USJ-R BAR OPS 2015

(16 Cases. Focus on the highlighted portions)

1.) COMMISSIONER OF INTERNAL REVENUE vs. TEAM SUAL
CORPORATION (formerly MIRANT SUAL CORPORATION) (G.R. No.
205055. July 18, 2014)

Upon appeal, the CTA EB concluded that TSC submitted the relevant documents to
substantiate its claim for refund or credit of input tax, to wit:

1. BIR Certificate of Registration (Annex "A", Petition for Review, CTA Case No.
7470, vol. 1, p. 13);

2. Quarterly VAT returns for the first, second, third and fourth quarters of 2004
(Exhibits "D", "E", "F", "G", & "H");

3. Summary of Input Tax Payments for the first, second, third and fourth
quarters of 2004 showing details of purchases of goods and service as well as the
corresponding input tax paid (Exhibits "D" to "D-3", "E" to "E-5-b", "F" to "F-4-b", "H-
3" to "H-4-c");

4. VAT official receipts and invoices for the first, second, third and fourth
quarters of 2004 (Exhibits "QQ-7" to "QQ-21-d", "RR-17", "SS-1" to "SS-19" & "TT-1"
to "TT-18");

5. Approved Certificate for Zero-Rate (Exhibit "A"); and

6. Application for Tax Credit/Refund (BIR Form 1914) (Exhibit "B-3")

We adopt the above-mentioned findings of fact of the CTA Special First Division, as
affirmed by the CTA EB. Whether TSC complied with the substantiation requirements
of Section 112 of the NIRC and RR 3-88 is a question of fact, which could only be
answered after reviewing, examining, evaluating, or weighing all over again the
probative value of the evidence before the CTA, which this Court does not have
reason to do in the present petition for review on certiorari. The findings of fact of
the CTA are not to be disturbed unless clearly shown to be unsupported by
substantial evidence. Since by the very nature of its functions, the CTA has
developed an expertise on this subject, the Court will not set aside lightly the
conclusions reached by them, unless there has been an abuse or improvident
exercise of authority.

The CIR, however, insists that TSC failed to submit the complete documents
enumerated in RMO 53-98. Thus, the 120-day period given for it to decide allegedly
did not commence.
The CIR's reliance on RMO 53-98 is misplaced. There is nothing in Section 112 of the
NIRC, RR 3-88 or RMO 53-98 itself that requires submission of the complete
documents enumerated in RMO 53-98 for a grant of a refund or credit of input VAT.
The subject of RMO 53-98 states that it is a "Checklist of Documents to be
Submitted by a Taxpayer upon Audit of his Tax Liabilities . . . ." In this case, TSC was
applying for a grant of refund or credit of its input tax. There was no allegation of an
audit being conducted by the CIR. Even assuming that RMO 53-98 applies, it
specifically states that some documents are required to be submitted by the
taxpayer "if applicable".

Moreover, if TSC indeed failed to submit the complete documents in support of its
application, the CIR could have informed TSC of its failure, consistent with Revenue
Memorandum Circular No. (RMC) 42-03. However, the CIR did not inform TSC of the
document it failed to submit, even up to the present petition. The CIR likewise
raised the issue of TSC's alleged failure to submit the complete documents only in
its motion for reconsideration of the CTA Special First Division's 4 March 2010
Decision. Accordingly, we affirm the CTA EB's finding that TSC filed its
administrative claim on 21 December 2005, and submitted the complete documents
in support of its application for refund or credit of its input tax at the same time.

Under Section 112 (C) of the NIRC, in case of failure on the part of the CIR to act on
the application, the taxpayer affected may, within 30 days after the expiration of
the 120-day period, appeal the unacted claim with the CTA. The charter of the CTA
also expressly provides that if the Commissioner fails to decide within "a specific
period" required by law, such "inaction shall be deemed a denial" of the application
for tax refund or credit. In Commissioner of Internal Revenue v. San Roque Power
Corporation, we emphasized that compliance with the 120-day waiting period is
mandatory and jurisdictional. In this case, when TSC filed its administrative claim on
21 December 2005, the CIR had a period of 120 days, or until 20 April 2006, to act
on the claim. However, the CIR failed to act on TSC's claim within this 120-day
period. Thus, TSC filed its petition for review with the CTA on 24 April 2006 or within
30 days after the expiration of the 120-day period. Accordingly, we do not find merit
in the CIR's argument that the judicial claim was prematurely filed.

RMC 42-03 provides:

Subject: Clarifying Certain Issues Raised Relative to the Processing of

Claims for Value-Added Tax (VAT) Credit/Refund, Including Those Filed with the Tax
and Revenue Group, One-Stop Shop Inter-Agency Tax Credit and Duty Drawback
Center, Department of Finance (OSS) by Direct Exporters.

xxx xxx xxx

 Q-16: Can the TCC processing office accept supporting documents of
claimant companies which were issued denial letters, or letters of denial of claim
due to absence of certain documents?

A-16: Taxpayers whose claims were denied due to failure to submit

supporting documents are given a period of thirty (30) days from receipt of the
letter of denial to file a request for reconsideration and to submit the required
documents to the Tax and Revenue Group, OSS-DOF or to other concerned BIR
offices which issued the denial letter. . . .

2.) BANK OF THE PHILIPPINE ISLANDS vs. COMMISSIONER OF

INTERNAL REVENUE (G.R. No. 181836. July 9, 2014)

The Issue

The issue boils down to whether or not BIR has a right to collect the assessed DST
from BPI.

The Ruling of the Court

We deny the right of the BIR to collect the assessed DST on the ground of
prescription.

Section 1, Rule 9 of the Rules of Court expressly provides that:

Section 1. Defenses and objections not pleaded. Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived.
However, when it appears from the pleadings or the evidence on record that the
court has no jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that the action is barred
by prior judgment or by the statute of limitations, the court shall dismiss the claim.
(Emphasis and underscoring supplied)

If the pleadings or the evidence on record show that the claim is barred by
prescription, the court is mandated to dismiss the claim even if prescription is not
raised as a defense. In Heirs of Valientes v. Ramas, ruled that the CA may motu
proprio dismiss the case on the ground of prescription despite failure to raise this
ground on appeal. The court is imbued with sufficient discretion to review matters,
not otherwise assigned as errors on appeal, if it finds that their consideration is
necessary in arriving at a complete and just resolution of the case. More so, when
the provisions on prescription were enacted to benefit and protect taxpayers from
investigation after a reasonable period of time.

Thus, we proceed to determine whether the period to collect the assessed DST for
the year 1985 has prescribed.
To determine prescription, what is essential only is that the facts demonstrating the
lapse of the prescriptive period were sufficiently and satisfactorily apparent on the
record either in the allegations of the plaintiff's complaint, or otherwise established
by the evidence. 19 Under the then applicable Section 319 (c) [now, 222 (c)] of the
National Internal Revenue Code (NIRC) of 1977, as amended, any internal revenue
tax which has been assessed within the period of limitation may be collected by
distraint or levy, and/or court proceeding within three years following the
assessment of the tax. The assessment of the tax is deemed made and the three-
year period for collection of the assessed tax begins to run on the date the
assessment notice had been released, mailed or sent by the BIR to the taxpayer.

In the present case, although there was no allegation as to when the assessment
notice had been released, mailed or sent to BPI, still, the latest date that the BIR
could have released, mailed or sent the assessment notice was on the date BPI
received the same on 16 June 1989. Counting the three-year prescriptive period
from 16 June 1989, the BIR had until 15 June 1992 to collect the assessed DST. But
despite the lapse of 15 June 1992, the evidence established that there was no
warrant of distraint or levy served on BPI's properties, or any judicial proceedings
initiated by the BIR.

The earliest attempt of the BIR to collect the tax was when it filed its answer in the
CTA on 23 February 1999, which was several years beyond the three-year
prescriptive period. However, the BIR's answer in the CTA was not the collection
case contemplated by the law. Before 2004 or the year Republic Act No. 9282 took
effect, the judicial action to collect internal revenue taxes fell under the jurisdiction
of the regular trial courts, and not the CTA. Evidently, prescription has set in to bar
the collection of the assessed DST.

The BIR nevertheless insists that the running of the prescriptive period to collect the
tax was suspended by BPI's filing of a request for the reinvestigation and/or
reconsideration on 23 June 1989. In the similar case of Bank of the Philippine
Islands, we already ruled on the matter as follows:

Of particular importance to the present case is one of the circumstances

enumerated in Section [320 (now, 223)] of the Tax Code of 1977, as amended,
wherein the running of the statute of limitations on assessment and collection of
taxes is considered suspended "when the taxpayer requests for a reinvestigation
which is granted by the Commissioner."

This Court gives credence to the argument of petitioner BPI that there is a
distinction between a request for reconsideration and a request for reinvestigation.
Revenue Regulations (RR) No. 12-85, issued on 27 November 1985 by the Secretary
of Finance, upon the recommendation of the BIR Commissioner, governs the
procedure for protesting an assessment and distinguishes between the two types of
protest, as follows
xxx xxx xxx

(a) Request for reconsideration. refers to a plea for a re-evaluation of an

assessment on the basis of existing records without need of additional evidence. It
may involve both a question of fact or of law or both.

(b) Request for reinvestigation. refers to a plea for re-evaluation of an

assessment on the basis of newly-discovered or additional evidence that a taxpayer
intends to present in the reinvestigation. It may also involve a question of fact or
law or both.

. . . Undoubtedly, a reinvestigation, which entails the reception and evaluation of

additional evidence, will take more time than a reconsideration of a tax assessment,
which will be limited to the evidence already at hand; this justifies why the former
can suspend the running of the statute of limitations on collection of the assessed
tax, while the latter can not.

. . . A close review of the contents thereof would reveal, however, that it protested
Assessment No. FAS-5-85-89-002054 based on a question of law, in particular,
whether or not petitioner BPI was liable for DST on its sales of foreign currency to
the Central Bank in taxable year 1985. The same protest letter did not raise any
question of fact; neither did it offer to present any new evidence. In its own letter to
petitioner BPI, dated 10 September 1992, the BIR itself referred to the protest of
petitioner BPI as a request for reconsideration. These considerations would lead this
Court to deduce that the protest letter of petitioner BPI was in the nature of a
request for reconsideration, rather than a request for reinvestigation and,
consequently, Section 224 of the Tax Code of 1977, as amended, on the suspension
of the running of the statute of limitations should not apply.

Even if, for the sake of argument, this Court glosses over the distinction between a
request for reconsideration and a request for reinvestigation, and considers the
protest of petitioner BPI as a request for reinvestigation, the filing thereof could not
have suspended at once the running of the statute of limitations. Article 224 of the
Tax Code of 1977, as amended, very plainly requires that the request for
reinvestigation had been granted by the BIR Commissioner to suspend the running
of the prescriptive periods for assessment and collection.

In the present case, the protest letter of BPI essentially raises the same question of
law, that is whether BPI was liable for DST on its sales of foreign bills of exchange to
the Central Bank in the taxable year 1985. Although it raised the issue of being
taxed twice, the BIR admitted that BPI did not present any new or additional
evidence to substantiate its allegations. In its letter dated 4 August 1998, the BIR
itself referred to the protest of BPI as a request for reconsideration, found the
arguments in it legally untenable, and denied the request. Hence, we find that the
protest letter of BPI was a request for reconsideration, which did not suspend the
running of the prescriptive period to collect.
Even considering that BPI's protest was a request for reinvestigation, there was
nothing in the records which showed that the BIR granted such request. On the
other hand, the BIR only responded to BPI on 4 August 1998 or after nine years from
the protest letter of BPI. In the Bank of the Philippine Islands case, we clarified and
qualified our ruling in Commissioner of Internal Revenue v. Wyeth Suaco
Laboratories, Inc., such that the request for reinvestigation in that case was
granted by the BIR. Thus, unlike in the present case, there was a proper ground for
suspension of the prescriptive period in Wyeth Suaco.

Considering that the dismissal of the present case due to prescription is imperative,
there is no more need to determine the validity of the assessment.

3.) COMMISSIONER OF INTERNAL REVENUE vs. UNITED

SALVAGE AND TOWAGE (PHILS.), INC. (G.R. No. 197515. July 2,
2014)

On this score, our ruling in Compagnie Financiere Sucres Et Denrees v. CIR, is

enlightening, to wit:

We reiterate the well-established doctrine that as a matter of practice and principle,

[we] will not set aside the conclusion reached by an agency, like the CTA, especially
if affirmed by the [CA]. By the very nature of its function, it has dedicated itself to
the study and consideration of tax problems and has necessarily developed an
expertise on the subject, unless there has been an abuse or improvident exercise of
authority on its part, which is not present here.

Under Section 8 of Republic Act (R.A.) No. 1125, the CTA is categorically described
as a court of record. As such, it shall have the power to promulgate rules and
regulations for the conduct of its business, and as may be needed, for the
uniformity of decisions within its jurisdiction. Moreover, as cases filed before it are
litigated de novo, party-litigants shall prove every minute aspect of their cases.
Thus, 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. Pertinent is Section 34, Rule 132 of the Revised
Rules on Evidence which reads:

SEC. 34. Offer of evidence. The court shall consider no evidence which has
not been formally offered. The purpose for which the evidence is offered must be
specified.
Although in a long line of cases, we have relaxed the foregoing rule and allowed
evidence not formally offered to be admitted and considered by the trial court, we
exercised extreme caution in applying the exceptions to the rule, as pronounced in
Vda. de Oate v. Court of Appeals, thus:

From the foregoing provision, it is clear that for evidence to be considered, the same
must be formally offered. Corollarily, the mere fact that a particular document is
identified and marked as an exhibit does not mean that it has already been offered
as part of the evidence of a party. In Interpacific Transit, Inc. v. Aviles [186 SCRA
385, 388-389 (1990)], we had the occasion to make a distinction between
identification of documentary evidence and its formal offer as an exhibit. We said
that the first is done in the course of the trial and is accompanied by the
marking of the evidence as an exhibit while the second is done only when
the party rests its case and not before. A party, therefore, may opt to formally
offer his evidence if he believes that it will advance his cause or not to do so at all.
In the event he chooses to do the latter, the trial court is not authorized by the
Rules to consider the same.

However, in People v. Napat-a [179 SCRA 403 (1989)] citing People v. Mate [103
SCRA 484 (1980)], we relaxed the foregoing rule and allowed evidence
not formally offered to be admitted and considered by the trial
court provided the following requirements are present, viz.: first,
the same must have been duly identified by testimony duly
recorded and, second, the same must have been incorporated in the
records of the case.

The evidence may, therefore, be admitted provided the following requirements are
present: (1) the same must have been duly identified by testimony duly recorded;
and (2) the same must have been incorporated in the records of the case. Being an
exception, the same may only be applied when there is strict compliance with the
requisites mentioned above; otherwise, the general rule in Section 34 of Rule 132 of
the Rules of Court should prevail.

In the case at bar, petitioner categorically admitted that it failed to formally offer
the PANs as evidence. Worse, it advanced no justifiable reason for such fatal
omission. Instead, it merely alleged that the existence and due execution of the
PANs were duly tackled by petitioner's witnesses. We hold that such is not sufficient
to seek exception from the general rule requiring a formal offer of evidence, since
no evidence of positive identification of such PANs by petitioner's witnesses was
presented. Hence, we agree with the CTA En Banc's observation that the 1994 and
1998 PANs for EWT deficiencies were not duly identified by testimony and were not
incorporated in the records of the case, as required by jurisprudence.

While we concur with petitioner that the CTA is not governed strictly by technical
rules of evidence, as rules of procedure are not ends in themselves but are
primarily intended as tools in the administration of justice, the presentation of PANs
as evidence of the taxpayer's liability is not mere procedural technicality. It is a
means by which a taxpayer is informed of his liability for deficiency taxes. It serves
as basis for the taxpayer to answer the notices, present his case and adduce
supporting evidence. More so, the same is the only means by which the CTA may
ascertain and verify the truth of respondent's claims. We are, therefore, constrained
to apply our ruling in Heirs of Pedro Pasag v. Spouses Parocha, viz.:

A formal offer is necessary because judges are mandated to

. . . .
rest their findings of facts and their judgment only and strictly
upon the evidence offered by the parties at the trial. Its function
is to enable the trial judge to know the purpose or purposes for
which the proponent is presenting the evidence. On the other
hand, this allows opposing parties to examine the evidence and
object to its admissibility. Moreover, it facilitates review as the
appellate court will not be required to review documents not
previously scrutinized by the trial court.
Strict adherence to the said rule is not a trivial matter. The Court in Constantino v.
Court of Appeals ruled that the formal offer of one's evidence is deemed waived
after failing to submit it within a considerable period of time. It explained that the
court cannot admit an offer of evidence made after a lapse of three (3) months
because to do so would "condone an inexcusable laxity if not non-compliance
with a court order which, in effect, would encourage needless delays and
derail the speedy administration of justice."

Applying the aforementioned principle in this case, we find that the trial court had
reasonable ground to consider that petitioners had waived their right to make a
formal offer of documentary or object evidence. Despite several extensions of time
to make their formal offer, petitioners failed to comply with their commitment and
allowed almost five months to lapse before finally submitting it. Petitioners'
failure to comply with the rule on admissibility of evidence is
anathema to the efficient, effective, and expeditious dispensation of
justice. . . . .

Anent the second issue, petitioner claims that the EWT assessment issued for
taxable year 1994 has factual and legal basis because at the time the PAN and FAN
were issued by petitioner to respondent on January 19, 1998, the provisions of
Revenue Regulation No. 12-99 which governs the issuance of assessments was not
yet operative. Hence, its compliance with Revenue Regulation No. 12-85 was
sufficient. In any case, petitioner argues that a scrutiny of the BIR records of
respondent for taxable year 1994 would show that the details of the factual finding
of EWT were itemized from the PAN issued by petitioner.

In order to determine whether the requirement for a valid assessment is duly

complied with, it is important to ascertain the governing law, rules and regulations
and jurisprudence at the time the assessment was issued. In the instant case, the
PANs and FANs pertaining to the deficiency EWT for taxable years 1994 and 1998,
respectively, were issued on January 19, 1998, when the Tax Code was already in
effect, as correctly found by the CTA En Banc:

The date of issuance of the notice of assessment determines which law applies- the
1997 NIRC or the old Tax Code. The case of Commissioner of Internal Revenue v.
Bank of Philippine Islands is instructive:

In merely notifying BPI of his findings, the CIR relied on the provisions of the former
Section 270 prior to its amendment by RA 8424 (also known as the Tax Reform Act
of 1997). In CIR v. Reyes, we held that:

In the present case, Reyes was not informed in writing of the law and the facts on
which the assessment of estate taxes had been made. She was merely notified of
the findings by the CIR, who had simply relied upon the provisions of former Section
229 prior to its amendment by [RA] 8424, otherwise known as the Tax Reform Act of
1997.

First, RA 8424 has already amended the provision of Section 229 on protesting an
assessment. The old requirement of merely notifying the taxpayer of the CIR's
findings was changed in 1998 to informing the taxpayer of not only the
law, but also of the facts on which an assessment would be made;
otherwise, the assessment itself would be invalid.

It was on February 12, 1998, that a preliminary assessment notice was issued
against the estate. On April 22, 1998, the final estate tax assessment notice, as well
as demand letter, was also issued. During those dates, RA 8424 was already in
effect. The notice required under the old law was no longer sufficient under the new
law. (Emphasis ours.)

In the instant case, the 1997 NIRC covers the 1994 and
1998 EWT FANs because there were issued on January 19,
1998 and September 21, 2001, respectively, at the time of
the effectivity of the 1997 NIRC. Clearly, the assessments
are governed by the law.
Indeed, Section 228 of the Tax Code provides that the taxpayer shall be informed in
writing of the law and the facts on which the assessment is made. Otherwise, the
assessment is void. To implement the aforesaid provision, Revenue Regulation No.
12-99 was enacted by the BIR, of which Section 3.1.4 thereof reads:

3.1.4.Formal Letter of Demand and Assessment Notice. The

formal letter of demand and assessment notice shall be issued by
the Commissioner or his duly authorized representative. The
letter of demand calling for payment of the taxpayer's deficiency
tax or taxes shall state the facts, the law, rules and regulations, or
jurisprudence on which the assessment is based, otherwise, the
formal letter of demand and assessment notice shall be void. The
same shall be sent to the taxpayer only by registered mail or by
personal delivery. . . .
It is clear from the foregoing that a taxpayer must be informed in writing of the legal
and factual bases of the tax assessment made against him. The use of the word
"shall" in these legal provisions indicates the mandatory nature of the requirements
laid down therein.

In the present case, a mere perusal of the FAN for the deficiency EWT for taxable
year 1994 will show that other than a tabulation of the alleged deficiency taxes due,
no further detail regarding the assessment was provided by petitioner. Only the
resulting interest, surcharge and penalty were anchored with legal basis. Petitioner
should have at least attached a detailed notice of discrepancy or stated an
explanation why the amount of P48,461.76 is collectible against respondent and
how the same was arrived at. Any short-cuts to the prescribed content of the
assessment or the process thereof should not be countenanced, in consonance with
the ruling in Commissioner of Internal Revenue v. Enron Subic Power Corporation to
wit:

The CIR insists that an examination of the facts shows that Enron was properly
apprised of its tax deficiency. During the pre-assessment stage, the CIR advised
Enron's representative of the tax deficiency, informed it of the proposed tax
deficiency assessment through a preliminary five-day letter and furnished Enron a
copy of the audit working paper allegedly showing in detail the legal and factual
bases of the assessment. The CIR argues that these steps sufficed to inform Enron
of the laws and facts on which the deficiency tax assessment was based.

We disagree. The advice of tax deficiency, given by the CIR to an employee of

Enron, as well as the preliminary five-day letter, were not valid substitutes for the
mandatory notice in writing of the legal and factual bases of the assessment. These
steps were mere perfunctory discharges of the CIR's duties in correctly assessing a
taxpayer. The requirement for issuing a preliminary or final notice, as the case may
be, informing a taxpayer of the existence of a deficiency tax assessment is
markedly different from the requirement of what such notice must contain. Just
because the CIR issued an advice, a preliminary letter during the pre-assessment
stage and a final notice, in the order required by law, does not necessarily mean
that Enron was informed of the law and facts on which the deficiency tax
assessment was made.

The law requires that the legal and factual bases of the assessment be stated in the
formal letter of demand and assessment notice. Thus, such cannot be presumed.
Otherwise, the express provisions of Article 228 of the NIRC and RR No. 12-99 would
be rendered nugatory. The alleged "factual bases" in the advice, preliminary letter
and "audit working papers" did not suffice. There was no going around the mandate
of the law that the legal and factual bases of the assessment be stated in writing in
the formal letter of demand accompanying the assessment notice.

We note that the old law merely required that the taxpayer be notified of the
assessment made by the CIR. This was changed in 1998 and the taxpayer must now
be informed not only of the law but also of the facts on which the assessment is
made. Such amendment is in keeping with the constitutional principle that no
person shall be deprived of property without due process. In view of the absence of
a fair opportunity for Enron to be informed of the legal and factual bases of the
assessment against it, the assessment in question was void. . . . .

