice.

RULING1. No.  Any outright  award for the refund of allegedly overpaid   customs  duties   in   favor  of  petitioner  on   its subject sixteen (16) importations is not favored in this jurisdiction unless there is a direct and clear finding. The relinquishment of the power to tax is not presumed.

2. The petitioner is mistaken in its contention that  its claims for refund of allegedly overpaid customs duties 

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are governed by Article 215418 of the New Civil Code on quasi-contract,   or   the   rule   on solutio indebiti, which prescribes in six (6) years pursuant to Article 1145 of the same Code.

The inaction of the Collector of Customs of Manila for nearly six (6) years on the protests seasonably filed by the   petitioner   has   caused   the   latter   to   immediately resort to the CTA. The petitioner did so on the mistaken belief that its claims are governed by the rule on quasi-contract   or solutio indebiti which   prescribes   in   six   (6) years under Article 1145 of the New Civil Code.This belief or contention of the petitioner is misplaced. 

In order for the rule on solution indebiti to apply it is an essential condition that petitioner must first show that its  payment  of   the   customs  duties  was   in   "excess  of what  was   required  by   the   law at   the  time when the subject   sixteen   (16)   importations   of   milk   and   milk products   were   made.   Unless   shown   otherwise,   the disputable presumption of regularity of performance of duty lies in favor of the Collector of Customs.

In the present case, there is no factual showing that the collection of  the alleged overpaid customs duties was more than what  is  required of the petitioner when  it made the aforesaid separate importations. There is no factual finding yet by the government agency concerned that   petitioner   is   indeed   entitled   to   its   claim   of overpayment and, if true, for how much it is entitled. It bears   stress   that   in   determining   whether   or   not petitioner is entitled to refund of alleged overpayment of customs duties, it is necessary to determine exactly how  much   the   Government   is   entitled   to   collect   as customs duties on the importations. Thus, it would only be   just   and   fair   that   the  petitioner-taxpayer  and   the Government alike be given equal opportunities to avail of the remedies under the law to contest or defeat each other's  claim and to determine all  matters of  dispute between them  in  one single  case.  Case   remanded to CTA for hearing and reception of evidence.

CASE No. 6

CHEVRON PHILIPPINES, INC.  vs.  COMMISSIONER OF THE BUREAU OF CUSTOMS

Petitioner  Chevron  Philippines,   Inc.   is  engaged   in   the business   of   importing,   distributing   and  marketing   of petroleum   products   in   the   Philippines.   In   1996,   the importations   subject   of   this   case   arrived   and   were 

covered  by  eight  bills  of   lading.   The   shipments  were unloaded from the carrying vessels onto petitioner’s oil tanks over a period of three days from the date of their arrival.   Subsequently,   the   import   entry   declarations (IEDs) were filed and 90% of the total customs duties were paid.The importations were appraised at a duty rate of 3% as provided under RA 8180 and petitioner paid the import duties   amounting   to P316,499,021.7 Prior   to   the effectivity of RA 8180 on April 16, 1996, the rate of duty on imported crude oil was 10%.It was alleged that there was deliberate concealment, manipulation and scheme employed by petitioner and Pilipinas Shell in the importation of crude oil.Petitioner received   from   the  District   Collector   a   demand   letter requiring   the   immediate   settlement   of   the   amount of P73,535,830 representing the difference between the 10% and 3% tariff   rates  on  the  shipments.  Petitioner objected to the demand for payment of customs duties using the 10% duty rate and reiterated its position that the 3% tariff rate should instead be applied. It likewise raised   the   defense   of   prescription   against   the assessment pursuant to Section 1603 of the Tariff and Customs Code.It was found that the import entries were filed beyond the   30-day   non-extendible   period   prescribed   under Section   1301   of   the   TCC.   They   concluded   that   the importations   were   already   considered   abandoned   in favor  of   the  government.  They  also   found  that   fraud was   committed   by   petitioner   in   collusion   with   the former   District   Collector.   Respondent  informed petitioner of the findings of irregularity in the filing and acceptance   of   the   import   entries   beyond   the   period required   by   customs   law   and   in   the   release   of   the shipments   after   the   same  had  already  been  deemed abandoned in favor of the government.Issues:

1.   whether   "entry"   under   Section   1301   in relation to Section 1801 of the TCC refers to the IED or the IEIRD;2. whether fraud was perpetrated by petitioner and3. whether the importations can be considered abandoned under Section 1801.

"ENTRY" IN SECTIONS 1301 AND 1801 OF THE TCC REFERS TO BOTH THE IED AND IEIRDUnder Section 1301 of the TCC, imported articles must be entered within a non-extendible period of 30 days from the date of discharge of the last package from a vessel.   Otherwise,   the   BOC  will   deem   the   imported goods impliedly abandoned under Section 1801. 

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The term "entry" in customs law has a triple meaning. It means (1) the documents filed at the customs house; (2)   the submission  and acceptance of   the  documents and   (3)   the  procedure  of  passing   goods   through   the customs house.22

The   IED   serves   as  basis   for   the  payment  of   advance duties on importations whereas the IEIRD evidences the final payment of duties and taxes. The question is: was the   filing   of   the   IED   sufficient   to   constitute   "entry" under the TCC?the   operative   act   that   constitutes   "entry"   of   the imported articles at the port of entry is the filing and acceptance of the "specified entry form" together with the other documents required by law and regulations. The "specified entry form" refers to the IEIRD.The filing of the IEIRDs has several important purposes: to ascertain the value of the imported articles, collect the   correct   and  final   amount   of   customs  duties   and avoid smuggling of goods into the country.It is the IEIRD which   accompanies   the   final   payment   of   duties   and taxes. These duties and taxes must be paid in full before the BOC can allow the release of the imported articles from its custody. The submission of the IEIRD cannot be left to the exclusive discretion or whim of the importer.Both the IED and IEIRD should be filed within 30 days from the date of discharge of the last package from the vessel or aircraft.THE EXISTENCE OF FRAUD WAS ESTABLISHEDThere  was   a   calculated   and   preconceived   course   of action  adopted  by  petitioner  purposely   to   evade   the payment of the correct customs duties then prevailing. This   was   done   in   collusion  with   the   former   District Collector,   who   allowed   the   acceptance   of   the   late IEIRDs   and   the   collection   of   duties   using   the   3% declared   rate.   A   clear   indication   of   petitioner’s deliberate intention to defraud the government was its non-disclosure of discrepancies on the duties declared in   the   IEDs   (10%)   and   IEIRDs   (3%)   covering   the shipments.   Due   to   the   presence   of   fraud,   the prescriptive   period   of   the   finality   of   liquidation  was inapplicable.THE IMPORTATIONS WERE ABANDONED IN FAVOR OF THE GOVERNMENTThe law is clear and explicit.   It gives a non-extendible period  of   30  days   for   the   importer   to   file   the  entry which we have already ruled pertains to both the  IED and   IEIRD.   Thus   under   Section   1801   in   relation   to Section 1301, when the importer fails to file the entry within   the   said  period,  he  "shall  be  deemed  to  have renounced all his interests and property rights" to the importations  and   these   shall   be   considered   impliedly 

abandoned in favor of the government. Unfortunately for petitioner, it was the law itself which considered the importation abandoned when it failed to file the IEIRDs within the allotted time. The law no longer requires that there  be  other  acts  or  omissions  where  an   intent   to abandon can be inferred. It is enough that the importer fails   to   file   the   required   import   entries   within   the reglementary period.NOTICE WAS NOT NECESSARY UNDER THE CIRCUMSTANCES OF THIS CASEPetitioner also avers that the importations could not be deemed impliedly abandoned because respondent did not   give   it   any   notice.  Under   the   peculiar   facts   and circumstances   of   this   case,   due   notice   was   not necessary. Fraud was established against petitioner;  it colluded with the former District Collector. Because of this, the scheme was concealed from respondent. The government was unable to protect itself until the plot was uncovered. The government cannot be crippled by the   malfeasance   of   its   officials   and   employees. Consequently,   it   was   impossible   for   respondent   to comply with the requirements under the rules.Also, petitioner, a regular, large-scale and multinational importer of oil and oil products, fell under the category of  a knowledgeable   importer  which was familiar  with the  governing   rules  and procedures   in   the  release  of importations.Furthermore,   notice   to   petitioner   was   unnecessary because it was fully aware that its shipments had in fact arrived in the Port of Batangas. The oil shipments were discharged from the carriers docked in its private pier or wharf, into its shore tanks. From then on, petitioner had actual physical possession of its oil importations. It was thus incumbent upon it to know its obligation to file the IEIRD within the 30-day period prescribed by law.The purpose of posting an "urgent notice to file entry" pursuant to Section B.2.1 of CMO 15-94 is only to notify the  importer  of   the  "arrival  of   its   shipment"  and the details of said shipment. Since it already had knowledge of   such,   notice  was   superfluous.  Besides,   the  entries had already been filed, albeit belatedly. It would have been oppressive to the government to demand a literal implementation of this notice requirement.CONCLUSIONPetitioner’s failure to file the required entries within a non-extendible   period   of   thirty   days   from   date   of discharge of the last package from the carrying vessel constituted   implied   abandonment   of   its   oil importations. This means that from the precise moment that   the  non-extendible   thirty-day  period   lapsed,   the abandoned   shipments  were   deemed   the   property   of 

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the government. Therefore, when petitioner withdrew the oil shipments for consumption, it appropriated for itself   properties   which   already   belonged   to   the government. Accordingly, it became liable for the total dutiable value of the shipments of imported crude oil amounting   to P1,210,280,789.21   reduced  by   the   total amount  of  duties  paid  amounting   to P316,499,021.00 thereby leaving a balance of P893,781,768.21.

CASE No. 7

Republic vs. Unimex Micro-Electronic, G.R. No. 166309-10, March 9, 2007

Facts:The   Bureau   of   Customs   seized   and   forfeited   the shipment owned by UNIMEX Micro-Electronics.  When the latter filed a petition for review in the Court of Tax Appeals,   the   forfeiture  decree  was   reversed   and   the court   ordered   the   release   of   the   goods.   However, respondent’s   counsel   failed   to   secure   a   writ   of execution   to   enforce   the   CTA   decision.   When respondent asked for release of its shipment by filing a petition for the revival of its June 15, 1992 decision on September 5,  2001,  BOC could no  longer find subject shipment in its warehouse. The CTA ordered the BOC to pay UNIMEX the commercial  value of  the goods with interest. 

The BOC Commissioner argued that the CTA altered its June 15, 1992 decision by converting it from an action for specific performance into a money judgment. On the other hand, respondent contended that the exchange rate  prevailing  at   the  time of actual payment  should apply. 

Held: Government Liability For Actual Damages

As previously discussed, the Court cannot turn a blind eye   to  BOC’s   ineptitude   and   gross   negligence   in   the safekeeping   of   respondent’s   goods.   Accordingly,   we agree  with   the   lower  courts’  directive   that  Petitioner Republic   of   the   Philippines,   upon   payment   of   the necessary customs duties by respondent Unimex Micro-Electronics GmBH, should pay the value of the subject shipment   in   the   amount   of   Euro   669,982.565. Petitioner’s liability may be paid in Philippine currency, computed at the exchange rate prevailing at the time of actual payment.

*Modification of a Final And Executory Judgment In the case at bar, parties do not dispute the fact that after the June 15, 1992 CTA decision became final and executory,   respondent’s   goods  were   inexplicably   lost while   under   the   BOC’s   custody.   Certainly,   this   fact presented   a  supervening   event  warranting   the modification of the CTA decision.

*Laches Did Not Set in to Frustrate Respondent’s Petition to Revive The June 15, 1992 CTA DecisionThere  was  never  negligence  or  omission   to  assert   its right within a reasonable period of time on the part of [respondent]. In fact, from the moment it intervened in the proceedings  before the Bureau of  Customs up to the   present   time,   [respondent]   is   diligently   trying   to fight   for  what   it   believes   is   right.   [Respondent]  may have failed to secure a writ of execution with this court when   the   [CTA  decision]  became  final  and  executory due to wrong legal advice, yet it does not mean that it was sleeping on its right for it filed a case against the shipping agent and/or the sub-agent. Therefore, there [was   never]   an   occasion   wherein   petitioner   had abandoned or declined to assert its right.

CASE No. 8

Rieta v. People of the Philippines

Corpus delicti refers to the fact  of the commission of the crime. It may be proven by the credible testimonies of witnesses,  not necessarily  by physical  evidence.   In-court identification of the offender is not essential, as long as the identity of the accused is determined with certainty   by   relevant   evidence.   In   the   present   case, there is no doubt that petitioner was the same person apprehended by the authorities and mentioned in the Information. His possession of the smuggled cigarettes carried   the   prima   facie   presumption   that   he   was engaged   in   smuggling.   Having   failed   to   rebut   this presumption,  he may  thus  be convicted of   the  crime charged. 

The CasePetitioner and his six co-accused -- Arturo Rimorin, Fidel Balita, Gonzalo Vargas, Robartolo Alincastre, Guillermo Ferrer and Ernesto Miaco – were charged of smuggling three  hundred five   (305)  cases  of  assorted  brands  of blue seal cigarettes which are foreign articles valued at P513,663.47   including   duties   and   taxes     which   was 

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found in the possession of said accused and under their control which articles said accused fully well knew have not   been  properly   declared   and   that   the  duties   and specific taxes thereon have not been paid to the proper authorities   in  violation of  said  Sec.  3601 of   the Tariff and Customs Code of the Philippines

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ISSUES1. The   respondents   trial   and   appellate   courts committed grave abuse of discretion tantamount to lack and/or   excess   of   jurisdiction   when   [they]   convicted herein   petitioner   notwithstanding   the   prosecutions failure   to   prove   the   guilt   of   the   petitioner   beyond reasonable doubt.

2. The  evidence  obtained  against   the  accused   is inadmissible in evidence because petitioner and his co-accused were arrested without a warrant but by virtue of   an   arrest   and   seizure   order   (ASSO)   which   was subsequently   declared   illegal   and   invalid   by   this Honorable Supreme Court.

HELD:

The Petition has no merit. 

First Issue:Sufficiency of Evidence

Petitioner contends that the existence of the untaxed blue seal  cigarettes  was  not  established,  because  the prosecution had not  presented them as  evidence.  He further argues that there was no crime committed, as the corpus delicti was never proven during the trial. 

Corpus Delicti Established by Other Evidence

We do not agree.  Corpus delicti refers to the specific injury or loss sustained. It is the fact of the commission of the crime that may be proved by the testimony of eyewitnesses. In its legal sense, corpus delicti does not necessarily refer to the body of the person murdered, to the firearms in the crime of homicide with the use of unlicensed firearms, to the ransom money in the crime of kidnapping for ransom, or -- in the present case -- to the seized contraband cigarettes.

In Rimorin v. People,  it was held:

Since   the   corpus   delicti   is   the   fact   of   the commission of the crime, this Court has ruled that even a single witness uncorroborated testimony, if credible, may   suffice   to   prove   it   and   warrant   a   conviction therefor. 

Corpus   delicti   may   even   be   established   by circumstantial evidence.

Both the RTC and the CA ruled that the corpus delicti   had   been   competently   established   by respondents   evidence,   which   consisted   of   the testimonies   of   credible   witnesses   and   the   Custody Receipt   issued   by   the   Bureau   of   Customs   for   the confiscated goods.

o We   find   no   reason   to   depart   from   the   oft repeated doctrine of giving credence to the narration of prosecution witnesses, especially when they are public officers  who   are   presumed   to   have   performed   their duties in a regular manner.

The existence of  the 305 cases of  blue-seal  cigarettes found in the possession of petitioner and his co-accused was duly proven by the testimonies of the prosecution witnesses   --   Lacson  and Abrigo.  They had  testified   in compliance  with   their   duty   as   enforcers   of   the   law. Their testimonies were rightly entitled to full faith and credit, especially because there was no showing of any improper motive on their part to testify falsely against petitioner. Further, the Court accords great respect to the   factual   conclusions   drawn   by   the   trial   court, especially  when affirmed by the appellate court  as  in this case.

Prima Facie Proof of Nonpayment of Taxes Sufficient

There is no merit, either, in the claim of petitioner that the prosecution failed to prove the nonpayment of the taxes and duties on the confiscated cigarettes. There is an   exception   to   the   general   rule   requiring   the prosecution to prove a criminal charge predicated on a negative allegation, or a negative averment constituting an  essential   element  of   a   crime.   In  People   v.   Julian-Fernandez, we held:

Where   the   negative   of   an   issue   does   not   permit   of direct proof, or where the facts are more immediately within the knowledge of the accused, the onus probandi rests upon him. 

Stated   otherwise,   it   is   not   incumbent   upon   the prosecution to adduce positive evidence to support  a negative averment the truth of which is fairly indicated by   established   circumstances   and   which,   if   untrue, 

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could   readily   be   disproved   by   the   production   of documents   or   other   evidence  within   the   defendants knowledge or control. (For example, where a charge is made  that  a  defendant  carried  on  a  certain  business without a license x x x, the fact that he has a license is a matter which is peculiar[ly] within his knowledge and he must establish that fact or suffer conviction). 

The truth of the negative averment that the duties and specific   taxes  on   the  cigarettes  were  not  paid   to   the proper  authorities   is   fairly   indicated  by   the   following circumstances that have been established: (1)   the   cargo   truck,   which   carried   the   contraband cigarettes   and   some   passengers   including   petitioner, immediately came from the 2nd COSAC Detachment; (2) the truck was intercepted at the unholy hour of 4:00 a.m.; (3) it fitted the undisclosed informers earlier description of it as one that was carrying contraband; and (4) the driver ran away. 

Hence,   it   was   up   to   petitioner   to   disprove   these damning   circumstances,   simply   by   presenting   the receipts showing payment of the taxes. But he did not do  so;  all   that  he   could  offer  was  his  bare  and   self-serving denial. 

Knowledge of the Illegal Nature of Goods

The   fact   that   305   cases   of   blue-seal   cigarettes  were found in the cargo truck, in which petitioner and his co-accused   were   riding,   was   properly   established. Nonetheless, he insists that his presence there was not enough   to   convict   him   of   smuggling,   because   the element of illegal possession had not been duly proved. He   adds   that   he   had   no   knowledge   that   untaxed cigarettes were in the truck.

Petitioners contention is untenable. 

Persons found to be in possession of smuggled items   are   presumed   to   be   engaged   in   smuggling, pursuant to the last paragraph of Section 3601 of the Tariff and Customs Code.  The burden of proof is thus shifted to them. To rebut this presumption, it is not enough for petitioner to   claim   good   faith   and   lack   of   knowledge   of   the unlawful source of the cigarettes. 

In the case adverted to earlier,  Rimorin v. People, we held thus:

In   order   that   a   person   may   be   deemed   guilty   of smuggling   or   illegal   importation   under   the   foregoing statute three requisites must concur: 

(1) that the merchandise must have been fraudulently or knowingly imported contrary to law; 

(2) that the defendant, if he is not the importer himself, must have received, concealed, bought, sold or in any manner facilitated the transportation,  concealment or sale of the merchandise; and 

(3)   that   the   defendant   must   be   shown   to   have knowledge   that   the   merchandise   had   been   illegally imported. If the defendant, however, is shown to have had possession of  the  illegally   imported merchandise, without satisfactory explanation, such possession shall be deemed sufficient to authorize conviction. 

