PRIMUS 2008 ONE-LINERS

TAXATION

VER. 2008.09.10 copyrighted 2008

Prepared by the PRIMUS Board of Consultants Prof. Abelardo T. Domondon

Principal Consultant These Notes in the form of one or two sentences and questions and answers were specially prepared by a Board of Consultants specially commissioned by PRIMUSInformation Center, Inc., for the use of candidates who are going to take the 2008 Bar Examination. They are not as comprehensive as the other PRIMUS publications such as the PRIMUS Bar Star Notes, or the PRIMUS Cut and Paste. They are intended to be read during the Pre-Week or before the start of the regular Bar review for any given Bar Examination year. These Notes attempt to second guess the areas where questions may probably be sourced for the 2008 Bar Examination in Taxation. They include enumerations and distinctions, as well digests of some landmark cases, although they go beyond two sentences. They may also serve as memory joggers to help the candidate recall concepts. The reader is advised to concentrate on the One-liners that are in bold letters.Those that are not in bold are mere elucidations of concepts. The PRIMUS 2008 ONE-LINERS shall be revised regularly to consider latest law and jurisprudence to meet the requirements of future Bar Reviews such that the title shall change from year to year. For the 2009 Bar examination the title shall be PRIMUS 2009ONE-LINERS which shall be released sometime in September, 2009. The reader is however advised to acquire and read the latest versions of the other PRIMUS publications such as the PRIMUS Bar Star Notes, or the PRIMUS Cut and Paste which contain more detailed information leading to a more comprehensive Bar review. Of course those who intend to take the 2009 Bar examination are encouraged to attend the PRIMUS 2009 Wrap-up Reviews Although primarily for the use of Bar candidates who have attended the PRIMUS 2008 Wrap-up Reviews, the On-Liners may be availed of by other students who are interested in the subject. While available for the free use of all the contents of the PRIMUS 2008ONE-LINERS are covered by copyright protection and should never be published (whether through printed media or through the internet) without written permission in writing from PRIMUS Information Center, Inc. Downloading and printing into hard copies is allowed only for private use and should not be distributed on a commercial basis.

TARIFF AND CUSTOMS CODE 1. Customs duties defined. Customs duties is the name given to taxes on the importation and exportation of commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country. (Nestle Phils. v. Court of Appeals, et al., G.R. No. 134114,July 6, 2001) 2. Safeguard measures are emergency measures, including tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them. The CTA is vested with jurisdiction to review decisions of the Secretary of Trade and Industry imposing

safeguard measures as provided under Rep. Act No. 8800 the Safeguard Measures Act

(SMA). (Southern Cross Cement Corporation v. The Philippine Cement Manufacturers Corp., et al., G.

R. No. 158540, July 8, 2004) The DTI Secretary cannot impose the safeguard measures if the Tariff Commission does not favorably recommend its imposition. 3. What is mean by the term entry in Customs Law ?

SUGGESTED ANSWER: It has a triple meaning. a. the documents filed at the Customs house; b. the submission and acceptance of the documents; and c. Customs declaration forms or customs entry forms required to be accomplished by passengers of incoming vessels or passenger planes as envisaged under Sec. 2505 of the TCCP (Failure to declare baggage). (Jardeleza v. People, G.R. No. 165265, February 6, 2006) 4. A flight stewardess arrived from Singapore. Upon her arrival she was asked whether she has anything to declare. She answered none, and she submitted her Customs Baggage Declaration Form which she accomplished and signed with nothing or written on the space for items to be declared. When her hanger bag was examined some pieces of jewelry were found concealed within the lining of said bag. She was then convicted of violating of Sec. 3601 of the Tariff and Customs Code for unlawful importation which penalizes any person who shall fraudulently import or bring into the Philippines any article contrary to law. She now appeals claiming that lower court erred n convicting her under Sec. 3601 when the facts alleged both in the information and those shown by the prosecution constitute the offense under Sec. 2505 Failure to Declare Baggage, of which she was acquitted. Is she correct ? SUGGESTED ANSWER: No. Sec. 3601 does not define a crime. It merely provides, inter alia,the administrative remedies which can be resorted to by the Bureau of Customs when seizingdutiable articles found the baggage of any person arriving in the Philippines which is not included in the accomplished baggage declaration submitted to the customs authorities, and the administrative penalties that such person must pay for the release of such goods if not imported contrary to law. Such administrative penalties are independent of the criminal liability for smuggling that may be imposed under Sec. 3601, and other provisions of the TCC which can only be determined after the appropriate criminal proceedings, prescinding from the outcome in any administrative case that may have been filed and disposed of by the customs authorities. Indeed the second paragraph of Sec. 2505 provides that nothing shall prevent the bringing of a criminal action against the offender for smuggling under Section 3601. (Jardeleza v. People, G. R. No. 165265, February 6, 2006) 5. How is smuggling committed ? SUGGESTED ANSWER: Smuggling is committed by any person who: a. fraudulently imports or brings into the country any article contrary to law; b. assists in so doing any article contrary to law; or c. receives, conceals, buys, sells or in any manner facilitates the transportation, concealment or sale of such goods after importation, knowing the same to have been imported contrary to law. (Jardeleza v. People, G.R. No. 165265, February 6, 2006 citing Rodriguez v. Court of Appeals, G. R. No. 115218, September 18, 1995, 248 SCRA 288, 296) 6. 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. RTCs are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus.(The Bureau of Customs, et al., v. Ogario, et al., G.R. No. 138081, March 20, 2000) What is the rationale for this doctrine ? SUGGESTED ANSWER: a. Regional Trial Courts have no jurisdiction to replevin a property which is subject to seizure and forfeiture proceedings for violation of the Tariff and Customs Code otherwise, actions for forfeiture of property for violation of the Customs laws could easily be undermined by the simple device of replevin. (De la Fuente v. De Veyra, et al., 120 SCRA 455) b. The doctrine of exclusive customs jurisdiction over customs cases to the exclusion of the RTCs is anchored upon the policy of placing no unnecessary hindrance on the governments drive, not only to prevent smuggling and other frauds upon Customs,

c. 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. (Jao, et al., v. Court of Appeals, et al., and companion case, 249 SCRA 35, 43) d. The issuance by regular courts of writs of preliminary injunction in seizure and forfeiture proceedings before the Bureau of Customs may arouse suspicion that the issuance or grant was for consideration other than the strict merits of the case. (Zuno v. Cabredo, 402 SCRA 75 [2003]) e. Under the doctrine of primary jurisdiction, the Bureau of Customs has exclusive administrative jurisdiction to conduct searches, seizures and forfeitures of contraband without interference from the courts. It could conduct searches and seizures without need of a judicial warrant except if the search is to be conducted in a dwelling place. Where an administrative office has obtained a technical expertise in a specific subject, even the courts must defer to this expertise. 7. A claiming to be the owner of a vessel which is the subject of customs warrant of seizure and detention sought the intercession of the RTC to restrain the Bureau of Customs from interfering with his property rights over the vessel. Would the suit prosper? SUGGESTED ANSWER: No. His remedy was not with the RTC but with the CTA, as issues of ownership of goods in the custody of customs officials are within the power of the CTA to determine. The Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings and trial courts are precluded from assuming cognizance over such matters even through petitions for certiorari, prohibition or mandamus. (Commissioner of Customs v. Court of Appeals, et al., G. R. Nos. 111202-05, January 31, 2006) 8. The customs authorities do not have to prove to the satisfaction of the court that the articles on board a vessel were imported from abroad or are intended to be shipped abroad before they may exercise the power to effect customs searches, seizures, or arrests provided by law and continue with the administrative hearings.(The Bureau of Customs, et al., v. Ogario, et al., G.R. No. 138081, March 20, 2000) 9. Instances where there is no right of redemption of seized and forfeited articles: a. There is fraud; b. The importation is absolutely prohibited, or c. The release of the property would be contrary to law. (Transglobe International, Inc. v. Court of Appeals, et al., G.R. No. 126634, January 25, 1999) 10. In Aznar v. Court of Tax Appeals, 58 SCRA 519, reiterated in Farolan, Jr. v. Court of Tax Appeals, et al., 217 SCRA 298, the Supreme Court clarified that the fraud contemplated by law must be actual and not constructive. It must be intentional, consisting of deception, willfully and deliberately done or resorted to in order to induce another to give up some right. 11. Requisites for forfeiture of imported goods: a. Wrongful making by the owner, importer, exporter or consignee of any declaration or affidavit, or the wrongful making or delivery by the same person of any invoice, letter or paper all touching on the importation or exportation of merchandise. b. the falsity of such declaration, affidavit, invoice, letter or paper; and c. an intention on the part of the importer/consignee to evade the payment of the duties due.(Republic, etc., v. The Court of Appeals, et al., G.R. No. 139050, October 2, 2001) 12. On January 7, 1989, the vessel M/V Star Ace, coming from Singapore laden with cargo, entered the Port of San Fernando, La Union for needed repairs. When the Bureau of Customs later became suspicious that the vessels real purpose in docking was to smuggle cargo into the country, seizure proceedings were instituted and subsequently two Warrants of Seizure and Detention were issued for the vessel and its cargo. Cesar does not own the vessel or any of its cargo but claimed a preferred maritime lien. Cesar then brought several cases in the RTC to enforce his lien. Would these suits prosper ? SUGGESTED ANSWER: No. The Bureau of Customs having first obtained possession of the vessel and its goods has obtained jurisdiction to the exclusion of the trial courts.