In the same vein, we have held in Commissioner of Internal Revenue v. Reyes, that:

Even a cursory review of the preliminary assessment notice, as well as the demand
letter sent, reveals the lack of basis for not to mention the insufficiency of the
gross figures and details of the itemized deductions indicated in the notice and the
This Court cannot countenance an assessment based on
letter.
estimates that appear to have been arbitrarily or capriciously
arrived at. Although taxes are the lifeblood of the government,
their assessment and collection "should be made in accordance
with law as any arbitrariness will negate the very reason for
government itself."
Applying the aforequoted rulings to the case at bar, it is clear that the assailed
deficiency tax assessment for the EWT in 1994 disregarded the provisions of Section
228 of the Tax Code, as amended, as well as Section 3.1.4 of Revenue Regulations
No. 12-99 by not providing the legal and factual bases of the assessment. Hence,
the formal letter of demand and the notice of assessment issued relative thereto are
void.

In any case, we find no basis in petitioner's claim that

Revenue Regulation No. 12-99 is not applicable at the time
the PAN and FAN for the deficiency EWT for taxable year
1994 were issued. Considering that such regulation merely
implements the law, and does not create or take away
vested rights, the same may be applied retroactively, as
held in Reyes:
xxx xxx xxx.

Second, the non-retroactive application of Revenue Regulation (RR) No. 12-99 is of

no moment, considering that it merely implements the law.

A tax regulation is promulgated by the finance secretary

to implement the provisions of the Tax Code. While it is
desirable for the government authority or administrative
agency to have one immediately issued after a law is
passed, the absence of the regulation does not
automatically mean that the law itself would become
inoperative.
At the time the pre-assessment notice was issued to Reyes, RA 8424 already stated
that the taxpayer must be informed of both the law and facts on which the
assessment was based. Thus, the CIR should have required the assessment officers
of the Bureau of Internal Revenue (BIR) to follow the clear mandate of the new law.
The old regulation governing the issuance of estate tax assessment notices ran
afoul of the rule that tax regulations old as they were should be in harmony
with, and not supplant or modify, the law.

It may be argued that the Tax Code provisions are not self-executory. It would be too
wide a stretch of the imagination, though, to still issue a regulation that would
simply require tax officials to inform the taxpayer, in any manner, of the law and the
facts on which an assessment was based. That requirement is neither difficult to
make nor its desired results hard to achieve.

Moreover, an administrative rule interpretive of a statute,

and not declarative of certain rights and corresponding
obligations, is given retroactive effect as of the date of
the effectivity of the statute. RR 12-99 is one such rule.
Being interpretive of the provisions of the Tax Code, even
if it was issued only on September 6, 1999, this regulation
was to retroact to January 1, 1998 a date prior to the
issuance of the preliminary assessment notice and
demand letter.
Indubitably, the disputed assessments for taxable year 1994 should have already
complied with the requirements laid down under Revenue Regulation No. 12-99.
Having failed so, the same produces no legal effect.

Notwithstanding the foregoing findings, we sustain the CTA En Banc's findings on

the deficiency EWT for taxable year 1998 considering that it complies with Section
228 of the Tax Code as well as Revenue Regulation No. 12-99, thus:

On the other hand, the 1998 EWT FAN reflected the following: a detailed factual
account why the basic EWT is P14,496.79 and the legal basis, Section 57 B of the
1997 NIRC supporting findings of EWT liability of P22,437.01. Thus, the EWT FAN for
1998 is duly issued in accordance with the law.

As to the last issue, petitioner avers that its right to collect the EWT for taxable year
1992 has not yet prescribed. It argues that while the final assessment notice and
demand letter on EWT for taxable year 1992 were all issued on January 9, 1996, the
five (5)-year prescriptive period to collect was interrupted when respondent filed its
request for reinvestigation on March 14, 1997 which was granted by petitioner on
January 22, 2001 through the issuance of Tax Verification Notice No. 00165498 on
even date. Thus, the period for tax collection should have begun to run from the
date of the reconsidered or modified assessment.

This argument fails to persuade us.

The statute of limitations on assessment and collection of national internal revenue

taxes was shortened from five (5) years to three (3) years by virtue of Batas
Pambansa Blg. 700. Thus, petitioner has three (3) years from the date of actual
filing of the tax return to assess a national internal revenue tax or to commence
court proceedings for the collection thereof without an assessment. However, when
it validly issues an assessment within the three (3)-year period, it has another three
(3) years within which to collect the tax due by distraint, levy, or court proceeding.
The assessment of the tax is deemed made and the three (3)-year period for
collection of the assessed tax begins to run on the date the assessment notice had
been released, mailed or sent to the taxpayer.

On this matter, we note the findings of the CTA-Special First Division that no
evidence was formally offered to prove when respondent filed its returns and paid
the corresponding EWT and WTC for taxable year 1992.

Nevertheless, as correctly held by the CTA En Banc, the Preliminary Collection Letter
for deficiency taxes for taxable year 1992 was only issued on February 21, 2002,
despite the fact that the FANs for the deficiency EWT and WTC for taxable year 1992
was issued as early as January 9, 1996. Clearly, five (5) long years had already
lapsed, beyond the three (3)-year prescriptive period, before collection was pursued
by petitioner.

Further, while the request for reinvestigation was made on March 14, 1997, the
same was only acted upon by petitioner on January 22, 2001, also beyond the three
(3) year statute of limitations reckoned from January 9, 1996, notwithstanding the
lack of impediment to rule upon such issue.

We cannot countenance such inaction by petitioner to the prejudice of respondent

pursuant to our ruling in Commissioner of Internal Revenue v. Philippine Global
Communication, Inc., 60 to wit:

The assessment, in this case, was presumably issued on 14 April 1994 since the
respondent did not dispute the CIR's claim. Therefore, the BIR had until 13 April
1997. However, as there was no Warrant of Distraint and/or Levy served on the
respondents nor any judicial proceedings initiated by the BIR, the earliest attempt of
the BIR to collect the tax due based on this assessment was when it filed its Answer
in CTA Case No. 6568 on 9 January 2003, which was several years beyond the three-
year prescriptive period. Thus, the CIR is now prescribed from collecting the
assessed tax.

Here, petitioner had ample time to make a factually and legally well-founded
assessment and implement collection pursuant thereto. Whatever examination that
petitioner may have conducted cannot possibly outlast the entire three (3)-year
prescriptive period provided by law to collect the assessed tax. Thus, there is no
reason to suspend the running of the statute of limitations in this case.

Moreover, in Bank of the Philippine Islands, citing earlier jurisprudence, we held that
the request for reinvestigation should be granted or at least acted upon in due
course before the suspension of the statute of limitations may set in, thus:

In BPI v. Commissioner of Internal Revenue, the Court emphasized the rule that the
CIR must first grant the request for reinvestigation as a requirement for the
suspension of the statute of limitations. The Court said:

In the case of Republic of the Philippines v. Gancayco, taxpayer Gancayco requested

for a thorough reinvestigation of the assessment against him and placed at the
disposal of the Collector of Internal Revenue all the evidences he had for such
purpose; yet, the Collector ignored the request, and the records and documents
were not at all examined. Considering the given facts, this Court pronounced that

. . . The act of requesting a reinvestigation alone does not suspend the period. The
request should first be granted, in order to effect suspension. (Collector v. Suyoc
Consolidated, supra; also Republic v. Ablaza, supra). Moreover, the Collector gave
appellee until April 1, 1949, within which to submit his evidence, which the latter did
one day before. There were no impediments on the part of the Collector to file the
collection case from April 1, 1949. . .

In Republic of the Philippines v. Acebedo, this Court similarly found that

. . . [T]he defendant, after receiving the assessment notice of September 24, 1949,
asked for a reinvestigation thereof on October 11, 1949 (Exh. "A"). There is no
evidence that this request was considered or acted upon. In fact, on October 23,
1950 the then Collector of Internal Revenue issued a warrant of distraint and levy
for the full amount of the assessment (Exh. "D"), but there was follow-up of this
warrant. Consequently, the request for reinvestigation did not suspend the running
of the period for filing an action for collection. [Emphasis in the original]

With respect to petitioner's argument that respondent's act of elevating its protest
to the CTA has fortified the continuing interruption of petitioner's prescriptive period
to collect under Section 223 of the Tax Code, the same is flawed at best because
respondent was merely exercising its right to resort to the proper Court, and does
not in any way deter petitioner's right to collect taxes from respondent under
existing laws.

On the strength of the foregoing observations, we ought to reiterate our earlier

teachings that "in balancing the scales between the power of the State to tax and
its inherent right to prosecute perceived transgressors of the law on one side, and
the constitutional rights of a citizen to due process of law and the equal protection
of the laws on the other, the scales must tilt in favor of the individual, for a citizen's
right is amply protected by the Bill of Rights under the Constitution." Thus, while
"taxes are the lifeblood of the government," the power to tax has its limits, in spite
of all its plenitude. Even as we concede the inevitability and indispensability of
taxation, it is a requirement in all democratic regimes that it be exercised
reasonably and in accordance with the prescribed procedure.

After all, the statute of limitations on the collection of taxes was also enacted to
benefit and protect the taxpayers, as elucidated in the case of Philippine Global
Communication, Inc., thus:

. . . The report submitted by the tax commission clearly states that these provisions
on prescription should be enacted to benefit and protect taxpayers:

Under the former law, the right of the Government to collect the tax does not
prescribe. However, in fairness to the taxpayer, the Government should be
estopped from collecting the tax where it failed to make the necessary investigation
and assessment within 5 years after the filing of the return and where it failed to
Just as the
collect the tax within 5 years from the date of assessment thereof.
government is interested in the stability of its collections,
so also are the taxpayers entitled to an assurance that
they will not be subjected to further investigation for tax
purposes after the expiration of a reasonable period of
time. (Vol. II, Report of the Tax Commission of the
Philippines, pp. 321-322).

4.) COMMISSIONER OF CUSTOMS vs. OILINK

INTERNATIONAL CORPORATION (G.R. No. 161759. July 2,
2014)

The CTA had jurisdiction over the controversy

There is no question that the CTA had the jurisdiction over the case. Republic Act
No. 1125, the law creating the CTA, defined the appellate jurisdiction of the CTA as
follows:

Section 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive

appellate jurisdiction to review by appeal, as herein provided:

xxx xxx xxx

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, forfeitures or other penalties imposed in relation thereto; or
other matters arising under the Customs Law or other law or part of law
administered by the Bureau of Customs;

xxx xxx xxx

Nonetheless, the Commissioner of Customs contends that the CTA should not take
cognizance of the case because of the lapse of the 30-day period within which to
appeal, arguing that on November 25, 1998 URC had already received the BoC's
final assessment demanding payment of the amount due within 10 days, but filed
the petition only on July 30, 1999.

We rule against the Commissioner of Customs. The CTA correctly ruled that the
reckoning date for Oilink's appeal was July 12, 1999, not July 2, 1999, because it
was on the former date that the Commissioner of Customs denied the protest of
Oilink. Clearly, the filing of the petition on July 30, 1999 by Oilink was well within its
reglementary period to appeal. The insistence by the Commissioner of Customs on
reckoning the reglementary period to appeal from November 25, 1998, the date
when URC received the final demand letter, is unwarranted. We note that the
November 25, 1998 final demand letter of the BoC was addressed to URC, not to
Oilink. As such, the final demand sent to URC did not bind Oilink unless the separate
identities of the corporations were disregarded in order to consider them as one.

2.

Oilink had a valid cause of action

The Commissioner of Customs posits that the final demand letter dated July 2, 1999
from which Oilink appealed was not the final "action" or "ruling" from which an
appeal could be taken as contemplated by Section 2402 of the Tariff and Customs
Code; that what Section 7 of RA No. 1125 referred to as a decision that was
appealable to the CTA was a judgment or order of the Commissioner of Customs
that was final in nature, not merely an interlocutory one; that Oilink did not exhaust
its administrative remedies under Section 2308 of the Tariff and Customs Code by
paying the assessment under protest; that only when the ensuing decision of the
Collector and then the adverse decision of the Commissioner of Customs would it be
proper for Oilink to seek judicial relief from the CTA; and that, accordingly, the CTA
should have dismissed the petition for lack of cause of action.

The position of the Commissioner of Customs lacks merit.

The CA correctly held that the principle of non-exhaustion of

administrative remedies was not an iron-clad rule because there
were instances in which the immediate resort to judicial action
was proper. This was one such exceptional instance when the
principle did not apply. As the records indicate, the Commissioner
of Customs already decided to deny the protest by Oilink on July
12, 1999, and stressed then that the demand to pay was final. In
that instance, the exhaustion of administrative remedies would
have been an exercise in futility because it was already the
Commissioner of Customs demanding the payment of the
deficiency taxes and duties.
3.

There was no ground to pierce

the veil of corporate existence

A corporation, upon coming into existence, is invested by law with a personality

separate and distinct from those of the persons composing it as well as from any
other legal entity to which it may be related. For this reason, a stockholder is
generally not made to answer for the acts or liabilities of the corporation, and vice
versa. The separate and distinct personality of the corporation is, however, a mere
fiction established by law for convenience and to promote the ends of justice. It may
not be used or invoked for ends that subvert the policy and purpose behind its
establishment, or intended by law to which the corporation owes its being. This is
true particularly when the fiction is used to defeat public convenience, to justify
wrong, to protect fraud, to defend crime, to confuse legitimate legal or judicial
issues, to perpetrate deception or otherwise to circumvent the law. This is likewise
true where the corporate entity is being used as an alter ego, adjunct, or business
conduit for the sole benefit of the stockholders or of another corporate entity. In
such instances, the veil of corporate entity will be pierced or disregarded with
reference to the particular transaction involved.

In Philippine National Bank v. Ritratto Group, Inc., the Court has outlined the
following circumstances that are useful in the determination of whether a subsidiary
is a mere instrumentality of the parent-corporation, viz.:

1. Control, not mere majority or complete control, complete

but
domination, not only of finances but of policy and business
practice in respect to the transaction attacked so that the corporate entity as to
this transaction had at the time no separate mind, will or existence of its own;

2. Such control must have been used by the defendant to commit fraud or
wrong, to perpetrate the violation of a statutory or other positive legal duty, or
dishonest and, unjust act in contravention of plaintiff's legal rights; and

3. The aforesaid control and breach of duty must proximately cause the injury or
unjust loss complained of.

In applying the "instrumentality" or "alter ego" doctrine, the courts are

concerned with reality, not form, and with how the corporation operated and the
individual defendant's relationship to the operation. Consequently, the absence of
any one of the foregoing elements disauthorizes the piercing of the corporate veil.

Indeed, the doctrine of piercing the corporate veil has no application

here because the Commissioner of Customs did not establish that
Oilink had been set up to avoid the payment of taxes or duties, or
for purposes that would defeat public convenience, justify wrong,
protect fraud, defend crime, confuse legitimate legal or judicial
issues, perpetrate deception or otherwise circumvent the law. It is
also noteworthy that from the outset the Commissioner of Customs sought to collect
the deficiency taxes and duties from URC, and that it was only on July 2, 1999 when
the Commissioner of Customs sent the demand letter to both URC and Oilink. That
was revealing, because the failure of the Commissioner of Customs to pursue the
remedies against Oilink from the outset manifested that its belated pursuit of Oilink
was only an afterthought.

5.) MARIA CAROLINA P. ARAULLO, CHAIRPERSON,

BAGONG ALYANSANG MAKABAYAN; JUDY M.
TAGUIWALO, PROFESSOR, UNIVERSITY OF THE
PHILIPPINES DILIMAN, CO-CHAIRPERSON,
PAGBABAGO; HENRI KAHN, CONCERNED CITIZENS
MOVEMENT; REP. LUZ ILAGAN, GABRIELA WOMEN'S
PARTY REPRESENTATIVE; REP. CARLOS ISAGANI
ZARATE, BAYAN MUNA PARTY-LIST REPRESENTATIVE;
RENATO M. REYES, JR., SECRETARY GENERAL OF
BAYAN; MANUEL K. DAYRIT, CHAIRMAN, ANG
KAPATIRAN PARTY; VENCER MARI E. CRISOSTOMO,
CHAIRPERSON, ANAKBAYAN; VICTOR VILLANUEVA,
CONVENOR, YOUTH ACT NOW, petitioners, vs.
BENIGNO SIMEON C. AQUINO III, PRESIDENT OF THE
REPUBLIC OF THE PHILIPPINES; PAQUITO N. OCHOA,
JR., EXECUTIVE SECRETARY; AND FLORENCIO B. ABAD,
SECRETARY OF THE DEPARTMENT OF BUDGET AND
MANAGEMENT [G.R. No. 209287. July 1, 2014.]

AUGUSTO L. SYJUCO JR., Ph.D. vs. FLORENCIO B. ABAD, IN HIS CAPACITY AS THE
SECRETARY OF DEPARTMENT OF BUDGET AND MANAGEMENT; AND HON. FRANKLIN
MAGTUNAO DRILON, IN HIS CAPACITY AS THE SENATE PRESIDENT OF THE
PHILIPPINES [G.R. No. 209135. July 1, 2014.]
MANUELITO R. LUNA vs. SECRETARY FLORENCIO ABAD, IN HIS OFFICIAL CAPACITY AS
HEAD OF THE DEPARTMENT OF BUDGET AND MANAGEMENT; AND EXECUTIVE
SECRETARY PAQUITO OCHOA, IN HIS OFFICIAL CAPACITY AS ALTER EGO OF THE
PRESIDENT [G.R. No. 209136. July 1, 2014.]

ATTY. JOSE MALVAR VILLEGAS, JR. vs. THE HONORABLE EXECUTIVE SECRETARY
PAQUITO N. OCHOA, JR.; AND THE SECRETARY OF BUDGET AND MANAGEMENT
FLORENCIO B. ABAD [G.R. No. 209155. July 1, 2014.]

PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA), REPRESENTED BY DEAN

FROILAN M. BACUNGAN, BENJAMIN E. DIOKNO AND LEONOR M. BRIONES vs.
DEPARTMENT OF BUDGET AND MANAGEMENT AND/OR HON. FLORENCIO B. ABAD
[G.R. No. 209164. July 1, 2014.]

INTEGRATED BAR OF THE PHILIPPINES (IBP) vs. SECRETARY FLORENCIO B. ABAD OF

THE DEPARTMENT OF BUDGET AND MANAGEMENT (DBM) [G.R. No. 209260. July
1, 2014.]

GRECO ANTONIOUS BEDA B. BELGICA; BISHOP REUBEN M. ABANTE AND REV. JOSE
L. GONZALEZ vs. PRESIDENT BENIGNO SIMEON C. AQUINO III, THE SENATE OF THE
PHILIPPINES, REPRESENTED BY SENATE PRESIDENT FRANKLIN M. DRILON; THE
HOUSE OF REPRESENTATIVES, REPRESENTED BY SPEAKER FELICIANO BELMONTE,
JR.; THE EXECUTIVE OFFICE, REPRESENTED BY EXECUTIVE SECRETARY PAQUITO N.
OCHOA, JR.; THE DEPARTMENT OF BUDGET AND MANAGEMENT, REPRESENTED BY
SECRETARY FLORENCIO ABAD; THE DEPARTMENT OF FINANCE, REPRESENTED BY
SECRETARY CESAR V. PURISIMA; AND THE BUREAU OF TREASURY, REPRESENTED BY
ROSALIA V. DE LEON [G.R. No. 209442. July 1, 2014.]

CONFEDERATION FOR UNITY, RECOGNITION AND ADVANCEMENT OF GOVERNMENT

EMPLOYEES (COURAGE), REPRESENTED BY ITS 1ST VICE PRESIDENT, SANTIAGO
DASMARINAS, JR.; ROSALINDA NARTATES, FOR HERSELF AND AS NATIONAL
PRESIDENT OF THE CONSOLIDATED UNION OF EMPLOYEES NATIONAL HOUSING
AUTHORITY (CUE-NHA); MANUEL BACLAGON, FOR HIMSELF AND AS PRESIDENT OF
THE SOCIAL WELFARE EMPLOYEES ASSOCIATION OF THE PHILIPPINES, DEPARTMENT
OF SOCIAL WELFARE AND DEVELOPMENT CENTRAL OFFICE (SWEAP-DSWD CO);
ANTONIA PASCUAL, FOR HERSELF AND AS NATIONAL PRESIDENT OF THE
DEPARTMENT OF AGRARIAN REFORM EMPLOYEES ASSOCIATION (DAREA); ALBERT
MAGALANG, FOR HIMSELF AND AS PRESIDENT OF THE ENVIRONMENT AND
MANAGEMENT BUREAU EMPLOYEES UNION (EMBEU); AND MARCIAL ARABA, FOR
HIMSELF AND AS PRESIDENT OF THE KAPISANAN PARA SA KAGALINGAN NG MGA
KAWANI NG MMDA (KKK-MMDA) vs. BENIGNO SIMEON C. AQUINO III, PRESIDENT OF
THE REPUBLIC OF THE PHILIPPINES; PAQUITO OCHOA, JR., EXECUTIVE SECRETARY;
AND HON. FLORENCIO B. ABAD, SECRETARY OF THE DEPARTMENT OF BUDGET AND
MANAGEMENT [G.R. No. 209517. July 1, 2014.]

VOLUNTEERS AGAINST CRIME AND CORRUPTION (VACC), REPRESENTED BY DANTE

L. JIMENEZ vs. PAQUITO N. OCHOA, EXECUTIVE SECRETARY, AND FLORENCIO B.
ABAD, SECRETARY OF THE DEPARTMENT OF BUDGET AND MANAGEMENT [G.R. No.
209569. July 1, 2014.]

Did the petitioners have the legal standing to sue?

Legal standing, as a requisite for the exercise of judicial review, refers to "a right of
appearance in a court of justice on a given question." The concept of legal standing,
or locus standi, was particularly discussed in De Castro v. Judicial and Bar Council,
where the Court said:

In public or constitutional litigations, the Court is often burdened with the

determination of the locus standi of the petitioners due to the ever-present need to
regulate the invocation of the intervention of the Court to correct any official action
or policy in order to avoid obstructing the efficient functioning of public officials and
offices involved in public service. It is required, therefore, that the petitioner must
have a personal stake in the outcome of the controversy, for, as indicated in Agan,
Jr. v. Philippine International Air Terminals Co., Inc.:

The question on legal standing is whether such parties have "alleged such a
personal stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the court so
largely depends for illumination of difficult constitutional questions." Accordingly, it
has been held that the interest of a person assailing the constitutionality of a
statute must be direct and personal. He must be able to show, not only that the law
or any government act is invalid, but also that he sustained or is in imminent
danger of sustaining some direct injury as a result of its enforcement, and not
merely that he suffers thereby in some indefinite way. It must appear that the
person complaining has been or is about to be denied some right or privilege to
which he is lawfully entitled or that he is about to be subjected to some burdens or
penalties by reason of the statute or act complained of.
It is true that as early as in 1937, in People v. Vera, the Court adopted the direct
injury test for determining whether a petitioner in a public action had locus
standi. There, the Court held that the person who would assail the validity of a
statute must have "a personal and substantial interest in the case such that he has
sustained, or will sustain direct injury as a result." Vera was followed in Custodio v.
President of the Senate, Manila Race Horse Trainers' Association v. De la Fuente,
Anti-Chinese League of the Philippines v. Felix, and Pascual v. Secretary of Public
Works.

Yet, the Court has also held that the requirement of locus standi, being a mere
procedural technicality, can be waived by the Court in the exercise of its discretion.
For instance, in 1949, in Araneta v. Dinglasan, the Court liberalized the approach
when the cases had "transcendental importance." Some notable controversies
whose petitioners did not pass the direct injury test were allowed to be treated in
the same way as in Araneta v. Dinglasan.

In the 1975 decision in Aquino v. Commission on Elections, this Court decided to

resolve the issues raised by the petition due to their "far-reaching implications,"
even if the petitioner had no personality to file the suit. The liberal approach of
Aquino v. Commission on Elections has been adopted in several notable cases,
permitting ordinary citizens, legislators, and civic organizations to bring their suits
involving the constitutionality or validity of laws, regulations, and rulings.