The involvement or participation he and his co-accused had  in  the smuggling of   the goods was confirmed by their lack of proper and reasonable justification for the fact that they had been found inside the cargo truck, seated   in   front,   when   it   was   intercepted   by   the authorities. Despite his protestation, it  is obvious that petitioner   was   aware   of   the   strange   nature   of   the transaction,  and that he was willing to do his  part   in furtherance   thereof.   The   evidence   presented   by   the prosecution   established   his   work   of   guarding   and escorting the contraband to facilitate its transportation from the Port Area to Malabon, an act punishable under Section 3601 of the Tax Code.

Second Issue:Validity of the Search and Seizure

Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO) No. 4754 was invalid,   as   the   law   upon  which   it  was   predicated   -- General   Order   No.   60,   issued   by   then   President Ferdinand E.  Marcos  --  was subsequently  declared by the Court,   in  Taada v.  Tuvera,     to  have no force and effect. Thus, he asserts, any evidence obtained pursuant thereto is inadmissible in evidence. We do not  agree.   In  Taada,   the  Court  addressed the possible   effects  of   its   declaration  of   the   invalidity  of various presidential issuances. 

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The Chicot doctrine cited in Taada advocates that, prior to the nullification of a statute, there is an imperative necessity of taking into account its actual existence as an operative fact negating the acceptance of a principle of  absolute retroactive  invalidity.  Whatever was done while   the   legislative   or   the   executive   act   was   in operation should be duly recognized and presumed to be valid  in all  respects.    The ASSO that was  issued in 1979 under  General  Order  No.  60   --   long  before  our Decision in Taada and the arrest of petitioner --  is an operative fact that can no longer be disturbed or simply ignored. 

Furthermore,   the   search   and   seizure   of   goods, suspected to have been introduced into the country in violation of customs laws, is one of the seven doctrinally accepted   exceptions     to   the   constitutional   provision. Such provision mandates that no search or seizure shall be made except by virtue of a warrant issued by a judge who   has   personally   determined   the   existence   of probable cause. 

Under the Tariff and Customs Code, a search,  seizure and arrest  may be made even without  a  warrant   for purposes of enforcing customs and tariff laws. Without mention of the need to priorly obtain a judicial warrant, the Code specifically allows police authorities to enter, pass through or search any land, enclosure, warehouse, store or building that is not a dwelling house; and also to   inspect,   search  and examine  any  vessel  or  aircraft and any trunk, package, box or envelope or any person on   board;   or   to   stop   and   search   and   examine   any vehicle,   beast   or   person   suspected   of   holding   or conveying any dutiable or prohibited article introduced into the Philippines contrary to law.  

WHEREFORE, the Petition is DENIED.

CASE No. 9

EL GRECO SHIP MANNING AND MANAGEMENT CORPORATION, vs. COMMISSIONER OF CUSTOMS. [G.R. No. 177188. December 4, 2008.]

Facts:   The   vessel  M/V  Criston  docked  at   the  Port  of Tabaco,  Albay,  carrying a shipment of  35,000 bags of imported   rice,   consigned   to  Antonio  Chua,   Jr.   (Chua) and Carlos Carillo (Carillo), payable upon its delivery to Albay. Glucer Shipping Company, Inc. (Glucer Shipping) 

is  the operator of M/V Criston.  Upon the directive of then  Commissioner  Titus  Villanueva  of   the  Bureau  of Customs (BOC), a Warrant of Seizure and Detention was issued  by   the  Legaspi  District  Collectorfor   the  35,000 bags of imported rice shipped by M/V Criston, on the ground   that   it   left   the   Port   of   Manila   without   the necessary  clearance  from the Philippine  Coast  Guard. Asubsequent  Warrant   of   Seizure   and  Detention,  was issued particularly for the said vessel. The BOC District Collector of the Port of Legaspi thereafter commenced proceedings for the forfeiture of M/V Criston and its. Chua and Carillo  filed before the Regional  Trial  Court (RTC) of Tabaco, Albay, a Petition for Prohibition with Prayer   for   the   Issuance  of  Preliminary   Injunction  and Temporary   Restraining   Order   (TRO)   assailing   the authority of the Legaspi District Collectors to issue the Warrants  of  Seizure  and Detention and praying   for  a permanent   injunction   against   the   implementation   of the said Warrants.In the meantime, while M/V Criston was berthing at the Port of Tabaco under the custody of the   BOC,   the   Province   of   Albay  was   hit   by   typhoon "Manang". In order to avert any damage which could be caused   by   the   typhoon,   the   vessel   was   allowed   to proceed to another anchorage area to temporarily seek shelter.  After   typhoon  "Manang"  had passed  through Albay province, M/V Criston, however, failed to return to   the   Port   of   Tabaco   and   was   nowhere   to   be found.Manila   District   Collector   issued   an   Order quashing the Warrant of Seizure and Detention it issued against  M/V  Neptune  Breeze   in   Seizure   Identification No.   2001-208   for   lack   of   probable   cause.   The   BOC Commissioner, CTA Second Division and CTA en banc all ruled that M/V Neptune Breeze is one and the same as M/V Criston which had been detained at   the  Port  of Tabaco, Albay, for carrying smuggled imported rice and had   fled   the   custody   of   the   customs   authorities   to evade its liabilities and ardered its forfeiture. 

Issues/ Held: W/N M/V Neptune Breeze is one and the same as M/V Criston- YES W/N the order of forfeiture of the M/V Neptune Breeze is valid- YES 

Ratio:  The crime  laboratory   report  of   the  PNP shows that the serial numbers of the engines and generators of  the two vessels  are  identical.  There  is  no question that M/V Neptune Breeze, then known as M/V Criston, was carrying 35,000 bags of imported rice without the necessary   papers   showing   that   they   were   entered lawfully through a Philippine port after the payment of appropriate taxes and duties thereon. This gives rise to 

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the   presumption   that   such   importation   was   illegal. Consequently,   the   rice   subject  of   the   importation,  as well   as   the   vessel   M/V   Neptune   Breeze   used   in importation are subject to forfeiture. The burden is on El Greco, as the owner of M/V Neptune Breeze, to show that its conveyance of the rice was actually legal.

TARIFF AND CUSTOMS CODE

El Greco Ship Manning and Management Corp. v. Commissioner of Customs, G.R. No. 177188, 4 December 2008

Facts:

On 23 September 2001, the vessel M/V Criston docked at   the Port of Tabaco,   Albay,   carrying   a   shipment   of 35,000 bags of imported rice.

Upon   the   directive   of   then   Commissioner   Titus Villanueva of the Bureau of Customs (BOC), a Warrant of   Seizure   and   Detention   for   the 35,000   bags   of imported rice  shipped by M/V Criston, on the ground that   it   left   the  Port  of  Manila  without   the  necessary clearance   from   the   Philippine   Coast   Guard.   And   a subsequent   Warrant   of   Seizure   and   Detention,  particularly   for   the   said   vessel. The   BOC   District Collector  of   the Port  of Legaspithereafter  commenced proceedings   for   the   forfeiture  of  M/V Criston and  its cargo.

In   the  meantime,  while  M/V Criston  was  berthing  at the Port of Tabaco under   the   custody   of   the   BOC, the Province of Albay was   hit   by   typhoon  Manang. In order to avert any damage which could be caused by the   typhoon, the   vessel   was   allowed   to   proceed   to another   anchorage   area   to   temporarily   seek shelter. After   typhoon   Manang   had   passed   through Albay province, M/V Criston, however, failed to return to the Port of Tabaco and was nowhere to be found.

Alarmed,   the   BOC   and   the   Philippine   Coast   Guard coordinated  with   the  Philippine  Air  Force   to  find   the missing vessel. On 8 November 2001, the BOC received information that M/V Criston was found in the waters of Bataan sporting the name of M/V Neptune Breeze

On the premise that the two vessel are the same, the Legaspi District Collector rendered a Decision  ordering 

the forfeiture of the M/V Criston, also known as M/V Neptune   Breeze,   and   its   cargo,   for   violating   Section 2530 (a), (f) and (k) of the Tariff and Customs Code.

Issue:

WHETHER   OR   NOT  M/V NEPTUNE BREEZE   AND  M/V CRISTON ARE ONE AND THE SAME VESSEL?

WHETHER OR NOT M/V NEPTUNE BREEZE IS QUALIFIED TO BE THE SUBJECT OF FORFEITURE UNDER SECTION 2531 OF THE TARIFF AND CUSTOMS CODE?

Held:

Yes, they are the same. The crime laboratory report of the PNP shows that the serial numbers of the engines and generators of the two vessels are identical. El Greco failed   to   rebut   this   piece  of   evidence   that   decisively identified  M/V  Neptune  Breeze   as   the   same  as  M/V Criston.

Yes, the vessel is qualified to be the subject of forfeiture.

SEC.  2530. Property Subject to Forfeiture Under Tariff and Customs Law. Any vehicle, vessel or aircraft, cargo, articles   and   other   objects   shall,   under   the   following conditions, be subject to forfeiture:

a. Any vehicle, vessel or aircraft, including cargo, which shall   be   used   unlawfully   in   the   importation   or exportation   of   articles   or   in   conveying   and/or transporting   contraband   or   smuggled   articles   in commercial quantities into or from any Philippine port or   place. The  mere   carrying   or   holding   on   board   of contraband   or   smuggled   articles   in   commercial quantities shall subject such vessel, vehicle, aircraft or any other craft to forfeiture; Provided, That the vessel, or   aircraft   or   any   other   craft   is   not   used   as   duly authorized common carrier and as such a carrier   it   is not chartered or leased;

f. Any article, the importation or exportation of which is effected or attempted contrary to law, or any article of prohibited   importation   or   exportation,   and   all   other articles  which,   in   the   opinion   of   the   Collector,   have been   used,   are   or   were   intended   to   be   used   as instruments   in   the   importation  or  exportation  of   the former;

k. Any conveyance actually being used for the transport of   articles   subject   to   forfeiture   under   the   tariff   and 

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customs laws, with its equipage or trappings, and any vehicle  similarly  used,   together with  its  equipage and appurtenances   including   the   beast,   steam   or   other motive   power   drawing   or   propelling   the   same. The mere conveyance of contraband or smuggled articles by such beast or vehicle shall  be sufficient cause for the outright   seizure   and   confiscation   of   such   beast   or vehicle, but the forfeiture shall not be effected if  it  is established that the owner of the means of conveyance used as aforesaid,   is  engaged as common carrier  and not chartered or leased, or his agent in charge thereof at the time has no knowledge of the unlawful act.

The   penalty   of   forfeiture   is   imposed   on   any   vessel engaged   in   smuggling,   provided   that   the   following conditions are present:

(1) The vessel is used unlawfully in the importation or exportation of articles into or from the Philippines;

(2) The articles are imported to or exported from any Philippine port or place, except a port of entry; or

(3) If the vessel has a capacity of less than 30 tons and is used in the importation of articles into any Philippine port or place other than a port of the Sulu Sea, where importation  in  such  vessel  may be  authorized  by   the Commissioner,  with   the   approval   of   the   department head.

There is no question that M/V Neptune Breeze, then known as M/V Criston, was carrying 35,000 bags of imported   rice  without   the   necessary   papers   showing that   they  were  entered   lawfully   through  a  Philippine port after the payment of appropriate taxes and duties thereon. This  gives   rise   to   the  presumption that  such importation was illegal.Consequently, the rice subject of the   importation,   as  well   as   the   vessel  M/V  Neptune Breeze  used   in   importation  are   subject   to   forfeiture. The   burden   is   on   El   Greco,   as   the   owner   of   M/V Neptune Breeze, to show that its conveyance of the rice was  actually   legal. The  issue that   the  said  cargo  is  of local origin is barren of any evidence or records as such from the authorities.

  There is nothing in Section 2313 of the Tariff and   Customs   Code   to   support   the   position   of   El Greco. As the CTA en banc explained,   in case the BOC Commissioner fails to decide on the automatic appeal of the Collectors Decision within 30 days from receipt of the   records   thereof,   the   case   shall   again  be  deemed 

automatically appealed to the Secretary of Finance. Also working against El Greco is the fact that jurisdiction over M/V Neptune Breeze, otherwise known as M/V Criston, was first acquired by the Legaspi District Collector; thus, the   Manila   District   Collector   cannot   validly   acquire jurisdiction  over   the   same  vessel. Judgment   rendered without jurisdiction is null and void, and void 

Pilipinas Shell v. Republic of the Philippines, G.R. No. 161953, 6 March 2008

                Facts:

                               Petitioner Pilipinas Shell was an assignee of various  Tax  Credit  memos and Tax  Credit  Certificates from different entities. The assignment had the a[[roval of BOI and the One Stop Shop Inter-agency Tax Credit and duty Drawback Center. Some of these TCC's were accepted   by   payment   by   the   Bureau   of   customs   in relation   to   its   taxes   and   import   duties.   Later,   The Finance   Secretary   informed   petitioner   that   the   said TCC's   were   fraudulently   issued   amounted   to P209,129,141.00   and   demanded   the   payment   of   the same.   Petitioner   assailed   the   action  of   the   Secretary contending that he was an assignee in good faith and the   it  was   genuine  and  authentic  but   the  Bureau  of Custom   demanded   the   said   payment   prompting   the petitioner   to   file   a   protest   but   was   denied   by   the bureau. Petitioner later filed a petition for review with the CTA questioning the legality of the cancellation of the TCC's. While it was still pending, respondent filed a complaint   for  collection with the RTC.  Petitioner  filed for dismissal contending that the RTC has no jurisdiction over the case because of the pending case in the CTA, and RTC only acquires jurisdiction only if the assessment made by the CIR becomes final and incontestable.

                           Issue: Whether RTC has jurisdiction over the case?

              Ruling:

              The filing of the petition is a proper remedy.

Assessments   inform   taxpayers   of   their   tax liabilities. Under the TCCP, the assessment is in the form of a liquidation made on the face of the import entry 

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return   and   approved   by   the   Collector   of   Customs.[37] Liquidation   is   the final computation and ascertainment by the Collector of Customs of the duties due on imported merchandise based on official reports as to the quantity, character and value thereof, and   the  Collector  of  Customs'  own  finding  as   to   the applicable rate of duty.[38] A liquidation is considered to have been made when the entry is officially stamped liquidated.[39] Petitioner   claims   that   it   paid   the   duties   due   on   its importations. Section 1603 of the old TCCP stated:

 Section   1603. Finality of Liquidation. When   articles   have   been entered   and   passed   free   of   duty   or final adjustments of duties made, with subsequent   delivery,   such   entry   and passage free of duty or settlement of duties will, after the expiration of one year   from   the   date   of   the   final payment of duties,   in the absence of fraud   or   protest,   be   final   and conclusive upon all parties, unless the liquidation   of   the   import   entry   was merely tentative.[40]

An assessment or liquidation by the BoC attains finality and conclusiveness one year from the date of the final payment of duties except when: 1. There was fraud  2.   There   is   a   pending   protest   or   the   liquidation   of import entry was merely tentativeNone of the foregoing exceptions is present in this case. There  was   no   fraud   as   petitioner   claimed   (and  was presumed)   to be  in  good  faith.  Respondent  does  not dispute   this.  Moreover,   records   show   that   petitioner paid those duties without protest using its TCCs. Finally, the   liquidation   was   not   a   tentative   one   as   the assessment  had  long become final  and  incontestable. Consequently,   pursuant   to Yabes[41] and   because   of the cancellation of the TCCs, respondent had the right to file a collection caseSection 1204 of the TCCP provides:

 Section 1204. Liability of Importer for Duties. ― Unless  relieved by  laws or regulations,   the liability for duties, taxes, fees and other charges

attaching on importation constitutes a personal debt due from the importer to the government which can be discharged only by payment in full of all duties, taxes, fees and other charges   legally   accruing.   It   also constitutes   a lien upon the articles imported which may be enforced while such articles are in the custody or subject to the control of the government. (emphasis supplied)

Under   this   provision,   import   duties   constitute   a personal debt of the importer that must be paid in full. The   importers   liability   therefore  constitutes  a   lien  on the   article   which   the   government   may   choose   to enforce  while   the   imported   articles   are   either   in   its custody or under its control. When   respondent   released   petitioner's   goods,   its (respondents)   lien   over   the   imported   goods   was extinguished.   Consequently,   respondent   could   only enforce the payment of petitioner's import duties in full by filing a case for collection against petitioner.

THE SUBJECT MATTER FALLS WITHIN THE JURISDICTION OF THE RTCRespondent filed its complaint for collection on April 3, 2002. The governing law at that time was RA[43] 1125 or the old CTA Law. Section 7 thereof stated:

 Section   7.   Jurisdiction.   The   Court   of Tax   Appeals   shall   exercise   exclusive appellate   jurisdiction   to   review   by appeal, as herein provided ― (1) Decision   of   the   Commissioner   of Internal   Revenue   in   cases   involving disputed   assessment,   refunds   of 

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internal   revenue taxes,   fees  or  other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue; (2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges; seizure, detention or release of property affected; fines and forfeitures or other penalties imposed in relation thereto; or other matters arising under Customs Law or other laws or part of law administered by the Bureau of Customs; and (3)  Decisions of the provincial  or city Boards of Assessment Appeals in cases involving the assessment and taxation of   real   property   or   other   matters arising   under   the   Assessment   Law, including rules and regulations relative thereto.[44] (emphasis supplied)

Inasmuch as the present case did not involve a decision of the Commissioner of Customs in any of the instances enumerated in Section 7(2) of RA 1125, the CTA had no jurisdiction over the subject matter. It was the RTC that had   jurisdiction   under   Section   19(6)   of   the   Judiciary Reorganization Act of 1980, as amended

 Section  19. Jurisdiction   in   Civil   Cases. ― Regional Trial  Courts shall  exercise exclusive original jurisdiction:

 (6) In all cases not within the exclusive jurisdiction   of   any   court,   tribunal, person  or   body   exercising   judicial   or quasi-judicial functions, xxx.

Southern Cross Cement vs Cement Manufacturers Assoc

The case centers on the interpretation of provisions of Republic   Act  No.   8800,   the   Safeguard  Measures   Act ("SMA"),   which   was   one   of   the   laws   enacted   by 

Congress soon after the Philippines ratified the General Agreement on Tariff and Trade (GATT) and the World Trade   Organization   (WTO)   Agreement.   3   The   SMA provides the structure and mechanics for the imposition of   emergency  measures,   including   tariffs,   to   protect domestic   industries   and   producers   from   increased imports  which  inflict  or  could  inflict  serious  injury on them. 4

Philcemcor,   an   association   of   at   least   eighteen   (18) domestic   cement  manufacturers  filed  with   the  DTI   a petition, seeking the imposition of safeguard measures on gray Portland cement, 5 in accordance with the SMA. After the DTI issued a provisional safeguard measure, 6 the application was referred to the Tariff Commission for a formal investigation pursuant to Section 9 of the SMA  and   its   Implementing  Rules   and  Regulations,   in order   to   determine   whether   or   not   to   impose   a definitive   safeguard   measure   on   imports   of   gray Portland cement. 

After the Tariff Commission’s investigation, it reported that   there   was   no   need   for   definitive   safeguard measures.   The   DTI   Secretary   then   denied Philamcemcor’s petition but expressed his opinion that he disagreed with the Tariff Commission’s findings.