When Cesar has impleaded the vessel as a defendant to enforce his alleged maritime lien, in the RTC, he brought an action in rem under the Code of Commerce under which the vessel may be attached and sold. However, the basic operative fact is the actual or constructive possession of the res by the tribunal empowered by law to conduct the proceedings. This means that to acquire jurisdiction over the vessel, as a defendant, the trial court must have obtained either actual or constructive possession over it. Neither was accomplished by the RTC as the vessel was already in the possession of the Bureau of Customs. (Commissioner of Customs v. Court of Appeals, et al., G. R. Nos. 111202-05, January 31, 2006) 13. What is the concept of assessments under the Tariff and Customs Code ? SUGGESTED ANSWER: 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 return and approved by the Collector of Customs. (Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., G. R. No. 161953, March 6, 2008) 14. What is meant by liquidation ? SUGGESTED ANSWER: 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. A liquidation is considered to have been made when the entry is officially stamped liquidated. (Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., G. R. No. 161953, March 6, 2008) 15. When assessment or liquidation made by the Bureau of Customs attains finality and conclusiveness. An assessment or liquidation by the Bureau of Customs attains finality and conclusiveness one year from the date of the final payment of duties except when: a. there was fraud; b. there is a pending protest or c. the liquidation of import entry was merely tentative. (Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., G. R. No. 161953, March 6, 2008) 16. Instance when the Bureau of Customs would utilize its remedy of filing a civil suit for collection of taxes. 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 Bureau of Customs has released the imported goods, its lien over the imported goods was extinguished. Consequently, Bureau of Customs could only enforce the payment ofimport duties in full by filing a case for collection against importer. (Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., G. R. No. 161953, March 6, 2008) 17. Despite the holding in Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., G. R. No. 161953, March 6, 2008, the distribution of jurisdiction for collection cases involving tariff and customs duties is as follows: a. Basic tax does not exceed P300,000.00 MTC if outside of Metro Manila; does not exceed P400,000.00 MTC if within Metro Manila; b. Basic tax exceeds P300,000 but does not reach P1 million RTC if outside Metro Manila, exceeds P400,000.00 but does not reach P1 million RTC if within Metro Manila; c. Basic tax is P1 million or over, Court of Tax Appeals, Division. Pilipinas Shell ruled that jurisdiction vested upon the RTC because it was interpreting the CTA jurisdiction prior to the amendment of Rep. Act No. 1125. 18. Importation begins when the conveying vessel or aircraft enters the jurisdiction of the Philippines with intention to unlade therein. (Sec. 1202, TCCP) The jurisdiction of the Bureau of Customs to enforce the provisions of the TCCP including seizure and forfeiture also begins from the beginning of importation.

19. Importation is deemed terminated upon payment of the duties, taxes and other charges due upon the agencies, or secured to be paid, at the port of entry and the legal permit for withdrawal shall have been granted. In case the articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs. (Sec. 1202, TCCP) The Bureau of Customs loses jurisdiction to enforce the TCCP and to make seizures and forfeitures after importation is deemed terminated. 20. The flexible tariff clause is a provision in the Tariff and Customs Code, which implements the constitutionally delegated power to the President of the Philippines, in the interest of national economy, general welfare and/or national security upon recommendation of the NEDA (a) to increase, reduce or remove existing protective rates of import duty, provided that, the increase should not be higher than 100% ad valorem; (b) to establish import quota or to ban imports of any commodity, and (c) to impose additional duty on all imports not exceeding 10% ad valorem, among others. 21. Customs duties defined. Customs duties is the name given to taxes on the importation and exportation of commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country. (Nestle Phils. v. Court of Appeals, et al., G.R. No. 134114, July 6, 2001) 22. Special customs duties are additional import duties imposed on specific kinds of imported articles under certain conditions. The special customs duties under the Tariff and Customs Code (TCCP) are the anti-dumping duty, the countervailing duty, the discriminatory duty, and the marking duty, and under the Safeguard Measures Act (SMA) additional tariffs as safeguard measures. 23. The special customs duties are imposed for the protection of consumers and manufacturers, as well as Philippine products. 24. Dumping duty is an additional special duty amounting to the difference between the export price and the normal value of such product, commodity or article (Sec. 301 (s) (1), TCC, as amended by Rep. Act No. 8752, Anti-Dumping Act of 1999.) imposed on the importation of a product, commodity or article of commerce into the Philippines at less than its normal value when destined for domestic consumption in the exporting country which is causing or is threatening to cause material injury to a domestic industry, or materially retarding the establishment of a domestic industry producing the like product. [Sec. 301 (s) (5), TCC, as amended by Rep. Act No. 8752, Anti-Dumping Act of 1999] 25. The anti-dumping duty is imposed a. Where a product, commodity or article of commerce is exported into the Philippines at a price less than its normal value when destined for domestic consumption in the exporting country, b. and such exportation is causing or is threatening to cause material injury to a domestic industry, or materially retards the establishment of a domestic industry producing the like product. [Sec. 301 (a), TCC, as amended by Rep. Act No. 8752, Anti-Dumping Act of 1999] 26. Normal value for purposes of imposing the anti-dumping duty is the comparable price at the date of sale of like product, commodity, or article in the ordinary course of trade when destined for consumption in the country of export. [Sec. 301 (s) (3 ), TCC, as amended by Rep. Act No. 8752, Anti-Dumping Act of 1999] 27. A dumped imported product is any product, commodity or article of commerce introduced into the Philippines at an export price less than its normal value in the ordinary course of trade, for the like product, commodity or article destined for consumption in the exporting country, which is causing or is threatening to cause material injury to a domestic industry, or materially retarding the establishment of a domestic industry producing the like product. [Sec. 301 (s) (5), TCC, as amended by Rep. Act No. 8752, Anti-Dumping Act of 1999] 28. The imposing authority for the anti-dumping duty is the Secretary of Trade and Industry in the case of non-agricultural product, commodity, or article or the Secretary of Agriculture, in the case of agricultural product, commodity or article,after formal investigation and affirmative finding of the Tariff Commission. [Sec. 301 (a), TCC, as amended by Rep. Act No. 8752, Anti-Dumping Act of 1999]