However, the assertion of a public right as a predicate for challenging a supposedly

illegal or unconstitutional executive or legislative action rests on the theory that the
petitioner represents the public in general. Although such petitioner may not be as
adversely affected by the action complained against as are others, it is enough that
he sufficiently demonstrates in his petition that he is entitled to protection or relief
from the Court in the vindication of a public right.

Quite often, as here, the petitioner in a public action sues as a citizen or taxpayer to
gain locus standi. That is not surprising, for even if the issue may appear to concern
only the public in general, such capacities nonetheless equip the petitioner with
adequate interest to sue. In David v. Macapagal-Arroyo, the Court aptly explains
why:

Case law in most jurisdictions now allows both "citizen" and "taxpayer" standing in
distinction was first laid down in Beauchamp
public actions. The
v. Silk, where it was held that the plaintiff in a taxpayer's
suit is in a different category from the plaintiff in a
citizen's suit. In the former, the plaintiff is affected by the
expenditure of public funds, while in the latter, he is but
the mere instrument of the public concern. As held by the
New York Supreme Court in People ex rel Case v. Collins: "In
matter of mere public right, however . . . the people are the real parties . . . It is at
least the right, if not the duty, of every citizen to interfere and see that a public
offence be properly pursued and punished, and that a public grievance be
remedied." With respect to taxpayer's suits, Terr v. Jordan held that "the right of a
citizen and a taxpayer to maintain an action in courts to restrain the unlawful use of
public funds to his injury cannot be denied."

The Court has cogently observed in Agan, Jr. v. Philippine International Air Terminals
Co., Inc. that "[s]tanding is a peculiar concept in constitutional law because in some
cases, suits are not brought by parties who have been personally injured by the
operation of a law or any other government act but by concerned citizens,
taxpayers or voters who actually sue in the public interest."

Except for PHILCONSA, a petitioner in G.R. No. 209164, the petitioners have invoked
their capacities as taxpayers who, by averring that the issuance and
implementation of the DAP and its relevant issuances involved the illegal
disbursements of public funds, have an interest in preventing the further dissipation
of public funds. The petitioners in G.R. No. 209287 (Araullo) and G.R. No. 209442
(Belgica) also assert their right as citizens to sue for the enforcement and
observance of the constitutional limitations on the political branches of the
Government. On its part, PHILCONSA simply reminds that the Court has long
recognized its legal standing to bring cases upon constitutional issues. Luna, the
petitioner in G.R. No. 209136, cites his additional capacity as a lawyer. The IBP, the
petitioner in G.R. No. 209260, stands by "its avowed duty to work for the rule of law
and of paramount importance of the question in this action, not to mention its civic
duty as the official association of all lawyers in this country."

Under their respective circumstances, each of the petitioners has established

sufficient interest in the outcome of the controversy as to confer locus standi on
each of them.

In addition, considering that the issues center on the extent of the power of the
Chief Executive to disburse and allocate public funds, whether appropriated by
Congress or not, these cases pose issues that are of transcendental importance to
the entire Nation, the petitioners included. As such, the determination of such
important issues call for the Court's exercise of its broad and wise discretion "to
waive the requirement and so remove the impediment to its addressing and
resolving the serious constitutional questions raised."
 6.) SAN ROQUE POWER CORPORATION vs.
COMMISSIONER OF INTERNAL REVENUE (G.R.
No. 205543. June 30, 2014)

Before the Court is a Petition for Review on Certiorari under Rule 16, Section
1 of A.M. No. 05-11-07-CTA, otherwise known as the Revised Rules of the
Court of Tax Appeals, in relation to Rule 45 of the Rules of Court,

There is no merit in the instant Petition.

At the crux of the controversy are the prescriptive periods for the filing of
administrative and judicial claims for refund or tax credit of creditable input
taxes under Section 112 of the NIRC of 1997, as amended, which provide:

SEC. 112. Refunds or Tax Credits of Input Tax.

(A) Zero-Rated or Effectively Zero-Rated Sales. Any VAT-registered

person, whose sales are zero-rated or effectively zero-rated may, within two
(2) 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, except transitional input tax, to
the extent that such input tax has not been applied against output tax: . . .

xxx xxx xxx

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made.
In proper cases, the Commissioner shall grant a refund or issue the tax
credit certificate for creditable input taxes within one hundred twenty (120)
days from the date of submission of complete documents in support of the
application filed in accordance with Subsection (A) hereof.

In case of full or partial 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, the taxpayer affected may, within thirty (30) days
from the receipt of the decision denying the claim or after the expiration of
the one hundred twenty day-period, appeal the decision or the unacted claim
with the Court of Tax Appeals. (Emphases supplied.)

Contrary to the assertion of San Roque, it was only in Aichi that the issue of
the prescriptive periods under Section 112 of the NIRC of 1997, as amended,
was first squarely raised before and addressed by the Court. The Court
significantly ruled in Aichi that: (a) Section 112 of the NIRC of 1997, as
amended, particularly governs claims for refund or tax credit of creditable
input taxes, which is distinct from Sections 204 (C) and 229 of the same
statute which concern erroneously or illegally collected taxes; (b) The two-
year prescriptive period under Section 112 (A) of the NIRC of 1997, as
amended, pertains only to administrative claims for refund or tax credit of
creditable input taxes, and not to judicial claims for the same; (c) Following
Commissioner of Internal Revenue v. Mirant Pagbilao Corporation, the two-
year prescriptive period under Section 112 (A) of the NIRC of 1997, as
amended, is reckoned from the close of the taxable quarter when the sales
were made; (d) In determining the end of the two-year prescriptive period
under Section 112 (A) of the NIRC of 1997, as amended, the Administrative
Code of 1987 prevails over the Civil Code, so that a year is composed of 12
calendar months; and (e) The 120-day period, under what is presently
Section 112 (C) of the NIRC of 1997, as amended, is crucial in filing an appeal
with the CTA, for whether the CIR issues a decision on the administrative
claim before the lapse of the 120-day period or the CIR made no decision on
the administrative claim after the 120-day period, the taxpayer has 30 days
within which to file an appeal with the CTA.

The Court en banc had the opportunity to further expound on the

prescriptive periods under Section 112 of the NIRC of 1997, as amended, in
its Decision in the consolidated cases of Commissioner of Internal Revenue v.
San Roque Power Corporation, Taganito Mining Corporation v. Commissioner
of Internal Revenue, and Philex Mining Corporation v. Commissioner of
Internal Revenue, promulgated in 2013 [San Roque (2013)].

According to the Court in San Roque (2013), the prescriptive periods under
Section 112 of the NIRC of 1997, as amended, shall be interpreted as follows:

Section 112(A) and (C) must be interpreted according to its clear,

plain, and unequivocal language. The taxpayer can file his
administrative claim for refund or credit at anytime within the
two-year prescriptive period. If he files his claim on the last day of
the two-year prescriptive period, his claim is still filed on time.
The Commissioner will have 120 days from such filing to decide
the claim. If the Commissioner decides the claim on the 120th
day, or does not decide it on that day, the taxpayer still has 30
days to file his judicial claim with the CTA. This is not only the
plain meaning but also the only logical interpretation of Section
112(A) and (C).
The Court emphasized in San Roque (2013) that a claim for refund or tax
credit, like a claim for tax exemption, is construed strictly against the
taxpayer. It cited Aichi and pointed out that one of the conditions for a
judicial claim for refund or tax credit under the VAT system is compliance
with the 120+30 day mandatory and jurisdictional periods under Section
112(C) of the NIRC of 1997, as amended.

Guided by the aforementioned law and jurisprudence, the Court now

determines whether or not San Roque complied in the instant case with the
prescriptive periods under Section 112 of the NIRC of 1997, as amended.

As the following tables will show, San Roque filed its administrative claims for
refund or tax credit of its creditable input taxes for the four quarters of 2006
within the two-year prescriptive period under Section 112(A) of the NIRC of
1997, as amended, whether reckoned from the close of the taxable quarter
when the relevant zero-rated or effectively zero-rated sales were made, in
accordance with Mirant and Aichi; or from the date of filing of the quarterly
VAT return and payment of the tax due 20 days after the close of the taxable
quarter, following Atlas Consolidated Mining and Development Corporation v.
Commissioner of Internal Revenue:

According to Mirant and Aichi

Tax Period Close of Quarter End of the Two-Year Date of Filing of

2006 When Relevant Sales Prescriptive Period Administrative

were Made Claim

First Quarter March 31, 2006 March 31, 2008 April 11, 2007

Second Quarter June 30, 2006 June 30, 2008 July 10, 2007

Third Quarter September 30, 2006 September 30, 2008 August 31,
2007

Fourth Quarter December 31, 2006 December 31, 2008 August 31,
2007

According to Atlas
 Tax Period Filing of Returns and End of the Two-Year Date of
Filing of

2006 Payment of Taxes 20 Prescriptive Period Administrative

Days after the Close Claim

of Taxable Quarter

First Quarter April 20, 2006 April 20, 2008 April 11, 2007

Second Quarter July 20, 2006 July 20, 2008 July 10, 2007

Third Quarter October 20, 2006 October 20, 2008 August 31, 2007

Fourth Quarter January 21, 2006 19 January 21, 2009 August 31, 2007

San Roque, however, failed to comply with the 120+30 day periods for the
filing of its judicial claims, as can be gleaned from the table below:

Tax Date of End of 120- End of 30-day Date of Actual No. of

Days:

Period Filing of Day Period for Period to File Filing of

End of 120-day

2006 Administrative CIR to Decide Appeal with Judicial Claim

Period to Filing

Claim CTA of Judicial

Claim

First April 11, 2007 August 9, 2007 September 8, March 28, 2008
232 days

Quarter 2007 20

Second July 10, 2007 November 7, December 7, June 27,

2008 233 days

Quarter 2007 2007

Third August 31, 2007 December 29, January 28, March 28, 2008 90
days

Quarter 2007 2008

Fourth August 31, 2007 December 29, January 28, March 28, 2008
90 days

Quarter 2007 2008

Because San Roque filed C.T.A. Case Nos. 7744 and 7802 beyond the 30-
day mandatory period under Section 112(C) of the NIRC of 1997, as
amended, the CTA First Division did not acquire jurisdiction over said cases
and correctly dismissed the same.

San Roque in the present case is in exactly the same position as Philex
Mining Corporation (Philex) in San Roque (2013). Hence, the ruling of the
Court on the judicial claim of Philex in San Roque (2013) is worth reproducing
hereunder:

Philex timely filed its administrative claim on 20 March 2006, within the two-
year prescriptive period. Even if the two-year prescriptive period is computed
from the date of payment of the output VAT under Section 229, Philex still
filed its administrative claim on time. Thus, the Atlas doctrine is immaterial in
this case. The Commissioner had until 17 July 2006, the last day of the 120-
day period, to decide Philex's claim. Since the Commissioner did not act on
Philex's claim on or before 17 July 2006, Philex had until 17 August 2006, the
last day of the 30-day period, to file its judicial claim. The CTA EB held that
17 August 2006 was indeed the last day for Philex to file its judicial claim.
However, Philex filed its Petition for Review with the CTA only on 17 October
2007, or four hundred twenty-six (426) days after the last day of filing. In
short, Philex was late by one year and 61 days in filing its judicial claim. As
the CTA EB correctly found:

Evidently, the Petition for Review in C.T.A. Case No. 7687 was filed 426 days
late. Thus, the Petition for Review in C.T.A. Case No. 7687 should have been
dismissed on the ground that the Petition for Review was filed way beyond
the 30-day prescribed period; thus, no jurisdiction was acquired by the CTA
Division; . . . .

Unlike San Roque and Taganito, Philex's case is not one of premature
filing but of late filing. Philex did not file any petition with the CTA
within the 120-day period. Philex did not also file any petition with the CTA
within 30 days after the expiration of the 120-day period. Philex filed its
judicial claim long after the expiration of the 120-day period, in fact 426 days
after the lapse of the 120-day period. In any event, whether governed by
jurisprudence before, during, or after the Atlas case, Philex's judicial claim
will have to be rejected because of late filing. Whether the two-year
prescriptive period is counted from the date of payment of the output VAT
following the Atlas doctrine, or from the close of the taxable quarter when
the sales attributable to the input VAT were made following the Mirant and
Aichi doctrines, Philex's judicial claim was indisputably filed late.

The Atlas doctrine cannot save Philex from the late filing of its judicial claim.
The inaction of the Commissioner on Philex's claim during the 120-day period
is, by express provision of law, "deemed a denial" of Philex's claim. Philex
had 30 days from the expiration of the 120-day period to file its judicial claim
with the CTA. Philex's failure to do so rendered the "deemed a
denial" decision of the Commissioner final and
inappealable. The right to appeal to the CTA from a decision or
"deemed a denial" decision of the Commissioner is merely a
statutory privilege, not a constitutional right. The exercise of such
statutory privilege requires strict compliance with the conditions
attached by the statute for its exercise. Philex failed to comply with the
statutory conditions and must thus bear the consequences. (Citations
omitted.)

Both the CTA First Division and CTA en banc went a step further and also
computed the 120+30 day periods from the date of filing by San Roque of its
amended administrative claims on March 10, 2008 for the first and second
quarters of 2006, and on September 21, 2007 for the third and fourth
quarters of 2006. According to the CTA First Division and CTA en banc, if the
120-day period was reckoned from the dates of filing of the amended
administrative claims, the judicial claims for the first and second quarters
were premature, while the judicial claims for the third and fourth quarters
were late.

For the Court, there is no more point in considering the amended

administrative claims for the first and second quarters of 2006. The amended
administrative claims were filed on March 10, 2008 after the 120+30 day
periods for filing the judicial claims, counting from the date of filing of the
original administrative claims for the first and second quarters of 2006, had
already expired on September 8, 2007 and December 7, 2007, respectively.
Taking cognizance of the amended administrative claims in such a situation
would result in the revival of judicial claims that had already prescribed.

Meanwhile, San Roque filed its amended administrative claims for the third
and fourth quarters of 2006 on September 21, 2007, before the end of the
120-day period for the CIR to decide on the original administrative claims for
the same taxable quarters. Nonetheless, even if the Court counts the
120+30 day periods from the date of filing of said amended administrative
claims, the judicial claims of San Roque would still be belatedly filed:

Tax Date of End of 120- End of 30-day Date of Actual No. of

Days:

Period Filing of Day Period for Period to File Filing of

End of 120-day

2006 Amended CIR to Decide Appeal with Judicial Claim

Period to Filing

Administrative CTA of Judicial

Claim Claim

Third September 21, January 19, February 18, March 28, 2008 69
days

Quarter 2007 2008 2008

Fourth September 21, January 19, February 18, March 28, 2008
69 days

Quarter 2007 2008 2008

Unable to contest the belated filing of its judicial claims, San Roque argues
against the supposedly retroactive application of Aichi and the strict
observance of the 120+30 day periods.

As the CTA en banc held, Aichi was not applied retroactively to San Roque in
the instant case. The 120+30 day periods have already been prescribed
under Section 112(C) of the NIRC of 1997, as amended, when San Roque
filed its administrative and judicial claims for refund or tax credit of its
creditable input taxes for the four quarters of 2006. The Court highlights the
pronouncement in San Roque (2013) that strict compliance with the 120+30
day periods is necessary for the judicial claim to prosper, except for the
period from the issuance of BIR Ruling No. DA-489-03 on December 10, 2003
to October 6, 2010 when Aichi was promulgated, which again reinstated the
120+30 day periods as mandatory and jurisdictional.
It is still necessary for the Court to explain herein how BIR Ruling No. DA-489-
03 is an exception to the strict observance of the 120+30 day periods for
judicial claims. BIR Ruling No. DA-489-03 affected only the 120-day period as
the BIR held therein that "a taxpayer-claimant need not wait for the lapse of
the 120-day period before it could seek judicial relief with the CTA by way of
Petition for Review. Neither is it required that the Commissioner should first
act on the claim of a particular taxpayer before the CTA may acquire
jurisdiction, particularly if the claim is about to prescribe." Consequently, BIR
Ruling No. DA-489-03 may only be invoked by taxpayers who relied on the
same and prematurely filed their judicial claims before the expiration of the
120-day period for the CIR to act on their administrative claims, provided
that the taxpayers filed such judicial claims from December 10, 2003 to
October 6, 2010. BIR Ruling No. DA-489-03 did not touch upon the 30-day
prescriptive period for filing an appeal with the CTA and cannot be cited by
taxpayers, such as San Roque, who belatedly filed their judicial claims more
than 30 days after receipt of the adverse decision of the CIR on their
administrative claims or the lapse of 120 days without the CIR acting on their
administrative claims. Pertaining to the similarly situated Philex, the Court
ruled in San Roque (2013) that:

Philex's situation is not a case of premature filing of its judicial claim but of
late filing, indeed very late filing. BIR Ruling No. DA-489-03 allowed
premature filing of a judicial claim, which means non-exhaustion of the 120-
day period for the Commissioner to act on an administrative claim. Philex
cannot claim the benefit of BIR Ruling No. DA-489-03 because Philex did not
file its judicial claim prematurely but filed it long after the lapse of the 30-day
period following the expiration of the 120-day period. In fact, Philex filed its
judicial claim 426 days after the lapse of the 30-day period.

San Roque harps that the Court itself categorically declared in the following
paragraph in San Roque (2013) that Aichi shall be applied prospectively:

Taxpayers should not be prejudiced by an erroneous interpretation by the

Commissioner, particularly on a difficult question of law. The abandonment of
the Atlas doctrine by Mirant and Aichi is proof that the reckoning of the
prescriptive periods for input VAT tax refund or credit is a difficult question of
law. The abandonment of the Atlas doctrine did not result in Atlas, or other
taxpayers similarly situated, being made to return the tax refund or credit
they received or could have received under Atlas prior to its abandonment.
This Court is applying Mirant and Aichi prospectively. Absent fraud, bad faith
or misrepresentation, the reversal by this Court of a general interpretative
rule issued by the Commissioner, like the reversal of a specific BIR ruling
under Section 246, should also apply prospectively. . . . . (Emphases
included.)

The Court is not persuaded. The aforequoted paragraph should be

understood in the context of the entire San Roque (2013). The statement of
the Court on applying Mirant and Aichi prospectively should be understood
relative to, and never apart from, Atlas and BIR Ruling No. DA-489-03.

The Court explained in San Roque (2013), under the heading "Effectivity and
Scope of the Atlas, Mirant and Aichi Doctrines", that:

The Atlas doctrine, which held that claims for refund or credit of input VAT
must comply with the two-year prescriptive period under Section 229, should
be effective only from its promulgation on 8 June 2007 until its abandonment
on 12 September 2008 in Mirant. The Atlas doctrine was limited to the
reckoning of the two-year prescriptive period from the date of payment of
the output VAT. Prior to the Atlas doctrine, the two-year prescriptive period
for claiming refund or credit of input VAT should be governed by Section
112(A) following the verba legis rule. The Mirant ruling, which abandoned the
Atlas doctrine, adopted the verba legis rule, thus applying Section 112(A) in
computing the two-year prescriptive period in claiming refund or credit of
input VAT.

The Atlas doctrine has no relevance to the 120+30 day periods under
Section 112(C) because the application of the 120+30 day periods was not in
issue in Atlas. The application of the 120+30 day periods was first raised in
Aichi, which adopted the verba legis rule in holding that the 120+30 day
periods are mandatory and jurisdictional. . . . .

xxx xxx xxx

To repeat, a claim for tax refund or credit, like a claim for

tax exemption, is construed strictly against the taxpayer.
One of the conditions for a judicial claim of refund or
credit under the VAT System is compliance with the
120+30 day mandatory and jurisdictional periods. Thus,
strict compliance with the 120+30 day periods is
necessary for such a claim to prosper, whether before,
during, or after the effectivity of the Atlas doctrine,
except for the period from the issuance of BIR Ruling No.
DA-489-03 on 10 December 2003 to 6 October 2010 when
the Aichi doctrine was adopted, which again reinstated
the 120+30 day periods as mandatory and jurisdictional.
(Emphases supplied.)

As for BIR Ruling No. DA-489-03, the Court clarified its period of effectivity,
thus:

There is no dispute that the 120-day period is mandatory and

jurisdictional, and that the CTA does not acquire jurisdiction over a
judicial claim that is filed before the expiration of the 120-day
period. There are, however, two exceptions to this rule. The first
exception is if the Commissioner, through a specific ruling, misleads
a particular taxpayer to prematurely file a judicial claim with the
CTA. Such specific ruling is applicable only to such particular
taxpayer. The second exception is where the Commissioner, through
a general interpretative rule issued under Section 4 of the Tax Code,
misleads all taxpayers into filing prematurely judicial claims with
the CTA. In these cases, the Commissioner cannot be allowed to later on
question the CTA's assumption of jurisdiction over such claim since equitable
estoppel has set in as expressly authorized under Section 246 of the Tax
Code.

xxx xxx xxx

BIR Ruling No. DA-489-03 is a general interpretative rule because it was a

response to a query made, not by a particular taxpayer, but by a
government agency tasked with processing tax refunds and credits, that is,
the One Stop Shop Inter-Agency Tax Credit and Drawback Center of the
Department of Finance. This government agency is also the addressee, or
the entity responded to, in BIR Ruling No. DA-489-03. Thus, while this
government agency mentions in its query to the Commissioner the
administrative claim of Lazi Bay Resources Development, Inc., the agency
was in fact asking the Commissioner what to do in cases like the tax claim of
Lazi Bay Resources Development, Inc., where the taxpayer did not wait for
the lapse of the 120-day period.

Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all
taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance
on 10 December 2003 up to its reversal by this Court in Aichi on 6 October
2010, where this Court held that the 120+30 day periods are mandatory and
jurisdictional. (Emphasis supplied.)

Based on the foregoing, "prospective application" of Aichi and Mirant, in the

context of San Roque (2013), only meant that the rulings in said cases would
not retroactively affect taxpayers who relied on Atlas and/or DA-489-03 when
they filed their administrative and judicial claims for refund or tax credit of
creditable input taxes during the period when Atlas and DA-489-03 were still
in effect. Aichi and Mirant can still be applied to cases involving
administrative and judicial claims filed prior to the promulgation of said
cases and outside the period of effectivity of Atlas and DA-489-03, such as
the instant case.

7.) TAGANITO MINING CORPORATION vs.

COMMISSIONER OF INTERNAL REVENUE (G.R.
No. 197591. June 18, 2014)

The CIR filed a motion for reconsideration praying for the reversal of the
partial refund granted in Taganito's favor, which was, however, denied in a
Resolution 14 dated March 12, 2010.

Dissatisfied, the CIR elevated the matter to the CTA En Banc. Records are
bereft of any showing that Taganito appealed the partial denial of its claim of
refund which had, thus, lapsed into finality

The Issues Before the Court

The issues for the Court's resolution are as follows: (a) whether or not the
CTA En Banc correctly dismissed Taganito's judicial claim for refund of excess
input VAT; and (b) whether or not Taganito should be entitled to its claim for
refund in the total amount of PhP1,885,140.22.

The Court's Ruling

The petition is partly meritorious.

The first provision that allowed the refund or credit of unutilized excess input
VAT is found in Executive Order No. 273, series of 1987, the original VAT Law.
Since then, this provision was amended numerous times, by Republic Act No.
(RA) 7716, 20 RA 8424, and, lastly, by RA 9337 which took effect on July 1,
2005. Since Taganito's claim for refund covered periods before the effectivity
of RA 9337, Section 112 of the NIRC, as amended by RA 8424, should apply.
The pertinent parts of the said provision read as follows:

Section 112. Refunds or Tax Credits of Input Tax.