Philcemcor challenged this decision in the CA. The CA ruled that the DTI Secretary was no bound by the Tariff Commission’s   report   since   it   was   merely recommendatory.   Based   on   this   Decision,   the   DTI Secretary then imposed a definitive safeguard measure on the importation of gray Portland cemen for 3 years.

Southern Cross challenged both CA and DTI Secretary decisions.

I. Jurisdiction of the Court of Tax Appeals

Under Section 29 of the SMA

It   should   be   emphasized   again   that   by   utilizing   the phrase "in connection with," it is the SMA that expressly vests jurisdiction on the CTA over petitions questioning the non-imposition by the DTI  Secretary  of  safeguard measures.  The Court   is   simply  asserting,  as   it   should, the clear intent of the legislature in enacting the SMA. Without "in connection with" or a synonymous phrase, the Court would be compelled to favor the respondents' position that only rulings imposing safeguard measures may be elevated on appeal to the CTA. But considering 

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that the statute does make use of the phrase, there is little sense in delving into alternate scenarios.

Respondents   fail   to   convincingly   address   the   absurd consequences   pointed  out  by   the  Decision  had   their proposed   interpretation   been   adopted.   Indeed, suffocated beneath the respondents'  legalistic tinsel is the elemental question ” what sense is there in vesting jurisdiction  on   the  CTA  over   a   decision   to   impose   a safeguard  measure,   but   not   on  one   choosing  not   to impose. Of course, it is not for the Court to inquire into the   wisdom   of   legislative   acts,   hence   the   rule   that jurisdiction   must   be   expressly   vested   and   not presumed.   Yet   ultimately,   respondents   muddle   the issue by making it appear that the Decision has uniquely expanded the jurisdictional rules. For the respondents, the proper statutory interpretation of the crucial phrase "in connection with" is to pretend that the phrase did not exist at all in the statute. The Court, in taking the effort to examine the meaning and extent of the phrase, is merely giving breath to the legislative will.

Philcemcor   imputes   intelligent   design   behind   the alleged intent of Congress to limit CTA review only to impositions of the general safeguard measures. It claims that there is a necessary tax implication in case of an imposition   of   a   tariff   where   the   CTA's   expertise   is necessary, but there is no such tax implication, hence no   need   for   the   assumption   of   jurisdiction   by   a specialized   agency,   when   the   ruling   rejects   the imposition   of   a   safeguard   measure.   But   of   course, whether the ruling under review calls for the imposition or   non-imposition   of   the   safeguard   measure,   the common question for resolution still is whether or not the tariff should be imposed ” an issue definitely fraught with   a   tax   dimension.   The   determination   of   the question will call upon the same kind of expertise that a specialized body as the CTA presumably possesses.

In response to the Court's  observation that the setup proposed   by   respondents   was   novel,   unusual, cumbersome   and   unwise,   public   respondents   invoke the maxim that  courts  should not  be concerned with the   wisdom   and   efficacy   of   legislation.   47   But   this prescinds from the bogus claim that the CTA may not exercise judicial review over a decision not to impose a safeguard measure, a prohibition that finds no statutory support.   It   is  likewise settled in statutory construction that an interpretation that would cause inconvenience and   absurdity   is   not   favored.   Respondents   do   not 

address the particular illogic that the Court pointed out would  ensue  if   their  position on  judicial   review were adopted. According to the respondents, while a ruling by the DTI Secretary imposing a safeguard measure may be elevated on review to the CTA and assailed on the ground of errors in fact and in law, a ruling denying the imposition of safeguard measures may be assailed only on the ground that the DTI Secretary committed grave abuse   of   discretion.   As   stressed   in   the   Decision, "[c]ertiorari   is   a   remedy   narrow   in   its   scope   and inflexible in its character. It is not a general utility tool in the legal workshop." 48

 

It is incorrect to say that the Decision bars any effective remedy should the Tariff Commission act or conclude erroneously   in  making   its  determination  whether   the factual   conditions   exist   which   necessitate   the imposition   of   the   general   safeguard  measure.   If   the Tariff Commission makes a negative final determination, the   DTI   Secretary,   bound   as   he   is   by   this   negative determination,   has   to   render   a   decision   denying   the application   for   safeguard   measures   citing   the   Tariff Commission's  findings as basis.  Necessarily  then, such negative determination of the Tariff Commission being an integral part of the DTI Secretary's ruling would be open   for   review   before   the   CTA,   which   again   is especially   qualified   by   reason   of   its   expertise   to examine   the   findings   of   the   Tariff   Commission. Moreover, considering that the Tariff Commission is an instrumentality   of   the   government,   its   actions   (as opposed   to   those   undertaken   by   the   DTI   Secretary under   the  SMA)  are  not  beyond the  pale  ofcertiorari jurisdiction. Unfortunately for Philcemcor, it hinged its cause on the claim that the DTI Secretary's actions may be annulled on certiorari,  notwithstanding the explicit grant   of   judicial   review   over   that   cabinet  member's actions under the SMA to the CTA. IEHTaA

Finally on this point, Philcemcor argues that assuming this Court's interpretation of Section 29 is correct, such ruling should not be given retroactive effect, otherwise, a gross violation of the right to due process would be had. This erroneously presumes that it was this Court, and not Congress, which vested jurisdiction on the CTA over   rulings   of   non-imposition   rendered   by   the   DTI Secretary. We have repeatedly stressed that Section 29 expressly   confers   CTA   jurisdiction   over   rulings   in connection   with   the   imposition   of   the   safeguard 

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measure,   and   the   reassertion   of   this   point   in   the Decision was a matter of emphasis, not of contrivance. The due process protection does not shield those who remain purposely blind to the express rules that ensure the sporting play of procedural law.

Besides, respondents' claim would also apply every time this Court is compelled to settle a novel question of law, or   to   reverse   precedent.   In   such   cases,   there  would always   be   litigants  whose   causes  of   action  might   be vitiated by the application of newly formulated judicial doctrines.  Adopting   their   claim  would  unwisely   force this   Court   to   treat   its  dispositions   in  unprecedented, sometimes landmark decisions not as resolutions to the live   cases   or   controversies,   but   as   legal   doctrine applicable only to future litigations.

->The   safeguard  measures   imposable  under   the  SMA generally   involve   duties   on   imported   products,   tariff rate   quotas,   or   quantitative   restrictions   on   the importation of a product into the country. Concerning as they do the foreign importation of products into the Philippines,   these   safeguard  measures   fall  within   the ambit  of  Section 28(2),  Article  VI  of   the  Constitution, which states:

The Congress may, by law, authorize the President to fix within specified limits,  and subject to such  limitations and restrictions  as   it  may  impose,   tariff rates,   import and  export  quotas,   tonnage  and  wharfage  dues,   and other  duties  or   imposts  within   the   framework  of   the national development program of the Government. 49

The Court acknowledges the basic postulates ingrained in   the   provision,   and,   hence,   governing   in   this   case. They are:

(1)It   is   Congress   which   authorizes   the   President   to impose tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts. Thus, the   authority   cannot   come   from   the   Finance Department,   the   National   Economic   Development Authority, or the World Trade Organization, no matter how insistent or persistent these bodies may be.

(2)The authorization granted to the President must be embodied in a  law. Hence, the justification cannot be supplied simply by inherent executive powers. It cannot arise   from   administrative   or   executive   orders promulgated   by   the   executive   branch   or   from   the wisdom or whim of the President.

(3)The authorization to the President can be exercised only  within   the   specified   limits   set   in   the   law and   is further   subject   to   limitations   and   restrictions   which Congress   may   impose.   Consequently,   if   Congress specifies that the tariff rates should not exceed a given amount, the President cannot impose a tariff rate that exceeds   such   amount.   If   Congress   stipulates   that   no duties may be imposed on the importation of corn, the President cannot impose duties on corn, no matter how actively  the  local  corn producers   lobby the President. Even the most picayune of limits or restrictions imposed by Congress must be observed by the President.

There is one fundamental principle that animates these constitutional   postulates.   These   impositions   under Section   28(2),   Article  VI   fall  within   the   realm  of   the power  of   taxation,   a  power  which   is  within   the   sole province the legislature under the Constitution.

Without Section 28(2), Article VI, the executive branch has no authority to impose tariffs and other similar tax levies   involving   the   importation   of   foreign   goods. Assuming that Section 28(2) Article VI did not exist, the enactment of the SMA by Congress would be voided on the ground that it would constitute an undue delegation of   the   legislative   power   to   tax.   The   constitutional provision   shields   such   delegation   from   constitutional infirmity,  and should be recognized as an exceptional grant of legislative power to the President, rather than the affirmation of an inherent executive power.

This   being   the   case,   the   qualifiers  mandated   by   the Constitution   on   this   presidential   authority   attain primordial   consideration.   First,   there  must   be   a   law, such as the SMA. Second, there must be specified limits, a detail which would be filled in by the law. And further, Congress   is   further  empowered   to   impose   limitations and restrictions on this presidential  authority.  On this last power, the provision does not provide for specified conditions, such as that the limitations and restrictions must conform to prior statutes, internationally accepted practices,   accepted   jurisprudence,   or   the   considered opinion of members of the executive branch. aHIDAE

The Court   recognizes   that   the  authority  delegated   to the  President  under   Section  28(2),  Article  VI  may  be exercised,   in   accordance  with   legislative   sanction,   by the   alter   egos  of   the  President,   such  as  department secretaries.   Indeed,   for   purposes   of   the   President's exercise   of   power   to   impose   tariffs   under  Article  VI, 

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Section 28(2),   it   is  generally   the  Secretary  of  Finance who   acts   as   alter   ego   of   the   President.   The   SMA provides an exceptional instance wherein it is the DTI or Agriculture Secretary who is tasked by Congress, in their capacities as alter egos of the President, to impose such measures. Certainly, the DTI Secretary has no inherent power, even as alter ego of the President, to levy tariffs and imports.

Concurrently,   the   tasking   of   the   Tariff   Commission under the SMA should be likewise construed within the same   context   as   part   and   parcel   of   the   legislative delegation of its inherent power to impose tariffs and imposts to the executive branch, subject to limitations and   restrictions.   In   that   regard,   both   the   Tariff Commission and the DTI Secretary may be regarded as agents   of   Congress   within   their   limited   respective spheres, as ordained in the SMA, in the implementation of   the   said   law which  significantly  draws   its   strength from the plenary legislative power of taxation. Indeed, even the President may be considered as an agent of Congress   for   the   purpose   of   imposing   safeguard measures.   It   is   Congress,   not   the   President,   which possesses   inherent   powers   to   impose   tariffs   and imposts.   Without   legislative   authorization   through statute, the President has no power, authority or right to impose such safeguard measures because taxation is inherently legislative, not executive.

 

->There   is   no   question   that   Section   5   of   the   SMA operates as a limitation validly imposed by Congress on the presidential 52 authority under the SMA to impose tariffs and imposts. That the positive final determination operates as an indispensable requisite to the imposition of   the   safeguard  measure,   and   that   it   is   the   Tariff Commission which makes such determination, are legal propositions plainly expressed in Section 5 for the easy comprehension for everyone but respondents. CEIHcT

 

It can be surmised at once that respondents' preferred interpretation is based not on the express language of the SMA, but from implications derived in a roundabout manner.  Certainly,  no provision   in   the  SMA expressly authorizes   the   DTI   Secretary   to   impose   a   general safeguard  measure  despite   the  absence  of  a  positive final recommendation of the Tariff Commission. On the 

other   hand,   Section   5   expressly   states   that   the   DTI Secretary   "shall   apply   a   general   safeguard   measure upon   a   positive   final   determination   of   the   [Tariff] Commission."   The   causal   connection   in   Section   5 between   the   imposition  by   the  DTI   Secretary   of   the general   safeguard   measure   and   the   positive   final determination of the Tariff Commission is patent,  and even respondents do not dispute such connection.

Respondents employed considerable effort to becloud Section  5  with  undeserved  ambiguity   in  order   that  a proper   resort   to   the   legislative  deliberations  may  be had. Yet assuming that Section 5 deserves to be clarified through   an   inquiry   into   the   legislative   record,   the excerpts   cited   by   the   respondents   are   far   more ambiguous than the language of the assailed provision regarding the key question of whether the DTI Secretary may   impose   safeguard   measures   in   the   face   of   a negative   determination   by   the   Tariff   Commission. Moreover, even Southern Cross counters with its own excerpts of the legislative record in support of their own view. 57

It will not be difficult, especially as to heavily-debated legislation,   for   two   sides   with   contrapuntal interpretations of a statute to highlight their respective citations from the legislative debate in support of their particular views. 58 A futile exercise of second-guessing is happily avoided if the meaning of the statute is clear on its face. It is evident from the text of Section 5 that there  must   be   a   positive   final   determination   by   the Tariff Commission that a product is being imported into the country  in  increased quantities (whether absolute or   relative   to   domestic   production),   as   to   be   a substantial   cause   of   serious   injury   or   threat   to   the domestic industry. Any disputation to the contrary is, at best, the product of wishful thinking.

Notwithstanding,   Congress   in   enacting   the   SMA   and prescribing the roles to be played therein by the Tariff Commission and the DTI Secretary did not envision that the   President,   or   his/her   alter   ego,   could   exercise supervisory powers over the Tariff Commission. If truly Congress intended to allow the traditional "alter ego" principle   to   come   to   fore   in   the   peculiar   setup established by the SMA, it would have assigned the role 

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now played by the DTI Secretary under the law instead to   the   NEDA.   The   Tariff   Commission   is   an   attached agency   of   the   National   Economic   Development Authority, 68 which in turn is the independent planning agency of the government. 69

 

The   Tariff   Commission   does   not   fall   under   the administrative supervision of the DTI. 70 On the other hand,   the   administrative   relationship   between   the NEDA and the Tariff Commission is established not only by   the  Administrative  Code,  but   similarly  affirmed by the Tariff and Customs Code.

Congress in enacting the SMA and prescribing the roles to be played therein by the Tariff Commission and the DTI   Secretary  did  not  envision   that   the  President,  or his/her   alter   ego   could   exercise   supervisory   powers over the Tariff Commission. If truly Congress intended to allow the traditional alter ego principle to come to fore   in   the  peculiar   setup established  by   the SMA,   it would have assigned the role now played by the DTI Secretary under the law instead to the NEDA, the body to which the Tariff Commission  is  attached under the Administrative Code.

The Court  has no  issue with upholding administrative control   and   supervision  exercised  by   the  head  of   an executive department, but only over those subordinate offices that are attached to the department, or which are, under statute, relegated under its supervision and control. To declare that a department secretary, even if acting as alter ego of the President, may exercise such control or supervision over all  executive offices below cabinet rank would lead to absurd results such as those adverted to above. As applied to this case, there is no legal   justification   for   the   DTI   Secretary   to   exercise control, supervision, review or amendatory powers over the   Tariff   Commission   and   its   positive   final determination

Indeed,   a   declaration   that   the   Tariff   Commission possesses quasi-judicial powers, even if ascertained for the limited purpose of exercising its functions under the SMA, may have the unfortunate effect of expanding the Commission's   powers   beyond   that   contemplated   by law. After all, the Tariff Commission is by convention, a fact-finding body, and its role under the SMA, burdened as   it   is   with   factual   determination,   is   but   a   mere 

continuance   of   this   tradition.   However,   Congress through the SMA offers a significant deviation from this traditional   role   by   tying   the   decision   by   the   DTI Secretary   to   impose   a   safeguard   measure   to   the required   positive   factual   determination   by   the   Tariff Commission. Congress is not bound by past traditions, or even by the jurisprudence of this Court, in enacting legislation it may deem as suited for the times. The sole benchmark   for   judicial   substitution   of   congressional wisdom   is   constitutional   transgression,   a   standard which the respondents do not even attempt to match.

Respondents' Suggested Interpretation

Of the SMA Transgresses Fair Play

Respondents   have   belabored   the   argument   that   the Decision's interpretation of the SMA, particularly of the role   of   the   Tariff   Commission   vis-Ã   -vis   the   DTI Secretary,   is   noxious   to   traditional   notions   of administrative control and supervision. But in doing so, they   have   failed   to   acknowledge   the   congressional prerogative to redefine administrative relationships,  a license   which   falls   within   the   plenary   province   of Congress   under   our   representative   system   of democracy.   Moreover,   respondents'   own   suggested interpretation falls wayward of expectations of practical fair play.

Adopting   respondents'   suggestion   that   the   DTI Secretary may disregard the factual findings of the Tariff Commission and investigatory process that preceded it, it would seem that the elaborate procedure undertaken by   the   Commission   under   the   SMA,   with   all   the attendant guarantees of due process, is but an inutile spectacle.   As   Justice   Garcia   noted   during   the   oral arguments,  why would  the DTI  Secretary  bother  with the   Tariff   Commission   and   instead   conduct   the investigation himself. 99

Certainly,   nothing   in   the   SMA   authorizes   the   DTI Secretary, after making the preliminary determination, to  personally  oversee   the   investigation,  hear  out   the interested parties, or receive evidence. 100 In fact, the SMA   does   not   even   require   the   Tariff   Commission, which   is   tasked   with   the   custody   of   the   submitted evidence,  101 to  turn over  to   the DTI  Secretary  such evidence it had evaluated in order to make its factual determination. 102 Clearly, as Congress tasked it to be, it   is   the Tariff Commission and not   the DTI  Secretary 

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which   acquires   the   necessary   intimate   acquaintance with the factual conditions and evidence necessary for the imposition of the general safeguard measure. Why then favor an interpretation of the SMA that leaves the findings  of   the  Tariff  Commission  bereft  of  operative effect and makes them subservient to the wishes of the DTI   Secretary,   a   personage   with   lesser   working familiarity with the relevant factual milieu? In fact, the bare theory of the respondents would effectively allow the DTI Secretary to adopt, under the subterfuge of his "discretion",   the   factual   determination   of   a   private investigative   group   hired   by   the   industry   concerned, and   reject   the   investigative   findings   of   the   Tariff Commission   as  mandated   by   the   SMA.   It   would   be highly   irregular   to   substitute   what   the   law   clearly provides for a dubious setup of no statutory basis that would be readily susceptible to rank chicanery.

->The   Court   has   been   emphatic   that   a   positive   final determination from the Tariff Commission is required in order   that   the   DTI   Secretary  may   impose   a   general safeguard measure, and that the DTI Secretary has no power   to   exercise   control   and   supervision   over   the Tariff   Commission   and   its   final   determination.   These conclusions   are   the   necessary   consequences   of   the applicable provisions of the Constitution, the SMA, and laws such as the Administrative Code. However, the law is   silent   though   on   whether   this   positive   final determination   may   otherwise   be   subjected   to administrative review.

There is no evident legislative intent by the authors of the SMA to provide for a procedure of administrative review. If ever there is a procedure for administrative review   over   the   final   determination   of   the   Tariff Commission, such procedure must be done in a manner that   does   not   contravene   or   disregard   legislative prerogatives   as   expressed   in   the   SMA   or   the Administrative   Code,   or   fundamental   constitutional limitations.

->In response to our citation of Section 28(2), Article VI, respondents   elevate   two   arguments   grounded   in constitutional   law.   One   is   based   on   another constitutional  provision,  Section 12,  Article  XIII,  which mandates   that   "[t]he   State   shall   promote   the preferential   use   of   Filipino   labor,   domestic  materials and  locally  produced goods and adopt measures  that help make them competitive." By no means does this provision   dictate   that   the   Court   favor   the   domestic 

industry in all competing claims that it may bring before this   Court.   If   it  were   so,   judicial   proceedings   in   this country would be rendered a mockery, resolved as they would   be,   on   the   basis   of   the   personalities   of   the litigants and not their legal positions.