29. Even when all the requirements for the imposition have been fulfilled, the decision on whether or not to impose a definitive anti-dumping duty remains the prerogative of the Tariff Commission. [Sec. 301 (a), TCC, as amended by Rep. Act No. 8752, Anti-Dumping Act of 1999] Thus, the cabinet secretaries could not contravene therecommendation of the Tariff Commission. They could not impose the anti-dumping duty or any special customs duty without the favorable recommendation of the Tariff Commission. 30. In the determination of whether to impose the anti-dumping duty, the Tariff Commission, may consider among others, the effect of imposing an anti-dumping duty on the welfare of the consumers and/or the general public, and other related local industries. (Sec. 301 (a), TCC, as amended by Rep. Act No. 8752, Anti-Dumping Act of 1999) 31. The amount of anti-dumping duty that may be imposed is the difference between the export price and the normal value of such product, commodity or article. (Sec. 301 (s) (1), TCC, as amended by Rep. Act No. 8752, Anti-Dumping Act of 1999) The anti-dumping duty shall be equal to the margin of dumping on such product, commodity or article thereafter imported to the Philippines under similar circumstances, in addition to ordinary duties, taxes and charges imposed by law on the imported product, commodity or article. 32. Countervailing duties are additional customs duties imposed on any product, commodity or article of commerce which is granted directly or indirectly by the government in the country of origin or exportation, any kind or form of specific subsidy upon the production, manufacture or exportation of such product commodity or article, and the importation of such subsidized product, commodity, or article has caused or threatens to cause material injury to a domestic industry or has materially retarded the growth or prevents the establishment of a domestic industry. (Sec. 302, TCCP as amended by Section 1, R.A. No. 8751) 33. The imposing authority for the countervailing duties is the Secretary of Trade and Industry in the case of non-agricultural product, commodity, or article or the Secretary of Agriculture, in the case of agricultural product, commodity or article,after formal investigation and affirmative finding of the Tariff Commission. Even when all the requirements for the imposition have been fulfilled, the decision on whether or not to impose a definitive anti-dumping duty remains the prerogative of the Tariff Commission. (Sec. 301 (a), TCC, as amended by Rep. Act No. 8752, Anti-Dumping Act of 1999) 34. The countervailing duty is equivalent to the value of the specific subsidy. 35. Marking duties are the additional customs duties imposed on foreign articles (or its containers if the article itself cannot be marked), not marked in any official language in the Philippines, in a conspicuous place as legibly, indelibly and permanently in such manner as to indicate to an ultimate purchaser in the Philippines the name of the country of origin. 36. The Commissioner of Customs imposes the marking duty. 37. The marking duty is equivalent to five percent (5%) ad valorem. 38. A discriminatory duty is a new and additional customs duty imposed upon articles wholly or in part the growth or product of, or imported in a vessel, of any foreign country which imposes, directly or indirectly, upon the disposition or transportation in transit through or reexportation from such country of any article wholly or in part the growth or product of the Philippines, any unreasonable charge, exaction, regulation or limitation which is not equally enforced upon like articles of every foreign country, or discriminates against the commerce of the Philippines, directly or indirectly, by law or administrative regulation or practice, by or in respect to any customs, tonnage, or port duty, fee, charge, exaction, classification, regulation, condition, restriction or prohibition, in such manner as to place the commerce of the Philippines at a disadvantage compared with the commerce of any foreign country. 39. The President of the Philippines imposes the discriminatory duties. 40. Safeguard measures are emergency measures, including tariffs, to protect domestic industries

and producers from increased imports which inflict or could inflict serious injury on them.

The CTA is vested with jurisdiction to review decisions of the Secretary of Trade and Industry

imposing safeguard measures as provided under Rep. Act No. 8800 the Safeguard Measures Act

(SMA). (Southern Cross Cement Corporation v. The Philippine Cement Manufacturers Corp., et

al., G. R. No. 158540, July 8, 2004) The DTI Secretary cannot impose the safeguard measures if the Tariff Commission does not favorably recommend its imposition. 41. Imposing authority for safeguard measures. The imposing authority for the countervailing duties is the Secretary of Trade and Industry in the case of non-agricultural product, commodity, or article or the Secretary of Agriculture, in the case of agricultural product, commodity or article, after formal investigation and affirmative finding of the Tariff Commission. 42. Safeguards measures that may be imposed. Additional tariffs, import quotas or banning of imports. 43. Payment under protest required where additional duties, taxes, fees or other charges are imposed by the Collector otherwise taxpayer could not obtain refund.When a ruling or decision of the collector is made whereby liability for duties, taxes, fees, or other charges are determined, except the fixing of fines in seizure cases, the party adversely affected may protest such ruling or decision a. by presenting to the Collector at the time when payment is made, or within fifteen (15) days thereafter, b. a written protest setting forth his objection to the ruling or decision in question, together with his reasons therefor. No protest shall be considered unless payment of the amount due after final liquidation has first been made and the corresponding docket fee. (Sec. 2308, TCC numbering and arrangement supplied)

44. Protest Exclusive Remedy in Protestable Cases. In all cases subject to protest, the interested party who desires to have the action of the collector reviewed, shall make a protest, otherwise the action of the collector shall be final and conclusive against him.(Sec. 2309, TCC) 45. The basis of dutiable value of merchandise that is subject to ad valorem customs duties the transaction value, which shall be the price actually paid or payable for the goods when sold for export to the Philippines, adjusted by adding certain cost elements to the extent that they are incurred by the buyer but are not included in the price actually paid or payable for the imported goods, and may include the following: a. Cost of containers and packing, b. Insurance, and c. Freight. (Sec. 201, TCC as amended by Sec. 1, Rep. Act No. 9135) 46. The above transaction value is the primary method of determining dutiable value. If the transaction value of the imported article could not be determined using the above, the following alternative methods should be used one after the other: a. Transaction value of identical goods b. Transaction value of similar goods c. Deductive method d. Computed method e. Fallback method 47. There is a mistaken belief that claims for refund are governed by the rule on quasi-contract of solutio indebeti which prescribes in six (6) years under Article 1145 of the Civil Code. In order for the rule on solutio indebeti to apply it is an essential condition that the petitioner must first show that its payment of the customs duties was in excess of what was required by the law at the time the subject 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. (Nestle Phil. v. Court of Appeals, et al., G.R. No. 134114, July 6, 2001) 48. There is no automatic grant of refund. In determining whether Nestle is entitled to refund of alleged overpayment of custom duties, it is necessary to determine exactly how much the Government is entitled to collect as customs duties. Until there is such a determination by the Collector and affirmed or rejected by the Commissioner, then the Court of Tax Appeals does not have jurisdiction. The CTAs jurisdiction under the Tariff and Customs Code is not concurrent with

that of the Commissioner of Customs due to the absence of any certification from the Collector of Customs of Manila that such import duties should be refunded. Consequently, the finding by the CTA in another case of overpayment of internal revenue taxes is not necessarily a finding that there was overpayment of customs duties. (Nestle Phil. v. Court of Appeals, et al., G.R. No. 134114, July 6, 2001) 49. All claims for refund of duties shall be made in writing and forwarded to the Collector of Customs to whom such duties are paid, who upon receipt of such claim, shall verify the same by the records of his Office, and if found to be correct and in accordance with law, shall certify the same to the Commissioner of Customs with his recommendation together with all necessary papers and documents. Upon receipt by the Commissioner of such certified claim he shall cause the same to be paid if found correct.(Sec. 1708, TCC) 50. Under the doctrine of primary jurisdiction, the Bureau of Customs has exclusive administrative jurisdiction to conduct searches, seizures and forfeitures of contraband without interference from the courts. It could conduct searches and seizures without need of a judicial warrant except if the search is to be conducted in a dwelling place. 51. The doctrine of exclusive customs jurisdiction over customs cases to the exclusion of the RTCs is anchored upon the policy of placing no unnecessary hindrance on the governments 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. (Jao, et al., v. Court of Appeals, et al., and companion case, 249 SCRA 35, 43) 52. 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. RTCs are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus.(The Bureau of Customs, et al., v. Ogario, et al., G.R. No. 138081, March 20, 2000) 53. Regional Trial Courts have no jurisdiction to replevin a property which is subject to seizure and forfeiture proceedings for violation of the Tariff and Customs Code otherwise, actions for forfeiture of property for violation of the Customs laws could easily be undermined by the simple device of replevin. (De la Fuente v. De Veyra, et al., 120 SCRA 455) 54. The customs authorities do not have to prove to the satisfaction of the court that the articles on board a vessel were imported from abroad or are intended to be shipped abroad before they may exercise the power to effect customs searches, seizures, or arrests provided by law and continue with the administrative hearings. (The Bureau of Customs, et al., v. Ogario, et al., G.R. No. 138081, March 20, 2000) 55. The Tariff and Customs Code allows the Bureau of Customs to resort to theadministrative remedy of seizure, such as by enforcing the tax lien on the imported article when the imported articles could be found and be subject to seizure and forfeiture. 56. The Tariff and Customs Code allows the Bureau of Customs to resort to the judicial remedy of filing an action in court when the imported articles could not anymore be found. 57. Instances where there is no right of redemption of seized and forfeited articles: a. There is fraud; b. The importation is absolutely prohibited, or c. The release of the property would be contrary to law. (Transglobe International, Inc. v. Court of Appeals, et al., G.R. No. 126634, January 25, 1999) 58. In Aznar v. Court of Tax Appeals, 58 SCRA 519, reiterated in Farolan, Jr. v. Court of Tax appeals, et al., 217 SCRA 298, the Supreme Court clarified that the fraud contemplated by law must be actual and not constructive. It must be intentional, consisting of deception, willfully and deliberately done or resorted to in order to induce another to give up some right. 59. Fraud must be proved to justify forfeiture. It must be actual, amounting to intentional wrong-doing with the clear purpose of avoiding the tax. Forfeiture is not favored in law nor in equity. Mere negligence is not equivalent to the fraud contemplated by law. An honest mistake, will not deprive

the government of its right to collect the proper tax. (Republic, etc., v. The Court of Appeals, et al., G.R. No. 139050, October 2, 2001) 60. Requisites for forfeiture of imported goods: a. Wrongful making by the owner, importer, exporter or consignee of any declaration or affidavit, or the wrongful making or delivery by the same person of any invoice, letter or paper all touching on the importation or exportation of merchandise. b. the falsity of such declaration, affidavit, invoice, letter or paper; and c. an intention on the part of the importer/consignee to evade the payment of the duties due.(Republic, etc., v. The Court of Appeals, et al., G.R. No. 139050, October 2, 2001) 61. Forfeiture of seized goods in the Bureau of Customs is in the nature of a proceeding in rem, i.e. directed against the res or imported goods and entails a determination of the legality of their importation. In this proceeding, it is in legal contemplation the property itself which commits the violation and is treated as the offender, without reference whatsoever to the character or conduct of the owner. The issue is limited to whether the imported goods should be forfeited and disposed of in accordance with law for violation of the Tariff and Customs Code. .(Transglobe International, Inc. v. Court of Appeals, et al., G.R. No. 126634, January 25, 1999) 62. The one-year prescriptive period for forfeiture proceedings applies only in the absence of fraud. (Commissioner of Customs v. Court of Tax Appeals, et al., G.R. No. 132929, March 27, 2000) 63. The posting of customs guards at the importers warehouse where the imported steel

billets were transferred under guard from the customs zone is an indication that the goods

were not yet released by the Bureau of Customs to the importer and that importation has not

yet been terminated.