(A) Zero-rated or Effectively Zero-rated Sales. any VAT-registered

person, whose sales are zero-rated or effectively zero-rated may, within two
(2) 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, except transitional input tax, to
the extent that such input tax has not been applied against output tax: . . . .

xxx xxx xxx

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made.
In proper cases, the Commissioner shall grant a refund or issue the tax
credit certificate for creditable input taxes within one hundred twenty (120)
days from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B) hereof.

In case of full or partial 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, the taxpayer affected may, within thirty (30) days
from the receipt of the decision denying the claim or after the expiration of
the one hundred twenty day-period, appeal the decision or the unacted claim
with the Court of Tax Appeals. (Emphases and underscoring supplied)

xxx xxx xxx

As correctly pointed out by the CTA En Banc, the Court, in the 2010 Aichi
case, ruled that the observance of the 120-day period is a mandatory and
jurisdictional requisite to the filing of a judicial claim for refund before the
CTA. Consequently, non-observance thereof would lead to the dismissal of
the judicial claim due to the CTA's lack of jurisdiction. The Court, in the same
case, also clarified that the two (2)-year prescriptive period applies only to
administrative claims and not to judicial claims. In other words, the Aichi
case instructs that once the administrative claim is filed within the
prescriptive period, the claimant must wait for the 120-day period to end
and, thereafter, he is given a 30-day period to file his judicial claim before
the CTA, even if said 120-day and 30-day periods would exceed the
aforementioned two (2)-year prescriptive period.

In the recent case of CIR v. San Roque Power Corporation (San Roque), the
Court, however, recognized an exception to the mandatory and jurisdictional
treatment of the 120-day period as pronounced in Aichi. In San Roque, the
Court ruled that BIR Ruling No. DA-489-03 dated December 10, 2003
wherein the BIR stated that the "taxpayer-claimant need not wait for the
lapse of the 120-day period before it could seek judicial relief with the CTA by
way of Petition for Review" provided taxpayers-claimants the opportunity
to raise a valid claim for equitable estoppel under Section 246 of the NIRC,
viz.:

There is no dispute that the 120-day period is mandatory and jurisdictional,

and that the CTA does not acquire jurisdiction over a judicial claim that is
filed before the expiration of the 120-day period. There are, however, two
exceptions to this rule. The first exception is if the Commissioner, through a
specific ruling, misleads a particular taxpayer to prematurely file a judicial
claim with the CTA. Such specific ruling is applicable only to such particular
taxpayer. The second exception is where the Commissioner, through a
general interpretative rule issued under Section 4 of the Tax Code, misleads
all taxpayers into filing prematurely judicial claims with the CTA. In these
cases, the Commissioner cannot be allowed to later on question the CTA's
assumption of jurisdiction over such claim since equitable estoppel has set in
as expressly authorized under Section 246 of the Tax Code.

Section 4 of the Tax Code, a new provision introduced by RA 8424, expressly

grants to the Commissioner the power to interpret tax laws, thus:

Sec. 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.

Since the Commissioner has exclusive and original jurisdiction to interpret

tax laws, taxpayers acting in good faith should not be made to suffer for
adhering to general interpretative rules of the Commissioner interpreting tax
laws, should such interpretation later turn out to be erroneous and be
reversed by the Commissioner or this Court . Indeed, Section 246 of the Tax
Code expressly provides that a reversal of a BIR regulation or ruling cannot
adversely prejudice a taxpayer who in good faith relied on the BIR regulation
or ruling prior to its reversal. . . . . (Emphases and underscoring supplied)

Reconciling the pronouncements in the Aichi and San Roque cases, the rule
must therefore be that during the period December 10, 2003 (when BIR
Ruling No. DA-489-03 was issued) to October 6, 2010 (when the Aichi case
was promulgated), taxpayers-claimants need not observe the 120-day period
before it could file a judicial claim for refund of excess input VAT before the
CTA. Before and after the aforementioned period (i.e., December 10, 2003 to
October 6, 2010), the observance of the 120-day period is mandatory and
jurisdictional to the filing of such claim.

In this case, records disclose that Taganito filed its administrative and judicial
claims for refund on December 28, 2005 and March 31, 2006, respectively
or during the period when BIR Ruling No. DA-489-03 was in place. As such, it
need not have waited for the expiration of the 120-day period before filing its
judicial claim for refund before the CTA. In view of the foregoing, the CTA En
Banc, thus, erred in dismissing Taganito's claim on the ground of prematurity.

However, as adverted to earlier, Taganito did not appeal the CTA Division's
partial denial of its claim for refund on the ground that it failed to provide
sufficient evidence that its suppliers did not avail of the benefits of zero-
rating. It is well-settled that a party who does not appeal from a judgment
can no longer seek modification or reversal of the same. For this reason,
Taganito may no longer question the propriety and correctness of the said
partial disallowance as it had lapsed into finality and may no longer be
modified. In fine, Taganito is only entitled to the partial refund of its
unutilized input VAT in the amount of P537,645.43, as was originally granted
to it by the CTA Division and herein upheld.

8.) COMMISSIONER OF INTERNAL REVENUE vs.

MINDANAO II GEOTHERMAL PARTNERSHIP (G.R. No.
189440. June 18, 2014.)

We grant the petition.

Notwithstanding the timely filing of the respondent's administrative claim,

we are constrained to order the dismissal of the respondent's judicial claim
for tax refund or tax credit for having been filed beyond the mandatory and
jurisdictional periods provided in Section 112 (C) of the NIRC. Section 112 (C)
expressly grants the taxpayer a 30-day period to appeal to the CTA the
decision or inaction of the Commissioner of Internal Revenue (CIR), thus:

SEC. 112. Refunds or Tax Credits of Input Tax.

xxx xxx xxx

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made.
In proper cases, the Commissioner shall grant a refund or issue the tax
credit certificate for creditable input taxes within one hundred twenty (120)
days from the date of submission of complete documents in support of the
application filed in accordance with Subsection (A) hereof.
In case of full or partial 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, the taxpayer affected may, within thirty (30) days
from the receipt of the decision denying the claim or after the expiration of
the one hundred twenty day-period, appeal the decision or the unacted claim
with the Court of Tax Appeals. (Emphasis supplied.)

This law is clear, plain, and unequivocal. Following the well-settled verba
legis doctrine, this law should be applied exactly as worded since it is clear,
plain, and unequivocal. As this law states, the taxpayer may, if he wishes,
appeal the decision of the CIR to the CTA within 30 days from receipt of the
CIR's decision, or if the CIR does not act on the taxpayer's claim within the
120-day period, the taxpayer may appeal to the CTA within 30 days from the
expiration of the 120-day period.

In Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.,

this Court clarified the mandatory and jurisdictional nature of the 120+30
day period provided under Section 112 (C) of the NIRC. We clarified that the
two-year prescriptive period under Section 112 (A) 19 of the NIRC refers only
to the filing of an administrative claim with the BIR. Meanwhile, the judicial
claim under Section 112 (C) of the NIRC must be filed within a mandatory
and jurisdictional period of 30 days from the date of receipt of the decision
denying the claim, or within 30 days from the expiration of the 120-day
period for deciding the claim. Thus, we mandated strict compliance with this
"120+30" day period:

Section 112(D) [now Section 112(C)] of the NIRC clearly provides that the CIR
has "120 days, from the date of the submission of the complete documents
in support of the application [for tax refund/credit]," within which to grant or
deny the claim. In case of full or partial denial by the CIR, the taxpayer's
recourse is to file an appeal before the CTA within 30 days from receipt of the
decision of the CIR. However, if after the 120-day period the CIR fails to act
on the application for tax refund/credit, the remedy of the taxpayer is to
appeal the inaction of the CIR to CTA within 30 days.

In this case, the administrative and the judicial claims

were simultaneously filed on September 30, 2004.
Obviously, respondent did not wait for the decision of the
CIR or the lapse of the 120-day period. For this reason, we
find the filing of the judicial claim with the CTA premature.
Respondent's assertion that the non-observance of the 120-day period is not
fatal to the filing of a judicial claim as long as both the administrative and
the judicial claims are filed within the two-year prescriptive period has no
legal basis.

There is nothing in Section 112 of the NIRC to support respondent's view.

Subsection (A) of the said provision states that "any VAT-registered person,
whose sales are zero-rated or effectively zero-rated may, 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." The phrase "within two (2) years . . . apply
for the issuance of a tax credit certificate or refund" refers to applications for
refund/credit filed with the CIR and not to appeals made to the CTA. This is
apparent in the first paragraph of subsection (D) of the same provision,
which states that the CIR has "120 days from the submission of complete
documents in support of the application filed in accordance with Subsections
(A) and (B)" within which to decide on the claim.

In fact, applying the two-year period to judicial claims would render nugatory
Section 112(D) of the NIRC, which already provides for a specific period
within which a taxpayer should appeal the decision or inaction of the CIR.
The second paragraph of Section 112(D) of the NIRC envisions two scenarios:
(1) when a decision is issued by the CIR before the lapse of the 120-day
period; and (2) when no decision is made after the 120-day period. In both
instances, the taxpayer has 30 days within which to file an appeal with the
CTA. As we see it then, the 120-day period is crucial in filing an appeal with
the CTA.

Thus, as long as the administrative claim is filed within

the two-year prescriptive period under Section 112 (A) of
the NIRC, the 30-day prescriptive period under Section
112 (C) can extend beyond two years after the close of the
taxable quarter where the sales were made.
In Commissioner of Internal Revenue v. San Roque Power Corporation, we
reiterated that the 30-day period for filing the judicial claim is mandatory and
jurisdictional:

When Section 112(C) states that "the taxpayer affected may, within thirty
(30) days from receipt of the decision denying the claim or after the
expiration of the one hundred twenty-day period, appeal the decision or the
unacted claim with the Court of Tax Appeals," the law does not make the
120+30 day periods optional just because the law uses the word "may." The
word "may" simply means that the taxpayer may or may not appeal the
decision of the Commissioner within 30 days from receipt of the decision, or
within 30 days from the expiration of the 120-day period. Certainly, by no
stretch of the imagination can the word "may" be construed as making the
120+30 day periods optional, allowing the taxpayer to file a judicial claim
one day after filing the administrative claim with the Commissioner.

In the present case, the respondent filed its administrative claim on May 30,
2003. The petitioner CIR therefore had only until September 27, 2003 to
decide the claim, and following the petitioner's inaction, the respondent had
until October 27, 2003, the last day of the 30-day period to file its judicial
claim. However, the respondent filed its judicial claim with the CTA only on
March 31, 2004 or 155 days late. Clearly, the respondent's judicial claim has
prescribed and the CTA did not acquire jurisdiction over the claim. Well to
remember, the right to appeal to the CTA from a decision or "deemed a
denial" decision of the CIR is merely a statutory privilege, not a constitutional
right. The exercise of such statutory privilege requires strict compliance with
the conditions attached by the statute for its exercise. The respondent failed
to comply with the statutory conditions and must thus bear the
consequences. Further, well settled is the rule that tax refunds or credits, just
like tax exemptions, are strictly construed against the taxpayer. The burden
is on the taxpayer to show that he has strictly complied with the conditions
for the grant of the tax refund or credit.

9.) DR. JOEL C. MENDEZ vs. PEOPLE OF THE

PHILIPPINES and COURT OF TAX APPEALS
(G.R. No. 179962. June 11, 2014.)

Preliminary consideration
 The petitioner correctly availed of the remedy of certiorari. Under Rule
65 of the Rules of Court, certiorari is available when there is no appeal
or any plain, speedy and adequate remedy in the ordinary course of
law. After failing in his bid for the CTA to reconsider its admission of the
amended information, the only remedy left to the petitioner is to file a
petition for certiorari with this Court.
Contrary to the prosecution's argument, the remedy of appeal to the
CTA en banc is not available to the petitioner. In determining the
appropriate remedy or remedies available, a party aggrieved by a
court order, resolution or decision must first correctly identify the
nature of the order, resolution or decision he intends to assail. What
Section 9 Rule 9 of the Rules of the CTA provides is that appeal to the
CTA en banc may be taken from a decision or resolution of the CTA
division in criminal cases by filing a petition for review under Rule 43 of
the Rules of Court. Under Section 1, Rule 43, the remedy of a petition
for review is available only against a judgments or a final order. I
A judgment or order is considered final if it disposes of the action or
proceeding completely, or terminates a particular stage of the same
action; in such case, the remedy available to an aggrieved party is
appeal. If the order or resolution, however, merely resolves incidental
matters and leaves something more to be done to resolve the merits of
the case, as in the present case, the order is interlocutory and the
aggrieved party's only remedy after failing to obtain a reconsideration
of the ruling is a petition for certiorari under Rule 65.
Nonetheless, while we rule that the petitioner availed of the correct
remedy, we resolve to dismiss the petition for failure to establish that
the CTA abused its discretion, much less gravely abused its discretion.
Amendment of information
Section 14, Rule 110 of the Revised Rules of Criminal Procedure
governs the matter of amending the information:
Amendment or substitution. A complaint or information may be
amended, in form or in substance, without leave of court, at any time
before the accused enters his plea. After the plea and during the trial,
a formal amendment may only be made with leave of court and when
it can be done without causing prejudice to the rights of the accused.
However, any amendment before plea, which downgrades the nature
of the offense charged in or excludes any accused from the complaint
or information, can be made only upon motion by the prosecutor, with
notice to the offended party and with leave of court. The court shall
 state its reasons in resolving the motion and copies of its order shall be
furnished all parties, especially the offended party.
There is no precise definition of what constitutes a substantial
amendment. According to jurisprudence, substantial matters in the
complaint or information consist of the recital of facts constituting the
offense charged and determinative of the jurisdiction of the court.
Under Section 14, however, the prosecution is given the right to amend
the information, regardless of the nature of the amendment, so long as
the amendment is sought before the accused enters his plea, subject
to the qualification under the second paragraph of Section 14.
Once the accused is arraigned and enters his plea, however, Section
14 prohibits the prosecution from seeking a substantial amendment,
particularly mentioning those that may prejudice the rights of the
accused. One of these rights is the constitutional right of the accused
to be informed of the nature and cause of accusation against him, a
right which is given life during the arraignment of the accused of the
charge of against him. The theory in law is that since the accused
officially begins to prepare his defense against the accusation on the
basis of the recitals in the information read to him during arraignment,
then the prosecution must establish its case on the basis of the same
information.
To illustrate these points, in Almeda v. Judge Villaluz, the prosecution
wanted to additionally alleged recidivism and habitual delinquency in
the original information. In allowing the amendment, the Court
observed that the amendment sought relate only to the range of the
penalty that the court might impose in the event of conviction. Since
they do not have the effect of charging an offense different from the
one charged (qualified theft of a motor vehicle) in the information, nor
do they tend to correct any defect in the trial court's jurisdiction over
the subject-matter, the amendment sought is merely formal.
In Teehankee, Jr. v. Madayag, the prosecution sought during trial to
amend the information from frustrated to consummated murder since
the victim died after the information for frustrated murder was filed.
The accused refused to be arraigned under the amended information
without the conduct of a new preliminary investigation. In sustaining
the admission of the amended information, the Court reasoned that the
additional allegation, that is, the supervening fact of the death of the
victim was merely supplied to aid the trial court in determining the
proper penalty for the crime. Again, there is no change in the nature of
offense charged; nor is there a change in the prosecution's theory that
 the accused committed a felonious act with intent to kill the victim; nor
does the amendment affect whatever defense the accused originally
may have.
In short, amendments that do not charge another offense different
from that charged in the original one; or do not alter the prosecution's
theory of the case so as to cause surprise to the accused and affect the
form of defense he has or will assume are considered merely as formal
amendments.
In the present case, the amendments sought by the prosecution
pertains to (i) the alleged change in the date in the commission of the
crime from 2001 to 2002; (ii) the addition of the phrase "doing
business under the name and style of Mendez Medical Group"; (iii) the
change and/or addition of the branches of petitioner's operation; and
(iv) the addition of the phrase "for income earned". We cannot see how
these amendments would adversely affect any substantial right of the
petitioner as accused.
The "change" in the date from 2001 to
2002 and the addition of the phrase "for
income earned"
At the outset we note that the actual year of the commission of the
offense has escaped both the petitioner and prosecution. In its Motion
to Amend the Information, the prosecution mistakenly stated that the
information it originally filed alleged the commission of the offense as
"on or about the 15th day of April, 2001" even if the record is clear
that that the actual year of commission alleged is 2002. The petitioner
makes a similar erroneous allegation in its petition before the Court.
Interestingly, in its August 13, 2007 resolution, denying the petitioner's
motion for reconsideration, the CTA implicitly ruled that there was in
fact no amendment of the date in the information by correctly citing
what the original information alleges. This, notwithstanding, the
petitioner still baselessly belaboured the point in its present petition by
citing the erroneous content of the prosecution's motion to amend
instead of the original information itself. This kind of legal advocacy
obviously added nothing but confusion to what is otherwise a simple
case and another docket to the High Court's overwhelming caseload.
That the actual date of the commission of the offense pertains to the
year 2002 is only consistent with the allegation in the information on
the taxable year it covers, i.e., for the taxable year 2001. Since the
information alleges that petitioner failed to file his income tax return
for the taxable year 2001, then the offense could only possibly be
 committed when petitioner failed to file his income tax return before
the due date of filing, which is on April of the succeeding year, 2002.
Accordingly, the addition of the phrase "for the income earned" before
the phrase "for the taxable year 2001" cannot but be a mere formal
amendment since the added phrase merely states with additional
precision something that is already contained in the original
information, i.e., the income tax return is required to be filed precisely
for the income earned for the preceding taxable year.
The nature of the remaining two items of amendment would be better
understood, not only in the context of the nature of the offense
charged under the amended information, but likewise in the context of
the legal status of the "Mendez Medical Group".
The addition of the phrase "doing business
under the name and style of Mendez
Medical Group and the change and/or
addition of the branches of petitioner's
operation
Under the National Internal Revenue Code (NIRC), a resident citizen
who is engaged in the practice of a profession within the Philippines is
obligated to file in duplicate an income tax return on his income from
all sources, regardless of the amount of his gross income. In complying
with this obligation, this type of taxpayer ought to keep only two basic
things in mind: first is where to file the return; and second is when to
file the return. Under Section 51 B of the NIRC, the return should "be
filed with an authorized agent bank, Revenue District Officer, Collection
Agent or duly authorized Treasurer of the city or municipality in which
such person has his legal residence or principal place of business in the
Philippines".
On the other hand, under Section 51 C of the NIRC, the same taxpayer
is required to file his income tax return on or before the fifteenth (15th)
day of April of each year covering income for the preceding taxable
year. Failure to comply with this requirement would result in a violation
of Section 255 of the NIRC which reads:
Section 255. Failure to File Return, Supply Correct and Accurate
Information, Pay Tax Withhold and Remit Tax and Refund Excess Taxes
Withheld on Compensation. Any person required under this Code or
by rules and regulations promulgated thereunder to pay any tax, make
a return, keep any record, or supply any correct and accurate
information, who wilfully fails to pay such tax, make such return, keep
such record, or supply correct and accurate information, or withhold or
remit taxes withheld, or refund excess taxes withheld on
 compensation, at the time or times required by law or rules and
regulations shall, in addition to other penalties provided by law, upon
conviction thereof, be punished by a fine of not less than Ten thousand
pesos (P10,000) and suffer imprisonment of not less than one (1) year
but not more than ten (10) years. [emphasis supplied]
Since the petitioner operates as a sole proprietor from taxable years
2001 to 2003, the petitioner should have filed a consolidated return in
his principal place of business, regardless of the number and location
of his other branches. Consequently, we cannot but agree with the CTA
that the change and/or addition of the branches of the petitioner's
operation in the information does not constitute substantial
amendment because it does not change the prosecution's theory that
the petitioner failed to file his income tax return.
Still, the petitioner cites the case of Matalam v. Sandiganbayan,
Second Division in claiming that the deletion of San Fernando
(Pampanga City) and Dagupan City deprives him of the defenses he
raised in his counter-affidavit.
In Matalam, the prosecution charged the accused with violation of RA
No. 3019 for "[c]ausing undue injury to several [government
employees] thru evident bad faith . . . by illegally and unjustifiably
refusing to pay [their] monetary claims . . . in the nature of unpaid
salaries during the period when they have been illegally terminated,
including salary differentials and other benefits." After a
reinvestigation, the prosecution sought to amend the information to
allege that the accused
[c]ause[d] undue injury by illegally dismissing from the service [several
government] employees, . . . to their damage and prejudice amounting
to P1,606,788.50 by way of unpaid salaries during the period when
they have been illegally terminated including salary differentials and
other benefits.
The accused moved to dismiss the amended information for charging
an entirely new cause of action and asked for preliminary investigation
on this new charge of illegal dismissal.
The Sandiganbayan observed that (i) there is a clear change in the
cause of action (from refusal to pay to illegal dismissal); and (ii) the
main defense of all the accused in the original information the lack
of a corresponding appropriation for the payment of the monetary
claims of the complaining witnesses would no longer be available
under the amendment. After finding, however, that the complainants'
demand for monetary claim actually arose from their alleged illegal
 dismissal, the Sandiganbayan allowed the amendment because an
"inquiry to the allegations in the original information will certainly and
necessarily elicit substantially the same facts to the inquiry of the
allegations in the Amended Information".
As to when the rights of an accused are prejudiced by an amendment
made after he had pleaded to the original information, Montenegro
ruled that prejudice exists when a defense under the original
information would no longer be available after the amendment is
made, and when any evidence the accused might have, would be
inapplicable to the Information as amended. Applying this test, the
Court disallowed the amendment for being substantial in nature as the
recital of facts constituting the offense charged was altered.
The inapplicability of Matalam to the present case is obvious. Here, the
prosecution's theory of the case, i.e., that petitioner failed to file his
income tax return for the taxable year 2001 did not change. The
prosecution's cause for filing an information remained the same as the
cause in the original and in the amended information. For emphasis,
the prosecution's evidence during the preliminary investigation of the
case shows that petitioner did not file his income tax return in his place
of legal residence or principal place of business in Quezon City or with
the Commissioner. In short, the amendment sought did not alter the
crime charged.
At first, a change in the location of branches alleged in the information
may appear to deprive the petitioner of his defense in the original
information, i.e., the petitioner's branches in Dagupan and San
Fernando were registered only in 2003 and were therefore "inexistent"
in 2001. However, this is not the kind of defense contemplated under
the Rules of Criminal Procedure, and broadly under the due process of
law.
Contrary to the petitioner's claim, the opportunity given to the accused
to present his defense evidence during the preliminary investigation is
not exhaustive. In the same manner that the complainant's evidence
during preliminary investigation is only required to establish the
minimal evidentiary threshold of probable cause, the evidence that the
respondent may present during trial is not limited to what he had
presented during the preliminary investigation, so long as the evidence
for both parties supports or negates the elements of the offense
charged.
To be sure, the jurisprudential test on whether a defendant is
prejudiced by the amendment of an information pertains to the
 availability of the same defense and evidence that the accused
previously had under the original information. This test, however, must
be read together with the characteristic thread of formal amendments,
which is to maintain the nature of the crime or the essence of the
offense charged. 38
In the present case, this thread remained consistently under the
amended information, alleging the petitioner's failure to file his return
and consequently to pay the correct amount of taxes. Accordingly, the
petitioner could not have been surprised at all.
We also reject for lack of merit petitioner's claim that the inclusion of
the phrase "doing business under the name and style of Mendez
Medical Group" after his preliminary investigation and arraignment
deprives him of the right to question the existence of this "entity".
The petitioner however has not drawn our attention to any of his
related operations that actually possesses its own juridical personality.
In the original information, petitioner is described as "sole proprietor of
Weigh Less Center". A sole proprietorship is a form of business
organization conducted for profit by a single individual, and requires
the proprietor or owner thereof, like the petitioner-accused, to secure
licenses and permits, register the business name, and pay taxes to the
national government without acquiring juridical or legal personality of
its own.
In the amended information, the prosecution additionally alleged that
petitioner is "doing business under the name and style of 'Weigh Less
Center'/Mendez Medical Group'". Given the nature of a sole
proprietorship, the addition of the phrase "doing
business under the name and style" is merely descriptive of the nature
of the business organization established by the petitioner as a way to
carry out the practice of his profession. As a phrase descriptive of a
sole proprietorship, the petitioner cannot feign ignorance of the
"entity" "Mendez Medical Group" because this entity is nothing more
than the shadow of its business owner petitioner himself.
At any rate, we agree with the prosecution that petitioner has no
reason to complain for the inclusion of the phrase "Mendez Medical
Group". In the Reply-Affidavit it submitted during the preliminary
investigation, the prosecution has attached copies of petitioner's paid
advertisements making express reference to "Mendez Medical Group".
 10.) THE COMMISSIONER OF CUSTOMS & THE DISTRICT
COLLECTOR OF CUSTOMS FOR THE PORT OF ILOILO vs. NEW
FRONTIER SUGAR CORPORATION (G.R. No. 163055. June 11,
2014.)

issued Alert Order No. ACI/120695/09 on the subject shipment declaring that
it violated Joint Order No. 1-91 for lack of Clean Report of Findings (CRF).
Thus, a Warrant of Seizure and Detention (WSD) against the shipment was
recommended for violation of said Joint Order, in relation to Section 2530 (f)
of the Tariff and Customs Code of the Philippines (TCCP).