Moreover, the duty imposed on by Section 12, Article XIII  falls primarily with Congress, which in that regard enacted the SMA, a law designed to protect domestic industries from the possible ill-effects of our accession to   the  global   trade  order.   Inconveniently  perhaps   for respondents,   the  SMA also  happens   to  provide   for  a procedure under which such protective measures may be   enacted.   The   Court   cannot   just   impose   what   it deems as the spirit of the law without giving due regard to its letter.

->Public respondents allege that the Decision is contrary to our holding in Tañada v. Angara, 111 since the Court noted   therein   that   the   GATT   itself   provides   built-in protection   from unfair   foreign  competition and   trade practices,  which  according   to   the  public   respondents, was a reason "why the Honorable [Court] ruled the way it   did."  On   the   other   hand,   the  Decision   "eliminates safeguard measures as a mode of defense." DCASIT

This is balderdash, as with any and all claims that the Decision   allows   foreign   industries   to   ride   roughshod over our domestic enterprises.  The Decision does not prohibit the imposition of general safeguard measures to protect domestic industries in need of protection. All it affirms is that the positive final determination of the Tariff  Commission  is  first   required  before  the general safeguard measures are  imposed and  implemented,  a neutral   proposition   that   gives   no   regard   to   the nationalities   of   the   parties   involved.   A   positive determination  by   the  Tariff  Commission   is  hardly   the elusive Shangri-la of administrative law. If  a particular industry   finds   it   difficult   to   obtain   a   positive   final determination  from the  Tariff  Commission,   it  may  be simply   because   the   industry   is   still   sufficiently competitive  even   in   the   face  of   foreign   competition. These   safeguard   measures   are   designed   to   ensure salvation, not avarice.

-> The   Court   of   Appeals'   Decision  was   annulled precisely because the appellate court did not have the power   to   rule   on   the   petition   in   the   first   place. Jurisdiction is necessarily the power to decide a case, and   a   court   which   does   not   have   the   power   to 

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adjudicate a case is one that is bereft of jurisdiction. We find no  reason  to disturb  our  earlier  finding  that   the Court of Appeals' Decision is null and void.

At   the   same   time,   the   Court   in   its   Decision   paid particular  heed to the peculiarities attaching to the 5 August  2003 Decisionof   the  DTI  Secretary.   In   the  DTI Secretary'sDecision, he expressly stated that as a result of   the  Court  of  Appeals'  Decision,   "there   is   no   legal impediment   for   the   Secretary   to   decide   on   the application." Yet the truth remained that there was a legal   impediment,   namely,   that   the   decision   of   the appellate   court   was   not   yet   final   and   executory. Moreover, it was declared null and void, and since the DTI   Secretary   expressly   denominated   the   Court   of Appeals' Decision as his basis for deciding to impose the safeguard measures, the latter decision must be voided as well.  Otherwise put,  without the Court of Appeals' Decision, the DTI Secretary's Decision of 5 August 2003 would not have been rendered as well.

Accordingly,   the   Court   reaffirms   as   a   nullity   the  DTI Secretary's   Decision   dated   5   August   2003.   As   a necessary consequence, no further action can be taken on Philcemcor's Petition for Extension of the Safeguard Measure.  Obviously,   if   the   imposition  of   the   general safeguard measure is void as we declared it to be, any extension   thereof   should   likewise   be   fruitless.   The proper remedy instead is to file a new application for the   imposition of   safeguard measures,   subject   to   the conditions prescribed by the SMA. Should this step be eventually availed of, it  is only hoped that the parties involved  would   content   themselves   in   observing   the proper procedure, instead of making a mockery of the rule of law.

WHEREFORE, respondents' Motions for Reconsideration are DENIED WITH FINALITY.

Respondent   DTI   Secretary   is   hereby   ENJOINED   from taking  any   further  action on   the  pending  Petition  for Extension of the Safeguard Measure. 

NIRC REMEDIES

1. CIR v. Standard Chartered Bank, G.R. No.

192173, July 29, 2015.

Facts:

Standard   Chartered   Bank   received   a   formal   letter   of demand (  dated  June 24,  2004)  for alleged deficiency income tax, final income tax – Foreign Currency Deposit Unit (FCDU), and expanded withholding tax (EWT) in the aggregate   amount   of   P33,076,944.18,   including increments covering taxable year 1998. 

Standard   Chartered   protested   the   said   assessment through  filing   a   letter-protest   stating   the   factual   and legal bases of the assessment and requested that it be withdrawn and cancelled.   It  further contended that  it already made payments through BIR’s electronic filing and  payment   system   (eFPS)  as   regards   its   deficiency [WTC]   and   [FWT]   assessments   in   the   amounts   of P124,967.73  and  P139,713.11,  respectively.  Thus,   the remaining   assessments   cover  only  the  modified   total amount of P33,076,944.18.

The decision of the CTA in Division, which was later on concurred   by   the   CTA   En   Banc,   is  that   petitioner’s subject   Formal   Letter   of   Demand   and   Assessment Notices should be cancelled considering that the same was   already   barred   by   prescription   for   having   been issued   beyond   the   three-year   prescriptive   period provided   for   in   Section   203   of   the  National   Internal Revenue   Code.  Although  waivers   of   the   statute   of limitations  were  executed  by   the  parties  on   July   20, 2001   and   April   4,   2002,   these  did   not   extend   the aforesaid prescriptive period because they were invalid by reason of  failure to comply with the requirements set forth in RMO No. 20-90.

Issues:

I. WON the CIR’s right to assess Standard Chartered for deficiency income tax and final income tax covering taxable year 1998 has already prescribed, despite the waiver of statute of limitations executed by the parties

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II. WON Standard Chartered is estopped from questioning the validity of the waivers of the Statute of Limitations in view of the partial payments it made on the deficiency taxes sought to be collected

Held:

I.  [YES] At the outset, the period for petitioner to assess and collect an internal revenue tax is limited only to three (3) years after the last day prescribed by law for the filing of the return.  Provided,   That  in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. (Section 203 of the NIRC) 

Thus,   in   the   present   case,   petitioner   only   had   three years,   counted   from   the   date   of   actual   filing   of   the return or from the last date prescribed by law for the filing of such return, whichever comes later, to assess a national   internal   revenue   tax   or   to   begin   a   court proceeding   for   the   collection   thereof   without   an assessment.   However,   one   of   the   exceptions   to   the three-year   prescriptive   period   on   the   assessment   of taxes   is  when  before   the   expiration   of   the   time prescribed in Section 203 for the assessment of the tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. (Section 222(b) of the NIRC of 1997)

The   cited  provision   authorizes   the   extension   of   the original three-year prescriptive period by the execution of   a  valid waiver,  where   the   taxpayer   and   CIR  may stipulate   to   extend   the   period   of   assessment   by   a written agreement executed prior  to the  lapse of  the period  prescribed  by   law,  and by   subsequent  written agreements   before   the   expiration   of   the   period previously agreed upon. 

RMO No. 20-90  implements the provisions of the NIRC relating to the period of prescription for the assessment and   collection   of   taxes.   The   provisions   of   the   RMO 

explicitly show their mandatory nature, requiring strict compliance.  Hence,  failure to comply with any of  the requisites renders a waiver defective and ineffectual.

In the instant case, the subject waivers did not comply with the form prescribed by the RMO, thus they did not extend the period to assess the subject deficiency tax liabilities  of   respondent   for   taxable  year  1998.  Hence prescription has already set in.

II. [NO] When respondent paid the deficiency WTC and   FWT   assessments,   petitioner   accepted   said payment   without   any   opposition.   This   effectively extinguished respondent’s obligation to pay the subject taxes.   It   bears   emphasis   that,   obligations   are extinguished,   among   others,   by   payment   or performance.

The   facts   of   this   case   do   not   call   for   the application   of   the   doctrine   of   estoppel.  It   must   be remembered that the execution of a Waiver of Statute of  Limitations  results   to  a  derogation of  some of   the rights of the taxpayer,  the same must be executed in accordance   with   pre-set   guidelines   and   procedural requirements.  The  Court   cannot   turn   blind   on   the importance   of   the   Statute   of   Limitations   upon   the assessment   and   collection   of   internal   revenue   taxes provided   for   under   the   NIRC.

Ruling: In fine, the period to assess or collect deficiency taxes   for   the   taxable  year  1998 was  never  extended. Consequently,   the   Formal   Letter   of   Demand   and Assessment Notices dated 24 June 2004 were issued by the BIR beyond the three-year prescriptive period and are   therefore   void.

WHEREFORE, the petition is DENIED.

2. COMMISSIONER OF INTERNAL REVENUE vs.   TEAM SUAL CORPORATION (formerly MIRANT SUAL CORPORATION)

Facts

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Team   Sual   Corporation   (TSC),   a   VAT-registered corporation,  is  principally  engaged in the business of   power   generation   and   the   subsequent   sale thereof solely to National Power Corporation (NPC). 

The   Commissioner   of   Internal   Revenue   (CIR) granted   TSC's   application   for   zero-rating   arising from its sale of power generation services to NPC for the taxable year 2000. 

TSC filed its VAT returns for the first, second, third, and fourth quarters of such year.

TSC filed with the BIR an administrative claim for refund, claiming that it is entitled to the unutilized input VAT  in   the   amount   of  more   than   P179m arising   from   its   zero-rated   sales   to   NPC   for   the taxable year 2000. 

On  April   1,   2002,   without   awaiting   the   CIR's resolution of its administrative claim for refund/tax credit, TSC filed a petition for review with the CTA seeking the refund or the issuance of a tax credit certificate for the amount stated. 

Issue

Should TSC’s claim for tax credit/refund be granted.

RulingNo.   The   claim   should   not   be   granted   for   failure   to comply   with   the   statutory   and   administrative procedures in claiming for tax credit/refund.

balik2x rani siya na rulign sa mga cases nothing different

Rationale

2 years admin claim- 

within two years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales

120 days

the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty days from the date of submission of complete documents in support of the application filed

30 days- file for judicial claim with the Court of Tax Appeals.

denial denial of the claim for tax refund or tax credit,

or the failure on the part of the Commissioner to act on the application within the period prescribed above (120days

TSC filed its administrative claim for refund/tax credit with the BIR on March 11, 2002, which is still within the two-year prescriptive period. However, without waiting for the CIR decision or the lapse of the 120-day period from the time it submitted its complete documents in support of its claim, TSC filed a petition for review with the CTA on April 1, 2002 — a mere 21 days after it filed its administrative claim with the BIR.   Clearly,   TSC's petition for review with the CTA was prematurely filed; the CTA had no jurisdiction to take cognizance of TSC's petition since there was no decision as yet by the CIR denying TSC's claim, fully or partially, and the 120-day period had not yet lapsed.

3. Team Pacific Corporation vs. Daza as Municipal Treasurer of Taguig, G.R. No. 167732, July 11, 2012.

FACTS: A domestic corporation engaged in the business of   assembling   and   exporting   semiconductor   devices, TPC conducts its business at the FTI Complex in the then Municipality of Taguig. It appears that since the start of its   operations   in   1999,   TPC   had   been   paying   local business taxes assessed at one-half (1/2) rate pursuant to   Section   75   (c)   of  Ordinance  No.   24-93,   otherwise known  as   the  Taguig  Revenue  Code.  Consistent  with Section   143   (c)2   of   Republic   Act   (RA)   No.   7160, otherwise   known   as   the   Local   Government   Code   of 1991,   said   provision   of   the   Taguig   Revenue   Code provides as follows:

 Section 75. Imposition of Tax. – There is hereby imposed on the following persons, natural or juridical, who establish, operate conduct or maintain their respective businesses within the Municipality of Taguig, a graduated business tax in the amounts hereafter prescribed: x x x x (c) On exporters, and on manufacturers, millers, producers, wholesalers, distributors, dealers or retailers of essential commodities enumerated hereunder at a rate not exceeding one-half (1/2) of the rates prescribed under subsections (a), (b) and (d) of

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this Section: (1) Rice and corn; (2) Wheat or cassava flour, meat, dairy products, locally manufactured, processed or preserved food, sugar, salt and other agricultural, marine, and fresh water products, whether in their original state or not; (3) Cooking oil and cooking gas; (4) Laundry soap, detergents, and medicine; (5) Agricultural implements, equipment and post- harvest facilities, fertilizers, pesticides, insecticides, herbicides and other farm inputs; (6) Poultry feeds and other animal feeds; (7) School supplies; and (8) Cement. x x x x

When it  renewed its business  license in 2004, however, TPC’s business tax for the first quarter of the same year was assessed in the sum of P208,109.77 by respondent   Josephine   Daza,   in   her   capacity   as   then Municipal   Treasurer   of   Taguig.  The assessment was computed by Daza by applying the full value of the rates provided under Section 75 of the Taguig Revenue Code, instead of the one-half (1/2) rate provided under paragraph (c) of the same provision. Constrained to pay the assessed business tax on 19 January 2004 in view of its being a precondition for the renewal of its business permit,  TPC filed on the same day a written protest with Daza, insisting on the one-half (1/2) rate on which its business tax was previously assessed. 

Subsequent to its 13 April 2004 demand for the refund and/or issuance of a tax credit which it considered as an overpayment  of   its  business  taxes  for   the same year, TPC filed a petition for certiorari under Rule 65 Alleging that no formal action was taken regarding its protest on or before 19 March 2004 or within the period of sixty (60) days from the filing thereof as prescribed under Article 195 of the Local Government Code, TPC maintained that it was simply informed by Atty. Marianito D. Miranda, Chief of the Taguig Business Permit and Licensing Office, that the assessment of its business tax at the full rate was justified by the fact that it was not an exporter of the essential commodities enumerated under Section 143 of the Local Government Code and Section 75 of the Taguig Revenue Code.   Arguing   that   Daza   acted   with   grave abuse of  discretion  in not applying the one-half   (1/2) rate   provided   under   paragraph   (c)   of   the   same provisions, TPC prayed for the issuance of a temporary restraining   order   and/or   permanent   injunction   to restrain the former from assessing business taxes at the 

full rate, the refund of its overpayment as well as the grant   of   its   claims   for   exemplary   damages   and attorney’s fees.

ISSUES:

(a) Whether or not it availed of the correct remedy against Daza’s illegal assessment when it filed its petition for certiorari before the RTC

(b) whether or not, as an exporter of semiconductor devices, it should be assessed business taxes at the full rate instead of the one-half (1/2) rates provided under Section 75 (c) of the Taguig Revenue Code and 143 (c) of the Local Government Code.

TPC argues that, without the remedy of appeal being specified with particularity under Article 195 of the Local Government Code, a Rule 65 petition for certiorari  is the proper and logical remedy since Daza acted with grave abuse of discretion in assessing its business taxes at the full   rate.   Although   it   is   an   exporter   of semiconductors, TPC insists that its business tax should have been computed at  one-half   (1/2) rate in accordance with the clear intendment of the law. It  likewise claimed that its position is congruent  with   administrative   determinations as well as Daza’s own act of reverting back to the half rate assessment of its business tax for the second quarter of 2006.

Daza,   in   turn,  asserted  that   the  RTC correctly dismissed TPC’s petition for certiorari in view of its   failure   to   avail   of   the   proper   remedy   of ordinary appeal  provided under Article 195 of the Local Government Code. As then Municipal Treasurer of Taguig,  Daza argued that she did not   exceed   her   jurisdiction   or   abuse   her discretion   in   assessing   TPC’s   business   tax pursuant to Section 143 (c) of the same Code and Section 75 (c) of the Taguig Revenue Code. Not being an exporter of the basic commodities enumerated under the subject provisions,  TPC cannot insist on the computation of its business taxes   on   the  basis   of   the  one-half   (1/2)   rate prescribed for a category of taxpayers to which 

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it clearly did not belong. In view of TPC’s choice of the wrong mode of appeal, Daza maintained that   the   assailed   assessment   had   already attained finality and can no longer be modified.

RULING: We find the dismissal of the petition in order. 

A taxpayer dissatisfied with a local treasurer’s denial of or inaction on his protest over an assessment has thirty (30)   days   within   which   to   appeal   to   the   court   of competent jurisdiction. Under the law, said period is to be reckoned from the taxpayer’s receipt of the denial of his   protest  or   the   lapse  of   the   sixty   (60)  day  period within which the  local  treasurer  is  required to decide the protest, from the moment of its filing. 

SEC. 195. Protest of Assessment. - When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee or charge, the amount of deficiency, the surcharges, interests and penalties. Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise, the assessment shall become final and executory. The local treasurer shall decide the protest within sixty (60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice canceling wholly or partially the assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty (60) day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable.

Absent any showing of the formal denial of the protest by Atty. Miranda, then Chief of the Taguig Business Permit and Licensing Office, we find that TPC’s filing of its petition before the RTC on 19 April 2004 still timely. Reckoned from the filing of the letter protest on 19

January 2004, Daza had sixty (60) days or until 19 March 2004 within which to resolve the same in view of the fact that 2004 was a leap year. From the lapse of said period, TPC, in turn, had thirty (30) days or until 18 March 2004 within which to file its appeal to the RTC. Since the latter date fell on a Sunday, the RTC correctly ruled that TPC’s filing of its petition on 19 April 2004 was still within the period prescribed under the above quoted provision.

We find that TPC erroneously availed of the wrong remedy in filing a Rule 65 petition for certiorari to question Daza’s inaction on its letter-protest.   The   rule   is   settled   that,   as   a special civil action, certiorari is available only if the following essential requisites concur: (1) it must be directed against a tribunal,  board,  or officer   exercising   judicial   or   quasi-judicial functions;   (2)   the   tribunal,   board,   or   officer must   have   acted   without   or   in   excess   of jurisdiction  or  with   grave   abuse   of   discretion amounting to lack or excess of jurisdiction; and, (3) there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law.

o   Judicial function  entails the power to determine what the law is and what the legal rights of the parties are, and then undertakes to determine these questions and adjudicate upon the rights of the parties. 

o Quasi-judicial function,   on   the   other hand, refers to the action and discretion of public administrative officers or bodies, which are required to investigate facts or ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for their official action and to exercise discretion of a judicial nature.

Daza cannot be said to be performing a judicial or quasi-judicial function  in   assessing   TPC’s business   tax   and/or   effectively   denying   its protest as then Municipal Treasurer of Taguig. For   this   reason,  Daza’s actions are not the proper subjects of a Rule 65 petition for certiorari which is the appropriate remedy in

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cases where a the tribunal, board, or officer exercising judicial or quasi-judicial functions acted without or in grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal or any plain, speedy, and adequate remedy in law.  It   is   likewise considered mutually exclusive with appeal  like the  one  provided  by  Article  195  of   the   Local Government Code for a local treasurer’s denial of or inaction on a protest.

Even if, in the interest of substantial justice, we were to consider its petition for certiorari as an appeal from Daza’s denial of  its protest, TPC’s availment  of   the wrong mode of  appeal   from the RTC’s assailed order has moreover,  clearly rendered the same final and executory. Granted that a Rule 45 petition for review on certiorari is the   proper  mode   of   appeal  when   the   issues raised are purely questions of law, TPC lost sight of the fact that  Section 725 of RA No. 112526 has vested the Court of Tax Appeals (CTA) with the exclusive appellate jurisdiction over, among others, appeals from the judgments, resolutions or orders of the RTC in tax collection cases originally decided by them in their respective territorial jurisdiction .   As amended it likewise requires that the appeal be perfected within thirty (30) days after receipt of the decision and shall be made by filing a petition for review  under   a   procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil Procedure.