However, when the Bureau of Customs allowed the processing of the import entry, accepted the

payment and issued an order of release such order is sufficient legal permit for withdrawal and

importation is then deemed terminated. The goods could not anymore be seized and forfeited

because importation has been validly terminated. (Sandoval-Gutierrez J.Commissioner of Customs

v. Milwaukee Industrial Corporation, G. R. No. 135253, December 9, 2004) 64. The Collector of Customs upon probable cause that the articles are imported or exported, or are attempted to be imported or exported, in violation of the tariff and customs laws shall issue a warrant of seizure. (Sec. 6, Title III, CAO No. 9-93) If the search and seizure is to be conducted in a dwelling place, then a search warrant should be issued by the regular courts not the Bureau of Customs. There may be instances where no warrants issued by the Bureau of Customs or the regular courts is required, as in search and seizures of motor vehicles and vessels. 65. Smuggled goods seized by virtue of a court warrant should be surrendered to the court that issued the warrant and not to the Bureau of Customs because the goods are in custodia legis.

REPUBLIC ACT NO. 1125, CREATING THE COURT OF TAX APPEALS INCLUDING JURISDICTION OF THE CTA, AS AMENDED 1. Why was the Court of Tax Appeals created ? SUGGESTED ANSWER: a. To prevent delay in the disposition of tax cases by the then Courts of First Instance (now RTCs), in view of the backlog of civil, criminal, and cadastral cases accumulating in the dockets of such courts; and b. To have a body with special knowledge which ordinary Judges of the then Courts of First Instance (now RTCs), are not likely to possess, thus providing for an adequate remedy for a speedy determination of tax cases. (Ursal v. Court of Tax Appeals, et al., 101 Phil. 209;Lacsamana, et al., etc., v. CTA, et al., 102 Phil. 931) 2. CTA specialized court. By the very nature of its functions, the CTA is a highly specialized court specifically created for the purpose of reviewing tax and customs cases. it is dedicated exclusively to

the study and consideration of revenue-related problems and has necessarily developed an expertise on the subject. (J. Panganiban in Southern Cross Cement Corporation v. Cement Manufacturers Association of the Philippines, et al., G. R. No. 158540, August 3, 2005, citing various cases in his separate opinion to the decision on the motion for reconsideration) 3. Court of Tax Appeals finding of fact binds the Supreme Court. It is doctrinal that the factual findings of the Court of Tax Appeals, when supported by substantial evidence, will not be disturbed on appeal, unless it is shown that it committed gross error in the appreciation of facts. (Commissioner of Internal Revenue v. Manila Electric Company, G. R. No. 121666, October 10, 2007 citing Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 124043, October 14, 1998, 298 SCRA 83, 91 citing Commissioner of Internal Revenue v. Mitsubishi Metal Corp., G.R. Nos. 54909 and 80041, January 22, 1990, 181 SCRA 214, 220;Philippine Refining Company v. Court Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 124043, October 14, 1998, 298 SCRA 83, 91 citing Commissioner of Internal Revenue v. Mitsubishi Metal Corp., G.R. Nos. 54909 and 80041, January 22, 1990, 181 SCRA 214, 220; Philippine Refining Company v. Court of Appeals, G.R. No. 118794, May 8, 1996, 256 SCRA 667, 676)

Hence, as a matter of practice and principle, the Supreme Court will not set aside the conclusion

reached by the Court of Tax Appeals, especially if affirmed by the Court of Appeals as in the present

case. For by the nature of its functions, the tax court dedicates itself to the study and consideration

of tax problems and necessarily develops expertise thereon, unless there has been an abuse or

improvident exercise of authority on its part. (Ibid. citing Compagnie Financiere Sucres et Denrees v.

Commissioner of Internal Revenue, G.R. No. 133834, August 28, 2006, 499 SCRA 664,

669; Commissioner of Internal Revenue v. General Foods (Phils.) Inc., G.R. No. 143672, April 24,

2003, 401 SCRA 545, 553. 4. Court of Tax Appeals is not governed strictly by technical rules of evidence. (Sec. 8, Rep. Act No. 1125) While this may be so rules of procedure are not ends in themselves but are primarily intended as tools in the administration of justice, the presentation of the purchase receipts and/or invoices is not mere procedural technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of the taxpayers claims. (Commissioner of Internal v. Manila Mining Corporation, G. R. No. 153204, August 31, 2005) Under Section 8 of RA 1125, the CTA is categorically described as a court of record. As cases filed before it are litigated de novo, party-litigants shall prove every minute aspect of their cases. Indubitably, no evidentiary value can be given the pieces of evidence submitted by the BIR, as the rules on documentary evidence require that these documents must be formally offered before the CTA. While the CTA is not governed strictly by technical rules of evidence, as rules of procedure are not ends in themselves and are primarily intended as tools in the administration of justice, the presentation of the BIR's evidence is not a mere procedural technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of BIR's claims. (Dizon, etc., v. Court of Tax Appeals, et al., G.R. No. 140944, April 30, 2008) 5. The legal remedies under the NIRC of 1997 and other laws available to an aggrieved taxpayer may be classified into the tax remedies with respect to: a. assessment; b. collection, and c. refund of internal revenue taxes.

The remedies may also be classified into the administrative or the judicial remedies. 6. The legal remedies under the NIRC of 1997 available to an aggrieved taxpayer at the administrative level with respect to assessment of internal revenue taxes are the following: a. Upon receipt of a pre-assessment notice, the taxpayer shall respond to the same within fifteen (15) days from receipt which is the period provided for by implementing rules and regulations. [3

rd par., Sec. 228 (e), NIRC of 1997]

b. Upon the issuance of an assessment notice, the taxpayer shall protest administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. c. Within sixty (60) days from the filing of the protest, all relevant supporting documents shall be submitted; otherwise the assessment shall become final. (4

th par., Ibid.)

7. The legal remedies under the NIRC of 1997 available to an aggrieved taxpayer at the judicial level with respect to assessment of internal revenue taxes:

a. If the protest is denied in whole or in part, or b. is not acted upon within one hundred eighty (180) days from submission of documents, c. the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax

Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180) day period; otherwise, the decision shall become final, executory and demandable. [last par., Sec. 228 (e), NIRC of 1997]

d. On appeal, the taxpayer should apply for the issuance of a writ of preliminary injunction to enjoin the BIR from collecting the tax subject of the appeal.

e. A decision of a division of the Court of Tax Appeals adverse to the taxpayer or the government may be the subject of a motion for reconsideration or new trial, a denial of which is appealable to the Court of Tax Appeals en banc by means of a petition for review. .

f. A decision of the Court of Tax Appeals en banc adverse to the taxpayer or the government may be appealed to the Supreme Court through a petition for review on certiorari filed with fifteen (15) days from notice, and extendible for justifiable reasons for thirty (30) days only. 8. The legal remedy under the NIRC of 1997 available to an aggrieved taxpayer at the administrative level with respect to refund or recovery of tax erroneously or illegally collected, is to file a claim for refund or credit with the Commissioner of Internal Revenue. (1

stpar., Sec. 229,

NIRC of 1997) 9. The legal remedy under the NIRC of 1997 at the judicial level with respect torefund or recovery of tax erroneously or illegally collected, is the filing of a suit or proceeding with the Court of Tax Appeals

a. before the expiration of two (2) years from the date of payment of the tax regardless of any supervening cause that may arise after payment (2

nd par., Sec. 229, NIRC of 1997;), or

b. within thirty (30) days from receipt of the denial by the Commissioner of the application for refund or credit. (Sec. 11, R.A. No. 1125)

10. The two (2) year period and the thirty (30) day period should be applied on a whichever comes first basis. Thus, if the 30 days is within the 2 years, the 30 days applies, if the 2 year period is about to lapse but there is no decision yet by the Commissioner which would trigger the 30-day period, the taxpayer should file an appeal, despite the absence of a decision. (Commissioners, etc. v. Court of Tax Appeals, et al., G.R.No. 82618, March 16, 1989, unrep.)