The CTA based its ruling on the following factual and legal findings: (1) that
since there was no valid seizure proceeding ever conducted by petitioners
against respondent's case, it therefore failed to comply with Section 2301 of
the TCCP, as amended, which requires the Collector to issue a WSD upon
making any seizure, and also with Section 2303 of the same, which provides
the need of a prior written notice of seizure and opportunity to be heard on
the part of the owner or importer in reference to the alleged delinquency, a
clear violation of respondent's constitutional right to procedural due process;
16 (2) that since there was no valid seizure as adverted to above, the
imposition of the 20% penalty under Customs Administrative Order (CAO) No.
4-94 is outright improper and without any legal basis; (3) that the
subsequent issuance of the CRF over respondent's shipment under the
provisions of Customs Memorandum Order (CMO) No. 9-95 satisfied the
inspection and the CRF required under paragraph 12 of Joint Order No. 1-91
considering that it cleared the said shipment from automatic seizure.
Nonetheless, even if the subject shipment of respondent may have been
subjected to an alleged automatic seizure, the eventual issuance of the CRF
covering the same shipment cured all deficiencies; (4) that respondent's act
of issuing a "STOP PAYMENT" order was justified considering petitioners' act
of depositing the post-dated guarantee/security check being improper and
without any legal basis; and (5) that petitioner Collector acted beyond his
mandate under Section 1508 of the TCCP when he withheld respondent's
subsequent shipment of raw sugar considering that there was still no
outstanding and demandable amount (penalty of fine) to be paid. The fine
which is the subject matter of the instant case was precisely the one being
questioned by respondent; hence, its liability has yet to be determined.
Subsequently, on 23 July 1998, the CTA denied petitioners' Motion for
Reconsideration for failure to raise any new matter which has yet to be
considered and passed upon in its assailed 19 June 1998 Decision.

Aggrieved, and following the rules on court hierarchy then prevailing,

petitioners appealed to the CA by filing a Petition for Review pursuant to Rule
43 of the 1997 Rules of Civil Procedure docketed as CA-G.R. SP No. 48842.

The Ruling of the CA

The CA affirmed both the aforesaid Decision and Resolution rendered by the
CTA in C.T.A. Case No. 5347, pronouncing that seizure of goods starts with
the issuance of a WSD, being a part of the procedural due process, to which
respondent is entitled to. Without it, respondent will then be deprived of its
right to avail of the tentative release of the shipment which is expressly
allowed under the conditions set forth in CMO No. 9-95.

In addition, the appellate court ruled that respondent cannot be faulted in

ordering the stop payment of its guarantee/security check because it was
deposited by petitioners on 2 March 1996, or exactly six (6) days ahead of
respondent's deadline to pay the alleged 20% penalty. It failed to consider
that before the lapse of the given period, the Bureau of Customs had no right
to hold the value of the check against respondent. More so, since there was
already the subsequent issuance of the CRF on 18 January 1996 by the SGS
Manila Liaison, respondent in effect could not have violated any customs
laws which would render it liable to pay for the 20% penalty.

Lastly, while it may be argued that the CRF is required to be issued before
the shipment of the goods, the late issuance of the same to respondent
amounts to substantial compliance with the provisions of Joint Order No. 1-
91. The purpose for which the CRF is required has already been served since
the imported goods were already inspected by the SGS. The CA therefore
concluded that if the belated issued CRF will be ignored, then it will work
against all the procedures conducted to determine the propriety of issuing
the late CRF.

Not satisfied, petitioners are now in quest for redemption before this Court,
raising that the CA committed serious and reversible error in ruling, that: (a)
the issuance of a WSD was necessary; (b) the imposition of the 20% penalty
on respondent's shipment was not justified; (c) the later issuance of the CRF
over the subject shipment had the effect of full compliance with Joint Order
No. 1-91; and (d) the deposit of respondent's check by petitioners was
improper and without legal basis.

The Issue

The core issue for the Court's consideration is whether or not respondent has
violated paragraph 12 of Joint Order No. 1-91, in relation to paragraph (f),
Section 2530 of the TCCP, as amended, for failure to submit the subject raw
cane sugar shipment to pre-shipment inspection and to present the
corresponding CRF resulting therefrom. Consequently, if respondent indeed
violated said provision, the question of the imposition of the 20% penalty
pursuant to CAO No. 4-94, on respondent's subject shipment, then arises.

Our Ruling

We find the petition unmeritorious.

Prefatorily, in accordance with the pertinent customs laws at the time of the
arrival of the subject shipment of this case, it must be pointed out that
importers, such as respondent herein, are duty-bound to comply with the
provisions of the CISS, implemented by Joint Order No. 1-91, particularly as
to the requirement of a pre-shipment inspection of the quality, quantity, and
price of the imports coming into the Philippines to be conducted at the
country of export. Notably, the pre-shipment inspection was intended to
prevent the possibility of the undervaluation, misdeclaration, and
overvaluation of imports shipped to our country which may defraud the
Philippine Government of revenues.

The aforesaid scheme aims to ensure the quality and quantity specifications
of consignments, and achieved through advance cargo clearance and
supplying the country's Bureau of Customs with accurate information about
the quality and specification of bulk and break bulk cargo. In other words, the
pre-shipment inspection requirement simply helps the Governments around
the world in protecting their import revenues, facilitate trade, and minimize
the risk of illegal imports.

Thereafter, upon inspection and determination that the subject shipment is

in order, a corresponding CRF shall be issued by the SGS. Only then may the
imports be allowed in our country for release, after compliance with other
equally significant requirements, such as but not limited to, filing of import
entry and payment of duty.
In the case at bench, it is apropos to look into the allegation that, as stated in
Alert Order No. A/CI/120695/09, respondent violated Joint Order No. 1-91,
which implements the CISS, particularly paragraph 12 thereof, to wit:

12. No Custom Entry shall be filed or accepted or any shipment released in

respect of any goods which require a CRF as provided for by this Joint Order
where the Importer is unable to produce to the Bureau of Customs the
authenticated customs copy of the CRF. With or without fault on the part of
the importer, such goods shall be subject to automatic seizure by the Bureau
of Customs. The Seller is therefore warned against the shipment of goods
which have not been inspected or for which a CRF has not been issued.
(Emphasis supplied)

Petitioners argue that the above-quoted provision should be read in relation

to paragraph (f), Section 2530 of the TCCP, as amended, quoted hereunder
as follows:

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

xxx xxx xxx

f. Any article of prohibited importation or exportation, the importation or

exportation of which is effected or attempted contrary to law, and all other
articles which, in the opinion of the Collector, have been used, are or were
intended to be used as instrument in the importation or exportation of the
former. (Emphasis supplied)

Records of the case reveal that, at the time of the arrival of the shipment of
respondent's raw cane sugar, it did not have the required CRF. Such lack of
CRF was due to failure to undergo the needed pre-shipment inspection from
its place of exportation. As a result thereof, pursuant to paragraph 12 of Joint
Order No. 1-91, read in conjunction with Section 2530 (f) of the TCCP, as
amended, petitioners assert that respondent's shipment of raw cane sugar
"shall be subject to automatic seizure".

The phrase "shall be subject to automatic seizure" is not, however, an

unrestrained mandate. It is not a roving commission to dispense with the
procedural due process of seizure proceedings. This is the particular
provision clearly expressed in Sections 2301 and 2303 of the TCCP, as
amended, which say:
Sec. 2301. Warrant for Detention of Property-Cash Bond. Upon making any
seizure, the Collector shall issue a warrant for the detention of the property;
and if the owner or importer desires to secure the release of the property for
legitimate use, the Collector shall, with the approval of the Commissioner of
Customs, surrender it upon the filing of a cash bond, in an amount to be
fixed by him, conditioned upon the payment of the appraised value of the
article and/or any fine, expenses and costs which may be adjudged in the
case: Provided, That such importation shall not be released under any bond
when there is a prima facie evidence of fraud in the importation of article:
Provided, further, That articles the importation of which is prohibited by law
shall not be released under any circumstance whatsoever: Provided, finally,
That nothing in this section shall be construed as relieving the owner or
importer from any criminal liability which may arise from any violation of law
committed in connection with the importation of the article. (Emphasis
supplied)

Sec. 2303. Notification to Owner or Importer. The Collector shall give the
owner or importer of the property or his agent a written notice of the seizure
and shall give him an opportunity to be heard in reference to the delinquency
which was the occasion of such seizure.

xxx xxx xxx (Emphasis supplied).

Ut magis valeat quam pereat. A statute is to be interpreted as a whole. The

provisions of a specific law should be read, considered, and interpreted
together as a whole to effectuate the whole purpose of which it was
legislated. A section of the law is not to be allowed to defeat another, if by
any reasonable construction, the two can be made to stand together. In other
words, the court must harmonize them, if practicable, and must lean in favor
of a construction which will render every word operative, rather than one
which may make the words idle and nugatory.

Applying the foregoing principles herein, paragraph 12 of Joint Order No. 1-

91 should be read in relation to Sections 2301 and 2303 of the TCCP, as
amended, in order to effectuate the purposes of which they were enacted,
particularly as to the procedural requirements set forth in conducting seizure
proceedings. Thus, in the 19 June 1998 Decision in C.T.A. Case No. 5347, the
CTA correctly articulated that a WSD is a condition precedent, before any
seizure proceeding can be formally initiated. It therefore emphasized the
constitutionally enshrined right to procedural due process of any person,
natural or juridical, under investigation especially if it will cause the person
his/its life or property. As previously mentioned, the above-quoted sections
clearly laid down the mandatory procedures to be observed in
a seizure case, to wit: (1) that a WSD must first be issued
upon making any seizure; and (2) that a written notice of
such seizure must be served upon the owner or importer
or his agent. Failure to comply with the foregoing
procedural requirements would negate the propriety of
having the subject shipment of respondent seized and
forfeited in favor of the Government in all cases. Hence, even
if the phrase "subject to automatic seizure" was used under paragraph 12 of
Joint Order No. 1-91, the same must be construed together and harmonized
with other related provision of law, i.e. Sections 2301 and 2303 of the TCCP,
as amended, in order to form a uniform system of jurisprudence on seizure
proceedings.

Likewise, it would be improvident not to state at this juncture that the

subject shipment could not be deemed liable for seizure or even forfeiture on
the ground of violation of Section 2530 (f) of the TCCP, as amended, for it
must be proven first that fraud has been committed by or there was bad
faith on the part of the importer/consignee to evade payment of the duties
due and demandable.

Time and again, and consistently, this Court has ruled that the onus
probandi to establish the existence of fraud is lodged with
the Bureau of Customs which ordered the forfeiture of the
imported goods. Fraud is never presumed. It must be
proved. Failure of proof of fraud is a bar to forfeiture. The reason is that
forfeitures are not favored in law and equity. The fraud contemplated by law
must be intentional fraud, consisting of deception willfully and deliberately
done or resorted to in order to induce another to give up some right. Absent
fraud, the Bureau of Customs cannot forfeit the shipment in its favor.

Significantly, based on the records of the present case, it was determined

during the administrative proceedings before the petitioner Collector, that
there was no intentional circumvention of the said CISS requirement on the
part of respondent because the failure to subject the shipment to SGS pre-
shipment inspection was purely attributable to the fault of the shipper;
hence, respondent acted in good faith. In other words, since there was no
deliberate circumvention of the CISS, the same therefore cannot be
recommended for seizure and/or forfeiture. As a matter of fact, pursuant to
CMO No. 9-95, it was no other than the petitioner Collector who
recommended and thereafter allowed that the subject shipment be
tentatively released, and that the imposition of the penalty against it be
dispensed with unless the SGS will not issue the required CRF. These factual
circumstances further strengthened the position taken by respondent that it
had indeed sufficiently proven its claim of good faith on the non-production
of CRF, which likewise established lack of fraudulent intent to evade payment
of duties on its part. Clearly, petitioners' failure to comply with the
procedural requirements set forth under the applicable provisions of the
TCCP, as amended, in pursuing for the seizure of the subject shipment under
paragraph 12 of Joint Order No. 1-91, was fatal to their cause.

Now this Court proceeds to determine whether or not the imposition of the
20% penalty on respondent's subject shipment is justified under the present
factual and legal circumstances of this case.

The aforesaid 20% penalty being collected by petitioners against respondent

was based on the imposition under CAO No. 4-94, particularly Part II (C)(C.1)
thereof, which reads:

SUBJECT: Schedule of fines to be imposed in the settlement of seizure

cases pending hearing pursuant to Section 2307 of the Tariff and Customs
Code, as amended by Executive Order No. 38.

xxx xxx xxx

II. SCHEDULE OF FINES

In the settlement of seizure cases pending hearing, where settlement

thereof is allowed under the existing laws and regulations, the following
schedule of fines for the corresponding violations are hereby provided:

xxx xxx xxx

C. ONLY VIOLATION IS LACK OF SGS CLEAN REPORT OF FINDINGS

(CRF)

C.1 First Violation 20%

xxx xxx xxx (Emphasis supplied)

Relevant thereto, Section 2307 of the TCCP, as amended, provides:

Sec. 2307. Settlement of Case by Payment of Fine of Redemption of Forfeited
Property. Subject to approval of the Commissioner, the district collector
may while the case is still pending, except when there is fraud, accept the
settlement of any seizure case provided that the owner, importer, exporter,
or consignee or his agent shall offer to pay to the collector a fine imposed by
him upon the property, or in case of forfeiture, the owner, exporter, importer
or consignee or his agent shall offer to pay for the domestic market value of
the seized article. The Commissioner may accept the settlement of any
seizure case on appeal in the same manner.

xxx xxx xxx (Emphasis supplied)

Clearly from the foregoing, the law presupposes a pending seizure

proceeding legally initiated against the shipment intended to be seized in
accordance with the pertinent provisions of the TCCP, as amended. Absence
of such pending proceeding against respondent's shipment renders CAO No.
4-94 and Section 2307 inapplicable in the present case. Consequently, there
would be no legal basis to hold the subject shipment liable for the aforesaid
20% penalty on the sole ground of lack of CRF.

Accordingly, this Court hereby adopts the factual and legal findings of the
CTA in its 19 June 1998 Decision, pertinent portions of which are quoted
hereunder as follows:

It is to be readily observed that the aforequoted subject of said CAO pertains

to fines imposed on seizure cases. Inasmuch as the instant case has not
been put under a valid seizure as adverted to above, the imposition of the
20% penalty under CAO 4-94 is outright improper and without legal basis.
The problem with [petitioners] is that in its desire to give more teeth to the
administrative requirement for the production of a Clean Report of Findings
(CRF) from the SGS, it overlooked one fundamental principle in law
that no fine, surcharge, forfeiture or any penalty may be imposed
except in pursuance of a provision of law. In the instant case, the
closest provision [petitioners] could cite is [S]ection 2307 of the Tariff and
Customs Code as implemented by CAO 4-94, without realizing that the same
pertains only to seizure cases. Under the provisions imposing fine found in
Sections 2505 to 2529 of the same Code, not one pertains to non-production
of CRF. The Secretary of Finance, Secretary of Trade and Industry and the
Governor of the Central Bank in issuing the Joint Order No. 1-91, which
serves as the basis of the requirement for the production of a CRF, did not
provide for the imposition of fine or other penalties maybe because they
realize that the imposition of penalties is a legislative
prerogative.
The non-production of CRF by itself does not give rise to any penalty but may
serve as a basis to hold and to investigate the particular shipment which
may lead to findings of undervaluation, misdeclaration or misclassification
for which the law provides the corresponding penalty such as surcharge, fine
or forfeiture under Sections 2503, 2530-2536 of the TCC[P]. These offenses
were not shown in the records of the case. On the contrary, there was this
finding by the [petitioners] that the non-production of the CRF was not
intentional. The mistake or error was found to be committed by the supplier
without prior knowledge on the part of the [respondent]. In fact, a CRF was
later on produced and the discrepancy was not enough to constitute
undervaluation under Sections (sic) 2503 of the said Code. The [respondent]
was only required by the [petitioners] to pay additional duties and taxes
corresponding to the difference of 4.79% in valuation.

Lastly, granting arguendo that this Court considers applying the provisions of
CAO No. 4-94 in the present case, we find that substantial compliance by
respondent in the provisions of CMO No. 9-95 has rendered the issue on the
imposition of the 20% penalty for lack of CRF moot.

CMO No. 9-95 categorically provides the revised procedures on the tentative
release of shipments lacking the required CRF. Its objectives are as follows:
(1) to avoid delays in the processing and releasing of shipments arising from
the lack of SGS-CRF in relation to Joint Order No. 1-91, as amended; (2) to
further facilitate trade and provide adequate security to government
revenue; and (3) to enable the prompt collection of revenue due the
government. Simply put, the aforesaid Order provides a remedy for
importers or consignees who have failed to undergo their shipments to pre-
shipment inspections under the CISS which arrived in the country and
entered in a customs house without the requisite CRF. More importantly, Part
V (1), Step 5 of CMO No. 9-95 clearly states that the processing of the SGS-
CRF by the SGS affiliate in the country of exportation shall be deemed "as if
inspection has taken place" and that the issuance of the SGS-CRF shall be
done by SGS-Manila Liaison Office.

Verily, it was proper for the CTA and CA to rule that the subsequent issuance
of the CRF over respondent's subject shipment pursuant to the provisions of
CMO No. 9-95 substantially complied and satisfied the mandatory inspection
and corresponding CRF required under paragraph 12 of Joint Order No. 1-91.
Therefore, the subsequent issuance of the CRF on 18 imposable under CAO
No. 4-94. The eventual issuance of the required CRF covering respondent's
shipment had indeed cured all deficiencies; thus, leaving petitioners no right
whatsoever in demanding for the value of the guarantee/security check
previously issued by respondent for the sole purpose it was made.

Parenthetically, this Court finds no abusive or improvident exercise of

authority on the part of the CTA. Since there is no showing of gross error or
abuse on the part of the CTA, and its findings are supported by substantial
evidence which were thoroughly considered during the trial, there is no
cogent reason to disturb its findings and conclusions and they carry even
more weight when the CA affirms its factual and legal findings.

11.) COMMISSIONER OF INTERNAL REVENUE vs. MANILA

ELECTRIC COMPANY (MERALCO)
G.R. No. 181459. June 9, 2014.

After a careful scrutiny of the records and evidence presented before us, we
find that respondent MERALCO has discharged the requisite burden of proof
in establishing the factual basis for its claim for tax refund.

First, as correctly decided by the CTA En Banc, the certification issued by the
Embassy of the Federal Republic of Germany, dated March 27, 2002,
explicitly states that NORD/LB is owned by the State of Lower Saxony,
Saxony-Anhalt and Mecklenburg-Western Pomerania, and serves as a
regional bank for the said states which offers support in the public sector
financing, to wit:

xxx xxx xxx.

Regarding your letter dated March 1, 2002, I can confirm the following:

NORD/LB is owned by the State (Land) of Lower Saxony to the extent of 40%,
by the States of [Saxony-]Anhalt and Mecklenbuvg-Western Pomerania to the
extent of 10% each. The Lower Saxony Savings Bank and Central Savings
Bank Association have a share of [26.66%]. The Savings Bank Association
Saxony-Anhalt and the Savings Bank Association Mecklenburg-Western
Pomerania have a share of [6.66%] each.

As the regional bank for Lower Saxony, Saxony-Anhalt and Mecklenburg-

Western Pomerania, NORD/LB offers support in public sector financing. It
fulfills as Girozentrale the function of a central bank for the savings bank in
these three states (Lander).

xxx xxx xxx

Given that the same was issued by the Embassy of the Federal Republic of
Germany in the regular performance of their official functions, and the due
execution and authenticity thereof was not disputed when it was presented
in trial, the same may be admitted as proof of the facts stated therein.
Further, it is worthy to note that the Embassy of the Federal Republic of
Germany was in the best position to confirm such information, being the
representative of the Federal Republic of Germany here in the Philippines.

To bolster this, respondent MERALCO presented as witness its Vice-President

and Head of Tax and Tariff, German F. Martinez, Jr., who testified on and
identified the existence of such certification. In this regard, we concur with
the CTA En Banc that absent any strong evidence to disprove the
truthfulness of such certification, there is no basis to controvert the findings
of the CTA-First Division, to wit:

The foregoing documentary and testimonial evidence were given probative

value as the First Division ruled that there was no strong evidence to
disprove the truthfulness of the said pieces of evidence, considering that the
CIR did not present any rebuttal evidence to prove otherwise. The weight of
evidence is not a question of mathematics, but depends on its effects in
inducing belief, under all of the facts and circumstances proved. The
probative weight of any document or any testimonial evidence must be
evaluated not in isolation but in conjunction with other evidence, testimonial,
admissions, judicial notice, and presumptions, adduced or given judicial
cognizance of, and if the totality of the evidence presented by both parties
supports the claimant's claim, then he is entitled to a favorable judgment.
(Donato C. Cruz Trading Corp. v. Court of Appeals, 347 SCRA 13).

Consequently, such certification was used by petitioner as basis in issuing

BIR Ruling No. DA-342-2003, which categorically declared that the interest
income remitted by respondent MERALCO to NORD/LB Singapore Branch is
not subject to Philippine income tax, and accordingly, not subject to ten
percent (10%) withholding tax. Contrary to petitioner's view, therefore, the
same constitutes a compelling basis for establishing the tax-exempt status of
NORD/LB, as was held in Miguel J. Ossorio Pension Foundation, Incorporated
v. Court of Appeals, which may be applied by analogy to the present case, to
wit:

Similarly, in BIR Ruling [UN-450-95], Citytrust wrote the BIR to request for a
ruling exempting it from the payment of withholding tax on the sale of the
land by various BIR-approved trustees and tax-exempt private employees'
retirement benefit trust funds represented by Citytrust. The BIR ruled that
the private employees' benefit trust funds, which included petitioner, have
met the requirements of the law and the regulations and, therefore, qualify
as reasonable retirement benefit plans within the contemplation of Republic
Act No. 4917 (now Sec. 28 [b] [7] [A], Tax Code). The income from the trust
fund investments is, therefore, exempt from the payment of income tax and,
consequently, from the payment of the creditable withholding tax on the sale
of their real property.