To our mind, TPC’s erroneous availment of the wrong mode of appeal and direct resort to this Court instead of the CTA both warrant the dismissal of the petition at bench. The rule is settled that the perfection of an appeal in the manner and within the period fixed by law is not only mandatory but jurisdictional and non-compliance with these legal requirements is fatal to a party’s cause. 

Although appeal is an essential part of our   judicial  process,   it  has  been  held, time and again, that the right thereto is not   a   natural   right   or   a   part   of   due 

process   but   is   merely   a   statutory privilege.   Thus,   the   perfection   of   an appeal   in   the  manner   and  within   the period   prescribed   by   law   is   not   only mandatory   but   also   jurisdictional   and failure   of   a   party   to   conform   to   the rules   regarding  appeal  will   render   the judgment  final  and  executory.  Once  a decision attains finality, it becomes the law of the case irrespective of whether the decision is erroneous or not and no court — not even the Supreme Court — has the power to revise, review, change or alter the same. 

4. ADAMSON VS CA

FACTS:   Adamson   and AMC sold   131,897   common shares   of   stock   in   Adamson   and   Adamson,   Inc. Commissioner   issued   a   Notice   of   Taxpayer informing them of deficiencies on their payment of capital gains tax and Value Added Tax (VAT).  Adamson filed a letter request   for   re-investigation   with   the   Commissioner. before   the   Commissioner   could   act   on   their   letter-request,   AMC,   Lucas   G.   Adamson,   Therese   June   D. Adamson and Sara S.  de los Reyes filed a Petition for Review with the CTA. They assailed the Commissioners finding of tax evasion against them. The Commissioner moved to dismiss the petition, on the ground that it was premature,   as   she   had   not   yet   issued   a   formal assessment   of   the   tax   liability   of   therein petitioners. On September 19, 1994, the CTA denied the Motion to Dismiss. It considered the criminal complaint filed by the Commissioner with the DOJ as an implied formal   assessment,   and   the   filing   of   the   criminal information  with   the   RTC   as   a   denial   of   petitioners protest   regarding   the   tax   deficiency.   Commissioner repaired  to   the Court  of  Appeals  on  the ground that the CTA acted   with   grave   abuse   of   discretion. She contended   that,  with   regard   to   the  protest  provided under  Section 229 of  the NIRC,   there must  first  be a formal assessment issued by the Commissioner, and it must be in accord with Section 6 of Revenue Regulation No. 12-85. She maintained that she had not yet issued a formal assessment of tax liability, and the tax deficiency amounts mentioned in her criminal complaint with the 

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DOJ were given only to show the difference between the   tax   returns   filed   and   the   audit   findings   of   the revenue examiner.

ISSUES:  The   issues   in G.R. No. 124557 and G.R. No. 120935 can be compressed into three:

1.                  WHETHER THE COMMISSIONER HAS ALREADY RENDERED AN ASSESSMENT (FORMAL OR OTHERWISE) OF THE TAX LIABILITY OF AMC, LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON AND SARA S. DE LOS REYES;

2.                  WHETHER THERE IS BASIS FOR THE CRIMINAL CASES FOR TAX EVASION TO PROCEED AGAINST AMC, LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON AND SARA S. DE LOS REYES; and

 

3.                  WHETHER THE COURT OF TAX APPEALS HAS JURISDICTION TO TAKE COGNIZANCE OF BOTH THE CIVIL AND THE CRIMINAL ASPECTS OF THE TAX LIABILITY OF AMC, LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON AND SARA S. DE LOS REYES.

RULING:

I. We rule that the recommendation letter of the Commissioner cannot be considered a formal  assessment. Even a cursory perusal of   the   said   letter  would   reveal   three   key points:

1.     It was not addressed to the taxpayers.

2.     There was no demand made on the taxpayers   to   pay   the   tax   liability, nor   a   period   for   payment   set therein.

3.     The letter was never mailed or sent to the taxpayers by the Commissioner.

Recommendation   letter   served   merely   as the prima facie basis   for   filing   criminal informations   that   the   taxpayers   had   violated the tax code.

II. When fraudulent tax returns are involved as in   the cases at  bar, a proceeding in court after the collection of such tax may be begun without assessment. Here,   the private   respondents  had  already  filed   the capital gains tax return and the VAT returns, and paid the taxes they have declared due therefrom. Upon   investigation   of   the examiners   of   the   BIR,   there   was   a preliminary finding of gross discrepancy  in the computation of the capital gains taxes due from the sale of two lots of AAI shares, first to APAC and then to APAC Philippines, Limited. The examiners also found that the VAT had not been paid for VAT-liable sale of services for the third and fourth quarters of 1990. Arguably,   the   gross   disparity   in   the taxes   due   and   the   amounts   actually declared   by   the   private   respondents constitutes   badges   of   fraud.  No  need   for precise computation and formal assessment in order for criminal complaints to be filed against him

“An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to defeat   and   evade   the   income   tax. A   crime   is complete when the violator has knowingly and willfully filed a fraudulent return, with intent to evade and defeat the tax. The perpetration of the crime is grounded upon knowledge on the part   of   the   taxpayer   that   he   has   made   an inaccurate return, and the governments failure to discover the error and promptly to assess has no   connections   with   the   commission   of   the crime.”

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III. Jurisdiction. The   Court   of   Tax Appeals   shall   exercise   exclusive appellate   jurisdiction   to   review  by appeal, as herein provided -

(1) Decisions of the Commissioner   of Internal   Revenue   in cases   involving disputed   assessments, refunds   of   internal revenue   taxes,   fees   or other charges, penalties imposed   in   relation thereto,   or   other matters   arising   under the   National   Internal Revenue Code or other laws   or   part   of   law administered   by   the Bureau   of   Internal Revenue

Laws have expanded the jurisdiction of the   CTA. However,   they   did   not   change   the jurisdiction of   the CTA to entertain  an appeal only from a final decision or assessment of the Commissioner,   or   in   cases   where   the Commissioner has not acted within the period prescribed by the NIRC. In the cases at bar, the Commissioner has not issued an assessment of the tax liability of private respondents.

5. RIZAL COMMERCIAL BANKING CORPORATION   vs . COMMISSIONER OF INTERNAL REVENUE

R E S O L U T I O N

Petitioner reiterates its claim that its former counsel's failure to file petition for review with the Court of Tax 

Appeals  within   the  period   set  by   Section  228  of   the National   Internal   Revenue   Code   of   1997   (NIRC)  was excusable and raised the following issues for resolution: 

Other   than   the   issue  of   prescription,  which   is   raised herein   for   the  first   time,   the   issues   presented  are   a mere rehash of petitioner's previous arguments, all of which have been considered and found without merit in our Decision dated June 16, 2006. HDacIT

I. Petitioner maintains  that its counsel's  neglect in not filing  the  petition  for   review within   the   reglementary period  was   excusable.   It   alleges   that   the   counsel's secretary misplaced the Resolution hence the counsel was not aware of its issuance and that it had become final and executory.

We are not persuaded.

In our Decision, we held that:

Relief cannot be granted on the flimsy excuse that the failure to appeal was due   to   the   neglect   of   petitioner's counsel.  Otherwise,   all   that  a   losing party  would   do   to   salvage   his   case would be to invoke neglect or mistake of   his   counsel   as   a   ground   for reversing or setting aside the adverse judgment, thereby putting no end to litigation.

Negligence to be "excusable" must be one   which   ordinary   diligence   and prudence   could   not   have   guarded against   and  by   reason  of  which   the rights   of   an   aggrieved   party   have probably  been   impaired.  Petitioner's former   counsel's   omission   could hardly be characterized as excusable, much less unavoidable.

II.   Petitioner   also   argues  that,   in   the   interest   of substantial justice, the instant case should be re-opened considering that it was allegedly not accorded its day in court   when   the   Court   of   Tax   Appeals   dismissed   its petition for review for late filing. It claims that rules of 

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procedure  are   intended   to  help  secure,  not  override, substantial justice.

Petitioner's arguments fail to persuade us.

As correctly observed by the Court of Tax Appeals in its Decision dated June 7, 2005:

If indeed there was negligence, this is obviously  on the part  of  petitioner's own   counsel   whose   prudence   in handling   the   case   fell   short   of   that required under the circumstances. He was well aware of the motion filed by the   respondent   for   the   Court   to resolve first  the issue of this  Court's jurisdiction  on   July  15,   2003,   that  a hearing   was   conducted   thereon   on August 15, 2003 where both counsels were present and at said hearing the motion was submitted for resolution. Petitioner's   counsel   apparently   did not show enthusiasm in the case he was handling as he should have been vigilant of the outcome of said motion and   be   prepared   for   the   necessary action to take whatever the outcome may   have   been.   Such   kind   of negligence   cannot   support petitioner's   claim   for   relief   from judgment.

petitioner's failure to file a petition for review with the Court   of   Tax   Appeals   within   the   statutory   period rendered the disputed assessment final, executory and demandable, thereby precluding it from interposing the defenses of   legality  or  validity  of   the assessment and prescription of the Government's right to assess.

In case the Commissioner failed to act on the disputed assessment  within   the   180-day   period   from   date   of submission of documents, a taxpayer can either: 

1)   file   a   petition   for   review   with   the   Court   of   Tax Appeals within 30 days after the expiration of the 180-day period; or 

2) await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a   copy  of   such  decision.  However,   these  options  are mutually   exclusive,   and   resort   to   one   bars   the application of the other. 

In the instant case, the Commissioner failed to act on the disputed assessment within 180 days from date of submission of documents. Thus, petitioner opted to file a petition for review before the Court of Tax Appeals. Unfortunately, the petition for review was filed out of time. Petitioner did not file a motion for reconsideration or  make   an   appeal;   hence,   the   disputed   assessment became final, demandable and executory.

III. Lastly, we note that petitioner is raising the issue of prescription for the  first time  in the instant motion for reconsideration. The rule  is well-settled that points of law,   theories,   issues   and   arguments   not   adequately brought to the attention of the lower court need not be considered by  the  reviewing  court  as   they cannot  be raised for the first time on appeal,  8 much more in a motion for reconsideration as in this case, because this would be offensive to the basic rules of fair play, justice and due process.

WHEREFORE,   in   view   of   the   foregoing,   petitioner's motion   for   reconsideration   is   DENIED.||| (Rizal Commercial Banking Corp. v. Commissioner of Internal Revenue, G.R. No. 168498 (Resolution), [April 24, 2007], 550 PHIL 316-326)

6. BONIFACIA SY PO v. CTA

G.R. No. 81446 August 18, 1988

FACTS:

Petitioner is the widow of the late Mr. Po Bien Sing. In the taxable years 1964 to 1972, the deceased Po Bien Sing was the sole proprietor of Silver Cup Wine Factory (Silver Cup for brevity). He was engaged in the business of manufacture and sale of compounded liquors, using alcohol and other ingredients as raw materials.

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On   the   basis   of   a   denunciation   against   Silver   Cup allegedly   "for   tax   evasion   amounting   to   millions   of pesos"   the   then   Secretary   of   Finance   directed   the Finance-BIR--NBI   team   constituted   under   Finance Department   to   conduct   the   corresponding investigation.   Accordingly,   a   letter   and   a   subpoena duces tecum were issued against Silver Cup requesting production of the accounting records and other related documents for the examination of the team.

Mr. Po Bien Sing did not produce his books of accounts as   requested.   This   prompted   the   team   with   the assistance of the PC Company, Cebu City, to enter the factory   bodega   of   Silver   Cup   and   seized   different brands, consisting of 1,555 cases of alcohol products. 

On the basis of the team's report of investigation, the respondent Commissioner of Internal Revenue assessed Mr. Po Bien Sing deficiency income tax for 1966 to 1970 in   the   amount   of   P7,154,685.16   and   for   deficiency specific tax for January 2,1964 to January 19, 1972 in the amount of P5,595,003.68.

Petitioner   protested   the   deficiency   assessments through   letters   which   protests   were   referred   for reinvestigation. The corresponding report dated August 13,   1981   recommended   the   reiteration   of   the assessments in view of the taxpayer's persistent failure to   present   the   books   of   accounts   for   examination, compelling   respondent   to   issue  warrants   of   distraint and levy.

The warrants were admittedly received by petitioner on October   14,   1981,   which   petitioner   deemed respondent's   decision   denying   her   protest   on   the subject   assessments.   Hence,   petitioner's   appeal   on October 29,1981. 

ISSUE:

Whether or  not  the assessments have valid  and  legal bases

HELD:

Yes.  The applicable   legal  provision  is  Section 16(b)  of the   National   Internal   Revenue   Code   of   1977   as amended. It reads:

Sec. 16. Power of the Commissioner of Internal Revenue to make assessments

(b) Failure to submit required returns, statements, reports and other documents. - When a report required by   law  as   a  basis   for   the   assessment  of   an  national internal revenue tax shall not be forthcoming within the time fixed by law or regulation or when there is reason to believe that any such report is false, incomplete, or erroneous, the Commissioner of Internal Revenue shall assess the proper tax on the best evidence obtainable.

In case a person fails to file a required return or other document at the time prescribed by law, or willfully or otherwise,  files   a   false  or   fraudulent   return  or  other documents, the Commissioner shall make or amend the return   from   his   own   knowledge   and   from   such information   as   he   can   obtain   through   testimony   or otherwise,   which   shall   be   prima   facie   correct   and sufficient for all legal purposes.

The   law   is   specific   and   clear.   The   rule   on   the   "best evidence   obtainable"   applies   when   a   tax   report required by law for the purpose of assessment  is  not available   or   when   the   tax   report   is   incomplete   or fraudulent.

In the instant case, the persistent failure of the late Po Bien   Sing   and   the   herein   petitioner   to   present   their books of accounts for examination for the taxable years involved left the Commissioner of Internal Revenue no 

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other   legal   option   except   to   resort   to   the   power conferred upon him under Section 16 of the Tax Code.

The   tax   figures   arrived   at   by   the   Commissioner   of Internal Revenue are by no means arbitrary. 

Where the taxpayer is appealing to the tax court on the ground that the Collector's assessment is erroneous, it is   incumbent   upon   him   to   prove   there  what   is   the correct and just liability by a full and fair disclosure of all pertinent   data   in   his   possession.   Otherwise,   if   the taxpayer   confines   himself   to   proving   that   the   tax assessment is wrong, the tax court proceedings would settle   nothing,   and   the  way  would   be   left   open   for subsequent   assessments   and   appeals   in   interminable succession.

Tax assessments by tax examiners are presumed correct and made in good faith. The taxpayer has the duty to prove   otherwise.     In   the   absence   of   proof   of   any irregularities   in   the   performance   of   duties,   an assessment duly made by a Bureau of Internal Revenue examiner and approved by his superior officers will not be   disturbed.     All   presumptions   are   in   favor   of   the correctness of tax assessments. 

7. CAPITOL STEEL CORPORATION, petitioner , vs . PHIVIDEC INDUSTRIAL AUTHORITY, respondent .

FACTS:

Petitioner,   Capitol   Steel,   is   a   domestic   corporation which owns 65 parcels of land 3 with a total land area of 337,733 square meters (the properties) located in the barrios of Sugbongcogon and Casinglot, Municipality of Tagoloan, Province of Misamis Oriental.

Respondent,   PHIVIDEC,   is   a   government-owned   and controlled   corporation   organized   and   existing   under 

Presidential  Decree  No.  538,  4  as  amended,  which   is vested with governmental and proprietary functions 5 including the power of eminent domain for the purpose of   acquiring   rights   of   way   or   any   property   for   the establishment  or  expansion  of   the  Phividec   Industrial Areas. 

The properties of  Capitol  Steel  were  identified as the most   ideal   site   for   the   Mindanao   International Container Terminal Project (MICTP), a PHIVIDEC project which involves the phased production of an 800-meter berth and the acquisition of port equipment  to handle the volume of seaborne break-bulk and container traffic in Mindanao. 

On  August  24,  1999,  PHIVIDEC  filed  an  expropriation case before the RTC of Misamis Oriental,   docketed as Civil Case No. 99-477, and raffled to Branch 38 thereof.

On   September   1,   1999,   Branch   38   of   the   Misamis Oriental   RTC   issued   a  writ   of   possession   in   favor   of PHIVIDEC.   Due,   however,   to   the   unauthorized engagement   by   PHIVIDEC   of   the   legal   services   of   a private   lawyer,   the  expropriation case was  dismissed, without   prejudice   to   the   filing   of   a   similar   petition through a proper legal officer or counsel.

In the meantime, Capitol Steel requested the Technical Committee on Real Property Valuation (TCRPV) of the Bureau of Internal Revenue (BIR), by letter of March 27, 2001,   for   a   revaluation  of   its   properties.   The   TCRPV thereafter   issued   Resolution  No.   36-2001   12   (TCRPV Resolution)   dated   December   11,  2001   fixing   the "reasonable   and   realistic   zonal   valuation"   of   the properties at P700 per square meter. 

By letter 14 of November 21, 2003, PHIVIDEC informed Capitol  Steel  that  it  would file anew an expropriation case   and   that   it   had   deposited   the   amount   of P116,563,500 in the name of Capitol Steel, P51,818,641 of   which   was   deposited   at   the   Landbank   of   the Philippines   (Landbank)   and   P64,744,859   at   the Development Bank of  the Philippines (DBP).  PHIVIDEC 

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further   informed  Capitol   Steel   that   the   total   amount deposited represents the zonal value of the properties, and may be withdrawn at any time.

Subsequently,   PHIVIDEC,   represented   by   the Government Corporate Counsel, re-filed on November 24, 2003 an expropriation case, docketed as Civil Case No.   2003-346,   and   raffled   to   Branch   20   of   RTC   of Misamis Oriental.

And on  December  8,  2003,  PHIVIDEC filed  an  Urgent Motion for the Issuance of a Writ of Possession 15 to which it attached a Certificate of Availability of Funds, 16 and Certifications from the Landbank 17 and the DBP 18 that it deposited the total amount of P116,563,500 required under Republic Act No. 8974 (R.A. 8974), "AN ACT   TO   FACILITATE   THE   ACQUISITION  OF   RIGHT-OF-WAY, SITE OR LOCATION FOR NATIONAL GOVERNMENT INFRASTRUCTURE   PROJECTS   AND   FOR   OTHER PURPOSES."

The   total   amount   deposited   represents   one  hundred percent (100%) of the value of the properties based on the   schedule   of   zonal   valuation   for   real   properties under   Department  Order   No.   40-97   19   (D.O.   40-97) fixing   the   zonal   valuation   of   the   properties   at Sugbongcogon   and   Casinglot   at   P300   and   P500   per square meter, respectively.

Capitol   Steel   opposed   the   application  of   D.O.   40-97, claiming instead that under the TCRPV Resolution, the properties   have   been   revalued   at   P700   per   square meter.

RTC ruled in favor of Capitol, on appeal, CA reversed the ruling of RTC.

Petitioner insists that the RTC was correct in ruling that the P700 per square meter valuation should be used in computing the provisional value of the property as the 

valuation   under   D.O.   40-97   has   been   "effectively superseded" by the TCRPV Resolution.