11. Where the taxpayer is a corporation the two year prescriptive period from date of payment for refund of income taxes should be the date when the corporation filed its final adjustment return not on the date when the taxes were paid on a quarterly basis. (Philippine Bank of Communications v. Commissioner of Internal Revenue, et al., G.R. No. 112024, January 28, 1999)

12. Generally speaking it is the Final Adjustment Return, in which amounts of the gross receipts and deductions have been audited and adjusted, which is reflective of the results of the operations of a business enterprise. It is only when the return, covering the whole year, is filed that the taxpayer will be able to ascertain whether a tax is still due or refund can be claimed based on the adjusted and audited figures. (Bank of the PhilippineIslands v. Commissioner of Internal Revenue, G.R. No. 144653, August 28, 2001) 13. Outline of tax remedies of a taxpayer and the government relative to ASSESSMENT of internal revenue taxes.

a. The taxpayer files his tax return. b. A Letter of Authority is issued authorizing BIR examiner to audit or examine the tax return

and determines whether the full and complete taxes have been paid.

c. If the examiner is satisfied that the tax return is truly reflective of the taxable transaction and all taxes have been paid, the process ends. However, if the examiner is not satisfied that the tax return is truly reflective of the taxable transaction and that the taxes have not been fully paid, a Notice of Informal Conference is issued inviting the taxpayer to explain why he should not be subject to additional taxes.

d. If the taxpayer attends the informal conference and the examiner is satisfied with the explanation of the taxpayer, the process is again ended.

If the taxpayer ignores the invitation to the informal conference, or if the examiner is not satisfied with taxpayers explanation,, and he believes that proper taxes should be assessed, the Commissioner of Internal Revenue or his duly authorized representative shall then notify the taxpayer of the findings in the form of a pre-assessment notice. The pre-assessment notice requires the taxpayer to explain within fifteen (15) days from receipt why no notice of assessment and letter of demand for additional taxes should be directed to him.

e. If the Commissioner is satisfied with the explanation of the taxpayer, then the process is again ended.

If the taxpayer ignores the pre-assessment notice by not responding or his explanations are not accepted by the Commissioner, then a notice of assessment and a letter of demand is issued.

The notice of assessment must be issued by the Commissioner to the taxpayer within a period of three (3) years from the time the tax return was filed or should have been filed whichever is the later of the two events. Where the taxpayer did not file a tax return or where the tax return filed is false or fraudulent, then the Commissioner has a period of ten (10) years from discovery of the failure to file a tax return or from discovery of the fraud within which to issue an assessment notice. The running of the above prescriptive periods may however be suspended under certain instances.

The notice of assessment must be issued within the prescriptive period and must contain the facts, law and jurisprudence relied upon by the Commissioner. Otherwise it would not be valid.

f. The taxpayer should then file an administrative protest by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment notice.

The taxpayer could not immediately interpose an appeal to the Court of Tax Appeals because there is no decision yet of the Commissioner that could be the subject of a review.

To be valid the administrative protest must be filed within the prescriptive period, must show the error of the Bureau of Internal Revenue and the correct computations supported by a statement of facts, and the law and jurisprudence relied upon by the taxpayer. There is no need to pay under protest. If the protest was not seasonably filed the assessment becomes final and collectible and the Bureau of Internal Revenue could use its administrative and judicial remedies in collecting the tax.

g. Within sixty (60) days from filing of the protest, all relevant supporting documents shall be submitted, otherwise the assessment shall become final and collectible and the BIR could use its administrative and judicial remedies to collect the tax.

Once an assessment has become final and collectible, not even the BIR Commissioner could change the same. Thus, the taxpayer could not pay the tax, then apply for a refund, and if denied appeal the same to the Court of Tax Appeals.

h. If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from the submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the adverse decision, or from the lapse of the one hundred eighty (180-) day period, with an application for the issuance of a writ of preliminary injunction to enjoin the BIR from collecting the tax subject of the appeal.

If the taxpayer fails to so appeal, the denial of the Commissioner or the inaction of the Commissioner would result to the notice of assessment becoming final and collectible and the BIR could then utilize its administrative and judicial remedies to collect the tax.

i. A decision of a division of the Court of Tax Appeals adverse to the taxpayer or the government may be the subject of a motion for reconsideration or new trial, a denial of which is appealable to the Court of Tax Appeals en banc by means of a petition for review. .

The Court of Tax Appeals, has a period of twelve (12) months from submission of the case for decision within which to decide.

j. If the decision of the Court of Tax Appeals en banc affirms the denial of the protest by the Commissioner or the assessment in case of failure by the Commissioner to decide the taxpayer must file a petition for review on certiorari with the Supreme Court within fifteen (15) days from notice of the judgment on questions of law. An extension of thirty (30) days may for justifiable reasons be granted. If the taxpayer does not so appeal, the decision of the Court of Tax Appeals would become final and this has the effect of making the assessment also final and collectible. The BIR could then use its administrative and judicial remedies to collect the tax. 14. The jurisdiction of the Court of Tax Appeals:

a. 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, in relation thereto, or other

matters arising under the National Internal Revenue Code or other laws administered by the

Bureau of Internal Revenue; (DIVISION)

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds or internal revenue taxes, fees or other charges, penalties in relation

thereto, or other matter arising under the National Internal Revenue Code or other laws

administered by the Bureau of Internal Revenue, where the National Internal Revenue Code

provides a specific period of action, in which case the inaction shall be deemed a denial; (The

inaction on refunds in two years from the time tax was paid.Thus, if the prescriptive period of

two years is about to expire, the taxpayer should interpose a petition for review with the CTA

DIVISION)

3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided

or resolved by them in the exercise of their original or appellate jurisdiction; (If original

DIVISION; if appellate EN BANC)

4. 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, forfeitures

or other penalties in relation thereto, or other matters arising under the Customs Law or other

laws administered by the Bureau of Customs; (DIVISION)

5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate

jurisdiction over cases involving the assessment and taxation of real property originally decided

by the provincial or city board of assessment appeals; (EN BANC)

6. Decisions of the Secretary of Finance on customs cases elevated to him automatically

for review from decisions of the Commissioner of Customs which are adverse to the

Government under Section 2315 of the Tariff and Customs Code; (This has reference to

forfeiture cases where the decision is to release the seized articles DIVISION)

7. Decisions of the Secretary of Trade and Industry, in case of nonagricultural product,

commodity or article, and the Secretary of Agriculture in the case of agricultural product,

commodity or article, involving dumping and countervailing duties under Section 301 and 302,

respectively, of the Tariff and Customs Code, and safeguard measures under Republic Act No.

8800, where either party may appeal the decision to impose or not to impose said

duties. (DIVISION)

b. Jurisdiction over cases involving criminal offenses as herein provided:

1. Exclusive original jurisdiction over all criminal cases arising from violations of the

National Internal Revenue Code or Tariff and Customs Code and other laws administered by

the Bureau of Internal Revenue or the Bureau of Customs: Provided, however, That offenses or

felonies mentioned in this paragraph where the principal amount of taxes and fees, exclusive of

charges and penalties claimed, is less than One million pesos (P1,000,000.00) or where there is

no specified amount claimed shall be tried by the regular Courts and the jurisdiction of the CTA

shall be appellate. Any provision of law or the Rules of Court to the contrary notwithstanding,

the criminal action and the corresponding civil action for the recovery of civil liability for taxes

and penalties shall at all times be simultaneously instituted with, and jointly determined in the

same proceeding by the CTA, the filing of the criminal action being deemed to necessarily carry

with it the filing of the civil action, and no right to reserve the filing of such civil action separately

from the civil action will be recognized.

2. Exclusive appellate jurisdiction in criminal offenses:

a) Over appeals from the judgments, resolutions or orders of the Regional Trial Courts

in tax cases originally decided by them, in their respective territorial jurisdiction.

b) Over petitions for review of the judgments, resolutions or orders of the Regional

Trial Courts in the exercise of their appellate jurisdiction over tax cases originally

decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit

Trial Courts in their respective jurisdiction.

c. Jurisdiction over tax collection cases:

1. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for

taxes, fees, charges and penalties: Provided, however, That collection cases where the

principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than

One million pesos (P1,000,000) shall be tried by the proper Municipal Trial Court, Metropolitan

Trial Court and Regional Trial Court.