Thus, the documents issued and certified by Citytrust showing that money
from the Employees' Trust Fund was invested in the MBP lot cannot simply be
brushed aside by the BIR as self-serving, in the light of previous cases
holding that Citytrust was indeed handling the money of the Employees'
Trust Fund. These documents, together with the notarized Memorandum of
Agreement, clearly establish that petitioner, on behalf of the Employees'
Trust Fund, indeed invested in the purchase of the MBP lot. Thus, the
Employees' Trust Fund owns 49.59% of the MBP lot.

Since petitioner has proven that the income from the sale of the MBP lot
came from an investment by the Employees' Trust Fund, petitioner, as
trustee of the Employees' Trust Fund, is entitled to claim the tax refund of
P3,037,500 which was erroneously paid in the sale of the MBP lot.

Second, in the parties' Joint Stipulation of Facts, petitioner admitted the

issuance of the aforesaid BIR Ruling and did not contest it as one of the
admitted documentary evidence in Court. A judicial admission binds the
person who makes the same, and absent any showing that this was made
thru palpable mistake, no amount of rationalization can offset it. In Camitan
v. Fidelity Investment Corporation, we sustained the judicial admission of
petitioner's counsel for failure to prove the existence of palpable mistake,
thus:
. . . . A judicial admission is an admission, verbal or written, made by a party
in the course of the proceedings in the same case, which dispenses with the
need for proof with respect to the matter or fact admitted. It may be
contradicted only by a showing that it was made through palpable mistake or
that no such admission was made.

xxx xxx xxx

Upon examination of the said exhibits on record, it appears that the alleged
discrepancies are more imagined than real. Had these purported
discrepancies been that evident during the preliminary conference, it would
have been easy for petitioners' counsel to object to the authenticity of the
owner's duplicate copy of the TCT presented by Fidelity. As shown in the
transcript of the proceedings, there was ample opportunity for petitioners'
counsel to examine the document, retract his admission, and point out the
alleged discrepancies. But he chose not to contest the document. Thus, it
cannot be said that the admission of the petitioners' counsel was made
through palpable mistake.

Based on the foregoing, we are of the considered view that respondent

MERALCO has shown clear and convincing evidence that NORD/LB is owned,
controlled or enjoying refinancing from the Federal Republic of Germany, a
foreign government, pursuant to Section 32 (B) (7) (a) of the Tax Code, as
amended, which provides that:

Section 32. Gross Income.

xxx xxx xxx.

(B) Exclusions from Gross Income. The following items shall not be
included in gross income and shall be exempt from taxation under this title:

xxx xxx xxx

(7) Miscellaneous Items.

(a) Income Derived by Foreign Government. Income derived from

investments in the Philippines in loans, stocks, bonds or other domestic
securities, or from interest on deposits in banks in the Philippines by (i)
foreign governments, (ii) financing institutions owned, controlled, or enjoying
refinancing from foreign governments, and (iii) international or regional
financial institutions established by foreign governments.

xxx xxx xxx.

Notwithstanding the foregoing, however, we uphold the ruling of the CTA En
Banc that the claim for tax refund in the aggregate amount of Thirty-Nine
Million Three Hundred Fifty-Nine Thousand Two Hundred Fifty-Four Pesos and
Seventy-Nine Centavos (P39,359,254.79) pertaining to the period from
January 1999 to July 2002 must fail since the same has already prescribed
under Section 229 of the Tax Code, to wit:

Section 229. Recovery of Tax Erroneously or Illegally Collected. No

suit or proceeding shall be maintained in any court for the recovery of any
national internal revenue tax hereafter alleged to have been erroneously or
illegally assessed or collected, or of any penalty claimed to have been
collected without authority, of any sum alleged to have been excessively or
in any manner wrongfully collected without authority, or of any sum alleged
to have been excessively or in any manner wrongfully collected, until a claim
for refund or credit has been duly filed with the Commissioner; but such suit
or proceeding may be maintained, whether or not such tax, penalty, or sum
has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of
two (2) years from the date of payment of the tax or penalty regardless
of any supervening cause that may arise after payment: Provided,
however, That the Commissioner may, even without a written claim therefor,
refund or credit any tax, where on the face of the return upon which payment
was made, such payment appears clearly to have been erroneously paid.

As can be gleaned from the foregoing, the prescriptive period provided is

mandatory regardless of any supervening cause that may arise after
payment. It should be pointed out further that while the prescriptive period
of two (2) years commences to run from the time that the refund is
ascertained, the propriety thereof is determined by law (in this case, from
the date of payment of tax), and not upon the discovery by the taxpayer of
the erroneous or excessive payment of taxes. The issuance by the BIR of the
Ruling declaring the tax-exempt status of NORD/LB, if at all, is merely
confirmatory in nature. As aptly held by the CTA-First Division, there is no
basis that the subject exemption was provided and ascertained only through
BIR Ruling No. DA-342-2003, since said ruling is not the operative act from
which an entitlement of refund is determined. In other words, the BIR is
tasked only to confirm what is provided under the Tax Code on the matter of
tax exemptions as well as the period within which to file a claim for refund.
In this regard, petitioner is misguided when it relied upon the
six (6)-year prescriptive period for initiating an action on
the ground of quasi-contract or solutio indebiti under
Article 1145 of the New Civil Code. There is solutio indebiti where:
(1) payment is made when there exists no binding relation between the
payor, who has no duty to pay, and the person who received the payment;
and (2) the payment is made through mistake, and not through liberality or
some other cause. 35 Here, there is a binding relation between petitioner as
the taxing authority in this jurisdiction and respondent MERALCO which is
bound under the law to act as a withholding agent of NORD/LB Singapore
Branch, the taxpayer. Hence, the first element of solutio indebiti is lacking.
Moreover, such legal precept is inapplicable to the present case since the
Tax Code, a special law, explicitly provides for a mandatory period for
claiming a refund for taxes erroneously paid.

Tax refunds are based on the general premise that taxes have either been
erroneously or excessively paid. Though the Tax Code recognizes the right of
taxpayers to request the return of such excess/erroneous payments from the
government, they must do so within a prescribed period. Further, "a taxpayer
must prove not only his entitlement to a refund, but also his compliance with
the procedural due process as non-observance of the prescriptive periods
within which to file the administrative and the judicial claims would result in
the denial of his claim."

In the case at bar, respondent MERALCO had ample opportunity to verify on

the tax-exempt status of NORD/LB for purposes of claiming tax refund. Even
assuming that respondent MERALCO could not have emphatically known the
status of NORD/LB, its supposition of the same was already confirmed by the
BIR Ruling which was issued on October 7, 2003. Nevertheless, it only filed
its claim for tax refund on July 13, 2004, or ten (10) months from the
issuance of the aforesaid Ruling. We agree with the CTA-First Division,
therefore, that respondent MERALCO's claim for refund in the amount of Two
Hundred Twenty-Four Million Seven Hundred Sixty Thousand Nine Hundred
Twenty-Six Pesos and Sixty-Five Centavos (P224,760,926.65) representing
erroneously paid and remitted final income taxes for the period January 1999
to July 2002 should be denied on the ground of prescription.

Finally, we ought to remind petitioner that the arguments it raised in support

of its position have already been thoroughly discussed both by the CTA-First
Division and the CTA En Banc. Oft repeated is the rule that the Court will not
lightly set aside the conclusions reached by the CTA which, by the very
nature of its function of being dedicated exclusively to the resolution of tax
problems, has accordingly developed an expertise on the subject, unless
there has been an abuse or improvident exercise of authority. This Court
recognizes that the CTA's findings can only be disturbed on appeal if they are
not supported by substantial evidence, or there is a showing of gross error or
abuse on the part of the Tax Court. In the absence of any clear and
convincing proof to the contrary, this Court must presume that the CTA
rendered a decision which is valid in every respect. It has been a long-
standing policy and practice of the Court to respect the conclusions of quasi-
judicial agencies such as the CTA, a highly specialized body specifically
created for the purpose of reviewing tax cases.

12.) VISAYAS GEOTHERMAL POWER COMPANY vs.

COMMISSIONER OF INTERNAL REVENUE (G.R. No. 197525.
June 4, 2014)

Ruling of the Court

Judicial claim not premature

The assignment of errors is rooted in the core issue of whether the

petitioner's judicial claim for refund was prematurely filed.

Two sections of the NIRC are pertinent to the issue at hand, namely Section
112 (A) and (D) and Section 229, to wit:

SEC. 112. Refunds or Tax Credits of Input Tax.

(A) Zero-rated or Effectively Zero-rated Sales. Any VAT-registered

person, whose sales are zero-rated or effectively zero-rated may, within two
(2) 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, except transitional input tax, to
the extent that such input tax has not been applied against output tax:
Provided, however, That in the case of zero-rated sales under Section 106(A)
(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign
currency exchange proceeds thereof had been duly accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP): Provided, further, That where the taxpayer is engaged in zero-rated or
effectively zero-rated sale and also in taxable or exempt sale of goods of
properties or services, and the amount of creditable input tax due or paid
cannot be directly and entirely attributed to any one of the transactions, it
shall be allocated proportionately on the basis of the volume of sales.

xxx xxx xxx

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made.
In proper cases, the Commissioner shall grant a refund or issue the tax
credit certificate for creditable input taxes within one hundred twenty (120)
days from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B) hereof.

In case of full or partial 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, the taxpayer affected may, within thirty (30) days
from the receipt of the decision denying the claim or after the expiration of
the one hundred twenty day-period, appeal the decision or the unacted claim
with the Court of Tax Appeals.

SEC. 229. Recovery of Tax Erroneously or Illegally Collected. No suit or

proceeding shall be maintained in any court for the recovery of any national
internal revenue tax hereafter alleged to have been erroneously or illegally
assessed or collected, or of any penalty claimed to have been collected
without authority, of any sum alleged to have been excessively or in any
manner wrongfully collected without authority, or of any sum alleged to have
been excessively or in any manner wrongfully collected, until a claim for
refund or credit has been duly filed with the Commissioner; but such suit or
proceeding may be maintained, whether or not such tax, penalty, or sum has
been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of
two (2) years from the date of payment of the tax or penalty regardless of
any supervening cause that may arise after payment: Provided, however,
That the Commissioner may, even without a written claim therefor, refund or
credit any tax, where on the face of the return upon which payment was
made, such payment appears clearly to have been erroneously paid.

It has been definitively settled in the recent En Banc case of CIR v. San
Roque Power Corporation (San Roque), that it is Section 112 of the NIRC
which applies to claims for tax credit certificates and tax refunds arising from
sales of VAT-registered persons that are zero-rated or effectively zero-rated,
which are, simply put, claims for unutilized creditable input VAT.
Thus, under Section 112 (A), the taxpayer may, within 2 years after the close
of the taxable quarter when the sales were made, via an administrative claim
with the CIR, apply for the issuance of a tax credit certificate or refund of
creditable input tax due or paid attributable to such sales. Under Section 112
(D), the CIR must then act on the claim within 120 days from the submission
of the taxpayer's complete documents. In case of (a) a full or partial denial
by the CIR of the claim, or (b) the CIR's failure to act on the claim within 120
days, the taxpayer may file a judicial claim via an appeal with the CTA of the
CIR decision or unacted claim, within 30 days (a) from receipt of the decision;
or (b) after the expiration of the 120-day period.

The 2-year period under Section 229 does not apply to appeals before
the CTA in relation to claims for a refund or tax credit for unutilized creditable
input VAT. Section 229 pertains to the recovery of taxes erroneously, illegally,
or excessively collected. San Roque stressed that "input VAT is not
'excessively' collected as understood under Section 229 because, at the time
the input VAT is collected, the amount paid is correct and proper." It is,
therefore, Section 112 which applies specifically with regard to claiming a
refund or tax credit for unutilized creditable input VAT.

Upholding the ruling in Aichi, San Roque held that the 120+30 day period
prescribed under Section 112 (D) mandatory and jurisdictional. The
jurisdiction of the CTA over decisions or inaction of the CIR is only appellate
in nature and, thus, necessarily requires the prior filing of an administrative
case before the CIR under Section 112. The CTA can only acquire jurisdiction
over a case after the CIR has rendered its decision, or after the lapse of the
period for the CIR to act, in which case such inaction is considered a denial.
A petition filed prior to the lapse of the 120-day period prescribed under said
Section would be premature for violating the doctrine on the exhaustion of
administrative remedies.

There is, however, an exception to the mandatory and jurisdictional nature of

the 120+30 day period. The Court in San Roque noted that BIR Ruling No.
DA-489-03, dated December 10, 2003, expressly stated that the "taxpayer-
claimant need not wait for the lapse of the 120-day period before it could
seek judicial relief with the CTA by way of Petition for Review." This BIR
Ruling was recognized as a general interpretative rule issued by the CIR
under Section 4 of the NIRC and, thus, applicable to all taxpayers. Since the
CIR has exclusive and original jurisdiction to interpret tax laws, it was held
that taxpayers acting in good faith should not be made to suffer for adhering
to such interpretations. Section 246 of the Tax Code, in consonance with
equitable estoppel, expressly provides that a reversal of a BIR regulation or
ruling cannot adversely prejudice a taxpayer who in good faith relied on the
BIR regulation or ruling prior to its reversal. Hence, taxpayers can rely on BIR
Ruling No. DA-489-03 from the time of its issuance on December 10, 2003 up
to its reversal by this Court in Aichi on October 6, 2010, where it was held
that the 120+30 day period was mandatory and jurisdictional.

Accordingly, the general rule is that the 120+30 day period is mandatory
and jurisdictional from the effectivity of the 1997 NIRC on January 1, 1998,
up to the present. As an exception, judicial claims filed from December 10,
2003 to October 6, 2010 need not wait for the exhaustion of the 120-day
period.

A review of the facts of the present case reveals that petitioner VGPC timely
filed its administrative claim with the CIR on December 6, 2006, and later, its
judicial claim with the CTA on January 3, 2007. The judicial claim was clearly
filed within the period of exception and was, therefore, not premature and
should not have been dismissed by the CTA En Banc.

In the present petition, VGPC prays that the Court grant its claim for refund
or the issuance of a tax credit certificate for its unutilized input VAT in the
amount of PhP14,160,807.95. The CTA Second Division, however, only
awarded the amount of PhP7,699,366.37. The petitioner has failed to present
any argument to support its entitlement to the former amount.

In any case, the Court would have been precluded from considering the same
as such would require a review of the evidence, which would constitute a
question of fact outside the Court's purview under Rule 45 of the Rules of
Court. The Court, thus, finds that the petitioner is entitled to the refund
awarded to it by the CTA Second Division in the amount of PhP7,699,366.37.

Atlas doctrine has no relevance

to the 120+30 day period for

filing judicial claim

Although the core issue of prematurity of filing has already been resolved,
the Court deems it proper to discuss the petitioner's argument that the
doctrine in Atlas, which allegedly upheld the primacy of the 2-year
prescriptive period under Section 229, should prevail over the ruling in Aichi
regarding the mandatory and jurisdictional nature of the 120+30 day period
in Section 112.
In this regard, it was thoroughly explained in San Roque that the Atlas
doctrine only pertains to the reckoning point of the 2-year prescriptive period
from the date of payment of the output VAT under Section 229, and has no
relevance to the 120+30 day period under Section 112, to wit:

The Atlas doctrine, which held that claims for refund or credit of input VAT
must comply with the two-year prescriptive period under Section 229, should
be effective only from its promulgation on 8 June 2007 until its abandonment
on 12 September 2008 in Mirant. The Atlas doctrine was limited to the
reckoning of the two-year prescriptive period from the date of payment of
the output VAT. Prior to the Atlas doctrine, the two-year prescriptive period
for claiming refund or credit of input VAT should be governed by Section
112(A) following the verba legis rule. The Mirant ruling, which abandoned the
Atlas doctrine, adopted the verba legis rule, thus applying Section 112(A) in
computing the two-year prescriptive period in claiming refund or credit of
input VAT.

The Atlas doctrine has no relevance to the 120+30 day periods under
Section 112(C) because the application of the 120+30 day periods was not in
issue in Atlas. The application of the 120+30 day periods was first raised in
Aichi, which adopted the verba legis rule in holding that the 120+30 day
periods are mandatory and jurisdictional. The language of Section 112(C) is
plain, clear, and unambiguous. When Section 112(C) states that "the
Commissioner shall grant a refund or issue the tax credit within one hundred
twenty (120) days from the date of submission of complete documents," the
law clearly gives the Commissioner 120 days within which to decide the
taxpayer's claim. Resort to the courts prior to the expiration of the 120-day
period is a patent violation of the doctrine of exhaustion of administrative
remedies, a ground for dismissing the judicial suit due to prematurity.
Philippine jurisprudence is awash with cases affirming and reiterating the
doctrine of exhaustion of administrative remedies. Such doctrine is basic and
elementary.

Thus, Atlas is only relevant in determining when to file an administrative

claim with the CIR for refund or credit of unutilized creditable input VAT, and
not for determining when to file a judicial claim with the CTA. From June 8,
2007 to September 12, 2008, the 2-year prescriptive period to file
administrative claims should be counted from the date of payment of the
output VAT tax. Before and after said period, the 2-year prescriptive period is
counted from the close of the taxable quarter when the sales were made, in
accordance with Section 112 (A). In either case, the mandatory and
jurisdictional 120+30 day period must be complied with for the filing of the
judicial claim with the CTA, except for the period provided under BIR Ruling
No. DA-489-03, as previously discussed.

The Court further noted that Atlas was decided in relation to the 1977 Tax
Code which had not yet provided for the 30-day period for the taxpayer to
appeal to the CTA from the decision or inaction of the CIR over claims for
unutilized input VAT. Clearly then, the Atlas doctrine cannot be invoked to
disregard compliance with the 120+30 day mandatory and jurisdictional
period. In San Roque, it was written:

The old rule that the taxpayer may file the judicial claim,
without waiting for the Commissioner's decision if the
two-year prescriptive period is about to expire, cannot
apply because that rule was adopted before the
enactment of the 30-day period. The 30-day period was
adopted precisely to do away with the old rule, so that
under the VAT System the taxpayer will always have 30
days to file the judicial claim even if the Commissioner
acts only on the 120th day, or does not act at all during
the 120-day period. With the 30-day period always
available to the taxpayer, the taxpayer can no longer file a
judicial claim for refund or credit of input VAT without
waiting for the Commissioner to decide until the
expiration of the 120-day period.
At any rate, even assuming that the Atlas doctrine was relevant to the
present case, it could not be applied since it was held to be effective only
from its promulgation on June 8, 2007 until its abandonment on September
12, 2008 when Mirant was promulgated. The petitioner in this case filed both
its administrative and judicial claims outside the said period of effectivity.

Aichi not applied prospectively

Petitioner VGPC also argues that Aichi should be applied prospectively and,
therefore, should not be applied to the present case. This position cannot be
given consideration.

Article 8 of the Civil Code provides that judicial decisions applying or

interpreting the law shall form part of the legal system of the Philippines and
shall have the force of law. The interpretation placed upon a law by a
competent court establishes the contemporaneous legislative intent of the
law. Thus, such interpretation constitutes a part of the law as of the date the
statute is enacted. It is only when a prior ruling of the Court is overruled, and
a different view adopted, that the new doctrine may have to be applied
prospectively in favor of parties who have relied on the old doctrine and have
acted in good faith.

Considering that the nature of the 120+30 day period was first settled in
Aichi, the interpretation by the Court of its being mandatory and
jurisdictional in nature retroacts to the date the NIRC was enacted. It cannot
be applied prospectively as no old doctrine was overturned.

The petitioner cannot rely either on the alleged jurisprudence prevailing at

the time it filed its judicial claim. The Court notes that the jurisprudence
relied upon by the petitioner consists of CTA cases. It is elementary that CTA
decisions do not constitute precedent and do not bind this Court or the
public. Only decisions of this Court constitute binding precedents, forming
part of the Philippine legal system.

As regards the cases 30 which were later decided

allegedly in contravention of Aichi, it is of note that all of
them were decided by Divisions of this Court, and not by
the Court En Banc. Any doctrine or principle of law laid
down by the Court, either rendered En Banc or in Division,
may be overturned or reversed only by the Court sitting
En Banc. Thus, the cases cited by the petitioner could not
have overturned the doctrine laid down in Aichi.
CIR not estopped

The petitioner's argument that the CIR should have been estopped from
questioning the jurisdiction of the CTA after actively participating in the
proceedings before the CTA Second Division deserves scant consideration.

It is a well-settled rule that the government cannot be estopped by

the mistakes, errors or omissions of its agents. It has been
specifically held that estoppel does not apply to the government,
especially on matters of taxation. Taxes are the nation's lifeblood
through which government agencies continue to operate and with
which the State discharges its functions for the welfare of its
constituents. Thus, the government cannot be estopped from
collecting taxes by the mistake, negligence, or omission of its
agents. Upon taxation depends the ability of the government to
serve the people for whose benefit taxes are collected. To safeguard
such interest, neglect or omission of government officials entrusted
with the collection of taxes should not be allowed to bring harm or
detriment to the people.

Rules on claims for refund or tax credit of unutilized input VAT

For clarity and guidance, the Court deems it proper to outline the rules laid
down in San Roque with regard to claims for refund or tax credit of unutilized
creditable input VAT. They are as follows:

1. When to file an administrative claim with the CIR:

a. General rule Section 112 (A) and Mirant

Within 2 years from the close of the taxable quarter when the sales
were made.

b. Exception Atlas

Within 2 years from the date of payment of the output VAT, if the
administrative claim was filed from June 8, 2007 (promulgation of Atlas) to
September 12, 2008 (promulgation of Mirant).

2. When to file a judicial claim with the CTA:

a. General rule Section 112 (D); not Section 229

i. Within 30 days from the full or partial denial of the administrative claim
by the CIR; or

ii. Within 30 days from the expiration of the 120-day period provided to
the CIR to decide on the claim. This is mandatory and jurisdictional beginning
January 1, 1998 (effectivity of 1997 NIRC).

b. Exception BIR Ruling No. DA-489-03

The judicial claim need not await the expiration of the 120-day period,
if such was filed from December 10, 2003 (issuance of BIR Ruling No. DA-
489-03) to October 6, 2010 (promulgation of Aichi).
WHEREFORE, the petition is PARTIALLY GRANTED. The February 7, 2011
Decision and the June 27, 2011 Resolution of the Court of Tax Appeals En
Banc, in CTA EB Case Nos. 561 and 562 are REVERSED and SET ASIDE. The
April 17, 2009 Decision and the October 29, 2009 Resolution of the CTA
Former Second Division in CTA Case No. 7559 are REINSTATED.

Public respondent is hereby ORDERED TO REFUND or, in the alternative, TO

ISSUE A TAX CREDIT CERTIFICATE, in favor of the petitioner the amount of
SEVEN MILLION SIX HUNDRED NINETY NINE THOUSAND THREE HUNDRED
SIXTY SIX PESOS AND 37/100 (P7,699,366.37) representing unutilized input
VAT paid on domestic purchases of non-capital goods and services, services
rendered by non-residents, and importations of non-capital goods for the first
to fourth quarters of taxable year 2005.