ISSUE:

Whether the appellate court erred in ordering the RTC to issue a writ of possession in favor of respondent

RULING:

The "current relevant zonal valuation" under Section 4 of   R.A.   8974   pertains   to   the   values   reflected   in   the schedule  of   zonal   values   embodied   in   a  Department Order issued pursuant to Revenue Memorandum Order (RMO)   No.   56-89   issued   by   the   Commissioner   of Internal Revenue. 52

RMO   56-89   provides   for   the   procedures   for   the establishment of the zonal values of real properties, viz:

(1). The submission or review by the Revenue District   Offices   Sub-Technical Committee  of   the   schedule   of recommended   zonal   values   to the TCRPV;

(2) The evaluation by TCRPV of the submitted schedule   of   recommended zonal values of real properties;

(3) Except   in   cases   of   correction   or adjustment, the TCRPV finalizes the   schedule   and   submits   the same   to   the   Executive Committee   on   Real   Property Valuation (ECRPV);

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(4) Upon approval  of   the  schedule  of   zonal values by the ECRPV, the same is   embodied   in   a   Department Order   for   implementation   and signed   by   the   Secretary   of Finance.   Thereafter,   the schedule takes effect (15) days after   its   publication   in   the Official   Gazette   53   or   in   any newspaper   of   general circulation. HDIaET

This  Court  finds   that   the  determination  of   P300  and P500 per square meter zonal values were, along with the zonal values of other real properties located in all municipalities under the jurisdiction of Revenue District Office No.  98 (Cagayan de Oro City),  Revenue Region No. 16 (Cagayan de Oro City),  the subject of a public hearing on February 5, 1996. On March 19, 1997, the zonal values were approved by both the TCRPV and the ECRPV and on even date, the Secretary of Finance, upon the recommendation of the BIR,   issued D.O. 40-97 to implement   the   schedule   of   zonal   values.   D.O.   40-97 thereafter   took   effect   on  October   21,   1997,   15  days after its publication in The Philippine Journal.

In   contrast,   the   P700   per   square  meter   zonal   value provided for under TCRPV Resolution was not approved by   the   ECRPV,   was   not   embodied   in   a   Department Order, and did not undergo the required public hearing and publication required under RMO 56-89.

IN FINE, all the requirements set forth under Section 4 of   R.A.   8974   have   been   satisfactorily   complied  with, there is no legal impediment to the issuance of a writ of possession in favor of respondent.

8. COMMISSIONER OF INTERNAL REVENUE VS. SONY PHILIPPINES, INC

FACTS:

Sony Philippines was ordered examined for “the period 1997   and  unverified   prior   years”   as   indicated   in   the Letter   of   Authority.   The   audit   yielded   assessments against  Sony  Philippines   for  deficiency  VAT and FWT, viz:   (1)   late   remittance   of   Final  Withholding   Tax   on royalties for the period January to March 1998 and (2) deficiency   VAT   on   reimbursable   received   by   Sony Philippines from its offshore affiliate, Sony International Singapore (SIS).

ISSUES:

(1) Is Petitioner liable for deficiency Value Added Tax?

(2) Was the investigation of its 1998 Final Withholding Tax return valid?

HELD:

(1)   NO.   Sony   Philippines   did   in   fact   incur   expenses supported by valid VAT invoices when it paid for certain advertising   costs.   This   is   sufficient   to   accord   it   the benefit of input VAT credits and where the money came from to satisfy said advertising billings is another matter but does not alter the VAT effect. In the same way, Sony Philippines   can  not  be  deemed   to  have   received   the reimbursable  as  a   fee   for  a  VAT-taxable  activity.   The reimbursable   was   couched   as   an   aid   for   Sony Philippines  by   SIS   in   view  of   the   company’s   “dire  or adverse  economic   conditions”.  More   importantly,   the absence   of   a   sale,   barter   or   exchange   of   goods   or properties   supports   the   non-VAT   nature   of   the reimbursement.   This   was   distinguished   from   the COMASERCO case where even if  there was similarly a reimbursement-on-cost   arrangement   between affiliates, there was in fact an underlying service. Here, the advertising services were rendered in favor of Sony Philippines not SIS.

(2)  NO.   A Letter of  Authority  should cover a taxable period not exceeding one year and to  indicate that  it covers   ‘unverified   prior   years’   should   be   enough   to invalidate it. In addition, even if the Final Withholding Tax was covered by Sony Philippines’ fiscal year ending March 1998, the same fell outside of ‘the period 1997’ 

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and   was   thus   not   validly   covered   by   the   Letter   of Authority. 

9. COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. KUDOS METAL CORPORATION, Respondent

Facts: 

1. Kudos   Metal   Corporation   filed   its   Annual Income  Tax  Return   (ITR)   for   the   taxable   year 1998.   (BIR)   served   upon   respondent   three Notices of Presentation of Records. Respondent failed to comply with these notices, hence, the BIR   issued   a   Subpeona   Duces   Tecum   dated September   21,   2006,   receipt   of   which   was acknowledged   by   respondents   President,  Mr. Chan Ching Bio,   in  a   letter dated October  20, 2000.

2. Respondent  accountant,  executed two Waiver of the Defense of Prescription.

3. BIR issued a Preliminary Assessment Notice for the taxable year 1998 against the respondent. This was followed by a Formal Letter of Demand with Assessment Notices for taxable year 1998.

4. Respondent   challenged   the   assessments   by filing its “Protest on Various Tax Assessments” on December 3, 2003 and its “Legal Arguments and Documents  in Support of Protests against Various Assessments” on February 2, 2004.

5. BIR   rendered   a   final  Decision   on   the  matter, requesting   the   immediate   payment   of   the Respondent’s tax liabilities.

6. Respondent filed a Petition for Review with the CTA.   CTA   cancelled   the   assessment   notices issued   against   respondent   for   having   been issued beyond the prescriptive period.

7. Petitioner  moved   for   reconsideration  but   the CTA   Second   Division   denied   the  motion.   On appeal,   the   CTA   En   Banc   affirmed   the cancellation   of   the   assessment   notices. Petitioner sought reconsideration but the same was unavailing.

Issue:

WON  THE  CTA   ERRED   IN  RULING  THAT   THE  GOV’T’. RIGHT   TO   ASSESS   UNPAID   TAXES   OF   RESPONDENT PRESCRIBED.

Held: 

Section 203 of the National  Internal  Revenue Code of 1997   (NIRC)   mandates   the   government   to   assess internal revenue taxes within three years from the last day prescribed by law for the filing of the tax return or the actual date of filing of such return, whichever comes later.   Hence,   an   assessment   notice   issued   after   the three-year   prescriptive   period   is   no   longer   valid   and effective.   Exceptions   however   are   provided   under Section 222 of the NIRC.

The waivers  executed  by   respondents  accountant  did not extend the period within which the assessment can be made

Petitioner does not deny that  the assessment notices were issued beyond the three-year prescriptive period, but   claims   that   the  period  was  extended by   the   two waivers executed by respondents accountant.

Section 222 (b) of the NIRC provides that the period to assess and collect taxes may only be extended upon a written agreement between the CIR and the taxpayer executed before the expiration of the three-year period.

A   perusal   of   the   waivers   executed   by   respondent's accountant reveals the following infirmities:

1.The waivers were executed without the   notarized   written authority of Pasco to sign the waiver   in   behalf   of respondent.

2.The  waivers   failed   to   indicate   the date of acceptance.

3.The   fact   of   receipt   by   the respondent   of   its   file   copy was   not   indicated   in   the original copies of the waivers.

Conversely,   in this  case,  the assessments were  issued beyond the prescribed period. 

The doctrine of estoppel cannot be applied in this case as   an   exception   to   the   statute   of   limitations  on   the assessment of taxes considering that there is a detailed 

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procedure for the proper execution of the waiver, which the BIR must strictly follow. As we have often said, the doctrine of estoppel is predicated on, and has its origin in, equity which, broadly defined, is justice according to natural law and right. As such, the doctrine of estoppel cannot give validity to an act that is prohibited by law or one that is against public policy. It should be resorted to solely as a means of preventing injustice and should not be permitted to defeat the administration of the law, or to accomplish a wrong or secure an undue advantage, or   to   extend   beyond   them   requirements   of   the transactions in which they originate.24 Simply put, the doctrine of estoppel must be sparingly applied.

10. CIR vs. Pascor Realty and Development Corp., et al., (1999)

Facts:

CIR authorized several revenue officers  to examine the books   of   accounts   and   other   accounting   records   of Pascor Realty and Development Corporation (PRDC) for the   years   ending   1986,   1987   and   1988.   The   said examination   resulted   in   a   recommendation   for   the issuance   of   an   assessment   in   the   amounts   of P7,498,434.65   and   P3,015,236.35   for   the   years   1986 and 1987, respectively.

CIR filed a criminal complaint before the DOJ against the PRDC, its President, and its Treasurer, alleging evasion of taxes in the total amount of P10,513,671.00. Private respondents PRDC, et.  al.  filed an Urgent Request for Reconsideration/Reinvestigation   disputing   the   tax assessment and tax liability. The CIR denied the urgent request   for   reconsideration/reinvestigation   of   the private   respondents   on   the   ground   that   no   formal assessment   has   as   yet   been   issued   by   the Commissioner.

Private respondents then elevated the Decision of the CIR to the Court of Tax Appeals.  CIR filed a Motion to Dismiss the petition on the ground that the CTA has no jurisdiction over the subject matter of the petition, as there   was   no   formal   assessment   issued   against   the petitioners. The CTA denied the said motion to dismiss and ordered the CIR to file an answer within thirty (30) 

days from receipt of said resolution but CIR did not file an   answer   nor   did   she   move   to   reconsider   the resolution. 

CIR, instead, filed a petition with the CA on the ground Respondent   Court   of   Tax   Appeals   acted   with   grave abuse   of   discretion   and   without   jurisdiction   in considering the affidavit/report  of  the revenue officer and the indorsement of said report to the secretary of justice  as  assessment  which  may  be  appealed   to   the Court   of   Tax   Appeals.  CA  sustained   the   CTA   and dismissed the petition.

Issue:

Whether   the   revenue  officers  Affidavit-Report,  which was attached to the criminal  Complaint filed with the Department of Justice, constituted an assessment that could be questioned before the Court of Tax Appeals.

Ruling:

Petitioner   argues   that   the   filing   of   the   criminal complaint with the Department of Justice cannot in any way  be   construed  as  a   formal  assessment  of  private respondents   tax   liabilities.   This   position   is   based   on Section   205   of   the   National   Internal   Revenue   Code (NIRC), which provides that remedies for the collection of   deficient   taxes  may   be   by   either   civil   or   criminal action. Likewise, petitioner cites Section 223(a) of the same Code, which states that in case of failure to file a return, the tax may be assessed or a proceeding in court may be begun without assessment.

We   agree  with   petitioner.  Neither   the  NIRC   nor   the revenue   regulations   governing   the   protest   of assessments provide a specific definition or form of an assessment.   However,   the   NIRC   defines   the   specific functions and effects of an assessment. To consider the affidavit   attached   to   the   Complaint   as   a   proper assessment is to subvert the nature of an assessment and to set a bad precedent that will prejudice innocent taxpayers

To   start   with,   an   assessment  must   be   sent   to   and received by a taxpayer, and must demand payment of the taxes described therein within a specific period. 

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The  issuance of  an assessment  is  vital   in determining the  period  of   limitation regarding   its  proper   issuance and the period within which to protest it. Section 203 of the NIRC provides that internal revenue taxes must be assessed  within   three  years   from the   last  day  within which to file the return. Section 222, on the other hand, specifies   a   period   of   ten   years   in   case   a   fraudulent return with intent to evade was submitted or in case of failure to file a return. Also, Section 228 of the same law states   that   said   assessment   may   be   protested   only within thirty days from receipt thereof. Necessarily, the taxpayer   must   be   certain   that   a   specific   document constitutes an assessment. Otherwise, confusion would arise   regarding   the   period  within  which   to  make   an assessment or to protest the same, or whether interest and penalty may accrue thereon.

In   the   present   case,   the   revenue   officers   Affidavit merely   contained   a   computation   of   respondents   tax liability.   It   did   not   state   a   demand   or   a   period   for payment.   Worse,   it   was   addressed   to   the   justice secretary, not to the taxpayers.

That the BIR examiners Joint Affidavit attached to the Criminal  Complaint  contained some details  of   the tax liabilities   of   private   respondents   does   not  ipso facto make   it   an   assessment.   The   purpose   of   the   Joint Affidavit  was  merely   to   support  and  substantiate   the Criminal Complaint for tax evasion. Clearly,  it was not meant to be a notice of the tax due and a demand to the private respondents for payment thereof.

Private   respondents   maintain   that   the   filing   of   a criminal complaint must be preceded by an assessment. This   is   incorrect,   because   Section   222   of   the   NIRC specifically   states   that   in   cases   where   a   false   or fraudulent return is submitted or in cases of failure to file a return such as this case, proceedings in court may be   commenced  without an assessment.   Furthermore, Section 205 of the same Code clearly mandates that the civil  and criminal aspects of the case may be pursued simultaneously.   In  Ungab v. Cusi,  petitioner   therein sought   the   dismissal   of   the   criminal   Complaints   for being premature, since his protest to the CTA had not yet  been resolved.  The Court  held   that  such protests could not stop or suspend the criminal action which was independent of the resolution of the protest in the CTA. This was because the commissioner of internal revenue had, in such tax evasion cases, discretion on whether to 

issue an assessment or to file a criminal case against the taxpayer or to do both.

11. Republic v. Dela Rama

FACTS: 

The   estate  of   the   late   Esteban  de   la   Rama  was   the subject of Special Proceedings No. 401 of the Court of First   Instance   of   Iloilo.   The   executor-administrator, Eliseo  Hervas,   filed   income   tax   returns  of   the  estate corresponding to the taxable year 1950. The Bureau of Internal  Revenue   later   claimed  that   it  had  found out that there had been received by the estate in 1950 from the De la Rama Steamship Company, Inc. cash dividends amounting   to   P86,800.00,   which   amount   was   not declared in the income tax return of the estate for the year 1950. The Bureau of Internal Revenue then made an   assessment   as   deficiency   income   tax   against   the estate.

The Collector of Internal Revenue wrote a letter to Mrs. Lourdes de la Rama-Osmeña informing her of the   deficiency   income   tax   and   asking   for   payment. Counsel   for   Lourdes   wrote   to   the   Collector acknowledging   receipt   of   the   assessment   but contended that Lourdes had no authority to represent the estate, and that the assessment should be sent to Leonor de la Rama who was pointed to by said counsel as the administratrix. The Deputy Collector of Internal Revenue   then  sent  a   letter   to  Leonor  de   la  Rama as administratrix of the estate, asking payment. The tax, as assessed,   not   having   been   paid,   the   Deputy Commissioner   of   Internal   Revenue,   on   September   7, 1959, wrote another  letter to Lourdes demanding the payment of the deficiency income tax within the period of   thirty   days   from   receipt   thereof.   The   counsel   of Lourdes insisted that the letter should be sent to Leonor de   la   Rama.   The   Deputy   Commissioner   of   Internal Revenue  wrote   to  Leonor  de   la  Rama another   letter, demanding the payment within thirty days from receipt thereof.

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The deficiency income tax not having been paid, the Republic of the Philippines filed a complaint against the   heirs   of   Esteban   de   la   Rama.   The   Trial   court, however, dismissed the complaint on the ground that [relevant to the subject heading]it  was  Eliseo  Hervas, and neither  Leonor nor Lourdes,  who was the proper administrator at the time, and to whom the assessment should have been sent.

The appellant  contended  that   the  assessment had become final, because the decision of the Collector of Internal Revenue was sent in a letter dated February 11, 1960 and addressed to the heirs of the late Esteban de   la   Rama,   through   Leonor   de   la   Rama   as administratrix  of   the estate,  and was not disputed or contested   by  way   of   appeal  within   thirty   days   from receipt thereof to the Court of Tax Appeals. 

ISSUE:   WON   there   was   proper   notice   of   the   tax assessment

RATIO: If the notice was not sent to the taxpayer for the purpose of giving effect to the assessment, said notice cannot produce any effect.

HELD: The SC sustained the finding of the lower court that neither Leonor nor Lourdes was the administratrix of the estate of Esteban de la Rama. The Court noted that at the time the tax assessment was sent, Special Proceedings No. 401 were still open with respect to the controverted matter regarding the cash dividends upon which the deficiency assessment was levied. It is clear that at the time these special proceedings were taking place,   Eliseo   Hervas   was   the   duly   appointed administrator of the estate.

Plaintiff-appellant also contends that the lower court could not take cognizance of the defense that the assessment was erroneous, this being a matter that is within   the   exclusive   jurisdiction   of   the   Court   of   Tax Appeals.   This   contention   has   no  merit.   According   to Republic   Act   1125,   the   Court   of   Tax   Appeals   has exclusive  jurisdiction to review by appeal  decisions of 

the   Collector   of   Internal   Revenue   in   cases   involving disputed   assessments,   and   the   disputed   assessment must be appealed by the person adversely affected by the decision within thirty days after the receipt of the decision.   In   the   instant   case,   the   person   adversely affected   should   have   been   the   administrator   of   the estate,  and the notice of the assessment should have been sent to him. The administrator had not received the notice of assessment, and he could not appeal the assessment to the Court of Tax Appeals within 30 days from notice. Hence the assessment did not fall  within the exclusive jurisdiction of the Court of Tax Appeals.

DISPOSITION: Petition is DISMISSED, decision appealed from is AFFIRMED

12. Commissioner of Internal Revenue v. Acosta, G.R. No. 154068, August 3, 2007

FACTS:

Respondent   is   an   employee   of   Intel Manufacturing Phils., Inc. For the period January 1, 1996 to December 31, 1996,   respondent   was   assigned   in   a   foreign country. During that period, Intel withheld the taxes   due   on   respondent's   compensation income and remitted to the BIR the amount of P308,084.56. On   March   21,   1997,   respondent   and   her husband filed with the BIR their Joint Individual Income Tax Return for the year 1996. On June 17, 1997, respondent filed an amended return and a Non-Resident Citizen Income Tax Return,   and   paid   the   BIR   P17,693.37   plus interests in the amount of P14,455.76. On October 8, 1997, she filed another amended return   indicating   an   overpayment   of P358,274.63.Claiming   that   the   income   taxes  withheld   and paid   by   Intel   and   respondent   resulted   in   an overpayment of P340,918.92,  respondent filed 

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on April 15, 1999 a petition for review  with the CTA.CIR moved to dismiss the petition for failure of respondent to file the mandatory written claim for refund before the CIR.The CTA dismissed respondent's petition. First, the CTA ruled that respondent failed to file a written   claim   for   refund   with   the   CIR,   a condition precedent  to the filing  of  a  petition for   review   before   the   CTA. Second,   the   CTA noted that respondent's omission, inadvertently or otherwise, to allege in her petition the date of  filing   the  final  adjustment   return,  deprived the   court   of   its   jurisdiction   over   the   subject matter of the case CA reversed the CTA and directed the latter to resolve   respondent's   petition   for   review. Applying Section 204 (c) of the 1997 NIRC, the CA ruled that respondent's filing of an amended return indicating an overpayment was sufficient compliance with the requirement of a written claim for refund.  

ISSUE:

1. Does the amended return filed by respondent indicating   an   overpayment   constitute   the written   claim   for   refund   required   by   law, thereby vesting the CTA with  jurisdiction over this case? 