2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from judgments, resolutions, or orders of the Regional Trial Courts in tax collection

cases originally decided by them, in their respective territorial jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the

exercise of their appellate jurisdiction over tax collection cases originally decided by the

Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in

their respective jurisdiction. (Sec. 7, R. A. No. 1125, as amended by R. A. No. 9282,

emphasis and words in parentheses supplied) 15. The following are the acts of BIR Commissioner considered as denial of a protest which serve as basis for appeal to the Court of Tax Appeals: a. Filing by the BIR of a civil suit for collection of the deficiency tax is considered a denial of the request for reconsideration. (Commissioner of Internal Revenue v. Union Shipping Corporation, 185 SCRA 547) b. An indication to the taxpayer by the Commissioner in clear and unequivocal language of his final denial not the issuance of the warrant of distraint and levy. What is the subject of the appeal is the final decision not the warrant of distraint. (Commissioner of Internal Revenue v. Union Shipping Corporation, 185 SCRA 547) c. A BIR demand letter sent to the taxpayer after his protest of the assessment notice is considered as the final decision of the Commissioner on the protest. (Surigao Electric Co., Inc. v. Court of Tax Appeals, et al., 57 SCRA 523) d. A letter of the BIR Commissioner reiterating to a taxpayer his previous demand to pay an assessment is considered a denial of the request for reconsideration or protest and is appealable to the Court of Tax Appeals. (Commissioner v. Ayala Securities Corporation, 70 SCRA 204) e. Final notice before seizure considered as commissioners decision of taxpayers request for reconsideration who received no other response. Commissioner of Internal Revenue v. Isabela Cultural Corporation, G.R. No. 135210, July 11, 2001 held that not only is the Notice the only response received: its content and tenor supports the theory that it was the CIRs 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 the taxpayer was being given this LAST OPPORTUNITY to pay; otherwise, its properties would be subjected to distraint and levy. 16. The taxpayer seasonably protested the assessment issued by the Commissioner of Internal Revenue. During the pendency of the protest the CIR issued a warrant of distraint and levy to collect the taxes subject of the protest. As counsel what advice shall you give the taxpayer. Explain briefly your answer. ANSWER: The taxpayer should appeal, by way of a petition for review, to the Court of Tax Appeals not on the ground of the denial of the protest but on other matter arising under the provisions of the National Internal Revenue Code. The actual issuance of a warrant of distraint and levy in certain cases cannot be considered a final decision on a disputed assessment.

To be a valid decision on a disputed assessment, the decision of the Commissioner or his duly authorized representative shall (a) state the facts, the applicable law, rules and regulations, or jurisprudence on which such decision is based, otherwise, the decision shall be void, in which case the same shall not be considered a decision on the disputed assessment; and (b) that the same is his final decision. (Sec. 3.1.6, Rev. Regs. 12-99) These conditions are not complied with by the mere issuance of a warrant of distraint and levy.(Commissioner of Internal Revenue v. Union Shipping Corp., 185 SCRA 547) Furthermore, a motion for the suspension of the collection of the tax may be filed together with the petition for review (Sec. 3, Rule 10, RRCTA effective December 15, 2005) because the collection of the tax may jeopardize the interest of the taxpayer. 17. As a general rule, there must always be a decision of the Commissioner of Internal Revenue or Commissioner of Customs before the Court of Tax Appeals, would have jurisdiction. If there is no such decision, the would be dismissed for lack of jurisdiction unless the case falls under any of the following exceptions. 18. Instances where the Court of Tax Appeals would have jurisdiction even if there is no decision yet by the Commissioner of Internal Revenue:

a. Where the Commissioner has not acted on the disputed assessment after a period of 180 days from submission of complete supporting documents, the taxpayer has a period of 30 days from the expiration of the 180 day period within which to appeal to the Court of Tax Appeals. (last par., Sec. 228 (e), NIRC of 1997; Commissioner of Internal Revenue v. Isabela Cultural Corporation, G.R. No. 135210, July 11, 2001)

b. Where the Commissioner has not acted on an application for refund or credit and the two year period from the time of payment is about to expire, the taxpayer has to file his appeal with the Court of Tax Appeals before the expiration of two years from the time the tax was paid.

It is disheartening enough to a taxpayer to be kept waiting for an indefinite period for the ruling,. It would make matters more exasperating for the taxpayer if the doors of justice would be closed for such a relief until after the Commissioner, would have, at his personal convenience, given his go signal. (Commissioner of Customs, et al, v. Court of Tax Appeals, et al., G.R. No. 82618, March 16, 1989, unrep.) 19. What is the legal remedy under the NIRC of 1997 at the judicial level with respect to refund or recovery of tax erroneously or illegally collected ? SUGGESTED ANSWER. The legal remedy under the NIRC of 1997 at the judicial level with respect to refund or recovery of tax erroneously or illegally collected, is the filing of a suit or proceeding with the Court of Tax Appeals

a. before the expiration of two (2) years from the date of payment of the tax regardless of any supervening cause that may arise after payment (2

nd par., Sec. 229, NIRC of 1997), or

b. within thirty (30) days from receipt of the denial by the Commissioner of the application for refund or credit. (Sec. 11, R.A. No. 1125)

20. The two (2) year period and the thirty (30) day period should be applied on a whichever comes first basis. Thus, if the 30 days is within the 2 years, the 30 days applies, if the 2 year period is about to lapse but there is no decision yet by the Commissioner which would trigger the 30-day period, the taxpayer should file an appeal, despite the absence of a decision. (Commissioners, etc. v. Court of Tax Appeals, et al., G. R. No. 82618, March 16, 1989, unrep.)

21. Where the taxpayer is a corporation the two year prescriptive period from date of payment for refund of income taxes should be the date when the corporation filed its final adjustment return not on the date when the taxes were paid on a quarterly basis. (Philippine Bank of Communications v. Commissioner of Internal Revenue, et al., G.R. No. 112024, January 28, 1999)

Generally speaking it is the Final Adjustment Return, in which amounts of the gross receipts and deductions have been audited and adjusted, which is reflective of the results of the operations of a business enterprise. It is only when the return, covering the whole year, is filed that the taxpayer will be able to ascertain whether a tax is still due or refund can be claimed based on the adjusted and audited figures. (Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No. 144653, August 28, 2001) 22. What is the burden of taxpayers seeking tax refunds or credits ? SUGGESTED ANSWER: It has always been the rule that those seeking tax refunds or credits bear the burden of proving the factual basis of their claims and of showing, by words too plain to be mistaken, that the legislature intended to entitle them to such claims. (Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue, G. R. No. 145526, March 16, 2007, See Commissioner of Internal Revenue v. Seagate Technology (Philippines) G. R. No. 153866, 11 February 2005, 451 SCRA 132) 23. What is the nature of proceedings before the Court of Tax Appeals ? SUGGESTED ANSWER: First, a judicial claim for refund or tax credit in the CTA is by no means an original action, but rather an appeal by way of petition for review of a previous, unsuccessful administrative claim. Therefore, as in every appeal or petition for review, a petitioner has to convince the appellate court that the quasi-judicial agency a quo did not have any reason to deny its claims. Second, cases filed in the CTA are litigated de novo. Thus, a petitioner should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the CTA. Since it is crucial for a petitioner in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place, part of the evidence to be submitted to the CTA must necessarily include whatever is required for the successful prosecution of an administrative claim. (Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue, G. R. No. 145526, March 116, 2007) 24. Applicability of Proton Pilipinas Corporation vs. Republic, etc., G. R. No. 165027, October 16, 2006. The case was decided on factual antecedents before R. A. No. 9282 which grants criminal jurisdiction to the Court of Tax Appeals if the value of the tax is P1 million or more. Interpreting the provisions of Republic Act No. 8249, which provides that the civil action for recovery of civil liability should be jointly determined in the criminal proceeding by the Sandiganbayan or appropriate courts, the prohibition of reservation of the criminal aspect, the Supreme Court said that tax collection cases may be tried separately, and not before the Sandiganbayan in Rep. Act No. 3019 cases. This is so because, Rep. Act No. 3019 is silent on the definition of civil liability and the application of Art. 104 of the Revised Penal Code does not cover taxes. Consequently, the Supreme Court ruled that on the tax collection case the RTC would have jurisdiction. Interpretation by the author in the light of Rep. Act. 9282. If it is a criminal case cognizable by the Sandiganbayan, then this court retains jurisdiction, with the civil jurisdiction being cognizable by the CTA or the lower courts depending on the amount. If the issue is a purely tax case, even if it involves cases cognizable by the Sandiganbayan, then jurisdiction vests upon the CTA or the lower courts depending on the amount of the tax. 25. On January 24, 1995, the then Secretary of Finance, through the recommendation of the then Commissioner of Internal Revenue issued Revenue Regulations [Rev. Reg.] No. 1-95, providing the Rules and Regulations to Implement the Tax Incentives Provisions Under Paragraphs (b) and (c) of Section 12, [R.A.] No. 7227, [o]therwise known as the Bases Conversion and Development Act of 1992. Subsequently, Rev. Reg. No. 12-97 was issued providing for the Regulations Implementing Sections 12(c) and 15 of [R.A.] No. 7227 and Sections 24(b) and (c) of [R.A.] No. 7916 Allocating Two Percent (2%) of the Gross Income Earned by All Businesses and Enterprises Within the Subic, Clark, John Hay, Poro Point