13.) COMMISSIONER OF INTERNAL REVENUE vs. THE

INSULAR LIFE ASSURANCE CO. LTD. (G.R. No.
197192. June 4, 2014)

"Time and again, the Court has held that it is a very desirable and necessary
judicial practice that when a court has laid down a principle of law as
applicable to a certain state of facts, it will adhere to that principle and apply
it to all future cases in which the facts are substantially the same. Stare
decisis et non quieta movere. Stand by the decisions and disturb not what is
settled. Stare decisis simply means that for the sake of certainty, a
conclusion reached in one case should be applied to those that follow if the
facts are substantially the same, even though the parties may be different. It
proceeds from the first principle of justice that, absent any powerful
countervailing considerations, like cases ought to be decided alike. Thus,
where the same questions relating to the same event have been put forward
by the parties similarly situated as in a previous case litigated and decided
by a competent court, the rule of stare decisis is a bar to any attempt to
relitigate the same issue."

Ruling
The Court has pronounced in Republic of the Philippines v. Sunlife Assurance
Company of Canada that "[u]nder the Tax Code although respondent is a
cooperative, registration with the CDA is not necessary in order for it to be
exempt from the payment of both percentage taxes on insurance premiums,
under Section 121; and documentary stamp taxes on policies of insurance or
annuities it grants, under Section 199."

Section 199 of the NIRC of 1997 provides:

Sec. 199. Documents and Papers Not Subject to Stamp Tax. The
provisions of Section 173 to the contrary notwithstanding, the following
instruments, documents and papers shall be exempt from the documentary
stamp tax:

(a) Policies of insurance or annuities made or granted by a fraternal or

beneficiary society, order, association or cooperative company, operated on
the lodge system or local cooperation plan and organized and conducted
solely by the members thereof for the exclusive benefit of each member and
not for profit.

xxx xxx xxx

As regards the applicability of Sunlife to the case at bar, the CTA, through
records, has established the following similarities between the two which call
for the application of the doctrine of stare decisis:

1. Sunlife Assurance Company of Canada and the respondent are both

engaged in mutual life insurance business in the Philippines;

2. The structures of both corporations were converted from stock life

insurance corporation to non-stock mutual life insurance for the benefit of its
policyholders pursuant to Section 266, Title 17 of the Insurance Code of 1978
and they were made prior to the effectivity of Republic Act (R.A.) No. 6938,
otherwise known as the "Cooperative Code of the Philippines";

3. Both corporations claim to be a purely cooperative corporation duly

licensed to engage in mutual life insurance business;

4. Both corporations claim exemption from payment of the documentary

stamp taxes (DST) under Section 199 (1) of the Tax Code (now Section 199
[a] of the NIRC of 1997, as amended); and

5. Petitioner CIR requires registration with the CDA before it grants tax
exemptions under the Tax Code.
The CTA observed that the factual circumstances obtaining in Sunlife and the
present case are substantially the same. Hence, the CTA based its assailed
decision on the doctrine enunciated by the Court in the said case. On the
other hand, the petitioner submitted that the doctrine in Sunlife should be
reconsidered and not be applied because the same failed to consider Section
3 (e) of R.A. No. 6939, which provides that CDA has the power to register all
cooperatives, to wit:

Section 3. Powers, Functions and Responsibilities. The Authority shall

have the following powers, functions and responsibilities:

xxx xxx xxx

(e) Register all cooperatives and their federations and unions, including
their division, merger, consolidation, dissolution or liquidation. It shall also
register the transfer of all or substantially all of their assets and liabilities and
such other matters as may be required by the Authority;

xxx xxx xxx

The petitioner proposed that considering the foregoing provision, registration

with the CDA is necessary for an association to be deemed as a cooperative
and to enjoy the tax privileges appurtenant thereto.

A perusal of Section 3 (e) of R.A. No. 6939 evidently shows that it is merely a
statement of one of the powers exercised by CDA. Neither Section 3 (e) of
R.A. No. 6939 nor any other provision in the aforementioned statute imposes
registration with the CDA as a condition precedent to claiming DST
exemption. Even then, R.A. No. 6939 is inapplicable to the case at bar, as will
be discussed shortly.

The NIRC of 1997 defined a cooperative company or association as

"conducted by the members thereof with the money collected from among
themselves and solely for their own protection and not for profit."
Consequently, as long as these requisites are satisfied, a company or
association is deemed a cooperative insofar as taxation is concerned. In this
case, the respondent has sufficiently established that it conforms with the
elements of a cooperative as defined in the NIRC of 1997 in that it is
managed by members, operated with money collected from the members
and has for its main purpose the mutual protection of members for profit.

The Court presented three justifications in Sunlife why registration with the
CDA is not necessary for cooperatives to claim exemption from DST.
First, the NIRC of 1997 does not require registration with the CDA. No tax
provision requires a mutual life insurance company to register with that
agency in order to enjoy exemption from both percentage and DST. Although
a provision of Section 8 of the Revenue Memorandum Circular (RMC) No. 48-
91 requires the submission of the Certificate of Registration with the CDA
before the issuance of a tax exemption certificate, that provision cannot
prevail over the clear absence of an equivalent requirement under the Tax
Code.

The respondent correctly pointed out that in other provisions of the NIRC,
registration with the CDA is expressly required in order to avail of certain tax
exemptions or preferential tax treatment a requirement which is
noticeably absent in Section 199 of the NIRC. Quoted below are examples of
cooperatives which are expressly mandated by law to be registered with the
CDA before their transactions could be considered as exempted from value
added tax:

Sec. 109. Exempt Transactions. The following shall be exempt from the
value-added tax:

xxx xxx xxx

(r) Sales by agricultural cooperatives duly registered with the Cooperative

Development Authority to their members as well as sale of their produce,
whether in its original state or processed form, to non-members; their
importation of direct farm inputs, machineries and equipment, including
spare parts thereof, to be used directly and exclusively in the production
and/or processing of their produce;

(s) Sales by electric cooperatives duly registered with the Cooperative

Development Authority or National Electrification Administration, relative to
the generation and distribution of electricity as well as their importation of
machineries and equipment, including spare parts, which shall be directly
used in the generation and distribution of electricity;

(t) Gross receipts from lending activities by credit or multi-purpose

cooperatives duly registered with the Cooperative Development Authority
whose lending operation is limited to their members;

(u) Sales by non-agricultural, non-electric and non-credit cooperatives duly

registered with the Cooperative Development Authority: Provided, That the
share capital contribution of each member does not exceed Fifteen thousand
pesos ([PhP]15,000) and regardless of the aggregate capital and net surplus
ratably distributed among the members;

xxx xxx xxx (Emphasis ours)

This absence of the registration requirement under Section 199 clearly

manifests the intention of the Legislative branch of the government to do
away with registration before the CDA for a cooperative to benefit from the
DST exemption under this particular section.

Second, the provisions of the Cooperative Code of the Philippines do not

apply. The history of the Cooperative Code was amply discussed in Sunlife
where it was noted that cooperatives under the old law, Presidential Decree
(P.D.) No. 175 "referred only to an organization composed primarily of small
producers and consumers who voluntarily joined to form a business
enterprise that they themselves owned, controlled, and patronized. The
Bureau of Cooperatives Development under the Department of Local
Government and Community Development (later Ministry of Agriculture)
had the authority to register, regulate and supervise only the following
cooperatives: (1) barrio associations involved in the issuance of certificates
of land transfer; (2) local or primary cooperatives composed of natural
persons and/or barrio associations; (3) federations composed of cooperatives
that may or may not perform business activities; and (4) unions of
cooperatives that did not perform any business activities. Respondent does
not fall under any of the abovementioned types of cooperatives required to
be registered under [P.D. No.] 175."

Thus, when the subsequent law, R.A. No. 6939, concerning cooperatives was
enacted, the respondent was not covered by said law and was not required
to be registered, viz.:

When the Cooperative Code was enacted years later, all cooperatives that
were registered under PD 175 and previous laws were also deemed
registered with the CDA. Since respondent was not required to be registered
under the old law on cooperatives, it followed that it was not required to be
registered even under the new law.

. . . Only cooperatives to be formed or organized under the Cooperative Code

needed registration with the CDA. . . . .

"The distinguishing feature of a cooperative enterprise is the mutuality of

cooperation among its member-policyholders united for that purpose. So
long as respondent meets this essential feature, it does not even have to use
and carry the name of a cooperative to operate its mutual life insurance
business. Gratia argumenti that registration is mandatory, it cannot deprive
respondent of its tax exemption privilege merely because it failed to register.
The nature of its operations is clear; its purpose well-defined. Exemption
when granted cannot prevail over administrative convenience."

Third, the Insurance Code does not require registration with the CDA. "The
provisions of this Code primarily govern insurance contracts; only if a
particular matter in question is not specifically provided for shall the
provisions of the Civil Code on contracts and special laws govern."

There being no cogent reason for the Court to deviate from its ruling in
Sunlife, the Court holds that the respondent, being a cooperative company
not mandated by law to be registered with the CDA, cannot be required
under RMC No. 48-91, a mere circular, to be registered prior to availing of
DST exemption.

"While administrative agencies, such as the Bureau of Internal

Revenue, may issue regulations to implement statutes, they are
without authority to limit the scope of the statute to less than
what it provides, or extend or expand the statute beyond its
terms, or in any way modify explicit provisions of the law. Indeed,
a quasi-judicial body or an administrative agency for that matter
cannot amend an act of Congress. Hence, in case of a discrepancy
between the basic law and an interpretative or administrative
ruling, the basic law prevails."

14.) MIRAMAR FISH COMPANY, INC. vs.

COMMISSIONER OF INTERNAL REVENUE
(G.R. No. 185432. June 4, 2014)
At the outset, this Court is not unaware that in a petition for review on
certiorari under Rule 45 of the Rules of Court, only questions of law may be
raised. The Court is not a trier of facts and does not normally undertake the
re-examination of the evidence presented by the contending parties during
the trial of the case considering that the findings of facts of the [CTA] are
conclusive and binding on the Court and they carry even more weight
when the [CTA En Banc] affirms the factual findings of the trial court.
However, this Court had recognized several exceptions to this rule, including
instances when the appellate court manifestly overlooked relevant facts not
disputed by the parties, which, if properly considered, would justify a
different conclusion.

Records of this case reveal that the CTA in Division in C.T.A. Case No. 6905
merely focused on the strict compliance with the invoicing and accounting
requirements set forth under Sections 113 and 237 of the NIRC of 1997, as
amended, in relation to Section 4.108-1 of Revenue Regulations (RR) No. 7-
95. These same findings were adopted and affirmed in toto by the CTA En
Banc in the assailed 18 November 2008 Decision.

While the invoicing requirements is a valid issue, we find it imperative to first

and foremost determine whether or not the CTA properly acquired
jurisdiction over petitioner's claim covering taxable years 2002 and 2003,
taking into consideration the timeliness of the filing of its judicial claim
pursuant to Section 112 of the NIRC of 1997, as amended, and consistent
with the pronouncements made in the San Roque case. Clearly, the claim of
petitioner for the TCC can proceed only upon compliance with the
jurisdictional requirement.

Section 7 of RA No. 1125, which was thereafter amended by RA No. 9282,

clearly defined the appellate jurisdiction of the CTA:

Section 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive

appellate jurisdiction to review by appeal, as herein provided.

(1) Decisions of the Collector 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 law or part of law administered
by the Bureau of Internal Revenue;

xxx xxx xxx

Relative thereto, Section 11 of the same law prescribes how the said appeal
should be taken, to wit:

Section 11. Who may appeal; Effect of appeal. Any person, association or
corporation adversely affected by a decision or ruling of the Collector of
Internal Revenue, the Collector of Customs or any provincial or city Board of
Assessment Appeals may file an appeal in the Court of Tax Appeals within
thirty days after the receipt of such decision or ruling.

xxx xxx xxx

The timeliness in the administrative and judicial claims can be found in

Section 112 of the NIRC of 1997, as amended. It reads:

SEC. 112. Refunds or Tax Credits of Input Tax.

(A) Zero-rated or Effectively Zero-rated Sales. Any VAT-registered

person, whose sales are zero-rated or effectively zero-rated may, within two
(2) 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, except transitional input tax, to
the extent that such input tax has not been applied against output tax: . . .

xxx xxx xxx

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made.
In proper cases, the Commissioner shall grant a refund or issue the tax credit
certificate for creditable input taxes within one hundred twenty (120) days
from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) hereof.

In case of full or partial 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, the taxpayer affected may, within thirty (30) days
from the receipt of the decision denying the claim or after the expiration of
the one hundred twenty-day period, appeal the decision or the unacted claim
with the Court of Tax Appeals.

xxx xxx xxx

As earlier stated, the proper interpretation of the above-quoted provision was

finally settled in the San Roque case by this Court sitting En Banc. The
relevant portions of the discussion pertinent to the focal issue in the present
case are quoted hereunder as follows:
To repeat, a claim for tax refund or credit, like a claim for tax refund
exemption, is construed strictly against the taxpayer. One of the conditions
for a judicial claim of refund or credit under the VAT System is compliance
with the 120+30 day mandatory and jurisdictional periods. Thus, strict
compliance with the 120+30 day periods is necessary for such a claim to
prosper, whether before, during, or after the effectivity of the Atlas doctrine,
except for the period from the issuance of BIR Ruling No. DA-489-03 on 10
December 2003 to 6 October 2010 when the Aichi doctrine was adopted,
which again reinstated the 120+30 day periods as mandatory and
jurisdictional.

In Mindanao II Geothermal Partnership v. Commissioner of Internal Revenue,

the Second Division of this Court, in applying therein the ruling in the San
Roque case, provided a Summary of Rules on Prescriptive Periods Involving
VAT as a guide for all parties concerned, to wit:

We summarize the rules on the determination of the prescriptive period for

filing a tax refund or credit of unutilized input VAT as provided in Section 112
of the 1997 Tax Code, as follows:

(1) An administrative claim must be filed with the CIR within two years
after the close of the taxable quarter when the zero-rated or effectively zero-
rated sales were made.

(2) The CIR has 120 days from the date of submission of complete
documents in support of the administrative claim within which to decide
whether to grant a refund or issue a tax credit certificate. The 120-day period
may extend beyond the two-year period from the filing of the administrative
claim if the claim is filed in the later part of the two-year period. If the 120-
day period expires without any decision from the CIR, then the administrative
claim may be considered to be denied by inaction.

(3) A judicial claim must be filed with the CTA within 30 days from the
receipt of the CIR's decision denying the administrative claim or from the
expiration of the 120-day period without any action from the CIR.

(4) All taxpayers, however, can rely on BIR Ruling No. DA-489-03 from the
time of its issuance on 10 December 2003 up to its reversal by this Court in
Aichi on 6 October 2010, as an exception to the mandatory and jurisdictional
120+30 day periods.

Certainly, it is evident from the foregoing jurisprudential pronouncements

that a taxpayer-claimant only had a limited period of thirty (30) days from
the expiration of the 120-day period of inaction of the Commissioner of
Internal Revenue (CIR) to file its judicial claim with the CTA, with the
exception of claims made during the effectivity of BIR Ruling No. DA-489-03
(from 10 December 2003 to 5 October 2010). Failure to do so, the judicial
claim shall prescribe or be considered as filed out of time.

Applying the foregoing discussion in the case at bench, although it appears

that petitioner has indeed complied with the required two-year period within
which to file a refund/tax credit claim with the BIR by filing its administrative
claims on 24 February 2003 and 25 March 2004 (within the period from the
close of the taxable quarters for the years 2002 and 2003, respectively,
when the relevant sales or purchases were made), this Court finds that
petitioner's corresponding judicial claim insofar as to the four quarters of
taxable year 2002 was filed beyond the 30-day period,

Section 112 (D) specifically states that in case of failure on the part of the
respondent to act on the application within the 120-day period prescribed by
law, petitioner only has thirty (30) days after the expiration of the 120-day
period to appeal the enacted claim with the CTA. Since petitioner's judicial
claim for the aforementioned quarters for taxable year 2002 was filed before
the CTA only on 30 March 2004, which was way beyond the mandatory
120+30 days to seek judicial recourse, such non-compliance with the
mandatory period of thirty (30) days is fatal to its refund claim on the ground
of prescription.

Distinctly, in its attempt to justify the timeliness of its judicial claim covering
taxable year 2002, petitioner made it appear in its Letter dated 25 March
2004 that there has been an amendment on its administrative claim
covering taxable year 2002. It explained:

We wish to make it clear that this letter, insofar as the 2002 claim is
concerned, amends the original claim for refund or issuance of TCC filed on
February 24, 2003. Please note that the difference between the amount
claimed in the original administrative claim filed (P6,751,751.65) and that
claimed in this letter (P6,845,224.42) is in view of the fact that the original
claim merely took into consideration the amount which, at that time, could
be supported by the "Summary Name of Suppliers, Invoices and Official
Receipts". As abovementioned, the amount for 2002 subject of the instant
claim is based on the figures reflected in the VAT returns filed for 2002.
However, we are not persuaded by such allegation considering that while
there was a supposed difference in the amounts being claimed for refund in
the Letter of Request for VAT Claim dated 24 February 2003 and in the Letter
dated 25 March 2004, a scrutiny of the subject letters reveals that both rely
on the figures reflected in the VAT returns filed for 2002. Contrary to
petitioner's assertion, the Transmittal Receipt attached to the 24 February
2003 Letter visibly shows that it has simultaneously submitted various
documents in support of its 2002 claim, including a copy of the VAT return for
2002. Thus, this Court cannot consider the subsequent Letter dated 25
March 2004 to have amended the previous one covering its refund claim for
taxable year 2002. For this reason, failure of petitioner to observe the 30-day
period under Section 112 of the NIRC of 1997, as amended, through its
belated filing of the Petition for Review before the CTA warrants a dismissal
with prejudice for lack of jurisdiction.

On the other hand, this Court has allowed the amendment of petitioner's
refund claim covering taxable year 2003 contained in the 25 March 2004
Letter since there was a statement therein that there were amended
quarterly VAT returns filed on 12 March 2004. Such undisputed factual
allegation is considered a valid justification in amending its earlier
administrative letter dated 15 March 2004. The aforesaid rationalization is
not without any legal basis as can be gleaned from the declaration in the San
Roque case, wherein the High Court considered the administrative claims for
refund of San Roque properly amended by reason of the amended quarterly
VAT returns. As a result, the 120+30 day prescriptive periods to seek judicial
recourse for petitioner's refund claim involving taxable year 2003 shall
commence only on 25 March 2004, and not on 15 March 2004.

Parenthetically, even if it is shown that petitioner did not strictly comply with
the mandatory 120+30 day prescriptive periods under Section 112 of the
NIRC of 1997, as amended, its administrative claim covering taxable year
2003 falls within the effectivity of BIR Ruling No. DA-489-03 (10 December
2003 to 5 October 2010), being an exception thereto. Hence, there is no
more need for petitioner to wait for the 120-day period to expire before it can
file its appropriate judicial claim before the CTA. Accordingly, the CTA indeed
acquired jurisdiction over petitioner's refund claim for taxable year 2003.

It must be emphasized that jurisdiction over the subject matter or nature of

an action is fundamental for a court to act on a given controversy, and is
conferred only by law and not by the consent or waiver upon a court which,
otherwise, would have no jurisdiction over the subject matter or nature of an
action. Lack of jurisdiction of the court over an action or the subject matter
of an action cannot be cured by the silence, acquiescence, or even by
express consent of the parties. If the court has no jurisdiction over the nature
of an action, its only jurisdiction is to dismiss the case. The court could not
decide the case on the merits.

Having ruled on the jurisdictional aspect of this case, we next discuss the
significance of strict compliance with the invoicing requirements under
existing laws and prevailing jurisprudence in order to be entitled to a refund
claim of excess and/or unutilized input VAT.

This is not novel.

It is worth mentioning that the High Court already ruled on the significance of
imprinting the word "zero-rated" for zero-rated sales covered by its receipts
or invoices, pursuant to Section 4.108-1 of Revenue Regulations No. 7-95.
Thus, in Panasonic Communications Imaging Corporation of the Philippines v.
Commissioner of Internal Revenue, the Second Division of this Court
enunciated:

But when petitioner Panasonic made the export sales subject of this case,
i.e., from April 1998 to March 1999, the rule that applied was Section 4.108-1
of RR 7-95, otherwise known as the Consolidated Value-Added Tax
Regulations, which the Secretary of Finance issued on December 9, 1995 and
took effect on January 1, 1996. It already required the printing of the word
"zero-rated" on the invoices covering zero-rated sales. When R.A. 9337
amended the 1997 NIRC on November 1, 2005, it made this particular
revenue regulation a part of the tax code. This conversion from regulation to
law did not diminish the binding force of such regulation with respect to acts
committed prior to the enactment of that law.

Section 4.108-1 of RR 7-95 proceeds from the rule-making authority granted

to the Secretary of Finance under Section 245 of the 1977 NIRC (Presidential
Decree 1158) for the efficient enforcement of the tax code and of course its
amendments. The requirement is reasonable and is in accord with the
efficient collection of VAT from the covered sales of goods and services. As
aptly explained by the CTA's First Division, the appearance of the word "zero-
rated" on the face of invoices covering zero-rated sales prevents buyers from
falsely claiming input VAT from their purchases when no VAT was actually
paid. If, absent such word, a successful claim for input VAT is made, the
government would be refunding money it did not collect.
Further, the printing of the word "zero-rated" on the invoice helps segregate
sales that are subject to 10% (now 12%) VAT from those sales that are zero-
rated. Unable to submit the proper invoices, petitioner Panasonic has been
unable to substantiate its claim for refund.

xxx xxx xxx

This Court held that, since the "BIR authority to print" is not one of the items
required to be indicated on the invoices or receipts, the BIR erred in denying
the claim for refund. Here, however, the ground for denial of petitioner
Panasonic's claim for tax refund the absence of the word 'zero-rated' on its
invoices is one which is specifically and precisely included in the above
enumeration. Consequently, the BIR correctly denied Panasonic's claim for
tax refund.

For emphasis, the settled rule is that absence or non-printing

of the word "zero-rated" in petitioner's invoices is fatal to
its claim for the refund and/or tax credit representing its
unutilized input VAT attributable to its zero-rated sales.
Equally essential herein, Section 113 of the NIRC of 1997, as amended,
categorically provides that a VAT-registered entity, like petitioner, shall issue
a duly registered VAT invoice or official receipt, which must contain "a
statement that the seller is a VAT-registered person." Therefore, as correctly
articulated by the CTA En Banc, compliance with the aforesaid invoicing
requirements is mandatory. Thus:

It bears stressing that the law and regulations are explicit in emphasizing
strict compliance with the invoicing requirements because for the same
transactions the output VAT of the seller becomes the input VAT of the
purchaser. Pursuant to Sections 106(D)(1) and 108(C) of the NIRC of 1997, as
amended, in relation to Section 110 of the same Code, the output or input
tax on the sale or purchase of goods is determined by the total amount
indicated in the invoice, while the output or input tax on the sale or
purchases of services is determined by the total amount indicated in the
official receipt. Since petitioner is engaged in the sale of goods, specifically,
canned tuna and canned pet food (Joint Stipulation of Facts and Issues, par.
3), its output tax, if any, will be determined by the total amount indicated in
the invoices. Thus, as required by Section 113 of the NIRC of 1997, as
amended, petitioner's sales invoices must indicate that it is a VAT-registered
person, which in this case was not complied with by petitioner.
At this juncture, and to settle strictness in compliance, we go to the textbook
lesson that if the language of the law is clear, explicit and unequivocal, it
admits no room for interpretation but merely application. A statute clear and
unambiguous on its face need not be interpreted; stated otherwise, the rule
is that only statutes with an ambiguous or doubtful meaning may be the
subject of statutory construction. The provisions of Sections 113 and 237 of
the NIRC of 1997, as amended, and Section 4.108-1 of RR No. 7-95, are clear
in enumerating the invoicing requirements necessary to be shown in order to
qualify as duly registered receipts or sales or commercial invoices issued by
VAT-registered entities, such as petitioner herein, for the purpose of claiming
for refund of creditable input tax due or paid attributable to any zero-rated or
effectively zero-rates sales. Absent compliance, the unavoidable result is
immediate denial of the claim.