2. Can the 1997 NIRC be applied retroactively?RULING:

1. NO. The applicable law on refund of taxes pertaining to the 1996 compensation income is Section 230 of the old Tax Code, which was the law then in effect, and not Section   204   (c)   of   the   new   Tax   Code,   which   was effective starting only on January 1, 1998.

The requirements under Section 230 for refund claims are as follows:

1. A written claim for refund or tax credit must be filed by the taxpayer with the Commissioner;

2. The   claim  for   refund  must  be  a categorical demand for reimbursement; DAESTI

3. The claim  for   refund  or   tax  credit  must  be filed, or the suit or proceeding therefor must be commenced in court within two (2) years from date of payment of the tax or penalty regardless of any supervening cause.

The law is clear. A claimant must first file a written claim for   refund,   categorically   demanding   recovery   of overpaid   taxes  with   the   CIR,   before   resorting   to   an action   in   court.   This   obviously   is   intended,  first,  to afford the CIR an opportunity to correct the action of subordinate   officers;   and  second,   to   notify   the government that such taxes have been questioned, and the notice should then be borne in mind in estimating the revenue available for expenditure.  

Tax refunds are in the nature of tax exemptions which are construed strictissimi juris against the taxpayer and liberally in favor of the government.  As   tax   refunds involve a return of revenue from the government, the claimant must show indubitably the specific provision of law from which her right arises; it cannot be allowed to exist upon a mere vague implication or  inference  nor can it be extended beyond the ordinary and reasonable intendment   of   the   language actually used by   the legislature in granting the refund.  

SC said that they cannot apply the liberal interpretation of the law based on their pronouncement in the case of BPI-Family Savings Bank, Inc. v. Court of Appeals, as asserted   by   respondent   because   in   that   case   the taxpayer    filed  a  written claim  for   refund  aside   from presenting other evidence to prove its claim, unlike this case. 

2. NO. Petitioner argues that the 1997 NIRC cannot be applied retroactively as the instant case involved refund of   taxes   withheld   on   a   1996   income.   Respondent, however,  points out that when the petition was filed with   the  CTA  on  April   15,   1999,   the  1997  NIRC  was already in effect,  hence, Section 204 (c) should apply, despite the fact that the refund being sought pertains to   a   1996   income   tax.   Note   that   the   issue   on   the retroactivity of Section 204 (c) of the 1997 NIRC arose because the last paragraph of Section 204 (c) was not found in Section 230 of the old Code. 

SC ruled that they   cannot give retroactive application to   Section   204   (c).  Tax laws are prospective in

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operation, unless the language of the statute clearly provides otherwise. 

13. CIR vs. The Estate of Benigno P. Toda, Jr., et al.,

G.R. No. 147188, September 14, 2004

Facts:

MCIC   authorized  Benigno  P.   Toda,   Jr.,   President   and owner of 99.991% of its issued and outstanding capital stock, to sell the Cibeles Building and the two parcels of land on which the building stands for an amount of not less than P90 million.

On 30 August 1989, Toda purportedly sold the property for P100 million to Rafael A. Altonaga, who, in turn, sold the same property on the same day to Royal Match Inc. (RMI) for P200 million. 

For   the   sale   of   the   property   to   RMI,   Altonaga   paid capital gains tax in the amount of P10 million.

On 16 April 1990, CIC filed its corporate annual income tax   return   for   the  year  1989,  declaring,  among other things, its gain from the sale of real property.

On 12 July 1990, Toda sold his entire shares of stocks in CIC to Le Hun T. Choa. Three and a half years later, Toda died.

On   29  March   1994,   the   Bureau  of   Internal   Revenue (BIR) sent an assessment notice and demand letter to the CIC for deficiency income tax for the year 1989.

The new CIC asked for a reconsideration, asserting that Toda   had   undertaken   to   hold   the   buyer   of   his 

stockholdings and the CIC free from all tax liabilities for the fiscal years 1987-1989.

On 27 January 1995, the Estate of Benigno P. Toda, Jr., represented   administrators   ,   received   a   Notice   of Assessment   dated   9   January   1995   from   the Commissioner   of   Internal   Revenue   for   deficiency income tax for the year 1989.

The CTA held that the Commissioner failed to prove that CIC committed fraud to deprive the government of the taxes  due  it.   It   ruled   that  even assuming   that  a  pre-conceived   scheme   was   adopted   by   CIC,   the   same constituted mere tax avoidance,  and not  tax  evasion. There   being   no   proof   of   fraudulent   transaction,   the applicable   period   for   the   BIR   to   assess   CIC   is   that prescribed in Section 203 of the NIRC of 1986, which is three years after the last day prescribed by law for the filing   of   the   return.   Thus,   the   governments   right   to assess CIC prescribed on 15 April 1993. The assessment issued   on   9   January   1995  was,   therefore,   no   longer valid.

Issue:

Is this a case of tax evasion or tax avoidance?

Has the period of assessment prescribed?

Held:

That Altonaga was a mere conduit finds support in the admission of respondent Estate that the sale to him was part of the tax planning scheme of CIC. 

The scheme resorted to by CIC in making it appear that there  were   two   sales   of   the   subject   properties,   i.e., from CIC to Altonaga, and then from Altonaga to RMI cannot  be  considered  a   legitimate   tax  planning.  Such scheme is tainted with fraud.

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Here,   it   is   obvious   that   the   objective  of   the   sale   to Altonaga was to reduce the amount of tax to be paid especially that the transfer from him to RMI would then subject the income to only 5% individual capital gains tax, and not the 35% corporate income tax. Altonagas sole purpose of acquiring and transferring title of  the subject properties on the same day was to create a tax shelter. Altonaga never controlled the property and did not   enjoy   the   normal   benefits   and   burdens   of ownership.  The sale  to  him was merely  a  tax  ploy,  a sham,   and   without   business   purpose   and   economic substance.  Doubtless,   the  execution  of   the   two  sales was calculated to mislead the BIR with the end in view of reducing the consequent income tax liability.

In a nutshell, the intermediary transaction, i.e., the sale of   Altonaga,   which   was   prompted   more   on   the mitigation of tax liabilities than for legitimate business purposes constitutes one of tax evasion.

General rule: BIR has 3 years  to collect and assess taxes

Exception:  in cases of  (1)  fraudulent returns;   (2)  false returns with intent to evade tax; and (3) failure to file a return, the period within which to assess tax is ten years from discovery of the fraud, falsification or omission, as the case may be.

It   is   true   that   in   a   query   dated   24   August   1989, Altonaga, through his counsel, asked the Opinion of the BIR   on   the   tax   consequence   of   the   two   sale transactions.Thus,  the BIR was amply  informed of the transactions   even   prior   to   the   execution   of   the necessary   documents   to   effect   the   transfer. Subsequently, the two sales were openly made with the execution of public documents and the declaration of taxes   for  1989.  However,   these circumstances  do not negate the existence of fraud. As earlier discussed those two   transactions  were   tainted  with   fraud.   And   even assuming arguendo that   there  was  no  fraud,  we find that the income tax return filed by CIC for the year 1989 was false. It did not reflect the true or actual amount gained from the sale of the Cibeles property. Obviously, 

such   was   done  with   intent   to   evade   or   reduce   tax liability.

As stated above, the prescriptive period to assess the correct taxes in case of false returns is ten years from the discovery of the falsity. The false return was filed on 15 April  1990,  and the falsity   thereof  was claimed to have   been   discovered   only   on   8   March   1991.The assessment for the 1989 deficiency income tax of CIC was issued on 9 January 1995. Clearly, the issuance of the correct assessment for deficiency  income tax was well within the prescriptive period.

14. CIR v. Hambrecht

FACTS: The assessment against Hambrecht & Quist had become final and unappelable since there was a failure to protest the same within the 30-day period provided by  law.  However,  the CTA held that the BIR failed to collect within the prescribed time and thus ordered the cancellation of the assessment notice. The CIR disputed the   jurisdiction   of   the   CTA   arguing   that   since   the assessment   had   become  final   and   unappealable,   the taxpayer can no longer dispute the correctness of the assessment even before the CTA. 

ISSUE: Can   the   CTA   still   take   cognizance   of   an assessment   case   which   has   become   ‘final   and unappealable’   for   failure   of   the   taxpayer   to   protest within the 30-day protest period?

HELD: YES. The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the CIR on matters relating to assessments or refunds. The CTA law clearly bestows jurisdiction to the CTA even on “other matters   arising   under   the   National   Internal   Revenue Code”. Thus, the issue of whether the right of the CIR to collect has prescribed, collection being one of the duties of   the BIR,   is  considered covered by the term “other matters”. The fact that assessment has become final for failure   to   protest   only   means   that   the   validity   or correctness   of   the   assessment   may   no   longer   be questioned  on  appeal.  However,   this   issue   is  entirely distinct   from the issue of whether the right to collect has in fact prescribed.  

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The  Court   ruled   that   the   right   to   collect   has   indeed prescribed since there was no proof that the request for reinvestigation was in fact   granted/acted upon by the CIR. Thus, the period to collect was never suspended. 

15. CIR vs Metro Star Superama

FACTS:

In   January  2001,  a   revenue officer  was  authorized  to examine the books of accounts of Metro Star Superama, Inc. In April  2002, after the audit review, the revenue district officer issued a formal assessment notice against Metro  Star  advising   the   latter   that   it   is   liable   to  pay P292,874.16 in deficiency taxes. Metro Star assailed the issuance of the formal assessment notice as it averred that  due  process  was  not  observed  when   it  was  not issued   a   pre-assessment   notice.   Nevertheless,   the Commissioner   of   Internal   Revenue   authorized   the issuance of a Warrant of Distraint and/or Levy against the properties of Metro Star.

Metro Star then appealed to the Court of Tax Appeals (CTA Case No. 7169). The CTA ruled in favor of Metro Star.

ISSUE: Whether or not due process was observed in the issuance of the formal assessment notice against Metro Star.

HELD: No. It is true that there is a presumption that the tax   assessment   was   duly   issued.   However,   this presumption is disregarded if the taxpayer denies ever having received a tax assessment from the Bureau of Internal  Revenue.  In such cases,   it   is   incumbent upon the   BIR   to   prove   by   competent   evidence   that   such notice was indeed received by the addressee-taxpayer. The onus probandi was shifted to the BIR to prove by contrary   evidence   that   the  Metro   Star   received   the assessment in the due course of mail. In the case at bar, the CIR merely alleged that Metro Star received the pre-assessment notice in January 2002. The CIR could have 

simply presented the registry receipt or the certification from the postmaster that it mailed the pre-assessment notice, but failed. Neither did it offer any explanation on why it failed to comply with the requirement of service of   the   pre-assessment   notice.   The   Supreme   Court emphasized that the sending of a pre-assessment notice is part of the due process requirement in the issuance of a deficiency tax assessment,” the absence of which renders   nugatory   any   assessment   made   by   the   tax authorities.

Taxes   are   the   lifeblood   of   the   government   and   so should be collected without unnecessary hindrance. But even so,  it  is a requirement in all  democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure.

16. CIR v. Enro Subic Power Corp.

GR No. 166387; January 19, 2009

Facts:

In 1997, Enron Subic Power Corporation received a pre-assessment notice from the Bureau of Internal Revenue (BIR).   Enron   allegedly   had   a   tax   deficiency   of   P2.8 million for the year 1996. Enron filed a protest. In 1999, Enron received a final assessment notice (FAN) from the BIR for the same amount of tax deficiency.

Enron however assailed the FAN  because according to Enron the FAN is not compliant with Section 228 of the National Internal Revenue Code (NIRC) which provides that the legal and factual bases of the assessment must be contained in the FAN. The FAN issued to Enron only contained the computation of its alleged tax liability.

The Commissioner of  Internal  Revenue (CIR) admitted that the FAN did not contain the legal and factual bases of   the assessment  however,   the CIR   insisted that   the same   has   been   substantially   complied   with   already because   during   the   pre-assessment   stage,   the representative of  Enron has been advised of  the said factual and legal bases of the assessment.

Issue:

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Whether or not the disputed assessment valid?

Held:

NO. The assessment is not valid. Although the revenue examiners  discussed   their  findings  with  Respondent’s representative   during   the   pre-assessment   stage,   the same, together with the Preliminary Five-Day Letter and Petitioner’s Annex G, were not sufficient to comply with the  procedural   requirement  of   due  process.   The   Tax Code provides that a taxpayer shall  be informed (and not merely “notified” as was the requirement before) in writing   of   the   law   and   the   facts   on   which   the assessment is made; otherwise, the assessment shall be void.   The   use   of   the   word   “shall”   indicates   the mandatory   nature   of   the   requirement.  Moreover,   It cannot   be   substituted  by  other   notices  or   advisories issued   or   delivered   to   the   taxpayer   during   the preliminary stage.

17. COMMISSIONER OF INTERNAL REVENUE vs.

ISABELA CULTURAL CORPORATIO

Facts: In an investigation conducted on the 1986 books 

of   account   of   [respondent,   petitioner]   had   the 

preliminary [finding] that [respondent] incurred a total 

income   tax   deficiency   of   P9,985,392.15,   inclusive   of 

increments.   Upon   protest   by   [respondent's]   counsel, 

the   said   preliminary   assessment  was   reduced   to   the 

amount of P325,869.44, a breakdown of which follows:

Deficiency Income Tax                                      P321,022.68

Deficiency Expanded Withholding Tax                  4,846.76

Total                                                                  P325,869.44

On   February   23,   1990,   [respondent]   received   from 

[petitioner]   an   assessment   letter,   dated   February   9, 

1990,   demanding   payment   of   the   amounts   of 

P333,196.86   and   P4,897.79   as   deficiency   income   tax 

and  expanded  withholding   tax   inclusive   of   surcharge 

and interest,  respectively,  for the taxable period from 

January 1, 1986 to December 31, 1986.

Respondent  filed with the [petitioner's] office on March 

23,  1990 a request   for reconsideration of  the subject 

assessment and, on April 18, 1990, a letter was sent and 

were   attached   certain   documents   supportive   of   its 

protest,  as  well  as  a  Waiver  of  Statute  of  Limitation, 

dated   April   17,   1990,   where   it   was   indicated   that 

[petitioner] would only have until April 5, 1991 within 

which to asses and collect the taxes that may be found 

due from [respondent] after the re-investigation.

On   February   9,   1995,   [respondent]   received   from 

[petitioner]   a   Final   Notice   Before   Seizure,   dated 

December   22,   1994.   In   said   letter,   [petitioner] 

demanded payment of   the subject  assessment  within 

ten (10) days from receipt thereof. Otherwise, failure on 

its   part   would   constrain   [petitioner]   to   collect   the 

subject assessment through summary remedies.

The   CTA   having   rendered   judgment   dismissing   the 

petition,   [respondent]   filed   the   instant   petition 

anchored on the argument that [petitioner's]  issuance 

of   the   Final   Notice   Before   Seizure   constitutes   [its] 

decision on [respondent's]  request for reinvestigation, 

which the [respondent] may appeal to the CTA.

The CA considered the final notice sent by petitioner as 

the latter's decision, which was appealable to the CTA. 

The   appellate   court   reasoned   that   the   final   Notice 

before   seizure   had   effectively   denied   petitioner's 

request   for   a   reconsideration   of   the   commissioner's 

assessment.   Thus, petitioner presents for this Court's 

consideration the issue.

Issue: Whether or not the Final Notice Before Seizure 

dated February 9, 1995 signed by Acting Chief Revenue 

Collection   Officer   Milagros   Acevedo   against   ICC 

constitutes the final decision of the CIR appealable to 

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the CTA.

Ruling:     In   the   normal   course,   the   revenue   district 

officer sends the taxpayer a notice of delinquent taxes, 

indicating the period covered, the amount due including 

interest,   and   the   reason   for   the   delinquency.   If   the 

taxpayer   disagrees   with   or   wishes   to   protest   the 

assessment,   it   sends  a   letter   to  the BIR   indicating  its 

protest,   stating   the   reasons   therefor,   and   submitting 

such   proof   as   may   be   necessary.   That   letter   is 

considered   as   the   taxpayer's   request   for 

reconsideration of the delinquent assessment. After the 

request is filed and received by the BIR, the assessment 

becomes   a   disputed   assessment   on   which   it   must 

render  a  decision.  That  decision   is   appealable   to   the 

Court of Tax Appeals for review.

Prior to the decision on a disputed assessment, there 

may still  be  exchanges  between the commissioner  of 

internal   revenue   (CIR)   and   the   taxpayer.   The   former 

may ask clarificatory questions or require the latter to 

submit additional evidence. However, the CIR's position 

regarding the disputed assessment must be indicated in 

the   final   decision.   It   is   this   decision   that   is   properly 

appealable to the CTA for review.

Indisputably, respondent received an assessment letter 

dated February 9, 1990, stating that it had delinquent 

taxes   due;   and   it   subsequently   filed   its   motion   for 

reconsideration  on  March  23,  1990.   In   support  of   its 

request for reconsideration, it sent to the CIR additional 

documents on April 18, 1990. The next communication 

respondent   received   was   already   the   Final   Notice 

Before Seizure dated November 10, 1994.

In the light of the above facts, the Final Notice Before 

Seizure cannot but be considered as the commissioner's 

decision  disposing  of   the   request   for   reconsideration 

filed by respondent, who received no other response to 

its request. Not only was the Notice the only response 

received;   its  content  and tenor  supported   the  theory 

that it was the CIR's final act regarding the request for 

reconsideration. The very title expressly indicated that it 

was a final notice prior to seizure of property. The letter 

itself   clearly   stated   that   respondent  was  being   given 

"this   LAST   OPPORTUNITY"   to   pay;   otherwise,   its 

properties would be subjected to distraint and levy.

Furthermore,   Section   228   of   the   National   Internal 

Revenue Code states   that  a  delinquent   taxpayer  may 

nevertheless  directly  appeal  a disputed assessment,   if 

its   request   for   reconsideration remains  unacted  upon 

180 days after submission thereof.

In   this  case,   the said  period of  180 days  had already 

lapsed   when   respondent   filed   its   request   for 

reconsideration on March 23, 1990, without any action 

on the part of the CIR.

Thus, petition is denied.

18. CIR VS PHILIPPINE GLOBAL COMMUNICATIONS INC

FACTS:

In   April   1991,   Philippine   Global   Communication,   Inc. (PGCI)  filed   its  annual income  tax return   (ITR)   for   the taxable   year   1990.   A   tax   audit   was   subsequently conducted by the Bureau of Internal Revenue (BIR) and eventually  a final  assessment notice (FAN) was timely issued in April  1994. The FAN demanded PGCI to pay P118 million  in deficiency taxes  inclusive of surcharge and interest. PGCI was able to file a protest within the reglementary   period.   PGCI   however   refused   to produce additionalevidence.   In   October   2002,   eight years  after the FAN was  issued,   the Commissioner  of Internal  Revenue (CIR)   issued a final  decision denying 

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the protest filed by PGCI. PGCI then filed a petition for review with   the  Court  of  Tax  Appeals   (CTA).  The  CIR filed its answer in January 2003. The CTA ruled that the CIR can no longer collect because it is already barred by prescription. The CIR argued that the prescriptive period has   been   extended   because   PGCI   asked   for   a reinvestigation.

ISSUE: Whether or not the CIR is barred by prescription.