Special Economic Zones and other Special Economic Zones under PEZA. OnSeptember 27, 1999, Rev. Reg. No. 16-99 was issued Amending [RR] No. 1-95, as amended, and other related Rules and Regulations to Implement the Provisions of paragraphs (b) and (c) of Section 12 of [R.A.] No. 7227, otherwise known as the Bases Conversion and Development Act of 1992 Relative to the Tax Incentives Granted to Enterprises Registered in the Subic Special Economic and Freeport Zone.

On June 3, 2003, the Commissioner of Internal Revenue issued Revenue Memorandum Circular (RMC) No. 31-2003 setting the Uniform Guidelines on the Taxation of Imported Motor Vehicles through the Subic Free Port Zone and Other Freeport Zones that are Sold at Public Auction, which provided for the tax treatments on the transactions involved in the importation of motor vehicles through the SSEFZ and other legislated Freeport zones and subsequent sale thereof through public auction. This was later amended by RMC No. 32-2003.

Asia International Auctioneers and others filed a complaint before the RTC of Olongapo City, to declare Void, Ultra Vires, and Unconstitutional [RMC] No. 31-2003 dated June 3, 2003 and [RMC] No. 32-2003 dated June 5, 2003, Rev. Reg. Nos. 1-95, 12-97 and 16-99 dated January 24, 1995, August 7, 1997 and September 27, 1999, respectively,

They contended that jurisdiction over the case at bar properly pertains to the regular courts as this is an action to declare as unconstitutional, void and against the provisions of [R.A. No.] 7227 the RMCs issued by the CIR. They do do not challenge the rate, structure or figures of the imposed taxes, rather they challenge the authority of the respondent Commissioner to impose and collect the said taxes. They also claim that the challenge on the authority of the CIR to issue the RMCs does not fall within the jurisdiction of the Court of Tax Appeals (CTA).

Does the RTC have jurisdiction ? SUGGESTED ANSWER: No. It is the Court of Tax Appeals that has exclusive jurisdiction. In the case at bar, the assailed revenue regulations and revenue memorandum circulars are

actually rulings or opinions of the CIR on the tax treatment of motor vehicles sold at public auction within the SSEZ to implement Section 12 of R.A. No. 7227 which provides that exportation or removal of goods from the territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines. They were issued pursuant to the power of the CIR under Section 4 of the National Internal Revenue Code, viz:

Section 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases.-- The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals. (as amended by the NIRC of 1997, emphases supplied, Asia International Auctioneers, Inc., etc et al., .v. Parayno, Jr., etc.,, et al., G. R. No. 103445, December 18, 2007) 26. What is the characteristic of a BIR denial of a protest such as would enable the taxpayer to appeal the same to the Court of Tax Appeals ? SUGGESTED ANSWER: The Commissioner of Internal Revenue should always indicate to the taxpayer in clear and unequivocal language whenever his action on an assessment questioned by a taxpayer constitutes his final determination on the disputed assessment. On the basis of his statement indubitably showing that the Commissioners communicated action is his final decision on the contested assessment, the aggrieved taxpayer would then be able to take recourse to the tax court at the opportune time. Without needless difficulty, the taxpayer would be able to determine when his right to appeal to the tax court accrues.(Commissioner of Internal Revenue v. Bank of the Philippines Islands, G. R. No. 134062, April 17, 2007 citing Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue, G. R. No. 148380, 9 December 2005, 477 SCRA 205, 211-212,

citing Surigao Electric Co., Inc. v. Court of Tax Appeals, G. R. No. L-254289, 28 June 1974, 57 SCRA 523) 27. Reasons for the rule requiring CIRs unequivocal language on his action on the protest. a. It would obviate all desire and opportunity on the part of the taxpayer to continually delay the finality of the assessment and, consequently, the collection of the amount demanded as taxes by repeated requests for recomputation and reconsideration. b. On the part of the Commissioner of Internal Revenue, this would encourage his office to conduct a careful and thorough study of every questioned assessment and render a correct and define decision thereon in the first instance. c. This would also deter the Commissioner of Internal Revenue from unfairly making the taxpayer grope in the dark and speculate as to which action constitutes the decision appealable to the tax court. d. Of greater import, this rule of conduct would meet a pressing need for fair play, regularity, and orderliness in administrative action. (Commissioner of Internal Revenue v. Bank of the Philippines Islands, G. R. No. 134062, April 17, 2007 citing Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue, G. R. No. 148380, 9 December 2005, 477 SCRA 205, 211-212, citing Surigao Electric Co., Inc. v. Court of Tax Appeals, G. R. No. L-254289, 28 June 1974, 57 SCRA 523) 28. Cite acts of BIR Commissioner that may be considered as denial of a protest which serve as basis for appeal to the Court of Tax Appeals. SUGGESTED ANSWER: a. Filing by the BIR of a civil suit for collection of the deficiency tax is considered a denial of the request for reconsideration. (Commissioner of Internal Revenue v. Union Shipping Corporation, 185 SCRA 547) b. An indication to the taxpayer by the Commissioner in clear and unequivocal language of his final denial not the issuance of the warrant of distraint and levy. What is the subject of the appeal is the final decision not the warrant of distraint. (Commissioner of Internal Revenue v. Union Shipping Corporation, 185 SCRA 547) c. A BIR demand letter sent to the taxpayer after his protest of the assessment notice is considered as the final decision of the Commissioner on the protest. (Surigao Electric Co., Inc. v. Court of Tax Appeals, et al., 57 SCRA 523) d. A letter of the BIR Commissioner reiterating to a taxpayer his previous demand to pay an assessment is considered a denial of the request for reconsideration or protest and is appealable to the Court of Tax Appeals. (Commissioner v. Ayala Securities Corporation, 70 SCRA 204) e. Final notice before seizure considered as commissioners decision of taxpayers request for reconsideration who received no other response. Commissioner of Internal Revenue v. Isabela Cultural Corporation, G.R. No. 135210, July 11, 2001 held that not only is the Notice the only response received: its content and tenor supports the theory that it was the CIRs 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 the taxpayer was being given this LAST OPPORTUNITY to pay; otherwise, its properties would be subjected to distraint and levy. 29. The taxpayer seasonably protested the assessment issued by the Commissioner of Internal Revenue. During the pendency of the protest the CIR issued a warrant of distraint and levy to collect the taxes subject of the protest. As counsel what advice shall you give the taxpayer. Explain briefly your answer. SUGGESTED ANSWER: The taxpayer should appeal, by way of a petition for review, to the Court of Tax Appeals not on the ground of the denial of the protest but on other matter arising under the provisions of the National Internal Revenue Code. The actual issuance of a warrant of distraint and levy in certain cases cannot be considered a final decision on a disputed assessment.

To be a valid decision on a disputed assessment, the decision of the Commissioner or his duly authorized representative shall (a) state the facts, the applicable law, rules and regulations, or jurisprudence on which such decision is based, otherwise, the decision shall be void, in which case the same shall not be considered a decision on the disputed assessment; and (b) that the same is his final decision. (Sec. 3.1.6, Rev. Regs. 12-99) These conditions are not complied with by the mere issuance

of a warrant of distraint and levy.(Commissioner of Internal Revenue v. Union Shipping Corp., 185 SCRA 547) Furthermore, a motion for the suspension of the collection of the tax may be filed together with the petition for review (Sec. 3, Rule 10, RRCTA effective December 15, 2005) because the collection of the tax may jeopardize the interest of the taxpayer. 30. Instances where the Court of Tax Appeals would have jurisdiction even if there is no decision yet by the Commissioner of Internal Revenue:

a. Where the Commissioner has not acted on the disputed assessment after a period of 180 days from submission of complete supporting documents, the taxpayer has a period of 30 days from the expiration of the 180 day period within which to appeal to the Court of Tax Appeals. (last par., Sec. 228 (e), NIRC of 1997; Commissioner of Internal Revenue v. Isabela Cultural Corporation, G.R. No. 135210, July 11, 2001)

b. Where the Commissioner has not acted on an application for refund or credit and the two year period from the time of payment is about to expire, the taxpayer has to file his appeal with the Court of Tax Appeals before the expiration of two years from the time the tax was paid.