By way of reiteration, the CTA has no jurisdiction over petitioner's judicial

appeal covering its refund claim for taxable year 2002 on the ground of
prescription, consistent with the ruling in the San Roque case. While as to its
refund claim for taxable year 2003, the same shall likewise be denied for
failure of petitioner to comply with the mandatory invoicing requirements
provided for under Section 113 of the NIRC of 1997, as amended, and
Section 4.108-1 of RR No.

15.) THE HONGKONG AND SHANGHAI BANKING

CORPORATION LIMITED-PHILIPPINE BRANCHES vs.
COMMISSIONER OF INTERNAL REVENUE (G.R. No.
166018. June 4, 2014)

HSBC's investor-clients maintain Philippine peso and/or foreign currency

accounts, which are managed by HSBC through instructions given through
electronic messages. The said instructions are standard forms known in the
banking industry as SWIFT, or "Society for Worldwide Interbank Financial
Telecommunication."
The Court finds for HSBC.

The Court agrees with the CTA that the DST under Section 181 of the Tax
Code is levied on the acceptance or payment of "a bill of exchange
purporting to be drawn in a foreign country but payable in the Philippines"
and that "a bill of exchange is an unconditional order in writing addressed by
one person to another, signed by the person giving it, requiring the person to
whom it is addressed to pay on demand or at a fixed or determinable future
time a sum certain in money to order or to bearer." A bill of exchange is one
of two general forms of negotiable instruments under the Negotiable
Instruments Law.

The Court further agrees with the CTA that the electronic messages of
HSBC's investor-clients containing instructions to debit their respective local
or foreign currency accounts in the Philippines and pay a certain named
recipient also residing in the Philippines is not the transaction contemplated
under Section 181 of the Tax Code as such instructions are "parallel to an
automatic bank transfer of local funds from a savings account to a checking
account maintained by a depositor in one bank." The Court favorably adopts
the finding of the CTA that the electronic messages "cannot be considered
negotiable instruments as they lack the feature of negotiability, which, is the
ability to be transferred" and that the said electronic messages are "mere
memoranda" of the transaction consisting of the "actual debiting of the
[investor-client-]payor's local or foreign currency account in the Philippines"
and "entered as such in the books of account of the local bank," HSBC.

More fundamentally, the instructions given through electronic messages that

are subjected to DST in these cases are not negotiable instruments as they
do not comply with the requisites of negotiability under Section 1 of the
Negotiable Instruments Law, which provides:

Sec. 1. Form of negotiable instruments. An instrument to be

negotiable must conform to the following requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in

money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or

otherwise indicated therein with reasonable certainty.

The electronic messages are not signed by the investor-clients as supposed

drawers of a bill of exchange; they do not contain an unconditional order to
pay a sum certain in money as the payment is supposed to come from a
specific fund or account of the investor-clients; and, they are not payable to
order or bearer but to a specifically designated third party. Thus, the
electronic messages are not bills of exchange. As there was no bill of
exchange or order for the payment drawn abroad and made payable here in
the Philippines, there could have been no acceptance or payment that will
trigger the imposition of the DST under Section 181 of the Tax Code.

Section 181 of the 1997 Tax Code, which governs HSBC's claim for tax refund
for taxable year 1998 subject of G.R. No. 167728, provides:

SEC. 181. Stamp Tax Upon Acceptance of Bills of Exchange and Others.
Upon any acceptance or payment of any bill of exchange or order for the
payment of money purporting to be drawn in a foreign country but payable
in the Philippines, there shall be collected a documentary stamp tax of Thirty
centavos (P0.30) on each Two hundred pesos (P200), or fractional part
thereof, of the face value of any such bill of exchange, or order, or the
Philippine equivalent of such value, if expressed in foreign currency.

Section 230 of the 1977 Tax Code, as amended, which governs HSBC's claim
for tax refund for DST paid during the period September to December 1997
and subject of G.R. No. 166018, is worded exactly the same as its
counterpart provision in the 1997 Tax Code quoted above.

The origin of the above provision is Section 117 of the Tax Code of 1904, 17
which provided:

SECTION 117. The acceptor or acceptors of any bill of exchange or order

for the payment of any sum of money drawn or purporting to be drawn in
any foreign country but payable in the Philippine Islands, shall, before paying
or accepting the same, place thereupon a stamp in payment of the tax upon
such document in the same manner as is required in this Act for the
stamping of inland bills of exchange or promissory notes, and no bill of
exchange shall be paid nor negotiated until such stamp shall have been
affixed thereto.
It then became Section 30 (h) of the 1914 Tax Code:

SEC. 30. Stamp tax upon documents and papers. Upon documents,
instruments, and papers, and upon acceptances, assignments, sales, and
transfers of the obligation, right, or property incident thereto documentary
taxes for and in respect of the transaction so had or accomplished shall be
paid as hereinafter prescribed, by the persons making, signing, issuing,
accepting, or transferring the same, and at the time such act is done or
transaction had:

xxx xxx xxx

(h) Upon any acceptance or payment upon acceptance of any bill of

exchange or order for the payment of money purporting to be drawn in a
foreign country but payable in the Philippine Islands, on each two hundred
pesos, or fractional part thereof, of the face value of any such bill of
exchange or order, or the Philippine equivalent of such value, if expressed in
foreign currency, two centavos[.]

It was implemented by Section 46 in relation to Section 39 of Revenue

Regulations No. 26, as amended:

SEC. 39. A Bill of Exchange is one that "denotes checks, drafts, and all
other kinds of orders for the payment of money, payable at sight or on
demand, or after a specific period after sight or from a stated date."

SEC. 46. Bill of Exchange, etc. When any bill of exchange or order for
the payment of money drawn in a foreign country but payable in this country
whether at sight or on demand or after a specified period after sight or from
a stated date, is presented for acceptance or payment, there must be affixed
upon acceptance or payment of documentary stamp equal to P0.02 for each
P200 or fractional part thereof.

It took its present form in Section 218 of the Tax Code of 1939, which
provided:

SEC. 218. Stamp Tax Upon Acceptance of Bills of Exchange and Others.
Upon any acceptance or payment of any bill of exchange or order for the
payment of money purporting to be drawn in a foreign country but payable
in the Philippines, there shall be collected a documentary stamp tax of four
centavos on each two hundred pesos, or fractional part thereof, of the face
value of any such bill of exchange or order, or the Philippine equivalent of
such value, if expressed in foreign currency.
It then became Section 230 of the 1977 Tax Code, as amended by
Presidential Decree Nos. 1457 and 1959, which, as stated earlier, was
worded exactly as Section 181 of the current Tax Code:

SEC. 230. Stamp tax upon acceptance of bills of exchange and others.
Upon any acceptance or payment of any bill of exchange or order for the
payment of money purporting to be drawn in a foreign country but payable
in the Philippines, there shall be collected a documentary stamp tax of thirty
centavos on each two hundred pesos, or fractional part thereof, of the face
value of any such bill of exchange, or order, or the Philippine equivalent of
such value, if expressed in foreign currency.

The pertinent provision of the present Tax Code has therefore remained
substantially the same for the past one hundred years. The identical text and
common history of Section 230 of the 1977 Tax Code, as amended, and the
1997 Tax Code, as amended, show that the law imposes DST on either (a)
the acceptance or (b) the payment of a foreign bill of exchange or order for
the payment of money that was drawn abroad but payable in the Philippines.

DST is an excise tax on the exercise of a right or privilege to transfer

obligations, rights or properties incident thereto. Under Section 173 of the
1997 Tax Code, the persons primarily liable for the payment of the DST are
those (1) making, (2) signing, (3) issuing, (4) accepting, or (5) transferring
the taxable documents, instruments or papers.

In general, 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. Examples of such
privileges, the exercise of which, as effected through the issuance of
particular documents, are subject to the payment of DST are leases of lands,
mortgages, pledges and trusts, and conveyances of real property.

As stated above, Section 230 of the 1977 Tax Code, as amended, now
Section 181 of the 1997 Tax Code, levies DST on either (a) the acceptance or
(b) the payment of a foreign bill of exchange or order for the payment of
money that was drawn abroad but payable in the Philippines. In other words,
it levies DST as an excise tax on the privilege of the drawee to accept or pay
a bill of exchange or order for the payment of money, which has been drawn
abroad but payable in the Philippines, and on the corresponding privilege of
the drawer to have acceptance of or payment for the bill of exchange or
order for the payment of money which it has drawn abroad but payable in
the Philippines.
Acceptance applies only to bills of exchange. Acceptance of a bill of
exchange has a very definite meaning in law. In particular, Section 132 of the
Negotiable Instruments Law provides:

Sec. 132. Acceptance; how made, by and so forth. The acceptance of a

bill [of exchange] is the signification by the drawee of his assent to the order
of the drawer. The acceptance must be in writing and signed by the drawee.
It must not express that the drawee will perform his promise by any other
means than the payment of money.

Under the law, therefore, what is accepted is a bill of exchange, and the
acceptance of a bill of exchange is both the manifestation of the drawee's
consent to the drawer's order to pay money and the expression of the
drawee's promise to pay. It is "the act by which the drawee manifests his
consent to comply with the request contained in the bill of exchange directed
to him and it contemplates an engagement or promise to pay." Once the
drawee accepts, he becomes an acceptor. As acceptor, he engages to pay
the bill of exchange according to the tenor of his acceptance.

Acceptance is made upon presentment of the bill of exchange, or within 24

hours after such presentment. Presentment for acceptance is the production
or exhibition of the bill of exchange to the drawee for the purpose of
obtaining his acceptance.

Presentment for acceptance is necessary only in the instances where the law
requires it. In the instances where presentment for acceptance is not
necessary, the holder of the bill of exchange can proceed directly to
presentment for payment.

Presentment for payment is the presentation of the instrument to the person

primarily liable for the purpose of demanding and obtaining payment thereof.

Thus, whether it be presentment for acceptance or presentment for

payment, the negotiable instrument has to be produced and shown to the
drawee for acceptance or to the acceptor for payment.

Revenue Regulations No. 26 recognizes that the acceptance or payment (of

bills of exchange or orders for the payment of money that have been drawn
abroad but payable in the Philippines) that is subjected to DST under Section
181 of the 1997 Tax Code is done after presentment for acceptance or
presentment for payment, respectively. In other words, the acceptance or
payment of the subject bill of exchange or order for the payment of money is
done when there is presentment either for acceptance or for payment of the
bill of exchange or order for the payment of money.

Applying the above concepts to the matter subjected to DST in these cases,
the electronic messages received by HSBC from its investor-clients abroad
instructing the former to debit the latter's local and foreign currency
accounts and to pay the purchase price of shares of stock or investment in
securities do not properly qualify as either presentment for acceptance or
presentment for payment. There being neither presentment for acceptance
nor presentment for payment, then there was no acceptance or payment
that could have been subjected to DST to speak of.

Indeed, there had been no acceptance of a bill of exchange or order for the
payment of money on the part of HSBC. To reiterate, there was no bill of
exchange or order for the payment drawn abroad and made payable here in
the Philippines. Thus, there was no acceptance as the electronic messages
did not constitute the written and signed manifestation of HSBC to a drawer's
order to pay money. As HSBC could not have been an acceptor, then it could
not have made any payment of a bill of exchange or order for the payment of
money drawn abroad but payable here in the Philippines. In other words,
HSBC could not have been held liable for DST under Section 230 of the 1977
Tax Code, as amended, and Section 181 of the 1997 Tax Code as it is not "a
person making, signing, issuing, accepting, or, transferring" the taxable
instruments under the said provision. Thus, HSBC erroneously paid DST on
the said electronic messages for which it is entitled to a tax refund.

16.) JESSE PHILIP B. EIJANSANTOS vs. SPECIAL PRESIDENTIAL

TASK FORCE 156, represented by ATTY. ALLAN U. VENTURA
(G.R. No. 203696. June 2, 2014)
The petition lacks merit.

The long standing policy of the Court is non-interference in the powers given
by no less than the Constitution to the Office of the Ombudsman. Except in
clear cases of grave abuse of discretion, the Court will not interfere with the
exercise by the Ombudsman of its investigatory and prosecutorial powers on
complaints filed against erring public officials and employees. Its findings of
fact are conclusive when supported by substantial evidence and are
accorded due respect and weight, especially when they are affirmed by the
CA. Generally, in reviewing administrative decisions, it is beyond the
province of this Court to weigh the conflicting evidence, determine the
credibility of witnesses, or otherwise substitute its judgment for that of the
administrative agency with respect to the sufficiency of evidence. It is not
the function of this Court to analyze and weigh the parties' evidence all over
again except when there is serious ground to believe that a possible
miscarriage of justice would thereby result. The recent case of Conrado
Casing vs. Hon. Ombudsman is enlightening:

The Constitution and R.A. No. 6770 endowed the Office of the Ombudsman
with wide latitude, in the exercise of its investigatory and prosecutory
powers, to pass upon criminal complaints involving public officials and
employees. Specifically, the determination of whether probable cause
exists is a function that belongs to the Office of the Ombudsman. Whether a
criminal case, given its attendant facts and circumstances, should be filed or
not is basically its call.

As a general rule, the Court does not interfere with the Office of the
Ombudsman's exercise of its investigative and prosecutorial powers, and
respects the initiative and independence inherent in the Office of the
Ombudsman which, "beholden to no one, acts as the champion of the people
and the preserver of the integrity of the public service." While the
Ombudsman's findings as to whether probable cause exists are generally not
reviewable by this Court, where there is an allegation of grave abuse of
discretion, the Ombudsman's act cannot escape judicial scrutiny under the
Court's own constitutional power and duty "to determine whether or not
there has been grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government."
Grave abuse of discretion implies a capricious and whimsical exercise of
judgment tantamount to lack of jurisdiction. The Ombudsman's exercise of
power must have been done in an arbitrary or despotic manner which
must be so patent and gross as to amount to an evasion of a positive duty or
a virtual refusal to perform the duty enjoined or to act at all in contemplation
of law in order to exceptionally warrant judicial intervention. The petitioner
failed to show the existence of grave abuse of discretion in this case.

In this regard, the Court agrees with the CA that there was no error
committed by the Ombudsman. The record shows that there is enough
evidence on record warranting the finding of guilt for grave misconduct
against the petitioner.

Misconduct has a legal and uniform definition. It is defined as an intentional

wrongdoing or a deliberate violation of a rule of law or standard of behavior,
especially by a government official. A misconduct is grave where the
elements of corruption, clear intent to violate the law or flagrant disregard of
established rule are present.

In the case at bench, the petitioner does not dispute that his duties and
responsibilities as an evaluator for the wearable/textile division are the
following:

a) check listing of tax credit claims;

b) preparation of evaluation reports and the computation of tax credit

claims;

c) preparation of correspondence and other communication letters to

exporters/claimants;

d) attending to inquiries and assistance on specific cases; and

e) physical verification/inspection of manufacturing facilities and plant

inspections

The petitioner did not deny that he evaluated and processed Evergreen's tax
credit application which was filed and accepted by the Center on November
26, 1993 and subsequently approved on January 5, 1994, and that TCC No.
020829 was subsequently issued to Evergreen.

He, however, claimed that he properly followed the procedure adopted by

the Center in the processing of tax credit applications by 1] requiring the
applicant to submit complete import documents (bills of lading, commercial
invoices, import entry internal revenue declaration and BOC official receipts)
and export documents (bills of lading, invoices, bank credit memo and export
declaration); 2] preparing an evaluation report which would include pertinent
information/data on the applicant, computation of the amount of tax credit
applied for; 3] submitting of the evaluation report to the immediate
supervisor recommending either the approval or denial of the particular tax
credit claim; and 4] submitting of the final evaluation report to the
immediate supervisor for further action after the latter's approval or after the
necessary corrections had been made by the latter.

He stressed that his participation as an evaluator ended after the approval of

his evaluation report by his superiors. He added that the procedure for
approval and release of the TCC to the applicant was already beyond his
function and duty as an evaluator.

In other words, the petitioner is trying to tell us that his duties and
responsibilities as an evaluator were just limited and that he performed the
same based on the directives given by the Center and the instructions given
to him by his superiors. Accordingly, he could not be considered negligent in
his duties and be adjudged guilty of grave misconduct for the alleged tax
credit scam.

The Court is not convinced.

The petitioner apparently failed in one of his duties and responsibilities as an

evaluator which was to conduct a physical verification/inspection of
manufacturing and plant facilities. While he followed the instructions and
training given to him by his superiors at the Center, he neither conducted a
physical verification/inspection on the actual office premises and the
manufacturing and plant facilities of Evergreen, nor did he conduct such
verification or inspection on Evergreen's suppliers and exporters. Definitely,
as a Senior Tax Specialist, the petitioner ought to know that there was a
necessity to thoroughly verify the authenticity of tax credit applications
before processing the same.

It was not just enough for the petitioner to require a tax credit applicant to
submit import and export documents and evaluate the particular application
based merely on the form and substance of the documents submitted. He
should have conducted a physical verification/inspection relating to all
important information stated therein such as the exact address and physical
location of the applicant company's business office including the true names,
background and exact addresses of the applicant's key officers, as well as
those of the suppliers and exporters. The petitioner should have left no stone
unturned, so to speak, in verifying such vital information. He should not have
been satisfied with his own judgment that the documents submitted to him
appeared to be correct and regular on its face. He should have dug deeper
instead of just looking at the surface in finding out the genuineness of the
documents before processing tax credit applications and finally submitting
the same to his superiors.

There were numerous TCCs issued to Evergreen worth several millions of

pesos. Based on the "Summary of TCCs Issued to Evergreen" on record,
there were several evaluators that were assigned to handle the processing of
Evergreen's TCCs. The petitioner was one of the evaluators who handled TCC
No. 020829. It was also established that from January 1994 to June 1998, a
total of thirty four (34) TCCs worth PhP110,194,158.00 were issued to
Evergreen. None of the evaluators, not even the reviewers and approving
authorities, were able to prevent the tax credit fraud from happening. All of
them had the same lame excuse that the documents submitted to them
for evaluation appeared to be regular and correct and that they never
conducted a physical verification/inspection of offices, manufacturing and
plant facilities.

There is no doubt that the petitioner, together with the other evaluators,
committed a deliberate disregard of established rules which can only be
considered as grave misconduct.

Flagrant disregard of rules is a ground that jurisprudence has already

touched upon. It has been demonstrated, among others, in the instances
when there had been open defiance of a customary rule; in the repeated
voluntary disregard of established rules in the procurement of supplies; in
the practice of illegally collecting fees more than what is prescribed for
delayed registration of marriages; when several violations or disregard of
regulations governing the collection of government funds were committed;
and when the employee arrogated unto herself responsibilities that were
clearly beyond her given duties. The common denominator in these cases
was the employee's propensity to ignore the rules as clearly manifested by
his or her actions.

The Court finds unacceptable petitioner's belated explanation that his

designated duty for physical verification/inspection of manufacturing and
plant facilities was only included and required sometime in 1995. Curiously,
he never mentioned this in his pleadings his counter-affidavit, motion for
reconsideration, supplemental motion for reconsideration, and even his
petition before the CA. Moreover, the petitioner did not substantiate this
argument by showing any written official memo, policy or circular from the
Center. Clearly, the petitioner's argument was just a plain afterthought.

Substantial evidence is the only

quantum of evidence needed
in administrative proceedings

The OSG correctly argued that in an administrative proceeding, the

evidentiary bar against which the evidence at hand is measured is not the
highest quantum of proof beyond reasonable doubt, requiring moral certainty
to support affirmative findings. Instead, the lowest standard of substantial
evidence, that is, such relevant evidence as a reasonable mind will accept as
adequate to support a conclusion, applies. Because administrative liability
attaches so long as there is some evidence adequate to support the
conclusion that acts constitutive of the administrative offense have been
performed (or have not been performed), reasonable doubt does not ipso
facto result in exoneration unlike in criminal proceedings where guilt must be
proven beyond reasonable doubt.

In this case, there is ample substantial evidence to support the conclusion

that the petitioner committed an act constitutive of grave misconduct. It
need not be emphasized that from January 1994 to June 1998, a total of
thirty four (34) TCCs worth at least PhP110,194,158.00 were issued to
Evergreen. These TCCs were utilized either through own use by Evergreen or
transfer to other companies. Had the petitioner exercised due care and
caution, he could have discovered that Evergreen, its suppliers and buyers
did not exist or could no longer be found. The sales invoices and delivery
receipts which were used as bases of tax credit claims of Evergreen were
fake and the TCCs were transferred fictitiously. All these anomalies resulted
due to the gross negligence committed by the petitioner and his co-
evaluators in handling the tax credit applications. The petitioner, to repeat,
failed to faithfully comply with his duty and responsibility to conduct a
physical verification/inspection of manufacturing and plant facilities, which
enabled Evergreen to succeed in deceiving the government in the amount of
P867,680.00 to its damage and prejudice.

The Court agrees with the CA and the Ombudsman that the tax credit
anomaly could have been avoided if the petitioner and his co-evaluators
followed to the letter their duty and responsibility to conduct a physical
verification/inspection of Evergreen's manufacturing and plant facilities
together with the facilities of its alleged suppliers and exporters. A mere
documentary verification should not have sufficed but, instead, an ocular
verification on the applicant's offices and manufacturing plants and facilities
should have been necessarily done. Although it is not a high policy making
position, an evaluator is, nonetheless, a very essential and sensitive one
because his superior relies on the result of his evaluation.

Public service requires integrity and discipline. For this reason, public
servants must exhibit at all times the highest sense of honesty and
dedication to duty. By the very nature of their duties and responsibilities,
public officers and employees must faithfully adhere to hold sacred and
render inviolate the constitutional principle that a public office is a public
trust and must at all times be accountable to the people, serve them with
utmost responsibility, integrity, loyalty and efficiency.

In fine, the entire act of petitioner clearly points to a deliberate disregard of

established rules constitutive of grave misconduct.

[G.R. No. 195615. April 21, 2014.]

BANK OF COMMERCE, petitioner, vs. RADIO PHILIPPINES NETWORK,

INC., INTERCONTINENTAL BROADCASTING CORPORATION, and
BANAHAW BROADCASTING CORPORATION, THRU BOARD OF
ADMINISTRATOR, and SHERIFF BIENVENIDO S. REYES, JR., Sheriff,
Regional Trial Court of Quezon City, Branch 98, respondents.
NATIONAL POWER CORPORATION vs. PROVINCIAL GOVERNMENT OF
BATAAN, SANGGUNIANG PANLALAWIGAN OF BATAAN, PASTOR B.
VICHUACO (IN HIS OFFICIAL CAPACITY AS PROVINCIAL TREASURER
OF BATAAN) and THE REGISTER OF DEEDS OF THE PROVINCE OF
BATAAN (G.R. No. 180654. April 21, 2014.)