RULING:

Yes.  Under   the   law,   the   CIR   has   3   years   from   the issuance of the FAN to make its collection

Section 269(c) of the Tax Code of 1977, which reads:

Section   269. Exceptions as to the period of limitation of assessment and collection of taxes. – x x x

x x x x

c.   Any   internal   revenue   tax   which   has   been assessed within the period of limitation above-prescribed may be collected by distraint or levy or by a proceeding in court within three years following the assessment of the tax.

The  law prescribed  a  period  of   three  years   from the date the return was actually filed or from the last date prescribed   by   law   for   the   filing   of   such   return, whichever came later, within which the BIR may assess a   national   internal   revenue   tax.13 However,   the   law increased the prescriptive period to assess or to begin a court   proceeding   for   the   collection   without   an assessment   to   ten   years  when   a   false   or   fraudulent return was filed with the intent of evading the tax or when no return was filed at all.14 In such cases, the ten-year   period   began   to   run   only   from   the   date   of discovery by the BIR of the falsity, fraud or omission.

If the BIR issued this assessment within the three-year period   or   the   ten-year   period,   whichever   was applicable, the law provided another three years after the assessment for the collection of the tax due thereon through the administrative process of distraint and/or levy   or   through   judicial   proceedings.15 The   three-year 

period for collection of the assessed tax began to run on the   date   the   assessment   notice   had   been   released, mailed or sent by the BIR.

 The FAN was issued in April  1994 and so the CIR has until April 1997 to make a collection. Within that period, the   CIR   never   issued   a  warrant   of   distraint/levy.   Its earliest   collection   effort   was   only   when   it   filed   an answer to the appeal filed by PGCI.  CIR’s answer was filed in January 2003 which was way beyond the three year prescriptive period to collect the assessed taxes.

The CIR cannot invoke that the protest filed by PGCI is in effect  a   request   for   reinvestigation.  Under   the  law,  a request for reinvestigation shall toll the running of the prescriptive period to collect.  However  in the case at bar,   the   protest   filed   by   PGCI   is   not   a   request   for reinvestigation   but   rather   it   was   a   request   for reconsideration.   And   in   such   case,   it   did not suspend the   prescriptive   period.   The   protest   is   a request   for   reconsideration   because   PGCI   did   not adduce additional evidence or documents. PGCI merely sought the CIR to review the existing records on file.

19. FISHWEALTH CANNING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE- Court of Tax Appeals

FACTS:

Petitioner  was  assessed   for   income tax,  Value  Added Tax   and  withholding   tax.  After  Court  of   Tax  Appeals issued   a   Final   Decision   on   Disputed   Assessment, Petitioner filed a Letter of Reconsideration with the CIR instead   of   appealing   the   same   to   the   Court   of   Tax Appeals   within   30   days.   The   CIR   then   issued   a Preliminary   Collection   Letter   which   prompted   the Petitioner   to   file   its   Petition   with   the   Court   of   Tax Appeals. CIR argued that the Petition with the Court of Tax   Appeals   was   filed   out   of   time.

ISSUE:

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Did the filing of a Reconsideration toll the running of the 30-day period to appeal to the Court of Tax Appeals?

HELD:

NO. A Motion for Reconsideration of the denial of the administrative protest does not toll  the 30-day period to appeal to the Court of Tax Appeals. 

20. LASCONA LAND, CO, INC. VS. CIR

FACTS:

On   March   27,   1998,   the   Commissioner   of Internal   Revenue   (CIR)   issued   Assessment Notice   No.   0000047-93-407 against   Lascona Land Co., Inc. (Lascona) informing the latter of its  alleged deficiency   income  tax   for   the  year 1993 in the amount of P753,266.56.

On April 20, 1998, Lascona filed a letter protest, but was denied by Norberto R. Odulio, Officer-in-Charge   (OIC),   Regional   Director,   Bureau   of Internal   Revenue,   Revenue   Region   No. 8,Makati City, in his Letter dated March 3, 1999 which says: we cannot give due course to your request to cancel or set aside the assessment notice issued to your client for the reason that the case was not elevated to the Court of Tax Appeals as mandated by the provisions of the last paragraph of Section 228 of the Tax Code.

On April   12,   1999,   Lascona   appealed   the decision   before   the   CTA   alleging   that   the Regional Director erred in ruling that the failure to   appeal   to   the   CTA  within   thirty   (30)   days from the lapse of the 180-day period rendered the assessment final and executory.

CTA,   in   its   Decision, nullified   the   subject assessment. It held that in cases of inaction by the  CIR  on  the  protested  assessment,  Section 228 of the NIRC provided two options for the taxpayer:   (1)   appeal   to   the  CTA  within   thirty (30)  days   from the   lapse  of   the  one hundred 

eighty   (180)-day  period,   or   (2)  wait   until   the Commissioner decides on his protest before he elevates the case.

The   CIR  moved   for   reconsideration. It   argued that in declaring the subject assessment as final, executory and demandable,  it did so pursuant to Section 3 (3.1.5) of Revenue Regulations No. 12-99   dated September   6,   1999 which   reads, thus:

If the Commissioner or his duly authorized representative fails to act on the taxpayer's protest within one hundred eighty (180) days from date of submission, by the taxpayer, of the required documents in support of his protest, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from the lapse of the said 180-day period; otherwise, the assessment shall become final, executory and demandable.

CTA denied the CIR's motion for reconsideration for   lack   of   merit.   It   held   that   Revenue Regulations No. 12-99 must conform to Section 228 of the NIRC. It pointed out that the former spoke   of   an   assessment   becoming   final, executory   and   demandable   by   reason   of   the inaction by the Commissioner, while the latter referred to decisions becoming final, executory and demandable should the taxpayer adversely affected  by   the decision   fail   to  appeal  before the CTA within the prescribed period. Finally, it emphasized   that   in   cases   of   discrepancy, Section 228 of the NIRC must prevail over the revenue regulations.

Court of Appeals granted the CIR's petition and set aside the Decision dated January 4, 2000 of the   CTA   and   its   Resolution   dated March   3, 2000. It   further   declared   that   the   subject Assessment   Notice   No.   0000047-93-407 dated March   27,   1998 as   final,   executory   and demandable.

ISSUE: 

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Whether   the   subject   assessment   has   become   final, executory   and   demandable   due   to   the   failure   of petitioner to file an appeal before the CTA within thirty (30)  days   from the   lapse  of   the  One  Hundred  Eighty (180)-day period pursuant to Section 228 of the NIRC.

RULING:

NO.

In RCBC v. CIR,[12] the  Court  has  held   that   in   case   the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either: (1) file a petition for review with  the Court  of  Tax  Appeals  within  30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision.

In   arguing   that   the   assessment   became   final   and executory by the sole reason that  petitioner failed to appeal the inaction of the Commissioner within 30 days after the 180-day reglementary period, respondent, in effect,   limited   the   remedy of   Lascona,  as  a   taxpayer, under Section 228 of the NIRC to just one, that is - to appeal   the   inaction   of   the   Commissioner   on   its protested   assessment   after   the   lapse  of   the  180-day period. This is incorrect.

Therefore, as in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it did not intend to limit it to a single remedy of filing of an appeal after   the   lapse   of   the   180-day   prescribed   period. Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide either positively or negatively.   A   taxpayer   cannot   be   prejudiced   if   he chooses to wait for the final decision of the CIR on the protested assessment.  More so,  because the  law and jurisprudence   have   always   contemplated   a   scenario where the CIR will decide on the protested assessment.

 in   case  of   the   inaction  of   the  CIR  on   the  protested assessment, while we reiterate − the taxpayer has two options,  either:   (1)  file a  petition for  review with the CTA within 30 days after the expiration of the 180-day period;   or   (2)   await   the   final   decision   of   the Commissioner on the disputed assessment and appeal 

such final decision to the CTA within 30 days after the receipt  of   a   copy  of   such  decision, these  options  are mutually   exclusive   and   resort   to   one   bars   the application of the other.

Considering   that   Lascona   opted   to   await   the   final decision   of   the   Commissioner   on   the   protested assessment,   it   then has the right to appeal  such final decision   to   the   Court   by   filing   a   petition   for   review within   thirty   days   after   receipt   of   a   copy   of   such decision or ruling, even after the expiration of the 180-day period fixed by law for the Commissioner of Internal Revenue  to  act  on   the  disputed  assessments.[17] Thus, Lascona,   when   it   filed   an   appeal   on April   12, 1999 before   the   CTA,   after   its   receipt   of   the Letter[18] dated March  3,   1999 on March  12,  1999,   the appeal was timely made as it was filed within 30 days after receipt of the copy of the decision.

21. COMMISSIONER OF INTERNAL REVENUE and ARTURO V.

PARCERO in his official capacity as Revenue District Officer of

Revenue District No. 049 (Makati) ,   petitioners,   vs. PRIMETOWN

PROPERTY GROUP, INC. , respondent .

Gilbert Yap of Primetown Property Group, Inc., applied for the refund or credit of income tax respondent paid in 1997 to petitioner RDO Parcero.  According to him, because respondent suffered losses, it was not liable for income   taxes. Since   it   paid   its   quarterly   corporate income   tax   and   remitted   creditable   withholding   tax from   real   estate   sales   to   the   BIR,   respondent   was entitled to tax refund or tax credit.

Respondent   submitted additional   required  documents but   its   claim was  not  acted  upon.  Thus,  on April  14, 2000, it filed a petition for review in the CTA. However, the CTA dismissed the petition as  it  was filed beyond 

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the   two-year   prescriptive   period   for   filing   a   judicial claim for tax refund or tax credit, invoking Sec. 229 of NIRC. CTA found that respondent filed its final adjusted return on April 14, 1998. According to the CTA, applying Article 13 of the Civil  Code, the two-year prescriptive period under Section 229 of the NIRC for the filing of judicial claims was equivalent to 730 days. Because the year 2000 was a leap year, respondent's petition, which was   filed   731   days   after   respondent   filed   its   final adjusted   return,   was   filed   beyond   the   reglementary period.

CA reversed and set aside the decision of the CTA.  It ruled that Article 13 of the Civil Code did not distinguish between a regular year and a leap year. The rule that a year has 365 days applies, notwithstanding the fact that a particular year is a leap year. In that, even if the year 2000 was a leap year, the periods covered by

April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14, 2000 should still

be counted as 365 days each or a total of 730 days.

Issue:

WON respondent’s claim was filed beyond the two-year prescriptive period for filing judicial claim for tax refund or tax credit.

Ruling.

The   conclusion   of   the   CA   that   respondent   filed   its petition   for   review   in   the   CTA   within   the   two-year prescriptive period provided in Section 229 of the NIRC is correct. Its basis, however, is not. Sec. 31 of EO 292 or the Administrative Code provides that  "Year" shall be understood to be twelve calendar months...” A calendar month is "a month designated in the calendar without regard to the number of days it may contain." 

There obviously exists a manifest incompatibility in the manner of computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, we  hold   that   Section  31,  Chapter  VIII,  Book   I   of   the 

Administrative  Code  of   1987,   being   the  more   recent law,   governs   the   computation   of   legal   periods.   Lex posteriori derogat priori.

Applying   Section   31,   Chapter   VIII,   Book   I   of   the Administrative Code of 1987 to this case, the two-year prescriptive period (reckoned from the time respondent filed   its   final   adjusted   return   on   April   14,   1998) consisted of 24 calendar months respondent's petition (filed on April 14, 2000) was filed on the last day of the 24th calendar month from the day respondent filed its final   adjusted   return.   Hence,   it   was   filed  within   the reglementary period.

22. CIR vs Smart Communication Inc.

Facts:

Respondent  entered   into   three  Agreements   for Programming   and   Consultancy   Services   with   Prism Transactive   (M)   Sdn.   Bhd.   (Prism),   a   non-resident corporation duly organized and existing under the laws of Malaysia. On June 25, 2001, Prism billed respondent in the amount of US$547,822.45.  Thinking that these payments constitute royalties,  respondent withheld the amount of US$136,955.61  or  P7,008,840.43,   representing   the   25% royalty   tax   under   the   RP-Malaysia   Tax   Treaty..  On September   25,   2001,   respondent   filed   its   Monthly Remittance Return of Final Income Taxes Withheld (BIR Form No. 1601-F) for the month of August 2001.

 

On September  24,  2003,  or  within   the   two-year period to claim a refund, respondent filed with the Bureau of Internal Revenue (BIR), through the International Tax Affairs Division (ITAD),  an administrative claim for refund of   the amount of P7,008,840.43.

Lower courts decided in favor of respondent  invoking the case of Commissioner of Internal Revenue v. Procter & Gamble Philippine Manufacturing Corporation.  Petitioner contends   that   the   cases   relied   upon   by   the   CTA   in upholding   respondents   right   to   claim   the   refund   are inapplicable   since   the   withholding   agents   therein   are 

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wholly owned subsidiaries of the principal taxpayers, unlike in the instant case where the withholding agent and the taxpayer are unrelated entities. Petitioner further claims that since respondent did not file the claim on behalf of Prism, it has no legal standing to claim the refund. To rule otherwise   would   result   to   the   unjust   enrichment   of respondent, who never shelled-out any amount to pay the royalty taxes. Petitioner, thus, posits that the real party-in-interest   to   file   a   claim   for   refund   of   the   erroneously withheld taxes is Prism. He cites as basis the case of Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue, where it was ruled that the proper party to file a refund is the statutory taxpayer.Finally, assuming that respondent is the  proper  party,  petitioner  counters   that   it   is   still  not entitled   to  any   refund because   the  payments  made   to Prism   are   taxable   as   royalties,   having   been   made   in consideration for the use of the programs owned by Prism.

Issues

 

The   two   issues   to  be   resolved  are:   (1)  whether respondent has the right to file the claim for refund; and (2) if respondent has the right, whether the payments made to Prism constitute business profits or royalties.

 

Held:

The petition is bereft of merit. Withholding agent may file a claim for refund as Sections 204(c) and 229 of the National Internal Revenue Code (NIRC) provide.  Pursuant to these sections, the person entitled to claim a tax refund is the taxpayer. However,  in case the taxpayer does not file a claim for refund, the withholding agent may file the claim. 

Relationship is not required or that the lack of such relation deprives the withholding agent of the right to file a claim for refund. Rather, what is clear  is that a withholding agent has a  legal right to file a claim for refund for two reasons. First, he is considered a taxpayer under the NIRC as he is personally liable for the withholding tax as well as for deficiency assessments, surcharges, and penalties, should the amount of the tax withheld be finally found to be less than the  amount   that   should  have  been  withheld  under   law. 

Second, as an agent of the taxpayer, his authority to file the necessary income tax return and to remit the tax withheld to the government  impliedly  includes the authority to file a claim for refund and to bring an action for recovery of such claim.

 

In this connection, it is however significant to add that while the withholding agent has the right to recover the taxes erroneously or illegally collected, he nevertheless has the obligation to remit the same to the principal taxpayer. As an agent of the taxpayer, it is his duty to return what he has recovered; otherwise, he would be unjustly enriching himself at the expense of the principal taxpayer from whom the taxes were withheld, and from whom he derives his legal right to file a claim for refund.

As to Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue  cited by the petitioner, we find the same inapplicable as it involves excise taxes, not withholding taxes. In that case, it was ruled that the proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another.

Under   the   RP-Malaysia   Tax   Treaty,   the   term royalties   is  defined as payments  of  any kind received as consideration for:  (i)  the use of,  or the right to use,  any patent, trade mark, design or model, plan, secret formula or process, any copyright of literary, artistic or scientific work, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience; (ii) the use of, or the right   to  use,   cinematograph   films,  or   tapes   for   radio  or television broadcasting. These are taxed at the rate of 25% of the gross amount.

 

Under the same Treaty, the business profits of an enterprise of a Contracting State is taxable only in that State, unless   the   enterprise   carries   on   business   in   the otherContracting State through a permanent establishment. The term permanent establishment is defined as a fixed place of business where the enterprise is wholly or partly carried on. However, even if there is no fixed place of business, an enterprise   of   a   Contracting   State   is   deemed   to   have   a permanent establishment in the other Contracting State if it carries on supervisory activities in that other State for more than   six   months   in   connection   with   a   construction, 

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installation or assembly project which is being undertaken in that other State.

 

In the instant case, it was established during the trial that Prism does not have a permanent establishment in the Philippines.   Hence,   business   profits   derived   from   Prisms dealings with respondent are not taxable.

23. MICHEL J. LHUILLIER PAWNSHOP, INC. vs. CIR, G.R. No. 166786. September 11, 2006

Facts: 

This   resolution   addresses   petitioner's   motion   for reconsideration   of   the  May   3,   2006   Decision   of   the Court holding that contracts of pledge entered into by pawnshops are subject to DST.  We ruled therein that DST is essentially an excise tax; it is not an imposition on the document itself but on the privilege to enter into a taxable transaction of pledge.

Issue: 

Whether or not a pawn ticket may be considered as a document subject to DST.

Ruling: 

Yes,  a pawn ticket may be considered as a document subject to DST.

Section 195 of the NIRC imposes a DST on every pledge regardless of whether the same is a conventional pledge governed by the Civil Code or one that is governed by the provisions of P.D. No. 114. All pledges are subject to DST, unless there is a law exempting them in clear and categorical language. This explains why the Legislature did   not   see   the   need   to   explicitly   impose   a  DST   on pledges entered into by pawnshops. These pledges are 

already covered by Section 195 and to create a separate provision especially for them would be superfluous.

It   is   the  exercise of the privilege to enter into an accessory contract of pledge,  as distinguished from a contract of  loan, which gives rise to the obligation to pay DST. If the DST under Section 195 is levied on the loan or the exercise of the privilege to contract a loan, then there would be no use for Section 179 of the NIRC, to separately impose stamp tax on all debt instruments, like a simple loan agreement.   It is for this reason why the definition of pawnshop ticket, as not an evidence of indebtedness, is inconsequential to and has no bearing on the taxability of contracts of pledge entered into by pawnshops.   For   purposes   of   Section   195,   pawnshop tickets need not be an evidence of indebtedness nor a debt instrument because it taxes the same as a pledge instrument. Neither should the definition of pawnshop ticket, as not a security, exempt it from the imposition of  DST.   It  was  correctly  defined  as  such  because   the ticket   itself   is   not   the   security   but   the  pawn  or   the personal property pledged to the pawnbroker. 

The law is clear and needs no further interpretation. No law on legal  hermeneutics could change the fact that the entries contained in a pawnshop ticket spell out a contract of pledge and that the exercise of the privilege to conclude such a contract is taxable under Section 195 of the NIRC. 

Moreover,   the   provisions   of   the   NIRC   on   DST   has recently been amended by R.A. No. 9243. Among the highlights   thereof   were   the   amendments   to   Section 199,     which   incorporated   12   more   categories   of documents   in   addition   to   the   initial   two   categories exempted from DST. A pawnshop tickets is not one of them.   Expressio   unious   est   exclusion   alterius.   The omission of pawnshop tickets only means that it is not among the documents exempted from DST. 

WHEREFORE,   the  motion  for   reconsideration   is  partly GRANTED.   The   December   29,   2004   Decision   of   the Court   of   Appeals   in   CA-G.R.   SP   No.   67667   ordering petitioner   Michel   J.   Lhuillier   Pawnshop,   Inc.   to   pay 

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deficiency   documentary   stamp   tax   is   AFFIRMED  with the MODIFICATION that surcharges and all the interests imposed thereon are DELETED.

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