It is disheartening enough to a taxpayer to be kept waiting for an indefinite period for the ruling,. It would make matters more exasperating for the taxpayer if the doors of justice would be closed for such a relief until after the Commissioner, would have, at his personal convenience, given his go signal. (Commissioner of Customs, et al, v. Court of Tax Appeals, et al., G.R. No. 82618, March 16, 1989, unrep.) 31. As a general rule, No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge. (Sec. 218, NIRC) No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the Commissioner of Customs or the Regional Trial Court, provincial, city or municipal treasurer or the Secretary of Finance, the Secretary of Trade and Industry and Secretary of Agriculture, as the case may be shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however, That when in the opinion of the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer the Court at any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court. (Sec. 11, Rep. Act No. 1125, as amended by Sec.9, Rep. Act No. 9282 ) The Supreme Court may enjoin the collection of taxes under its general judicial power but it should be apparent that the source of the power is not statutory but constitutional. The Supreme Court did not grant the provisional remedy prayed for in Southern Cross Cement Corporation v. The Philippine Cement Manufacturers Corp., et al., G. R. No. 158540, July 8, 2004 for it would be tantamount to enjoining the collection of taxes, a peremptory judicial act which is traditionally frowned upon unless there is a clear statutory basis for it.Evident is the clear legislative intent that the imposition of safeguard measures, despite the availability of judicial review, should not be enjoined notwithstanding any timely appeal of the imposition. This so because the Safeguard Measures Act states that the filing of a petition for review before the CTA does not stop, suspend, or otherwise toll the imposition or collection of the appropriate tariff duties or the adoption of other appropriate safeguard measures.

32. General rule: The rule is that in the absence of accounting records of a taxpayer, his tax

liability may be determined by estimation. The petitioner (Commissioner of Internal Revenue) is not

required to compute such tax liabilities with mathematical exactness.Approximation in the calculation of

taxes due is justified. To hold otherwise would be tantamount to holding that skillful concealment is an

invincible barrier to proof. [Commissioner of Internal Revenue v. Hantex Trading Co., Inc. G. R. No.

136975, March 31, 2005 citing United States v. Johnson, 319 U.S. 1233 (1943)] However, the rule

does not apply where the estimation is arrived at arbitrarily and capriciously. [Commissioner of Internal

Revenue v. Hantex Trading Co., Inc., citing United States v. Rindskopf, 105 U.S.418 (1881)]

33. Meaning of "best evidence obtainable" under Sec. 6 (B), NIRC of

1997. Thismeans that the original documents must be produced. If it could not be produced, secondary

evidence must be adduced. (Hantex Trading Co., Inc. v. Commissioner of Internal Revenue, CA - G.R.

SP No. 47172, September 30, 1998)

34. Sec. 6 (B) of the NIRC of 1997 allows the BIR to make or amend a tax return from his own

knowledge or obtained through testimony or otherwise. Thus, the Commissioner of Internal

Revenue investigates any circumstance which led him to believe that the taxpayer had taxable

income larger than that reported. Necessarily, this inquiry would have to be outside of the books

because they supported the return as filed. He may take the sworn testimony of the taxpayer, he may

take the testimony of third parties; he may examine and subpoena, if necessary, traders and brokers

accounts and books and the taxpayers books of accounts. The Commissioner is not bound to follow

any set of patterns.The existence of unreported income may be shown by any particular proof that is

available in the circumstances of the particular situation. [Commissioner of Internal Revenue v. Hantex

Trading Co., Inc. citing Campbell, Jr., v. Guetersloh, 287 F.2d 878 (1961)]

Citing its ruling in a previous case, a U.S. appellate court declared that where the records of the

taxpayer are manifestly inaccurate and incomplete, the Commissioner may look to other sources of

information to establish income made by the taxpayer during the years in question. (Ibid., in turn

citing Kenney v. Commissioner, 111 F.2d 374) 35. The following are the general methods developed by the Bureau of Internal Revenue

for reconstructing a taxpayers income where the records do not show the true income or where no return was filed or what was filed was a false and fraudulent return

(a) Percentage method; (b) Net worth method.; (c) Bank deposit method; (d) Cash expenditure method; (e) Unit and value method; (f) Third party information or access to records method; (g) Surveillance and assessment method. (Chapter XIII. Indirect Approach to Investigation,

Handbook on Audit Procedures and Techniques Volume I, pp. 68-74) 36. Under the percentage method, the computed amount of revenues based on the percentage computation is compared to the amount of revenues reflected on the return. The percentages used may be obtained from the taxpayer, industry publication, prior years audit results, or third parties. The comparison will provide an indication on the possibility of revenue being understated.

Among the significant ratios and trends to be analyzed are the percentage mark-up, gross profits ratio or gross margin percentage, profit margin, total assets turnover, and inventory turnover. (Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques Volume I, pp. 68-74) 37. The net worth method is a method of reconstructing income which is based on the theory that if the taxpayers net worth has increased in a given year in an amount larger than his reported income, he has understated his income for that year. The net worth on a fixed starting date is compared with the net worth on a fixed ending date. Any increase in net worth is presumed to be income not declared for tax purposes. (Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques Volume I, pp. 68-74) 38. The difficulty of establishing the opening net worth of a tax payer has led to the Cohan Rule which is the use of estimates or approximations of the amount of cash and other asserts where the taxpayer lacks adequate records. (Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques Volume I, pp. 68-74) 39. Under the bank deposit method, the bank records of the taxpayer are analyzed and the BIR estimates income on the basis of the total bank deposits after eliminating non-income items. This method stands on the premise that deposits represent taxable income unless otherwise explained as being non-taxable items. This method may be used only where the BIR has been legally allowed

access to the taxpayers bank records. (Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques Volume I, pp. 68-74) 40. The cash expenditure method assumes that the excess of a taxpayers expenditures during the tax period over his reported income for that period is taxable to the extent not disproved otherwise. (Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques Volume I, pp. 68-74) 41. Under the unit and value method, the determination or verification of gross receipts may be computed by applying price and profit figures to the known ascertainable quality of business of the taxpayer. (Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques Volume I, pp. 68-74) For example, in order to determine the gross receipts of a pizza parlor, multiply the pounds of flour used by the number of pizzas per pound which in turn would then be multiplied by the average price per pizza. 42. Third party information or access to records method. The BIR may require third parties, public or private to supply information to the BIR, and thus, obtain on a regular basis from any person other than the person whose internal revenue tax liability is subject to audit or investigation, or from any office or officer of the national and local governments, government agencies and instrumentalities including the Bangko Sentral ng Pilipinas and government-owned or controlled corporations, any information such as, but not limited to, costs and volume of production, receipts or sales and gross incomes of taxpayers, and the names , addresses, and financial statements of corporations, mutual fund companies, insurance companies, regional operating headquarters or multinational companies, joint accounts, associations, joint ventures or consortia and registered partnerships, and their members; xxx[Sec. 5 (B), NIRC of 1997) 43. A pre-assessment notice is a letter sent by the Bureau of Internal Revenue to a taxpayer asking him to explain within a period of fifteen (15) days from receipt why he should not be the subject of an assessment notice. It is part of the due process rights of a taxpayer. As a general rule, the BIR could not issue an assessment notice without first issuing a pre-assessment notice because it is part of the due process rights of a taxpayer to be given notice in the form of a pre-assessment notice, and for him to explain why he should not be the subject of an assessment notice. 44. Instances where a pre-assessment notice is not required before a notice of assessment is sent to the taxpayer. a. When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return; or b. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or c. When a taxpayer opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding table year; or d. When the excess tax due on excisable articles has not been paid; or e. When an article locally purchased or imported by an exempt person, such as, but not limited to vehicles, capital equipment, machineries and spare parts, has been sold, trade or transferred to non-exempt persons. (Sec. 228, NIRC of 1997) 45. The word assessment when used in connection with taxation, may have more than one meaning. More commonly the word assessment means the official valuation of a taxpayers property for purpose of taxation. The above definition of assessment finds application under tariff and customs taxation as well as local government taxation. For real property taxation, there may